FEDERAL COURT OF AUSTRALIA Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 5) [2014] FCA 976 Citation: Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 5) [2014] FCA 976 Parties: TRAXYS EUROPE SA v BALAJI COKE INDUSTRY PVT LTD, BOOYAN COAL PTY LIMITED (ACN 115 420 598) and CONCAST EXIM LTD File number: NSD 1490 of 2011 Judge: FOSTER J Date of judgment: 9 September 2014 Catchwords: ARBITRATION – international arbitration – whether the Court should appoint receivers in respect of shares in a private company incorporated in Australia being the only known asset in Australia belonging to an Indian corporation which is an award debtor under a foreign arbitral award – whether a purported sale of the said shares to another Indian corporation was a sham. Legislation: Corporations Act 2001 (Cth), s 491 and s 1070A Evidence Act 1995 (Cth), s 167 and s 169 Property Law Act 1958 (Vic), s 172 Cases cited: Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Limited [2013] FCA 882 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 Gujarat NRE Coke Limited v Coeclerici Asia (Pte) Ltd [2013] 304 ALR 468 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 Raftland Pty Ltd v Commissioner of Taxation (2008) 238 CLR 516 Sharrment Pty Ltd v Official Trustee (1988) 18 FCR 449 Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) (2012) 201 FCR 535 Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 4) [2012] FCA 1416 Dates of hearing: 10–11 December 2012 and 5 February 2013 Date of Last Submissions 19 March 2013 Place: Sydney Division: GENERAL DIVISION Category: CATCHWORDS Number of paragraphs: 133 Counsel for the Applicant: Mr JRJ Lockhart SC and Mr JA Watson Solicitor for the Applicant: Clifford Chance Counsel for the First Respondent: Mr R White and Mr CP O'Neill Solicitor for the First Respondent: McCullough Robertson Solicitor for the Second Respondent: The Second Respondent did not appear Solicitor for the Third Respondent: On 10 December 2012, Mr MF O'Neill of O'Neill Partners applied for and was granted leave to cease to act for the third respondent. Thereafter, the third respondent did not appear. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1490 of 2011 BETWEEN: TRAXYS EUROPE SA Applicant AND: BALAJI COKE INDUSTRY PVT LTD First Respondent BOOYAN COAL PTY LIMITED (ACN 115 420 598) Second Respondent CONCAST EXIM LTD Third Respondent JUDGE: FOSTER J DATE OF ORDER: 9 SEPTEMBER 2014 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The applicant lodge with the Associate to Foster J and serve upon the solicitors for the first respondent Short Minutes of Orders giving effect to the Reasons for Judgment of Foster J published this day. 2. By 16 September 2014, the first respondent inform the Associate to Foster J and the solicitors for the applicant whether it agrees that the draft orders proposed by the applicant give effect to the said Reasons for Judgment and, if it does not so agree, the first respondent is to lodge its version of the appropriate orders supported by a brief written submission. 3. To the extent necessary, by 23 September 2014, the applicant is to reply to any such submission by the first respondent. 4. Thereafter, the final form of relief is to be decided on the papers. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1490 of 2011 BETWEEN: TRAXYS EUROPE SA Applicant AND: BALAJI COKE INDUSTRY PVT LTD First Respondent BOOYAN COAL PTY LIMITED (ACN 115 420 598) Second Respondent CONCAST EXIM LTD Third Respondent JUDGE: FOSTER J DATE: 9 september 2014 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The applicant (Traxys) is a Luxembourg company which provides financial, marketing and distribution services to the mining industry. It has representative offices in more than twenty countries. 2 The first respondent, Balaji Coke Industry Pvt Ltd (Balaji) is a company organised under the laws of India. Its head office is in Kolkata, India. It is part of a group of companies which imports coal and coke into India and which manufactures low ash metallurgical coke and coking coal for supply to others. It also trades more generally in coal and coke. Balaji is controlled by Mr Naresh Sharma and his relations. At all relevant times, Naresh Sharma was the Chairman and Managing Director of Balaji. 3 Traxys is the award creditor under a foreign arbitral award dated and published on 22 June 2011 made by Dr Serge Lazareff, Ms SiobÁn Healy QC and Mr Christopher Newmark (the Award). 4 By its Originating Application filed in the present proceeding, Traxys applied to the Court for orders recognising and enforcing the Award and for consequential relief. 5 By a judgment published on 23 March 2012 (Traxys Europe SA v Balaji Coke Industry Pvt Ltd & Anor (No 2) (2012) 201 FCR 535) (Traxys No 2), I decided that the Court should enforce the Award. 6 Subsequently, on 12 April 2012, I made orders enforcing the Award. 7 Paragraphs 1 to 6 of those Orders were in the following terms: THE COURT ORDERS THAT: 1. The issues and questions raised by the claims for relief made in paragraphs 1 and 2 of the Amended Originating Application filed by the applicant on 16 September 2011 be heard separately from and prior to all other issues and questions in the proceeding. THE COURT DECLARES THAT: 2. Pursuant to s 8(3) of the International Arbitration Act 1974 (Cth) (the Act), the applicant is entitled to have the award dated 22 June 2011 made by Dr Serge Lazareff, Ms SiobÁn Healy QC and Mr Christopher Newmark (the Award), a certified copy of which is exhibited to the affidavit of Peter Bennett sworn on 1 September 2011 at Tab 3 of Exhibit PB1, recognised by this Court and to enforce the Award in this Court as if the Award were a judgment of this Court. THE COURT ALSO ORDERS THAT: 3. There be judgment in favour of the applicant against the first respondent in the amounts of: (a) US$2,743,649.66 (comprising US$2,576,250.38 (Award principal) and US$167,399.28 (pre-judgment interest)); and (b) EUR277,624.04 (comprising EUR260,668.58 (Award principal) and EUR16,955.46 (pre-judgment interest)); and (c) £457,787.20 (comprising £427,576.40 (representing costs of the arbitration giving rise to the award and the reference carried out for the purposes of the arbitration) and £30,210.80 (pre-judgment interest)). 4. The first respondent pay post-judgment interest on all of the amounts referred to in Order 3 above from 12 April 2012 to the date of payment at the prescribed rate referred to in Rule 39.06 of the Federal Court Rules 2011. 5. The first respondent pay the applicant's costs of and incidental to the claims made by the applicant in paragraphs 1 and 2 of its Amended Originating Application in an amount to be taxed or otherwise agreed, such costs to be payable forthwith. 6. There be a separate trial of the remaining claims for relief made in paragraphs 3 to 8 of the applicant's Amended Originating Application. 8 Paragraphs 7 to 12 of the orders which I made on 12 April 2012 comprised interlocutory directions directed to preparing the second trial contemplated by pars 1 and 6 of those orders. 9 The only assets in Australia owned by Balaji of which Traxys is aware are two shares (the shares) held by Balaji in the second respondent, Booyan Coal Pty Limited (Booyan), which is a proprietary company incorporated in Victoria. The shares are on Booyan's register of members which is kept and maintained in that State. The shares comprise all of the issued capital of Booyan. Booyan is the second respondent in this proceeding. 10 In addition to seeking a judgment by way of enforcement of the Award, Traxys claimed an order that Messrs Andrew Cummins and Brian Sylvia be appointed as receivers of the shares with powers to inspect the books and records of Booyan and to sell the shares or to wind up Booyan pursuant to s 491 of the Corporations Act 2001 (Cth) (Corporations Act). The shares comprise the whole of the issued capital of Booyan. 11 In circumstances which I explained more fully in Traxys (No 2) (at 538 [5]-[8]), a few days before the commencement of the final hearing of Traxys' claims for enforcement of the Award, Balaji asserted for the first time that, on 16 July 2011, the shares had been sold in an arms-length transaction to a third party, Concast Exim Ltd (Concast), pursuant to an agreement for sale and purchase of shares entered into between Balaji and Concast on 16 July 2011 (share sale agreement). According to Balaji, Concast has held the entire beneficial interest in the shares since 16 July 2011. According to Balaji, Concast paid the whole of the purchase price for the shares (INR 50,000,000) (approximately A$1 million) on 16 July 2011 and was, at all times thereafter, entitled to require Balaji to deliver an appropriate transfer of the shares. Balaji has been restrained from completing the transfer of the shares by Freezing Orders granted by me on 2 September 2011. 12 Traxys commenced the present proceeding on 2 September 2011. On the same day, I granted Freezing Orders against both Balaji and Booyan. Those orders remain in place. 13 Balaji's contention that it had sold the shares to Concast on 16 July 2011 raised the possibility that there would be no assets in Australia against which Traxys could execute its judgment. 14 Faced with this new and important contention, Senior Counsel who appeared for Traxys at the first trial submitted that his client was unable properly to litigate Traxys' claim for the appointment of receivers to the shares at the first trial. He made an application for those claims to be severed from Traxys' claims to enforce the award. Ultimately, both Traxys and Balaji accepted that the appropriate course was to proceed in the manner suggested by Senior Counsel for Traxys. For this reason, I agreed to defer consideration of Traxys' claim for the appointment of receivers to the shares and the question of the powers of such receivers, if appointed. 15 Booyan ceased to be represented in the present proceeding at the end of May 2012. Thereafter, it has taken no part in the proceeding. 16 On 5 June 2012, I granted leave to Traxys to: (a) Join Concast as an additional respondent in the proceeding; (b) Amend its Originating Application in order to accommodate the joinder of Concast; and (c) Serve any Amended Originating Application on Concast in India. 17 On 8 June 2012, Traxys filed a Further Amended Originating Application by which it joined Concast as a third respondent. It did not amend its claims for relief at that time. 18 On or about 5 October 2012, Concast appointed Michael Francis O'Neill of O'Neill Partners, to represent it in the present proceeding. Thereafter, Mr O'Neill appeared on behalf of Concast at listings which took place before the Court on 31 October 2012, on 14 November 2012, on 16 November 2012 and on 20 November 2012. Some of those listings were Directions Hearings and others involved Interlocutory Applications made by other parties. 19 On at least two occasions in the period from early October 2012 to 20 November 2012, all respondents were ordered to file and serve their respective Defences and evidence upon which they intended to rely at the second trial. As I have already mentioned, by this time, Booyan had ceased to participate in the proceeding. Concast did not file a Defence and did not file any evidence, notwithstanding the directions made by the Court. 20 On 18 October 2012, Traxys again amended its Originating Application. On this occasion, it added a prayer for relief 7A which is in the following terms: 7A Further, or in the alternative, if the conveyance of the shares in Booyan by the first respondent to the third respondent is lawful and effective (which is not admitted), a declaration that the purported conveyance of shares in Booyan by the first respondent to the third respondent is void. 21 On the same day, Traxys filed a Statement of Claim. 22 The claims which were litigated at the second trial were those made in the Second Further Amended Originating Application and the Statement of Claim both of which were filed on 18 October 2012. As I have already mentioned, Balaji was the only respondent which filed a Defence to Traxys' claims and was the only respondent which filed any evidence in answer to those claims. In the end, it was also the only respondent which actively participated in the second trial. 23 At the commencement of the second trial, Mr O'Neill sought the leave of the Court to cease to act for Concast. I granted that leave on that day. Thereafter, Mr O'Neill ceased to represent Concast. Concast did not appoint any other legal representative and did not appear at the second trial. 24 By these Reasons for Judgment, I determine Traxys' claim for the appointment of receivers to the shares with the powers which I have described as well as its claim to have the sale of the shares as between Balaji and Concast declared to be void. The Issues at the Second trial 25 Traxys is the award creditor under the Award and has had the benefit of the award since 22 June 2011. In addition, Traxys is now a judgment creditor of Balaji. Prima facie, Traxys is entitled to enforce its judgment against Balaji and against Balaji's assets. 26 Balaji is the registered holder of the shares and thus the legal owner of the shares. The shares are personal property (s 1070A(1)(a) of the Corporations Act). The shares are taken to be situated where the register of members is kept (s 1070A (4)(a)). There is no dispute between Traxys and Balaji about these matters. 27 Accordingly prima facie, Traxys is entitled to execute its judgment against the shares. One remedy available to it is the appointment of receivers to the shares with the powers sought by Traxys. Had there been no dispute as to the beneficial ownership of the shares, I would have had no hesitation in appointing receivers to the shares as sought by Traxys. I appointed receivers to shares in similar circumstances in Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Limited [2013] FCA 882 esp at [105]-[111] and my decision to do so was upheld by the Full Court in Gujarat NRE Coke Limited v Coeclerici Asia (Pte) Ltd [2013] 304 ALR 468. 28 Concast, the alleged beneficial owner of the shares, has not come to court to assert its beneficial ownership. Concast has made no claims at all in the present proceeding and has not otherwise asserted any beneficial interest in the shares. In October 2012, I was informed by Concast's solicitor that Concast intended to cross-claim against Traxys, presumably in order to assert Concast's alleged beneficial ownership of the shares. No such Cross-Claim was ever filed. Further, Concast has not filed a Defence to Traxys' claims despite being ordered to do so on at least two occasions. In those circumstances, Concast must be taken to have admitted the allegations made by Traxys in its Statement of Claim, at least insofar as those allegations are made against it. 29 Notwithstanding the above matters, Balaji seeks to persuade the Court that it no longer has any beneficial interest in the shares because it sold them to Concast on 16 July 2011 pursuant to the share sale agreement. Balaji then argues that the Court ought not appoint receivers to the shares because Balaji has only a bare legal interest in the shares, the full beneficial ownership residing in Concast. 30 Traxys submitted that Balaji bears the onus of establishing that it no longer has any beneficial interest in the shares. Traxys argued that, in order to discharge that onus, in the circumstances of the present case, Balaji must prove to the satisfaction of the Court that the share sale agreement evidenced or embodied a genuine arms-length transaction. Traxys submitted that the Court could not be satisfied of this. In addition, Traxys mounted two positive cases: First, it submitted that the share sale agreement was a sham because Balaji and Concast had the common intention that that agreement would not create the legal rights and obligations which it gave the appearance of creating or, alternatively, Balaji and Concast did not intend that either of them would act on the agreement. In particular, so Traxys submitted, Balaji and Concast did not intend that the purported sale would effect an irrevocable, complete and unqualified conveyance of all of Balaji's interests, legal or equitable, in the shares. Second, in the event that the Court were to accept that there was a genuine sale of the shares, Traxys contended that that sale was effected by Balaji with the intention of defrauding its creditors, including Traxys, by hindering or delaying Traxys in recovering the award debt and was thus void by reason of the operation of s 172 of the Property Law Act 1958 (Vic). 31 In order to give effect to the second of its positive cases, Traxys seeks a declaration that the purported transfer of the beneficial interest in the shares was a conveyance of property made with the intention of defrauding, hindering or delaying Balaji's creditors and was thus void at the instance of Traxys as a person thereby prejudiced. 32 Traxys also raised arguments based upon discretionary considerations. 33 Therefore, the issues to be determined are: (a) Was the transaction evidenced by or embodied in the share sale agreement intended to have legal effect or was it a sham (Issue 1)? (b) If that transaction was intended to have legal effect, was it put in place in order to hinder or delay Traxys in the recovery of the sums due to it under the Award with the consequence that it was void (Issue 2)? (c) Alternatively, in all the circumstances, even if the share sale agreement is found to be genuine and not a sham and even if Traxys does not succeed in proving that the share sale agreement was entered into by Balaji with the necessary fraudulent intent, should the Court withhold its intervention in aid of Balaji because it would be against equity and good conscience for the Court to intervene in the manner sought by Balaji in order to assist it to avoid paying its debts (Issue 3). 34 Before considering these issues, it is necessary to examine the evidence and make necessary findings as to the relevant facts. The Relevant FActs Introduction 35 In support of its current claims for relief, Traxys tendered certain extracts from affidavits affirmed by Timothy James Grave, its Australian solicitor, and certain extracts from affidavits sworn by Peter Bennett, its solicitor in England. It also tendered a considerable number of documents (Exhibits A1, A2, B, C1, C2, D, E, F and G). 36 Balaji, for its part, read and relied upon three affidavits affirmed by Naresh Sharma, being his affidavits of 4 May 2012, 12 November 2012 and 7 December 2012. 37 Neither Mr Grave nor Mr Bennett was cross-examined. 38 Naresh Sharma, on the other hand, was cross-examined for more than a day. 39 At the commencement of the second trial, Counsel then appearing for Balaji endeavoured to read and rely upon an affidavit affirmed by Sanjay Sureka on 7 December 2012. Mr Sureka was a senior executive employed by Concast who, according to Mr Sharma, was involved in the negotiation and execution of the share sale agreement. In addition, Balaji sought to have Mr Sureka give his evidence by video-link to India. At the trial, I rejected Balaji's application to read and rely upon the affidavit of Mr Sureka (as to which see Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 4) [2012] FCA 1416). The case therefore proceeded without any evidence from Mr Sureka. The Parties and the People Balaji 40 Naresh Sharma was the Chairman and Managing Director of Balaji at all relevant times. I had the impression from looking at a large number of communications emanating from Balaji, particularly those concerning the share sale agreement, that he was the directing mind of Balaji. I so find. 41 Mr Ramesh Sharma, Naresh Sharma's elder brother, was involved in Balaji's business. He looked after production at Balaji's factory at Gujarat. He had some involvement in the activities of Booyan from time to time, including after the execution of the share sale agreement on 16 July 2011. He visited Australia in September 2011 for the purpose of discussion Booyan's exploration activities with Mr Grainger, a consultant to Booyan, and others. 42 Mr Deepak Sharma is Ramesh Sharma's son. In 2011 and 2012, he looked after sales and marketing and, if needed, also did other work. According to Naresh Sharma, Deepak Sharma was the person who, on behalf of Balaji, handled the London arbitration proceedings which ultimately resulted in the Award being made. 43 Mr Abhoy Prasad Mukherjee was a director of Balaji throughout 2011 and for the first half of 2012. He retired from that position in about July or August 2012. He appears to have had a relatively senior role within the organisation, although he reported to Naresh Sharma. 44 Mr Padmanabhan (or Padman) acted in an office managerial or secretarial role. 45 Mr Sushantra Kumar Hazra was also a director of Balaji in 2011. He managed the technical side of the business. 46 Mrs Kaushol Sharma, who was also a director, looked after administrative matters. 47 Ashok Kumar Sharma also worked in the business in marketing. 48 The shares were originally acquired by Balaji on or about 20 January 2010 for about A$550,000. Booyan 49 Booyan did not have any employees in Australia. The only business activity of Booyan concerned Exploration Permit C969 which concerns an area in Queensland. Booyan has an office in Melbourne. That office would not be accurately described as the business premises of Booyan. Rather, its office is located in the business premises of a firm of accountants called "Taxperts", the principal of which is Mr Dugar. 50 At all relevant times, Naresh Sharma was the person who made business decisions for Booyan. This continued to be the case at all times after 16 July 2011, right up to the commencement of the second trial. 51 In answer to a request made by me, the parties supplied an agreed note outlining the key features of exploration permits under the relevant Queensland statutory provisions. It is not necessary to set out that note in full. However, the following matters of importance are drawn from that note, namely: (a) An exploration permit is a permit that is issued for the purpose of exploration only. It allows a holder to take action to determine the existence, quality and quantity of particular minerals. The relevant legislation makes specific provision for exploration permits to be issued for coal exploration. (b) Examples of permissible exploration activities to determine the existence of any minerals or the mineral bearing capacity of the land include prospecting, geophysical surveys, drilling, sampling and testing. (c) The holder of an exploration permit may apply for a mineral development licence or mining lease. These latter instruments entitle the holder to carry out mining activity. Concast 52 Concast is a corporation organised under the laws of India, with a place of business in Kolkata. It has been a significant customer of Balaji since 2005 or 2006. It purchases coke from Balaji in order to make steel. Concast's main business activity is the making and trading of steel. Mr Sureka, a director of Concast, is a close business associate of Naresh Sharma who has been known to Mr Sharma for many years. Concast is by far the most significant customer of Balaji. As at 5 December 2012, it owed Balaji approximately A$7.1 million on its trading account with Balaji (Exhibit F). This was 62% of the total of Balaji's trade debtors. That state of affairs was typical of the state of accounts as between Balaji and Concast in 2011. Document production issues 53 In its final submissions at the second trial, Traxys endeavoured to make much of what it alleged was a deliberate failure on the part of Balaji to comply with various compulsory processes of the Court requiring the production of documents and things, including, in particular, metadata residing in its computer systems. 54 In his affidavit affirmed on 7 December 2012, Naresh Sharma explained Balaji's normal business practices concerning the retention of electronic records and also offered explanations as to why Balaji was unable fully to comply with the requirements of the compulsory production processes of the Court. 55 It was submitted on behalf of Balaji that the evidence of Mr Sharma amply demonstrated that, by the time the second trial had commenced, Balaji had complied as best it could with the production requirements imposed upon it. In addition, Balaji submitted that Mr Sharma's evidence in this regard was not challenged in any way, notwithstanding the length of his cross-examination. 56 I am not convinced that Balaji has failed to comply with the multiple orders of the Court requiring the production of documents and things. I think there is considerable force in the submissions made on its behalf in relation to this issue. I do not propose to draw any inferences adverse to Balaji based upon the proposition that it failed to comply with the orders of the Court in relation to the production of documents and things. Balaji's case in respect of the sale of the shares 57 The account which follows is taken from the affidavit evidence of Naresh Sharma and the documents annexed to those affidavits or otherwise referred to therein. 58 Soon after it acquired Booyan, Balaji entered into a loan agreement with Booyan which required repayment of each advance made thereunder within a period of three years after the making of each such advance. 59 On 11 April 2011 the directors of Balaji met. Present on this occasion were Naresh Sharma, Kaushol Sharma and Abhoy Mukherjee. At this meeting, the directors resolved that Balaji should sell its entire interest in Booyan for a minimum of A$1 million or the equivalent in Indian Rupees. The board also authorised Naresh Sharma to give effect to that resolution and to sign all relevant documents. 60 On or about 19 April 2011, Naresh Sharma casually met Sanjay Sureka in a social environment. They had a conversation to the following effect: Sureka: Concast is interested in obtaining a stake in a coal mining facility in Australia or maybe in another foreign country. Sharma: Balaji has a stake in an Australian mining company called Booyan. Mr Sharma then discussed Booyan's operations with Mr Sureka. He then said: Perhaps Balaji will sell you its stake in Booyan. If Concast is interested, it should express its intent in writing. 61 On or about 20 April 2011, Naresh Sharma received a letter from Mr Sureka. After noting Concast's interest in a coal mine in Australia or the USA, Mr Sureka said: You would be aware that our company, in conjunction with other companies of Concast Group, is engaged in the business of manufacture and trading of iron and steel and products thereof. Hence, we regularly require metallurgical coke as raw material in our production process. In view of the spiralling prices of met coke coupled with lower availability of good quality met coke, we feel that backward integration of a coking coal mine with our existing steel plants will help in stability of requirements of the essential raw material i.e. met coke. 62 By letter dated 25 April 2011, Naresh Sharma responded to Mr Sureka. In that letter, he said: I appreciate that you are considering backward integration to further your business and thank you for the interest expressed by you in exploring possibility of a synergy between our companies. Nevertheless, I would like to mention that our company's current stake is an investment through holding of shares in Booyan Coal Pty Ltd, an Australian company, which has a permit to explore for coal in a designated area near Brisbane, Australia. The said company is presently carrying out exploration activities in the designated area – such activities will take a considerable time period to yield any concrete results. Therefore, it will be too premature to assess or even comment whether our investment would be fruitful. 63 Nonetheless, Naresh Sharma suggested that he and Mr Sureka meet on 27 April 2011 at Concast's offices. 64 The foreshadowed meeting for 27 April 2011 took place on that day. The meeting was attended by Naresh Sharma, Mr Sureka and Mr Ramakant Agarwal. At that time, Mr Agarwal was an executive of Concast. A note of the key points from that meeting was prepared and signed by each of the persons present. That note is in English. The first five points of the note recapped what appears to have been discussed between Mr Sureka and Naresh Sharma on earlier occasions. Paragraph 6, however, suggested something new. This was the idea that Balaji and Concast should consider a joint business in respect of Booyan's mining activities in Australia. 65 On 9 May 2011 Messrs Sureka, Agarwal and Naresh Sharma again met to discuss Concast's interest in Booyan. A record of this meeting was also kept in English and signed by each of the participants. It appears from the record that Mr Sureka was endeavouring to gauge Balaji's attitude to Concast's interest in participating in the exploration activities of Booyan rather than acquiring the issued capital of Booyan or entering into some sort of partnership or joint venture with Balaji or Booyan. It appears also that Naresh Sharma said that Balaji would require a concrete proposal before responding in any detail. 66 On or about 12 May 2011, Naresh Sharma received a further letter from Mr Sureka. By that letter, Mr Sureka, on behalf of Concast, offered to purchase half of Booyan's issued capital for A$300,000. 67 Naresh Sharma responded to that overture by letter dated 24 May 2011. In his response, Naresh Sharma said that Balaji preferred to sell its entire holding in Booyan or not sell at all. He then put a counter proposal whereby Balaji offered to sell its entire shareholding in Booyan for A$14 million. In addition, Naresh Sharma said that Balaji would wish to be repaid the loans which it had made to Booyan. 68 A further meeting between Concast representatives and Balaji representatives took place on 9 June 2011. A note of that meeting was also prepared. It appears to be inconsistent with the terms of Naresh Sharma's letter of 24 May 2011. 69 By letter dated 10 June 2011, Concast offered to purchase all of Balaji's shares in Booyan for A$900,000. 70 By letter dated 17 June 2011, Naresh Sharma offered to sell those shares for A$1.05 million 71 Upon receipt of that letter, Mr Sureka telephoned Naresh Sharma and said that Concast would not be minded to allow Balaji to secure repayment of the loans which it had made to Booyan in the event that a deal could be struck between Concast and Balaji. 72 By letter dated 18 June 2011, Concast offered to buy all of Balaji's shares in Booyan for A$1.05 million. The offer was subject to parties entering into a formal share sale agreement. 73 On 22 June 2011, Messrs Sureka, Agarwal and Naresh Sharma met at Concast's offices in order to discuss the transaction. At this meeting, the Concast representatives informed Naresh Sharma that, if the deal were to go ahead, Balaji had to write off its loans to Booyan. Naresh Sharma suggested that Concast ought to prepare a draft of the formal share sale agreement. 74 Another meeting was held on 30 June 2011 in order to sort out some of the more important details of the proposed transaction. Thereafter, Concast arranged for the preparation of a draft share sale and purchase agreement. That draft was considered by the parties at a meeting held on 8 July 2011. 75 On 15 July 2011, the directors of Balaji resolved to sell all of its shares in Booyan and to write off the loans which it had made to Booyan. 76 On 16 July 2011, a further meeting took place attended by Mr Sureka, Naresh Sharma and other persons, including a notary. At this meeting, Naresh Sharma signed the share sale agreement and affixed the company seal of Balaji to that agreement. He observed Mr Sureka sign the agreement and affix the company seal of Concast to that agreement. He then observed the notary affix his seal to the agreement. On the same day, Balaji received the purchase price of INR50,000,000 into its account held with Allahabad Bank of Kolkata. 77 Also at the meeting on 16 July 2011, Naresh Sharma handed to Mr Sureka a letter in which Balaji gave certain warranties as to the unencumbered nature of the shares and the irrevocable nature of the transfer. 78 In his affidavits, Naresh Sharma acknowledged that, shortly after 22 June 2011, he became aware of the terms of the Award and appreciated that Balaji had unsuccessfully resisted Traxys' claims in the arbitration proceedings. He said that he had no inkling that Balaji was going to lose the case until he was informed of the arbitrators' decision. 79 Naresh Sharma also testified that the Freezing Orders which I made on 2 September 2011 have prevented the registration of the transfer of the shares from Balaji to Concast. He claimed that, in his view, Balaji had a moral obligation to assist Concast after 16 July 2011 with the exploration program referrable to EPC969. In this context, Naresh Sharma made reference to the engagement by Booyan of UGM to assist with title and environmental aspects of EPC969. The individual at UGM who acted from Balaji was Mr Paul Grainger. Mr Grainger left UGM at some point and commenced to provide similar services through a new organisation, McCallum Environmental Management Services Pty Limited and ultimately on his own account through his own consultancy. 80 Traxys expressly disavowed any case based upon the proposition that the documents relied upon by Balaji as evidencing the genuineness of the share sale transaction were created after 2 September 2011, that is to say, after I made the Freezing Orders against Balaji and Booyan. 81 Traxys' case was that these documents constituted an elaborate construct leading up to the share sale agreement which was never intended to have legal effect or, alternatively, was entered into with the intention of defrauding Balaji's creditors, including, in particular, Traxys. 82 It was submitted on behalf of Balaji that it did not bear any onus in relation to the critical issues in the case. Alternatively, it was submitted that, if it did bear any such an onus, it had discharged that onus. Balaji went on to submit that the Court should accept Naresh Sharma's account of the negotiations which took place in the period from April to July 2011 for the sale of the shares and should accept the genuineness of the share sale agreement and the many documents evidencing the negotiations leading to the making of that agreement. 83 It was also submitted on behalf of Balaji that the Court should make the following findings of fact, namely: The share sale agreement was executed on 16 July 2011; Stamp duty was paid on that transaction; The sale of the shares was for valuable consideration; The consideration was actually received by Balaji from Concast; The sale was the subject of negotiations, including as to price, between the parties prior to the execution of the agreement; The Balaji board of directors authorised the sale of the shares and authorised Naresh Sharma to find a buyer and consummate the sale. 84 Balaji submitted that the Court should find that the sale of shares embodied in or evidenced by the share sale agreement actually took place in accordance with the terms of that agreement. Traxys' attack on Naresh Sharma 85 Traxys made a number of general observations as to the reliability of Naresh Sharma's evidence and then mounted a detailed attack upon that evidence based upon documents tendered by it and the evidence given by Naresh Sharma in cross-examination. 86 In this section of these Reasons, I will endeavour adequately to capture the substance of Traxys' attacks upon the evidence of Naresh Sharma, and Balaji's response to those attacks. To the extent that it may be necessary to make specific findings in respect of particular facts, I will do so. 87 The following general submissions were made on behalf of Traxys about Naresh Sharma's evidence: (a) Mr Sharma's affidavit evidence consisted mainly of a rehearsal of the terms of documents and did not seek to address matters squarely raised in the Statement of Claim. He failed to refer to a number of matters which were always going to assume significance (such as his dealings with Guilford Coal). (b) Mr Sharma consistently maintained that he was unable to recall much or anything by way of detail, including the progress of the arbitration proceedings and the contents of many documents. (c) Mr Sharma endeavoured to portray the decision-making processes of Balaji as more democratic than they truly were. The evidence plainly suggested that he was the controlling mind of Balaji. (d) Mr Sharma sought to distance himself entirely from the arbitration proceedings in London whereas the Court should find that he kept himself well informed of the progress of those proceedings. (e) Mr Sharma prevaricated and behaved evasively in his responses to the many questions about Guilford Coal and his and Mr Mukherjee's dealings with Mr Grainger. Ultimately, he did concede that he was aware of Mr Mukherjee's communications with Mr Grainger concerning a potential sale of Booyan or its EPC to Guilford Coal (Transcript p 132ll 25-44). (f) Mr Sharma often added to his answers in order to make points which he considered would be favourable to his case. (g) There was an ample and appropriate basis for the Court to conclude that Mr Sharma's evidence overall was tactical and lacked reliability. 88 Most of the criticisms which I have endeavoured to summarise at [87] above are well made. At the conclusion of Mr Sharma's evidence, I was left with a feeling of disquiet about that evidence and determined that I would treat it with considerable caution. 89 I also have to bear in mind that Mr Sureka was not called to testify nor were any of the other executives of Balaji who had some involvement in the sale of Balaji's shares in Booyan and in the business activities of Booyan, particularly in the period after 16 July 2011. 90 Having made the general observation concerning the evidence of Naresh Sharma which I have endeavoured to summarise at [87] above, Traxys proceeded to make a number of specific criticisms of that evidence. I now turn to deal with those specific criticisms. 91 Traxys submitted that Mr Sharma's evidence to the effect that he did not pay close attention to the progress of the London arbitration proceedings should not be accepted. Nor should his evidence to the effect that Mr Deepak Sharma handled that matter on behalf of Balaji. In support of this contention, Traxys emphasised the fact that Deepak Sharma had not been called by Balaji to give evidence before me. 92 I do think that Mr Sharma exaggerated his lack of involvement with the arbitration proceedings in London. However, I see this as largely going only to Mr Sharma's credit. For this reason, I do not think that Deepak Sharma was a witness that the Court could have expected would be called in the second trial before me. I draw no adverse inference against Balaji from his absence from the witness box. 93 Traxys next submitted that the origins of the Concast transaction are largely unexplained. It submitted that the board meeting held on 11 April 2011 at which Balaji decided to divest itself of its interest in Booyan was held on the same day as the arbitrators in London wrote to the parties inviting submissions as to the costs of the arbitration. 94 I do not think that I should give much weight to this alleged coincidence of events. However, Mr Sharma did not really explain why it was that Balaji had decided to sell the shares and there is an air of artificiality about the documents created in April 2011 which are relied upon by Balaji as providing a context for the execution of the share sale agreement. For example, the desired sale price for the shares in April 2011 was A$1m and, despite the strange negotiations which ensued thereafter, the final price was struck at A$1.05m – a figure which was remarkably close to the A$1m apparently spoken of on 11 April 2011. Nor is there any evidence as to the way in which the sale price was arrived at. The negotiations about price commenced with the parties being many millions of dollars apart but rapidly reached a point by the end of May 2011 where common ground on price was very likely to be achieved. The price ultimately agreed was much closer to the figures originally offered by Concast than to the A$14 million originally sought by Balaji from Concast and much closer to the A$1 million referred to in the Balaji Board Minute of 11 April 2011. 95 There is no evidence that Mr Sharma did anything to bring about a sale of the shares other than to speak with Mr Sureka and thereafter confine himself to his negotiations with Concast. One would have thought that, given the initial very significant disparity between the parties' respective externalised positions on price, had Mr Sharma been genuinely looking to secure the best price, other potential avenues for securing a sale would have been explored. 96 Next, Traxys submitted that there was no rational reason why Concast would have wanted to buy a stake in the company (Booyan) whose only asset was an exploration permit in Queensland and whose only business was exploiting that permit. This submission is sound and I accept it. 97 Concast was not in the business of making, selling or trading coal or coke. Its business was making and trading steel. Concast did not have a coke oven in 2011 and still did not have one by the time of the second trial. 98 Mr Sureka was not called to explain his thinking in progressing and consummating the negotiations which he held with Mr Sharma in the middle of 2011. Balaji did not produce any documentary evidence to suggest that Concast had made a serious business assessment of that which it was intending to achieve by acquiring the shares. The ideas of "backward integration" and "synergy" mentioned by Mr Sureka in his correspondence do not really make any sense. Further, it did not make commercial sense for Balaji to sell its coal mining interests in Australia to Concast. Were Concast to secure its own supply of coking coal and purchase a coking oven, it would no longer need to do business with Balaji. At the time, Concast was Balaji's major customer, its business constituting more than 50% of the sales of coke which Balaji was making in 2011. There was no evidence before me of Concast requesting or receiving any particulars of Booyan's assets. The documentary record shows that discussions appear to have taken place at only the most general level. There was no evidence before me of any inquiry or sharing of information concerning Booyan's drilling and exploration activities. 99 No due diligence was done by Concast. 100 Mr Sharma testified that his discussions with Mr Sureka had generally been conducted in Hindi or Rajasthani, not in English. Why then, so Traxys asked rhetorically, were the formal records of these discussions expressed in English? Traxys submitted that the Court should infer that the minutes and correspondence were not prepared to record what had actually happened at all: Rather they were written in English and prepared for the purpose of being shown to third parties, if that became necessary, in order to present a picture of genuineness when, in truth, that picture was false. 101 Mr Sharma explained what he said was normal practice in India concerning the formal recording of business transactions. 102 I do not accept Mr Sharma's explanation. The documentary record displays a significant degree of artificiality. It contains various statements which seem to me to be overly formal and completely superfluous given the relationship between Mr Sharma and Mr Sureka. The fact that a formal record signed by the parties was created and was expressed in English appears to me to be unusual. 103 In his letter of 17 June 2011, Mr Sharma set a deadline for the sale as 20 June 2011. He explained this by saying that he wished to bring the matter to a head because negotiations had dragged on a little. Traxys submitted that he did this because he should be taken to have been well aware that the Award was about to be published and was endeavouring to consummate the transaction before the publication of the Award. 104 I do not think that the evidence demonstrates a sudden pick up of the pace of the transaction around 20 June 2011. Indeed, the transaction was not consummated until almost a month later. I am not prepared to draw the inferences which Traxys has urged upon me in respect of Mr Sharma's endeavours to impose a deadline on the consummation of the transaction. 105 Traxys next submitted that the contract had been cobbled together in somewhat of a hurry. I do not think that the evidence really bears this out. I do not propose to give any weight to this submission. 106 Traxys criticised Balaji for taking steps to set aside the award in India. That is a legitimate matter of criticism in terms of Balaji's commercial morality. However, I consider that it is a matter of only slight weight in relation to the issues presently before me. 107 Traxys went on to submit that there were certain curiosities in the draft and final form of the share sale agreement which strongly support the proposition that there was something more to the arrangement than a simple sale of shares. Traxys pointed to the following matters: (a) No one from Concast ever communicated with anyone from Booyan, either before or after the sale. No one from Concast ever became involved in the running of Booyan. Mr Sharma sought to explain this away upon the basis that Mr Sureka had asked him to remain involved in the running of Booyan because of the Freezing Orders granted by me on 2 September 2011. (b) The share sale agreement itself provided for the ongoing participation by Mr Sharma in the affairs of Booyan. He could not be removed from the board of Booyan but rather had an entitlement to remain there for as long as he wished. (c) There was no satisfactory explanation offered by anyone as to why Mr Sharma needed to remain as a director of Booyan. 108 It was then submitted by Traxys that the Court should not accept Mr Sharma's failure to recollect the side letter provided to Concast on 16 July 2011. It was submitted that the Court should infer that this letter was prepared for the benefit of having something to show third parties. However, although its text is somewhat clumsy and contains material that might more satisfactorily have been included in the share sale agreement itself, I see nothing sinister in the circumstance that this letter was provided at settlement of the share sale agreement. 109 Next, Traxys submitted that nothing changed at all in the conduct of the business activities of Booyan after 16 July 2011. In particular, Traxys submitted that: (a) Balaji continued to control Booyan. (b) Balaji continued to instruct UGM and Mr Grainger. (c) Balaji did not discuss any of the business activities of Booyan with any representative of Concast. In particular, it did not seek Concast's approval to the incurring of future expenses. (d) Concast played no role whatsoever in the running of Booyan. (e) No one told Mr Grainger of the sale of Balaji's interest in Booyan to Concast. (f) Mr Sharma endeavoured to suggest that he had told Mr Grainger of the existence of that sale three or four months before the commencement of the second trial although one cannot but help but wonder why he would have done so. (g) Balaji endeavoured to sell the exploration permit to Guilford Coal. It conducted its negotiations with Guilford Coal without reference to Concast and through Mr Grainger who continued to believe that Balaji still owned and controlled Booyan. 110 The matters to which I have referred at [109] above should all be accepted as appropriate conclusions based upon the primary facts relied upon in support of those conclusions by Traxys. 111 No transfer of the shares in Booyan was ever prepared or submitted to Booyan. 112 Counsel for Traxys devoted a significant amount of time and a good deal of effort in endeavouring to establish that in the period commencing in early September 2011 and continuing up to mid to late April 2012, Balaji made a concerted effort to sell the exploration permit owned by Booyan or, alternatively, its shares in Booyan to Guilford Coal. Guilford Coal controlled a mining tenement which was located next to the area over which EPC969 was held. Mr Sharma was cross-examined extensively about that prospect. A great deal of evidence was tendered before me, for the most part comprising email exchanges between Mr Mukherjee, and Mr Grainger, which were copied to Mr Sharma and others, which established that Balaji was endeavouring to sell the permit or its shares in Booyan to Guilford Coal. Mr Sharma vacillated in his responses to the questions asked of him concerning the prospect of selling to Guilford Coal. On some occasions, he endeavoured to distance himself from the communications that were taking place. On other occasions, he suggested that all that Balaji was doing in the period referred to was sounding out a prospect in order to satisfy Concast of the value of the asset which it had acquired back in July 2011. 113 I found Mr Sharma's evidence in relation to Balaji's dealing with Guilford Coal to be most unsatisfactory. I think that he was well aware that the objective facts demonstrated by the emails tendered in evidence concerning Balaji's dealing with Guilford Coal were capable of being viewed by the Court as demonstrating that the true intent of Mr Sharma and Mr Sureka when entering into the share sale agreement was that the agreement would never be given any legal effect. Absent witnesses 114 Traxys submitted that adverse inferences should be drawn against Balaji from the absence of a number of witnesses. However, in my view, the only witness whose absence may give rise to an appropriate adverse inference is Mr Mukherjee. Mr Mukherjee, I infer, would have been able to testify as to the thinking on Balaji's part behind the sale of the shares and also of the true import of the dealings which he had with Mr Grainger post-16 July 2011. I infer that the evidence of Mr Mukherjee on these matters would not have assisted Balaji. 115 I do not think that the absence of Mr Sureka is a matter which can found an adverse inference against Balaji. However, the absence of Mr Sureka from the witness box is a very significant matter. As submitted by Traxys, Concast has not deigned to come to court to defend its acquisition of the shares. After all, it is the party which Balaji says now owns the entire beneficial interest in the shares. In a case where one party challenges the bona fides of a share sale transaction, to which it is not a party, the fact that only one of the parties to the transaction brings forward evidence to support the transaction may be very significant. This will be particularly so in circumstances where the evidence of the party who does come to court in order to support the transaction is beset with doubts and difficulties. Consideration Issue 1 – Sham transaction 116 In Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 at 486-487 [46], the High Court explained "sham" as steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences. 117 In Sharrment Pty Ltd v Official Trustee (1988) 18 FCR 449, the Full Court gave detailed consideration to the meaning of "sham". At 454, Lockhart J said that a "sham" was something that is intended to be mistaken for something else or that is not really what it purports to be. It is something which is not genuine or true – something made to appear to be something which it is not. His Honour went on to consider (at 454-458) particular elements of "sham" transactions. 118 The High Court looked at the matter again in Raftland Pty Ltd v Commissioner of Taxation (2008) 238 CLR 516 (at 531-532 [33]-[36] per Gleeson CJ, Gummow and Crennan JJ) where their Honours said: 33 It was not contended by the appellant that the amounts referred to above were misappropriated. Yet it is central to the argument for the appellant that they were amounts to which the E & M Unit Trust and, through that trust, its beneficiaries were entitled. The apparent discrepancy between the entitlements appearing on the face of the documents and the way in which the funds were applied gave rise to a question whether the documents were to be taken at face value. In various situations [See Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 at 484 [36]; Hadijiloucas v Crean [1988] 1 WLR 1006 at 1019; [1987] 3 All ER 1008 at 1019], the court may take an agreement or other instrument, such as a settlement on trust, as not fully disclosing the legal rights and entitlements for which it provides on its face. If that be so, the parol evidence rule in Australia identified with Hoyt's Pty Ltd v Spencer [(1919) 27 CLR 133 at 144] does not apply. 34 One such case is where other evidence of the intentions of the relevant actors shows that the document was brought into existence "as a mere piece of machinery" for serving some purpose other than that of constituting the whole of the arrangement [Hawke v Edwards (1947) 48 SR (NSW) 21 and 23 per Jordan CJ. See also the remarks of Windeyer J in Scott v Federal Commissioner of Taxation [No 2] (1966) 40 ALJR 265 at 279]. That, in essence, is the respondent's case with respect to the alleged existence of the "present entitlement" of the trustee of the E & M Unit Trust to the income of the Raftland Trust. 35 The term "sham" may be employed here, but as Lockhart J emphasised in Sharrment Pty Ltd v Official Trustee in Bankruptcy [(1988) 18 FCR 449 at 453] the term is ambiguous and uncertainty surrounds its meaning and application. With reference to remarks of Diplock LJ in Snook v London and West Riding Investments Ltd, [[1967] 2 QB 786 at 802], Mustill LJ later identified [Hadjiloucas v Crean [1988] 1 WLR 1006 at 1019; [1987] 3 All ER 1008 at 1019] as one of several situations where an agreement may be taken otherwise than at its face value, that where there was a "sham"; the term, when "[c]orrectly employed", denoted an objective of deliberate deception of third parties. 36 The presence of an objective of deliberate deception indicates fraud. This suggests the need for caution in adoption of the description "sham". However, in the present litigation it may be used in a sense which is less pejorative but still apt to deny the critical step in the appellant's case. The absence of a present entitlement within the meaning of s 100A(1)(a) of the Act may appear from an examination of the whole of the relevant circumstances, and these are not confined to the terms of the Raftland Trust instrument. 119 A sham allegation is akin to an allegation of fraud. The allegation must be firmly alleged and cogently proved. It is essential to the notion of a sham in Australian law that the parties do not intend to give effect to the legal arrangements set out in their apparent agreement. It is the parties' subjective intentions which must be determined. In order to justify a conclusion that a transaction or set of documents constitutes a sham, the requisite intention to mislead must be a common intention of all of the parties to the transaction. In analysing whether a transaction is a sham, the Court is not confined to examining the documents alone, but may examine and draw inferences from other evidence, including the parties' explanations as to their dealings and evidence describing their subsequent conduct. 120 Balaji submitted that Traxys has fallen short of that which is required to establish that the sale of the shares by Balaji to Concast was a sham. 121 Traxys submitted that the share sale transaction was a sham for the following reasons: (a) Given that the hearing of the arbitration had concluded by March 2011, and that the arbitrators had adjourned to consider their decision, Balaji should be taken to have appreciated that an award might be forthcoming within the next couple of months after March 2011. (b) On 11 April 2011, the arbitrators asked for submissions on costs. (c) No serious endeavour was made by Balaji or Mr Sharma to find an arms-length buyer for Balaji shares in Booyan. According to Mr Sharma, he happened to run into Mr Sureka and the sale simply developed from there. This is an extraordinary coincidence. The sale of the shares to Concast made no commercial sense for either party. It was against Balaji's commercial interests and of no real benefit to Concast. (d) There was no explanation as to how the price was struck or how either party arrived at its various negotiating positions. (e) Negotiations were conducted in Hindi or Rajasthani but were minuted in English in a stilted and somewhat artificial manner. (f) By reason of its conduct in the proceeding itself, Concast must be taken to have admitted the allegations made against it by Traxys concerning the share sale transaction. (g) Balaji has not complied with the Court's orders concerning the production of documents and other items. (h) Notwithstanding a significant number of communications emanating from Balaji to Mr Grainger, Mr Grainger was never told of the sale. (i) Concast never participated in any of the business activities of Booyan or the running of Booyan at any time. (j) Mr Sharma's endeavours to distance himself from the attempted sale to Guilford Coal are unconvincing and should be regarded as constituting a serious dent in his credit. (k) No steps were taken to prepare or register a transfer of the shares promptly after 16 July 2011. 122 I accept the submissions made on behalf of Balaji that the strength of evidence necessary to establish a fact in issue on the balance of probabilities will vary according to what is sought to be proved (Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449-450 per Mason CJ, Brennan, Deans and Guadron JJ) and that the evidence to be evaluated in respect of Traxys' allegations will need to be carefully considered and will need to be cogent. 123 Traxys accepts that the documents created by Balaji and Concast in the period from 11 April 2011 to late July 2011 were all created on or about the dates each of those documents purports to have been created. Indeed, Traxys relies upon that circumstance as supporting its fundamental proposition that the share sale transaction was a sham. 124 Balaji argued that, if Traxys is right, and the share sale transaction was a sham, it was an elaborate charade. Balaji said that it would involve the fabrication of a multitude of documents, the telling of significant lies about the extent of negotiations and the consideration paid, and the unnecessary obtaining of legal advice on the taxation implications of the deal. Balaji submitted that Traxys' theory required Concast, with no connection to Traxys, and no apparent motive for assisting Balaji, to be in on the charade. It must be found to have had a common intention to deceive Traxys. It requires a finding that Balaji had the intention to set up the sham at a time long before it knew that it was indebted to Traxys. Balaji also submitted that Traxys had failed to put squarely to Mr Sharma the elements of its sham case and, for that matter, the elements of its s 172 case. This last point cannot be made good. I am satisfied that, at Transcript p 156, the substance of Traxys' sham case was put to Mr Sharma. 125 I have come to the conclusion that the share sale transaction relied upon by Balaji to defeat Traxys' claim to have receivers appointed to the shares was, in truth, a sham at law. I have reached this conclusion for the following reasons: (a) Concast did not come to court to defend its acquisition. Given that it apparently paid A$1.05 million for the shares in Booyan, if it had been a bona fide purchaser for value, it seems extraordinary that it would not come to court to justify the transaction. On the face of it, its failure to support Balaji leaves it out of pocket to the tune of A$1.05 million and no shares in Booyan. This is not the behaviour of a party who participated in a genuine share acquisition. In addition, and in any event, because it has not filed a Defence, Concast should be taken to have admitted the allegations made in Traxys' Statement of Claim. I should add that Concast's apparent lack of concern about having actually paid A$1.05 million to Balaji is not really surprising. As at 16 July 2011, it would have owed Balaji much more than that on its trading account. (b) It is highly likely that Naresh Sharma was kept well informed of the progress of the arbitration proceedings in London. I find that he was kept informed in this way. It is also highly likely that those who represented Balaji in those proceedings and who provided advice to Balaji from time to time would have drawn to the attention of Balaji's executives the very real prospect that it might lose the arbitration and be found liable to Traxys in a very significant sum. I find that the prospect of an adverse award being handed down within a month or two of March 2011 was something that Naresh Sharma was well aware of as at April 2011. (c) The share sale transaction made no sense commercially for either Balaji or Concast. If it were a real transaction, Balaji was arming Concast with the capacity to secure its own supply of coking coal in the future which, when joined with its capacity to purchase a coking oven in India, had the potential to allow Concast to manufacture its own coke from a steady supply of coking coal coming from Australia. On the other hand, from Concast's point of view, the project was a long term one with no immediate benefits. (d) There is no evidence of either Balaji or Concast conducting a feasibility study or business assessment of the proposal. There is no evidence that any thought was given to the benefits and detriments of the proposal for either party. (e) There is no evidence of any serious analysis being undertaken by either party directed to an appropriate price for the shares. (f) From Balaji's point of view, there was no real explanation as to why it had suddenly decided to sell its shares in Booyan. (g) Mr Sharma did not take any steps to engage with any other potential purchaser. (h) To the outside world, nothing changed in the way in which Booyan was run or the way in which its exploration activities were undertaken after 16 July 2011. To the outside world, nothing at all changed. I do not accept that this was done in order to accommodate the wishes of Mr Sureka because the Freezing Order had caused Concast difficulty in dealing with the shares. (i) Balaji took steps to sell the shares in Booyan to Guilford Coal. Those steps were undertaken immediately after it became aware of the present proceeding. I infer that Balaji believed that it would be able successfully to resist Traxys' claim for the appointment of receivers by bringing forward its argument that the shares had been sold to Concast thus freeing up the shares from the Freezing Orders which I had made and allowing them to be sold. Otherwise, any sale would have been in breach of those Freezing Orders. (j) The contractual term in the share sale agreement to the effect that Naresh Sharma was to remain as a director of Booyan for as long as he chose was uncommercial and unusual. By way of contrast, Concast did not seek the appointment of a nominee of it as a director of Booyan and showed no interest in the affairs of Booyan. (k) No attempt was ever made to formalise the share sale transaction by preparing, executing and registering a share transfer. (l) In the end, I formed the impression that Mr Sharma was well aware of the issues in the case and, whenever possible, endeavoured to press upon me a version of events which he considered best suited Balaji's case. In expressing this view, I have taken into account the fact that English is not Mr Sharma's first language. However, I think that he had a good command of English and managed successfully most of the time to alert me to those occasions when he may have had some difficulty understanding a question or may have been confused so that, for the most part, questions were clarified then and there. In the end, I did not think that Mr Sharma was at any disadvantage by reason of the fact that English was not his first language. (m) There is no reason to think that, upon the assumption that the share sale transaction was genuine, Concast now wished to extricate itself from the transaction because it considered the transaction no longer to be to its advantage. Issue 2 – Intention to defraud 126 This issue would only arise for consideration if I were to conclude that the transaction was not a sham but was intended to have legal effect. As I have come to the view that the transaction was a sham, this issue does not arise. Issue 3 – Discretion 127 I do not really understand this argument. Were I to be of the opinion that the share sale transaction was a genuine transaction for fair value and that Balaji had not entered into the transaction with an intention to defraud its creditors, I find it hard to imagine I would nonetheless appoint receivers to the shares. However, given the conclusion to which I have come in respect of Traxys' allegation that the share sale transaction was a sham, I need not consider this issue further. Reasons for Ruling (s 169 of the Evidence Act, 1995 (Cth)) 128 At the commencement of the second trial, Traxys objected to the tender of certain minutes of meetings, various letters and the share sale agreement itself upon the basis that it had made several requests of Balaji in the period leading up to the trial asking it to produce the metadata from its computers and that no metadata had been produced. The documents to which objection was taken were all computer-generated documents. Traxys contended that its requests were all valid requests made under s 167 of the Evidence Act and that Balaji had failed or refused to comply with Traxys' requests without reasonable cause. Traxys then argued that the Court should exclude all of the computer-generated documents to which objection was taken by exercising its discretion to reject evidence in relation to which the requests were made (s 169(1)(d) of the Evidence Act). 129 I declined to reject this evidence. I informed the parties that I would give brief reasons for that ruling in this judgment. 130 In support of its s 169 application, Traxys submitted that, contrary to the evidence given by Mr Sharma in his affidavit affirmed on 7 December 2012, the metadata requested by Traxys must still exist within the hard drive of Balaji's computers and thus should be produced. Mr Sharma said that this was not so and explained why. Traxys did not call expert evidence in order to establish the essential proposition which underpinned its argument, viz that the metadata must still exist. In any event, I was not satisfied that Traxys had established that Balaji's failure to produce the metadata was a failure for which there was no reasonable excuse. Mr Sharma testified that it was no longer available. I took the view that, as non-compliance with Notices to Produce and an Examination Order was relied upon by Traxys as a plank in its arguments that the share sale transaction was a sham or, alternatively, was entered into by Balaji with the intent to defraud its creditors, the preferable course was to admit the documents into evidence and evaluate Mr Sharma's explanations in light of the totality of the evidence. For these reasons, I admitted into evidence the computer-generated documents to which objection was taken. Conclusion 131 I think that Traxys has made out a case that the share sale transaction was a sham. That being so, there is nothing standing in the way of my appointing receivers to the shares with the powers sought by Traxys. I propose to make appropriate orders appointing receivers in due course. Costs should follow the event. 132 As I understand Traxys' current claims, it does not seek a declaration that the share sale transaction was a sham. As presently advised, I think that I should make such a declaration in order to protect the receivers from potential claims by Balaji or by Concast and in order to make clear in a fashion binding upon all relevant parties that I have found the share sale transaction between Balaji and Concast apparently entered into by those parties on 16 July 2011 to be a sham. 133 I propose to direct Traxys to bring in Short Minutes of Orders giving effect to these Reasons for Judgment within seven (7) days of the date of publication of these Reasons. I will allow Balaji a period of seven (7) days thereafter to lodge with my Associate any submissions that it wishes to make as to the orders proposed by Traxys. Traxys will then have an opportunity to reply to Balaji's submissions. Thereafter, I will decide the form of relief on the papers. I certify that the preceding one hundred and thirty-three (133) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate: Dated: 9 September 2014