The Federal Court has found for the Commissioner in holding that mortgages granted by the first respondent over 2 valuable residential properties in suburban Perth in favour of the second respondent, Mercury Services Limited, were void pursuant to s 89(1) of the Property Law Act 1969 (WA) (PLA) as being an alienation of property with intent to defraud her creditors, one of whom was the Commissioner to the tune of $186.3 million in tax debts re the years ended 30 June 2007 and 2010, judgment for which was given by the Federal Court in August 2011.

The 2 mortgages were granted by one mortgage document. The Court noted that, at the time of execution of the Mortgage, Mrs Oswal had also executed several securities in favour of Australian and New Zealand Banking Group Limited (ANZ).

The Court noted that a threshold argument was advanced by both respondents that, as the Mortgage is registered under the Transfer of Land Act 1893 (WA) (TLA), Mercury’s interest, as mortgagee, is indefeasible by reason of s 68(1) of that Act and cannot be impugned by operation of s 89 of the PLA. Should that argument fail, the Court said that Mrs Oswal’s defence was that the requisite intent under s 89 of the PLA has not been made out. Each respondent also contended that the provision in s 89(3) of the PLA is not a defence in respect of which they carry the onus of proof, but rather it is for the Commissioner to prove that the Mortgage did not fall within the reach of that provision.

After review of the matter, the Court concluded that there should be judgment for the Commissioner. The Court rejected the submissions that the suit must fail because there was “no evidence that Mrs Oswal was aware of the existence of any creditors or potential creditors at the time she executed the Mortgage, nor evidence that she was aware of any potential liability to the Commissioner”. Proof of such knowledge was not, in the Court’s opinion, necessary to obtain relief under s 89(1). “Indeed it is not necessary to prove the existence of any creditor or that there will be creditors in the future” Gilmour J said.

In the result, the Court found that “Mrs Oswal intended to defraud not merely the ANZ but her creditors generally, whether present or future”.  The Court was of the view that Mrs Oswal executed each mortgage the subject of the Mortgage in respect of the Properties “with intent to defraud her creditors”. Thereby, each mortgage was voidable pursuant to s 89(1) of the PLA at the instance of the Commissioner. (FCT v Oswal (No 6) [2016] FCA 762, Federal Court, Gilmour J, 29 June 2016.)