Applicant v Respondents

2 This proceeding was commenced by originating motion filed on 24 December 2012, together with a summons of the same date. The initial application was supported by an affidavit of Aris Zafirou also dated 24 December 2012. The respondents to the application were Leopold Ekelmans; his wife, Rosa Maria Ekelmans; Ekel Pty Ltd, as trustee for the Famek Trust; Nopi Pty Ltd, as trustee for the Ekfam Trust; and the Registrar of Titles.

3 Ex parte orders were made on 24 December 2012 against Leopold Ekelmans, Rosa Ekelmans, Nopi and Ekel prohibiting removal from Australia, or the disposal of, dealing with, or diminishing the value of any assets in Australia up to an unencumbered value of $11 435 460.61. Particular assets were identified. In respect of Leopold Ekelmans, these were a property at 10 Western Park Road, Somers; an account with the Union Bank of Switzerland; and an account with ABN Amro held jointly in the names of Leopold Ekelmans and his mother, Tryntje Pothoff. In respect of Rosa Ekelmans, the particular assets affected by the freezing order were properties at 7 Glasson Square, Mount Waverley; 5 Sandy Court, Somers; and 10 Western Park Road, Somers. In respect of Ekel, the particular asset identified in the order was a property at 60 Mills Road, Braeside; and for Nopi, a property at 750 Blackburn Road, Clayton.

4 On 7 January 2013, a further order was made amending property descriptions and extending the freezing orders until 14 January 2013. Also on that day, a further summons was filed by the applicant seeking orders against Ekelmans & Co Pty Ltd and Mark Hendrick Ekelmans. They were joined as respondents, and an order was made against Mark Ekelmans freezing five Aclass shares held by him in Ekelmans & Co, as well as 'any assets held by [him] for on behalf of or that is otherwise beneficially owned by' Leopold Ekelmans. An order was also made against Ekelmans & Co freezing its assets, and in particular land at 100-104 Main Road, Clayton South, Victoria; and land at Victoria Avenue, Castle Hill, New South Wales. Shares held by Ekelmans & Co in Boomerang Tapes Pty Ltd were also frozen. The freezing orders were extended to 4 February 2013, and the value of the claimed debt increased to $12 065 287.08.

5 On 4 February 2013 the freezing orders, first made on 24 December 2012, and varied on 7 and 14 January 2013, were further extended to 21 February 2013. Directions were made for affidavit material and the exchange of written submissions in advance of trial. There were some variations made to the orders which are not material for present purposes. On 20 February the freezing orders were further extended until 6 March 2013 in anticipation of a trial commencing that day.

6 On 4 March 2013, the applicant filed a further summons in which he sought freezing orders against Juka Louise Ekelmans, daughter of Leopold and Rosa Ekelmans, and BTESF Pty Ltd, as trustee of the BT Executive Superannuation Fund. They were joined as respondents. The order made against Juka Ekelmans identified a parcel of Westpac shares, and the order against BTESF identified a number of parcels of shares. Broad freezing orders were also made against both new respondents over any assets held by them for or on behalf of Leopold Ekelmans, or that were otherwise beneficially owned by Leopold Ekelmans. Further orders were made on 6 March 2013 varying the previous orders for trial, which eventually commenced on 24 April 2013.

7 Following the audit, but prior to the issue of assessments, the Deputy Commissioner of Taxation, Greg L Williams, wrote to Leopold Ekelmans by letter dated 12 October 2012 attaching a 'Position Paper' in which the Australian Taxation Office outlined the basis for proposed assessments. The audit had covered the years of income ended 30 June 2002 to 30 June 2011, inclusive. The entities and individuals whose affairs were identified as the subject of audit, other than Leopold Ekelmans, were Rosa Ekelmans; Tryntje Pothoff; Mark Ekelmans; Juka Ekelmans; Suralwood International Inc, a company incorporated in the British Virgin Islands; Nopi and the Ekfam Trust; Ekel and the Famek Trust; Boomerang Tapes; and the legal representatives and tax agents who had provided advice to Leopold Ekelmans.

8 The Position Paper foreshadowed the intention of the Australian Taxation Office to issue assessments imposing a total liability on Leopold Ekelmans of $11 930 342.36 comprised of unpaid tax, penalties and interest charges for each relevant year. The basis for the proposed assessments was summarised by Mr Zafiriou in his first affidavit by reference to a number of issues.

9 The first 'issue' concerned the assessment of amounts purportedly distributed over the years from the Ekfam Trust to Mrs Pothoff, and paid into the ABN Amro account. The evidence disclosed that Mrs Pothoff died on 2 May 2002. The ATO contended that the distributions were never intended to benefit the deceased nonresident beneficiary. Leopold Ekelmans was assessed on that income as if the distributions were derived by him.

10 The second 'issue' concerned deposits of $4.1 million remitted from the UBS account to the Ekfam Trust. The ATO contended that the source of income was unexplained and assessable in the hands of Leopold Ekelmans.

11 The third 'issue' concerned purported advances made by way of loans from Suralwood to the Ekfam Trust. These amounts were apparently onlent by Nopi to the Famek Trust and utilised for the purchase of commercial investment properties. The ATO contended that the loans from Suralwood were shams and assessed them as income in the hands of Leopold Ekelmans.

12 The fourth 'issue' concerned the interest paid by Nopi to Suralwood on the loans and the fifth 'issue' concerned a payment of $600 000 by Suralwood to Nopi as an unsubstantiated gift.

13 During the course of the audit, Leopold Ekelmans or his accounting and legal advisers, advanced various contentions to resist assessment, which may be summarised as follows:

(a) the distributions made by Nopi from the Ekfam Trust were genuine;

(c) there was no legal basis to characterise the $4.1 million transferred from the UBS account to Nopi as assessable to Leopold Ekelmans;

(d) there was no legal basis to characterise the advances from Suralwood as other than loans;

(e) interest paid by Nopi was a deductible expense; and

(f) there was no basis in fact or law to characterise the payment of $600 000 from Suralwood to Nopi as assessable income of Leopold Ekelmans.

14 Leopold Ekelmans has stated his intention to object to the assessments. Objections do not, of course, limit the ability of the applicant to recover the amounts properly assessed. I assume, that objections will be advanced and if disallowed, Leopold Ekelmans will contest the assessments.

15 Following publication of the Position Paper, events occurred which caused the applicant to come to this Court seeking freezing orders. On 26 November 2012, Nopi transferred $3 million to Leopold Ekelmans' UBS account in Zurich. On 30 November 2012, a further $1 million was transferred. These transactions were described in the relevant books of account as 'repayment of loan Nopi Pty Ltd'. In and between 2009 and early December 2011, Suralwood had advanced $500 000 to Nopi, and Leopold Ekelmans had advanced $4 000 010 to Nopi. Leopold Ekelmans contended that the payments made in late November 2012 were in the nature of repayment of those loans.

16 On 24 November 2012, Leopold and Rosa Ekelmans left Australia for Amsterdam. In an affidavit sworn 31 January 2013, Leopold Ekelmans said that with deteriorating health, aggravated by the continuous stress caused by the protracted audit, he decided to attend to fixing up his financial affairs and go on his last overseas trip, which was in part to be with a close friend in Amsterdam who was dying of cancer. Rosa Ekelmans returned to Australia but, as at the conclusion of the trial, Leopold Ekelmans remained abroad.

17 Other events had occurred following the commencement of the audit, and more recently following the publication of the Position Paper, upon which the applicant relied to contend that Leopold Ekelmans had engaged in conduct calculated to defeat creditors, or that evidenced a real risk that assets would be dealt with so as to place them beyond the reach of creditors. These events included transfers from the UBS account to the Ekfam Trust. The applicant contended that these transfers correlated with credits to Rosa Ekelmans' loan account with the trust. Other payments made to the Ekfam Trust were said to correlate with credits made to loan accounts maintained by Mark and Juka Ekelmans with the Ekfam Trust. Leopold Ekelmans also transferred five Aclass shares in Ekelmans & Co Pty Ltd to Mark Ekelmans. The nominated date of the transfer was 2 July 2007, although ASIC was only notified of the change in November 2012. Leopold Ekelmans also transferred his interest in the family home in Mount Waverley to his wife on 15 November 2012. On 21 November 2012, he transferred his interest in a property at Somers to his wife.

37A.05 Order against judgment debtor or prospective judgment debtor or third party

(a) judgment has been given in favour of an applicant by -

(ii) in the case of a judgment to which paragraph (2) applies, another court; or

(b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in -

(ii) in the case of a cause of action to which paragraph (3) applies, another court.

(2) This paragraph applies to a judgment if there is a sufficient prospect that the judgment will be registered in or enforced by the Court.

(3) This paragraph applies to a cause of action if -

(a) there is a sufficient prospect that the other court will give judgment in favour of the applicant; and

(b) there is a sufficient prospect that the judgment will be registered in or enforced by the Court.

(4) The Court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the Court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied because any of the following might occur -

(a) the judgment debtor, prospective judgment debtor or another person absconds; or

(b) the assets of the judgment debtor, prospective judgment debtor or another person are -

(i) removed from Australia or from a place inside or outside Australia; or

(ii) disposed of, dealt with or diminished in value.

(5) The Court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a third party) if the Court is satisfied, having regard to all the circumstances, that -

(a) there is a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied because -

(i) the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or

(ii) the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or

(b) a process in the Court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment of the Court, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.

(6) Nothing in this Rule affects the power of the Court to make a freezing order or an ancillary order if the Court considers it is in the interests of justice to do so.

19 The source of power regulated by r 37A is not in doubt. The issue at trial concerned the application of r 37A.05(5), and in particular whether a process might be available to the applicant to require third parties to disgorge assets. In Cardile v LED Builders Pty Ltd,[1] the High Court said:

What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasise the word "may", be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which: (i) the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including "claims and expectancies", of the judgment debtor or potential judgment debtor; or (ii) some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor.[2]

20 A question arose at trial concerning the extent to which a court must be satisfied about the likelihood of recovery under process that may be initiated by a trustee in bankruptcy of the estate of Leopold Ekelmans. Thus , it would not be the applicant who might initiate recovery process. The applicant argued that in such circumstances, all he was obliged to demonstrate on this application was a real case to be investigated by trustees. He argued that he was not required to establish a good arguable case. In other words, the applicant sought to draw a distinction between the test to be applied on an application against a judgment debtor (good arguable case) and an application against a third party (real case to be investigated) which was less stringent.

21 The High Court in Cardile acknowledged that even though the applicant for a freezing order may not be entitled to pursue the recovery of property from a third party, an order may still be made in appropriate circumstances to avoid an abuse of the court's process. The High Court did not draw any distinction between the degree of satisfaction required in the different circumstances, but emphasised that the basis of the jurisdiction was to protect the court's process. That emphasis was reflected in the court's analysis of the jurisdictional foundation of protective orders, as well as in the rules of this court applicable to the present application. The High Court continued:

Discretionary considerations generally also should carefully be weighed before an order is made. Has the applicant proceeded diligently and expeditiously? Has a money judgment been recovered in the proceedings? Are proceedings (for example, civil conspiracy proceedings) available against the third party? Why, if some proceedings are available, have they not been taken? Why, if proceedings are available against the third party and have not been taken and the court is still minded to make a Mareva order, should not the grant of the relief be conditioned upon an undertaking by the applicant to commence, and ensure so far as is possible the expedition of, such proceedings? It is difficult to conceive of cases where such an undertaking would not be required. Questions of this kind may be just as relevant to the decision to grant Mareva relief as they are to a decision to dissolve it. These are matters to which courts should be alive. As will appear, they are matters which should have been considered by the Full Court in this case.[3]

22 In DCT v AES Services (Aust) Pty Ltd,[4] Forrest J set out, in summary form, the legal principles governing applications under r 37A. I would respectfully endorse and adopt that summary.

Last year in Zhen and Mo v ors[5] I endeavoured to set out what I thought were the appropriate principles regarding applications under o 37A. I reproduce those points:

First, that a freezing order, by its very nature, is a drastic remedy and a court must exercise a high degree of caution before taking a step which will interfere with a party's capacity to deal with his or her assets.[6]

Second, the order is not designed to provide security for the applicant's claim.[7] It is solely directed to preserving assets from being dissipated, thereby frustrating the court process.[8]

Third, the applicant bears the onus both in satisfying the Court that the order should be continued and in satisfying the Court as to the amount which is to be the subject of the order.

Fourth, that an order can only be made on the basis of admissible evidence which supports the contentions made by the party seeking the order. Speculation and guesswork is no substitute for either the facts or inferences properly drawn from proved facts.[9]

Fifth, that before such an order can be made it is necessary that the applicant establish-

(a) an arguable case against the defendant[10]; and

(b) that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the defendant's actions in either removing the assets or disposing or dealing with them so as to diminish their value.[11]

Sixth, the balance of convenience must favour the granting of the freezing order.[12]

Seventh, that there is no set process determining the exact nature of an order. The order will be framed according to the circumstances of the case.[13]

Eighth, the applicant must establish with some precision the value of prospective judgment. The order should not unnecessarily tie up a party's assets and property.[14]

Finally, there may be discretionary considerations which militate against the granting of a freezing order, such as delay in bringing the application on before the court or a lack of candour in the materials placed before the court.[15]

23 The applicant relied upon a decision of Hargrave J in Robmatjus Pty Ltd v Violet Home Loans Australia Pty Ltd[16] to contend that the correct test to be applied only required him to establish a case to be investigated by, for example, a trustee in bankruptcy. In that case, the applicant for freezing orders had commenced a proceeding against the defendant for unpaid fees. There was no counterclaim or pleaded setoff by way of a defence. The catalyst for the application for freezing orders was the sale by one of the defendants of its loan portfolio, which had comprised its business. The nonparties, against whom freezing orders were sought, were associated with the defendant and involved in the sale. A threshold issue, raised by the defendant and nonparties, was whether the applicant for a freezing order against a third party must establish a 'compelling cause of action' for relief as a result of a recovery process being instigated. His Honour said:

A threshold issue was raised in argument. It was submitted on behalf of the defendant and the non-parties that, in order to establish that a relevant process "may" ultimately be available, the plaintiffs must establish "a compelling cause of action" for relief as a result of such process being instigated. It was submitted that a mere possibility that some process may ultimately lead to relief of the relevant kind is not sufficient for the purposes of the rule. I do not accept this submission. Although I accept that a merely theoretical possibility will not fall within the rule, I do not think that a plaintiff need establish a "compelling cause of action". It will be enough if a plaintiff can satisfy the Court that, in all the circumstances of the case, there is a real case to be investigated under the process or processes relied upon as potentially yielding a means of satisfaction of the judgment from the assets of the non-parties.[17]

24 The respondents in this proceeding contended that the correct test to be applied by a court, when assessing an applicant's case for freezing orders against third parties, was the same as for an order against the judgment debtor - a good arguable case.

25 This dichotomy has been considered in a number of subsequent decisions, drawn together and analysed by Lander J in Rafferty v Time 2000 West Pty Ltd (No 7).[18] His Honour said:

It was put by counsel for Gemhall that there were a number of reasons why the freezing order should be discharged. First it was put that because his Honour had granted liberty to apply to discharge the order the application was not contrary to the terms of the order. Nothing more needs to be said about that proposition which cannot be sustained. Secondly it was put that there had been "a shift in the law" since Besanko J made his orders and in particular in relation to the degree of satisfaction required in relation to granting a Mareva injunction against a third party. In that regard Gemhall's counsel relied upon a decision of Vickery J in the Supreme Court of Victoria in Groeneveld Australia Pty Ltd v Nolten Vastgoed BV and Chris Nolten [2011] VSC 18. In that case Vickery J addressed r 37A.05(4) of the Supreme Court (General Civil Procedure) Rules 2005 in Victoria which are harmonised court rules with the other rules of court in the various jurisdictions in Australia. In particular, his Honour addressed r 37A.05(5)(b) which is in the same terms as O 25A r 5(5)(b).

His Honour referred to a previous decision in the Supreme Court of Victoria in Robmatjus Pty Ltd v Violet Home Loans (2007) VSC 165 where Hargrave J speaking of the power under that rule said:

A threshold issue was raised in argument. It was submitted on behalf of the defendant and the non-parties that, in order to establish that a relevant process "may" ultimately be available, the plaintiffs must establish "a compelling cause of action" for relief as a result of such process being instigated. It was submitted that a mere possibility that some process may ultimately lead to relief of the relevant kind is not sufficient for the purpose of the rule. I do not accept their submission. Although I accept that a merely theoretical possibility will not fall within the rule, I do not think that a plaintiff need establish a "compelling cause of action". It will be enough if a plaintiff can satisfy the Court that, in all the circumstances of the case, there is a real case to be investigated under the process or processes relied upon as potentially yielding a means of satisfaction of the judgment from the assets of the non-parties.

In Groeneveld Australia Pty Ltd v Nolten Vastgoed BV and Chris Nolten [2011] VSC 18, Vickery J said that insofar as Hargrave J was seeking to apply a test of "the real case to be investigated", his Honour was wrong. Vickery J said that the real test to be applied was whether there was an arguable case.

I do not need to decide which of the Victorian cases is to be preferred or if in fact there is any real distinction between the two decisions. I am not so sure that Hargrave J was seeking to apply the kind of test which Vickery J ascribed to him. I think Hargrave J was simply answering the proposition put by counsel for the defendant and non-parties that the party seeking freezing orders had to establish a "compelling cause of action".

26 I would respectfully adopt the approach taken by Lander J, in which he doubted that Hargrave J was seeking to apply a modified test. In my view, Hargrave J was, as Lander J pointed out, responding to a contention that the applicant was required to establish a 'compelling cause of action'. I propose to proceed on the basis that an applicant for relief against third parties is required to establish a 'good arguable case', and more particularly, a good arguable case that a third party 'may be obliged to disgorge assets or contribute towards satisfying a judgment or prospective judgment'.

27 There is no doubt that the applicant would be entitled to commence a proceeding against Leopold Ekelmans to recover the amount due under the assessments and, save for a compromise or successful stay application, move for judgment. But the applicant made a conscious decision not to do so, and after the commencement of the trial foreshadowed from the bar table, an application to apply to bankrupt Leopold Ekelmans under s 40(1)(c) of the Bankruptcy Act 1966 (Cth) on the ground that, with intent to defeat or delay his creditors, he departed or remained out of Australia. I was informed from the bar table that such a proceeding would be commenced shortly, although no evidence of any such proceeding has been advanced. Such an act of bankruptcy would, the applicant hoped, extend the period of recovery under s 120 of the Bankruptcy Act. In that sense his decision seems tactical. Reliance on an unsatisfied judgment, and bankruptcy notice, may delay the commencement of that period.

28 Thus, the applicant's proposed course was to, in effect, delegate all recovery steps to a trustee in bankruptcy, whose appointment on the ground to be propounded, is by no means certain. Presumably, the applicant hoped that a trustee, once appointed, would investigate opportunities to recover property under ss 120 or 121 of the Bankruptcy Act or s 172 of the Property Law Act 1958 (Vic). Should a trustee be appointed, the estate of Leopold Ekelmans would be under his or her control and the applicant would be required to prove in the bankruptcy along with any other credits, although his right to prove on the basis of the assessments would not be in doubt. The relevant provisions under which recovery might be sought by a trustee against third parties are set out below.

29 Section 120 of the Bankruptcy Act provides:

(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.

30 Section 121 of the Bankruptcy Act provides:

(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 property would probably have become part of the transferor's estate or would probably have been available to creditors if the property had not been transferred; and

(b) the transferor's main purpose in making the transfer was:

(i) to prevent the transferred property from becoming divisible among the transferor's creditors; or

(ii) to hinder or delay the process of making property available for division among the transferor's creditors.

Each of these provisions contain exceptions, provisions dealing with insolvency, for the refund of consideration and for the protection of purchase is in good faith.

31 Section 172 of the Property Law Act provides:

(1) Save as provided in this section, every alienation of property made, whether before or after the commencement of this Act, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced.

(2) This section shall not affect the operation of a disentailing assurance, or the law of bankruptcy or insolvency for the time being in force.

(3) This section shall not extend to any estate or interest in property alienated for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the alienation, notice of the intent to defraud creditors.

32 No doubt conscious of the implications of his decision not to initiate a recovery proceeding, the applicant had sought to rely upon the assessments alone to invoke the jurisdiction of this Court. He called in aid Deputy Commissioner of Taxation v Sharp,[19] a decision of the Supreme Court of the Australian Capital Territory. The judgment was delivered by Kelly J on an application made ex parte by the Commissioner of Taxation for a Mareva injunction to restrain defendants from removing assets from the jurisdiction. The basis for the money claim by the applicant in that case was an amount due under amended assessments that had been issued but which were not yet payable. The court was informed that no writ had issued, because the period allowed for payment of the assessments had not elapsed. Kelly J considered that notices of assessment gave rise to special circumstances when the Commissioner of Taxation sought a Mareva injunction in respect of an assessment that had issued but which was not immediately payable, because the time for payment had not elapsed. His Honour said:

It follows, in my opinion, that a peculiar quality attached to a debt claimed as a result of an assessment made under the Act. All that the Commissioner need do to establish conclusively the existence of the debt is to produce the appropriate notice of or copy of the notice of assessment. The debt is not payable in presenti but is a debt in existence - debitum in presenti, solvendum in futuro. In these circumstances it seems to me that the Commissioner is entitled to pray in aid the injunctive power of the Court when he establishes that prima facie there is a real risk that the taxpayer will so deal with his assets to render useless in whole or in part the judgment to which the Commissioner would be conclusively entitled upon the mere passage of time.

33 Having regard to the accepted limits on the right to obtain an interlocutory injunction to prevent the dissipation of assets,[20] the decision of Kelly J may have been regarded as pressing boundaries, even though a recovery proceeding was plainly under contemplation, and the utility of that proceeding might have been prejudiced, had the applicant delayed until after a proceeding could have been commenced. But the authorities now plainly recognise that a proceeding need not have been commenced before a Mareva injunction might be granted. That position is now reflected in r 37A, which refers to a 'prospective cause of action', as a basis to invoke the jurisdiction to avoid an abuse of process. But the authorities and the rules contemplate that a recovery proceeding will be commenced.

(1) The Court may make an order (a freezing order), upon or without notice to the respondent, for the purpose of preventing the frustration or inhibition of the Court's process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied.[21]

35 Practice Note No 5 of 2010 is consistent with the decided cases, and makes it clear that:

The purpose of a freezing order is to prevent frustration or abuse of the process of the Court, not to provide security in respect of a judgment or order.

36 A freezing order may not be made for the purpose of providing the Commissioner of Taxation with security for an assessment. Nor, in my view, should an order be made in circumstances where a claimant has deliberately declined to bring a proceeding to recover the debt in a court.

37 The respondents did not, however, contend that the absence of a proceeding in this Court, was an impediment to the freezing orders sought by the applicant. They seemed to accept that the applicant's ability to bring a proceeding, if so advised, was a sufficient jurisdictional basis for such orders. Such an approach does not, however, coincide with the purpose of such orders, which is to protect the integrity of the court's process. In the absence of at least a contemplated proceeding, freezing orders have no legitimate purpose. At a more practical level, in the absence of an actual or contemplated proceeding, there is no event to define the duration or utility of final orders.

38 The applicants recently foreshadowed intention to apply to bankrupt Leopold Ekelmans, on the ground that he remains abroad with the intention of defeating creditors, may involve a hardfought contest. The applicant cannot be assured of success. Assuming that a bankruptcy order is made on that basis, it will then be up to the trustee to decide whether to bring proceedings in this or some other court to recover property.

39 The factual matrix upon which the applicant proposed to apply for a declaration of bankruptcy was not at the forefront of the material filed by him on this application, although the basis was outlined in submissions. The applicant relied upon inferences arising from the timing of Leopold Ekelmans' departure, the audit and assessments, the timing of certain transactions, and his failure to return. Insofar as the applicant does proceed with his application for a declaration of bankruptcy, I am satisfied that he would have a good arguable case. It was not contended otherwise by the respondents. But the Court remains uninformed by evidence about any such application, its timing and status. Even if that application is successful, the appointment of a trustee is only the first step.

40 The bankruptcy application, in contemplation by the applicant, will not initiate any proceeding under which the third party respondents 'may be obliged to disgorge assets or contribute towards satisfying the ... prospective judgment'. That would be a decision for the trustee. No trustee has yet been appointed. But on the assumption that a trustee will be appointed, and decide to commence the recovery proceedings contended for by the applicant, the applicant must, in my view, establish a good arguable case that the assets targeted for recovery will be recovered from the third parties and contribute towards the assets available to satisfy the applicant's claim proved in the bankruptcy.

41 Nopi is the trustee of the Ekfam Trust. The applicant sought a freezing order over the assets of the trust to the value of $4 859 288. As might be expected, those assets attracted most attention during the trial, in particular the significance of various loan accounts.

42 Nopi was incorporated on 18 March 1966, initially trading as Henderson Industrial Tapes. Its directors are Leopold Ekelmans, Rosa Ekelmans and Mark Ekelmans. The Ekfam Trust was established on 27 February 1995. It is a discretionary trust. The appointor is Leopold Ekelmans, and he and other family members are beneficiaries.

43 The assets of the Ekfam Trust include real estate at 750 Blackburn Road, Clayton, valued at approximately $650 000; cash as at 30 January 2013 in the sum of $764 811.49; shares in listed companies with an estimated value in December 2012 of $3.4 million; an asset comprising a loan to the Famek Trust of a little over $2 million; and some debtors. The transactions before the Court, involving the Ekfam Trust, indicate that it may have been employed as a family 'banker' to which funds were transferred from Suralwood and other accounts and entities, and from which loans were made. Loan accounts for beneficiaries were established, funded and managed.

44 The applicant contended that Leopold Ekelmans was the ultimate controlling hand over all family entities, including the affairs of the Ekfam Trust and Famek Trust. That contention was supported by evidence given by Mark Ekelmans during an interview conducted on 24 April 2012, pursuant to s 264 of the ITAA. It was also supported by the evidence of Rosa Ekelmans at trial. Such a concession does not, however, transform the assets of each trust into the assets of Leopold Ekelmans. The fact that one member of a family may have exercised effective control over the affairs of a corporate entity or a trust may go no further than expose the entity or trust to the possibility, or even likelihood, that it might in future be susceptible to such control or influence. That does not, of itself, convert its assets into assets of the controlling person.

45 The applicant relied on the decision of French J (as he then was) in ASIC v Carey & Ors,[22] to contend that the cumulative effect of the role and entitlement of Leopold Ekelmans under the trust instruments amounted to a contingent interest in all of the assets of the trust, making those assets amenable to a freezing order as if the assets of Leopold Ekelmans. French J said:

The difficulty with applying the notion of contingent interests to beneficiaries of a discretionary trust lies partly in the uncertain scope of the distribution be it income or capital, which may be made in favour of any given beneficiary. I am inclined to think that a beneficiary in such a case, at arms length from the trustee, does not have a 'contingent interest' but rather an expectancy or mere possibility of a distribution. In some discretionary trusts, and there is an example among those of which Mr Beck is a beneficiary, charities as a class are included in the class of beneficiaries. It could hardly be said that every charity in Australia has thereby acquired a contingent interest in that trust. On the other hand, where a discretionary trust is controlled by a trustee who is in truth the alter ego of a beneficiary, then at the very least a contingent interest may be identified because, to use the words of Nourse J, 'it is as good as certain' that the beneficiary will receive the benefits of distributions either of income or capital or both.

46 In my view, the decision in Carey does not assist the applicant. In Carey, French J was concerned with the definition of 'property' in s 9 of the Corporations Act 2001, and whether the interest of a beneficiary in trust assets was susceptible to the reach of a receiver appointed over his property under s 1323 of the Corporations Act. While his Honour also considered cases decided in the Family Law jurisdiction, he did not purport to state a general rule. The remedial regime under consideration in Carey was quite different in character and purpose to the general law and rule-based regime authorising the making of freezing orders. The purpose of an order under r 37A is to protect against the risk of dissipation of assets that might frustrate or inhibit the court's process. Such orders are intended to be of limited duration, and do not of themselves invest in a successful applicant any entitlement to the assets enjoined. Their purpose is to protect the processes of the court.

47 In any event, it is unnecessary to decide whether the scope of the power under r 37A.05(4) extends to the assets of the trust because of Leopold Ekelmans powers under the trust deed. Any powers that Leopold Ekelmans may have over trust property may be expressly enjoined to ensure that he does not exercise them so as to place assets beyond the legitimate reach of a trustee in bankruptcy. A satisfactory order may also be framed that would prevent Leopold Ekelmans from influencing any power of distribution, thus ameliorating that risk of dissipation.

48 In the alternative, the applicant contended that the trust was a sham, although that submission was only faintly pressed. The applicant's evidence did not address the intention with which the trusts were established, maintained and utilised, other than to reveal some transactions recorded in the establishing documents and ledgers. I am not satisfied that there is a good arguable case to support that contention.

49 Attention quickly turned to the question whether the applicant had established, to the requisite degree of satisfaction, that third parties may be obliged to disgorge assets to contribute towards 'a judgment or prospective judgment of the court' made against Leopold Ekelmans.

50 The applicant contended that Leopold Ekelmans held a beneficial interest in trust assets capable of recovery by a trustee in bankruptcy under ss 120 or 121 of the Bankruptcy Act or s 172 of the Property Law Act. There were four components to this part of his case. The first three components were based upon amounts credited to loan accounts of Rosa Ekelmans, Mark Ekelmans and Juka Ekelmans. The applicant contended that most of the funds applied to the credit of the accountholders were paid to the trust by Suralwood or from bank accounts operated by Leopold Ekelmans, in and between 2009 and 2012. In the case of Mark and Juka Ekelmans, $500 000 was credited to each loan account on 3 September 2010, $250 000 on 4 October 2011 and $250 000 on 6 December 2011.

51 The fourth component was characterised as an unpaid present entitlement of Leopold Ekelmans as a beneficiary of the Ekfam Trust, in the sum of $345 000. Such an entitlement, if it existed, is an asset of Leopold Ekelmans and presumably, recovery could not be resisted if a demand were to be made by a trustee in bankruptcy.

52 The precise circumstances under which the payments by Leopold Ekelmans to the Ekfam Trust were credited to the various loan accounts was not explored in evidence and remains uncertain. The payments made by Leopold Ekelmans might be characterised as gifts or advances to the trust. In either case, subject to the relation back period in the case of gifts, the payments would be susceptible to recovery by a trustee in bankruptcy from trust property. Further, if a payment had been made by Leopold Ekelmans in direct reduction of a liability under a loan account, it might be characterised as a gift or advance to the beneficiary accountholder. Insofar as Leopold Ekelmans had been repaid advances, a trustee would presumably be entitled to recover only the net balance due to him, if any.

53 In my view, on the evidence before the court, it is more probable, that payments by Leopold Ekelmans were made to the trust, rather than directly to a beneficiary in reduction of their loan accounts. If trust assets were subsequently distributed to beneficiaries and credited to their loan account, the assets of the trust would have been depleted to that extent. A trustee in bankruptcy may, of course, attempt to trace distributions into the hands of each beneficiary. If a trustee were to be confined to the credit balance in each of the loan accounts, the evidence indicates that the balances are substantially less than the amount of the deposits. The trustee may also attempt to trace funds into property acquired by drawing down on a loan account. That is what the applicant contended a trustee might do. In any event, there was uncertainly about the real target of any such proposed claim - the assets of the trust, the credit balance of any loan account or the assets acquired by use of funds drawn from the loan accounts. This last category of claim overlaps with separate claims against the assets of Rosa, Mark and Juka Ekelmans.

54 I am satisfied that a trustee in bankruptcy would have a good arguable case to recover the net balance of the advances made by Leopold Ekelmans to the Ekfam Trust and, in the case of gifts, those made within the relation back period. The approach taken by the applicant in declining to proceed to a judgment, and proceeding to bankrupt Leopold Ekelmans on the ground that he left or remained out of the jurisdiction with intent to defraud creditors, creates some uncertainty about the relation back period. If the applicant does not succeed in bankrupting the taxpayer on the preferred basis, but is driven to obtain a judgment, serve a bankruptcy notice and rely upon the unsatisfied demand, the relation back period may be materially different.

Rosa Ekelmans - share purchases and loan account

55 The application to freeze the publicly listed shares owned by Rosa Ekelmans falls into two parts. The first part relates to shares acquired by Rosa Ekelmans from funds drawn against her Ekfam Trust loan account. The second part relates to shares transferred to her by Leopold Ekelmans.

56 The estimated value of the shares acquired through the loan account, as at 31 December 2012, was $4 800 000 with an acquisition cost of $2 552 566.40. The applicant sought a freezing order over all such shares to a value of $799 833, based upon the contention that shares had been acquired from funds borrowed from the Ekfam Trust, that could be traced to deposits made substantially by Leopold Ekelmans. These deposits were alleged to total $1 917 750. The applicant contended that Leopold Ekelmans' funds could be traced into the shares upon application made by a trustee in bankruptcy.

57 The extent of the freezing order ($799 833) was calculated by reference to a summary prepared by Rosa Ekelmans' accountants, in which she conceded that purchases had been made by drawing on her loan account in the Ekfam Trust. Of those purchases, only those extending back five years from the date of Leopold Ekelmans' departure from Australia were taken into account.

58 The respondents contended that there was no factual basis upon which to obtain a freezing order over the shares, even if it were established that Leopold Ekelmans had made advances or gifts to the trust that were applied in reduction of Rosa Ekelmans' loan account. The respondents pointed to a history of gifts by Leopold Ekelmans to family members and entities commencing many years before the applicant commenced the investigation. While that history may militate against a finding that such gifts were made in an attempt to defraud, or for a prescribed purpose under s 121 of the Bankruptcy Act, it would not assist Leopold Ekelmans to resist claims made under s 120 of the Bankruptcy Act against trust assets.

59 The respondents advanced a multilayered challenge to the applicant's claims based on the opportunities for recovery by a trustee in bankruptcy. At the threshold was a contention that the proposed exercise of such powers did not involve a 'process in the Court available to the applicant'. They argued that, following bankruptcy, any such process would only be available to a trustee or receiver in bankruptcy. They also contended that such a process must be one capable of initiation in this Court, whereas a bankruptcy proceeding would be brought in another court. In my opinion, the respondents' contention lacked substance. While it is true that r 37A.05(5)(b) may be narrowly construed as the respondents contended, r 37A.06 provides:

Nothing in this Order limits the inherent, implied or statutory jurisdiction of the Court to make a freezing order or an ancillary order.

60 There is nothing to prevent a trustee in bankruptcy proceeding in this Court to recover property under the Property Law Act, although a trustee may be confined to the Federal Court if proceeding under the Bankruptcy Act.[23] Furthermore, the general law does not confine the scope of a relevant proceeding deserving of protection by a freezing order, to one in this Court.[24] Cardile makes it clear that the scope of the jurisdiction to make orders against third parties, includes bankruptcy to recover property. The rules of court also contemplate that a proceeding in another court may, in the prescribed circumstances, be amenable to protection.[25]

61 The respondents next contended that there was no sound legal or factual basis to support any such 'process'. That is, a proceeding commenced by a receiver or trustee to recover property from a third party. For a successful claim under s 121 of the Bankruptcy Act or s 172 of the Property Law Act, a trustee must establish purposive conduct. While such conduct may be, and usually is, established from circumstantial evidence, the seriousness of the allegation requires a commensurate degree of satisfaction.[26]

62 The respondents' contention that the right to bring a proceeding under ss 120 or 121 vests only in the trustee, not the applicant, is correct. The applicant contended that it had the right to bring a proceeding, 'as a person thereby prejudiced', under s 172 of the Property Law Act. The bankruptcy of Leopold Ekelmans would, however, divest the applicant of any such right in relation to his estate. Thus, the applicant's reliance on such grounds to recover from third parties following bankruptcy of Leopold Ekelmans is contingent upon the successful appointment of a trustee, followed by the trustee's decision to commence the proposed proceedings against Rosa Ekelmans and other third parties in an attempt to recover the property of the bankrupt. For present purposes I will assume each such step will take place.

63 The respondents further contended that the recovery process available to a trustee in bankruptcy rendered a transaction 'voidable', not void ab initio. While the transactions that might be more readily challenged by a trustee are the payments made by Leopold Ekelmans to the Ekfam Trust, the applicant hoped that a trustee would seek to recover from the shares acquired by Rosa, and not just trust assets. If Leopold Ekelmans' cash has been converted by the trustee into a distribution to Rosa Ekelmans as a beneficiary, resulting in a credit to her loan account, such distributions made by a trustee may be likened to a payment made to a bank to retire a debt, making it difficult to trace into an asset acquired with earlier borrowed funds.

64 The applicant was no doubt mindful of these complexities when contending for the less stringent test of a 'real case to be investigated' by a trustee, as the basis for a freezing order. If adopted, such a test would seem to dispense with any requirement to satisfy the Court that the claim had any prospect of success. In my opinion, to so characterise the degree of persuasion required to support a freezing order would unfairly and unreasonably expose third parties to draconian orders, severely limiting their property rights without any corresponding obligation on the applicant to address the strength of the case for recovery from third parties. Such a consequence was not, in my view, expressly or impliedly authorised by Hargrave J in Robmatjus.

65 On 28 October 2011, Leopold Ekelmans transferred 1239 BHP shares to Rosa Ekelmans. The applicant sought a freezing order over those shares to the value of $44 604. It is not entirely clear from the affidavit material how the applicant arrived at that value. Nevertheless, the applicant contended that he (presumably a trustee in bankruptcy) had a good arguable case under ss 120 or 121 of the Bankruptcy Act or s 172 of the Property Law Act to avoid the transfer. This claim has the added simplicity that there was a direct transfer from Leopold Ekelmans to Rosa Ekelmans. In my view, a trustee in bankruptcy would have a good arguable case to avoid the transfer under s 120 of the Bankruptcy Act.

66 All that can be said so far concerning a trustee's prospects for recovery against the Ekfam Trust and the shares owned by Rosa Ekelmans is that:

(a) Leopold Ekelmans owes a debt due to the Crown in the cumulative sum of the assessments, together with interest.

(b) The applicant has declined to bring proceedings in this or another court to recover the debt. Instead, the applicant proposes to delegate the task of recovery to a trustee which he hopes will be appointed to the estate of Leopold Ekelmans under s40(1)(c) of the Bankruptcy Act, on the basis that he left or remains out of the jurisdiction with the intention of defeating his creditors.

(c) This Court has not yet been provided with any evidence that such a proceeding has been commenced or when it will be heard.

(d) The evidence upon which such a proceeding might be based is only available in summary form in the evidence before this Court, and relied upon almost as an afterthought.

(e) Even so, I am satisfied that the applicant has a good arguable case for the proposed bankruptcy order.

(f) I am also satisfied that the appointment of a trustee will probably lead to proceedings brought in another court under the recovery provisions already mentioned. While the applicant may hope that a trustee commences such proceedings, the initiation of such 'process' is a matter for the trustee.

(g) I am satisfied that a trustee, if appointed, would have a good arguable case to recover advances made by Leopold Ekelmans to the Ekfam Trust, and gifts within the relation back period, although there remains some uncertainty as to when that period will commence.

(h) I am not satisfied, on the material presently before the Court, that the basis for the proposed claims by a trustee in bankruptcy, against the shares purchased by Rosa Ekelmans from drawings made on her loan account, constitutes a good arguable case. The basis upon which a trustee might seek to trace funds into the shares remains too uncertain.

67 The applicant sought to obtain a freezing order over shares transferred by Leopold Ekelmans to Mark Ekelmans to a value of $416 176, referred to in documents produced by Link Market Services Ltd; and shares to the value of $66 240, referred to in a summary of shareholdings produced by Computershare Investor Services Pty Ltd.

68 Four parcels of shares were transferred. Leopold Ekelmans transferred 5220 shares in AGL Energy on 8 September 2009; 1800 shares in Woodside Petroleum Ltd on 2 December 2009; 4335 shares in CBA on 13 August 2010; and 2000 shares in Westpac on 27 October 2011. The applicant contended that he had a real case to investigate voidable transfers under ss 120 or 121 of the Bankruptcy Act, or s 172 of the Property Law Act.

69 The respondents contended that there was evidence that Leopold Ekelmans had declared a capital gain on the transfer of the shares in his income tax returns for the AGL Energy, CBA and Westpac shares, which would indicate that there was consideration given for them. Although a liability for capital gains tax on a transfer does not necessarily mean that cash or value was in fact given by the transferee, it would be a factor to be taken into account and investigated by a trustee in bankruptcy, if and when appointed, before deciding whether to seek to avoid the transfers. Even so, I am presently satisfied that a trustee would have a good arguable case, if appointed, to recover the shares as gifts under s 120 of the Bankruptcy Act. Adjustments may be made for consideration given for property recovered under that provision.

70 Mark Ekelmans was joined as the sixth respondent by order made on 14 January 2013, when Ekelmans & Co was also joined as a respondent. A summons had been issued by the applicant to Mark Ekelmans and Ekelmans & Co that day, and a freezing order made over five Aclass shares in Ekelmans & Co that had been transferred to Mark Ekelmans. The freezing order extended to:

any asset held by you for or on behalf of or that is otherwise beneficially owned by the first respondent, Leopold Arnold Ekelmans.

71 The freezing order granted over the five Aclass shares in Ekelmans & Co is not contested by the respondents. The other order, directed to 'any assets', is unfortunately vague, requiring Mark Ekelmans to conduct himself in relation to other assets, without specification, indefinitely, and without particular knowledge of what conduct might expose him to a penalty.

72 The affidavit in support of the application against Mark Ekelmans, dated 11 January 2013, and sometimes referred to as the second Zafiriou affidavit, dealt with the transfer of shares in Ekelmans & Co from Leopold Ekelmans to Mark Ekelmans. On one view, that transfer took place in November 2012, although it was recorded as having occurred on 2 July 2007. In paragraph 26, the deponent expressed the view that Leopold Ekelmans may have taken steps to divest himself of the ownership of Ekelmans & Co after being informed of the ATO's intention to issue the assessments, with a view to frustrating the judgment that the Commissioner may obtain against him in respect of those assessments. The deponent continued:

Further, I believe that there is a significant risk that the shares held by Mark Ekelmans and the assets of Ekelmans & Co (both of which may potentially be able to satisfy Mr Ekelmans' tax debt) may be at risk of being dealt with in such a manner as to frustrate any judgment obtained by the Commissioner in any future proceeding against Mr Ekelmans.

As outlined in my December affidavit and based upon the facts available to the Commissioner at this time, I believe there to be an ongoing risk that properties may become encumbered and/or any remaining shareholdings may be liquidated and the moneys received may be transferred offshore.

Accordingly, I would respectfully ask the Court to make the additional freezing orders sought by the plaintiff in respect of Ekelmans & Co and Mark Hendrick Ekelmans.

73 The first affidavit of Mr Zafiriou, sworn 24 December 2012, did not reveal any particular assets of Mark Ekelmans that might fall within the scope of the order made on 14 January 2013. It was not until the fourth affidavit of Mr Zafiriou, sworn 4 March 2013, that particular property of Mark Ekelmans, apart from the shares in Ekelmans & Co, was identified. This property comprised the shares mentioned above, and the interest of Mark Ekelmans as a member of the BT Executive Super Fund. It was not until Mr Zafiriou's fifth affidavit, sworn 15 April 2003, that attention was directed to Mark Ekelmans' loan account with the Ekfam Trust. The scope of the initial order, extending to 'all property', is unsatisfactory.

74 Notwithstanding the contentious issue about the date of the transfer and the basis upon which it was made, I am satisfied, for the purpose of this proceeding, that a trustee in bankruptcy, if appointed, would have a good arguable case to recover those shares as an asset disposed of by Leopold Ekelmans within the relation back period. The respondents do not contend otherwise.

75 The applicant relied upon ss 120 and 121 of the Bankruptcy Act and s 172 of the Property Law Act as the basis for a freezing order over other assets of Mark Ekelmans allegedly acquired using funds borrowed from the Ekfam Trust. The basis of the claim centred around subsequent deposits made by Leopold Ekelmans from various accounts controlled by him to the Ekfam Trust and corresponding credits to the loan account of Mark Ekelmans on 23 April 2009 ($50 000), 1 July 2009 ($896 616.44), and 16 October 2009 ($75 000). The applicant would have these funds traced back into property purchased in December 2004 by Mark and Helen Ekelmans, in Dorrington Avenue, Glen Iris, for $2.8 million. The applicant contended that, taking into account the proceeds from the sale of a property, the transaction was funded through borrowings by Mark Ekelmans from the Ekfam Trust. The resulting debit balance was restored through the credit of the amounts mentioned above. On 3 September 2010, there was a further credit of $500 000 to Mark Ekelmans' loan account following a payment made to the Ekfam Trust from Leopold Ekelmans' UBS account. Further credits of $250 000 each were made on 4 October 2011 and 6 December 2011.

76 The respondents contended that the payments identified by the applicant, to meet the cost of the purchase of the property in December 2010, were made to Nopi and not to Mark. They contended that there was no basis to require repayment of those amounts by Mark Ekelmans, and therefore no basis upon which the payments could be traced into the property.

77 As with the Rosa Ekelmans loan account, the circumstances in which the payments were made to the Ekfam Trust, and came to be credited to the loan account of Mark Ekelmans, was not fully explored or explained. The true nature of the transactions remains uncertain. While the Ekfam Trust might be characterised as a banker, maintaining accounts that were credited and debited directly by payments in and out, such a characterisation is unlikely. It is more likely that the payments made by Leopold Ekelmans to the trust would be characterised as gifts or advances. Advances made by him would create a corresponding asset in the nature of a loan due to Leopold Ekelmans. If characterised as gifts, the amounts may be recovered by a trustee, if made during the relation back period, or in circumstances contemplated under s 121 of the Bankruptcy Act. If, as appears more likely, the credits to the various loan accounts were the result of trust distributions, the ability of a trustee in bankruptcy to trace payments made by Leopold Ekelmans, into the property in Dorrington Avenue, may be much more difficult. While a trustee may have a good arguable case against the trust assets, or even against Mark Ekelmans, if the payments are characterised as gifts made directly to him, I am not satisfied, on the material presently before the Court, that a trustee would have a good arguable case to pursue payments into the property purchased in 2004.

78 The respondents did not resist a continuation of the freezing order over five Aclass shares in Ekelmans & Co transferred to Mark Ekelmans on 14 November 2012. The value to be preserved under the freezing order was $1 750 000. The basis for the claim was that the shares were transferred by Leopold Ekelmans to Mark Ekelmans at face value of $1 each. But the applicant further contended that he was entitled to a freezing order over the assets of Ekelmans & Co, so as to preserve the value in the shares transferred to Mark Ekelmans. I note that the applicant no longer relied on an alleged indebtedness of Ekelmans & Co to the Ekfam Trust in the sum of $1 million.

79 Ekelmans & Co owns property in Clayton South, which is the premises from which Boomerang Tapes business is conducted. It also owns property in Castle Hill, some debtors, and shares in the Boomerang Tapes business.

80 The applicant does not contend that any of the assets of Ekelmans & Co are susceptible to a claim by a trustee in bankruptcy. The basis for the applicant's claim is through the shares and a perceived need to preserve the value of the shares.

81 The applicant's claims against Juka Ekelmans fall into three broad categories. First, 3699 Westpac shares transferred by Leopold Ekelmans to her on 27 October 2011, then valued at $103 867.92. The second category involves 6470 ANZ shares transferred by Leopold Ekelmans on 17 August 2010, valued at $185 042, and 1200 BHP shares transferred to her on 28 October 2011, then valued at $43 200. The applicant sought to maintain a freezing order over the shares to the values attributed on the basis that he (or a trustee in bankruptcy) had a real case to investigate under ss 120 or 121 of the Bankruptcy Act, or s 172 of the Property Law Act. The respondents advance the same contentions in respect of these transfers as for the offmarket transfers to Mark Ekelmans. The same considerations apply to all such transfers when determining this part of the application. I am satisfied that a trustee in bankruptcy would have a good arguable case to pursue recovery of the value of the shares transferred to Juka Ekelmans under s 120 of the Bankruptcy Act.

82 The third category of claim against Juka Ekelmans arose out of her use of a loan account with the Ekfam Trust. Like Mark, Juka Ekelmans drew down on her loan account in November 2005 to purchase a property. The property is the family home at 1 Sandown Street, Brighton. The purchase price was $1.92 million. The debit balance was partly repaid from the proceeds of the sale of a property in Port Melbourne. On 10 November 2005, the Ekfam Trust received $1 million from Suralwood. Other amounts were received by the trust from Suralwood in 2009, and from the UBS account in that and the following year. The applicant contended that some part of these payments, from or initiated by Leopold Ekelmans, were credited to Juka Ekelmans' loan account, and that a trustee might be capable of tracing the amounts so credited into the property that was purchased in 2005.

83 The amount of the claim made by the applicant against the property of Juka Ekelmans was $534 727, calculated by reference to the sum of the advances said to have been made by Leopold Ekelmans and credited to Juka Ekelmans' loan account from April to July 2009, which were then applied in satisfaction of the outstanding debt.

84 Similar observations may be made about the uncertain basis of the applicant's claim for a freezing order over the property purchased by Juka Ekelmans and her loan account, as are made above in respect of the property purchased by Mark Ekelmans in 2004 and his loan account. That is not to suggest that a trustee in bankruptcy would not have a good arguable case against the trust, under s 120 of the Bankruptcy Act, for the net balance of advances made to the trust by Leopold Ekelmans, and for gifts made during the relation back period. On the evidence presently available, I am not satisfied that a trustee would have a good arguable case to trace those funds into Juka's property in Brighton.

85 The application for a freezing order over the assets of the superannuation fund was based in part on the transfer of shares by Leopold Ekelmans to Ekelmans & Co, and then to the superannuation fund. On 10 December 2009, Leopold Ekelmans transferred 16 907 APA Group shares to Ekelmans & Co. On 19 March 2012, most of the shares owned by Ekelmans & Co were transferred to the superannuation fund. Leopold Ekelmans also transferred Orica, Telstra and Westpac shares to the Ekfam Trust, which were then transferred to the superannuation fund. The transfers from Leopold Ekelmans to the Ekfam Trust occurred between November 2009 and October 2011. The transfer from the Ekfam Trust to the superannuation fund took place on 13 December 2012. The number of shares transferred into the superannuation fund did not correspond precisely with those transferred by Leopold Ekelmans. Some of the shares have since been sold. The applicant sought a freezing order over the assets of the superannuation fund to the value of the shares transferred, including the amount of the sale proceeds of any shares sold.

86 A further parcel of shares (NAB, Santos Ltd and Woodside Petroleum Ltd) were transferred from Leopold Ekelmans to the Ekfam Trust in late 2009 and early 2010, and subsequently transferred to the superannuation fund. The applicant attributes a value to those shares of $226 939. Another parcel (ANZ, AWC, BHP, Rio and Wesfarmers) was transferred by the Ekfam Trust to the superannuation fund in November and December 2012. The value attributed to that transfer by the applicant was $267 200.

87 The applicant does not concede that consideration was given for the shares, but relied primarily upon s 172 of the Property Law Act as the basis upon which a trustee in bankruptcy might seek to avoid the transfers of such of the shares as were originally owned by Leopold Ekelmans. The applicant seemed to overlook the intervening transactions involving Ekelmans & Co and the Ekfam Trust, insisting on tracing the shares from Leopold Ekelmans into the superannuation fund.

88 The respondents contended that the APA Group shares transferred to the superannuation fund were transferred at market price and that payment was made. There was some evidence to support that contention. At the time, Ekelmans & Co was the trustee of the superannuation fund. It was replaced as trustee by BTESF on 24 June 2011.

89 The respondents further contended that, as a result of the replacement of Ekelmans & Co as trustee of the superannuation fund, all the assets of the superannuation fund held by Ekelmans & Co were transferred to the new trustee and accordingly, there was no change in the beneficial ownership in those shares. Of the shares transferred by Leopold Ekelmans to the Ekfam Trust, the respondents contended that they were sold and paid for at market price. Of the shares transferred by the Ekfam Trust to the superannuation fund, they contended that all of the shares transferred on 13 December 2012 were sold and paid for at market price. Those transactions only account for about half of the shares transferred into the fund. The respondents contended that the remaining shares were either sold on market by Nopi, or continue to be held by Nopi. In short, the respondents contended that, upon a correct analysis, full consideration was paid for the shares that were transferred into the superannuation fund.

90 I am not satisfied that a trustee in bankruptcy, if appointed, would have a good arguable case to set aside the transfer of shares from Ekelmans & Co or the Ekfam Trust to the superannuation fund under s 172 of the Property Law Act. Such a proceeding would depend upon a trustee establishing that the relevant alienation of property was made with an intent to defraud creditors.

91 The lack of precision in the formulation of the claim and the required proof of intent, lead to the conclusion that the prospects of success, based upon the material presently before the Court, are tenuous. So much so that, on the evidence presently available, I have real doubt as to whether a trustee would even commence such a proceeding against a superannuation fund.

92 The position of the Famek Trust received little attention at trial. The order made on 24 December 2012 extended to any assets held by the Famek Trust that were beneficially owned by Leopold Ekelmans. The property at 60 Mills Road, Braeside, was specifically identified.

93 The basis for the claim was unexplained until the third affidavit of Mr Zafirou, dated 8 February 2013, in which he linked funds flowing from Suralwood into the Ekfam Trust, with a subsequent loan made to the Famek Trust. The loans were made in the same financial year as the property was purchased.

94 Mark Ekelmans deposed that the property was purchased using a loan from the ANZ Bank, which had been repaid. That was verified by the bank in response to formal enquiries made on behalf of the applicant.

95 The evidence disclosed that as at 30 June 2009, the Ekfam Trust was owed $2.1 million by the Famek Trust. The timing of the transactions supports the conclusion that the loan from the Famek Trust was used to repay the bank.

96 The applicant contended that the evidence established that there was 'a case to be investigated' as to whether the loan would be recovered out of the property. In my opinion, that is not sufficient basis to support a freezing order against Ekel. If, on the other hand, the evidence disclosed that there is a real risk that the assets of the Famek Trust may be depleted so as to prejudice the ability of a trustee in bankruptcy to recover from the Ekfam Trust, an injunction may be appropriate to protect the value of the Ekel loan as an asset of the Ekfam Trust, much in the same way as an injunction may, in appropriate circumstances, be granted over the assets of Ekelmans & Co to protect the value of the five Aclass shares.

97 The applicant's claim against the Mills Road property seemed to proceed on the same footing as the claim against the properties purchased by Mark and Juka Ekelmans. The applicant seemed to assume that the coincidence of the advances and debt repayment was sufficient to establish a case to be investigated, without addressing the veracity of any proposed course of action. I am not satisfied that a trustee in bankruptcy would have a good arguable case to trace funds advanced or given by Leopold Ekelmans to the Ekfam Trust into a beneficial interest in the property in Mills Road or even the Famek Trust.

98 The case advanced by the applicant for freezing orders over the property of the third party respondents relied upon steps that might be taken by a trustee in bankruptcy, if appointed on the basis of an application to be made under s 40(1)(c) of the Bankruptcy Act. The applicant advanced evidence and argument in support of the contention that there was a case to be investigated by a trustee, who might then decide to commence recovery proceedings under s 120 or s 121 of the Bankruptcy Act, or s 172 of the Property Law Act. I have rejected the 'case to be investigated' test in favour of a 'good arguable case'. I accept that in respect of some assets held by some of the third parties, the applicant has established such a case.

99 Assets held by third parties, that might be the subject of a claim by a trustee in bankruptcy for which there exists, on the evidence presently before the court, a good arguable case, are:

(a) The interests in real estate transferred by Leopold Ekelmans to his wife in late 2012. These are not contested.

(b) The five Aclass shares in Ekelmans & Co, transferred to Mark Ekelmans. This is not contested.

(c) Assets of the Ekfam Trust to the extent of the net balance of all advances (or gifts) made by Leopold Ekelmans within the relation back period; and

(d) Shares transferred by Leopold Ekelmans to Rosa, Mark and Juka Ekelmans within the relation back period.

100 On the evidence presently before the Court, I am not satisfied that a trustee in bankruptcy would have a good arguable case in respect of the other assets, including the properties purchased by Mark and Juka Ekelmans, the Mills Road property owned by the Famek Trust, the assets of Ekelmans & Co, and the assets of the superannuation fund. The applicant's case for orders in respect of the assets of Ekelmans & Co and the Famek Trust depend upon his establishing that such orders are necessary to preserve the value in the five A-class shares and Ekfam Trust assets.

101 Mark Ekelmans is the sole beneficiary of the Famek Trust. It is a discretionary trust established in July 2004. Mark is a director of Ekel, along with his father and mother. The Mills Road property is an investment rental property. It has been on the market since 27 September 2012. Mark has, from time to time, sought a relaxation of the freezing orders to undertake repairs. He has applied for the freezing orders over the assets of Ekel to be discharged, to enable him to manage and deal with the asset, for rental or sale.

102 In my opinion the evidence falls short of establishing that any of the third parties are likely to remove assets from the jurisdiction or dispose of assets or deal with them so as to diminish their value to the prejudice of a trustee's ability to recover assets beneficially owned by Leopold Ekelmans in order to satisfy creditors of his estate. The evidence does not establish any material future risk to assets in jurisdiction, save for the possibility that Leopold Ekelmans may seek to exert his influence over family members or entities to transfer more cash out of the jurisdiction.

103 The applicant initially framed his contentions in relation to the risk by reference to the steps alleged to have been taken by Leopold Ekelmans to transfer assets to his UBS account in Switzerland; the transfers of property from Leopold Ekelmans to his wife; the fact that the Mills Road property owned by the Famek Trust was on the market; and the fact that Rosa and Mark Ekelmans had participated in the transfers of the real estate; and the departure from Australia of Leopold Ekelmans. It was on that basis that the applicant first expressed a belief, through Mr Zafirou, of a significant risk that Leopold and Rosa Ekelmans, Nopi and Ekel may deal with their assets in such a manner as to frustrate any judgment obtained by the Commissioner in any future proceeding against Leopold Ekelmans.

104 In his second affidavit, dated 11 January 2013, Mr Zafirou repeated the substance of what he had said in his December affidavit, but went further, deposing to a belief that there was a significant risk that the shares held by Mark Ekelmans (presumably Westpac, ANZ and BHP shares mentioned in the affidavit) and the assets of Ekelmans & Co, all of which were said to be potentially available to satisfy the tax debt, were at risk of being dealt with in such a manner as to frustrate any judgment obtained by the Commissioner in any future proceeding against Leopold Ekelmans. Mr Zafirou went on to depose to an ongoing risk that properties may become encumbered, or shareholdings liquidated and transferred offshore. The generality of the asserted risk was to be inferred from the events that had occurred, and in particular, by the transfers of cash by the Ekfam Trust in late November 2012 to the UBS account.

105 In his third affidavit, dated 8 February 2013, Mr Zafirou deposed to facts and matters relating to assets held by the Ekfam Trust, distributions made to Ms Pothoff, to the receipt by Nopi of funds from Suralwood by way of loan, to the property owned by the Famek Trust, and to the transfers from the UBS bank account to Nopi's ANZ account, but he did not further depose to any additional risk to assets.

106 In his fourth affidavit, dated 4 March 2013, Mr Zafirou dealt with the transfers of shares to the superannuation fund, the assets of the fund and member entitlements, and sought an extension of the freezing order to superannuation fund assets on the basis that the transfers had been made during the period immediately preceding the issue of the assessments, with the intention of placing those assets beyond the reach of the Commissioner of Taxation. Mr Zafirou deposed to a belief, based on his earlier affidavits, that in the absence of freezing orders there was a real risk that the trustee of the fund may liquidate assets with a view to placing them beyond the reach of the applicant. No new evidentiary basis for the asserted risk was advanced.

107 In his fifth affidavit, dated 15 April 2013, Mr Zafirou sought an extension of the freezing orders to cover shares transferred by Leopold Ekelmans to his children and wife. Mr Zafirou also undertook a further analysis of the loan accounts maintained by Rosa, Mark and Juka Ekelmans with the Ekfam Trust. He confirmed that Leopold Ekelmans remained out of the country and that, in December 2009, an officer of the Australian Taxation Office had been informed by Leopold Ekelmans' accountant that Leopold Ekelmans' mother, Ms Pothoff, was alive, that funds held in the ABN Amro account belonged to her, and that Leopold Ekelmans anticipated inheriting those funds upon her death. In truth, Ms Pothoff died on 2 May 2002. Accordingly, there was some evidence of deceit by or on behalf of Leopold Ekelmans.

108 The evidence established that Leopold Ekelmans was responsible for a number of transactions after becoming aware of the possibility, even likelihood, of assessment by the applicant. The most powerful evidence was the transfers of cash in late November 2012 from the Ekfam Trust to the UBS account in Zurich. Those transfers, the transfers of real estate to Rosa, and the circumstances surrounding the transfer to Mark Ekelmans of five Aclass shares in Ekelmans & Co demonstrate a propensity on the part of Leopold Ekelmans to divest himself of assets or remove assets from jurisdiction.

109 There is sufficient basis for the applicant's concern that, unless restrained, Leopold Ekelmans may attempt to further deplete assets otherwise available to satisfy a judgment. But this application is not primarily concerned with the risk that Leopold Ekelmans may prejudice or further prejudice his creditors by procuring or facilitating similar transactions. The relief now sought is against the third parties. The applicant contended that the evidence implicated Rosa Ekelmans and Mark Ekelmans at least in a plan by Leopold Ekelmans to place his assets beyond the reach of the applicant.

110 I am satisfied that Rosa and Mark Ekelmans were involved in the conveyances and the transfer of shares in Ekelmans & Co. As the beneficiaries of distributions by Nopi, resulting in amounts credited to their loan accounts, and as recipients of shares transferred by Leopold Ekelmans, Rosa, Mark and Juka Ekelmans were direct beneficiaries of some transactions that the applicant hopes a trustee in bankruptcy will seek to set aside. That said, the question remains: what is the nature and extent of any risk that Leopold, Rosa, Mark, or Juka Ekelmans will hereafter enter into, authorise, approve or procure transactions that, if implemented, may diminish the fund available to the applicant for recovery under a judgment, or to a trustee of the estate of Leopold Ekelmans?

111 In the absence of effective control or manipulation of family members by Leopold Ekelmans, the evidence does not support a real risk that the assets of Ekelmans & Co will be dealt with in a way that might undermine the value of the five Aclass shares. Save for that possibility, I am not satisfied that there is a real risk that the various properties will be sold, or if sold, that the proceeds might be placed beyond the reach of the applicant, or the value of the properties otherwise diminished, so as to prejudice the applicant's right to recover under any judgment. The respondents, including Leopold Ekelmans, are now fully acquainted with the risk to their credibility, and exposure to further draconian orders, should any step be taken that might prejudice the applicant's ability to recover under a judgment. It would seem counterintuitive for the current directors to diminish or otherwise prejudice the value of the assets of Ekelmans & Co. There is no evidence that any such steps are in contemplation. Furthermore, to freeze the assets of Ekelmans & Co may unnecessarily inhibit the business carried on by the company.

112 There is evidence of various attempts by Leopold Ekelmans, his advisers and some family members, to disguise and conceal facts from the applicant, to have transactions backdated, and to place assets beyond the reach of the judgment creditor, or a trustee in bankruptcy, or to alienate assets by transferring them to family members or entities. While those actions are now in the past, such conduct calls for a realistic regime to ensure that the Commonwealth will not be left completely unprotected from the possibility that Leopold Ekelmans may hereafter attempt to deal with assets that are part of his estate available to a trustee in bankruptcy to recover, if so advised.

113 The applicant's contention that the balance of convenience favoured the making of freezing orders was predicated on the Court accepting his case paradigm, that only required the evidence to support a 'case to be investigated' by a trustee in bankruptcy. Curiously, the applicant asserted that 'there is a significant risk that in the absence of freezing orders against the Respondents, any protective judgment obtained by the applicant against Mr Ekelmans may remain largely unsatisfied'. At the time of so asserting, the applicant had no intention of seeking any such judgment.

114 Nothing was advanced by the applicant to differentiate between risks associated with different assets, entities or parties. The risk that Leopold Ekelmans may attempt to procure the transfer of more cash out of the jurisdiction is obvious.

115 The respondents contended that there were three matters that should be taken into account on the balance of convenience. First, that there was no evidence that the third parties may dissipate their assets to prevent the recovery of money owing by Leopold Ekelmans. They contended that the third parties had been on notice since December 2012 that the applicant may seek to obtain orders against them, and had made no attempt to dispose of any assets preceding the making of orders against them. I accept that the likelihood of Mark and Juka Ekelmans dissipating assets upon which they rely to maintain their families and lifestyle is remote.

116 Secondly, the respondents contended that freezing orders over the third party assets unreasonably interfered with the ability of Rosa, Mark and Juka Ekelmans to deal with family assets in the normal way, including payment of ordinary living expenses. Further, the respondents contended that the superannuation fund ought to be permitted to buy and sell such shares as the trustee considered appropriate.

117 Thirdly, the respondents contended that notwithstanding the limited scope of the freezing orders, confined in a money sum, they had the effect of inhibiting the ability of the respondents to deal with assets far beyond that value.

118 Injunctions may be crafted to minimise the risk that Leopold Ekelmans will exercise his control to have assets removed from jurisdiction. In the absence of that risk, there is no compelling evidence of a future risk of dissipation or alienation of assets by the third party respondents. Because of the relationship between the value of the Ekfam Trust and the Famek Trust debt, and between the value of the A-class shares and the assets of Ekelman & Co, orders might be appropriate that require regular financial reporting, and notification of any proposed sale of a property or business.

119 The risk that Leopold Ekelmans may procure the conversion of assets into cash and a transfer of cash to another jurisdiction may be minimised by orders that prohibited his operation of any bank account, or the exercise of any power as an officer of any of the respondent entities, or under any trust instrument, until further order.

120 The balance of convenience will only favour the grant of freezing orders and ancillary relief when an applicant has established that such orders are required to protect the processes of the court. The evidence does not yet go that far in this case. There is no evidence that the applicant proposes to move for judgment on the assessments, or that a proceeding has been commenced and is being prosecuted for the bankruptcy of Leopold Ekelmans under s 40(1)(c) of the Bankruptcy Act as foreshadowed.

121 In the absence of such evidence, the freezing orders sought by the applicant cannot be justified on the basis that they are in aid of an existing or contemplated proceeding to recover the debt. It is not sufficient for the applicant to merely rely upon the existence of the assessments and a proposal, almost as an afterthought, announced from the bar table to, in effect, delegate recovery to a trustee in bankruptcy.

122 In the absence of evidence of some existing or contemplated process, the freezing orders now in existence are without a legitimate purpose and, more practically, they are without a relationship to a proceeding that will define the duration and inform the question of their continued utility. I do not propose to make any final orders in respect of any property until satisfied that an appropriate proceeding has been commenced, will be prosecuted with reasonable expedition, and within an acceptable timetable.

123 I propose to adjourn the further hearing to a date to be fixed, on which occasion the applicant will have an opportunity to adduce evidence on the question of any proposed proceeding to recover the amount due under the assessments. On that occasion I will also hear the parties on costs and, if satisfied with the applicants evidence, make final orders.

[1] (1998) 198 CLR 380.

[2] Cardile v LED Builders Pty Ltd (1998) 198 CLR 380, [57] (footnotes omitted).

[3] Cardile v LED Builders Pty Ltd (1998) 198 CLR 380, [53].

[4] [2009] VSC 418, [20].

[5] [2008] VSC 300.

[6] Cardile v LED Builders Pty Limited (1998) 198 CLR 380, [51]; Practice Note 3 of 2006.

[7] Jackson v Sterling Industries [1987] HCA 23; (1987) 162 CLR 612, 621, 625.

[8] Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; (1998) 195 CLR 1, [73].

[9] Hartwell Trent (Aust) Pty Ltd v Tefal Societe Anonyme [1968] VicRp 1; [1968] VR 3, 13.

[10] Glenwood Management Group Pty Ltd v Mayo [1991] VicRp 45; [1991] 2 VR 49, 49.

[11] R. 37A.02(1) Under the general law the plaintiff must establish that there is a real risk of assets being disposed of: Cardile [122].

[12] Consolidated Constructions Pty Ltd v Bellenville Pty Ltd [2002] FCA 1513.

[13] Jackson v Sterling Industries [1987] HCA 23; (1987) 162 CLR 612, 621.

[16] [2007] VSC 165 [59].

[18] [2011] FCA 405, [60]-[63].

[19] (1988) 91 FLR 70.

[20] Siskina v Distos Compania Naviera SA [1979] AC 210, 256 per Lord Diplock.

[22] (2006) FCA 814; 153 FCR 509.

[23] But see Sutherland v Brien [1999] NSWSC 155; Barwick v Goodridge [2011] NSWSC 1233.

[24] Cardile v LED Builders Pty Ltd (1998) 198 CLR 380, [57].

[26] Brigginshaw v Brigginshaw [1938] HCA 34; (1938) 60 CLR 336, 361-2.