New South Wales Supreme Court CITATION : Ivanovski v Keith Stevens McConnell as representative of the estate of Walter Perdacher (deceased) [2009] NSWSC 1036 HEARING DATE(S) : 17, 18, 19 August 2009 JUDGMENT DATE : 30 September 2009 JUDGMENT OF : Hammerschlag J DECISION : Judgment for the plaintiffs against the first defendant in the amount of $3,536,846.04 to be adjusted to bring the amount up to date. Order for the transfer of Lot 153 on Registered Plan 144770 with registered dealing number 709 266 213 in the Queensland Land Registry to be set aside and for the second defendant to sign all such documents as are necessary to effect the transfer of an undivided one half share in Lot 153 on Registered Plan 144770 to the estate of the late Walter Perdacher as tenant in common. Proceedings against the second defendant otherwise dismissed. CATCHWORDS : CONTRACT – loan – debtor defaults in payment of interest – creditors terminate loan agreement – creditors entitled to judgment for amount of interest payments accrued due before termination and damages for loss of bargain – REAL PROPERTY – claim under s 228 of the Property Law Act 1974 (Qld) ("the Act") that alienation of property was made with intent to defraud creditors – second defendant and her deceased husband owned real property as joint tenants – deceased transferred his interest to second defendant – transfer records that consideration was natural love and affection – at the time deceased owed plaintiffs significant sum of money – order sought for retransfer to the deceased estate of his interest – second defendant put that order for retransfer would be of no utility because on retransfer deceased share would pass to her by right of survivorship – second defendant also asserts that interest was conveyed to her for valuable consideration and in good faith under s 228(3) of the Act – held transfer with fraudulent intent established – order is of utility – Court can achieve the effect of avoiding the alienation by appropriate measures in the particular case – held second defendant failed to make out transfer was for valuable consideration and in good faith. Property Law Act 1974 (Qld) LEGISLATION CITED : Uniform Civil Procedure Rules 2005 Trade Practices Act 1974 (Cth) CATEGORY : Principal judgment Sergei Ivanovski v Walter Perdacher [2009] NSWSC 913 McDonald v Dennys Lascelles (1933) 48 CLR 457 Wenham v Ella (1972) 127 CLR 454 Silvera v Savic & Anor (1999) NSWSC 83 Green v Schneller (2002) NSWSC 671 Williams v Lloyd (1934) 50 CLR 341 World Expo Park Pty Ltd v EFG Australia Ltd (1995) 129 ALR 685 D M Cannane & Anor v J Cannane Pty Limited (In Liq) & Anor (1998) 192 CLR 557 CASES CITED : Re Trautwein; Richardson v Trautwein (1944) 14 ABC 61 P T Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 Freeman v Pope (1875) LR5 Ch App 538 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 Cornish v Clark (1872) LR 14 Eq 184 Briginshaw v Briginshaw (1938) 60 CLR 336 Helton v Allen (1940) 63 CLR 691 Rejfek v McElroy (1965) 112 CLR 517 Watson v Foxman (1995) 49 NSWLR 315 TEXTS CITED : P Butt, Land Law, 5th ed (2006) Lawbook Co Sergei Ivanovski - First Plaintiff PARTIES : Galina Ivanovsky - Second Plaintiff Keith Stevens McConnell as representative of the estate of Walter Perdacher (deceased) - First Defendant Marie Perdacher - Second Defendant FILE NUMBER(S) : SC 50091/2006 J. Horowitz (Plaintiffs) COUNSEL : K.S. McConnell - Solicitor (First Defendant) G.M. Egan (Second Defendant) Horowitz & Bilinsky (Plaintiffs) SOLICITORS : McConnell Jaffray (First Defendant) Bolster & Co (Second Defendant) - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST HAMMERSCHLAG J 30 SEPTEMBER 2009 50091/2006 SERGEI IVANOVSKI & ANOR –V- WALTER PERDACHER & ANOR JUDGMENT BACKGROUND The Parties 1 Walter Perdacher ("Walter" or "the deceased") was a coffee grower and exporter who lived in Papua New Guinea ("PNG") for many years. He died there on 8 February 2007 at the age of 64. 2 Walter was born in Austria. He was married to the second defendant, Marie Eustice Perdacher ("Marie") for 38 years. They maintained a home at Mt Hagen, in PNG, near a coffee plantation and processing plant in which Walter had an interest. 3 Marie has Australian resident status. Prior to Walter's death, for many years she resided for about half the year in PNG and for the remainder in suburban Brisbane, Queensland in a house which she and Walter owned, as joint tenants, at 14 Tranquil Street, Sunnybank Hills ("the Property"). The title reference of the Property is Lot 153 on Registered Plan 144770 in the county of Stanley in the parish of Yeerongpilly. 4 The plaintiffs, Sergei Ivanovski ("Sergei") and Galina Ivanovsky ("Galina") are husband and wife. They are originally from Russia. The parties' early dealings 5 The plaintiffs became acquainted with Walter in about 2003 through a mutual Russian friend, Mr Alex Savranski. That year, to enable Walter to buy coffee for later export and sale, Sergei agreed to advance Walter $150,000 for three years bearing interest at 25% per annum. 6 In 2005 Walter and Sergei discussed the possibility that Walter might borrow a far larger amount of money for business purposes. 7 On 8 February 2005 Walter and the plaintiffs entered into a written loan agreement under which the plaintiffs lent Walter $200,000 at an interest rate of $16,666 per month (or 100% per annum). 8 On about 1 July 2005 Walter and the plaintiffs entered into a written loan agreement under which they lent Walter $150,000 at an interest rate of 7% per month (or 84% per annum). The US $1 M Loan Agreement and Walter's default 9 On 18 August 2005 the plaintiffs and Walter entered into a one page written loan agreement ("the Loan Agreement") under which the plaintiffs advanced to Walter US $1 M ("the loan amount") to be repaid in full on 20 August 2006, and which bore interest at the rate of 10% (or US $100,000) per month (or 120% per annum), such interest to be paid between the 20th and 25th day of each month. 10 Part of the loan amount was advanced by electronic transfer to a joint bank account of Walter and Marie on 22 August 2005, and the remainder by set off against other monies owed by Walter to the plaintiffs. 11 In order to advance the loan amount, the plaintiffs borrowed money from a Mr Andrey Bredikhin and Mrs Svetlana Bredikhina of Moscow at an interest rate of 5% per month. 12 Walter defaulted in paying the monthly interest instalments under the Loan Agreement, the first of which fell due on 25 September 2005. 13 On 29 September 2005 in a fax addressed to Walter and Marie, the plaintiffs called for payment of the overdue first interest instalment. It was not paid. There then followed a series of facsimiles (including ones dated 1 October 2005, 4 October 2005, 10 October 2005, 18 October 2005, 21 October 2005, 3 November 2005, 18 November 2005 and 28 November 2005) addressed to Walter and Marie calling for payments under the Loan Agreement. It is not necessary to set out the contents of the correspondence. Some of it is in what might be thought of as strident terms, perhaps reflecting the plaintiffs' concern about Walter's default in paying significant sums of money he owed them. 14 On 8 December 2005 Walter wrote to the plaintiffs as follows: "The interest payment will be 20% Per Annumn (sic) and the first interest payment will be made end (sic) of February 2005." This position was inconsistent with the terms of the Loan Agreement." 15 In addition to the money which Walter borrowed from the plaintiffs, he apparently obtained an advance from a Mr and Mrs Tokmakoff which was repayable on 29 October 2005 and which by 16 December 2005 had not been repaid. The Tokmakoffs, also Russian, had apparently been introduced to Walter by the plaintiffs. 16 On 16 December 2005 Sergei sent an email to Marie in which, amongst others, he said that they (the plaintiffs) were responsible for having introduced the Tokmakoffs to Walter and were going to protect the Tokmakoffs' rights "in the legal and moral way" by, amongst others, taking legal proceedings in an Australian Supreme Court. 17 On 20 December 2005 (that is eight months before the principal amount under the Loan Agreement was repayable) a firm of Sydney solicitors, Aitken McLachlan Thorpe, on behalf of the plaintiffs wrote to Walter asserting breaches of essential terms and repudiation of the Loan Agreement, and terminating it. The letter asserted that the plaintiffs' damages at that point exceeded US $2 M. The letter also claimed amounts due under other loans to Walter. It demanded payment of US $2,234,226.64 on or before 5pm on 27 December 2005. The letter attached a draft Statement of Claim in which the plaintiffs claimed damages from Walter. 18 The solicitors' letter and Statement of Claim were sent by courier to the post office box address of Walter and Marie in Mt Hagen. They were also sent as attachments to an email to Marie's email address under cover of a brief note addressed to her and Walter. 19 On 21 December 2005 the plaintiffs sent an email to Marie's email address asking for outstanding amounts payable under other loans. Walter transfers his share in the property to Marie, and subsequent events 20 On 22 December 2005 Marie as transferor and transferee executed a transfer, in registrable form under the applicable Queensland Torrens Title legislation, of the fee simple in the Property to herself ("the transfer"). Walter executed the transfer as transferor on 28 December 2005. 21 The transfer described the consideration as "natural love and affection". 22 The transfer was lodged by Campbell's Legal Services, whom Marie instructed on the transaction. Marie's signatures were witnessed by Peter Anthony Campbell, solicitor. 23 The transfer was registered on 5 January 2006. It had the effect of alienating Walter's interest in the Property and vesting the fee simple in it (previously held by Walter and Marie as joint tenants) in Marie alone. 24 Walter made payments to the plaintiffs on 24 February 2006 ($99,981 and $31,559), 21 August 2006 ($129,981) and 24 August 2006 ($19,981). 25 On 23 June 2006 there was received into the joint bank account of Walter and Marie with the ANZ Bank Garden City Branch (Brisbane) the sum of $128,118.71. This was the amount of an inheritance received by Marie on the passing of her mother in September 2005. It represented a half share in a house which her mother had owned at Frenchville, Queensland. 26 On 27 June 2006 the sum of $100,028 was paid from that bank account (by transfer) to the Tokmakoffs. THE PROCEEDINGS Course of the proceedings up to trial 27 The proceedings were commenced, initially only against Walter, by Summons and accompanying List Statement sued out of this Court on 12 July 2006. Judgment for damages in the amount of $2,971,768.20 for breach and repudiation of the Loan Agreement was claimed. 28 On 28 August 2006 Walter filed a motion returnable on 15 September 2006, seeking a stay on the grounds that this Court was an inappropriate forum for trial. He swore an affidavit on 29 August 2006 which was filed in Court on 12 September 2006. 29 On 15 September 2006 the stay application was heard and dismissed by Palmer J. Mr G Egan of counsel instructed by Messrs Bolster & Co appeared for Walter. 30 Walter filed a List Response on 9 October 2006 alleging amongst others that the Loan Agreement had been varied. 31 Walter died, as has been mentioned, on 8 February 2007. He apparently left a will appointing Marie executrix. The will was not in evidence. Marie made it clear that she did not intend to participate in the proceedings on behalf of the deceased estate and did not wish to put herself to the expense of obtaining a grant of probate. 32 The plaintiffs' List Statement was amended on 12 February 2007. 33 On 27 July 2007 the plaintiffs filed a motion seeking to join Marie "in her capacity as representative of the estate of the late Walter Perdacher" and as second defendant in her own right. 34 On 14 September 2007 the plaintiffs were given leave to file a Further Amended List Statement and they did so on 21 September 2007, joining Marie in her own right as second defendant to the proceedings. They made claims against her in her own right on the basis that she had personally guaranteed Walter's obligations under the Loan Agreement, and for damages for conduct on her part which they alleged was misleading and deceptive. She was not sued as representative of the estate, because she had not sought a grant of probate. 35 The Further Amended List Statement, for the first time, made a claim against her under s 228 of the Property Law Act 1974 (Qld) ("the Act") that the transfer was effected with intent to defraud the plaintiffs as creditors of Walter ("the fraudulent conveyance claim"), and seeking to avoid it. 36 On 23 November 2007 Marie filed a List Response. In answer to the fraudulent conveyance claim she said amongst others that: "The property located at 14 Tranquil Street, Sunnybank Hills, was transferred from the first and second defendant's (sic) as joint tenants to the first as a result of a private arrangement between them. The transaction had nothing to do with any alleged creditors. So far as the second defendant was aware the first defendant had successfully traded as a coffee grower processor and exporter for in excess of 30 years in Papua New Guinea, and was continuing to successfully trade." 37 On 21 February 2008 Marie swore her principal affidavit in the proceedings. 38 On 11 July 2008 on the plaintiffs' application, McDougall J made an order under rule 7.10(2)(a) of the Uniform Civil Procedure Rules 2005 that the proceedings continue in the absence of a representative of Walter's estate ("the no representative order"). 39 On 12 September 2008 the matter was set down to commence on 9 February 2009 for two days. On 6 February 2009, by consent the hearing date was vacated. On 1 May 2009 the matter was set down for hearing to commence on 17 August 2009 on an estimate of three days. The hearing 40 The hearing commenced on 17 August 2009. 41 Mr J Horowitz of counsel, appeared for the plaintiffs. Mr G Egan of counsel appeared for Marie. The estate of Walter was not represented. 42 Counsel for the plaintiffs opened on the basis that as against the estate the unpaid interest instalments and loss of bargain damages for breach of the Loan Agreement were sought. As against Marie the plaintiffs opened on the basis that the fraudulent conveyance claim, and the claims against Marie as guarantor and for damages for contravention of the Trade Practices Act 1974 (Cth) were being prosecuted. 43 My attention was drawn to the no representative order. 44 On the first day of the hearing there was sought to be filed and read an affidavit of Marie sworn 14 August 2009 in which she gave evidence for the first time of an alleged arrangement with Walter whereby he would transfer to her his interest in the property for $100,000. Reliance on this evidence was opposed on the basis that it was in defective form and late. I rejected it as being bad in form. 45 An affidavit of 18 August 2009 in proper form was sought to be filed and read on the second day of the hearing. I permitted this over the plaintiffs' objection. It is appropriate to set it out in full. "I say on oath: 1. I refer to earlier affidavits filed on my behalf in these proceedings. 2. As to the circumstances surrounding the transfer of Wally's half interest in the property at Sunnybank in Brisbane to me, I say that after the death of my mother in Queensland on 11 September 2005, I resolved to live permanently in Brisbane. I had suffered health problems associated with diabetes and I was fearful of staying in Mt Hagen because of the need for treatment. Also, after my return to Mt Hagen on 16 September after my mother's funeral, our compound was attacked and I had to lock myself in the house. Wally was away in Germany at the time. Also, there was only one other white woman of my age living there and I felt isolated and scared. 3. Upon Wally's return to Mt Hagen on about 19 September 2005, I said to Wally,. "I have had enough. I am going to return to live full-time in Brisbane. I can't deal with this anymore and I want to be closer to the girls" 4. I said "Would you transfer to me your share in the house at Sunnybank. I'll give you $100,000.00 out of the money I get from Mum's estate." He said "That will be OK. I'll pay you back one day" I said "no you won't, it's fine." 5. In July 2006 I received the sum of $128118.71 from my mother's estate. At that time Wally said, "Instead of giving it to me, pay it to the Tokmakoffs." 6. On the 23rd of June 2006 I deposited the sum of $128118.71 into the account held jointly by Wally and myself. Several days later I transferred the sum of $100,028.00 to the Tokmakoffs, using bank details that Wally had given me. Annexed and marked MPA-1 is a copy of the bank statement that shows both the transactions referred to above." 46 The 18 August 2009 affidavit made reference for the first time in the affidavit evidence to a 16 September 2005 attack on the Perdacher's compound in Mt Hagen and to Marie's fear of staying there for that reason. 47 Both Sergei and Galina swore a number of affidavits and they were cross-examined at some length by counsel for Marie. Their credit was attacked. Marie was cross-examined at some length by counsel for the plaintiffs. Her credit was attacked. No other persons gave evidence in the trial. Over 300 pages of documents were tendered. 48 Most of the cross examination was directed to the claims against Marie which were abandoned. A deal of the cross examination of Marie concerned her level of involvement in Walter's business affairs and her dealings with the plaintiffs. The plaintiffs asserted numerous conversations with Marie which were denied. Marie's position was that she did not have any involvement in Walter's business other than to occasionally assist him in transferring money and that she was not involved in any of the business dealings with the plaintiffs. 49 On conclusion of the evidence, counsel for the plaintiffs abandoned the plaintiffs' claims against Marie as guarantor and for damages. As against her, only the fraudulent conveyance claim was maintained. 50 During final submissions I requested the plaintiffs' counsel to address the Court on the identity of the party against whom the money judgment would lie (and on the form of the order sought) given that Walter is deceased (so that judgment cannot effectively be given against him) and there was no named defendant against whom a money judgment could lie. 51 This led to an application being made for the appointment of a representative of the estate for the purpose of the proceedings. The application was opposed by Marie. 52 On 4 September 2009 I ordered that Keith Stevens McConnell be appointed as representative of the estate for the purpose of the proceedings and I made ancillary orders: Sergei Ivanovski v Walter Perdacher [2009] NSWSC 913. 53 I stood the proceedings over to 18 September 2009 to enable Mr McConnell to put submissions to the Court on behalf of the estate as to the future conduct of the proceedings. On that day Mr McConnell appeared and requested further time to consider his position. 54 On 25 September 2009 he notified the Court in writing that he would not take any further part in the proceedings and would submit to the orders of the Court save as to costs. He appeared on that day and confirmed that position. 55 I now turn to the plaintiffs' claims. THE MONEY CLAIM AGAINST WALTER'S DECEASED ESTATE 56 The evidence established the Loan Agreement, Walter's default and the termination of it by the plaintiffs on 20 December 2005. 57 The plaintiffs are accordingly entitled to judgment against the first defendant as representing the estate in debt for the interest payments which had accrued due before the termination, together with interest plus the value of the bargain as at 20 December 2005, that is the position in which they were as compared to the position they would have been in had Walter performed the Loan Agreement less the effect of the payments that Walter made (see McDonald v Dennys Lascelles (1933) 48 CLR 457; Wenham v Ella (1972) 127 CLR 454). 58 This entails converting US dollar amounts into Australian dollars, discounting at an appropriate rate the interest payments and capital repayment to the date the Loan Agreement was terminated (that is 20 August 2006) and applying interest at the Court rate thereafter. 59 The appropriate discount rates, and exchange rates were established by evidence in the form of material produced by the Reserve Bank of Australia and are reflected in a schedule admitted into evidence. In the schedule the repayments are taken into account and the calculation of Court interest to 19 August 2009 are also reflected. The result is that as at 19 August 2009 the plaintiffs are entitled to judgment against the estate of the late Walter Perdacher in the amount of $3,536,846.04. THE FRAUDULENT CONVEYANCE CLAIM 60 Section 228 of the Property Law Act 1974 (Qld) provides: (1) Subject to this section, every alienation of property, made whether before or after the commencement of this Act, with intent to defraud creditors, shall be voidable, at the instance of any person prejudiced by the alienation of property. (2) This section does not affect the law of bankruptcy for the time being in force. (3) This section does not extend to any estate or interest in property conveyed for valuable consideration and in good faith to any person not having, at the time of the conveyance, notice of the intent to defraud creditors. 61 It was put for the plaintiffs that the circumstances leading up to and surrounding the transfer pointed strongly to an intention on Walter's part to defraud his creditors, in particular the plaintiffs, by the alienation. 62 The plaintiffs pointed to the fact that: a the property had been owned by Walter and Marie for many years; b Walter was under financial pressure at the time of the transfer; and c the transfer was, on its face, not for valuable consideration. 63 For Marie a submission in limine was put that the relief sought by the plaintiffs should be refused as being of no utility because: a the property was owned by Walter and Marie as joint tenants and would have passed to Marie on Walter's death by operation of law; b the power of the Court under s 228(1) of the Act to avoid the alienation does not extend to doing anything more than to restoring the status quo ante, meaning that Walter's joint tenancy would be restored; and c Walter having died, avoiding the transfer would be doing no more than causing Marie to become owner of the fee simple by survivorship. 64 On the merits it was put that: a the plaintiffs were alleging fraud and had not discharged the onus of establishing it; b there was a non-fraudulent motivation for the transfer arising out of a desire on the part of Marie not to live in PNG and to separate from Walter; and c the alienated property was acquired by Marie for valuable consideration, in good faith and without notice of Walter's intent to defraud creditors as contemplated by s 228 (3) of the Act. It was put that the consideration was the agreement with Walter recounted in Marie's affidavit of 18 August 2009 referred to above and that her promise to pay was fulfilled by the payment made to the Tokmakoffs. 65 Marie's submission in limine that an order under s 228(1) of the Act would be of no utility because the Property would end up being vested in her solely is unsustainable and may be dealt with shortly. 66 One of the incidents of co-ownership as joint tenants is the right of survivorship by which when one joint tenant dies the whole of the land remains in the hands of the surviving joint tenant. If the joint tenancy is determined, so is the right of survivorship. A joint tenant may bring the joint tenancy to an end by severance during his or her lifetime, which converts the interest held as joint tenant into one held as tenant in common. If there are two joint tenants, each is able to sever the joint tenancy and become a tenant in common of an undivided one half share. Severance is achieved by the joint tenant alienating his or her interest; see P Butt, Land Law, 5th ed (2006) Lawbook Co at Chapter 14. 67 There was no issue that the transfer constituted an alienation. 68 The alienation had the effect of severing the joint tenancy. 69 When an application is made to the Court under s 228(1) of the Act the Court can achieve the effect of avoiding the alienation by such measures as seem appropriate in the particular case: Silvera v Savic & Anor (1999) NSWSC 83 at [72] per Hodgson CJ in Eq. 70 Where the transfer of an interest is voidable the Court can and should make orders which overcome the effect of the transfer in so far as that effect is such as to cause the property to be beyond the reach of the transferor's creditors: Green v Schneller (2002) NSWSC 671 at [101] per Barrett J. As His Honour made clear in that case, it is not necessary that matters be so far reversed and restored to their former position that the joint tenancy is recreated by means of a transfer by Marie to herself and Walter as joint tenants. 71 The severance created by the transfer of Walter's interest to her may be allowed to stand but with an undivided half share in the Property being transferred to Walter's estate as a tenant in common. 72 The submission in limine accordingly fails. 73 Whether the alienation was made with intent to defraud creditors as contemplated by s 228 (1) of the Act is a question of fact and the onus of establishing the fact is on the plaintiffs. 74 The intention to defraud may be established and inferred from the surrounding circumstances. Each case must be considered as a matter of fact on its own facts: Williams v Lloyd (1934) 50 CLR 341; World Expo Park Pty Ltd v EFG Australia Ltd (1995) 129 ALR 685 at 701; D M Cannane & Anor v J Cannane Pty Limited (In Liq) & Anor (1998) 192 CLR 557 at 566. 75 It is not necessary for the plaintiff to prove that Walter actually had in his mind an intention to defraud creditors. If it appears from evidence of all the circumstances that the transfer might be expected to have that effect, and has had that effect, the Court will attribute fraudulent intention to him: Re Trautwein; Richardson v Trautwein (1944) 14 ABC 61; P T Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 523-4; D M Cannane v J Cannane at 566. 76 If the conveyance is voluntary it is easier to infer a dishonest intention than when it is made for consideration: Freeman v Pope (1875) LR5 Ch App 538. 77 In Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 at 170-1, Mason CJ and Brennan, Deane and Gaudron JJ said: "The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary "where so serious a matter as fraud is to be found". Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct. As Dixon J commented in Briginshaw v Briginshaw : "The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved …" 78 Although there is old authority to the effect that the fraudulent intent may emanate from the transferee and not the transferor (see Cornish v Clark (1872) LR 14 Eq 184), the submissions of the parties were directed exclusively to the fraudulent intent or otherwise of Walter. With respect to Marie, their submissions were directed only to whether she established the matters contemplated in s 228(3). 79 The onus of establishing that the property was conveyed for valuable consideration and in good faith without notice of the intent to defraud creditors as contemplated by s 228 (3) is on Marie. 80 For the reasons which follow: a I am satisfied that the alienation of Walter's interest in the property was with intent to defraud creditors; b I am not satisfied that the property was conveyed for valuable consideration, indeed, I am satisfied that it was not; and c I am not satisfied that the Property was conveyed to Marie in good faith or without notice of Walter's intent to defraud his creditors. 81 Walter and Marie had jointly owned the property for over 30 years. 82 On 20 December 2005 Walter was indebted to the plaintiffs for a very significant sum of money and was in default of his obligations to them. On that day he received notice from the plaintiffs' solicitors that legal proceedings were imminent. He was also indebted to the Tokmakoffs. 83 In his affidavit of 29 August 2006 (which was read on the final hearing) Walter explained that tribal fighting had broken out in the highlands of PNG which had the result that he could not arrange for the transportation of bulk quantities of coffee, which he had bought using the plaintiffs' money, to the coffee factory at Mt Hagen. This put him in a position where he could not make the payments for which he was liable. 84 He then almost immediately after receiving a draft Statement of Claim transferred his interest in the Property which he had held for many years to his wife pursuant to a transfer which records that there was no valuable consideration. 85 The transfer had the effect of putting a real asset which might otherwise have been available to his creditors beyond their reach. 86 Absent a different motivation for the transfer it may safely be inferred in the circumstances that Walter's intention was to defraud his creditors. 87 I turn then to the questions whether there was a different motivation for the transfer, namely the asserted arrangement with Walter and whether Marie took the property for valuable consideration and in good faith without notice of the intent to defraud creditors. 88 Marie was well aware, and accepted that she knew, that Walter was having difficulties. 89 She was in PNG from 27 June 2005 to 9 September 2005, from 16 September 2005 to 14 October 2005, from 1 February 2006 to 11 July 2006, and from 18 October 2006 to 29 May 2007. 90 The plaintiffs' facsimile requests for payment were all addressed to both Walter and her. Marie had access to their fax and regularly collected documents from it. The plaintiffs' email communications were addressed to her email and she received the 16 December 2005 email about the Tokmakoffs as well as the solicitor's letter of 20 December 2005 and attached draft Statement of Claim. 91 Moreover she was unhappy about the fact that Walter had been doing business with Russians. She said in her affidavit evidence that she was particularly opposed to Walter having anything to do with the plaintiffs or any other Russians as she was aware that Walter had lost a lot of money in the early 1990s with other Russians who wanted to import helicopters into PNG. She recounted that Walter went into "receivership" over the Russian helicopter deal and she had no idea there were any problems until some time later. Once again Walter was in financial difficulties because of dealings with Russians. 92 By her affidavit of 14 August 2009 Marie for the first time sought to give evidence of an arrangement under which Walter would transfer his interest in the Property and she would pay him $100,000. She gave oral evidence to similar effect. 93 Where a party seeks to rely upon spoken words as a foundation for a cause of action, including a cause of action based on a contract, the conversation must be proved to the reasonable satisfaction of the Court which means that the Court must feel an actual persuasion of its occurrence or its existence. Moreover, in the case of contract, the Court must be persuaded that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: see Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319. 94 Marie was an unsatisfactory witness. 95 I do not accept her evidence of the asserted conversation and arrangement with Walter. 96 Far from being satisfied that the asserted conversation and arrangement with Walter took place, there are a number of features surrounding it which lead me to the conclusion that it is more probable than not that no such conversation or arrangement occurred. 97 Marie instructed a solicitor on the transfer. The occurrence of the asserted conversation is inconsistent with the recording on the transfer that consideration for it was natural love and affection. 98 Furthermore, her solicitor was not called and no explanation given for the omission. It is to be inferred that his evidence would not have assisted Marie. 99 No plausible explanation was given for why the conversation was not referred to in her principal affidavit of 21 February 2008, and referred to for the first time only in her affidavit of 14 August 2009. No rationale for the transfer was given in her principal affidavit. 100 Marie's evidence that part of the motivation for the transfer was her resolution after her mother's death on 11 September 2005 to live permanently in Brisbane, and her asserted fear of living in PNG after the attack on their compound on 16 September 2005 is not supported by her own actions. She returned to PNG on 1 February 2006 and stayed there for five months. She was also there for seven months commencing on 18 October 2006. 101 Even if she then no longer wished to live in PNG, there is no plausible reason, other than Walter's financial difficulties, for the transfer having occurred when it did. She accepted that it made no difference to her living arrangements whether she owned the Property or not. She said under cross-examination "we weren't divorcing or anything". 102 Marie's evidence was that her promise was fulfilled by the payment into her joint account with Walter of $128,118.71 on 23 June 2006 and payment out to the Tokmakoffs on 27 June 2006 of $100,028. Her evidence was that the remainder was for her use. This evidence was not borne out by the facts. On 27 June 2006, $5000 was transferred from the same account to Mr Savranski and on 29 June 2006 a further $1500 was transferred to him. Even taking into account the fact that the account was in credit in the amount of $3603.60 immediately before payment into it of the $128,118.71, part of her inheritance monies was clearly used to pay other business debts of Walter. Other small amounts were paid to Walter himself. What occurred is consistent with her money being used to alleviate part of Walter's significant financial strain on a number of fronts. 103 There is no written or other objective contemporaneous material which links the transfer of the Property to any promise by Marie to pay Walter or to the payment to the Tokmakoffs. 104 I am not satisfied, and Marie has failed to establish, that the transfer was for valuable consideration. 105 The conclusion that I have reached that I should not accept Marie's evidence with respect to the asserted conversation and arrangement with Walter is reinforced by the fact that her evidence was unsatisfactory in a number of other respects. 106 She gave evidence that she had no involvement in Walter's business dealings or affairs other than occasionally to assist him in transferring money. She undoubtedly had greater involvement than that. She knew the names of various companies that Walter operated. She was a director of some of them. From at least 2003 until 19 August 2005 she was a director of Highlands Coffee Exports Limited, which until then was 90% owned by Walter. She was also a director of another of Walter's companies Pous Trading Company Limited. She was director and secretary of another company, KUM Farming and Trading Company. She "did all his messages in Australia". She received fax and email communications pertinent to Walter's business dealings. On behalf of Pous Trading Company, she signed a mortgage in favour of Sergei in relation to providing security for the Loan Agreement. 107 Her evidence was that she did not remember signing the mortgage and that she did not know of the directorships until after Walter's death. Her evidence was that she regularly signed documents in circumstances where she did not know what she was signing. 108 Marie is clearly an intelligent person. Whilst there is little doubt that Walter was the driving force, I do not accept Marie's evidence that she had no involvement in his business dealings or that she was oblivious to what she was signing, in particular the mortgage in favour of Sergei, a Russian with whom she was adamant her husband should not do business. She was in my view seeking to convey an inaccurate picture of herself as naïve and completely ignorant of Walter's business affairs. 109 Marie also gave affidavit evidence that she had no knowledge of the meaning of certain business terms referred to in an affidavit of Sergei sworn 1 August 2007. These terms included security, turnover, financial position of a company, mortgage and shareholder. Cross-examination revealed this evidence to be unworthy of belief. 110 It follows from what is said above that I find that there was no motivation for the transfer other than to defraud Walter's creditors and Marie has failed to discharge the onus on her of establishing that the property was conveyed for valuable consideration and in good faith without notice of the intent to defraud creditors as contemplated by s 228 (3) of the Act. CONCLUSION 111 There will be judgment for the plaintiffs against the first defendant in the amount of $3,536,846.04 adjusted to bring the amount up to date. 112 The plaintiffs have established that the transfer was fraudulent and Marie has failed to establish that it was for valuable consideration, in good faith and without notice. 113 I accordingly propose to order the transfer of Lot 153 on Registered Plan 144770 with registered dealing number 709 266 213 in the Queensland Land Registry be set aside and the second defendant sign all such documents as are necessary to effect the transfer of an undivided one half share in Lot 153 on Registered Plan 144770 to the estate of the late Walter Perdacher as tenant in common. 114 The proceedings against the second defendant will otherwise be dismissed. 115 The parties are to bring in short minutes reflecting this outcome, including any ancillary orders necessary to achieve it and any adjustments to the money sum up to the date of the orders. 116 I will hear the parties on costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.