Vasiliou v Marchesi [2008] FCAFC 129 (14 July 2008)

BANKRUPTCY – vesting of properties in trustee in bankruptcy – proper parties to application – whether primary judge erred in factual findings – role of appellate court – no error shown

PRACTICE AND PROCEDURE – no basis for allowing further evidence on appeal – incompetent appeal against interlocutory judgment granting leave to amend application to add a claim under s 121 of the Bankruptcy Act 1966 (Cth)

Bankruptcy Act 1966 (Cth) ss 58, 120, 121
Federal Court of Australia Act 1976 (Cth) ss 24(1A), 27
Federal Court of Australia Rules O 52 r 36
Transfer of Land Act 1958 (Vic)

Abalos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167 referred to
Cannane v J Cannane Pty Lid (in liq) [1998] HCA 26; (1998) 192 CLR 557 referred to
Council of the City of Greater Wollongong v Cowan [1955] HCA 16; (1955) 93 CLR 435 applied
CSR Ltd v Della Maddalena [2006] HCA 1; (2006) 224 ALR 1 referred to
Florance v Andrew (1985) 58 ALR 377 cited
Fodare Pty Ltd v Official Trustee in Bankruptcy [2000] FCA 1721 cited
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 referred to
Freeman v Pope (1870) LR 5 Ch App 538 cited
House v R [1936] HCA 40; (1936) 55 CLR 499 referred to
Orr v Ford [1989] HCA 4; (1989) 167 CLR 316 referred to
Paterson v Paterson [1953] HCA 74; (1953) 89 CLR 212 referred to

ANDREW VASILIOU and VASILIKI APOSTOLOU AS TRUSTEE OF THE VASILIOU FAMILY TRUST v BRENDAN JOHN MARCHESI AS TRUSTEE OF THE BANKRUPT ESTATE OF ANDREW VASILIOU, A BANKRUPT
VID 656 OF 2007
VID 755 OF 2007

FINN, KENNY AND EDMONDS JJ
14 JULY 2008
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 656 OF 2007 VID 755 OF 2007

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	ANDREW VASILIOU First Appellant VASILIKI APOSTOLOU AS TRUSTEE OF THE VASILIOU FAMILY TRUST Second Appellant
AND:	BRENDAN JOHN MARCHESI AS TRUSTEE OF THE BANKRUPT ESTATE OF ANDREW VASILIOU, A BANKRUPT Respondent

JUDGES:	FINN, KENNY AND EDMONDS JJ
DATE OF ORDER:	14 JULY 2008
WHERE MADE:	MELBOURNE

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 656 OF 2007 VID 755 OF 2007

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	ANDREW VASILIOU First Appellant VASILIKI APOSTOLOU AS TRUSTEE OF THE VASILIOU FAMILY TRUST Second Appellant
AND:	BRENDAN JOHN MARCHESI AS TRUSTEE OF THE BANKRUPT ESTATE OF ANDREW VASILIOU, A BANKRUPT Respondent

JUDGES:	FINN, KENNY AND EDMONDS JJ
DATE:	14 JULY 2008
PLACE:	MELBOURNE

(1) VID 656 of 2007 is an appeal from orders made on 4 July 2007 including a declaration that the beneficial title to each of three properties has vested in the respondent, as trustee of the bankrupt estate of Andrew Vasiliou (‘Mr Vasiliou’) pursuant to s 58 of the Bankruptcy Act 1966 (Cth) (‘the Bankruptcy Act’), as well as from orders made by the primary judge on 20 July 2007.

(2) VID 755 of 2007 is an appeal from orders made by the primary judge on 13 August 2007 including orders giving effect to the judgment in (1) above and refusing Vasiliki Apostolou’s (‘Ms Apostolou’) application for leave to bring a cross-claim.

2 In addition, by notice of motion filed 26 October 2007 the appellants made application to the Court to receive evidence on the hearing of the appeals additional to the evidence below: cf. O 52 r 36 of the Federal Court of Australia Rules. An affidavit sworn by Mr Vasiliou on 26 October 2007 and said to be in support of the motion was filed on the same date. But the affidavit did not state the grounds of the application, cf. sub-rule (4), let alone the evidence necessary to establish the grounds, cf. sub-rule (5).

3 In Council of the City of Greater Wollongong v Cowan [1955] HCA 16; (1955) 93 CLR 435 ("Greater Wollongong City Council"), at 444, Dixon CJ prescribed the requirements of the rule allowing further evidence on appeal in the following terms:

5 The test enunciated by Dixon CJ in Greater Wollongong City Council was referred to with approval by Lockhart J in Florance v Andrew (1985) 58 ALR 377 at 381. His Honour observed (at 382) the discretion given to the Court in s 27 and O 52 r 36 may be broader than that dealt with by the High Court in Greater Wollongong City Council. An application to put on further evidence on appeal should be supported by evidence to explain why the evidence now sought to be adduced was not led at the trial, or why the case now sought to be made was not raised at the trial: Fodare Pty Ltd v Official Trustee in Bankruptcy [2000] FCA 1721. Mr Vasiliou’s ‘supporting affidavit’ did not meet these requirements nor on any reading of it could one conclude that it met the prescription of the rule as articulated by Dixon CJ in Greater Wollongong City Council.

6 The notice of motion also sought an order that the Court lay "criminal charges ... and [impose] other penalties against each party responsible for providing or being involved in false evidences on OATH". Based on Mr Vasiliou’s supporting affidavit, it would appear that the motion contemplated that charges and the like be directed to persons such as Phillip Dwyer (‘Mr Dwyer’), who was a witness at the trial. It is plain enough, however, that, as indicated to the appellants at the hearing of the appeal, the Court does not have jurisdiction to make an order of this kind.

8 Before turning to address the grounds and the issues that Mr Vasiliou sought to raise before us, it is convenient to set out briefly the main legal and factual issues before the learned primary judge together with his Honour’s conclusions. The case came before Jessup J for a retrial following a successful appeal by Mr Vasiliou against the judgment of Weinberg J (see Vasiliou v Marchesi [2006] FCAFC 197). The central issue at the trial was whether or not the beneficial interest in three properties, which are also the subject of this appeal, vested in Brendan John Marchesi (‘Mr Marchesi’) by operation of s 58 of the Bankruptcy Act. In concluding that they did, his Honour dealt with this main question via a number of sub-issues, which are reflected in our discussion below of his Honour’s reasons for judgment.

9 The primary judge accepted that Optquest Pty Ltd (‘Optquest’) was registered on 11 August 1987 and was the intended corporate trustee for a ‘family trust known as "The Vasiliou Family Trust"’ (‘the VFT’). In addition, the primary judge found that Optquest was likely to have been appointed the trustee of the VFT sometime in September 1987. His Honour found that on 8 October 1987 Mr Vasiliou purported to execute a deed of gift of the three properties in favour of the VFT and that at about the same time Mr Vasiliou, as transferor, and Optquest, as transferee, executed a transfer under the Transfer of Land Act 1958 (Vic) (‘the TL Act’) in respect of each of the subject properties.

10 The primary judge found that the executed TL Act transfers were left in the custody of Mr Dwyer, a solicitor acting for Mr Vasiliou, and that they were never delivered to Optquest. Accordingly, they remained in the custody of Mr Vasiliou, or his agent, throughout. Applying the equitable principles respecting the requirements for the perfection of a gift in land, his Honour further found that Mr Vasiliou, as donor, did not, therefore, do everything necessary on his part to vest the legal title to the subject properties in Optquest as donee. It followed, according to his Honour, that equity would not recognise the gift as complete and that Mr Vasiliou held the full beneficial title to the subject properties at all times (see Marchesi v Apostolou [2007] FCA 986 ("Marchesi v Apostolou") at [77]).

Whether any effective gift in equity of the three properties was void as against Mr Marchesi pursuant to s 121 of the Bankruptcy Act?

11 For the purpose only of considering this issue, the primary judge treated the purported gift of the subject properties to Optquest in October 1987 as effective in equity, contrary to his findings in [10] above. Mr Marchesi argued in the alternative that if there was an effective gift, then the transfers were void against him, pursuant to s 121 of the Bankruptcy Act.

12 In respect of this argument, the primary judge, subject to one matter referred to later in his reasons but not presently relevant, held that, were it not for the gift in 1987, the subject properties would probably have been part of Mr Vasiliou’s estate in his bankruptcy and would probably have been available to his creditors.

13 The primary judge found that, on the evidence before him, there were too many objective circumstances for the appellants to avoid the inference that Mr Vasiliou’s main purpose in making the transfers in October 1987 was to prevent the subject properties from becoming divisible amongst his creditors (chiefly the Deputy Commissioner of Taxation). Accordingly, his Honour accepted Mr Marchesi’s submissions based on subs 121(1) of the Bankruptcy Act.

14 In relation to Mr Marchesi’s reliance on subs 121(2) of the Bankruptcy Act, the primary judge:

(i) was not prepared to find that Mr Vasiliou was insolvent for the reason that, in October 1987, he was not able to pay the amounts of income tax assessments served on him in 22 September 1987; and

(ii) was not persuaded that it was a reasonable inference from all the circumstances that, in October 1987, Mr Vasiliou was about to become insolvent because of his inability to pay sales tax on assessments due to be paid on 30 October 1987.

Whether assuming Mr Vasiliou held the beneficial title to the subject properties in March 1989 (consistent with his Honour’s findings in [10] above), the execution of an agreement made between Optquest and Mr Vasiliou on 25 March 1989 had the effect, in law, of passing the title to Optquest: that is, of imposing upon Mr Vasiliou an equitable obligation to hold the properties for the benefit of Optquest?

15 The appellants’ alternative case at trial was that Mr Vasiliou had divested himself of his beneficial interest in the subject properties by reason of an agreement of 25 March 1989 between Mr Vasiliou and Optquest. The primary judge observed that this question was difficult for a number of reasons. First, the unusual nature and terms of the agreement. Second, the circumstance that the agreement had apparently been drawn by someone with an understanding of the distinction between legal and equitable estates, but whose limitations in the relevant area of the law were plain to see. Third, the agreement was not done at arm’s length. Fourth, it was the appellants who relied on the agreement, yet their submissions on its legal effect were spare in the extreme.

16 The primary judge observed that Mr Vasiliou, in his affidavit of 24 March 2006 said that the full amount of $182,000.00 had been paid to him by Optquest by June 1989. His Honour did not accept this evidence and found that Optquest paid only the sum of $175,320.24 under the agreement of 25 March 1989.

17 The primary judge also found that Optquest did not pay (nor did subsequent trustees of the VFT pay) the rates and outgoings on the subject properties as required by cl 9 of the agreement of 25 March 1989. In this respect, his Honour found that the agreement was not performed.

18 The primary judge reasoned that in the case of a contract of sale which remains unperformed by the purchaser, whether or not an equitable interest passes depends on whether the purchaser would obtain specific performance. That is to say, to assert that the purchaser had acquired an equitable interest is to go no further than to state the consequences of the circumstance that equity would, in the facts as they existed, grant specific performance.

19 The primary judge found that on the facts of the present case, Optquest was in breach of essential conditions of the agreement of March 1989. It had not paid the whole purchase price of $182,000.00. Likewise with the rates and outgoings. Although they fell due over a period of time well subsequent to the execution of the agreement, the fact is that the agreement had not been fully performed and, while the subject property remained registered in the name of Mr Vasiliou, the agreement required that Optquest pay the rates and outgoings. That was not done. Accordingly, equity would not grant specific performance and Optquest and Ms Apostolou did not acquire the equitable interest in the subject properties.

20 The primary judge then considered a second possibility apropos the agreement of March 1989, that is, that it was not a contract for the sale of land at all, but rather a contract under which an option to purchase arose. His Honour observed that the hypothesis is that, by the agreement, Mr Vasiliou gave Optquest an option to purchase the subject properties, exercisable by payment of the sum of $182,000.00 and by calling for the transfer of the legal title pursuant to cll 7, 12 and perhaps 13 of the agreement.

21 In the course of his reasoning process, the primary judge referred to what was said by Latham CJ in Commissioner of Taxes (Qld) v Camphin [1937] HCA 30; (1937) 57 CLR 127 ("Camphin") at 132 and concluded that Camphin was authority for the proposition that the equitable interest which arises under an option is a reflection of the availability of specific performance in the circumstances then subsisting. His Honour observed that if Optquest were to be regarded as the grantee of an option, there would perhaps be no problem created by the circumstance that it had not paid the whole price of $182,000.00: in the nature of things, the grantee of an option will necessarily pay the price, or the balance of the price, at the point of exercising the option. But his Honour observed that there were more fundamental problems confronting the hypothesis, namely, that where an option arises under a contract which imposes obligations, such as the payment of rates and outgoings on the subject properties, on the grantee during the period which elapses before the exercise of the option, clearly the grantee would have no entitlement to specific performance and, therefore, should not be regarded as the holder of an equitable interest, where those obligations remain unperformed. His Honour concluded that because of the unpaid rates and outgoings, and regardless of whether there was readiness and willingness to make good the shortfall in the payment of the $182,000.00 to Mr Vasiliou, the trustee of the family trust (by this time Ms Apostolou) as grantee did not, as at the date of Mr Vasiliou’s bankruptcy, have an option to purchase the subject properties.

22 Finally, the primary judge concluded that if, because of incomplete performance on the part of Optquest, equity would not have intervened by specific performance to give effect to Mr Vasiliou’s obligation (if there were one) under the agreement to transfer the registered title, manifestly it would not give effect to the agreement as some kind of commercial transfer of the equitable title as such.

23 For these reasons, the primary judge held that the operation of the agreement of 25 March 1989 did not give rise to a situation in which Optquest held the beneficial title to the subject properties.

Whether, if the transaction of 25 March 1989 was otherwise effective in law, it was voidable at the instance of Mr Marchesi pursuant to s 121 of the Bankruptcy Act by reason that Mr Vasiliou’s main purpose in entering into the transaction was to prevent the subject properties from becoming divisible among his creditors or to hinder or delay the process of making those properties available for division among those creditors?

24 The primary judge observed that, as with the gift of October 1987, for the purpose of only considering this alternative claim, he would treat the agreement of 25 March 1989 and the payments made under it, as giving rise to an equitable interest in the subject properties in the hands of Optquest.

25 The primary judge found that notwithstanding his income tax settlement ($113,000.00) in March 1989, Mr Vasiliou remained concerned about his sales tax liability ($160,000.00 or thereabouts) and about the potential exposure of the subject properties to enforcement proceedings in that regard.

26 The primary judge found that although he effectively denied it in his evidence, the inference was inescapable that Mr Vasiliou’s reference in his affidavit to the possibility of an attack by the tax office on a gift less than two years old was based on a concern that s 120 of the Bankruptcy Act might be used against him in relation to his voluntary settlement of October 1987. At the time, s 120 had a relation-back period of two years before the commencement of the bankruptcy. His Honour inferred therefore that in March 1989 Mr Vasiliou was concerned that circumstances might occur which would constitute the commencement of a bankruptcy for him and that the 1987 settlements, because they were voluntary, would then be void as against the trustees of his estate.

27 The primary judge found that Mr Vasiliou’s main purpose in entering into the agreement of 25 March 1989 was to prevent the subject properties from becoming divisible among his creditors, chiefly the Deputy Commissioner of Taxation. His Honour held therefore that such transfer as may have been effected by that agreement was void as against Mr Marchesi.

Whether, if the family trust was beneficially entitled to the subject properties at the time of Mr Vasiliou’s bankruptcy, and remained so, Mr Vasiliou, as trustee, is entitled to an indemnity in relation to the outlays which he has made and the liabilities which he has incurred in relation to those properties?

28 Mr Marchesi argued that Mr Vasiliou was entitled to be indemnified for the liabilities he had incurred in relation to the subject properties. As to this argument, the primary judge observed that since he had held that Optquest was not, and that therefore the VFT was not, beneficially entitled, the indemnity issue was moot. However, as the matter was fully argued, and might become relevant on appeal, his Honour proceeded to deal with the point.

29 The primary judge reasoned that Mr Vasiliou’s entitlement to an indemnity from the VFT in relation to outlays and liabilities which related to Mr Vasiliou’s development activities with respect to 10 Claremont Street, South Yarra, would depend upon the capacity in which he incurred them and the obligations which equity would impose upon him in relation to that development. His Honour found that the outlays and liabilities were incurred by Mr Vasiliou in his personal capacity and not as trustee, and that therefore he was not entitled to an indemnity from the VFT.

30 As at the trial, the appellants were self-represented on this appeal. The appellants’ amended notice of appeal against the orders of the primary judge made on 4 and 20 July 2007 (VID 656 of 2007) contains some 65 grounds and the notice of appeal against the orders of the primary judge made on 13 August 2007 (VID 755 of 2007) contains some six grounds.

31 In the appellants’ written outline submissions and Mr Vasiliou’s oral submissions on the hearing of the appeal, most of these grounds were not ventilated, and understandably so. They are not grounds of appeal; rather they are bare assertions of error on ultimate conclusions of law and findings of fact without any asserted foundation for the alleged error. Because of this, many of them, indeed most of them, are incapable of any appropriate response.

32 Towards the end of the appellants’ written outline submissions, five issues, the subject of their grievance with the primary judge’s decision below, are drawn out:

(2) the granting of leave to Mr Marchesi to amend his application to include a claim for relief under s 121 of the Bankruptcy Act;

(5) the VFT’s purported acquisition of the properties on payment of their market value.

33 The appellants said that they had "an issue with the legality of the proceedings". It is difficult to understand this contention. The appellants’ written submissions indicate that their reference to the ‘legality’ of the proceedings is a reference to the choice of respondents to the proceedings. In oral submissions, Mr Vasiliou said that the reference to the ‘legality’ of the proceedings was a reference to ground 16 of the amended notice of appeal and that his own appointment and that of Ms Apostolou as trustee of the VFT were illegal or improper since these appointments were not permitted by the trust deed establishing the trust. Therefore, so Mr Vasiliou argued, the beneficial interests in the subject properties vested in the Australian Securities and Investments Commission upon deregistration of Optquest.

34 In response, Mr Marchesi submitted (and Mr Vasiliou conceded) that this was not raised before the primary judge. Additionally, Mr Marchesi submitted that Ms Apostolou was an appropriate respondent to the application before the primary judge because she was the trustee of the VFT when the proceeding was commenced. It is clear from the way the parties conducted the trial before the primary judge that they in fact proceeded on the basis that Ms Apostolou was at the relevant time a trustee of the VFT, and the primary judge was not asked to decide differently. Mr Marchesi further submitted that Mr Vasiliou was also an appropriate respondent because he was the registered proprietor of the properties and allegations of fraudulent conduct were made against him. We agree with these submissions.

35 The appellants did not advance any other bases upon which the ‘legality’ of the proceeding was challenged and we are unable to identify any. In these circumstances, we reject the appellants’ contention as to the legality of the proceeding.

The granting of leave to the respondent to add a claim under s 121 of the Bankruptcy Act

36 On 2 March 2007, Jessup J granted leave (under O 13 r 2) to Mr Marchesi to file and serve a further amended application (see Marchesi v Apostolou [2007] FCA 254). The appellants contended that the primary judge ought not to have allowed the respondent to amend his application so as to include an alternative claim relying on s 121 of the Bankruptcy Act to the effect that the alleged gift in 1987, if effective in equity, was done to defraud Mr Vasiliou’s creditors. The appellants argued that the primary judge erred in not adjourning the hearing to give them additional time to prepare their case. This argument was reflected in grounds 22 and 23 of the amended notice of appeal.

37 Mr Marchesi replied to this argument in a number of ways. First, he argued that leave was granted in an interlocutory judgment on 8 February 2007. He submitted, and we accept, that the appellants need leave to appeal from this order before they can challenge it further (Federal Court of Australia Act 1976 (Cth) s 24(1A)). No such leave has been obtained. This ground, or these grounds, of appeal are incompetent.

38 Secondly, we accept, as in substance Mr Marchesi submitted, that the appellants have not identified any proper basis for the grant of leave to appeal, supposing such leave was sought. It is apparent from his Honour’s reasons that the primary judge gave due consideration to the question whether or not leave should be granted. It should be borne in mind too that his Honour expressly noted that the appellants had, for their own reasons, chosen not to make an application for the adjournment of the trial (see Marchesi v Apostolou [2007] FCA 254 at [5] and [23]).

39 The appellants called Mr Dwyer to give evidence in relation to the restructuring of Mr Vasiliou’s affairs in 1987. He was a significant witness since he was Mr Vasiliou’s solicitor and involved in the purported transfer of the subject properties from Mr Vasiliou to Optquest as trustee of the VFT. Mr Dwyer’s evidence was that: (1) he initially took instructions from Mr Vasiliou but subsequently acted for both Mr Vasiliou and Optquest; (2) Mr Vasiliou instructed him to set up the VFT and to prepare documents relating to the transfer of the properties to it; (3) Mr Vasiliou instructed him not to proceed because the stamp duty was too expensive; (4) the executed TL Act transfers were neither stamped nor lodged at the Titles Office; and (5) by 1 March 1988, the gift had not been finalised.

40 The primary judge accepted the evidence of Mr Dwyer. His Honour found that Mr Dwyer acted in the normal course of his practice as a solicitor and dealt with the funds that Mr Vasiliou gave him in accordance with his professional obligations. His Honour rejected the allegations of Mr Vasiliou and Ms Apostolou that Mr Dwyer had misapplied these funds to his own professional fees instead of for the payment of stamp duty. His Honour made these findings on the basis of conflicting evidence and after dealing with credibility issues of the kind that inevitably arise in such a case as this.

41 The primary judge referred to the fact that Mr Dwyer ultimately accounted to Mr Vasiliou, and not Optquest, for the balance of money held in his trust account. Further, although he did not recall to whom the transfers were sent after he ceased to act, Mr Dwyer "expressed amazement that it might be suggested that his firm had corresponded with Optquest" by means of the envelope relied upon by the appellants. His Honour accepted Mr Dwyer’s evidence in this regard and said that the explanation for the envelope "is at least as likely to be falsification on the initiative of Mr Vasiliou as any other" (see Marchesi v Apostolou at [72]).

42 There were, as Mr Marchesi noted, other considerations that supported Mr Dwyer’s version of events and the finding that Mr Vasiliou retained the transfers in his personal capacity. These considerations included that neither Optquest nor any subsequent trustee of the VFT attempted to complete the transfer of the properties. The primary judge found the transfers produced to Mr Marchesi in April 2006 were fabrications. Mr Vasiliou admitted continuing to treat the properties as his own and made numerous identifications of the properties as his, with no reference to the VFT. Indeed, Mr Vasiliou acknowledged retaining control of the properties as his own to deal with as he saw fit. Further, the appellants did not call as witnesses any of the accountants who advised them over the years, notwithstanding the clear warnings of Mr Marchesi’s counsel and the Court. In 1997, Mr Vasiliou’s accountants stated in a letter that Mr Vasiliou had ‘very substantial land holdings in Melbourne’. The VFT did not record the properties in a list of its assets or a balance sheet (as required by cl 15 of the Trust Deed) or prepare tax returns or other trust accounts or records evidencing its ownership of the properties.

43 The appellants contended that the primary judge erred in accepting Mr Dwyer’s evidence. The respondent replied, and we accept, that the primary judge’s findings with respect to the above matters were plainly open to him on the evidence. As we have sought to show above, a review of the evidence at trial shows this to be the case. The primary judge found Mr Dwyer to be a conscientious and honest practitioner whose evidence he had no hesitation in preferring to the appellants. His findings of fact, including his findings with respect to the evidence of Mr Dwyer, depended on his assessment and weighing of the credit of witnesses and should not be interfered with on appeal (Paterson v Paterson [1953] HCA 74; (1953) 89 CLR 212 at 222 and 224; Abalos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167 at 178 – 179; Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at 128 per Gleeson CJ, Gummow and Kirby JJ; and CSR Ltd v Della Maddalena [2006] HCA 1; (2006) 224 ALR 1 at 7-9 per Kirby J, Gleeson CJ agreeing; 27-29 per Hayne J; 44 per Callinan and Heydon JJ). Bearing in mind the nature of our appellate task, there is no occasion to interfere with the primary judge’s decision in this respect.

44 The appellants alleged that the primary judge made various errors respecting the application of s 121 of the Bankruptcy Act, as reflected in grounds 25 – 27 and 29 and 30 of the amended notice of appeal.

45 As noted previously, Mr Marchesi submitted that if, contrary to the Court’s finding, the gift of the properties was perfect, it would nonetheless be liable to be set aside under s 121 of the Bankruptcy Act. On appeal, he argued that the primary judge’s findings and conclusions with respect to this matter were open to him on the evidence.

46 According to the primary judge (and it was not disputed on appeal) by 1989, Mr Vasiliou had been in dispute with the Australian Tax Office (‘the ATO’) for four years. On 21 September 1987, the ATO issued amended income tax assessments for the 1981 – 1986 years, thereby obliging Mr Vasiliou to pay, by 26 October 1987, a total sum in excess of $500,000. Payment was not made. On 11 March 1988, the Deputy Commissioner of Taxation commenced a debt recovery proceeding. In July 1988, the Deputy Commissioner of Taxation began a separate action to recover unpaid sales tax totaling $160,849.43 going back to October 1984.

47 According to Mr Dwyer, the VFT trust deed was most probably prepared on 22 September 1987, the day after amended income tax assessments had been issued, and backdated to 11 August 1987 on Mr Vasiliou’s instructions. Bearing in mind his assessment that Mr Dwyer was a reliable witness, the primary judge was entitled to accept Mr Dwyer’s evidence on this matter, and to have regard to the date (‘22/9’) on the face of the document. Equally, his Honour was entitled to find that the deed of gift and the statutory declaration (both of which were executed on 8 October 1987) were most probably prepared on 25 September 1987.

48 As Mr Marchesi submitted, and we accept, the appellants gave no plausible explanation for the timing of the transfers and their proximity to the ATO’s investigation and amended income tax assessments (see Freeman v Pope (1870) LR 5 Ch App 538 at 541). Ms Apostolou claimed that the reason was her children’s future and security. Her children were aged four and eight years at the time, and she failed to explain how the transaction would improve their future or security. When challenged, Ms Apostolou conceded that, at the time, she and Mr Vasiliou were worried about the ATO’s claims. She said in evidence that the accountant had advised that it was ‘not a good idea’ to have the properties in Mr Vasiliou’s name. Mr Vasiliou’s evidence was that the accountant who accompanied him when the amended assessments were put to him recommended that he ‘restructure’ his affairs and, in consequence, he retained Mr Dwyer to establish the trust and prepare the related documents. Mr Vasiliou was unable to give a coherent account about the timing of the gift.

49 The primary judge found that there were "just too many objective circumstances" to avoid the inference that Mr Vasiliou’s main purpose in making the transfers in October 1987 was to prevent the subject properties from becoming divisible among his creditors, principally the Deputy Commissioner of Taxation, or to hinder or delay the process of making those properties divisible.

50 The gift, if effective, had the effect of reducing the assets available to Mr Vasiliou’s creditors in the event of his bankruptcy (Cannane v J Cannane Pty Lid (in liq) [1998] HCA 26; (1998) 192 CLR 557 at [12] and [49]). In the circumstances of the case, the finding that the gift was intended to prevent, hinder or delay creditors, especially the Commissioner, was virtually irresistible, particularly having regard to the timing of the amended assessments, the establishing of the VFT and backdating of the trust deed, and the making of the gift.

51 Plainly enough, the primary judge was justified in rejecting Mr Vasiliou’s denial that the restructuring of ownership of the properties was not intended to defeat the Deputy Commissioner of Taxation, having regard to the findings in the judgment. We are unable to discern any error in the primary judge’s reasons respecting the application of s 121(1) of the Bankruptcy Act. These grounds of appeal are not made out.

52 In the circumstances, it is unnecessary for us to deal with Mr Marchesi’s cross-contention in relation to the application of s 121(2) of the Bankruptcy Act.

The VFT’s purported acquisition of the properties on payment of their market value

53 As noted above, the primary judge held that specific performance was not available to the trustee of the VFT because it was in default under the agreement of 25 March 1989, in that Optquest had not paid the sum of $182,000 in full and nor had it paid rates and other outgoings. The appellants argued that the primary judge erred "in not giving a total regard or effectiveness to the Heads of Agreement/Sale Contract executed in favour of Optquest" as trustee of the VFT: see for example grounds 8, 12, 36 and 42 of the amended notice of appeal.

54 The primary judge’s finding was, however, based on documentary evidence. Mr Vasiliou claimed that the entire amount of $182,000 was paid from a Citibank loan between March and June 1989. In reopening the appellants’ case, he tendered the Citibank statement. The statement showed, however, that only part of this amount had been drawn down, with the apparent result that the appellants changed their case. This led the primary judge to comment "Mr Vasiliou gave me the impression that he was moulding his own oral evidence to the new factual scenario disclosed by that document". The appellants’ latest case – that they derived the balance of funds from elsewhere – was unsupported by documentary evidence.

55 As to rates and outgoings being unpaid, that is not disputed and is evident from the proofs of debt which have been lodged with the respondent. Furthermore, the VFT has kept no records of any payment or its ownership of the property. On the appellants’ own case, this would be contrary to the obligation under cl 15 of the deed of trust (and Optquest’s financial record keeping obligations under the Corporations Law). Moreover, Mr Marchesi noted, it has stood by whilst Mr Vasiliou asserted the properties were his own. Further, no claim based on the agreement was raised until the commencement of the trial on 7 March 2007. It is unnecessary to consider whether, as the respondents submitted, this would support a successful claim of laches and acquiescence against the successive trustees of the VFT (Orr v Ford [1989] HCA 4; (1989) 167 CLR 316 at 330 and 334 – 335).

56 In the circumstances outlined above, it was undoubtedly open to the primary judge to conclude that the purpose of the agreement was to avoid the potential application of s 120 of the Bankruptcy Act to the 1987 gift. We agree with his Honour that the conclusion was ‘inescapable’. Mr Vasiliou’s own evidence and his failure to call his accountant to give evidence about the matter virtually compelled it. His Honour was entitled to reject the explanation given by Mr Vasiliou in his oral evidence at trial that sought to link the 1989 agreement with accounting advice and tax benefits.

57 We would reject the appellants’ submissions to the contrary and the grounds of appeal that were said to support them.

I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Finn, Kenny and Edmonds.

Counsel for the Appellants:	Mr Vasiliou appeared in person

Counsel for the Respondent:	Mr J Peters SC with Mr M Galvin

Solicitor for the Respondent:	Piper Alderman

Date of Hearing:	15 November 2007

Date of Judgment:	14 July 2008

Federal Court of Australia - Full Court

Vasiliou v Marchesi [2008] FCAFC 129 (14 July 2008)