FEDERAL COURT OF AUSTRALIA Camm v Linke Nominees Pty Ltd (No 5) [2015] FCA 431 Citation: Camm v Linke Nominees Pty Ltd (No 5) [2015] FCA 431 Parties: LACHLAN MCINTOSH AND JOHN PARK IN THEIR CAPACITY AS TRUSTEES OF THE PROPERTY OF GARY STIRLING CAMM, A BANKRUPT v LINKE NOMINEES PTY LTD (ACN 005 860 944) File number: VID 828 of 2009 Judge: TRACEY J Date of judgment: 11 May 2015 Catchwords: BANKRUPTCY – whether transfer of property void against the trustee in bankruptcy under s 121 of the Bankruptcy Act 1966 (Cth) – whether transferor intended to prevent the property from becoming divisible amongst creditors or acted with intent to defraud creditors Legislation: Bankruptcy Act 1966 (Cth) ss 19(1), 30, 81, 121 Bankruptcy Legislation Amendment Act 1996 (Cth) ss 2(2), 3, sch 1, items 208, 457 Federal Court of Australia Act 1976 (Cth) ss 37M, 37N Land Title Act 1994 (Qld) Real Property Acts of 1861 and 1877 (Qld) Cases cited: Adsett v Berlouis (1992) 37 FCR 201 – cited Camm v Linke Nominees Pty Ltd (2010) 190 FCR 193 – cited Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2004] FCAFC 48 – cited McIntosh v Linke Nominees Pty Ltd [2008] QCA 275 – cited McIntosh v Linke Nominees Pty Ltd [2008] QSC 79 – cited Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 29 WAR 273 – cited Re Brogden; Billing v Brogden (1888) 38 Ch D 546 – cited River Bank Pty Ltd v The Commonwealth (1974) 48 ALJR 483 – cited Spencer v The Commonwealth (1907) 5 CLR 418 – cited Vale v Sutherland (2009) 237 CLR 638 – cited Date of hearing: 8-11, 15-19, 29-31 October 2012, 1 November 2012, 27-31 May 2013 and 25-28 November 2013 Place: Melbourne and Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 111 Counsel for the Applicant: Mr I Jones SC, Mr P Baume and Mr J Ribbands (8-11, 15-19, 29-31 October 2012 and 1 November 2012) Mr G Nash QC and Mr P Baume (27-31 May 2013 and 25-28 November 2013) Solicitor for the Applicant: Maitland Lawyers Counsel for the Respondent: Mr M Amarena Solicitor for the Respondent: Broadley Rees Hogan Lawyers IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 828 of 2009 BETWEEN: LACHLAN MCINTOSH AND JOHN PARK IN THEIR CAPACITY AS TRUSTEES OF THE PROPERTY OF GARY STIRLING CAMM, A BANKRUPT Applicant AND: LINKE NOMINEES PTY LTD (ACN 005 860 944) Respondent JUDGE: TRACEY J DATE OF ORDER: 11 MAY 2015 WHERE MADE: MELBOURNE (HEARD IN BRISBANE and MELBOURNE) THE COURT ORDERS THAT: 1. The application be dismissed. 2. If either party wishes to be heard on the issue of costs that party should so advise my associate within 14 days of the making of these orders. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 828 of 2009 BETWEEN: LACHLAN MCINTOSH AND JOHN PARK IN THEIR CAPACITY AS TRUSTEES OF THE PROPERTY OF GARY STIRLING CAMM, A BANKRUPT Applicant AND: LINKE NOMINEES PTY LTD (ACN 005 860 944) Respondent JUDGE: TRACEY J DATE: 11 May 2015 PLACE: MELBOURNE (heard in brisbane and melbourne) REASONS FOR JUDGMENT 1 This proceeding was referred to the Court by the former Federal Magistrates Court. It involves a dispute between the applicants ("the trustees"), who are the current trustees of the bankrupt estate of Mr Gary Camm, and Linke Nominees Pty Ltd ("Linke Nominees"). The dispute relates to the transfer of certain property owned by Mr Camm to Linke Nominees in 1995 or 1996. 2 In their application the trustees seek a declaration that the transfer of the property from Mr Camm to Linke Nominees is void against them and an order that Mr Camm do all things necessary to transfer the property to them. The trustees contend that they are entitled to seek such a declaration and orders under s 121 of the Bankruptcy Act 1966 (Cth) ("the Act"). Linke Nominees disputes this contention. 3 The relevant property was identified as an estate in fee simple in land located in Weyba Drive Noosaville in Queensland ("the property"). More specifically, it is identified, in paragraph 3 of the statement of claim, as the "estate in fee simple in the land more particularly described as Lot 4, Registered Plan 36729, County of March, Parish of Weyba, Local Government: Sunshine Coast, being Title Reference 12489178." The proceeding is, therefore, concerned with real property otherwise identified as the property at 111 or 123 Lake Weyba Drive, Noosaville. 4 Mr Camm purchased the property on 13 May 1988. Between then and 22 February 1996 he was the registered proprietor (and later the registered owner) of the property under, respectively, the Real Property Acts of 1861 and 1877 (Qld) and the Land Title Act 1994 (Qld). The purchase was funded by a mortgage from the Commonwealth Bank of Australia ("the Bank") for about $500,000. 5 There was a house on the property in which Mr Camm lived. There were also some out-buildings and a swimming pool. 6 In the early 1990's Mr Camm was party to a number of unsuccessful business transactions. By early 1995 some of his creditors were threatening him with bankruptcy proceedings because of his failure to pay monies they claimed he owed them. Bankruptcy proceedings were, in fact, commenced on 1 August 1995 in the Federal Magistrates Court. 7 At about this time Mr Camm was not making the necessary payments to service the mortgage to the Bank. He had discussions with representatives of the Bank with a view to exploring terms on which the mortgage might be discharged. In September 1995 the Bank commissioned a registered valuer, Mr John O'Hagan, to advise it as to the current market value of the property on orderly selling and forced cash realisation bases. Mr O'Hagan provided the Bank with a report, dated 15 September 1995, in which he valued the property at $360,000 on an orderly selling basis and $320,000 on a forced cash realisation basis. 8 In August 1995 Mr Camm had a discussion with Mr Robert Linke, the principal of Linke Nominees at the property. During this discussion the possibility of Mr Linke purchasing the property was raised. Further communications followed. On 26 October 1995 Mr Camm and Linke Nominees entered into a contract for the sale of the property. The contract provided for the payment of a deposit of $1,000 by Linke Nominees with the balance of the purchase price of $400,000 payable on completion of the contract on 23 November 1995. The Bank was consulted and agreed to accept the $400,000 as part payment of Mr Camm's indebtedness to it. 9 After a series of adjournments a final hearing of the bankruptcy proceeding in the Federal Magistrates Court had been scheduled for 29 November 1995. 10 By agreement of the parties the settlement date for the sale was extended to 30 November 1995. This delay occurred because the Westpac Banking Corporation ("the Westpac Bank"), from whom Mr Linke was borrowing the funds for the purchase, took longer than expected to make the funds available. 11 On 29 November 1995 a sequestration order was made against Mr Camm's bankrupt estate and Mr Trevor Schmierer was appointed as trustee of the estate. 12 On the same day as he was appointed Mr Schmierer wrote to Mr Camm's solicitors advising that he consented to the sale of the property proceeding at the scheduled settlement on the following day. 13 Mr Schmierer was subsequently to report to creditors in this, Mr Camm's first bankruptcy, that the property had been "realised by the bank" and that the Bank had taken almost all the proceeds of the sale. The land was sold for $400,000 of which sum the Bank received almost $393,000. The Bank became an unsecured creditor for a little over $119,000. 14 An instrument of transfer was prepared. It was signed by Mr Camm on 24 November 1995 and by Linke Nominees' solicitor on 30 November 1995. It was lodged in the Land Registry on 14 February 1996 and registered on 22 February 1996. 15 On 27 February 1999 Mr Camm was discharged from his first bankruptcy. 16 On 19 November 2003 a further sequestration order was made against Mr Camm. The trustees were appointed as the trustees of Mr Camm's second bankrupt estate. 17 Despite the transfer of ownership in 1996 Mr Camm continued to reside at the property until 2007 and did so rent free. 18 Between 1996 and 2007 Linke Nominees made a number of attempts to evict Mr Camm from the property. Some of these attempts involved informal discussions and arrangements between Mr Camm and Mr Linke. When these attempts proved unsuccessful Linke Nominees had resort to legal proceedings. 19 Those proceedings were brought by Linke Nominees in the Queensland Small Claims Tribunal in 2004. Mr Camm defended the action. As part of his defence he filed an affidavit in which he deposed that: "3. I have occupied the entire Land and improvements (since about 1988) at 111 Lake Weyba Drive, Noosaville – also known as 123 Lake Weyba Drive, Noosaville ("the property"). While I occupied the property it was the subject of a sale transaction with the Claim ant (sic) and my occupation has been: - (a) without any substantive contact or inference (sic) by or on behalf of the Claimant; and (b) with the Claim ant's (sic) knowledge and consent; (c) Since and before it's (sic) sale by me to the Claimant (sic). … 5. I occupy the property as a result of an understanding or arrangement ('arrangement') between myself on behalf of my Mother and/or the Stirling Family Trust, and Linke on behalf of the Claimant which is either of a contractual or trust nature not a Residential Tenancy Agreement. This is explained later in this Affidavit. … 11. The arrangement arose in a number of discussions that I had, in particular, with Linke before entering into the Contract of Sale for the property to the Claimant. Exhibit "GSC3" is a copy of the Contract dated 26 October, 1995 ('the Contract'). I entered the Contract to sell the property for $400,000.00 to the Claimant (at a time when I had previously received a verbal offer from my neighbours, Mr & Mrs Hook that they may pay $550,000.00) on the understanding and in consideration of the Claimant, through Linke, agreeing to terms not evidenced in the Contract which terms were to ultimately to benefit my Mother and/or the Stirling Family Trust. Linke was well aware at the time of sale that I was on the brink of bankruptcy and that I wished to preserve monies (ie: $114,000.00) that my Mother had provided in respect of reducing the Mortgage debt to the Commonwealth Bank over the property and $13,500.00 for satisfaction of a Warrant of Execution registered over the property. ('My Mother's investment'). I believe this sale price and due to other aspects of the arrangement a special condition was inserted by Linke in the Contract requiring confidentiality which was required by the Claimant. I believe this is an unusual condition f or (sic) a standard Land Sale Contract. 12. The arrangement, inter alia, was to the following effect: - (a) I would sell the property to the Claim ant (sic) for $400,000.00 (b) There was no requirement to give possession of the property to the Claimant; (c) The property could be repurchased by me or by me as Agent for my Mother or the Stirling Family Trust (yet to be constituted) for a portion of the current market value (at the time of the future purchase) based on a formula. The formula was 400/550 of the market value which was the price that would have to be paid to the Claimant by me or on behalf of my Mother or the Stirling Family Trust. (d) There was also the First Right to Purchase the property for that price if the Claimant wished to sell the property in the future. (e) The Claimant would pay certain monies referred to in paragraph 14 hereof. Linke referred to the 'repurchase price' as a price that had to be 'fair and equitable' and he came up with the formula. … 14. Linke, on behalf of the Claimant, agreed to these terms and as part of the arrangement the Claimant did or caused to be done, the following: - (a) paid out two (2) Esanda hire purchase agreements for motor vehicles in my name. Exhibit "GSC4" are copies of letters dated 28 December, 1995 that relate to the Agreements with a note by me at the bottom of each of the letters as to the payout figures addressed to Linke ("Bob"). (b) other payments totalling to the best of my recollection $12,000.00 - $15,000.00 to my Mother's and my former Partner's Carla De La Rue's account; (c) paid my legal fees for thousands of dollars; (d) paid about $3,000.00 on or about 21 November, 1995 for my trip to Hong Kong and Hotel bills when I had to return in or about that time due to the imminent settlement of the sale of the property to the Claimant. Linke had no reason to pay these monies except pursuant to the arrangement." 20 There is no evidence that these assertions by Mr Camm were tested by cross-examination in the Small Claims Tribunal. It is likely that they were not as Mr Camm succeeded in challenging the Tribunal's jurisdiction to deal with the application. 21 Upon becoming aware of the existence of the affidavit and its terms in 2007 the trustees commenced what was to be a series of legal proceedings in an effort to have the sale of the property avoided and the property vested in them for the benefit of Mr Camm's creditors. 22 This is one of those proceedings. It was commenced in the Federal Magistrates Court in 2009 and transferred to this Court later that year. The trustees contended that the transfer of the property was void against them. This contention was founded on the provisions of s 121 of the Act. THE LEGISLATION 23 Prior to 16 December 1996 s 121(1) of the Act provided: "(1) Subject to this section, a disposition of property, whether made before or after the commencement of this Act, with intent to defraud creditors, not being a disposition for valuable consideration in favour of a person who acted in good faith, is, if the person making the disposition subsequently becomes a bankrupt, void as against the trustee in the bankruptcy." 24 By operation of the Bankruptcy Legislation Amendment Act 1996 (Cth) ("the Amending Act") this version of s 121(1) was repealed and a new section was substituted. The substituted section commenced on 16 December 1996: see s 2(2) and s 3 of item 208 of sch 1. 25 Schedule 1 also contained a transitional provision which provided that the new s 121 applied to bankruptcies for which the date of the bankruptcy was on or after 16 December 1996: see sch 1, item 457. 26 The new section was in force on 19 November 2003 when the second sequestration order was made against Mr Camm's estate. Insofar as it is relevant it provided: "121 Transfers to defeat creditors Transfers that are void (1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if: (a) the property would probably have become part of the transferor's estate or would probably have been available to creditors if the property had not been transferred; and (b) the transferor's main purpose in making the transfer was: (i) to prevent the transferred property from becoming divisible among the transferor's creditors; or (ii) to hinder or delay the process of making property available for division among the transferor's creditors. Showing the transferor's main purpose in making a transfer (2) The transferor's main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent. Other ways of showing the transferor's main purpose in making a transfer (3) Subsection (2) does not limit the ways of establishing the transferor's main purpose in making a transfer. Transfer not void if transferee acted in good faith (4) Despite subsection (1), a transfer of property is not void against the trustee if: (a) the consideration that the transferee gave for the transfer was at least as valuable as the market value of the property; and (b) the transferee did not know that the transferor's main purpose in making the transfer was the purpose described in paragraph (1)(b); and (c) the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent. Refund of consideration (5) 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. …" 27 Section 30 empowers the Court to grant declarations and mandatory orders to facilitate the avoidance of transfers in the circumstances prescribed by s 121. 28 At an earlier hearing the parties submitted, and I accepted that, by operation of the transitional provisions in items 208 and 457 of sch 1 of the Amending Act the position is that s 121, in its original form, applied to Mr Camm's first bankruptcy and s 121, in its amended form, applied to his second bankruptcy: see Camm v Linke Nominees Pty Ltd (2010) 190 FCR 193 at 197. THE TRUSTEES' CONTENTIONS 29 The trustees alleged that, at the time at which the property was transferred, Mr Camm was or was about to become insolvent. He had transferred the property to Linke Nominees in order to prevent the property from becoming divisible amongst his creditors. Had he not done so the property would probably have been available to them. Alternatively, they contended, the transfer had been made with intent to defraud creditors and was not a disposition for valuable consideration in favour of a person who acted in good faith. The transfer had been effected pursuant to the contract of sale and, what was described in the statement of claim, as a "side agreement". 30 Despite their earlier submissions, the trustees claimed to be entitled to relief under the terms of s 121 of the Act which was in force at the time of Mr Camm's first bankruptcy in 1995. This change of position may be explained by my earlier decision that Mr Camm had not transferred the property to Linke Nominees. By the time the settlement and transfer had occurred Mr Camm had become bankrupt and the property was vested in his first trustee, Mr Schmierer. Mr Camm was not, at the time of the transfer, "a person who later [became] a bankrupt": he was already bankrupt: see Camm v Linke Nominees Pty Ltd (2010) 190 FCR 193 at 201-3. 31 For reasons which I will explain nothing turns on this change of position because the evidence led by the trustees would not entitle them to relief under either version of the section. THE EVIDENCE 32 The burden of proving that, on the balance of probabilities, a factual basis existed for invoking s 121 of the Act fell on the trustees. 33 In pleading the existence of a side agreement the trustees relied on what Mr Camm had said in his 2004 affidavit. In paragraph 7 of their statement of claim they averred that: "At and about the time of entry into the contract of sale, Linke granted Camm the option to reacquire the property at the expiration of the first bankruptcy at a price equal to 400/550ths of its then market value ("the side agreement"). PARTICULARS The side agreement was wholly oral. It was contained in conversations between Camm and Linke's director. The conversations occurred at various times in October and November 1995 and were to the effect alleged and as follows: Linke would warehouse the property for Camm during the first bankruptcy. Linke would allow Camm to reside on the property rent free and indefinitely. Linke would pay only $400,000, an amount that the then mortgagee indicated it was prepared to accept in order to discharge its mortgage over the property, become the registered proprietor of the property and later the property would be transferred back to Camm or otherwise dealt with in such a manner as to benefit Camm's mother or the Stirling Family Trust. Camm and Linke considered the market value of the property in October/November 1995 to be $550,000, as against the contract price of $400,000, so Camm would have to pay Linke 400/550ths of the then market value of the property if Camm exercised his option to repurchase the property (whether by himself or through a third party)." 34 The trustees alleged that the existence of the side agreement and its terms were not disclosed to the Bank, Mr Schmierer or Mr Camm's creditors in his first bankruptcy. 35 One of the consequences which, it was alleged, flowed from the partial implementation of the side agreement was that the property was sold for a price well below its true market value. That value was said to have been $550,000. This figure is the one identified by Mr Camm in paragraph 11 of his 2004 affidavit in which he said that a Mr and Mrs Hook had made a verbal offer to him to purchase the property at that price prior to him entering into the contract for sale on 26 October 1995. 36 Another pleaded consequence was that Mr Camm was able to occupy the property rent free for some 12 years. 37 Linke Nominees denied the existence of any side agreement. If no such agreement existed an essential foundation for the trustees' claim has not been made good. It will, therefore, be convenient to turn immediately to this critical issue. 38 The existence of a side agreement of the kind to which Mr Camm deposed in his 2004 affidavit (or elements thereof) was suggested, directly and indirectly, by evidence which Mr Linke gave to the Federal Magistrates Court in 2007, in the course of an examination conducted under s 81 of the Act, and in some documentary and oral evidence given at trial. 39 Both Mr Linke and Mr Camm maintained at trial that they had met for the first time on 27 July 1995. On that day Mr Camm had arrived, unannounced, at Mr Linke's property at Tamarama in Sydney. Mr Linke had observed Mr Camm in the grounds of his property and asked who he was and what he wanted. Mr Camm had identified himself and said that he had come to talk about the Noosaville property that he wished to sell. Mr Linke was otherwise engaged and said that he wasn't ready to discuss the issue and asked Mr Camm to leave. Although Mr Linke had been taken aback by Mr Camm's unannounced attendance, he was aware that a Noosaville property, adjacent to the local airport, might have been available for purchase. He had been so advised by a friend, Mr Jeff Straney, who had been living on the property under some arrangement with Mr Camm. Mr Straney had earlier negotiated, on Mr Linke's behalf, for the sale of a hangar at the nearby Noosa airport from Mr Camm to Mr Linke. 40 The trustees contended that Mr Camm and Mr Linke had enjoyed a longer association than that they were prepared to admit. They directed attention to a number of statements, made by Mr Linke, to third parties in the course of negotiations for the sale of the property. These negotiations had commenced on 31 July 1995. Mr Linke had sought finance from the Westpac Bank. According to a note, taken by his personal banker, he had advised that he wished to purchase the property "from a friend of his." Mr Linke advised his solicitor, according to another contemporaneous note, that Mr Camm was a business associate/friend who he [Mr Linke] had known for a number of years. 41 Under cross-examination at his s 81 examination Mr Linke was asked whether he had rung a Commonwealth Bank manager and said that he was "an old football mate" of Mr Camm's. Mr Linke's answer was that he couldn't recollect it "but it may not have been out of the question." When taken to this exchange at trial Mr Linke's evidence was that he had "made a very bad admission" and that he should have responded by saying that he had never said such a thing to the Bank manager because the fact was that he had never played football with Mr Camm. 42 The trustees also sought to place reliance on a facsimile memorandum from Mr Linke to Mr Camm on 1 December 1997 in which Mr Linke said that: "In 1995 when you came to see me in Sydney (after you had sold your hangar to Jeff Straney), you were broke and facing bankruptcy. The CBA were on the verge of throwing you out of 123 Lake Weyba Drive and you were to be sold up. You had people suing you from all over the world. I forwarded you money for various schemes, all of which failed, and you've never repaid." The Sydney visit was the one which occurred on 27 July 1995. The only payments made by Mr Linke or his company to Mr Camm, about which evidence was given at trial, post-dated 27 July 1995. Some of them are referred to in paragraph 14 of Mr Camm's 2004 affidavit. The fact that these payments were made, after negotiations for the sale of the property had commenced in early August, is not supportive of the existence of any earlier associations between Messrs Camm and Linke. 43 Mr Linke's evidence during his s 81 examination was, at many points, flippant, non-responsive and evasive. His evidence at trial suffered from the same vices. He was inclined to give answers which, he thought, served his interests or enabled him to avoid dealing with difficult questions. I have no reason to doubt that the file notes taken by the bankers and the solicitor faithfully recorded the substance of what Mr Linke told them. I am not, however, persuaded that his references to Mr Camm as an old friend can be seen as any more than throw away lines in the course of explaining, less than truthfully, the circumstances in which he was proposing to purchase the property. 44 At one point during his examination Mr Linke denied outright the existence of a side agreement. Elsewhere, however, he said that there was an agreement pursuant to which Mr Camm could remain on the property for a short time after settlement of the sale and that there was a later agreement that Mr Camm could remain for a period of 12 months. These two positions were not necessarily inconsistent. 45 Mr Linke asserted that the agreement was "done on a handshake" in 1995 and allowed Mr Camm to reside in the property rent free until Mr Linke wished to take it over. He claimed Mr Camm agreed to vacate the property on Mr Linke's request. At trial, however, Mr Linke gave evidence that the agreement permitted Mr Camm to reside at the property for a period of 12 months and any occupancy subsequent to that was "by default." 46 The trustees contended that Mr Linke had failed to make any "serious attempt" to evict Mr Camm and take possession of the property prior to the commencement of the Small Claims Tribunal proceeding in 2004. 47 If, by "serious", the trustees meant "successful" their contention must be correct. Mr Linke did, however, make many attempts, both orally and in writing, between 1997 and 2000, to prevail on Mr Camm to vacate the property. Many examples could be cited. 48 Towards the middle of 1997 Mr Linke attended the property to undertake some surveying work. Mr Linke wished to undertake repairs and improvements. He told Mr Camm that he wished him to vacate the property. Mr Camm had agreed orally to leave within weeks and no later than the end of June. He did not do so. 49 Another example is to be found in a facsimile memorandum from Mr Linke to Mr Camm on 1 December 1997. In that document Mr Linke objected to Mr Camm "pretending" that he still owned the property. He continued: "Just in case you cannot face up to or see the reality of the situation. In 1995 when you came to see me in Sydney (after you had sold your hangar to Jeff Straney), you were broke and facing bankruptcy. The CBA were on the verge of throwing you out of 123 Lake Weyba Drive and you were to be sold up. You had people suing you from all over the world. I forwarded you money for various schemes, all of which failed and you've never repaid. Then after assuring me that you would not be bankrupted, you were. I even had your solicitors seeking funds from me to pay accounts to get the sale finalised. … I'm sure that [your solicitor] can advise you that 123 Lake Weyba Drive was sold with the approval of your trustee after you were bankrupted. Also, that both the CBA and Westpac had independent valuations (no involvement from me) to validate the sale price. …" 50 Mr Linke then noted that Mr Camm had lived rent free on the premises for two years, had agisted other people's horses on it, had rented out accommodation at the premises and had operated businesses from the property. The message concluded with Mr Linke advising Mr Camm that he needed occupancy of the premises and asking Mr Camm to vacate them. 51 Mr Camm obviously wished to remain on the property and responded by sending Mr Linke two facsimile letters in which he made a series of express and implied threats to Mr Linke. He wrote: "Good! I needed to pin-point you. I cannot believe that you are still resorting to these ridiculous denials of the facts and nasty imputations against me. These are of little importance to me. I have tried to appraise you of the actual situation and held off as long as possible. at the same time accumulating all necessary data for the final show-down which I guess starts today. You have been verbally advised of the actions I intend to take. It is characteristic of me never to reveal all my cards. What is to be initiated today is the easiest action with the previous as a secondary or fall-back position. In simple terms it can be shown that you have not only defrauded me but also the CBA. Whilst I would like to keep the Trustee out of this and the ATO you leave me no choice. Your attempts to negate this in your recent communications carry little relevance. You had full knowledge that the property was worth $550,000.00 at the time of purchase. A Contract exists to this effect from "the other buyer" (now deceased). The valuations of $400,000.00 were a result of the "Sheriff's Auction", in the first instance and my enlargement of this theme to Westpac, based on the former. The way was clear for me to sell on the 23rd of November, 1995. If I had done so and not declared this to the Trustee, then I would have been guilty of Fraud but this did not eventuate. It is clear that my instructions were to sell prior to the 29th of November but you elected for whatever reason not to comply. In my case I was overseas at the time of settlement and carried into a fraudulent situation by your actions. You have clearly stated to me that in the case of the CBA; "if they become aware of it" you will merely pay them the difference. Unfortunately the situation has progressed beyond that and it has the potential to become a criminal matter. The CBA could not enter into an arrangement with you as they would be party to your deception. With further ramifications apparent in respect of the ATO/Stamp Duty and the Trustee. You have freely indicated in your communication of: 01 December, 1997 that you advanced funds to me, therein breaching Stamp Duty criteria. Unless these amounts have been declared. The indications I have are that the simplest and most expedient way for the CBA and myself to gain remedy, without undue legal cost, is to advise the QLD. Fraud Squad of your actions. This will no doubt result in your arrest and prosecution. With subsequent legal action from other interested parties, no doubt to follow. I am having todays meeting (CBA) to discuss this in principal, with a tentative meeting scheduled next Friday with Q-POL, allowing you time to consider your situation. Now because of your obdurate attitude, I will implement this after the CBA have clarified their position. It is obvious to me that my pleas to settle this matter have come to naught. I must also advise you that I have had the opportunity to fully profile you and your activities, in some cases via sources sympathetic to me, due to past service. As an example: your CMF service, used purely as an escape from National Service. On a more serious note, it has become obvious that you have a background of employing "Bully Boys" several of your past victims have been contacted and I have affidavits on file with the Noosa Police, to substantiate any action I may take with respect to my own personal safety, in line with this I have made myself aware of the latest laws which have recently come into effect, dealing specifically with "home invasion". As for my leaving the property, I retain occupation under the terms of an "implied lease" and will continue to remain here until certain matters are resolved. Should you elect or are able to initiate action to commence eviction, I intend to fight this in the appropriate Court. I am aware of the time period involved and feel that other factors will overtake any such action. Much research has been done. I have a copy of the Contract for work done in Hong Kong, detailing with amounts and payment (via a disgruntled employee). The specific deployment of this will be vested in the ATO investigation no doubt to follow. Further to this you will find that the work done on lodgement with the ASC of shares was incomplete for Linke Nominees P/L ACN#: 005860944. I took the opportunity of having someone purchase from the Byrnes and hold them. A shareholders meeting is due to be called. Whilst this can possibly be subject to review, I feel it is encumbent on me to advise Westpac of this and other relevant details-today! … It appears to me that you have tried to disguise your intentions from the outset of this matter and used deceit to promote a situation to take advantage of someone whom you considered was in a defenceless situation. That was the first "fundamental mistake". The retribution for the second is yet to manifest. I am still willing at this late stage to try to rectify this unfortunate situation. There is a way to comply and satisfy all legal requirements but due to your past behaviour I will not contemplate this until at least part of the invoice for works done, submitted yesterday is satisfied. That is goods and services purchased and installed on the property. This would indicate to me a return to the previous agreement, which was legal. You may indicate your willingness to sort this out by effecting a transfer by 1300Hrs Qld. time. 52 As Mr Camm admitted at trial under cross-examination this letter contained a number of falsehoods. Mr Linke had never said to him that, if the Bank became aware of the so-called "fraud", he would merely pay the Bank the difference between the purchase price and $550,000. No meetings between Mr Camm and the Bank or the Queensland Police to discuss Mr Linke's alleged fraudulent conduct had been arranged or ever occurred. No complaint was ever made by Mr Camm to the Queensland Police Fraud Squad. Mr Camm was plainly prepared to resort to false allegations and threats in an effort to achieve his ends. He was, at that time, "determined" to stay on the property. He described the correspondence as a "tactical letter". 53 Four days later Mr Camm again wrote to Mr Linke. He sought to persuade Mr Linke that he was in a strong financial position. He said that: "There seems to be a re-occurring theme that I am 'on the ropes'. I am happy to forward you copies of a wire transfer advices (edited) and show you the originals on a one to one basis. I have been on retainer to an American Corporation based in Virginia since 1990. An amount of $3,000.00USD comes in every 14 days." 54 Under cross-examination Mr Camm said that this statement was "deliberately" inaccurate. Later in the letter Mr Camm said that: "It is true that I was short of cash at the crucial time but that was mainly due to large amounts of legal fees and repayments to the CBA, to hang onto the house … So I was comfortable doing a deal with you. There was a situation where I could have sold for $550,000.00 and done a deal with the CBA. It is likely that they may have settled for $400,000.00. On paper they wanted $519,000.00. The offer was: $400,000.00 for the house and $150,000.00 Contract 'for sale of an aircraft'. What I could have done was use your efforts and money and sold on the 23rd of November, 1995. The guy was here with $150,000.00 in cash. Then you really would have reason to be unhappy with me! All this I can prove." 55 Far from being able to prove the assertion, Mr Camm, at trial, admitted that no one was present with $150,000 in cash to pay for an aircraft. 56 In the next paragraph Mr Camm said that, shortly after his bankruptcy, he had: "… tried to suggest that I pay rent or deduct amounts commensurate with the rent. I even offered to buy back the property but no reply for two years! Then you show up unannounced and suggest I take off and you will give me some 'inducement'." Mr Camm said that his reference to an "inducement" referred to a threat, made by Mr Linke, to take legal action to eject him from the property. 57 Mr Camm's assertion that he made an offer to buy back the property after he had become bankrupt does not sit comfortably with the claim, in his 2004 affidavit, that there was already in place an arrangement for repurchasing at the time Mr Camm became bankrupt. 58 Within a few weeks, Mr Camm had had a change of heart. On 21 December 1997 Mr Linke spoke to Mr Camm and again demanded that he leave. Mr Camm said that he would do so by mid-January 1998. Mr Linke asked him to confirm that commitment in writing. Mr Camm did so on the following day. He failed to honour the commitment. 59 On 6 April 2000 Mr Linke commenced a court proceeding (S3085/2000) in the Queensland Supreme Court. An order was sought in that proceeding that Mr Camm give up possession of the property. The proceeding was not prosecuted to judgment because the parties wanted to avoid the expense and inconvenience of legal proceedings. 60 An impasse prevailed until 2004 when Linke Nominees commenced the aborted eviction proceeding in the Small Claims Tribunal. 61 Further attempts to evict Mr Camm from the property were rendered unnecessary by an agreement entered into between the parties in 2007. In the course of Mr Linke's examination in the Federal Magistrates Court an agreement was reached between the trustees and Mr Linke who purported to act on his own behalf and that of Linke Nominees. Under that agreement the parties were jointly to seek an order in the Federal Magistrates Court that Mr Camm deliver up vacant possession of the property. Such an order was subsequently sought and made. 62 The deed of settlement was entered into on 16 May 2007. Among the recitals which it contained was an acknowledgement that Mr Camm had remained in continuous occupation of the property on a rent free basis since 30 November 1995. There was a further recital that recorded the trustees' view "that the property was sold to [Linke Nominees] at a substantial undervalue." This allegation was based on certain valuations obtained by the trustees that placed the value of the property at the time of sale at about $515,000. Another recital also bears mention. It recorded that Mr Linke and Linke Nominees wished to avoid the expense and inconvenience of legal proceedings threatened by the trustees and that "solely for that reason they acknowledge[d] that the company holds an interest in the property on a constructive trust for the bankrupt and, by reason of s 58 of the Bankruptcy Act, that interest vests in the trustee." 63 The deed included a term that the parties would arrange for the property to be valued as at the date of the agreement. Linke Nominees was then required to pay the trustees 50 per cent of the valuation of the property. A part payment of $500,000 was to be paid by bank cheque by 23 May 2007. 64 Neither Mr Linke nor the company honoured the agreement to pay the trustees half of the sum of the agreed valuation. After the date on which the $500,000 instalment was due to be paid had passed the trustees commenced a proceeding to enforce the settlement deed. That proceeding was brought in the Queensland Supreme Court. At first instance Dutney J held that Mr Linke had no authority to bind Linke Nominees when he signed the deed. The deed was, as a result, held only to be enforceable against Mr Linke personally: see McIntosh v Linke Nominees Pty Ltd [2008] QSC 79. On appeal, the Court of Appeal held that no such obligation fell on Mr Linke: see McIntosh v Linke Nominees Pty Ltd [2008] QCA 275. 65 At trial Mr Linke said that he had never intended that either he or the company would comply with the terms contained in the deed. He had found the examination to be taxing and entered into the deed as a means of avoiding further questioning. This is not what he had told the Registrar when the settlement was announced in the Federal Magistrates Court on the day on which it was entered into. He then thanked the Registrar for his help and also thanked counsel and solicitor for the trustees "for helping to resolve this dilemma." He went on: "Obviously it's going to cost some money but that can be reclaimed in time and use of the property." Mr Linke's conduct in relation to the settlement did him no credit. 66 The failure of Mr Linke to pursue the eviction of Mr Camm more vigorously between 1997 and 2004 is explicable for a number of reasons. During this period Mr Linke had serious health problems which required his hospitalisation. He had domestic issues relating to his estranged wife and one of his sons. He was otherwise busily engaged in his surveying business which required him to be away from Australia for long periods. Furthermore, he had no urgent need to take possession of the property. 67 Although the claims made by Mr Camm in his 2004 affidavit were not challenged at that time, he was questioned about its contents in the Federal Magistrates Court. On 14 May 2007 Mr Camm was examined in that Court pursuant to s 81 of the Act. He was questioned by the trustees' solicitor and affirmed that the contents of the 2004 affidavit were "true and correct". His attention was drawn to paragraphs 11 to 16 of the affidavit. 68 A series of exchanges then occurred in which Mr Camm sought to retreat from many of the material allegations made in his affidavit and the trustees' solicitor strove to have him confirm their accuracy: "It's talking about an arrangement, you had an arrangement with Mr Linke on the purchase of this property, didn't you? --- I assisted him, you know. It was a good deal for him. The arrangement --- the only arrangement that I had was that --- first of all, do you want me to read this or answer this question? Answer the question first. It is going to make it a little easier for somebody to follow what you're saying? --- Right. Well, what do you want me to do? Firstly I want you to tell me yes or no, did you enter into any arrangement in regard to the property with Mr Linke? --- Yes. It was that, you know, if he bought it then I could continue living there for a reasonable amount of time. Did you have an option to purchase the property back from him? --- Not in writing. That was a possibility but highly unlikely. That's highly unlikely? I want you to think about your answers, Mr Camm? --- Did I have it in --- Hang on. You're under oath? --- Sure. You're under oath? --- Mm. If you want to, I will get you to reread your affidavit because what you just told me was inconsistent with what you swore as being true and correct in every particular. Now if you need a set of reading glasses to read it, I can lend you some. I want you to be dead on accurate with your evidence. You wouldn't lie to this Court, would you Mr Camm? --- No, no, no I'm just slightly confused. Of course I don't want you to be confused. You have deposed in this affidavit that there was an arrangement and I want to ask you about the arrangement with Mr Linke. Okay? --- Mm You appeared a little confused at the start. I won't say that you're evasive because you've been good enough to turn up to Court today and I want you to explain to this honourable Court what the arrangement was. Now if you can precis it before you read it out, do so. Can you precis it? --- Yes, I think I can. I've got this in front of me. This would have been prepared originally by my solicitors Jones King, which I'm sure you're familiar with. You've got all those documents. This is a generally – or precis, yes, I think I know what you – a way to precis this. Yes. It was, as I said earlier, they had a sheriff's auction and it didn't come to 400,000. Nobody would buy it. So we had a general understanding. Who's we? --- Mr Linke and I, that okay you know, this house is available. At that stage we were sort of reasonable friends and I was interested in the airport out there too and the general understanding was that if I – if he bought the house, I could keep on living there and you know, maybe one day if I ever made some more money again. I could maybe buy it back but that's about – that's what I understand to be the case there. You said the word "maybe" a few times as if it's not definitive. Is it not definitive that you had a right to occupy or a right to repurchase, Mr Camm? --- Well there's nothing in writing. It's only, you know, things that I'm saying. I'm sure Mr Linke would disagree with it. It's only things that you're saying? --- Yes. There was no – nothing in writing as far as from Mr Linke. What are you trying to say to me, that it didn't really exist? --- Well, it existed for me but I don't think it had existed for Mr Linke. Then why did you sign the affidavit in the way that you did? --- Well, that's what I believe but I just said I don't think Mr Linke will go along with it. Forget about Mr Linke. I want to know what you did? --- Well there it is. I considered it was worth more --- and in fact it was in so much as what I paid for the place and building it but however, at the time it was --- and you could look it up in the Supreme Court, it didn't reach anywhere near $400,000. Nobody bid on the property because the Commonwealth Bank, as I recollect, wanted 550 from me. I think it ultimately ended up being sold for 386 to Mr Linke. Just be very careful what you're saying, Mr Camm. I will give you a caution? --- Mm. I have an enormous amount of documents, I know them all? --- Sure. I'm not worried about that. I want you to answer very carefully; I don't want you to guess. I don't want you to guess, I don't want you to be evasive. I can make this short and sweet. I want you to get right to the point each time if you possibly can, without straying away. You had – you have deposed in paragraph 11 of your affidavit; I want you to look at that? --- Mm." (Emphasis added). 69 As can be seen, especially in the highlighted passages, Mr Camm gave evidence which plainly contradicted many of the serious allegations which he made in his 2004 affidavit. The trustees' solicitor was sufficiently concerned about Mr Camm's retreat on material matters that he felt the need to remind Mr Camm that he was under oath. 70 Mr Camm was questioned further by the trustees' solicitor. These later exchanges occurred: "Please look at paragraph 11. I just need some help here, Mr Camm. I can't understand this. I need you to explain, have a look at paragraph 11 of your affidavit. In the middle of the paragraph: Linke was well aware at the time of sale that I was on the brink of bankruptcy and that I wished to preserve moneys, ie, 114,000. What do you mean, "I wished to preserve moneys"? What does that mean? --- I don't exactly know. "I wished to preserve moneys". That's a very, you know, intensive period. I – what I wished and I guess is of little consequence. You know, to be perfectly honest with this. I've handed over a whole lot of documents to Mr Frangos [Mr Camm's then solicitor] and he's made this. I've skimmed through it. It looked pretty right to me. So I – you know, I signed it. Is it Mr Frangos's fault? --- No. It's nobody's fault. But --- Well, you just mentioned Mr Frangos? --- Mm. In a tone that suggested it was somehow his fault that I've asked this question. Now you haven't answered the question, you say that you don't know where you came up with the figure of $114,000 for your mum? --- Well, what happened with this document was that it was prepared by Mr Frangos to – specifically to offset the tenancy agreement issue in the minor Court. I skimmed through it, it was bound and looked pretty right to me. Yes? --- I signed it. I didn't see any lies. Whether it's an accurate document under this sort of scrutiny, I don't know. It's – this document was produced simply to frustrate Mr Linke's minor debt claim. Now you're asking me to go back over things that happened, I don't know how many years ago, 10 or 12 years ago, you know?" (Emphasis added). 71 When asked about the arrangement, to which he referred in paragraph 11 of the affidavit, Mr Camm said: "… you understand that no actual arrangement exists. There was never an actual arrangement." He continued: "There was never an actual arrangement. This document [the affidavit] was something that of course was entered into evidence, it's reasonable, but this was to defeat a tenancy objection and furthermore not to interfere with the Supreme Court issue if it ever came to hand." 72 Again, these passages hardly reveal a robust defence by Mr Camm of the truth of the statements made in his 2004 affidavit. 73 Mr Camm was further examined under s 81 of the Act on 16 October 2007. His attention was again directed to paragraphs 11, 12 and 14 of his 2004 affidavit. He was questioned by the trustees' solicitor who invited him to explain "a little bit more about this arrangement", namely, that pursuant to which the property was sold to Linke Nominees. Mr Camm was then asked a series of leading questions which elicited answers from him which were materially inconsistent with those which he had given in the course of his earlier examination. The following exchanges occurred: "So you can just explain to the court, a little bit more about this arrangement? As I understand it, you agreed to sell the property to Linke. He was getting it at a price of $400,000, even though there was a lot more owing on it? --- Yes. It was valued at substantially more, perhaps $550,000, maybe even more? --- Yes, I guess. And in return, Linke would pay out moneys for you after you were bankrupt, on your behalf, so that you had vehicles, and some other payments ---? --- Yes. --- to your girlfriend, to your mother, and to Strainey, perhaps? --- Yes. And this was at the expense of other creditors, even though they were – you were dudding your creditors, you were dudding the trustee? --- Well, regrettably that's correct, yes. Okay. And was Linke in full knowledge that that was going to affect your creditors? In other words, by withholding that money, and not disclosing it to the trustee. Was he aware of that? -- Yes. How do you know that? --- How do I know? Did you discuss that with him? --- Absolutely, yes. So this wish list of payments to be made, Mr Linke did that as part of the deal? --- Yes. The – possibly why I was able to push him along to pay a bit more, was that – don't forget that James King negotiated the Commonwealth Bank down 382 instead of 400. So he was in front a bit there. We will just get to that. Well, actually, while we are on it, let's talk about the negotiations between yourself and Linke and the bank. Now, you said that the negotiations between yourself and Linke occurred, what, in the period around September 1995? --- Well, I believe that to be correct, yes. … This side deal – I will go on to the side deal a little bit – so it's a $400,000 property sale, and you say that it got negotiated down to 382 or thereabouts with the bank? --- Yes. The property was worth at least 550? --- Yes. And so the deal was to conceal $150,000 from your creditors, including the Commonwealth Bank, to hide the assets from your first trustees, and that would give you a flying start when you came out of bankruptcy? --- Correct. So at any stage you could have repurchased the property, if you had the money, and if you weren't in bankruptcy? --- Yes, that was my understanding. And Linke was – did Linke have a formula for – was he going to do it just for love, at 400,000, or did he want a bit of money on top? Interest? Some consideration? --- Well, I always understood the formula to be 400 – you know, 150 over 400. That was what I felt that I had, and there was also, though, another thing of, "Okay. Well, you can buy it back at a" – and his words were "fair and equitable price," which somewhat annoyed me a bit later on when the McMahon offer came in, I think, for six or six-fifty which was a little bit – and I said, "Well, I would like to buy it back now or exercise my right," and, of course, he wouldn't go on at that. So you wanted to buy it back. How were you going to buy it back if you were a bankrupt? --- Well, I was looking at doing what I call a contemporaneous settlement. So when you came out, you were going to be able to settle on that day? --- Mm." 74 By resort to these leading questions the trustees' solicitor succeeded in having Mr Camm affirm the substance of the critical passages in his 2004 affidavit. The solicitor thus achieved what he had failed to accomplish by adhering to the rules of evidence when he questioned Mr Camm in May 2007. The mutual agreement or arrangement which had been said, in May 2007, not to exist was resurrected. One of its terms, an option given to Mr Camm to repurchase, which, in May, did not exist, was said to have formed part of the agreement. 75 At trial Mr Camm was also examined about the accuracy of his assertions in the 2004 affidavit. His response was, at best for him, equivocal. At times he appeared to have difficulty understanding the content of his affidavit. 76 His evidence was that, in addition to the $400,000 payment for the purchase of the property, he was also entitled to an amount of $150,000 as separate consideration. Mr Camm admitted that there was never any discussion about the method or manner of this payment. He also claimed that, under the agreement, he, or a nominated entity, was entitled to repurchase the property at a commercially realistic price. He did not assert an entitlement to repurchase for a sum, fixed by the formula, as deposed to in his affidavit. 77 On 12 January 1998 Mr Camm instructed his solicitors to prepare an option to purchase the property for $400,000. Such an option would hardly have been necessary if there had, in fact, been an agreement of the kind to which Mr Camm deposed in paragraph 12 of his 2004 affidavit. 78 In his affidavit, Mr Camm had denied discussing any terms of any licence to occupy the property. Mr Camm denied at trial that he was, at any time, a licensee of the property but alleged that a licence was given in favour of the Stirling Family Trust. This trust was, however, not established until 9 May 1996, after Linke Nominees had purchased the property. 79 Under cross-examination Mr Camm was confronted with a facsimile letter dated 17 October 1995 in which he had advised the Bank and his solicitors that the agreement which he had entered into with Mr Linke was an "arms-length" agreement which offered him "no advantage … other than perhaps securing a higher offer than could be expected from the market, in order to reduce my future obligation to the Bank" and that Mr Linke wished to take up residence on the property. 80 In the same facsimile letter Mr Camm advised the Bank that the agreed purchase price was $400,000. Mr Camm sought, unconvincingly, to maintain that there was nothing in this facsimile letter which was in conflict with his 2004 affidavit and, in particular, paragraph 12 of that affidavit. 81 Mr Camm admitted that he had not disclosed the terms of the "arrangement", referred to in that paragraph, to his first trustee in bankruptcy. 82 Mr Linke agreed that he had made a number of the payments on behalf of Mr Camm which Mr Camm had identified in paragraph 14 of his 2004 affidavit. He said that, from August 1995, Mr Camm had regularly asked him for money. He had refused many of these requests but agreed to others. He had, for example, agreed to pay Mr Camm's legal expenses in relation to the conveyancing of the property. Had he not done so the solicitors would not have been paid and Mr Linke wanted to ensure that the transfer proceeded smoothly. Mr Linke had also paid a Hong Kong hotel bill which had been incurred by Mr Camm in November 1995. Had the bill not been paid the hotel would have prevented Mr Camm leaving the city. Mr Linke wished to have Mr Camm back in Australia to give instructions to his legal advisers and execute documents relating to the sale of the property. I do not consider that Mr Linke's willingness to make some payments on behalf of Mr Camm is in any way suggestive of an agreement or arrangement entered into between them for the purpose of preventing ownership of the property vesting in either Mr Camm's first or second trustees in bankruptcy. Mr Camm made repeated attempts to importune Mr Linke and was partially successful because, at times, Mr Linke perceived it to be in his interests to relieve Mr Camm of some of his financial obligations. 83 I closely observed Mr Camm as he gave his evidence at trial. He was a very poor historian. When confronted with contradictory propositions he prevaricated. He often responded with vague and ambiguous statements when greater precision might reasonably have been expected. At times he was disarmingly frank. At others he was disingenuous. He sought to rationalise his conduct even when he accepted that he had told lies. 84 I reject critical elements of Mr Camm's testimony. In particular, I reject his evidence that he entered into an agreement or arrangement with Mr Linke of the kind to which he deposed in his 2004 affidavit. 85 The main purpose of Mr Camm's dealings with Mr Linke was to procure a sale of the property for an amount that the Bank would accept as discharging most of Mr Camm's liability to it under the mortgage. Mr Camm wished to be relieved of the pressure which was being imposed on him by the Bank. When Mr Linke showed some interest in purchasing the property Mr Camm saw his opportunity significantly to reduce the amount which he owed. To this end he entered into what he truthfully advised the Bank was an "arms-length" agreement with Mr Linke. He also probably harboured some hope, based on discussions with Mr Linke, that he might be able to remain in residence on the property until Mr Linke was ready to move in. 86 The evidence does not satisfy me that Mr Camm acted with intent to defraud creditors. Furthermore, the disposition of the property did not occur until after Mr Camm had become bankrupt and the disposition was effected by his trustee in bankruptcy. As a result the trustee's claims, based on the former version of s 121, of the Act cannot succeed. 87 Mr Camm did not act for either of the malign purposes identified in s 121(1)(b) as they appeared in the 1996 amendment to the Act. Moreover, Mr Camm was not, at the time of the transfer, "a person who later [became] a bankrupt." 88 For these reasons the trustees' claims fail under both versions of s 121. UNDERVALUATION 89 Considerable time was spent during the trial in dealing with evidence and submissions relating to the valuation of the property. Although it is not strictly necessary that I do so, having regard to my findings relating to the circumstances in which the transfer occurred, it is appropriate that I say something shortly about the valuation issue. 90 An element of the purported agreement which I have found was not entered into was an agreed undervaluation of the property. I am not persuaded that the property was undervalued but, if it was, this was not the result of any agreement by Messrs Camm and Linke. 91 The Bank was consulted about the proposed sale by Mr Camm to Linke Nominees. As already noted (at [7]), in September 1995, it commissioned a valuation of the property on both an orderly selling and a forced cash realisation basis. That valuation was undertaken by Mr John O'Hagan of Rafter and O'Hagan Professional Services. He valued the property at $360,000 on an orderly selling basis and $320,000 on a forced cash realisation basis. The Bank acted on this valuation in accepting the proposed sale for $400,000 on the condition that the sale price (less expenses associated with the sale) be credited to Mr Camm's loan account. 92 Mr O'Hagan gave evidence at trial in which he confirmed the opinion expressed in his valuation report on the property. He was retained by the Bank to express an opinion as to the property's market value in September 1995. He was aware that the Bank wanted the report for the purposes of a sale by a mortgagee in possession. He inspected the property on 7 September 1995 and advised the Bank of his valuation on 15 September 1995. He said that he would have arrived at the same valuations at any time between 26 October 1995 and 22 February 1996. Mr O'Hagan conducted an on-ground inspection of the property. He used a tape measure so as to enable him to record the dimensions of the improvements on the property. He was unable to identify any directly comparable sales. As a result his valuation was based on both a summation approach of land value plus the "added value" of the existing improvements together with the "direct comparison" approach which involved a consideration of the sales evidence in the immediate locality. 93 Mr O'Hagan had been a valuer for about seven years at the time he prepared his report for the Bank. It was not prepared in a litigious context. He re-affirmed his views as an expert witness in the present proceeding. He defended his views and was not shaken in cross-examination. I regard him as a reliable witness. 94 Two other experts were called, one on either side. Both laboured under the disadvantage of expressing opinions based on assessments made by them in 2012 of the value of the property in 1995-6. They had limited access to contemporaneous documents. Despite this they did their best to assist the Court in difficult circumstances. 95 Mr Ian Brosnan gave evidence for Linke Nominees. He accepted that there were no directly comparable sales at the time to assist his assessment of market value. He made an assessment on the basis of a direct market comparison opining that: "Improved town and acreage property has sold from $325,000 to $480,000. Most of the dwellings are superior in size and presentation. In my opinion, the market value for the subject property as at late 1995 to early 1996 would be $380,000. This value may have a variation of 5% tolerance above or below this assessment." 96 He valued the land at $240,000 and improvements at $140,000. 97 Mr Denis Cupitt gave evidence for the trustees. Unlike the other valuers Mr Cupitt only conducted a kerbside inspection. Mr Cupitt placed a much higher valuation on the property. He assigned a value of $560,000 applying what he described as "the hypothetical development model". In fixing on this figure he assumed a potential for sub-division. This opinion was based, to a substantial degree, on his view that sub-division was an option and/or was "imminent". He expressed this view on the basis that "the town plan contained provisions that would have enabled the owners to subdivide the subject property." He made no checks to see whether his understanding was supported by contemporaneous documents. Had he done so he would have become aware that a sub-division would have required re-zoning and that the local Council was ill disposed, at the time, to such developments. The relevant plan imposed a number of significant constraints on re-zoning. They included the conduct of a "flood study". This was necessary because the property fell away at the rear where it regularly became water logged at times of heavy rainfall. Under cross-examination Mr Cupitt was unable to elaborate on the basis of his assumption that the land was ripe for sub-division. He attributed this inability to the Council's unwillingness to provide historical information to him. He had not acknowledged his approach to the Council or the Council's response in his report or in his evidence in chief. One would have expected him, as an expert witness, to have done so. 98 Alternatively, he suggested that its market value was $500,000 on a "Direct Comparison of sales approach incorporating also the use of the Summation approach". His estimate was based on the assumption that there would be no immediate potential for sub-division if an application were declined by the local Council. He further assumed that "there would be a number of parties who would use the property as a residential property or who would be willing to hold onto the property pending Council changing its town plan or who would be willing to fight Council in Court." 99 Valuation of real property for the purpose of s 121 of the Act requires an estimate of market value at the time of transfer: see Vale v Sutherland (2009) 237 CLR 638 at 646. 100 That estimate is to be based on the highest and best use to which the property might be put: see Spencer v The Commonwealth (1907) 5 CLR 418 at 441. That may be a use different from that to which the land is being put at the time of the valuation: see Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 29 WAR 273 at 307-8. It will, therefore, be appropriate, in some cases, for the valuer to take into account any realistic prospects of sub-division which might enhance the value of a property. 101 Most commonly, the determination of the market value of land is strongly influenced by directly comparable sales evidence: see River Bank Pty Ltd v The Commonwealth (1974) 48 ALJR 483 at 484. There will, however, be cases, such as the present, when such evidence is not available. In these cases the valuer must look to less comparable sales and make appropriate adjustments. 102 The three valuers were familiar with these principles and, generally speaking, sought to apply them in coming to their estimates of the value of the property in 1995-6. The major reason for the disparity between the valuations arrived at by three experts was that Mr Cupitt considered that the property, could, at that time, have been attractive to a developer who could have sub-divided it at a profit either fairly quickly or after awaiting a change of attitude by the local Council. This assumption was not warranted. The evidence strongly suggested that the Council was opposed to residential sub-division in the area and that any applications to re-zone and sub-divide the land would have confronted onerous requirements such as the conduct of studies and the need to put in place flood mitigation infrastructure. 103 Mr O'Hagan had the advantage of making a contemporaneous assessment in the light of his local knowledge and experience. His valuation was undertaken for the Bank, an institution which is and was at the forefront of home lending. I readily infer that it would not have engaged the services of a valuer or acted on such valuer's opinions unless it regarded the valuer as being competent. When he made the original valuation Mr O'Hagan had no knowledge of the arrangements between Mr Camm and Mr Linke or of the subsequent litigation between the trustees and Linke Nominees. His objectivity was not in issue. I consider that his valuation is to be preferred. 104 For the sake of completeness I would add that I place no weight on Mr Camm's evidence relating to the alleged offer, by Mr and Mrs Hook, in August 1995, to purchase the property for $550,000. Even were such evidence to be accepted, the offer could not serve as direct evidence when assessing the value of the land: see Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2004] FCAFC 48 at [128]-[129]. In any event, Mr Camm's evidence in relation to this matter was vague and unpersuasive and I do not accept it. THE ROLE OF THE TRUSTEES 105 Heavy responsibilities fall on trustees of bankrupt estates. Those duties are identified in s 19 of the Act. They include "taking appropriate steps to recover property for the benefit of the estate": see s 19(1)(f); and "administering the estate as efficiently as possible by avoiding unnecessary expense": see s 19(1)(j). A trustee in bankruptcy is also required to comply with the general law relating to trustees to the extent that it has not been modified by the Act: see Adsett v Berlouis (1992) 37 FCR 201 at 209. The dominant duty of a trustee at general law is "recovering, securing, and duly applying the trust fund": see Re Brogden; Billing v Brogden (1888) 38 Ch D 546 at 571. 106 The trustees, who are the moving party in the present proceeding, became aware of the terms of Mr Camm's 2004 affidavit in 2007. In it, Mr Camm had deposed to the existence of an agreement with Mr Linke and Linke Nominees which, had it been entered into, would, prima facie, have suggested the existence of an attempt, fraudulently, to prevent the property forming part of Mr Camm's bankrupt estate. Their enquiries and information which they obtained in the course of the s 81 examination no doubt reinforced their view that Mr Camm and Mr Linke had colluded in an attempt to prevent the property being held or disposed of for the benefit of Mr Camm's creditors. No doubt they were frustrated by Mr Camm's failure, in May 2007, to "swear up" to the truth of the assertions contained in his 2004 affidavit. It was, however, a mistake to seek to bolster their case through leading questions during the October 2007 examination. Their need to resort to such an approach should have raised serious questions about the wisdom of relying on Mr Camm's evidence. 107 Their assessment of Mr Camm's evidence should also have been tempered by an acknowledgment that he had given accounts of his dealings with Mr Linke which were internally inconsistent and that this called into serious question his reliability as a witness. On the other hand, the trustees also had reason to discount Mr Linke's credibility having regard to his conduct in the witness box during his examination. 108 In the event, for the reasons which I have outlined, I do not consider that an agreement or arrangement of the kind to which Mr Camm deposed in his 2004 affidavit was ever made. Relevantly its contents amounted to no more than an attempt by Mr Camm to rationalise and rewrite historical events in an attempt by him to stave off eviction from the property. 109 As a result the trustees' prodigious efforts have come to nought. Their application must be dismissed. COSTS 110 Although Linke Nominees has been successful in resisting the trustees' claims, its conduct, at various points during the litigation, was not, in my view, consistent with the requirements of ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). On a number of occasions I found it necessary to raise my concerns about such matters with the parties and these concerns culminated in the making of orders, under s 37N(3), for the lawyers on both sides to provide their clients with an estimate of the likely amount of costs that would be incurred in the event that the proceeding continued, as it has, to judgment. The costs of various interlocutory applications stand reserved. One of these applications arose out of an arrangement entered into by Linke Nominees with Mr Schmierer without notice to the trustees. I also bear in mind that the trustees were led to prosecute the proceeding by untruthful and misleading evidence which was given by Mr Linke in the course of the s 81 examination and some false assertions made by him during his dealings with third parties during the negotiation of the sale. 111 In an effort to avoid further costs being incurred I consider it desirable to express a provisional view as to an appropriate costs order. Unless either or both parties express a wish to be heard in opposition to the making of such an order, an order reflecting my provisional view will be made. That view is that the trustees should pay 80% of the respondent's costs, of and incidental to the proceeding, including reserved costs. I certify that the preceding one hundred and eleven (111) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey. Associate: Dated: 11 May 2015