Grellman, R.J. v P.T. Garuda Indonesia Ltd (formerly known as Garuda Indonesian Airways)

Re: RICHARD JOHN GRELLMAN
And: P.T. GARUDA INDONESIA LTD (formerly known as Garuda Indonesian Airways)
and PAUL ANTHONY SIMPSON
No. W970 of 1986
FED No. 134
Bankruptcy
101 ALR 135
29 FCR 26

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Hill J.(1)

CATCHWORDS

Bankruptcy - repayment of misappropriated funds by bankrupt to previous employer by way of transfer of property and payment of money in exchange for promise not to report the matter to police; transactions carried out at time when damages claim pending against bankrupt - whether transactions fraudulent dispositions under s.121 Bankruptcy Act 1966 (Cth) - meaning of valuable consideration discussed - whether repayment of an antecedent debt valuable consideration - meaning of good faith discussed - whether recipient of property must intend to derive a special advantage from the transaction - effect of illegal conduct on question of good faith - transaction involving payment by bank cheque - whether question of good faith to be determined at time of receipt of cheque or time of actual banking.

Bankruptcy Act 1966 (Cth): ss. 120, 121

HEARING

SYDNEY

#DATE 11:4:1991

Counsel and Solicitors R.B.S. Macfarlan QC and
for Applicant: L. Coonan instructed by Abbott Tout

Russell Kennedy

Counsel and Solicitors B.J. Skinner instructed by
for Respondent: Alderdice and Clarke

ORDER

The Court orders that the parties bring in Short Minutes of Order on a date to be fixed.

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

JUDGE1

The applicant, Richard John Grellman, is the trustee of the estate of the second respondent, Paul Anthony Simpson, a bankrupt. Mr Grellman seeks a declaration that a payment to P.T. Garuda Indonesia Ltd ("Garuda") of $100,000 and a transfer to Garuda of a house in Marrickville by Mr Simpson is void as against the registered trustee pursuant to the provisions of s.120 of the Bankruptcy Act 1966 (Cth) (as amended) ("the Act") or pursuant to the provisions of s.121 of that Act. Mr Grellman seeks additionally orders that Garuda repay to him the sum of $100,000 and the net proceeds of sale of the Marrickville property being the whole of the land comprised in volume 9696 folio 250 and known as 347 Livingstone Road, Marrickville.

Mr Simpson was employed by Garuda from November 1975 to July 1983 as an accounts manager. As such his duties included the processing and recording of all financial transactions of Garuda in Australia including the receipting of moneys received for tickets, the administration of moneys received from other offices such as Melbourne, the arrangement of transfers of moneys overseas, negotiations of exchange rates, payment of wages and superannuation, as well as other administrative tasks. He was not, however, authorised to sign cheques.
After Mr Simpson left Garuda, a company of which he and his wife were shareholders, Coroba Pty Limited, entered into a contract in approximately June 1985, to buy a travel agency called Matra Travel Service Pty Limited. Between the time of contract and the time completion was contemplated under it, Mr Simpson worked for some months in the travel agency business. According to Mr Simpson, it was in that time that he discovered that he had been told a lot of lies. He formed the view that he did not wish to proceed with the sale and sought advice from a solicitor and barrister as to whether Coroba Pty Limited was bound to complete the contract. The advice he was given was that if he did not go ahead with it he could be sued for damages.
Following that advice Mr Simpson decided to take matters into his own hands and set fire to the premises upon which the travel agency was conducted. The fire occurred on 13 October 1985.
Mr Simpson was injured in setting fire to the building and was apprehended by the police. He was hospitalised for some weeks. At some stage he was charged with malicious damage to the building and pleaded guilty. He was not sentenced to prison, but instead received a bond.
It seems that Mr Simpson's apprehension by the police triggered an enquiry into his affairs. In particular, it came to the attention of the police that there were substantial funds in Mr Simpson's bank account which required explanation. Some time in October 1985 (the evidence suggests around 23 October) Detective Luffe of the Arson Unit of the CIB, attended the offices of Garuda by appointment and met Mr Santangelo, the then accounts manager of Garuda. He told Mr Santangelo that he was investigating Mr Simpson's arson of the travel agency and that during the investigation he had noted that there were substantial funds in Mr Simpson's bank account, and that there was a mismatching of assets and income. He said that he was led to believe that the money came from Garuda and requested information regarding superannuation payments, the length of employment of Mr Simpson with Garuda, details of his salary etc. In due course that information was provided. According to Mr Santangelo, whose evidence I accept, Detective Luffe did not elaborate about the fire at the agency.
The day before Detective Luffe saw Mr Santangelo, Mrs Simpson had telephoned Mr Woerjanto who at that time was district manager for Garuda in Sydney. Mrs Simpson asked Mr Woerjanto, in a conversation conducted in the Indonesian language, to help her children and herself. She said that she was afraid that the whole family would end up in jail. Mr Woerjanto asked why and was told by Mrs Simpson that her husband had been taking money from Garuda. She asked that Garuda take no legal action against the family and that she would arrange for her husband to return the money to Garuda. Mr Woerjanto agreed that if the money were returned, he would report the matter to his head office but not report it to the police. In fact Mr Woerjanto never reported the matter to the police, although he did, of course, report it to his head office.
Mr Santangelo, on the day he had his conversation with Detective Luffe or perhaps the next day if Mr Woerjanto was not in Sydney, reported the conversation to Mr Woerjanto. Mr Woerjanto's version of the conversation differed slightly from that of Mr Santangelo. While generally accepting the evidence of Mr Woerjanto, it was clear that he had some difficulties with English and some difficulties in remembering what had happened in the past. To the extent that there is a conflict between Mr Santangelo and Mr Woerjanto, I would prefer the evidence of Mr Santangelo who impressed me as a witness of truth in the witness box.
According to Mr Woerjanto, Mr Santangelo told him that the police had interrogated Mr Simpson and that they had found that Mr Simpson had taken money from Garuda. According to Mr Woerjanto, Mr Santangelo said nothing about the fire at the agency which seems somewhat strange. I think it is more probable than not that Mr Santangelo mentioned the arson, although presumably it was not at that stage regarded by either man as of great significance.
About two days after Mrs Simpson had called Mr Woerjanto, that is to say one day after Detective Luffe had visited the premises of that company, Mr Simpson telephoned Mr Woerjanto. He told Mr Woerjanto that he had taken money from Garuda and that he would return it. Mr Simpson probably mentioned the sum of $250,000. He said he did not have the whole money, although he did have money in the bank. Mr Simpson said that he wanted to pay the money back so that Garuda would not report the matter to the police. Mr Simpson said that he would send a bank cheque to Mr Woerjanto in the mail. The suggestion of a bank cheque apparently emanated from Mr Woerjanto.
Approximately a week later, the bank cheque arrived at the office of Garuda. This payment appears to have been made on 1 November 1985. On this basis the conversation with Mr Simpson occurred approximately on 24 October 1985, the conversation with Detective Luffe on 23 October 1985 and the conversation with Mrs Simpson on 22 October 1985.
About another week later, that is to say approximately 8 November 1985, Mr Simpson met with Mr Woerjanto at the office of Garuda by appointment. In this conversation, according to Mr Woerjanto, Mr Simpson repeated what had already been said by Mrs Simpson. He said he would return the money stolen in the sum of $250,000 of which $100,000 by then had already been received. He told Mr Woerjanto that he had a property which he had just bought in Marrickville for $150,000 and that he would transfer that property to Garuda. Mr Woerjanto did not suggest that it would be preferable if Mr Simpson sell the property and return the money to him. He thought, so he said in evidence, that it was better for Garuda that the transfer take place as soon as possible. This, so Mr Woerjanto said, was because he had to report to Jakarta and it was better if the story was "complete". Mr Woerjanto made no independent check on the value of the Marrickville property, but merely contacted his solicitors to process the transfer. In fact, it seems that Mr Simpson had only paid $134,425 for the purchase of the property.
On or about 4 December 1985, Messrs McCaw Johnson, solicitors for the vendors of the travel agency and related companies which owned the land upon which the travel agency business was conducted, wrote a letter to Mr Simpson. The letter was addressed to an address at which Mr Simpson was no longer residing, and according to Mr Simpson at least, he did not receive it. It is not necessary in these proceedings to determine whether Mr Simpson did in fact receive it. The significant matter is that a copy of that letter was sent to Mr Clapin, Mr Simpson's solicitor. The letter indicated that the clients of McCaw Johnson intended to proceed with a claim for damages against Mr Simpson, it being expected that the damages were substantial. In fact, the damages ultimately claimed were in excess of a quarter of a million dollars. The letter concluded with the following paragraph:

"Our clients are concerned that you may attempt to dispose of your assets prior to the completion of their claiMs In these circumstances you are requested to provide us with your undertaking that you will not dispose of or encumber in any way any of the assets. In the event of you not being prepare (sic) to provide this undertaking by 12 midday on Monday, 9th December 1985 an application will be made to the Supreme Court for appropriate orders."

On 9 December 1985, Mr Clapin, acting for Mr Simpson, contacted a Mr Davenport, solicitor, acting for Garuda. The file note made by Mr Davenport of this conversation read as follows:

"9.12.85 Phone from Bill Clapin. 2324311. Paul Simpson took $250,000 from Garuda. He has repaid $100,000. He will transfer another property to Garuda worth $150,000. He is in more trouble as he burnt a building down and the solicitors want an undertaking that he won't transfer any property."

I am satisfied, on the evidence, that Mr Clapin received the copy of the letter addressed to Mr Simpson from Messrs McCaw Johnson and was well aware of the possibility of the vendors of the travel agency seeking an undertaking that Mr Simpson not part with assets.
On the same day, Mr Davenport rang Mr Woerjanto. Mr Davenport's note of this conversation is as follows:

"Phone to Woerjanto - OK. He will give release for $250,000. Told him about stamp duty and agent's commission."

Mr Davenport was not called to give evidence in the proceedings. His note of the conversation with Mr Woerjanto is somewhat cryptic. It is not clear what proposition it was to which Mr Woerjanto assented, as indicated by the letters "OK". It is, however, more probable than not in my opinion that Mr Davenport would have mentioned to Mr Woerjanto the terms of his conversation with Mr Clapin which presumably was only minutes before and in particular the fact that the solicitors for the vendors of the agency business had sought an undertaking that the property would not be transferred.
Mr Woerjanto was cross-examined in respect of this conversation. He said that he did not remember whether Mr Davenport had told him that a conversation had occurred with Mr Clapin and that the solicitors sought an undertaking. He did not deny that such a conversation took place but I am satisfied on the balance of probabilities that it did.
Thereafter, Mr Davenport spoke again to Mr Clapin on three more occasions on the day. In these conversations Mr Clapin agreed to prepare the contract. He advised Mr Davenport that Mr Simpson would pay the stamp duty on the contract and there was a discussion concerning the form of receipt which Garuda would give to Mr Simpson.
A contract was duly prepared. It was in the ordinary form approved by the Law Society of New South Wales and Real Estate Institute and showed a contract of purchase and sale for a consideration of $150,000. It provided in the usual way for an adjustment of rates, taxes and outgoings at completion but this did not take place. Mr Davenport, acting for Garuda, made no enquiries of statutory authorities and, so far as the evidence would suggest, such rates as may have been outstanding at the time of contract were met by Garuda.
The form of receipt which was prepared and handed to Mr Simpson in exchange for his handing over the Certificate of Title and a form of transfer read as follows:

"Received from Paul Anthony Simpson Certificate of Title Volume 9696 Folio 250 in respect of property number 347 Livingstone Road Marrickville together with executed form of Transfer in favour of Garuda Indonesian Airways with respect to such property in full satisfaction and discharge of debt to extent of $150,000 outstanding from Paul Anthony Simpson to Garuda Indonesian Airways. It is acknowledged that a sum of $100,000 has previously been paid by Paul Anthony Simpson to Garuda Indonesian Airways.

That receipt was dated 9 December 1985, that is to say the day on which the conversations between Mr Clapin and Mr Davenport and between Mr Davenport and Mr Woerjanto took place. On the next day Mr Davenport phoned Mr Woerjanto who advised that he had the documents. They were then forwarded to Mr Davenport for stamping and registration, together with a bank cheque (presumably provided by Mr Simpson) for $3,375.50, stamp duty. At that stage neither the transfer nor agreement for sale had been signed by Garuda.
After the transfer had been registered and a Certificate of Title issued in the name of Garuda, Mr Davenport wrote to Garuda to the attention of Mr Woerjanto, a letter which said relevantly:

"We confirm that in acting on the transfer we did not make any enquiries from the relevant authorities and accordingly we do not know what amounts, if any, are outstanding for Council rates, water rates and land tax. Should Mr Simpson become bankrupt within six months of the date of the transfer it is possible that the Trustee in bankruptcy could require this property to be transferred back into the bankrupt estate as the transfer would be a preference to a creditor."

The above findings of fact are based upon the evidence of Mr Woerjanto, Mr Santangelo and the documentary material tendered. Perhaps not surprisingly, Mr Simpson's account differed.
According to Mr Simpson, the $100,000 he had paid to Garuda and the transfer of land related to a transaction of loan 10 years earlier. According to Mr Simpson, his then prospective father in law, who lived in Indonesia, a Mr Paath, had arranged a loan from Garuda in the course of Mr Paath's ordinary business activities. The loan was said to be in the amount of US$250,000. Mr Simpson, at that time, was about to start employment with Garuda and Mr Paath asked Mr Simpson, so it was said, to come with him to the management of Garuda and "ratify" the loan. Mr Paath, it was said, just wanted Mr Simpson to put the loan in his name, being an employee of the company. Mr Paath, it was said, did not explain the reason for this and Mr Simpson did not ask. Mr Simpson had no recall of the person he saw at Garuda and said that he signed no document in relation to the transaction. The loan was said to be for a period of 10 years without interest. Mr Simpson said that he did not see the transaction as an unusual one.
During the course of his evidence, when cross-examined about the misappropriation, Mr Simpson was warned that he was not obliged to answer the questions on the ground that they might incriminate him. He, however, denied the misappropriation, although he said it may have been possible that Mr Woerjanto had suggested the possibility of misappropriation in the course of conversations.
No evidence of any such loan having been made was adduced by Garuda. Mr Woerjanto was unaware of any such loan. It would, obviously, have been in Garuda's interest to have presented its case as one involving the mere repayment of a loan, rather than as one involving it in admitting that it had agreed not to report to the police the circumstances of a misappropriation.
I formed the view, from observing Mr Simpson in the witness box, that he was not telling the truth. Apart from the fact that his version of events in Indonesia was inherently improbable, his demeanour in the witness box and his manner of answering questions, lead me to the conclusion that I would not believe a word he said unless it was corroborated by some other person, and indeed in address neither counsel suggested that I should accept Mr Simpson's version of what happened.
In due course judgment was entered on 29 April 1986 against Mr Simpson, following an assessment of damages by Master Allen in the Supreme Court of New South Wales in the sum of $496,529.18, which sum included costs and interest. On 9 August 1986 a sequestration order was made on the petition of the vendor of the travel agency business on the ground of failure to comply with a bankruptcy notice based upon the Supreme Court judgment. The transactions under challenge in the present proceedings occurred more than six months after the commencement of the bankruptcy.
Section 121 of the Bankruptcy Act provides relevantly as follows:

"(1) Subject to this section, a disposition of property, whether made before or after the commencement of this Act, with intent to defraud creditors, not being a disposition for valuable consideration in favour of a person who acted in good faith, is, if the person making the disposition subsequently becomes a bankrupt, void as against the trustee in the bankruptcy.

Section 121 had its origin in 13 Eliz c 5 which rendered voidable all dispositions of property made with the intention of hindering, delaying or defrauding creditors. The modern version of the Elizabethan Statute is still to be found in state conveyancing or property legislation, cf Conveyancing Act 1919 (NSW) s.37A. Neither the Statute of Elizabeth nor its modern versions were part of bankruptcy law. Section 121 is part of the bankruptcy law, although subject to its context it is to be construed having regard to its ancient origins.
It was conceded by counsel for the respondent that on the evidence, and so far as it concerned Mr Simpson, both the payment of $100,000 and the transfer of the property at Marrickville made by him were dispositions made with intent to defraud creditors. In my opinion this concession was properly made. The evidence leaves me in no doubt that Mr Simpson entered into both these transactions with the intent of defeating or defrauding his other creditors, including particularly the vendor of the travel agency business, in order to obtain an advantage for himself, namely the exaction of a promise by Garuda that that company would not, if the transactions took place, report the misappropriations to the police.

The more difficult question is whether the two transactions were made for valuable consideration in favour of Garuda being a company which acted in good faith.
It was conceded by the applicant that the transactions in question were made for "valuable consideration" as those words are used in s.121. There is no reason to doubt that consideration in s.121 means valuable consideration and that it may include past consideration in the nature of an antecedent debt at least where there is a promise to forbear from suing. No question of adequacy of consideration arises. In Glegg v Bromley (1912) 3 KB 474, a case concerned with the provisions of 13 Eliz c 5, Vaughan-Williams L.J. held that a charge to secure existing debts was given for valuable consideration. However, Vaughan-Williams L.J. also expressed his firm agreement with the proposition that the mere existence of the antecedent debt was itself not good consideration. There had to be some benefit or advantage accruing to the assignor, eg time for the payment of the debt or some other consideration. That of course was a case involving the giving of additional security and it may be that a repayment of moneys misappropriated may itself be seen to be a payment for consideration without more. To the extent that something further is necessary by way of consideration that exists in the present case, namely in the agreement on the part of Garuda not to disclose the misappropriation to the police. However, if that promise on the part of Garuda is seen to be the appropriate consideration, then there is much to be said for the view that it is illegal and should be excluded from account. However, the concession having been made, I do not pursue the matter further.
The real issue between the parties was whether on its part Garuda was acting in good faith.
In Re Barnes; Ex parte Stapleton (1962) QdR 231, Gibbs J, then sitting in the Supreme Court of Queensland, referred to the necessity, in a case where there is consideration, that the disponee be shown to have been privy to the fraud. In Re Walters; Ex parte Official Assignee Currie (Respondent) (1898) 19 LR (NSW) B and P 1 at 2 it was said in a case involving a disposition for value that the disponee's fraudulent intent must be "brought home" to the purchaser. It was submitted in the present case that the evidence did not show that Garuda was in the relevant sense, privy to or in other words party to the fraud.
It must be said at the outset that absence of good faith will not be shown merely because the disponee, as a result of the disposition, obtained a preference as against the other creditors. The cases decided in the context of the Statute of Elizabeth (13 Eliz c 5) make it clear that a disposition made for the express purpose of defeating other creditors by giving a preference to one of them, will not necessarily be held to be fraudulent in the relevant sense: Alton v Harrison (1869) LR 4 Ch 622. Thus, in Middleton v Pollock (1876) 2 Ch D 104 at 109. Jessel M.R., speaking of the Statute of Elizabeth said:

"It has no regard whatever to the question of preference or priority amongst the creditors of the debtor."

Again in Re Lloyds Furniture Palace Limited, Evans v The Company (1925) 1 Ch 853, it was held that an agreement by a company to issue debentures to a creditor as security for past and future loans, delayed in issue to retain credit with other creditors, was not voidable under the Statute of Elizabeth. In that case Romer J said (at 860):

"The Statute of Elizabeth has, as is well known, been the subject of judicial consideration in a great number of reported cases ... Those cases seem to establish the principle that a conveyance is not avoided by the statute merely because it is made with the intention of preferring, and does in the result prefer, one creditor of the grantor over the others." In Alton v Harrison (supra) Giffard L.J. in reference to a deed executed by a debtor at a time when he knew that a writ of sequestration would be issued against him, said: `If the deed is bona fide - that is, if it is not a mere cloak for obtaining a benefit to the grantor - it is a good deed under the Statute of Elizabeth.' In Middleton v Pollock (supra) Jessel M.R. said (at 108-9): `The meaning of the Statute is that the debtor must not retain a benefit for himself. It has no regard whatever to the question of preference or priority amongst the creditors of the debtor.'"

His Lordship then referred to Glegg v Bromley (supra); a decision of Fletcher-Moulton L.J. and of Parker J, the latter of whom said (at 492):

"Does a debtor who gives his creditor security with the intention of preferring him to other creditors or another creditor, and consequently defeating or delaying such other creditors or creditor, have an illegal intention within the meaning of the statute? In my opinion it is well decided that he has not, and as far as I can gather no distinction has ever been drawn in the cases between a preference given for fresh security and a preference given without any fresh security."

Reference may also be made to a paper given by Fox J, then a judge of the Supreme Court of the Australian Capital Territory for the Committee for Post-Graduate Studies in the Department of Law entitled "Voidable transactions under the Bankruptcy Act 1966 with particular reference to fraudulent dispositions of property."
Of course, s.121 of the Act is now part of the law relevant to the administration of estates in bankruptcy. The section is contained in an Act which deals specifically with the setting aside of preferences. That fact does not change the apparent function of a section such as s.121, rather it reinforces it. If s.121 covered the entire field of preferences, there would be no need for specific statutory provisions dealing with that subject matter. While some change may have been made to the policy inherent in the Statute of Elizabeth by s.6 of the Act which provides that a reference in the Act to an intent to defraud the creditors or to defeat or delay the creditors of a person is to be read as including an intent to defraud or to defeat or delay any one or more of those creditors, that section does not seem of itself to alter the position that s.121 is not concerned with voiding transactions the only purpose or effect of which is to give a preference to one creditor as against another.
Accepting therefore that more than preferential treatment of one creditor is necessary to constitute intent to defraud, if it be shown that the disponor entered into a transaction with the intention not merely of giving a preference to one creditor as against another but in so doing to gain for himself a special advantage, and that the disponee accepts the disposition on that basis, then in my view the transaction can be characterised as more than one designed merely to give a preference to one creditor. It will fall to be avoided by s.121.
Thus, the question that needs to be resolved, and it is a question of fact in the present case, is whether Garuda in accepting the payment to it of $100,000 and further in accepting the contract and transfer of the Marrickville property, was a party to Mr Simpson's fraud?
It seems to me that there is a real distinction between the acceptance by Garuda of the payment of $100,000 on the one hand and the acceptance by it of the transfer of land on the other.
At the time Garuda accepted the payment of money, it had no actual notice of the claim of the vendor of the travel agency business. It is true, as was submitted by the applicant, that having notice of the fact that Mr Simpson had set fire to the premises, it was aware of facts which were likely to give rise to a claim by the vendor for damages against Mr Simpson. However, I accept the evidence of Mr Woerjanto, that this was not a matter which he took into account in accepting the payment of $100,000. He had no notice then of circumstances which might suggest that Mr Simpson was insolvent or indeed was likely to become insolvent. Rather, faced with a confession by Mr Simpson that the latter had misappropriated funds of Garuda, his concern was to ensure that those funds be repaid. He was making a commercial decision which may have had the result of giving Garuda a preference if it were to turn out that Mr Simpson was insolvent, but at that stage it could not be inferred from his conduct that he was a party to the fraud which Mr Simpson was perpetrating.
It is a quite different matter when one comes to consider the acceptance by Garuda of the land transfer.
By the time Garuda accepted the transfer of the Marrickville property, Mr Woerjanto was aware, as I have found, that a claim was in fact being made by the vendor, that the vendor had sought undertakings that property would not be transferred and that despite those undertakings, Mr Simpson was keen to ensure that the transaction was completed as quickly as possible and that Mr Simpson would, as a result of that transaction being completed, obtain an advantage to himself in the form of an undertaking by Mr Woerjanto that Garuda would not inform the police as to the relevant facts constituting misappropriation. Further, the transaction itself was a strange one. As I have already indicated it was completed without searches being made on the part of Garuda, without the adjustments which the contract itself called for, and with a haste that in the circumstances allows one readily to infer that Garuda was, in the relevant sense, a party to the fraud.
It was submitted for the applicant that it was sufficient to establish lack of good faith that Garuda was prepared to agree that it would not inform the police of facts which would enable misappropriation to be established. For present purposes it may be accepted that Garuda may have been guilty of misprision of a felony or of compounding a felony, fraudulent misappropriation being an offence punishable by penal servitude: Watson and Purnell, Criminal Law in New South Wales Indictable Offences para 2188 and Halsbury's Laws of England 3rd Edition paras 1201-3. If the offence were to turn out to be merely a misdemeanour, it may well be that Garuda could be charged with obstructing or preventing the course of justice. However, it does not follow from this that Garuda in the relevant sense was guilty of a lack of good faith. Those words are concerned with the involvement of the disponee in a disposition made with intention to defraud creditors, they are not concerned with whether the transaction itself involves some illegal conduct on the part of the disponee.
There is one matter which has caused me some concern. It was not the subject of submissions by the applicant. As I have already indicated, the bank cheque of $100,000 was obtained by Mr Simpson and handed to Garuda on 1 November 1985. The bank cheque, however, was not banked until August 1986 following an instruction so to do on 8 July 1986. There is some confusion as to the text of that instruction. A translation in evidence, apparently supplied by Garuda, read:

"Money received in the amount of AUD100,000 and should be banked in bank book with clarification being Court Order."

Mr Woerjanto, in his evidence, when referred to the original text in the Indonesian language, said that the reference to "Court Order" was incorrect. The true translation was that the receipt of $100,000 was to be entered in the bank book "according to the statement". The reference to the statement was, he said, a reference to the receipt signed in December. There was also evidence of the entry of the transactions in the books of account of Garuda being altered but the alteration, I am satisfied, arose because of an incorrect coding and is of no significance.
A bank cheque, that is to say a cheque drawn by a banker upon itself is not as such a bill of exchange for it is not an order addressed by one person to another. But for the provisions of s.88A of the Bills of Exchange Act 1989 (Cth) in force at the relevant time, it would not be a cheque within the definition in that Act: McClintock v Union Bank of Australia Limited (1920) 20 SR (NSW) 498 reversed on appeal on other grounds (see (1922) 1 AC 240). Nevertheless, like a bill of exchange, the tender and receipt of a bank cheque will, unless the circumstances otherwise require, be treated as a conditional payment of the face value of the debt, that payment being conditional on the cheque being met: Misa v Currie (1876) 1 AC 554. It may perhaps be arguable that, the bank cheque not having been presented for payment until after Garuda became aware of the circumstances which constituted the fraud on the part of Mr Simpson, that the transaction of payment of the $100,000 was incomplete at that time so that the act of presenting the bill of exchange through its bankers may be seen as being the completion of the fraudulent disposition by Mr Simpson, being then a transaction to which Garuda was privy.
Because, however, the matter was not argued and the case proceeded on the basis that the relevant time to test whether Garuda was a party to the fraud was the time of payment I do not propose to consider the question further.
I direct the applicant to bring in short minutes of order to reflect my decision at a date to be fixed when I will hear argument as to costs.
I propose on this later day to declare that the transfer to Garuda by Mr Simpson of the property in Marrickville is void as against the applicant pursuant to the provisions of s.121 and further declare that the payment of $100,000 to Garuda was not void as against the applicant pursuant to provisions of that section. I would further order that Garuda repay to the applicant the net proceeds of sale of the Marrickville property together with interest to the date of judgment.
The applicant agreed that if I were to find that Garuda acted in good faith as those words are used in s.120 of the Act, a similar finding would need to be made in respect of s.121 and that the applicant must accordingly fail under that section.

[1991] FCA 134

11 APRIL 1991