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}{\b\fs24\lang2057\langfe1033\langnp2057\insrsid15932498\charrsid9591130 NEW ZEALAND}{\b\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid9591130 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid9717285 {\fs24\lang2057\langfe1033\langnp2057\insrsid9717285\charrsid5591138 \par }\pard \qc \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid14420556 {\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 CA 8/02 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid9717285 {\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 \par }\pard \qc \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid14420556 {\b\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid12539341 FOR THE FULL NAMES }{\b\fs24\lang2057\langfe1033\langnp2057\insrsid3569944\charrsid12539341 OF THE PARTIES SEE THE ATTACHED \par }{\b\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid12539341 MEMORANDUM WHICH IS NOT TO BE PUBLISHED \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid9717285 {\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 \par }\pard \qc \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid14420556 {\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 BETWEEN \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid14420556 {\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 \par }\pard \qc \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid14420556 {\b\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 E AND B \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 Appellants \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid14420556 {\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 \par }\pard \qc \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid14420556 {\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 AND \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid14420556 {\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 \par }\pard \qc \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid14420556 {\b\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 A \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 Respondent \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid9717285 {\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid10488250\charrsid5591138 Hearing: 10 Decem}{\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 ber 2002 \par \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid4416385 {\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 Coram: }{\fs24\lang2057\langfe1033\langnp2057\insrsid15932498\charrsid5591138 Casey}{ \fs24\lang2057\langfe1033\langnp2057\insrsid9717285\charrsid5591138 }{\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 JA}{\fs24\lang2057\langfe1033\langnp2057\insrsid10488250\charrsid5591138 }{ \fs24\lang2057\langfe1033\langnp2057\insrsid9717285\charrsid5591138 (P}{\fs24\lang2057\langfe1033\langnp2057\insrsid15932498\charrsid5591138 residing)}{\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid10488250 {\fs24\lang2057\langfe1033\langnp2057\insrsid15932498\charrsid5591138 Barker}{\fs24\lang2057\langfe1033\langnp2057\insrsid9717285\charrsid5591138 }{ \fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 JA \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid15932498\charrsid5591138 Smellie J}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 A \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid4416385 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 Appearances: A.F. Grant & H. Mc}{\fs24\lang2057\langfe1033\langnp2057\insrsid13790517\charrsid5591138 K}{\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 ee for Appellants \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid10488250 {\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 J.R.F}{\fs24\lang2057\langfe1033\langnp2057\insrsid15932498\charrsid5591138 .}{ \fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 Fardell QC & C. Morris for Respondent \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid14420556 {\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid5133934\charrsid5591138 Judgment: 6 January 2003}{\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid4416385 {\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 \par }\pard \qc \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid282886 {\b\caps\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 Judgment of the Court \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid4416385 {\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 \par [1}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ] This is an appeal against an interlocutory judgment of Williams J delivered on 10 October}{\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 2002 in the High Court at Rarot}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 onga}{\fs24\lang2057\langfe1033\langnp2057\insrsid282886\charrsid5591138 .}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 H}{ \fs24\lang2057\langfe1033\langnp2057\insrsid282886\charrsid5591138 e}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ordered disclosure by the appellants to }{\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 the respondent of discoverable}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 documents for which legal privilege had been claimed in an action commenced by the respondent in the High Court claiming some $US 17m from the appellants (resident in the }{\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 United States), alleging fraudu}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 lent disposal of their assets to avoid payment of a judgment in its }{\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 favo}{ \fs24\lang2057\langfe1033\langnp2057\insrsid12539341 u}{\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 r}{\fs24\lang2057\langfe1033\langnp2057\insrsid5712021\charrsid5591138 by an American C}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ourt. \par \par [2] The respondent is an American bank and the first appellant E settled property on her husband (B) and their children under a trust to which B also t}{\fs24\lang2057\langfe1033\langnp2057\insrsid6649966\charrsid5591138 ransferred property. That trust}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 established on }{\fs24\lang2057\langfe1033\langnp2057\insrsid11947398\charrsid5591138 12 July 2000}{\fs24\lang2057\langfe1033\langnp2057\insrsid12539341 is a registered Cook Island International T}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 rust pursuant to the International Trusts Act 1984. The appellants had gu}{ \fs24\lang2057\langfe1033\langnp2057\insrsid282886\charrsid5591138 aranteed payment to the respond}{\fs24\lang2057\langfe1033\langnp2057\insrsid12539341 ent bank of a $US}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 17m promissory note and on default the bank commenced arbitration proceedings, and claims that, while these were pending, the appella nts transferred assets to the trust in the Cook Islands for no consideration, rendering themselves unable to pay the bank. On 31 October 2000 they consented to arbitration awards for the amounts due under the guarantees and on 28 }{ \fs24\lang2057\langfe1033\langnp2057\insrsid4654019\charrsid5591138 December}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 }{\fs24\lang2057\langfe1033\langnp2057\insrsid4654019\charrsid5591138 of that year }{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 the Circuit Court in Maryland entered judgment against them for the amount now claimed. \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid282886\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 [3]}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 The present proceedings are brought pursuant to s 13B}{\fs24\lang2057\langfe1033\langnp2057\insrsid4287833 }{ \fs24\lang2057\langfe1033\langnp2057\insrsid4654019\charrsid5591138 (1) of the I}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 nternational Trusts Act 1984 which reads: \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 \par }\pard \ql \li720\ri0\widctlpar\faauto\adjustright\rin0\lin720\itap0\pararsid10488250 {\fs24\lang2057\langfe1033\langnp2057\insrsid282886\charrsid5591138 13B. (1) }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 Where it is proven beyond reasonable doubt by a cr}{\fs24\lang2057\langfe1033\langnp2057\insrsid4654019\charrsid5591138 editor than}{\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 an international}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 trust settled or established or property disposed to an international trust}{\fs24\lang2057\langfe1033\langnp2057\insrsid282886\charrsid5591138 -}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid1988449 {\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 \par }\pard \ql \li1440\ri0\widctlpar\faauto\adjustright\rin0\lin1440\itap0\pararsid10488250 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 (a) was so settled, established or disposed by or on behalf of the settlor with principal intent to defraud that creditor of the settlor; and \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid1988449 {\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 \par }\pard \ql \li1440\ri0\widctlpar\faauto\adjustright\rin0\lin1440\itap0\pararsid10488250 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 (b) did at the time such settlement, establishment or disposition took place render the settlor, insolvent or without property by which that creditor}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s claim (if successful) could have been satisfied. \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid1988449 {\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 \par }\pard \ql \li720\ri0\widctlpar\faauto\adjustright\rin0\lin720\itap0\pararsid1988449 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 then such settlement, est}{\fs24\lang2057\langfe1033\langnp2057\insrsid4654019\charrsid5591138 ablishment or disposition shall}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 not be void or voidable and the international trust shall be liable to satisfy the creditor}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s claim out of the property which, but for the settlement establishment or disposition, would have been available to satisfy the creditor}{ \fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s claim and such liability shall only be to the extent of the interest that the settlor had in the property prior to settlement, establishmen}{\fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 t or disposition and any accumu}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 lation to the property (if any) subsequent thereto. \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid1988449 {\fs24\lang2057\langfe1033\langnp2057\insrsid1988449\charrsid5591138 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid4416385 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 There are some impo}{\fs24\lang2057\langfe1033\langnp2057\insrsid4654019\charrsid5591138 rtant qualifications. Under sub}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s (2), regard must be had to the fair market value of the settlor}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s other property immediately after settlement in determin}{\fs24\lang2057\langfe1033\langnp2057\insrsid4654019\charrsid5591138 ing whether it had rendered him}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 or her insolvent, and if it exceeded the value of the creditor}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s claim, the disposition to the trust is deemed not to have been with intent to defraud the creditor. Of particular releva}{ \fs24\lang2057\langfe1033\langnp2057\insrsid282886\charrsid5591138 nce to these proceedings is sub}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s (5)}{\fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 : \par \par }\pard \ql \li720\ri0\widctlpar\faauto\adjustright\rin0\lin720\itap0\pararsid16451382 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 A settlor shall not have imputed to him an intent to defraud a creditor, solely by reason that the settlor- \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid2254140 {\fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 \par }\pard \ql \li1440\ri0\widctlpar\faauto\adjustright\rin0\lin1440\itap0\pararsid13003698 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 (a) has settled or established a trust or has disposed of property to such trust within two years from the date of that creditor}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s cause of action accruing; \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid2254140 {\fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 \par }\pard \ql \li1440\ri0\widctlpar\faauto\adjustright\rin0\lin1440\itap0\pararsid13003698 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 (b) has retained, possesses or acquires any of the powers or benefits referred to in paragraphs (a }{\fs24\lang2057\langfe1033\langnp2057\insrsid14707644\charrsid5591138 ) to (f)}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 of section 13C; \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid2254140 {\fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 \par }\pard \ql \li1440\ri0\widctlpar\faauto\adjustright\rin0\lin1440\itap0\pararsid13003698 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 (c) is a beneficiary, trustee, or protector;}{ \fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid4416385 {\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 \par }\pard \ql \li1440\ri0\widctlpar\faauto\adjustright\rin0\lin1440\itap0\pararsid13003698 {\fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 (d) has settled or established a trust, or has disposed of property to such trust, at a time when proceedings in respect of that creditor}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid14707644\charrsid5591138 s }{\fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 cau}{\fs24\lang2057\langfe1033\langnp2057\insrsid14707644\charrsid5591138 se of action against that settlo}{ \fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 r have already been commenced in a co}{\fs24\lang2057\langfe1033\langnp2057\insrsid13003698\charrsid5591138 urt of competent jurisdiction.}{ \fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid4416385 {\fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 \par The onus of proof of the settlor}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 s intent to defraud the creditor}{ \fs24\lang2057\langfe1033\langnp2057\insrsid14707644\charrsid5591138 lies on that creditor (see sub}{\fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 s (7)}{\fs24\lang2057\langfe1033\langnp2057\insrsid14707644\charrsid5591138 )}{ \fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 . \par \par [4] }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 The purp}{\fs24\lang2057\langfe1033\langnp2057\insrsid13640714\charrsid5591138 ose of s 13B, accepted by this C}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ourt in }{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 515 South Orange Grove Owners Association v Orange Grove Partners}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 (}{ \fs24\lang2057\langfe1033\langnp2057\insrsid14707644\charrsid5591138 Court of Appeal, Cook Islands, CA 1/95, 6 November 1995}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ) is to provide funds to satisfy a creditor}{ \fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s claim out of properties settled on or disposed of to an international trust which, but for the settlement or disposition, would have been available to sa tisfy that claim. It does not render the trust or disposition void or voidable, but achieves a balancing action, preserving the integrity of the trust while granting access to the assets fraudulently settled or disposed of earlier (p 19). }{ \fs24\lang2057\langfe1033\langnp2057\insrsid3944561\charrsid5591138 At page 27 the C}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ourt, in di}{\fs24\lang2057\langfe1033\langnp2057\insrsid3944561\charrsid5591138 scussing the purpose of the}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 Act}{\fs24\lang2057\langfe1033\langnp2057\insrsid3944561\charrsid5591138 , was loathe to interpret it as a statute }{ \fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{\fs24\lang2057\langfe1033\langnp2057\insrsid3944561\charrsid5591138 which was intended to give succour}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 to cheats and fraudsters by totally excluding the legitimate claims of overseas creditors.}{\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 \par }{\b\fs24\lang2057\langfe1033\langnp2057\insrsid3944561\charrsid5591138 Privilege and the Fraud E}{\b\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 xception \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 \par [5]}{\fs24\lang2057\langfe1033\langnp2057\insrsid3631102\charrsid5591138 T}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 here is no doubt about the fundamental importance of privilege from disclosure of communications passing between a client and legal adviser, whether for the purpose of seeking advice generally, or of litigation. Mr Grant cited the justification for the ru le given to the European Court of Justice by Advocate General Slynn of England}{\fs24\lang2057\langfe1033\langnp2057\insrsid3631102\charrsid5591138 }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 -}{ \fs24\lang2057\langfe1033\langnp2057\insrsid3631102\charrsid5591138 }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 namely that every person }{\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 should be able to know what they can do under the law, what is forbidden, where they must tread circumspectly, where they run risks.}{\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 " }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 However, privilege will not attach to communications made with intent on the client}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s part to facilitate crime or fraud, and this exception has been consistently recognised in civil and criminal proceedings since }{ \b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 R v Cox}{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid3631102\charrsid7277388 and Railton}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 (1884}{ \fs24\lang2057\langfe1033\langnp2057\insrsid3631102\charrsid5591138 ) 14 QBD 153.}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 We hardly need add tha}{\fs24\lang2057\langfe1033\langnp2057\insrsid3631102\charrsid5591138 t this exception does not apply}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 to communications made for the dominant purpose of being used in pending or contemplated proceedings. \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid16451382\charrsid5591138 \par [6]}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 Williams J discussed at some length the meaning of fraud in relation to privilege in civil litigation, and we quo}{ \fs24\lang2057\langfe1033\langnp2057\insrsid3631102\charrsid5591138 te the following forthright com}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ments of Kekewich J in }{ \b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 Williams v Quebrada Railway Land and Copper Co}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 [1895] 2 Ch}{ \fs24\lang2057\langfe1033\langnp2057\insrsid3631102\charrsid5591138 ancery}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 751 at 755: \par \par }\pard \ql \li720\ri0\widctlpar\faauto\adjustright\rin0\lin720\itap0\pararsid2254140 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ... where there is anything of an underhand nature or approaching to fraud, especially in commercial matters, where there should be the veriest good faith, the whole transaction should be ripped up and disclosed in all its nake}{ \fs24\lang2057\langfe1033\langnp2057\insrsid12586224\charrsid5591138 dness to the light of the Court}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ... }{\fs24\lang2057\langfe1033\langnp2057\insrsid12586224\charrsid5591138 Then }{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 it is alleged that the company was insolvent, and that they found it useless for them to continue to carry on busin ess and they had to stop, but that in order to prevent for a time this inevitable result they gave a charge in favour of their agents, and, as the plaintiff alleges, they did it in such a way as to defeat the holders of }{ \fs24\lang2057\langfe1033\langnp2057\insrsid12586224\charrsid5591138 first debentures. That is what I}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 understand the plaint}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4591785\charrsid5591138 iff}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid4591785\charrsid5591138 s case to be, and it is said}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 }{\fs24\lang2057\langfe1033\langnp2057\insrsid12586224\charrsid5591138 that is not a charge of fraud. It is difficult to say it is not commercial }{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 dishonesty. It is, in my opinion, commercial dishonesty of the very worst type; and that is fraud. \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid2254140 {\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid4416385 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 [7] This dictum was referred to by Vinelott J in }{ \b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 Derby & Co Ltd v Weldon}{\fs24\lang2057\langfe1033\langnp2057\insrsid14812662\charrsid5591138 [1990] }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 3 All ER 1} {\fs24\lang2057\langfe1033\langnp2057\insrsid14812662\charrsid5591138 64}{\fs24\lang2057\langfe1033\langnp2057\insrsid12192977\charrsid5591138 }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 and by Goff J in }{ \b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 Crescent Farm (Sidcup)}{\b\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 }{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 Sports Ltd v Sterling Offices Ltd}{\fs24\lang2057\langfe1033\langnp2057\insrsid10169660\charrsid5591138 [197}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 1}{\fs24\lang2057\langfe1033\langnp2057\insrsid10169660\charrsid5591138 ]}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 3 All ER 1192 and }{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 Gamlen Chemical Co (UK) Ltd v Rochem Ltd (No 2)}{ \fs24\lang2057\langfe1033\langnp2057\insrsid10365710\charrsid5591138 (1979) 124 SJ}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 27 6. In the former case, Goff J held that a conspiracy and inducement of a breach of contract did not come within the ambit of fraud, while in the }{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 Gamlen Chemical Co}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 case he thought commercial men and lawyers alike would say that it is fraud for servants to secretly use a master}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s time and money to take his customers and employees and profit from them in their own business. He added: \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 \par }\pard \ql \li720\ri0\widctlpar\faauto\adjustright\rin0\lin720\itap0\pararsid2254140 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 Where you draw the line in the infinite gradation of good and evil between }{ \b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 Williams}{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid5858280\charrsid7277388 '}{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 s}{ \i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 case (Kekewich J) and the }{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 Crescent Farm Sports}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 case ... I do not attempt to say, but I have no doubt the present case is on the same side as }{ \b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 Williams}{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid5858280\charrsid7277388 '}{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 s}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 case and that discovery ought to be given ... I wish only to add two further observations. First the court must in every case, of course, be satisfied that what is prima facie proved really is dishonest, and not merely disreputable or a failure to maintain good ethical standards and must bear in mind that legal professional privilege is very necessary thing and is not lightly to be overthrown, but on the other hand the interests of victims of fraud must not be overlooked. Each}{\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 case depends on its own facts.}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid2254140 {\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid4416385 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 We are in agreement with this common}{\fs24\lang2057\langfe1033\langnp2057\insrsid2638145 -}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 sense assessment of the approach to be taken by the courts. \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 \par [}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 8] Williams J saw the theme of dishonest purpose in the cases he cited, leading him to conclude that t}{\fs24\lang2057\langfe1033\langnp2057\insrsid6887382 he scope of the fraud exception}{\fs24\lang2057\langfe1033\langnp2057\insrsid4591785\charrsid5591138 -}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 \par }\pard \ql \li720\ri0\widctlpar\faauto\adjustright\rin0\lin720\itap0\pararsid9460277 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 goes beyond deceit or fraud simpliciter and catches any commercial practice or business dealing that would readily be described as dishonest to the point of fraud by a reasonable businessman. Beyond this, further generalit}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4591785\charrsid5591138 ies are probably not helpful.}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid4416385 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 \par He saw no reason for a more restrictive definition in the light of the asset protection regime of the legislation, and the requirement of proof beyond reasonable doubt by the creditor, and we agree. Mr Grant criticised the judge}{ \fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s reference to }{\fs24\lang2057\langfe1033\langnp2057\insrsid2638145 "}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 the reasonable businessman}{\fs24\lang2057\langfe1033\langnp2057\insrsid2638145 "}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 , but this is no more than a c}{ \fs24\lang2057\langfe1033\langnp2057\insrsid16325576\charrsid5591138 onventional recognition by the C}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ourts of an objective test of }{\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 dishonesty to the point of fraud}{\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 in the commercial environment of the questioned transaction. Mr Grant also referred to a passage}{\fs24\lang2057\langfe1033\langnp2057\insrsid3892628\charrsid5591138 at para 48}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 of the judgment citing the New Zealand Law Commission}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s statement in its Evidence Code of 1999, that a strong prima facie case of fraud or dishonest purpose should be established to justify the exception. We do not think this reference to }{\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 dishonest purpose}{\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 indicates that the judge was accepting mere dishonesty as sufficient. He was dealing with the quite different qu}{\fs24\lang2057\langfe1033\langnp2057\insrsid8852638\charrsid5591138 estion of the standard of proof,}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 }{\fs24\lang2057\langfe1033\langnp2057\insrsid4591785\charrsid5591138 focusing}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 on what the Commission said about that}{\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 aspect in the passage. Read as a whole, the judgment makes it quite clear that }{ \fs24\lang2057\langfe1033\langnp2057\insrsid9709853\charrsid5591138 Williams J understood that the t}{\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 est was fraudulent purpose and applied it.}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 \par [9]}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 The judge then went on to consider the standard of proof of fraud required to justify disclosure. Afte}{\fs24\lang2057\langfe1033\langnp2057\insrsid14120969\charrsid5591138 r considering a range of cases (}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 many of which were summarised by Vinelott J in }{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 Derby & Co Ltd v Weldon}{ \fs24\lang2057\langfe1033\langnp2057\insrsid14120969\charrsid5591138 )}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 , and bearing in mind that s 13B required the creditor to prove fraud beyond reasonable doubt, he held that a strong prima facie case of fraud had to be established. This test was accepted by Mr Fardell }{ \fs24\lang2057\langfe1033\langnp2057\insrsid4591785\charrsid5591138 f}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 or the respondent, but Mr Grant submitted that it should have been more stringent by requiring a strong prima facie case that the plaintiff will be able to establish beyond reasonable doubt at trial that the dispositions were made by the appellants with the principal intent of defrauding the bank. It must be borne in mind, of course, that in civil proceedi}{\fs24\lang2057\langfe1033\langnp2057\insrsid10838431\charrsid5591138 ngs where fraud is alleged the C}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ourts will always scrutinise the evidence with a degree of care reflecting the gravity of the charge}{\fs24\lang2057\langfe1033\langnp2057\insrsid5523989\charrsid5591138 ,}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 requiring to be satisfied in Mr Fardell}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s submission at the higher end of the spectrum of probabilities, effectively leaving little distinction between proof on balance of probability and proof beyond reasonable doubt. Like those in many of the reported c ases, these attempts to define the strength of the prima facie case required often lead to semantic ar}{\fs24\lang2057\langfe1033\langnp2057\insrsid12148064\charrsid5591138 guments tending to obscure the C}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ourt}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s basic approach to the exercise of its discretion. This approach was stated by Viscount Finlay in }{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 O}{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid5858280\charrsid7277388 '}{ \b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 Rourke v Darbishire}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 [1}{\fs24\lang2057\langfe1033\langnp2057\insrsid5648085\charrsid5591138 920] AC 581 at 604}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 in the following passage, also cited by Cardozo J in the United States Supreme Court in }{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 Clark v United States}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4591785\charrsid5591138 289}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 US 1}{\fs24\lang2057\langfe1033\langnp2057\insrsid12201838\charrsid5591138 (1933)}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 at }{\fs24\lang2057\langfe1033\langnp2057\insrsid12201838\charrsid5591138 p }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 15: \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 \par }\pard \ql \li720\ri0\widctlpar\faauto\adjustright\rin0\lin720\itap0\pararsid4338082 {\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 The }{ \fs24\lang2057\langfe1033\langnp2057\insrsid16012022\charrsid5591138 C}{\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 ourt will exercise its discretion}{\fs24\lang2057\langfe1033\langnp2057\insrsid5142103\charrsid5591138 ,}{ \fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 not merely as to the terms in which the allegation [of fraud] is made, but also as to the surrounding circumstance}{\fs24\lang2057\langfe1033\langnp2057\insrsid4338082\charrsid5591138 s, for the purpose of seeing whether the charge is made honestly and with sufficient probability of its truth to make it right to disallow the privilege}{\fs24\lang2057\langfe1033\langnp2057\insrsid1200697\charrsid5591138 of professional communication.}{ \fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid4416385 {\fs24\lang2057\langfe1033\langnp2057\insrsid2254140\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 This approach was also adopted by the New Zealand Court of Appeal in }{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid7277388 Matua Finance Ltd v Equiticorp Industries Group Ltd}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 [1993}{\fs24\lang2057\langfe1033\langnp2057\insrsid2913745\charrsid5591138 ]}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4612955\charrsid5591138 }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 3 NZLR 650}{\fs24\lang2057\langfe1033\langnp2057\insrsid4129805\charrsid5591138 ,}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 653. \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid6562433\charrsid5591138 \par }{\b\fs24\lang2057\langfe1033\langnp2057\insrsid1838003\charrsid5591138 Disputed F}{\b\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 acts and }{\b\fs24\lang2057\langfe1033\langnp2057\insrsid7891802\charrsid5591138 C}{ \b\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 onclusions \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid1200697\charrsid5591138 \par [10]}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 Williams J held there was a strong prima facie case of the fraud in his conclusions summarised in para}{\fs24\lang2057\langfe1033\langnp2057\insrsid11731804\charrsid5591138 graph}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 85 of his judgment: \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid3281873\charrsid5591138 \par }\pard \ql \li720\ri0\widctlpar\faauto\adjustright\rin0\lin720\itap0\pararsid5705854 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 The }{\fs24\lang2057\langfe1033\langnp2057\insrsid13641114\charrsid5591138 P}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 laintiff contends in essence that the timing of the establishment of the }{\fs24\lang2057\langfe1033\langnp2057\insrsid13641114\charrsid5591138 T}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 rust and the transfers to it, occurring immediately after demand for payment by the }{\fs24\lang2057\langfe1033\langnp2057\insrsid7812448\charrsid5591138 Ba}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 nk and commencement of arbitration proceedings to recover the debt, gives rise to a strong inference that actions were undertaken to defraud E and B}{ \fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s creditors. The }{\fs24\lang2057\langfe1033\langnp2057\insrsid7812448\charrsid5591138 F}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 irst }{\fs24\lang2057\langfe1033\langnp2057\insrsid7812448\charrsid5591138 D}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 efendants, on the other hand, say that the }{\fs24\lang2057\langfe1033\langnp2057\insrsid15670578\charrsid5591138 T}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 rust was established and funded for the legitimate purpose of future asset protection for themselves and their children. They say that they believed that the assets they had left after funding the }{ \fs24\lang2057\langfe1033\langnp2057\insrsid14883059\charrsid5591138 T}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 rust would be}{\fs24\lang2057\langfe1033\langnp2057\insrsid3281873\charrsid5591138 }{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 sufficient to satisfy their outstanding creditors. In my view the }{\fs24\lang2057\langfe1033\langnp2057\insrsid9858192\charrsid5591138 P}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 laintiff has satisfied the strong prima facie test by reference to the establishment of the }{\fs24\lang2057\langfe1033\langnp2057\insrsid14313090\charrsid5591138 T}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 rust in the shadow of an impending arbitration and judgment (eventually by consent) for a very substantial sum}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid9382524 . Although E and B profess legitimate reasons for the establishment of the }{\fs24\lang2057\langfe1033\langnp2057\insrsid2710058\charrsid9382524 T}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid9382524 rust, a}{ \fs24\lang2057\langfe1033\langnp2057\insrsid3281873\charrsid9382524 careful reading of B}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280\charrsid9382524 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid3281873\charrsid9382524 s explana}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid9382524 tion reveals no persuasive reason for its timing or the rapid transfer of assets to it thereafter. If, in fact, E and B were establishing a tr ust for legitimate reasons, it is perhaps odd that they had not done so before. They are clearly wealthy and sophisticated business people who had been taking business risks involving substantial borrowings since the establishment of the first store in 19 95. Full evidence at trial may lead to the prima facie case falling away and the }{\fs24\lang2057\langfe1033\langnp2057\insrsid8409549\charrsid9382524 P}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid9382524 laintiff failing}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 to satisfy the beyond reaso}{\fs24\lang2057\langfe1033\langnp2057\insrsid10583571 nable doubt test contained in section }{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 13}{\fs24\lang2057\langfe1033\langnp2057\insrsid3696791\charrsid5591138 B}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 but as matters stand a strong prima facie case has been established, especially since the requirem}{\fs24\lang2057\langfe1033\langnp2057\insrsid3281873\charrsid5591138 ent under s 13B}{\fs24\lang2057\langfe1033\langnp2057\insrsid10583571 }{ \fs24\lang2057\langfe1033\langnp2057\insrsid3281873\charrsid5591138 (1) is to demon}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 strate that the }{\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 principal intent}{\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 , not the sole intent, was to defraud.}{ \fs24\lang2057\langfe1033\langnp2057\insrsid3281873\charrsid5591138 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid5705854 {\fs24\lang2057\langfe1033\langnp2057\insrsid5705854\charrsid5591138 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid4416385 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 [11] Mr Grant submitted that, in reaching this conclusion, }{ \fs24\lang2057\langfe1033\langnp2057\insrsid3093679\charrsid5591138 His Honour}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 relied effectively on the disposal of the assets while the arbitration was pending, and that this ignores the provision in s 13B(5)(d) as set out earlier in this judgment, to the effect that a settlor shall not have imputed to him an intent to defraud a creditor, solely by reason that the settlor has disposed of property to the trust, at a time when proceedings in respect of that creditor}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s cause of action had already been commenced in a }{\fs24\lang2057\langfe1033\langnp2057\insrsid15742120\charrsid5591138 C}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ourt of competent jurisdiction. (Mr Fardell accepted that for the pu rpose of these proceedings, this provision in subs (5)(d) applied, and he also conceded that the settlement fell within subs (5)(a) as a disposal within two years from the date of the creditor}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s cause of action accruing.) However, if there is other evidenc e from which fraud can be inferred, then the matters referred to in subs (5) can be taken into account in determining whether a sufficient prima facie case has been made out. In the extract just cited, Williams J referred to other matters from which such an inference can be drawn. In order to understand the factual situation more clearly and the opposing arguments thereon advanced by counsel, it is convenient to set out the relevant parts of }{ \fs24\lang2057\langfe1033\langnp2057\insrsid3281873\charrsid5591138 the chronology prepared by the J}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 udge: \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid3281873\charrsid5591138 \par }\trowd \irow0\irowband0\ts15\trgaph108\trrh570\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt \brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852 \pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 April 1995 - Sept 1999\cell E and B}{ \fs24\lang2057\langfe1033\langnp2057\insrsid5514976 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 s Company, P Inc., opened four bookstores.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 \trowd \irow0\irowband0 \ts15\trgaph108\trrh570\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 24 March 1988\cell The Plaintiff Bank made a line of credit available to }{\fs24\lang2057\langfe1033\langnp2057\insrsid1207246 P in total and not to exceed US$}{\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 17 million.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 \trowd \irow1\irowband1 \ts15\trgaph108\trrh570\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\trowd \irow2\irowband2 \ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 31 May 1999\cell E and B guaranteed payment to th e Plaintiff of all indebtedness under a promissory note given by P to the bank.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 { \fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 \trowd \irow2\irowband2 \ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\trowd \irow3\irowband3 \ts15\trgaph108\trrh1140\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 31 May 2000\cell The promissory note matured. As a result, all indebtedness to the Bank under the promissory note and the guarantee signed by E and B became immediately due and payable.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 \trowd \irow3\irowband3 \ts15\trgaph108\trrh1140\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\trowd \irow4\irowband4 \ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 5 June 2000\cell The Plaintiff demanded payment from P and E and B on 12 June 2000. The demand was not met.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 { \fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 \trowd \irow4\irowband4 \ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\trowd \irow5\irowband5 \ts15\trgaph108\trrh570\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 Circa April to June 2000\cell E and B decided to sell the stores.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 \trowd \irow5\irowband5\ts15\trgaph108\trrh570\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt \brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852 \row }\trowd \irow6\irowband6\ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt \clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 Circa June 2000\cell Efforts to sell the stores commenced. The initial asking price was US$15 million.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 { \fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 \trowd \irow6\irowband6 \ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976 June 2000 -}{ \fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 circa Dec 2000\cell Efforts to sell the stores continued. Initial interest was shown by retail chain stores Q and R. Negotiations began with R.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 \trowd \irow7\irowband7 \ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 23 June 2000\cell E and B were served with a notice of claim by the Bank and demand for arbitration.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 { \fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 \trowd \irow8\irowband8 \ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 12 July 2000\cell A notice was issued by the arbitrator S notifying the parties that arbitration proceedings had been init}{\fs24\lang2057\langfe1033\langnp2057\insrsid11207086 i}{\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 ated.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid5514976\charrsid5591138 \trowd \irow9\irowband9 \ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\trowd \irow10\irowband10\ts15\trgaph108\trrh570\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt \brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852 \pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 12 July 2000\cell E and B formed the Trust.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 \trowd \irow10\irowband10\ts15\trgaph108\trrh570\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt \brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852 \row }\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 18 July 2000\cell T he Bank served its Complaint in the arbitration proceedings.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 { \fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 \trowd \irow11\irowband11 \ts15\trgaph108\trrh570\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 26 July 2000\cell E and B served their Answer to the Bank}{\fs24\lang2057\langfe1033\langnp2057\insrsid16021409 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 s Complaint.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 \trowd \irow12\irowband12 \ts15\trgaph108\trrh570\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\trowd \irow13\irowband13\ts15\trgaph108\trrh1995\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt \brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852 \pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409 1 August -}{ \fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 circa Oct 2000\cell E and B transferred assets to the Trust for minimal consideration. The transferred assets include E and B}{\fs24\lang2057\langfe1033\langnp2057\insrsid16021409 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 s residence in Maryland, a second property in Georgia, the furnishings and artwork contained in the Maryland residence and cash, shares and interests in partnerships worth over US$16 million. All appear to have been transferred prior to the end of October 2000.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 \trowd \irow13\irowband13 \ts15\trgaph108\trrh1995\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\trowd \irow14\irowband14\ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt \brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852 \pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 7 August 2000\cell A Price}{ \fs24\lang2057\langfe1033\langnp2057\insrsid13916322 W}{\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 aterhouse Cooper}{\fs24\lang2057\langfe1033\langnp2057\insrsid13916322 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 s valuation report on P wa}{\fs24\lang2057\langfe1033\langnp2057\insrsid11207086 s issued. The report valued P (the bookstore company) at US$}{ \fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 12.7 million.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 { \fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 \trowd \irow14\irowband14 \ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 31 October 2000\cell E and B consented to two arbitration awards against them in favour of the Bank tota}{\fs24\lang2057\langfe1033\langnp2057\insrsid11207086 lling over US}{\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 $17 million.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 \trowd \irow15\irowband15 \ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 28 December 2000\cell The Circuit Court entered judgment against E and B for an amount over US$17 million including interest and costs.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 \trowd \irow16\irowband16 \ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 End of 2000\cell [Retail chain store] R indicated that it was not in a position to proceed with the purchase of the stores.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 \trowd \irow17\irowband17 \ts15\trgaph108\trrh855\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\trowd \irow18\irowband18\ts15\trgaph108\trrh1425\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt \brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852 \pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 Late December 2000\cell Approximately US$14 million in cash and US$729,000 in stocks and other investments were transferred by the Trust to a Swiss bank. There was no explanation in the First Defendants}{\fs24\lang2057\langfe1033\langnp2057\insrsid16021409 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 affidavits as to the purpose of this transfer.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 \trowd \irow18\irowband18 \ts15\trgaph108\trrh1425\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\trowd \irow19\irowband19\ts15\trgaph108\trrh570\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt \brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852 \pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 Circa 2001\cell P filed for bankruptcy protection.\cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid16021409\charrsid5591138 \trowd \irow19\irowband19\ts15\trgaph108\trrh570\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt \brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852 \row }\trowd \irow20\irowband20\lastrow \ts15\trgaph108\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt \clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\pard\plain \ql \li0\ri0\widctlpar\intbl\faauto\adjustright\rin0\lin0\pararsid5514976\yts15 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 {\fs24\lang2057\langfe1033\langnp2057\insrsid279688\charrsid5591138 January 2001}{ \fs24\lang2057\langfe1033\langnp2057\insrsid12205125\charrsid5591138 \cell }{\fs24\lang2057\langfe1033\langnp2057\insrsid279688\charrsid5591138 The Plaintiff Bank learned of the existence of the Trust.}{ \fs24\lang2057\langfe1033\langnp2057\insrsid12205125\charrsid5591138 \cell }\pard\plain \ql \li0\ri0\widctlpar\intbl\aspalpha\aspnum\faauto\adjustright\rin0\lin0 \fs20\lang1033\langfe1033\cgrid\langnp1033\langfenp1033 { \fs24\lang2057\langfe1033\langnp2057\insrsid12205125\charrsid5591138 \trowd \irow20\irowband20\lastrow \ts15\trgaph108\trleft612\trftsWidth3\trwWidth9240\trftsWidthB3\trftsWidthA3\trautofit1\trpaddl108\trpaddr108\trpaddfl3\trpaddft3\trpaddfb3\trpaddfr3\tbllkhdrrows\tbllklastrow\tbllkhdrcols\tbllklastcol \clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb \brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth2628\clshdrawnil \cellx3240\clvertalt\clbrdrt\brdrtbl \clbrdrl\brdrtbl \clbrdrb\brdrtbl \clbrdrr\brdrtbl \cltxlrtb\clftsWidth3\clwWidth6612\clshdrawnil \cellx9852\row }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid4416385 {\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid279688\charrsid5591138 [12]}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 }{\fs24\lang2057\langfe1033\langnp2057\insrsid5381876\charrsid5591138 His Honour ad}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ded that E and B and their children continue to live in their residence in Baltimore and enjoy the furnishings and artwork}{ \fs24\lang2057\langfe1033\langnp2057\insrsid5703490\charrsid5591138 ;}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 that }{\fs24\lang2057\langfe1033\langnp2057\insrsid335004\charrsid5591138 most }{ \fs24\lang2057\langfe1033\langnp2057\insrsid11535977 of }{\fs24\lang2057\langfe1033\langnp2057\insrsid335004\charrsid5591138 their }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 assets remaining in United States apart from}{ \fs24\lang2057\langfe1033\langnp2057\insrsid279688\charrsid5591138 th}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 eir shares}{\fs24\lang2057\langfe1033\langnp2057\insrsid279688\charrsid5591138 }{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 in P cannot be reached by creditors; that the }{\fs24\lang2057\langfe1033\langnp2057\insrsid3763933\charrsid5591138 B}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ank has recovered }{\fs24\lang2057\langfe1033\langnp2057\insrsid279688\charrsid5591138 approximately $US}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 3.4}{\fs24\lang2057\langfe1033\langnp2057\insrsid279688\charrsid5591138 }{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 m}{\fs24\lang2057\langfe1033\langnp2057\insrsid279688\charrsid5591138 illion}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 from the sale of P}{ \fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s assets. He also set out the reason given by B for the establishment of the trust. He said it was done on the advice of senior and experienced lawyers as part of estate planning to preserve the value of assets by placing them in the trust}{ \fs24\lang2057\langfe1033\langnp2057\insrsid279688\charrsid5591138 for their children}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid279688\charrsid5591138 s benefit. I}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 n effect he claimed they were simply setting up a }{\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 spendthrift trust}{\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 to save them from potentially ill-advised business}{ \fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ventures which they and eventually their children might otherwise undertake. B concluded that he was confident they could satisfy their then creditors from assets n}{\fs24\lang2057\langfe1033\langnp2057\insrsid8925524\charrsid5591138 ot placed in the trust. As the J}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 udge observed, whether this was so depended largely on the s uccessful sale of the bookstores at a good price and that this was by no means guaranteed at the time the trust was set up on 12 July 2000. The asking price was }{\fs24\lang2057\langfe1033\langnp2057\insrsid7874247\charrsid5591138 $}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 15m}{\fs24\lang2057\langfe1033\langnp2057\insrsid7874247\charrsid5591138 illion}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 set in conjunction with the lawyer, who obtai}{\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 ned a valuation from Price Water}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 house}{ \fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 Coopers which arrived on 7 August 2000, by which date transfers to the trust had already begun. \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 [13] In this }{\fs24\lang2057\langfe1033\langnp2057\insrsid2377247\charrsid5591138 C}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ourt Mr Fardell emphasised as highly significant the timing of the transfer of property and assets to the trust in the face of the appellants}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 con sent to the award and eventual confession of judgment; the lack of consideration; their continued enjoyment of the residence and chattels; the transfer to the Swiss bank account by the trust, the choice of assets transferred to the trust as against those of relatively little value left behind; the inaccessibility of other assets held in trust for }{\fs24\lang2057\langfe1033\langnp2057\insrsid2377247\charrsid5591138 Mrs }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 E; the discrepancy between the valuation of the business and the actual realised value; and the lack of candour in the appellants}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 dealing with the }{\fs24\lang2057\langfe1033\langnp2057\insrsid5078068\charrsid5591138 B}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ank. One of Mr Fardell}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 s main criticisms was the Price}{\fs24\lang2057\langfe1033\langnp2057\insrsid2058302\charrsid5591138 W}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 aterhouse valuation, which was hedged around with disclaimers and was based on discounted future earning capacity from information supplied by the company and without any independent check. On the other hand, Mr Grant relied heavily on the appellants}{ \fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 claim of good faith in going ahead to make their dispositions to the trust in reliance on this valuation and their expectation of a sale price sufficient to satisfy their liabilities. Most of the other matters rais ed by Mr Fardell were dismissed by him as occurrences normally incidental to protective tr}{\fs24\lang2057\langfe1033\langnp2057\insrsid11034282\charrsid5591138 usts from which no fraudulent in}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ferences should be drawn. \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 [14] It seems clear that the P corporation was not profitable and when the sale negotiations collapsed it s ought bankruptcy protection in February 2001. Against this background there are obvious reservations about the genuineness of the appellants}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 belief that the stores would sell for sufficient to clear the }{\fs24\lang2057\langfe1033\langnp2057\insrsid15995797\charrsid5591138 B}{ \fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ank. It could be strongly urged that they were not prepared to take this risk and bundled all their disposable assets into the trust. There seems no satisfactory answer to the obvious question that if they were honestly motivated, why did they not arrange to pay the bank out of the substantial assets appa rently readily at their disposal before setting up the trust for the future protection of themselves and their children, as they now maintain. There is a startling di}{\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 fference between the Price Water}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 house valuation and the amount actually realised for the bo okstores, and the basis of that valuation may be open to question. We see an obvious need for disclosure of the advice the appellants received from their legal experts experienced in the intricacies of protective trusts in order to ascertain whether it is being advanced as mere window-dressing to conceal their alleged purpose of defrauding the }{\fs24\lang2057\langfe1033\langnp2057\insrsid2976225\charrsid5591138 B}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ank. \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 [15] The }{\fs24\lang2057\langfe1033\langnp2057\insrsid4355037\charrsid5591138 C}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 ourt is always most reluctant to interfere with the operation of legal privilege, and in this case must also bear in mind the special}{\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 protection afforded by s}{ \fs24\lang2057\langfe1033\langnp2057\insrsid13918040 }{\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 13B. But in the end it has to stand back and form a }{\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 judgment}{\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 based on the whole of the relevant circumstances in deciding whether it is }{\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{ \fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 right to disallow the }{\fs24\lang2057\langfe1033\langnp2057\insrsid13201922\charrsid5591138 privilege}{\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 of professional communications}{\fs24\lang2057\langfe1033\langnp2057\insrsid3479535 "}{\fs24\lang2057\langfe1033\langnp2057\insrsid13918040 -}{\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 per Viscount Finlay in }{ \b\i\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid7277388 O}{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid5858280\charrsid7277388 '}{\b\i\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid7277388 Rourke v Darbishire}{ \i\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 }{\fs24\lang2057\langfe1033\langnp2057\insrsid13195362\charrsid5591138 above. From the circumstances of the formation of the trust}{ \fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 and the disposal of assets to it in the face of the pending arbitration and judgment, which are highly relevant circumstances along with the other factors mentioned above, we are satisfied that a strong prima facie case of fraud }{\fs24\lang2057\langfe1033\langnp2057\insrsid13725914\charrsid5591138 has been established; indeed it satisfies Mr Grant}{\fs24\lang2057\langfe1033\langnp2057\insrsid5858280 '}{ \fs24\lang2057\langfe1033\langnp2057\insrsid13725914\charrsid5591138 s test of a case of fraud }{\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 able to be proved at trial beyond reasonable doubt. We therefore uphold the conclusions reached by Williams J.}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 \par }{\b\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 Result \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 \par [16] The appeal is dismissed with costs of $5,000 to the respondent together with disbursements to be fixed by the Registrar if the parties cannot agree.}{\fs24\lang2057\langfe1033\langnp2057\insrsid4416385\charrsid5591138 \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 \par }\pard \qc \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid15932498 {\b\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 Cas}{\b\fs24\lang2057\langfe1033\langnp2057\insrsid12538752\charrsid5591138 e}{ \b\fs24\lang2057\langfe1033\langnp2057\insrsid14420556\charrsid5591138 y JA \par Barker JA \par Smellie JA}{\b\fs24\lang2057\langfe1033\langnp2057\insrsid14420556 \par }\pard \ql \li0\ri0\widctlpar\faauto\adjustright\rin0\lin0\itap0\pararsid13187477 {\b\fs24\lang2057\langfe1033\langnp2057\insrsid13187477 \par Solicitors: \par }{\fs24\lang2057\langfe1033\langnp2057\insrsid13187477 MC Mitchell & Co, Avarua for Appellant \par Brown Gibson Harvey PC, Rarotonga for Respondent}{\fs24\lang2057\langfe1033\langnp2057\insrsid13187477\charrsid13187477 \par }}