Marcolongo v Chen

The High Court of Australia considered an appeal concerning the validity of a registered transfer of land. The appellant, Mrs Marcolongo, sought to set aside a transfer of property from Lym International Pty Ltd (Lym) to Mr Yu Po Chen (the first respondent), arguing it was made to defraud creditors, specifically in contravention of s 37A of the Conveyancing Act 1919 (NSW). Lym was the second respondent. The dispute arose from a District Court judgment where Mrs Marcolongo had recovered substantial damages against Lym for loss of support to her adjacent property due to Lym's development activities.

The central legal issues before the High Court were whether the transfer of the subject property by Lym to Mr Chen was made with the intention to "delay, hinder or defraud" creditors, as contemplated by s 37A of the Conveyancing Act 1919 (NSW). This involved determining the requisite state of mind for the provision, specifically whether proof of "actual" or "predominantly" fraudulent intent was necessary, or if the broader interpretation of "delay, hinder or defraud" sufficed. The court also considered whether such intent could be inferred from a voluntary alienation of property.

The High Court allowed the appeal, finding that the transfer was indeed made with the intention to delay, hinder, or defraud creditors. The court reasoned that the critical mind for assessing intent was that of Ms Limin Yang, a director and shareholder of Lym, whose decisions were pivotal. In light of the ongoing litigation and substantial judgment against Lym, coupled with Ms Yang's personal concerns about Chinese authorities potentially targeting her assets, the transfer of the property, which was Lym's only significant Australian asset, to Mr Chen was viewed as a deliberate act to place it beyond the reach of Mrs Marcolongo. The court emphasised that s 37A requires a liberal construction and that intent could be inferred from the circumstances, particularly where a voluntary alienation occurs in the face of existing or prospective creditor claims. The court accordingly set aside the orders of the New South Wales Court of Appeal and reinstated the orders of the primary judge, which had found in favour of Mrs Marcolongo.