FEDERAL COURT OF AUSTRALIA Clout (Trustee) v Anscor Pty Ltd [2003] FCA 326 BANKRUPTCY - payment of moneys by person later becoming bankrupt to third party void as against trustee in bankruptcy - tracing remedies available to trustee in respect of moneys received by third party from person later becoming bankrupt and paid over to other parties to enable them to acquire interests in their own properties - whether tracing remedies are available in respect of moneys paid into a mixed fund TRUSTS - despite execution of trust deed, no trust ever constituted where evidence shows that person controlling the activities including those taken to establish a trust, that person's adviser as settlor and the putative trustee had no intention that there was to be a trust for the benefit of others but that the trust fund was to be a repository of moneys to be disbursed by the trustee as and when the controlling person directed Bankruptcy Act 1966 (Cth) ss 116 and 120 Barton v Official Receiver (1984) 4 FCR 380 Chan v Zacharia (1984) 154 CLR 178 Cohen v Cohen (1929) 42 CLR 91 Associated Alloys case (2000) 202 CLR 588; [2000] HCA 25 Air Canada v M & L Travel Ltd (1993) 108 DLR (4th) 592 Stephens Travel Service International Pty Ltd (Receivers and Managers Appointed) v QANTAS Airways Ltd (1988) 13 NSWLR 331 Daly v Sydney Stock Exchange Limited (1986) 160 CLR 371 Re Hodby (Fisher J, Federal Court of Australia, 16 April 1987, unreported) Re Goode; Ex parte Mount (1974) 4 ALR 579 Brady v Stapleton (1952) 88 CLR 322 Windsor Mortgage Nominees Pty Ltd (as trustee) v Cardwell [1979] ACLC 32,195 Australian Securities Commission v Melbourne Asset Management Nominees Pty Ltd (Receiver and Manager Appointed) (1994) 49 FCR 334 Victorian Producer's Co-Operative Co Ltd v Kenneth [1999] FCA 1488 Sutherland v Brien (1999) NSWSC 155 Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372 Richard Walter Pty Ltd v Commissioner of Taxation (1996) 67 FCR 243 Manzi v Smith (1975) 132 CLR 671 Agip (Africa) Ltd v Jackson [1990] 1 Ch 265 at 290 and, on appeal, [1991] Ch at 566 - 567 Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449 Baker v Official Trustee (Full Court of the Federal Court, 3 August 1995, unreported) Jacobs, Law of Trust in Australia, 6th ed, at par 214 DAVID LEWIS CLOUT (AS TRUSTEE IN BANKRUPTCY OF THE ESTATE OF GEOFFREY ROBERT DEXTER) v ANSCOR PTY LTD,MACKAY & ALLEN PTY LTD, HINATORIE PTY LTD (PROVISIONAL LIQUIDATOR APPOINTED), THE FUND ADMINISTRATORS PTY LTD, REINSAG NOMINEES PTY LTD, SPECTRUM FUND ADMINISTRATION PTY LTD, AUSTRALIAN SECURED MORTGAGES PTY LTD, PROJECT FINANCE (QLD) PTY LTD, ANNE SHIRLEY CORBETT, CROFTBY DOWNS PTY LTD, THORNVILLE PTY LTD IN ITS OWN CAPACITY AND IN ITS CAPACITY AS TRUSTEE OF THE ANSCOR EXECUTIVE INCENTIVE TRUST AND THE THORNVILLE EXECUTIVE INCENTIVE TRUST, ANSCOR INVESTMENTS PTY LTD AND PACIFIC INTERNATIONAL ASSET MANAGEMENT LIMITED QG 7308 OF 1998 DRUMMOND J 10 APRIL 2003 BRISBANE IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 7308 OF 1998 BETWEEN: DAVID LEWIS CLOUT (AS TRUSTEE IN BANKRUPTCY OF THE ESTATE OF GEOFFREY ROBERT DEXTER) APPLICANT AND: ANSCOR PTY LTD FIRST RESPONDENT MACKAY & ALLEN PTY LTD SECOND RESPONDENT HINATORIE PTY LTD (PROVISIONAL LIQUIDATOR APPOINTED) THIRD RESPONDENT THE FUND ADMINISTRATORS PTY LTD FOURTH RESPONDENT REINSAG NOMINEES PTY LTD FIFTH RESPONDENT SPECTRUM FUND ADMINISTRATION PTY LTD SIXTH RESPONDENT AUSTRALIAN SECURED MORTGAGES PTY LTD SEVENTH RESPONDENT PROJECT FINANCE (QLD) PTY LTD EIGHTH RESPONDENT ANNE SHIRLEY CORBETT NINTH RESPONDENT CROFTBY DOWNS PTY LTD TENTH RESPONDENT THORNVILLE PTY LTD IN ITS OWN CAPACITY AND IN ITS CAPACITY AS TRUSTEE OF THE ANSCOR EXECUTIVE INCENTIVE TRUST AND THE THORNVILLE EXECUTIVE INCENTIVE TRUST ELEVENTH RESPONDENT ANSCOR INVESTMENTS PTY LTD TWELFTH RESPONDENT PACIFIC INTERNATIONAL ASSET MANAGEMENT LIMITED THIRTEENTH RESPONDENT JUDGE: DRUMMOND J DATE OF ORDER: 10 APRIL 2003 WHERE MADE: BRISBANE THE COURT MAKES THE FOLLOWING DECLARATIONS AND ORDERS: 1. As against the first, ninth, tenth, eleventh, twelfth and thirteenth respondents: (1) a declaration that the amount of $26,379,260 paid to the first respondent by Geoffrey Robert Dexter comprised transfers of property to the first respondent which are void as against the applicant pursuant to the provisions of s 120 the Bankruptcy Act 1966 (Cth). (2) a declaration that the total value of the consideration given by the first respondent for the sum of $26,379,260 is an amount equal to 5% of the capital invested by each investor in the Wattle scheme being investments procured by Anscor in an amount totalling $26,379,260 plus an amount equal to the sum of 0.25% per annum of the capital sum so invested by each such investor that aggregate to $26,379,260 for the period each investor's capital sum was deposited with Dexter commencing with the date of the initial deposit of that sum and ending on 28 March 1998. (3) a declaration that each of the money amounts which the applicant is entitled to recover from any of the first and the ninth to thirteenth respondents, whether by judgment for a money sum or by way of a charge upon property of the particular respondent, are the amounts otherwise recoverable by the applicant from the particular respondent reduced according to the ratio between the amount referred to in declaration (2) to be ascertained by inquiry and the sum of $26,379,260. (4) an order that the District Registrar make inquiry to ascertain the amount the subject of declaration (2) above. 2. As against the first respondent: (5) judgment for the sum of $26,379,260 subject to abatement in accordance with declaration (3) together with interest on the abated amount at the rate or rates agreed between the parties or if not agreed at the rates determined by the District Registrar after inquiry during the period from the commencement of this action to the date of entry of judgment after the inquiry referred to in Order (4). (6) an order that the sum of $193,662 with accretions, if any, preserved under the order of this Court of 21 March 2000, abated in accordance with declaration (2), be paid out to the applicant in part satisfaction of the judgment in Order (5) and the balance of that sum though otherwise payable to the first respondent also be paid to the applicant in further satisfaction of that judgment. (7) in the alternative to Orders (5) and (6), at the election of the applicant, an order that the first respondent account to the applicant for any property or interest in property acquired with moneys from the said void transfers referred to in Declaration (1) being property held by the first respondent at or after the commencement of these proceedings and including an interest in any property acquired by the first respondent by the reduction or payment in full of the moneys secured by any mortgage or charge granted by the first respondent over any such property. 3. As against the ninth respondent, Anne Shirley Corbett: (8) an order charging her property at 628 Mt Crosby Road, Anstead (described as Lot 9 on RP 89621, Title Reference 13299159) and securing as a first ranking charge the payment of $170,000 abated as aforesaid, with interest on the abated sum at the rates referred to in Order (5), from 6 August 1997 against 628 Mt Crosby Road. (9) an order charging her property at 76 Cantwell Street, Anstead (described as Lot 11 on RP 806843, Title Reference 50047204) and securing as a first ranking charge the payment of $676,067 abated as aforesaid, with interest on the abated sum at the rates referred to in Order (5), from the dates each component of this sum was advanced to or for the ninth respondent which is set out in the reasons for judgment published herein against 76 Cantwell Street . (10) an order charging her property at 78 Cantwell Street, Anstead (described as Lot 10 on RP 806843, Title Reference 50047203) and securing as a first ranking charge the payment of $78,636 abated as aforesaid, with interest on the abated sum at the rates referred to in Order (5), from 21 August 1997. (11) an order charging her property at 530 Gold Creek Road, Brookfield (described as Lot 4 on RP 117941, Title Reference 14402144) and securing as a first ranking charge the payment of $100,030 abated as aforesaid, with interest on the abated sum at the rates referred to in Order (5), from the dates each component of this sum was advanced to or for the ninth respondent which is set out in the reasons for judgment published herein against 530 Gold Creek Road. 4. As against the tenth respondent, Croftby Downs Pty Ltd: (12) An order charging all its properties at Carney's Creek Road, Croftby via Boonah described as: · Lot 110 on Crown Plan W311581, Title Reference 10735104 · Lot 2 on Registered Plan 126509, Title Reference 15722049 · Lot 49 on Crown Plan W311250, Title Reference 16324122 · Lot 67 on Crown Plan W311443, Title Reference 16324124 · Lot 75 on Crown Plan W311443, Title Reference 16324125 · Lot 34 on Crown Plan W311073, Title Reference 16324126 · Lot 33 on Crown Plan W311073, Title Reference 16324127 · Lot 53 on Crown Plan W311295, Title Reference 16324128 · Lot 54 on Crown Plan W311295 and Lot 91 on Crown Plan W311550, Title Reference 16324129 · Lot 109 on Crown Plan W311581, Title Reference 16324130 · Lot 108 on Crown Plan W311581, Title Reference 16391098 · Lot 58 on Crown Plan W311332, Title Reference 16535044 · Lot 41 on Crown Plan W311073, Title Reference 16535045 · Lot 2 on Registered Plan 195338, Title Reference 16578227 and all its plant, equipment, vehicles and other assets now situated on such properties and securing against each of those properties as a first ranking charge the payment to the Applicant of the sum of $1,510,000 used in the acquisition by the tenth respondent of the real property set out above and the sums referred to in the reasons for judgment used in acquiring each item of plant, equipment, vehicles and other assets of the tenth respondent now situate upon this real property abated as aforesaid with interest on the abated sum at the rates referred to in Order (5) from the dates each component of this sum was advanced to or for the tenth respondent which is set out in the reasons for judgment published herein. (13) an order that the District Registrar make inquiry to ascertain the amount of the sums used in the acquisition for the tenth respondent of the items of personal property described in Order (12). 5. As against the twelfth respondent, Anscor Investments Pty Ltd: (14) an order charging the property of the twelfth respondent at Villa 2, 3 Park Edge Road, Sunshine Beach (described Lot 2 in GTP105103, Title Reference 50149403) and securing as a first ranking charge the payment to the applicant of the sum of $510,000 abated as aforesaid with interest on the abated sum at the rates referred to in Order (5) from 21 May 1997. 6. As against the thirteenth respondent, Pacific International Asset Management Limited: (15) a declaration that the securities registered in favour of the thirteenth respondent and listed below have never operated to encumber any of the properties and assets over which each is registered and each security is void as against the applicant: The Securities (a) Bill of Mortgage Registered No 702598118 which was registered on or about 2 April 1998 over Mrs Corbett's Mt Crosby Road property; (b) Bill of Mortgage Registered No 702598118 which was registered on or about 2 April 1998 over Mrs Corbett's 76 Cantwell Street property; (c) Bill of Mortgage Registered No 702598118 which was registered on or about 2 April 1998 over Mrs Corbett's 78 Cantwell Street property; (d) Bill of Mortgage Registered No 702598118 which was registered on or about 2 April 1998 over Mrs Corbett's Gold Creek Road property; (e) Bill of Mortgage Registered No 702588272 which was registered on or about 30 March 1998 over Croftby Downs' farm property; (f) Bill of Mortgage Registered No 702588287 which was registered on or about 30 March 1998 over Anscor's property situated at Level 11, 344 Queen Street, Brisbane described as Lot 32 in Building Units Plan of Resubdivision 104317, Title Reference 50125892; (g) Mortgage Debenture Registered ASIC No 603957 which was registered on or about 12 August 1997 over all the assets and undertakings of Anscor Pty Ltd. (16) An order that the thirteenth respondent forthwith do all such things as may be necessary to secure the release of each of these securities. (17) An order that upon default by the thirteenth respondent in complying with Order (16) in respect of the Bills of Mortgage described in Orders 15(a), (b), (c), (d), (e) and (f) the Registrar of Titles and in respect of the Mortgage Debenture described in Order 15(g) the District Registrar is authorised to sign all documents presented to him by the applicant as may be necessary to secure the release of each of these securities. (17A) A declaration that PIAM is not liable to account to the applicant for any part of the $1,155,000 transferred from its Brisbane bank account conducted for it by its attorney on 26 March 1998. (18) An order that the applicant's proceedings against the ninth respondent be dismissed but only in so far as the applicant by those proceedings has claimed relief in respect of the ninth respondent's Range Rover motor vehicle. (19) An order that the applicant's proceedings against the eleventh respondent be dismissed. (20) An order that the applicant's proceedings against the second to sixth respondents be dismissed. (21) An order that the applicant pay the ninth respondent's costs of the proceedings but only in so far as they are costs incurred by her with respect to the applicant's claim to the ninth respondent's Range Rover motor vehicle. (22) An order that the applicant pay the eleventh respondent's costs of and incidental to the proceedings against it, including the eleventh respondent's costs incurred with respect to the proceedings brought by the applicant against it for interlocutory injunctions. (22A) An order that the applicant pay the thirteenth respondent's costs of and incidental to the proceedings against it but only in so far as they are costs incurred by it with respect to the applicant's claim for an account in respect of the sum of $1,155,000 referred to in Order (17A). (23) Subject only to Orders (20), (21) and (22A), an order that the first, ninth, tenth, twelfth and thirteenth respondents pay the costs of the applicant of and incidental to these proceedings against those respondents, including the proceedings brought by the applicant against those respondents for interlocutory injunctions. (24) Liberty to apply. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 7308 OF 1998 BETWEEN: DAVID LEWIS CLOUT (AS TRUSTEE IN BANKRUPTCY OF THE ESTATE OF GEOFFREY ROBERT DEXTER) APPLICANT AND: ANSCOR PTY LTD FIRST RESPONDENT MACKAY & ALLEN PTY LTD SECOND RESPONDENT HINATORIE PTY LTD (PROVISIONAL LIQUIDATOR APPOINTED) THIRD RESPONDENT THE FUND ADMINISTRATORS PTY LTD FOURTH RESPONDENT REINSAG NOMINEES PTY LTD FIFTH RESPONDENT SPECTRUM FUND ADMINISTRATION PTY LTD SIXTH RESPONDENT AUSTRALIAN SECURED MORTGAGES PTY LTD SEVENTH RESPONDENT PROJECT FINANCE (QLD) PTY LTD EIGHTH RESPONDENT ANNE SHIRLEY CORBETT NINTH RESPONDENT CROFTBY DOWNS PTY LTD TENTH RESPONDENT THORNVILLE PTY LTD IN ITS OWN CAPACITY AND IN ITS CAPACITY AS TRUSTEE OF THE ANSCOR EXECUTIVE INCENTIVE TRUST AND THE THORNVILLE EXECUTIVE INCENTIVE TRUST ELEVENTH RESPONDENT ANSCOR INVESTMENTS PTY LTD TWELFTH RESPONDENT PACIFIC INTERNATIONAL ASSET MANAGEMENT LIMITED THIRTEENTH RESPONDENT JUDGE: DRUMMOND J DATE: 10 APRIL 2003 PLACE: BRISBANE REASONS FOR JUDGMENT 1 The applicant, Mr Clout, is the trustee in bankruptcy of Geoffrey Robert Dexter. In this action, he seeks to recover property of the bankrupt in reliance on s 120 the Bankruptcy Act 1966 (Cth). 2 On 26 March 1998, Dexter appointed Clout as controlling trustee of his estate pursuant to s 188 the Bankruptcy Act. A sequestration order was made against Dexter's estate on a creditor's petition presented a little while later and Clout was appointed Dexter's trustee in bankruptcy. The bankruptcy is deemed to have commenced on 26 March 1998. 3 For some years prior to March 1998, Dexter ran a scheme under the name "the Wattle Group" through which he offered a return of about 50% each year of the sum invested with him to persons prepared to lend their moneys to him on an unsecured basis. The scheme collapsed in March 1998 when the Australian Securities and Investment Commission obtained an injunction to restrain Dexter from carrying it on. But it was for a time very successful, particularly for those involved in running it, including the first to eighth respondents. Lenders were recruited into the scheme not by Dexter, but by other organisations, called "administrators"; for introducing lenders to the Wattle Group scheme and for administering the loans as between Dexter and the lenders, they were paid by Dexter very large commissions, equal to about 50%, over a year, of the loan moneys they procured from each investor. The respondent Anscor Pty Ltd was one such organisation. The second to eighth respondents were others. Over the period of nearly four years that the Wattle scheme operated to the end of March 1998, Dexter received sums totalling nearly $200,000,000, most of which appears to have come directly or indirectly from people who invested in the Wattle scheme. At the date of Clout's appointment, Clout says Dexter owed over 3,100 lenders in excess of $155,000,000, in respect of which Dexter had paid commissions to Anscor and other administrators of over $43,000,000. Clout says little is likely to be recovered for distribution to these unsecured lenders. 4 By his originating application, Clout as trustee in bankruptcy seeks recovery of commission moneys paid by the bankrupt Dexter to Anscor. Clout claims that those payments are transfers which are void against him as Dexter's trustee because they were "undervalued" transactions within s 120 the Bankruptcy Act: he claims that the consideration provided by Anscor to Dexter was much less than the amount of the commissions. Clout's claim is now restricted to those commissions paid to Anscor by Dexter between 26 March 1996 and 26 March 1998. It is common ground that these commissions total $26,379,260.35. Clout also seeks to recover for the estate from the other Anscor respondents, the ninth to twelfth respondents and the thirteenth respondent, part of those commission moneys paid by Dexter to Anscor which the trustee contends can be traced into property that remains under the control of the Anscor respondents and the thirteenth respondent. The interlocutory proceedings 5 The second to eighth respondent companies were, like Anscor, administrators for the Wattle scheme, ie, recruiters of investors, though none operated on as large a scale as Anscor. Before the trial commenced, the second to fifth respondents went into liquidation or voluntary administration and as a consequence of ss 440D and 471B the Corporations Act 2001 (Cth), the action is stayed against them. Clout indicated that he would not be seeking leave to proceed against them. The proceedings against all those respondents will be dismissed. Clout has discontinued his proceedings against the seventh and eighth respondents. The sixth respondent has not filed an appearance or put any material before the Court in defence of the trustee's claim against it. Clout indicated that he would file evidence in support of his case against the sixth respondent before the end of the trial and would proceed to default judgment. However, the action necessary to obtain such judgment against that respondent has not been taken. I assume from this that Clout no longer intends to pursue his claims against this respondent. The action will therefore be dismissed against the sixth respondent. 6 On 31 May 2000, I joined Mrs Corbett and three other companies of which she was the sole director as respondents to the action, on application by the trustee. They became the ninth to twelfth respondents. The first and the ninth to twelfth respondents are collectively referred to as the "Anscor respondents". Mrs Corbett was the sole director of Anscor and the tenth to twelfth respondents. Mr Corbett is Mrs Corbett's husband. He replaced his wife in January 2001 as the sole director of the first and tenth to twelfth respondents. For all practical purposes, the first and the tenth to twelfth respondents, at all presently relevant times, have been under the control of Mr and Mrs Corbett. 7 Also on 31 May, the applicant sought a Mareva injunction restraining the Anscor respondents from dealing with any of their assets. I granted the injunction, but only over those assets which the evidence before me at the time suggested had been purchased with moneys advanced to them by the first respondent, Anscor. I refused then to grant a Mareva injunction over two of Mrs Corbett's properties, 530 Gold Creek Road and 76 Cantwell St. 8 On 26 June 2000, Pacific International Asset Management Pty Ltd (PIAM) was joined in the action as the thirteenth respondent. PIAM is a New Zealand company. On 30 June 1997, it took a mortgage debenture, subsequently registered, over Anscor's assets and undertaking to secure an advance of $2,800,000 it made that day to Anscor from what are said to be funds of the Anscor Superannuation Fund trust established that same day with PIAM as trustee. On 26 March 1998, the day Dexter appointed Clout to be trustee of his estate, Mrs Corbett granted to PIAM mortgages over all her properties. Croftby Downs, the tenth respondent also granted a mortgage to PIAM on that same day. Clout seeks to set aside all these securities taken by PIAM. 9 On 26 February 2001, I extended the Mareva injunction to include Mrs Corbett's Cantwell Street and Gold Creek Road properties on the basis of further evidence obtained by the trustee. At the same time, the Anscor respondents sought a relaxation of the Mareva injunction granted on 31 March in order to meet living expenses and to pay for legal representation. I refused this motion on the grounds that approximately $20,000,000 (later revised to over $26,000,000) had been received by Anscor from Dexter between March 1996 and February 1998 and a large part of those moneys were unaccounted for: the Anscor respondents failed to show that they had no access to any of this money or other assets from which they could meet their living and legal expenses, apart from the frozen property. 10 On 4 May 2001, I gave the solicitors for the Anscor respondents leave to withdraw. On 16 May 2001, I gave the solicitors representing the thirteenth respondents leave to withdraw on the ground that the Anscor respondents, who had agreed to pay the thirteenth respondent's legal fees, claimed they were no longer able to do so. 11 On 4 May and on 7 June 2001, I again refused applications by Mrs Corbett to relax the Mareva injunction. Mrs Corbett also made a number of oral applications during the final hearing for a relaxation of the injunction, though she never attempted to show that her access to assets was confined to the frozen assets. I accordingly refused each application. 12 On the first day of the final hearing, 21 May, Mr Corbett sought leave to represent the Anscor respondents and the thirteenth respondent, PIAM. On 23 May, I refused to grant Mr Corbett leave to represent the Anscor respondents other than in the limited capacity of representing them in relation to one issue only, referred to as the "Annexure 3" issue. (This issue only arose on Mrs Corbett's application made on 23 May.) I refused Mr Corbett leave to represent the thirteenth respondent. On 25 May, I gave Mr Corbett leave to assist Mrs Corbett as a "McKenzie friend". The trustee's claim and the course of the trial 13 Clout's case is based on s 120 the Bankruptcy Act and is that all the commission moneys received by Anscor in the two year period to March 1998 from the Wattle scheme were Dexter's own moneys: this is so, according to the trustee, because once investors handed their funds over to Dexter, they became unsecured creditors of Dexter, a proposition originally admitted by the Anscor respondents by their pleading. It is on that basis that the trustee claims the right to trace the disbursements by Anscor to the various other Anscor respondents that were used by them to acquire the properties the subject of the trustee's claims against the ninth to twelfth respondents and to the account it seeks against the thirteenth respondent. 14 Section 120 the Bankruptcy Act provides: SECTION 120 UNDERVALUED TRANSACTIONS 120(1) [Transfers that are void against trustee] A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if: (a) the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and (b) the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property. … 120(3) [Transfers that are not void] Despite subsection (1), a transfer is not void against the trustee if: (a) the transfer took place more than 2 years before the commencement of the bankruptcy; and (b) the transferee proves that, at the time of the transfer, the transferor was solvent. 120(4) [Refund of consideration] The trustee must pay to the transferee an amount equal to the value of any consideration that the transferee gave for a transfer that is void against the trustee. … 120(7) [Meaning of "transfer of property" and "market value"] For the purposes of this section: (a) "transfer of property" includes a payment of money; and … (c) the "market value"of property transferred is its market value at the time of the transfer. 15 The amendment of s 120 to include a payment of money in the expression "transfer of property" significantly widened the reach of the section which had previously only applied to "settlements", a term long held not to include mere payments of money: Barton v Official Receiver (1984) 4 FCR 380 at 394. 16 The trustee, in confining his case to only the commission moneys received by Anscor in the two years prior to the commencement of Dexter's bankruptcy, was not prepared to assume the burden of proving that at any time before March 1996, Dexter was insolvent when he paid commission moneys to Anscor. 17 On 23 May 2001, I gave the first and the ninth to twelfth respondents leave to amend their defence to put into dispute whether the essential foundation for the trustee's claims against all the Anscor respondents, viz, that the commission moneys received by Anscor were Dexter's own moneys, was established. That leave was limited, however, to leave to raise the "annexure 3" issue, ie, the argument that the commission moneys received by Anscor were not Dexter's own moneys, but moneys he received in trust for investors pursuant to agreements between Dexter and investors in the form of the agreement exhibited as REC3 to one of Mr Corbett's affidavits. I also gave leave to Mr Corbett to represent the first and the tenth to twelfth respondents in the further conduct of the proceedings, with such leave also being limited to representing those respondents in pursuing this new defence to the trustee's claim against them. Ultimately, Mr Corbett delivered written submissions directed to this particular issue, and also to a number of other issues. The closing submissions made by Mr Corbett and those by Mrs Corbett suggest they have had skilled legal assistance in preparing them. Mr Corbett's object in making the submissions that extended beyond the REC3 issue was to seek to show that all of the $26,000,000 commission moneys Anscor received from Dexter in the two years to March 1998 here in question were not Dexter's own money. He submitted that some of the moneys paid to Anscor as commissions additional to those paid by Dexter in respect of investors with REC3-type agreements, were not paid to Anscor by Dexter, but by the corporate group he controlled, the Foundation Group, from moneys belonging not to Dexter but to members of that group. In these submissions, Mr Corbett also sought to show that the whole of the $26,000,000 of commission moneys was not Dexter's moneys, but moneys impressed with trusts in favour of the investors because it was said that Dexter stole the entirety of the investors' moneys. Counsel for the trustee objected to the Anscor respondents broadening their case in these two respects. 18 So far as the Foundation Group point is concerned, on 23 May 2001, early in the trial the Anscor respondents sought leave to amend their defence to raise the issue that some of the moneys received by Anscor by way of commissions had come, not from Dexter, but from a separate entity, Foundation Group Pty Ltd, a Dexter-controlled corporation. I declined to allow the respondents to raise that issue at that stage of the trial, firstly, because, unlike the REC3 issue I then allowed them to raise, there was no sufficient evidentiary basis for permitting the respondents to withdraw their longstanding admissions that the moneys the subject of the trustee's claim were all Dexter's own moneys, particularly given that there was evidence suggesting that if the commission payments made by the Foundation Group to Anscor were investigated, it might be that the Foundation Group merely passed payments of Dexter's money as Dexter's agent on to Anscor, and, secondly, because if the amendment proposed were allowed, the trustee would have to embark upon an extensive factual inquiry at a very late stage, after the trial had started. I do not accept the respondents' submission, based on a brief exchange between Mr Corbett and Mr Clout in cross-examination of the latter at t 596 and t 602, that a substantial part of the $26,000,000 in commissions Anscor received in the two years in question came not from Dexter's moneys, but from the moneys of a separate legal entity, Foundation Group Ltd. As I have explained, I refused the respondents leave to amend to pursue this issue. 19 Mr Corbett's more general submission made only at the end of the trial that the moneys Anscor received from Dexter were not Dexter's own moneys because they were stolen moneys is based upon the proposition that the Wattle scheme conducted by Dexter was what is called a "Ponzi" scheme, ie, one in which investors were fraudulently induced to pay money into the scheme, with Dexter using the moneys received from new investors to pay existing investors amounts equal to their interest entitlements and to repay existing investors who wanted it, amounts equal to the principal they had invested and to pay, among other things, the commissions to "administrators", including Anscor. It is common ground between Clout and the Corbetts that the Wattle scheme was a "Ponzi" scheme having the features described and conducted by Dexter on an enormous scale. 20 The trustee says in his submissions in reply that, in so far as it is now submitted by Mr Corbett and the Anscor respondents that all moneys received by Anscor from Dexter with which he paid the entirety of the commissions to Anscor that are here in question belong beneficially to the investors because of Dexter's fraudulent behaviour, the respondents have never pleaded such a case. The trustee submits that it is too late to raise it now because it involves unexplored factual issues. 21 I decline to consider the submissions by Mr Corbett and the submissions to the same effect by Mrs Corbett that the commission moneys received by Anscor were not Dexter's own moneys to the extent that those commissions were paid by the Foundation Group from its moneys and the general submission that the entirety of the commission moneys paid to Anscor in question in this action were not Dexter's moneys because he stole them from the investors. As to the Foundation Group point, the Anscor respondents cannot ignore my ruling of 23 May that they were not entitled to raise that particular issue at that stage of the proceedings, particularly since they did not put on any evidence showing that the Foundation Group paid Anscor not with Dexter's moneys and only as Dexter's agent, but with the Foundation Group's own moneys. As to the more general submission, it is not self-evident that even accepting that the Wattle scheme was conducted by Dexter as a "Ponzi" scheme, none of the commission moneys received by Anscor from Dexter were Dexter's own moneys because he stole them all. I am not prepared to accept, without the issue being properly litigated, that Dexter did, in fact, steal any of the investors' moneys. He was given all those moneys by investors under either the REC3 form of agreement or the later "Agreement for the Loan of Money". That he misappropriated those moneys or at least all from which Anscor's commissions were paid in the last two years the scheme operated, in the sense that he did not use them for the purposes the investors may well have believed the moneys would be used, does not necessarily mean that the moneys, if they had become, on receipt by Dexter, his own moneys, subsequently became impressed with a trust in favour of the investors from the time Dexter misapplied them. In any event, in order to show that any particular payment of commission to Anscor was not of Dexter's own moneys, it is not enough to show that it consisted of moneys Dexter stole from investors. As will appear, unless it can be shown that each commission payment made in the two years here in question can be appropriated in specific portions to identified investors, Dexter would not hold the sum of money from which he paid the particular commission to Anscor as moneys on trust for any particular investor or investors. This is not to say that investors may not have had equitable claims to the moneys they placed with Dexter less extensive than the rights of beneficial owners in equity of those moneys. But, as will also appear, such lesser entitlements are not sufficient to make the moneys trust moneys and so not Dexter's funds for the purposes of s 120. I accept the trustee's submission that it is not possible to resolve the issue raised by the Corbetts' general submission without a further factual investigation that would in all probability be very complicated indeed, even if it were ultimately possible to reach conclusions as to the beneficial ownership of the moneys comprising each commission payment to Anscor. 22 The Anscor respondents are therefore confined, in attacking the trustee's contention that the commission moneys received by Anscor from Dexter were Dexter's own moneys, to the issue whether, because Dexter received certain of the moneys from which he paid part of the Anscor commissions from investors under REC3 forms of agreements, commissions paid from such moneys were not paid from Dexter's own moneys, but moneys he held on trust for the particular investors under those agreements. 23 The case the respondents seek to make out here focuses on the standard form of agreement entered into between Dexter, on the one part, and each investor, on the other, at least for part of the time the Wattle scheme operated. An example of this agreement is Exh REC3 to Mr Corbett's affidavit of 17 May 2001. By their amended pleading filed 5 June 2001, the first and the ninth to thirteenth respondents admit receipt by Anscor in the period 26 March 1996 to 26 March 1998 of commission payments totalling $26,379,260; this pleading continues as follows: Before and during the period 26 March 1996 to on or about September 1997 during which time part of the payments referred to in paragraph 28 [sic: number "8" was intended] of the Statement of Claim ("the period") were made, Dexter received sums from investors pursuant to written agreements similar to REC3. These agreements obliged Dexter to use such funds only for the purpose of onlending such funds as an undisclosed agent for short periods of time and to apply the monies earned from such investments, if any, towards, amongst other things, the payment of commission to the administrators and interest to the investor. The amount received by Anscor in respect to these agreements during the period was at least $10,316,948 (refer affidavit and annexures Robert Edward Corbett dated 5 June 2001) In the premises, upon receipt of the respective sums which comprised the investors principal funds. Dexter held them on trust for the investor from whom he had received them for the sole purpose of applying them to the purpose stipulated in the agreement. The only cash or liquid sums available to Dexter and therefore the only sums from which he could make the payments to Anscor referred to in paragraph 28 [sic: number "8" was intended] of the Statement of Claim were from the principal funds of later investors. In the premises, each of the payments referred to in the Statement of Claim were made from funds which were not beneficially owned by Dexter but were held by him subject to a trust or trusts in favour of the investors. 24 In his reply to this amended defence, the trustee contends firstly that, having regard to the proper interpretation of the REC3 forms of agreement, moneys paid by investors under such agreements were, when received by Dexter, not moneys which he held on trust. Secondly, the trustee contends that, because Dexter paid the moneys invested under an REC3 agreement into his own bank account, and mixed those moneys with other moneys contributed by other investors (under REC3 agreements and otherwise) and with his own funds, the rights of an investor under any particular REC3 agreement were not to the beneficial ownership of distinct moneys held by Dexter on trust for that investor. Next, the trustee contends that Dexter paid some of the commissions to Anscor from moneys which had been paid to or were held by Dexter under agreements other than REC3 agreements and that from no later than 15 March 1997, all commissions paid by Dexter were able to be paid from Dexter's own funds, being moneys contributed by investors under the newer form of agreement (not being an REC3 agreement) under which Dexter was an unsecured borrower. The trustee finally contends that all investments under REC3-types of agreement made through Anscor, and substantially all the other investments under REC3 agreements made through other Wattle administrators, were converted to investments under new agreements providing simply for an unsecured loan to Dexter. That process of conversion occurred, it was said, around July 1997. It was also said that if any of the Anscor commission payments are shown to have been made from moneys held by Dexter on trust for an investor or investors, that trust was extinguished upon the agreement that the investment would be no longer according to an REC3 agreement but would be simply an unsecured loan. The consequence is that any moneys sought to be recovered by the applicant in these proceedings are not moneys to which any investor is beneficially entitled but are Dexter's own moneys divisible amongst his creditors to the extent that Clout can recover them. 25 The REC3 agreement between Dexter and the investor provides: PARTIES: GEOFFREY ROBERT DEXTERtrading as THE WATTLE GROUP … AND [the named investor] (referred to in this agreement as "you" and "your") INTRODUCTION A You have agreed to engage Wattle to invest, on your behalf as your undisclosed agent, the Initial Amount (The sum of money stated in the schedule of this agreement), and any further money you may place with Wattle in the future. B. Wattle will invest your money in one or more Loans ("Loans") in the nature of bridging Loans to individuals or corporations … Each loan is for a term of no more than 60 days, unless you agree in writing to a longer term. C. Although Wattle will exercise due care and skill in making Loans, the Loans are of the "High Risk" type and Wattle does not guarantee either the refund of your capital or any return on your investment. WATTLE AND YOU AGREE AS FOLLOWS: 1. You have advised Wattle that you have appointed the person … named as administrator in the schedule of this agreement to act on your behalf in relation to all matters concerning administration and you authorise Wattle to forward your monthly reports and pay any money owed to you, either as principle or interest to the administrator for onforwarding to you. … 2. You engage Wattle to invest the Initial Amount, and any further money you lend through Wattle. Wattle will make Loans on your behalf in its own name as lender. 3. Wattle undertakes to exercise care and skill in making the Loans, but has complete discretion as to whom it lends and the terms and conditions of the Loans. (Provided no Loan is for longer than 60 days unless you authorise a longer term) 4. You must leave the Initial Amount (and any further money you pay to Wattle), with Wattle for a minimum of 6 months, for investment in accordance with this agreement, before requesting its return. 5. … 6. Wattle will continue to invest the Initial Amount, and any further money you place with it, in Loans until you make a written request for their return. Subject to clauses 4 and 7, Wattle must return your money (including accrued interest) within 60 days (being the maximum Loan term) of your request, … 7. Wattle does not guarantee either that your capital will be refunded or that you will make any return on that capital. 8. Subject to clause 7, Wattle must account to you on settlement of the Loans in which your funds are placed, and through the Administrator a monthly summary will be provided by Wattle. … 9. You acknowledge that your funds may not earn interest for the whole of the time they are placed with Wattle, but only while they are deployed in Loans. An amount equivalent to 5% per calendar month of the capital you have with Wattle will be paid to you on settlement of the Loans in which your funds are invested, … If Wattle believes, at any time, there may be a significant delay (i.e. greater than 1 month) in using your funds for a Loan, it will return them to you until a suitable opportunity arises. 10. You acknowledge and accept that Wattle will charge a high rate on the Loans (up to 15% per calendar month) and subject to clause 11, Wattle is entitled to retain for its own use absolutely any interest paid to it on the Loans in excess of 5% per calendar month. … 11. You acknowledge and accept that Wattle will pay the Administrator and entitles associated with them, from income received by Wattle on the Loans, a monthly commission for providing management services in relation to your funds invested through Wattle. … 12. … 13. Wattle must bear the cost of any investigations, searches, credit checks etc carried out by Wattle in relation to any Loans, as well as the cost of any attempt to enforce payment. 14. To the extent that Wattle might owe you duties of a fiduciary nature (as your agent) beyond Wattles express obligations to you under this agreement, you release Wattle from those fiduciary duties. 26 In the case of investors recruited by Anscor, the relevant agreement names Anscor as the administrator. 27 Mr Corbett said that the REC3 form of agreement between Dexter and each investor "or a similar contract applied throughout most of the period we [ie, Anscor] were involved and up until the new agreements in mid 1997". But he also said: "No loan type agreements were used prior to the 31st January 1997 and these loan type agreements commenced about mid February 1997, although some sourcing agents [ie, "administrators"] still had some undisclosed agency agreements on hand which were also used during February 1997 and March/April 1997". (This may explain why Egan's analysis of the 2,531 agreements on foot as at December 1997, referred to later, showed that sixty-six REC3-type agreements remained on foot.) Mr Corbett's evidence, based on Anscor records, suggests that, in substantial part, the commissions paid to Anscor by Dexter in respect of particular investors during the two year period to March 1998 the subject of these proceedings, came from moneys placed by investors with Dexter under REC3-type agreements. Anscor's records are not complete. But Mr Corbett exhibited REC3-type contracts between 573 investors and Dexter procured by Anscor and set out the interest paid to each of these investors saying: "the interest earned by them during the relevant period, 26 March 1996 to 26 March 1998, was a total of $10,316,948". It is common ground that, as Mr Corbett says, Anscor received an identical amount as its commission in respect of these 573 investors. Some of these 573 investment contracts came to an end in 1996. Anscor would have received its last commission payments in respect of them at about the same time. However, the last interest payments and thus the last commission moneys paid to Anscor in respect of others of these 573 contracts were only made in November 1997, while in a large number of the remaining cases the last interest payments and thus the last commissions received by Anscor were made at various times through 1997. Mr Corbett also said, in the context of dealing with why Anscor received its commission, at least up until February 1997, from Dexter in the form of ten payments each year, each equalling 5% of the amount of money that was at the date of payment being administered by Anscor, that that payment arrangement continued: … up until mid February 1997 when Dexter decided to change his arrangements and started the transition by the Wattle Group to a direct loan agreement with new clients and which culminated in all clients being on the new type of agreement from around July/August/September 1997 … 28 Clout, in his very brief submissions to the effect that Dexter was not a trustee for each investor of moneys placed with him under REC3-type agreements, advanced no cogent case for that conclusion. I reject the invitation to hold that, despite the terms of the REC3 agreements, it was, for two reasons, never the intention of the investor and Dexter as objectively ascertain that the latter should be trustee of the investor's moneys: (1) that there was no agreement that Dexter would keep an investor's moneys in a separate account and nor did he do so; (2) investors' funds could be used for the benefit of Dexter on high risk investments which were expressed to have the potential for extraordinary profits for Dexter, which Dexter would not be obliged to even disclose to the investor. It was said that: "these matters seem difficult to reconcile with the duties of a trustee". 29 As to the second point, it is not the law that a relationship cannot be one of trust if the putative trustee is entitled under the agreement said to give rise to the trust to profit from his activities in advancing the interests of the putative beneficiaries and to be under no obligation to account to the beneficiaries for the profits the trustee earns from the activities from which the beneficiaries are also to profit. Despite the frequently inflexible statements of the rule that a trustee cannot retain a personal benefit or gain from his activities as trustee, a trustee is not bound to account for a gain derived in what would otherwise be a breach of fiduciary obligation if the trustee can show that he has the informed and effective consent of the person to whom the obligation of fidelity is owed to act in the manner in which the trustee has acted. See, eg, Chan v Zacharia (1984) 154 CLR 178 at 204. I would not accept, in the absence of convincing argument, that Dexter's right to benefit from the investment activities contemplated by the REC3 form of agreement, without even having to disclose the extent of those benefits, provides grounds for concluding that there could be no trust. That is all quite explicitly disclosed to the investor in the agreement in provisions such as cl 10. 30 As to point (1), it is beyond dispute that Dexter did not keep each investor's money in a separate account. But that may show no more than that he acted in breach of trust by doing that. In any event, even if, on the true construction of the REC3 form of agreement, Dexter was not obliged to keep the investors' moneys in a separate account that would not necessarily show that there was no trust. 31 Where A pays money to B, it can be a difficult task to determine whether the relationship between them is that of trustee and beneficiary or debtor and creditor. "The answer to the question whether a debt or trust was created in any particular case depends upon the intention of the parties. If the parties intended that the one receiving the money should hold that money for the benefit of the other … then it will be a trust because there is actual trust property. If the payee was entitled to use the money as his own, being under an obligation merely to repay the same amount of money at a future time, then he is merely a debtor." See Jacobs, Law of Trust in Australia, 6th ed, at par 214. Where it appears that the parties intended that the payee is not to be free to use the money as his own, but must deal with it as a separate fund on behalf of the payer, there will be a trust: see Cohen v Cohen (1929) 42 CLR 91 at 100 - 101. But the governing consideration is the intention of the parties to be gathered from all the circumstances; so the absence of a prohibition on the recipient paying the money into a general account is not determinative as between trust and debt. See the Associated Alloys case (2000) 202 CLR 588 at 604; [2000] HCA 25 and the Canadian Supreme Court decision, Air Canada v M & L Travel Ltd (1993) 108 DLR (4th) 592 at 603 - 604, referred to therein and also Stephens Travel Service International Pty Ltd (Receivers and Managers Appointed) v QANTAS Airways Ltd (1988) 13 NSWLR 331 at 349. 32 Under the terms of the REC3 agreement: (1) The investor engaged Dexter as the former's agent to invest on his or her behalf what is described as the investor's money in loans of a particular character, viz, "in the nature of bridging loans", each such loan being "for a term of no more than 60 days" unless the investor agrees in writing to a longer term for the particular loan. (2) Dexter agreed to make loans "on your [ie, the investor's] behalf" in the name of Dexter trading as Wattle as lender, but as the investor's "undisclosed agent". (3) Subject to various provisions of the agreement, the investor is entitled to the return by Dexter of "your money". (4) Dexter was obliged to account to each investor in the manner described in cl 8 "on settlement of the loans in which your funds are placed" and by providing the investor with "a monthly summary" "through the Administrator". (5) By cl 9 of the agreement, it is provided: "you acknowledge that your funds may not earn interest for the whole of the time they are placed with Wattle, but only while they are deployed in loans" and Dexter promised to pay to the investor "an amount equivalent to 5% per calendar month of the capital you have with Wattle … on settlement of the loans in which your funds are invested". Dexter further promised that, if he believed at any time that there might be a delay greater than one month "in using your funds for a loan", Dexter "will return them to you". (6) By cl 10, there is a specific agreement that Wattle anticipates a high rate of return from lending out the investor's money and is to be entitled to retain for its own use absolutely any interest paid to it on the loans in excess of 5% per calendar month and the investor expressly releases Dexter from any obligation to account to the investor for that excess. (7) By cl 14, the investor releases Dexter from the fiduciary duties he owes the investor as the latter's agent, but only "to the extent that" Dexter might owe the investor such duties "beyond [Dexter's] express obligations to you under this agreement". 33 Under the REC3 form of agreement, Dexter was engaged by the investor as the investor's agent to perform a specific task, viz, the lending to third parties on behalf of the investor of the investor's own money paid over to Dexter by the investor. When he loaned out an investor's moneys to third parties, Dexter acted on behalf of the investor; he did not lend on his own behalf moneys which he had himself borrowed from the investor. In dealing with the investor's moneys on behalf of the investor, there was a specified range of loans Dexter could make to third parties with the investor's moneys. If Dexter could not promptly lend out the investor's moneys to third parties, he had to "return them" to the investor. In certain other events, he also promised the investor he would return "your money". Where he loaned an investor's moneys out to third parties, he had to account to the investor "on settlement of the loans in which your funds are placed" and had to also account to the investor in respect of such loans by way of a monthly summary to be provided by Dexter to the administrator and thence to the investor. These features of the agreement all point to the parties' mutual intention being that the relationship between Dexter and the investor under the REC3 agreement was that of trustee and beneficiary and not mere debtor and creditor. 34 It is difficult to imply into the REC3 form of agreement an obligation on Dexter to keep each investor's moneys in a separate account. The surrounding circumstances show that the REC3 form of agreement was the form under which a very large number of investors would place money with Dexter, as in fact many thousands did. This consideration is, I think, a powerful indication that an obligation to keep each investor's moneys in a separate account should not be implied into the agreement: cf Stephens Travel Service International at 341. If the agreement was one under which Dexter was trustee and the investor was the beneficiary, as I think it was, it was permissible for Dexter to pay each investor's moneys into a general account. But for the reasons given, that would not destroy the trust. 35 The arrangement provided for by REC3 forms of agreement is, in my opinion, one of trust, not one of debt. Cf Daly v Sydney Stock Exchange Limited (1986) 160 CLR 371 at 379 - 380. 36 Commencing from February 1997, Dexter required new investors to place their money with him under a form of agreement entitled "Agreement for the Loan of Money" that differed significantly from the REC3 agreements. Moreover, from July 1997, it appears that Dexter sought and obtained the consent of existing investors to place their funds with him under this new form of agreement in substitution for the REC3-type agreements they had hitherto entered into. He did this through his administrators including Anscor. Typical of the letters requiring existing investors to switch over from the REC3 agreement to the new "Agreement for the Loan of Money" is that written by Mr Corbett on behalf of Anscor to a Mr and Mrs Millar dated 15 July 1997. This letter reads: … [The Wattle Group] have implemented a restructuring of the loan documentation. This new documentation will properly accommodate existing commitments and enable them to undertake future growth in the business. It will also simplify accounting requirements and enable the Wattle Group and Anscor Pty Ltd as Administrator to more effectively account to you. One of the benefits of this new agreement is that you will receive your interest on a fixed day each month and that the Wattle Group will become directly liable to you for funds. The interest rate is 50% per annum and equates to the average return you will have received in the past. It is intended that this new agreement, as attached, be in operation as soon as possible and we would appreciate your co-operation in signing it, and the accompanying authority and returning both to our office in the stamped addressed envelope enclosed. … For those clients who may decide not to proceed with the new agreement, the Wattle Group will refund those amounts to ensure completion of the restructure … 37 Mr Egan, of Clout's organisation, exhibits to his affidavit only the Anscor letter to the Millars: he does not also exhibit the authority accompanying that letter. However, Anscor itself invested moneys with Dexter, initially under the REC3 form of agreement. On 25 July 1997, it executed the new form of "Agreement for the Loan of Money" itself and returned this new form of agreement to Dexter under cover of what I take to be the standard form of authority prepared by Dexter for existing investors who agreed to lend under the new form of agreement in substitution for the REC3-type agreement hitherto used. This letter reads: We are pleased to enclose herewith a new signed contract for loan funds to the Wattle Group as requested. We hereby agree that the existing contract we have with you will become null and void upon your acceptance of this new contract and repayment of all funds, and we hereby authorise you to transfer those funds from the existing contract to the new contract as they mature. 38 Dexter's determination, recorded in the Anscor letter to the Millars, that existing lenders would have to switch from their REC3 forms of agreement to the new form of "Agreement for the Loan of Money" appears to have been almost completely realised. According to Egan, as at 31 December 1997, of the 2,531 agreements then on foot, only sixty-six or about 2.5% of the total were in the REC3 form, a further thirty or about 1% were not able to be identified by Egan and the remaining 96.5% were all in the new form of Agreement for the Loan of Money. 39 The new form of "Agreement for the Loan of Money" is in the following terms: Agreement for the Loan of Money No. ……… This agreement is made this day of 1997 BETWEEN: [Name of investor] Address (in this agreement referred to as the "Lender") AND: Geoffrey Robert Dexter trading as The Wattle Group of 11 Kestrel Court, Warner in the State of Queensland (in this agreement referred to as the "Borrower") INTRODUCTION: A. The "Borrower" lends monies for short periods of time, to individuals and corporations usually referred to the "Borrower" by Solicitors, Accountants, Banks and Finance Brokers and upon such security or surety suitable in the circumstances. B. The "Lender" has agreed to lend to the "Borrower" and the "Borrower" has agreed to borrow from the "Lender" the sum of money set out in Item 1 of the Schedule to this agreement (in this agreement referred to as the "loan") upon the terms and conditions contained in this agreement. TERMS AND CONDITIONS OF AGREEMENT: 1. The "loan" from the "Lender" to the Borrower" shall be unsecured. 2. The "Lender" shall pay the "loan" to the "Borrower" upon execution of this agreement. 3. The "Borrower" shall pay interest on the loan at the rate and in the manner set out in Item 2 of the schedule. 4. The "Borrower" shall have the right to repay the "loan" to the "Lender" at any time together with any unpaid interest. 5. The "Lender" shall have the right to demand repayment of the loan and any accrued interest by giving 30 days notice in writing to the "Administrator", provided that such demand shall not be given earlier than 6 calendar months from the date of this agreement. 6. The "Lender" and the "Borrower" herein agree that Anscor Pty Ltd (in this agreement referred to as the "Administrator") of Level 11, 344 Queen Street, Brisbane in the State of Queensland be appointed to act as the "Administrator" of the loan funds for the purpose of receiving directly from the "Borrower" both principle and interest amounts payable to the "Lender" by the "Borrower" and disbursing those funds to the "Lender" after verifying the information provided by the "Borrower". The "Lender" agrees that receipt of such funds by the "Administrator" is good discharge for payment of the same by the "Borrower". 7. The "Lender" and the "Borrower" herein agree that all notices to be served by any party on the other shall be served on the "Administrator" and shall be deemed to have been received by the other party on the day following receipt of such notice by the "Administrator". 8. The "Lender" acknowledges that the "Administrator" receives a fee for its services and that such fee is payable in full by the "Borrower". 9. If the "Lender" lends further amounts to the "Borrower" then such further amounts shall be deemed to have been lent on the same terms and conditions as this agreement and shall bear interest commencing 15 days from the date of clearance of such further amounts. 10. It is agreed between the Borrower and the lender that the Lender may request the Borrower to reborrow the interest earned by acknowledging so in the attached schedule, in which case the interest so borrowed will be treated as a further amount for the purposes of this agreement. SCHEDULE ITEM 1: THE LOAN $Balance at time of transfer being the initial amount together with such further sums which may be lent from time to time. ITEM 2: INTEREST Interest shall be calculated on the following basis No interest shall be payable for the first 14 days of the loan period for any amounts loaned after the initial amount. Interest at the rate of 50% per annum calculated on a daily basis shall be paid no later than 30 days after the end of each calendar monthly period, the first calendar monthly period commencing on the day of receipt of this agreement by the Borrower or 15 days from the date of receipt of any amounts loaned after the initial amount, the final calendar monthly period ending upon repayment of the loan in full. … EXECUTION: This agreement is signed by the "Lender" and the "Borrower" Signed by the "Lender" ) in the presence of ) Witness Signed by the "Borrower" ) in the presence of ) Witness 40 In my opinion, the relationship between Dexter and the investor who placed money with him under the new form of "Agreement for the Loan of Money" was that of creditor and debtor only. Accordingly, once an investor's funds were placed with Dexter under this new form of agreement, they became Dexter's own moneys and the investor thereafter had only contractual rights against Dexter in respect of payment of interest and repayment of the loan that are set out in the agreement. 41 I do not, however, accept the applicant's submission that the effect of the authority given to Dexter by each investor under the REC3 form of agreement when the investor at Dexter's request through an administrator such as Anscor switched to the new form of "Agreement for the Loan of Money" operated to destroy any trust that may have been imposed on Dexter upon receipt of investors' moneys under the REC3 agreement retrospectively, ie, to the date when moneys were first advanced by the investor to Dexter under the REC3 form of agreement. The authority signed by investors on switching from the REC3 form of agreement to the new "Agreement for the Loan of Money", in so far as it refers to the investor's existing contract becoming null and void upon Dexter's acceptance of the new contract, is capable of being read as operating to discharge the original REC3 form of agreement retrospectively from the outset. But the authority is also capable of being read as operating only prospectively, ie, to discharge the pre-existing REC3 form of agreement only on and from Dexter's acceptance of the new contract proffered by the investor. Entry by an existing investor into the new agreement results in the investor losing accrued rights he or she had under the REC3-type agreement at the date of the switch. These may well have included, in the case of a particular investor who switched agreements, rights to payment of interest that had accrued under the older agreement but had not been received by the investor at the date of the switch. There is no transitional provision in the new form of agreement that covers such matters. It cannot be accepted that the objective intention of Dexter and the particular investor who switched contracts, as recorded in the switching agreement, was that the investor would abandon accrued rights. I consider this is good reason for holding that the arrangement involving substitution of the new form of agreement for the REC3-type of agreement accompanied by the authority from the investor, to which I have referred, operated so that the old REC3-type agreement was only discharged for the future upon entry by the investor at Dexter's request into the new form of agreement. Investors who followed that course therefore retained, in respect of events occurring up to the substitution, the rights given them under the REC3 form of agreement that had accrued to those investors by the date of the switch to the new agreement that were not necessarily extinguished by the coming into existence of the new agreement, such as the rights they may then have had to the moneys they had placed with Dexter. 42 The trustee developed a more substantial argument for the proposition that, even if moneys invested under REC3 agreements were impressed with a trust for the particular investors Dexter, in the events which have happened, so dealt with investors' moneys including moneys received by him under REC3 agreements, that, though investors may have equitable claims against him, those moneys nevertheless became his property for the purposes of s 120 and, in so far as he transferred those moneys to Anscor, it is accordingly recoverable by the trustee. 43 The trustee submitted that, even if Dexter received moneys from investors under the REC3 forms of agreement as trust moneys, he mixed the funds of many investors together and mixed them, moreover, with funds of his own. It was then submitted that, thereafter, and certainly by the start of the two year period here in question, from the time he paid newly received investors' moneys into his "Wattle" account, any trusts on which he may have received those moneys were destroyed because of the impossibility of identifying which moneys were held by Dexter for any particular investor. The trustee further submitted that, in these circumstances, the investors would be entitled to equitable charges upon such moneys as remained in Dexter's hands in proportion to the respective claims of the investors. The trustee finally submitted that the existence of equitable charges in favour of investors to the moneys paid over by Dexter to Anscor does not, however, mean that Dexter held those moneys in trust for the various investors within the meaning of s 116(2)(a) the Bankruptcy Act: despite the existence of those equitable charges, the moneys comprising the mixed fund remain Dexter's own moneys. It was finally submitted that, this being so, all the payments by Dexter to Anscor over the two years here in question were transfers by Dexter to Anscor of his own moneys, with none of those moneys being held in trust by Dexter for any investors. 44 Specific property which a bankrupt holds for the benefit of others is property held by the bankrupt on trust. The trustee in bankruptcy has no claim to such property. But I accept that property of a bankrupt which, by force of s 116 the Bankruptcy Act, vests in the trustee in bankruptcy, includes property in respect of which third parties have only equitable charges. That property vests in the trustee as property of the bankrupt, but subject to the equitable interests of the chargees. See Re Hodby (Federal Court of Australia, 16 April 1987, unreported) at pars [19] and [20] where Fisher J expressed agreement with the views of White J in Re Goode; Ex parte Mount (1974) 4 ALR 579 at 595 and following. I also accept that, if property of a bankrupt does not cease to be such and accordingly vests in the trustee in bankruptcy pursuant to s 116, where the property is equitably charged in favour of a third party, a transfer of property by a person who later becomes bankrupt, which transfer his trustee in bankruptcy seeks to avoid under s 120, will include property of the bankrupt though equitably charged to third parties. Whether such a charge survives the transfer will depend on general equitable principles as to notice and whether the transferee gave value for the transferred property. 45 The evidence of Clout and his assistant, Egan, shows that from at least 1994 to the end of March 1998, Dexter maintained only one bank account in respect of the Wattle investment scheme. A total of $197,011,634 was deposited into this account between 1 July 1994 and 1 April 1998. Clout has been able to identify a little over $129,000,000 or 65% of the total deposits as moneys given to Dexter by investors in the Wattle scheme and a little over $32,000,000 or 16% of the total as deposits made into the account by various members of the Foundation Group. He has not been able to identify the source of the remaining deposits of a little over $35,000,000 or 19% of the total. The examination of the Wattle account conducted by Clout and his assistants shows that, in respect of the two years the subject of the trustee's claim, a total of nearly $56,000,000 was deposited to the Wattle account in the year ending 30 June 1997 and 70% of this, or a little over $39,000,000, came from investors' deposits, 16%, or about $8,800,000, comprised payments into the account from members of the Foundation Group and $71,580 comprised interest paid by the bank on funds in the Wattle account during the year. Clout was unable to identify the source of the remaining 14%, or $7,800,000, of deposits into the account in that period. For the nine months, 1 July 1997 to 31 March 1998, a total of a little over $116,000,000 was deposited to the Wattle account with nearly $73,000,000, or 63%, being identified as coming from investors' deposit moneys and about $23,500,000, or 20%, being identified as deposits by members of the Foundation Group. The trustee's evidence does not reveal what was the position in relation to the remaining 17%, but it is likely that the trustee has not been able to identify the source of most, if not all, of these moneys. 46 Foundation Group members paid in total, very substantial sums into the Wattle account during the two years in question. The fourteen member companies of the Foundation Group carried on a number of businesses in their own right. The evidence indicates that at least a number of these companies operated substantial businesses ranging from software retailing, computer manufacturing, a retail travel agency with a number of stores, security services, catering services, two night clubs, property investment. Though the members of the Group are all now in liquidation, there is nothing to suggest that the very substantial sums of moneys paid into the Wattle Group account by Foundation Group members, particularly over the two years to March 1998, were other than moneys belonging in law and equity to the particular Foundation Group member who made the payment. Deposits into the account from members of the Foundation Group were by way of repayment of interest-free loans made from the Wattle account by Dexter to those Foundation Group members. These moneys, on payment into the account, I think became Dexter's own moneys. 47 Although Dexter has claimed that moneys were deposited into the Wattle account by way of "transaction settlements", "joint venturee funds" and "profits", ie, moneys not coming from investors, Clout and those assisting him could not identify in the deposits to the Wattle Group account any amounts that might have come from such activities, other than the repayment with interest of two fairly small loans made by Dexter from the account to two of the Wattle Group administrators. 48 Though Mr Corbett says that Anscor, as trustee of the Anzcorp Discretionary Trust, carried on, in addition to its business as a Wattle administrator, other businesses said to comprise investing in its own right "in several other companies such as the Australian Pearl Farms Group of companies, Lawngrove Pty Ltd as the developer of units in Cleveland and the Marlin Mushrooms project in Cairns", the Anscor respondents did not put any evidence before the Court to suggest that Anscor derived income from any such activities in the two years in question that could have been mixed with receipts from Dexter. Mr Corbett gave evidence, which I accept, that Anscor was also a direct investor in the Wattle scheme itself on the same basis as other investors. Mr Corbett also said that Anscor received what he described as "accumulated interest" from these investments in the Wattle scheme of $151,638 over an unspecified period. That is only partially correct. In that part of his affidavit where he sets out details of Anscor's investments in and interest earnings from the Wattle scheme, Mr Corbett refers to his Exh REC5 as containing relevant details. This exhibit consists of statements issued by Anscor itself to Mrs Corbett, as the director of Anscor, that show the amount of Anscor's total investment in the Wattle scheme as at 30 March 1998 was $818,388. It is apparent from these statements that Anscor never received any payment into its own account of the interest recorded in these statements as having been earned on Anscor's deposits in the Wattle scheme: all interest recorded as earned on Anscor's deposits in the scheme was compounded, ie, added to and became part of the principal amount that remained on deposit with Dexter. 49 There is thus no evidence that, in the two years in question, Anscor had any moneys available for disbursement by it apart from the commission moneys it received from Dexter. That is, there is nothing to contradict what I think is the position, viz, that the moneys which Anscor and the other Anscor respondents used to acquire the properties the subject of the tracing claims were comprised entirely of moneys received by Anscor from Dexter. 50 On 30 June 1997, the Corbetts, with McAuley's assistance, established the Anscor Superannuation Fund with the thirteenth respondent as its trustee. That same day Anscor paid $2,805,000 purportedly as a contribution to this fund and immediately borrowed all save $5,000 of those moneys back from the fund. Anscor got this $2,805,000 from Dexter's commission moneys. As will appear, I do not consider that any trust was established by the actions taken on 30 June 1997: PIAM merely held the moneys it received, including this $2,805,000, purportedly as trust contributions by Anscor for the Corbetts. These events of 30 June 1997 therefore do not operate to bar Clout's entitlement to pursue Dexter's moneys into Anscor's hands. These, for the reasons given, were all Dexter's own moneys unfettered with any trusts. 51 As to out flows from the Wattle account, Dexter paid all commissions to administrators from the Wattle account and also the substantial personal expenses and the expenses, additional to commissions to administrators, he incurred in running the scheme. Clout agreed that he had been unable to find "any evidence of any systematic on-lending by Dexter of investors' funds", ie, in short term loans of the kind he informed investors were intended to be made. Clout said that such moneys as Dexter lent out were confined (except for the two isolated loans to two of the administrators) to loans to members of the Foundation Group of companies who engaged in a range of business activities. There is no suggestion in the evidence, however, that any of the Foundation Group of companies carried on the kind of lending Dexter lead investors to believe he intended to engage in with their moneys. 52 In addition to the non-interest bearing loans made by Dexter from investors' moneys in the Wattle account to Foundation Group members outstanding when the Group went into liquidation, Dexter also maintained what was called a "sweep" facility between the Wattle Group and the Foundation Group. Under this facility, Dexter's bank was authorised to transfer funds from the Wattle account to the bank accounts of the various members of the Foundation Group at the end of each day, to the extent necessary to ensure that Foundation Group members own separate accounts that would have been short of funds were thus able to meet payments due by those members. As at March 1998, when the Wattle scheme collapsed, Foundation Group members owed Dexter, in respect of loans made by him to them, a total of approximately $40,000,000. Clout said that this $40,000,000 included the total of the amounts originally lent interest-free by Dexter to Foundation Group members, which were transmuted from loans to Foundation Group members by Dexter into equity held by Dexter in the Group. 53 Clout concluded that at no point had Dexter made any money out of his other business activities or short term lending. In relation specifically to the $10,316,948 of what purported to be interest payments paid to investors by Anscor from moneys received from Dexter and an equal amount of $10,316,948 received by Anscor from Dexter in the same period as commissions, Clout's conclusion was that this $21,000,000 came from the funds placed in Dexter's hands by investors. He does not here refer to payments into the Wattle account by Foundation Group members. So far as Clout's investigations revealed, the entirety of the moneys paid by Dexter to particular investors by way of interest and repayment of principal where that was done and to administrators, including Anscor, by way of commissions came from capital moneys paid over to Dexter by investors. It was for this reason that Clout, by May 1988, was of the opinion that Dexter had been operating the Wattle scheme as a "Ponzi" scheme. That Dexter was conducting a fraudulent scheme by using incoming investors' deposits to make payments purportedly by way of interest and repayment of capital to existing investors and to meet all other expenses he incurred, including commissions paid to administrators, is confirmed by Clout, who agreed that Dexter fabricated summary sheets purporting to record interest earnings from long term loans. Clout said these were "basically the main form of marketing which the administrators used to attract new investors", but that these sheets generated by Dexter were "just a fabrication because the moneys weren't being lent out on a short term basis and therefore the calculations of interest on those sheets were not correct". Clout says that Dexter used to prepare, on a periodic basis, summary sheets for individual clients which were forwarded to the relevant administrator electronically to pass on to the investor. He says that: "Although the client summary sheets seemed to record a series of on-lending transactions of the investors' funds by Dexter, I have been unable to identify any systematic on-lending of funds by Dexter to third parties that replicates the entries on the clients' summary sheets". 54 I find that throughout the two years to March 1998, the Wattle account was, at any point in time, a mixed fund made up, firstly, of a large amount, in total, of moneys deposited by many individual investors with Dexter under either one of the two forms of agreement used by Dexter for on-lending by him. In so far as they consisted of deposits by investors under the new form of agreement, the moneys in the Wattle account were Dexter's own moneys. Secondly, the account also comprised moneys paid in by various Foundation Group members from their own funds, which became Dexter's own moneys on receipt by him. At any other point of time within the same two year period, the Wattle account would comprise a mix of the same kinds of moneys, though it is highly likely that they would have been sourced from a differently constituted group of investors and Foundation Group members than were the funds in the account at a different time. 55 I accept the trustee's submission that where (as here) it is not possible to identify what part of a mixed fund should be regarded as belonging to or should be appropriated to a particular payee, any trust that might hitherto have existed in respect of the moneys of a particular payee paid into the mixed fund will be destroyed by that impossibility. Brady v Stapleton (1952) 88 CLR 322 is a decision concerned with how the principles of tracing should apply to a mixed corpus of shares, none of which were able to be identified as those of individual owners. Dixon and Fullagar J rejected the argument that the impossibility of precisely identifying which shares in the remaining mixed corpus of shares had belonged to particular owners precluded the making of a tracing order for the transfer of shares to the claimant. Their Honours, in reviewing the law, said at 338 - 339: Equities are not defeated if a trustee mixes trust moneys with his own moneys and with the mixture purchases a grey horse and a black horse or a grey horse alone. In such a case equity imposes a charge on the two horse or the one horse. But, where it is possible to give effect to the rights of a cestui que trust by simply taking out so much money or so many bonds or so many shares, the cestui que trust may elect whether he will take property in specie out of the mass or have a charge on the mass. … It is to be noted that such expressions as "indistinguishable mass" - which are not technical expressions - are capable of being used in a misleading way and are not really apt to convey the true distinction observed by equities. That distinction is well illustrated by the contrast between the case, instanced above, where a trustee has mixed trust moneys with his own and bought a horse, and the case where he has mixed trust bonds with bonds of his own. Yet a horse is an "indistinguishable mass" in one sense and the bonds are an "indistinguishable mass" in almost the opposite sense. The horse is an "indistinguishable mass" in the sense that it is not practicable to attribute one part of him to the trust fund and other part of him to the trustee's own funds. The bonds are an "indistinguishable mass" in the sense that there is no practical reason for differentiating one bond from another and it is quite possible to take out so many bonds as will suffice to make good the trust fund. The real distinction which equity draws is between the case where it is, and the case where it is not, practicable to give effect to the rights of the cestui que trust by appropriating to him a specific severable part of the available property. (emphasis added) 56 In Stephens Travel Service, Hope JA said the same principles were applicable where the question arises in relation to mixed funds of money. 57 Windsor Mortgage Nominees Pty Ltd (as trustee) v Cardwell [1979] ACLC 32,195 was a case in which a company solicited money from investors to be aggregated in parcels and lent out to borrowers on the security of mortgages; the scheme required the company, in making each syndicated loan, to execute a Deed of Trust which would have enabled each individual investor to know precisely in what mortgage or mortgages precise amounts of his advances had been invested. While the company did lend out some of the investors' moneys on mortgage securities, in breach of its obligations to them it made some unsecured loans and simply held part of the investors' moneys. Though the company did execute Deeds of Trust in relation to some of the investments it made including some it made in breach of its obligations to investors, it made no attempt to ensure that the Deeds identified the particular investors whose moneys had, in fact, been lent out in the particular transaction. The receiver subsequently appointed in respect of the company sought directions from the Court as to how to distribute the moneys in his hands: the receiver had found it impossible to trace the particular funds of any one investor into any one investment. It was the misconduct of the trustee itself that prevented the express trust for each investor that came into existence when the company entered into the mortgage transaction from being given effect. Accordingly, because of this impracticability, no investor was held entitled to look to any particular investment for repayment of its moneys. A similar situation was the subject of the decision in Australian Securities Commission v Melbourne Asset Management Nominees Pty Ltd (Receiver and Manager Appointed) (1994) 49 FCR 334 at 359 - 361. 58 As appears from Brady v Stapleton, if it is impracticable to appropriate a specific severable part of a mixed fund to a person otherwise beneficially entitled to a part of the fund, equity imposes a charge on the entire fund in favour of the beneficiary. But that is not the inevitable result. In Stephens Travel Service, Hope JA expressed some tentative views on the position where a trustee mixes his own money with the moneys of two or more trusts and there is insufficient left to meet the entitlement of all beneficiaries; his Honour suggested that "possibly depending in the case of a particular beneficiary upon the application of the rule in Devaynes v Noble; Clayton's Case…, the beneficiaries may be able to claim and recover only a part of the moneys to which they are entitled; that is, their claims on the fund may have to abate because of the trustee's default". His Honour went on to suggest that, in such a case, the beneficiary may be entitled to receive from the moneys remaining his abated share of money in specie rather than to be content with a charge. 59 However, I do not think this question needs to be pursued. The task of present concern is to determine whether, at the time each of the commission payments in the two years in question was made by Dexter to Anscor, those payments were made by Dexter with moneys which should be regarded as his moneys for the purposes of s 120 the Bankruptcy Act. The critical question is whether it is now possible, in relation to each of the many payments by Dexter of commissions to Anscor that together make up the $26,000,000 paid in the two years the subject of the trustee's claims, to apportion those payments so as to identify the money in specie forming part of each payment by Dexter which should be treated as belonging to a particular investor with the residue of the particular commission payment being attributable to Dexter's own moneys, eg, because they were paid in by Foundation Group members or by investors under the later form of loan agreement with Dexter. In my opinion, this is a case in which it can properly be said that even though the commission payments in question were made by Dexter to Anscor which, in all probability, consisted in part of moneys received by Dexter from particular investors as trust moneys under REC3-type agreements, it is not practicable to give effect to the rights of the investors as beneficiaries by appropriating to them specific, severable parts of each commission payment. To the extent that Dexter paid Anscor commissions during the two years in question with moneys which on receipt by him belonged in equity to individual investors, the trusts are destroyed by the impracticability of giving effect to them. 60 For the reasons given, that a group of investors may have had equitable rights in each of the amounts of commission paid over by Dexter to Anscor less extensive than full beneficial ownership does not show that each of those commission payments were not of moneys of Dexter within s 120 the Bankruptcy Act. It is unnecessary, however, to pursue further the task of identifying the nature and extent of the limited equitable rights particular investors may have had in each of the bulk payments made by Dexter to Anscor each month, from which Anscor paid investors' "interest" and its own commissions. This case is not concerned with claims by individual investors against any of the respondents. 61 Notwithstanding the existence of such rights with respect to the moneys Dexter need to make each bulk commission payment to Anscor to March 1998, the moneys paid by Dexter to Anscor by way of commissions during the two years in question were all transfers of his property within s 120. DID ANSCOR give consideration of less value than the market value of the commissions paid to it by Dexter? 62 The market value of the commissions is the amount of the money so paid by Dexter to Anscor, ie, $26,379,260 in the period 26 March 1996 to 26 March 1998. 63 In order to determine whether Anscor gave consideration of less value than the amount of the commissions it received from Dexter, it is necessary to compare the "value" - not necessarily the market value - of the consideration given by Anscor for those commission payments at the time each payment was made. Further, the consideration given by Anscor is to be assessed on an objective basis, not dependent on any special value which Dexter may have subjectively placed on the consideration. Victorian Producer's Co-Operative Co Ltd v Kenneth [1999] FCA 1488 at par [18], following Sutherland v Brien (1999) NSWSC 155. 64 The major part of the work done by Anscor through the three years in question to earn its commissions was in sourcing the loan moneys, ie, identifying persons prepared to place their moneys with Dexter. In this respect it did, as Mr Corbett said, perform work ordinarily performed by a finance broker, but part of that work only. 65 Mr Corbett described in his evidence how Anscor's relationship with Dexter, which commenced in 1994, developed over time. He said that Anscor's role "as a broker" was extremely difficult at first as it was very hard to get people to provide unsecured funds to an individual for such a high risk venture. He added "our role became easier as time went on and the Wattle Group continued to perform". That the task of sourcing investors prepared to place and leave money with Dexter during the two years to March 1998 must have been quite undemanding as word spread about the consistent, very high returns Dexter was paying to investors is confirmed by the figures. From July 1994 to the end of March 1998, Dexter received funds of over $197,000,000. $56,000,000 of those funds were received in the year ending 30 June 1997, with a further $116,000,000 being received in the next nine months to the end of March 1998. Only $25,000,000 in total was received by Dexter in the initial two years, 1994 to June 1996. Further confirmation that finding lenders for Dexter in the two years in question did not require a great deal of effort on the part of Anscor is provided by the fact that there appears to have been little in the way of organised marketing campaigns and little in the way of distribution of promotional material. Promotional material appears to have been confined to the fabricated payment schedules prepared by Dexter and distributed to administrators including Anscor for the purpose of being shown to prospective investors. I accept Clout's submission that, at least in the two years presently relevant, the marketing of Dexter's business performed by Anscor, including sourcing investment funds for Dexter, was uncomplicated and required little effort on Anscor's part. 66 The administrative work done by Anscor on which it relies to justify in part the reasonableness of its commissions was also limited in extent. The administrative services that Anscor performed in relation to each investor after the latter had placed moneys with Dexter consisted essentially of checking from summary sheets provided by Dexter each month the amount to be paid by way of interest for the month to the particular investor from the lump-sum transfer payment then made by Dexter to Anscor, drawing the appropriate interest cheque for the investor and forwarding it with the client's summary sheet relating to that payment, prepared not by Anscor but by Dexter. Further, because Anscor was paid monthly commission payments equal to the monthly interest payments made to investors sourced by Anscor, part of the work that Anscor did in checking clients' interest payments each month was work done for Anscor's own benefit in so far as it involved checking to ensure Anscor was receiving its own commission entitlements. Mr Corbett agrees that, so far as the administrative services performed by Anscor were concerned, which are included in par 7A of the amended statement of claim, that those services "were undertaken primarily on our clients and our own behalf as part of our ongoing costs of doing our business efficiently". 67 There is considerable evidence that establishes the existence of what can be described as a market in the mid 1990s in which lenders lent out their moneys to borrowers for short terms at very high rates of interest. Though I accept Mr Jackson's evidence (and that of the other witness called by both Clout and the Anscor respondents) as to the existence of this market, I do not accept Jackson's assertion that commission fees of the size paid by Dexter to Anscor were fair and reasonable. His basis for saying that was his own experience with Dexter. He sourced loans for Dexter and was paid commissions similar to those paid to Anscor. The existence of that market is, in any event, of little relevance to the question whether Anscor gave consideration equal in value to the commission moneys it received. Anscor was not putting any of its own moneys at risk, merely finding persons willing to lend to Dexter and then performing a limited range of services in relation to each investor while the latter's moneys remained with Dexter. 68 The Anscor respondents' strongest evidence was the affidavit of Mr Unwin prepared for use in the present action, but in the proceedings between Clout and the seventh respondent, Australian Secured Mortgages, like Anscor, a Wattle Group administrator. Unwin is a very well qualified finance broker. He expressed the opinion that a commission fee of 4% per month of the amount of loan moneys invested on a short term loan would be market value for the broker's services. However, that opinion was coloured by his assumption that an intermediary in the position of a Wattle administrator like Australian Secured Mortgages would perform a range of the services required of someone managing Dexter's entire loan book, from receipt of application by a prospective borrower, to assessment of security offered, to arranging for the advance of the loan moneys, then monitoring performance by the borrower and finally arranging for discharge of securities on repayment of the loan. This is so though Unwin's final opinion was expressly directed to the range of duties said to have been performed by Australian Secured Mortgages in par 126 of Clout's amended statement of claim. Ultimately, Unwin conceded it was very difficult to maintain his opinion as to the reasonableness of a Wattle Group administrator receiving 3% to 5% each and every month of the amount of moneys placed by an investor with Dexter for procuring those moneys and for performing the limited range of services administrators provided to Dexter thereafter. 69 The trustee called a Mr McLaren, who is also well qualified in finance broking. I accept his evidence that the range of commissions paid to finance brokers is typically between 0.5% and 5% of the face value of the loan and is paid as a once only flat fee upon settlement of the loan. I also accept what he has to say about how, in more recent times, it has become fairly common for finance brokers to also receive a trailer commission - he says of not more than 0.25% per annum - for the duration of the loan in respect of certain finance products such as residential mortgage lending. He agreed with the evidence led on behalf of the Anscor respondents that the Wattle investment scheme was not a mainstream product and said that there was, in fact, no other product in the market like it. He said, in effect, that he considered the extraordinarily high commissions paid to Wattle administrators of up to 50% of the capital invested by investors on a per annum basis reflected the fact that there was no realistic prospect of such an investment producing any return to investors "over the medium or long term". He spoke of his experience, albeit limited, in arranging for finance for borrowers who can be regarded as "desperate" and who are willing to pay rates of interest "vastly above mainstream lending rates". Importantly, he said that his experience was that where such loans were brokered, the commission paid to the broker would be at the higher end of the range, but he had never heard of brokerage in excess of a one-off payment of 5% of the principal sum being paid even in those cases. He added that the broker in such cases would typically not only find a lender willing to lend to such a borrower, but would oversee the loan documentation and settlement of the loan in return for his once only fee. 70 Under the REC3 form of agreement, investors were required to leave their initial investment with Wattle "for a minimum of six months". Under the new form of agreement, they were required to leave their money with Dexter for the same initial period. In fact, many investors left their moneys with Dexter for much longer periods. In all cases, Anscor was paid 5% of the amount of principal invested month by month. In view of the evidence of McLaren that a one-off payment of 5% of the loan (plus a small trailing commission) was the upper limit of the fees a broker could expect for arranging a short term high risk loan, Clout's submission that Anscor was remunerated as if it had negotiated a new short term loan each and every month in respect of each investor, irrespective of how long the investor's moneys were left with Dexter has substance. It was this characteristic of Anscor's commission arrangement coupled with the requirement for moneys to be left with Dexter for a minimum of six months with Dexter that ultimately caused Unwin to concede that it was hard to justify the level of commissions paid to Anscor. 71 The fact that Dexter was prepared to pay the commissions he did to Anscor provides no evidence that they were a fair or reasonable recompense for the work done by Anscor. There was no written agreement between Anscor and Dexter detailing Anscor's obligations. There is nothing to suggest that the rate of commission that Anscor (and other administrators) received was the result of any bargaining process between Anscor and Dexter. Rather does it appear that Dexter simply offered to pay the very high rate of commission which Anscor was paid. Dexter was on a treadmill which he could not get off: he needed a constant inflow of new funds to keep the scheme going. He was apparently not prepared or not able to do that himself or through his own organisation. Hence his willingness to offer the very large commissions he did to Anscor and the other administrators. The fact that Anscor's sub-agents received commissions from Anscor that varied, in some cases between 1% and 2.5% per month of the funds sourced by the sub-agent, does not, I think, provide any ground for thinking that Anscor's own commissions were a fair or reasonable return for the work Anscor did for Dexter: as Clout submits, the rates paid to sub-agents to Anscor derived from the rates Dexter paid and not vice versa. Anscor could only offer them to its sub-agents because Dexter paid as much as he did to Anscor. And as the trustee submits, Anscor had to pay its sub-agents generously to discourage them from going to Dexter and requesting that they be appointed "administrators", as some sub-agents in fact did. 72 I do not accept the Anscor respondents' submission that, in order to determine whether Anscor gave adequate consideration for the commissions it received in the two years in question, it is necessary to examine every payment of commissions in that period and the services actually performed each month in respect of each and every one of the thousands of investors. Anscor was paid throughout, a standard commission that equated on an annual basis to 50% of the amount of the funds placed with Dexter through Anscor. Much of the sourcing of these funds was done by Anscor's sub-agents in this two year period. There is nothing to suggest that sourcing funds in this particular period, when the Wattle scheme was attracting large numbers of investors because of its performance up to that time, presented Anscor with any difficulty. I have referred to the evidence detailing the limited administrative services that Anscor provided. The Anscor respondents did not put any evidence before the Court to suggest that Anscor's task in administering investments in this two year period was anything other than the routine one I have described. In particular, the Anscor respondents did not attempt to show that Anscor had to deal with any individual investors, who each raised difficulties which required the input of considerable effort by Anscor to resolve. There is, as Clout submits, no basis for thinking that Anscor provided services in relation to some investors which were substantially more valuable than its services for investors generally. Each investor therefore appears to have been interchangeable with any other investor, so far as the quantum of effort that Anscor put into locating the investor and then administering the investor's loan is concerned. 73 In my opinion, Anscor gave consideration of very much less value than the amount of the commissions it received in the two year period to March 1998. The payment by Dexter of these commissions to Anscor is therefore void as against Dexter's trustee in bankruptcy. It is unnecessary, in reaching this conclusion, to assess the value of the consideration that Anscor gave for those commissions: see Victorian Producer's Co-Operative Co Ltd v Kenneth at par [23]. 74 However, in order to deal with the issues raised in this case and in particular the tracing claims, it is necessary to determine the allowance the trustee in bankruptcy must make pursuant to s 120(4) for what was done by Anscor in return for receiving the commissions. The value of the services provided by Anscor to Dexter 75 The Anscor respondents submit that Anscor should be regarded as having given substantial consideration for the commission payments measured by its actual operating expenses during the two year period, plus a profit margin of 25%. Figures contained in the Anscor respondents' submissions suggest that, if Anscor's expenses are adjusted to exclude payments in the two year period to its employee benefit fund and superannuation funds, Anscor should be regarded as having given, on this basis, consideration worth $16,473,686 for the commissions it received in the period. 76 I would not regard the very substantial payments made by Anscor in the period in respect of its employee superannuation fund as one to be brought into account in its favour in assessing the actual value of the consideration it gave for the Dexter commissions. In so far as these funds were set up as a means of providing a source of income to the Corbetts that would otherwise have been taxable in either Anscor's or their hands, I would not regard them as expenses of Anscor's operations for present purposes. There is evidence that suggests that this may well be the case. I refer to the evidence indicating that the moneys paid on 26 March 1998 by Anscor to PIAM purportedly into a superannuation fund have been used, in large part, to meet the legal expenses incurred not only by Anscor, but also by Mrs Corbett and to meet the Corbetts' living expenses. But I reject Anscor's approach. 77 Anscor's adjusted expenses for the period of $13,178,949 include $9,548,509 paid by Anscor to its own sub-agents. Anscor says these payments must be regarded as a legitimate expense of Anscor incurred in conducting its activities as a Wattle administrator. It points out that its costs of operations, including these payments to sub-agents, were real costs paid with real money. 78 I have already referred to Sutherland v Brien as authority for the proposition that the value of the consideration given by Anscor for the Dexter commission payments for the purposes of s 120(1)(b) must be assessed on an objective basis. In that case, Roberts, who later became bankrupt, gave personal guarantees and a mortgage over his property to procure from Sutherland, the administrator of his company [AIG], the deferral for a period of about one month of action by the administrator to shut down trading by the company. Austin J concluded that the administrator had given consideration of no value or only nominal value for the purposes of s 120(1)(b) for the Roberts' guarantee and mortgage. His Honour said: 40 I must compare the market value of the property with the `value' - not necessarily, one notes, the market value - of the consideration given by Mr Sutherland. It is plain that the value of the consideration must be assessed on an objective basis not dependent on any special value which the transferor may have subjectively placed on the consideration. This is an important point in the present case because the evidence suggests that Mr Roberts had a totally unrealistic sense of optimism about the future of the company and therefore placed an unrealistically high value on securing a short extension of time. The Explanatory Memorandum indicates that the present wording of s 120(1) is intended to overcome the decision inBarton v Official Receiver (1986) 161 CLR 75, that a person who claims to be a purchaser of property need not show that he or she has given fully adequate consideration for the transfer as long as the consideration is real and substantial. Under the new s 120 the Court is required to make an assessment of the objective value of the consideration if it can, on the basis of such evidence as is available. 41 It seems to me that if one puts aside the hopes, expectations and commitments of Mr Roberts about the future of AIG, all one has by way of consideration are the two promises to forebear from taking various steps for two very short periods of time which can have had very little, if any, value at all, given that after the expiration of that extended time those very steps were promptly taken. 79 In my opinion, the same objective assessment required to be made by s 120(1)(b) has to be made in order to give effect to s 120(4) where it is concluded that the transferee has given consideration of some value, though less than market value, for the property transferred by the bankrupt. 80 Dexter needed to have a lot of organisations soliciting funds from the widest range of potential new investors. Anscor was paid the extraordinarily high rate of commission because Dexter, in order to keep the Wattle scheme going, had a necessarily unsatisfiable need for a constant inflow of new investor moneys. It was for that reason that the services provided to him by organisations like Anscor, particularly in sourcing new investors, had an especially high value to Dexter personally, which those services, on the evidence, would have to no one else seeking to raise funding for short term high risk lending to others. That is why Dexter was prepare to offer the commissions he did. 81 In addition to the evidence about the short term lending market that I have dealt with, the Anscor respondents also rely upon three prospectuses, apparently accepted by the ASIC for registration, as supporting the proposition that the claim by Anscor to a mark-up on expenses of 25% for profit is a reasonable allowance to make in assessing the value of the consideration Anscor gave for the Dexter commissions. I will deal with the Brannelly Group prospectus in a moment. The other two prospectuses are in respect of business activities entirely different from those of the Wattle scheme and of Anscor's involvement in it. Neither supports the Anscor respondents' point that commissions of as much as 25% of expenses were accepted in the market place. Further, there is no evidence as to whether the ventures the subject of any of the three prospectuses proceeded. If they did not, that would suggest that the proposals were, for one reason or another, unacceptable in the market place. 82 The Anscor respondents also rely on the prospectus of the Brannelly Group, approved by the ASIC on 6 April 1998 to support their contention that the commissions Dexter paid Anscor were in line with the level of commissions accepted in the short term lending market. This prospectus solicits funds from investors to be placed in a trust fund and lent out by the manager to borrowers prepared to pay high rates of interests for short term loans. It states: "The rate of interest which the Manager charges Borrowers will be in the order of 15% per month. Of the interest charged, at least 26.67% will be returned to investors, with the balance being used by the Manager to pay the payment of expenses and to pay the Manager's fees". The prospectus, by way of illustration, states that if the manager were to charge a borrower 15% per month, investors who have their money allocated to that particular loan would receive 4% per month on their loan moneys. 83 The Anscor respondents rely on this prospectus as evidence of the existence, not only of a market for short term, high interest rate lending, but also the existence in that market of organisations engaged in activities similar to those of Anscor from which they derived income at rates significantly greater than those derived by Anscor in the form of the Dexter commissions paid to it. I do not accept this ASIC-approved prospectus as evidence that the value of the consideration given by Anscor for the Dexter commissions should be assessed as the Anscor respondents submit, on the basis of Anscor's operating expenses, plus a profit mark-up of about 25%. Firstly, it is apparent from the Brannelly prospectus that the Brannelly manager intended to assume a much more onerous task than did Anscor. The Brannelly manager intended to assume responsibility for assessing the capacity of each borrower of investors' moneys to repay those moneys, having regard to the manager's assessment also of the worth of any security offered. (section 2.2) The Brannelly manager arranged for the preparation by its solicitors of security and loan documentation. (section 2.3) It maintained detailed accounts in respect of investment moneys. (section 2.4) Once Anscor had, through its sub-agents, located investors, in contrast to the Brannelly manager, Anscor simply passed the money over unquestioningly to Dexter. Anscor's administrative duties thereafter were much less onerous than those proposed for the Brannelly manager. Secondly, the prospectus is unclear about just how the interest income derived from the short term lending business was to be split up between the Brannelly manager and investors. The prospectus states that: Of the interest charged at least 26.67% will be returned to investors, with the balance being used by the Manager to pay the payment of expenses and to pay the Manager's fees. 84 Nowhere in this prospectus that I can see is there any further elucidation of what fees the manager intends to charge on top of his actual expenses. I would read the prospectus as guaranteeing investors a minimum share of 26.67% of interest income derived from the Brannelly manager's lending business, with the manager being entitled to recoup from the balance its actual expenses and a reasonable but otherwise unidentified fee for the manager's efforts. In this regard, it is significant that in section 6.4 of the Brannelly prospectus, the manager refers to its intention to engage sub-agents to introduce investors to the Brannelly scheme and states: "The maximum commission payable will be 5% of the money paid into the fund and the payment will be made from the Manager's own fund." A one-off 5% payment of the amount of the investment money introduced is here proposed to be paid. In so far as the prospectus entitles the manager to an unspecified but reasonable remuneration by way of fees in addition to covering the manager's expenses, it might be thought that section 6.4 provides strong evidence of what the amount of that fee would be. In so far as this prospectus may support Anscor's case, Matthew Brannelly, one of the principals of the Brannelly Group, was also the principal of the eighth respondent. The Brannelly Group expectations as to the value of their services set out in this prospectus may have been coloured by Matthew Brannelly's experience with the Wattle scheme. The scheme the subject of this prospectus may, in fact, have its origin in advice Dexter gave Brannelly in April 1997: see Clout's exhibit DLC79, at p 2. 85 I accept McLaren's evidence as showing that reasonable remuneration for Anscor's services to Dexter in sourcing funds and administering investors' deposits is, firstly, a one-off fee of 5% of the amount sourced by Anscor from each investor and, secondly, a payment in the nature of a trailing commission of 0.25% per annum of the amount of each investment over the period those moneys were with Dexter. It is this measure of a reasonable remuneration for the services provided by Anscor to Dexter that will constitute the value of the consideration that Anscor gave for the commissions, for the purposes of s 120(4) the Bankruptcy Act. 86 The ratio between the value of the total consideration given by Anscor for all the commission moneys and the total amount of those commissions of $26,379,260 will be the ratio to be applied to abate the amounts recoverable as money judgments and the amounts of Clout's tracing claims. 87 I do not think I am in a position to assess what part of the $26,379,260 received by Anscor from Dexter by way of commissions in the two years to 26 March 1998 should be regarded as comprising the value of the consideration Anscor provided for the payments totalling that amount. If the figure cannot be agreed between the parties, there will have to be an inquiry by the Registrar to determine this figure in accordance with the approach I have described in the preceding paragraph. The tracing claims 88 I have already set out the principles upon which effect is given to the equitable right to trace in respect of money paid into a mixed fund. Clout, as Dexter's trustee in bankruptcy, can rely on this equitable form of relief to give effect to his legal right under s 120 to avoid the commission payments made by Dexter to Anscor: see Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372 at 427. 89 In my opinion, the Anscor respondents' submission that, if these claims are to succeed, the commission payment received by Anscor in respect of each particular investment must be identified and traced separately is misconceived. I have explained why. So long as the trustee can show that the Anscor respondents acquired the various properties the subject of the trustee's tracing claims with moneys they got from Anscor during the period in question, that is all that is necessary to make out the tracing claims: Anscor moneys all came in the form of the commission payments from moneys free of any trusts, ie, they all came from Dexter's own moneys. 90 Though s 120 declares that an undervalued transfer of property by a person who later becomes bankrupt is void against the trustee in bankruptcy, it is settled law that the courts will treat the transfer as effective to vest the property in the transferee until the transfer is impugned in proceedings brought by the trustee in bankruptcy. It follows from this that, to the extent that Anscor (and PIAM) have dissipated Dexter commission moneys received by them in the two years in question before the trustee commenced the present action, the trustee has no claim under s 120 against Anscor (or PIAM) in respect of those commission moneys. However, if commission moneys already paid away remain "in some derivative form in the hands of [Anscor], title to the property revests in the trustee in bankruptcy and [Anscor] thereafter continues to hold the property as trustee for the trustee in bankruptcy and will be ordered to do all necessary acts to revest the property in the trustee in bankruptcy": Alvaro at 426. And where Anscor has not retained the Dexter commissions but they have been transformed into the identifiable property of a third party, equity will allow the trustee in bankruptcy to claim the property in its altered form from that third party, so long as the third party cannot rely upon equitable principles protecting a bona fide purchaser for value to answer the trustee's demand. These principles cannot protect the other Anscor respondents from the trustee's demands: each of the respondents, Mrs Corbett, Croftby Downs, Thornville and Anscor Investments acquired interests in properties which they still hold with moneys provided to them provided to them by Anscor with notice that the moneys had come from Dexter commissions: Mrs Corbett was the sole director of Anscor and the other corporate Anscor respondents. As will appear, none gave any value to Anscor for the moneys each received from Anscor and which they laid out in acquiring the interests in question. 91 The trustee's right to trace commission moneys received by Anscor into properties purchased with those moneys by Anscor and the other Anscor respondents must, I think, be subject to a qualification because of s 120(4). Even if all the commission moneys paid in the two years in question by Dexter to Anscor remained in some identifiable form in Anscor's hands when Clout instituted the present action in reliance on s 120 the Bankruptcy Act, by force of that provision, the trustee would not be entitled to recover, after avoidance of the transfer, all those commission moneys. Rather would the trustee be entitled, at most, to recover only the total amount of the commissions paid in the period less the value of the consideration given by Anscor for those commission moneys as assessed under s 120(4). I think it follows from this and from the fact that the commission moneys received by Anscor were, in their entirety, moneys that belonged in law and equity to Dexter personally, that the trustee will have a tracing claim not to the whole of the Anscor commission moneys that can be followed into properties acquired by the Anscor respondents with those moneys, but to a proportionate part only, of those moneys: if, by way of illustration, it is ultimately determined that Anscor gave consideration worth $6 for every $100 of commission it received, the trustee can recover, in his various claims, 94% of the total amount of Anscor moneys that it can follow into the various properties acquired with those moneys by the Anscor respondents and in his money claims, a similarly abated part of the amounts made out. 92 The Anscor respondents submit that all the tracing claims must fail because Anscor did not receive any of the Dexter commission moneys here in question as its own property to do with as it wished, but in its capacity as trustee of the Anzcorp Discretionary Trust. There is nothing in the wording of s 120 the Bankruptcy Act that I can see which lends any support to the respondents' submission that the section does not apply to transfers of property by persons who become bankrupt to transferees who are themselves trustees for third party interests. The section operates on transfers of property by persons who become bankrupt which, because of the want of consideration by the recipient of the property, results in the bankrupt's estate being diminished, to the detriment of the mass of unsecured creditors to an extent that it would not have been diminished, if adequate consideration had been given for the property transferred away. The identity of the transferee or the capacity in which the transferee acts in taking the property at an under value is irrelevant to the legislative intention sought to be achieved by s 120. 344 Queen Street 93 By the Anscor respondents' defence, it is admitted that: (1) Anscor purchased this property in July 1996 and took title to it; (2) that Anscor contributed $145,376 from funds available to it in making this purchase, with the balance being provided by borrowings from a third party; (3) that between July 1996 and 23 March 1998, Anscor expended $174,533 of moneys available to it in fitting out and otherwise improving the premises; (4) that between 6 December 1996 and 12 June 1998, Anscor expended not less than $179,659 of moneys available to it in repaying principal and interest on borrowings made in respect of the premises. 94 This property was sold some time ago and, after discharge of encumbrances, there remains from the proceeds of sale a fund of $193,662 preserved in accordance with the Court's order of 21 March 2000. I have held that all the moneys spent by Anscor in respect of this property referred to above must be regarded as having come from Dexter's own moneys paid to Anscor as commissions. The Dexter moneys expended by Anscor on this property very greatly exceed the fund that now represents the property. For the reasons given, the applicant is entitled to payment of the sum of $193,662 abated to allow for the trustee's obligation to give credit to Anscor for the value of the consideration it gave in return for the Dexter commissions, which can be traced into this preserved fund. The remaining balance should, in principle, be paid back to Anscor. 628 Mt Crosby Road 95 Mrs Corbett holds title to this property. She admits the trustee's allegation that she purchased it on or about 6 August 1997 for $170,000. The trustee claims Mrs Corbett holds this property on trust for him because she purchased it with Dexter commission moneys that can be traced through Anscor's hands into the purchase moneys referred to. The Anscor respondents admit that the $170,000 claimed by the trustee in respect of the purchase of Mrs Corbett's property at Mt Crosby Road was paid out of Anscor's moneys, though they say that Anscor first lent those moneys to Mr Corbett, who then gifted them to Mrs Corbett to enable her to pay for this property. In response, the trustee contends, firstly, that there was never any loan by Anscor to Mr Corbett of the moneys in question and that the books of Anscor were simply written up later on to give the appearance that loans had been made to Mr Corbett; secondly, it is contended that the moneys used by Mrs Corbett to purchase this Mt Crosby Road property were either loaned to her by Anscor, which does not result in the moneys ceasing to be traceable into the property, or that they were simply Anscor moneys that Mrs Corbett appropriated for her own use; finally, it is contended that, if the purchase moneys for this property originated in loans made by Anscor either to Mr Corbett or Mrs Corbett, that resulted from the abuse by her of her powers as the sole director of Anscor and thus a breach of her fiduciary duty to Anscor, with the consequence that property acquired by her with moneys so obtained from Anscor is charged in equity to secure payment to Clout of the money used for the acquisition of the properties. 96 Anscor maintained a loan account in its electronic records for Mrs Corbett. Though this loan account information was printed out as a result of an account inquiry obtained by the Australian Securities and Investments Commission from Anscor's computerised records for the period 1 July 1995 to 30 June 1998, the last transaction posted to this account is on 11 March 1998. In the period 1 July 1995 to 11 March 1998, many payments were made by Anscor or for Mrs Corbett; they total $2,141,273. These records indicate that, over the period to 11 March 1998, Anscor paid many of Mrs Corbett's debts, many of which appear to be of a personal nature; these payments were all recorded as loans by Anscor to Mrs Corbett. For example, in the last couple of months to 11 March 1998, Mrs Corbett's loan account shows that Anscor paid on her behalf her Visa Card accounts and her home electricity account. Credits to Mrs Corbett's loan account in this same period total only $122,516. These credits are confined to some form or forms of inflow posted to the loan account in respect of Mrs Corbett's Visa card and Mastercard accounts. The account also shows that on 1 August 1997, Anscor paid $170,348 to Mr Klooger, Mrs Corbett's solicitor in the transaction, in respect of her acquisition of 628 Mt Crosby Road. 97 Clout's evidence that he could find no evidence of any written agreement between Anscor and Mrs Corbett with respect to loans by Anscor to her, any evidence of her having paid any interest to Anscor in respect of the many loans by it to her or any evidence of any security of any kind having been provided at any time by Mrs Corbett to Anscor in respect of any of the loan advances is not challenged. Mrs Corbett's case is that, despite what is recorded in Anscor's books in respect of her loan account, her indebtedness to Anscor as at 30 June 1997 was assigned on that same date to Mr Corbett and that all transactions posted to her loan account thereafter, until 11 March 1998, were accounting errors by Anscor's staff that were corrected some time after March 1998. She says that, despite the entry in her loan account recording an advance by Anscor to her which she used to purchase the 628 Mt Crosby Road property, the true position is that those moneys were loaned by Anscor to Mr Corbett and it was he who gifted them as his own moneys to Mrs Corbett to make that purchase. The Anscor respondents further contend that all payments made by Anscor after 30 June 1997 and recorded as loans to Mrs Corbett in this account were, in truth, loans to Mr Corbett. 98 Anscor maintained in its electronic records a loan account for Mr Corbett. The same ASIC inquiry in respect of his loan account for the same period, 1 July 1995 to 30 June 1996, showed payments throughout the period 4 September 1996 to 11 March 1998 of a range of expenses on behalf of Mr Corbett. The last entry to Mr Corbett's account is also 11 March 1998. The balance of his loan account over the period was $483,377. This account does not record any payment by way of loan to Mr Corbett of the $170,000 used by Mrs Corbett to purchase the Mt Crosby Road property (nor any of the other amounts used by Mrs Corbett to acquire the other properties or to increase her equity in them, which are the subject of the trustee's tracing claims against Mrs Corbett). 99 The rewriting of Anscor's accounts after March 1998 to record the transfer to Mr Corbett of Mrs Corbett's indebtedness to Anscor as at 30 June 1997 increased Mr Corbett's loan account by about $1,500,000. Mr Corbett's loan account ultimately stood at about $4,500,000. Mr Corbett was able to identify the disbursements of about $2,500,000 of these moneys he personally received or benefited from, purportedly by way of loan from Anscor, but he could only say of the difference of nearly $2,000,000 that it is "made up of numerous amounts that have been spent on general expenditure between approximately June 1996 and May 2000". On the face of it, Mr Corbett's loan account records the payment by Anscor of a vast range of personal expenses of Mr Corbett that were entered up to him as loans in Anscor's books. Since these moneys were provided as loans, he confirmed that he did not pay tax on any of these moneys. As with Mrs Corbett, Clout's evidence to the effect that there was no formal agreement ever entered into between Anscor and Mr Corbett in respect of the loans purportedly made by Anscor to him, that he never paid any interest to Anscor in respect of these loans and that he never provided any security for the huge amount of Anscor moneys allegedly lent to him was not disputed. Nor does the evidence indicate any repayments were made by Mr Corbett in reduction of the amount of this loan account. He says the position now is that he is not able to repay anything in respect of it. Clout has not been able to identify any assets that Mr Corbett owns in his own name from which he might clear the Anscor loan account, a position that, in view of Mr Corbett's history of difficulties with creditors, may be due to careful planning by him. 100 It is difficult to accept that Mrs Corbett ever intended to repay the large amount of money in total that was booked to her as loans in Anscor's accounts either up to 30 June 1997 or up to the last of those transactions on 11 March 1998. There is no evidence, other than the fact that each advance was posted to Mrs Corbett's loan account, that these advances by Anscor for the benefit of Mrs Corbett were intended to be repaid by her, something essential if they are to be truly regarded as loans: see Richard Walter Pty Ltd v Commissioner of Taxation (1996) 67 FCR 243 at 259. Mrs Corbett has not put any evidence before the Court to suggest there was any arrangement for her to provide security for repayment by her of what quickly amounted to a very large sum indeed. Nor is there any evidence that she paid any interest on any of these advances at any time to Anscor or any repayments of principal moneys. The amounts involved were very large: by 30 June 1997, over $1,500,000 and, as at 11 March 1998, $2,100,000. I accept the trustee's submission that the moneys drawn from Anscor's account and used by Mrs Corbett to acquire property for herself were not, in truth, advanced by way of loan, but involved only the appropriation of Anscor's money for Mrs Corbett's own benefit. 101 As to Mr Corbett's loan account with Anscor, both before and after 30 June 1997, Mr Corbett drew large amounts, in all, from Anscor's moneys which were used to meet his personal expenses. Mr Corbett's loan account, which includes the amount of Mrs Corbett's indebtedness as at 30 June 1997 transferred to him, is now in excess of $4,500,000. He has made no repayments and he says he has no prospect now of repaying them. Though they were debited to his loan account, there is no other documentary evidence that they were intended to be loans; Mr Corbett did not pay any interest on the funds advanced to him or any of the principal sums and he gave no security for repayment. Moreover, with one qualification, the trustee's evidence that Mr Corbett did not have any means of repaying the so-called loans to him is not disputed. The only suggestion that he may have had the capacity to repay these so-called loans is that Mrs Corbett, as sole director of the trustee of the Anzcorp Discretionary Trust, could have made distributions from the trust to Mr Corbett that would have enabled him to do that. But there is no suggestion that Mrs Corbett has ever done that: Mr Corbett appears to have been content to meet a wide range of personal expenses over the years with Anscor moneys posted in its accounts as loans to him which he never repaid and now cannot repay and on which he has not paid tax because of his contention that they are loans. The power in Mrs Corbett to put Mr Corbett in funds to enable him to repay these loans was never exercised. Now, in view of Anscor's position, it cannot be exercised. That power was, in my view, never intended to be exercised. Recording in Anscor's accounts the very many payments by Anscor of the personal expenses of Mr and Mrs Corbett as loans from Anscor was, in all probability, a device to avoid tax on the moneys they lived off. I do not accept that the advances posted to Mr Corbett's loan account with Anscor were ever intended by Mr Corbett or Mrs Corbett, as Anscor's controlling director, to be repaid. They were therefore not loans but the appropriation of Anscor's funds in question for Mr Corbett's own benefit. 102 Mrs Corbett's case that Mr Corbett took over the whole of her indebtedness on her loan account to Anscor as at 30 June 1997 is based on a transaction in which Mrs Corbett gave Anscor promissory notes bearing the date 30 June 1997 for the amount of her indebtedness as at that date, $1,558,077, which Mr Corbett then endorsed and presented to Anscor in discharge of Mrs Corbett's indebtedness; on its acceptance by Anscor, he thus assumed liability to Anscor for the face value of the notes as an unsecured loan, ie, for Mrs Corbett's indebtedness to Anscor as at 30 June 1997. Mr Corbett's evidence was that his substitution for his wife in respect of her indebtedness to Anscor up to 30 June 1997 was concluded on that day in McAuley's presence, but that the promissory notes were not signed until "we came back from overseas, around mid August, late August [1997], something like that". 103 Mr Corbett said: The only reason Mrs Corbett's loan account shows beyond 30 June 1997 is that in the flurry of activity on the 30th of June 1997, it was overlooked to inform Sue Cruickshank our staff accountant that from that date onwards all funds drawn for personal use by either myself or Mrs Corbett were to be debited to my loan account. 104 He added: It was not until Mr McAuley was looking after our accounts in the first half of 1998 that it was realised Sue Cruickshank had not been advised as to the treatment of loan account entries for Mrs Corbett and myself and after having been advised of this by Mr McAuley she re-entered the loan accounts correctly. 105 He also added: The loan account was placed in my name on advice from Mr McAuley to the effect that as I was not a named beneficiary of the Anzcorp Discretionary Trust these funds would not be a deemed dividend for taxation purposes and should have interest charged against them as shown in the Minutes. This was done in accounts to the 30th of June 1998. 106 McAuley, the Corbetts' accountant on whose advice this transaction was entered into, acknowledged that he prepared the promissory notes after discussions with Mr and Mrs Corbett about how Mr Corbett might be able to be substituted for his wife as Anscor's debtor. But he was evasive in his evidence as to when all that occurred. Typical of his evidence is this exchange: … I'm not sure when they were signed. But I agree with you, they certainly weren't signed before 1 July 1997. And they may have been signed, for example, in 1998?---I really - I don't know when they were signed Don't you?---I don't, no. 107 The evidence shows that this substitution transaction took place long after 30 June 1997. It is not disputed that the transfer of Mrs Corbett's loan account as at 30 June 1997 to Mr Corbett was not journalised in Anscor's records until 14 April 1998 at the earliest. 108 The Corbetts' case was that this substitution was done out of concerns that, because Mrs Corbett was the director of Anscor, loans by Anscor to her might be assessed as income under s 99B the Income Tax Assessment Act 1936 (Cth). In my opinion, the steps taken by Mr and Mrs Corbett on McAuley's advice, designed to give the appearance that Mr Corbett had taken over his wife's indebtedness to Anscor as at 30 June 1997, which included the issue of the promissory notes, were only taken after the Corbetts learned of Dexter's impending collapse at the end of March 1998 and as part of an elaborate exercise designed to put the properties acquired by Mrs Corbett personally and the other Anscor respondents with Anscor moneys beyond the reach of Dexter's trustee. Payments recorded in Anscor's books as loans of Anscor moneys to Mrs Corbett might be traced into Mrs Corbett's properties which she acquired with those moneys. Mr Corbett, however, owns no property so he is immune from claims to trace Anscor moneys. 109 It may be that, as between Mr and Mrs Corbett and Anscor, the promissory note transaction they entered into sometime after 26 March 1998, designed to have Mr Corbett take over Mrs Corbett's liability on her loan account to Anscor as at 30 June 1997, is effective as between the three of them to retrospectively determine their rights inter se. But the promissory note transaction entered into after the purchase cannot alter the fact that when Mrs Corbett purchased the 628 Mt Crosby Road property on 6 August 1997, she did so with moneys that, at best for her, she, and not her husband, had then borrowed from Anscor for that specific purpose. Clout was not a party to that transaction and does not claim the benefit of any right to repayment that Anscor may have against Mr Corbett by reason of this transaction in respect of the $170,000. Re-arrangements of the indebtedness of a company's members to the company effected by entries in the company's records do not necessarily bind persons who are neither parties to those re-arrangements nor claim rights in reliance on them: cf Manzi v Smith (1975) 132 CLR 671. Clout's claim in respect of Mt Crosby Road is to the equitable remedy of tracing Dexter commission moneys initially paid to Anscor and then disbursed by Anscor and expended on the purchase of this property. The only relevance Anscor has to the trustee's claim here is that it was, on 6 August 1997, the conduit through which $170,000 of Dexter's moneys passed into Mrs Corbett's Mt Crosby Road property. It might be a different matter if the true position was that, at the time Mrs Corbett purchased the Mt Crosby Road property, she did so with moneys gifted to her by Mr Corbett, which he had already then obtained by borrowing them from Anscor. In that event, assuming Mr Corbett had truly borrowed the moneys from Anscor, Mrs Corbett would have paid for the property with Mr Corbett's moneys, not Anscor's moneys and the tracing remedy now claimed might not be available to Clout. 110 Further, even if the moneys that Mrs Corbett used to pay for the Mt Crosby Road property were moneys loaned to her by Anscor or were moneys Anscor loaned Mr Corbett which he then gifted to Mrs Corbett, the making of the loan to Mrs Corbett herself would be a breach of her fiduciary duty as sole director of Anscor: Anscor got no benefit at all from such loans. There is no suggestion that Anscor got any benefit from lending out its money to Mrs Corbett on an unsecured basis without any agreement for the payment of interest. If the purchase moneys were, in truth, loaned by Anscor to Mr Corbett and then gifted to Mrs Corbett, the same result follows. Any loan could only have been made by Mrs Corbett acting in breach of her fiduciary duty as sole director of Anscor. And since there is nothing to suggest that Mr Corbett gave any consideration for the loan he claims was made to him of the moneys for the purpose of his gifting it to Mrs Corbett to enable her to acquire her Mt Crosby Road property, it is enough that the moneys were advanced to him in circumstances involving a breach by Mrs Corbett of her fiduciary duties as Anscor's director to enable Clout to rely on her breach of duty. Even if there was in truth a loan of the purchase moneys either to Mrs Corbett or to Mr Corbett (and then as a gift to Mrs Corbett), those moneys can be traced by Clout directly through Mrs Corbett's hands into her property or indirectly through Mr Corbett into Mrs Corbett's hands. See Agip (Africa) Ltd v Jackson [1990] 1 Ch 265 at 290 and, on appeal, [1991] Ch at 566 - 567. 76 Cantwell Street 111 Mrs Corbett has long owned this property. It is called "Bindaree". 112 In April 1995, Mrs Corbett granted a mortgage over these premises to a third party lender to secure principal moneys of $395,000. By a registered amendment on 15 May 1996, the amount of principal moneys secured by the mortgage was reduced to $345,000. The evidence shows that this reduction was paid for with a cheque dated 18 April 1996 drawn on Anscor's account for $50,020. I was not directed to any evidence showing whether Anscor received any consideration for this payment that benefited Mrs Corbett. Under this mortgage, Mrs Corbett was obliged to pay monthly repayments of $3,881 to the third party mortgagee. The account inquiry in respect of Mrs Corbett's loan account, printed out from Anscor's electronic records, records ten monthly payments each of $3,883 as having been made by Anscor and posted to Mrs Corbett's loan account. They are variously described as "periodical payment", "house - Cantwell Street", "house at Brookfield". The last payment was on 9 April 1997 and was recorded as a payment in respect of "house - Cantwell Street". I infer that Mrs Corbett paid the mortgage instalments due in respect of the mortgage on her 76 Cantwell Street property, "Bindaree", up to 9 April 1997 with Anscor moneys. On 9 April 1997, she paid the sum of $365,000 to the third party mortgagee to obtain the release of the mortgage over this property also with Anscor moneys, also recorded in her loan account. 113 Between 14 August 1997 and 2 March 1998, twelve payments totalling $280,000 were made by cheque drawn on Anscor's account. Each of these payments is recorded in Mrs Corbett's loan account inquiry printout as a "loan" without further details against the same date as the corresponding cheque. These same twelve payments are also listed in an Anscor account inquiry printout of the "loan account - Robert Corbett" for the period 26 March 1996 to 26 March 1998 against the same dates. The details in each case are listed as "loan Bindaree". The respondents' submissions acknowledge that these "Bindaree" payments were moneys gifted by Mr Corbett to Mrs Corbett, who had received them from Anscor by way of loan. It does not appear when the information the subject of this printout for Mr Corbett was entered into Anscor's records. But it was in all likelihood done in connection with the litigation after the time when Clout confined his claims to the Anscor commissions received in this same two year period. Mr Corbett says, of these twelve payments totalling $280,000: Whilst some of the funds may have been used in improvements to her property, many of the funds would have been expended on maintenance items. As they items were of a personal expenditure matter, no records have been maintained. 114 I am satisfied that all the moneys expended on 76 Cantwell Street referred to above were provided by Anscor from moneys it obtained by way of commissions from Dexter. Whether these various moneys were simply applied by Mrs Corbett for her benefit or were loaned by Anscor to her or, in part at least, were loaned by Anscor to Mr Corbett and then gifted to Mrs Corbett so that she could make the payments in question, for the reasons I have given in relation to Mrs Corbett's Mt Crosby Road property, the trustee is entitled to relief by way of an equitable charge for $676,067 and interest thereon on this property. The trustee has made no claim in respect of the payment of $50,020 in April 1996 and I do not include it in the amount of the charge. 78 Cantwell Street 115 On 21 August 1997, Mrs Corbett purchased the property at 78 Cantwell Street with $78,636 of Anscor's moneys. The balance purchase price of $175,000 was raised by Mrs Corbett on the security of a mortgage granted to the lender. The trustee is only concerned with the $78,636. It is common ground that this sum was paid by Mrs Corbett with Anscor moneys, though the respondents' case, once again, is that they came only indirectly to Mrs Corbett, as a gift by Mr Corbett. 116 For the same reasons I have given in relation to her Mt Crosby Road property, the trustee is entitled to an equitable charge on this property for this sum, together with interest. Gold Creek Road property 117 It is common ground that on or about 3 February 1997, Mrs Corbett obtained the release of a mortgage on her Gold Creek Road property with a payment of $51,820 together with additional moneys raised by her on the security of a new mortgage she granted over the property to the Bank of Queensland. It is also common ground that between 16 January 1997 and 13 May 1997, she made six payments to the Bank of Queensland in reduction of the amount owing under its mortgage, amounts which total $8,035. All these payments are recorded in the account inquiry printout for Mrs Corbett's loan account from Anscor's electronic records, being variously described as payments in respect of "house at Brookfield"; "monthly payment on Brookfield"; "house payment". All the payments in respect of the Gold Creek Road property here in question were made with Anscor moneys. For the same reasons I have given in relation to her Mt Crosby Road property, the trustee is entitled to a charge on the Gold Creek Road property for the amount of $100,030 and interest thereon. Mrs Corbett's Range Rover vehicle 118 Mrs Corbett purchased this vehicle in September 1996 for $111,506. The moneys came from Anscor. The printout of her Anscor loan account inquiry records shows that on 2 September 1997, Anscor purchased a bank cheque for this sum payable to Austral Motors, in payment for a land rover. 119 For the same reasons I have given in relation to her Mt Crosby Road property, I would have held that Mrs Corbett holds this vehicle on a constructive trust for Clout. But the vehicle was sold in February 2001. The proceeds are no longer identifiable. The trustee submits, however, that he became entitled to this vehicle no later than when he avoided the payments by Dexter to Anscor pursuant to s 120 by commencing these proceedings on 7 August 1998. The trustee submits that Mrs Corbett should be ordered to account for the proceeds of sale. 120 In the original application, he claimed a declaration against Mrs Corbett that the payment of the entire amount of the commissions by Dexter to Anscor was void as against him. But he made no claim in respect of this vehicle. Mrs Corbett was joined as a party to the proceedings in May 2000, ie, prior to the sale by her of the vehicle. The declaration I have referred to was sought against her, together with relief with respect to her three properties. No order was sought in respect of the vehicle until the trustee filed his amended pleading on 27 February 2001. By then the vehicle had been sold and the trustee concedes the proceeds were not identifiable. I do not think Mrs Corbett came under any obligation to account to the trustee in respect of the vehicle until he made a claim to it. See Alvaro at 426. Croftby Downs 121 It is admitted by the respondents that on or about 16 December 1997 and on or about 9 January 1998, Croftby Downs became the owner of two lots of properties which can be called "the farm" for which it paid a total of $1,510,000. It is also admitted by the respondents that thereafter Croftby Downs acquired certain plant, equipment, vehicles and other assets situated upon the farm. It is common ground that all the moneys used to acquire both the farm properties and the farm assets came from Anscor. The respondents, however, allege that the moneys in question were all loaned to Croftby Downs by Anscor in its capacity as trustee of the Anzcorp Discretionary Trust. 122 I have explained why I think it irrelevant to the claim against Croftby Downs that Anscor disbursed moneys to it in Anscor's capacity as trustee of the discretionary trust. 123 Nor for the reasons given, would it be any answer to Clout's claim against Croftby Downs that the moneys Croftby Downs used both to acquire the farm properties and the farm assets were lent to it by Anscor. But I do not accept the moneys in question were advanced by Anscor to Croftby Downs as loans. The only documentary evidence suggesting they were is the fact that the disbursements by Anscor to Croftby Downs used by the latter to acquire the farm and the farm assets were entered up in the Croftby Downs loan account in Anscor's books as loans. What Clout has to say about their being no formal loan agreement entered into between Croftby Downs and Anscor in respect of these moneys, their being no payment of any interest by Croftby Downs to Anscor in respect of the moneys advanced by Anscor and their being no security given by Croftby Downs in respect of what are said to be Anscor loan moneys is not disputed. I infer from this that there was never any intention on the part of either Anscor or Croftby Downs, both of which companies at all relevant times had Mrs Corbett as its sole director, that the advances in question by Anscor to Croftby Downs would be repaid. They were therefore not advances made by way of loan, but simply Anscor moneys used by Mrs Corbett to acquire assets for Croftby Downs. 124 Even if the Anscor disbursements here in question should be regarded as having been made by way of loan, since Mrs Corbett, as sole director, controlled both Anscor and Croftby Downs when these transactions were made, any such loans being made in breach of Mrs Corbett's fiduciary duty as sole director of Anscor and to Croftby Downs with knowledge via Mrs Corbett as its sole director of that breach of fiduciary duty, Clout is entitled to an equitable charge on Croftby Downs assets for the moneys here in question. 125 As Clout submits, there must be an inquiry to identify the farm assets acquired by Croftby Downs with moneys from Anscor. Clout will be entitled to a charge on any assets so acquired by Croftby Downs that remain in Croftby Downs' ownership. Clout took action to put Croftby Downs on notice of his intention to pursue the claims now made against it by his notice of motion of 25 May 2000 seeking an order joining Croftby Downs as a respondent in the proceedings and an injunction restraining it from disposing of any of its assets. So far as concerns farm assets disposed of by Croftby Downs prior to 25 May 2000, Clout, for the reasons I have already given, is not entitled to any relief. But he is entitled to an account by Croftby Downs of all the farm assets that it may have disposed of after 25 May 2000 and an order that it pay to Clout an amount equal to the proceeds of any such disposals received by Croftby Downs after paying the expenses of those disposals, such amount to be abated in the way indicated above. Thornville's Mt Crosby Road property 126 On or about 4 February 1998, Thornville, the eleventh respondent, purchased a property at 624 Mt Crosby Road for $245,000. It is common ground that Thornville was, at all relevant times, acting as trustee of the Thornville Executive Incentive Trust. This trust was established on 30 June 1997. Mrs Corbett, at all relevant times, was Thornville's sole director. 127 The trust was established with a contribution by Anscor of $1,500,000, of which the trust handed back to Anscor $1,495,000 all on the same day, 30 June 1997. Clout has been unable to find any loan agreement in respect of the loan the respondents says was made by Thornville to Anscor of the $1,495,000. His counsel submits: "Prima facie then the funds used to purchase the property belong to Anscor and the respondents have not established otherwise", ie, they cannot be regarded as part repayments by Anscor of any earlier "loans". Clout also summarises the evidence given by Mrs Corbett at her compulsory examination to the effect that the Thornville Executive Incentive Trust did not trade or make money and that she did not recall this trust having any assets when it purchased Thornville's Mt Crosby Road property. 128 However, Mr Corbett says the 624 Mt Crosby Road property was purchased by Thornville from moneys available to it at the time: though the day it was established it lent back almost the entirety of the $1,500,000 contribution made by Anscor to Anscor, that company, according to Mr Corbett, repaid that loan, together with interest. In support of this, Mr Corbett exhibits what appears to be one page of the Thornville account from Anscor's records. It is unclear when the information in this document was compiled. It covers the period 30 June 1997 to 25 March 1998. The opening entry is a payment made by Thornville to Anscor on 30 June 1997 of $1,495,000. Thereafter, substantial sums in excess of $750,000 are recorded as having been paid into this account against the description "loan payment" or "loan repayment". In addition, the account records the receipt of various payments, eg, "September interest from Ansc - $8,299.96". On the face of this account, Thornville had, as at 4 February 1998, more than enough moneys of its own to pay for the 624 Mt Crosby Road property. 129 If Anscor did make substantial repayments of principal in respect of the loan back of the $1,495,000 in the period between 30 June 1997 and February 1998, the moneys that Thornville had available to it and which it used to purchase the Mt Crosby Road property were all moneys which Anscor obtained from Dexter's commission moneys, ie, Dexter's own moneys. But if Thornville did, in fact, loan the $1,495,000 of trust contributions it received from Anscor back to Anscor on 30 June 1997, moneys recorded in Thornville's account as subsequent repayments of that loan by Anscor and any property purchased by Thornville with those receipts, including 624 Mt Crosby Road, would be protected by s 120(6) from the claim Clout now makes. The account also records a payment made for the benefit of Thornville of $300,285 described as "loan for Kingscliffe". On the face of this document, which Clout does not deal with, it appears that Thornville, on 4 February 1998, had other moneys in excess of the amount paid for the Mt Crosby Road property available to it in addition to moneys it received from Anscor. 130 On this state of the evidence, I am not prepared to hold that Clout has made out his claim in respect of this particular property. His claim against Thornville will be dismissed. The Sunshine Beach property 131 By his pleading, Clout alleges that on or about 21 May 1997, the twelfth respondent, Anscor Investments, acquired the Sunshine Beach property and that the purchase price of "not less than $710,000" was paid by Anscor Investments using Anscor moneys of "not less than $510,000", with the balance of the purchase price being borrowed from the Bank of Queensland. The evidence shows that Anscor Investments purchased this property from Foundation Group Pty Ltd, effectively paying $710,000 for the property and a further $80,080 to that vendor in respect of furniture and fitout of the property, ie, a total of $790,080. 132 By their submissions, the respondents, including the twelfth respondent, admit that Anscor Investments received funds of $510,000 from Anscor to assist it in the purchase of this property. They contend Anscor Investments got these Anscor moneys by way of an unsecured loan upon which it paid interest until 30 June 1998, when the loan from Anscor and other loans to Anscor Investments from others were repaid in full. Clout's evidence that he could find neither a loan agreement nor any evidence of security given by Anscor Investments in respect of this $510,000 advance by Anscor to Anscor Investments was not challenged. He also said he could find no evidence of any repayments (whether of principal or interest) in respect of this loan by Anscor Investments. At her compulsory examination, Mrs Corbett, though the sole director of both Anscor and Anscor Investments, had little recall of anything to do with the acquisition by Anscor Investments of this Sunshine Beach property. She knew that it had bought the property, said first that she did not recall where the funds came from and then added that they "may have come from Anscor". If they had, in fact, come from Anscor (as the respondents now admit), Mrs Corbett had "no idea" why a mortgage was not granted to Anscor as security for repayment of the loan. 133 Despite the submissions made on behalf of the twelfth respondent to the effect that interest was paid by Anscor Investments on this unsecured loan from Anscor until 30 June 1998 and that, on that date, all loans owed by Anscor Investments to Anscor were repaid in part by way of distribution and in part by borrowing funds from elsewhere, there is no acceptable evidence establishing any of this other than Mr Corbett's own assertions at trial. When asked to explain his assertion about this repayment on 30 June 1998, in his affidavit of 17 May 2001 and the single line entry: "1-6970 Anscor Investment Pty Ltd ($18,000)" in his Exh REC12 on which he relied to support his assertion, Mr Corbett said that this document, described as "Chart of Accounts [Summary]" from Anscor's records, though dated 2nd May 2001 in truth showed the position as at 30 June 1998". This exchange followed in cross-examination: I'm sorry. Where does that appear - how do you know that?‑‑‑You probably don't from that document, but behind that is a series of ledger accounts which show those payments having been made, or that - the journal entries that relate to those payments having been made. Is this within REC12, Mr Corbett, what you're referring to - when you say "behind that" is something?‑‑‑No, unfortunately not. It's short on material there, I'm afraid. I'm sorry. Well, what you're saying to his Honour is that, although it doesn't appear from REC12 itself, it in some way represents the state of the loan accounts as at 30 June 1998?‑‑‑Yes, in fact I - I thought REC12 included the ledger account that - that - that reflects that - that transaction. Unfortunately, it doesn't, but it should. Well, against Anscor Investment, we see a number in brackets of $18,000. Is that to indicate that, in fact, Anscor owed money to Anscor Investments?‑‑‑That shows - it shows that Anscor owes Anscor Investments 18,000 now, yes. Now, or at 30 June 1998?‑‑‑Or at the - at the - sorry. No, at 30 June, on that balance date. How did that happen?‑‑‑I don't know without looking at the ledgers behind that. Was it - was that as a result of a transaction in which money was actually paid, or was it the result of some journal entries?‑‑‑The repayment of the loan was by way of a journal entry. It didn't involve actual - the actual payment of funds by or on behalf of Anscor Investments to Anscor?‑‑‑No, but it ‑ ‑ ‑ We can assume that, can we?‑‑‑That - there was no cash funds paid, no. And, so, then when you say in paragraph number 70, on page 17 of your affidavit, that all amounts were discharged by repayment on 30 June 1998, you're referring there to the effect of the journal entries made on 30 June 1998?‑‑‑Certainly. Now, those journal entries, were they actually made on 30 June or were they of the kind you described as, in effect, "common place", as ones that "would be made by your accountants after the balance date"?‑‑‑Correct. So it's the latter?‑‑‑The latter. So the repayment of that debt was by a journal entry made after 30 June but to - intended to take effect as and from 30 June 1998. Is that the position?‑‑‑Yes, it reflected - reflected a distribution from the [ANZCORP Discretionary] Trust on 30 June 1998. 134 A little later, this further exchange occurred: You said there that the Anscor Investments debt to Anscor was repaid by transactions, the subject of journal entries?‑‑‑Yes. And is your evidence still that it was repaid in particular by a distribution by Anscor of trust income of the ANZCORP Discretionary Trust to Anscor Investments?‑‑‑Yes. Not to Anscor Investment. To Global Managed Investments, and then Anscor Investments. To Global Managed Investments?‑‑‑Sorry; let me clear that up. The distribution was made to Global Managed Investments. Global Managed Investments loaned to Anscor Investments. Anscor Investments repaid its loan to Anscor - or to the trust. And in each case that was effected by journal entries rather than the actual flow of funds between bank accounts?‑‑‑Certainly; standard practice. And are you able to tell his Honour when it was that those journal entries were posted?‑‑‑I - you'd have to ask Mr Atchison that. I only know when they decided. I don't know when they were actually posted. 135 One of the many things which the Corbetts did on McAuley's advice on 26 March 1998 was for Mrs Corbett, the sole director of Anscor Investments, to arrange for it to grant a mortgage to Thornville, of which she was also sole director. Mr Corbett, in his affidavit, said that his wife granted this mortgage by Anscor Investments to Thornville "to secure funds of $210,000 to be advanced by Thornville and which were subsequently advanced by payments as follows: $60,000 on 21 April 1998, $100,000 on 1 May 1998 and $50,000 on 20 May 1998". 136 He referred to his exhibit REC13 as evidencing this. In cross-examination, he gave this evidence: You've agreed that Anscor Investments used money borrowed from Anscor to purchase this property [Sunshine Beach]?‑‑‑Yes. And whatever was the situation on 30 June 1998, as at 26 March 1998 that loan was unpaid?‑‑‑But Anscor owed - sorry, Anscor Investment owed Anscor a certain amount of money, at 26 March if you like. Are you agreeing with me in my suggestion that that loan was unpaid as at 26 March 1998?‑‑‑Between Anscor Investments and Anscor? … Do you agree that that was unpaid as at 26 March 1998?‑‑‑It was unpaid? I think it was unpaid in part; I don't know about in total. Well, what of it had been paid?‑‑‑Well, I think the original amount was something like 1.4 or 1.6 [million dollars] - something like that. On 26 March Thornville loaned Anscor money; received cash - Anscor Investments money; received cash for that mortgage; and the funds that Anscor Investments received were repaid in cash to Anscor, which reduced its loan at that point in time from - by the amount of 210,000. And that's reflected in the accounts. On 26 March?‑‑‑I don't know when it's reflected in the accounts but that's when the transaction took place. If you follow the tracing of that through you will see the cash paid, the cash deposited to Anscor Investments account, the cash deposited to Anscor's account from Anscor Investments. … All right. Now, can you explain why it was that Anscor Investments mortgaged that property, not to Anscor from whom it had borrowed the purchase price, but to Thornville?‑‑‑Because it received some funds from Thornville which enabled it to repay part of outstanding debt to Anscor. 137 And a little later, this exchange occurred: And you were telling us that in the context of the mortgage given by Anscor Investments to Thornville rather than to Anscor on 26 March 1998?‑‑‑Yes. And is your evidence that on that date funds were advanced or further funds were advanced by Thornville to Anscor Investments?‑‑‑No, my evidence is that the mortgage [to Thornville] was drawn and the funds were advanced in three payments following the completion of that mortgage. So it happened in this sequence. The mortgage was executed on 26 March?‑‑‑Yes. That's before the funds which it was to secure had been advanced, is that right?‑‑‑The funds that it was to advance were actually on - on deposit and had to be withdrawn. Well, are you agreeing with me that the mortgage was executed before the funds which it was to secure were advanced?‑‑‑Yes. Yes. And in turn the mortgage was registered before those funds were advanced?‑‑‑I don't know when it was registered. Well, if I ask - the funds themselves were advanced in the following months after March 1998, weren't they?‑‑‑April and May. In fact you've referred to this on page 18 of your affidavit?‑‑‑Yes. And at paragraph 70AB you've referred to those payments, those three payments in April and May 1998?‑‑‑Yes. So your case is that - when I say your case, you're the Director of Anscor Investments as well, are you?‑‑‑I am now, yes [ie, from January 2001]. Yes. Is that the mortgage over the Sunshine Beach property, given as it happened on 26 March 1998, was given to secure advances which were proposed to be made?‑‑‑Yes. And it was given of all days on 26 March because it was thought appropriate to then tidy things up?‑‑‑We were just doing a series of transactions. I suggest that it was done to try to immunise that property against any claims that might be made in consequence of Mr Dexter's demise?‑‑‑I never even contemplated any claims against that property because of Mr Dexter's demise. Now, those three payments of April and May 1998, they in turn were the subject of repayments or purported repayments by Anscor Investments to Anscor itself, were they?‑‑‑Yes. So what was done on those dates in April and May was, in effect, to substitute Thornville as a debtor in those amounts for Anscor as the - I'm sorry, as the creditor of Anscor Investments?‑‑‑To substitute, I wouldn't quite see it like that. Well, let's take the payment of 60,000 on 21 April?‑‑‑Yes. Funds were advanced by Thornville, you say, on that date to Anscor Investments?‑‑‑Yes. And those funds were immediately then paid to Anscor, were they?‑‑‑Yes, in reduction of debt. So on 21 April, the effect of those transactions was to transfer 60,000 of debt owing by Anscor Investments from - a debt owing to Anscor to become debt owing to Thornville?‑‑‑Well, I guess that's the end result, yes. What was the purpose of that?‑‑‑To reduce Anscor Investments loan to Anscor. It was always intended to reduce it. It put it - again, took off a demand liability to a mortgage liability. And does the same apply for the payments of 100,000 and 50,000?‑‑‑Certainly. I suggest there was no sensible purpose in that?‑‑‑Well, you may suggest that, but that's incorrect. 138 Though Mr Corbett's evidence initially was that Anscor Investments repaid the loan from Anscor in respect of the Sunshine Beach property on 30 June 1998 by means of journalised transfers of funds effected at some time after 30 June 1998, when later called on to explain why Anscor Investments had granted a mortgage to Thornville on 26 March 1998, his evidence that repayment by Anscor Investments of the Anscor loan was effected as mentioned on 30 June 1998 was forgotten and he then gave an account involving Thornville borrowing from Anscor, lending the cash in three transfers to Anscor Investments for which it took the mortgage as security with Anscor Investments using that cash totalling $210,000 by the end of May 1998 to repay, in part, its indebtedness to Anscor. 139 I reject Mr Corbett's evidence, unsupported by any satisfactory documentation and internally inconsistent, that the $510,000 loan from Anscor to Anscor Investments to assist it in purchasing the Sunshine Beach property should be taken to have been repaid in full by 30 June 1998. I prefer Clout's evidence that there was, in fact, no debt owing by Anscor Investments to Thornville for which it granted, by way of security, the mortgage in question to Thornville. The inference is that this was but yet another step taken by the Corbetts on McAuley's advice on 26 March 1998 in the flurry of activity that then occurred, all designed to put the assets the Corbetts controlled through their various companies beyond the reach of Dexter's trustee in bankruptcy, who they then well knew would soon be appointed. 140 I accept that Anscor Investments used $510,000 of Anscor moneys which came from Dexter commissions to purchase this property. I do not accept that any part of this sum has been repaid by Anscor Investments to Anscor. 141 For similar reasons to those I gave in relation to Mrs Corbett's Mt Crosby Road property, Clout is entitled to a charge on the Sunshine Beach property for the sum of $510,000, abated as indicated, together with interest on the abated amount. Pacific International Asset Management Limited 142 Clout claims that certain registered securities granted by the various Anscor respondents to PIAM are void as against him. This is so, he contends, for two reasons: firstly, PIAM obtained each of these securities in circumstances which "did not engage" s 120(6) the Bankruptcy Act in its favour and, secondly, none of the securities was intended to be enforceable by PIAM according to its terms, ie, they were sham transactions. 143 In my opinion, s 120(6) does not apply to the securities taken by PIAM from the various Anscor respondents other than Anscor itself. Section 120(1) makes void, at the election of the person's trustee in bankruptcy, a transfer of property by that person prior to the bankruptcy if the transferee of the property either gave no consideration for the transfer or gave consideration of less value than the market value of the property for its transfer. Section 120(6) declares that s 120(1) does not affect the rights of a person who acquired property in good faith and by giving consideration that was at least as valuable as the market value of the property. But, in express terms, s 120(6) only applies to a person who acquired property "from the transferee". Apart from the mortgage debenture it took from Anscor on 30 June 1997 and the mortgage over Anscor's Queen Street property it took on 26 March 1998, PIAM did not acquire any of its securities from the transferee from Dexter, ie, Anscor itself. If Clout is to have the securities granted by the other Anscor respondents set aside, he has to show that they are sham transactions, ie, transactions intended by both PIAM and the relevant Anscor respondent who granted the particular security that it was not intended to secure to PIAM the performance of any obligation owed to PIAM by that Anscor respondent, but was intended by both to give the appearance to third parties that an effective security existed in favour of PIAM over the property of that Anscor respondent. See Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449. 144 In mid 1997, on McAuley's advice, the Corbetts took action to establish the Anscor Superannuation Fund. The trust deed was executed on 30 June 1997; the trustee was PIAM, a company based in New Zealand. McAuley was the settlor of this trust. McAuley had not had any prior dealings with PIAM. He was introduced to PIAM through a business associate in Melbourne in May 1997, in circumstances in which he said he was giving consideration to Anscor obtaining the benefits of having a non-complying superannuation fund, ie, one with a non-resident trustee. McAuley said that in mid June 1997 he went to Auckland to meet Francken of PIAM to assess whether PIAM was suitable "to act as trustee of the superannuation fund that I was proposing to set up for the employees of the Anzcorp Trust", of which Anscor was trustee. 145 The same day this trust was established, 30 June 1997, Anscor paid to PIAM by way of contribution into the trust fund, $2,805,000; save for $5,000, PIAM immediately lent it all back to Anscor. PIAM also then took a mortgage debenture over Anscor's assets and undertaking to secure repayment of this loan. The loan of $2,800,000 was for a twelve month period and was to become due and payable by Anscor on thirty days' notice, which, however, could not be given until after 30 June 1998. Before he established the trust, McAuley had taken steps to arrange for this immediate loan-back to Anscor. McAuley claimed that prior to the loan of the $2,800,000 being made back to Anscor, he provided PIAM on 26 June 1997 with full financial statements in relation to the Anscor trust so it could satisfy itself as to the value of the mortgage debenture provided by Anscor. He agreed, however, that the material he sent to Francken would not have enabled PIAM to assess Anscor's capacity to repay the $2,800,000 lent back to it by PIAM, acting as trustee of a trust set up to benefit Anscor's employees, and thus to assess the worth of the mortgage debenture as security for that loan. 146 Absent an intention on the part of McAuley when he established the Anscor Superannuation Fund trust on 30 June 1997 that it was to provide benefits of the kind described in the Trust Deed for those of Anscor's staff admitted to fund membership, no trust can ever have existed, despite the paperwork prepared by McAuley and signed by him as settlor and by PIAM by its attorney, Klooger, and Anscor by its director, Mrs Corbett, designed to suggest the contrary. See Baker v Official Trustee (Full Court of the Federal Court, 3 August 1995, unreported) at 10 - 13. As I earlier noted, when the question is whether a trust has been established, the governing consideration is the intention not just of the settlor but of all relevant parties to be gathered from all the circumstances of the case. I do not accept that it was ever the intention of McAuley as settlor of this trust or of the Corbetts or of Anscor or PIAM that the Anscor Superannuation Fund would operate as a trust fund for the benefit of Anscor's staff. The evidence showing that PIAM merely minded off-shore, moneys provided by Anscor and disbursed them as the Corbetts directed, evidences that no trust was intended. McAuley was privy to so many of the activities of PIAM and the Corbetts that it can be inferred that this was his intention from the outset. 147 The fact that Anscor immediately borrowed back from the fund the entirety of Anscor's contribution is inconsistent with the existence of such an intention. Acting under cl 3 of the trust deed, Anscor, as the employer, formally nominated to be, and PIAM accepted, Mr and Mrs Corbett and four named employees of Anscor as members of the superannuation fund. McAuley describes how, on 30 June 1997, he met with Mr and Mrs Corbett and these other four employees, got their agreement to being beneficiaries of the fund and gave them advice about the circumstances in which they might be entitled to receive a benefit, which included reaching retirement age, resignation and death. McAuley cannot have intended, when he created the Anscor Superannuation Fund trust, that it was to function, among other things, as a vehicle for providing retirement and other benefits not only for Mr and Mrs Corbett, but for these four staff members. This was McAuley's explanation for how these purposes of the Anscor Superannuation Fund could be achieved though the entirety of its assets were immediately lent back to Anscor, as had been planned by McAuley prior to setting up the trust: Well, as I've indicated, this deed caters for a wide range of investments by the trustee. And if - if the employer made the contribution to the fund and made arrangements with the trustee to borrow the money back subject to the security constraints of this deed, to me that seemed a - would have seemed a reasonable basis, in the sense that if anything had have happened to the employer the - there was security for the benefit of the employees who were members of the fund. Well now, one of the benefits apparently provided by the fund, or to be provided by the fund, was a benefit on the untimely death of an employee?‑‑‑I - yes, there was a range of different categories of entitlement; yes. Yes. And how was - in the event that there had been an untimely death of one of the employees in, say, July of 1997, how would the fund have helped?‑‑‑Well, the question is how quickly after the death of the employee was the fund required to make the payment. If I recall, the moneys were lent back on a relatively short period of time. It was 12 months, if I recall. 148 Clout submits that, by June 1997, the Corbetts were giving consideration to the possible collapse of the Wattle scheme. There is good reason to think that in June 1997, when they engaged PIAM as trustee of the newly established Anscor Superannuation Fund, the Corbetts were concerned about how much longer Dexter's Wattle scheme would continue to operate: if it collapsed, the huge income stream Anscor had enjoyed for the past few years would collapse with it. When Dexter's scheme did collapse, Anscor's business came to an end, as Mrs Corbett acknowledged. The decision to establish this trust was made at the meeting of Anscor attended by Mr and Mrs Corbett, Klooger and McAuley held on 30 June 1997. The reason why it was established, as recorded in the minutes, is this: It was noted that the income of the company [Anscor] over the past few years has been received from one source. In the event of the death or incapacitation of the person providing the income source the income of the company would collapse unless other income sources can be established. Accordingly, the company wishes to make a substantial initial contribution to the superannuation fund. 149 It was then resolved that that contribution should be the $2,805,000 paid to PIAM that day. 150 By 17 June 1997, ASIC's investigation into Dexter and the Wattle scheme had progressed to the stage where it was issuing notices to Wattle administrators compelling the production to ASIC of information about the activities of the scheme. McAuley, at his compulsory examination, acknowledged that, as at June 1997, given that the ASIC investigation was on foot and had attracted a lot of publicity, it was "sort of on the cards" that there was some doubt as to whether Dexter would be able to continue to trade. In this context, McAuley volunteered the comment "It's in those minutes that we just referred to", ie, the minutes of the Anscor meeting of 30 June 1997. I have set out what appears to be the relevant extract from those minutes. It was not out of the concern recorded in the minutes, viz, that Dexter might die or be incapacitated, that Anscor took the steps it then did, but rather that he might not long continue to operate the Wattle scheme. McAuley gave this evidence at trial about why he proposed the setting up of the Anscor Superannuation Fund in June 1997: There was some concern expressed to me by Mr Corbett that this fellow, Mr Dexter, whom I hadn't met had indicated that there was a - he was going to stop, if you like, at a particular level of whatever business activity he conducted and this particular section upon which this superannuation fund is based commenced to have effect in the 1996 year. It was specifically inserted into the Act and I suggested to Mr Corbett that this provision was there and it was something perhaps that he should consider in that if Mr Dexter's business was to sort of level off if you like, he could make adequate provision for superannuation, beyond the level of limits that are prescribed for contributions to what we call complying superannuation funds. The Act clearly distinguishes between complying and non-complying. The easiest way to have a non-complying fund is for it simply to be a non-resident - that is for tax purposes - of Australia. So I was sort of looking at, if you like, some forward sort of planning; estate planning, if you like. So the idea for the superannuation fund which was ultimately established was from you?‑‑‑Came from me; yes. (emphasis added) 151 It appears from this that by June 1997, Dexter had told the Corbetts what he also told Matthew Brannelly, the principal of the eighth respondent, about his plans for the Wattle scheme. Mrs Corbett said she kept in close and frequent telephone contact with Dexter up to March 1998. In April 1997, Dexter spoke with Brannelly whose very detailed note of this conversation includes the following: 1. Wattle is being wound up by Christmas 1997 - he [Dexter] plans to begin drawing funds down in September to be completed late December or early January 1998. 2. Wattle has grown to such a size that it is becoming too difficult to run and Geoff is basically tied [sic] of the process - he is unable to delegate the basic functions of Wattle - he no longer needs the worry. 3. MB indicated that we would have to look for other bridging finance managements or do it ourselves to replace Wattle's role. Geoff understood this. 152 On 30 June 1997, PIAM received $2,805,000 from Anscor purportedly as a contribution to the Anscor Superannuation Trust established that day, which it immediately loaned back to Anscor. By doing that, PIAM acted inconsistently with the moneys being trust moneys, for reasons touched on in McAuley's cross-examination. Moreover, PIAM took security from Anscor for repayment of the $2,800,000 loaned back in circumstances where it could not assess the worth of that security. This approach to dealing with moneys which it could only properly deal with as trustee was repeated by PIAM in relation to the $1,155,000 it received from Anscor on 26 March 1998. 153 On 26 March 1998, Dexter ceased trading and appointed Clout as his controlling trustee under the bankruptcy laws, having told Mr Corbett of his intention to do this two days before. On the same day, 26 March, the Corbetts, McAuley, their accountant since 1996, and their solicitor, Klooger, engaged in a flurry of activity. This, so the Corbetts and McAuley contend, had nothing to do with Dexter's collapse. They then arranged for PIAM to take mortgages, subsequently registered, over the following properties: (a) Anscor's property at 344 Queen Street (b) Mrs Corbett's property at Mt Crosby Road (c) her property at 76 Cantwell Street (d) her property at 78 Cantwell Street (e) her property at Gold Creek Road (f) the Croftby Downs farm. 154 On the same day, 26 March 1998: (g) Early that day Klooger sought, and obtained from PIAM later that day, its authority for him to amend the Anscor Superannuation Fund Trust Deed to remove the power under the deed vested solely in Anscor Pty Ltd as principal employer to replace the trustee of the fund, which power would vest in any liquidator of Anscor, and to vest that power instead in "all employers, including any principal employer, together". This amendment was made, according to Klooger's advice to PIAM, on 26 March 1998 "with the agreement of Anscor Pty Ltd as principal employer and Saleja Nominees Pty Ltd as additional employer". Saleja was trustee of Klooger's family trust. (h) moneys provided by Anscor totalling $969,000 were deposited into the PIAM account referred to in sub-par (i). (i) $1,155,000 was transferred from this account which was kept in Brisbane by Klooger then acting in his capacity as attorney for PIAM, trustee of the Anscor Superannuation Fund, to the account of a PIAM associated company in Singapore. 155 From 1 July to 30 August 1997, the account which Klooger kept for PIAM in respect of the Anscor Superannuation Fund in Brisbane had a credit balance of only $5,076 with no movements into or out of the account. The only movement in the account from 30 August 1997 to the end of February 1997 were monthly deposits, which totalled a little over $184,000, paid by Anscor on the loan of $2,800,000 which it obtained from PIAM on 30 June 1997. According to McAuley's advice of 30 March 1998 to Mr Francken of PIAM, $800,000 of the $969,000 deposited by Anscor in the PIAM account in Brisbane constituted part repayment by Anscor of the $2,800,000 loan. It was drawn out of Anscor's investment account. McAuley describes the remaining $169,000 of this $969,000 deposit as "1997 - 1998 member contributions", ie, to the Anscor Superannuation Fund. All this money, which was deposited to Klooger's account in the form of four cheques, came from Anscor's investment account. On 25 March 1998, Anscor gave Thornville its cheques for $129,000, $14,000 and $21,000 and, on 26 March, Thornville cheques for the same amounts comprised part of the $169,000 deposit; the fourth cheque for $5,000 was drawn by Anscor itself on its investment account. This $969,000 was part of the $1,155,000 transferred from Klooger's PIAM Brisbane account to PIAM's Singapore account on 26 March 1998; the balance of $186,000 was explained by McAuley in his letter to Francken as comprising interest paid by Anscor on the $2,800,000 loan from 30 June 1997 to 26 March 1998, less withholding tax: as I have said, the account by February 1997 held about $184,000 in interest payments made by Anscor from August 1997 together with $5,000 of earlier deposits. 156 Anscor's investment account, on 20 March 1998, had a credit balance of $1,253,000. The $969,000 paid by Anscor from this account into Klooger's PIAM account on 26 March 1998 was one of a number of drawings from Anscor's investment account which, between 20 March and 27 March, reduced the opening credit balance to a little over $3,000 only. Between 24 March, when the Corbetts were told by Dexter of the impending collapse of the Wattle scheme, and 27 March, the $1,200,000 of moneys that Anscor had under its control were entirely dissipated, a large part of those moneys being sent off-shore on 26 March 1998 to PIAM. Further, on the morning of 26 March 1998, each of Anscor and the ninth and tenth respondents held property acquired by each with moneys obtained from Anscor. Some were unencumbered while others were mortgaged to third parties. By the end of that day, each had granted mortgages over their properties to PIAM. Prima facie, these raised a barrier to anyone, and in particular Dexter's trustee in bankruptcy, who might seek to follow the Anscor moneys used by these respondents in acquiring these properties into the properties themselves. The transaction by which this position, at the end of the day on 26 March 1998, was achieved - the substitution of Croftby Downs for Anscor as providers of security to PIAM for the $2,000,000 balance then outstanding of the $2,800,000 loan-back to Anscor made by PIAM on 30 June 1997 with the first and ninth respondents granting PIAM the mortgages over their properties as security collateral to the Croftby Downs mortgage - has, for the reasons given, the hallmark of a subtefuge engaged in to protect Anscor moneys received from Dexter that then remained in the form of various properties held by Anscor and the other Anscor respondents from a claim by Dexter's trustee. 157 Though PIAM can have made no attempt to assess whether the mortgage debenture was adequate security for the $2,800,000 it lent back to Anscor, it nevertheless had received payments of interest from Anscor at the agreed 10% rate on that loan or at least its Brisbane attorney Klooger had been receiving those amounts into the bank account he kept on behalf of PIAM. On 26 March 1998, PIAM agreed to the request made the same day by Klooger, this time acting in his capacity as the Corbetts' solicitor, to substitute Croftby Downs for Anscor as the entity responsible for repaying to PIAM the outstanding balance of the $2,800,000 loan it had made to Anscor back on 30 June 1997, which, as a result of the payments of $1,155,000 I have referred to that were made by Anscor to Klooger as attorney for PIAM, also on 26 March 1998, had fallen to $2,000,000. That is, PIAM agreed to substitute for Anscor, a debtor which had been paying interest, a company, Croftby Downs, which had no income, which had just purchased its only undertaking, the farm, and which had no demonstrated means of servicing a debt of $2,000,000 at 10% per annum interest. 158 McAuley took part in the meeting of Croftby Downs at which the substitution strategy was agreed upon: I infer from the role he took in relation to this strategy that it was adopted by Croftby Downs, in part at least, upon his advice. He must have known that it was not a strategy of any benefit to the Anscor Superannuation Fund trust if such a trust, in truth, then existed. Croftby Downs has paid no interest at all to PIAM as trustee for the fund. Almost immediately after PIAM agreed to substitute Croftby Downs for Anscor, Croftby Downs went into default and PIAM became entitled to enforce its security over Croftby Downs and all the collateral securities it took on 26 March 1998 over Mrs Corbett's properties and Anscor's Queen Street property. PIAM has taken no action at all to protect the fund of which it is said to be trustee from Croftby Downs' longstanding default. 159 I do not accept that the replacement of Croftby Downs for Anscor as debtor to PIAM for the $2,000,000 outstanding on the loan made on 30 June 1997 by PIAM to Anscor, was brought about by the concerns recorded in the minutes of the Croftby Downs meeting of 20 February 1998. The minutes state that Croftby Downs had become concerned at owing about $2,000,000 to Anscor, repayable at call, and wanted to put its indebtedness on a longer and more certain term basis. This was the second of the three points that McAuley identified in his evidence as "the rationale for the transaction". The minutes record a proposal to approach Anscor and PIAM to permit Croftby Downs to be substituted for Anscor as PIAM's debtor, with collateral security being provided by Anscor over its Queen Street property and by Mrs Corbett over her properties; part of the proposal required Anscor to reduce its indebtedness to PIAM from $2,800,000 to $2,000,000, as was done. As at 20 February 1998, the Corbetts denied any knowledge that Dexter was in difficulty and thus had no reason to expect that the stream of commissions Anscor had long been getting from Dexter might stop. Why Mrs Corbett, as the sole director of Croftby Downs would become concerned on 20 February 1998 that Anscor, of which she was also the sole director, might destroy Croftby Downs by precipitately calling up the $2,000,000 in loan moneys was not explained by any of the participants at the Croftby Downs meeting, Mrs Corbett, Mr Corbett, McAuley (who gave evidence) or Klooger (who did not appear in the witness box). The only other justification offered in the respondents' evidence for this substitution of Croftby Downs for Anscor was put forward by McAuley as his third point: he referred to speculation in December 1997 that the government might make changes to Div 7A the Income Tax Assessment Act 1936 (Cth) that could impact adversely on the Anscor respondents. He said, however, that this was only a matter "in the back of my mind" when he advised the Corbetts on the substitution. It cannot explain the transaction. 160 McAuley's evidence that PIAM was hard nosed about insisting on proper security before it would accept the substitution of Croftby Downs for Anscor and that PIAM required the indicative value of the security offered by Croftby Downs and by Mrs Corbett to be confirmed by proper valuations and also insisted as additional security on a mortgage over Anscor's Queen Street premises is not consistent with the Croftby Downs' minutes of meeting, which meeting, on the face of the minutes, took place before the idea of substitution had ever been raised with PIAM. The whole arrangement, actually implemented on 26 March 1998, is detailed in these minutes of 20 February 1998. 161 Despite its agreement to substitute Croftby Downs for Anscor on 26 March 1998 and despite taking security from Croftby Downs and the other collateral securities from Mrs Corbett and over Anscor's Queen Street property, PIAM did not release the mortgage debenture over the entirety of Anscor's assets and undertaking. Though in summarising in his affidavit what he called "the rationale for the transaction", the first point McAuley made was that there were distinct advantages for Anscor as trustee of the Anzcorp Trust in obtaining the release of the mortgage debenture over its undertaking, that has not been done. There is no suggestion that Anscor has ever called for the release by PIAM of this registered charge against its business. The only explanation for PIAM not releasing its mortgage debenture over Anscor's undertaking once Croftby Downs was substituted for Anscor and the collateral securities taken on 26 March 1998 is the suggestion in the minutes of the Anscor meeting of 20 February 1998 that PIAM would require the floating charge over Anscor's undertaking to remain in place until such time as the debt security ratio requirement of PIAM in respect of the substitution of Croftby Downs as debtor was satisfied. The respondents' evidence is that these valuations were not obtained. McAuley did not take any action to do that, assuming that Mr and Mrs Corbett would look after it. Mr Corbett said he did not do anything to obtain them either. The mortgage debenture remains as a bar to creditors who might seek to enforce claims against Anscor. 162 Between receipt by PIAM on 30 June 1997 of the $2,805,000 of Anscor moneys and its receipt of the further sum of $1,155,000 from Anscor on 26 March 1998, PIAM showed no interest in performing its duties as trustee. It was content to leave the interest payments made by Anscor in the Brisbane bank account held by its attorney Klooger; these amounted, by early 1998, to a substantial sum over $180,000. The Bank of Queensland did not pay any interest on the moneys in Klooger's account. PIAM did nothing to make these moneys productive of any benefit for the trust. Though PIAM received into one of its Singapore accounts the $1,155,000 transferred by Klooger on 26 March 1998, it has not treated those moneys as the trust moneys they are supposed to be: instead, as and when the Corbetts called on it for access to those moneys to meet their own personal expenses, including legal costs and the legal costs of the other Anscor respondents in this litigation, PIAM handed the moneys over to the Corbetts. Mr Corbett said of this $1,155,000 received by PIAM that, in the period from about June 1998 through to early 2000, these moneys were spent in the following manner: (a) Approximately $600,000.00 has been spent during that period on the various overheads, costs and expenses of Anscor Pty Ltd, including the payment of significant legal costs associated with the various court actions that Anscor Pty Ltd, my wife and I are involved in; (b) An amount of approximately $300,000.00 has been spent on the Croftby Downs Farm, including normal overhead and operating expenses as well as an olive grove plantation; (c) The balance of approximately $200,000.00 has been utilized in various smaller investments which have not been successful. 163 The manner in which PIAM acted in disbursing moneys it received from Anscor to the Corbetts on demand by them is inconsistent with the proposition that PIAM was appointed trustee of a trust set up to serve what Anscor then anticipated would be its long term business interests by providing benefits for key staff well into the future. 164 There is no suggestion PIAM required loan agreements to be drawn up or security from the Corbetts for these disbursements to them of what are presented by the respondents to be trust moneys. Nor has PIAM required the Corbetts to pay any interest. Instead, its conduct shows it has treated so-called trust moneys as moneys minded by it and to be made available to the Corbetts for whatever purposes they wanted, whenever they called on PIAM for a disbursement. Immediately the Corbetts called on PIAM to give them unrestricted access to so-called trust moneys, PIAM simply abandoned all responsibility for protecting the interests of Berridge, van der Kolk, Rapley and Cruickshank, the four staff members of Anscor nominated on 30 June 1997 and spoken to at length that day by McAuley about the benefits they were supposed to anticipate from the trust fund. 165 That Anscor made payments on account of interest into PIAM's Brisbane account in respect of the loan-back of the $2,800,000 between August 1997 and February 1998 is evidence that the loan-back was a genuine loan and thus evidence that PIAM as trustee of the Anscor Superannuation Fund, not Anscor or the Corbetts, controlled those moneys. But, as against that, PIAM, though supposed to be a trustee of those interest payments, ignored them until the Corbetts on 26 March 1998 took the action that resulted in Klooger paying those so-called interest moneys, and the other moneys then paid into Klooger's PIAM account by Anscor, to the PIAM company in Singapore. Then, over the next year or so, PIAM paid all the moneys it received from Klooger on 26 March 1998, including these interest payments, out to the Corbetts. I do not therefore accept that the fact that Anscor made a number of payments to Klooger between August 1997 and March 1998, said to be by way of interest on the $2,800,000 loan-back to Anscor are sufficient to show that that loan-back was a genuine loan made by PIAM acting as trustee of a genuine trust. 166 The trustee is given by cl 10.1 very wide powers to lend trust moneys. But these powers are conferred on the trustee as custodian of a trust fund set up for the purpose of providing superannuation benefits to nominated employees of Anscor. I do not think they could be properly exercised unless the trustee reasonably and not capriciously considered that a loan would, in the circumstances of a particular case, be in some way beneficial to the trust. The width of these powers therefore provides no basis for denying the significance, as evidence that a trust was never truly established, of how PIAM dealt with the moneys provided by Anscor purportedly by way of contributions to the trust both in June 1997 and on 26 March 1998. 167 So little interest has PIAM in performing a trustee's duty of protecting the trust assets that, once the Corbetts said they were not prepared to continue to pay for PIAM's representation in this action, it proposed in the most casual of ways that Mr Corbett should represent it. The only material PIAM put before me to support its application to have Mr Corbett represent it at the trial was a letter from its director, Francken, handed up by Mr Corbett asserting that it had no free funds from which it could pay for legal representation, and requesting that Mr Corbett be permitted to act on its behalf. Francken did not go into whether the trust nevertheless had funds against which PIAM could borrow to defend the trust against Clout's claims, which were aimed at stripping the trust of the apparently valuable securities it held over the property of Anscor, Mrs Corbett and Croftby Downs. 168 PIAM advertises on its website that it is part of a network of professional firms offering services which include international funds movement and international asset protection from "the unwanted and untimely claims from government authorities, creditors and others who may have a claim on their assets". McAuley said that, when in mid June 1998 he was told by the solicitor acting for Anscor and the Corbetts in this action that PIAM's website stated it provided international asset protection services, he was "shocked to hear this" and immediately contacted Francken to express his concerns. What he was told apparently did not put those concerns to rest: he said that "in fact, since then I have deliberately not used PIAM for trustee services of other clients of mine because of this website". Notwithstanding that, he went on to say that "PIAM has not been removed as trustee of the [Anzcorp] superannuation fund because, in my opinion, it does act clearly as an independent trustee". 169 I reject what McAuley here says about the quality of PIAM's conduct. In my opinion, PIAM's conduct shows that it delivered to the Corbetts the services it advertised, meeting all requests made by or on behalf of the Corbetts for access to what are claimed to be trust moneys. No doubt it was well rewarded for this: according to McAuley's letter of 26 June 1997 to Francken, PIAM received a "trustee fee account" of 1% of the initial "contribution" made to the Anscor Superannuation Fund by Anscor of $2,800,000 and an ongoing charge. The evidence indicates that PIAM was engaged by McAuley on behalf of the Corbetts to provide the services it advertised and it did provide those services. There was, in my opinion, no intention on the part of either PIAM or Anscor or McAuley that there was to be a trust for the benefit of Anscor staff when the steps orchestrated by McAuley to set the trust up in June 1997 were implemented. PIAM instead acted only as a repository for moneys paid by Anscor which it held not under the trust the subject of the Anscor Superannuation Trust Deed, but on behalf of the Corbetts to be dealt with by PIAM as the Corbetts directed. The payment back PIAM made on 30 June 1997 of Anscor moneys to Anscor was not made by way of loan of any trust moneys: PIAM therefore gave no consideration for the mortgage debenture it took from Anscor on 30 June 1997. It cannot rely on s 120(6) to protect that security from Clout's claims. Clout is entitled to have the mortgage debenture declared of no effect. 170 The Corbetts said that at no time prior to the end of March 1998, did they believe that the collapse of the Wattle scheme was imminent. Mr Corbett says, and his evidence is not contradicted, that Anscor continued to receive from Dexter regularly and on time until late February 1997, all moneys payable as interest to Anscor-sourced investors and as commission to Anscor itself. The Corbetts were content to leave a substantial amount of Anscor moneys (and Thornville moneys also) invested with Dexter. Under agreement no 898, Anscor had moneys invested in the Wattle scheme which, at 20 March 1998, totalled over $818,000 of principal moneys and compounded interest. Under agreement no 932, Thornville had moneys deposited in the Wattle scheme which, at 28 February 1998, amounted to nearly $81,000. But Mr Corbett acknowledged that the records of Anscor show that from no later than 1 March 1998, Anscor had begun to pay lenders prior to receipt of the corresponding funds from Dexter. Clout identifies twenty-four such payments by Anscor. 171 In addition to the Corbetts leaving Anscor and Thornville moneys on deposit with Dexter up to the time of the collapse, Mr Corbett's evidence, which I accept, is that Corbett family members, some of their friends and some of Anscor's senior staff all had money on deposit with Dexter at the time of the collapse. Mr Corbett also points out that a substantial number of federal police were confident enough to invest in the Wattle scheme through one of Anscor's sourcing agents, investments that were still with Dexter when the Wattle scheme collapsed. 172 I think that by June 1997 the Corbetts had some concerns, probably exacerbated by the ASIC investigation, about how long the Wattle scheme would continue to operate and that these concerns played a part in the decision they then made to establish an off-shore repository for Anscor's income from Dexter. But interest payments for investors sourced by Anscor and its sub-agents and the associated commissions to Anscor continued to be paid by Dexter, at least in the case of Anscor, up to the end of February. No attempt was made to show that the payments Anscor received from Dexter up to this point were ever late or that Anscor ever had to chase Dexter up for these payments. I accept that, though the Corbetts probably long held generalised concerns about the viability of the Wattle scheme, Dexter's collapse of which he told them on 24 March, came as a surprise to them. But even so, I do not think there is any acceptable explanation for the flurry of activity the Corbetts immediately then engaged in with the advice of Klooger and McAuley than that they were seeking to take all steps available to them to protect the assets and moneys they then controlled from claims that they expected as likely to be made on them as a result of Dexter's collapse. 173 For the reasons given, the securities granted by the Anscor respondents on 26 March 1998 to PIAM are shams and thus constitute no barrier to Clout following the relevant Anscor moneys into those properties. 174 Clout did not make any claim against PIAM until he joined that company as a respondent in the action on 26 June 2000. It is thus only from that date that PIAM became personally liable to account to Clout for the $1,155,000 of Anscor moneys it received on 26 March 1998. But Mr Corbett's evidence is that this entire fund was dissipated in the manner he described in his evidence by early 2000. Clout has not attempted to show that PIAM, as at 26 June 2000, held any part of this sum of $1,155,000 or any other moneys it may have received from Anscor directly or through any of the other Anscor respondents. Clout's claim for an account by PIAM in respect of the $1,155,000 must therefore be dismissed. See Alvaro at 426. I certify that the preceding one hundred and seventy-four (174) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Drummond. A/Associate: Dated: 10 April 2003 Counsel for the Applicant: Mr P McMurdo QC and Mr D Quayle Solicitor for the Applicant: Mallesons Stephen Jaques Counsel for the Ninth Respondent: The Ninth Respondent appeared in person. Counsel for the First, Tenth, Eleventh and Twelfth Respondents: The sole director of these respondents, Mr Corbett, appeared for them by leave on limited issues only. Dates of Hearing: 21, 22, 23, 24, 28, 29, 30 and 31 May, 1, 4, 7, 14, 21 and 22 June, 6 and 26 July and 4 September 2001 Dates of written Submissions: 6 and 25 July 2001 and 29 September 2001 Date of Judgment: 10 April 2003