Abdi and Trustees of the Bankrupt Estate of Abdi

[2020] FamCA 313

FAMILY COURT OF AUSTRALIA

ABDI & TRUSTEES OF THE BANKRUPT ESTATE OF ABDI [2020] FamCA 313

FAMILY LAW – SUMMARY DISMISSAL – Where Orders made under section 79 of the Family Law Act 1975 (Cth) were made without jurisdiction – Where those orders are voidable – Where the section 79A application has no prospect of success – Order for summary dismissal.

Bankruptcy Act 1996 (Cth) ss. 30, 120, 121
Family Law Act 1975 (Cth) ss. 45A, 71A, 79, 79A, 90D

Kettle & Green [2014] FamCAFC 98

APPLICANT: Ms Abdi

RESPONDENTS:	Trustees of the Bankrupt Estate of Mr Abdi
FILE NUMBER:	SYC	7706	of		2019

DATE DELIVERED: 1 May 2020

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 29 April 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Coulton

SOLICITOR FOR THE APPLICANT: Brander Smith McKnight Lawyers

COUNSEL FOR THE RESPONDENT: Ms Walker

SOLICITOR FOR THE RESPONDENT: Mellor Olsson

Orders

IT IS ORDERED

1. That the wife’s Further Amended Application lodged 21 April 2020 be accepted for filing.

2. That the Further Amended Application, seeking orders pursuant to section 79A of the Family Law Act 1975 (Cth) (“the Act”) be dismissed pursuant to section 45A of the Act.

3. That the respondents’ application for costs is reserved to be determined in Chambers.

4. That in the event that either party wishes to file any written submissions in relation to costs, those submissions are to be filed by 4pm on 8 May 2020.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Abdi has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 7706 of 2019

Ms Abdi

Applicant

And

Trustees of the Bankrupt Estate of Mr Abdi

Respondents

REASONS FOR JUDGMENT

1. On 14 November 2019 Ms Abdi (“the applicant”) filed an application in the Sydney Registry of the Family Court of Australia seeking orders in the following terms:

   1.That the wife be appointed Trustee for sale of the property situate at B Street, Suburb F, NSW … and do all acts and things and execute all documents necessary to sell the property for the best price available in the market.

   2.That the proceeds of sale of the property be distributed in the following order and priority:

   a.         In payment of agent’s fees and conveyancing costs;

   b.         In discharge of the mortgage;

   c.In payment of a sum enough to discharge the amounts owing to the creditors of the Bankrupt Estate;

   d.In payment of the reasonable costs of the Trustees of the South Australian District Court proceedings;

   e.In payment of the remainder to the wife…

   3.That a declaration be made that the wife be entitled to retain all other property in her possession custody or control.

2. The named respondents in the application were the Trustees of the bankrupt estate of the husband.

3. The wife’s application was amended by an Amended Initiating Application filed 10 December 2019 to seek the following orders:

   1.That the property known as B Street, Suburb F… be transferred to the wife by way of settlement pursuant to s79 of the Family Law Act.

   2.That the Applicant Wife be liable for the mortgage on the property…

   3.That the Applicant Wife be declared the sole and beneficial owner of any superannuation her name.

   4.That the Applicant Wife be declared the owner in equity or in law of any other chattel in her possession or under her control including jewellery and furniture.

   5.That the Wife be declared the owner to any funds in bank accounts, property or assets in her possession and under her custody or control.

   6.The Applicant Wife have liberty to amend this Application once the Respondents provide full and frank disclosure of all matters pertaining to their claim for remuneration and legal expenses and administration of the bankrupt estate of the Husband including an account of alleged creditors of the bankrupt estate.

   7.That the respondents pay the wife’s costs.

4. On 14 January 2020 the respondents filed a response seeking, inter alia:

   That the proceedings be dismissed pursuant to s.45A of the Family Law Act 1974 [sic] or s.17A of the Federal Circuit Court Act 1999 as an abuse of process and/or on the basis that the Applicant has no reasonable prospect of success and/or pursuant to the principles of res judicata.

5. The respondents also sought the transfer of the proceedings to the Federal Circuit Court (“FCC”) in Adelaide where, as shall be explained, there had been a considerable history of litigation in relation to this matter.

6. On 28 February 2020, Registrar McNamara made orders transferring the proceedings to Adelaide.

7. The applicant seeks to review that decision and thus the application comes before me by way of hearing de novo.

8. Each of the wife and the respondents have made written submissions. The wife was given the opportunity to respond to the submissions of the respondents.

9. The matter was listed before me for mention on 21 April 2020 when I indicated to the parties that I proposed to hear both the review of the registrar’s decision as to venue and the respondent’s application to dismiss the wife’s application.

10. In the course of that mention, the solicitor then appearing for the wife confirmed that it was the wife’s case that she and the husband had entered into a Binding Financial Agreement (“BFA”) on 3 April 2013 and that they had also entered into consent orders for property settlement on 30 July 2013.

11. From this information alone, it can be seen that the matter has a convoluted history.

HISTORY

1. The wife, in affidavits sworn 8 November 2019 and 5 March 2020, provided some relevant history.

2. The history which follows is taken from the wife’s affidavits and from the judgment of Judge Heffernan delivered in the Federal Circuit Court on 19 August 2019.

3. The husband and the wife married in 1993 and finally separated in November   2012.

4. During their relationship, they acquired a number of properties.

5. In 1996 they purchased a business providing equipment to the retail sector. The business was run through a company D Pty Ltd. They were both engaged in the business.

6. In February 2003 the husband ceased to be a Director of D Pty Ltd.

7. On 18 January 2011, liquidators were appointed to D Pty Ltd. The liquidators commenced proceedings against the husband and the wife in the District Court of South Australia. The husband owed D Pty Ltd $649,276, the wife owed D Pty Ltd $62,521 and companies associated with the husband owed D Pty Ltd $36,121.

8. In November 2012, when their relationship ended, the husband and the wife owned three properties.

   ·    B Street, Suburb F (in the husband’s sole name)

   ·    E Street, Suburb F (in the husband’s sole name)

   ·    G Street, Suburb H (in joint names)

9. The wife and the husband each engaged solicitors to commence proceedings in relation to their property.

10. On 16 November 2012, the respondents gave notice that they intended to file for summary judgment in the District Court proceedings.

11. On 29 November 2012, the husband’s solicitors wrote to the wife’s solicitors in relation to proposed amendments to a BFA that had been prepared by the wife’s solicitors.

12. On 30 November 2012, the property at E Street, Suburb F was transferred to the wife for no consideration, said to be pursuant to a “Financial Agreement dated 28 November 2012”. The transfer was witnessed by the solicitors for the husband and the wife.

13. On 27 March 2013 the G Street property was transferred to the wife, the consideration stated to be “pursuant to a Financial Agreement dated [blank].” The wife’s signature on the transfer document was witnessed by her solicitor.

14. On 3 April 2013 the husband and the wife signed the BFA which purported to be pursuant to s90D of the Family Law Act 1975 (Cth). The agreement is not in evidence before me but the reasons for judgment of Judge Heffernan record that it provided for the transfer of the three real properties to the wife. The schedule to the agreement recorded that the husband had no other assets.

15. On 11 April 2013, lawyers for the respondents wrote to the wife’s solicitors stating their view that the BFA had been entered into for the purpose of defeating creditors and their intention to make an application to the Family Court of Australia (“the Family Court”) to set aside the BFA.

16. The next day, the wife’s solicitor, Mr M, wrote to the respondents’ lawyers advising that he no longer had instructions and specifically that he was not instructed to accept service.

17. On 23 July 2013, the husband’s solicitors forwarded to Mr M an application for consent orders to be filed in the Parramatta registry of the Family Court. Those documents were returned by Mr M the following day signed by the wife.

18. On the same day, 24 July 2013, the wife transferred the G Street property to Mr J and Ms K for a consideration of $428,000.

19. The application for consent orders, prepared by the solicitor for the husband, was filed on 26 July 2013. The answer to Question 14 of the application,

    Have the parties previously entered into a financial agreement, a Part VIIIAB financial agreement or a superannuation agreement under the Family Law Act or under any relevant State or Territory legislation?

    was “No”.

20. The answer to Question 19,

    Is there any person who may be entitled to become a party to the case under Subsection 79(10) or subsection 90SM(10) of the Act?

    was “No”.

21. Clearly, by 26 July 2013, the solicitors for the husband were on notice of the claim of the respondents.

22. The wife signed the “Statement of Truth of respondent” on 24 July 2013, as did her solicitor.

23. On 30 July 2013, consent orders were made which provided, inter alia, for the husband to transfer to the wife the properties at B Street, Suburb F and E Street, Suburb F.

24. On 16 December 2013, the wife transferred the property at E Street, Suburb F to Mr L for a consideration of $1,000,000.

25. On 12 June 2014, judgment was entered by the liquidators of D Pty Ltd against the husband for $748,828.26 plus costs.

26. The husband left Australia on 12 August 2014 and has not returned.

27. In December 2014, the wife put the property at B Street, Suburb F on the market for $2,600,000. The respondents, in the District Court of South Australia, sought and were granted orders restraining the wife from dealing with the proceeds of sale.

28. On 3 June 2015, a sequestration order was made against the husband.

29. On 15 March 2017 the respondents commenced proceedings in the Federal Circuit Court against the wife, seeking relief pursuant to sections 120 and 121 of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”).

30. The wife was represented by solicitors and counsel and defended those proceedings. An application was made on behalf of the wife to transfer the proceedings to the Family Court. That application was dismissed on 3 May 2018. The wife was ordered to pay costs.

31. In the proceedings under the Bankruptcy Act, the wife relied on the validity of the BFA. In his reasons for judgment, Judge Heffernan stated:

    3.The respondent contends that she has a defence to the Trustees’ claims on a number of grounds:

    a)Section 120 cannot operate because the transfers of the Suburb F properties were not transfers “by a person who later becomes bankrupt” but rather, were transfers made by operation of consent orders made in the Family Court;

    b)In the alternative, there was no transfer of property to which s.120 could operate because interest in all three properties had been transferred by operation of a Binding Financial Agreement;

    c)The transfers of the three properties were not for consideration less than market value but were part of a property settlement between the parties as set out in the Binding Financial Agreement and the consent orders; and

    d)Section 121 does not apply because the respondent at all times acted in good faith and could not have known or reasonably inferred a fraudulent intent on the part of the Bankrupt or that he was about to become bankrupt.

    (Emphasis added).

32. On 19 August 2019, Judge Heffernan made orders in the following terms:

    THE COURT DECLARES THAT:

    The transfer for the [the husband’s] interest in each of the B Street, Suburb F…, E Street, Suburb F…and G Street, Suburb H… is void as against the Trustees by operation of sections 120 and 121 of the Bankruptcy Act 1966 (Cth).

    THE COURT ORDERS THAT:

    a.The transfer of B Street, Suburb F from the [husband] to the [wife] is set aside.

    b.The [wife] do all things necessary to cause B Street, Suburb F to be registered in the name of [the Trustees].

    c.Pursuant to section 30 of the Bankruptcy Act 1966 (Cth), the [wife] account to the [Trustees] for:

    a.50% of the proceeds of sale of G Street, Suburb H; and

    b.The entirety of the proceeds of sale of the E Street, Suburb F.

    d.The [wife] pay to [the Trustees] an amount equal to any rent received and/or payable to [the wife] in relation to B Street, Suburb F in the period from 3 April 2013 to the date of judgment.

    e.[The wife] pay [the Trustees’] costs.

33. No appeal was lodged against the orders of Judge Heffernan and no stay has been sought.

THE PRESENT APPLICATION

1. The application filed on 14 November 2019 (“the s. 79 application”) was filed in the Sydney registry of the Family Court. The document, on its face contains no reference to the proceedings in the Parramatta Registry in 2013.

2. There are a number of omissions in the information provided by the wife in the application.

3. In answer to question 50a. of the application form, “Are there any existing orders…” the wife answered “Yes” and referred to orders made in the Federal  Circuit Court at Adelaide on 19 August 2019. There was no reference to the orders for property settlement made in the Family Court at Parramatta on 30 July 2013.

4. The answer to question 51 “Have the parties entered into a financial agreement…” is left blank, as is the answer to question 53 “Is any party currently bankrupt…”

5. On 21 April 2020, the wife filed a further amended application (“the  s.79A  application”) seeking relevantly the following orders:

   a.That the property known as B Street, Suburb F N.S.W. … (“the Suburb F property”) be transferred to the Applicant Wife by way of property settlement pursuant to s79A of the Family Law Act 1975 (Cth).

   b.That any Orders prior to the current proceedings relating to the Suburb F property are set aside or discharged under s79A of the Family Law Act 1975 (Cth).

6. By way of interim orders, the wife seeks:

   a.That proceedings regarding file number ADG 92/2017 in the Federal Circuit Court at Adelaide be stayed.

   b.That pending further order of this Honourable Court the Respondents be and hereby are restrained from enforcing the Orders made by the Federal Circuit Court on 19 August 2019 in Adelaide relating to File number ADG 92/2017.

   c.That a declaration be made that the Applicant Wife is entitled to bring the current proceedings under s79A of the Family Law Act 1975 (Cth).

   d.That pending further order the Wife have the sole use and occupation of [Suburb F]…

   e.That the Respondents provide full and frank disclosure of all matters pertaining to their claim for remuneration and legal expenses and administration of the bankrupt estate of the Husband including an account of alleged creditors of the bankrupt estate.

   f.[Costs].

7. In the course of submissions on 29 April 2020, counsel for the wife sought leave to amend the application again. That leave was refused.

8. The proceedings were adjourned on 21 April 2020 in order to allow the wife to amend her application. She did so by seeking to file the s.79A application on 21 April 2020. Although that application had not been filed when the matter came before me for determination, probably because the proceedings had been transferred to Adelaide on the orders of the registrar, it was treated as the operative application for the purpose of the s.45A application.

9. No formal notice had been given to the respondents of the application to amend again. The written submissions of counsel for the wife, filed on the morning of the hearing, alluded to the wife’s right to bring proceedings to set aside the BFA but did not foreshadow an application.

10. The wife has had ample opportunity to amend her application.

CONSIDERATION

1. The applications before me are the wife’s application to review the decision of the registrar to transfer the proceedings to Adelaide and the respondent’s application for summary dismissal. 

2. I propose to deal firstly with the summary dismissal application. If that is successful, the wife’s challenge to the change of venue is nugatory.

3. Section 45A (2) and (3) of the Family Law Act 1975 (Cth) (“the Act”) provides:

   (2)The court may make a decree for one party against another in relation to the whole or any part of a proceedings if:

   (a)the first party is defending the proceedings or that part of the proceedings; and

   (b)the court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceedings or that part of the proceedings.

   When there is no reasonable prospect of success

   (3)  For the purposes of this section, a defence or proceedings or part of proceedings need not be:

   (a)         hopeless; or

   (b)         bound to fail;

   to have no reasonable prospect of success.

4. Thus the question to be addressed is whether the wife’s application pursuant to section 79A has no reasonable prospect of success.

5. It is not a matter in dispute that, at the time the consent orders were made pursuant to section 79 of the Act, there was a BFA in existence binding the parties.

6. In those circumstances, by virtue of the operation of section 71A of the Act, Part VIII of the Act does not apply to the financial matters between the husband and the wife.

7. Thus when the husband and the wife applied for section 79 orders, the Court had no jurisdiction to make those orders.

8. In the case of Kettle & Green [2014] FamCAFC 98, the Full Court of the Family Court noted:

   It is well settled that the decision of a superior court, even if in excess of jurisdiction, is valid unless and until it is set aside ( Re: Macks; Ex Parte Saint (2000) 204 CLR 158). In DMW v CGW (1982) 151 CLR 491 the High Court determined that this principle applied to orders and judgments pronounced by the Family Court of Australia.

9. The section 79 orders are therefore voidable and can be set aside for want of jurisdiction.

10. Section 79A does not provide the basis for such an application.

11. The section 79A application is misconceived and has no prospect of success.

12. The application will be dismissed. There being no proceedings before the Court seeking final relief, it is not therefore necessary to deal with the issue of venue.

COSTS

1. The respondent seeks its costs of the section 79 and section 79A applications and the application pursuant to section 45A.

2. The application of the wife has been wholly unsuccessful.

3. In the event that the wife seeks to make submissions in relation to the respondent’s application for costs she should do so by 4pm on 8 May 2020.

I certify that the preceding sixty-nine (69) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 1 May 2020.

Associate:

Date:  01/05/2020