D Pty Ltd (in liq) v Calas

Introduction 1 In July 2012, the second defendant (the Wife) commenced a proceeding in the Family Court of Australia (the Family Court Proceeding) against the third defendant (the Husband). The proceeding sought orders for adjustment of property interests under the Family Law Act 1975 (Cth). 2 The Wife joined, as parties to that proceeding, the Husband's brother (the Brother-in-law) and four companies associated with the Husband or the Brother-in-law, including companies which will be referred to as C Pty Ltd and D Pty Ltd. 3 On 7 December 2012, the Family Court made orders by consent in that proceeding (the Consent Orders). These included an order that the Husband pay into a trust account in the name of the Wife the sum of $500,000, with an initial sum of $300,000 to be paid from the proceeds of sale of a property by C Pty Ltd, and with any shortfall to be paid from the proceeds of sale of a property at a location which will be referred to as G Street, Suburb H (the Property) by D Pty Ltd. The orders provided that the money was to be used to purchase a townhouse to be developed by or on behalf of the Husband to the value of $500,000; and that the property would be registered in the name of the Wife but be used as accommodation for the Wife and the child of the Husband and Wife (the Child) until such time as the Child had attained the age of 30 years, after which the home would vest absolutely in the Wife. 4 Some days earlier, on 4 December 2012, the Wife and Husband had signed minutes of proposed consent orders (the Minutes of Proposed Consent Orders). Those minutes were not signed on behalf of D Pty Ltd. The terms of the minutes were different from the Consent Orders as made by the Family Court. 5 On 10 July 2014, the Wife brought an application in the Family Court seeking orders for enforcement of the Consent Orders. 6 On 9 August 2014, a sequestration order was made against the estate of the Wife. The first defendant was appointed trustee in bankruptcy of the Wife's estate. He will be referred to in these reasons as the Trustee in Bankruptcy. 7 On 22 August 2014, D Pty Ltd was placed into liquidation. The plaintiff and another person were appointed the liquidators of the company. The plaintiff remains the liquidator of D Pty Ltd. He will be referred to in these reasons as the Liquidator. 8 The Liquidator has sold the Property and holds some of the proceeds of sale. 9 On 9 December 2015, the Family Court gave judgment on a series of questions arising in the Wife's application for enforcement of the Consent Orders. The publicly available version of the Family Court's judgment, which adopts pseudonyms for the names of the parties, is: Megalos & Katsaros [2015] FamCA 1094. The Family Court made orders and declarations to the following effect: (a) pursuant to s 471B of the Corporations Act 2001 (Cth), the Court granted leave to the Trustee in Bankruptcy to pursue and continue the enforcement application; (b) the Court declared that the Property was appropriated in favour of the Wife to discharge the Husband's obligations pursuant to the Consent Orders and was thereby charged with satisfaction of those obligations; and (c) pursuant to provisions of the Bankruptcy Act 1966 (Cth), the Court declared that all monies received by the Liquidator in relation to the sale of the Property were held on trust for the benefit of the Trustee in Bankruptcy as trustee for the bankrupt estate of the Wife. 10 In this proceeding, the Liquidator contends that on 4 December 2012 the Wife, the Husband and D Pty Ltd agreed to settle the Family Court Proceeding on terms which included the creation of a charge over the Property; and that the charging of the Property was an "unreasonable director-related transaction" of D Pty Ltd within the meaning of s 588FDA of the Corporations Act. The Liquidator seeks declarations including that the charge is void and unenforceable. 11 For the reasons that follow, I have concluded that the Liquidator's application should be dismissed. My reasons, in summary, are as follows: (a) First, insofar as the Liquidator relies on the Minutes of Proposed Consent Orders as recording an agreement between the relevant parties creating a charge over the Property, this document was not signed on behalf of D Pty Ltd and there is no sufficient basis to infer that D Pty Ltd was a party to the agreement. In any event, even if the Minutes of Proposed Consent Orders had been signed on behalf of D Pty Ltd, I do not think the document evinces an intention to create a charge independently and in advance of the making of consent orders by the Family Court. Rather, I think the document evinces an intention to propose orders to the Court in the terms set out therein. (b) Secondly, while it may be inferred that, at some point in the period 4 to 7 December 2012, D Pty Ltd agreed to orders in substantially the same terms as the Consent Orders actually made by the Family Court on 7 December 2012, it is not established that the parties (including D Pty Ltd) reached an agreement which created a charge independently and in advance of the making of any consent orders. I would infer that any agreement between the parties was merely to the Court making consent orders as proposed by the parties. On this analysis, while a charge over the Property was created by the making of the Consent Orders, no charge was created by agreement between the parties in advance of the making of the Consent Orders. (c) Thirdly, in any event, the Liquidator has not established that it may be expected that a reasonable person in D Pty Ltd's circumstances would not have entered into the alleged transaction. In particular, the evidence does not establish that the alleged transaction was of no benefit to D Pty Ltd. Settlement of the Family Court Proceeding may well have been of benefit to D Pty Ltd. The Wife had joined D Pty Ltd to the proceeding and made claims in relation to property registered in its name. The evidence before me includes a copy of an affidavit filed by the Wife in the Family Court Proceeding which provided at least some basis for her contentions. No contrary evidence has been filed by the Liquidator. (d) Fourthly, in circumstances where the Consent Orders themselves create a charge over the Property, the declarations sought by the Liquidator would conflict, or appear to conflict, with the Consent Orders, being orders made by another superior court in the Australian legal system. In these circumstances, I do not think it would be appropriate to make the declarations sought. 12 It is convenient to note at this point that, having regard to the operation of s 121 of the Family Law Act, I have adopted pseudonyms for the names of the parties and have de-identified certain other matters such as the addresses of properties and the names of other persons. For convenience, I have adopted the pseudonyms and labels used by the Family Court in Megalos & Katsaros.

Procedural matters 13 The proceeding in this Court was commenced by originating process supported by an affidavit of the Liquidator dated 25 January 2016. Subsequently, the Liquidator filed points of claim. Although the originating process named D Pty Ltd as the first plaintiff and the Liquidator as the second plaintiff, in the points of claim only one plaintiff is named, that is, the Liquidator. I will proceed on the basis that both the company and the Liquidator are plaintiffs to the proceeding. This is consistent with the principles discussed in [67] below. 14 The first defendant (the Trustee in Bankruptcy) and the second defendant (the Wife) filed defences to the points of claim. The third defendant (the Husband) and the fourth defendant (the Brother-in-law) did not participate in the proceeding. 15 There were two significant shifts in the Liquidator's case at the hearing of the matter. In the originating process and points of claim as originally filed, the Liquidator contended that the Consent Orders made by the Family Court, or the charging of the Property by the Consent Orders, constituted a voidable transaction. Further, the Liquidator invoked both the uncommercial transaction provisions and the unreasonable director-related transaction provisions of Pt 5.7B of the Corporations Act. 16 At the outset of the hearing, however, the Liquidator stated that he did not press his case based on the uncommercial transaction provisions. One legal and practical consequence of this was that it ceased to be an issue whether or not D Pty Ltd was insolvent at the time of the relevant transaction. The Liquidator also sought leave to amend his case to allege, in summary, that the parties created a charge by agreement on 4 December 2012 (the date when the Minutes of Proposed Consent Orders were signed) and that the charging of the Property pursuant to that agreement was an unreasonable director-related transaction. The Liquidator was granted leave to amend the originating process and points of claim to reflect these changes in his case. The Trustee in Bankruptcy and the Wife subsequently filed amended defences. 17 The amended originating process states that the application is made pursuant to ss 588FE, 588FF and 588FDA of the Corporations Act. The document states that it is an application for an order that the charge (as defined in paragraph 7B(iv) of the amended points of claim - see [19] below) is a voidable transaction pursuant to s 588FDA of the Act, and for orders pursuant to s 588FF(4) to recover the benefit for the creditors of D Pty Ltd. The relief sought in the amended originating process (apart from interest and costs and such other orders as the Court considers appropriate) is as follows: 1. A declaration that the charge is an unreasonable director related transaction within the meaning of section 588FDA of the Act in that it was constituted by the incurring of [D Pty Ltd] of an obligation to make such a payment, disposition or issue by [D Pty Ltd] to either or both of the [Trustee in Bankruptcy] and [the Wife] for their benefit and no reasonable person in [D Pty Ltd's] circumstances at that time would have entered into that transaction having regard to the detriment to [D Pty Ltd] and the benefits to the [Trustee in Bankruptcy] and [the Wife] in entering into it. 2. A declaration that the charge is void. 3. A declaration that the charge is unenforceable. 18 The amended points of claim is a concise document. It sets out details relating to the parties in paragraphs 1 to 6. These paragraphs are admitted in the responding pleadings. 19 The balance of the amended points of claim comprises paragraphs 7, 7A, 7B, 8-10 and 14 (paragraphs 11-13 having been omitted when the document was amended), which are in the following terms: 7. [D Pty Ltd] was at all material times prior to 7 December 2012 the legal and beneficial owner of two of three equal undivided shares in [the Property]. 7A. On 4 December 2012, [the Husband], [the Wife] and [D Pty Ltd] entered into a settlement agreement to settle proceedings in the Family Court of Australia, being proceeding no. … (the Agreement). 7B. There were terms of the Agreement that: (i) [The Husband] would cause to be erected a new dwelling for [the Wife] and [the Child]; (ii) Such dwelling was to have a market value of not less than $500,000; (iii) The property at [P Street, Suburb Q] was charged with payment of the costs of construction of the dwelling up to $300,000; (iv) The Property was charged with payment of any shortfall in the proceeds of sale of the [property at P Street, Suburb Q] (the Charge). 8. On 7 December 2012, the Family Court made consent orders (the Consent Orders) in Family Court of Australia proceeding no. … (the Family Court proceeding), which orders provided (inter alia) that: (i) [The Husband] would pay a sum of $500,000 into a trust account in the name of [the Wife] for the benefit of [the Wife]; (ii) of the said $500,000, an initial amount of $300,000 was to be paid from the net proceeds of sale by [C Pty Ltd] of the [property at P Street, Suburb Q]; and (iii) to the extent that the net proceeds of sale of the [property at P Street, Suburb Q] were less than $300,000, the shortfall was to be paid from the proceeds of sale of the Property. PARTICULARS The Consent Orders are in writing. A copy of them may be inspected at the offices of the Plaintiff's solicitors. 9. The effect of the Consent Orders was to give effect to the Agreement and the Charge within the meaning of s 588FDA(3)(b). 10. On a date presently unknown to the Liquidator, [C Pty Ltd] entered into a contract for the sale of the [property at P Street, Suburb Q], which sale settled on a date presently unknown to the Liquidator. PARTICULARS Particulars of the date of the sale of the property [at P Street, Suburb Q] and the date of the settlement of the sale will be provided after discovery. Unreasonable Director-Related Transaction 14. In the premises, the Charge is an unreasonable director-related transaction of [D Pty Ltd] within the meaning of section 588FDA of the Act. 20 The defence of the Trustee in Bankruptcy is styled "Defence to amended statement of claim". In response to paragraphs 7A and 7B of the amended points of claim, the Trustee in Bankruptcy pleads: 7A. As to paragraph 7A: (a) he admits that [the Husband], [the Wife], [C Pty Ltd] and [D Pty Ltd] agreed to a proposed minutes of orders (consent); (b) he says that the consent and the final orders made by Benjamin J on 7 December 2012 are different; (c) he says that the consent was not enforceable; (d) he otherwise denies paragraph 7A. 7B. As to paragraph 7B: (e) subject to production of the consent and reference to its full terms and effect at trial, he admits that there were terms substantially similar to those set out in paragraph 7B; (f) he otherwise denies paragraph 7B. 21 In paragraph 11 of his defence, the Trustee in Bankruptcy pleads that D Pty Ltd was a party to the Family Court Proceeding; the Consent Orders were made by the Family Court in exercise of jurisdiction under ss 79 and 90AE of the Family Law Act; the Family Court had jurisdiction under Pt VIIIAA of the Family Law Act to make orders against both D Pty Ltd and its property; and the Consent Orders were appropriate, reasonable, commercial and just and equitable having regard to various circumstances as set out in that paragraph of the defence. 22 Paragraph 16 of the defence is in the following terms: Further or in the alternative: (a) s 90AC of the [Family Law Act] provides that the power of the Family Court to bind third parties "has effect despite anything to the contrary in … any law of the Commonwealth, State or Territories"; (b) to the extent that there is inconsistency between s 90AC of the [Family Law Act] and s 588FF of the [Corporations Act], the former prevails; (c) in the premises, to the extent that there is inconsistency between the Consent Orders and the liquidator's rights under Part 5.7B of the [Corporations Act], the former prevails. 23 Part of paragraph 17 of the defence is directed to the Liquidator's original case (which sought to set aside the Consent Orders) and can be put to one side. The balance of paragraph 17 of the defence is as follows: Further or in the alternative: … (b) the Consent Orders were made by the Family Court of Australia in the exercise of jurisdiction under the [Family Law Act]; (c) the Consent Orders were made in relation to a matrimonial cause; (d) the Federal Court of Australia does not have jurisdiction under the [Family Law Act]; (e) the orders sought may give rise to inconsistent obligations: (i) obligations to comply with the Consent Orders; (ii) obligations to comply with orders of this court; (f) the orders sought would not promote comity between courts; … (h) in the premises, the Federal Court: (i) ought to decline to exercise jurisdiction; (ii) further or in the alternative, the Federal Court ought not to grant any relief in the exercise of its discretion. 24 In paragraph 18 of the defence, the Trustee in Bankruptcy seeks to rely on s 588FG(1) of the Corporations Act. 25 The Wife in her amended defence denies the allegation in paragraph 7 of the amended points of claim (that D Pty Ltd was the legal and beneficial owner of a share in the Property) and says that, at all material times before 7 December 2012, D Pty Ltd held its interest in the Property on constructive trust for the Husband. 26 In response to paragraphs 7A and 7B of the amended points of claim, the Wife pleads: 7A. She denies paragraph 7A and says further that: (i) [D Pty Ltd] did not enter into a settlement agreement as alleged or at all, and was not a party to, and did not execute or agree to be bound by any settlement agreement or minutes of consent which were entered into and executed by the [Wife] and [Husband] only; (ii) the minutes of consent between the [Wife] and [Husband] were not immediately binding on the [Wife] and [Husband], and were at all material times subject to approval by the Family Court of Australia before becoming binding; (iii) the [Wife] and [Husband] made application to the Family Court of Australia for approval of the minutes of consent, such application being heard on 7 December 2012; (iv) at the time that the [Wife] and [Husband] made application for approval, [D Pty Ltd] was a party to the said proceedings in the Family Court of Australia, and was represented by its legal practitioner [Ms L]; (v) [D Pty Ltd] consented to the orders being made in terms of the orders made 7 December 2012 ("the Orders"); (vi) in the premises [D Pty Ltd] did not enter into any settlement agreement as pleaded, rather it consented to the Orders being made in terms of the orders made 7 December 2012. 7B. She denies paragraph 7B and says further that: (i) save that she admits that the husband was to cause to be erected a new dwelling no smaller than a two bedroom unit in an area to be selected by her she denies paragraph 7B(i); (ii) save that she admits that a dwelling to be erected by or on behalf of the husband which was to have a market value of not less than $500,000 she denies paragraph 7B(ii); (iii) she denies paragraph 7B(iii) on the basis that [D Pty Ltd] was not a party to the terms of settlement and/or further or alternatively that the minutes of consent create no such charge as alleged or at all; (iv) she denies paragraph 7B(iv) on the basis that (a) the property was not so charged as [D Pty Ltd] was not a party to the terms of settlement, and (b) further or alternatively that the minutes of consent create no such charge as alleged or at all, and (c) further or alternatively that any lien or charge did not arise in respect of the property until such time as [D Pty Ltd] consented to the Orders being made on 7 December 2012, and coincidentally the Orders were made. 27 In paragraphs 15 and 16 of the Wife's amended defence she raises jurisdictional and discretionary matters which are similar to those raised by the Trustee in Bankruptcy. In paragraph 17 of the amended defence, the Wife relies on s 588FG(2) of the Corporations Act. 28 At the hearing of the application the following evidence was relied on: (a) the Liquidator relied on an affidavit of the Liquidator dated 25 January 2016; (b) the Trustee in Bankruptcy relied on an affidavit of Stefan De Palma sworn on 10 April 2016 and an affidavit of the Trustee in Bankruptcy sworn on 21 July 2016; (c) the Wife relied on two affidavits she had made, one dated 9 July 2014 (from the Family Court Proceeding) and one dated 20 July 2016. 29 There was no cross-examination of any of the deponents. The hearing took place over three days but occupying only part of each day.

Facts 30 The following statement of the facts is drawn from the affidavits referred to above. 31 At all material times, the Brother-in-law was a director and the secretary of D Pty Ltd. The sole shareholder of D Pty Ltd is C Pty Ltd. The sole shareholder of C Pty Ltd is the Brother-in-law. D Pty Ltd is the trustee of a discretionary trust. 32 On 5 April 2011, D Pty Ltd became the registered proprietor of two of three shares of the property at G Street, Suburb H (referred to in these reasons as the Property). 33 In June 2012, prior to issuing the Family Court Proceeding, the Wife registered caveats against certain properties registered in the name of C Pty Ltd and D Pty Ltd. These included the Property, which was registered in the name of D Pty Ltd. 34 On 27 June 2012, C Pty Ltd and D Pty Ltd applied under s 89A(1) of the Transfer of Land Act 1958 (Vic) for service of a notice under s 89A(3) of that Act seeking removal of the caveats. By two letters, both dated 28 July 2012, the Registrar of Titles gave notice seeking satisfaction of the requirements prescribed by s 89A(3) of the Act. 35 On 30 July 2012, the Wife commenced the Family Court Proceeding. The respondents to the proceeding were the Husband, the Brother-in-law, C Pty Ltd, D Pty Ltd, E Pty Ltd and F Pty Ltd. In her initiating application in the Family Court Proceeding, the Wife sought, among other things: (a) a declaration pursuant to s 78 of the Family Law Act that D Pty Ltd held on constructive trust for the Husband one half of its interest in certain properties (including the Property); (b) a declaration pursuant to s 78 of the Family Law Act that the Husband held his interest in certain companies (including D Pty Ltd) on constructive trust for himself and the Wife in equal shares. 36 On 30 July 2012, the Wife's solicitors sent two letters to the Registrar of Titles (in response to the notices referred to above) to the effect that proceedings were on foot in a court of competent jurisdiction to substantiate the claims of the caveator in relation to the caveats. The letters referred to the Family Court Proceeding. 37 On 4 September 2012, a Registrar of the Family Court made orders for the filing and service of affidavits in the Family Court Proceeding and for the exchange of certain documents and categories of documents. Limited discovery took place in the Family Court Proceeding. 38 The respondents to the Family Court Proceeding were initially represented by a firm of solicitors. However, on 24 September 2012, that firm filed a notice of ceasing to act in relation to the Husband and the Brother-in-law; and on 11 October 2012, the firm filed a notice of ceasing to act in relation to C Pty Ltd, D Pty Ltd, E Pty Ltd and F Pty Ltd. 39 On 17 October 2012, the parties to the Family Court Proceeding appeared before the Registrar and certain orders were made. 40 In October 2012, the Wife withdrew the caveats over certain properties, including the Property. 41 On or about 5 November 2012, Ms L, a solicitor, commenced acting on behalf of the respondents to the Family Court Proceeding. 42 On 4 December 2012, the Wife and the Husband signed the Minutes of Proposed Consent Orders. The document was in the following terms: Spousal Maintenance 1. That the respondent ("the husband") will pay to the applicant ("the wife") by way of periodic spousal maintenance an amount of $300.00 per week to help support the rent and bond and towards child maintenance. Property 2. The husband will cause to be erected a new dwelling no smaller than a two bedroom unit in an area or suburb to be selected by the wife to the market value of not less than $500,000.00. Such dwelling to be in the name of the husband's and wife's child … or to be held on Trust for and on behalf of the said [child] until such time as [the child] has attained the age of thirty years ([the child's] birthday being [date omitted]) of which the sum of $300,000 will be paid from the proceeds of the sale by [C Pty Ltd] of the property at [P Street, Suburb Q] (and the shortfall if any from the proceeds of the sale by [D Pty Ltd] of the development of the properties at [G Street, Suburb H]. 3. That the husband will transfer the registration of the … motor vehicle … to the wife absolutely. 4. That the wife will be responsible for payment of all her own running costs, registration and insurance in respect of the motor vehicle including the maintenance and servicing thereof. 5. That the husband will pay the sum of $20,000.00 in accordance with legal costs and disbursements payable by her. 6. Upon completion of this agreement that the wife will vacate … and move in to a rental property. 7. That the husband will use his best endeavours to obtain all necessary releases in respect of the debts of the company and any business and or occupation by him and otherwise indemnify the wife in relation to all and any such liabilities of the company and the business including but not limited to loans, trade creditors, tax liabilities and any penalties payable in respect thereof and any liabilities of the wife recently arising out of her involvement in the company, and or the business whensoever and howsoever arising. 8. The wife will remove any Intervention Order against the husband's brother, [Mr Katsaros] and will do so upon the execution of this agreement. 9. Upon completion of this agreement the wife will agree not to pursue or seek any claim or demand or interfere with the affairs of the husband or his business activities. 10. That subject to the due completion of this agreement the wife will withdraw any Caveats for and except in the case of the property situate at and known as [P Street, Suburb Q], and the funds arising therefrom shall be utilised for the purposes of the acquisition and building of the property referred to in paragraph 2 hereof. 11. Further and upon execution of this agreement the wife will discontinue any proceedings brought by her and being in respect of … 43 On 7 December 2012, a judge of the Family Court (Benjamin J) made the Consent Orders. These were in the following terms: UPON APPLICATION made to the Court AND UPON HEARING the Applicant wife in person and [Ms L] for the Respondents. IT IS ORDERED BY CONSENT 1. That the husband will pay the wife by way of spousal maintenance the sum of $300 per week, the first payment seen days from todays date. 2. That the husband will pay into a Trust Account in the name of the wife the sum of $500,000, the initial sum being in the sum of $300,000 to be paid from the proceeds of the sale of [C Pty Ltd] of [P Street, Suburb Q] (and any short fall on or about the proceeds of sale by [D Pty Ltd] in respect of property [G Street, Suburb H]. This money will be used to purchase a town house to be developed by or on behalf of the husband to the value of $500,000. It will be no smaller than a two bedroom home unit in an area or suburb to be reasonably selected by the wife. That property will be registered in the name of the wife but shall be accommodation for her and the child … until such time as [the child] has attained the age of thirty years, [the child's] birthday being [omitted], after which the home will [vest] absolutely in the wife. I note the agreement between the wife and the husband that the wife will execute an irrevocable will providing that she leaves the whole of her estate to the son and will re-execute that will if she enters into a defacto relationship or remarries). 3. That the husband will transfer the ownership of the … motor vehicle … to the wife and the wife will be responsible for payment for all of the running costs, registrations and insurance in respect of the motor vehicle including maintenance and service thereof. 4. That the husband will pay the sum of $20,000 which the wife will use to pay outstanding legal costs and disbursements, such payment to be paid within three months from the date of todays date. 5. That the wife shall be entitled to reside at … until such time as all of the following have occurred: (a) the [motor vehicle] has been transferred to her name and absolutely; (b) the husband has paid $20,000 for legal costs as referred to earlier; (c) the money is paid into the Trust Account; (d) that the property set out in order 2 is available for occupation by the wife; or (e) alternatively the wife is provided with alternative rental accommodation. 6. That the husband shall indemnify the wife in respect of all liabilities in regards to companies and businesses including and not limited to loans, trade creditors, tax liabilities, penalties payable, and shall use his best endeavours to obtain releases in respect of any such liabilities. 7. That all outstanding applications are dismissed and the proceedings are removed from the list of cases requiring determination and I note the Outline of Agreement contained in the documents signed by the parties initialled by them and dated todays date. 8. That pursuant to Rule 19.50 of the Family Law Rules 2004 (Cth) it was reasonable to engage Counsel to attend. IT IS NOTED (a) That the wife shall be responsible for payment of council rates, water rates, and all other expenses in respect of the maintenance of the new property to be developed and built pursuant to these orders upon taking occupation of that property. (b) That the wife no longer feels threatened by the husband will make such applications as are necessary to discharge any Intervention Order against him. (c) That the wife will not make any further claims against the husband's property pursuant to s81 of the Family Law Act 1975. (d) That the wife will withdraw caveats on properties, except in the case of the property [P Street, Suburb Q] and the caveat will be withdrawn upon the payment of the $300,000 referred to earlier in these orders. (e) That the proceedings of the husband against the wife and the wife against the husband and the wife against [Mr Katsaros], [C Pty Ltd, D Pty Ltd, E Pty Ltd and F Pty Ltd] are dismissed. (f) That the wife had received legal advice in relation to the agreement. 44 As indicated in the preamble to the Consent Orders, and confirmed in the judgment of the Family Court dated 9 December 2015 at [27], the respondents to the Family Court Proceeding (including D Pty Ltd) were represented by a lawyer (referred to as Ms L in the Family Court's judgment) when the Consent Orders were made. 45 In her affidavit sworn 20 July 2016, the Wife gives evidence that she agreed to the Consent Orders, having signed the Minutes of Proposed Consent Orders "in similar terms" on 4 December 2012; she entered into the Minutes of Proposed Consent Orders in good faith, having negotiated the terms of that document with the solicitor representing the respondents to the Family Court Proceeding; at the time the Consent Orders were made, she had no reasonable grounds for suspecting that the third, fourth, fifth or sixth respondents to the Family Court Proceeding (that is, C Pty Ltd, D Pty Ltd, E Pty Ltd and F Pty Ltd) were insolvent at that time or would become insolvent in the future; there was no information known to her which would have given any grounds for suspecting that the third, fourth, fifth or sixth respondents was insolvent at that time or would become so in the future; she provided valuable consideration with respect to the Minutes of Proposed Consent Orders and the Consent Orders as she gave up her rights to proceed against each of the respondents, discontinued the Family Court Proceeding and withdrew the caveats she had over properties owned by the third and fourth respondents, pursuant to paragraph 10 of the Minutes of Proposed Consent Orders and as noted in notation (d) of the Consent Orders. 46 Following the making of the Consent Orders, the Wife withdrew the caveats over several other properties of C Pty Ltd and D Pty Ltd. 47 On 10 July 2014, the Wife brought an application in the Family Court for enforcement of the Consent Orders. 48 On 7 August 2014, a sequestration order was made against the estate of the Wife. The first defendant to the present proceeding was appointed the trustee in bankruptcy of her estate. At the time of his appointment, he was not aware of the existence of D Pty Ltd. He states in his affidavit that he accepted his appointment as trustee and the vesting of property in him in good faith. 49 On 22 August 2014, C Pty Ltd and D Pty Ltd were placed into liquidation. Mr J and Mr K were appointed the liquidators of the companies. Mr K subsequently ceased to be a liquidator of these companies and Mr J (referred to in these reasons as the Liquidator) is now the sole liquidator of each company. The relation-back day, for the purposes of the relevant provisions of the Corporations Act, is 22 August 2014. 50 The Property has been sold and some of the proceeds are held by the Liquidator.

Family Court judgment of 9 December 2015 51 On 9 December 2015, Benjamin J made orders and published reasons (the Reasons) in respect of several questions arising in the Wife's application for enforcement of the Consent Orders: Megalos & Katsaros. The Trustee in Bankruptcy was joined as the seventh respondent to the Family Court Proceeding. In the Reasons at [4] and [5], the Husband is referred to as Mr B Katsaros and the Brother-in-law as Mr Katsaros. I have referred to them in the same way in these reasons. 52 The Reasons recorded at [1] that this was a dispute between the Trustee in Bankruptcy and the liquidators of C Pty Ltd and D Pty Ltd. At [2] of the Reasons, his Honour noted that real property owned by C Pty Ltd and D Pty Ltd had been sold, and the Trustee in Bankruptcy claimed that the net proceeds of sale of the properties were secured in favour of the Wife and as such were payable to the Trustee in Bankruptcy. 53 At [7] of the Reasons, it was noted that the Trustee in Bankruptcy contended that the effect of the Consent Orders or, in the alternative, the agreement on which those orders were based, was to create an equitable charge or an equitable lien in favour of the Wife over the proceeds of sale of the property at G Street, Suburb H (that is, the Property). 54 The key section of the judgment of present relevance is that dealing with the alleged equitable interest at [102]-[131]. In this section of the Reasons, his Honour stated, in part: The alleged equitable interest 102. It is the case on behalf of the Trustee in Bankruptcy that the orders create an equitable interest in favour of the wife in relation to G Street, Suburb H: By way of an equitable charge arising from the terms of [that order]. 103. It was submitted, and I accept, that interest arose at the time the order was made. The companies were represented at the time the orders were made and consented to those orders. For the reasons I have set out as follows I am satisfied that the Liquidators took the property subject to the subsisting and existing equitable interests of the wife created by the orders of 7 December 2012. 104. In her proceedings the wife had joined the companies, the subject of the liquidation, and asserted that they were either properties of the husband or at least in part his alter ego. 105. The wife compromised her proceedings in relation to the broader entitlements that she may or may not have had under s 79 of the Family Law Act on the basis of the terms contained in order 2 of the December 2012 orders. 106. At that time D [Pty Ltd] owned G Street, Suburb H which was divided into those three lots. A proper construction of the meaning of order 2 is that the husband would pay the sum of $500,000 into a trust account to enable the construction of a home for the wife to the value of $500,000 (subject to conditions). The initial sum of $300,000 was to be paid from the proceeds of the sale by C [Pty Ltd] of property at P Street, Suburb Q. 107. If there was any shortfall then that was made up out of the proceeds of sale by D [Pty Ltd] in respect of the then whole property at G Street, Suburb H which was then sub-divided into three properties. 108. Therefore as a party to that settlement, F Holdings (sic) created either an equitable charge or an equitable lien on the net proceeds of sale after any registered mortgage at that time, of those properties and presumably less the sub-division costs and less the legal fees, agents' commissions and the like on the sale. … 110. Pursuant to the earlier agreement, the wife asked the Court to note that she would withdraw the caveats on the properties except in relation to P Street, Suburb Q which caveat would be withdrawn upon the payment of $300,000 referred to earlier in the orders. 111. By reasons of that agreement at least C [Pty Ltd] (as owner of that P Street property) acknowledged that the wife had a caveatable interest and was entitled to use that to secure her interest in that property. 112. Having regard to the matters contained in the wife's affidavit this settlement was prepared by lawyers for the companies and for the husband and the brother-in-law. It was clear from the agreement and orders that there was an intention by all parties to create security for the wife. 113. This is not a re-agitation of proceedings pursuant to s 79 of the Family Law Act; this was simply an interpretation of the order given the circumstances that have followed since that time and in the light of an enforcement application. … 115. The orders are being enforced against [D Pty Ltd] through the Liquidators as that company by way of the December 2012 consent orders and underlying agreement gave that lien or charge. 116. I am satisfied that the consent order and/or agreement created an equitable charge and/or an equitable lien. As such I will make the orders as sought by the Trustee in Bankruptcy. … 119. This is simply an analysis of the orders that the parties themselves asked the court to make. This application is not intended to change the status of those orders but merely to reflect what it is that those orders mean from an objective point of view. 120. There is no issue that the wife's property and her rights in respect of enforcement of orders vested in the trustee once she became a bankrupt. In Official Trustee in Bankruptcy v Mateo [2003] FCAFC 26 the Full Court of the Federal Court comprising of Wilcox, Branson and Merkel JJ stated that:- … the effect of a transfer order under s79 of the Family Law Act is to vest in the beneficiary of the order [an] equitable [estate] in the property interest that is the subject of the order … 121. In this case this was not a transfer order but it did create what is likely to be a charge. … … 123. Given this analysis of the law, which I accept, I am satisfied that whilst the order did expressly refer to the payment out of the proceeds of sale, and although not specifically asserted, I am satisfied that the effect of the orders, to which the companies were parties, give rise to an equitable charge in respect of the proceeds of sale subject to any registered mortgage on the property at that time and subject to the normal expenses of sale such as real estate agent's commission and legal costs of the sale etc. 124. I also accept that a lien may also arise in circumstances where there is such a promise of payment and the property is specifically identified. (Emphasis added.) 55 The orders made by Benjamin J on 9 December 2015 included: 2. The Court declares that the property at G Street, Suburb H (namely G Street, 1 and 2 I Street, Suburb H) were appropriated in favour of the applicant wife to discharge [the Husband's] obligations pursuant to amounts respectively attributed under order 2 made 7 December 2012 and is thereby charged with the satisfaction of that obligation. 3. Pursuant to the provisions of the Bankruptcy Act 1966, the Court declares that all monies received by the liquidator for the D Pty Ltd and C Pty Ltd (the third and fourth respondents) in relation to the sale of G Street Suburb H (namely G Street, 1 and 2 I Street, Suburb H) are held in trust for the benefit of the seventh respondent as trustee for the bankrupt estate of the applicant wife.

Relevant legislative provisions 56 Part 5.7B of the Corporations Act deals with the recovery of property or compensation for the benefit of creditors of an insolvent company. The key provisions of present relevance are s 588FDA, s 588FE(1) and (6A), s 588FF(1)(h)-(j) and (4), and s 588FG(1) and (2) of the Corporations Act, which provided as follows at the time of the transaction relied on by the Liquidator (4 December 2012): 588FDA Unreasonable director-related transactions (1) A transaction of a company is an unreasonable director-related transaction of the company if, and only if: (a) the transaction is: (i) a payment made by the company; or (ii) a conveyance, transfer or other disposition by the company of property of the company; or (iii) the issue of securities by the company; or (iv) the incurring by the company of an obligation to make such a payment, disposition or issue; and (b) the payment, disposition or issue is, or is to be, made to: (i) a director of the company; or (ii) a close associate of a director of the company; or (iii) a person on behalf of, or for the benefit of, a person mentioned in subparagraph (i) or (ii); and (c) it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to: (i) the benefits (if any) to the company of entering into the transaction; and (ii) the detriment to the company of entering into the transaction; and (iii) the respective benefits to other parties to the transaction of entering into it; and (iv) any other relevant matter. The obligation referred to in subparagraph (a)(iv) may be a contingent obligation. Note: Subparagraph (a)(iv) - This would include, for example, granting options over shares in the company. (2) To avoid doubt, if: (a) the transaction is a payment, disposition or issue; and (b) the transaction is entered into for the purpose of meeting an obligation the company has incurred; the test in paragraph (1)(c) applies to the transaction taking into account the circumstances as they exist at the time when the transaction is entered into (rather than as they existed at the time when the obligation was incurred). (3) A transaction may be an unreasonable director-related transaction because of subsection (1): (a) whether or not a creditor of the company is a party to the transaction; and (b) even if the transaction is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency. 588FE Voidable transactions (1) If a company is being wound up: (a) a transaction of the company may be voidable because of any one or more of subsections (2) to (6) if the transaction was entered into on or after 23 June 1993; and (b) a transaction of the company may be voidable because of subsection (6A) if the transaction was entered into on or after the commencement of the Corporations Amendment (Repayment of Directors' Bonuses) Act 2003. … (6A) The transaction is voidable if: (a) it is an unreasonable director-related transaction of the company; and (b) it was entered into, or an act was done for the purposes of giving effect to it: (i) during the 4 years ending on the relation-back day; or (ii) after that day but on or before the day when the winding up began. 588FF Courts may make orders about voidable transactions (1) Where, on the application of a company's liquidator, a court is satisfied that a transaction of the company is voidable because of section 588FE, the court may make one or more of the following orders: … (h) an order declaring an agreement constituting, forming part of, or relating to, the transaction, or specified provisions of such an agreement, to have been void at and after the time when the agreement was made, or at and after a specified later time; (i) an order varying such an agreement as specified in the order and, if the Court thinks fit, declaring the agreement to have had effect, as so varied, at and after the time when the agreement was made, or at and after a specified later time; (j) an order declaring such an agreement, or specified provisions of such an agreement, to be unenforceable. … (4) If the transaction is a voidable transaction solely because it is an unreasonable director-related transaction, the court may make orders under subsection (1) only for the purpose of recovering for the benefit of the creditors of the company the difference between: (a) the total value of the benefits provided by the company under the transaction; and (b) the value (if any) that it may be expected that a reasonable person in the company's circumstances would have provided having regard to the matters referred to in paragraph 588FDA(1)(c). 588FG Transaction not voidable as against certain persons (1) A court is not to make under section 588FF an order materially prejudicing a right or interest of a person other than a party to the transaction if it is proved that: (a) the person received no benefit because of the transaction; or (b) in relation to each benefit that the person received because of the transaction: (i) the person received the benefit in good faith; and (ii) at the time when the person received the benefit: (A) the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and (B) a reasonable person in the person's circumstances would have had no such grounds for so suspecting. (2) A court is not to make under section 588FF an order materially prejudicing a right or interest of a person if the transaction is not an unfair loan to the company, or an unreasonable director-related transaction of the company, and it is proved that: (a) the person became a party to the transaction in good faith; and (b) at the time when the person became such a party: (i) the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and (ii) a reasonable person in the person's circumstances would have had no such grounds for so suspecting; and (c) the person has provided valuable consideration under the transaction or has changed his, her or its position in reliance on the transaction. 57 Also relevant are the definitions of "close associate", "party", "relative" and "transaction" in s 9 of the Corporations Act which were in the following terms: close associate of a director means: (a) a relative of the director; or (b) a relative of a spouse of the director. party, in relation to a transaction that has been completed, given effect to, or terminated, includes a person who was a party to the transaction. relative, in relation to a person, means the spouse, parent or remoter lineal ancestor, child or remoter issue, or brother or sister of the person. transaction, in Part 5.7B, in relation to a body corporate or Part 5.7 body, means a transaction to which the body is a party, for example (but without limitation): (a) a conveyance, transfer or other disposition by the body of property of the body; and (b) a security interest granted by the body in its property (including a security interest in the body's PPSA retention of title property); and (c) a guarantee given by the body; and (d) a payment made by the body; and (e) an obligation incurred by the body; and (f) a release or waiver by the body; and (g) a loan to the body; and includes such a transaction that has been completed or given effect to, or that has terminated. 58 As has been noted in a number of cases, s 588FDA(1)(c) substantially adopts the language used to identify an "uncommercial transaction" under s 588FB. That provision provided: 588FB Uncommercial transactions (1) A transaction of a company is an uncommercial transaction of the company if, and only if, it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to: (a) the benefits (if any) to the company of entering into the transaction; and (b) the detriment to the company of entering into the transaction; and (c) the respective benefits to other parties to the transaction of entering into it; and (d) any other relevant matter. (2) A transaction may be an uncommercial transaction of a company because of subsection (1): (a) whether or not a creditor of the company is a party to the transaction; and (b) even if the transaction is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency. 59 In relation to s 588FB, the authors of Ford, Austin & Ramsay's Principles of Corporations Law (LexisNexis Butterworths, as at December 2015) observed: When considering whether s 588FB extends to a particular transaction the court is directed by the Acts Interpretation Act 1901 (Cth) s 15AA to prefer a construction which will promote the purpose or object of the provisions about voidable transactions. The purpose or object is to prevent a depletion of the assets of a company which is being wound up by certain transactions entered into within a specified limited time before the winding up, usually transactions at an undervalue: Demondrille Nominees Pty Ltd v Shirlaw (1997) 25 ACSR 535; 15 ACLC 1716 (Full Court, Fed C of A) applied in McDonald v Hanselmann (1998) 28 ACSR 49, discussed (1998) 16 C&SLJ 214. 60 In Crowe-Maxwell v Frost (2016) 91 NSWLR 414 (discussed below), it was stated at [65] that the same observations may be made with respect to s 588FDA.

Applicable principles 61 The principles applicable to the unreasonable director-related transaction provisions of the Corporations Act were recently considered in Crowe-Maxwell v Frost (2016) 91 NSWLR 414 at [67]-[92] by Beazley P (with whom Macfarlan and Gleeson JJA agreed). Beazley P at [70] referred to the judgment of Gleeson J in Smith (in his capacity as liquidator of Action Paintball Games Pty Ltd) (in liq) v Starke (No 2) (2015) 109 ACSR 145; [2015] FCA 1119 and adopted the following principles from her Honour's judgment: (a) impropriety or breach of director's duty is not necessary to establish an unreasonable director-related transaction (at [104]); (b) the inquiry under s 588FDA(1)(c) is concerned with the reasonableness of the company's conduct, objectively assessed (at [104]-[105]); (c) the inquiry under s 588FDA(1)(c) is conducted by reference to the company's circumstances, encompassing all relevant matters (at [107]); (d) normal commercial practice is a relevant but not determinative matter in conducting the s 588FDA(1)(c) inquiry (at [108]); and (e) a transaction of derivative benefit only can still be for the benefit of the company (at [110]). 62 In Crowe-Maxwell v Frost, Beazley P cited with approval the passages set out below from Weaver v Harburn (2014) 103 ACSR 416; [2014] WASC 227 and Vasudevan v Becan Constructions (Australia) Pty Ltd (2014) 41 VR 445. 63 In Weaver v Harburn, McLure P made the following observations as to what is required to satisfy s 588FDA(1)(c): [91] The test of unreasonableness in s 588FDA of the Act is objective; it is what a reasonable person in the company's circumstances may be expected not to do. The 'company's circumstances' encompass all relevant matters, starting with its status as a company and what flows from that; its controllers, shareholders, business and other activities; and the facts and circumstances of, and surrounding, the transaction. [92] The matters in para (c)(i), (ii) and (iii) of s 588FDA(1) are mandatory relevant matters in the evaluative assessment of what is objectively unreasonable. The 'any other relevant matter' requirement in para (c)(iv) recognises that relevance depends on the facts and circumstances of the particular case. [93] The only insolvency related elements (ie necessary conditions) of a voidable unreasonable director-related transaction are that the company is being wound up and the transaction was entered into within four years of the relation-back day. Otherwise, the relevance and/or weight to be given to the fact, or risk, of insolvency depends on the facts … a transaction may, like an unfair loan, be so objectively unreasonable that the financial position of the company at the time of entry into the transaction is not relevant. In other circumstances, the transaction may be unreasonable solely or primarily because of the financial condition of the company at the time of the transaction. 64 In Vasudevan v Becan Constructions (Australia) Pty Ltd, which was concerned with the question whether there was an unreasonable director-related transaction where a company agreed to assume joint liability for obligations owed by a director to a third party, and to grant a mortgage securing performance of that liability, Nettle JA (as his Honour then was) made the following observations: [23] … the natural and ordinary meaning of a requirement that something be for 'for the benefit of' a person is that it be 'for the advantage, profit or good' of the person. So, in this context, just as moneys paid by A to B to discharge C's indebtedness to B would ordinarily be conceived of as paid to B for the benefit of C, so too the incurrence by A of obligations to B in order pro tanto to relieve C of his obligations to B would naturally and ordinarily be conceived of as being for the benefit of C. [24] … the natural and ordinary meaning of 'for the benefit of' accords to the objective of the section of preventing directors stripping benefits out of companies to their own advantage. Conversely, given the ease with which an errant director might channel benefits from a company under his charge to another company in which he is financially although not legally or equitably interested, there is every reason to suppose that Parliament intended not to confine the meaning of the expression to something in the nature of an equitable interest. (Footnote omitted.) 65 In Crowe-Maxwell v Frost, Beazley P stated at [74] that, given the similarities between s 588FDA(1)(c) and s 588FB, authorities concerning "uncommercial transactions" are also of assistance in identifying circumstances that may constitute "unreasonable director-related transactions". Her Honour considered a number of those authorities at [75]-[79]. 66 Further, in Crowe-Maxwell v Frost at [89]-[92], Beazley P considered the onus of proof in relation to unreasonable director-related transactions. Her Honour stated at [89]: A common thread in the uncommercial transaction cases is that, where there is limited evidence of the nature or purpose of a transaction, but the surrounding circumstances show it to be a departure from normal commercial practice and to raise inferences as to a lack of benefit to the company, detriment caused to the company, or benefit accruing to other parties, absent some commercial explanation, courts may infer the transaction was uncommercial, without requiring the liquidator to prove its precise uncommercial nature. The same may be said with respect to the identification of unreasonable director-related transactions. 67 Paragraphs (h)-(j) of s 588FF(1) each provide for orders to be made in relation to an agreement constituting, forming part of, or relating to, the voidable transaction. In such cases, the court's order will alter a legal relationship between the company and another person, to the benefit of the company and to the detriment of the other person; for this reason it will be appropriate for the company to be a party to the proceedings initiated by the liquidator: New Cap Reinsurance Corp Ltd v AE Grant (2009) 257 ALR 740 at [17] per Barrett J; see also Assaf et al, Voidable Transactions in Company Insolvency (LexisNexis Butterworths, 2015), at [8.39]. 68 Different views have been expressed as to whether s 588FF(1) confers a discretion or, rather, a jurisdiction. The view that s 588FF(1) confers a discretion was assumed or held in: BP Australia Ltd v Brown (2003) 58 NSWLR 322 at [157], [171] (Spigelman CJ, Mason P and Handley JA agreeing); Ansell Ltd v Davies (2008) 219 FLR 329; [2008] SASC 203 at [52] (Doyle CJ, Anderson and David JJ agreeing); and New Cap Reinsurance Corp Ltd v AE Grant (2009) 257 ALR 740 at [59] (Barrett J). See also Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd (2011) 81 NSWLR 47 at [244], [258]-[261] (Young JA). On the other hand, the view that the provision confers a jurisdiction was taken by Einstein J in Cashflow Finance Pty Limited (in liq) v Westpac Banking Corporation [1999] NSWSC 671 at [569]; by Nicholas J in Cussen v Sultan (2009) 74 ACSR 496; [2009] NSWSC 1114 at [24]-[30] and by Flick J in Kazar, in the matter of Frontier Architects Pty Limited (2010) 81 ACSR 158; [2010] FCA 1381 at [28]. See Assaf et al, supra, at [8.43]. To the extent that it is necessary for the determination of the present matter, I consider s 588FF(1) to confer a discretion, at least where, as here, the relief sought is declarations under s 588FF(1)(h) and (j). This reflects the terms of the provision and the view expressed in the appellate authorities to which I have referred. 69 A number of cases have considered the application of voidable transaction provisions (in particular, ss 120-122 of the Bankruptcy Act) in circumstances where there have been orders made for the alteration of property interests under the Family Law Act: see, eg, Re Baxter; Ex parte The Official Receiver v Baxter (1986) 10 FCR 398; Re Sabri; Ex parte Sabri v O'Brien (1995) 60 FCR 131; Official Trustee in Bankruptcy v Higgins (2000) 109 FCR 1; and Official Trustee in Bankruptcy v Mateo (2003) 127 FCR 217. 70 In Official Trustee in Bankruptcy v Higgins, Tamberlin J, after setting out relevant passages from Re Baxter and Re Sabri, stated at [19], [21]-[22]: 19. I accept that strictly speaking it might be said that there is no conflict between the order sought in the Federal Court and the consent orders … … 21 However, as Davies J pointed out in the passage I have cited from Re Sabri; Ex parte Sabri v Brien, on their face, the consent orders and any order requiring the retransfer of the property by the respondent give at least an appearance of conflict which should be avoided if possible. The consent orders in this case were made pursuant to s 79 of the Family Law Act which requires the Court to exercise a discretion before making the orders. Although the orders were consent orders they were not simply a matter of course or a mere administrative action but they involved the approval of the Court: s 79(2). It cannot be said that the Court, in making the orders, was engaged in an executive exercise. The Court in making the orders was exercising a judicial discretion in the exercise of federal jurisdiction with respect to matrimonial causes. 22 … as a matter of discretion, for the reasons given by Davies J in Re Sabri; Ex parte Sabri v Brien it is desirable in this case not to [make an order under s 121 of the Bankruptcy Act] where … the Family Court has power to both set aside or vary the order under s 79A and to exercise jurisdiction under the Act. Such a course will avoid the appearance of conflicting orders between the two courts. 71 His Honour then stated that, although there had not been a motion to transfer the proceeding to the Family Court under the applicable provision, having heard the submissions, he was satisfied that such a transfer should be ordered. 72 In Official Trustee in Bankruptcy v Mateo, the Full Court of this Court considered the question whether an alteration of the interests in property owned by a person, who later becomes bankrupt, by a consent order made under s 79 of the Family Law Act is a "transfer of property by a person … to another person" within the meaning of those words in ss 120 and 121 of the Bankruptcy Act. It was held that such an alteration of interests in property was outside the purview of ss 120 and 121 of the Bankruptcy Act: see at [100], [104] per Branson J, at [126], [135]-[136] per Merkel J; see also at [64] per Wilcox J.

Disposition 73 The Liquidator contends that on 4 December 2012 the Wife, the Husband and D Pty Ltd agreed to settle the Family Court Proceeding on terms which included the creation of a charge over the Property, and that the charging of the Property was an "unreasonable director-related transaction" of D Pty Ltd within the meaning of s 588FDA of the Corporations Act. The Liquidator's submissions can be summarised as follows: (a) For the purposes of Pt 5.7B of the Corporations Act, a "transaction" in relation to a body corporate means a transaction to which the body is a party, and includes, inter alia, a conveyance, transfer or other disposition by the body of property of the body, a payment made by the body and an obligation incurred by the body, whether or not such a transaction has been completed, given effect to or terminated: see the definitions of "transaction" and "party" in s 9 of the Corporations Act. (b) Relevantly, for the purposes of s 588FDA, a transaction may be an unreasonable director-related transaction of a company if it is a payment made by the company, a conveyance, transfer or other disposition of property of the company or the incurring by the company of an obligation to make such a payment or disposition: s 588FDA(1)(a). (c) The creation of a security over a company's property is a transfer or disposition of property for the purposes of Pt 5.7B of the Act: Re Ashington Bayswater Pty Ltd (in liq) [2013] NSWSC 1008 at [55]. (d) Section 588FDA(3)(b) provides that a transaction may be an unreasonable director-related transaction even if the transaction is given effect to, or is required to be given effect to, because of an order of an Australian court. (e) The relevant transaction in the present case was the charging or encumbering of the Property to secure the Husband's obligation to the Wife under the agreement of 4 December 2012 and the Consent Orders. (f) For the purposes of s 588FDA, the relevant payment or transfer must be made to a director or "close-associate" of a director of the company, or a person on behalf of, or for the benefit of, a director or such close associate: s 588FDA(1)(b). A "close associate" of a director means a relative of the director or a relative of a spouse of the director: see the definition of "close associate" in s 9 Corporations Act. For the purposes of the Corporations Act, "relative" in relation to a person means the spouse, parent or remoter lineal ancestor, child or remoter issue, or brother or sister of the person: see the definition of "relative" in s 9 Corporations Act. In the present case, the relevant close associate is the Husband, who is the brother of the Brother-in-law, the director of the Company. (g) The language and elements of s 588FDA are virtually identical to those of s 588FB. See the observations of Sifris J in Golden Heritage Golf Pty Ltd v Sun (in liq) (recs and mgrs apptd) (2016) 113 ACSR 550; [2016] VSC 167 at [34] and Davies J in Super Art Australia Pty Ltd v Foden [2014] FCA 1168 at [59]. The statutory description of uncommercial transactions and unreasonable director-related transactions in ss 588FB(a) and 588FDA(1)(c) respectively directs primary attention to a balancing of benefit and detriment: Golden Heritage Golf Pty Ltd (in liq) (recs and mgrs apptd) v Sun at [58]. See also Tosich Construction Pty Ltd (in liq) v Tosich (1997) 78 FCR 363 at 367. (h) In the present case, the relevant enquiry is into whether a reasonable person, in D Pty Ltd's circumstances, would not have agreed to the charging of the Property to secure the Husband's obligations to the Wife under the 4 December 2012 agreement and the Consent Orders. (i) Given the similarities between s 588FDA(1)(c) and s 588FB, authorities concerning "uncommercial transactions" are of assistance in identifying circumstances that may constitute "unreasonable director-related transactions": Lewis (as liq of Doran Constructions Pty Ltd) (in liq)) v Doran (2005) 219 ALR 555 at [136] per Giles JA; Golden Heritage Golf Pty Ltd v Sun at [51]. See also Capital Finance Australia Ltd v Tolcher (2007) 245 ALR 528 at [129] per Gordon J. (j) By the agreement dated 4 December 2012, or otherwise at a point in time prior to the making of the Consent Orders, D Pty Ltd pledged the Property as security for the performance of the Husband's obligations under paragraph 2 of the agreement. (k) On 9 December 2015, Benjamin J declared that the Property was charged with satisfaction of the Husband's obligations, and that all moneys received by the Liquidator in relation to the sale of the Property were held on trust for the benefit of the Trustee in Bankruptcy. In the Reasons, his Honour drew a plain distinction between the prior agreement, on the one hand, and the subsequent orders giving effect to the agreement, on the other: see [108], [110], [112], [113] and [116] of the Reasons (set out at [54] above). (l) The transaction for the purposes of s 588FDA was the charging of the Property to secure the Husband's liability to the Wife under the agreement, and under the Consent Orders. There is no question that this was a "transaction" in the relevant sense in that it was both a transfer or disposition of an equitable interest in property (within the meaning of s 588FDA(1)(a)(ii)) and the incurring of an obligation within the meaning of s 588FDA(1)(a)(iv). Moreover, it was a transaction of D Pty Ltd for the purposes of that section. (m) The fact that the transaction was embodied in, and became enforceable as, orders of the Family Court is no answer to the Liquidator's claim because s 588FDA(3)(b) provides that a transaction may be an unreasonable director-related transaction because of subsection (1) even if the transaction is given effect to, or is required to be given effect to, because of an order of an Australian court. (n) There is no question that the Husband is a close associate of D Pty Ltd within the meaning of s 588FDA(b)(ii). The detriment to D Pty Ltd caused by the transaction for the purposes of s 588FDA(1)(c)(ii) was the encumbering, and ultimately the loss of, its rights in the Property. On the other hand, the Husband (being the brother of the director) derived a benefit from the transaction, within the meaning of s 588FDA(1)(c)(iii), in that property of D Pty Ltd became charged to secure his obligations to the Wife under the settlement agreement. The Wife, being another party to the transaction within the meaning of s 588FDA(1)(c)(iii), also received a benefit by the securing of the Husband's obligations to her. (o) By contrast, D Pty Ltd derived no benefit whatsoever from the transaction. The Trustee in Bankruptcy seeks to contradict this by his assertion that, as a result of the Consent Orders, D Pty Ltd received: (i) a forbearance by the Wife to make any further claims in respect of the properties owned by C Pty Ltd and D Pty Ltd; (ii) the final resolution of all claims by the Wife against C Pty Ltd and D Pty Ltd and in respect of the properties held by them (including the Property); and (iii) the final resolution of the Family Court claims. (p) It is important to note that the claim made by the Wife with respect to the Property was a claim for a declaration under s 78 of the Family Law Act to the effect that D Pty Ltd held its interest in the Property as trustee pursuant to a "constructive trust" for the Husband, who in turn held his interest for her pursuant to a "constructive trust". This was a claim for a declaration as to existing property rights. The Wife made a separate claim under s 79 of the Family Law Act for an adjustment of her and her Husband's existing rights in the pool of matrimonial assets. That claim could only affect the Property to the extent that it was first found that the property was held on trust for the Husband. In the absence of such a finding, there was no scope for an order under s 79 to affect the Property. (q) In any event, there is no evidence to support any genuine claim by the Wife against D Pty Ltd or the Property, other than mere unsupported assertions in her caveat and her initiating application. There is no material to demonstrate how either of the claimed constructive trusts came into existence. The Wife's affidavit material does not in any way support their existence. Moreover, the assertion is inconsistent with the fact that D Pty Ltd was trustee of a discretionary trust. The property of the trust, including the Property, was held on the trusts provided for in the trust deed. The beneficiaries of the trust had no proprietary interest in the trust property, only a right against the trustee to compel due performance of its duties as trustee. Nor is there any evidence of forbearance by the Wife from bringing any claims she might have against D Pty Ltd. Her claims were against her Husband. The claim which she asserted against the Property was in truth a claim against her Husband's alleged interest in it under an asserted constructive trust. Weighing the benefits which accrued to the Husband and the Wife under the settlement agreement against the corresponding detriment to D Pty Ltd leads to the conclusion that the transaction was unreasonable within the meaning of s 588FDA. 74 I accept that, if a charge was created over the Property, this involved a disposition of property by D Pty Ltd within s 588FDA(1)(a). I am also prepared to accept that any such disposition was made to a person as described in s 588FDA(1)(b). The disposition may be taken to have been made to the Wife, as the person benefiting from the charge, and to have been of benefit to the Husband (being a close associate of a director). The provision of the security may be taken to have benefited the Husband by facilitating resolution of the proceeding. 75 However, in my view, for the reasons that follow, the Liquidator has not established that a charge was created by a settlement agreement between the parties or that the charging of the Property pursuant to any such settlement agreement was an "unreasonable director-related transaction" of D Pty Ltd within the meaning of s 588FDA of the Corporations Act. 76 First, insofar as the Liquidator relies on the Minutes of Proposed Consent Orders as recording an agreement between the relevant parties creating a charge over the Property, this must be rejected. The document is signed only by the Wife and Husband. It is not signed on behalf of D Pty Ltd. There is no sufficient basis to infer that D Pty Ltd was party to the agreement recorded in the Minutes of Proposed Consent Orders. I do not think the fact that the same solicitor was acting for all the respondents to the Family Court Proceeding, and negotiated its terms with the Wife, provides a sufficient basis to draw such an inference. In any event, even if the Minutes of Proposed Consent Orders had been signed on behalf of D Pty Ltd, I do not think the document evinces an intention to create a charge independently and in advance of the making of consent orders by the Family Court. Rather, I think the document evinces an intention to propose orders to the Court in the terms set out therein. The fact that there are significant differences between the Minutes of Proposed Consent Orders and the Consent Orders underlines the point that it was always possible that the Court would not make orders in the terms proposed by the parties. Specifically, the differences between the terms of the Minutes of Proposed Consent Orders and the Consent Orders were: (a) the Minutes of Proposed Consent Orders provided that the Husband would erect a new dwelling to the market value of not less than $500,000, whereas the Consent Orders provided for the Husband to pay $500,000 into a trust account in the name of the Wife, this money to be used to purchase a townhouse to be developed by or on behalf of the Husband; (b) the Minutes of Proposed Consent Orders provided for the dwelling to be in the name of the Child or to be held on trust for the Child until the Child attained 30 years, whereas the Consent Orders provided for the townhouse to be registered in the name of the Wife, but to be used for accommodation for her and the Child until the Child attained 30 years, after which the home would vest absolutely in the Wife. 77 Secondly, while it may be inferred that, at some point in the period 4 to 7 December 2012, D Pty Ltd agreed to orders in substantially the same terms as the Consent Orders actually made by the Family Court on 7 December 2012 (as it was represented at the hearing on 7 December 2012 when the Consent Orders were made), it is not established that the parties (including D Pty Ltd) reached an agreement which created a charge independently and in advance of the making of any consent orders. The parties did not enter into a written settlement agreement. There is no document which contains an agreement to create a charge over the Property on the terms set out in the Consent Orders. On the state of evidence before me, I would infer that any agreement between the parties was merely to the Court making consent orders as proposed by the parties. On this analysis, while a charge over the Property was created by the making of the Consent Orders, no charge was created by agreement between the parties in advance of the making of the Consent Orders. Put another way, any agreement between the parties to resolve the proceeding was provisional on the Court making orders as proposed by the parties. The matter was not resolved unless and until the Court made such orders. It follows that no charge was created separately and in advance of the making of the Consent Orders. 78 The Liquidator relied on s 588FDA(3)(b) of the Corporations Act, which is set out in [56] above. However, I do not think this assists the Liquidator in the present case. Section 588FDA(3)(b) is concerned with a situation where a company gives effect to a transaction because of an order of the court. For example, where a company enters into a contract and a court orders specific performance of the contract, it may be said that the performance of the contract by the company involves the company giving effect to the transaction (the contract) because of the court order. In the present case, for the reasons given above, I do not accept that the company (D Pty Ltd) entered into a relevant transaction (eg, an agreement to create a charge) before the making of the Consent Orders. It follows that s 588FDA(3)(b) does not have a role to play. 79 It is true that Benjamin J in the Reasons referred to the "consent order and/or agreement" creating an equitable charge or equitable lien (see [116] of the Reasons; see also [112]). However, the overall thrust of the Reasons is that the Consent Orders created the equitable charge or equitable lien. I respectfully agree with this view. 80 Thirdly, in any event, in order to qualify as an unreasonable director-related transaction, it needs to be established that it may be expected that "a reasonable person in the company's circumstances would not have entered into the transaction", having regard to the matters referred to in s 588FDA(1)(c) (set out in [56] above). The Liquidator contends that a charge was created as a term of a settlement agreement between the parties (including D Pty Ltd) and that D Pty Ltd derived no benefit from this transaction. However, the evidence does not establish that the alleged transaction was of no benefit to D Pty Ltd. Settlement of the Family Court Proceeding may well have been of benefit to D Pty Ltd. The Wife had joined D Pty Ltd to the proceeding and made claims in relation to property registered in its name. The evidence before me includes a copy of an affidavit filed by the Wife on 30 July 2012 in the Family Court Proceeding which provided at least some basis for her contentions which, if correct, would have resulted in declarations being made affecting property registered in the name of D Pty Ltd. No contrary evidence has been filed by the Liquidator. Further, the evidence does not enable an assessment to be made of the extent of the detriment to D Pty Ltd of entering into the transaction. I note that it was merely providing a second level of security for the obligations of the Husband. Another matter to which regard is to be had is the "respective benefits to other parties to the transaction of entering into it" (s 588FDA(1)(c)(iii)). The Wife and the Husband were parties to the transaction. The evidence does not enable an assessment to be made of the extent of the benefits to the Wife or Husband of entering into the transaction. As for other relevant matters (s 588FDA(1)(c)(iv)), the evidence does not enable a detailed assessment to be made. Taking these matters into account, the Liquidator has not established that it may be expected that a reasonable person in D Pty Ltd's circumstances would not have entered into the alleged transaction. 81 Fourthly, the declarations sought by the Liquidator in his amended originating process and amended points of claim are directed to the charging of the Property pursuant to a term of a settlement agreement. The Liquidator does not seek declarations directed at the Consent Orders themselves. In circumstances where the Consent Orders themselves create a charge over the Property (as Benjamin J held), the declarations sought by the Liquidator would conflict, or appear to conflict, with the Consent Orders, being orders made by another superior court in the Australian legal system. In these circumstances, I do not think it would be appropriate to make the declarations sought. I note that, if I had been of the view that the elements of the definition of "unreasonable director-related transaction" were made out, I would have been inclined to transfer the proceeding to the Family Court. But, for the reasons I have given, I do not consider the elements to be made out. Although reference was made in the submissions to the possibility of transfer, there was no application before me to transfer the proceeding. 82 I note that in the course of reply submissions, senior counsel for the Liquidator submitted that the Liquidator did not want to be "locked out" from contending that the charge arose from the Consent Orders. The difficulty, however, with this contention is that Consent Orders do not constitute a transaction "of the company" for the purposes of s 588FDA(1): see Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557; [2007] NSWCA 191 at [97], [101]-[102] per Giles JA, at [211]-[212] per Ipp JA, at [236] per Basten JA. 83 For these reasons, the Liquidator has not made out his case in relation to s 588FDA. 84 The conclusion I have reached above makes it unnecessary to consider a number of other issues raised in the parties' submissions. In particular, it is unnecessary to consider the limitation on the Court's power in s 588FF(4) and whether the elements of s 588FG are established.

Conclusion 85 For these reasons, the application is to be dismissed. I will also make an order that the parties provide written submissions on costs. I certify that the preceding eighty-five (85) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.

SCHEDULE OF PARTIES VID 83 of 2016 Defendants Fourth Defendant: MR KATSAROS