Johnson v Leader Computers Pty Ltd - [2014] SASCFC 14

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
JOHNSON v LEADER COMPUTERS PTY LTD; JOHNSON v SYNNEX AUSTRALIA PTY LTD
[2014] SASCFC 14
Judgment of The Full Court
(The Honourable Justice Sulan, The Honourable Justice Anderson and The Honourable Justice Blue)
5 February 2014
REAL PROPERTY - TORRENS TITLE - OFFENCES AND OTHER MATTERS
RESTITUTION - GENERAL PRINCIPLES
CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - CREATION OF RELATIONSHIP OF AGENCY
The appellants Mr and Mrs Johnson were sued in the District Court by the respondents for declarations that a transfer by Mr Johnson to Mrs Johnson of his half interest in their residential property was made to defraud his creditors and was void pursuant to section 86 of the Law of Property Act 1936 (SA). The respondents were creditors of Mr Johnson pursuant to director’s guarantees given by him in respect of the indebtedness of Arcom Computers Pty Ltd.
The Johnsons’ principal defence at trial was that the transfer of the residential property was made in partial discharge of loans by Mrs Johnson to Mr Johnson being monies paid by the Johnson Superannuation Fund to Arcom. In the alternative, the Johnsons claimed that the payments gave rise to a restitutionary claim by Mrs Johnson against Mr Johnson.
The trial Judge granted judgment in favour of the respondents and made declarations that the transfer was void pursuant to the Act. The trial Judge rejected the evidence of the Johnsons that there were any loans by Mrs Johnson to Mr Johnson and held that in the circumstances no restitutionary claim by Mrs Johnson against Mr Johnson arose.
Mrs Johnson appeals against the declarations granted by the trial Judge. She does not challenge the trial Judge’s conclusion that there were no loans by Mrs Johnson to Mr Johnson. However, she contends that the trial Judge erred in rejecting the Johnsons’ restitution case and in rejecting the Johnsons’ contention that a transfer of property in favour of a creditor is incapable of being made with intent to defraud creditors merely because it prefers one creditor over other creditors. Mrs Johnson contends that the trial Judge wrongly imposed an additional requirement over and above a request by Mr Johnson that Mrs Johnson pay Arcom, namely that Mr Johnson personally benefit from the payment.
Held per Blue J (Sulan and Anderson JJ agreeing) (dismissing the appeals):
1.       In a cause of action in restitution for monies paid at the request of the defendant, there is no independent element that the defendant received a benefit as a result of the payment. However, the trial Judge did not so hold and her reference to benefit was merely part of her consideration of whether the defendant made a request in his personal capacity (at [81]-[83]).
2.       The trial Judge’s unchallenged finding that there was no loan by Mrs Johnson to Mr Johnson encompassed a finding and necessarily entailed that the loan was by Mrs Johnson directly to Arcom. On the unchallenged findings of the trial Judge, the request made by Mr Johnson to Mrs Johnson was made in his capacity as a director and agent of Arcom and not in his personal capacity. It was incapable of giving rise to a cause of action in restitution for monies paid at the request of the defendant (at [93]).
3.       The contractual relationship between Mrs Johnson as lender and Arcom as borrower was inconsistent with and left no room for a restitutionary obligation by Mr Johnson in favour of Mrs Johnson (at [96]).
4.       Even if Mrs Johnson had been a creditor of Mr Johnson, in the circumstances in which the conveyance of his half interest in the residential property to Mrs Johnson conferred substantial personal benefits upon him, a creditor/debtor relationship would not have been inconsistent with a finding that Mr Johnson acted with intent to defraud his creditors (at [112]).
5.       Appeals dismissed (at [114]).
Law of Property Act 1936 (SA) ss 86, 86(1), 86(2); Conveyancing Act 1919 (NSW) s 37A; 13 Eliz 1 Chapter 5 1571 (Eng), referred to.
Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635; Marcolongo v Chen [2011] HCA 3; (2011) 242 CLR 546, applied.
Alton v Harrison (1869) LR 4 Ch App 622; Angelopoulos and Anor v Sabatino & Anor (1995) 65 SASR 1 , discussed.
Horton v Jones (No 1) (1934) 34 SR (NSW) 359; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; Re Kelly; Ex parte Young (1932) 4 ABC 258; Re Lloyd's Furniture Palace Ltd [1925] Ch 853, considered.

JOHNSON v LEADER COMPUTERS PTY LTD; JOHNSON v SYNNEX AUSTRALIA PTY LTD
[2014] SASCFC 14
Full Court: Sulan, Anderson and Blue JJ

SULAN J: I would dismiss the appeals. I agree with the reasons of Blue J.
ANDERSON J: I agree that the appeals should be dismissed and I agree with the reasons of Blue J.
BLUE J: These are appeals by the second defendant, Mrs Johnson, against declarations made in favour of each of the plaintiffs, Leader Computers Pty Ltd and Synnex Australia Pty Ltd, against the defendants Robert and Fay Johnson.
On 20 October 2010, Mr Johnson transferred to Mrs Johnson his half interest in their residential property at Hove. The consideration shown in the memorandum of transfer was $550,000. It was the Johnsons’ case at trial that the consideration was paid by deducting $550,000 from amounts owing by Mr Johnson to Mrs Johnson.
At the time of the transfer, Mr Johnson was liable under director’s guarantees to Leader and Synnex for a total of approximately $337,000.[1]
[1] Dollar figures herein are generally rounded to the nearest $1,000.
By separate actions in the District Court, Leader and Synnex sued Mr and Mrs Johnson seeking declarations that the transfer was made with intent to defraud Mr Johnson’s creditors and was void pursuant to section 86 of the Law of Property Act 1936 (SA) (“the Act”).
The defence of the Johnsons was that monies paid by the A and R Computer Services Pty Ltd Superannuation Fund to Arcom Computers Pty Ltd were paid by way of loan from Mrs Johnson to Mr Johnson or alternatively the payments gave rise to a restitutionary claim by Mrs Johnson against Mr Johnson and in the circumstances the transfer of Mr Johnson’s interest in the Hove property could not have been and was not made with intent to defraud creditors. In the alternative, Mrs Johnson relied on the exception in section 86(2) that she purchased Mr Johnson’s interest in the Hove property for valuable consideration in good faith and without notice of intent to defraud creditors.
The trial Judge found that the transfer was made with intent to defraud creditors and granted declarations in favour of Leader and Synnex to that effect.
Mrs Johnson appeals on the cumulative grounds that the trial Judge erred:
1.in rejecting the Johnsons’ case that Mr Johnson was obliged to make restitution to Mrs Johnson for monies advanced to Arcom at his request; and
2.in rejecting the Johnsons’ contention that a transfer of property in favour of a creditor (namely Mrs Johnson as a result of a restitutionary obligation) is incapable, as a matter of law, of being made with intent to defraud creditors because it merely has the effect of preferring one creditor over other creditors.
Background
Mr and Mrs Johnson have been married since 1966.
In 1993, A & R Computer Services Pty Ltd (“ARCS”) was incorporated and commenced business selling and providing services for computers. The company was part owned and controlled by the Johnsons.
In 1994, the Johnsons established the Johnson Family Trust. They were the co‑trustees. The Johnson Family Trust was a discretionary trust. Eligible beneficiaries included Mr and Mrs Johnson and companies of which they were shareholders.
The Johnsons established a superannuation fund called the A and R Computer Services Pty Ltd Superannuation Fund (“the Johnson Superannuation Fund”). Mr and Mrs Johnson were the trustees and only members.
In 1997, Arcom Computers Pty Ltd (“Acrom”) was incorporated and took over from ARCS the business of selling and providing services for computers trading as A & R Computer Services. At all material times, Mr and Mrs Johnson were the joint shareholders of Arcom, apparently holding their shares on trust for the Johnson Family Trust. Mr Johnson was the sole director.
From time to time, the Johnsons jointly bought and sold a number of investment properties. They operated a joint bank account. They banked with the National Australia Bank.
By the time of Arcom’s incorporation in 1997, Mrs Johnson was the general manager of the business. From the outset of the business, strategic decisions about the business were made jointly by the Johnsons.
Initially Arcom operated from leased premises. In due course, the Johnsons acquired three properties as trustees of the Johnson Family Trust which they leased to Arcom to conduct its business. Those properties were situated at Keswick (acquired before 2003), Holden Hill[2] (acquired before 2003), and Grote Street, Adelaide (acquired in about 2006). The National Australia Bank provided finance facilities which were secured by mortgages over the Johnson Family Trust’s three properties. At some point, the Johnsons granted a mortgage over the Hove property as collateral security for the facilities provided by the Bank to the Johnson Family Trust.
[2] Also known as Modbury.
A loan account was maintained by Arcom with Mr and Mrs Johnson jointly. Credits were entered to the joint loan account for monies advanced by Mr and/or Mrs Johnson and debits were entered to the account for payments made by Arcom to or for Mr and/or Mrs Johnson.
In 2003, Kauritire Pty Ltd (“Kauritire”), of which the Johnsons were both directors, replaced the Johnsons personally as trustee of the Johnson Family Trust. Kauritire was also the trustee of the Kauritire Trust, of which the Johnsons were beneficiaries.
In about 2004, Mrs Johnson reduced her hours of work at Arcom from four days to three days a week and progressively further reduced her hours to one or two days per week by 2009. Progressively, her eldest son Leigh Johnson became operations manager, one of her other sons became sales manager and her daughter, Penny Johnson, became accounts administrator. Mrs Johnson maintained regular oversight over their functions. In particular, Mrs Johnson closely monitored financial matters at Arcom.
In January 2006, Mr and Mrs Johnson purchased the Hove property for $800,000. It comprised a modern two storey house.
In December 2007, Arcom applied to Leader for a credit trading account. Mr Johnson executed a director’s guarantee.
As at 30 June 2008, Mr and Mrs Johnson owed approximately $266,000 to Arcom on the joint loan account.
In May 2009, Arcom applied to Synex for a credit trading account. Mr Johnson executed a director’s guarantee.
As at 30 June 2009, Mr and Mrs Johnson owed approximately $114,000 to Arcom on their joint loan account. Mr Johnson gave evidence that, up to that point, whenever funds of Mrs Johnson were paid to or for Arcom, Arcom repaid those monies and entries were recorded to the joint loan account by Arcom. He gave evidence that the loan account was kept as a record of monies put in by or paid back to Mr Johnson, Mrs Johnson or the Johnson Family Trust.[3]
[3] Transcript 333/7-12 (R.W. Johnson).
In the year ended 30 June 2009, Arcom made a loss of approximately $175,000 compared to a profit of $44,000 the previous year. Revenue fell by $2.2 million from $15.1 million the previous year to $12.9 million in the year ended June 2009.
In the 2009 financial year, the Johnson Family Trust sold the freehold of the Grote Street property, making a capital gain of approximately $557,000. It also made an ordinary profit of approximately $160,000 in that financial year (disregarding superannuation contributions made by the company) which was distributed to Arcom and Arcom in turn contributed that amount to the Johnson Superannuation Fund in favour of Mrs Johnson. Of the total profit before superannuation contributions of approximately $717,000, approximately $139,000 was distributed to Mr Johnson and credited as a superannuation contribution in favour of Mr Johnson in the Johnson Superannuation Fund. The balance of approximately $578,000 was distributed and paid to Mrs Johnson and credited either directly or via Arcom as a superannuation contribution to her credit in the Johnson Superannuation Fund.
As at 30 June 2009, the Johnson Superannuation Fund had net assets of approximately $1,155,000, mostly held in accounts with Australian Central Credit Union. Mr Johnson had a balance of approximately $606,000 credited to his member account and Mrs Johnson had a balance of approximately $549,000 credited to her member account. The entirety of the balance of $549,000 was sourced from contributions made during the financial year by the Johnson Family Trust directly or indirectly in favour of Mrs Johnson as described in the previous paragraph.
The Johnsons gave evidence that financial transactions such as distributions by the Johnson Family Trust and contributions to the Johnson Superannuation Fund were decided by their accountant and they simply acted in accordance with their accountant’s advice. The Johnsons’ accountant, Mr Edwards, gave evidence that, in respect of the 2009 financial year, the distributions by the Johnson Family Trust were not discussed until after the end of the financial year when the financial statements were prepared and the profit was known. The accountants’ time records showed that work on the financial statements of the Johnson group for the 2009 financial year was undertaken in May and June 2010. The distributions by the Johnson Family Trust and contributions to the Johnson Superannuation Fund as at 30 June 2009 were apparently not decided until around May 2010 when the accountants prepared the relevant financial statements.
On 28 July 2009, $200,000 was transferred from the Johnson Superannuation Fund’s credit union account into Arcom’s bank account. Mr and Mrs Johnson gave evidence, and it was common ground at trial, that the transfer was made by Mrs Johnson at the instigation of Mr Johnson. It was general practice for Mrs Johnson rather than Mr Johnson to make transfers between accounts and to draw cheques on behalf of the Johnson Superannuation Fund, regardless of the nature or purpose of the payment.
On 27 August 2009, $202,025 was transferred from the Johnson Superannuation Fund’s credit union account into Arcom’s bank account. On 12 November 2009, two cheques totalling $80,000 were drawn on the Superannuation Fund’s credit union account and paid to Arcom and an Arcom creditor. On 2 December 2009, a cheque for $200,000 was drawn on the Superannuation Fund’s credit union account and paid into Arcom’s bank account.
By Christmas 2009, $682,025 had been paid out of the Johnson Superannuation Fund’s credit union account to or for Arcom.
On 25 February 2010, a cheque for $50,000 was drawn on the Johnson Superannuation Fund’s credit union account and paid into Arcom’s bank account. On 3 March 2010, three cheques totalling $102,000 were drawn on the Superannuation Fund’s credit union account and paid to Arcom and two Arcom creditors. On 12 May 2010, four cheques totalling $114,000 were drawn on the Johnson Superannuation Fund’s credit union account and paid to Arcom and three Arcom creditors.
By May 2010, $946,099 had been paid out of the Superannuation Fund’s credit union account to or for Arcom.
In the financial year ended 30 June 2010, Arcom made a loss of approximately $650,000.
On 25 July 2010, the Johnsons signed a contract to sell the Holden Hill property with settlement scheduled for 23 September 2010. This left only the Keswick property owned by the Johnson Family Trust.
In late August 2010, Mr and Mrs Johnson met with their bank manager, Mr Thomson. The Johnsons agreed that the proceeds of the sale of the Holden Hill property would be used to clear their bank loans and to reduce Arcom’s overdraft. The Johnsons requested the Bank to release the debentures granted by Arcom and the Kauritire Trust and the collateral mortgage over the Hove property and to rely only on the mortgage over the Keswick property for ongoing facilities. The Bank agreed to do so.
On 31 August 2010, Mr Thomson sent an email to Mr Johnson. He confirmed the discussion at the recent meeting with the Johnsons. However, he suggested that the Johnsons consider not discharging the debentures as it would protect the company against hostile creditors and protect the directors.
On 31 August 2010, Mr Johnson sent an email to the Johnsons’ accountant, Mr Edwards. In the email, Mr Johnson said:
We have had a meeting with our Bank Manager and he suggests the following below.
What Fay and I are trying to achieve is to rid ourselves of as much debt as possible, ie bank loans and the overdraft (we will keep a $50K facility available for emergencies). Also to free up our house so we can possibly move it across into Fay’s name only.
Do we have the full proceeds from Holden Hill go into our Arcom bank account and then pay the loan out from there, or do the proceeds go directly to the NAB who will then pay out the mortgage and deposit the balance into our Arcom account (which in turn will clear the overdraft)?
Also, bearing in mind what you said about us having a charge over the business for our loan to Arcom, is the bank manager correct in what he is saying regarding creditors and their claim on the business.
I will await your reply before replying to him.
On 19 October 2010, the Johnsons met with their accountant, Mr Edwards, and their solicitor, Mr Camatta. They were then introduced to Mr Jorgensen, an insolvency practitioner. It was agreed that Arcom should be placed into administration, its business should be closed and its staff should be told not to come to work. On that day, Mr Jorgensen was appointed administrator of Arcom.
On 20 October 2010, the Johnsons went to the office of Mr Costi, a solicitor whom they had not previously instructed. They instructed him that Mr Johnson wished to transfer his half interest in the Hove property to Mrs Johnson. An appraisal dated 15 September 2010 had been obtained from Ray White Adelaide estimating the value of the Hove property at $1.1 to $1.2 million. Mr and Mrs Johnson instructed Mr Costi that the consideration for the transfer was to be $550,000.
Mr Costi prepared the memorandum of transfer and Mr and Mrs Johnson returned to his office later that day to execute it. Mr Costi lodged the transfer at the Lands Titles Office later that day for registration.
In November 2010, Arcom was placed into liquidation. In November 2011, Mr Johnson was declared bankrupt.
The cases at trial
The Johnsons gave evidence that, at the time of the payment on 28 July 2009, Mr Johnson asked Mrs Johnson to lend him $200,000 out of her member’s account with the Johnson Superannuation Fund. Mrs Johnson agreed. Mr Johnson requested Mrs Johnson to pay the monies into Arcom’s bank account so that Arcom could pay creditors without exceeding its overdraft.
The Johnsons gave evidence that a similar conversation occurred in respect of each of the payments by the Johnson Superannuation Fund to Arcom of $202,025 in August, $80,000 in November, $200,000 in December 2009, $50,000 in February, $102,000 in March and $114,000 in May 2010.
The Johnsons’ case was that each time there were back to back loans: for example in respect of the 28 July payment by the Johnson Superannuation Fund to Arcom, there was a loan of $200,000 by Mrs Johnson to Mr Johnson and then a loan by Mr Johnson of $200,000 to Arcom so that it could pay creditors. The plaintiffs’ case was that the Johnsons fabricated this evidence to advance their case and that there was a single loan of $200,000 by Mr and Mrs Johnson jointly (or alternatively Mrs Johnson alone) to Arcom. These were the only two characterisations suggested at trial of the transactions and the only two characterisations open on the evidence. It was not suggested, for example, that the monies were a gift. It follows that, if the Johnsons’ case that these were back to back loans were to be rejected, there must have been a loan by Mrs Johnson (whether alone or jointly with Mr Johnson) directly to Arcom.

The Johnsons’ case was that in January or February 2010 it was agreed between them that Mr Johnson would transfer his half interest in the Hove property to Mrs Johnson in connection with the loan of monies by Mrs Johnson to Mr Johnson. Their evidence differed concerning the agreement.
Mr Johnson gave evidence that the discussion and agreement occurred in February 2010. He said that they had decided at that point to open a new store at Gepps Cross and close the existing store at Holden Hill and Arcom would need several hundred thousand dollars to meet expenses. He gave evidence that he offered to transfer his half interest in the Hove property as security for monies to be advanced by Mrs Johnson in future. His evidence was:
AObviously I needed money and was opening a store that’s several hundred thousand dollars worth of expense, and that’s when I approached Faye and said ‘Well, can I borrow some more money out of your super’ and she was extremely cautious about doing that and didn’t really – I said at that point ‘Well, I’ll transfer the half of Wattle Avenue as security for the money’.
QCan you remember what time that was, when that –
AThat would have been in February 2010.
QWas money forthcoming from Faye’s superannuation account as a consequence of that?
AYes. [4]
[4] Transcript 311 (R.W. Johnson).
By contrast, Mrs Johnson gave evidence that the conversation and agreement occurred in early January 2010. Her evidence was that it was agreed that Mr Johnson would transfer his half interest in the Hove property in partial repayment of monies already lent or to be lent. Her evidence was:
AAfter Christmas we did talk about it because we talked at length after Christmas about where the company was going and what the plans were for the following years. We discussed the amount in total that I’d lent for the business and I think by that stage I was getting concerned that it was a large amount of money and that if the business were to continue to grow that that money in cash wasn’t going to come out of the business. So we discussed the house ...
...
AActually, ... it would have been after Christmas because that particular year, as I recall, I think I recall, I hope I’m getting this right, it wasn’t a very good Christmas period for sales ... that’s when they started discussing the – what’s the word – performance of each particular store over that period and the Holden Hill had performed poorly. Port Adelaide was starting to perform poorly as well ...
...
AMy husband said ‘If there’s going to be any more money then because I don’t think there will be enough cash to pay you back’ – which there never would be at that stage – ‘then I’ll transfer the house into your name and repay you that way’
... I said ‘yes’.
QWhat did you say ‘yes’ to?
AYes, ‘that would be sufficient repayment to transfer the house into my name’.[5]
[5] Transcript 77, 778, 782, 783 (F. Johnson).
The Johnsons gave evidence that the transfer of Mr Johnson’s interest in the Hove property could not be undertaken in early 2010 because the National Australia Bank held a mortgage over the Hove property as collateral security for a loan on the Holden Hill property. They took the view that the Bank would not agree to the transfer of Mr Johnsons’ half interest in the Hove property and they would have to wait until the Holden Hill property was sold and the Bank had been repaid.
The plaintiffs’ case was that the Johnsons fabricated their evidence of an agreement in early 2010 for the transfer of Mr Johnson’s half interest in the Hove property to advance their case.
Mr Johnson gave evidence in cross‑examination that, as at February 2010, he believed that he could access money in his member account in the Johnson Superannuation Fund upon turning 65, which was to occur on 20 March 2010, but that his wife could access money in her member account with the Johnson Superannuation Fund upon turning 63, which had occurred on 27 May 2007.
The Johnsons gave evidence that it was purely coincidental that the memorandum of transfer was executed and lodged for registration on 20 October 2010, the day after Arcom was placed into administration. Their evidence was that settlement occurred on the sale of the Holden Hill property on 23 September 2010 and on that day the National Australia Bank was paid out the debt secured by the mortgages over the Holden Hill and Hove properties. However, their evidence was that the Bank did not release the duplicate certificate of title until 19 October 2010 when Mr Johnson went to pick it up from the Bank.
As observed above, the Johnsons’ principal case at trial was that there was a loan by Mrs Johnson to Mr Johnson of the amounts paid out of the Johnson Superannuation Fund to or for Arcom. Alternatively, as a matter of law, Mr Johnson was liable to make restitution to Mrs Johnson of those amounts because in each case he made a request that she advance those monies to Arcom. Their case was that, if Mrs Johnson was liable to Mr Johnson for the amounts paid to or for Arcom out of the Johnson Superannuation Fund’s credit union account, as a matter of law there could be no intent to defraud creditors within the meaning of section 86 of the Act. Finally, Mrs Johnson contended that the exception created by section 86(2) applied because the estate in property conveyed was for valuable consideration and in good faith.
It was the plaintiffs’ case that the monies in question were lent directly by Mrs Johnson (whether alone or jointly with Mr Johnson) to Arcom. Mr Johnson was not liable to Mrs Johnson in respect of the monies paid to or for Arcom and in any event, if he was, that did not preclude a finding that Mr Johnson had the requisite intent to defraud creditors.
The reasoning of the trial Judge
The trial Judge referred to the elements of section 86 of the Act and to the recent decision of the High Court in Marcolongo v Chen.[6] She concluded that the issue under section 86(1) was whether Mr Johnson made the conveyance with intent to defeat, hinder or delay his creditors.[7] Section 86(1) was capable of applying when consideration was provided by the transferee, although it obviously may be easier to infer the requisite intention to defeat, hinder or delay creditors where there was no consideration.[8]
[6] [2011] HCA 3; (2011) 242 CLR 546.
[7] [2013] SADC 72 at [25].
[8] [2013] SADC 72 at [27]-[28].
The trial Judge made adverse credibility findings about the evidence of both Mr and Mrs Johnson. She rejected the Johnsons’ primary case that there was a loan (or series of loans) by Mrs Johnson to Mr Johnson of the monies paid from the Johnson Superannuation Fund to or for Arcom. She noted that the onus of proof lay upon the plaintiffs to prove that there was no loan by Mrs Johnson to Mr Johnson. She explicitly rejected the evidence of the Johnsons and considered that the objective evidence suggested otherwise.[9] The loan was simply by Mrs Johnson (jointly with Mr Johnson or else alone) to Arcom.
[9] [2013] SADC 72 at [119]-[120] and [126].
The trial Judge referred to the joint loan account maintained by Arcom which showed the monies received from the Johnson Superannuation Fund as loans by Mr and Mrs Johnson jointly to the company. While she acknowledged that the entries to that loan account were made by Arcom staff, she noted that, if the true position were as described by the Johnsons, it would be expected that the company would have maintained a loan account showing funds received from Mr Johnson separately from other funds recorded in the joint loan account.[10] The trial Judge also referred to Mr Johnson’s 31 August 2010 email to Mr Edwards referring to “us having a charge over the business for our loan to Arcom” (emphasis added by the trial Judge).[11]
[10] [2013] SADC 72 at [122]-[123].
[11] [2013] SADC 72 at [124].
The trial Judge referred to the fact that the Johnsons had a longstanding marriage and had treated their assets as joint.[12] The trial Judge considered that it was quite unlikely that the Johnsons believed that the payments made to or for Arcom would give rise to personal liability by Mr Johnson to Mrs Johnson.[13]
[12] [2013] SADC 72 at [142].
[13] [2013] SADC 72 at [144].
The trial Judge rejected the Johnsons’ evidence that they agreed in January or February 2010 that Mr Johnson would transfer his half share in the Hove property to Mrs Johnson. She observed that there was no objective contemporaneous evidence of such an agreement.[14] She observed that in his email on 31 August 2010 Mr Johnson stated “also to free up our house so that we can possibly move it across into Fay’s name only” (emphasis added by the trial Judge).[15]
[14] [2013] SADC 72 at [120].
[15] [2013] SADC 72 at [124].
The trial Judge considered that, if there had been an agreement for the transfer reached in about February 2010, it seemed unusual that the Johnsons did not investigate the possibility of the Bank permitting a transfer of the title to Mrs Johnson at a much earlier time.[16] She referred to the Johnsons’ evidence that, while trading conditions in early 2010 were difficult, neither contemplated that the business would fail. She referred to the fact that the monies previously paid into Arcom had been repaid from the business. She concluded that, on the Johnsons’ evidence, there was no need for an agreement to transfer Mr Johnson’s interest in the Hove property unless there was a perceived risk to Mr Johnson’s assets.[17]
[16] [2013] SADC 72 at [124].
[17] [2013] SADC 72 at [141].
The trial Judge considered the timing and circumstances of the conveyance, finding that it was undertaken in extreme haste and rejecting the Johnsons’ evidence that the timing was coincidental with the entry of Arcom into administration.[18]
[18] [2013] SADC 72 at [129]-[139].
The trial Judge concluded that Mr Johnson conveyed his interest in the Hove property with intent to defraud his creditors. She found that, in so acting, the Johnsons’ primary concern was to protect assets, whether joint or held in any other way, for their benefit. She rejected the Johnsons’ evidence as to their intentions and beliefs at the time of the transfer on 20 October 2010.[19]
[19] [2013] SADC 72 at [143], [147] and [148].
The trial Judge rejected the Johnsons’ contention that Mr Johnson was subject to a restitutionary obligation to pay to Mrs Johnson the amounts advanced to Arcom. In this respect, she said:
The defendants relied upon Lumbers v W Cook Builders Pty Ltd (in liq) and In re: Cleadon Trust Ltd in support of their argument. ... The law recognises an action for money paid at the request of another (in the absence of contractual arrangements) in certain circumstances but these cases do not assist with determination of the issues before me. The factual circumstances are different.
Where money is paid by A to C at the request of B there may be a claim against B. However the law recognises such a claim where there has been a benefit to B. There must be some benefit or enrichment to B; for example where A has paid for a debt which B owed to C. Another situation which may arise is where A pays C for an expense incurred by B due to emergency or some other necessity. The authorities relied upon by the defendants all refer to the requisite benefit to the party held to be liable.
In this case, the defendants assert that Mr Johnson requested that Mrs Johnson pay Arcom. The benefit (apart from the indirect benefit that might flow to shareholders; both of the Johnsons) was received by Arcom. My view is consistent with the liability of directors and employees who obtain funds, lines of credit or goods on behalf of a company; they are not liable for debts of a company as they do not directly benefit.[20]
(Citations omitted)
[20] [2013] SADC 72 at [113]-[115].
The trial Judge considered that, in any event, the ultimate question was the intention of Mr Johnson at the time of the transfer. The existence of consideration, whether by reference to a debt or restitutionary obligation, was not conclusive that there could be no intent to defraud creditors. The trial Judge said:
The arguments advanced by the defendants tend to focus on the question of consideration and the events of early 2010 (sometimes referred to by the defendants as the ‘February agreement’). In my view, the question for me is the conduct and intention of the transferor, Mr Johnson, at the time of the transfer, namely 20 October 2010. I accept that the earlier conduct may bear upon Mr Johnson’s intentions as at 20 October 2010, but I do not agree that the existence or otherwise of ‘consideration’ is necessarily determinative of the issue. That view is supported by Marcolongo’s case. In that case there was apparent consideration; the contract between the company and the transferee expressly referred to the transferor’s indebtedness to the transferee as part of the consideration.[21]
(Citations omitted)
[21] [2013] SADC 72 at [116].
Finally, the trial Judge made a finding that Mrs Johnson had notice of Mr Johnson’s intent to defraud creditors and did not act in good faith such that the exception created by section 86(2) had no application.[22]
[22] [2013] SADC 72 at [145] and [148].
Contentions on appeal
On appeal, Mrs Johnson does not challenge the credit findings made by the trial Judge. She does not challenge the trial Judge’s rejection of the Johnsons’ primary case that there was a loan by Mrs Johnson to Mr Johnson and a debt due by Mr Johnson to Mrs Johnson. She does not challenge the trial Judge’s conclusion that, if Mr Johnson had the requisite intention to defraud creditors under subsection 86(1), subsection 86(2) did not apply to except the conveyance from avoidance.
There are two limbs to Mrs Johnson’s contentions on appeal. She acknowledges that she must succeed on both.
1.The trial Judge erred in law in finding that Mr Johnson was not obliged to make restitution to Mrs Johnson for the money advanced to Arcom at his request.
2.The trial Judge erred in law in holding that the transfer was made with intent to defraud creditors in circumstances in which the transfer merely preferred one creditor (Mrs Johnson) over other creditors.
On the first limb, Mrs Johnson makes two contentions:
(a)the trial Judge erred in holding that it is a necessary ingredient of restitution that payment be of material benefit or actual enrichment to the party requesting it; and
(b)the trial Judge erred in finding (implicitly) that the requests made by Mr Johnson were not made in his personal capacity but in his capacity as director of Arcom.
The plaintiffs contend that the trial Judge was correct in rejecting the Johnsons’ case in restitution. They contend that the rejection of the restitution case necessarily followed from the rejection of the primary debt case. They contend that, in any event, if Mrs Johnson was a creditor of Mr Johnson, that fact does not necessarily lead to the conclusion that there was no intent to defraud creditors on the part of Mr Johnson within the meaning of section 86(1) of the Act.
Restitutionary obligation
The role of benefit
Mrs Johnson’s first contention on the first limb of her argument on appeal is that the trial Judge wrongly confined the action in restitution to cases where there is a benefit or enrichment to the requesting party. Mrs Johnson refers in this respect to the passages from the trial Judge’s reasons for judgment extracted at [64] above.
Mrs Johnson refers to the decision of this Court in Angelopoulos & Anor v Sabatino & Anor.[23] In that case the importance of the specific facts in a case of claimed restitution was emphasised.[24] Doyle CJ (Duggan and Nyland JJ agreeing) then identified the circumstances which, in that particular case, gave rise to the acceptance of a benefit of the character necessary to support the claim. His Honour identified nine circumstances including the following:
First, the plaintiffs did not intend to provide their services gratuitously … Secondly, the plaintiffs did not provide their services and supply the plant and equipment entirely at their own initiative. They acted not only with the knowledge of Ditara, through its agents, but with the approval of Ditara. In my opinion there was more than passive acquiescence. It is not necessary for me to find that there was a request that the services be performed and the plant and equipment supplied, but were it necessary to do so I would be prepared to conclude that there was an implied request … Fifthly, the defendant Ditara benefited from what the plaintiffs did. Ditara either incurred less expense than it otherwise would have incurred in restoring the premises or alternatively had premises better fitted for letting out … Ninth, there is no argument advanced identifying any particular circumstance by virtue of which it is unjust to require Ditara to remunerate the plaintiffs.[25]
[23] (1995) 65 SASR 1.
[24] Ibid at 11-13.
[25] Ibid at 12-13.
Mrs Johnson contends that, if work is done or money paid by a person at the request of another, a cause of action arises in accordance with long-established principles governing conventional actions for work and labour done or money paid and no question arises as to whether the benefit is conferred upon the person making the request.
Mrs Johnson relies upon the decision of the High Court in Lumbers v W Cook Builders Pty Ltd (in liq),[26] in which the High Court overruled Angelopoulos to the extent that it held that additional factors are relevant if there is a conventional request to do work or pay money. Gummow, Hayne, Crennan and Kiefel JJ said:
[26] [2008] HCA 27; (2008) 232 CLR 635.
Builders’ … arguments about the availability of an action for work and labour done or money paid were directed ultimately to the proposition that adopting the framework for analysis used by the majority in the Full Court in this case was not inconsistent with long-established principles governing actions for work and labour done or money paid.
Adapting what was said by Doyle CJ in Angelopoulos to the facts of this case, the nine factors identified by Builders as supporting its claim were:
...
(b) Builders did not act "entirely at [its] own initiative” but at the implied request of the Lumbers
…
(e) the Lumbers benefited from what Builders did;
…
It will be noted that the second of the matters identified was the making of an "implied request" by the Lumbers to Builders to do the work and to pay money. At once it should be pointed out that, if Builders did whatever work it did and paid whatever money it paid at the Lumbers' request, Builders' claim for a reasonable price for the work and for the money it paid would fall neatly within long-established principles … Builders would have an action for work and labour done or money paid for and at the request of the Lumbers.
And if Builders did work or paid money at the Lumbers' request, it would also follow that it would be neither necessary nor appropriate to consider any of the other eight factors identified in Angelopoulos in deciding whether Builders could recover a fair price for the work it had done and the amount it had paid for and at the request of the Lumbers. To the extent that Angelopoulos is understood as requiring separate or additional consideration of those other factors, where a plaintiff seeks to recover a fair price for work done at the defendant's request, or the amount the plaintiff has paid for the defendant at the defendant's request, Angelopoulos is wrong and should not be followed.[27]
(Emphasis added)
[27] (2008) 232 CLR 635 at [87], [88], [89] and [90].
Mrs Johnson contends that, if in the present case it is found that she paid the monies to Arcom at the request of Mr Johnson, no question then arises as to whether Mr Johnson benefitted from the payment. The plaintiffs contend that the High Court’s reference to the other factors being irrelevant was premised upon there first being a finding that the work and labour was done or the money was paid “for the defendant at the defendant’s request”. The plaintiffs contend that the reference to “for” involves the work being done or the money being paid for the benefit of the defendant.

In Lumbers, the High Court did not single out the fifth factor identified by Doyle CJ in Angelopoulos, that is a benefit to the defendant, as a specific factor to which it was unnecessary and inappropriate to have regard if the claim fell within the long-established principles governing conventional actions for work done or money paid. The High Court was making a more general observation that conventional actions for work done or money paid are governed by their own requirements which, if satisfied, give rise to the cause of action without having regard to extraneous factors that might be considered in a more general restitutionary claim. Because the High Court was dealing with the question at this level of generality, there was no need to distinguish between the action for work done on the one hand and the action for money paid on the other hand.
It is commonly described as an element of the conventional action for work done that the work and labour is done for and at the request of the defendant.[28] Similarly it is commonly described as an element of the conventional action for money paid that it is paid for and at the request of the defendant.[29]
[28] I.H. Jacob, Bullen & Leake & Jacob’s Precedents of Pleadings (Sweet & Maxwell, 12^th ed, 1975) 896-899; G. Jones and R. Goff, Goff and Jones: The Law of Restitution (Sweet & Maxwell, 6^th ed, 2002) [1-002]-[1-003]; K. Mason, J.W. Carter and G.J. Tolhurst, Mason & Carter’s Restitution Law in Australia (LexisNexis, 2^nd ed, 2008) [118]; Horton v Jones (1934) 34 SR (NSW) 359 at 367 per Jordan CJ (Halse Rogers J and Markell AJ agreeing); Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 250 per Deane J.
[29] I.H. Jacob, Bullen & Leake & Jacob’s Precedents of Pleadings (Sweet & Maxwell, 12^th ed, 1975) 678-679; G. Jones and R. Goff, Goff and Jones: The Law of Restitution (Sweet & Maxwell, 6^th ed, 2002) [1-002]-[1-003]; K. Mason, J.W. Carter and G.J. Tolhurst, Mason & Carter’s Restitution Law in Australia (LexisNexis, 2^nd ed, 2008) [115]-[116].
Properly understood, the concept of the payment being made “for and at the request of the defendant” is a composite concept rather than two independent requirements. The mere fact that a person makes a request of another to make a payment does not necessarily result in liability under the action for money paid. For example, if the request is made by an agent acting on behalf of a principal, the agent will not become liable under the action. On the other hand, a person may be liable where the money paid is not directly to the benefit of that person. For example, in certain circumstances, if a person requested another to make a payment to a charity, the mere fact that the first person did not receive a direct or personal benefit as a result of the payment would not matter.
It might be considered to be implicit in the concept of a request by a defendant to pay money to a third party that, if there is truly a request by the defendant, the parties are proceeding on the basis that the defendant is receiving a benefit from the payment simply because the defendant wishes the payment to be made. Conversely, it might be considered to be implicit in the concept of a payment of money for the defendant that the payment is being made at the request of the defendant. This analysis confirms that reference to a payment being made “for and at the request” of the defendant is to a composite concept rather than two independent requirements.
The fact that the High Court in Lumbers referred to work done and amounts paid “for and at the request” of the defendant is inconsistent with Mrs Johnson’s contention based on the High Court’s decision that the question of who receives the payment is completely irrelevant to the cause of action for money paid.
In short, in a conventional action for work done or money paid at the request of the defendant, there is no independent requirement that a personal benefit be conferred on the defendant. However, the question upon whom the benefit is conferred may be a relevant factor in determining whether the request has been made by the defendant.
Although the trial Judge in the passage from her reasons extracted at [64] above might be understood as referring to an independent element in the cause of action in restitution requiring that there be a direct benefit to the defendant, properly understood she was making a finding that Mr Johnson was acting for and on behalf of Arcom in making the request and the request therefore was a request by Arcom and not by Mr Johnson for the purposes of the law of restitution. This is made clear by the last sentence in the passage extracted:
My view is consistent with the liability of directors and employees who obtain funds, lines of credit or goods on behalf of a company; they are not liable for debts of a company as they do not directly benefit.
This appeal can be decided on the basis of the necessity for a “request” to be made by a defendant for the money to be paid. Properly characterised, the requests which Mr Johnson made to Mrs Johnson for payment of monies to Arcom were made by Mr Johnson in his capacity as a director or agent of Arcom and not in his personal capacity. The circumstances were incapable of giving rise to a conventional action for money paid by Mrs Johnson against Mr Johnson or a restitutionary obligation by Mr Johnson to Mrs Johnson in respect of those monies.
I turn to address Mrs Johnson’s second contention on the first limb of her appeal, namely that the trial Judge erred in finding that Mr Johnson made the requests in his capacity as a director of Arcom and not in his personal capacity.
The capacity in which Mr Johnson made the requests
In the course of her rejection of the Johnsons’ debt case, the trial Judge made affirmative findings that Mrs Johnson loaned the monies directly to Arcom and not via a loan to Mr Johnson. The trial Judge’s findings and conclusion in this respect are not challenged on appeal. On those findings, the request made by Mr Johnson was made by him for and on behalf of Arcom and was incapable of giving rise to any restitutionary obligation by Mr Johnson to Mrs Johnson.
It is important to observe the necessary consequences of the trial Judge’s finding that there was no loan from Mrs Johnson to Mr Johnson of the monies paid out of the Johnson Superannuation Fund to or for Arcom. It is clear from the trial Judge’s reasons for judgment, and in any event a necessary corollary of her finding that there was no loan by Mrs Johnson to Mr Johnson, that the loan was by Mrs Johnson (either jointly with Mr Johnson or alone) directly to Arcom.
It is also evident from the trial Judge’s reasons for judgment, and a necessary corollary of her findings that, when Mr Johnson asked Mrs Johnson to transfer funds or draw cheques in favour of Arcom, he was acting in his capacity as a director and agent of Arcom and was not making the request in his personal capacity.
Contrary to Mrs Johnson’s contention on appeal,[30] there was ample evidence to support a finding that the requests made by Mr Johnson were not made in his personal capacity but as a director of Arcom. Historically, the Johnsons had acted jointly in virtually all financial matters, including operating a joint bank account and in the joint ownership (whether themselves or as controlling trustees of trusts) of real property and other assets.
[30] Ground 2 contained in the Notice of Appeal.
Historically, to Mr Johnson’s knowledge, Arcom operated a joint loan account with the Johnsons in which were recorded all monies paid to or received from Mrs Johnson and there was no separate loan account maintained by Arcom with either Mr Johnson or Mrs Johnson.
The Johnsons’ pleaded case[31] was that all of the payments made out of the Johnson Superannuation Fund to or for Arcom between July 2009 and May 2010 totalling $946,099 were made at the request of Mr Johnson in his personal capacity and gave rise to loans by Mrs Johnson to Mr Johnson or alternatively a restitutionary obligation on the part of Mr Johnson to Mrs Johnson. Mr and Mrs Johnson both gave evidence to the same effect.
[31] Paragraph 12 of the Johnsons’ defence in the Leader action and paragraph 21 of the Johnsons’ defence in the Synnex action.
Mr Johnson’s evidence was that it was agreed in February 2010 that he would transfer his half interest in the Hove property to Mrs Johnson as security for contemplated future advances by Mrs Johnson to him of several hundred thousand dollars. However, at the beginning of July 2009 Mrs Johnson only had available in her member account with the Johnson Superannuation Fund approximately $549,000. The accumulative total of the monies paid out of the Johnson Superannuation Fund to or for Arcom exceeded that amount by 2 December 2009. The cumulative total including the payment of $200,000 on that date was $682,025. It was not possible that Mrs Johnson’s monies could have funded all of those payments.
As the trial Judge observed, at the time of the payments made in 2009 out of the Johnson Superannuation Fund in favour of Arcom, the Johnsons were confident that Mrs Johnson would be repaid by Arcom out of its resources in due course. The obvious inference is that Mrs Johnson was making the loans directly to Arcom and there was no objective reason for Mr Johnson to be interposed such that the loans were made first to him and then to Arcom. Such an arrangement flies in the face of the historical manner of dealing by the Johnsons identified above. In addition, on the evidence given at trial, from the perspective of the Johnsons, it was artificial to characterise the monies in the Johnson Superannuation Fund as belonging separately to Mr Johnson or Mrs Johnson. The entirety of the monies which ultimately stood to the credit of Mrs Johnson were derived from a distribution by the Johnson Family Trust of the capital gain and other profit derived in 2009 which distribution was probably not decided until May 2010 and could legally have been made to Mr Johnson instead of Mrs Johnson or jointly to Mr and Mrs Johnson. On the evidence, the reality was that the Johnsons treated all of their assets as joint and in 2009 simply did not make the distinction between their separate interests which they said in evidence that they made and which the trial Judge rejected.
Once the trial Judge rejected the evidence of the Johnsons that they agreed on the occasion of each payment that it was by way of loan from Mrs Johnson to Mr Johnson and rejected their further evidence concerning the alleged January/February 2010 agreement for transfer of the Hove property, it was a natural and indeed inevitable finding for the trial Judge to make that Mr Johnson’s requests were made in his capacity as a director of Arcom.
The same result is reached by consideration of a different aspect of the High Court’s decision in Lumbers.[32] In that case, there was a contract between the Lumbers and W Cook & Sons Pty Ltd (“Sons”) for the construction of a house. Under the contract, the Lumbers requested Sons to construct a house. Unbeknown to the Lumbers, W Cook Builders Pty Ltd (“Builders”) took over construction of the house under a contract or arrangement with Sons. The Lumbers paid all amounts claimed by Sons but Sons paid Builders less than the amount incurred on construction. Builders sued the Lumbers for restitution on the basis that the Lumbers had received the benefit of Builder’s work. The High Court held that the contract between Sons and the Lumbers and the contract or arrangement between Builders and Sons were of vital importance in determining whether there was an action for work done and monies paid for and at the request of the Lumbers or otherwise a restitutionary claim by Builders against the Lumbers.[33]
[32] (2008) 232 CLR 635.
[33] Ibid at [46]-[49] and [51]-[53] per Gleeson CJ and [94]-[95], [107], [111]-[114] and [121]-[127] per Gummow, Hayne, Crennan and Kiefel JJ.
Gleeson CJ said:
In considering Builders' restitutionary claim, the contractual relations between the Lumbers and Sons, and between Sons and Builders, cannot be put to one side as an inconvenient distraction …
The contractual arrangements that were made effected a certain allocation of risk; and there is no occasion to disturb or interfere with that allocation. On the contrary, there is every reason to respect it.[34]
[34] Ibid at [45] and [46].
and Gummow, Hayne, Crennan and Kiefel JJ said:
These reasons will demonstrate that the legal relationship between Sons and the Lumbers cannot be dismissed from consideration, whether on the bases assigned by the majority in the Full Court or otherwise. When proper account is taken of the rights and obligations that existed between Sons and the Lumbers under their contract, the analysis made by the majority in the Full Court is shown to be flawed. The Lumbers are not shown to have received a "benefit" at Builders' "expense" which they "accepted", and which it would be unconscionable for them to retain without payment …
The application of a framework for analysis expressed only at the level of abstraction adopted in this case, by reference to "benefit", "expense" and "acceptance" coupled with considerations of unconscionability, creates a serious risk of producing a result that is discordant with accepted principle, thus creating a lack of coherence with other branches of the law. There are two reasons of particular relevance to this case why that is so. They may be identified by reference to two questions which, although expressed separately, will later be seen to intersect in several ways. First, does applying the posited framework for analysis to the facts of the present case extend the availability of recovery beyond the circumstances in which a claim for work and labour done (or money paid) for and at the request of the defendant would be available? Secondly, and no less importantly, how is the result of applying this framework for analysis consistent with the obligations relevant parties undertook by their contractual arrangements?
... It is essential to consider how the claim fits with contracts the parties have made because, as Lord Goff of Chieveley rightly warned in Pan Ocean Shipping Co Ltd v Creditcorp Ltd, "serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract".
…
... Reference to whether the Lumbers "accepted" any work that Builders did or "accepted" the benefit of any money it paid is irrelevant. It is irrelevant because it distracts attention from the legal relationships between the three parties: the Lumbers, Sons and Builders. To now impose on the Lumbers an obligation to pay Builders would constitute a radical alteration of the bargains the parties struck and of the rights and obligations which each party thus assumed. There is no warrant for doing that.
The second observation to be made is more general. It is that identification of the rights and obligations of the parties, in this as in any matter, requires close attention to the particular facts and circumstances of the case. Necessarily that requires close attention to what contractual or other obligations each owes to the other.[35]
(Citations omitted)
[35] Ibid at [77], [78], [79], [126] and [127].
In the present case, on the unchallenged findings of the trial Judge, there was a direct legal relationship between Mrs Johnson and Arcom, namely that of creditor and debtor. Mrs Johnson lent to Arcom the sums of money in question. The very reasoning which led the trial Judge to that conclusion (which is not challenged on appeal) leads to the conclusion that the payments did not give rise to any indebtedness of Mr Johnson to Mrs Johnson under a conventional action for monies paid or any restitutionary obligation by Mr Johnson in favour of Mrs Johnson.
The first limb of Mrs Johnson’s contention on appeal should be rejected.
Intent to defraud
Mrs Johnson’s second contention that there can be no intent to defraud creditors where one creditor is preferred over other creditors is dependent upon acceptance of her first contention which I have rejected. It is not strictly necessary to consider Mrs Johnson’s second contention but I do so because it was fully argued.
Section 86(1) of the Act provides:
Every conveyance of property made with intent to defraud creditors shall be voidable at the instance of the party prejudiced thereby.
Section 86(1) was modelled on the English statute 13 Eliz 1 Chapter 5. That statute was received as part of the law of England applicable in South Australia in 1836.[36]
[36] See Marcolongo v Chen (2011) 242 CLR 546 at [1] per French CJ, Gummow, Crennan and Bell JJ.
In Marcolongo v Chen,[37] the High Court held that section 37A of the Conveyancing Act 1919 (NSW), which replaced the English statute in New South Wales and referred merely to “intent to defraud creditors”, should be construed as reproducing the meaning of the expression “delay, hinder or defraud creditors” in the English statute.[38] The same reasoning applies to section 86(1) of the Act.
[37] (2011) 242 CLR 546.
[38] Ibid at [19] per French CJ, Gummow, Crennan and Bell JJ.
The trial Judge found that Mr Johnson’s intention was to defraud creditors within the meaning of section 86(1) of the Act.
Mrs Johnson contends that a deliberate decision by a debtor to pay a debt of one creditor in preference to debts of other creditors is incapable of amounting to intent to defraud within the meaning of section 86(1). Mrs Johnson relies upon the following authorities.
In Alton v Harrison,[39] a debtor conveyed to trustees substantially all of his property for the benefit of five of his creditors. The Vice Chancellor found that the conveyance was executed by the debtor honestly. The Vice Chancellor’s decision was upheld on appeal. Sir GM Giffard LJ agreed with the Vice Chancellor who had said:
In this, as in all other cases of the same kind, the question is as to the bona fides of the transaction. If the deed of mortgage and bill of sale was executed by Harrison honestly for the purpose of giving a security to the five creditors, and was not a contrivance resorted to for his own personal benefit, it is not void, but must have effect.[40]
[39] (1869) LR 4 Ch App 622.
[40] Ibid at 626.
In Glegg v Bromley,[41] Mrs Glegg was indebted to her husband and assigned to him as security for the debt her interest in two choses of action (for false representation and slander). The Court of Appeal held that the assignment was not made with intent to defraud. Vaughan Williams LJ said:
Finally, I may say that I have taken it for granted throughout my judgment that mere preference of one creditor over another does not bring the case within the statute 13 Eliz. c.5, even though the parties may have been minded to defeat a particular creditor.[42]
Fletcher Moulton LJ said:
It may fairly be regarded as a deliberate attempt to prefer Mr. Glegg to any creditors that might thereafter arise ... Now it is well settled law that apart from the rules of bankruptcy a person may pay his debts in any order he pleases, and may charge his property as he will as security for paying those debts.[43]
and Parker J said:
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 …[44]
[41] [1912] 3 KB 474.
[42] Ibid at 484.
[43] Ibid at 485.
[44] Ibid at 492.
Mrs Johnson also relies upon the decisions of Romer J in Re Lloyd’s Furniture Palace Ltd[45] and Lukin J in Re Kelly; Ex parte Young[46] who referred to and applied the decision of the Court of Appeal in Glegg v Bromley.
[45] [1925] Ch 853 at 862.
[46] (1932) 4 ABC 258 at 262.
In Marcolongo v Chen,[47] Ms Yang was a director and half owner of Lym International Pty Ltd which owned a townhouse development under construction at Mona Vale. At the material time, the development was valued at approximately $15 million. There was a first mortgage over the development property. Mr Chen’s company, Heard Park Ltd, lent $4.2 million to Lym International to partly repay the first mortgage, leaving $7.6 million owing to the first mortgagee. In addition Heard Park advanced various monies to companies associated with Ms Yang. Mrs Marcolongo brought proceedings in the District Court against Lym International for damages, claiming $600,000. Prompted by a concern that Mrs Marcolongo would succeed in her action and make a claim against Lym International’s assets, Ms Yang transferred to Mr Chen the relevant property at Mona Vale for $15 million on the basis that $7.6 million would be used to discharge the mortgage and the balance applied to debts owed to Mr Chen by Lym International or a related entity.
[47] (2011) 242 CLR 546.

Hamilton J at first instance found that the property was transferred with intent to defraud creditors. That decision was reversed by the Court of Appeal which was in turn reversed by the High Court. There was no finding in that case that the purchase price of $15 million was at an undervalue and no suggestion that Mr Chen was not a creditor of Lym International or did not provide consideration for the transfer. The High Court did not rely upon any distinction between Mr Chen and his company Heard Park, nor upon the fact that only $12.1 million was paid in discharge of Lym International’s debts and the balance to debts of related entities of Ms Yang, or upon any doubt about the amount of those other detbs. The High Court held that the fact that consideration was provided by Mr Chen (and implicitly that his company was a creditor of Lym International) did not preclude a finding of intent to defraud.
French CJ, Gummow, Crennan and Bell JJ said:
… A succinct description of the operation of the Elizabethan Statute was understood in 1912 is given by Parker J in Glegg v Bromley. His Lordship said:
Now the scheme of that statute is this: By it all conveyances and assignments made with intent to hinder and delay creditors are rendered void against all creditors hindered or delayed by their operation ... The illegal intent under the operative part is a question of fact for the jury or the judge sitting as a jury. On the one hand the want of consideration for the conveyance or assignment is a material fact in considering whether there was any illegal intent, but it is not conclusive that there existed any such intent. In the same way consideration was by no means conclusive that there was no illegal intent. ...
In his treatise on equity jurisprudence, Story had seen the object of the Elizabethan Statute as the protection of creditors "from those frauds which are frequently practised by debtors under the pretence of discharging a moral obligation [to] wives, children, and other relations". But the term "voluntary" did not appear in the statute and the case law established that its application was not so limited. On appeal from the Supreme Court of New South Wales, the Privy Council in Godfrey v Poole had approved the statement of principle respecting the operation of the Elizabethan Statute which had been made by Kindersley V-C in Thompson v Webster. The Vice-Chancellor said:
The language of [the Elizabethan Statute] being that any conveyance of property is void against creditors, if it is made with intent to defeat, hinder or delay creditors, the Court is to decide in each particular case whether, on all the circumstances, it can come to the conclusion that the intention of the settlor, in making the settlement, was to defeat, hinder or delay his creditors. (Emphasis in original.)
The Vice-Chancellor (like Parker J in the passage from Glegg v Bromley set out above) had also been at pains to point out that to attract the Elizabethan Statute it was not sufficient, of itself, merely to show that the deed was voluntary; nor, on the other hand, was it necessary in order to set aside a voluntary deed that the settlor should actually be insolvent.
The sufficiency of proof of intent
Nevertheless, the nineteenth century cases did support a related distinction bearing upon the sufficiency of proof in these cases. The effect of the decisions was summed up as follows in the treatment under the title "Fraudulent and Voidable Conveyances" in the first edition of Halsbury's Laws of England:
In an action to set aside an alienation under the statute the onus of proof of actual fraud on the part of the grantor, and that the grantee was privy to the intent, rests upon the plaintiff where the alienation is for valuable consideration (a). Where, however, the alienation is voluntary, then on proof that the grantor was at the time of its execution contemplating his entry upon a hazardous business (b), or that the natural consequence of the alienation was to delay, hinder, or defraud creditors (c), or that the circumstances under which the alienation was effected bore one of the indications or badges of fraud hereafter mentioned (d), the onus of upholding the alienation is imposed on the defendants. (Emphasis added.)
...
The point sought to be made in the text of Halsbury attached to footnote (c) may be expressed by saying that it would be the duty of the judge to direct a jury that they might infer an intention by the settlor to defeat or delay creditors, even in the absence of direct evidence of that intention, where this outcome was the necessary consequence of a voluntary settlement. In this way, it was easier to infer a dishonest intention if the conveyance were voluntary than if it were made for consideration. Evidence that the conveyance was voluntary does not replace the requirement of proof of intent by a distinct category where constructive fraud, with notions of constructive knowledge or notice as understood in equity, would suffice for the application of s 37A. Rather, the evidence is that species which has sufficient weight to entitle the fact finder to decide an issue (here the necessary intent) in favour of the moving party, although the fact finder is not obliged to do so and other evidence given may be decisive to the contrary.[48]
(Citations omitted)
[48] Ibid at [12], [22]-[24], [25].
It is clear from the statements by the High Court and from the actual decision that the existence of consideration or the fact that the transferee is a creditor is only one factor to be taken into account in approaching the factual issue of whether a particular conveyance was made with intent to defraud creditors. That reasoning and that result is inconsistent with a fixed rule that the mere fact that a conveyance is made to a creditor means that there can never be an intent to defraud creditors.
In the present case, in any event, Mr Johnson obtained a very substantial personal benefit by conveying his half interest in the Hove property to Mrs Johnson. Given the endurance of their marriage since 1966, Mr Johnson could reasonably expect that he would be permitted to live in the house with Mrs Johnson for the remainder of his life and that the house would be ultimately left to their children. The transfer of his half interest would in reality leave Mr Johnson in exactly the same position as if he had retained half ownership of the house except that the house was no longer subject to potential claims by his creditors.
The trial Judge correctly concluded that the ultimate issue was the intention of Mr Johnson in October 2010 at the time of the transfer. Even if Mrs Johnson had been a creditor of Mr Johnson at that time, that would not have precluded a finding that Mr Johnson acted with intent to defraud his creditors. The second limb of Mrs Johnson’s contention on appeal should be rejected.
Nevertheless, if the trial Judge had found that Mrs Johnson was a creditor of Mr Johnson, that might potentially have impacted on her overall finding as to Mr Johnson’s state of mind. If the trial Judge had been wrong in her conclusion that Mrs Johnson was not a creditor, it would have been necessary to consider the extent to which that vitiated her overall conclusion on the factual issue of intent to defraud. That question does not arise given the conclusion reached on the first limb of Mrs Johnson’s contention on appeal.
Conclusion
I would dismiss the appeals.