BELMONT and BRIDE

[2019] FCWA 59

JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA

ACT: FAMILY LAW ACT 1975

LOCATION: PERTH

CITATION: BELMONT and BRIDE [2019] FCWA 59

CORAM: O'BRIEN J

HEARD: 5 MARCH 2019

DELIVERED : Ex tempore

FILE NO/S: PTW 1929 of 2017

BETWEEN: MR BELMONT

Applicant

AND

MS BRIDE

Respondent

Catchwords:

PROPERTY - Practice and procedure - Where applicant for orders for alteration of property interests becomes bankrupt during course of proceedings - Where primary parties then reach agreement but required notice to trustee in bankruptcy not given.

Legislation:

Bankruptcy Act 1966 (Cth)
Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Category: Not Reportable

Representation:

Counsel:

Applicant	:	Self-Represented Litigant
Respondent	:	Mr Evans

Solicitors:

Applicant	:	Self-Represented Litigant
Respondent	:	Graeme A Ryan & Associates

Case(s) referred to in decision(s):

Aware Industries Ltd, Christopher Avery, Peter McCloskey, James Johnson, William Sterling and Allan Bounader v David Charles Robinson (1997) 75 FCR 600
Lincoln (Deceased) v Moore [2016] FamCA 547
Sloan & Sloan [2018] FamCA 610
Trent & Rowley [2014] FamCA 447

WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT - PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED

1The financial proceedings listed for trial today were commenced by the filing of an application by the husband on 27 March 2017 seeking the alteration of property interests, on both an interim and final basis. The wife filed a response on 12 May 2017. After the parties attended a conciliation conference in September 2017 the proceedings progressed towards a trial as quickly as could be accommodated by the Court.

2After the proceedings were listed for trial, at my direction the parties attended a status hearing on 15 February 2019. Neither party had complied with directions made requiring the filing of their Papers for the Judge prior to that hearing, but the relief sought by each of them was clarified.

3The husband confirmed that he sought orders in the terms of a Minute filed by him on 18 September 2018. In that Minute he sought the return to him of certain specified chattels, and the payment to him by the wife of the sum of $90,000 within five days of orders being made. He characterised that amount as being a sum which he alleges was transferred by the wife to an account under her sole control on the date of separation.

4The wife filed a Minute of Final Orders sought on 19 February 2019. She proposed orders which would require her to return to the husband a particular motor vehicle in her possession, and five of the 13 chattel items sought by him. Otherwise, she sought orders whereby each party would retain their own property and superannuation, and responsibility for their own liabilities.

5In short, on their papers neither party suggests that there is any property of substance available to be divided between them. The husband alleges that the wife misappropriated funds from his inheritance at the date of separation, and seeks to be repaid. In fact, he alleges that the wife must still have, in her possession but undisclosed, at least some of those funds. The wife denies the husband’s allegation other than in certain limited respects, and says that there is no money available to be repaid in any event.

6Those competing positions called squarely into question the utility of any trial for alteration of property interests, and I raised my concerns in that regard with both parties at the status hearing.

7Those concerns were only exacerbated when the husband then informed me (and, apparently for the first time, the lawyer for the wife) that he had recently entered into bankruptcy. He was unable to provide much in the way of detail regarding the progress of his bankruptcy. He told me that he had completed the necessary paperwork with the assistance of a [charitable] organisation and I inferred from what he told me that a debtor’s petition pursuant to s 55 (2) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) had been lodged.

8I raised with the husband the potential issues which would arise from that development. Counsel appearing for the wife, having been taken somewhat by surprise, was not in a position to make appropriate submissions at the status hearing but was placed squarely on notice of the need to be prepared to do so this morning.

9I made various procedural orders to ready the matter for trial if in fact a trial was to proceed. Those orders included orders requiring each party to comply with their duty of disclosure by 20 February 2019, and specifically requiring the husband to provide to the wife by that date copies of all documents related to his asserted bankruptcy.

10I enquired of the parties this morning as to whether there had been compliance with that order. I was told that there had been some limited compliance only, but counsel for the wife acknowledged that the only reasonable inference to be drawn from the materials provided is that the husband is now bankrupt.

11By way of update this morning the husband told me that he has not yet been informed of the appointment of a trustee, but expects to hear further in that regard shortly

12That series of events raised the issue of whether, regardless of other concerns I might properly hold as to the state of readiness of the matter, the trial could proceed as listed in any event.

13Pursuant to orders made at the status hearing, the primary parties have conferred this morning and have reached an agreement as to what orders they say should be made to finalise the proceedings. After some dialogue with me, however, they accept that for the reasons shortly to be set out, orders in terms of their intended agreement cannot be made today.

The Legal Principles and Procedural Requirements

14Pursuant to s 40(daa) of the Bankruptcy Act, a person who has presented a debtor’s petition in accordance with s 55 commits an act of Bankruptcy. Section 55 sets out the circumstances in which the Official Receiver must or may reject the debtor’s petition.

15Pursuant to s 57A of the Bankruptcy Act the petitioner is “deemed to become a bankrupt at the first instant of the day on which the petition is accepted by the Official Receiver”. Section 58 provides that where a debtor becomes bankrupt, and subject to limited exceptions, his or her property vests forthwith in the Official or registered Trustee. Section 59A provides that s 58 has effect subject to an order under part VIII of the Family Law Act 1975 (Cth) (“the Family Law Act”).

16Section 60 ss 2&3 of the Bankruptcy Act relevantly provide as follows;

…

(2)An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.

(3)If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.

17Section 60(5) defines an action to mean “any civil proceeding, whether at law or in equity.” Subsections 60(4) and (4A) define specific categories of actions which are expressly permitted to be continued by a bankrupt in his or her own name; those defined categories do not include proceedings under the Family Law Act.

18Accordingly, in a number of first instance decisions in the Family Court of Australia it has been held that subsections 60(2) and 60(3) apply to proceedings of the nature of the present case. [1]

[1] See the decisions of Gill J in Sloan & Sloan [2018] FamCA 610, Carew J in Lincoln (Deceased) v Moore [2016] FamCA 547; and Cronin J in Trent & Rowley [2014] FamCA 447.

19I respectfully agree with the analysis reflected in those decisions.

20Against that background the relevant provisions of the Family Law Act and the Family Law Rules 2004 (Cth) fall to be considered.

21Section 79(11) of the Family Law Act provides that if an application is made for an order under s 79 in proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, and after the application was made, but before it is finally determined, a party becomes bankrupt and

(a)the bankruptcy trustee applies to the court to be joined as a party; and

(b)the court is satisfied that the interests of the bankrupt’s creditors may be affected by the making of an order under s 79,

then the court must join the bankruptcy trustee as a party to the proceedings.

22Section 79(12) provides that if the bankruptcy trustee is a party to property settlement proceedings then, except with leave of the court (which is to be granted only in exceptional circumstances), the bankrupt party is not entitled to make a submission to the court in connection with any vested bankruptcy property.

23Rule 6.17(1) of the Family Law Rules provides that if a party to the proceedings is bankrupt that party must notify all other parties to the case in writing about the bankruptcy, must notify the bankruptcy trustee about the relevant case in accordance with r 6.18 and must notify the court in accordance with r 6.19.

24Rule 6.18 provides that the relevant notice to the bankruptcy trustee must be in writing and be given within seven days or as soon as practicable after the date on which the party becomes both a relevant party to proceedings and a bankrupt. The notice must also attach a copy of the application starting the relevant case, response (if any) and any other relevant documents, and state the date and place of the next court event.

25Similarly, r 6.19 provides that the required notice to the court must be in writing, be given within seven days of receipt as practicable after the date on which the party becomes both a relevant party and a bankrupt, and attach a copy of the notices given to the other parties and to the trustee in accordance with r 6.17(1)(a) and (b).

26The sections of the legislation referred to, and the rules, apply together to provide that in a case such as this one, where an applicant seeking orders for the alteration of property interests becomes bankrupt after proceedings are commenced:

(a)the bankrupt must give written notice of the bankruptcy to the other party to the proceedings in this court;

(b)the bankrupt must give written notice of the proceedings to his or her trustee, and provide copies of relevant court documents and notice of the next court event;

(c)the bankrupt must give written notice to the court confirming compliance with the requirement to give notice to the trustee and to other parties, and attaching copies of the notices given;

(d)with effect from the date upon which the party becomes bankrupt, the proceedings are stayed by operation of s60 of the Bankruptcy Act until the trustee makes a written election to prosecute or discontinue them; and

(e)the deeming provision in ss 60(3) of the Bankruptcy Act will take effect if the trustee does not make an election within 28 days after notice of the proceedings is served.

27The question of notice to the trustee was considered by the Full Court of the Federal Court of Australia in Aware Industries Ltd, Christopher Avery, Peter McCloskey, James Johnson, William Sterling and Allan Bounader v David Charles Robinson (1997) 75 FCR 600, where the court made the following observations;

Section 60(3) cannot be read as if the 28 day period runs from the day on which the trustee becomes aware of the existence of an action. That is not what the subsection says, and the two concepts – becoming aware of the existence of an action and becoming served with notice of it – are quite different. The second is a formal concept involving the notions familiar to lawyers of “notice” and “service”. The word “notice” is used in its strict sense. There must be a document which is a notification, and it must be served upon the trustee.

28In my view, proper compliance with r 6.18 of the Family Law Rules would constitute sufficient notice to meet the requirements of s 60 of the Bankruptcy Act, and potentially trigger the operation of ss 60(3).

Conclusion

29The affidavit filed most recently by the husband on 20 February 2019, notwithstanding that in most respects it did not comply with the limitations set upon it by paragraph 2 of my orders of 15 February 2019, was useful in that annexed to it was a copy of the debtor’s petition which the husband says he completed and lodged pursuant to s 55(2) of the Bankruptcy Act. The document annexed to the husband’s affidavit, however, does not clearly identify when it was lodged with the Australian Financial Security Authority. Nevertheless, I am told that it has been lodged.

30I do not know whether the debtor’s petition has been accepted or rejected. It follows that I do not know with certainty whether the husband is presently bankrupt, although as counsel for the wife sensibly concedes that is the clear inference to be drawn.

31It may therefore be that the substantive proceedings are already effectively stayed by operation of s 60 of the Bankruptcy Act. What can be said with confidence is that if the proceedings are so stayed, I cannot be satisfied that the operation of ss 60(3) of the Bankruptcy Act has been triggered by the passage of the required period of time since any notice was given to the trustee.

32What follows from all of that uncertainty is an inevitable conclusion that the trial listed for today simply could not proceed if the parties sought to do so, and that I cannot presently make the proposed consent orders.

33What is required is that the trustee be given the required notice of both the proceedings and the orders that are proposed to bring them to an end. The trustee will have the opportunity to either confirm that he or she consents to the proposed orders (in which case they can be made in chambers without further delay or expense) or that he or she wishes to adopt one of the other courses open, in which case further directions will be required.

34I will accept the Minute of Proposed Consent Orders for filing, while recording that orders will not be made in its terms in the absence of either positive consent from the trustee, or confirmation that the trustee does not oppose them. I record further that the husband has been provided with copies of the Rules with which I will order him to comply.

Orders

35There will be the following orders:

1.The trial listed to commence today be and is hereby vacated.

2.The husband must forthwith comply with rules 6.17, 6.18 and 6.19 of the Family Law Rules 2004 (Cth).

3.Until further order, the husband must provide to the solicitors for the wife copies of any and all correspondence received by him from the Australian Financial Security Authority, or any trustee in bankruptcy, as and when such correspondence is received.

4.The solicitors for the wife are at liberty to publish to the Australian Financial Security Authority and to any trustee in bankruptcy appointed to the husband copies of any documents filed in the proceedings to date, a copy of these orders, and the reasons for decision delivered today.

5.The substantive proceedings are adjourned for monitoring to Monday, 27 May 2019 at 10.00 am.

These reasons are the reasons for decision I delivered on 5 March 2019, edited in places but only as to correct grammatical errors and some infelicity of expression without variation to the substance thereof

I certify that the preceding paragraph(s) comprise the reasons for decision of the Family Court of Western Australia.

KM
Associate

11 MARCH 2019