Etrard and Etrard and Ors (No. 2)

FAMILY COURT OF AUSTRALIA

ETRARD & ETRARD AND ORS (NO. 2)

[2009] FamCA180

FAMILY LAW – PROPERTY – asset preservation orders – where during period of an adjournment party becomes bankrupt

Family Law Act 1985 (Cth) ss 79, 106B
Bankruptcy Act 1966 ss 120, 121
Bankruptcy and Family Law Legislation Amendment Act 2005

Waugh and Waugh (2000) FLC 93-052
Glover v Walters (1950) 80 CLR 172
Cardile v LED Builders Proprietary Limited (1999) 162 ALR 294

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 Pty Limited

FILE NUMBER:

(P)NCF

1315

1998

DATE DELIVERED:

12 February 2008

PLACE DELIVERED:

Newcastle

PLACE HEARD:

Newcastle

JUDGMENT OF:

The Hon. Justice Ryan

HEARING DATE:

12 February 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

I give leave to the Deputy Commissioner of Taxation leave to file the following documents in Court:
(a) Application in a Case;
(b) Affidavit sworn 8 February 2008.

BY CONSENT (AND UNOPPOSED BY THE ATO) IT IS ORDERED:

That pending further order that to the extent required N Etrard is removed from holding the position of Trustee of the E Family Trust.
That pending further order N Etrard shall forthwith provide the wife Ms Etrard with all information available to him as to the whereabouts of the assets of the E Family Trust and its records.
That orders 10, 10.1 and 11 made in this Court on 16 September 2003 are discharged.
That orders 5, 6, 7, 8 and 9 of the orders made in this Court 12 December 2007 are discharged.
That pending further order the wife is appointed Trustee to apply on her own behalf, on behalf of the husband Mr Etrard and/or the Trustee for the Bankrupt Estate of the husband to the New South Wales Department of Water & Energy for payment pursuant to the Achieving Sustainable Groundwater Entitlements program payment offer in respect of Water Access Licences Numbered WAL …5, WAL …2 and WAL …6 and Supplementary Water Access Licence WAL …4 and in that regard sign all documents and do all things necessary to obtain payment pursuant to the offer.
In the event that the New South Wales Department of Water & Energy pays compensation in response to any application made pursuant to the above order, those funds are to be paid into a trust or controlled monies account operated by the wife’s solicitors Rugendyke Lawyers and shall only be paid out therefrom pursuant to an order or with the consent of all parties to these proceedings.

IT IS FURTHER ORDERED:

That N Etrard is joined as a Respondent to the proceedings and shall hereinafter be referred to as “the Second Respondent”.
That pending further order the wife is at liberty to sell the real property situate at and known as ‘[V Property] being the land contained in Certificate of Title Identifier Number … (‘[V Property]) and to pay the net proceeds of sale thereto to the Australian Taxation Office in reduction of her liability to the Australian Taxation office for income tax, interest and penalties.
Subject to the rights of the Trustee of the Bankrupt Estate of the husband, the wife shall have exclusive occupation of the property situate at and known as ‘[U property], being the land contained in Certificate of Title Identifier Number ….
That the husband, N Etrard and M Pty Limited are restrained from interfering with the wife taking occupation of U property pursuant to the above order.
That N Etrard is restrained from disposing of or in any way encumbering or dealing with his interest in Water Access Licence numbers WAL …2, WAL …6, WAL …5 and WAL ….4
Unless the E Family Trust Deed by which the E Family Trust was created provides that upon the husband committing an act of bankruptcy he is removed as a Trustee of the E Family Trust and the wife is appointed its sole Trustee.
That M Pty Limited is restrained from disposing of or dealing with property owned by the E Family Trust other than in accordance with the written direction of the wife and, in the event the husband’s interest has vested in his Trustee, the Trustee of his bankrupt estate.
That the Application in a Case filed by M Pty Limited on 6 February 2008 is dismissed.
That these proceedings are adjourned for further mention before me at 9.30 am on 20 March 2008.

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: (P)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 COMMISSIONER OF TAXATION

First Intervener

And

M PTY LIMITED

Second Intervener

REASONS FOR JUDGMENT

These reasons were delivered orally.
On 27 March 1998 Ms Etrard (“the wife”) commenced proceedings for the adjustment of property against her husband, Mr Etrard (“the husband”). Not long after the proceedings started the husband and wife reconciled. On 18 October 1998 all prior orders were discharged and all outstanding applications were withdrawn.
The husband and wife separated again for the last time on 22 April 2003. During their reconciliation they entered into a series of transactions the primary purpose of which was, according to the wife, to preserve the family's assets. Preserving the assets from whom or what is unclear. What is clear is that the transactions which took place were a joint enterprise between the husband and the wife.
On 29 August 2003 the wife filed a further application for s 79 Family Law Act 1975 (FLA) property proceedings. These are those proceedings. She subsequently amended her application and now applies for those interim and final orders contained in her amended application filed on 8 February 2008. The orders sought are set out below:
Interim Orders:
1.That [N Etrard] be joined as a second respondent to the proceedings.
2.That [K] Pty Limited be joined as a third respondent to the proceedings.
3.That [M] Pty Limited be joined as a fourth respondent to the proceedings.
4.That pending further order, the wife be at liberty to sell the real property situate at and known as [V property], being the land contained in Certificate of Title Identifier No […] ([“V property”]) and to pay the net proceeds of sale thereof to the Australian Taxation Office in reduction of her liability thereto for income tax, interest and penalties.
5.That pending further order, the wife be and is hereby granted the right to exclusive occupation of the real property situate at and known as [U property], being the land contained in Certificate of Title Identifier No […] ([“U Property”]).
6.That the husband and each other respondent do all acts and things necessary to allow the wife to take possession of [U property].
7.That the second respondent be and is hereby restrained from disposing of or in any way encumbering his interest in the Water Access Licence (“WAL”) No. […2] except as provided for below.
8.That the second respondent within 14 days of the date hereof do all acts and things and sign all documents necessary to transfer to the husband such WAL provided that the wife shall be responsible for preparation and submission to the second respondent of the form of Transfer and all documents necessary to give effect to this order.
9.That pending further order, the wife be and is hereby appointed as the sole trustee of the [E] Family Trust.
10.That the Respondents each do all acts and things necessary to facilitate the wife becoming the sole trustee of the [E] Family Trust and taking possession of all assets and records of the [E] Family Trust.
11.That pending further order, the wife be entitled to all income derived from the production and sale of [produce] and any other farming activity carried out on [U property].
12.That the wife be appointed trustee on behalf of the parties to apply to the New South Wales Department Of Water & Energy for payment pursuant to the Achieving sustainable Groundwater Entitlements Program payment offer in respect of Water Access Licence No. WAL […5] and Supplementary Water Access Licence No. WAL […4] and in that regard sign all documents and do all things necessary to obtain payment pursuant to the offer and that the proceeds of such offer be paid to the wife.
13.That pending further order, the husband and the second respondent each be and are hereby restrained from instituting or prosecuting any petition for bankruptcy as a debtor.
14.That orders 10, 10.1 and 11 made on 16 December 2003 be discharged.
15.That order 5 made on 12 December 2007 be discharged.
16.That in the event that any party fails to do any act or thing necessary to give effect to any of these orders within 14 days of being requested to do so then pursuant to s 106A of the Family Law Act the Registrar of this Court is appointed to do all such acts or things as are necessary to be done on behalf of the defaulting party as are necessary to give effect to these orders.
17.That in the event there is no appearance by or on behalf of the respondent on any listing for hearing or directions of this application for interim orders or any of them before this Honourable Court that this application proceed on an undefended basis as against the respondent.
Final Orders:
1.That the husband transfer to the wife the whole of his interest in the real property situate at and known as [U property], being the land contained in Certificate of Title Identifier No. […] together with all plant and equipment located on or ordinarily used in any farming or other enterprise operated on [U property].
2.That the husband transfer to the wife the whole of his interest in the Water Access licence WAL […5] and Supplementary Water Access licence WAL […4] related to or used in any farming or other enterprise operated on [U property].
3.That the wife be at liberty to sell the real property situate at and known as [V property], being the land contained in Certificate of Title Identifier No. […] and to pay the net proceeds of sale thereof to the Australian Taxation Office in reduction of her liability for income tax, interest and penalties.
4.That pursuant to s 106B of the Family Law Act the transfer of the Water Aquifier Licence (“WAL”) No. WAL […2] from the husband to [N Etrard] registered on 17 October 2007 be set aside and that the husband and the second respondent each do all acts and things necessary to re-transfer the sale WAL to the husband.
5.The husband do all acts and things and sign all documents necessary to sell the property [“B property”] and the attached WAL […2] and to pay the proceeds of sale to the first intervenor.
6.Pursuant to s 106B of the Family Law Act the transfer of the husband’s share in each of the companies [M] Pty Limited and [K] Pty Limited to [N Etrard] be set aside and that [N Etrard] do all acts and things and sign all documents necessary to re-transfer to the husband such shares.
OR in the alternative
6.1That the companies [M] Pty Limited do all acts and things and sign all documents necessary to sell all the assets owned by or in the possession or under the control of each of them and take such other steps as are necessary to convert such assets into money and to pay the proceeds equally to the husband and the wife.
7.That it be declared that there is no lease over the properties [B] and [U]in favour of the third or fourth respondents or any other entity.
8.That the respondents each do all acts and things necessary to cause the third and fourth respondents to pay to the husband and the wife equally all proceeds of sale of [produce] received by those companies since 1 July 2000.
OR, if it be found that a lease of either [B] or [U] exists in favour of the third or fourth respondents, in the alternative:
8.1The third and fourth respondents pay market rent as determined by [Mr S], valuer of [G], equally to the husband and wife as from the sale of commencement of such lease to the present.
9.That the husband and the wife each do all acts and things necessary to wind up the [E] Family Trust and to distribute the proceeds of trust as follows:
(a)to the wife sufficient funds to pay the balance of her liability to the Australian Taxation Office; and
(b) the balance equally to the husband and wife
and in each case to pay the funds so distributed direct to the Australian Taxation Office on behalf of each beneficiary.
10.That the husband do all acts and things necessary to cause all other assets in his possession custody or control to the Australian Taxation Office.
11.That in the event that any party fails to do any act or thing necessary to give effect to any of these orders within 14 days of being requested to do so then pursuant to s 106A of the Family Law Act the Registrar of this Court is appointed to do all such acts or things as are necessary to be done on behalf of the defaulting party as are necessary to give effect to these orders.
The husband filed his Response on 5 December 2003. The husband subsequently amended his Response and now relies on his Amended Response filed on 2 May 2006. The husband applies for the orders set out below:
1.That within 28 days of the date of these orders the husband do all acts and things and sign all documents necessary to transfer to the wife all his right, title and interest in the property situated at and known as [V property], being the whole of the land in Certificate of Title Folio Identifier […].
2.That within 28 days of the date of these orders the wife do all acts and things and sign all documents necessary to transfer to the husband all of her right, title and interest in the property situated at and known as:
2.1[B property] being the whole of the land I Folio Identifier […]; and
2.2[U property] being the whole of the land in Folio Identifier […].
3.That within 28 days of the date of these orders the wife in her capacity as Trustee of the [E] Family Trust do all acts and things and sign all documents necessary to transfer to the husband all of the assets of that Trust.
4.That within 28 days of the date of these orders the wife do all acts and things and sign all documents to disclaim any interest as beneficiary that she may have in the [E] Family Trust.
5.That within 28 days of the date of these orders the wife do all acts and things and sign all documents necessary to resign as Trustee of the [E] Family Trust.
6.That within 28 days of the date of these orders the wife do all acts and things and sign all documents necessary to transfer to the husband all [livestock] and platinum coins owned by her.
7.That within 24 hours the wife deliver up to the husband all records relating to the [livestock] including but not limited to all mating records, registers, registration certificates, data sheets, records of sale, acquisition and disposal, transfers, invoices, receipts, copy agreements, cheque butts and other records, details of any oral agreements.
8.That except as otherwise provided and as between the parties the husband and the wife retain solely all right title and interest in:
8.1Any chattels goods furnishings and other property which are, at the date hereof, in their possession respectively.
8.2Any monies, shares, debentures which stand in their sole name respectively at the date hereof.
9.That each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders.
10.That the husband and wife do all acts and things and give all consents and execute all documents and writings necessary to give effect to the orders made herein.
11.That each party be solely entitled to all benefits accrued and due under any superannuation fund, scheme or policy held by or in their respective behalf.
12.That the wife pay the husband’s costs of and incidental to these proceedings.
Orders sought as to the child [A]
13.That the child have contact with the husband for the first half of each school holiday period commencing in even numbered years and the second half of each school holiday period commencing in odd numbered years.
On his own petition on 4 February 2008 the husband became a bankrupt. Consequently his bankrupt estate has vested in his Trustee. The Trustee appeared yesterday.
The husband and wife are on the land and as one often sees their farming businesses are managed through a scheme of interconnected trusts, companies and private holdings. The assets owned between these entities, the husband and wife, are substantial, as are their liabilities.
During the period of the years of the parties' reconciliation they established E Family Trust, M Pty Limited and K Proprietary Limited.
M Pty Limited was initially used by the husband to manage machinery, owned by the E Family Trust, to farm two family properties, B property and U property. The husband was the sole registered owner of B property and he and the wife owned U property jointly in equal shares. The husband purchased B property in 1978. U property was purchased in 1994.
From inception M Pty Limited employed labour to work these properties. K Pty Limited is an associated entity. It was incorporated at the same time as M Pty Limited with, as I understand it, the husband initially its sole director and shareholder. Until 1 July 2002 K Pty Limited ran the farming operations on B and U properties. It appears that from 1 July 2002 M Pty Limited assumed both roles, that is farming and provision of labour, and continues to do so. At some stage the husband transferred his share holding in M Pty Limited to N Etrard. N Etrard is an adult son of these parties.
In his affidavit filed 29 November 2007 the husband says K Pty Limited has been inactive for the preceding 12 months.
E Family Trust is a discretionary family trust established in June 2000. The husband is its appointer and the wife and the parties' children are its beneficiaries. The Trust Deed is not in evidence. The affidavit evidence suggests that when E Family Trust was established the wife was the sole trustee.
E Family Trust purchased a leasehold estate in a property, V property, not long after it was established. As trustee, on 17 January 2003, the wife sold V property to herself for $305,000. This is where the wife lives. She remains its sole registered proprietor.
During the period of the reconciliation, P Proprietary Limited, of which the husband and wife were the only directors and shareholders, transferred assets worth about $2 million to the E Family Trust. These transactions triggered an Australian Tax Office audit which resulted in amended notices of assessment for the wife and the husband for the tax years ending June 2000 and 2001. In addition to the amended notices of assessment, the wife and the husband were each penalised for having a tax shortfall for these years.

On 23 December 2004 the Deputy Commissioner of Taxation obtained judgment in the District Court of New South Wales against the wife for $627,730.97.
On 22 June 2005 the Deputy Commissioner of Taxation obtained judgment against the husband in the Supreme Court of Queensland in the sum of $2,642,471.51.
As neither the husband nor wife paid the Deputy Commissioner of Taxation the moneys due by virtue of their respective judgment debts, on 3 July 2007 the Deputy Commissioner of Taxation issued a Bankruptcy Notice to each of them.
Neither of the husband or the wife paid the monies demanded.
Consequently, on 15 October 2007 the Deputy Commissioner of Taxation issued a Creditor's Petition in the Federal Magistrates Court against the wife and the following day another against the husband. By arrangement both Creditors’ Petitions were adjourned to 28 February 2008 in the Federal Magistrates Court.
The amounts now due to the Deputy Commissioner of Taxation are approximately $670,000 for the wife and $3.2 million for the husband.
The Deputy Commissioner of Taxation intervened in these proceedings as of right on 26 October 2007. The same day, the Deputy Commissioner of Taxation filed an application seeking the following orders:
1.Pursuant to s 92 of the Family Law Act 1975 (as amended), leave be granted to the Deputy Commissioner of Taxation to intervene in the proceedings.
2.As part of any final property settlement or orders between the husband and the wife, this Honourable Court:
(a)take into account the taxation liabilities of the husband and the wife;
(b)make provision for the payment of the taxation liabilities of the husband and the wife to the Deputy Commissioner of Taxation by ordering that within 42 days of delivery of judgment the husband and wife pay to the Deputy Commissioner of Taxation the total of their personal taxation debt.
3. Such orders or further orders as this Honourable Court deems fit.
On 4 December 2007, M Pty Limited applied to intervene in these proceedings.
On 12 December 2007 a series of order were made which I incorporate into these reasons.
The proceedings first came before me for mention on 23 January 2008 on which occasion I adjourned all current and mooted applications for interlocutory relief for hearing on 11 February 2008. At that stage the only outstanding interim application was the wife’s application filed on 26 October 2007. Relevantly, by way of this interim application, the wife sought to take control of a produce harvest which would otherwise be managed by M Pty Limited. In his affidavit sworn 4 December 2007, N Etrard as the sole shareholder and director of M Pty Limited, swore that the crop would not be ready for harvesting until early March 2008 and that harvesting would be completed sometime around mid-April 2008. Assuming appropriate rainfall, N Etrard said the harvest would produce product worth about $150,000. After expenses he said this would produce a net gain of approximately $75,000. It is this issue that was adjourned for hearing to yesterday.
The Australian Taxation Office indicated its intention to apply to suspend and ultimately discharge orders made by consent in this Court on 12 December 2007, whereby the husband was able to sell B property. Pursuant to the 12 December 2007 orders, M Pty Limited, or its nominee, had first option to acquire B property following valuation. By letter dated 24 January 2008 M Pty Limited nominated N Etrard to purchase B property for $1.3 million. N Etrard gave notice of his acceptance of his option to purchase B property.
During the valuation process the Australian Taxation Office and the wife discovered that during 2007 the husband had transferred his interests in all water licences to N Etrard. Valued as a dry property, rather than with attached water rights, produced a lesser market value for B property.
On 23 January 2008 I made the following orders.
1.That these proceedings are listed into Justice Ryan’s docket.
2.That the Wife, the Husband and [N Etrard] (on behalf of the Second intervenor) each files an Undertaking as to Disclosure in accordance with Rule 13.15 of the Family Law Rules within 7 days.
3.That by 22 February 2008 the Wife, the Husband and [N Etrard] (on behalf of the Second intervenor) each serves a List of Documents in accordance with Rule 13.20.
4.That the parties each be at liberty to request any other party to disclose a specified document or class of documents and in the event of any such request, the document or documents specified shall be produced for inspection within 14 days or such longer period as they may agree.
5.That the parties each be at liberty to issue such subpoena to produce documents as they may be advised.
6.That the Wife file and serve a Further Amended Application by 4.00 pm on 31 January 2008.
7.That any application to join [N Etrard] shall be filed and served by 4.00 pm on 31 January 2008.
8.In the event any party seeks an asset preservation order, at the time such application is filed an undertaking as to damages must also be filed.
9.That all outstanding interim or interlocutory applications are listed for hearing at 10:00 am on 11 February 2008.
10.If, in addition to any outstanding interim or interlocutory application a party seeks further interim or interlocutory relief, that person must file and serve an Application in a Case (setting out the relevant section or source of power for the relief sought) together with supporting affidavits by no later than 4:00 pm on 4 February 2008.
11.If a party opposes relief sought in an Application in a Case they must file and serve a Response to an Application in a Case (setting out the relevant section or source of power for the relief sought) together with supporting affidavits by no later than 4:00 pm on 7 February 2008.
12.By no later than 3:00 pm on 8 February 2008 the parties shall each file with my Associate and serve upon each other a case outline concerning the interim and interlocutory applications listed for hearing on 11 February 2008.
13.By no later than 3:00 pm on 8 February 2008 the parties shall each file with my Associate and serve upon each other a list of issues, list of documents relied upon in the substantive and interim proceedings, chronology and steps which it is said are required to prepare this matter for final hearing.
14.By no later than 3:00 pm on 8 February 2008 the parties shall file with my Associate a collaboratively prepared single balance sheet which sets out the parties assets, liabilities and financial resources. If the parties do not agree upon the value of any item they shall identify the value asserted by each and the basis for the assertion. Each party shall identify the steps required to resolve, for example by the appointment of a single expert, the factual dispute. In relation to each item the parties shall identify the legal owner and, where it allegedly differs, the beneficial owner of the item.
The husband failed to comply with these directions.
During the period of the adjournment M Pty Limited harvested the crop. In answer to questions raised by the wife’s solicitor, N Etrard said the harvest produced a crop of little value. M Pty Limited sold the resultant lucerne to C Etrard, who is related to the parties but I do not know how, for $10 per bale and the remaining crop is to be used for mulch. The effect of this is that far from realising $150,000 this premature harvest produced little.
Having completed its harvest and, in effect, defeated the wife’s application that she have control of it, on 6 February 2008 M Pty Limited applied to be discharged as a party and for dismissal of its application. In support of its stance, N Etrard swore that M Pty Limited had returned possession of U property to the husband and no longer had any interest in that property.
The Deputy Commissioner of Taxation and the wife assert that against this background there is an appreciable risk that unless a series of asset preservation orders are made, whether held by the parties or entities under the control of one or other of the parties, there is an appreciable risk those assets will be disposed of. The evidence in relation to N Etrard and M Pty Limited’s conduct concerning the premature harvest of the crop is evidence that the risk alleged is manifest. I make similar observations concerning the husband’s failure to notify the other parties of his transfer of the water licences.
With acceptance of the husband’s Debtor's Petition his property has vested in his Trustee. The effect of the Debtor's Petition is that the trustee will now control these assets and as a consequence the risk that the husband will dissipate property inappropriately has been addressed.
The applicable law is found in Waugh and Waugh (2000) FLC 93-052. There the Full Court cites with approval Glover v Walters (1950) 80 CLR 172 and Cardile v LED Builders Proprietary Limited (1999) 162 ALR 294. For the purposes of this case, it is sufficient to recite the concurring judgment of Kirby J where he says:
To secure an asset preservation order in a case such as the present, it will be necessary for the parties seeking it to show in addition to the conditions ordinary to the grant of relief injunctive in nature that there is a danger that the non-party will dispose of the relevant assets or property in its possession or under its control.
and further:
The grant of such relief is discretionary, they must often be provided or withheld in urgent circumstances where a propensity to shift assets apparently to defeat a Judgment has already been manifested. The plaintiff must establish a real risk of assets being disposed of.
During the course of the proceedings agreement was reached that the transfer of B property provided for in the orders of 12 December 2007 would be set aside. This was a sensible concession the effect of which is that this property vests in the Trustee. There is either consent or no opposition to the wife taking control of the process of applying for compensation which may be attached to the various water licences in which she, formerly the husband, perhaps now the Trustee, and presently N Etrard have an interest. N Etrard has agreed to provide to the wife such information as he has concerning the whereabouts of E Family Trust assets and its records.
Agreement was reached that in the event an order is required N Etrard is removed from holding the position of trustee of the E Family Trust. This was ordered in 2003 and again in 2004. By these orders the husband was ordered to do everything required to remove N Etrard as trustee of the E Family Trust. The husband and N Etrard swear that although it took them some years to comply, no later than at least twelve months ago these orders were complied with. It is of concern that the Court received documents in the wife’s case which show that as recently as mid 2007 N Etrard purported to hold himself out as trustee of the E Family Trust and demanded delivery of Trust assets. It is common ground that N Etrard was not a trustee of the E Family Trust, and to the extent that he purported to act in that capacity in 2007 he was not entitled to. This provides further support for the wife’s and Deputy Commissioner of Taxation’s position that there is an appreciable risk of asset disposal unless asset preservation orders are made and injunctions addressing issues of future control pending finalisation of these and the bankruptcy proceedings underway in the Federal Magistrates Court.
The wife sought to join N Etrard and M Pty Limited as a respondent to the proceedings. It appears to be common ground that N Etrard, as the sole shareholder and director of M Pty Limited is its alter ego. N Etrard presently owns the water rights the husband transferred to him in 2007. Thus it would be insufficient to join only M Pty Limited. N Etrard says that he purchased the water rights for value in accordance with, according to the husband, a valuation obtained by the Australian Taxation Office. More will need to be known before this issue can be clarified. However, there is nothing to which I have been taken which suggests that, when the December 2007 orders were entered, the Australian Taxation Office was aware that the water rights had been transferred.
The Trustee for the Bankrupt Estate of the husband and the Australian Taxation Office have indicated that whether by virtue of s 120 and s 121 of the Bankruptcy Act or s 106B of the Family Law Act, one, other, or both may apply to set aside the transfer of the water licences to N Etrard. As orders are sought against N Etrard and against M Pty Limited, N Etrard must be joined as a party to the proceedings and N Etrard’s, through M Pty Limited’s, application that M Pty Limited’s involvement in the proceedings is ended must be refused. If at the end of the day N Etrard can establish that the orders which are sought against he or M Pty Limited were without proper foundation, his remedy lies in costs.
The wife wishes to proceed with a timely sale of V property and to take possession of U property. M Pty Limited says it has no further interest in U property. The husband’s interest in U property has now vested in the Trustee. Consequently at this point the persons entitled to occupation of U property are the wife and the Trustee. Giving the wife exclusive occupation of U property, provided it is expressed to be subject to the rights of the Trustee, does not adversely impact upon any of the parties to these proceedings or any other person or entity to whom my attention has been drawn. By making an order for exclusive occupation on the terms discussed yesterday, to the wife will be in a position to prepare V property for sale. As she does she will move to U property. The wife concedes an order that upon the sale of V property she will pay its sale proceeds to the Australian Taxation Office to reduce her liability to it.
I commented yesterday on what appeared to be ‘shenanigans’ which involve the husband, N Etrard and M Pty Limited So that there is no doubt about the intent and effect of my orders the husband, N Etrard and M Pty Limited will be restrained from interfering with the wife taking possession of U property.
For reasons which must be apparent, N Etrard is restrained from disposing of or in any way encumbering or dealing with his interest in the water access licences to which I have earlier made reference.
Unless the E Family Trust Deed provides that upon the husband committing an act of bankruptcy he is automatically removed as trustee of the E Family Trust the wife, pending further order, is appointed its sole trustee. Thereafter, M Pty Limited is restrained from disposing or dealing with property owned by the E Family Trust other than in accordance with the wife’s written direction. To the extent that M Pty Limited and/or N Etrard have possession of assets which have now vested in the husband’s trustee this is a matter for the Trustee.
These orders preserve pending further order those assets which have not vested in the Trustee, including assets transferred in transactions which are now impugned by the wife, the Deputy Commissioner for Taxation and perhaps in another place, the Trustee.
I will adjourn these proceedings to 20 March 2008. During the period of the adjournment the bankruptcy proceedings in the Federal Magistrates Court will again be before that Court. I tentatively agree with the submissions made on behalf of the trustee that because these s 79 proceedings were commenced prior to the operation of the Bankruptcy and Family Law Legislation Amendment Act 2005 ss 79(11), (12) and (13) FLA do not apply.
Thus the Federal Magistrates Court will need to consider whether it should continue to hear the bankruptcy proceedings or whether those proceedings should be transferred to this Court. Another option is that this Court could consider on the application of one the parties, whether these proceedings should be transferred to the Federal Magistrates Court. There is an obvious advantage in the bankruptcy proceedings and the Family Law Act proceedings being dealt with in the one Court. However, I pause to observe that it may well also be an efficient use of the respective Court's resources if the Federal Magistrates Court completes the bankruptcy proceedings and at the conclusion of which this Court determines the outstanding s 79 proceedings. I express no view as to whether the advantages of one course are outweighed by taking another.
For these reasons I make orders 1 to 16 of the orders dated today.
Costs continue to be reserved.

I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan

Associate:

Date: 12March 2009

[2009] FamCA 180

12 February 2009

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