Costagliola v Autore

order made by: WIGNEY J DATE OF ORDER: 3 February 2025

1. Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), on the ground that it is necessary to prevent prejudice to the proper administration of justice, publication and disclosure of the confidential affidavit of Alessio Autore dated 14 January 2025 and the annexures thereto be prohibited: (a) other than to the parties to this proceeding, their legal advisers and the trustee of the bankrupt estate of the first respondent and his legal advisers; and (b) with the exception of information in the affidavit and annexures thereto that is referred to in this judgment.
2. The confidential affidavit of Alessio Autore dated 14 January 2025 is a confidential document for the purposes of r 2.32 of the Federal Court Rules 2011 (Cth).
3. The applicant's application for freezing orders against the second respondent be dismissed.
4. The applicant pay the second respondent's costs of and associated with the application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

WIGNEY J 1 Mr Gennaro Autore is the founder of the Graaf Group, a family-owned group of companies that was said to be active in real estate, luxury fashion, hospitality, interiors and architecture design services and media. He is now a bankrupt who is currently residing with members of his family in Italy and France. Prior to Mr Autore's bankruptcy, the applicant, Mr Giuseppe Costagliola, obtained a judgment against him in the District Court of New South Wales for $732,619.70. Mr Costagliola filed interim applications in this Court pursuant to which he sought freezing orders against Mr Autore and two companies with which he was associated or was alleged to have controlled, Nerotua Pty Ltd and Codimark Projects Pty Ltd. Interim freezing orders were made against Mr Autore shortly before his bankruptcy. Those orders have been continued until 5 February 2025 or further order. Interim freezing orders have also been made against Codimark. Those orders remain in force until 5 February 2025. It is anticipated that there will be a hearing on that date to determine whether those orders should continue. 2 Freezing orders were not made against Nerotua when Mr Costagliola's interim application first came before the Court, though Nerotua did give a limited undertaking concerning one of its assets pending the hearing of Mr Costagliola's application. Nerotua subsequently filed evidence in opposition to the application. The application in due course came before me as duty judge. This judgment concerns only the orders sought by Mr Costagliola against Nerotua. 3 The orders that Mr Costagliola sought against Nerotua could fairly be said to be ambitious and novel. No judgment against Nerotua in favour of Mr Costagliola has been given by this Court, or any other court. Nor does Mr Costagliola contend that he personally has a good arguable case on an accrued or prospective cause of action against Nerotua in this Court, or any other Court. Rather, he contended that Mr Autore's trustee in Bankruptcy, Mr Thyge Trafford-Jones (the Trustee), had a good arguable case on a prospective cause of action against Nerotua. That cause of action was said to be for relief under s 139D and s 139E of the Bankruptcy Act 1966 (Cth). If the Trustee commenced proceedings against Nerotua under either or both of those provisions and was successful, the result would be an order by the Court that a specified part of Nerotua's estate in certain real property vest in the Trustee (in the case of relief under s 139D), or an order by the Court directing Nerotua to pay a specified amount of money to the Trustee (in the case of relief under s 139E). That estate, or that money, would become part of Mr Autore's bankrupt estate divisible amongst his creditors, including Mr Costagliola. The Trustee had not, as at the date of the hearing of Mr Costagliola's application, made any decision as to whether to commence any proceedings against Nerotua. 4 The orders sought by Mr Costagliola against Nerotua were novel in another respect. Mr Costagliola did not seek an order the effect of which was to restrain Nerotua from removing from Australia, disposing of, dealing with or diminishing the value of its assets generally. Rather, the main order he sought was an order restraining Nerotua from completing or agreeing to complete the sale of certain real property it owned unless it undertook that it would, "on the application of a trustee in bankruptcy of [Mr Autore's] estate, pay such portion of the net proceeds of sale as the Court determines it would be liable for had it retained an estate in" that real property. Mr Costagliola also sought an order restraining Nerotua from disbursing, dealing with, disposing of, or otherwise dissipating the net proceeds of sale of the real property until, relevantly, either two years had elapsed, or the Trustee had obtained an order under the Bankruptcy Act in respect of the proceeds. 5 Nerotua opposed the orders sought by Mr Costagliola. It contended that, even if the Trustee did in due course decide to bring proceedings against it pursuant to s 139D and s 139E of the Bankruptcy Act, the Trustee would not have a good arguable case in that regard. Nerotua also submitted that the balance of convenience did not tilt in favour of making the orders sought by Mr Costagliola, mainly because it wanted to sell the properties in question and repay the secured creditor, which was owed a very large sum of money. That sum of money was said to exceed the likely selling price of the properties. The orders sought by Mr Costagliola, if made would, Nerotua submitted, prejudice both it and the secured creditor. 6 For the reasons that follow, I am not persuaded that the orders sought by Mr Costagliola should be made. In my view Mr Costagliola did not demonstrate that, if the Trustee did in due course commence proceedings against Nerotua for relief under s 139D and s 139E of the Bankruptcy Act, he would have a good arguable case, at least on the present state of the evidence. Moreover, even if the Mr Costagliola had been able to demonstrate that the Trustee would have a good arguable case, in my view the balance of convenience would not favour making the orders proposed by Mr Costagliola.

CHRONOLOGY OF RELEVANT FACTS 7 The parties each adduced affidavit and documentary evidence. Mr Costagliola relied on affidavit evidence from his solicitor. Nerotua relied on affidavit evidence from Mr Alessio Autore, Mr Autore's son and one of the current directors of Nerotua. None of the deponents of the affidavits were cross-examined. The documentary evidence relied on by the parties was voluminous, at least for an interlocutory application of this nature. Following is a brief chronological distillation of what appear to be the facts relevant to Mr Costagliola's application. 8 Mr Autore has been involved in many businesses and business ventures over the years. The Graaf Group website described him as having "30 years' experience as a business owner and adviser in luxury retail, wholesale, hospitality and concept ventures". Mr Autore's LinkedIn page also stated that he worked "across the global retail and wholesale luxury fashion and commercial real estate sectors to bring pioneering retail offerings from concept to launch". Mr Autore's business ventures included property development. His LinkedIn page described his business ventures as including "Property Development and Management" and referred to the Graaf Group's previous acquisition of the retail levels in an iconic building in Sydney and a plan to open a major international luxury goods brand flagship store in that space.

Events in 2019 9 On 29 March 2019, Mr Autore entered into a Consultancy Agreement with Codimark. Codimark was described in that agreement as "a high-end construction services company which offers clients professional design, 3D rendering, fit-out and DA/CC/CDC". Ms Elizabeth Pearce was a director of Codimark at the time, having been appointed on 1 February 2019. As will be seen, Mr Autore was a director of Codimark between 26 May and 8 December 2024. Ms Pearce is currently the sole director of Codimark and owns all its issued shares. There was evidence which indicated that Ms Pearce was also Mr Autore's personal assistant. 10 The Consultancy Agreement between Codimark and Mr Autore provided that Mr Autore was to act as an "advisor to the company, offering specialized knowledge in areas such as market analysis, project feasibility, design optimization, financial modelling, and regulatory compliance" so as to "help ensure that projects are profitable, sustainable, and aligned with the company's objectives". The services that Mr Autore was to provide Codimark under the agreement included, relevantly: "[a]ct as a bridge between the property development company and external stakeholders, including architects, engineers, contractors, and government authorities"; "[e]nsure projects adhere to local zoning laws, building codes, and environmental regulations"; and "[a]ssist with obtaining necessary permits and licenses". It can be seen that, broadly speaking, the services that were to be provided by Mr Autore under the consultancy agreement related primarily to property development. 11 The Consultancy Agreement provided that Mr Autore was required to attend to the "business and affairs of the Company and Related Companies" five days per week to a maximum of 10 hours, for which he was to be paid a "Base Consultancy Fee" of $150,000 payable in 50 equal weekly instalments of $3,000. Mr Autore was also to be reimbursed "all reasonable and necessary expenses incurred by him in the performance of his duties". 12 Ms Pearce's evidence was that all work that Mr Autore did for Codimark was performed pursuant to the Consultancy Agreement. Ms Pearce produced a document which recorded the payments that Codimark made to Mr Autore pursuant to the Consultancy Agreement, including in respect of expenses, from 1 January 2020. More will be said later about this document and the pattern of credits and debits recorded in it. It suffices at this point to note that the document indicates that Mr Autore was not paid strictly in accordance with the terms of the Consultancy Agreement. Rather, the base consultancy fee was recorded as a recurring quarterly credit to the account, along with a regular credit of $9,000 for "General Expenses Incl Travel Expenses". Those amounts do not appear to have been actually paid to Mr Autore. They were just recorded as a credit to the account. The amounts actually paid to Mr Autore appeared to be recorded as debits to the account. The payments actually made to Mr Autore were for varying amounts at irregular intervals. The document records a running balance. From about mid-2022, the running balance recorded that Mr Autore was in debit - that is, that he owed Codimark money. 13 It should perhaps also be noted in this context that the question whether the Consultancy Agreement between Codimark and Mr Autore constituted a transfer of property for the purpose of Mr Autore defeating his creditors will likely be considered at the hearing in respect of the continuation of the freezing orders against Codimark. As will be seen, however, the nature and terms of the Consultancy Agreement are also of some relevance to this matter. 14 On 3 April 2019, Nerotua was incorporated. Mr Autore was Nerotua's initial director. He remained the sole director until 15 October 2021, when his son and daughter, Mr Alessio Autore and Ms Floriana Autore were appointed directors. I will refer to Mr Alessio Autore and Ms Floriana Autore by their given names to avoid confusion. There was some evidence which indicated that Alessio and Floriana currently reside in Naples, Italy. Mr Autore was initially the sole shareholder of Nerotua, though as will be seen Redco Solutions Pty Ltd became the sole shareholder on 30 April 2021. 15 Alessio's evidence was that Nerotua was a "special purpose vehicle" for holding real estate assets as trustee of a trust. It did not employ or pay staff. 16 The Nerotua Family Trust was also established by deed on 3 April 2019. Nerotua was the trustee of the trust and Mr Autore was the appointor. The named beneficiaries were Mr Autore, Alessio and Floriana, though as will be seen Mr Autore was subsequently removed as a beneficiary. 17 On 8 November 2019, Redco Solutions was incorporated. Redco Solutions' involvement or relationship with the relevant events will be explained later. Redco Solutions' initial directors were Alessio and Floriana. As will be seen, Mr Autore was a director for a brief period in 2023 and Alessio resigned as a director on 1 June 2024. Floriana remains as the sole director of Redco Solutions. The shares in Redco Solutions were (and still are) owned equally by Alessio and Floriana. 18 On 12 December 2019, Nerotua was removed as trustee of the Nerotua Family Trust and replaced by Redco Solutions.

Events in 2020 19 Several other amendments were made to the Nerotua Family Trust during 2020. Relevantly, on 21 September 2020 Mr Autore was removed as a beneficiary and, on 7 October 2020, Mr Autore was replaced by Mr Glen Whiteman as the appointor of the trust. Mr Whiteman was the chief financial officer of the Graaf Group. Mr Costagliola submitted that the evidence suggested that Mr Autore was effectively divesting himself of any interest in or association with the Nerotua Family Trust.

Events in 2021 20 On 30 April 2021, Redco Solutions acquired the issued shares in Nerotua and became (and remains) the sole shareholder. 21 On 15 March 2021, the Redco Bayswater Unit Trust (RBU Trust) was settled by deed. Nerotua was named as the trustee of the trust. The initial unit holder of the trust was (and remains) Redco Solutions as trustee for the Nerotua Family Trust. 22 On 17 March 2021, a contract for the sale and purchase of land at 20-26 Bayswater Road Potts Point, New South Wales (the Potts Point Properties) was exchanged. The purchaser was Nerotua as trustee for the RBU Trust. The evidence indicates that Mr Autore executed the contract as sole director and secretary of Nerotua. The evidence also indicates that he executed the contract as guarantor of the purchaser's obligations under the contract. The purchase price was $22 million. The completion date for the purchase was specified as being 16 December 2021. 23 There was no evidence concerning the circumstances in which Nerotua came to purchase the property, or the negotiations that preceded the contract, including who engaged in those negotiations and what they involved. That is of some significance because, as will be seen, Mr Costagliola's arguments in relation to prospective relief under s 139D of the Bankruptcy Act were premised on the contention that Mr Autore provided valuable personal services to Nerotua by negotiating and signing the contract. 24 A valuation report obtained not long after Nerotua's purchase of the Potts Point Properties described them in the following terms: The subject property comprises a 4 level (including basement) retail and commercial heritage building in the heart of the entertainment precinct of Potts Point. The basement and ground floor spaces are a mix of food and beverage premises and a gym. The upper floors contain a mixture of office/studio spaces plus the upper floors of a bar in 24-26 Bayswater Road. 25 It is also relevant to note that the properties appeared to have been leased to various business for use as commercial offices or studios and retail or food and beverage businesses. There is no suggestion that the properties were used for, or were suitable for, use as residential premises. 26 Alessio's evidence was that Nerotua intended to develop the Potts Point Properties into a high-end hotel. He also stated that on 1 February 2021, Nerotua engaged Codimark to undertake work for Nerotua as the building project manager for that project. While Alessio's evidence in that regard was not challenged and he was not cross-examined, there is an issue as to precisely when that agreement was entered into. 27 At some point on or after 31 March 2021, Codimark and Nerotua, as trustee for the RBU Trust, executed a document which recorded the terms of a Consultancy Agreement between those two companies. The document is dated 1 February and states that the agreement was entered into on 1 February 2021. The evidence indicates, however, that the document must have been created and signed after 31 March 2021. That is because the document refers to the Australian Business Number (ABN) of the RBU Trust and that ABN was not "active" until 31 March 2021. Nerotua submitted that the written agreement may have recorded the terms of an earlier oral agreement, though that is not reflected in the terms of the documented agreement. Nor did Alessio's evidence suggest that the written agreement recorded the terms of an earlier oral agreement. 28 The Consultancy Agreement between Codimark and Nerotua provided that Codimark agreed to provide services to Nerotua which included "[m]anaging and coordinating consultants such as architects, engineers, and surveyors" and "[o]verseeing the development timelines, ensuring compliance with project milestones and deadlines". In consideration of Codimark providing those services, Nerotua agreed to pay Codimark a monthly fee of $40,000 plus GST and documented expenses. 29 Ms Pearce's evidence was that the work that Codimark performed for Nerotua pursuant to the Consultancy Agreement related to Nerotua's development project in respect of the Potts Point Properties. She also stated that all the work that Mr Autore performed for Nerotua was "in his capacity as a consultant engaged by Codimark" and "on behalf of Codimark" pursuant to the Consultancy Agreement between Codimark and Nerotua. Alessio's evidence was that, although the fees payable by Nerotua to Codimark were to be paid monthly, Nerotua did not always pay Codimark on a monthly basis. Rather, he decided when and what to pay Codimark based on Nerotua's cashflow. There was no evidence to suggest that Codimark objected to that practice. 30 Ms Pearce's evidence was that Codimark issues invoices to Nerotua for the fees due and payable pursuant to the Consultancy Agreement. The first invoice, for $528,000 (12 monthly payments of $40,000 plus GST) is dated 1 February 2021. The evidence again indicated that this invoice could not in fact have been issued on 1 February 2021 because it refers to the ABN for the RBU Trust. Similar invoices were issued on 1 February 2022, 2023 and 2024. There is no evidence to suggest that those invoices were not paid. 31 On 1 May 2021, the Consultancy Agreement between Codimark and Mr Autore was varied. Mr Autore's consultancy fee was increased to $240,000 per annum plus GST. 32 As noted earlier, on 15 October 2021 Alessio and Floriana were appointed directors of Nerotua. Documents lodged with the Australian Securities & Investments Commission (ASIC) record that, at the time of their appointment, Alessio's address was in Woolloomooloo, Sydney, and Floriana's address was in Neutral Bay, Sydney. ASIC records also indicate that Mr Autore ceased to be a director of Nerotua on 15 October 2021 and was reappointed the following day. The ASIC documents record that Mr Autore's address at this time was in Woolloomooloo. 33 On 24 December 2021, Nerotua's purchase of the Potts Point Properties was completed. 34 Alessio's evidence was that Nerotua's purchase of the Potts Point Properties was funded through borrowings from J & A Potts Point Investments Pty Ltd. That loan was secured by a mortgage over the properties. 35 J & A Potts Point was a company incorporated on 8 December 2021. Its initial director was Mr Autore's brother, Mr Rosario Autore, however he was replaced as a director on 23 February 2021 by Mr Michael Furlong. Alessio's evidence was that his understanding was that the funds advanced to Nerotua through J & A Potts Point came from an overseas investor contact of Rosario and that he, Alessio, was responsible for managing the relationship with J & A Potts Point. Documentary evidence tendered by Mr Costagliola suggested that there were several changes to the debt and security arrangements, particularly in 2023, though the relevance of those changes to the issues in this proceeding was not explored in the parties' submissions. As will be seen, the evidence indicated that the current secured creditor is J & A Potts Point.

Events in 2022 36 In about September 2022, Nerotua lodged a development application in respect of the Potts Point Properties with the City of Sydney. Documents lodged with or obtained for the purpose of the development application indicate that Mr Autore performed work for or on behalf of Nerotua in respect of the development application. The available inference from the evidence of Alessio, Ms Pearce and the Consultancy Agreements between Codimark and Mr Autore, and Codimark and Nerotua, is that Mr Autore performed that work on behalf of Codimark. 37 An online article published by Urban.com.au on 13 October 2022 reported that the "Graaf retail and development dynasty", which was said to be "led by Graaf Founder, Managing Director, and Family Patriarch Genaro", was "set to redevelop one of Potts Point's most iconic buildings into four luxury terraces".

Events in 2023 38 Nothing of particular relevance occurred during 2023, save for some changes in the directorships of some of the relevant companies. 39 Mr Autore was appointed a director of Redco Solutions on 10 June 2023. That appointment was short lived. He ceased to be a director on 29 August 2023. 40 Mr Autore ceased to be a director of Nerotua on 29 August 2023. 41 Mr Costagliola contended that, despite ceasing to be a director of Nerotua on 29 August 2023, Mr Autore continued to manage and control the affairs of Nerotua after that time. Indeed, he contended that Mr Autore continues to control Nerotua. That contention was primarily based on documents which indicated that Mr Autore continued to perform work in respect of the proposed development of the Potts Point Properties after his resignation as a director. The available inference, however, is that Mr Autore was performing that work on behalf of Codimark pursuant to the Consultancy Agreement. 42 Perhaps more significantly, Alessio's unchallenged evidence was that, while Mr Autore continued to be involved in the proposed development after his resignation as a director of Nerotua, all of "the legal and financial decisions relating to Nerotua" were ultimately made by him, Alessio, either alone or in conjunction with Floriana. Alessio's evidence was that he had the "responsibility of managing Nerotua's financial relationships" and that Floriana "also has responsibilities in relation to marketing". The overall effect of Alessio's evidence was that he and Floriana controlled Nerotua and that Mr Autore did not. Mr Costagliola submitted, in effect, that Alessio's evidence should not be accepted because both Alessio and Floriana reside in Naples and therefore could not be involved in the management of Nerotua. I reject that submission. Nerotua did not conduct any day-to-day business and I can see no reason why it could not be managed by Alessio and Floriana from Italy. There was no evidence to suggest that Alessio and Floriana were beholden to Mr Autore and no other reason to doubt or reject Alessio's evidence. I should also note, in this context, that Redco Solutions is the sole shareholder of Nerotua and that Floriana is currently the sole director of Redco Solutions. 43 Having regard to the current state of the evidence, I am not satisfied that Mr Costagliola has a good arguable case that Mr Autore continued to control Nerotua after 29 August 2023. As will be seen, that is of some considerable significance to the question of whether the Trustee would have a good arguable case against Nerotua under either or both of s 139D and s 139E of the Bankruptcy Act. 44 On 15 November 2023, Mr Autore was appointed a director of J & A Potts Point in lieu of Mr Furlong. Mr Furlong was reappointed as a director on 27 December 2023. Mr Autore's appointment as a director of J & A Potts Point was also relatively short-lived. He ceased being a director on 19 February 2024.

Events in 2024 45 On 4 March 2024, J & A Potts Point, as lender, and Nerotua and Redco, as borrowers, entered into a finance facility and security deed in respect of the financing and security arrangements for the Potts Point Properties. Alessio's evidence was that the facility rolled up three separate facilities that J & A Potts Point had advanced to Nerotua. The facilities and security deed were executed by Alessio and Floriana on behalf of Nerotua. The loan is secured by a mortgage over the Potts Point Properties 46 On 14 May 2024, Neilson DCJ handed down a judgment in proceedings that Mr Costagliola and a company with which he was associated had commenced against Mr Autore. It is unnecessary to detail the nature of the dispute between Mr Costagliola and Mr Autore other than that it involved a restaurant that the two proposed to open in Sydney. His Honour gave judgment in favour of Mr Costagliola for $732,619.70 and ordered Mr Autore to pay Mr Costagliola's costs. Neilson DCJ also found in favour of the company associated with Mr Costagliola. 47 On 26 May 2024, Mr Autore was appointed a director of Codimark. 48 On 1 June 2024, Alessio ceased to be a director of Redco Solutions. 49 On 29 August 2024, a bankruptcy notice was issued against Mr Autore in respect of his indebtedness to Mr Costagliola arising from the District Court judgment. The total debt specified in the bankruptcy notice was $754,373.10. 50 On 23 September 2024, the City of Sydney approved Nerotua's development application in respect of the Potts Point Properties. 51 On 4 November 2024, on Mr Costagliola's application, a Registrar of this Court made orders for substituted service of the bankruptcy notice on Mr Autore. There is some suggestion in the evidence that by this time Mr Autore was residing in France. 52 On 8 November 2024, the Australian Financial Review (AFR) reported that the Potts Point Properties - said to be "four 1880s-built grand terraces" had "hit the market with a price guide of $36 million". The article referred to the "recently approved DA" which encompassed "four high-end restaurants at ground level and four luxury residences atop each terrace". 53 On 11 November 2024, an unrelated creditor presented a creditor's petition against Mr Autore in the Federal Circuit and Family Court of Australia. 54 On 8 December 2024, Mr Autore ceased to be a director of Codimark. 55 On 17 December 2024, Mr Autore was declared bankrupt upon the acceptance of his debtor's petition by the Australian Financial Security Authority (AFSA) and Mr Trafford-Jones was appointed as trustee of Mr Autore's bankrupt estate. 56 The Trustee did not give evidence in support of Mr Costagliola's application. Mr Costagliola did, however, tender a report to creditors prepared by the Trustee and dated 17 January 2025. The report stated that Mr Autore had filed a statement of affairs with AFSA. The statement of affairs stated that Mr Autore had no assets and liabilities of $13,524,254. Mr Autore's major creditors included Mr Costagliola, Ms Pearce, Floriana, Alessio and Codimark. The report states that Mr Autore current address was 13 Centre Street, Blakehurst NSW, but that he was currently residing with family in both Italy and France. 57 It is clear from the Trustee's report that he is aware of these proceedings. The report states: I have met with the solicitors for each of the parties and have been provided with the relevant documentation. The application is listed for further hearing on Monday 20 January 2025. It is likely that following the hearing, I will seek legal advice in respect of the same. My investigations into this matter are ongoing.

Other relevant facts 58 Alessio's evidence was that as at 30 November 2024, Nerotua owed J & A Potts Point $31,635,596.58. That debt is no doubt considerably larger by now given that, not surprisingly, the finance facility provides for the payment of interest on the debt. The debt is secured by, among other things, a mortgage over the Potts Point Properties. 59 Alessio also gave evidence that he and Floriana have decided that Nerotua should sell the Potts Point Properties because the project to develop the properties had not been successful. He stated that "[a]lthough the development application was successful, undertaking that project will cost too much money and as such it is not commercially viable to try to continue the project". His unchallenged evidence was that "Nerotua is projected to incur substantial losses once the Properties are sold". 60 Alessio's evidence included some documentary evidence concerning the value of the Potts Point Properties. An interim non-publication order has been made in respect of that evidence. As briefly discussed later, I propose to make a final non-publication order in respect of the valuation evidence. It is, in those circumstances, not appropriate to refer to that evidence in this judgment. It suffices for present purposes to note that the evidence comprised a valuation report in respect of the Potts Point Properties, albeit one prepared before the grant of the development application, and a communication between Alessio and the real estate agent who has been retained to sell the property. That evidence provides some support for Alessio's evidence that Nerotua is likely to incur a loss if and when the properties are sold. There is, in short, reason to believe that the properties might ultimately be sold for less than the secured debt owed to J & A Potts Point. As discussed later, I do not accept that the media report concerning the "price guide" in respect of the Potts Point Properties provides any cogent or reliable evidence of the value or likely sale price of the properties.

FREEZING ORDERS - RELEVANT PRINCIPLES 61 This Court, as a superior court of record, has an inherent power to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction: Jackson v Stirling Industries Ltd (1987) 162 CLR 612 at 623, 638; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 at 26. That power is comprehended by the express grant in s 23 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) of the "power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate". 62 The Court's power to prevent the abuse or frustration of its process is reflected in and supplemented by the powers conferred by Div 7.4 of the Federal Court Rules 2011 (Cth), which powers extend to the making of orders restraining a respondent from removing, disposing of, dealing with, or diminishing the value of any assets. Rules 7.31 to 7.36 of the Rules, which are within Div 7.4, provide as follows: 7.31 Definitions for Division 7.4 In this Division: "ancillary order" has the meaning given by rule 7.33. "another court" means a court outside Australia or a court in Australia other than the Court. "applicant" means a person who applies for a freezing order or an ancillary order. "freezing order" has the meaning given by rule 7.32. "judgment" includes an order. "respondent" means a person against whom a freezing order or an ancillary order is sought or made. 7.32 Freezing order (1) The Court may make an order (a freezing order ), with or without notice to a 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. (2) A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets. Note: Without notice is defined in the Dictionary. 7.33 Ancillary order (1) The Court may make an order (an ancillary order) ancillary to a freezing order or prospective freezing order as the Court considers appropriate. (2) Without limiting the generality of subrule (1), an ancillary order may be made for either or both of the following purposes: (a) eliciting information relating to assets relevant to the freezing order or prospective freezing order; (b) determining whether the freezing order should be made. 7.34 Order may be against person not a party to proceeding The Court may make a freezing order or an ancillary order against a person even if the person is not a party in a proceeding in which substantive relief is sought against the respondent. 7.35 Order against judgment debtor or prospective judgment debtor or third party (1) This rule applies if: (a) judgment has been given in favour of an applicant by: (i) the Court; or (ii) for a judgment to which subrule (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: (i) the Court; or (ii) for a cause of action to which subrule (3) applies--another court. (2) This subrule applies to a judgment if there is a sufficient prospect that the judgment will be registered in or enforced by the Court. (3) This subrule 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 will be wholly or partly unsatisfied because any of the following might occur: (a) the judgment debtor, prospective judgment debtor or another person absconds; (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 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, 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 ancillary order if the Court considers it is in the interests of justice to do so. 7.36 Jurisdiction Nothing in this Division diminishes the inherent, implied or statutory jurisdiction of the Court to make a freezing order or ancillary order. 63 The power conferred by r 7.32(1) of the Rules is expressly subject to two limitations. First, the power is limited to making such orders as the Court may determine to be appropriate to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction. What that means is that an order under r 7.32(1) is directed at dispositions or dealings which are intended to frustrate, or have the necessary effect of frustrating, the applicant in its attempt to seek through the court a remedy for the obligation to which he claims the respondent is subject: Deputy Commissioner of Taxation v Huang (2021) 273 CLR 429; [2021] HCA 43 at [17]. Second, an order under r 7.32(1) must serve the specified purpose by "seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied": Huang at [18]. 64 Rule 7.32 is not subject to r 7.35 of the Rules - rather r 7.35 extends the scope of r 7.32, including by identifying reasons why the Court may be satisfied, having regard to all the circumstances, that of danger of the kind specified in r 7.32 exists: Huang at [21]. Both r 7.35(6) and r 7.36 explicitly contemplate that a freezing order may be made even though the applicant is unable to satisfy r 7.35: Huang at [22]. 65 It is important to emphasise that the purpose of a freezing order is to prevent the frustration or inhibition of the Court's process, not to create a security for the applicant or to require an applicant to provide security as a condition of being allowed to defend the proceeding: Jackson v Stirling at 625. 66 An applicant must establish by evidence that there is a real danger that, unless restrained, the respondent will dispose of, deal with, or diminish the value of its assets and thereby frustrate or inhibit the Court's processes - mere assertions will not be enough: Frigo v Culhaci [1998] NSWCA 88 at 8. The risk of dissipation does not, however need to be demonstrated on the balance of probabilities; nor is it necessary to that there be evidence in respect of the respondent's intentions: Deputy Commissioner of Taxation v Chemical Trustee Ltd (No 4) [2012] FCA 1064 at [23]-[24]. 67 The power to make a freezing order is discretionary and "requires a high degree of caution on the part of the court" given that it is "bound to have a significant impact on the property of the person against whom it is made" and "an order lightly or wrongly granted may have a capacity to impair or restrict commerce": Cardile at [50]. 68 Discretionary considerations that might apply or be relevant include: whether the applicant has proceeded diligently and expeditiously; whether proceedings, including against a third party, are available but have not been taken; and whether the grant of relief should be conditioned upon an undertaking by the applicant to commence proceedings and ensure so far as possible that the proceedings are expedited, noting that it "is difficult to conceive of cases where such an undertaking would not be required": Cardile at [53]. 69 The Court should generally grant the minimum relief necessary to do justice between the parties and specify the circumstances in which the freezing orders will cease to operate: Cardile at [70].

JURISDICTION to make the order sought by the applicant 70 An issue arose as to the Court's jurisdiction to make the orders that Mr Costagliola sought against Nerotua. The issue arose because Nerotua was not a judgment debtor and it was not suggested that Mr Costagliola had a cause of action, or prospective cause of action against Nerotua. Rather, the prospective cause of action postulated by Mr Costagliola was a cause of action only available to the Trustee. As was noted at the outset, that cause of action was said to be a cause of action against Nerotua that was available to the Trustee under either or both of s 139D and s 139E of the Bankruptcy Act. Mr Costagliola contended that a freezing order could nonetheless be made, on his application, pursuant to r 7.35(5)(b) of the Rules. 71 There are difficulties in applying r 7.35(5)(b) of the Rules to the circumstances of this case. Rule 7.35(5) only applies in the circumstances identified in r 7.35(1). Rule 7.35(1)(a)(i) does not apply because judgment has not been given in favour of Mr Costagliola by the Court. Nor does r 7.35(1)(a)(ii) apply because, while a judgment has been given in favour of Mr Costagliola by another court (the District Court), it was not suggested that that judgment could be directly enforced by the Court. 72 As for r 7.35(1)(b), r 7.35(1)(b)(i) does not appear to apply because, while Mr Costagliola contended that the Trustee had a good arguable case on an accrued or prospective cause of action in the Court - the cause of action under s 139D or s 139E of the Bankruptcy Act - that was not a cause of action available to him, as the applicant for the freezing order. Rule 7.31 defines "applicant" as meaning a person who applies for a freezing order or an ancillary order. The Trustee has not applied for a freezing order. Mr Costagliola submitted that, if the Trustee did not commence proceedings against Nerotua, he could apply for an order compelling the Trustee to do so, or apply for an order appointing a special purpose trustee to commence those proceedings. That relief was said to be available to him pursuant to ss 90-15 and 90-20 of the Insolvency Practice Schedule (Bankruptcy) (being schedule 2 to the Bankruptcy Act). Even if that be so, that is a prospective cause of action that Mr Costagliola may have available against the Trustee, not Nerotua. Mr Costagliola also did not advance any submissions which addressed the requirement that he had a good arguable case in respect of that prospective cause of action against the Trustee. Mr Costagliola also did not contend that the circumstances of his case, however put, fell within r 7.35(1)(b)(ii) of the Rules. 73 Even if Mr Costagliola was able to proceed through the gateway provided by r 7.35(1) of the Rules, there are difficulties in applying r 7.35(5)(b) of the Rules to the circumstances of his case. He submitted that his circumstances fell within r 7.35(5)(b) because there was a "process in the Court [that] is or may be available to" him - that process being the application to the Court, referred to earlier, for orders compelling the Trustee to commence proceedings against Nerotua, or appointing a special purpose trustee to do so. The difficulty, however, is that even accepting that Mr Costagliola may have such a process available to him, r 7.35(5)(b) requires that the process available to the applicant be one pursuant to which a "third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment". The process said to be available to Nerotua is not such a process. It is at least one step removed from the process by which Nerotua may ultimately be required to disgorge assets or pay money to the Trustee. 74 Mr Costagliola did not contend that the circumstances of his application fell within r 7.35(4) of the Rules, though I should for completeness briefly consider whether they do. On one view, r 7.35(4) could possibly be said to apply to Mr Costagliola's case if Nerotua is said to be the "prospective judgment debtor" for the purposes of that rule. The difficulty, however, is that would require r 7.35(4) to be read in such a way that it would permit someone other than the prospective judgment creditor to apply for a freezing order against the prospective judgment debtor. If Nerotua is the prospective judgment debtor, the prospective judgment creditor is the Trustee, not Mr Costagliola. 75 While I entertain some doubts as to whether the circumstances of Mr Costagliola's application falls within r 7.35(1), (4) or (5), I do not consider it necessary to express a concluded view in that regard. That is because, as has already been noted, r 7.32(1) is not to be read as being subject to r 7.35, and the Court in any event has the power to make a freezing order either pursuant to r 7.35(6), if it "considers it in the interests of justice to do so", or pursuant to its implied or statutory jurisdiction, including under s 23 of the FCA Act, to make a freezing order: see r 7.36 of the Rules. 76 There is authority which supports the proposition that the Court has jurisdiction to make a freezing order against Nerotua, on the application of Mr Costagliola, pursuant to r 7.32 and s 23 of the FCA Act, even if his case does not strictly fall within the terms of r 7.35 of the Rules. In Cardile, the plurality stated (at [57]: 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. (Emphasis added; footnote omitted) 77 It can be seen from this passage that the plurality in Cardile envisaged that a freezing order may be made on the application of a judgment creditor where the available process that may result the disgorgement of property or contribution of funds by a third party is a process that only arises following, or as a consequence of, the appointment of a liquidator or trustee in bankruptcy. That appears to be how that passage from Cardile was interpreted in In the matter of HPack Investments Pty Ltd [2020] NSWSC 1638. In that case, Black J made a freezing order pursuant to rules relevantly similar to those in Div 7.4 of the Rules, on the application of the Deputy Commissioner of Taxation, against two directors of a company which owed a significant tax debt. The Deputy Commissioner had applied to wind up the company and had sought freezing orders against the directors on the basis that, once appointed, a liquidator would have causes of action against the directors, including actions to recover from them allegedly voidable (unreasonable director-related) transactions. Black J's reasons included (at [47]-[48]): I recognise that this application differs from many applications under UCPR r 25.11, because the existing proceedings brought by the DCT are winding up proceedings, which cannot themselves lead to a judgment in the DCT's favour; and the Court's process and the prospective judgment that are sought to be protected are proceedings which could only be brought by a liquidator appointed to HPack if the winding up order is made. There are therefore contingencies in whether such a judgment will be made beyond those which ordinarily exist, including whether the winding up order is made; whether a liquidator appointed to HPack chooses to bring such proceedings; and whether they have sufficient prospects of success. Nonetheless, it seems to me that the Court does have the requisite jurisdiction to make, on the DCT's application, a freezing order that will preserve the claims that may be brought by a liquidator appointed to HPack on the DCT's application. That order is, in my view, directed to preventing the frustration or inhibition of the Court's winding up process by seeking to meet a danger that a prospective judgment that could be obtained by a liquidator consequent on that process will be wholly or partly unsatisfied, for the purposes of UCPR r 25.11. That jurisdiction is analogous to, although not identical to, the extended jurisdiction contemplated by the observations of the plurality of the High Court in Cardile v LED Builders Pty Ltd above at [57]… 78 Justice Black went on to observe (at [49]) that the jurisdiction to make a freezing order was not "excluded because the relevant judgment requires a two-step process, involving first the winding up of [the company] and then the liquidator's claim". His Honour approached the Deputy Commissioner's application for a freezing order on the basis that it was necessary for the Deputy Commissioner to establish both that there was a good arguable case for the winding up of the company, and that the liquidator would have a good arguable case for recoveries against the directors. 79 This case is relevantly analogous to HPack Investments. The only material difference is that in this case a trustee in bankruptcy has already been appointed. The fact that the Trustee has not yet commenced proceedings against Nerotua, or decided or undertaken to do so, is a relevant discretionary consideration. That issue is addressed later. I am, however, persuaded that Mr Costagliola, who is in a relevantly similar position to the Deputy Commissioner's position in HPack Investments, has standing to apply for freezing orders against Nerotua and that the Court has jurisdiction and the power to make those orders.

A GOOD ARGUABLE CASE AGAINST NEROTUA? 80 As has already been noted, Mr Costagliola argued that the Trustee has a good arguable case against Nerotua for relief pursuant to either or both of s 139D and s 139E of the Bankruptcy Act. 81 Sections 139D and 139E are in Pt VI Div 4A of the Bankruptcy Act, which is entitled "Orders in relation to property of an entity controlled by bankrupt or from which bankrupt derived a benefit". 82 Section 139A provides that the "trustee of a bankrupt's estate may, at any time within 6 years after the date of the bankruptcy, apply to the Court for an order under this Division in relation to an entity (in this Division called the respondent entity)". 83 Section 139D provides as follows: 139D Order relating to property of entity other than a natural person (1) Where, on an application under section 139A for an order in relation to a respondent entity other than a natural person, the Court is satisfied that: (a) the bankrupt supplied personal services to, or for or on behalf of, the respondent entity at a time or times, during the examinable period and before the end of the bankruptcy, when the bankrupt controlled the entity in relation to the supply of those services; (b) either: (i) the bankrupt received for those services no remuneration in money or other property; or (ii) the remuneration in money or other property that the bankrupt received for those services was substantially less in amount or value than a person supplying those services in similar circumstances might reasonably be expected to have received if the person had dealt with the entity at arm's length in relation to the supply of those services; (c) during the examinable period, the entity acquired an estate in particular property as a direct or indirect result of, or of matters including, the supply by the bankrupt of those services; (d) the bankrupt used, or derived (whether directly or indirectly) a benefit from, the property at a time or times during the examinable period when the bankrupt controlled the entity in relation to the property; and (e) the entity still has an estate in the property; subsections (2) and (3) have effect, whether or not the bankrupt has ever had an estate in the property. (2) The Court may, by order, vest in the applicant: (a) the entity's estate in the whole, or in a specified part, of the property; or (b) a specified estate in the whole, or in a specified part, of the property, being an estate that could, by virtue of the entity's estate in the property, be so vested by or on behalf of the entity. (3) The Court may make an order directing: (a) the execution of an instrument; (b) the production of documents of title; or (c) the doing of any other act or thing; in order to give effect to an order under this section made on the application. 84 The "examinable period" is defined in s 139CA in the following terms: 139CA Definition of examinable period (1) For the purposes of this Division, the examinable period is: (a) in the case of an application for an order in relation to a related entity of the bankrupt - the period beginning: (i) if, at a time or times during the period of 1 year beginning 5 years before the commencement of the bankruptcy, the bankrupt became insolvent - at that time, or at the first of those times, as the case may be; or (ii) in any other case - 4 years before the commencement of the bankruptcy; and ending on the day on which the application is made; or (b) in any other case - the period beginning: (i) if, at a time or times during the period of 3 years beginning 5 years before the commencement of the bankruptcy, the bankrupt became insolvent - at that time, or at the first of those times, as the case may be; or (ii) in any other case - 2 years before the commencement of the bankruptcy; and ending on the day on which the application is made. 85 The expression "personal services" in relation to a bankrupt is defined in s 5 of the Bankruptcy Act as meaning "services of a physical, intellectual or other kind supplied by the bankrupt himself or herself: (a) whether or not in a capacity as employee; and (b) whether or not the supply of the services by the bankrupt discharged the obligations of an entity to supply services." The expression "controlled the entity in relation to the property" is relevantly explained in s 5F of the Bankruptcy Act, which provides as follows: 5F Controlling an entity in relation to a matter (1) Subject to this section, a person shall be taken, for the purposes of this Act, to control an entity at a particular time in relation to a matter if, and only if: (a) no act, omission or decision inconsistent with the person's directions, instructions or wishes was; and (b) having regard to all the circumstances, it may reasonably be expected that no such act, omission or decision would have been; done or made at that time, in relation to the matter, by or on behalf of the entity. (2) A person shall not be taken to control an entity at a particular time in relation to a matter merely because: (a) no act, omission or decision inconsistent with advice given by the person in the proper performance of the functions attaching to his or her professional capacity, or to his or her business relationship with the entity, was; and (b) having regard to all the circumstances, it may reasonably be expected that no such act, omission or decision would have been; done or made at that time, in relation to that matter, by or on behalf of the entity. (3) A reference in subsection (1) or (2), in relation to a matter, to an act, omission or decision is a reference to an act, omission or decision that, having regard to the nature of that matter, is of substantial importance. (4) A person shall not be taken to control a company at a particular time in relation to a matter if the company is not a private company at that time. 86 Section 139E of the Bankruptcy Act provides as follows: 139E Order relating to net worth of entity other than a natural person (1) Where, on an application under section 139A for an order in relation to a respondent entity other than a natural person, the Court is satisfied that: (a) the bankrupt supplied personal services to, or for or on behalf of, the respondent entity at a time or times, during the examinable period and before the end of the bankruptcy, when the bankrupt controlled the entity in relation to the supply of those services; (b) either: (i) the bankrupt received for those services no remuneration in money or other property; or (ii) the remuneration in money or other property that the bankrupt received for those services was substantially less in amount or value than a person supplying those services in similar circumstances might reasonably be expected to have received if the person had dealt with the entity at arm's length in relation to the supply of those services; and (c) the entity's net worth at a particular time during the examinable period exceeded by a substantial amount what might reasonably be expected to have been the entity's net worth at the last - mentioned time if those services had not been supplied; subsection (2) has effect. (2) The Court may by order direct: (a) if the entity is a partnership--a partner or partners in the partnership; or (b) in any other case--the entity; to pay to the applicant a specified amount not exceeding the amount referred to in paragraph (1)(c). 87 The expression "net worth" in relation to an entity, and in relation to a time, is relevantly defined in s 5 of the Bankruptcy Act to mean: (a) … (b) if the entity that is not a trust and the total value of the entity's assets as at that time exceeds the total of the amounts of the entity's liabilities as at that time - the amount of the excess; or (b) in any other case - a nil amount. 88 The provisions in Div 4A of the Bankruptcy Act are complex and by no means easy to interpret or apply. There is also precious little authority in relation to the operation of the provisions, perhaps because, due to the complexity of the provisions, there have been very few cases where trustees in bankruptcy have sought to employ them. It is perhaps useful in those circumstances to consider what was said in the explanatory memorandum to the Bill which inserted Div 4A into the Bankruptcy Act - the Bankruptcy Amendment Bill 1987 (Cth) (the EM). The EM may provide some insight in respect of the evil or issue to which the provisions of Div 4A were intended to be directed, which in turn may provide some relevant contextual assistance in construing the text of those provisions. 89 Paragraph 305 of the EM provides the following general explanation of the intended operation of Div 4A: The proposed Division 4A will permit to be treated as part of the bankrupt estate property, to the acquisition of which by a third party the bankrupt has materially contributed, directly or indirectly, but which is in the hands of a company, partnership, trust, or another person with whom the bankrupt is associated. The proposed Division will address the problem posed by persons who become bankrupt (and who will eventually obtain a release from their debts) whilst enjoying all the trappings of wealth. Upon examination it may be found that assets enjoyed by the bankrupt have been disguised as assets of a trust, company or the like. Frequently the bankrupt will have extensive assets at his or her disposal, notwithstanding the fact that he or she is a bankrupt. Commonly, the property will be made available to the bankrupt by a company, a trust, a partnership or some other person, which, although having an independent existence in law, is in fact the alter-ego of the bankrupt. The entity acts in effect at the dictation of the bankrupt. The asset position or wealth of the entity has come about because of the physical or mental exertion of the bankrupt. The bankrupt may or may not at any time have owned the property which the entity owns. The bankrupt may or may not have some formal legal relationship with the entity as an employee, a director, a shareholder, a partner, a beneficiary under a trust, or in some other capacity. 90 Paragraphs [309] and [310] of the EM illustrate the problem or issue to which the division is directed by reference to what is said to be a "common manifestation" of the problem: A common manifestation of this is a person who provides personal services of one kind or another. The person will establish a private company to carry on the business which will then employ the person at a nominal, or less than market, income. A discretionary family trust will be established and the profits derived by the company (generated by the personal services of the person) will be diverted to the trust which will then acquire assets which are made available to the person. Upon the person becoming bankrupt he or she will appear to be a wage earner, to be insolvent as a result of a serious deficiency between assets and liabilities, whilst still enjoying the trappings of wealth through having access to the property of the trust. 91 Further reference will be made to the EM when considering the elements of s 139D and s 139E that the Trustee would, if he commenced proceedings against Nerotua, need to establish to obtain any relief under those provisions.

A good arguable case under 139D of the Bankruptcy Act? 92 It can be seen at a general level that there are five elements that the Trustee would need to prove before obtaining any relief against Nerotua pursuant to s 139D of the Bankruptcy Act. 93 The first element is that Mr Autore supplied personal services to, or for or on behalf of, Neotura at a time or times, during the examinable period and before the end of the bankruptcy, when he controlled Nerotua in relation to the supply of those services: s 139D(1)(a). 94 The second is that Mr Autore either received no remuneration in money or other property for those services, or the remuneration he received for those services was substantially less in amount or value than a person supplying those services in similar circumstances might reasonably be expected to have received if the person had dealt with the Nerotua at arm's length in relation to the supply of those services: s 139D(1)(b). 95 The third element is that, during the examinable period, Nerotua acquired an estate in particular property as a direct or indirect result of, or of matters including, the supply by Mr Autore of those services: s 139D(1)(c). 96 The fourth element is that Mr Autore used, or derived (whether directly or indirectly) a benefit from, the property at a time or times during the examinable period when he controlled Nerotua in relation to the property: s 139D(1)(d). 97 The fifth element is that Nerotua still has an estate in the property: s 139D(1)(e). 98 I will address each of those elements separately. The issue is whether Mr Costagliola has established that the Trustee would, if he commenced proceedings against Nerotua, have a good arguable case in respect of each of the elements. Before addressing the elements, however, it is necessary to determine the relevant "examinable period".

The examinable period 99 The relevant examinable period, having regard to the facts and circumstances of this case, would appear to be the period prescribed in s 139CA(1)(a)(ii), namely the period beginning four years before the commencement of Mr Autore's bankruptcy. Section 115 of the Bankruptcy Act relevantly specifies when a bankruptcy is taken to have commenced. Where, as here, a person became bankrupt as a result of the acceptance of a debtor's petition, and the debtor's petition was presented when at least one creditor's petition was pending against the petitioning debtor, the bankruptcy is taken to have commenced at the time of the commission of the earliest date of bankruptcy on which the creditor's petition was based. 100 There is evidence that, in Mr Autore's case, a creditor's petition was pending against him when his debtor's petition was presented or accepted. That petition was presented on 11 November 2024. While it is unclear when the earliest act of bankruptcy upon which that creditor's petition was based occurred, it must have been before November 2024. It follows that the examinable period in Mr Autore's case must begin at some point before November 2020 (being four years before November 2024).

Did Mr Autore provide relevant personal services to Nerotua during the examinable period? 101 Mr Costagliola alleged that the relevant "personal services" that were provided to Nerotua by Mr Autore comprised him negotiating the purchase of the Potts Point Properties and signing the purchase contract on behalf of Nerotua. 102 There was no dispute that Mr Autore signed the purchase contract on behalf of Nerotua. He did so in his capacity as the then sole director and secretary of Nerotua. I find it difficult to accept, however, that merely executing a contract on behalf of, and as a director of, a corporation, could necessarily be said to involve the provision of personal services to that company. It is, however, unnecessary to express a concluded view in that regard because I am nevertheless satisfied that it is at least reasonably arguable that it can be inferred from the evidence that Mr Autore was likely to have had at least some involvement in the negotiation of the purchase of the properties. It is accordingly reasonably arguable that, in negotiating the purchase of the properties by Nerotua, Mr Autore provided personal services to Nerotua. 103 Mr Autore was the sole director of Nerotua at the time of the purchase and the evidence concerning his experience and role with the Graaf Group and Codimark, including in respect of pursuing development opportunities, would tend to suggest that he played some role in the purchase. While the precise nature of the role played by Mr Autore and the scope and scale of what he did is unclear from the evidence, I am nevertheless satisfied that it is at least arguable that Mr Autore provided some personal services to Nerotua in respect of the negotiation of the sale, particularly given the broad definition of "personal services" in s 5 of the Bankruptcy Act. I would, however, infer and conclude from the evidence as a whole, that such personal services that were provided by Mr Autore to Nerotua were provided by Mr Autore in his capacity as a consultant for Codimark. In other words, such services as Mr Autore may have provided in respect of the negotiation of the contract were provided to Nerotua by Mr Autore on behalf of Codimark. That is of some significance in relation to the second element.

Remuneration in respect of the provision of the relevant personal services by Mr Autore to Nerotua 104 Mr Costagliola contended that Mr Autore received no remuneration in respect of the personal services he provided in negotiating the purchase of the Potts Point Properties and signing the purchase contract. He seemingly relied, in support of that contention, on Mr Autore's evidence that he had "never entered into any agreements with Nerotua", as well as Alessio's evidence that: Nerotua has "never paid amounts directly to [Mr Autore] in relation to work he may have performed relating to Nerotua's developments" (emphasis added); Nerotua "does not have any agreement with any existing or prior director, including [Mr Autore], to pay director fees to directors"; and there is "no agreement or circumstance giving rise to an obligation on Nerotua to pay money to [Mr Autore]". 105 I am not persuaded that there is a good arguable case, based on that evidence, that Mr Autore was not paid for such personal services he may have provided in respect of the negotiation of the purchase of the Potts Point Property and the execution of the contract (assuming, for the sake of argument, that execution of a contract by a director on behalf of a company could be said to be a personal service). The evidence as a whole, including the unchallenged evidence of Alessio and Ms Pearce, indicated that, while Mr Autore may not have been paid directly by Nerotua in respect of the personal services he performed in respect of the project involving the Potts Point Properties, he was nevertheless remunerated for those personal services by Codimark pursuant to the Consultancy Agreement between him and Codimark. It is immaterial, for the purposes of s 139D(1)(b)(i), that Mr Autore received that remuneration from Codimark and not directly from Nerotua. The element in s 139D(1)(b)(i) is, relevantly, that the bankrupt received no remuneration, not that the bankrupt received no remuneration from the respondent entity. Nerotua also paid Codimark for the services provided by Codimark, which, it may be inferred, included the services provided by Mr Autore to Nerotua on behalf of Codimark. It cannot, in the circumstances, be concluded that Mr Autore received no remuneration for any personal services that he provided to Nerotua on behalf of Codimark. 106 Mr Costagliola submitted that it could not be inferred or concluded that Mr Autore was remunerated by Codimark for the services he provided to Nerotua in respect of the negotiation and execution of the purchase contract. The basis of that submission was that the Consultancy Agreement between Codimark and Nerotua was not in existence at the time Mr Costagliola provided those services. As discussed earlier, while the consultancy agreement is dated 1 February 2021, the evidence indicated that it had been backdated and could not have been executed until after 31 March 2021. Mr Costagliola submitted, in effect, that because no consultancy agreement between Codimark and Nerotua was in existence when Mr Autore negotiated and executed the contract for the purchase of the Potts Point Properties, Mr Autore could not have provided those services to Nerotua on behalf of Codimark, and therefore could not have been remunerated by Codimark in respect of the provision of those services. 107 I do not accept that submission. While I accept that the evidence indicated that the Consultancy Agreement between Codimark and Nerotua could not have been executed until after 31 March 2021, it does not follow that Mr Autore was not remunerated by Codimark for any services he provided to Nerotua before 31 March 2021. The evidence indicated that Codimark invoiced Nerotua for consultancy fees payable from 1 February 2021, though it may again be inferred that the invoice in respect of those fees was also backdated. Nevertheless, the invoice was issued at some later date and, it may be inferred, was eventually paid by Codimark. The evidence also indicated that Codimark paid (or at least credited) Mr Autore in respect of fees referrable to, relevantly, the months of February and March 2021, pursuant to the Consultancy Agreement between it and Mr Autore. In short, the evidence indicated that Mr Autore was remunerated by Codimark for the relevant services, albeit after 31 March 2021. It is in my view immaterial, for the purposes of s 139D(1)(b)(i), that Mr Autore may have been remunerated for the services some months after he provided them. The element in s 139D(1)(b)(i) is, relevantly, that the bankrupt received no remuneration for the services, not that the bankrupt received no remuneration for the services at the time he or she provided those services. 108 The question, then, is whether there is a good arguable case on the evidence that the remuneration that Mr Autore received from Codimark, in respect of the services provided to Nerotua, was substantially less in value than a person supplying those services might reasonably be expected to have received if the person had dealt with Nerotua at arms length in relation to those services. 109 I find it difficult to accept that the Trustee has or would have a good arguable case in respect of this element of s 139D on the basis of the evidence as it currently stands. There are in my view a number of difficulties with Mr Costagliola's contention that Mr Autore received less than the amount that a person supplying the services would have expected to have received if they had dealt with Nerotua at arm's length. 110 First, as already noted, there is no evidence capable of establishing exactly what Mr Autore did in respect of the negotiation and execution of the contract for the purchase of the Potts Point Property. It is in those circumstances difficult to see how any inferences could be drawn, or findings made, in respect of the arm's length remuneration that a person may have expected to receive from those services. 111 Second, there is no evidence as to the amount of remuneration Mr Autore received that was specifically referable to such services as he provided in relation to the negotiation and execution of the purchase contract. The evidence indicated that Autore was remunerated by Codimark pursuant to the Consultancy Agreement he had with Codimark, but the amount paid to him could not be said to be specifically referrable to the relevant personal services - the negotiation and execution of the purchase contract in respect of the Potts Point Property. Similarly, while Nerotua paid consultancy fees to Codimark pursuant to the Consultancy Agreement between those two companies, those consultancy fees could again not be said to be specifically referrable to the services provided by Mr Autore in respect of the negotiation and execution of the purchase contract. 112 Third, there is no evidence before the Court in respect of the issue as to what a person supplying the relevant personal services - negotiating and executing the purchase contract in respect of the Potts Point Property - might reasonably be expected to have received if the person had dealt with Nerotua at arm's length in relation to those services. As discussed earlier, it is also difficult to see how any inferences could be drawn in that regard in circumstances where the nature and extent of the services in fact provided by Mr Autore is entirely unclear from the evidence. What exactly did he do? How many hours, days, or weeks did he spend engaged in the performance of those services? 113 Mr Costagliola submitted, in effect, that a person supplying (on an arm's length basis) the services that Mr Autore was said to have provided to Nerotua might reasonably be expected to have received more than Mr Autore in fact received. The basis or essence of that submission was that the evidence indicated that the consultancy fees that Mr Autore received from Codimark under the Consultancy Agreement between Codimark and Mr Autore were less than the consultancy fees that Codimark received from Nerotua under the Consultancy Agreement between those two companies. In short, Mr Costagliola contended that the fees that Codimark received from Nerotua reflected the fees that a person providing the relevant services on an arm's length basis might reasonably be expected to have received. Or, to put it more directly, Mr Autore should have received the full amount of the consultancy fees that Nerotua paid Codimark. 114 I reject that submission for a number of reasons. As already indicated, the fees payable under the consultancy agreements were not specifically referrable to any personal services that Mr Autore provided in respect of the negotiation and execution of the purchase contract. The fees payable under the consultancy agreements therefore do not provide any reliable guide in respect of the fees that a person supplying personal services comprising only the negotiation and execution of the purchase contract might reasonably be expected to have received if the person had dealt with Nerotua at arm's length in relation to those services. Moreover, the Consultancy Agreement between Codimark and Nerotua could hardly be said to be an arm's length agreement given the association between those companies. The same could perhaps be said in respect of the Consultancy Agreement between Codimark and Mr Autore. Indeed, Mr Costagliola's case included the contention that Mr Autore controlled both Codimark and Nerotua. The consultancy agreements therefore provide no assistance in determining the amount that would have been paid in respect of the relevant personal services pursuant to an arms-length arrangement. 115 Fourth, if the Consultancy Agreement between Codimark and Mr Autore could be said to indicate what Mr Autore was paid in respect of the relevant personal services - the negotiation and execution of the purchase contract - that would suggest that, at the time Mr Autore provided those services to Nerotua on behalf of Codimark, he was entitled to receive $3,000 per week plus GST. It is difficult to accept that remuneration of $3,000 per week plus GST is substantially less than the amount that a person supplying the relevant personal services might reasonably be expected to have received if the services were provided on an arm's length basis. 116 The EM gave the following example to illustrate when the test in s 139D(1)(b)(ii) would be made out: For example, the test would be satisfied where a medical practitioner is employed by a company which offers medical services to the general public and receives a salary of $10,000 pa from the company in circumstances where it might be expected that a properly remunerated medical practitioner would receive $70,000 pa. 117 The circumstances of this case are far removed from that example.

Did Nerotua acquire an estate in the Potts Point Properties as a result of the supply of personal services by Mr Autore? 118 It may be accepted that Nerotua acquired an estate in the Potts Point Properties as a result of the services that Mr Autore may be inferred to have provided in respect of the negotiation and execution of the purchase contract.

Did Mr Autore use or derive a benefit from the Potts Point Properties at a time when he controlled Nerotua? 119 Mr Costagliola contended that Mr Autore used or derived a benefit from the Potts Point Properties at a time when he controlled Nerotua in three ways: first, because he received positive publicity; second because he resided in one of the properties; and third, because Codimark leased one of the properties. I reject Mr Costagliola's contentions in that regard. I am unable to accept that there is a good arguable case that Mr Autore derived any relevant or material benefit from the Potts Point premises at a time when he controlled Nerotua. 120 As for publicity, Mr Costagliola relied on: the article in Urban.com.au, referred to earlier, which was published in October 2022 and which stated that the "Graaf retail and development dynasty are set to redevelop one of Potts Point's most iconic buildings into four luxury terraces" and that "Graaf has a long history in both retail and property development"; the post on Mr Autore's LinkedIn page which appeared to have been posted in November 2024 and which stated that "GRAAF Group is proud to announce the Development Approval for 20-26 Bayswater Rd, Potts Point - a milestone in Sydney's architectural heritage restoration and urban luxury"; and the AFR article, also published in November 2024, which reported that the Graaf Group had listed the Potts Point Properties for sale with a price guide of $36 million. 121 I reject the contention that the Urban.com.au and AFR articles and the LinkedIn post could be said to constitute a benefit to Mr Autore for the purposes of s 139D(1)(d) of the Bankruptcy Act. I doubt that something as intangible as positive publicity could sensibly be said to be a benefit for the purposes of s 139D(1)(d) of the Bankruptcy Act, other than perhaps in an exceptional case where the publicity could be said to have had some discernible and quantifiable commercial or monetary value. I doubt that a LinkedIn post and an article in what appears to have been a fairly obscure or niche online publication could be said to have any commercial or monetary value. The same could be said for the AFR article, which simply reported that the Graaf Group had listed the properties for sale. There was certainly no evidence, or even available inference, that those articles had any commercial or monetary value. In any event, the positive publicity, if that is what it was, related to the Graaf Group, not Mr Autore personally. Moreover, if the positive publicity was beneficial to anyone, it would have been beneficial to the owner of the Potts Point Properties. Mr Autore did not own the Potts Point Properties. 122 Another problem with Mr Costagliola's reliance on the LinkedIn post and AFR article is that they were published in November 2024. As discussed earlier, I reject Mr Costagliola's contention that Mr Autore controlled Nerotua at that time. The evidence, as a whole, indicated that, following Mr Autore's resignation as a director of Nerotua on 29 August 2023, Nerotua was controlled by Alessio and Floriana. As for the Urban.com.au article, that article was published in October 2022. At that time, Mr Autore was still a director of Nerotua, but so too were Alessio and Floriana. It is at least questionable that Mr Autore controlled Nerotua at that time given that he was only one of three directors. 123 As for the assertion that Mr Autore resided in the Potts Point Properties, that contention was based on no more than the fact that an ASIC record stated that Mr Autore was appointed as a director of Redco 25 MP Pty Ltd on 20 July 2024 and that his address was said to be unit 104 20 Bayswater Road Potts Point. I am unable to accept that, when the evidence as a whole is considered, the ASIC record provides an arguable basis for inferring that Mr Autore resided in the Potts Point Properties at a time that he controlled Nerotua. 124 The Trustee's report to creditors recorded that Mr Autore's address as at the date of the report was 13 Centre Street, Blakehurst NSW. That is also the address referred to in Mr Autore's affidavit. The evidence included many ASIC records which referred to Mr Autore's address. Various addresses for Mr Autore were recorded in those records, including Unit 30 210 Lincoln Crescent Woolloomooloo (which was also recorded in various ASIC records as being Alessio's address), Unit 102 6 Cowper Wharf Roadway Woolloomooloo (which the evidence suggested may have been the business address or registered office of Estro Concept Pty Ltd) and Unit 1 155 King Street Sydney. While it may be accepted that the effect of ss 205B and s 205D of the Corporations Act 2001 (Cth) is that a company must lodge with ASIC a notice which includes details of the residential address of its director or directors, I would infer that on occasion companies of which Mr Autore was a director lodged notices which recorded the business, not residential, address for Mr Autore. There is also no evidence that Mr Autore was responsible for lodging the form on behalf of Redco 25 MP Pty Ltd. 125 Perhaps more significantly, there was some evidence that indicated that the Potts Point Properties were not, or did not include, residential premises in 2024. They had been and were being used for commercial purposes. Mr Costagliola submitted that an inference adverse to Mr Autore should be drawn in respect of his residential address, effectively because he did not deny that he resided in the Potts Point Properties. I reject that submission. No such inference is available because Mr Autore had no reason to believe or suspect that it was part of Mr Costagliola's case that he resided at the Potts Point Properties. 126 Finally, even if the ASIC record was capable of supporting an inference that Mr Autore resided in the Potts Point Properties on 20 July 2024 (when he was appointed a director of Redco 25 MP Pty Ltd), for the reasons already given I would not infer or conclude that Mr Autore controlled Nerotua at that point in time. 127 As for the contention that Mr Autore derived a benefit from the Potts Point Properties because Codimark leased one of the properties, Mr Costagliola relied on a definition clause in the facilities deed between, inter alia, Nerotua (as borrower) and J & A Potts Point (as lender), that defined the expression "Codimark Lease" as meaning "the lease of part of the [Potts Point Properties] between [Nerotua] and Codimark Projects Pty Ltd as Lessee commencing 28 February 2022, as varied by a Deed of Variation of Lease between those parties dated 15 December 2023". There was no evidence in respect of the terms of that lease. The lease itself was not in evidence. 128 I am unable to accept that the fact that Codimark may have leased part of the Potts Point Premises constituted a benefit derived by Mr Autore from the Potts Point Properties. At the time the lease was entered into, Mr Autore was neither a director nor shareholder in Codimark. Mr Costagliola submitted that it could be inferred that Mr Autore controlled Codimark, though that submission appeared to be based on no more than the fact that Codimark's director and shareholder was Ms Pearce, who appeared to have been Mr Autore's personal assistant. He also relied on the evidence that indicated that Codimark's payments to Mr Autore were made at irregular intervals, were not strictly in accordance with the Consultancy Agreement, and that at one point Mr Autore owed Codimark money. Mr Costagliola did not, however, cross-examine Ms Pearce and put to her that Mr Autore controlled Codimark. 129 In any event, even if it was open to infer that Mr Autore controlled Codimark, it does not follow that Mr Autore derived a benefit of some sort from the fact that Codimark leased part of the Potts Point Properties. That would only follow if there was an available inference that the lease between Nerotua and Codimark was on other than commercial terms. There is, however, no evidential basis for drawing that inference. Mr Costagliola submitted that the inference could be drawn because Mr Autore controlled Codimark. The difficulty with that submission, however, is that Mr Costagliola also submitted that Mr Autore controlled Nerotua when the lease was apparently entered into. If that was the case, it would follow that it was in Mr Autore's interests to ensure that Nerotua's lease to Codimark was on commercial terms. I am, in those circumstances, unable to accept that it is open to infer that the lease was on other than commercial terms, that Codimark therefore obtained a benefit as a result of the lease, and that Mr Autore therefore derived an indirect benefit from the Potts Point Properties. 130 The EM described the benefit element in s 139D(1)(d) in the following terms: In other words, it needs to be shown that the entity made the property available for the use and enjoyment of the bankrupt as and when the bankrupt required, as if the property were owned by the bankrupt himself or herself. 131 It may, of course, be accepted that the Court is required to apply the text of s 139D(1)(d), properly construed, not the terms of the EM. The EM is, at most, a contextual consideration that may aid in the construction of the provision in question. Nevertheless, on any view the facts of this case are far removed from the type of scenario envisaged in the EM as the evil to which the provision was directed. 132 It follows that I am not satisfied that Mr Costagliola has an arguable case that Mr Autore derived any benefit from the Potts Point Properties at a time when he controlled Nerotua.

Does Nerotua still have an estate in the Potts Point Properties? 133 It is clear that, while Nerotua intends to sell the Potts Point Properties, it currently has an estate in the properties. 134 It should be noted that it is this element of the cause of action under s 139D of the Bankruptcy Act that explains why it is necessary for the freezing orders sought by Mr Costagliola to include an order restraining Nerotua from selling the Potts Point Properties. If the properties are sold, the Trustee will no longer have available to him an action under s 139D.

Is there a good arguable case that the Court would grant relief under s 139D(2) of the Bankruptcy Act? 135 For the reasons that have been given, if the Trustee commenced proceedings against Nerotua seeking relief under s 139D of the Bankruptcy Act, I am not satisfied on the current state of the evidence that the Trustee has, or would have, a good arguable case in respect of all of the elements necessary to secure relief under that provision. I also entertain considerable doubts about whether the Court would be likely to grant the relief available under s 139D(2) of the Bankruptcy Act even if all the elements in s 139D(1) were made out. The relief available under s 139D(2) would appear to be discretionary because that provision states that the Court "may" make the order referred to in that subsection. 136 The order that the Court "may" make under s 139D(2), if the elements in s 139D(1) are made out in the case of Nerotua, is that the "estate in the whole, or in a specified part, of" the Potts Point Properties, or a "specified estate in the whole, or in a specified part, of" the Potts Point Properties, vest in the Trustee. The relevant estate must be one which "could, by virtue of [Nerotua's] estate in the [Potts Point Properties], be so vested by or on behalf of [Nerotua]." 137 There are or would in my view be significant complexities in applying s 139D(2) to the facts of this case, even if it be assumed that the Trustee was able to establish all of the elements in s 139D(1). The provision might be relatively easy to apply in the sort of case referred to in the EM, where money that should have been paid to a bankrupt in respect of services provided by him or her are instead diverted to a trust which then acquires a property which is made available for use by the bankrupt. In such a case, it is relatively easy to see why the Court would order that the legal or equitable estate in the property vest in the Trustee. 138 This, however, is not such a case. Nerotua purchased the Potts Point Properties for $22 million using funds borrowed from a third party or parties. It is not contended that Mr Autore contributed any funds towards the purchase of the properties. The most that could be said is that he provided some relatively modest personal services (negotiating the purchase and executing the contract) for which he was not remunerated, or properly remunerated, by Nerotua. It is also not contended that Mr Autore used the Potts Point Properties as if they were his own. There could be no doubt that Nerotua intended to develop the Potts Point Properties as a commercial venture. The most that could be said is that Mr Autore derived some intangible, and on any view very modest, benefit from the properties as a result of positive publicity, or an indirect benefit because a company that he supposedly controlled was able to lease part of the properties, or that he was able to reside in part of one of the properties for some unspecified (but it would seem very short) period of time. 139 The question that would undoubtedly arise in the unusual circumstances of this case is what estate, or type of estate, or part thereof, in the Potts Point Properties would it be appropriate for the Court to order vest in the Trustee, noting in that regard that only an estate which could be vested by or on behalf of Nerotua could be the subject of such an order. Plainly it would not be appropriate to vest in the Trustee the entire legal or equitable estate held by Nerotua. That could hardly be said to be appropriate in circumstances where Mr Autore's contribution towards the purchase of the properties (the personal services he provided) was on just about any view very modest, as was the benefit he supposedly derived from the properties. 140 It might perhaps be considered appropriate for the Court, by order, to vest in the Trustee a specified estate in a specified part of Nerotua's estate in the Potts Point Property, to the extent to which that specified part of the estate reflected the benefit received by Mr Autore, or the value of his contribution towards the acquisition of the properties: cf Aravanis (Trustee) v Kapp, in the matter of the Bankrupt Estate of Kapp [2023] FCA 702 at [267]-[284]). But what specified estate and what specified part of that estate? Where the relevant property is money, as was the case in Kapp, it may be relatively easy to determine the appropriate specified part of the estate in the money that reflects the bankrupt's contribution. The position is not so straightforward where, as here, the property is real property and it is not suggested that the bankrupt ever had the full use of the property, or that the bankrupt had effectively contributed all the funds for the acquisition of the property. Mr Costagliola was unable to meaningfully assist the Court in grappling with this difficult issue. 141 I do not propose to consider this issue any further, save as to note that the question of what relief the Trustee might actually be able to achieve under s 139D(2), if he otherwise succeeded in establishing all of the elements in s 139D(1), is complex and unlikely to be easily resolved. One thing is tolerably clear. That is that any recovery is likely to be relatively modest given the relatively modest benefit (if any) received by Mr Autore and the relatively modest contribution (if any) that he made in respect of the acquisition of the Potts Point Properties.

Conclusion in respect of the prospective cause of action under s 139D of the Bankruptcy Act 142 I am not satisfied, on the current state of the evidence, that the Trustee would have a good arguable case against Nerotua for relief pursuant to s 139D of the Bankruptcy Act.

A good arguable case under 139E of the Bankruptcy Act? 143 There are three elements that the Trustee would be required to prove to obtain any relief under s 139E of the Bankruptcy Act. 144 The first and second elements are essentially in the same terms as the first and second elements of s 139D of the Bankruptcy Act. 145 The third element is that "the entity's [Nerotua's] net worth at a particular time during the examinable period exceeded by a substantial amount what might reasonably be expected to have been the entity's net worth" at that time if the services supplied by Mr Autore had not been supplied: s 139E(1)(c) of the Bankruptcy Act.

Did Mr Autore supply personal services to Nerotua? 146 This element was discussed earlier in the context of Mr Costagliola's allegations in support of the case based on s 139D. There is, however, a difference in applying the facts to this element in the context of s 139E. That difference is that the personal services that Mr Costagliola contended that Mr Autore supplied to Nerotua in the context of the case under s 139E extend beyond negotiating and executing the contract for the purchase of the Potts Point Properties. The personal services supplied by Mr Autore were said to include all the services he supplied in relation to Nerotua's development application. 147 It may be accepted that Mr Autore provided personal services to Nerotua in respect of its development application. As discussed earlier in the context of the elements of the alleged action under s 139D, the evidence indicates that he did so on behalf of Codimark, or in his capacity as a consultant of Codimark pursuant to his Consultancy Agreement with Codimark. Codimark was remunerated by Nerotua for that work pursuant to the Consultancy Agreement between those two companies.

Remuneration in respect of the provision of the relevant personal services by Mr Autore to Nerotua 148 Mr Costagliola contended that, while Codimark remunerated Mr Autore in respect of the personal services he provided to Nerotua in respect of the development application, that remuneration was substantially less than a person supplying those services in similar circumstances might reasonably be expected to have received if the person had dealt with Nerotura at arm's length in relation to the supply of those services. That was said to be because a person supplying those services to Nerotua at arm's length would reasonably expect to receive all of the money that Nerotua paid to Codimark. 149 As discussed earlier, the Consultancy Agreement between Codimark and Mr Autore provided that Mr Autore was to be paid fees of $150,000 per annum, plus GST and, from 1 March 2021, fees of $240,000, plus GST. The Consultancy Agreement between Codimark and Nerotua, however, provided that Codimark was to be paid $480,000 per annum plus GST. There may be some superficial attraction to Mr Costagliola's argument based on the disparity between the fees payable under the respective Consultancy Agreement. I am not, however, persuaded that it necessarily follows from that disparity that it can be concluded that the Trustee would have a good arguable case that the remuneration that Mr Autore received in respect of the personal services he provided to Nerotua was substantially less in amount than a person supplying those services in similar circumstances might reasonably be expected to have received if it had dealt with Nerotua at arm's length. 150 The main difficulty with that argument is again that it cannot be concluded that the Consultancy Agreement between Codimark and Mr Autore was an arm's length agreement. It therefore cannot be concluded that the amount of the fees payable under that agreement was an arm's length amount. The fees payable to Mr Autore by Codimark under their Consultancy Agreement also related to all manner of consultancy and project work that might be provided by Mr Autore. The consultancy work that Mr Autore was expected to perform for Codimark under the agreement may have included work in relation to development applications, but it also extended to, for example, market research and analysis, project feasibility studies, financial advisory, risk management and client and partner relations. The fees payable under the Consultancy Agreement no doubt reflected the fact that Mr Autore provided, or may have provided, those types of services. The fees payable under the Consultancy Agreement between Codimark and Mr Autore therefore could not be said to provide any guide, or reliable guide, in relation to the arm's length fees that might reasonably be expected to be paid for work that just related to the pursuit of development applications. 151 There was no evidence as to what the arm's length remuneration was, or would reasonably be expected to be, in respect of the provision of services involving the progress of development applications. I am therefore not persuaded that Mr Costagliola has, or the Trustee would have, a good arguable case in respect of this element in s 139E(1)(b) of the Bankruptcy Act on the evidence as it currently stands.

Did Nerotua's "net worth" exceed the net worth it would have had if the services had not been supplied? 152 Mr Costagliola's case in respect of this element of s 139E effectively involved three contentions. The first contention was that Nerotua's net worth at the time the development application in respect of the Potts Point Properties was effectively equivalent to the value of the Potts Point Properties at that time. The time at which the development application was granted was said to be the "particular time" for the purposes of s 139E(1)(c). The second contention was that the value of the Potts Point Properties at the time the development application was granted was $36 million. The third proposition was that Nerotua's net worth at the time the development application was granted might reasonably be expected to have been $22 million if Mr Autore had not performed the work he did in relation to the development application. 153 None of those contentions have any merit. 154 Nerotua's net worth cannot simply be equated to the value of the Potts Point Property. That is because, as is clear from the definition of "net worth" in s 5 of the Bankruptcy Act, the net worth of a company must take into account not only the company's assets, but also its liabilities. Mr Costagliola's arguments in respect of Nerotua's net worth completely ignored its liabilities. 155 There is also no merit in the contention that the Potts Point Properties were valued at $36 million after the grant of the development application. That contention was based on an article in the AFR which referred to a "price guide" or "asking" price of $36 million. There was, however, no evidence in relation to the source of that information. While the article quotes Mr Autore, it was not suggested that he was the source of the price guide or asking price. In any event, the value of a property cannot simply be equated with an asking price or price guide provided by someone in the context of a proposed sale. The confidential valuation evidence adduced by Alessio cast considerable doubt on the proposition that the value of the Potts Point Properties was in the vicinity of $36 million. It is true that the confidential valuation report is over two years old and does not take into account the granting of the development application. It does, however, provide a somewhat more reliable guide than the AFR article. The communication from the real estate agent also casts doubt on Mr Costagliola's contentions concerning the current value of the properties. 156 In any event, as already noted, Nerotua's net worth cannot be equated with the value of the Potts Point Properties. Alessio's evidence was that, as at 30 November 2024, Nerotua owed J & A Potts Point $31,635,596.58. There was no evidence in respect of Nerotua's other liabilities. It cannot be assumed that it had no other liabilities at the relevant time. 157 There is also no merit in Mr Costagliola's contention that Nerotua's net worth, had Mr Autore not performed the services he performed in respect of the development application, might reasonably be expected to have been $22 million, that being the price that Nerotua paid for the properties in 2021. There are several problems with that proposition. 158 First, the relevant question is what Nerotua's net worth might reasonably be expected to have been at the relevant "particular time", that time being the time when the development application was granted in September 2024. It cannot be assumed that the value of the properties would not have appreciated between 2021 and 2024 even without the approval of the development application. 159 Second, the relevant question also involves a consideration of what Nerotua's net worth would have been if Mr Autore had not performed the work in relation to the development application. That question involves not only assessing the value of Nerotua's assets, but also its liabilities, on the assumption that Mr Autore had not performed the relevant work. On the one hand, if Mr Autore did not perform that work, and nobody else did in his stead, the development application would not have been granted. However, Nerotua also would not have incurred any liabilities in respect of the development application. Those liabilities would include not only Nerotua's payments to Codimark under the terms of their Consultancy Agreement, but also, it may be inferred, payments to other professionals who prepared plans, reports or performed other work in respect of the development application. Mr Costagliola's arguments completely ignored those liabilities. On the other hand, if Mr Autore did not perform the relevant work, but someone else did in his stead, the development application would, it may be inferred, have been granted and Mr Costagliola's arguments concerning the value of the Potts Point Properties without any successful development application would fall away. 160 The third problem has just been adverted to. Mr Costagliola's arguments were premised on the proposition that, if Mr Autore did not provide the services in respect of the development application, Nerotua would not have retained someone else to provide those services and its development application would not have been granted. I doubt that it could be inferred that Nerotua would not have retained someone else to provide services in relation to its development application if Mr Autore, on behalf of Codimark, had not provided those services. In that case, the development application would most likely have been granted. 161 In any event, the fundamental problem with Mr Costagliola's case in respect of s 139E(1)(c) is that he adduced no evidence which was capable of establishing what Nerotua's net worth was as at the date the development application was granted, and no evidence capable of establishing what Nerotua's net worth might reasonably be expected to have been as at that date if Mr Autore had not provided the services in relation to its development application. There was, among other things, no cogent or reliable evidence concerning the value of the Potts Point Properties at the time of the grant of the development application, and no evidence capable of establishing what the value of the properties would have been at that time if the development application had not been granted. Nor was there any relevant evidence in respect of Nerotua's liabilities, including those incurred in obtaining the development application. Mr Costagliola's case appeared to be based, at least to some extent, on the proposition that the value of the properties would inevitably have increased as a result of the grant of the development applications. I am not persuaded that that inference was necessarily available. 162 I am not in all the circumstances persuaded that Mr Costagliola has established a good argument case in respect of this element of s 139E.

Conclusion in respect of the prospective cause of action under s 139E of the Bankruptcy Act 163 I am not satisfied, on the current state of the evidence, that the Trustee would have a good arguable case against Nerotua for relief pursuant to s 139E of the Bankruptcy Act.

No good arguable case in respect of a prospective cause of action 164 It follows from my analysis of the proposed causes of action that were said to have been available to the Trustee under the Bankruptcy Act that I am not satisfied, on the current state of the evidence, that the Trustee has or would have a good arguable case under either s 139D or s 139E of the Bankruptcy Act. Of course, that may change if the Trustee conducts further investigations and is able to gather further evidence. My conclusions, based on the current state of the evidence, should not necessarily deter the Trustee from conducting further investigations or, if further evidence is obtained, commencing proceedings against Nerotua at some point in the future. That will be a matter for him to consider in due course. 165 I should also emphasise that I am mindful of the fact that at this point Mr Costagliola was only required to demonstrate that the Trustee had, or would have, a good arguable case in respect of the postulated causes of action under s 139D and s 139E of the Bankruptcy Act. He was not required to demonstrate that the Trustee had a strong case available to him, let alone that the Trustee was likely to, or would, win that case. That said, I am equally mindful of the fact that, as was made clear in Cardile, the Court must exercise a high degree of caution when considering whether to make freezing orders. That includes caution in analysing whether the applicant has a good arguable case. A good arguable case is not made out simply because it is possible for the applicant to mount an argument or arguments in support of the cause of action, or prospective cause of action. The argument or argument must have some degree of merit. While the arguments mounted by Mr Costagliola were not entirely unmeritorious, I am ultimately not persuaded that they had sufficient force, or were sufficiently supported by cogent or reliable evidence, to constitute a good arguable case. 166 I also accept, in this context, that it is not the Court's function on an application such as this to conduct a preliminary trial of the postulated action that might be available to the Trustee, or to resolve conflicts between the evidence adduced by Mr Costagliola and Nerotua respectively: Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729 at 734; F Hoffman-La Roche AG v Sandoz Pty Ltd [2018] FCA 874 [90]-[92]; Warner-Lambert Co LLC v Apotex Pty Ltd [2014] FCAFC 59; (2014) 311 ALR 632. I have not conducted a preliminary trial or endeavoured to resolve the conflicts in the evidence. Rather, I have had regard to the evidence as a whole. For the reasons I have given, when Nerotua's evidence is juxtaposed against the evidence adduced by Mr Costagliola, I have concluded that the Trustee would not have a good arguable case in respect of the action proposed by Mr Costagliola.

A DANGER OF DISSIPATION? 167 Given that I have found that Mr Costagliola has not demonstrated that the Trustee has a good arguable case, it is strictly unnecessary for me to address whether Mr Costagliola has established that there is a risk or danger that Nerotua will remove from Australia, or otherwise dispose of or dissipate, any of its assets, including, relevantly, any proceeds from the sale of the Potts Point Properties. It is equally strictly unnecessary for me to consider whether the balance of convenience weighs in favour of making the orders sought by him. I nevertheless propose to address those issues given the complexity of the issues raised by the proposed causes of action under s 139D and s 139E of the Bankruptcy Act. I will address those issues on the hypothesis that, for one reason or other, I have been wrong to conclude that, on the current state of the evidence, the Trustee does not, or would not have, a good arguable case against Nerotua under either or both of those provisions. 168 Mr Costagliola contended that, if Nerotua is permitted to sell the Potts Point Properties, as it intends to do, there is a risk or danger that, unless restrained from doing so, Nerotua will remit the proceeds of the sale (after the secured creditor is paid out) to Alessio and Floriana, who reside overseas. He relied, in support of that contention, on the trust and corporate structures that had been put in place in respect of the beneficial ownership of the properties. Those structures were, in summary: Nerotua owns the property as trustee for the RBU Trust; the sole unit holder in the RBU Trust is Redco Solutions as trustee for the Nerotua Family Trust; Floriana is the sole director of Redco Solutions; and Alessio and Floriana are the sole beneficiaries of the Nerotua Family Trust. Mr Costagliola also relied on the fact that Alessio and Floriana currently reside in Italy. Mr Costagliola submitted, in short, that it was reasonable to infer that, if not restrained, Nerotua would cause the proceeds of sale of the Potts Point Properties to be remitted to Alessio and Floriana as sole beneficiaries of the Nerotua Family Trust. If that occurred, the Trustee's prospective claims against Nerotua would, it was submitted, therefore be rendered nugatory. 169 There was no evidence from which it could be inferred that the current directors of Nerotua, Alessio and Floriana, had any present intention of remitting the proceeds from the sale of the Potts Point Properties to themselves pursuant to the trust arrangements to which reference has been made. Nor was there any evidence to suggest that Mr Autore intended to, or was in any position to, direct Alessio or Floriana to so deal with the proceeds. Mr Costagliola did not suggest that there was any evidence from which it could be inferred that Mr Autore, Alessio or Floriana intended to deal with the proceeds of sale for the purpose of defeating any claims that the Trustee might have against Nerotua. That said, as discussed earlier, it is unnecessary for an applicant for freezing orders to establish that the respondent intended to remove or dissipate its assets. An applicant need only establish that there is a risk that assets may be removed or dissipated. 170 Despite the absence of any evidence of any intention on the part of Nerotua to remove or dissipate the proceeds of sale of the Potts Point Properties, I am nevertheless satisfied that there is a risk that that may occur if Nerotua is not restrained from doing so. The inference or conclusion that there is a risk of dissipation is supported by the nature and complexity of the corporate and trust arrangements that have been put in place, including in respect of the beneficial ownership of the Potts Point Properties. Those arrangements, I would infer, were put in place by Mr Autore, or others acting on his behalf, for reasons which included ensuring that Alessio and Floriana would ultimately benefit from the ownership of the Potts Point Properties. I would also infer that, unless restrained, there is at least a risk that, assuming that there are any proceeds of sale remaining after the repayment of the secured creditor, those funds may end up being remitted to Alessio and Floriana, in Italy, as beneficiaries of the Nerotua Family Trust. That risk may not be immediate or significant, because the sale of the Potts Point Premises does not appear to be imminent. It is nevertheless a risk that would, subject to a consideration of the balance of convenience, support the making of a freezing order. I note that Nerotua did not submit that there was no risk of removal or dissipation of the proceeds of sale should the properties be sold.

BALANCE OF CONVENIENCE 171 As already noted, given my finding that Mr Costagliola has not demonstrated that the Trustee would have a good cause of action against Nerotua under the Bankruptcy Act, I am not strictly required to consider the balance of convenience. I have, nevertheless, decided, for more abundant caution, to address that issue on the hypothesis that my finding that the Trustee does not have, or would not have, a good arguable case against Nerotua under s 139D or s 139E of the Bankruptcy Act might be wrong. 172 In my view, even if Mr Costagliola had demonstrated that the Trustee would have a good cause of action, the balance of convenience does not, or would not, support the making of the freezing orders sought by Mr Costagliola. That is so for a number of reasons. 173 First, even if I am wrong in concluding that the Trustee would not have a good arguable case against Nerotua under either or both of s 139D and s 139E of the Bankruptcy Act, I am nevertheless of the view that any case that the Trustee might have against Nerotua under either of those provisions would, at least on the current state of the evidence, be very weak and would face significant hurdles. The weaknesses and hurdles are apparent from my earlier analysis of the relevant causes of action and the evidence adduced and submissions advanced in relation to the elements of those proposed actions. It is unnecessary to rehearse that analysis in this context. 174 When considering whether to make a freezing order, which is a species of injunctive relief, the issue of whether the applicant has made out a good arguable case and whether the balance of convenience favours the grant of relief are related inquires because "the apparent strength of the parties' substantive cases will often be an important consideration to be weighed in the balance": Samsung Electronics Co. Ltd v Apple Inc. [2011] FCAFC 156; (2011) 286 ALR 257 at [67]; GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser Healthcare (UK) Limited [2013] FCAFC 102; (2013) 305 ALR 363 at [81(j)]. It will "often be necessary to give close attention to the strength of a party's case when assessing the risk of doing an injustice to either party by the granting or withholding of interlocutory relief": Warner-Lambert at [70]. As will be seen, the freezing orders sought by Mr Costagliola would, if made, result in prejudice or disadvantage to Nerotua. In those circumstances, it is necessary to weigh in the balance my assessment that, even if Mr Costagliola had demonstrated that the Trustee would have a good arguable case, that case in my view is at best weak and problematic, at least on the current state of the evidence. 175 Second, the freezing orders sought by Mr Costagliola are sought in circumstances which are out of the ordinary. Ordinarily it is the judgment debtor, or prospective judgment debtor, who seeks freezing orders. As explained earlier, judgment has not been given in Mr Costagliola's favour in this Court, and he does not contend that he has a good arguable case on a cause of action or prospective cause of action that is justiciable in this Court. Rather, he contended that the Trustee has a good arguable case on a cause of action or prospective cause of action. While, for the reasons given earlier, in my view that does not preclude him from applying for freezing orders, it gives rise to a number of considerations that bear on the balance of convenience. 176 In particular, I am somewhat sceptical that there is any real prospect that the Trustee will commence the proceedings envisaged by Mr Costagliola. The Trustee was appointed over a month ago. He was no doubt aware of this proceeding. Mr Costagliola did not adduce any evidence from him. The only indication of the Trustee's attitude concerning the postulated proceeding against Nerotua is his statement in his report to creditors that, having met with the solicitors for each of the parties, it was likely that, following the hearing in this matter, he would seek advice and that his investigations were ongoing. That is hardly a ringing endorsement of the proceeding proposed by Mr Costagliola. I accept that the evidence indicates that Mr Costagliola only became aware of Mr Autore's bankruptcy in recent times and that his, or his legal advisers', discussions with the Trustee must also have occurred in recent times. That said, the absence of any real indication from the Trustee that he is likely to commence the proceedings envisaged by Mr Costagliola is a relevant consideration. 177 Perhaps more significantly, the Trustee's report to creditors reveals that Mr Autore's bankrupt estate has no assets and significant liabilities. I would readily infer in those circumstances that the Trustee would be unlikely to commence the proceedings proposed by Mr Costagliola unless Mr Costagliola agreed to indemnify the Trustee and fund the action. Mr Costagliola did not himself give any evidence in support of this application. There is no evidence that he would be prepared to indemnify the Trustee and fund the proposed proceeding against Nerotua. There is also no evidence that he has the financial capacity to fund the proposed proceeding. I am also somewhat sceptical that he would ultimately be prepared to fund the litigation, particularly given that the commercial reality is that, even if the Trustee's case against Nerotua succeeded, it would not necessarily follow that Mr Costagliola would receive anything from Mr Autore's bankrupt estate. Nor is there any evidence capable of supporting an inference that a litigation funder or other third party would be prepared to fund the proposed action. 178 This case is distinguishable from HPack Investments in that regard. In that case, Black J's reasoning included the following (at [49]): It does not seem to me that that jurisdiction is excluded because the relevant judgment requires a two step process, involving first the winding up of HPack and then the liquidator's claim. In determining whether to make such an order, the Court would, of course, have to assess the likelihood that a winding up order will be made and that a liquidator would obtain such a judgment, and I do so below. Absent a resolution of the issues with the Respondents, there is here no reason to think that a liquidator would choose not to bring the proceedings if funded to do so, given the apparent prospects of the claims (which I address below) and the amount of the potential recoveries. If he or she could not fund those proceedings from CSF's existing resources, relying on any right of indemnity or exoneration against trust assets (as to which I note a dispute below), and if the DCT did not fund them, then there is no reason to think that he or she could not readily obtain any necessary third party funding to bring the relevant claims, given their apparent prospects and the potential recoveries. The Court may of course need to reconsider that position and potentially discharge a freezing order made on that basis, if a winding up order was not promptly made or a liquidator did not promptly commence and expeditiously carry on the contemplated proceedings. (Emphasis added) 179 I would not draw the same inferences in this case. Unlike in HPack Investments, given what I have said about the prospects and likelihood of recovery, and in the absence of any evidence from Mr Costagliola or the Trustee, I can see no basis for inferring that the Trustee would, or would be likely to, commence the proposed proceedings against Nerotua unless he was funded to do so, or any basis for inferring that Mr Costagliola could or would fund the proceeding, or that any third party would be likely to fund the proceedings. 180 I should also emphasise that if I had been persuaded to make any freezing orders against Nerotua, the orders that I would have made would only have operated for a relatively short period (perhaps as short as 30 days) to allow the Trustee to consider whether he proposed to commence proceedings against Nerotua. Before continuing the orders, I would most likely have required evidence or even an undertaking from the Trustee that he would, within a short period, commence the proposed proceeding and prosecute that proceeding expeditiously. The orders proposed by Mr Costagliola envisaged that the Trustee would have up to two years in which to commence the proposed proceeding against Nerotua. That, in my view, would be entirely inappropriate in the circumstances, particularly given the likely impact that the proposed orders would have on Nerotua and the secured creditor. 181 Third, the freezing orders proposed by Mr Costagliola included an order (order 2 b) restraining Nerotua from: completing or agreeing to complete any sale of the [Potts Point] Properties, unless Nerotua has first undertaken that it will, on the application of the trustee in bankruptcy of [Mr Autore's] estate, pay such portion of the net proceeds of sale as the Court determines it would be liable for had it retained an estate in the Properties. 182 There are in my view a number of significant problems with that order. 183 If the proposed undertaking is not given by Nerotua, the effect of the order would be that Nerotua would be restrained from selling the Potts Point Properties. The effect of Alessio's unchallenged evidence was that he and Floriana, the current directors of Nerotua, wanted to sell the Potts Point for entirely legitimate commercial reasons. The proposed development of the properties was not considered to be commercially viable, Nerotua owes a large debt to J & A Potts Point arising from the purchase of the properties and the proposed development, and Nerotua was projected to incur substantial losses once the properties are sold. The difficultly is that if the sale of the properties is prevented from proceeding, Nerotua's debt will no doubt continue to grow and its projected losses will increase. That is likely to be to the detriment of not only Nerotua, but also J & A Potts Point as secured creditor. I will say something further in respect of Mr Costagliola's undertaking as to damages shortly. 184 While it is true that Nerotua could proceed to sell the Potts Point Properties if it gave the undertaking referred to in the proposed order, there are in my view a number of problems with the requirement that Nerotua give that undertaking. It is unclear to whom the undertaking is to be given. It is equally unclear who Nerotua must undertake to pay. It may, however, perhaps be assumed that the undertaking is to be given to the Court, and that Nerotua must undertake to pay the Trustee. A more significant issue is that the undertaking that Nerotua would be required to give is to pay the Trustee an unspecified sum of money. Moreover, given the complexities of the matter, Nerotua has no real way of ascertaining or even guessing what that sum might be. Freezing orders typically prevent the respondent from removing or disposing of assets up to a specified amount that generally reflects the amount that the respondent is or may be liable to pay as a result of the judgment debt or prospective judgment debt. No such amount is specified in the proposed undertaking. 185 Another difficulty is that, if Nerotua gives the undertaking, it may, as events transpire, have no capacity to make that payment once the properties are sold given the size of the secured debt. That is because the evidence tends to indicate that it is possible, if not likely, that the properties will be sold for less than the amount of the secured debt owed to J & A Potts Point. If Nerotua is unable to pay any money to the Trustee in accordance with the undertaking in those circumstances, it would breach of the undertaking. Mr Costagliola submitted that in those circumstances he would be unlikely to commence proceedings to enforce the undertaking. That, however, is not a complete answer to the problem created by the fact that Nerotua may not be able to pay the amount that is required to pay to comply with the undertaking. Even if Mr Costagliola did not commence proceedings to enforce the undertaking, Nerotua would nonetheless be in breach of the undertaking. It would, in my view, be oppressive to expect Nerotua to give an undertaking that it might not be able to comply with, let alone one which it is unlikely to be able to comply with. 186 The difficulties do not end there. Even if Nerotua gives the undertaking and is able to sell the Potts Point Properties, the effect of the other order sought by Mr Costagliola is that Nerotua is restrained from "disbursing, dealing with, disposing of, or otherwise dissipating the net proceeds of the sale of the [Potts Point Properties], after payment of sale costs, secured creditors of Nerotua, and the usual fees and adjustments". That restraint is proposed to continue until either the elapse of two years during which time the Trustee has not applied for relief under the Bankruptcy Act, or the Trustee obtains an order under the Bankruptcy Act in respect of the proceeds, or the parties agree, or the Court makes a further order, whichever occurs first. 187 There are in my view several difficulties with that order. One difficulty is that the restraint operates in respect of the entirety of the sale proceeds (less the deductions specifically identified). As noted earlier, freezing orders typically prevent the respondent from removing or disposing of assets up to a specified amount that generally reflects the amount that the respondent is or may be liable to pay as a result of the judgment debt or prospective judgment debt. That is not the case with the proposed order. Another difficulty is that the restraint is not subject to any exceptions. Freezing orders are typically subject to exceptions which permit the respondent to pay, for example, reasonable legal expenses, or to deal with or dispose of their assets in the ordinary and proper course of business, including paying business expenses. That is not the case with the orders proposed by Mr Costagliola. While the proposed orders would permit Nerotua to pay secured creditors from the sale proceeds, it would not be permitted to pay any unsecured creditors. That would undoubtedly cause prejudice to not only Nerotua, but also the unsecured creditors. 188 A related difficulty is that, if the Trustee does obtain an order under either s 139D or s 139E of the Bankruptcy Act against Nerotua, and Nerotua is required to pay the amount specified in the order to the Trustee in accordance with the undertaking, that payment might be seen as preferring the interests of the Trustee to the detriment of other unsecured creditors. If, as is possible, Nerotua turns out to be insolvent at the time it pays the Trustee, the payment to the Trustee might, in those circumstances, be considered to be a preferential payment and therefore voidable pursuant to ss 588FA and 588FE of the Corporations Act and as a result liable to be disgorged to the liquidator of Nerotua pursuant to s 588FF of the Corporations Act: see the discussion, in relevantly analogous circumstances, in Skyworks v 32 Drummoyne Road [2017] NSWSC 343 at [52]. 189 Fourth, the apparent reason for Mr Costagliola seeking to restrain Nerotua from selling the Potts Point Properties is that he perceives that, due to the element in s 139D(1)(e) of the Bankruptcy Act that the entity still has an estate in the relevant property, the Trustee will no longer have a cause of action under s 139D against Nerotua if the properties are sold. Mr Costagliola also apparently believes that if the properties are sold, but the undertaking is given by Nerotua, the Court would consider and determine any action taken by the Trustee against Nerotua pursuant to s 139D on the hypothetical basis that Nerotua still held an estate in the properties as required by s 139D(1)(e). 190 It is, however, by no means clear to me that the Court would, or would be able to, proceed in that manner. It is also difficult to see how the Court could grant relief under s 139D(2) if Nerotua no longer has an estate in the Potts Point Properties, unless the Court proceeded on the basis that the sale proceeds constituted the relevant property for the purposes of s 139D(2). It is not entirely clear to me that the Court could proceed on that basis. I do not propose to express any concluded views in respect of this issue, other than to note that the basis upon which the Court could proceed under s 139D if the Potts Point Properties are sold raises complex issues the resolution of which is by no mean easy or clear. 191 Fifth, for the reasons that have been given, the orders sought by Mr Costagliola would, if made, potentially prejudice Nerotua and cause it to suffer damage. That is particularly the case if the sale of the Potts Point Premises is prevented or impeded by the orders. Mr Costagliola has given an undertaking as to damages. There is, however, no evidence that Mr Costagliola can give a valuable undertaking in that regard because there is no evidence concerning his financial position. The "inability of a plaintiff to give a valuable undertaking as to damages is a factor which can be taken into account in assessing the balance of convenience and may even by decisive": Epp v Levy [2001] NSWSC 482 at [31] quoting Hodgson J in Wentworth v Wentworth (unreported, Supreme Court of New South Wales 12 June 1997). I do not go so far as to say that Mr Costagliola is unable to give a valuable undertaking as to damages. There is, however, no evidence that he can.

CONCLUSION AND DISPOSITION 192 I am not satisfied that the orders sought by Mr Costagliola should be made. Mr Costagliola has not demonstrated that, if the Trustee did in due course commence proceedings against Nerotua for relief under s 139D and s 139E of the Bankruptcy Act, he would have a good arguable case, at least on the present state of the evidence. I am also not persuaded that the balance of convenience would weigh in favour of making the orders proposed by Mr Costagliola, even if the Mr Costagliola had demonstrated that the Trustee would have a good arguable case. 193 Mr Costagliola's application must accordingly be dismissed with costs. 194 I should finally note that I propose to make a final non-publication order pursuant to s 37AF of the FCA Act in respect of Alessio's affidavit dated 14 January 2025 that includes evidence concerning the valuation of the Potts Point Properties and communications between Alessio and the estate agent concerning the sale of the properties. The ground for making that order is that it is necessary to prevent prejudice to the proper administration of justice: s 37AG(1)(a) of the FCA Act. The valuation and the communications are commercially confidential. The publication or dissemination of that information would potentially cause prejudice to Nerotua in respect of the sale of the Potts Point Properties. It was reasonable for Alessio, on behalf of Nerotua, to adduce evidence in respect of that confidential information in opposition to the orders sought by Mr Costagliola. It would be contrary to the proper administration of justice for litigants in the position of Nerotua to be prevented or deterred from adducing evidence that may disclose confidential information. I certify that the preceding one hundred and ninety-four (194) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wigney.