FEDERAL COURT OF AUSTRALIA

Prentice v Cummins (No 5)

[2002] FCA 1503

Sackville J

5 December 2002 - Sydney

Sackville J.

The question for determination

In these proceedings, the applicants (the Trustees) are the trustees of the bankrupt estate of John Daniel Cummins (the Bankrupt). They have applied, pursuant to ss 120 and 121 of the Bankruptcy Act 1966 (Cth) for orders and declarations that certain transfers of assets by the Bankrupt are void as against them. The transfers were made to the second respondent (Mrs Cummins), the wife of the Bankrupt, and to the third respondent (Aymcopic), the trustee of the Cummins Family Trust. The Trustees have also sought other relief, but for reasons that will become clear, it is not necessary to deal with the other claims in this judgment.

2 The Bankrupt presented his own debtor's petition on 13 December 2000 and became bankrupt by virtue of the acceptance of that petition: Bankruptcy Act 1966 (Cth), s 55(4A). At the time the petition was accepted, the Bankrupt was a senior counsel, in practice at the Sydney bar.

3 It is common ground that the largest creditor by far of the Bankrupt is the Australian Taxation Office (the ATO). The Bankrupt's indebtedness to the ATO arose by reason of assessments issued in consequence of his lodging tax returns on 14 February 2000, in respect of the taxation years ended 30 June 1992 to 30 June 1999. Prior to the lodgement of the returns for these years, the Bankrupt had not lodged any income return since about 1955, a period of some 45 years. This rather startling omission on the Bankrupt's part occurred despite the fact that he was admitted as a barrister of the Supreme Court of New South Wales on 28 April 1961 and was appointed one of Her Majesty's Counsel on 2 December 1980. (Even more startling is the fact that the ATO seems to have done nothing about the Bankrupt's failure to lodge income tax returns until the late 1990s. The evidence does not address the reasons for the ATO's apparent inability to ascertain that a barrister, latterly a senior counsel, had apparently managed to carry on a professional practice for nearly 40 years without ever troubling to lodge an income tax return.)

4 The Bankrupt was originally one of the 4 respondents joined to the proceedings. However, at the commencement of the hearing on 17 September 2002, I ordered that the Bankrupt cease to be a party to the proceedings: Prentice v Cummins (No 1) [2002] FCA 1140; Prentice v Cummins (No 2) [2002] FCA 1165. The remaining respondents are:

• Mrs Cummins;

• Aymcopic; and

• the fourth respondent (Hospitality Hire), a company of which Mrs Cummins is the sole director and which carries on trading activities.

In addition to the claims made under ss 120 and 121 of the Bankruptcy Act 1966 (Cth), the Trustees also allege that a share held in the Bankrupt's name in Hospitality Hire was beneficially owned by him at the date of his bankruptcy and thus became vested in the Trustees on that date.

5 Both the Trustees and the respondents have sought to gain forensic advantages by tactical manoeuvring in the course of this litigation. I say this not by way of criticism, since they have each doubtless had good reasons for their respective approaches. The tactical manoeuvring explains, however, at least in part, why the proceedings have reached the point they have and, in particular, why I have to rule on so-called no case submissions made by the respondents without the benefit of evidence from either the Bankrupt or Mrs Cummins.

6 The Trustees' case in chief largely consisted of documentary evidence. Mr Coles QC, who appeared with Mr Newlands for the Trustees, adduced evidence from only 2 witnesses. These were Mr Morelli, an accountant retained by the Bankrupt in 1999 to prepare tax returns for the 1992 to 1999 taxation years, and Mr Porter, an employee of the Trustees, who analysed documents created by Mr Morelli largely from primary records maintained by the Bankrupt during those years of income.

7 At the close of the case in chief for the Trustees, the respondents submitted that they had no case to answer in relation to 3 of the Trustees' pleaded claims. The claims subject to the no case submissions relate to the Bankrupt's transfer:

• in 1987 to Mrs Cummins of his interest in the matrimonial home at Alexandra Street, Hunters Hill (the Hunters Hill Property);

• in 1987 to Aymcopic of 6000 shares in Counsel's Chambers Ltd (the Shares); and

• the transfer of various sums of money totalling $194,516.40 to Mrs Cummins over the period 1992 to 1999.

8 For reasons that I gave in an earlier judgment (Prentice v Cummins (No 4) [2002] FCA 1215), I ruled that the respondents could make no case submissions on those 3 issues, but only if they elected to call no evidence. Mr Brereton SC, who appeared with Mr Ashhurst for the respondents, made the election in circumstances described in that judgment: Prentice v Cummins (No 4), at [8]-[11].

9 As I record in that judgment, there was some debate as to whether the ruling meant that the respondents' election required them to refrain from calling evidence in the proceedings on any issue, or whether they were required only to refrain from calling evidence in respect of the 3 issues on which the no case submissions were to be made. That debate was cut short by the Trustees' decision to consent to my hearing the no case submissions in the manner foreshadowed by Mr Brereton: that is, the Trustees consented to my entertaining the no case submissions on the basis that the respondents' election to call no evidence related only to evidence in respect of the 3 issues the subject of the submissions.

10 The question for determination is, therefore, whether the evidence adduced by the Trustees is sufficient, having regard to the principles governing no case submissions in civil trials, to sustain findings against the respondents on the 3 issues they have identified. If the Trustees fail to satisfy me that the evidence is sufficient on one or more of those issues, their claim, to that extent, must be dismissed. If they do satisfy me, however, the case will proceed, but with the respondents bound by their election not to call further evidence on the issues the subject of the no case submissions. As I shall explain, the practical result of the Trustees satisfying me that the respondents have a case to answer on those issues is likely to be that the Trustees will succeed in relation to them, although some questions of quantification may remain.

11 The approach taken by the parties has produced consequences that are not entirely satisfactory. In particular, the hearing had to be adjourned to enable judgment to be delivered on the no case submissions. Regardless of the outcome, the hearing will need to resume in order to deal with the issues not subject to the respondents' election. Nonetheless, this is the course that has been agreed upon.

The pleaded case

12 The Trustees' case is pleaded in a further amended statement of claim (the statement of claim) which is, in effect, divided into 4 parts.

The Hunters Hill property

13 The first part of the statement of claim pleads the Trustees' case in relation to the transfer by the Bankrupt to Mrs Cummins of his interest in the Hunters Hill Property. The Trustees allege that:

• the Bankrupt and Mrs Cummins purchased the Hunters Hill Property as joint tenants in or about 1970 and thereafter lived on the property as their matrimonial home (paras 4 and 5);

• on 26 August 1987, the Bankrupt and Mrs Cummins executed a contract of sale and a transfer whereby the Bankrupt purported to transfer all his legal and beneficial interest in the Hunters Hill property to Mrs Cummins for a consideration of $205,250 (para 6);

• no consideration was paid for the purported transfer (para 7); and

• if not for the purported transfer, one half of the Bankrupt's legal and beneficial interest as tenant in common in the Hunters Hill property would have become part of his bankrupt estate (para 8).

14 Paragraph 9 of the statement of claim is as follows:

At the time of the transfer Mr Cummins' main purpose in making the Purported Land Transfer was:
(a) to prevent the Property from becoming divisible among his creditors; or

(b) to hinder or delay the process of making the Property available for division amongst his creditors:
Particulars

(i) From about 1960 until the date of the Purported Transfer Mr Cummins had practised as a barrister at the Sydney Bar;

(ii) During the entire period that Mr Cummins practised as a barrister he did not lodge any income tax returns at all, nor did he pay any income tax;

(iii) In the circumstances, it is reasonable to infer that Mr Cummins was aware that the Deputy Commissioner of Taxation was either a creditor or a contingent creditor in a large amount of money and that inevitably there would come a time when the Deputy Commissioner of Taxation would press him for payment of moneys which he would not be able to pay;

(iv) Further and in the alternative, Mr Cummins, by his solicitor, adverted to the provisions of both section 121 of the Bankruptcy Act 1966 (Cth) and section 37A of the Conveyancing Act 1919 (NSW) when considering the transaction;

(v) … .

15 In the alternative, it is alleged that by virtue of her failure to pay the consideration provided for pursuant to the transfer, Mrs Cummins remained liable to pay the Bankrupt the sum of $205,250 (referred to as the Debt) (para 10). It is said that as a consequence of the liability arising out of the transfer, the Bankrupt retained a lien over the share of the property transferred to Mrs Cummins to secure the Debt and interest thereon (para 11). Paragraph 12 pleads that by virtue of the Limitation Act 1969 (NSW) the Bankrupt lost the ability to enforce the Debt on or about 26 August 1999, that is 12 years after execution of the transfer.

16 It is further alleged that between 26 August 1987 and 26 August 1999, the Bankrupt failed and neglected to take any steps to enforce the Debt or the lien (para 13). The Bankrupt's failure to enforce his legal and equitable rights against Mrs Cummins as at August 1999 is said to have constituted a disposition or transfer of one half of the fee simple in the Hunters Hill Property free of the equitable rights retained by the Bankrupt over his former share in the property by virtue of the lien (para 14). The disposition is alleged to be a disposition without consideration within 5 years of the commencement of the bankruptcy and accordingly is void against the Trustees by virtue of s 120 of the Bankruptcy Act 1966 (Cth) (para 13).

17 The statement of claim alleges that the Purported Land Transfer and the acts or omissions referred to in paras 11-15 are dispositions within the meaning of s 121 of the Bankruptcy Act 1966 (Cth) and are therefore void as against the Trustees (para 16).

Shares in Counsel's Chambers Ltd

18 The statement of claim alleges that:

• on 10 August 1987, the Bankrupt owned the Shares in Counsel's Chambers Ltd (it was common ground that, as a practical matter, the Shares entitled the Bankrupt to occupancy of a double room on a floor of practising barristers in Wentworth Chambers) (para 17);

• on the same date, the Bankrupt caused a discretionary trust, known as the Cummins Family Trust, to be created for the benefit of Mrs Cummins and their 4 children, and purchased Aymcopic as a shelf company to act as trustee for the Trust (para 18);

• on 26 August 1987, the Bankrupt and Aymcopic executed a purported share transfer recording the sale of the Shares to Aymcopic for a stated consideration of $360,000 (para 19);

• in fact Aymcopic paid no consideration for the Shares (para 20); and

• if not for the purported transfer of the Shares, the Shares would have become part of the Bankrupt's estate (para 21).

19 Paragraph 22 alleges that the share transfer was carried out by the Bankrupt for the main purpose identified in para 9. The particulars to para 22 are identical to those to para 9.

Shares in Hospitality Hire

20 The statement of claim pleads that since 1980 the Bankrupt was the registered holder of one share in Hospitality Hire and that, upon his bankruptcy, the share formed part of his bankrupt estate (paras 25, 26). This cause of action is not the subject of a no case submission and need not be considered further in this judgment.

Money transfers

21 The statement of claim pleads that from 1992 to 1999, the Bankrupt transferred various sums of money totalling $194,516.40 to Mrs Cummins. The largest single transfer is alleged to comprise a cheque for $138,546.80 drawn by the Bankrupt in 1992 (para 28). It is said that no consideration was given for the transfers or, alternatively, that the consideration was given for less than market value (paras 29-30). It is then pleaded that if not for the transfers, the funds transferred would have formed part of the Bankrupt's estate (para 31). Paragraph 32 alleges that the money transfers were effected for the main purpose identified in para 9 and particulars (b)(i)-(iii) to para 9 are repeated. It is then pleaded that the money transfers were transfers of property within s 121 of the Bankruptcy Act 1966 (Cth) and accordingly are void as against the Trustees (para 33).

22 The statement of claim pleads in the alternative that all the money transfers other than the first (totalling $55,969.60) were made within 5 years of the commencement of the bankruptcy (para 34). Since the transfers were without consideration or at an undervalue, they were void as against the Trustees by reason of s 120 of the Bankruptcy Act 1966 (Cth) (paras 35-37).

23 Finally, the statement of claim pleads, in the further alternative, that the payment of $138,546.80 in 1992 was a loan by the Bankrupt to Mrs Cummins which has not been repaid (paras 38-40). The respondents concede that there is evidence to support this claim, although they plead that the loan has been repaid. The respondents do not put forward a no case submission in relation to the Trustees' claim that the sum of $138,546.80 was a loan to Mrs Cummins.

Relief

24 The relief sought by the Trustees includes declaratory relief and orders requiring Mrs Cummins and Aymcopic to transfer a half share in the Hunters Hill property and the shares in Counsel's Chambers Ltd respectively to the Trustees. Declaratory relief is also sought in relation to the money transfers, together with orders requiring Mrs Cummins to account for the funds transferred to her.

Legislation

25 The Trustees' case relies essentially on ss 120 and 121 of the Bankruptcy Act 1966 (Cth). These provisions were introduced by the Bankruptcy Legislation Amendment Act 1996 (Cth) and replaced earlier provisions that had been in the Bankruptcy Act 1966 (Cth) since its enactment in 1966. It was common ground that the present case is governed by the provisions in their current form even though the relevant events occurred in 1987.

26 Section 120(1) of the Bankruptcy Act 1966 (Cth) provides, subject to certain qualifications not presently relevant, that a transfer of property by a person who later becomes bankrupt to another person is void against the trustee in bankruptcy if:

• the transfer took place within 5 years of the commencement of the bankruptcy; and

• the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.

A transfer of property includes payment of money: s 120(7)(a).

27 Section 121 is as follows:

(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.

…

(9) For the purposes of this section:
(a) "transfer of property" includes a payment of money;

…

28 Section 6 of the Bankruptcy Act 1966 (Cth) provides that a reference in the Act to an intent to defraud the creditors of a person, or to defeat or delay such creditors, shall be read as including an intent to defraud or to defeat or delay any one or more of those creditors. Section 121(1) of the Bankruptcy Act 1966 (Cth), unlike its predecessor, does not refer to an "intent to defraud creditors", but does refer to the transferor's main purpose being to delay the process of making property available for division among the transferor's creditors.

Narrowing the issues

29 The respondents submitted that the evidence adduced by the Trustees was insufficient to make out the pleaded case in relation to:

• the Hunters Hill property (paras 4-16);

• the Shares in Counsel's Chambers Ltd (paras 17-23); and

• the money transfers (paras 28-37).

30 As the argument on the no case submissions progressed a number of issues disappeared or at least diminished in significance. Four issues in particular fall into this category.

31 The respondents initially contended that the Trustees' claim in relation to the Hunters Hill property was bound to fail, not only because the evidence did not establish the requisite purpose, but because the Trustees had failed to show that the Bankrupt had any interest in the Hunters Hill property which, but for the transaction, would have formed part of his bankrupt estate. Mr Brereton acknowledged that the Bankrupt and Mrs Cummins were registered proprietors of the property as joint tenants. He relied, however, on evidence suggesting that Mrs Cummins had contributed the cash component ($16,000) of the purchase price of $31,000, the remaining $15,000 being obtained by way of a secured loan.

32 In the course of argument, Mr Brereton accepted that since the Bankrupt was a co-mortgagor, the highest the case could be put on behalf of Mrs Cummins on the current evidence was that the Bankrupt's beneficial interest in the Hunters Hill property was limited to approximately a quarter share. While this was less than the one half share contended for by the Trustees, it necessarily followed that the Bankrupt retained a beneficial interest in the Hunters Hill property which, had the 1987 transfer of his interest not been registered, would have formed part of his bankrupt estate. Mr Brereton therefore accepted that, for the purposes of the no case submission, the Trustees had adduced evidence capable of establishing that the Bankrupt had an interest in the Hunters Hill property which, but for the transaction, would have formed part of his bankrupt estate.

33 Secondly, the Trustees' case in relation to the Hunters Hill property, as pleaded, included a claim that the Bankrupt's failure to enforce his right to recover the Debt (the unpaid purchase price) constituted a transfer of his one half interest in the fee simple estate. The "transfer" was said to have been effected by the extinguishment in 1999, by operation of the Limitation Act 1969 (NSW), of the Bankrupt's right to recover the Debt. Mr Coles made no submission in support of this pleaded claim, apparently because he took the view that the extinguishment of the Debt could not be considered independently of the extinguishment of the lien which came into existence by reason of the non-payment of the purchase price.

34 Thirdly, although Mr Coles wished to submit that the Bankrupt's failure to enforce the lien constituted a transfer of that lien by virtue of it having been extinguished by operation of the Limitation Act 1969 (NSW), I declined to permit him to put that argument. I took that course because I considered that the statement of claim, which omitted any reference to the lien in para 12, did not plead that the lien had been extinguished, or that the Bankrupt had lost his ability to enforce the lien, by virtue of the Limitation Act 1969 (NSW). I also refused an application by Mr Coles, made in the course of the hearing, to amend para 12, on the ground that the respondents would be prejudiced by such an amendment.

35 Fourthly, Mr Coles conceded that the evidence was not capable of establishing that but for the money transfers pleaded in para 28 of the statement of claim (totalling $194,516.40), the funds so transferred would have become part of the Bankrupt's estate. Accordingly, the no case submissions must succeed in relation to paras 28-33 of the statement of claim.

36 It follows from what I have said that the Trustees cannot make out the claims pleaded in paras 10-15 (the "transfer" of the Debt and lien) and those pleaded in paras 28-33 (the money transfers totalling $194,516.40). It also follows that the only remaining issue in the no case submissions as they apply to the transfers of the Hunters Hill Property and the Shares is whether the Bankrupt's main purpose in executing the transfers was that identified in s 121(1) of the Bankruptcy Act 1966 (Cth). The only remaining issue in relation to the money transfers is whether there is sufficient evidence to make out the case pleaded in paras 34-37 of the statement of claim (the money transfers totalling $55,969.60).

The facts

37 The evidence adduced by the Trustees in some respects is somewhat sparse, a fact that doubtless contributed to the respondents making their no case submissions. Little of the evidence relevant to those submissions is disputed. What is principally in dispute is the nature of the inferences that should be drawn from the evidence.

38 Although the respondents (or perhaps more accurately, each respondent in relation to the pleaded claim against her or it) do not dispute that certain inferences can and should be drawn from the evidence, they submit that the evidence is insufficient to warrant the inference that the Bankrupt's main purpose in transferring his interest in the Hunters Hill property and the Shares was:

• to prevent the transferred property from becoming divisible among his creditors; or

• to hinder or delay the process of making property available among his creditors.

They also dispute that the evidence is capable of establishing that the payments of $55,960.60 by the Bankrupt to Mrs Cummins were made without consideration or at an undervalue. It is convenient to commence with an account of the facts that are not in dispute.

Background

39 The Bankrupt and Mrs Cummins were married in 1964, from which date (according to admissions on the pleadings) they have lived together as husband and wife. As I have already indicated, the Bankrupt presented his own petition on 13 December 2000 and became bankrupt by virtue of the acceptance of that petition. The principal creditor in his estate is the ATO, which claims to be owed $955,672.92.

40 The Bankrupt was admitted as a solicitor of the Supreme Court of New South Wales in 1957 and in 1961 he was admitted as a barrister of that court. He was appointed a senior counsel in December 1980.

41 In August 1999, the Bankrupt engaged Mr Morelli, a chartered accountant, to prepare and lodge income tax returns on the Bankrupt's behalf. Mr Morelli gave evidence that the Bankrupt had advised him that the last time he (the Bankrupt) had had contact with the ATO was in 1955. I infer from this evidence (as Mr Brereton accepted was open to me) that the Bankrupt had not lodged any tax returns between about 1955 and 14 February 2000, when Mr Morelli lodged on his behalf returns for the 1992 to 1999 taxation years. The evidence did not explain why the Bankrupt did not lodge tax returns in respect of any year prior to the 1992 taxation year.

42 Mr Morelli gave unchallenged evidence that he prepared the tax returns from documents, including cheque butts, bank statements, deposit books and receipt records, supplied to him by the Bankrupt. Mr Morelli described these records as "incomplete and unsatisfactory in many serious respects", for example because cheque butts, deposit books, and bank statements were missing for various periods of time. He also said that when he sought further instructions to fill in the gaps, "on by far the majority of these occasions no satisfactory information was available".

43 There was no documentary evidence as to the Bankrupt's income from professional or other activities in respect of any period prior to the 1992 taxation year. For that matter, there was no detailed evidence as to the nature of the Bankrupt's professional activities between the date of his admission as a barrister (1961) and the date of the transactions that are the subject of the present proceedings (1987). However, successive transfers or mortgages to which the Bankrupt was a party described him as a "Barrister at Law" or "Barrister". These documents were executed in 1965, 1967, 1970, 1971, 1982 and 1987. As will be seen, the Bankrupt's tax returns show that he derived substantial professional income from his practice as a barrister in each of the taxation years 1992 to 1999, although the precise amounts vary considerably.

44 By 1987, the Bankrupt had acquired the Shares. As I have noted, the Shares entitled the Bankrupt to occupancy of a double room on a floor of barristers' chambers. The evidence does not enable me to say when the Shares were acquired (they were not necessarily acquired at the one time, but may have been acquired progressively as the Bankrupt moved to larger chambers). In 1986, the Bankrupt acquired units in the Barristers Chambers Parramatta Unit Trust ("Parramatta Unit Trust"), for a price of $30,000. These units, which related to a second set of barristers' chambers in Parramatta, formed part of his bankrupt estate and were ultimately sold by the Trustee for $100,000.

Pre-1987 transactions

45 Prior to the 1987 transactions, the Bankrupt and Mrs Cummins acquired or sold several properties as follows:

• In about May 1965, they purchased a property at Linley Point for £10,000. The purchase was financed by a loan of £7,000 secured on the property. It appears from subsequent references to the residential address of the Bankrupt and Mrs Cummins that the Linley Point property was purchased as the matrimonial home. The property was sold in about December 1967 for $22,600.

• In about January 1967, the Bankrupt, Mrs Cummins and a third party purchased a property at 12 Ferdinand Street, Hunters Hill as tenants in common. The purchase price was $68,000, of which the vendor lent $46,000 on the security of a mortgage.

• In October 1967, the Bankrupt and Mrs Cummins became registered as joint tenants of a property apparently known as 12A Ferdinand Street, Hunters Hill. This property, which became the matrimonial home, is likely to have been created as the result of a subdivision of 12 Ferdinand Street, Hunters Hill, although the evidence is not entirely clear on the point. If this is correct, the registration of the Bankrupt and Mrs Cummins as proprietors may well have come about in consequence of an agreement with the third party involved in the acquisition of 12 Ferdinand Street. In any event, the property was sold in about December 1968 for $58,500.

46 On 14 April 1970, the Bankrupt and Mrs Cummins entered into a contract to purchase the Hunters Hill Property. The transaction was completed on 27 July 1970 and the purchasers became registered as joint proprietors. The transfer is expressed to be:

in consideration of $31,000 (the receipt whereof is hereby acknowledged) paid to [the vendor] by John Daniel Cummins and Mary Elizabeth Cummins.

47 The purchase of the Hunters Hill Property was financed in part by a loan of $15,000 from the Commonwealth Trading Bank of Australia, secured by a mortgage executed by both the Bankrupt and Mrs Cummins as mortgagors. For some reason this mortgage appears not to have been registered until 1974. The solicitors acting for the purchasers issued a receipt to Mrs Cummins on 27 July 1970 for the sum of $13,053.27. Mr Brereton relied on this receipt, together with a debit of $3000 recorded in a loan account in her name on 30 April 1970, as evidence that Mrs Cummins provided the deposit and the balance of the purchase price.

The 1987 transactions

48 On 26 August 1987, the Bankrupt entered into a contract with Mrs Cummins to sell to her his interest as joint tenant of the Hunters Hill Property. The price was said to be $205,250, being half the value attributed to the Property by a registered valuer. The contract required the payment of the purchase price on completion. On the same date, the Bankrupt executed a transfer of the Hunters Hill Property in favour of Mrs Cummins as transferee. The transfer was signed by Mr Harris, the solicitor who prepared the documentation, as "solicitor for" the transferee. The transfer included an acknowledgement by the Bankrupt that he had received the consideration of $205,250. It is, however, common ground that Mrs Cummins did not pay the purchase price or any part of it. Nonetheless, she paid the stamp duty on the contract and transfer and the valuer's fees. The transfer was subsequently registered and Mrs Cummins became registered as proprietor of the fee simple estate in the Hunters Hill Property.

49 On 17 August 1987, shortly before the transfer of the Bankrupt's interest in the Hunters Hill Property, he and Mrs Cummins each acquired one share in Aymcopic, a "shelf" company. On 24 August 1987, a deed was executed whereby Aymcopic became the trustee of the Cummins Family Trust. The beneficiaries of the discretionary trust so created were Mrs Cummins and the 4 children of the marriage. On 26 August 1987, the Bankrupt executed a transfer of the Shares to Aymcopic, in consideration of the sum of $360,000 said to have been paid by Aymcopic. Again it is common ground that Aymcopic did not pay any part of the purchase price. Mrs Cummins provided the funds to meet the stamp duty on the transfer. The Shares were registered in Aymcopic's name in December 1987.

50 The 2 transactions - that is, the transfer of the Bankrupt's interest in the Hunters Hill property and the transfer of the Shares - were obviously linked. They were completed on the same day and documents in the solicitor's file indicate that they were intended to be completed together.

51 On 7 October 1987, Mr Harris, the solicitor who prepared the documentation to give effect to the transactions already described, confirmed in a letter to the Bankrupt his instructions "to transfer by way of gift" to Aymcopic his units in the Parramatta Unit Trust. These instructions were never implemented and the units in the Parramatta Unit Trust ultimately formed the most valuable single asset in the Bankrupt's estate following his bankruptcy. In a letter written a decade later, the solicitor reported to the Bankrupt, in response to an inquiry from the latter, that the failure to prepare a transfer of the units was an oversight on his (the solicitor's) part. Clearly enough, the Bankrupt intended to transfer the units in the Parramatta Unit Trust to Aymcopic in 1987, but his instructions were not implemented.

52 The solicitor who carried out the transactions did not give evidence. However, his handwritten file notes were in evidence. These notes, although cryptic and incomplete, show that the solicitor paid attention to the possible application of s 121 of the Bankruptcy Act 1966 (Cth) (which at that time was concerned with dispositions of property "with intent to defraud creditors") and its State counterpart, namely s 37A of the Conveyancing Act 1919 (NSW).

53 After referring to the terms of the relevant legislation, the notes record the observation that "Mary [Mrs Cummins] Must be a Purchaser ". The notes relating to the Hunters Hill property ask "what is valuable consideration [?]" and "is forgiveness of a debt a settlement [?]". They refer, without elaboration to the decision of the High Court in Williams v Lloyd (1934) 50 CLR 341. They also record the observation that "[p]romise to pay is valuable consideration" and an apparent suggestion that a deed of release of debt be executed after say 4 months.

54 The notes relating to the transfer of the Shares record that, as the Bankrupt was a director of the transferee, the company "could not escape notice of any intent on John's [the Bankrupt's] part". The solicitor observes that "[s]emble could be attacked under s 37A [of the Conveyancing Act 1919 (NSW)]" but asks himself "where is evidence of intent[?]".

55 Because none of the participants in the 1987 transactions gave evidence, there was no direct evidence of the Bankrupt's purpose in transferring assets to Mrs Cummins and to Aymcopic. However, some business records were in evidence which are relevant to the question of the Bankrupt's purpose. In a letter dated 2 March 1998, the managing director of a company described as a "strong" source of referrals to the National Australia Bank, applied to the Bank on Mrs Cummins' behalf seeking a loan of $1.3 million for residential investment purposes. The letter stated that:

[I]n addition to substantial real estate holdings which are held in her name for legal reasons in view of her husband's occupation, Mrs Cummins currently has [certain other assets]. (Emphasis added.)

Contemporaneous records of the Bank, apparently recording information supplied on behalf of Mrs Cummins, refer to "all assets" or "all real estate property" being in her name. In particular, one document, dated 3 April 1998, records that "Mary's husband is a Queens Council (sic) thus why all assets are in her name and only minimal income".

The Giannarelli litigation

56 As will be seen, the respondents invited me to infer that the primary or at least co-equal reason for the Bankrupt transferring his assets in 1987 was because of his concern that the High Court was about to abrogate the "in-court" immunity of barristers from professional negligence actions. This invitation requires a brief account of the course of the "Giannarelli litigation" ultimately decided by the High Court on 13 October 1988: Giannarelli v Wraith (1988) 165 CLR 543.

57 One issue in the Giannarelli litigation was whether s 10(2) of the Legal Profession Practice Act 1958 (Vic) rendered a barrister liable in damages to a client for the negligent conduct of a criminal trial. Section 10(2) provided as follows:

Every barrister shall be liable for negligence as a barrister to the client on whose behalf he has been employed to the same extent as a solicitor was on [23 November 1891] liable to his client for negligence as a solicitor.

58 In a judgment delivered on 9 May 1986, Marks J held in the Supreme Court of Victoria that s 10(2) operated to subject the plaintiffs' barristers to liability in respect of the negligence alleged against them. His Honour answered certain questions of law in accordance with his opinion: see Wraith v Giannarelli [1988] VR 713 at 715.

59 An appeal was heard by the full court of Victoria in April 1987. On 10 April 1987, the full court announced it was discharging the orders made by Marks J because it considered that the questions asked were inappropriate to answer. The full court then heard argument on reformulated questions of law. In a judgment delivered on 19 May 1987, 3 months before the transactions relevant to the present case, the full court (Young CJ, Crockett and Fullagar JJ) unanimously held that:

• at common law a barrister is immune from suit in respect of work carried out in court (following the decision of the House of Lords in Rondel v Worsley [1969] 1 AC 191); and

• in 1891, solicitors were not liable in Victoria for "in court" negligence and, accordingly, s 10(2) of the Legal Profession Practice Act 1958 (Vic) did not alter the common law immunity of barristers.

60 The plaintiffs in Giannarelli applied to the High Court for special leave to appeal from the decision of the full court. That application was heard and granted on 14 August 1987. The appeal itself was heard on 10 and 11 February 1988 and judgment was delivered on 13 October 1988. The appeals were dismissed and a majority of the court upheld the common law immunity of a barrister to his or her client in respect of court work (on this issue the majority comprised Mason CJ, Wilson, Brennan and Dawson JJ, with Deane J dissenting; Toohey and Gaudron JJ, although dissenting as to the result, did not address the common law immunity of barristers). The majority also held, following Saif Ali v Sydney Mitchell & Co [1980] AC 198, that the common law immunity does not apply to work done out of court which is unconnected with work in court.

61 The decision of the High Court, of course, was handed down more than a year after the Bankrupt transferred his interests in the Hunters Hill Property and the Shares. Oral argument in the present case seems to have been conducted on the assumption that the High Court granted special leave in Giannarelli before the Bankrupt gave instructions to his solicitor to prepare documentation for the transfer of his assets. As the Trustees pointed out in supplementary written submissions, however, the evidence supports an inference that the Bankrupt's instructions to his solicitor to implement, or at least to take steps in preparation for, the transfers predated the High Court granted special leave. Thus the file indicates that on 10 August 1987, 4 days before the grant of special leave, the solicitor made handwritten notes concerning a transaction relating to the Hunters Hill Property. On 13 August 1987, the solicitor wrote to the Manager of the Commonwealth Trading Bank, on behalf of the Bankrupt and Mrs Cummins, requesting execution of a discharge of the existing mortgage over the property, presumably in preparation for the transfer executed on 26 August 1987. The valuation of the Hunters Hill Property, prepared on account of the Bankrupt and Mrs Cummins for "stamp duty assessment" is dated 14 August 1987. I infer that, on the balance of probabilities, instructions were given to the valuer before the date of the valuation (which date coincides with the date the High Court granted special leave in Giannarelli).

The bankrupt's tax returns

62 The tax returns filed on behalf of the Bankrupt by Mr Morelli show the following gross receipts and net income from the Bankrupt's business or professional activities:

Year ended 30 June	Gross Receipts $	Net Business Income $
1992	335,425	181,026
1993	337,294	208,277
1994	299,664	188,859
1995	377,300	239,426
1996	191,909	89,679
1997	261,379	151,756
1998	350,625	264,051
1999	520,525	397,050

63 Not all the gross receipts were derived from the Bankrupt's practice as a barrister, but the great bulk were derived from that source. For example, the deposits for the 1992 tax year show that of the $335,425 recorded as gross receipts, the sum of $325,032 constituted fees received by the Bankrupt.

64 None of the returns discloses the sale or disposal of any substantial assets during the period 1992 to 1999. The details of income and expenditure suggest that throughout the 7 year period the Bankrupt owned a motor vehicle and had a small share portfolio. The returns do not indicate that the Bankrupt derived any substantial income from a source other than his practice as a barrister. This picture is not changed by the 2000 return, which covered an earnings period after the Bankrupt had finally recognised the need to lodge at least some income tax returns.

65 The Bankrupt's statement of affairs as at 30 January 2001 disclosed that his assets totalled $259,614 and his liabilities to unsecured creditors totalled $1,040,400. His principal assets were the units in the Parramatta Unit Trust ($100,000), a motor vehicle (sold for $51,750) and shares (sold for approximately $42,000).

SUBMISSIONS

The respondents' submissions

66 Mr Brereton put 3 preliminary propositions on behalf of the respondents:

(i) In addressing a no case submission, the function of a judge sitting alone is no different from a judge who has heard all of the evidence and who is delivering judgment in the usual way.

(ii) Since the allegation against the Bankrupt was "essentially one of fraud", the principle of Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362, applied. That is, before the court could be reasonably satisfied that the Bankrupt's main purpose in transferring the Hunters Hill property and the Shares was to prevent the assets becoming divisible among his creditors, it was necessary to pay due regard to the serious nature of the allegation.

(iii) Where an applicant's case rests on inferences to be drawn from primary fact, it is not enough that the circumstances give rise to conflicting inferences reflecting different degrees of probability.

67 Mr Brereton submitted that the evidence did not support an inference that the Bankrupt's "main purpose" was that required by s 121(1) of the Bankruptcy Act 1966 (Cth). He pointed out that there was no evidence as to the extent of the Bankrupt's income tax liabilities as at 1987, nor indeed of the Bankrupt's income for the years leading up to the 1987 transaction. Accordingly, so he argued, there was no basis for concluding that the amounts due by the Bankrupt to the Deputy Commissioner of Taxation (the Commissioner) as at 1987 would necessarily have been large. Furthermore, the contemporaneous notations made by the solicitor in relation to the 1987 transactions merely indicated that he had acted as a prudent solicitor in considering the possible application of the relevant provisions of the Bankruptcy Act 1966 (Cth). There was nothing to suggest that the solicitor was aware of any purpose on the part of the Bankrupt that might involve defeating the latter's creditors.

68 Mr Brereton accepted that there was a line of authority which established that a person who is intending to embark on a financially hazardous undertaking and who moves to secure assets against claims by future creditors in the event of an adverse outcome has the purpose identified by s 121(1) of the Bankruptcy Act 1966 (Cth). However, he submitted that:

• this principle applies only where there are creditors within the immediate contemplation of the transferor and not to a case where there is merely a remote possibility that the transferor might be liable to some unidentified person at a remote time in the future; and

• the transfer of an asset to a family member to withdraw it from the risk of being exposed to creditors is not capable of evincing an intent to defeat creditors unless its effect is to reduce the fund available to satisfy creditors below the amount of the transferor's debts due to the creditors.

69 Mr Brereton argued that there is a great difference between a trader who transfers assets to family members just as he or she is about to embark on a hazardous undertaking and an established professional person with no known professional negligence claims against him or her who, for more abundant caution, transfers home and chambers to family members so that those assets will not be at risk in the event of a change in the law permitting claims for "in court" negligence. In the latter case, so Mr Brereton contended, the transferor does not have the purpose of defeating creditors within the meaning of s 121 of the Bankruptcy Act 1966 (Cth).

70 Mr Brereton identified 4 possible explanations for the Bankrupt's transfer of assets in 1987 to Mrs Cummins and Aymcopic, each of which, so he argued, was consistent with the evidence. These were that the Bankrupt:

(i) desired to take his assets out of the reach of the Commissioner, who could be expected to issue an assessment against him at some stage;

(ii) wished to make provision for his wife and family;

(iii) wished to save a marriage that might have otherwise been in difficulties; and

(iv) transferred assets because he contemplated that the High Court might change the law giving barristers immunity from "in court" negligence and thus he might be at risk that at some future time a dissatisfied client would sue him.

Mr Brereton submitted that the sketchy evidence was insufficient to support the first as the Bankrupt's main purpose.

71 Mr Brereton also submitted that the evidence was insufficient to establish that the Bankrupt's 1987 transfer of assets left insufficient assets available to satisfy the Bankrupt's liabilities. There was simply no evidence as to the extent of the Bankrupt's assets in 1987 and thus no inference was available that he had transferred most or all of his substantial assets to Mrs Cummins and Aymcopic. This was a "fundamental and irremediable flaw" in the Trustees' case.

The trustees' submissions

72 Mr Coles on behalf of the Trustees pointed out that the requirement in s 121(1)(b) of the Bankruptcy Act 1966 (Cth) is "no more than that" the transferor's main purpose in making the transfer is to prevent the transferred property becoming divisible among his or her creditors, or to hinder or delay that process. He also pointed out that historically it had never been necessary for the party seeking to have a transfer declared void to prove that the transferor actually intended to defraud creditors. It was enough that the intent could be inferred from the circumstances surrounding the transfer of the property. The same approach, so he argued, should be taken to s 121(1)(b) in its current form.

73 Mr Coles identified a number of features of the 1987 transfers that supported the conclusion that the Bankrupt had the requisite purpose. These included the following:

• Each transaction was voluntary (that is, involved no valuable consideration), yet was supported by a false recital that moneys had been paid by the transferee.

• Neither transaction was at arm's length and each was part of a concerted plan or scheme.

• The Bankrupt retained the benefit of each asset after the transfer (in the one case as his matrimonial home and in the other as his professional chambers).

• The fact that the Bankrupt had not lodged tax returns since 1955 suggested strongly that his main purpose was to put his major assets out of the reach of his known or apprehended creditors (that is, in practical terms, the Commissioner).

• The notation in the bank records relating to Mrs Cummins were inconsistent with the suggestion that the transactions were entered into by reason of the Bankrupt's love or affection for his wife or family.

• The solicitor's contemporaneous notations suggested that the transactions were structured in the way they were so as to provided defence to any later contention that the transfers were intended to defraud creditors, indicating that the solicitor appreciated that the Bankrupt intended to put property beyond the reach of his creditors.

• The evidence was inconsistent with the suggestion that the Bankrupt retained sufficient assets to meet his obligations to the Commissioner. In particular, the Bankrupt's taxation returns for the 1992 and subsequent tax years gave rise to the inference that his pre-1987 earnings were substantial and thus his taxation liabilities were very substantial indeed. Moreover, there was nothing in the returns to suggest that he had retained any significant assets after 1987.

• The Bankrupt's conduct over many years in concealing his true income from the Commissioner was dishonest by community standards and, by the standards of his profession, was disgraceful. It was therefore easy to infer that the Bankrupt's main motivation in transferring assets was to deny the Commissioner the opportunity to recover tax due from the Bankrupt.

• As a matter of commonsense, the Bankrupt must have had at the forefront of his mind at all times, when dealing with financial matters but especially when he gave instructions to his solicitor to transfer assets voluntarily to family members, that he would inevitably owe the Commissioner very large amounts of money once he (the Bankrupt) lodged returns or the Commissioner issued an assessment.

74 The Trustees' written submissions did not expressly rely on s 121(2) of the Bankruptcy Act 1966 (Cth). I indicated to Mr Coles towards the end of his oral submissions that I did not propose to rule on the possible application of s 121(2) if he advanced no argument in support of the proposition that the sub-section applied to the circumstances of the case. Mr Coles then simply asserted that on 26 and 27 August 1987 the Bankrupt, by reason of long accrued but unassessed liabilities to the Commissioner, was on the face of it unable to pay his debts, he having no apparent assets apart from those the subject of the transfer. Mr Coles did not develop the submission any further.

REASONING

A preliminary issue: a question of judicial notice

75 As I have noted, the respondents argued that a plausible explanation for the Bankrupt transferring his interest in the Hunters Hill property and in the Shares was his concern that his assets might be imperilled by reason of a client seeking damages against him at some future time for professional negligence. The respondents submitted that I should take into account, in support of that contention, the decision of the full court of the Supreme Court of Victoria in Wraith v Giannarelli, handed down on 19 May 1987, and the grant on 14 August 1987 by the High Court of special leave to appeal from the full court decision. The Giannarelli litigation was said to support an inference that the Bankrupt's main purpose was not to prevent his property from becoming divisible among his creditors, in particular the Commissioner. This was so because the Giannarelli litigation showed that barristers could be exposed to liability for professional negligence and it was reasonable to infer that the Bankrupt was mindful of that risk. I have already set out the chronological course of the Giannarelli litigation.

76 The Trustees at no stage disputed that I could take into account the Giannarelli litigation for the purpose suggested by the respondents, although the Trustees disputed that any inference should be drawn that the Bankrupt was aware of or motivated by the litigation to take the action that he did in 1987. In written submissions filed after the hearing, the Trustees accepted that judicial notice could be taken of the Giannarelli litigation because the various judgments and orders were matters of historical record as to the existence of which there could be no doubt. Mr Coles appears to have had in mind the principle that a court may take judicial notice of historical events which are generally known to educated or well-informed people, or which can be ascertained after such investigations as are required to eliminate any doubt: Holland v Jones (1917) 23 CLR 149 at 153, per Isaacs J; Australian Communist Party v Commonwealth (1953) 83 CLR 1 at 196, per Dixon J; DCT (NSW) v W R Moran Pty Ltd (1939) 61 CLR 735 at 806; 5 ATD 204 at 246, per Evatt J.

77 It may be that a more secure basis for taking the judicial decisions into account on the question of the Bankrupt's motivation for the transfer of assets is the principle that domestic law is not a matter for proof or disproof: J D Heydon, Cross on Evidence, 6th Aust ed, 2000, at [3075]. While this principle is usually invoked in relation to the judge's function in ruling on legal submissions, there appears to be no reason why it cannot apply to "an adjudicative fact", that is, a fact in issue or a fact relevant to a fact in issue: cf Woods v Multi-Sport Holdings Pty Ltd (2002) 186 ALR 145 at 157, per McHugh J. An alternative approach may be to invoke s 144(1) of the Evidence Act 1995 (Cth), which provides that proof is not required about knowledge that is not reasonably open to question and is capable of verification by reference to a document the authority of which cannot reasonably be questioned. Since, however, the Trustees did not dispute that the Giannarelli litigation could be taken into account as an adjudicative fact, it is not necessary to identify the precise common law principle or statutory provision that justifies that course.

78 A more contentious issue arose in consequence of a belated submission made on behalf of the Trustees. During the hearing, I invited supplementary written submissions from the parties as to the additional tax or penalties to which the Bankrupt might have been exposed in 1987 by reason of his failure to lodge tax returns. The Trustees, in their supplementary submissions on that issue, referred without elaboration to the fact that on 2 April 1987 the Senate rejected for the second time the Australian Card Bill 1987 (Cth) (Australia Card Bill) which (according to the Trustees) was the precursor to the present compulsory tax file number system. The Trustees asserted that the Senate's rejection of the legislation had been "used as the basis" for calling the general election held on 11 July 1987, at which the Labor government was returned. The Trustees had previously made no reference whatever to the Australia Card Bill, whether in pleadings, in opening, in evidence or in submissions.

79 I took the view that the Trustees' reference to the Australian Card Bill in its supplementary submissions implicitly invited me to take into account the part played by the Bill in the 1987 election in determining whether the Bankrupt's "main purpose" in transferring assets in that year to Mrs Cummins and Aymcopic was that identified in s 121 of the Bankruptcy Act 1966 (Cth). In particular, the Trustees seemed to be suggesting that the proposed legislation (the objects of which included facilitating the administration and execution of the laws of the Commonwealth relating to taxation: cl 3(a)) provided an obvious motivation for the Bankrupt to divest himself of assets, independently of any concern about the Giannarelli litigation. Accordingly, I invited further submissions as to whether I should take the course I understood the Trustees to be suggesting, namely that I should take the terms of the Australia Card Bill into account in assessing the Bankrupt's main purpose.

80 In response to that invitation, the Trustees contended that the introduction of the Australia Card Bill into Parliament and its rejection by the Senate were "notorious facts", of which judicial notice could be taken. They also submitted that the fact that there had been a double dissolution of Parliament in 1987 in consequence of the Senate's rejection of the Australia Card Bill fell into the same category.

81 A matter of which a court can take judicial notice is not "evidence strictly so called": Woods v Multi-Sports Holdings at 157, per McHugh J, citing Baldwin & Francis Ltd v Patents Appeal Tribunal [1959] AC 663 at 691, per Lord Denning. The court takes notice of notorious facts of which ordinary persons are presumed to be aware: R v Henry (1999) 46 NSWLR 346 at 364, per Spigelman CJ. The court may be "reminded" of what it knows by reference to appropriate documentary material: R v Henry at 364; Saul v Menon [1980] 2 NSWLR 314 at 325, per Moffitt ACJ. But the material to which the court is referred is not evidence in the ordinary sense: Saul v Menon at 325.

82 Had the matters now relied upon by the applicants been referred to at an earlier stage of the proceedings, I have little doubt that it would have been appropriate to take judicial notice of them. The fact that important legislation such as the Australia Card Bill was introduced into Parliament and was rejected by the Senate is a matter of public record and is easily verifiable. So is the fact that both Houses of Parliament were dissolved on 5 June 1987 in consequence of the rejection by the Senate of the Bill: see Commonwealth Gazette, 5 June 1987, at 13187/87. That the court might have to "remind" itself of these facts is no barrier to judicial notice being taken of them as "adjudicative facts". In any event, the applicants could have relied on s 144(1) of the Evidence Act 1995 (Cth) as the basis for the court taking the facts into account. The facts relied upon are "not reasonably open to question" and are "capable of verification by reference to a document, the authority of which cannot reasonably be questioned".

83 The difficulty facing the Trustees is that they failed to refer to the Australia Card Bill or the double dissolution of 1987 until after the hearing of the no case submissions had concluded. The respondents elected to call no evidence on the basis of the case pleaded and presented by the Trustees. The respondents made their election without having received any notification prior to completion of the Trustees' case in chief, whether by way of particulars, submissions or otherwise, that the Trustees wished to rely on the Australia Card Bill to support the contention that the Bankrupt's main purpose was to prevent the transferred assets becoming divisible amongst his creditors. It seems to me that the respondents would be unfairly prejudiced in relation to their no case submissions if the Trustees were now entitled to invite the court to take judicial notice of the Australian Card Bill and its role in the 1987 election. Perhaps the unfairness might be overcome if the respondents were permitted to withdraw their election not to call evidence, but neither party has suggested this course.

84 In my view, although facts of which judicial notice can be taken are not strictly evidence, the position in the present case is analogous to that which applies where a party seeks to reopen its case for the purpose of adducing fresh evidence. In such circumstances, the court has a discretion whether to permit the fresh evidence, to be adduced and ordinarily must exercise its discretion in the interests of justice: see Cross on Evidence at [17220], [17225]. For the reasons I have given, I do not think it would be in the interests of justice to permit the Trustees, on the no case submissions, to rely on the Senate's rejection of the Australia Card Bill and its role as the "trigger" for the 1987 double dissolution as adjudicative facts relevant to the issue of whether the Bankrupt's main purpose was to defeat or delay his creditors.

85 If the question is to be addressed by reference to s 144(1) of the Evidence Act 1995 (Cth), rather than the common law doctrine of judicial notice, I think a similar analysis would apply. Section 144(4) of the Evidence Act 1995 (Cth) provides that the judge is to give a party such opportunity to make submissions, and to refer to relevant information as is necessary to ensure that the party is not unfairly prejudiced. If it is impossible to take into account knowledge of the kind referred to in s 144(1) without unfairly prejudicing one of the parties, I would read s 144(4) as authorising the court to decline to take that knowledge into account, even if the requirements of s 144(1) otherwise appear to be satisfied.

86 Accordingly, I do not propose to take into account either the fact that the Australia Card Bill was rejected by the Senate in 1987, or the fact that it provided the "trigger" for the dissolution of both Houses of Parliament in June 1987. The exclusion of these facts perhaps can be regarded as making an already somewhat artificial exercise even more artificial, since it is hard to imagine that the Bankrupt, who for decades had flouted his obligation to file taxation returns, could have been unaware of the significance of what the Explanatory Memorandum to the Australia Card Bill called a "national system of identification". Fairness in the conduct of litigation demands, however, that I put the facts to which I have referred out of my mind.

TRANSFERS TO DEFEAT CREDITORS

The construction of s 121 of the Bankruptcy Act 1966 (Cth)

87 As I have noted, the current s 121 of the Bankruptcy Act 1966 (Cth) was introduced by the Bankruptcy Legislation Amendment Act 1996 (Cth). It replaced the previous s 121 which provided that, subject to certain exceptions, a disposition of property "with intent to defraud creditors" was, if the person making the disposition subsequently became bankrupt, void as against the trustee in bankruptcy. The historical origins of the previous s 121, which can be traced to the Fraudulent Conveyances Act 1571 (UK) (13 Eliz I, c 5), have been explained in PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 521-522, per curiam; Cannane v J Cannane Pty Ltd (1998) 192 CLR 557 at 573-574, per Gummow J at 587-589, per Kirby J.

88 The current provision has its genesis in the report of the Law Reform Commission, General Insolvency Inquiry Report No 45, 1988) (Harmer Report). The Harmer Report recommended (vol 1, paras 667-669 widening the previous s 120 of the Bankruptcy Act 1966 (Cth) by replacing the expressions "settlement" and "disposition" with the concept of a "transaction at an undervalue". The Commission pointed out (at para 679) that if the "settlement" provision was reformed as recommended, there might be less need to challenge dispositions on the basis that they are fraudulent. Nonetheless, it accepted that the fraudulent conveyance provision had an important place in insolvency law. The Commission continued (at paras 680-681) as follows:

680. Intent to defraud. The critical element in the existing provision is an "intent to defraud creditors". It is sufficient if such intent is directed against only one creditor. The element of "intent to defraud", however, really amounts to an issue of whether there was an intent to defeat, delay or hinder creditors. As stated in DP 32 (para 449) it is the view of the Commission that the term "defraud" has unnecessary overtones of criminality. The substance and thrust of the provision is directed toward transactions that are made with intent to deprive creditors of their otherwise legitimate, expectant and timely rights. The connotation of fraud should be removed and the provision should express the expanded and better understood meaning of the term. …

681. Recommendation. The Commission recommends a revision of the Bankruptcy Act 1966 (Cth), s 121 by replacing the expression "intent to defraud creditors" with "an intention of defeating, delaying or obstructing one or more of the creditors of the company". While this does not greatly differ from the effect of the existing provision there is a shift in emphasis by:
• avoiding the connotation of "fraud" and

• requiring proof of an intention of the type specified.

Additionally, the Commission recommends that it must also be shown that the transaction had the effect intended. (Footnotes omitted.)

The Commissioner also recommended (at para 683) that for the purpose of determining whether a transaction was made with the necessary intention, the court should consider (inter alia) whether the Bankrupt was insolvent at the time of the transaction or became insolvent as a result of it.

89 The Commission's approach was taken up by the Senate Legal and Constitutional Legislation Committee in its report on the Bankruptcy Legislation Amendment Bill 1995 (Cth) (the Report). The Report did not give a detailed explanation for the change, but noted (at para 1.79) that the:

most problematic aspect of [the old s 121] is the use of the notion of "fraudulent intent" which carries with it overtones of criminality.

The Explanatory Memorandum to the Bankruptcy Amendment Bill made the same comment (at para 29) and noted (at para 23) that:

[t]o the extent that a person's intention in dealing with the property is relevant, as it will be in relation to proposed section 121, objective criteria are laid down which can be used to draw inferences as to the likely intention of the transferor of the property.

The Explanatory Memorandum also noted (at [84.24]) that the new s 121:

will change the tenor of the provision, and instead of focussing on the notion of fraud, is concerned with a person's purpose of delaying the satisfaction of creditors.

90 As the Explanatory Memorandum implies, there are some important differences between the old s 121 and the current version. Without being exhaustive, 3 such differences can readily be identified.

91 First, the current s 121(1) makes no reference to the debtor transferring or disposing of property "with intent to defraud creditors". The provision applies to make a transfer of property void as against the transferor's trustee in bankruptcy if, inter alia, the transferor's "main purpose in making the transfer" was either:

• to prevent the transferred property from becoming divisible among the transferor's creditors; or

• to hinder or delay the process of making that property available for division among the transferor's creditors.

92 Secondly, although the person challenging the transfer under the old s 121 had to prove that the transferor had "an actual intent to defraud creditors at the time of the disposition" (Cannane v J Cannane at 565-566, per Brennan CJ and McHugh J), it was not necessary to establish that that was the transferor's sole or even predominant intent: Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370 at 375, per Stephen J (with whom Menzies and Gibbs JJ agreed); Garuda v Grellman at 526-527, per curiam. The current provision requires the person challenging the transaction to establish that the debtor's "main purpose" in making the transfer was as described in s 121(1).

93 Thirdly, the current s 121(2) provides a means by which it can be "taken" that the debtor's main purpose was to prevent, hinder or delay the process of making property available for division among the transferor's creditors, namely:

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.

In Re Jury; Ashton v Prentice (1999) 92 FCR 68 at 81, the court pointed out that the language used in s 121(2) is not "if the transferor was insolvent". Their Honours explained the operation of s 121(2) as follows:

The statutory provision, as a matter of ordinary language, leaves open the possibility that it may also reasonably be inferred that the transferor was solvent. In other words, it is sufficient if the inference of insolvency is reasonably open. An analogy is the leaving of a case to a civil jury. If it can reasonably be inferred from all the circumstances that the defendant was negligent, or that the publication complained of was defamatory of the plaintiff, then the matter must go to a jury. Nevertheless the jury is not required to draw the relevant inference, and may not do so.

94 Several other points can be made about s 121 in its current form.

95 First, s 121(3) provides that s 121(2) does not limit the ways of establishing the transferor's main purpose in making a transfer. As was said in Re Jury (at 82):

What s 121(3) does is acknowledge that the trustee may resort to modes of proving the transferor's main purpose which are alternative to the presumption afforded by s 121(2). For example, the trustee may prove an admission by the transferee that the main purpose of the transfer was to prevent the property becoming divisible among the transferor's creditors, even though all of the circumstances at the time of the transfer did not permit, or positively contradicted, the inference that the transferor was, or was about to become, insolvent.

If reliance is placed on s 121(2), the transferor's subjective intention is likely to be irrelevant: in other words, if it can be reasonably inferred that the transferor was insolvent at the time of transfer, it will not matter if his or her subjective intention was not to prevent, hinder or delay the process of making property available for division among creditors: Re Jury at 82. On the other hand, if the trustee attacking a transfer does not rely on s 121(2), the trustee will need to establish that the transferor's subjective purpose was that described in s 121(1)(b).

96 Secondly, the Bankruptcy Act 1966 (Cth) does not define the expression "main purpose". The relevant dictionary definition of "main" is "chief; principal; leading". The concept is similar to that of the "dominant purpose" used in s 177A(5) of the Income Tax Assessment Act 1936 (Cth) (the ITAA 1936) (although the "dominant purpose" under Pt IVA of the ITAA 1936 is to be assessed objectively by reference to its objective facts). In FCT v Spotless Services Ltd (1996) 186 CLR 404 at 416; 34 ATR at 187-88; 96 ATC 5201 at 5206, the joint judgment interpreted "dominant" as meaning "the ruling, prevailing or most influential" purpose. A transfer of property will be within s 121(1)(b) of the transferor's principal or leading purpose was to prevent the transferred property from becoming divisible among his or her creditors, or to hinder or delay the process of making property available for division among the creditors. The transfer can be caught by s 121 even though the transferor had other purposes in mind.

97 Thirdly, as under the previous law (Williams v Lloyd (1934) 50 CLR 341 at 372, per Dixon J), the party attacking the transfer bears the onus of establishing that the terms of s 121(1) have been satisfied.

98 Fourthly, just as a court could infer from the surrounding circumstances that a transferor had an actual intention to defraud creditors (Noakes v J Harvy Holmes & Son (1979) 37 FLR 5 at 10-11, per Brennan J (with whom Deane and Fisher JJ agreed); Garuda v Grellman (1992) 35 FCR 515 at 523-524, per curiam; Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372 at 416-421, per Wilcox and Cooper JJ) so a court can infer from the circumstances (independently of s 121(2)) that a transferor's "main purpose" was that described in s 121(1)(b) of the Bankruptcy Act 1966 (Cth). Thus if a debtor makes a voluntary settlement of property, leaving the debtor without sufficient assets to meet his or her debts, it can readily be inferred that the debtor's main purpose was to prevent the transferred property from becoming divisible among creditors since that is the necessary consequence of the disposition: Freeman v Pope (1870) 5 Ch App 538 at 541, per Giffard LJ, followed in Noakes v Harvy Holmes at 10, per Brennan J.

99 Fifthly, a transferor's main purpose may be to hinder or delay the process of making property available for division among his or her creditors even if the transferor has no creditors, or is able to satisfy all creditors, at the date of the transfer: Re Jury at 82. It was well established under the previous law, for example, that a person who made a voluntary settlement immediately before entering into a financially hazardous venture could be said to have intended to defraud his or her creditors notwithstanding that there were no outstanding creditors at the date of the transfer: Mackay v Douglas (1872) LR 14 Eq 106 at 118-120, per Malins V-C; Official Trustee v Alvaro at 419-421, per Wilcox and Cooper JJ. In other words, the transferor's creditors can include future or anticipated creditors: see Ebner v Official Trustee in Bankruptcy (1999) 91 FCR 353 at 370-371, per curiam. A fortiori, a transferor may have the requisite purpose if assets are given away at a time when he or she is aware of an impending liability, but one which has not yet crystallised into an existing indebtedness: Barton v DCT at 374, per Stephen J (where the impending liability related to a taxation debt which would come into existence only once an assessment had issued).

Transfer of assets out of the reach of a future damages claimant

100 As I have noted, Mr Brereton contended that s 121 of the Bankruptcy Act 1966 (Cth) does not apply to an established professional person who, for more abundant caution, transfers his or her assets to family members in order to ensure that those assets will not be at risk in the event of a change in the law permitting claims for "in court" negligence. He argued that such a case is different from the "hazardous venture" cases. For this proposition he relied on the decision of the Court of Appeal in Ex parte Mercer; In re Wise (1886) 17 QBD 290.

101 In Ex parte Mercer, a master mariner, 9 days afters after being served with a writ in an action for breach of promise, made a voluntary settlement of a legacy of £500 which had fallen into possession some 5 months earlier. The plaintiff in the breach of promise action ultimately recovered £500 and the mariner was subsequently adjudicated bankrupt. In proceedings impugning the settlement, it was held that there was insufficient evidence to support a finding that he intended to delay, defeat or defraud his creditors. Ex parte Mercer ultimately depended on its particular facts. Lord Esher MR pointed out that at the time the voluntary settlement was made, the mariner had no debts and it was "entirely a matter of speculation" as to what the verdict might have been in the action. Accordingly, he considered (at 300) that the Divisional Court had been justified in finding that the mariner did not intend to defeat the plaintiff's claim.

102 It does not seem to me that Ex parte Mercer necessarily means that a barrister who transfers assets in order to keep them out of the hands of clients or potential clients who, at some stage in the future might sue for professional negligence, is outside the scope of s 121(1)(b) of the Bankruptcy Act 1966 (Cth) should the transfer be subsequently impugned. It must be borne in mind that s 121(1)(b) may be satisfied even if the transferor was solvent at the time of the transfer and even if the transferor had no creditors at that time. It seems to me that the answer to the question is likely to depend on the facts of the particular case.

103 I am prepared to assume for the purposes of this case, without deciding, that if all that is known is that a professional person:

• transfers the bulk of his or her assets to a family member for no consideration;

• has no creditors at the time of the transfer (or retains assets sufficient to meet all liabilities known at that time);

• is not engaged and does not propose to engage any hazardous financial ventures; and

• intends to protect the transferred assets from any action brought by a client who might in the future sue for professional negligence (there being no such suit in the offing at the time of the transfer),

then s 121(1) of the Bankruptcy Act 1966 (Cth) does not render the transfer void against the person's trustee in bankruptcy. For reasons that will appear, I do not think that this assumption is of assistance to the respondents in the circumstances of the present case.

THE BANKRUPT'S LIABILITY TO TAX IN 1987

104 The Bankrupt's liability to lodge tax returns and pay tax prior to 1987 was determined by the ITAA 1936. Like all Australian taxpayers, he was liable to furnish to the Commissioner an annual return, setting forth his income and deductions, unless he was a member of a class exempted by the Commissioner from the requirement: ITAA 1936, s 161(1). The Commissioner was required to make an assessment of a taxpayer's taxable income from the returns furnished by the taxpayer or from any other information in the Commissioner's possession: ITAA 1936, s 166. If any person defaulted in furnishing a return, the Commissioner could issue an assessment of the amount upon which, in his judgment, income tax ought to be levied and that amount was to be the person's taxable income: ITAA 1936, s 167.

105 Where a taxpayer failed to furnish when and as required to do so a return relating to a year of income, the taxpayer was liable to pay, by way of penalty, "additional tax equal to double the amount of tax payable by the taxpayer in respect of the year of income": ITAA 1936, s 222(1). As at 1987, the ITAA 1936 did not provide for a taxpayer to pay interest on tax that would have been due had a return been lodged in a timely fashion: cf Taxation Administration Act 1953 (Cth), Pt 11A, Div 1 (the TAA). It would seem that in 1987, the Commissioner could have issued assessments against the Bankrupt in respect of each of the years for which he had failed to lodge a return: cf ITAA 1936, s 170 (the Commissioner's power to amend assessments); DCT v Moorebank Pty Ltd (1988) 165 CLR 56 at 64-65, per curiam (State limitation laws do not apply to actions to recover additional tax).

106 Section 17 of the ITAA 1936 as it stood in 1987 and in earlier years provided that income tax at the rates declared by the Parliament was levied and was to be paid upon the taxable income derived during the year of income by any person. Section 204 of the ITAA 1936 provided that income tax assessed was due and payable on the date specified in the notice of assessment as the date on which tax was deemed payable, not being a date less than 30 days after service of the notice. By the ITAA 1936, s 208, income tax when due and payable was a debt due to the Commonwealth.

107 The authorities, especially Clyne v DCT (1981) 150 CLR 1; 12 ATR 173; 81 ATC 4429, establish that under the provisions in force in 1987 income tax did not become due until assessed and notice of the assessment had been served on the taxpayer: Taylor v FCT (1987) 16 FCR 212 at 217; 18 ATR 715 at 720; 87 ATC 4441 at 4445, per Woodward and Northrop JJ. Income tax was not payable until the date fixed by the ITAA 1936, (s 204), that is the date specified in the notice of assessment as the date on which the tax was due and payable: Comr of Taxation v Kavich (1996) 68 FCR 519 at 524, per Lockhart J, with whom Lee J agreed. In the absence of an assessment, tax was not due (in the sense of owing) and was not payable. It was, however:

a liability contingent on an assessment being issued and served:

Taylor at FCR 218; ATR 721; ATC 4446. It is therefore accurate to describe the Bankrupt in 1987 as having a liability to pay tax in respect of the years of income for which he had failed to lodge returns, contingent on the issue and service of assessments by the Commissioner.

108 A failure to lodge tax returns when required to do so constituted a criminal offence: TAA, ss 8C, 8E (providing for penalties). The imposition or payment of a penalty in respect of a taxation offence did not relieve the offender from liability to assessment for tax: TAA, s 8ZH.

THE PRINCIPLES APPLICABLE TO THE NO CASE SUBMISSIONS

The role of a judge sitting alone

109 The expression "no case submission" has been described as an "unfortunate phrase to use in civil proceedings": James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 399, per Toohey J, quoting Tate v Johnson (1953) 53 SR (NSW) 492 at 493-95; 70 WN (NSW) 302 at 304, per Street CJ. The reason is that it may mean different things. As Tadgell J pointed out in Protean (Holdings) Ltd v American Home Assurance Co [1985] VR 187 at 238-239, a no case submission might rest on the proposition that there is no evidence at all in support of the applicant's case: that is, accepting all of the applicant's evidence at face value, no case has been established at law. Alternatively, the submission might be that although there is some evidence in support of an applicant's case (such as the Trustees' case in the present proceedings), the judge sitting alone should not act upon that evidence because it is so inherently unreliable or equivocal that the decision-maker should find that the applicant has not discharged the burden of proof resting on him or her. In essence, the respondents' submission in the present case is of the latter kind.

110 In Rasomen Pty Ltd v Shell Company of Australia Ltd (1997) 75 FCR 216, the full court held (at 228) that in addressing a no case submission the function of a judge sitting alone is no different from that which has to be performed by a judge who has heard all the evidence of the parties in the usual way and who has to give final judgment. In particular, where the moving party (in this case the respondents) contends that the evidence does not give rise to the inferences of fact alleged by the opponent (in this case the Trustees), it is appropriate for the trial judge to decide what inferences he or she would draw from the evidence and to act on those conclusions, if necessary to determine finally the issues in the case: Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd (2000) 169 ALR 344, per Sackville J, at 360.

111 In Rasomen v Shell Company, the full court (at 226-227) approved the observation of Young CJ (with whom Fullagar J agreed) in Protean v American Home Assurance at 215:

Where a trial judge entertains a submission that there is no case to answer without requiring an election, any one of three results may ensue. The judge may conclude that the evidence could sustain a finding against the party making the submission, in which case he would overrule the submission and allow the case to proceed. The second possible result is that the case is so finely balanced that the judge is not satisfied that even if the evidence could sustain a finding against the party making the submission he would be prepared to make the necessary finding himself. Where the case is being tried without a jury, a trial judge in such a position would no doubt allow the case to proceed. …

The third possible result of a submission that there is no case to answer is that the judge is persuaded by it and decides to uphold it. In reaching such a conclusion a trial judge is entitled to draw all proper inferences from the evidence, but he cannot draw inferences against the party making the submission based upon the absence of evidence from that party. Theoretically he then concludes that the evidence could not sustain a finding against the party making the submission. In such a case he upholds the submission. The consequence must then be that judgment must be entered for the party making the submission. His opponent has simply not discharged the burden which rested on him of establishing his case. Where this result ensues there is no room for a distinction between whether the evidence could sustain a finding against the party making the submission and whether the judge would make such a finding. Such a case is covered by the second possible result referred to above. The third possibility is where the proposition "no case to answer" means "would you, the Judge, on the evidence given, decide for the party against whom the submission is made": cf Jones v Dunkel (1959) 101 CLR 298 at 330-1. (Emphasis added.)

112 As I have explained, the respondents elected to call no evidence on the issues in respect of which the "no case submission" has been made and the Trustees agreed to this course. In these circumstances, as Toohey J observed in James v ANZ Bank at 400:

the judge has before him all the evidence upon which he is called to make a decision. Any distinction between the role of the judge in ruling on a no case submission and the role of the judge as an arbiter of fact becomes largely illusory. (This of course is in the context of a no case submission based on the evidence; such a submission based on a proposition of law may be in quite a different position).

113 Toohey J in James v ANZ Bank did not need to address the question of whether, where the moving party on a no case submission elects to call no evidence, the trial judge is entitled to draw inferences against the moving party based on the absence of evidence from that party. The respondents' submissions appeared to assume that the position stated in Protean applies in the present case notwithstanding that they elected to call no evidence as the price for being permitted to put the no case submissions. Mr Coles did not explicitly challenge this assumption, although he did suggest, without elaboration of the legal position, that I should take into account the fact that the Bankrupt himself had not been called by the respondents.

114 The no case submissions in the present case rest on what is said to be the insufficiency of the evidence to discharge the burden of proof resting on the Trustees. As a matter of principle, it is difficult to understand why, in such a case, once the respondents have made the election not to call evidence, the material to be taken into account should not include any inferences that may be available on the principle of Jones v Dunkel (1959) 101 CLR 298, by reason of their failure to call evidence. The respondents, by their election, have chosen to adduce no evidence in support of their case. The position is different from that which obtains where the respondents have reserved the right to call evidence if the no case submission is rejected. In such circumstances, it would be inappropriate to draw adverse inferences against the respondents for not doing something they have not yet been called on to do. But here the respondents have made it clear that they will not be calling, for example, Mrs Cummins or the Bankrupt, regardless of the outcome of the no case submission on the 3 issues that have been identified. As Toohey J pointed out in James v ANZ, in substance I am in the position of an arbiter of fact on those issues at the conclusion of a trial.

115 I propose to analyse the facts of the present case in the first instance independently of the principle of Jones v Dunkel. I shall then consider the effect of that principle, assuming (as I think is the better view) that it can apply where the moving party on a no case submission has elected to call no evidence.

Burden of proof

116 Mr Coles did not dispute the respondents' submission that, although the civil standard of proof applies, in determining what inferences should be drawn from the primary facts, it is necessary to have regard to the seriousness of the allegations made against the Bankrupt (even though he is not a party to the proceedings) and the gravity of the consequences flowing from an adverse finding: see Briginshaw v Briginshaw at 361-362, per Dixon J.

117 Nonetheless, it is also necessary to bear in mind that s 121 of the Bankruptcy Act 1966 (Cth), unlike its predecessor, does not require a finding to be made that the Bankrupt intended to defraud his creditors. The finding that is required for the Trustees to succeed is that the Bankrupt's main purpose in making the transfer was to prevent the transferred property from becoming divisible among the Bankrupt's creditors or to hinder or delay the process of making property available for division among the creditors. As the Explanatory Memorandum to the Bankruptcy Legislation Amendment Bill 1996 (Cth) makes clear, the departure in the new s 121 from the focus on fraud was a deliberate choice by Parliament. Doubtless, a finding that the Bankrupt had the requisite "main purpose" is a serious matter, but it does not have the same degree of seriousness or gravity of consequences as a finding, for example, that a respondent has committed fraud and is accordingly liable to pecuniary penalties imposed by statute: cf ACCC v Amcor Printing at 360-361. This is to be borne in mind in applying the proposition stated by Dixon J in Briginshaw v Briginshaw at 362, that:

reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequences of the fact or facts to be proved.

Inferences

118 In ACCC v Amcor Printing, I said this (at 361):

The principle was stated by the High Court in Bradshaw v McEwans Pty Ltd (HC of A, 27 April 1951, unreported) and adopted repeatedly since:

Of course as far as logical consistency goes many hypotheses may be put which the evidence does not exclude positively. But this is a civil and not a criminal case. We are concerned with probabilities, not with possibilities. The difference between the criminal standard of proof in its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence, while in the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort, where direct proof is not available, it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture.… But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then, though the conclusion may fall short of certainty, it is not to be regarded as mere conjecture or surmise.

This principle is to be borne in mind in the present case. It is, of course, also to be borne in mind that the question is whether the evidence is sufficient for me to find that the Bankrupt's main purpose was to defeat or delay creditors.

THE BANKRUPT'S PURPOSE

Does the evidence justify the inference that the bankrupt's main purpose was to defeat or delay his creditors?

119 I have explained the manner in which the Trustees put their case and the extent to which the issues were narrowed in the course of argument. The critical question is whether, independently of the deeming effect of s 121(2) of the Bankruptcy Act 1966 (Cth), the primary facts justify inferring that the Bankrupt's main purpose in transferring the Hunters Hill property and the Shares was that described in s 121(1)(b), namely:

• to prevent the transferred property from being divisible among his creditors; or

• to hinder or delay the process of making property available for division among his creditors.

120 Mr Brereton correctly pointed out that the evidence adduced on behalf of the Trustees was less complete than might have been expected. For example, it would not have been difficult for the Trustees to call evidence (if it be the case) that subpoenas had been issued and served on the Bankrupt requiring him to produce records of his professional income prior to 1987 and that no documents had been produced in response. Similarly, the Trustees could have tendered searches of land titles records (if such searches had been conducted) in order to show that the Bankrupt had not been registered as proprietor of any land in New South Wales in 1987, other than in respect of his interest in the Hunters Hill Property.

121 It is, of course, necessary to take account of the evidence as a whole, including apparent omissions of this kind. But the question is not whether the Trustees' case could have been improved. It is whether, on the evidence that has been adduced, it is appropriate to infer that the Bankrupt's main purpose, at the time the transfers took place, was as described in s 121(1)(b) of the Bankruptcy Act 1966 (Cth). As I have explained, in assessing the no case submission made by the respondents, my task is no different from that which must be performed by a judge who has heard all the evidence in a case and is to give final judgment. As I have also explained, I shall approach the submissions, in the first instance, on the basis that I cannot draw inferences against the respondents based on the absence of evidence from them on any given issue. I shall also take into account the Briginshaw principle.

122 It seems to me that there is one overriding factor in this case that cannot be pushed into the background or minimised. It is that by August 1987 the Bankrupt had not lodged a tax return for over 30 years. By that time he had been in practice as a barrister for at least 22 years and probably 26 years. This is not like the "hazardous venture" cases, which typically involve a person of sound financial position disposing voluntarily of assets in order to keep them out of the reach of anticipated or future creditors. The Bankrupt, as at 1987, had what properly can be described as "an impending liability" for income tax. It is true that, unlike the taxpayer in Barton v DCT the Bankrupt had not actually lodged a return and thus no assessment would actually issue until the ATO had ascertained the true position. But the Bankrupt who, after all, was a lawyer, must have known and appreciated in 1987 that the ATO's state of ignorance could end at any moment. He must have known and appreciated that once his egregious breaches of his statutory obligations came to the attention of the ATO, the Commissioner had both the power and duty to issue assessments in respect of previous income years, perhaps going back many years.

123 It is also relevant that the Bankrupt must have been aware not only that he was contingently liable to pay income tax due in respect of many years of income, but that failure to lodge tax returns when required by law to do so constituted a criminal offence. He must also have realised that once his tax delinquency was discovered and revealed, he was at risk of professional disgrace and loss of his right to practise as a barrister. Moreover, the Bankrupt plainly had no intention of "coming clean" in 1987 (it was to be another 12 years before he lodged any tax returns). These facts make it much easier to infer that the Bankrupt was prepared to take measures which he well understood were designed to prevent the Commissioner recovering tax due (in the sense I have explained) in respect of past taxation years.

124 Mr Brereton sought to underplay the significance of the Bankrupt's knowledge of his own tax delinquency. Mr Brereton asked, rhetorically, why the Bankrupt suddenly, after 30 or more years of tax delinquency, would wish to protect his assets against the ATO. At this stage, it is sufficient to observe that, so far as the evidence reveals, only the Bankrupt knew the true position concerning his tax delinquency in 1987. It is possible, as Mr Brereton suggested, the Bankrupt employed some psychological mechanism to suppress the thought that his delinquency would ultimately be discovered. But there is no evidence of that. The most obvious and, to my mind, irresistible inference from the evidence is that, whatever mechanism the Bankrupt used to rationalise his pattern of tax default, he was fully aware of the fact that with each passing year his liability to the Commissioner was increasing. In other words, his indebtedness to the Commissioner, contingent only on the issue and service of assessments, must have been very much in the forefront of the Bankrupt's mind.

125 Mr Brereton submitted that there was insufficient evidence to justify the conclusion that the Bankrupt had incurred a substantial contingent or potential tax liability in 1987. Indeed, at one point, Mr Brereton submitted that the evidence was insufficient to justify an inference that the Bankrupt's earnings prior to 1987 had exceeded the threshold below which a person was not required to lodge a tax return.

126 These submissions seem to me to overstate the deficiencies in the evidence. By 1987, the Bankrupt had been in practice as a barrister for at least 22 years and probably more. He had been appointed a senior counsel in 1981, 6 years before the asset transfers took place. Mr Brereton did not dispute that I could take judicial notice of the fact that appointment as a senior counsel is and was at the time a recognition of a barrister's professional attainments and expertise. Moreover, by 1987 the Bankrupt had acquired the Shares which were worth $360,000 and entitled him, as a practical matter, to occupy a "double room" on a floor of barristers' chambers. In 1986, the Bankrupt acquired units entitling him to occupation of another set of chambers in Parramatta for the purpose (so I infer) of facilitating his practice. There is nothing to indicate that the assets connected with his practice were paid for otherwise than out of the Bankrupt's professional earnings. These facts lead readily enough, in my opinion, to an inference that for many years prior to 1987 the Bankrupt derived substantial assessable income from his practice as a barrister and, after taking into account allowable deductions, would have been liable to pay tax on that income.

127 Any doubts about the appropriateness of drawing this inference are, I think, allayed by the information contained in the Bankrupt's tax returns for the 1992 to 1999 taxation years. Although based on incomplete information (which may well have resulted in an understatement of assessable income), the returns indicate that the Bankrupt's annual gross receipts for the first 4 years (the 1992-1995 taxation years) averaged $337,420 and his annual net business income averaged $204,397. For reasons not explained in the evidence, the recorded amounts decreased for the 1996 taxation year, but increased again thereafter.

128 Clearly it would not be appropriate to extrapolate from the taxation returns to make findings as to the Bankrupt's precise income for a particular period prior to the 1987 transfers. Nor can I rule out significant variations in the Bankrupt's income from year to year, depending upon such matters as changes in his practice, his health, the general vicissitudes of life and the changing value of money. Nonetheless, the taxation returns cover a lengthy period, commencing slightly less than 4 years after the transfers themselves were executed. There is nothing to suggest that the Bankrupt's earnings during that period were abnormally high, or markedly out of alignment with earlier periods in which he practised as a barrister (although doubtless his appointment as a senior counsel in 1981 had some effect on his practice).

129 In these circumstances, in my opinion, the returns support the inference available from other evidence that in 1987 the Bankrupt faced very substantial tax liabilities flowing from his tax default over many years. It is not possible on the evidence to be precise as to the extent of the Bankrupt's tax liabilities. I am satisfied, however, that the contingent liabilities amounted at the very least to several hundred thousand dollars (in 1987 dollars) and, in all probability, to substantially more. The Bankrupt also faced the strong likelihood that the Commissioner, once assessments issued, would impose additional tax of up to double the tax due, although the precise amount of additional tax would depend on how the Commissioner exercised his statutory powers.

130 A similar factual question arises as to whether the Bankrupt retained insufficient assets to satisfy his tax liabilities, if the Commissioner were to issue assessments against him. The significance of this question is that, if the Bankrupt left himself insufficient assets to meet his potential tax liabilities, it is much easier to infer that his main purpose was to defeat or delay his creditors, specifically the Commissioner. Once again, Mr Brereton submitted that the evidence did not support the inference that the Bankrupt could not have paid any tax that might have become due. He argued that I could not be satisfied that the Bankrupt did not retain assets, other than those transferred to Mrs Cummins and Aymcopic, that could be used to satisfy any debt to the Commissioner.

131 There is no evidence that, after executing the transfers in 1987, the Bankrupt retained assets substantial enough to enable him to satisfy his liability to pay tax. (The Bankrupt did retain his units in the Parramatta Unit Trust, but this was due to his solicitor's failure to implement instructions to transfer the units in 1987 by way of gift.) However, the mere absence of evidence that the Bankrupt retained other assets could not, without more, satisfy me affirmatively that there were no such assets. But there is some evidence from which inferences can be drawn.

132 If, as Mr Brereton contended, one of the Bankrupt's motives for divesting himself of 2 valuable assets in 1987 was to protect himself against being sued by future clients, it would have made no sense for the Bankrupt to have retained other substantial assets in his own name. Furthermore, if one thing is clear in this case, it is that the Bankrupt was not concerned to make provision for his income tax liabilities. Moreover:

• the Bankrupt's tax returns give no indication that he either disposed of substantial assets or derived substantial income from investment assets during the period 1992 to 2000 (the disposal of substantial assets would have had implications for capital gains tax);

• the Bankrupt's 2001 statement of affairs disclosed no substantial assets in his own name, other than the units in the Parramatta Unit Trust, a motor vehicle and shares worth about $40,000; and

• bank documents record, apparently on the basis of information supplied by or with the authority of Mrs Cummins in 1998, that "all assets are in her name".

133 The evidence does not enable me to rule out definitively the possibility that the Bankrupt retained assets in his own name after the 1987 transfers, but disposed of them between September 1987 and June 1991 (the tax returns cover the period from July 1991 onwards). However, I regard this as merely a possibility. It is much more likely on the evidence that the Bankrupt disposed of virtually all his substantial assets in 1987. Whether or not this is so, having regard to the documentary evidence to which I have referred, I am satisfied that the Bankrupt, after August 1987, did not retain sufficient assets to meet in full his then liability to pay income tax. A fortiori he did not retain sufficient assets to ensure that he could meet in full his liability to pay income tax and any additional tax that the Commissioner might have chosen to impose.

134 A third factor to take into account in assessing the Bankrupt's purpose or purposes in transferring the assets is the form of the transactions and the advice he appears to have received. Contrary to Mr Coles' submissions, I am not prepared to infer from the solicitor's contemporaneous notes that he was privy to the Bankrupt's tax delinquency. If he had been, the likelihood is that the notes would have been expressed differently. But the Bankrupt was well aware of his own tax delinquency and chose not to tell his solicitor of that critical fact, despite his proposal to divest himself of his major assets.

135 It is clear that the solicitor directed his attention to the effect on the proposed transactions of ss 120 and 121 of the Bankruptcy Act 1966 (Cth). It is also clear enough that the solicitor recommended that the transfers should record that the expressed consideration had actually been received, because he thought (rightly or wrongly) that this would increase the chances that the transactions would survive subsequent scrutiny if challenged under the relevant legislation. (His notes say that "Mary must be a purchaser" and a letter written by him 10 years after the events suggests that he thought in 1987 that if the transfers were for an expressed consideration and the Bankrupt subsequently forgave the indebtedness, the transfers would not constitute "settlements" for the purposes of the Bankruptcy Act 1966 (Cth), s 120.)

136 It is very likely that the solicitor discussed his views with his client, the Bankrupt. The Bankrupt, being aware of his own tax delinquency, would have seen the transactions in a very different light than his solicitor. Given the Bankrupt's state of knowledge, I think it virtually inevitable that, whatever techniques he used to rationalise his tax default, at the time of the transactions he had at the forefront of his mind the impact of the transfers on the Commissioner's chances of recovering the income tax that he (the Bankrupt) should have paid over many years. The fact that the Bankrupt had no intention of "coming clean" reinforces the inference that, in his mind, the principal or leading purpose of the transfers was to protect his major assets from any claims that would be made by the Commissioner if and when the tax delinquency was discovered. Whether the Bankrupt took that view because he thought that the misleading form of the transfers would offer protection when the time came, or because the solicitor's advice gave him reason for optimism, is not necessary to determine.

137 In summary, I am satisfied that:

• the Bankrupt was well aware in August 1987 that he had incurred very substantial liabilities to the Commissioner, contingent only on the Commissioner issuing assessments in respect of past income years;

• the Bankrupt was well aware at that time that the Commissioner would issue assessments once the Bankrupt's longstanding tax delinquency became known, an event that could occur at any time;

• the Bankrupt divested himself voluntarily of virtually all his substantial assets in August 1987;

• in any event, the assets retained by the Bankrupt were not sufficient to meet his taxation liabilities, if the Commissioner decided to issue assessments; and

• the Bankrupt saw the transfers as increasing the chances that his assets would be protected from any claims made by the Commissioner.

138 These findings, in my view, strongly support the conclusion that the Bankrupt's main purpose was to prevent the transferred property from becoming divisible among his creditors, in particular the Commissioner. Mr Brereton, however, submitted that the evidence was equally consistent with the Bankrupt having 3 other purposes in mind and that, therefore, I should not conclude that the Bankrupt's main purpose was to defeat or delay his creditors. As I have noted, he emphasised the proposition that where an applicant's case rests on inferences from primary facts, it is not enough for the circumstances to give rise to inferences of equal degrees of probability.

139 One of the 3 alternative hypotheses can be discarded immediately. There is no evidence whatsoever to support the suggestion that the Bankrupt's purpose was to save a faltering marriage. Any such suggestion is no more than unsupported speculation.

140 The second hypothesis is that the Bankrupt wished to provide for his wife and family. There is nothing, however, in the documentation which suggests that this was the Bankrupt's motive for the transfers, or was even one of his motives. The transfers were not expressed to be in consideration of the Bankrupt's love and affection for his wife and family. While the form the transactions ultimately took doubtless reflected the solicitor's views, there is nothing in his notes that suggests that the Bankrupt stated that he was motivated by the desire to provide for his family. (Of course, even if the Bankrupt did express that to be his motive, it would be necessary to take account of what he concealed from his solicitor.)

141 Moreover, the 1998 correspondence and bank records, apparently reflecting information supplied by Mrs Cummins or with her authority, state that assets were placed in her name for legal reasons in view of her husband's occupation. This would have been a very strange statement to make, particularly to a financial institution asked to provide a loan to her in her own right, if Mrs Cummins had understood that the Bankrupt intended to give her his interest in the Hunters Hill property because he wished to provide for her. The statements suggest that Mrs Cummins' understanding was that there was something about her husband's occupation as a barrister that had prompted the transfer to her and that the Bankrupt's motive was not to provide for her financial security or that of other family members.

142 In my view, the evidence does not support the contention that the Bankrupt was motivated to any significant extent to execute the transfers by a desire to benefit his wife and family. It may go too far to say that such a desire played no part whatsoever in the Bankrupt's decision-making process. But even if it played a minor part, that is consistent with a finding that the Bankrupt's main purpose was to defeat or delay his creditors.

143 The respondents' third hypothesis is that the Bankrupt was motivated by his concern that the law relating to a barrister's in-court immunity might be changed by the High Court and his desire to avoid the possibility that his assets might be at risk if a future client sued him. As I have explained, this hypothesis assumes that the "main purpose" of a barrister who is motivated by such a concern is not to defeat or delay his or her creditors within the meaning of s 121(1)(b) of the Bankruptcy Act 1966 (Cth).

144 There are curious aspects to this hypothesis. Mr Brereton submitted that I should infer that the Bankrupt had been prompted to transfer his assets by the Giannarelli litigation, specifically by the High Court's grant of special leave on 14 August 1987. The evidence establishes, however, that the Bankrupt must have given instructions to the solicitor to take the necessary steps to transfer the assets before the High Court granted special leave. At the time instructions appear to have been given, the Victorian full court had unanimously upheld the common law immunity of a barrister from suit in respect of "in-court" work. In these circumstances, it would be somewhat surprising if the Bankrupt were motivated, at the time he gave instructions, by a genuine fear that the High Court would change the law relating to barristers' immunity. Furthermore, there is no evidence that the Bankrupt was actually aware of the Giannarelli litigation.

145 Nevertheless, it seems that the Bankrupt at some stage gave as an explanation for the course he proposed the fact that there were risks associated with his practice as a barrister. So much can be inferred from the 1998 bank records to which I have already referred. The solicitor's notes made shortly before the transfers are consistent with such an explanation having been made at the time, although they do not by any means point to it unequivocally.

146 The critical point, in my opinion, is that the Bankrupt, alone of the participants in the 1987 transfers, knew the true position concerning his tax delinquency and liabilities. He concealed the facts from his solicitor and, presumably, from his wife. From his perspective, the risks he faced were:

• the possibility that at some time in the future his assets would be under threat from a client who might sue him for professional negligence (notwithstanding a barrister's immunity from suit for in court negligence which immunity had been upheld by the Victorian full court and was subsequently affirmed by the High Court); and

• the inevitability that the Commissioner would pursue him to recover the substantial tax liabilities that had already accrued, subject only to the Commissioner ascertaining the true position and issuing assessments against him.

Faced with these competing risks, in my view it defies reality to conclude that the Bankrupt's main purpose was other than to defeat the Commissioner's claims, which could be kept at bay only so long as the Bankrupt's tax delinquency remained undetected.

147 I think the probabilities, having regard to the timing of the Bankrupt's instructions to his solicitor, are that the Bankrupt was not genuinely concerned that the High Court might change the law relating to barristers' immunity from suit. It may be that the Bankrupt took the Giannarelli litigation (if he was aware of it at the time he gave instructions for the transfers) or perhaps concerns expressed by colleagues about the financial risks faced by barristers (if he heard of such concerns), as the occasion for divesting himself of assets. At most, however, the Bankrupt saw protecting himself against future professional negligence claims as a side benefit of the transfer of assets. In the light of the circumstances I have identified, his main purpose was to prevent his assets from becoming divided among his creditors, specifically the Commissioner.

148 I appreciate that, in the end, a finding as to whether the Bankrupt's main purpose was that specified in s 121(1)(b) of the Bankruptcy Act 1966 (Cth), depends on an assessment of the evidence as a whole. To this end it is not enough merely to evaluate separately each of the hypotheses advanced by Mr Brereton against that supported by the Trustees. They must all be considered together. In my opinion, the circumstances considered as a whole point to the Bankrupt's main purpose in transferring his assets was being to prevent the assets being divisible among his creditors, specifically the Commissioner. Any other purpose, whether viewed individually or collectively, was subsidiary to that purpose.

149 It follows that I reject the respondents' submission that the Trustee failed to adduce sufficient evidence to support their pleaded case in relation to the Bankrupt's transfer of his interests in the Hunters Hill Property and the Shares.

The respondents' failure to call evidence

150 I have reached the conclusion that the respondents' no case submissions, insofar as they are based on the Bankrupt's main purpose in making the transfers, must fail on the basis that it is not open to me to draw inferences against them for their failure to adduce evidence. As I have explained, I think that the better view is that, once the respondents elect to call no evidence, the usual principles apply, including the principles stated in Jones v Dunkel at 320-321, per Windeyer J. These principles allow (not compel) the court to take into account the unexplained failure by a party to call evidence from a witness, if that party could reasonably have been expected to call the witness in his or her case: O'Donnell v Reichard [1975] VR 916 at 929, per Newton and Norris JJ. It will usually be regarded as reasonable for one party to call a witness if the witness is in that party's camp so as to make it unrealistic for the other party to call him or her: Payne v Parker [1976] 1 NSWLR 191 at 200-201, per Glass JA. The reasoning that is permissible:

involves the treatment of a failure to adduce evidence as a reason for increasing the weight of the proofs of the opposite party or reducing the weight of the proofs of the party in default. The principle may be invoked for a deficiency in the evidence either of a party bearing the legal onus of proving an issue, or of a party bearing the evidentiary burden only. If the failure is of the latter kind, the direct evidence of the party with the onus of proof can be more readily accepted, and inferences in his favour may be more confidently drawn: Payne v Parker at 200-201.

The significance of the inference depends on the closeness of the relationship of the absent witness with the party who did not call the witness: Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) 110 FCR 157 at 176, per Hill and Finkelstein JJ (quoting Heydon J D, Cross on Evidence, 6th Aust ed, 2000, Butterworths Sydney at para 1215).

151 Mrs Cummins admits on the pleadings that she has lived together with the Bankrupt as his wife since 1964. The evidence is consistent with that admission. The Bankrupt and Mrs Cummins were the shareholders of, and the Bankrupt was a director of Aymcopic. Aymcopic, in turn, was the trustee of the Cummins Family Trust.

152 In these circumstances, the Bankrupt can fairly be regarded as within the respondent's camp. He has a close relationship, in the relevant sense, both with Mrs Cummins and Aymcopic and it seems to me that it would have been reasonable to have expected the respondents to call the Bankrupt. I do not think that the fact that the Trustees could cause the Bankrupt to be examined pursuant to s 81 of the Bankruptcy Act 1966 (Cth) detracts from this conclusion, since the Trustees cannot use the transcript of any examination as evidence in this case (the Bankrupt having been removed as a party). Certainly the Bankrupt's evidence would have shed light on the critical issues in the case. For example, he would have been able to give evidence of his income from his practice as a barrister in the years prior to August 1987 and of the assets that he retained after the 1987 transfers. Most importantly, he would have been able to give evidence as to his purpose or purposes in entering into the transactions.

153 In my opinion, the Bankrupt's absence from the witness box enables me to accept more readily the inferences I have drawn from the evidence. Specifically, I am able more readily to infer that the Bankrupt's main purpose in effecting the transfers was to prevent the transferred assets from becoming divisible among his creditors.

The argument based on s 121(2) of the Bankruptcy Act 1966 (Cth)

154 In view of the conclusion I have reached, it is not necessary to address Mr Coles' undeveloped submission founded on s 121(2) of the Bankruptcy Act 1966 (Cth). The findings of facts, however, suggest that the submission, had it been developed, might have had some force.

THE MONEY TRANSFERS

155 Little attention was paid in submissions to whether the Trustees had adduced evidence sufficient to establish the case pleaded in relation to the money transfers totalling $55,969.60. That case rested on the allegation that the payments were made without consideration, or for less than market value and accordingly were void as against the Trustees by virtue of s 120 of the Bankruptcy Act 1966 (Cth).

156 The evidence shows only that 7 cheques totalling $55,969.60 were drawn by the Bankrupt in favour of Mrs Cummins during the period 31 December 1996 to 31 December 1999. There was no evidence as to the purpose of these payments and Mr Porter, when asked, said he had no idea what the payments were for. However, there was evidence that during the period from December 1996 to December 1999, Mrs Cummins drew cheques in favour of the Bankrupt. For example, on 31 May 1997 Mrs Cummins drew a cheque for $5010 and on 31 December 1998 she drew a cheque for $15,000. There was also evidence that Mrs Cummins had borrowed moneys from the Bankrupt on other occasions.

157 The evidence is consistent with the moneys paid by the Bankrupt being by way of loan to Mrs Cummins or perhaps for household purposes rather than for Mrs Cummins' benefit. Indeed, on the evidence before me the probabilities are that the payments were not of the kind caught by s 120(1) of the Bankruptcy Act 1966 (Cth). Accordingly, the respondents' no case submission in relation to paras 34-37 of the statement of claim must be upheld.

CONCLUSION

158 The respondents' no case submissions succeed in relation to the claims made in paras 10-15 and 28-37 of the statement of claim. That is, the submissions succeed in relation to:

• the Trustees' claim that the transfer of the Bankrupt's interest in the Hunters Hill property is void against them by reason of s 120 of the Bankruptcy Act 1966 (Cth); and

• the money transfers claims (except for the claim that Mrs Cummins had failed to repay the loan of $138,546.80).

159 The respondents' no case submissions fail in relation to the claims made in paras 4-9 (including para 16, so far as it is dependent on paras 4-9) and paras 17-23 of the statement of claim. That is, the submissions fail in relation to:

• the Trustees' claim that the transfer of the Bankrupt's interest in the Hunters Hill Property is void against them by reason of s 121 of the Bankruptcy Act 1966 (Cth); and

• the Trustees' claim that the transfer of the Shares is void against them by reason of s 121 of the Bankruptcy Act 1966 (Cth).

160 The appropriate course is to set a date for a further hearing to resolve any outstanding issues. These include the extent of the Bankrupt's interest in the Hunters Hill Property at the time of the 1987 transfer. It will of course also be necessary to address the issues in respect of which no case submissions were not made, in accordance with the evidentiary regime agreed between the parties.

161 I shall list the matter for further directions to set a further hearing date.