Grapple Pay Pty Ltd v Conroy

[2025] NSWSC 64

Supreme Court

New South Wales

Medium Neutral Citation:

Grapple Pay Pty Ltd v Conroy [2025] NSWSC 64

Hearing dates:

12-13 and 17-18 December 2024

Date of orders:

18 February 2025

Decision date:

18 February 2025

Jurisdiction:

Equity

Before:

Nixon J

Decision:

(1) The Amended Summons be dismissed.

(2) Direct that by 5pm on 28 February 2025, the First Defendant serve and provide to the Associate to Nixon J, the form of costs order which she seeks and her submissions on costs (limited to 5 pages), indicating whether, and if so why, an oral hearing is requested to deal with the issue of costs.

(3) Direct that by 5pm on 10 March 2025, the Plaintiff serve and provide to the Associate to Nixon J, any submissions in reply, including any competing form of order in respect of costs, indicating whether, and if so why, an oral hearing is requested to deal with the issue of costs.

(4) Note that, in the event that neither party requests an oral hearing, the issue of costs will be determined on the papers.

Catchwords:

REAL PROPERTY – Conveyancing – Section 37A of the Conveyancing Act 1919 (NSW) – Alienation of property – Intention to defraud creditors – where plaintiff advanced moneys to company – where director of company guaranteed company’s obligations in his own right and as trustee of trust – where only asset of trust was a block of land – where land was transferred by the director to his mother, the first defendant, on the same day that the company entered voluntary administration – where director became bankrupt and second defendant was appointed trustee in bankruptcy - whether property was transferred to first defendant for valuable consideration – whether property was transferred to first defendant with intent to defraud creditors – whether first defendant was a purchaser in good faith not having, at the time of the transfer, notice of any intent to defraud creditors

EQUITY – Trusts and Trustees – Trust Instruments – Amendment – whether purported addendums to trust instrument appointed first defendant as trustee of the trust - whether purported addendum appointed third party as trustee of the trust

Legislation Cited:

Bankruptcy Act 1966 (Cth) s 120(1)

Conveyancing Act 1919 (NSW) s 37A

Duties Act 1997 (NSW) s 57

Cases Cited:

Agusta Pty Ltd v Provident Capital Ltd [2012] NSWCA 26

Barton v Official Receiver (1986) 161 CLR 75 at 86; [1986] HCA 44

Cannane v J Cannane Pty Ltd(in liq) (1998) 192 CLR 557; [1998] HCA 26

Commissioner of Taxation v Oswal (No 6) [2016] FCA 762

Ingram v Y TwelvePty Ltd [2013] NSWSC 1777

In the matter of FW Projects Pty Ltd (in liq) [2019] NSWSC 892

Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3

Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360; [1979] HCA 61

Peter Sleiman Investments Pty Ltd v Deputy Commissioner of Taxation [2017] NSWCA 81

P T Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515

Super Vision Resources BVI Registered No 1,810,534 v AC Holdings Co Pty Ltd [2020] NSWCA 319

Wentworth v Rogers & Anor [2004] NSWCA 430

Wise Investments Pty Ltd v Ruddy Tomlins & Baxter, Solicitors [2019] QCA 271

Category:

Principal judgment

Parties:

Grapple Pay Pty Ltd (Plaintiff)
Ingrid Doris Conroy in her own right and in her capacity as trustee of The Bungabbee First Light Trust (First Defendant)
Manuel Hanna as the Trustee of the Bankrupt Estate of Jarrod Arthur Conroy (Second Defendant)

Representation:

Counsel:
N Simpson (Plaintiff)
P Afshar w E ten Kate (First Defendant)

Solicitors:
Maddocks (Plaintiff)
KB Legals (First Defendant)

File Number(s):

2023/00461544

Publication restriction:

Nil

JUDGMENT

1. This proceeding concerns the transfer of a property in Bentley, New South Wales, being Lot 31 in Deposited Plan 869759 (the Property), from Mr Jarrod Conroy to the First Defendant, Ms Ingrid Conroy. Ms Conroy is the mother of Mr Conroy.

2. Mr Conroy held the Property as trustee of the Bungabbee First Light Trust (the Trust). The Property was the only asset of the Trust.

3. Mr Conroy was the director and company secretary of Prana Energy Co Ltd, which operated an electrical installation business. On 2 May 2022, Prana entered into a Facility Agreement with the Plaintiff, Grapple Pay Pty Ltd, pursuant to which Grapple agreed to provide finance to Prana.

4. Mr Conroy, in his own right and as trustee of the Trust, gave a guarantee and indemnity to Grapple in respect of Prana’s obligations under the Facility Agreement (Conroy-Grapple Guarantee).

5. The Property was transferred by Mr Conroy to Ms Conroy on the same day that Prana entered voluntary administration. At that time, Prana owed $237,804.01 to Grapple.

6. In December 2022, Grapple commenced a proceeding in the District Court of New South Wales against Mr Conroy in his own right and as trustee of the Trust, seeking recovery of this amount pursuant to the terms of the Conroy-Grapple Guarantee. Grapple obtained default judgment against Mr Conroy, who subsequently became bankrupt.

7. In the present proceeding, Grapple sought declarations that:

1. the Property is held by Ms Conroy as trustee of the Trust; or

2. alternatively, the transfer of the Property by Mr Conroy to Ms Conroy was voidable pursuant to section 37A of the Conveyancing Act 1919 (NSW).

8. In the event either of those claims was established, Grapple sought declarations that it has a right of indemnity out of the assets of the Trust and has an equitable charge or lien over the Property.

9. The Second Defendant, Mr Hanna as the trustee of the bankrupt estate of Mr Conroy, did not take an active part in the proceeding, having indicated that he would abide by any orders made by the Court.

10. There were three principal witnesses: Ms Conroy, Mr Conroy and the Chief Executive Officer of Grapple, Mr Stephen Dawson. Mr Conroy was called on subpoena by Grapple. He declined to meet with Grapple’s legal representatives prior to giving evidence and, accordingly, Grapple led his evidence in chief orally. In addition, Grapple sought, and was granted, leave to cross-examine Mr Conroy on a limited number of topics.

11. Grapple’s claim that Ms Conroy was trustee of the Trust was based on a document purporting to be an addendum to the Trust Deed (the “August 2022” Addendum). This document was signed by Ms Conroy and was dated 25 August 2022 (that is, one week before the transfer of the Property to Ms Conroy). The “August 2022” Addendum named Ms Conroy as the sole trustee of the Trust.

12. In opening submissions, Grapple contended that the “August 2022” Addendum was effective to appoint Ms Conroy as trustee of the Trust, or alternatively that Ms Conroy had become trustee de son tort by intermeddling in the Trust, including by signing the “August 2022” Addendum and subsequently taking possession of the Property for the benefit of the beneficiaries of the Trust.

13. In closing submissions, Grapple abandoned any allegation that Ms Conroy had become trustee of the Trust or had received the Property in such capacity. Grapple acknowledged that this allegation could not be maintained in light of evidence given by Mr Conroy in the course of the hearing regarding the date when the “August 2022” Addendum was executed and the circumstances in which it was executed. Although there are no longer any claims relating to the “August 2022” Addendum, it will be necessary to address the evidence given by Mr Conroy in relation to those matters, as Grapple relied on this evidence in making adverse submissions about the credit of each of Mr Conroy and Ms Conroy.

14. As a result of these developments during the course of the hearing, the only claim pressed by Grapple in closing submissions was that the transfer of the Property to Ms Conroy was voidable pursuant to section 37A of the Conveyancing Act. Grapple acknowledged that, if its s 37A claim was not made out, then its various prayers for relief would fall away.

15. Accordingly, the principal issues for determination in this proceeding are:

1. whether the transfer of the Property to Ms Conroy on 1 September 2022 was made by Mr Conroy “with the intent to defraud creditors” (s 37A(1)); and

2. whether Ms Conroy was “a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors” (s 37A(3)).

Factual background

16. On 26 June 2017, Prana was incorporated. From around September 2018 onwards, Mr Conroy was the sole director of Prana. The business of Prana was primarily commercial solar installations.

17. Ms Conroy was employed by Prana as a bookkeeper from around the time of its incorporation until it was placed into liquidation. She performed tasks such as payroll and entry of data into the Xero accounting system.

Establishment of Trust

18. On 4 June 2021, the Trust was established by a Deed of Settlement which was executed by Mr Mark Borleis as Settlor and Mr Conroy as Trustee (the Trust Deed).

19. The Trust was established for the purposes of purchasing and holding the Property. Mr Conroy explained that his former partner, Ms Isabel Lucas, had suggested that the Property be purchased and held under a trust, and that she had recommended Mr Borleis as someone who could assist in setting up this trust.

20. Mr Conroy gave evidence that he and Ms Lucas had previously been in a relationship for more than two years, which had ended prior to the time that the Property was purchased. He said that they decided to purchase the Property because they wanted “to have somewhere to, you know, grow food, set up beehives and with the intention to get other friends, aligned friends in the community involved as a, you know, [philanthropic] sort of project”.

21. The Schedule to the Trust Deed named Mr Conroy as trustee of the Trust; Mr Conroy and Ms Conroy as Primary Beneficiaries of the Trust; Ms Lucas as the Secondary Beneficiary of the Trust; and Mr Conroy and Ms Conroy as Default Beneficiaries.

22. Clause 11.1(f) of the Trust Deed relevantly provided as follows:

“the Trustee shall not in any circumstances be entitled to any indemnity, reimbursement or recompense from the Beneficiaries or any of them but if acting in good faith shall be entitled to be indemnified out of the Trust Fund in respect of all liabilities incurred relating to the execution of any powers, duties, authorities or discretions vested in the Trustee under the provisions of this Deed and in respect of all actions, proceedings, costs, claims and demands relating to any matter or thing done or omitted to be done concerning the Trust Fund;”

23. Clause 17.1 of the Trust Deed relevantly provided as follows:

“Additional Powers

Without prejudice to the generality of clause 11 and to the intent that the authority conferred by it shall not in any way be restricted or limited the Trustee shall have the following powers:

…

(d)    To Give Guarantees and Indemnities. To give any guarantee or indemnity for payment of moneys or the performance of any contract, obligation or undertaking by any person, firm, company, corporation or association … and to secure the obligations from any such guarantee to indemnity by mortgaging or charging any undertaking of the Trustee or all or any part of the Trust Fund including any property which may subsequently be acquired by the Trustee so that it will form part of the Trust Fund, and any monies or charge created or purported to be created under this clause shall be valid in all respects irrespective of the purpose for which such guarantee or indemnity has been given and the rights of the mortgagee or charge shall take priority in all respects over the rights of the Beneficiaries and all other persons;

(e)   To Provide Security. To secure the performance of any debt, liability, contract, guarantee, indemnity or other engagement incurred or to be entered into by the Trustee in any way and in particular by any mortgage, charge or encumbrance upon all or any of the Trust Fund;

…

(ff)   To Provide Guarantees As To Securities. Either alone or jointly or jointly and severally with any other person to guarantee, secure or undertake in any way, including the granting of a mortgage or charge over the whole or any part of the Trust Fund, the discharge of any debt, liability or obligation incurred or undertaken whether in the past or in the future (prior to the vesting date) and by any other person whatsoever regardless of whether or not:

(i)    that person happens to be a Trustee of or Beneficiary under this Trust;

(ii)   any consideration, right or other benefit accrues to the Trustee in return for such guarantee, security or undertaking; or

(iii)   there is any contractual, legal or fiduciary relationship between the Trustee and the person to whom or on behalf of whom the Trustee gives such guarantee, security or undertaking, provided that it shall be entirely at the discretion of the Trustee as to whether the Trustee secures from such person in consideration of such guarantee, security or undertaking an indemnity against any obligation, liability, loss, cost, charge, expense, action, claim or demand which may be sustained or suffered by or recovered or made against the Trustee under or in connection with such guarantee, security or undertaking; …”

Purchase of the Property

24. On 9 June 2021, Mr Conroy in his capacity as trustee of the Trust executed a contract of sale for the purchase of the Property for $770,000. The date for settlement was 9 August 2021.

25. Mr Conroy initially approached National Australia Bank (NAB) for a mortgage. NAB obtained a valuation of the Property on 14 July 2021, which estimated the market value of the property to be $575,000. NAB declined to fund the purchase because there was no habitable dwelling on the Property. Mr Conroy then had to “move really quick” to obtain other finance before the settlement date.

26. The amount due on settlement of the purchase of the Property ($732,107.62) was funded from two sources.

27. First, Ms Lucas paid the sum of $551,790 into the trust account of Wall & Co Lawyers, who were the solicitors acting for Mr Conroy on the purchase.

28. According to Mr Conroy, Ms Lucas said to him “I have X amount of dollars available. And if you can come up with the rest, we can – we can get it done”. It was unclear from Mr Conroy’s evidence whether Ms Lucas provided funds for the purchase of the Property on the basis that she was making a loan or on the basis that she would have an equitable interest in the Property. He gave the following responses to questions regarding the terms of his arrangement with Ms Lucas:

“Q. What do you say were the terms of that arrangement with Isabelle?

A. That she was - that she had more financial equity than me in the property, and that that money was equity for her. And as always, you know, it wasn’t a loan. She was involved with the property as well, as equally as I was.

Q. So you say it wasn’t a loan?

A. It was a loan to the trust. Yeah. But she’s involved in the property as well, you know. She would come there with me. We would do things there. We would plan. We would vision.

Q. When you say a loan to the trust, what were the terms of that loan?

A. It was just oral communication. As in, if she ever wants to exit, then the money would be paid back to her.

Q. I see. Was that reduced to writing at all?

A. Oral declaration.

…

Q. What do you what do you mean by oral declaration?

A. Well, what I mean is the - the conversation would have looked something like, “Hey, I’m putting in X amount of money.” That money is owed to me if I ever choose to leave, or if we sell the property, that - that percentage ratio would go back to me.

…

Q. When you said “that percentage ratio would go back to me”, if she put in, say, 70% of the money, was the discussion that she’d get back the money she put in--

A. Yeah.

Q. --or she’d get back 70% of the sale price? Was that discussed?

A. That - those specifics weren’t discussed, but it was - it was just based on being fair and reasonable, right? If you sell the property for more than you paid it with, then you’d enter into another conversation on what’s fair and reasonable.”

29. For reasons set out below, it is unnecessary to determine the precise basis on which Ms Lucas provided funds for the purchase of the Property. Grapple did not submit, and there is no basis to conclude, that she did so by way of a gift.

30. Secondly, Sempre Funding Pty Ltd advanced an amount of $188,700 to Prana. This was secured by a mortgage over the Property, which was granted by Mr Conroy as trustee of the Trust (Sempre Mortgage). From this advance, Prana paid an amount of $180,227.62 into the Wall & Co trust account.

31. Prana’s obligations to Sempre were guaranteed by Mr Conroy in his own right and as trustee of the Trust (Conroy-Sempre Guarantee).

32. The entire balance of the funds deposited into the Wall & Co trust account by Ms Lucas and Prana was applied to the settlement of the purchase of the Property by Mr Conroy as trustee of the Trust, which occurred on 9 August 2021.

Evidence regarding Ms Lucas’ desire to “exit” the Property

33. Mr Conroy gave evidence that in around March 2022, Ms Lucas had told him that she “wanted to exit the property”, and that they subsequently came to an arrangement that, if he could not repay the money within six months, he would list the Property for sale. He said that this arrangement was made at a meeting which was also attended by Ms Lucas’s father, and that there were “minutes” of this meeting. Mr Conroy further said that these “minutes” were not produced under subpoena, because he had been unable to locate them.

34. Ms Conroy deposed to having had a conversation with Mr Conroy in late February or March 2022 during which words were said to the following effect:

Mr Conroy:    “We (referring to Jarrod and Isabel) are placing the Larnook Property (referring to the Property) on the market as Isabel is wanting repayment of her loan.”

Ms Conroy:    “I am in the process of selling my property and I would be willing to assist by buying the property. We (referring to me and my husband) can build a house on it and we could move up there and live in it. We would be closer to you all and the grandkids.”

Mr Conroy:    “Really good timing that you are selling up in Victoria as Isabel has requested that her loan be repaid within 6 months.”

Ms Conroy:    “How much do you want for the property?”

Mr Conroy:    “There is a first mortgage on the property for about $180,000 and Isabel loaned the balance of the monies to enable our trust to purchase the property. The amount is roughly $550,000.”

Ms Conroy:    “I will buy [the] property by paying out the first mortgage and repay the monies owing to Isabel.”

Mr Conroy:    “I would be happy with that.”

35. Grapple disputed that there was any arrangement between Mr Conroy and Ms Lucas to the effect set out above. I return to this issue below.

Entry into Facility Agreement and Conroy-Grapple Guarantee

36. On 2 May 2022, Grapple entered into the Facility Agreement with Prana, pursuant to which Grapple agreed to provide financing to Prana.

37. On 3 May 2022, Mr Conroy in his own right and as trustee of the Trust executed the Conroy-Grapple Guarantee in respect of Prana’s obligations under the Facility Agreement.

38. Clauses 4.1 to 4.2 of the Conroy-Grapple Guarantee provided as follows:

“4.1 Guarantee

The Guarantor irrevocably and unconditionally guarantees to Grapple that [Prana] will:

(a) pay to Grapple on time all money owing to Grapple under the Guaranteed Obligations; and

(b) observe and perform [Prana’s] obligations under each Agreement.

4.2 Payment

If:

(a) [Prana] does not pay money owing to Grapple under the Guaranteed Obligations on time; or

(b) an Event of Default occurs,

the Guarantor must immediately pay to Grapple all money forming part of the Guaranteed Obligations, whether or not:

(c) Grapple has made demand on [Prana];

(d) Grapple has made demand on the Guarantor; or

(e) money owing under the Guaranteed Obligations is immediately payable by [Prana].”

39. In executing the Conroy-Grapple Guarantee, Mr Conroy warranted that he was sole trustee of the Trust and that the copy of the Trust Deed which was delivered to Grapple was “a true and complete copy of the Trust Deed which is in force at the date of this deed” (clause 10.4(a) and (c)).

39. Pursuant to the Facility Agreement, Grapple provided financing services to Prana until around 17 June 2022.

Sale of Ms Conroy’s home, with proceeds paid to “Connective Energies Foundation”

41. On 7 July 2022, Ms Conroy sold her home located in Victoria and received a sum of $1,277,520.97 at settlement. Those monies were paid into a bank account with Westpac in the name of the “Connective Energies Foundation”.

42. There was in evidence a document described as “Articles of Agreement” of the “Connective Energies Foundation”, which was signed by Ms Conroy. This document included the following statements:

“The private sui generis suveran sentient enspirited natural human men or women hereby form a Private Foundation, not-for-profit, tax-exempt, non-government-organisation, adopting these Articles of Agreement, effective the first day of March in the Year commonly known as 2021 AD”.

…

‘tax-exempt’ means tax exempt and free from all forms of financial and involuntary servitude, limitations and imposts by way of, taxation, usury, stamp or other duties, levies, where appropriate indirect taxation, and any other imposts by governments, administrations, or any other purported authority or directive entity, either present or future.

…

Suveranty itself remains with the individual by whom and for whom all government exists and acts. Suveranty is not subject to law for it is the author and source of law. …”

43. Neither party advanced any submission that the Connective Energies Foundation was a legal person. There is no evidence of any person other than Ms Conroy being involved in this “foundation” and hence no basis to conclude that it was any form of unincorporated association. Given the statements set out above, this “foundation” appears to have been established by Ms Conroy, at least in part, in the expectation, or hope, that any transactions conducted in the name of this “foundation” would not be subject to any form of taxation, duty or levy.

44. The bank account in the name of Connective Energies Foundation was opened and operated by Ms Conroy. Having regard to the matters set out above, I accept Ms Conroy’s submission that any moneys in this account were her moneys and that any payments made from this account were payments made by her.

45. It was Mr Conroy who put Ms Conroy in touch with the person who set up the “Connective Energies Foundation” (being someone who had previously set up the “Innerstand Foundation” for Mr Conroy).

46. A similar expectation, or hope, of not being subject to any form of tax or duty is expressed in the Trust Deed which Mr Conroy signed on the establishment of the Trust, which states as follows:

“As this is a private not for surplus-profit (hereinafter ‘NFP’) non government organisation (hereinafter ‘NGO’) it is not subject to the “Tax Assessment Act:, meaning both the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 as amended, re-written, varied, replaced or re-enacted from time to time and includes their regulations, and any additions thereto, and where the context requires, either of them”.

47. Mr Conroy’s keenness not to pay any form of tax or duty underlies and explains a number of the events which followed.

Retainer of Wall & Co in relation to transfer of Property

48. On 14 July 2022, Mr Conroy sent an email to Ms Emma Moses of Wall & Co, copied to Ms Conroy, which stated as follows:

“Thanks for taking my call earlier.

As discussed, I would like to transfer the title of [the Property] into my Mother’s name.

Her name is currently listed on the private trust as primary beneficiary.

When I spoke to Kyla [of Wall & Co] during settlement [of the purchase of the Property], she did some high level investigation on whether stamp duty would apply transferring the property over to someone already listed on the trust and it was her opinion that we wouldn’t have to pay stamp duty again with Revenue NSW – if [Ms Conroy] was already on the trust.

Could you please do some investigation around this and come back to me.”

49. Mr Conroy attached a copy of the Trust Deed to this email.

50. On 9 August 2022, Ms Moses sent an email to Mr Conroy enclosing a costs disclosure and client authorisation document. Ms Moses indicated that she would “also send the same to Ingrid [Ms Conroy] and schedule a zoom meeting with her to complete the VOI [Verification of Identity]”. Ms Moses added: “I will commence the transfer and when the authorisation and VOI boxes are ticked will make the application to Revenue NSW [in respect of stamp duty]”.

Payment of Stamp Duty and Discharge of Sempre Mortgage

51. On 11 August 2022, Ms Conroy completed a “Purchaser Declaration Form” in relation to the Property, which was submitted to Revenue NSW. In answer to questions in that form, Ms Conroy indicated that she was not acting as trustee in purchasing the Property; that she intended to occupy the Property as her principal place of residence for at least 6 months, commencing within 12 months from date of settlement; that the proposed transfer date was 31 August 2022; and that the dutiable value of the Property was $770,000 (this being the price that had been paid for the purchase of the Property in August 2021).

52. On the same day, Wall & Co submitted an application to Revenue NSW seeking an exemption from stamp duty under s 57 of the Duties Act 1997 (NSW).

53. Also on 11 August 2022, Ms Conroy transferred an amount of $195,076.31 from the Connective Energies Foundation bank account to the trust account of Wall & Co. The reference for this payment was “Bluestreak Jarrod”. “Bluestreak” was another name for Sempre. This payment was made by Ms Conroy for the purpose of discharging the Sempre Mortgage.

54. On 12 August 2022, Revenue NSW rejected the application for a stamp duty exemption, stating that s 57 “is not usually applicable for trusts where the only asset of the trust, at the time of creation (declaring the trust), is cash ($10).”

55. On 16 August 2022, Ms Moses sent an email to Mr Conroy, copied to Ms Conroy, confirming that the funds to discharge the Sempre loan were cleared in the Wall & Co trust account, and that she could sign off immediately on the discharge of the mortgage. She informed Mr Conroy and Ms Conroy of Revenue NSW’s decision, stating that it would be necessary for a valuation of the Property to be undertaken, so that stamp duty could be assessed. Ms Moses indicated that she would speak to her principal about the Revenue NSW decision and sought confirmation from Mr Conroy, in the light of this development, whether she should proceed with the discharge of the Sempre Mortgage.

56. On the same morning, Mr Conroy sent two emails to Ms Moses, each of which was copied to Ms Conroy. In the first, he asked Ms Moses to speak to her principal in relation to the decision of Revenue NSW and to report back to him. Shortly afterwards, and before receiving any such report, Mr Conroy sent his second email, which stated as follows:

“Please go ahead with the discharge

And also the stamp duty costs to move it into Ingrids name asap

We will just have to accept that extra cost for our own peace of mind

Please action this swiftly thanks”

57. It is plain from the terms of this second email that Mr Conroy was keen to ensure that the transfer of the Property to Ms Conroy be effected as soon as possible, and was willing to accept “the stamp duty costs” in order to ensure that this occurred. The reasons for urgency were the subject of cross-examination of each of Mr Conroy and Ms Conroy, and this issue is addressed below when considering whether the transfer was made with the intent to defraud creditors.

58. On 17 August 2022, Wall & Co informed Mr Conroy and Ms Conroy that the final payout figure for the Sempre Mortgage was $194,554.18, leaving $1,022.13 in Wall & Co’s trust account.

59. On 18 August 2022, Wall & Co obtained a valuation of the Property. The stated purpose of the valuation was to provide “Evidence of Value – Stamp Duty Purposes”. The “as is” market value of the Property was estimated to be $700,000.

60. On 24 August 2022, Wall & Co provided Mr Conroy and Ms Conroy with a Settlement Statement in relation to the Property. It showed that an amount of $28,168.17 was required to be paid on settlement, including $26,590.00 in respect of stamp duty, with the balance relating to Wall & Co’s invoice, the transfer fee and the PEXA fee. (The amount of stamp duty payable was calculated on the basis of the $700,000 valuation.)

61. On 29 August 2022, Ms Conroy transferred an amount of $28,168.17 to the Wall & Co trust account, with the narrative “Conroy to Conroy T[rans]fer”.

Payments to Ms Lucas

62. Also on 29 August 2022, Ms Conroy transferred $200,000 from the Connective Energies Foundation bank account to Ms Lucas. The narrative for this transfer was “Isabel Lucas Larnook Purchase Larnook Purchase”. The reference to “Larnook Purchase” was a reference to the purchase of the Property, which is located near the town of Larnook in New South Wales. As set out in paragraph [34] above, Ms Conroy gave evidence that, in discussions with her, Mr Conroy referred to the Property as “the Larnook Property”.

63. On 30 August 2022, Ms Conroy transferred a further $200,000 from the Connective Energies Foundation bank account to Ms Lucas. The narrative for this transfer was “Isabel Luc[as] Larnook Purchase”.

64. Each of these payments was made into an account in the name of another “foundation” which had been established by Ms Lucas (the “Earth Blossom Foundation”), and was transferred from that account into an account in Ms Lucas’s name.

65. On 1 September 2022, the Property was transferred to Ms Conroy. Wall & Co lodged the transfer form in respect of the Property, which recorded the following information under the heading “Consideration”:

“Without Monetary Consideration And A Change In Manner of Holding”

Prana enters voluntary administration

66. On the same day that the Property was transferred to Ms Conroy, Prana entered voluntary administration. At this time, Prana owed $237,804.01 to Grapple.

67. On 12 September 2022, there was a telephone conversation between Mr Conroy and the Chief Executive Officer of Grapple, Mr Dawson. This included the following exchange in relation to the transfer of the Property:

“[Mr Dawson]:   Why did you change the title from you to your mum?

Mr Conroy:   She helped pay the last part of the debt owing to Sempre, she wanted to be on title to have more control.

[Mr Dawson]:   So did you change the trustee from you to your mum?

Mr Conroy:   (Mr Conroy did not respond to that question)”

68. In cross-examination, Mr Dawson gave the following evidence about this conversation:

“Q. You said to his Honour a moment ago that you enquired, you were asking questions about why the property had been transferred into Ingrid’s name and that’s right. Isn’t it?

A. Yeah, I’ve got that – yep –

Q. You were asking that on 12 September. Weren’t you?

A. Yes. That’s in my affidavit. Yes.

Q. And what then Mr Conroy said in response was that it’s in her name because she paid a lot of money to the ex-partner and to the mortgagee and purchased the property. He told you that. Didn’t he?

A. Not in those words. No.

…

Q. A moment ago I asked you whether or not Mr Jarod Conroy, in response to a question that you had asked about why his mum was on title, had told you that she was on title because she’d paid a large sum of money to the mortgagee and also paid out the ex-partner. And you said, ‘not in those words’. You remember that. Don’t you?

A. Yeah. Yes. Because it’s not about Isabelle.

Q. No. I asked you the question, you said a moment ago and not in those words. Isn’t that right?

A. Okay.

Q. I’m going to suggest to you that what I asked you was a gist of what he said to you in response to your question. Do you accept that or not?

A. Okay. Yes. Yes.”

69. On 10 October 2022, Prana was placed into liquidation.

Further payment to Ms Lucas

70. On 2 December 2022, Ms Conroy transferred $70,000 from the Connective Energies Foundation account into a bank account held by Mr Conroy in the name of “Innerstand Foundation”.

71. On the same date, Mr Conroy transferred an amount of $79,827 from the “Innerstand Foundation” account into an account held by Ms Lucas in the name of “Earth Blossom Foundation”.

Grapple obtains default judgment and Mr Conroy becomes bankrupt

72. On 2 December 2022, Grapple commenced a proceeding in the District Court of NSW against Mr Conroy in his own right and as trustee of the Trust. Grapple sought, pursuant to the Conroy-Grapple Guarantee, the amount of the outstanding principal under the Facility Agreement ($237,804.01), together with interest and costs.

73. On 24 January 2023, Grapple obtained default judgment in the District Court against Mr Conroy in his own right and as trustee of the Trust in the amount of $269,150.16 inclusive of costs.

74. On 22 February 2023, a bankruptcy notice was issued to Mr Conroy.

75. On 4 May 2023, pursuant to a debtor’s petition, Mr Conroy declared himself bankrupt. Mr Manuel Hanna was appointed as trustee of the bankrupt estate of Mr Conroy.

76. On 19 June 2023, Grapple lodged a proof of debt in Mr Conroy’s bankruptcy.

77. On 12 July 2023, an email was sent to Mr Hanna by Mr Ben Chislett, who was assisting Mr Conroy in relation to his bankruptcy. In his oral evidence, Mr Conroy confirmed that Mr Chislett’s email was sent on his instructions. In this email, Mr Chislett stated as follows:

“Isab[e]l Lucas, Jarrod’s ex partner paid $551,790 towards the purchase of the [Property]…

Please see trust account receipt below…

Once Jarrod and Isab[e]l separated, Isab[e]l wanted to finalise the financial connection between her and Jarrod.

The amount of funding Ingrid Conroy was able to secure at the time was $479,827. It was agreed for this to be full and final settlement.

The amount was paid via the below payment instalments.”

78. Mr Chislett’s email provided links to payment confirmations from Westpac relating to the two payments of $200,000 each and the further payment of $79,827 which had been made to Ms Lucas (see paragraphs [62]-[63] and [71] above).

79. On 5 October 2023, Grapple lodged a caveat on the title of the Property.

80. On 21 December 2023, Grapple commenced this proceeding.

Credit Issues: The Addendums of “May 2022” and “August 2022”

81. As noted above, it was common ground in closing submissions that Ms Conroy did not become trustee of the Trust at any time, including by reason either of:

1. a document entitled “Addendum 2 to Schedule 1”, which is signed by Ms Conroy “as Trustee” and is dated 21 May 2022 (the “May 2022” Addendum), and which includes a “Schedule 3” naming Ms Conroy as Trustee of the Trust; or

2. the “August 2022” Addendum, which likewise was signed by Ms Conroy “as Trustee”, was dated 25 August 2022, and which included a “Schedule 1” naming Ms Conroy as Trustee of the Trust.

82. Despite Grapple abandoning any claim based on either of those documents, it is necessary to set out in some detail the circumstances leading to their creation, in order to address submissions made by Grapple regarding the credit of each of Ms Conroy and Mr Conroy. As outlined below, it appears that these documents were in fact created in 2023, in an attempt to recover the stamp duty which had been paid by Ms Conroy on the purchase of the Property. It should be noted that there is no evidence that either document was in fact subsequently provided to Revenue NSW or otherwise deployed for this purpose, or that any refund of stamp duty was ultimately obtained.

Events of January to May 2023

83. On 31 January 2023, around five months after the transfer of the Property to Ms Conroy, Mr Conroy sent an email to Ms Moses of Wall & Co, which was copied to Ms Conroy, stating relevantly as follows:

“On another note, I made a phone call to the stamp duty office yesterday to see if the property still sat under the original trust it was under (set up by Kayla) Bungab[b]ee First Light Trust.

Due to the rushed nature of the transfer, it seems it was an oversight when lodging the paperwork.

Stamp Duty office informed us that they can change it over and add the private trust (At no cost) into the transaction if the following can be done via your office:

1. Go to section 65 – First hyperlink which is Evidentiary requirement sub section 14

2. provide everything that they list here

3. Two of the main things they mentioned were a cover letter from you and a stat dec just stating that there was an unintentional error made when submitting the stamp duty claim.

It would be great to action this swiftly, thanks heaps.”

84. In his oral evidence, Mr Conroy explained that his purpose at the time was to see if he could obtain, for his mother, a refund of the stamp duty which she had paid when the Property was transferred to her. He said that he had spoken to someone at the “stamp duty office” who had told him that “if Ingrid was the trustee then we could get a refund”. Mr Conroy acknowledged that, although he had proposed in this email that a statutory declaration be signed stating “that there was an unintentional error made when submitting the stamp duty claim”, there had in fact been no such “error”. He gave the following evidence (emphasis added):

“Well, there wasn’t an unintentional error made. What I’m saying is that I was trying to create a new narrative to get the stamp duty refund processed.”

85. Unsurprisingly, Ms Moses appears to have been uncomfortable with Mr Conroy’s request. On the following day, she sent a response to Mr Conroy, indicating that she would have to discuss his request with her principal. Ms Moses further stated that, in circumstances where Mr Conroy’s “original instructions were to transfer to Ingrid as a beneficiary”, things “may be a little more complicated” (this was a reference to the instructions in Mr Conroy’s email to Ms Moses dated 14 July 2022, set out in paragraph [48] above). Ms Moses concluded that: “If you can clarify in an email what it is you wanted to achieve from the transfer, I can look at how any issues may best be resolved.”

86. Mr Conroy responded later the same day, copying Ms Conroy, and setting out in numbered paragraphs “what we’re wanting to achieve” (emphasis added):

“1. The land to be held in trust as it were originally. Land titles can not sit under a trust so a name needs to be nominated.

2. What I was wanting to happen for was the land title to transfer from my name into Ingrid’s name, whilst still sitting in the trust – Which is listed when stamp duty is paid.

3. The land will still sit in Ingrid’s name – It will just say Ingrid Conroy as the trustee for the Bungab[b]ee First Light Trust. Ingrid is now the Trustee.”

87. Further emails were exchanged between Ms Moses and Mr Conroy, and copied to Ms Conroy, on 9 February 2023, as follows:

1. Ms Moses again noted that she would need to review Mr Conroy’s request with the principal of her firm, stating that: “My understanding is that Ingrid would need to be named as a trustee (she is named as a beneficiary not a trustee in the documentation provided to me)”;

2. Mr Conroy replied that: “There is a new trust in place and Ingrid is now the trustee”; and

3. in response, Ms Moses requested that the relevant documentation be sent to her.

88. When asked about these emails, Mr Conroy said that his reference to a “new trust in place” was likely a reference to “that addendum” which named Ms Conroy as trustee (this presumably being a reference to either the “May 2022” Addendum or the “August 2022” Addendum).

89. Mr Conroy does not appear to have provided any such documentation to Ms Moses until around May 2023. At this time, Mr Conroy delivered, by hand, a copy of the “May 2022” Addendum to Wall & Co. There is no evidence that he provided a copy of the “August 2022” Addendum to Ms Moses.

90. On 19 May 2023, Ms Moses sent an email to Mr Conroy, noting that she had looked back at their previous correspondence, including the email which he had sent on 14 July 2022, enclosing the original Trust Deed and giving instructions that Ms Conroy was listed as primary beneficiary. Ms Moses continued as follows:

“The addendum 2 that you have delivered to the office is dated 21 May 2022, which predates the discussion you had with me noting Ingrid as the primary beneficiary. Due to the timing of these events, any statutory declaration I could prepare for you would indicate that I only acted in accordance with your instructions and with documents provided at that time, which ultimately does little to support your case for an error. It may be more appropriate for you to ask Revenue NSW if a statutory declaration from you may be appropriate, if at the time you were confused about the correct terminology and working of a trust.”

91. On 22 May 2023, Mr Conroy signed a statutory declaration, which he sent to Ms Moses on the same day. This statutory declaration was (omitting formal parts) in the following terms:

“On July 14^th 2022 I made contact with Emma Moses from Wall Co Lawyers at … to change the title of [the Property].

The property was currently held in Trust – Bungab[b]ee First Light Trust with Jarrod Arthur Conroy listed as the Trustee.

My intention was to have the property and land title stay held within the Bungab[b]ee First Light Trust. With the trustee changing from Jarrod Arthur Conroy to Ingrid Dorris Conroy.

My instruction to Emma Moses at the time was to change the title into the name of Ingrid Dorris Conroy.

At the time, I was confused about the correct terminology and working of a trust and made the assumption that the property would naturally stay in the trust. I made the honest mistake of not adding the specific part in my communication to Emma – Ingrid Dorris Conroy as the Trustee for the Bungab[b]ee First Light. Being our first time making such a title change within our trust.”

92. In his evidence in this proceeding, Mr Conroy acknowledged that he made, in this statutory declaration, a series of “incorrect statements” for the purpose of “trying to get stamp duty back”. In particular, he gave the following evidence (emphasis added):

”Q. So Mr Conroy the third paragraph where you say, ‘My intention was to have the property and land title stay held within the Bungabbee First Light Trust.’ And then in the next sentence, ‘With the trustee changing from Jarrod Conroy to Ingrid Doris Conroy’, do you see that?

A. Yes.

Q. Now, what did you mean by the land title staying held with the trust?

A. Well, I’ve made an incorrect statement on that stat dec on the basis of trying to get stamp duty back.

Q. Right. Now, when you say then in the next sentence, ‘With the trustee changing from Jarrod Arthur Conroy to Ingrid Doris Conroy’, what did you mean by that statement?

A. The same answer I just gave you.

Q. Sorry, what were you about to say?

A. I was saying that I made an incorrect statement on this stat dec on the basis to try and get stamp duty back.

Q. I see. Then you say, ‘at the time’, this is the last paragraph, ‘I was confused about the correct terminology and working of a trust, and made the assumption that the property would naturally stay in the trust’. Do you see that?

A. Yeah.

Q. So what were you confused about? And what was the terminology that you were confused about?

A. I wasn’t confused. I was making an incorrect statement on this sta[t] de[c] to try and get stamp duty back.

Q. And then also you then say, ‘I made the honest mistake of not adding the specific part in my communication to Emma Ingrid Doris Conroy as the trustee for the Bungabbee First Light’, do you see that?

A. Yeah.

Q. So what did you mean by that?

A. Well, again, I’ve made an incorrect statement here, on the basis to try and get stamp duty back.

Q. Right. But when you wrote that, what did you mean by ‘not adding the specific part in my communication to Emma’, and then, ‘Ingrid Doris Conroy as the trustee for the Bungabbee First Light’? What did you mean by that?

A. Well, like - like I said before, when I spoke to stamp duty office, they said if I can make Ingrid trustee, then she could get stamp duty back. So I’ve made an incorrect statement on this stat dec on the basis to try and recoup stamp duty.”

93. Mr Conroy also confirmed that the “May 2022” Addendum and “August 2022” Addendum were created after the transfer of the Property to Ms Conroy. He described the May 2022 document as having been “created to – to support the – the stamp duty claim”.

94. On 22 May 2023, Mr Conroy requested that Ms Moses sign a statutory declaration “saying that you have reviewed [Mr Conroy’s statutory declaration] and it’s consistent with our communication”. On the following day, Ms Moses responded as follows:

“I attempted to call you this morning. As already discussed, any statutory declaration I provide will have to give an account of what happened and why those steps were taken. That would then be assessed with any statement you provide. I believe the question would be raised as to why you did not provide the trust amendment at the time. I have discussed this with my colleague who has advised that you may need to seek advice from another lawyer. If I had no knowledge of the amendment existing at that time, then I am not able to represent otherwise.”

95. There is no evidence that Mr Conroy sent the statutory declaration or either the “May 2022” Addendum or the “August 2022” Addendum to Revenue NSW, or sought a stamp duty exemption on the basis of any of that material.

Mr Conroy’s credit

96. I accept Grapple’s submission that these matters significantly undermine Mr Conroy’s credit. Mr Conroy has, by his own admission, been willing to “create a new narrative” in relation to the events which are at the heart of this proceeding, including by making a series of “incorrect statements” under oath in relation to his knowledge and intentions at the time of the transfer of the Property, and by producing backdated documents purporting to record transactions in relation to the Trust which did not in fact occur, for the purpose of trying to improve his mother’s financial position. Given this conduct, given Mr Conroy’s close relationship with his mother, and given the relief sought by Grapple against his mother, it is difficult to place any substantial weight on his evidence in this proceeding regarding the transfer of the Property, including his evidence regarding the events leading up to the transfer and regarding his knowledge and intentions at the time of the transfer.

97. It should be noted that, in closing submissions, neither party placed any significant reliance on Mr Conroy’s evidence. Grapple, who called Mr Conroy, submitted that “if he has said things when giving answers that are favourable to [Ms Conroy], and that’s not supported by any objective document, then [the Court] shouldn’t give that significant weight”. In response, Ms Conroy’s counsel confirmed that he did not “rely on Mr Conroy’s evidence in a general way”, and proposed that Mr Conroy’s evidence be assessed in the light of the objective documents and “the logic of events”.

Ms Conroy’s credit

98. I accept Grapple’s submission that the matters outlined above also affect Ms Conroy’s credit.

99. Ms Conroy was copied on the email correspondence between Mr Conroy and Ms Moses in 2023 which is set out above. She signed each of the “May 2022” Addendum and the “August 2022” Addendum.

100. In her affidavit, Ms Conroy did not refer to the “May 2022” Addendum, and gave the following evidence in relation to the “August 2022” Addendum:

“I signed the document on or about 25 August 2022. … I signed it, because Jarrod had asked me to sign it.

On or around 25 August 2022, Jarrod said to me ‘I want you to sign a document’. I was not provided that document until the day I signed it. I did not understand the document. I was unaware of the contents of the [Trust Deed]. I did not read the document. I did not have the opportunity to obtain any legal advice in relation to the document or its effect.

… My attention has been drawn by my solicitor to the words ‘Ingrid Conroy as Trustee’ that appears in the space for the signature on the document … I did not notice those words when I signed the document. I was not the trustee of the trust at that time and have not been the trustee of the trust at any time.”

101. The substance of Ms Conroy’s evidence is that she signed the “August 2022” Addendum around the date that it bears and was unaware of its effect or purpose when she did so.

102. I do not accept this evidence. Having regard to the matters set out above, it is likely that the “August 2022” Addendum was created well after the date it bears, and probably some time in 2023. It is also likely that, at the time Ms Conroy signed the document, she saw the words “Signed, Sealed and Delivered by Ingrid Conroy as Trustee”, which appear immediately next to her signature. In any case, she was copied on the extensive email correspondence between Mr Conroy and Ms Moses in 2023, in which Mr Conroy repeatedly asserted that Ms Conroy had become the trustee of the Trust in 2022. It is likely that she read those emails.

103. In one of his initial emails to Ms Moses about this issue, Mr Conroy outlined “what we’re wanting to achieve” (see paragraph [86] above). The first-person plural likely refers to Mr Conroy and Ms Conroy (who was copied on the email). Its use here suggests that, prior to contacting Wall & Co, Mr Conroy had discussed with Ms Conroy his plan to obtain a refund of stamp duty.

104. In circumstances where Ms Conroy was of the view, as set out in her affidavit evidence quoted above, that she had “not been the trustee of the trust at any time”, it is striking that she did not say a word in response to Mr Conroy’s repeated statements to the contrary, including in emails to a solicitor and in a statutory declaration. Further, Ms Conroy must have been aware, from reading those emails, that Mr Conroy’s assertions that Ms Conroy had become the trustee of the Trust were being made not for his own benefit, but in an attempt to gain a financial advantage for Ms Conroy (namely, the refund of stamp duty).

105. Having regard to those matters, I have formed the view that I should exercise caution in placing any significant weight on Ms Conroy’s oral evidence in relation to the events at issue in this proceeding, particularly where the evidence concerns conversations which are not referred to in any contemporaneous document, or concerns her knowledge and intentions at the relevant time. I have not disregarded such evidence, but have instead assessed such evidence in light of the contemporaneous documents, the objectively established facts, the apparent logic of events, the existence and nature of corroborative evidence, and the effect of the evidence as a whole.

Adverse inferences from absence of Ms Lucas and Mr Lucas?

106. Finally, Grapple submitted that adverse inferences should be drawn from the failure of Ms Conroy to call either Ms Lucas or Ms Lucas’s father to give evidence regarding their discussions and dealings with Mr Conroy in relation to the Property.

107. I do not accept this submission. Ms Conroy did not, in her evidence, refer to any dealings or discussions with either Ms Lucas or her father in relation to the Property. It was Grapple who led evidence, through Mr Conroy, of such discussions. The first reference to Ms Lucas’s father in these proceedings appears to have been in the course of Mr Conroy’s examination in chief by Grapple’s counsel. In any case, there is no reason to conclude that a person who was in a relationship with Ms Conroy’s son which ended several years ago, let alone that a relative of that person, is in the camp of Ms Conroy. It was equally open to Grapple to call evidence from Ms Lucas or Mr Lucas.

Overview of Grapple’s Claim

108. Grapple provided finance to Prana under the Facility Agreement, with the outstanding principal being $237,804.01 as at the date that Prana entered voluntary administration.

109. Pursuant to the terms of the Conroy-Grapple Guarantee, Prana’s obligations to Grapple under the Facility Agreement were guaranteed by Mr Conroy in his own right and as trustee of the Trust.

110. Mr Conroy had power, as trustee of the Trust, to give the Conroy-Grapple Guarantee and to mortgage the Trust’s property as security for the obligations under the Conroy-Grapple Guarantee (see Trust Deed, cl 17.1(d), (e), (ff), set out in paragraph [23] above).

111. Having entered the Conroy-Grapple Guarantee in his capacity as trustee of the Trust, Mr Conroy had a right to be indemnified out of the assets of the Trust against his liability under that guarantee: Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367; [1979] HCA 61 per Stephen, Mason, Aickin and Wilson JJ. As their Honours there observed:

“In such a case there are then two classes of persons having a beneficial interest in the trust assets: first, the cestuis que trust, those for whose benefit the business was being carried on; and secondly, the trustee in respect of his right to be indemnified out of the trust assets against personal liabilities incurred in the performance of the trust. The latter interest will be preferred to the former, so that the cestuis que trust are not entitled to call for a distribution of trust assets which are subject to a charge in favour of the trustee until the charge has been satisfied … ”

112. As Leeming JA explained in Peter Sleiman Investments Pty Ltd v Deputy Commissioner of Taxation [2017] NSWCA 81 at [56] (Beazley P agreeing), the trustee’s right of indemnity may be vindicated in two distinct ways:

“The trustee may, if the trustee has discharged the liability, be reimbursed from trust property. Alternatively, if the liability has not been discharged, the trustee may apply trust property to do so. In some cases it is convenient to distinguish the former right of reimbursement from the latter right of exoneration. But common to both, of course, is the notion that the trustee can have recourse to assets held by the trustee on trust in support of the trustee’s right of indemnity.”

113. Where the trustee becomes bankrupt, a creditor of the trustee will be subrogated to the beneficial interest enjoyed by the trustee: Octavo Investments at 367.

114. As Barrett JA observed in Agusta Pty Ltd v Provident Capital Ltd [2012] NSWCA 26 at [72], this may be better viewed as a “remedy” of subrogation, rather than a right of subrogation:

“That characterisation seems appropriate in a case such as the present where equity would allow creditors with an unsatisfied money judgment at law to bring proceedings in which the creditors, for their own benefit, asserted in respect of the trust property in the trustee's hands, the beneficial interest enjoyed by the trustee by virtue of the right of indemnity.”

115. In order to give a particular creditor the fruits of that beneficial interest, equity will appoint a receiver, thereby facilitating a sale of trust property and ensuring that the proceeds, having been brought under the control of the court, are, to the appropriate extent, put into the hands of creditors entitled by subrogation rather than the hands of the trustee: Agusta at [74].

116. The principles outlined above were not in dispute.

117. The immediate practical difficulty for Grapple, in seeking any remedy in respect of the assets of the Trust, is that the Trust currently has no assets. The only property of the Trust was the Property and it was transferred to Ms Conroy on 1 September 2022. It is now common ground that Ms Conroy is not and never has been a trustee of the Trust, and did not receive the Property in such capacity.

118. Accordingly, in order to obtain the relief which it seeks in respect of the Property – including a declaration that Grapple possesses an equitable charge or lien over the Property – Grapple must first establish that the transfer of the Property to Ms Conroy is voidable pursuant to s 37A of the Conveyancing Act 1919.

119. Section 37A relevantly provides as follows:

37A   Voluntary alienation to defraud creditors voidable

(1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced.

…

(3)  This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors.

120. The principles relating to this provision were also not in dispute.

121. The term “creditors” includes, for the purposes of section 37A, future, contingent or prospective creditors: Ingram v Y TwelvePty Ltd [2013] NSWSC 1777 at [107] (Stevenson J). There was no dispute that, at the time of the transfer, Grapple was a “creditor” of Mr Conroy as trustee of the Trust, by reason of the Conroy-Grapple Guarantee.

122. In order to establish an “intent to defraud creditors”, it is “unnecessary to show that the debtor wanted creditors to suffer a loss or that the debtor had a purpose of causing loss”; rather, it is “necessary to show the existence of an intention to hinder, delay or defeat creditors and in that sense to show that accordingly the debtor had acted dishonestly” (emphasis in original): Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3 at [32] per French CJ, Gummow, Crennan and Bell JJ. It is sufficient that the debtor had an intention to hinder or delay creditors, even if this was not the sole or predominant purpose: ibid at [56]-[57].

123. The intention of the transferor may be inferred from the surrounding circumstances as disclosed by the evidence. In Cannane v J Cannane Pty Ltd(in liq) (1998) 192 CLR 557; [1998] HCA 26 at [12], Brennan CJ and McHugh J observed that:

“Although the party impugning the disposition of property must show an actual intent to defraud creditors at the time of the disposition, the intent may be inferred from the making of a disposition which, to adopt the words of Lord Hatherley LC in Freeman v Pope, ‘subtracts from the property which is the proper fund for the payment of [the] debts, an amount without which the debts cannot be paid’. The ‘proper fund’ may consist in assets out of which future creditors as well as present creditors would be entitled to be paid a dividend in respect of what is owing to them. Therefore a subtraction of assets which, but for the impugned disposition, would be available to meet the claims of present and future creditors is material from which an inference of intent to defraud those creditors might be drawn. Whether that inference should be drawn depends upon all the circumstances of the case.”

124. In Marcolongo at [34], the plurality referred to this passage, observing that Brennan CJ and McHugh J had added “the word ‘actual’ [to the statutory language of an ‘intent to defraud creditors’] as a periphrasis to emphasise that, while the existence of the intent might be inferred from the evidence, it was to be found as a fact”.

125. If it appears from all of the circumstances surrounding the alienation of the property that the effect of the alienation might have been expected to be, and has in fact been, to hinder, delay or defeat creditors, the court will attribute the relevant intention to the transferor: P T Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 523-524 per Wilcox, Gummow and von Doussa JJ.

126. In that regard, Gilmour J noted in Commissioner of Taxation v Oswal (No 6) [2016] FCA 762 at [66] that there are “various circumstances in which it is recognised that the Court will move readily to infer the existence of the requisite intention”, including where (citations omitted):

“(1)   the ‘natural and probable consequence’ of the disposition is the defeat or delay of creditors;

(2)   the alienation is made voluntarily;

(3)   the alienation is made, relevantly, for no consideration by a person in financial difficulties;

(4)   the alienation is made in favour of a family member; and

(5)    the alienation is made in haste or proximately to one or more events indicating financial stress on the part of the disponor.”

127. Once the elements of s 37A(1) are satisfied, the onus shifts to the party seeking to have the benefit of s 37A(3) to establish the necessary statutory ingredients for that subsection: ibid at [118].

127. In closing submissions, Grapple submitted that the requisite “intent to defraud creditors” could be inferred from, in particular, the following matters:

“(1)   at the time of the transfer of the Property, Grapple was a creditor of the Trust by virtue of the Principal Debt;

(2)   [Mr Conroy] had knowledge of Grapple’s potential interest in the assets of the Trust if there was a relevant default by Prana on the facility. That clearly follows from [Mr Conroy’s] acceptance of entering the personal guarantee – there can be no doubt that he understood the legal effect of this document if the facility agreement was breached.

(3)   the transfer of the Property on 1 September 2022:

(i)   took place on the same day as Prana was placed into voluntary administration;

(ii)   took place one month and nine (9) days prior to the liquidation of Prana;

(iii)   was voluntary, in the sense that it was made without consideration, as [recorded] by the transfer;

(iv)   was made to [Ms Conroy], a family member

(v)   was not supported by any written contract of sale;

(vi)   occurred in close proximity to Prana’s liquidation and voluntary administration and in that regard, was made in haste;

(vii)   various emails between [Mr Conroy] and his solicitors, [Wall and Co], between July and September 2022, disclose an imposed (and unexplained on the face of the emails) urgency to effect the transfer – this all taking place whilst [Mr Conroy] was discussing the solvency of Prana at least from July 2022 – this highlighted in more detail in the updated chronology, which will be addressed orally. The Court would pay particular attention to Exhibit N and the language used therein;

(viii)   was made in the context of financial stress being suffered by [Mr Conroy] and Prana. As at September 2022, [Mr Conroy] has personal debts of at least $2,2 million.”

129. The matter in subparagraph (1) above was not in dispute.

130. As regards subparagraph (2), I am satisfied that Mr Conroy was aware, having signed the Conroy-Grapple Guarantee, that he had provided a guarantee and indemnity to Grapple in respect of Prana’s obligations under the Facility Agreement. Further, given that he was sole director of Prana, he was likely aware of the extent of Prana’s borrowings under the Facility Agreement. (Ms Conroy did not advance any submissions to the contrary.)

131. As regards subparagraph (3) above, the matters in subparagraphs (i), (ii), (iv), (v) and (viii) are uncontroversial. The key factual matters which were in dispute are:

1. whether the transfer was “voluntary, in the sense that it was made without consideration” (subparagraph (3)(iii)); and

2. whether the transfer was made “in haste” and, if so, the reasons why there was “urgency to effect the transfer” (subparagraphs 3(vi) and (vii)).

Was the transfer made without consideration?

132. Grapple relied on the fact that the transfer form which was lodged in respect of the Property stated that the transfer was made “without monetary consideration” (see paragraph [65] above).

133. Grapple also relied on the following matters:

1. Mr Conroy’s initial instructions to Ms Moses on 14 July 2022 were that “I would like to transfer the title of this property into my Mother’s name. Her name is currently listed on the private trust as primary beneficiary”; and

2. Ms Moses submitted an application to Revenue NSW for a ruling under s 57 of the Duties Act 1997 (NSW) in respect of stamp duty. This provision provides that, subject to the matters in s 57(2)-(3), duty of $100 is chargeable “in respect of a transfer for no consideration of dutiable property to a beneficiary made under and in conformity with the trusts contained in a declaration of trust”. (As noted at paragraph [54] above, this application was subsequently rejected.)

134. Based on this material, Grapple submitted that the Court should find that the Property was transferred to Ms Conroy as a beneficiary, and not for valuable consideration. Grapple contended that the transfer was, in substance, an in specie distribution of trust property.

135. I consider the statement made in the transfer form to be of limited weight. There was no evidence that Ms Conroy was aware of or agreed with its contents. It is not clear whether Mr Conroy had an understanding of the term “without monetary consideration” or what his understanding was. For example, he may have been of the view that, because he did not personally receive any of the payments made by Ms Conroy, he was transferring the Property to her “without monetary consideration”.

136. Further, Mr Conroy’s instructions to Ms Moses must be read in the context of the email of 14 July 2022, in which those instructions are set out. Mr Conroy was, in that email, keen to find out whether, if the Property was transferred to a person who was a named beneficiary of the Trust, stamp duty would be payable. As has been set out above, Mr Conroy demonstrated, in his dealings with Ms Moses, a concern to see whether the transfer of the Property could be structured, or characterised, in such a way that stamp duty would not be payable (and was willing to “change the narrative” and make “incorrect statements” in order to achieve this outcome). Given that is so, I do not consider that Mr Conroy’s query about the stamp duty implications of a transfer to a beneficiary of the Trust is a reliable guide to the substance of the transaction.

137. Whatever Mr Conroy may have understood or intended when completing the transfer form, or when asking Ms Moses about whether stamp duty would be payable on a transfer of the Property to a beneficiary of the Trust, the simple and undisputed fact is that Ms Conroy made substantial payments from the Connective Energies Foundation account to the Wall & Co trust account (for discharge of the Sempre Mortgage) and to Ms Lucas. Those payments totalled around $665,076, with a further $28,168.17 being paid by Ms Conroy in respect of stamp duty, costs and fees associated with the transfer (see paragraphs [53], [58], [60]-[61], [62]-[64] and [70]-[71] above).

138. While not disputing that those amounts were paid by Ms Conroy, Grapple submitted that “the Court would not be persuaded by the evidence before the Court that the monies paid by [Ms Conroy] were in consideration of the purchase of the Property”.

139. Grapple noted that the original instructions provided to Ms Moses on 14 July 2022 in relation to the transfer of the Property made no reference either to Ms Conroy purchasing the property or to Ms Conroy repaying any amount which Mr Conroy as trustee of the Trust owed to Ms Lucas.

140. Whatever the scope of Mr Conroy’s original instructions, Ms Moses was aware that Ms Conroy supplied the funds to discharge the Sempre Mortgage over the Property, because those funds were paid by Ms Conroy into the Wall & Co trust account and were then applied by Ms Moses for that purpose (see paragraphs [53], [55] and [58] above).

141. I accept that there is no evidence that Ms Moses was told that moneys were being paid by Ms Conroy to Ms Lucas. However, given that Ms Conroy made those payments directly into Ms Lucas’s bank account, it may be that Mr Conroy and Ms Conroy did not consider that there was any need for Ms Moses to be involved in those arrangements or informed of those payments. Further, they may have had a concern about the possible tax consequences of disclosing that those payments were being made to Ms Lucas (which might also explain why these payments were made from and to accounts in the name of “foundations” which were supposedly “tax-exempt”).

142. In submissions, Grapple emphasised that the narratives for the relevant entries in the Connective Energies Foundation bank account do not refer to any loan by Ms Lucas or any repayment of such loan.

143. However, in those narratives Ms Conroy expressly recorded that the payments to Ms Lucas were for the “Larnook Purchase”: that is, for the purchase by Ms Conroy of the Property (see paragraphs [62]-[63] above). Significantly, those words indicate that it was Ms Conroy’s understanding both that she was purchasing the Property and that she was making a payment to Ms Lucas in connection with and for the purpose of that purchase.

144. Grapple also sought to place some weight on the fact that on 12 July 2023, Mr Chislett had, acting under instructions from Mr Conroy, informed the trustee in bankruptcy that, following the separation of Ms Lucas and Mr Conroy, Ms Lucas “wanted to finalise the financial connection between her and Jarrod” and that the amounts which Ms Conroy paid to Ms Lucas totalling $479,827 represented “full and final settlement” in that regard (see paragraph [77] above). (In fact, Ms Conroy paid $470,000 to Ms Lucas, not $479,827. The discrepancy is explained by the fact that, in December 2022, Mr Conroy received $70,000 from Ms Conroy, and then paid $79,827 to Ms Lucas; see paragraphs [70]-[71] above).

145. Grapple submitted that Mr Chislett’s email indicated that those moneys were not paid to Ms Lucas in respect of the purchase of the Property, and were not payments made in respect of any liability of the Trust to Ms Lucas, but were instead made in order to achieve a financial separation between Mr Conroy and Ms Lucas following the end of their domestic relationship. On this basis, Grapple described the payments to Ms Lucas as “a purely personal financial arrangement between those parties”.

146. I do not accept this submission. The communication from Mr Chislett is very brief, and does not go into the detail of the “financial connection” between Ms Lucas and Mr Conroy which Ms Lucas wanted to “finalise”. On the evidence before the Court, the only such “financial connection” which existed as at August 2022 was a connection in respect of the Property held by the Trust: specifically, Ms Lucas had contributed $551,790 to the purchase of the Property, which was worth around $700,000, and which was held by Mr Conroy in his capacity as trustee of the Trust. It is likely that this was the “financial connection” which Ms Lucas sought to “finalise”. In circumstances where Ms Lucas had contributed over half a million dollars to the purchase of the Property, and where the relationship between herself and Mr Conroy had come to an end, it stands to reason that she was motivated to ensure that she received back all or most of those funds.

147. Further, the communication from Mr Chislett to the bankruptcy trustee on behalf of Mr Conroy on 12 July 2023 must be placed in context of other prior communications between those persons. In particular, prior to the communication discussed above, there had been a telephone conference call between the bankruptcy trustee, Mr Conroy and Mr Chislett on 24 May 2023, in which Mr Conroy provided “some context” regarding the transfer of the Property, including the following matters:

“-  The [Property] was purchased by [Mr Conroy] in his capacity as Trustee of the Bungab[b]ee First Light Trust in 2021 and he purchased the property             with his partner at the time, Isabel Lucas (now ex partner).

-   [Mr Conroy] advise that Isabel Lucas contributed all of the money and the rest came from finance obtained from Sempre Funding.

-   In January of 2022, Isabel and [Mr Conroy] agreed that they would either sell the property o[r] she would get paid out by July or August 2022.

-   [Mr Conroy] told his mother, Ingrid Conroy, about his finance and she said she would use her money to buy the property and pay Isabel out.”

148. Given the terms of this prior communication, it is likely that, when Mr Chislett referred in July 2023 to the payments made by Ms Conroy as having been made in order to finalise the “financial connection” between Mr Conroy and Ms Lucas, Mr Chislett was referring to, and the bankruptcy trustee would have understood him to be referring to, the arrangement which had previously been outlined in this teleconference, which involved Ms Lucas wanting to be repaid the amount of her contribution to the purchase of the Property by the Trust, and Ms Conroy “us[ing] her money to buy the property and pay [Ms Lucas] out”.

149. On the available evidence, it is unclear whether Ms Lucas contributed to the purchase of the Property on the basis that she was making a loan to the Trust or on the basis that she would have an equitable interest in the Property. However, it is unnecessary to decide this issue.

150. Having regard to the evidence outlined above, I am satisfied that the payments by Ms Conroy to Ms Lucas in August 2022 were made in consideration for Ms Conroy’s purchase of the Property from the Trust and, in particular, were made at the request of the trustee, Mr Conroy, either for the purpose of repaying Ms Lucas’s loan to the Trust or for the purpose of paying out Ms Lucas’s equitable interest in the Property.

151. Finally, Grapple submitted that, if (as I have found) the payments of $470,000 by Ms Conroy to Ms Lucas represented consideration for the purchase of the Property, then the Property was purchased by Ms Conroy at an undervalue.

152. If property is disposed of by sale and the sale price received by the transferor is equal to the true value of the property at the time of the transfer, the creditors have an undepleted fund against which to prove their debts; but if property is sold for an undervalue, that fact is relevant to the intent to be attributed to the transferor in disposing of the property: Cannane at [13] per Brennan CJ and McHugh J.

153. The thrust of Grapple’s submission was that, in determining whether the Property was purchased at an undervalue, the Court should have regard only to the payments made to Ms Lucas ($470,000) and not to the moneys paid by Ms Conroy to discharge the Sempre Mortgage ($195,076.31), because the latter payment was made in respect of a liability of Prana. Grapple submitted that the debt secured by the Sempre mortgage was “not a debt of the trust”, but “was Prana Energy’s debt”.

154. This submission fails to acknowledge that Mr Conroy had, as trustee of the Trust, given the Conroy-Sempre Guarantee in respect of Prana’s obligations to Sempre; that he had, as trustee of the Trust, mortgaged the Property to Sempre as security for repayment of the moneys advanced to Prana; and that (on Grapple’s own case) Prana was, to Mr Conroy’s knowledge, insolvent or close to insolvent as at August 2022. In those circumstances, as at August 2022, it was highly likely, if not certain, that unless the moneys advanced by Sempre were repaid, Sempre would in the near future take steps to enforce its mortgage over the only asset of the Trust.

155. In Wise Investments Pty Ltd v Ruddy Tomlins & Baxter, Solicitors [2019] QCA 271, a husband (Mr Cullen) executed a transfer of property to his wife (Ms Cullen), describing the consideration for the transfer as being “the natural love and affection” borne by the transferor for the transferee. It was contended that the transfer was made with the intent to defraud creditors and was therefore voidable under the equivalent of s 37A (namely, s 228 of the Property Law Act 1974 (Qld)). This claim was dismissed, with the trial judge finding, relevantly, that Ms Cullen had provided valuable consideration for the transfer. Although she did not pay any money to Mr Cullen, she refinanced the property and as a result the mortgage for which Mr Cullen was personally liable was discharged. On appeal, Gotterson JA (with whom Philippides JA and Bradley J agreed) referred (at [58]) to the decision in Barton v Official Receiver (1986) 161 CLR 75 at 86; [1986] HCA 44, where the High Court held that, for the purposes of s 120(1) of the Bankruptcy Act 1966 (Cth), a “purchaser … for valuable consideration” is “one who has given consideration for his purchase ‘which has a real and substantial value, and not one which is merely nominal or trivial or colourable’”. His Honour continued (at [59]) as follows:

“It is true that Michelle Cullen did not pay any money to Grant Cullen for the transfers of this property. However, her conduct in securing the refinancing by Westpac in anticipation of the transfers was of real value to Mr Cullen. It enabled the discharge of the NAB mortgage and the CEG mortgage in consequence of which Mr Cullen was released from personal liability to those lenders for the amount secured by their respective mortgages. The benefit of the releases was neither nominal, trivial nor colourable.”

156. In the present case, I am satisfied that, as a result of Ms Conroy providing the funds to discharge the Sempre Mortgage, Mr Conroy as trustee of the Trust received something of real and substantial, and not merely nominal or trivial or colourable, value. Specifically, he was, as trustee of the Trust, relieved of liability under the Conroy-Sempre Guarantee and relieved of the risk (which was highly likely) of Sempre enforcing its mortgage over the Trust’s only asset.

157. When the amount of the payment made by Ms Conroy to discharge the Sempre Mortgage is added to the amount of the payments made by Ms Conroy to Ms Lucas, the total amount paid by Ms Conroy was $665,076.

158. According to the only contemporaneous valuation of the Property, its “as is” market value at the time of the transfer to Ms Conroy was $700,000 (see paragraph [59] above).

159. The payments made by Ms Conroy to Sempre and Ms Lucas are, in total, approximately 95% of this valuation figure.

160. Further, it is necessary to consider value from the perspective of the transferor. The payments to Ms Lucas were received, as stated by Mr Chislett (in the email of 12 July 2023 upon which Grapple relied), in “full and final settlement” of the trustee’s obligation to repay the amount of Ms Lucas’s contribution to the purchase of the Property ($551,790). Accordingly, the value received by the Trust as a result of the payments made by Ms Conroy was both:

1. the release from any liability of the Trust to Sempre in respect of the Conroy-Sempre Guarantee ($195,076.31) and

2. the release from any liability of the Trust to Ms Lucas in respect of her contribution to the Property ($551,790).

161. The combined value of those benefits for the Trust was well in excess of the assessed market value of the Property at the time of its transfer to Ms Conroy.

Reasons for urgency?

162. In August 2022, Mr Conroy was impressing upon Ms Moses that the completion of the transfer was urgent. He asked her to take steps to “move [the Property] into [Ms Conroy’s] name asap” and to “action” this “swiftly” (see paragraph [56] above). A strong indicator of Mr Conroy’s desire to have this transaction completed “swiftly” was his willingness, despite his evident aversion to stamp duty, to accept that such duty was payable by his mother as an “extra cost for our own peace of mind” (namely, the peace of mind that would come from knowing that the transfer had been effected).

163. In his evidence, Mr Conroy said that his sense of urgency in August 2022 was due to the fact that he had reached an agreement with Ms Lucas to repay the amount of her contribution to the Property within a period of six months (which meant that payment was due around August or September 2022).

164. I do not accept this evidence, particularly in light of the following matters.

1. There is no objective evidence that there was any agreed deadline for repayment of moneys to Ms Lucas. Mr Conroy claimed that Mr Lucas had prepared “minutes” of the agreement between Ms Lucas and Mr Conroy, but no such minutes were produced.

2. Given the informality of the dealings between Ms Lucas and Mr Conroy which led to her making a contribution to the purchase of the Property by the Trust, and the ongoing close friendship between them, it is unlikely that any firm or formal deadline for repayment would have been imposed or enforced by Ms Lucas.

3. Mr Conroy indicated that the substance of his agreement with Ms Lucas was that, if the moneys were not repaid in this six-month period (that is, by around September 2022), the consequence would be that the Property would need to be sold. However, from mid-July 2022, Mr Conroy had already taken steps to transfer the Property to his mother in return for her making payments to Ms Lucas in respect of the amount she was owed.

1. Finally, some $79,000 of the moneys paid to Ms Lucas were paid in December 2022, well after the point in time at which any six-month “deadline” would have expired. There is no evidence of any communication from Ms Lucas to Mr Conroy in the period from August to December 2022, complaining that the deadline for payment had already passed.

165. It is far more likely that the reason for Mr Conroy’s sense of urgency in August 2022 was that he was aware of Prana’s parlous financial state and was aware that Prana would likely be placed under external administration in the near future. Further, he was aware that, when this occurred, Grapple would likely take steps to enforce its rights under the Conroy-Grapple Guarantee against the assets of the Trust (that is, the Property). Significantly, the transfer of the Property to Ms Conroy ultimately took place on the same day that Prana entered voluntary administration.

166. While I accept that Mr Conroy was motivated to complete the transfer as swiftly as possible because of the looming insolvency of Prana, it does not follow that the transfer was made “with intent to defraud creditors”.

167. It is more likely that, given his close relationship with Ms Lucas, Mr Conroy’s motivating concern in pushing through the transfer of the Property as swiftly as possible was to ensure that Ms Lucas received the full amount which she was owed in respect of the Property, prior to Grapple taking any steps to enforce the Conroy-Grapple Guarantee against the Property. Accordingly, Mr Conroy’s conduct may be seen as motivated by a desire to prefer Ms Lucas’s interests over those of Grapple.

168. As noted above, it is unclear whether, by reason of her contribution to the purchase of the Property, Ms Lucas had acquired an equitable interest in the Property or had made a loan to the Trust.

169. If Ms Lucas had an equitable interest in the Property, then it would follow that, as at August 2022, the Trust did not have any (or any substantial) equity in the Property, given that:

1. The Sempre Mortgage secured an amount of $194,554.18 in August 2022, representing approximately 28% of the value of the Property at that date ($700,000); and

2. Ms Lucas had contributed 72% of the moneys used to purchase the Property ($551,790 of the $770,000 purchase price in August 2021).

170. On this scenario, the position of the only creditor of the Trust, Grapple, was unaffected by the transfer. There was, at the date of the transfer, no equity in the Property which was available to satisfy any liability of Mr Conroy as trustee of the Trust to Grapple.

171. Alternatively, if Ms Lucas had loaned $551,790 to the Trust and had a claim to be repaid that sum, the position as at August 2022 was that, after allowing for the Sempre Mortgage, there was around $500,000 of equity in the Property which was available to meet the claims of the two creditors of the Trust, namely:

1. the claim by Ms Lucas for repayment of $551,790; and

2. the likely claim by Grapple under the Conroy-Grapple Guarantee in respect of Prana’s indebtedness of $237,804.01.

172. On this scenario, the effect of the transactions undertaken by Mr Conroy as trustee of the Trust in August 2022, pursuant to which the Property was transferred to Ms Conroy in return for Ms Conroy making payments of $470,000 in full and final settlement of the Trust’s liability to Ms Lucas, was to prefer the interests of one creditor of the Trust (Ms Lucas) over another (Grapple).

173. In In the matter of FW Projects Pty Ltd (in liq) [2019] NSWSC 892 at [76], Black J observed that the authorities indicate that a transaction which is advantageous to one creditor, while “prejudicial to unsecured creditors as a whole”, “would not be sufficient, without some further element amounting to fraud in the relevant sense to support relief under s 37A of the Conveyancing Act”. His Honour continued as follows (at [76]-[78]):

“In Abignano v Wenkart (1998) 9 BPR 16,765, Cohen J held that, although a mortgage was executed by the first defendant with the intention to thwart the plaintiffs’ prospects of recovering the amount of their judgment, and the effect of that mortgage was to give a preference to the second defendant as a creditor of the third defendant, a transaction that operated to give preference to another creditor was not voidable under s 37A of the Conveyancing Act. His Honour there referred to Glegg v Bromley [1912] 3 KB 474; [1911-13] All ER Rep 1138, where Vaughan Williams LJ observed (at 484) that “mere preference of one creditor over another” does not bring the case within the scope of a predecessor to that section “even though the parties may have been minded to defeat a particular creditor”; and Fletcher Moulton LJ (at 485) and Parker J took the same view; see also Re Sarflax Ltd [1979] Ch 592. His Honour held (at 16,778) that, despite finding that the first defendant had there taken the relevant steps to avoid paying the plaintiffs as his creditors, he was bound by authority to find that the transaction could not be avoided under s 37A of the Conveyancing Act. In Wentworth v Rogers [2004] NSWCA 430, the Court of Appeal again referred to earlier authorities, including Abignano v Wenkart above, in observing (at [63]) that s 37A of the Conveyancing Act did not affect an alienation of property which amounted merely to a preference of one creditor over another.

In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 89 ACSR 1 at [2638]–[2640], Drummond AJA (with whom Carr AJA agreed at [3096]) observed that an insolvent creditor that disposes of the whole of its assets to a creditor to which the debtor was indebted, at least to the value of the assets transferred, does not infringe the corresponding provision, even if the debtor intended to prefer that creditor over its other creditors, unless the debtor reserved some benefit for itself. His Honour there referred to New South Wales appellate decisions reaching the same result, including Abignano v Wenkart above and Wentworth v Rogersabove. …

It seems to me that, at the highest, the evidence on which the Plaintiffs rely raises a serious question that the Company’s entry into the Manassen Security Agreements in September 2018 preferred the interests of Manassen over the interests of the other unsecured creditors of the Company, likely including the Plaintiffs. There is no indication that that transaction reserved any benefit for the Company, or of any intent to defraud even within the expanded meaning of s 37A of the Conveyancing Act, beyond the advantage of the transaction to Manassen which does not establish that intent. I am therefore not persuaded that, on the evidence as it stands, the Plaintiffs can establish a serious question to be tried under s 37A of the Conveyancing Act in respect of the grant of security to Manassen under the Manassen Security Agreements ...”

174. In the present case, there is no indication that the transaction in question reserved any benefit for Mr Conroy as trustee of the Trust, and there is no indication of any intent to defraud creditors beyond the advantage of the transaction to Ms Lucas, which is insufficient to establish any such intent.

175. Grapple highlighted the observation in the passage quoted above to the effect that a transaction preferring one creditor over another would not infringe s 37A, where the transaction involves a disposal “at least to the value of the assets transferred”, and submitted that, in the present case, the transfer of the Property to Ms Conroy was at an undervalue. I have already addressed, and rejected, this submission above.

176. It follows that Grapple has not established that the transfer of the Property was made “with intent to defraud creditors” within the meaning of s 37A of the Conveyancing Act.

Section 37A(3)

177. Given the findings I have made, it is not necessary to determine whether Ms Conroy is a “purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors” within the meaning of s 37A(3).

178. If it had been necessary to determine this issue, I would have found that Ms Conroy met this description.

179. The onus is on a person relying on s 37A(3) to prove that he or she comes within its operation: Super Vision Resources BVI Registered No 1,810,534 v AC Holdings Co Pty Ltd [2020] NSWCA 319 at [95] per Meagher JA (Basten JA agreeing), citing Wentworth v Rogers & Anor [2004] NSWCA 430 at [66]-[68] per Hodgson JA (Santow JA and Hislop J agreeing).

180. It is doubtful that constructive notice is sufficient to deprive a purchaser of the protection of s 37A(3): Super Vision Resources at [96]-[102].

181. There was no evidence that Ms Conroy was aware of the financial position of Prana. I do not consider that Ms Conroy’s role as a bookkeeper for Prana provides, given her limited responsibilities, a sufficient basis for inferring that she was aware that Prana was, in August 2022, nearing insolvency. Nor do I consider that the close relationship between Mr Conroy and his mother provides a sufficient basis for inferring that he would likely have disclosed to her, prior to the transfer, such matters. Ms Conroy denied having any such knowledge and I regard those denials as plausible, particularly given the absence of any objective evidence that Mr Conroy informed her of Prana’s financial position during this period.

182. Grapple relied on the response given by Ms Conroy in cross-examination which is highlighted below:

”Q. I want to suggest to you that the reason for this transfer being rushed was because you were aware of the financial position that Prana was in. Do you agree or disagree with that?

A. No.

Q. And Jarrod was rushing this transfer through because he didn’t want to lose the property to Grapple. Do you agree with that?

A. No.

Q. And he spoke to you in August about this, 2022?

A. No.

Q. And you were on notice of this plan by Jarrod, weren’t you?

A. I was on notice?

Q. Yes.

A. Do you mean with my work?

Q. Well, you were on notice by Jarrod discussing with you this plan to transfer the property before Prana went into voluntary administration, weren’t you?

A. Yes.

Q. Jarrod as worried about the debts of Prana. That’s true, isn’t it?

A. Yes.

Q. And he was worried about his personal debts still, as at August 2022. That’s true, isn’t it?

A. I imagine so.

Q. And he was discussing that with you, wasn’t he, in August 2022?

A. No. No.

Q. And you were aware of the facility agreement between Grapple and Prana as of August 2022?

A. No.

…

Q. Now, I wanted to suggest to you that you were in regular contact with Jarrod during July and August about this planned transfer of the property to you. Do you agree with that?

A. I was in contact with him, yes.

Q. And that was because Jarrod was constantly updating you as to the state of Prana Energy, wasn’t he?

A. No.

Q. And he was stressed about the amounting debts that Prana held?

A. He was not discussing that with me.”

183. The proposition highlighted above, with which Ms Conroy agreed, was ambiguous. It could mean either:

1. that Mr Conroy discussed with Ms Conroy his plan, being a “plan to transfer the property before Prana went into voluntary administration”; or

2. that Mr Conroy discussed with Ms Conroy, at a time “before Prana went into voluntary administration”, his plan, being a “plan to transfer the property” to Ms Conroy.

184. When regard is had to the whole of Ms Conroy’s evidence, including the evidence quoted above given before and after she accepted this proposition, it is clear that she understood and accepted the proposition in the latter, and not the former, sense.

185. In any case, whatever Ms Conroy’s knowledge of Prana’s financial position, there is no evidence that Ms Conroy was aware that Mr Conroy as trustee of the Trust had given a guarantee in respect of any liability of Prana, or that she was aware of Prana’s liability to Grapple. In cross-examination, she consistently denied knowledge of the Conroy-Grapple Guarantee. Those denials are plausible, particularly because there is no objective evidence that Ms Conroy was ever informed of the arrangements with Grapple or that there were any creditors or potential creditors of the Trust other than Sempre and Ms Lucas.

186. I accept Ms Conroy’s evidence that she was purchasing the Property in order to live there in the future. She had sold her home in Victoria in July 2022 and, naturally enough, wanted to move closer to her family. Consistently with this evidence, Ms Conroy declared to Revenue NSW on 11 August 2022 that she would occupy the Property as her principal place of residence or for a continuous period of at least six months, commencing within twelve months from the date of settlement. Although there was no habitable dwelling on the Property as at August 2022, Ms Conroy did arrange, shortly after purchase, for building works to be undertaken on the Property. It is likely that, in deciding to purchase the Property (rather than any other similar property in the same region), Ms Conroy was also, in part, motivated by a desire to assist her son in finalising the financial position between himself and Ms Lucas, by providing the Trust, through this transaction, with the funds necessary to pay back what was owing to Ms Lucas in relation to the Property.

187. Ms Conroy must have been aware, from the terms of the communications from Mr Conroy to Ms Moses on which she was copied, that Mr Conroy was motivated to ensure that the transfer occur as soon as possible. However, she may well have understood that this was due to Mr Conroy being keen to ensure that Ms Lucas was repaid the moneys which she had contributed to the Property.

188. Further, the fact that Ms Conroy was motivated, in part, by a desire to assist her son to repay moneys owed to Ms Lucas does not establish that she was aware that Mr Conroy was preferring Ms Lucas over other creditors of the Trust, particularly since there was no evidence that she was aware that there were any other creditors of the Trust.

Was Ms Lucas a necessary party?

189. There was in evidence a document entitled “Addendum to Schedule 1”, which is dated “28 July 2021” (the “July 2021” Addendum).

190. This document contains a “Schedule 2”, which names Mr Conroy and Ms Lucas as trustees of the Trust, and which names Mr Conroy, Ms Conroy and Ms Lucas as Default Beneficiaries. It appears to have been executed by Mr Borleis as Settlor and by Mr Conroy and Ms Lucas as “Trustees”.

191. Ms Conroy submitted that Grapple cannot succeed on its pleaded case because it had not joined Ms Lucas to the proceeding. The contention was put as follows:

1. Ms Lucas was appointed as a trustee of the Trust on around 28 July 2021 by the execution of the “July 2021” Addendum. From that time, Mr Conroy and Ms Lucas were the trustees of the Trust;

2. Mr Conroy ceased to be a trustee of the Trust when he became bankrupt, pursuant to an “ipso facto” provision in the Trust Deed (cl 14.4); and

3. it follows that Ms Lucas is the only trustee of the Trust and, insofar as any relief is sought in respect of Grapple’s rights against the property of the Trust, she is a necessary party to such an action.

192. It is unnecessary to determine this issue, because I have found that Grapple’s claim under s 37A of the Conveyancing Act has not been established and the transfer of the Property to Ms Conroy is not voidable, with the result that the Trust does not have any assets.

193. If it had been necessary to determine this issue, I would not have been satisfied that Ms Lucas became trustee of the Trust as a result of the execution of the “July 2021” Addendum.

194. When questioned about this document, Mr Conroy acknowledged that he did not know when it was signed. Given the evidence of Mr Conroy that other similar documents were created well after the date which they bear, and were created to record transactions which had not in fact occurred, this document must be treated with some caution and its reliability must be assessed in the light of other available evidence. In that regard, the following matters are significant.

1. Leaving aside the “July 2021” Addendum, there is no contemporaneous document which refers to Ms Lucas as a trustee of the Trust.

2. For example, Ms Lucas was not named as a trustee of the Trust in the documentation relating to the Sempre Mortgage (which was entered after the date of the “July 2021” Addendum).

3. Further, in executing the Conroy-Grapple Guarantee in May 2022, Mr Conroy represented and warranted that he was the “sole trustee of the Trust”, and that the copy of the Trust Deed which was delivered to Grapple (which did not include the “July 2021” Addendum) was “a true and complete copy of the Trust Deed which is in force at the date of this deed”. Those matters provide a basis for inferring that, as at May 2022, the “July 2021” Addendum either had not come into force or did not continue in force.

4. There is no explanation as to why, if Ms Lucas was appointed trustee in July 2021 and remained so at all times thereafter, Mr Conroy did not refer to her as a trustee in any of the communications with Ms Moses in July or August 2022 regarding the sale of the Property to Ms Conroy.

5. Similarly, Mr Conroy did not refer to Ms Lucas as a trustee of the Trust in any of his subsequent communications with the bankruptcy trustee, Mr Hanna.

195. Finally, it should be noted how this matter arises on the pleadings. In its Amended Statement of Claim (at [7]), Grapple pleads that the Trust Deed “was said to be allegedly amended by way of” the “July 2021” Addendum. In her Defence (at [2B(a)], [7]-[8]), Ms Conroy “notes the contents” of the “July 2021” Addendum, “does not admit that such document varied the terms of the Trust Deed”, but says that if it did, then Ms Lucas remained as the sole trustee of the Trust. Ms Conroy’s position was put as follows in paragraph 2B(a) of the Defence:

“[Mr Conroy] says if as the plaintiff asse[r]ts at paragraph 7 of the ASOC that the Trust Deed was amended by the ‘July Amendment’, then upon the cessation of [Mr Conroy’s] office because of [Mr Conroy’s] bankruptcy, Isabel Lucas (Isabel) remained as the sole trustee of the Trust”.

196. Accordingly, neither Grapple nor Ms Conroy advanced a positive case that the Trust Deed was amended by the “July 2021” Addendum.

197. Ms Conroy raised a contention that Ms Lucas was “the sole trustee of the Trust” only in the event that Grapple established that the Trust Deed was amended by the July 2021 Addendum. However, Grapple advanced no such contention in its pleading and expressly disavowed any such contention in its opening.

Conclusion & Orders

198. For the reasons given above, I have determined that Grapple has failed to establish its claim that the transfer of the Property to Ms Conroy is voidable pursuant to s 37A of the Conveyancing Act. It follows that Grapple’s claims for relief in the Amended Summons must be dismissed.

199. Ms Conroy indicated that, in the event that she was successful, she sought an opportunity to be heard on the question of costs.

200. Accordingly, I make the following orders:

1. The Amended Summons be dismissed.

2. Direct that by 5pm on 28 February 2025, the First Defendant serve and provide to the Associate to Nixon J, the form of costs order which she seeks and her submissions on costs (limited to 5 pages), indicating whether, and if so why, an oral hearing is requested to deal with the issue of costs.

3. Direct that by 5pm on 10 March 2025, the Plaintiff serve and provide to the Associate to Nixon J, any submissions in reply, including any competing form of order in respect of costs, indicating whether, and if so why, an oral hearing is requested to deal with the issue of costs.

4. Note that, in the event that neither party requests an oral hearing, the issue of costs will be determined on the papers.

Decision last updated: 18 February 2025