Background
In Grapple Pay Pty Ltd v Conroy [2025] NSWCA 171, the New South Wales Court of Appeal examined when a property transfer defrauding creditors NSW can be set aside under s 37A of the Conveyancing Act 1919 NSW. The case concerned a rural property in northern New South Wales that Jarrod Conroy purchased through a trust, with significant funding from his former partner, Isabel Lucas, and a mortgage loan from Sempre Funding Pty Ltd.
When Ms Lucas sought repayment of her contribution, Mr Conroy’s mother, Ingrid Conroy, offered to purchase the property. Instead of paying cash to Mr Conroy, she paid out the mortgage, repaid Ms Lucas, and paid stamp duty on the transfer.
On the same day the parties registered the property transfer, Prana Energy Co Pty Ltd entered voluntary administration owing money to Grapple Pay Pty Ltd. Grapple alleged that Mr Conroy structured the transfer to keep the property out of reach of creditors and sought to set it aside under s 37A.
The Legal Issue
Section 37A of the Conveyancing Act allows a court to set aside a property transfer made with intent to defraud creditors. However, the provision does not apply where a transferor transfers property to a purchaser who acts in good faith, gives valuable consideration, and has no notice of any fraudulent intent.
The key question for the Court of Appeal was whether Mr Conroy transferred the property with an intention to defraud creditors, particularly Grapple.
The Court’s Decision
The Court of Appeal dismissed Grapple’s appeal and confirmed that the transfer was not voidable.
1. Preference is not fraud
The Court emphasised that preferring one creditor over another does not, by itself, amount to an intention to defraud creditors.
Mr Conroy was entitled to prioritise repaying Ms Lucas and discharging the mortgage, even if that meant Grapple was left unpaid. Preference may be unfair, but it is not automatically fraudulent under s 37A.
2. Real value was paid for the property
Even though the transfer form stated there was “no consideration”, the Court looked at the transaction. Ingrid Conroy paid substantial amounts to discharge the mortgage and repay Ms Lucas, and she also paid stamp duty based on a $700,000 valuation. Taken together, those payments broadly matched the property’s value, so the transfer did not strip assets from the trust or leave Mr Conroy with any hidden benefit
3. Payments to creditors can still be “consideration”.
The Court accepted that a buyer can provide value by paying off the seller’s mortgage or other debts as part of the deal, even if no money is paid directly to the seller. In other words, clearing the seller’s liabilities can amount to real consideration for the transfer.
4. Good faith purchaser
Although it was not necessary to decide the point, the Court indicated that Ingrid Conroy would likely qualify as a purchaser in good faith without notice, as there was no evidence she knew of Grapple’s debtor of any intention to defraud creditors.
Key Takeaways for Property and Insolvency Disputes
1. s 37A requires actual fraudulent intent
Timing, family relationships and looming insolvency may raise suspicion, but they may not be enough on their own. A court will usually look for evidence that the transferor intended to defeat or delay creditors, which an undervalue transaction or a benefit the debtor retained may suggest.
2. Commercial substance outweighs paperwork
Even if the transfer documents state “no consideration”, courts may focus on the substance of what actually occurred. Paying off a mortgage and other debts can amount to valuable consideration, and in some cases a court may treat it as full consideration.
3. Preference vs fraudulent transfer
There is an important distinction between (1) paying one creditor ahead of others, and (2) transferring property with an actual intent to hinder, delay or defeat creditors. The law may permit the former outside the bankruptcy and corporate insolvency regimes, while a court can set aside the latter under s 37A. In practice, a creditor may need to consider whether bankruptcy or corporate insolvency “preference” provisions provide a more suitable pathway than s 37A.
4. Family transfers are not automatically suspicious
“Transfers to relatives may attract closer scrutiny, but they are not invalid just because of the relationship. The key questions are whether the parties paid fair value and whether the transferor used the transfer as a sham or retained a hidden benefit.
Conclusion
Grapple Pay Pty Ltd v Conroy highlights the practical limits of s 37A for creditors seeking to unwind pre-insolvency property transfers. A court cannot set aside a transfer merely because it occurred shortly before insolvency or involved a family member. The central issue is whether the transferor made the transfer with an actual intent to hinder, delay or defeat creditors, and whether the parties exchanged real value rather than stripping value from the asset.
For creditors and insolvency practitioners, the decision underscores the importance of choosing the correct statutory pathway – including, where available, bankruptcy or corporate insolvency preference regimes , when challenging pre-insolvency transactions.
Jake McKinley notes that this article is written for the purpose of providing generalised information and not to provide specialised legal advice. If you require qualified legal advice on anything mentioned in this article, our experienced team of solicitors at Jake McKinley are here to help. Please get in touch with us on 02 9232 8033 today to make an enquiry.
By Estephen Gear Bugarin, Solicitor
