FEDERAL COURT OF AUSTRALIA

Johnson (Trustee), in the matter of McCardle v McCardle [2016] FCA 1484

ORDERS

THE COURT ORDERS THAT:

1.    Subject to the orders in paragraphs 2, 3 and 4, each of the respondents be restrained until further order from doing any of the following acts in relation to the 1963 Austin Healey 3000 BJ8 Phase 1 Mark III motor vehicle chassis number HBJ8L/25714 forming the subject matter of this action (“the motor vehicle”):

(a)    transferring, selling, charging, pledging, mortgaging, assigning, hiring or lending the motor vehicle or offering to do any such act;

(b)    moving, altering or using the motor vehicle for any purpose other than its proper maintenance and preservation;

(c)    causing or permitting any person to do any of the acts mentioned in paragraph 1(a) or 1(b) herein.

2.    The respondents or either of them may do an act specified in paragraph 1 of these orders with the written consent of the applicant.

3.    The applicant may impose conditions upon any grant of consent made in accordance with paragraph 2.

4.    The respondents must comply with the conditions of any grant of consent imposed in accordance with paragraph 3.

5.    The respondents are to pay the applicant’s costs of their interlocutory application of 10 October 2016 in an amount to be determined by the Court.

6.    The respondents are to pay the applicant’s costs of the application for interlocutory relief in an amount to be determined by the Court.

7.    The matter is to be set down for further case management at a date to be fixed.

8.    The applicant is, by 23 December 2016, to advise the respondents in writing of the actual costs incurred by the applicant of and incidental to the applications referred to in the orders in paragraphs 5 and 6.

9.    The applicant is, on or before 30 January 2017, to file and serve any submissions and affidavits upon which he relies in respect of the amount of costs to be fixed in accordance with the orders in paragraphs 5 and 6.

10.    The respondents are, by 20 February 2017, to file and serve any submissions and affidavits upon which they rely in respect of the amount of costs to be fixed in accordance with the orders in paragraphs 5 and 6.

11.    Liberty to apply.

12.    Costs in the cause.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

CHARLESWORTH J:

1    The parties to this action are in dispute over the ownership of a red 1963 Mark III Austin Healey motor vehicle (the car). The applicant seeks an interlocutory injunction restraining the respondents from certain dealings with the car pending judgment in the substantive proceeding.

2    The applicant was appointed substitute trustee of the bankrupt estate of the first respondent on 16 June 2016. He alleges that the car is property that vested in him pursuant to s 58 and 116 of the Bankruptcy Act 1966 (Cth) (Act). The respondents allege that the car is property of the second respondent, being the alleged trustee of a regulated self-managed superannuation fund of which the first respondent is said to be a beneficiary.

3    The applicant and the first respondent engaged in correspondence for some months preceding the commencement of this proceeding. For most of that time, the car was held by Finnis Finance Pty Ltd, trading as Collectable Classic Cars (CCC). It had been given over to CCC by the first respondent on instructions that it be sold. CCC has received correspondence from the applicant and the first respondent in which both parties asserted competing entitlements to the car and (if it be sold) its sale proceeds.

4    On or around 5 September 2016, the applicant became aware that the first respondent had caused the car to be retrieved from CCC without his prior knowledge. The applicant alleges, and I accept, that the respondents knew that the applicant had asserted title in the car at the time that the first respondent arranged for it to be retrieved from CCC.

5    The applicant commenced proceedings in this Court on 13 September 2016. He made an urgent ex parte application for an order restraining the respondents from dealing in any way with the car pending the delivery of judgment in the substantive proceeding. The application for urgent interlocutory relief was supported by an affidavit sworn by the applicant on 12 September 2016. On 14 September 2016 I made an interim order expressed to remain in force until 5:00pm on 21 September 2016 to the effect inter alia that the respondents be restrained from selling the car. I set the matter down for directions on the same day that the interim order was due to expire. I ordered that the respondents be served in the interim with the originating application, the applicant’s supporting affidavit, and the orders that I had made.

6    Over the course of two further directions hearings, the respondents confirmed their intention to contest the applicant’s application for an interlocutory injunction pending the delivery of judgment in the proceedings proper. In the meantime, I made orders further extending the period in which the orders made on 14 September 2016 were to remain in force. I adjourned the hearing of the interlocutory application for reasons that included the prospect that the parties might agree upon terms on which the car might be sold and the proceeds preserved and maintained pending the resolution of the substantive proceedings. There appeared at that time to be a reasonable prospect of settlement in that the applicant had indicated a willingness to permit the car to be sold provided that the respondents were each restrained from dissipating the proceeds. No such compromise was reached.

7    Instead, on 11 October 2016 the respondents filed an application for orders dismissing the proceedings on the basis that they constituted an abuse of the applicant’s powers as trustee of the first respondent’s bankrupt estate and an abuse of the processes of the Court (the Abuse Application). In addition, the respondents filed materials in which they asserted that there is no serious issue to be tried in relation to the ownership of the car.

8    The application for an interlocutory injunction and the Abuse Application were together set down for hearing on 2 November 2016. At the commencement of the hearing, Counsel for the respondents informed the Court that the Abuse Application was no longer pressed. The applicant now seeks an order that the respondents pay his costs of the Abuse Application.

9    For the reasons given below, I am satisfied that the respondents should be restrained from certain dealings with the car pending the delivery of judgment in the substantive proceedings. I am also satisfied that it is appropriate in all of the circumstances to order that the first and second respondents be jointly and severally liable to pay the applicant’s costs of the Abuse Application. I deal with the application for interlocutory relief first.

the injunction

Principles

10    The principles governing the exercise of the Court’s discretion to grant an interlocutory injunction are well settled. In Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 (O’Neill), Gleeson CJ and Crennan J said at [19]:

…in all applications for an interlocutory injunction, a court will ask whether the plaintiff has shown that there is a serious question to be tried as to the plaintiff’s entitlement to relief, has shown that the plaintiff is likely to suffer injury for which damages will not be an adequate remedy, and has shown that the balance of convenience favours the granting of an injunction. These are the organising principles, to be applied having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed.

11    The degree of likelihood of success in the action is a factor that is related to the balance of convenience: Castlemaine Tooheys Limited v The State of South Australia (1986) 161 CLR 148 at 154 (Mason ACJ). As Gummow and Hayne JJ said in O’Neill (at [65]), an applicant for an interlocutory injunction must show a “sufficient likelihood” of success to justify, in the circumstances, the preservation of the status quo pending trial. The strength of the probability depends upon the nature of the rights the applicant asserts and the practical consequences likely to flow from the order: see Beecham Group Limited v Bristol Laboratories Pty Limited (1968) 118 CLR 618 at 622 (Kitto, Taylor, Menzies and Owen JJ). To similar effect, in Medallion Homes Pty Ltd v Lares Homes Pty Ltd [2016] FCA 12 at [19], Besanko J said:

The inquiry into whether the applicant has made out a ‘prima facie case’, and the inquiry relating to the balance of convenience, are not considered in isolation from each other, and the likelihood of success or otherwise of the applicant’s case has a bearing upon what is required by way of the balance of convenience: Bullock v The Federated Furnishing Trades Society of Australasia (No 1) (1985) 5 FCR 464 at 472.

Background to the dispute

The first respondent’s bankruptcy

12    On the information that is presently available, it appears that the first respondent’s bankruptcy has its genesis in a family law dispute with her former husband. In the course of the dispute, the first respondent engaged a family lawyer, Mr Alan Oxenham. She had a dispute with Mr Oxenham in relation to his fees. That dispute was determined by the Adelaide Magistrates Court in favour of Mr Oxenham. In the result, the first respondent owed to Mr Oxenham judgment debts totalling $65,756.32 (debt). The first respondent continues to dispute the debt, including by advancing her position in that dispute at some length in her affidavits filed in these proceedings. She alleges, in short, that there has been a “miscarriage of justice” in relation to her dealings with Mr Oxenham.

13    The applicant alleges that on 30 November 2015, Mr Oxenham served a bankruptcy notice on the first respondent in respect of the debt.

14    The first respondent filed a debtor’s position pursuant to s 55(2) of the Act on 18 March 2016. That petition was accepted on 31 March 2016.

15    Initially, the Official Trustee in Bankruptcy was the trustee of the first respondent’s bankrupt estate. The applicant in these proceedings became the replacement registered trustee on 16 June 2016 pursuant to s 181A of the Act. The first respondent was promptly notified of his appointment and of the provision of the Act pursuant to which the appointment was made.

16    On 29 April 2016, Mr Oxenham filed a creditor’s petition in the Federal Circuit Court. The petition states that an act of bankruptcy was committed by the first respondent on 21 December 2015 by reason of her failure to comply with the requirements of the bankruptcy notice. It will be the applicant’s case at trial that the first respondent’s bankruptcy commenced on 21 December 2015, that being the date upon which the relevant act of bankruptcy occurred: see s 115(2) of the Act.

Dealings with the car

17    On 29 November 2011, the then-named Federal Magistrates Court (FMC) made a property settlement order in the family law proceedings between the first respondent and her former husband. The order contains a notation to the effect that the first respondent and her former husband had operated a self-managed superannuation fund known as the “McCardle Motors Pty Limited Superannuation Fund” and that the fund held certain assets. The car is not identified among those assets. Paragraph 30 of the property settlement order provides that the first respondent’s former husband was to transfer to the first respondent all right, title, interest and estate he had in relation to the car. It is apparent from the terms of the orders that the superannuation fund had not prepared financial statements or tax returns or any other regulatory returns in relation to the 2009/2010 and 2010/2011 financial years. No such documents in respect of those financial years or any subsequent financial year have been adduced in evidence on the present application by either respondent. It appears that they simply have not been prepared at all since at least 2009/2010 and continuing to the present day.

18    The second respondent company was established on 12 April 2012. On the first respondent’s case, the company was established in preparation for the transfer of the assets held by the McCardle Motors Pty Ltd Superannuation Fund, pursuant to the FMC orders.

19    On 19 June 2012, the first respondent filed a financial statement in the FMC. She declared in that statement that she personally owned the car as at that date. She ascribed an estimated value for the car of $40,000.00.

20    On 29 March 2016 the first respondent completed a Statement of Affairs (SoA) pursuant to s 54(1) of the Act. The applicant relies heavily upon the responses given by the first respondent to the questions posed in the standard form SoA. The relevant responses are as follows:

(1)    Question 26 of the SoA required the first respondent to List all superannuation funds and life insurance policies. In response, the first respondent stated that she had a superannuation fund in the name of the second respondent, Wisecrew Investments Pty Ltd. The assets of the fund were said to be worth $400,000.00. In response to the question Is this a regulated fund? the first respondent ticked “no”. She stated that she had made a lump sum payment to a superannuation fund in January 2012 in the sum of “$55,000 (at cost)”.

(2)    Question 33 of the SoA asked Have you sold, transferred or given away any assets worth more than $1000 in the last 5 years? Provide a copy of the receipt or settlement statement. In response to the questions that then followed, the first respondent stated that in January 2012 she had sold, transferred or given away a “collectable car (not registered)” to “super fund”. She stated that the car was worth “$55,000 (at cost)”. In response to each of the questions How much was it sold for? and How much did you receive net? the first respondent wrote a word that appears to read “NIL”.

(3)    Question 43A of the SoA required the first respondent to state whether she had been a director or in a management role in a company at any time in the last five years. The first respondent responded “yes”, with a notation “N/A, is super fund only so excluded as not a trading company as such”.

(4)    When asked at question 43F of the SoA whether she had transferred any assets to the company in the last five years, the first respondent stated “as per item 33”. The date of transfer was stated as January 2012 and the value of the asset was relevantly stated as “$55,000 as cost but likely worth less”. When prompted to state the money she had received for the transfer, the first respondent again wrote a word that appears to read “NIL”.

(5)    The first respondent gave no substantive response when prompted to disclose who prepares the financial statements and tax returns for the company. Instead, she stated “N/A as supr’n fund excluded from these proceedings. There is another director appointed for super fund now”.

21    By letter dated 18 May 2016, Ms Karen Cooper of the Australian Financial Security Authority (AFSA) on behalf of the Official Trustee wrote to the first respondent seeking further information in relation to the car and in relation to the superannuation fund (the Cooper letter). By the Cooper letter, AFSA required the first respondent to provide policies, financials and transaction statements for two superannuation funds she had mentioned in the SoA. AFSA also required the first respondent to specify the make, model and year of the vehicle said to have been transferred to a superannuation fund in 2012 and valued at $55,000.00. The first respondent was asked to explain the reason for transferring the car and why she received no benefit from the transfer. She was also required to provide financials from the superannuation fund that showed the transfer of the car to the fund.

22    The first respondent did not immediately respond to the Cooper letter. She alleges in these proceedings that she did not receive it until sometime after it was sent.

23    On 30 May 2016 Ms Cooper wrote to Mr Ben Finnis of CCC asserting ownership by the Official Trustee of the car and stating that CCC should not part with possession of the car without the consent of the Official Trustee.

24    On 20 June 2016, the applicant emailed the first respondent. He attached a copy of his certificate of appointment as substitute trustee of her bankrupt estate pursuant to s 181A of the Act. He requested that she provide a response to the Cooper letter. The applicant wrote again to the first respondent on 25 June 2016 requesting that all of the information sought in the Cooper letter be provided. The first respondent replied by facsimile on 14 July 2016. In relation to the affairs of the second respondent, the first respondent stated:

Wisecrew Investments Pty Ltd is a regulated superannuation fund, its income has been derived from superannuation payments via employer contributions and rental income from an investment property. There is a bare trust (No 2) within that fund which holds property. There is a life insurance policy attached to the fund which has no cash-in surrender value.

25    The first respondent stated that the car was “placed in the fund for investment” and that the fund had then repaired and restored the car before putting it on the market “for offers around $75,000”. She stated that the second respondent incurred the costs of storage, insurance, sales commission and repair. The first respondent stated that there was a written agreement “about its unconditional transfer to the fund for $55,000”. The first respondent did not provide a copy of that agreement to the applicant, nor did the first respondent provide financial documents relating to the second respondent as requested in the Cooper letter. The first respondent instead stated:

The trustee is requested to provide specific details of his powers in relation to non-personal assets such as superannuation funds, and life insurance policies within regulated superannuation funds etc.

26    The first respondent asserted that documents relating to the second respondent’s financial affairs were not readily accessible to her and she repeated her request that the applicant “clarify” his powers to seek the information. The first respondent also requested that she be provided with what she understood to be a “notice of demand served on a third party who has the storage of the vintage vehicle” and she requested a copy of that document. She went on to level heated criticism at the applicant in respect of the administration of her estate and to further claim that the applicant had a “perceived conflict of interest” because he had, she alleged, previously agreed to act on behalf of her debtor Mr Oxenham.

27    The first respondent further stated that she had sent a request to her accountant to “arrange for” her resignation as a director of the second respondent and that she believed that her resignation had become effective in or around March 2016.

28    The first respondent is incorrect in her stated belief that she was, as from March 2016, no longer a director of the second respondent. She was indeed a director at that time and has remained a director at all relevant times appertaining to these proceedings, including for the purposes of instructing solicitors on the second respondent’s behalf.

29    On 11 August 2016, the applicant lodged a Notice of Objection to Discharge with the Official Receiver pursuant to s 149D of the Act. The objection had the effect of extending the first respondent’s bankruptcy for an additional five years. The notice was filed on grounds including that the first respondent had not provided all of the information that had been sought in the Cooper letter.

30    The first respondent wrote again to the applicant on 30 August 2016. Attached to the letter were documents relating to the second respondent which were heavily redacted. The first respondent claimed that the documents were “commercial in confidence” and “privileged”. She maintained her position that the applicant was not entitled to require her to provide documents relating to the financial affairs of the second respondent. At [10] of that letter, the first respondent states, in relation to the car:

… the vehicle was held in the McCardle Motors Pty Ltd Superannuation Fund immediately prior to its holding by Wisecrew Investments Pty Ltd when it was established in 2012, some 4 years earlier and before any court proceeding was issued and filed in 2012 let alone any adverse decisions etc themselves based on the other side’s misleading of the courts (also do you hold insurances for your liability as to false accusations or acting in any way with ill-intent, malice or with obvious partiality as trustee?)

31    The first respondent stated that she could not provide documents that were not in her possession or that do not exist, and that although some documents might be situated in South Australia she could not conduct searches for them there due to her residing in Victoria and her ill health. She repeated various criticisms about the administration of her bankrupt estate and demanded that the Notice of Objection to Discharge be withdrawn.

32    On 31 August 2016 the first respondent sent an email to the applicant. Among other things, the email asserts that the second respondent is not a related entity and asserted and that the applicant did not have “power over” the second respondent. The email concludes “You may wish to rethink your notice of objection and then withdraw it within the week”. It appears from the email that the first respondent understood the creditors of her bankrupt estate to include her former husband (who she names throughout her filed documents in this proceeding as “the ex-husband” or simply “the ex”) and her former lawyer Mr Oxenham. She alleged that their claims were “the result of fraud, misleading or deceptive conduct”.

33    Between May and August 2016, the first respondent sent email communications to Mr Finnis of CCC concerning the interests asserted by AFSA and the applicant in the car. Those emails indicate that the first respondent was aware that the applicant had (whether rightly or wrongly) asserted title in the car. By email dated 9 June 2016, Mr Finnis informed the first respondent that he had been advised not to permit the car to leave his premises until the matter had been resolved between the first respondent and AFSA. On 2 August 2016, Mr Finnis advised the first respondent that the applicant had instructed him to sell the car. The email states “once sold [the proceeds] will be deposited into a nominated account which I will leave for you and [the applicant] to sort out”.

34    The first respondent threatened Mr Finnis with legal action should he sell the car on behalf of the applicant and requested that he confirm whether he had “insurance cover for such a liability”. The emails evidence a growing degree of frustration and unease on Mr Finnis’ part as the demands for information and threats emanating from the first respondent increased. In one email Mr Finnis describes himself as being “in a very uneasy situation”. That is an appropriate and understandable description for the difficult position Mr Finnis appears to have found himself in.

35    Finally in relation to the emails, it is relevant that as early as 22 March 2016 the communications emanating from the first respondent appeared to have been made expressly on behalf of the second respondent. The relevant emails are titled “Wisecrew Investments Pty Ltd – Austin Healey BJ8”. It also appears that it was the understanding between the first respondent and Mr Finnis that the second respondent would be responsible for bearing the costs of storage, insurance and sales commission.

THE issue in DISPUTE

The applicant’s case

36    It is the applicant’s case that the first respondent became the owner of the car by virtue of orders made in the FMC on 29 November 2011 and that she has never effectively transferred the car to any other entity since that time. Accordingly, the applicant contends, the car was property that vested in him pursuant to s 58 of the Act upon the first respondent becoming a bankrupt.

37    In the alternative, the applicant contends that if the car was transferred by the first respondent to the second respondent some time in 2012, the transfer occurred for nil or inadequate consideration and that the transfer is void as against the applicant pursuant to ss 120, 121 or 128B of the Act, to which I will later refer. In respect of his alternative claims, the applicant contends that the second respondent is an associated entity of the first respondent. I accept there is a serious issue to be tried in respect of that question: see s 5 (definitions of associated entity, examinable affairs, and examinable person), ss 5B, 5E and 5K of the Act.

38    On the evidence currently available, the applicant does not admit that the second respondent is properly described as a regulated superannuation fund in any event. He will allege at trial that any alleged superannuation fund is a sham arrangement so affecting the validity of any alleged transfer of assets to it.

The respondent’s case

39    The first respondent does not deny that the car became her property by virtue of the FMC proceedings. However, she alleges that in 2012 she transferred the car, for valuable consideration (being an actual payment of money) to the second respondent. Money was said to have been paid for the car by a series of bank transfers occurring in the second half of 2012. As the car was transferred for market value, it is alleged the transfer is not void as against the trustee pursuant to s 120 of the Act.

Serious issue to be tried

40    The parties’ submissions focussed primarily on the potential operation of s 120 of the Act. It relevantly provides:

120 Undervalued transactions

Transfers that are void against trustee

(1)    A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor’s bankruptcy if:

(a)    the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and

(b)    the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.

Note:    For the application of this section where consideration is given to a third party rather than the transferor, see section 121A.

…

(3)    Despite subsection (1), a transfer is not void against the trustee if:

(a)    in the case of a transfer to a related entity of the transferor:

(i)    the transfer took place more than 4 years before the commencement of the bankruptcy; and

(ii)    the transferee proves that, at the time of the transfer, the transferor was solvent; or

(b)    in any other case:

(i)    the transfer took place more than 2 years before the commencement of the bankruptcy; and

(ii)    the transferee proves that, at the time of the transfer, the transferor was solvent.

Rebuttable presumption of insolvency

(3A)    For the purposes of subsection (3), a rebuttable presumption arises that the transferor was insolvent at the time of the transfer if it is established that the transferor:

(a)    had not, in respect of that time, kept such books, accounts and records as are usual and proper in relation to the business carried on by the transferor and as sufficiently disclose the transferor’s business transactions and financial position; or

(b)    having kept such books, accounts and records, has not preserved them.

41    The phrase “market value” in relation to property is defined to mean the market value of the property at the time of the transfer: s 120(7)(c).

42    For the reasons given below, and on the assumption that the respondents can make out their case that the car was transferred to the fund in 2012, I am satisfied that there is a serious question to be tried as to whether such a transfer was void as against the applicant. In the circumstances, it is not necessary that I express any view as to whether there is also a serious question to be tried in relation to the applicant’s alternative claims under s 121 and 128B of the Act.

43    The first respondent relies upon her affidavit affirmed on 10 October 2016. Exhibited to the affidavit is a document dated 12 January 2012 titled “Deed of Intention between Roxanne McCardle and McCardle Motors Pty Ltd Superannuation Fund”. It states:

Upon receipt of Red 1963 Austin Healey BJ8 3000 Phase 1 Mark III, of 6,246 miles and with Chassis No HBJ8L/25714, Vin No 29KRUIH528 then it is noted the intention once the super fund accounts are transferred, upon Andrew Morris’ attendance on financial statements, that the said vehicle be transferred at market value to the super fund for investment purposes.

The market value will be between $40,000 and $55,000 and yet to be agreed

44    That document, if authentic, is evidence that the respondents did indeed intend that the car would be sold at market value by the first respondent to the second respondent upon it coming into the first respondent’s possession.

45    At [21] of the affidavit, the first respondent states:

As a result of the ex-husband’s obstruction in transferring the superannuation fund to me, and some other issues of non-compliance, that it was not until the second half of 2012 that I actually had possession of the superannuation fund. For this reason, the monetary transfer for the vehicle did not occur until much later in 2012. Annexed and marked with the letters “RMC5” is a copy of the bank statements showing the relevant monetary transfers and also some vehicle costs which amount to around $45,000 being paid for the vehicle.

46    Exhibit RMC5 comprises two pages from two different bank statements in respect of an account held at BankSA in the name of “WISECREW INVESTMENTS PTY LTD ATF MCCARDLE MOTORS SUPERANNUATION”. The statements are addressed “C/- Ms R McCardle”. The bank statements are partially redacted by the concealing of content with a black marker. The debit column, insofar as it is not redacted, shows debits made by way of internet withdrawals in August and September 2012, being seven withdrawals in the amount of $5,000.00 and two withdrawals in the amount of $1,000.00. Those are the withdrawals relied upon by the respondents as evidence that the second respondent paid the first respondent for the car. The withdrawals total $37,000.00.

47    In the column titled “Transaction Description” each of those withdrawals is referred to as an “internet withdrawal”. Beneath that description, there is, in each case, a black line, indicating that words from the bank statement have been redacted. The attempts to conceal the content of the documents have, however, been unsuccessful. The words describing each transaction are legible beneath the black marks. The nine withdrawals I have mentioned are described as “Wisecrew Investments”, “barrister fees/ ref 12057”, “Barrister fees Ref 12057”, “12057 M Pyke”, “RMCCardle, Pyke”, “McCardle, Pyke”, “shares”, “part pay asset into fund” and “McCardle-Pyke”. With one exception (being an entry of $1,000.00 titled “part pay asset into fund”), those descriptions fairly support an inference that the transfers affirmed by the first respondent to evidence part payments as consideration for the transfer of the car are in fact, to the knowledge of the first respondent, transfers for the purpose of paying monies owed by the first respondent to a barrister, and also a payment of money relating to shares. The descriptions raise a real dispute as to whether the car was transferred to the second respondent for any consideration. The inference is open that the first respondent has drawn down money from the superannuation fund to pay debts entirely unrelated to the fund.

48    No satisfactory explanation has been given by the first respondent for her conduct in redacting obviously relevant material from the bank statements before exhibiting them to her affidavit. Nor has any adequate explanation been given for the difference between the nature of the descriptions given on the bank statements and purpose of the withdrawals deposed to in the first respondent’s affidavit evidence. When asked in these proceedings to explain her conduct in redacting the material the first respondent responded, through her Counsel, in terms that asserted that the “matters” redacted from the bank statements “related to her own personal business and had nothing to do with, you know, matters relating to her bankruptcy”.

49    That is a peculiar response given that the affidavit evidence of the first respondent was to the effect that the bank statements evidenced payments made by the second respondent to the first respondent as consideration for the transfer of the car forming the very subject matter of her dispute with the applicant. Critically, the first respondent did not seek to assert that the second respondent’s payments totalling $37,000.00 were made by way of the second respondent discharging debts owed by the first respondent to a third party.

50    The content of the redacted material, and the fact of the redaction, give rise to a genuine dispute concerning the first respondent’s veracity in relation to all of her claims. Further issues arise as to the potential relevance and significance of other redacted material before the Court. A further example is an email from the first respondent’s accountant dated 27 November 2012 in which the accountant appears to respond to a request for advice made by the first respondent concerning the transfer of the car to the superannuation fund. The email opens as follows:

Hi Roxanne,

Further to today’s meeting I provide you with some feedback on the ability to hold the abovementioned collectible car in your personal self managed super fund (SMSF).

You stated that its worth $75,000, and to date you only withdrew $37,000 of the sale proceeds from the SMSF — and that this transaction was done in October 2012.

51    To that extent the email lends prima facie support to the position advanced by the respondents on this application insofar as it evidences a prior consistent statement concerning the alleged transfer. However, the remainder of the email is redacted, this time successfully. When the Court asked the respondents’ Counsel to explain why that was so, the following exchange occurred:

HER HONOUR:    But does the redacted portion of this email shed any light on the question that I have asked you? The email is redacted and it’s unclear to me why that should be so. Why has it been redacted?

MR O’BRIEN:    Yes. So my instructors are, your Honour, that at the time the accountant believes that, as to whether it was a contribution to the superannuation fund, whereas Ms McCardle’s view is that there wasn’t any contribution, it was an actual sale of the vehicle for which the superannuation paid, you know, that amount of money, you know, the 40 …

HER HONOUR:    That seems to me to be a fairly critical issue, Mr O’Brien. Why – if that’s the subject matter of the redacted material from this email why isn’t it before the court?

MR O’BRIEN:    Well, my submission, your Honour, it’s not dealing with the actual, you know, that concern. Not dealing with the actual sale of the vehicle. The vehicle has been sold. There was a preliminary payment for it and then there was a subsequent payment for it. And so it’s not regarded as any form of contribution, it’s simply the purchase by the superannuation fund at a value which is consistent with what she had in her affidavit of financial circumstances in the Family Court so …

HER HONOUR:    Is your client prepared to disclose the unredacted portion of this email to the court?

MR O’BRIEN:    Yes. Yes, she has no objection to that, your Honour.

52    Notwithstanding Counsel’s intimation, the first respondent did not disclose the redacted material, nor did she disclose any other material redacted from other documents exhibited to her affidavits, although she was given 14 days to do so. In the circumstances, for the purposes of determining the present application I consider there to be a genuine issue to be tried as to the authenticity of, the meaning of, and the weight to be accorded to the documentary material that may be relied upon by the respondents at trial. The unsuccessfully redacted portions of the bank statements belie the first respondent’s evidence concerning the purpose for which certain payments were allegedly made. Although the respondents may rely on prior consistent statements at trial to the effect that the second respondent was (or was at least believed or asserted to be) the owner of the car since mid to late 2012, those prior statements do not assist the respondents on the question of whether the car was acquired by the second respondent for at least its market value. I include in that assessment a statutory declaration made by the first respondent in November 2013 in which she declared that the car was held and owned by the second respondent but did not declare what, if any, consideration was paid for it. I also include in that assessment the accountant’s email which, on its face, may support an inference that a car, said by the first respondent herself to be worth $75,000.00, may have been sold for only $37,000.00.

53    Furthermore, an inference fairly arises from the SoA that the transfer of the car to the second respondent was made for no consideration. The first respondent seeks to explain the entries that appear to read “NIL” by asserting that the entries in fact read “N/K”. The entry “N/K” is alleged to mean “not known”. There is, in my opinion, a serious question to be tried as to whether the first respondent stated (and intended to state) NIL in response to critical questions concerning the amount actually paid by the second respondent for the car in the SoA. It is not for the Court at this stage of the proceedings to finally resolve that aspect of the dispute, nor to resolve the issues of credibility and authenticity to which I have referred.

54    There are, inconsistencies in the respondents’ evidence as to how much was in fact paid by the second respondent to the first respondent as consideration upon the transfer of the car in any event. The bank statements indicate transfers totalling $37,000.00. The first respondent otherwise asserts that the second respondent paid $55,000.00. There is no evidence of actual payments totalling $55,000.00 being made by the second respondent to the first respondent in consideration for the transfer of the car. I am satisfied that even if the sum of $37,000.00 was paid in consideration for the transfer of the car, there remains a serious issue to be tried as to whether that sum was less than the car’s market value at the relevant time within the meaning of s 120(1)(b) of the Act.

55    In relation to s 120(3) of the Act, there is, as I have said, a serious question to be tried as to whether the first and second respondents are related entities for the purpose of s 120(3)(a) of the Act. Section 120(3)(a) of the Act could not assist the respondents in that event because on their case, the transfer did not take effect until September or October 2012, being less than four years before the date of commencement of the bankruptcy: see s 120(3)(a)(i). Even assuming that the first and second respondents are not related entities, the onus would remain on the second respondent to prove that, at the time of the transfer of the car, the first respondent was solvent: see s 120(3)(b)(ii). There is, I am satisfied, a serious question to be tried as to the first respondent’s solvency in 2012 and continuing. As I have already mentioned, there is prima facie evidence that the money held in the superannuation fund may well have been drawn upon by the first respondent for purposes other than that permitted by the documents constituting and governing the fund, namely for the purpose of paying debts owed to a barrister that, it may be inferred, were the first respondent’s personal debts. That of itself gives rise to an issue concerning the ability of the first respondent to pay her personal debts as and when they fell due at or around the time of the alleged transfer. The onus in any event will be on the second respondent to prove the first respondent’s solvency.

56    In all of the circumstances, I am satisfied that the issues to be tried are sufficiently serious to satisfy the threshold requirement for an interlocutory injunction restraining the respondents from dealing with the car other than under the supervision of the Court, pending the resolution of the substantive dispute.

The balance of convenience

57    On the question of the balance of convenience, the first respondent’s affidavit affirmed on 10 October 2016 states (at [35]):

… any potential sale of the vehicle [is] also effectively compromised (especially on price) and so this entire proceeding has further fall out on myself and on my super fund, and I say it has been quite obviously deliberately prosecuted to cause detriment without any concern for the issue of costs not only for myself and the superannuation fund, but also for the bankrupt estate;

58    The applicant contends that there is a real chance that if the respondents are not restrained from selling the car or dealing with the proceeds of any sale, the car or the proceeds will be lost, at the expense of the creditors of the first respondent’s bankrupt estate.

59    The applicant’s submission should be accepted for two reasons. First, I am satisfied that the first respondent has conducted these proceedings in such a manner as to indicate that she is so firmly entrenched in her position that she will not consider any sensible compromise providing for the preservation of the proceeds of the sale of the car. Second, the first respondent has demonstrated by the tenor and content of her written materials that she perceives her dispute with the applicant to be inseparable from her acrimonious and long-running dispute with her former husband and her more recent dispute with her former family lawyer. For the reasons that follow, these interrelated circumstances give rise to an appreciable risk that the respondents may dissipate the asset or its sale proceeds unless restrained by the Court.

60    On 15 September 2016, the applicant’s solicitor wrote to the first respondent in the following terms:

We refer to previous correspondence.

Putting aside the dispute regarding the true ownership of the Austin Healey motor vehicle and whether it can be successfully claimed by our client as part of your bankrupt estate, we note that you appear to be interested in selling the motor vehicle for the best possible price.

Our client is prepared to consent to a sale of the motor vehicle on suitable terms and conditions, including an agreement as to the minimum price, method of sale and retention of a suitable motor vehicle dealer to assist in the marketing and sale of the motor vehicle.

Any such agreement to sell the vehicle would have to be on the basis that the net proceeds of sale after the dealer’s agreed commission, fees and marketing expenses are paid, are either deposited into court if such a facility is maintained by the Federal Court, or alternatively, are banked into a joint interest-bearing account in the name of yourself and our client. Both yourself and our client would have to be the joint signatories to that term deposit and the net proceeds would remain banked until the Federal Court determines the dispute or alternatively there is a further written agreement between yourself and our client.

The advantage of such a process would be that you and our client would not need to expend any further resources on maintain/opposing the injunction and we could get to the core of the issues in dispute.

We look forward to hearing from you on this matter.

61    The suggested compromise is an eminently sensible one. It is consistent with the overarching principles of case management and, had it been accepted, would have enabled the parties to proceed to trial on the substantive issues, rather than engage in a costly dispute as to whether an interlocutory injunction ought to be made: see s 37M of the Federal Court of Australia Act 1976 (Cth).

62    In an unexpected turn of events, the respondents’ Counsel stated, late in submissions on 2 November 2016, that the applicant’s proposal of the sale of the car and the preservation of the sale proceeds was acceptable to the respondents. No email or other correspondence evidencing the terms of any binding agreement was tendered by either party. In those unusual circumstances, the Court delayed the reservation of judgment on this application and the delivery of these reasons so that the terms of a binding settlement agreement (if any) on the interlocutory question could be confirmed and then communicated to the Court within a prescribed time frame. Neither party has informed the Court of the fact or terms of any such binding settlement agreement. I proceed on the basis that the proposal for settlement as stated in the correspondence of 15 September 2016 remains open, but is, for reasons that have not been explained, unacceptable to the respondents.

63    The respondents have not themselves proffered to the Court any alternative form of orders to reflect or advance what would appear to be a sensible compromise. The unusual circumstances as I have described them weigh heavily in the exercise of my discretion, particularly on the question of whether it is necessary and appropriate for the Court to make orders to safeguard the interests of the creditors of the first respondent’s bankrupt estate.

64    Further as to the balance of convenience, I am satisfied that the car is not a wasting asset. It is unlikely to depreciate in value if it is not sold prior to the delivery of judgment on the applicant’s claims. Orders may be fashioned so as to permit its sale with the consent of the applicant. It is for the applicant to consider his position as to whether to grant any such consent (and the conditions that might attach) having regard to the usual undertakings he has given as to damages.

65    Finally, I have taken into account all of the submissions made by the respondents concerning the conduct of the applicant in first seeking an interim injunction on an ex parte basis. I am satisfied that the applicant did not act improperly in adopting that course. The applicant properly concluded that the first respondent had caused the car to be removed from CCC at a time when she was aware that the applicant had asserted title in it and had asserted an entitlement to additional information from her concerning the alleged transfer to the second respondent which she had not, at that time, provided. I am also satisfied that the second respondent was clearly on notice of the applicant’s position, by virtue of the first respondent’s status as its director at all material times. The first respondent did not notify the applicant of her intentions to have the car removed from CCC. The applicant’s concerns that the respondents intended to sell the car and dissipate the sale proceeds were, in all of the circumstances, genuine and reasonable given the tenor and content of the first respondent’s communication with him. It was not inappropriate for the applicant to proceed ex parte, nor have the respondents persuaded me that the applicant otherwise secured the interim relief improperly. Furthermore, the order for the interim injunction was framed in terms prohibiting the sale of the car for only a few days. I am not satisfied that the respondents would have adopted any different position in these proceedings had they been notified of the applicant’s intention to seek an injunction at any earlier time. They would, I am satisfied, have remained as unwilling to compromise as they remain as at the date of this judgment.

66    On the whole, I am satisfied that the applicant has satisfied the criteria for the injunctive relief he seeks, albeit with some modifications to the terms of the order to provide, among other things, for the sale of the car should the applicant grant his consent for that to be done. It is appropriate that the order permit the applicant to impose conditions upon the grant of any such consent, including in relation to the preservation or investment of any net proceeds of sale.

67    I will hear further submissions from the parties in relation to the following proposed orders:

1.    Subject to the orders in paragraphs 2, 3 and 4, each of the respondents be restrained until further order from doing any of the following acts in relation to the 1963 Austin Healey 3000 BJ 8 Phase 1 Mark III motor vehicle chassis number HBJ8L/25714 forming the subject matter of this action (“the motor vehicle”):

(a)    transferring, selling, charging, pledging, mortgaging, assigning, hiring or lending the motor vehicle or offering to do any such act;

(b)    moving, altering or using the motor vehicle for any purpose other than its proper maintenance and preservation;

(c)    causing or permitting any person to do any of the acts mentioned in paragraph 1(a) or 1(b) herein.

2.    The respondents or either of them may do an act specified in paragraph 1 of these orders with the written consent of the applicant.

3.    The applicant may impose conditions upon any grant of consent made in accordance with paragraph 2.

4.    The respondents must comply with the conditions of any grant of consent imposed in accordance with paragraph 3.

THE ABUSE APPLICATION

68    The respondents submit that there was a fair and reasonable basis upon which to bring the Abuse Application. They contend that they withdrew the Abuse Application upon receiving and reading the affidavit of the applicant sworn on 2 November 2016. That affidavit was served upon the respondents’ solicitor only a short time before the hearing on 2 November 2016 commenced, although certain documents annexed to it were provided a few days prior.

69    The allegations made in support of the Abuse Application were wide-ranging and serious. I will refer to only a few of them.

70    It was alleged that the applicant had a real or perceived conflict of interest because he had previously indicated that he would consent to act as trustee of the first respondent’s bankrupt estate in respect of the creditor’s petition filed by Mr Oxenham (which was never heard and determined) and that his appointment was the result of a conspiracy between the applicant, Mr Oxenham and the first respondent’s former husband. That allegation was misconceived. The applicant’s affidavit of 2 November 2016 was said to have altered the first respondent’s views in that regard.

71    The first respondent’s explanation for withdrawing the Abuse Application on that basis is not an acceptable one. The first respondent had been promptly advised that the applicant was appointed as the substitute trustee of her bankrupt estate by the operation of s 181A of the Act. The first respondent is a legal practitioner and is legally represented in these proceedings. The ordinary operation of s 181A of the Act ought to have been appreciated by her. Insofar as she might have subscribed to a theory that her former husband or Mr Oxenham might somehow have had a hand in the applicant’s appointment, her theory was ill-considered. The applicant should not be deprived of his costs by reason of his giving a more full explanation on 2 November 2016 of the facts and law concerning his appointment.

72    It was then alleged that the applicant had wrongly relied in this Court on a document that had been filed by the first respondent in the FMC proceedings. It was said that his use of the document was contrary to the law or otherwise improper. As the Abuse Application has been withdrawn, I am not called upon to finally determine whether there has been any such misuse of the document in question. I am, however, satisfied that if the document was not properly before this Court that circumstance would not, of itself, justify an order that the entire proceedings be dismissed as an abuse of process. I do not consider that the receipt of the applicant’s affidavit of 2 November 2016 had any bearing on the respondents’ eleventh-hour decision to withdraw their allegations concerning the FMC document.

73    It was also contended that the applicant had acted in excess of his powers by making enquiries of first respondent in relation to the financial affairs of the second respondent and the alleged transfer of the car. That submission finds no support in the Act itself. The applicant was clearly entitled to make the relevant enquiries of the first respondent, particularly having regard to her status as a director of the second respondent.

74    The complaints made on the Abuse Application went further than the examples I have given. They included serious allegations that the applicant had failed to act impartially and that he has otherwise knowingly acted contrary to the law. The allegations are all withdrawn.

75    Having regard to the content and tenor of the respondents’ written materials, I am satisfied that the Abuse Application was motivated by a sense of anger and victimisation on the first respondent’s part, supported by a belief that her former husband and Mr Oxenham were benefiting from the wrongful exercise of the applicant’s powers and functions. In all of the circumstances, I am not satisfied that the Abuse Application would not have been brought even if the material contained in or exhibited to the applicant’s affidavit of 2 November 2016 had been disclosed at any earlier time. I infer that the application was withdrawn upon a belated reconsideration of its merits.

76    The respondents should jointly and severally pay the applicant’s costs of the Abuse Application. I will hear from the parties on the specific terms of a costs order that will minimise the potential for further disputes in relation to the assessment of the respondent’s costs to date.

Associate:

Dated:    9 December 2016