Etrard and Etrard and Ors

[2008] FamCA 1225

FAMILY COURT OF AUSTRALIA

ETRARD & ETRARD AND ORS [2008] FamCA 1225

FAMILY LAW – PROPERTY – Asset preservation orders

Family Law Act 1975 (Cth)
Bankruptcy and Family Law Legislation Amendment Act 2005 (Cth)

APPLICANT: Ms Etrard

FIRST RESPONDENT: Mr Etrard

SECOND RESPONDENT: N Etrard

THIRD RESPONDENT: Trustee of the Property of Mr Etrard, a bankrupt

FIRST INTERVENER: Deputy Commissioner of Taxation

SECOND INTERVENER: M Proprietary Limited

FILE NUMBER: (P)NCF 1315 of 1998

DATE DELIVERED: 20 March 2008

PLACE DELIVERED: Newcastle

PLACE HEARD: Newcastle

JUDGMENT OF: The Honourable Justice Ryan

HEARING DATE: 20 March 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Gersbach

SOLICITOR FOR THE APPLICANT: Rugendyke Lawyers

FIRST RESPONDENT: In person

SOLICITOR FOR THE SECOND RESPONDENT: Thomas Mitchell Solicitors (Ms Gillard)

COUNSEL FOR THE THIRD RESPONDENT: Mr Davelaar

SOLICITOR FOR THE THIRD RESPONDENT Sally Nash & Associates

COUNSEL FOR THE FIRST INTERVENER: Mr Lethbridge SC

SOLICITOR FOR THE FIRST INTERVENER: Australian Taxation Office

SOLICITOR FOR THE SECOND INTERVENER: Thomas Mitchell Solicitors (Ms Gillard)

Orders

1. That until 6.00 pm on 21 March 2008 the respondent husband and, subject to Order 5 hereof, the second respondent N Etrard be restrained from entering on the property at B.

2. That pending further order the wife do all acts and things necessary to remove the items of property owned by the E Family Trust from the B property and to relocate those items to the U property or such other place of security which she in her sole discretion may determine.

3. That to give effect to Order 2, the second respondent and the husband, their servants or agents shall immediately make available for collection by the wife from B property all keys, accessories and other devices necessary to operate and move all items identified by the wife as property of E Family Trust.

4. That the wife shall not remove any items of property located on B Property other than the property of the E Family Trust referred to in the depreciation schedule attached to the balance sheet of the E Family Trust for the year ended 30 June, 2003, being exhibit ‘C’ in these proceedings today.

5. That the wife shall give notice to the second respondent, necessary to enable him to be present with one other representative (not being the respondent husband) to admit her to the property and during the course of removal of items from B property pursuant to Order 2 hereof.

6. That the wife compiles a list of the items of property removed from B property containing sufficient particulars to enable all items to be individually identified and shall serve a copy of such list to all other parties not later than 4.00 pm on 26 March 2008.

7. That the wife shall, with such contractors as she may in her sole discretion employ, harvest the crop presently growing on B property, such harvesting to be completed not later than 6.00 pm on 30 April 2008.

8. That the husband be and is hereby restrained from being on or in the vicinity of B property during harvesting and removal of the crop from B property pursuant to Order 7 hereof and the wife shall give to the husband not less than 24 hours written notice, sent by facsimile transmission to the facsimile number for M Limited, being …, of the intention to commence harvesting pursuant to Order 7 hereof.

9. That the second respondent and his representative be permitted to be present and to observe the harvesting of the crop pursuant to Order 7 hereof provided that the second respondent is restrained form interfering with or in any way impeding the orderly completion of such harvesting.

10. That the wife ensure that the crop harvested pursuant to Order 7 hereof is identified by weight or such other means as she considers appropriate and shall serve a written record of such identification together with notification of completion of the harvest on each other party not later than 48 hours after completion of harvesting and if the wife needs to remove the crop from B property for this purpose, N Etrard and his representative may be present during such removal and return.

11. That upon completion of the harvest and recording by the wife, the harvested crop shall be stored on B property as directed by the second respondent.

12. That pending completion of the wife’s removal of the property of E Family Trust from B property the husband and the second respondent are restrained from removing any items of plant and equipment referred to in the schedule in Exhibit “C” from B property.

13. That service of these Orders on the husband shall be effected by a means of a sealed copy being sent by facsimile transmission to facsimile number …. (The Court notes that the husband was present when these orders were made and was provided with a sealed copy today). 

14. That pending further order the husband, the wife and the second respondent are restrained from selling, changing or otherwise encumbering or disposing of any item of plant or equipment claimed by the wife to be the property of E Family Trust.

15. I give liberty to all parties to apply on 24 hours notice.

16. That the First Intervener files and serves written submissions by 4.00 pm on 28 March 2008.

17. That the Third Respondent files and serves submissions in response by 4.00 pm on 4 April 2008.

18. That the First Intervener files and serves any submissions in reply by 4.00 pm on 11 April 2008.

19. That further consideration of this matter is adjourned to 14 April 2008 at 4.15 pm.

20. That the First Intervenor has leave to make an oral application for expedition.

21. That the final hearing of this matter is expedited.

IT IS NOTED that publication of this judgment under the pseudonym Etrard & Etrard and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: NCF1315 of 1998

MS ETRARD

Applicant

And

MR ETRARD

First Respondent

And

N ETRARD

Second Respondent

And

TRUSTEE OF THE BANKRUPT ESTATE OF MR ETRARD, A BANKRUPT

Third Respondent

And

DEPUTY COMMISIONER OF TAXATION

First Intervener

And

M PROPRIETARY LIMITED

Second Intervener

REASONS FOR JUDGMENT

1. These reasons were delivered orally.

2. On 12 February 2008, I adjourned these proceedings to today.  The purpose of the adjournment was so that the Deputy Commissioner of Taxation and the Trustee for the Bankrupt Estate of the husband could discuss and hopefully agree upon how these and the bankruptcy issues would in the future be conducted.  That is whether in one Court, this Court, or between the Federal Magistrates Court dealing with the bankruptcy matters and the Family Court of Australia dealing with the discreet Family Law Act issues.  Unfortunately there is no agreement.  Their positions arise because of different views concerning the operation of the Bankruptcy andFamily Law Legislation Amendment Act 2005.

3. Because of the complexity of the issues raised by learned senior counsel appearing for the Deputy Commissioner of Taxation I agree that the trustee should be afforded the opportunity to further consider the issue.  The Trustee is also concerned about the Court’s jurisdiction to deal with vested bankrupt property.

4. Today there is returnable an urgent application brought by the wife in which she seeks a series of orders about which there is no issue concerning the Court's jurisdiction.

5. The background history to the proceedings is contained in my reasons of 12 February 2008. 

6. By her Application in a Case filed on 18 March 2008 the wife seeks a series of further asset preservation orders, none of which relate to assets in which the husband or his bankrupt estate has an interest.

7. The focus of this interim application is upon plant and machinery which the wife says is owned by the E Family Trust.  Today I have received a copy of the trust deed, the balance sheet for M Pty Limited as at 2006 and the financial statement for the E Family Trust as at 30 June 2003.  The E Family Trust statement shows that at the June 2003 date it owned plant and equipment worth about $690,588.89.  This comprised property acquired for approximately $1,500,000 less accumulated depreciation of some $800,000.  The wife says that a significant portion of the E Family Trust plant and equipment is presently located at B property and in the possession of N Etrard or M Pty Limited.  The depreciation schedule attached to the financial statements of June 2003 identified a large number of items of farming machinery including, for example, tractors, one of which was acquired at $100,000, balers and wrappers.  The items were obviously expensive.   There is no evidence that they have been disposed of.

8. A side issue arose this morning about whether, because of the Creditors Petition, the wife can no longer continue to act as the trustee of the E Family Trust.  Reference to the trust deed shows that until the wife is bankrupt, she is able to continue to fulfil that role.  Therefore she was entitled as trustee to reclaim the plant and machinery owned by the E Family Trust located on B property.  She says when she attempted to do so N Etrard and the husband refused to give it up. 

9. Today by way of explanation, and for the first time, N Etrard claimed that M Pty Limited owns significant plant and machinery, including plant and machinery located at B property.  This is inconsistent with his affidavit filed on 4 December 2007 and the M Pty Limited balance sheet.  It is possible that M Pty Limited acquired plant and machinery after 30 June 2006, but there is no evidence of it.  The acquisition of plant and machinery post 30 June 2006 by M Pty Limited should be readily provable. Although sworn testimony may be sufficient, in this case the absence of corroboration is important.  The state of the evidence at this point is not sufficiently clear that I could be confident that M Pty Limited and N Etrard are able to show that the items which the E Family Trust documents demonstrate it owns have been intermingled or later acquired by M Pty Limited. 

10. There is no doubt that N Etrard and or M Pty Limited has a large amount of E Family Trust property at B property.  He says he is entitled to possession of it by virtue of a lease he alleges M Pty Limited executed with the E Family Trust on or about 1 July 2000.  If there is a lease it is not in evidence.  The wife, who as I understand it was the sole trustee of the E Family Trust at the time this lease is said to have been completed, knows nothing of it.  Although the existence of this lease had previously been referred to and had been clearly relevant for some time, its absence today is somewhat concerning.  I will give M Pty Limited and N Etrard the opportunity to produce it to the date to which we stand adjourned, at which point I will reconsider the continuation of the injunctions that I am asked to order today.

11. The argument made by the wife is that unless the E Family Trust can secure its assets there is a high risk that the trust assets will be disposed of or damaged.  In support of her case, the wife highlights recent extensive damage to U property.  Reference was made in passing to the transfer of water licences in apparent breach of injunctions made in these proceedings.  Reference was made to the cropping of the seed crop at U property at a time and in circumstances inconsistent with N Etrard’s sworn evidence and in the face of the wife’s application that she be entitled to complete the U property harvest in order to preserve a valuable asset.  There is no doubt that the crop at U property has produced a crop only a fraction of what it was agreed to be worth. 

12. At an earlier point in time the husband purported to establish his own country as part of an asset protection scheme.  It may be said this was a futile attempt to put assets beyond the reach of this Court and perhaps others. 

13. At this preliminary stage these matters persuade me that the wife is entitled to aspects of the relief that she seeks.  She has demonstrated a high risk that unless preserved, Trust assets may be dissipated or damaged.  If the Trust assets remain in situ at B property, it appears the risk is heightened.  The appropriate course is in the first instance for the assets to be documented and are then removed to N property or such other place as the wife arranges.  Consistent with the theme of asset preservation the wife will be restrained from disposing of those assets which she removes.  What flows from this in the short term is the potential damage to the crop ready for harvest at B property.  I am told, and it appears uncontentious, that the crop is ready for harvest and the Trust plant and equipment is required in order to complete the harvest.  Unless it is harvested in a timely manner the suggestion is that just as the U property crop was all but destroyed the same fate awaits the B property crop.  A balance must be struck therefore between preserving the Trust assets and enabling M Pty Limited to harvest the crop.  With respect to the submission by senior counsel for the Deputy Commissioner of Taxation his client’s strikes the balance between enabling the crop to be harvested and ensuring that the Trust assets are not damaged or disposed of.

14. The wife says that the seed collected from the B property harvest should be preserved and its disposition conducted by a selection of the parties.  Underpinning this approach is her assertion that the transaction whereby E Family Trust transferred its seed growing venture to M Pty Limited should be set aside.  As I understand it the transaction which she seeks to impugn took place years ago and the evidence at this preliminary hearing, is not so strong that I consider the disposition of the B property crop should be conducted in the fashion she alleges.  The approach I have taken is to ensure that the crop is harvested and identified. Beyond that I do not propose to limit M Pty Limited and N Etrard’s ability to sell the harvested crop at a fair market value.  This means that N Etrard will need to cooperate with the wife so that the trust machinery needed for the B property harvest can be made available to independent contractors overseen by N Etrard.

15. For these reasons I make the orders identified above.

I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan

Associate: 

Date:  20 March 2008