Trustees of the Property of Batavia (Bankrupt) and Batavia & Ors

The proceedings before Cronin J of the Federal Circuit Court involved the trustees of the property of a bankrupt, Mr. Batavia, seeking to set aside financial agreements made between Mr. Batavia and his wife, Ms. Batavia. These proceedings were consolidated with earlier proceedings brought by liquidators who had previously controlled Mr. Batavia's affairs. The core dispute concerned the beneficial ownership of certain properties, particularly a home located at D Street, Suburb E, and another at P Street, Suburb E, which had been transferred to Ms. Batavia.

The court was required to determine whether a constructive trust arose from the financial dealings between Mr. and Ms. Batavia, and whether the financial agreements were entered into for the purpose of defeating creditors' claims, thereby justifying their setting aside under section 90K(1)(aa) of the *Family Law Act 1975* (Cth). The court also needed to address the priority of claims over the proceeds of sale of the D Street property, given the competing interests of the liquidators, the trustees, and a garnishee order from the Australian Taxation Office.

Cronin J found that a constructive trust arose, establishing that while legal title to the properties vested with Ms. Batavia, Mr. Batavia retained an equitable interest. The court was satisfied that the financial agreements were designed to defeat creditors, leading to their being set aside. The court applied principles of equity to make declarations regarding beneficial ownership. An agreement between the trustees and the liquidators established a priority for the liquidators' claims, followed by the trustees, with any remaining proceeds subject to the ATO's garnishee order. The court also ordered that Ms. Batavia pay the costs of the proceedings.