Cannane & Anor v Official Trustee in Bankruptcy

(1996) 65 FCR 453

---

(Judgment by: Beaumont, Hill JJ)

Andrew Vincent Cannane, First Appellant
Wisbeck Pty Ltd, Second Appellant
Official Trustee in Bankruptcy as Trustee of the Bankrupt Estate of John Vincent Cannane, Respondent
Denise Mary Cannane, First Appellant
J Cannane Pty Ltd (in liq), First Respondent
John Vouris (as Liquidator of J Cannane Pty Ltd (in liq)), Second Respondents

Court:

Judges:
Beaumont
Hill

Subject References:
Bankruptcy
Application to set aside antecedent transactions
disposition of property with intent to defraud creditors under the Bankruptcy Act 1966, s121(1)
transfer of shares with no commercial value at time of disposition
whether commercial value a prerequisite to establishing an intention to defraud
payment of full consideration not determinative
existence of intention to defraud to be determined having regard to all the circumstances
Whether transferees purchasers in good faith
transferee with full notice of transferor's intention to place shares beyond reach of creditors
transferee without notice of purpose of transaction
transferee cannot deliberately eschew being put on notice of relevant facts and circumstances
settlement under the Bankruptcy Act 1966, s120
transfers of nominal value
retention of property must be contemplated
Valuation
shares in private company
price which a willing but not anxious vendor could reasonably expect to pay, and a willing but not anxious purchaser could reasonably expect to pay in friendly negotiation
events subsequent to date of valuation not to be taken directly into account
value to be determined without reference to warranties which may inhere to them
shares with no commercial value
prospect of company being used as investment vehicle for backdoor listing

Legislative References:
Bankruptcy Act 1966, ss120, 121 - ss 120; ss 121

Case References:
P T Garuda Indonesia Ltd v Grellman - (1992) 35 FCR 515
Freeman v Pope - (1870) LR 5 Ch App 538
Re Walters; Ex parte The Official Assignee - (1898) 19 LR (NSW) B & P 1
In re Tetley; ex parte Jeffrey - (1896) 66 LJQB 111
Lloyd's Bank Ltd v Marcan - [1973] 1 WLR 33
Trautwein v Richardson - (1946) 52 ARG LR 129
Re Barnes; Ex parte Stapleton - [1962] Qd R 231
Mogridge v Clapp - [1892] 3 Ch 38
The Official Trustee v Marchiori - (1983) 69 FLR 290
Official Trustee in Bankruptcy v Mitchell - (1992) 38 FCR 364
Caddy v McInnes - (1995) 131 ALR 277
Abrahams v The Federal Commissioner of Taxation - (1944) 70 CLR 23
Commissioner of Succession Duties (SA) v Executor Trustee & Agency Co (SA) Ltd - (1947) 74 CLR 358
St Helens Farm (ACT) Pty Ltd v Federal Commissioner of Taxation - (1979) 79 ATC 4161
Gorton v Federal Commissioner of Taxation - (1965) 113 CLR 604
Hardie v Hansen - (1960) 105 CLR 451

Hearing date: 29 February 1996
Judgment date: 22 March 1996

Sydney

---

Judgment by:
Beaumont
Hill JJ

The appellants, Andrew Vincent Cannane ("Andrew") and Denise Mary Cannane ("Mrs Cannane") appeal against the judgment of a judge of this Court (Tamberlin J), to the extent that his Honour held that transfers of one share each to them by Mr John Cannane ("Mr Cannane") were void under s121(1) of the Bankruptcy Act 1966 (Cth) ("the Act") as a disposition made by Mr Cannane with intent to defraud creditors.

THE BACKGROUND FACTS

Although the background facts appear complicated, there is no real dispute between the parties about them.

Mr Cannane had, since 1978, been a director of Ausminco Holdings Limited ("Ausminco"), Carbon Consulting International Pty Limited ("CCI") and Commercial and Domestic Finance Limited ("CDF").

CDF was a wholly owned subsidiary of Ausminco. Ausminco and CDF together owned all the shares in CCI. The business of CCI was providing technical and testing services to the coal industry. Mr Cannane was interested in achieving a back door listing for CCI. This proposal was complicated by the appointment, on 2 November 1990, of Mr Shirlaw and Mr Smith as receivers and managers of both Ausminco and CDF. The proposed back door listing vehicle was a company then known as Mendolsohn Corporation Limited ("Mendolsohn"), which later changed its name to CCI Holdings Ltd ("CCIH"). The shares in Mendolsohn were listed with the stock exchange, although that listing had been suspended.

Wisbeck Pty Limited ("Wisbeck") was a Cannane family company. Until 15 May 1991 its shareholders were Mr Cannane and J Cannane Pty Limited ("JCPL"), each holding one share. On 15 May these two shares were transferred to Mrs Cannane and Andrew respectively, the transfers the subject of the present proceedings. Each of the shares was transferred in consideration of a promise to pay one dollar on the part of the transferee. So far as appears the one dollar was never paid, but it further appears that it is no longer in issue that the promise to pay the one dollar was a genuine promise. At the same time as the transfer of shares took place, a new share was allotted in Wisbeck to Richard Cannane, another son of Mr and Mrs Cannane.

Other players in the commercial transaction involving the back door listing included a Mr Lambert who was at all relevant times the managing director of Mendolsohn and Mr Aitken who was also a director with Mr Cannane of Ausminco, CCI and CDF. A Mr John Wallis and a Mr Denis Wood were each directors of CCI.

The judgment traces events as they unfolded, leading up to the share transfers and subsequent winding up of JCPL and bankruptcy of Mr Cannane. These events as narrated by the learned trial judge were as follows:

"JVC [Mr Cannane] had been a director of Ausminco, CCI and CDF since early 1978.

On 21 July 1989, a finance facility was entered into between the State Bank of New South Wales (`State Bank') and Barclays Bank Australia Ltd (`Barclays Bank') on the one hand, and Ausminco, whereby the banks agreed to lend $22 million to Ausminco. The loan was guaranteed by JVC and JCPL, among others.

In about June 1990 JVC and Aitken, then directors of Ausminco, which owned about 95% of the shares in CCI, were considering the sale of the CCI shares out of the ownership of Ausminco.

The purpose was to sell the shares in CCI to a listed public company and to arrange for Ausminco to be paid for those shares by the allotment of shares in the public company. It was envisaged that the allotment would give Ausminco a majority interest in the public company.

The idea was that at the end of the series of contemplated transactions Ausminco would own a majority interest in a public company which in turn would own all the shares in CCI. As it turned out Mendolsohn was the public company contemplated to acquire the shares.

It was proposed that as [a] result of these transactions, CCI would achieve what is commonly referred to as `a back door listing'.

These proposals were still under discussion when on 2 November 1990, the banks appointed Kevin Shirlaw and John Smith as Receivers and Managers of Ausminco, and CDF. This introduced new complications into the transactions because it became necessary to deal with the new parties who were in control of Ausminco.

On 22 November 1990 Lambert of Mendolsohn wrote to the receiver of Ausminco to confirm that Mendolsohn had an agreement with Ausminco and CDF to buy all of the issued capital of CCI. The consideration was said to be $4 million to be paid wholly in shares of 20 cents par in the company. The basis of the agreement was expressed to be as follows:

`(1)

Mendolsohn (MCL) purchases all the shares in CCI for an issue of 20,000,000 shares of 20 cents each.

(2)

On change in control of MCL CCI will cause MCL to repay a loan of $47,779 to Fayara Securities Ltd and G E Lambert ...

(3)

CCI will not pay a proposed dividend of $300,000 prior to settlement.

(4)

The costs incurred in the transaction, other than disbursements paid progressively, are to be paid immediately shareholder approval to the deal is obtained.'

Lambert stated that it was his understanding that the receiver would prefer cash for the business. He stated that subject to finalisation of funding, Mendolsohn would purchase the equity in CCI and the debt due to Ausminco from CCI (being a sum of approximately $433,000) for a total of $2 million cash as an alternative to the deal fully set out (above) in the letter.

On 5 December 1990, JCPL applied for a $2 million facility from the Bank of Singapore (`BOS') to enable it to purchase CCI from `the liquidator' of Ausminco, which clearly should be a reference to the receiver. The total facility required was $2.850 million. $2 million of this was to be used to purchase CCI. The $850,000 above the $2 million purchase price was to refinance the existing mortgages on property owned by Cannane family interests.

By letter of 6 December 1990 Lambert notified Mr Smith, the receiver, that there was an agreement to acquire CCI as set out in the letter of 22 November 1990. He stated his understanding to be that Mr Smith had been advised by the directors of CCI in early November that the sale had been agreed. He expressed concern that CCI was actively being offered around the market by the receiver.

On 12 December 1990 JVC and Aitken, who had previously been directors of CCI, were removed from office as directors in that company and there were thereafter only two directors, namely Messrs Wallis and Wood. In a letter of 10 December 1990 to the Stock Exchange, Wallis made it clear that the statement of directors of CCI which appeared in a public information memorandum regarding the acquisition of the company by Mendolsohn was signed without the knowledge or consent of Messrs Wallis and Wood. It was put to JVC in cross-examination that the statement in the information memorandum was the reason for his removal as a director, but this was denied.

On 28 December 1990, Lambert wrote to the Manager of the Stock Exchange stating that, at an extraordinary meeting of shareholders held on that date, a resolution was passed that subject to the completion of the acquisition by Mendolsohn of all of the issued shares in the capital of CCI, and the issue and allotment of 20 million shares in the capital of Mendolsohn (or such lesser number of shares of 20 cents each as would equate to the actual consideration paid to the vendors, or interests associated with the vendors) of all of the issued shares in the capital of CCI, and subject to the passing of all other resolutions set out in the Notice convening the meeting, the name of Mendolsohn be changed to CCI Holdings Limited.

On 22 January 1991 Mendolsohn made a cash offer to the Receiver and Manager of Ausminco proposing $1.1 million for the shares in CCI plus $433,000 in repayment of the net inter-company loans between CCI and Ausminco. The total consideration was thus $1.533 million.

About 5 February 1991 JCPL made an application to BOS seeking a $1.3 million loan to enable it to purchase CCI from the Receiver and Manager of Ausminco. That company also sought a further loan of $900,000 to refinance mortgages on residential premises at 26 Burrawong Avenue, Clifton Gardens.

On 22 February 1991, a Notice of Demand was served on behalf of the State Bank and Barclays Bank on JVC and JCPL seeking payment of $6,591,284.61.

On 26 February 1991, Lambert wrote to the Receiver of Ausminco, offering a cash alternative for the purchase of all the issued shares in the capital of CCI and the net indebtedness of CCI to Ausminco for $1.2 million cash.

On 14 March 1991, Lambert sent an amended offer to the Receiver for a total consideration of $1.310 million to be paid in cash on settlement.

On 27 March 1991 Mallesons Stephen Jaques (`Mallesons') on behalf of the Receivers of Ausminco wrote to the solicitors for Mendolsohn regarding the proposed share purchase and enclosed a draft agreement. The price set out in the draft agreement was $1.310 million. The vendors were Ausminco and CDF and the purchaser was Mendolsohn. On completion the vendors agreed to deliver executed transfers in favour of the purchaser and also to deliver to Mendolsohn an executed set off and release agreement between CCI and Ausminco, whereby the companies agreed to set off their mutual debts of $200,000 and $633,000. Ausminco was to release CCI from its net debt of $433,000. Mendolsohn was to pay Ausminco and CCI on completion the purchase price for the shares by bank cheque. The total number of shares to be sold was 1,094,592 with 55,556 shares being sold by CDF and the balance by Ausminco.

On 2 April 1991 JVC wrote to his accountant, Mr Hopper of Nygh Hopper and Partners. So far as relevant the letter reads:

`... I am near to concluding the deal to buy CCI and would like to bounce a few ideas of (sic) you....

For the purchase of CCI my preferred position would be to acquire the shares in Denise's name or company controlled by her. My thoughts are:

A.

As Wisbeck P/L has no real purpose in life, and it's (sic) only asset is a few shares in Keycorp and a $82,000 liability to J Cannane P/L, we could sell/transfer the shareholding to Denise and my son. This could then be the vehicle to buy the shares in CCI. It would save setting up a new company. Alternatively I could put the CCI shares into Denise's name, however there is (sic) tax problems with dividends being assessable at top personal rate.

B.

Assuming Wisbeck purchases shares in CCI I would propose J. Cannane P/L would charge a management fee for managing the investment. This would flow (sic) income from Wisbeck and utilise J. Cannane P/L tax losses.

C.

As Wisbeck has no funds I would propose J. Cannane P/L would lend the funds to Wisbeck.

D.

The acquisition transaction should flow as follows

1.

Wisbeck borrows from J. Cannane P/L - $1,333,000.

2.

Wisbeck purchases 10 Million [M]endolsohn (to be renamed CCI Holdings) shares of 20 cents (par) at discounted price 7.01 cents - $701,000. Wisbeck lends Mendolsohn $632,000.

Mendolsohn will be raising $1.5 Million through a share issue. Of these funds Wisbeck loan will be repayed (sic).

F.

The shares issue reduces Wisbeck Holdings in Mendelsohn (sic) from 75% to 48% with a theoretical (par) value of $2.0 M.

G.

Shortly after acquiring CCI, Mendolsohn will pay a $300,000 dividend of which [illegible] will flow to Wisbeck. I would see the following effect on the Wisbeck P/L.

I would appreciate you (sic) thoughts on these issues and would like to discuss them with you over the next week.....'

The mention of Wisbeck in this letter from JVC to his accountant is the first time that this company had been referred to in the history of this matter.

By letter dated 9 April 1991, the solicitors for the Receivers sent a letter to the solicitors for Mendolsohn, enclosing an amended draft agreement reflecting their then instructions. The purchase price was expressed to be $877,000 in lieu of $1.310 million. The purchase price was to be paid on completion. This included a promise to pay Ausminco the net indebtedness of $433,000. Again the payment was to be by bank cheque on completion. The purchase price of $877,000 was to be apportioned between Ausminco and CDF in the sums of $832,488 and $44,512 respectively.

On 10 April 1991 further Notices of Demand were served on JCPL and JVC for $6,752,044.26. It was common ground that neither JCPL nor JVC had any ability to repay this sum.

On 17 April 1991 BOS approved a cash advance to Wisbeck for funds to purchase CCI shares. The amount of the loan was $2.2 million for the purpose of purchasing a 100% shareholding in CCI from the liquidator (meaning the receiver) of Ausminco in the sum of $1.3 million and included refinancing existing first and second mortgages on property at Clifton Gardens in the sum of $900,000. The internal memorandum of BOS of that date, stated that:

`Following discussions with his taxation advisors Cannane has requested a change in the structure of the loan for the purchase of the CCI shareholding by interposing a shelf company (Wisbeck Pty Ltd) as the Borrower and holder of the CCI shareholding.'

This memorandum observes that this request did not materially affect BOS's position as it would now hold a charge over both Wisbeck and JCPL. The `amendment' was recommended for approval.

On 18 April 1991, State Bank and Barclays Bank commenced proceedings against JCPL and JVC in the Supreme Court of New South Wales. Judgment was given on 26 June 1992 awarding the banks a sum of $6,948,188.21.

On 22 April 1991 JVC was appointed as a director of Mendolsohn. At this stage no contract had been concluded with Mendolsohn.

On 29 April 1991 JVC arranged for Wisbeck to pay an establishment fee of $11,000 in relation to facilities approved by BOS referred to above.

On 2 May 1991 Mendolsohn changed its name to CCI Holdings Limited. This is said by the applicants to demonstrate a firm view on the part of the Cannane interests that the transaction then contemplated would proceed to completion.

On 7 May 1991 Mendolsohn submitted a draft announcement to the Stock Exchange concerning the anticipated settlement on, or before, 17 May 1991 of a transaction whereby Mendolsohn would own 100% of CCI and would change its name to `CCI Holdings Limited'. It was anticipated that the company would be the leading coal technology and coal superintendent group in Australia. Reference is made to the `back door listing' of CCI having been sponsored by Hambros Securities Ltd. The document refers to Mendolsohn issuing a total of 10 million shares of 20 cents paid to 8.77 cents to enable the acquisition of all of the issued capital of CCI. This was said to represent one half of the number of shares which shareholders approved at the extraordinary general meeting held on 28 December 1990. It was said that the 10 million shares would be issued to [blank] Pty Ltd (described as a company associated with JVC who also controlled Ausminco, the vendor of the shares in CCI). In order to pay the shares to 20c it was proposed to credit 11.23 cents from the share premium reserve.

It is further stated that in addition [blank] Pty Ltd would advance Mendolsohn the sum of $433,000 by way of unsecured loan which would be on-lent to CCI to enable CCI to repay its net indebtedness to Ausminco.

On 13 May 1991 JVC, on the letterhead of JCPL, wrote to his accountant asking him to effect the `restructuring' of Wisbeck and enclosed two share transfers. Instructions were given to issue one share in Wisbeck to Richard Cannane.

By transfer dated 15 May 1991, but probably executed a day or so before that date, JVC transferred his share in Wisbeck to Andrew Cannane for a stated consideration of $1. At the same time JCPL transferred its share in Wisbeck to Denise Cannane for the stated consideration of $1.

The transfers dated 15 May 1991 were in the following standard form:

`I/We the registered holder(s) and undersigned Seller(s) for the above consideration do hereby transfer to the above name(s) hereinafter called the Buyer(s)..... the securities as specified above standing in my/our name(s) in the books of the above-named Company...' (Emphasis added)

On 15 May 1991 the accountants to JVC sent him three new share certificates, minutes of meeting of directors, an application for shares, a notification of allotment of shares and a share transfer form to `give effect to the rearrangement of shareholders of the company as requested' in the letter of 13 May 1991. The letter asked JVC to arrange for the documents to be signed under the Wisbeck company seal and to return them with a cheque payable to the Office of State Revenue for stamp duty in the sum of $20.

On 15 May 1991 the transactions were documented by minutes of meeting of directors of Wisbeck approving the share transfers and allotting one ordinary share to Richard Cannane. There was also a notification of allotment of shares in respect of the allotment of one ordinary share in Wisbeck to Richard Cannane.

On 20 May 1991 Mallesons wrote to the solicitor for Mendolsohn enclosing a revised agreement for the purchase of shares.

On 27 May 1991 a redraft of the proposed announcement concerning the acquisition of the CCI shares was sent by CCIH to the Stock Exchange stating:

`The 10 million shares will be issued to Wisbeck Pty Ltd (a company associated with Mr J Cannane who also controls Ausminco the vendor of shares in Carbon). Mr Cannane founded Carbon in 1977.

... Wisbeck Pty Ltd will advance CCI the sum of $633,000 by way of unsecured loan at commercial rates of interest ... The funds will be on lent to Carbon (upon acquisition) to enable Carbon to repay its net indebtedness to Ausminco .... '

On 7 June 1991 Lambert on behalf of CCIH (formerly Mendolsohn) wrote to the Receiver of Ausminco offering to acquire all the issued shares in CCI and the net indebtedness of CCI to Ausminco for $600,000 cash on settlement and to pay out on settlement the total indebtedness of CCI to National Australia Bank up to a maximum of $1,500,000.

In the period 7-14 June 1991 there was an offer by CCIH for the purchase of CCI at an increased price of $700,000 including the discharge of the net inter-company indebtedness and on the basis of a deferred payment of $100,000.

On 26 June 1991 BOS wrote to Wisbeck stating that it was prepared to provide $600,000 to fund the purchase of 75% of the issued capital of CCIH from the Receiver of Ausminco on the basis that CCIH would acquire the whole of the capital of CCI from Ausminco and CDF.

On 2 July 1991 CCIH confirmed its offer of $700,000 payable as to $600,000 in cash on settlement and as to $100,000 on 31 October 1991. It also expressed willingness to pay a non-refundable deposit of $50,000 for an option until 12 August 1991.

On 9 July 1991 a further form of share sale agreement was submitted by Mallesons to the solicitors for CCIH. This letter referred to the Receiver `currently considering' alternative offers and "invited" CCIH to make an offer for the CCI shares and provide (i) an executed copy of the enclosed Share Sale Agreement, (ii) a bank cheque for $50,000 and (iii) a letter from BOS confirming finance.

On 12 July 1991 the solicitors for CCIH submitted an offer to the receiver to buy shares in CCI together with an Agreement for Purchase of Shares, duly executed by CCIH and a bank cheque for $50,000. The covering letter stated that the letter from BOS would be sent as soon as available. Reference is also made to documentation for the purposes of s 205 of the Law.

On 19 July 1991 BOS indicated that it was disposed to provide $600,000 to Wisbeck to enable it to use those funds to take up shares in CCIH on the basis that CCIH would then acquire the whole issued capital of CCI from the receivers of Ausminco and CDF.

On 26 July 1991 Mallesons wrote rejecting CCIH's offer of 12 July 1991 and returning the bank cheque.

On 31 July 1991 BOS offered an aggregate facility with a limit of $1.5 million to fund the purchase of 100% of the shareholding in CCI, in an amount of $600,000 and as to the balance sum of $900,000 to refinance existing mortgages over the property at Clifton Gardens.

On 2 August 1991 an offer was made by Wisbeck through its solicitors to purchase CCI for a deposit of $50,000, a balance of purchase of $117,000, a discharge of CCI indebtedness to Ausminco in the sum of $433,000 and a transfer of 500,000 shares in CCIH credited as fully paid to 20 cents, by Wisbeck to Ausminco, to be placed on the market, on the basis that CCIH directors would guarantee to pay to Ausminco on 30 November 1991 the sum of $100,000 less the proceeds of sale by Ausminco of the shares.

On 6 August 1991 a sale agreement, in respect of the CCI shares, was entered into between Ausminco and CDF as vendors, and Wisbeck as purchaser for the sale of CCI. The consideration for the shares was $700,000 to be paid (i) on execution of the agreement, $50,000 (ii) on completion $550,000 and (iii) as to $100,000 on 30 November 1991.

On 8 August 1991 Wisbeck accepted the offer of finance by BOS.

On 9 August 1991 BOS offered to finance Wisbeck in the sum of $600,000 to enable it to buy the whole of the shares in CCI and on sell the same to CCIH in exchange for 10 million shares in CCIH. $900,000 was offered to refinance mortgages over the property at Clifton Gardens.

On 20 August 1991 the revised offer of finance of 9 August 1991 was accepted by JVC on behalf of Wisbeck.

On 20 August 1991 a deed was executed amending the agreement to purchase between Ausminco and CDF, and Wisbeck. On the same date a loan agreement was made between Wisbeck and BOS. An agreement was made between Wisbeck and CCIH for the allotment of 10.5 million shares in the capital of CCIH to Wisbeck. Of these, 10 million were to be allotted as partly paid to 6 cents each on the basis that the balance 14 cents was to come from the share premium revenue and 500,000 were allotted fully paid at a par value of 20 cents.

On 21 August 1991 an announcement was made to the Australian Stock Exchange."

In separate proceedings brought in this Court and heard together, the trustee of Mr Cannane's estate and the liquidator of JCPL sought to set aside the transfers made to Andrew and Mrs Cannane respectively. They relied upon ss120 and 121 of the Act made applicable in the case of JCPL by force of s565 of the Corporations Law. Section 120 relevantly provides as follows:

"120(1)

A settlement of property ... not being:

(a)

A settlement made ... in favour of a purchaser ... in good faith and for valuable consideration; ...

is, if the settlor becomes a bankrupt and the settlement came into operation ... within 2 years before, the commencement of the bankruptcy, void as against the trustee in the bankruptcy...

(8)

In this section, `settlement of property' includes any disposition of property."

Section 121 relevantly provides:

"121(1)

Subject to this section, a disposition of property, whether made before or after the commencement of this Act, with intent to defraud creditors, not being a disposition for valuable consideration in favour of a person who acted in good faith, is, if the person making the disposition subsequently becomes a bankrupt, void as against the trustee in the bankruptcy.

...

(3)

In this section, `disposition of property' includes a mortgage of property or a charge on or in respect of property." [emphasis added]

THE JUDGMENT APPEALED FROM

At the hearing the Official Trustee and the Liquidator of JCPL sought to demonstrate that the two shares in Wisbeck transferred had a value considerably in excess of the one dollar consideration expressed to be payable for them. To this end valuation evidence was adduced. Ultimately, his Honour accepted the evidence of Mr Hunter who was called as an expert valuer for Mrs Cannane and Andrew, over the evidence given by Mr Humphrey, the expert called on behalf of the present respondents. The difference between the expert valuers went to a matter of principle rather than to any lack of qualification on the part of the one valuer or the other or other matter personal to the valuers.

In the result his Honour found that the shares in Wisbeck had no commercial value and thus were worth not more than the one dollar which was promised to be paid for them. The respondents to the appeal, by a notice of contention, challenge his Honour's findings as to valuation, seeking to have this Court on appeal approve the approach for valuation adopted by Mr Humphrey.

His Honour found, however, in favour of the present respondents that the dispositions of the shares were void under s121, notwithstanding that, the shares being worth no more than the one dollar promised to be paid for them, full value in every sense had been given for the transfer. His Honour found the necessary intention to defraud. He said:

"It is clear from the evidence that the share transfers were made with the intent, on the part of JVC and JCPL, that the fruit of any benefits which might accrue to Wisbeck and any consequential increase in value of the shares, as a result of the proposed transactions, should not fall into the hands of creditors of JVC and JCPL. I therefore find that the transfers were made by them with an intent to defraud, defeat or delay creditors as to any increased worth of the shares within s6 of the Act."

Likewise his Honour found that neither Mrs Cannane nor Andrew were purchasers in good faith. The findings that there was the necessary intention to defraud and as to good faith are challenged on the appeal.

His Honour found, however, that there had been no settlement of the shares within the meaning of that expression in s120. His Honour dealt with this matter quite briefly in the following passage in his Honour's judgment:

"The respondents submit that there was no `settlement' of property in the present case, as required by s 120 of the Act. They contend that where shares are of only nominal value there is no `settlement'.

The term `settlement' is intended to connote a transaction or transactions with an end or purpose which involves a disposition of property to be held for the enjoyment of some other person, as opposed to an arrangement whereby the property is to be immediately dispersed. The concept of `settlement' involves the retention of the property settled. In the present case that essential element is missing. The `property' is only nominal in value in my view. In addition, it cannot be said that the transfers of the shares were made for the purpose of being retained for the enjoyment of another person. It may in fact eventuate that the shares are held for a long time by the transferees, but it cannot be said that the `end and purpose' of the transfer was necessarily retention for their benefit. See Barton v Official Receiver (1984) 4 FCR 380 at 394-395 per Lockhart J.

Accordingly, on the conclusion I have reached as to the value of the company and consequently as to the value of shares in it, there was no settlement of property in the present case."

In its notice of contention the respondents submit that his Honour erred in finding that there had not been a settlement.

INTENTION TO DEFRAUD

For the purposes of this part of the appeal it may be accepted that the shares in Wisbeck as at the time of their transfer were worth no more than the one dollar paid for them.

It was the submission of senior counsel for the appellants that a disposition could never be held to be found to be made with intent to defraud, unless at the time of the disposition the subject property had commercial value and the transaction by which the disposition was effected was not a sale for full value.

Senior counsel for the appellants argued that Mr Cannane might well have arranged for his wife and children to have acquired a shelf company to take up the shares in Mendolsohn rather than utilising Wisbeck and that had this been done no question could have arisen of setting aside any step in the transaction. It was further contended that the fact that the disponor or some third party might, subsequent to a disposition, add value to an asset could not affect the matter, for it was not the intent to remove from the creditors that added value at which s121 was aimed; rather, the argument went, s121 prevented any attempt to remove the asset disposed of itself from the reach of creditors.

It must first be said that it can be no answer to a claim to set aside a disposition under s121 that the transaction could have been carried out in a way which did not involve a disposition which fell within the section. The question whether there is a disposition with intent to defraud must be determined by reference to the actual facts before the Court rather than by reference to some other, different hypothetical set of facts which did not happen.

Section 121 derived from the Statute 13 Eliz c5 enacted in 1570 which rendered void transfers of property made for the purpose of "delaying, hindering or defrauding creditors". The history is discussed in the judgment of the Full Court of this Court in P T Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515. Generally, as the Full Court noted, cases on the Elizabethan Statute are regarded as authoritative in interpreting the present section. However, s121 is wider in that it extends to dispositions which operate to give a preference to one set of creditors as against another, a situation which did not fall within the Elizabethan Statute, cf Glegg v Bromley [1912] 3 KB 474 at 484.

The object of the section, in its statutory context, is clear on its face. It is concerned to ensure that a person cannot, with the relevant intention, subtract assets from his estate so that in the event of bankruptcy they are no longer available (or at least readily available) to be distributed rateably among creditors (including in that expression persons who were not creditors as at the time of the disposition). This policy is, of course, subject to the protection of persons who take in good faith and for valuable consideration. The object of the Elizabethan Statute was broadly the same (subject to the question of preferences to which reference has been already made). So, in Freeman v Pope (1870) LR 5 Ch App 538 at 541 Lord Hatherley LC (speaking of the Elizabethan Statute) said:

"... if a person owing debts makes a settlement which subtracts from the property which is the proper fund for the payment of those debts, an amount without which the debts cannot be paid, then, since it is the necessary consequence of the settlement... that some creditors must remain unpaid, it would be the duty of the Judge to direct ... that the case is within the statute."

The onus will lie on the person seeking to set aside the disposition to show the relevant intent, although, as the Garuda case makes clear, in an appropriate case intent may be inferred (see at 526). But, for the reasons that follow, whether the necessary intent is shown must be a matter of fact which, if the case were to be heard before a jury, would be for the jury.

The cases on the Elizabethan Statute sometimes spoke of a transfer only falling with the terms of the Statute if it reserved some benefit to the transferor: cf Glegg v Bromley at 485 per Fletcher Moulton LJ. Given that s121 (by virtue of s6) now extends to dispositions having the purpose of defeating, delaying or defrauding any one or more of the creditors, it must be clear that there can no longer be a need to find benefit to the disponor for s121 to apply. So it is correct to say, as this Court said in Garuda, that while all cases falling within the Elizabethan Statute would fall within s121, not all cases within s121 would fall within the Elizabethan Statute.

Section 121 excludes from its operation dispositions which are made for valuable consideration in favour of a person who acted in good faith. It makes no specific mention of the adequacy of that consideration. It is, of course, true that there is a distinction between valuable consideration on the one hand and fully adequate consideration on the other. A consideration may be valuable where it consists:

"... either in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment loss or responsibility, given, suffered, or undertaken by the other"

(see, for example, Currie v Misa (1875) LR 10 Ex 153 at 163 and Fleming v Bank of New Zealand [1900] AC 577 ). So long as the disposition is not voluntary (or the consideration is not illusory) the disposition will be for valuable consideration. The adequacy of that consideration, so long as the consideration is not nominal or illusory, will be irrelevant. Past or "executed" consideration would not ordinarily be seen to be consideration at all, in the connotation of fully adequate consideration, but will be valuable consideration for the purposes of s121: Garuda at 531.

But this is not to say that the adequacy of consideration will necessarily be irrelevant in the application of s121 to particular circumstances. A gross inadequacy of consideration may readily be a badge of fraud so as to permit fraud to be inferred. See, for example, World Expo Park Pty Ltd v EFG Australia Ltd (1995) 129 ALR 685 at 701 and cases there cited. Conversely, the section would not be likely to be attracted if a person disposed of property, say land, for its full value paid in cash, for the disposition would not have the necessary intent. In place of the asset otherwise available for creditors would be another asset of identical value.

In Garuda the Full Court of this Court cited with approval (at 523) a passage from Lewis' Australian Bankruptcy Law 4th Ed, 1955 at 45-46 as follows:

"The general principle may be stated that any dealing with property (other than by sale for a reasonable price) made with the object of putting it beyond the reach of present or future creditors comes within the definition of a fraudulent conveyance if the person concerned cannot immediately pay his debts or anticipates some event which may render him unable to pay his debts in future; such a dealing will be treated as fraudulent irrespective of the presence or absence of a conscious fraudulent intent on the part of the debtor if the necessary result of the dealing is to put the property beyond the reach of his creditors. Typical examples are transfers of property to the debtor's wife, transfers to a trustee to hold for the debtor, and transfers to one or a group of creditors to stave off threatened action. The word `fraudulent' indeed has received an interpretation in bankruptcy matters somewhat wider than its ordinary use, and it may be defined as equivalent to `with an intention to deprive creditors of recourse against all or any of his assets'".

The emphasis is that adopted by their Honours.

Three comments may be made concerning this passage, upon which the appellants strongly relied, in support of the submission that a transaction for full consideration cannot, as a matter of law, fall within s121. First, the approval of the passage cited has to be seen in the context of the issues under consideration in Garuda. Second, and more important, the passage seeks only to express a general principle, it does not purport to be an exclusive discussion of relevant principle. Finally, it does not follow as a matter of logic that because a sale other than for a reasonable price may fall within s121, that a sale for a reasonable price must fall outside the section.

Although there are a number of cases where the question has arisen whether dispositions for valuable consideration fall within the section, no case has directly canvassed the issue whether a disposition for full consideration necessarily falls outside it. However, the approach adopted in the cases tends against the appellant's submission. Thus, for example, in Re Walters; Ex parte The Official Assignee (1898) 19 LR (NSW) B & P 1 at 2, Simpson J said:

"Where valuable consideration is given the deed is prima facie valid, but it may be shewn to be invalid by proving that both vendor and purchaser had a fraudulent intention of defeating or delaying creditors. ... Whether this fraudulent intent can be brought home to both parties is a question of fact, and, of course, depends on the circumstances of each particular case. There are various indications of fraud, inadequacy of consideration, retention of possession by the vendor, secrecy, & c.; but in all cases the only question is, do the facts prove fraud?"

In re Tetley; ex parte Jeffrey (1896) 66 LJQB 111 dealt with an attempt to set aside a post nuptial settlement as void under the Statute. The settlement was made for consideration in the form of covenants by the settlor's mother and brother to pay him an annuity. No attempt was made by the Court to measure the adequacy of the consideration. Rather, the Court pointed out that where there was valuable consideration there must be evidence of an actual intent to defeat and delay creditors before the Statute could be void, as contrasted with a purely voluntary settlement where the settlement will be void if the necessary consequence is to defeat or defraud creditors. So much may be accepted but the case suggests that the question must ultimately be a question of fact.

Lloyd's Bank Ltd v Marcan [1973] 1 WLR 339 is instructive. In that case Pennycuick VC, in discussing the question of intent in the context of a case where there was valuable consideration, referred (at 345) to Parker J, sitting in the Court of Appeal in Glegg v Bromley (at 492):

"The illegal intent under the operative part is a question of fact for the jury or the judge sitting as a jury. On the other hand the want of consideration for the conveyance or assignment is a material fact in considering whether there was any illegal intent, but it is not conclusive that there existed any such intent. In the same way consideration was by no means conclusive that there was no illegal intent...".

Later the Vice Chancellor said (at 347):

"... at the end of the day what has to be decided is the intention of the particular individual concerned in all the particular circumstances...".

An appeal from the decision of Pennycuick VC was dismissed: see [1973] 1 WLR 1387. It is not necessary in this case to consider whether the comments of Cairns LJ on appeal that dishonesty was an essential element of the Elizabethan Statute are to be preferred to the contrary view of Pennycuick VC. As the Full Court in Garuda points out, there has been criticism of the views of Cairns LJ and those views may not reflect the law in Australia.

That the question whether a disposition for full consideration may in some circumstances be capable of falling within s121 if made with the necessary intent, can be seen from three examples. The first is where the consideration given to the disponor is a promise in favour of a third person. If A agrees with B to dispose of A's property to B in consideration of B paying A's wife a sum of money equal to the value of the property, there will have been a fully adequate consideration given to A consisting of A's promise to pay. Yet there would seem no difficulty in the section having application.

It may be objected that this first example involves a case where the consideration is not received in the form of advantage to A. But if this case is excluded then the proposition of law for which the appellants contend must then be reformulated to say that a disposition for a fully adequate consideration received or receivable by the disponor cannot fall within s121. But that formulation cannot be accepted either. Take by way of an example the case where A disposes of property to B in consideration that B promises to pay A on demand the purchase price being the value of the property, but that demand can not be made if A commits an act of bankruptcy. At the time the disposition is made there will have been a full consideration (assuming A has not then committed an act of bankruptcy), for the promise to pay on demand at that time could constitute a full consideration: cf Bray v Commissioner of Taxation (1968) 117 CLR 349. Such a disposition, if made with intent to defraud creditors, would clearly be capable of being set aside.

A third example may be less extreme. Suppose a disponor with intent to delay creditors disposed of his family home to a company in consideration of a promise by the company to pay the purchase price (being the then value of the house) over, say, one hundred years, but with interest at a market rate in the meantime. Such a disposition would be for full value and, if it stood, would substantially defeat or delay creditors who would have to wait the hundred years before obtaining the asset. There is no reason why such a case could not fall within the Statute.

These factors lead us to the conclusion that in truth, there is no principle of law that a disposition made for full consideration must fall outside s121. Rather, whether such a disposition does fall within or without the section will be a question of fact to be determined having regard to all circumstances. It may be added that it may be accepted that where there is a fully adequate consideration it will usually be difficult to show that the necessary intent exists.

I turn now to consider the question whether on the facts of the present case the necessary intent existed.

First, the transfers must be seen against the background of events at the time. Both Mr Cannane and JCPL had received demands from the State Bank and Barclays that they pay $6,591,284.61. Proceedings had been commenced against them for the recovery of this amount in the Supreme Court and Mr Cannane was aware of that. He knew that he could not meet the judgment and that it was likely that he would be made bankrupt. Indeed, it was but six weeks later judgment was entered against them. Mr Cannane also said that he understood the consequence of bankruptcy or liquidation. In a revealing interchange in cross-examination Mr Cannane made important admissions:

"Because the whole point of transferring these shares from your name and the company's name, that is J Cannane Pty Limited to the names of your wife and son was to preserve for the family such interest as Wisbeck might ultimately acquire in the CCI acquisition? --- Yes.

The reason you were concerned to transfer your share and to cause the company to transfer its share was that you had in contemplation the possibility of your bankruptcy? --- Yes.

And the winding up of J Cannane Pty Limited? --- Yes.

You were concerned to ensure that in the event that those unhappy events came to pass that neither the creditors of you or the company would get their hands on the shares in Wisbeck? --- Yes.

You thought that the way to do that was to transfer the shares out of your name, out of the company's name into the names of members of your family? --- Yes.

...

So what I want to suggest to you, Mr Cannane is that your whole object in orchestrating these transfers of shares was to quarantine the shares in your family's name and beyond the reach of your creditors? That is right, is it not? --- I'd like a definition of quarantine.

Place the shares beyond the reach of your creditors? --- Yes.

And that there was no other reason that you would effect these share transfers or procure that the company effect the share transfers, was there? --- At that time, no."

In the light of these admissions there was no conclusion open to his Honour, other than that the object of the transfers was to put the shares beyond the reach of creditors. To borrow the language of Dixon J in Trautwein v Richardson (1946) 52 ARG LR 129 at 133-4, the appellants' contention is "met at once by the finding of fact that in truth the intent of the bankrupt was to defeat and delay creditors". This ground of appeal must thus fail.

WHETHER THE TRANSFEREES WERE PURCHASERS IN GOOD FAITH

Mrs Cannane and Andrew challenged the conclusions of the primary judge that neither of them was a purchaser in good faith. The respondents conceded that each of them was a purchaser. The issue was whether there was the necessary lack of good faith.

The Full Court of this Court in Garuda considered (at 528) the meaning of the expression "good faith" in the present context. Their Honour's said:

"In Butcher v Stead (1875) LR 7 HL 839 the Lord Chancellor (Lord Cairns) said (at 847) in relation to s92 of the Bankruptcy Act 1869 (UK): `I think that there can be no doubt that the words `in good faith' mean without notice that any fraud or fraudulent preference is intended.' In Re Hyams; Official Receiver v Hyams (at 256) Gibbs J, in relation to the meaning accorded to good faith by the Lord Chancellor in Butcher v Stead (supra), said: `...In the context of the Australian statute this exposition may be modified to read `without notice that any fraud or preference contrary to the statute is intended'.' This formulation of the meaning of `in good faith' in s120(1) was applied by the Full Court of the Supreme Court of Queensland in Re Pacific Projects Pty Ltd (In liq) [1990] 2 Qd R 541 at 545."

Immediately after this passage their Honours refer to the judgment of Gibbs J, sitting as a judge of the Supreme Court of Queensland in Re Barnes; Ex parte Stapleton [1962] Qd R 231 at 240 where in a different context his Honour referred to the need to show that the disponee was "privy to the fraud." They referred also to Mogridge v Clapp [1892] 3 Ch 382, followed by Fisher J in The Official Trustee v Marchiori (1983) 69 FLR 290 where it is said that "good faith":

"... must mean or involve a belief that all is being regularly and properly done."

Their Honours then comment that:

"In substance the notion of good faith expressed by these authorities is the same, and should be followed."

We were referred to the decision of another Full Court, differently constituted, in Official Trustee in Bankruptcy v Mitchell (1992) 38 FCR 364 where Burchett, French and Einfeld JJ expressed a preference for the test in Re Hyams, and appear to reject the test in Mogridge v Clapp (not, it may be noted, the test of "privy to the fraud" which had actually been applied in Garuda). It is unnecessary to consider any difference here, noting that the Full Court in Garuda saw none. We are content to accept for present purposes the test adopted by Gibbs J in Re Hyams.

The evidence made it abundantly clear that Mrs Cannane had full notice of her husband's intention that the shares in Wisbeck should be put beyond the reach of creditors. Indeed, she said that it was a "good idea", a view she expressed in reply to her husband saying to her:

"I have had professional advice that in view of my situation which could be in financial jeopardy it would be in our best interests to keep me out of the purchase of Carbon Consulting International Pty Limited."

She was aware that demands had been served upon her husband and CVI and that legal proceedings had commenced. She was aware of the possibility of bankruptcy or liquidation and the consequences thereof. She wished to ensure that the shares in the company would not be lost to the family. On no view could it be said of her that she was a purchaser in "good faith".

Andrew was in a different category. He was at the time of transfer eighteen years of age. It does not seem that his father proffered any explanation of the transaction. He was merely asked by his father to sign the transfer and did so. He made no inquiries of the circumstances and turned a blind eye to the purpose or the effect of the transaction. A person who deliberately eschews being put on notice of the facts and circumstances constituting the fraud cannot be accepted to be a purchaser in good faith without notice of those facts and circumstances. We accept what was said about this matter by Fisher J in Marchiori at 297-298 as applied by the learned primary judge:

"The difficulties on the part of creditors which were referred to by the Full Court of Victoria in Michael v Thompson (supra) are compounded if the person seeking to perpetrate the fraud effects a transfer to a child. If the attempt is successful, there is considerable justification for applying the label of The Cheat's Charter (see 91 Law Quarterly Review 86 to s121 of the Act. It would be too easy to defeat the just claims of creditors and to avoid the intention of Parliament."

See also Caddy v McInnes (1995) 131 ALR 277 at 292.

The appellants' appeal against the findings of bad faith accordingly fail.

THE RESPONDENTS' NOTICE OF CONTENTION

Having regard to the conclusion reached on s121 there is strictly no need to deal with the two matters raised by the respondents in their notice of contention. However, as we are firmly of the view that the respondents must fail with respect to them we will shortly state our reasons for that conclusion.

THE VALUATION ISSUE

At the heart of the valuation issue lay a difference of approach between the expert valuers. The valuer for the respondents, Mr Humphrey, was of the view that there could not be any willing buyer for the shares in Wisbeck unless those shares were offered together with a warranty of the following matters:

"(d)

Mr J V Cannane would continue to be actively involved in progressing the transaction on behalf of an intending purchaser.

(e)

Wisbeck would remain as the purchase vehicle the subject of the transaction...

(f)

Mr J V Cannane considered there to be very good prospects of completing the acquisition of CCI."

On the basis that such a warranty was given by the vendor (or perhaps Mr Cannane), Mr Humphrey formed the view that each share had a substantial value. This he determined by commencing with the valuation of the share in the event that the backdoor listing was completed, and then by applying an appropriate discount.

It is not in controversy between the parties that the appropriate approach to valuation is that enunciated by Griffith CJ in Spencer v The Commonwealth (1907) 5 CLR 418 at 432. What must be ascertained is:

"... the price which a willing but not anxious vendor could reasonably expect to obtain and a hypothetical willing but not anxious purchaser could reasonably expect to have to pay for the shares if the vendor and purchaser had got together and agreed on a price in friendly negotiation...". (Abrahams v The Federal Commissioner of Taxation (1944) 70 CLR 23 at 29 per Williams J.)

As Abrahams demonstrates, the test in Spencer has been adopted as applicable in cases other than compensation for the purposes of resumption (which was the issue dealt with in Spencer) and will, subject to a minor reservation, be adopted where what has to be determined is the real value of particular property. The reservation is that the purpose of valuation in compensation cases is to ensure that the person whose property has been resumed will be given the full monetary compensation for his or her loss so that doubts will more readily be resolved in favour of a liberal estimate: Commissioner of Succession Duties (SA) v Executor Trustee & Agency Co (SA) Ltd (Clifford's case) (1947) 74 CLR 358 at 373--374 per Dixon J.

Although Wisbeck had some assets, it is common ground that there was a deficiency of assets over liabilities. In particular, there was a liability of around $82,000 to Mr Cannane. Without more it is clear that its shares had no value. The positive prospect it had was the possibility of participating as an investment vehicle in the backdoor listing arrangement.

It is well settled that events subsequent to the date of valuation cannot be taken into account directly in making a valuation: Longworth v Commissioner of Stamp Duties (1953) 53 SR (NSW) 342 at 348-9; Weldon (Commissioner of Taxes for Victoria) v Union Trustee Company of Australia Limited (1925) 36 CLR 165. However, it is both necessary and relevant to take into account all facts affecting value which may have been in the contemplation of the hypothetical buyer and seller. These include the probability (if there be one) or even possibility of the events happening as they in fact did. So, if it be necessary to value for some purpose a remainder interest, the fact that the life tenant died shortly after the date the valuation is required will not, of itself, be relevant, where, for example, the death of the life tenant arose from an unforeseen accident. However, if the life tenant had been suffering a life threatening illness as at the date the valuation was required, the probability of death would be a relevant matter to take into account: Trustees Executors & Agency Company Limited v The Commissioner of Taxes (Vic) (1941) 65 CLR 33.

In the present case another factor intruded over and above the commercial risk that the backdoor arrangement would ultimately not succeed, because, for example, the receivers of CCIH might choose to sell to another purchaser. The fact was that, subject to any fiduciary obligation to which he may have been subjected (and none has been suggested), Mr Cannane was free to direct the advantageous acquisition of shares in CCIH (and the finance therefore) to any person or entity he chose. It was for this reason that Mr Humphrey took the view that no sale could reasonably be envisaged of shares in Wisbeck unless the purchaser sought and obtained the warranties to which reference has been made.

There are two fallacies in this argument. The first, and least important, is that the task of valuation proceeds on the assumption that the hypothetical parties to it will in fact proceed to a sale, making it unnecessary to construct artificial terms of sale which might induce an actual sale. The second and more important fallacy in the argument is that it fails to distinguish between the value which inheres in the shares to be valued and the value of something extraneous to the shares, namely the assurance by Mr Cannane that the benefit of the advantageous backdoor listing would inure to Wisbeck. The argument of the appellants in the present case is contrary to the approach adopted by Sheppard J in a number of the cases reported as St Helens Farm (ACT) Pty Ltd v Federal Commissioner of Taxation (1979) 79 ATC 4161. His Honour's approach to valuation was affirmed (subject to a statutory matter irrelevant for present purposes) on appeal to the High Court: see (1981) 146 CLR 336.

The various factual situations involved in the St Helens Farm decision flowed from the earlier High Court decision in Gorton v Federal Commissioner of Taxation (1965) 113 CLR 604. In all factual situations, except that concerned with the company St Helens Farm (ACT) Pty Ltd, there had been an allotment of ordinary shares in a private company in circumstances where the only other shares in the company were preference shares, held by a person who intended to ensure that after death the value in the company would pass to the holders of ordinary shares. The holders of the preference shares had various powers which permitted them, should they so decide, to reverse the situation and recapture for themselves the assets. The nature of these powers differed in the various cases.

It was inappropriate to treat the ordinary shareholders, in such a case, as entitled to all the assets of the company in question. A hypothetical purchaser of those shares would pay little for them unless guaranteed that the holder of the ordinary shares would not exercise the rights to recapture the value of the company. The existence of the power to reconvert the preference shares to ordinary shares made it clear that the ordinary shares at the time of allotment had no substantial value. No doubt a person purchasing the ordinary shares would have paid more if he or she secured a guarantee from the holder of the preference shares that the power to reconvert would not have been exercised. But such a payment would be a payment for the guarantee, and representing the value of the guarantee, not a payment for the shares representing the value of the shares.

So, too, in the present case. If a hypothetical purchaser secured the warranties postulated in the present case, the consideration payable would reflect the value of those warranties, not the value of the shares.

In our view, his Honour was correct to conclude that the shares in Wisbeck were worthless, or worth no more than the one dollar which was agreed to be paid for them.

SETTLEMENT - SECTION 120

It is not clear to us why the mere fact that the property the subject of the transfers was of nominal value necessarily precludes the transfers being a settlement, but it is not necessary to pursue that question. The fact is that his Honour found as a fact that the transfers were not made for the purpose of being retained for the enjoyment of the transferees.

It is an essential element of a settlement falling within s120 that there be a disposition by the settlor of such a nature that the retention of the property in some form is contemplated, not its immediate disposal or consumption: Williams v Lloyd (1934) 50 CLR 341 at 375. Whether that element is present in a particular case will depend upon the facts. We were taken to cross-examination which, it was said, was directed to showing that retention was contemplated and where, it was said, admissions were made. With respect, if the cross-examination was directed at that matter, it was far from clear on its face and the responses were not clear admissions. It was for the trial judge to determine any matters of credit and this Court would not interfere with such findings.

In the circumstances we would find against the respondent on the matters the subject of the notice of contention.

We would accordingly dismiss the appeals with costs.