BLAKE & BLAKE
[2011] FMCAfam 796
•17 August 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BLAKE & BLAKE | [2011] FMCAfam 796 |
| FAMILY LAW – Property – threshold issue – bankrupt spouse’s standing to bring application for property orders – application to vary a spousal maintenance order. |
| Family Law Act 1975, ss.74(2), (3), (5), (6), 79(5), 83(1A), 83(1A)(b) |
| Audet v Audet; Official Trustee in Bankruptcy (Intervener) (1995) FLC 92-607 Cummings v Clearmont Petroleum (1996) 185 CLR 124 In the Marriage of O’Neill (1998) 23 Fam LR 326 Pacelli v Hopkinson & Anor [2010] FMCAfam 1248 Rand v Rand (No.2) (2009) 41 Fam LR 668 |
| Applicant: | MS BLAKE |
| Respondent: | MR BLAKE |
| File Number: | MLC 11120 of 2009 |
| Judgment of: | Connolly FM |
| Hearing date: | 4 March 2011 |
| Date of Last Submission: | 15 April 2011 |
| Delivered at: | Melbourne |
| Delivered on: | 17 August 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr Nehmy of Counsel |
| Solicitors for the Applicant: | Hall & Wilcox |
| Counsel for the Respondent: | Mr Johns |
| Solicitors for the Respondent: | Carew Counsel Pty Ltd |
ORDERS
The application for modification of the spousal maintenance orders made on 11 December 2009 be listed for hearing on a date to be fixed.
IT IS NOTED that publication of this judgment under the pseudonym Blake & Blake is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 11120 of 2009
| MS BLAKE |
Applicant
And
| MR BLAKE |
Respondent
REASONS FOR JUDGMENT
The Proceedings
This judgment arises from the husband’s application in a case filed on 5 November 2010 seeking to discharge the interim spousal maintenance order made by consent on 3 February 2010 that he pay the sum of $5,300.00 per month commencing on 18 February 2010.
The husband’s application in a case filed on 5 November 2010 is supported by:
a)
an updated statement of financial circumstances filed on
5 November 2010; and
b)an affidavit by the husband filed on 5 November 2010.
When the matter came on for hearing in a duty list on 21 December 2010, the respondent wife sought to make submissions about the husband’s standing to bring the application whilst a bankrupt, to discharge the spousal maintenance order. Orders were then made on
21 December as follows:
i)all extant applications be adjourned to this Court on 4 March 2011 for hearing the threshold issue of whether the Applicant husband has the necessary standing to bring his application filed on 5 November 2011 (with an estimated hearing time of 1 day); and
ii)the party responsible for the payment of any fee including a setting down or hearing fee do pay or cause to be paid such of the Fees as shall be payable by that party in accordance with, and within the time specified in, the Federal Magistrates Regulations 2000.
When the matter came before the Court on the adjourned date of
4 March 2011, it became clear that it was unlikely to be reached, and both counsel sought to have the matter determined on written submissions. Accordingly, orders were made as follows:
i)Within 14 days the Applicant husband file and serve written submissions with respect to:
(a) the question of the husband’s standing to bring his application filed 5 November 2011;
(b) the question of the joining of any other parties (if any); and
(c) the appropriate future progression of the matter and/or orders sought by the parties.ii)Within 28 days the Respondent wife file and serve written submissions in response to the husband’s submissions pursuant to paragraphs 1 (a) to (c).
iii)Within 48 days the Applicant husband file and serve any written submissions in reply to the wife’s submissions pursuant to paragraph 2 hereof.
iv)Costs be reserved.
v)Pursuant to rule 21.15 of the Federal Magistrates Court Rules2001, the Court certifies that it was reasonable for the parties to employ an advocate.
vi)There be liberty to apply.
vii)The matter be adjourned to a date to be fixed.
Written submissions of the husband were filed pursuant to those orders on 18 March 2011. The written submissions by the wife, pursuant to those orders, were filed on 1 April 2011. The husband’s reply to the wife’s written submissions were filed on 15 April 2011.
The background
Prior to the orders of 21 December 2010, on 11 December 2009 the wife filed her initiating application together with an affidavit and statement of financial circumstances. The matter then came before the Court on
3 February 2010, when interim orders were made by consent for the husband to pay the spousal maintenance to the wife in the sum of $5,300 per month commencing on 18 February 2010. Orders were otherwise made for discovery, the husband to file responding material by 3 March 2010 and for the parties to attend a conciliation conference on 12 April 2010. The matter was otherwise listed for final hearing on 9 August 2010. Both parties were represented at the hearing. On 9 March 2010, the husband filed a response and affidavit and a financial statement. On 28 June 2010, the wife filed an application in a case and an affidavit seeking that the proceedings be adjourned to a date to be fixed pursuant to section 79(5) of the Family Law Act 1975. On 13 August 2010, interim orders were made adjourning the matter for mention on 21 December 2010. On 12 August 2010, the husband resigned as a director of [H] Pty Ltd and transferred his shareholding to
Mr H for no consideration. According to the husband’s financial statement filed on 9 March 2010, he remains an employee of that company and receives remuneration of approximately $80,000.00 per annum.
On 17 August 2010, the husband was declared bankrupt on his own petition. On 5 November 2010, the husband filed the current application and then the orders earlier referred to on 21 December 2010 and 4 March 2011 were made.
The parties’ submissions
The husband submitted that authority supports the view that despite bankruptcy, a bankrupt party has standing to bring or maintain proceedings under the Family Law Act 1975 (“the Act”) that are personal in nature. In broad terms, and as a matter of principle, bankruptcy is no bar to a bankrupt maintaining claims on his or her own behalf. Three cases are referred to: Audet v Audet; Official Trustee in Bankruptcy (Intervener) (1995) FLC 92-607, In the Marriage of O’Neill (1998) 23 Fam LR 326 and Pacelli v Hopkinson & Anor [2010] FMCAfam 1248 (17 November 2010).
The husband’s further submission was that the principle that proceedings are personal in nature and which do not affect the quantum of the bankrupt estate was recognised in Cummings v Claremont Petroleum NL (1996) 185 CLR 124. Thirdly, the bankrupt’s entitlement to be heard and his standing, albeit under and in relation to non-vested property under section 79A of the Act was considered in Pacelli v Hopkinson & Anor. It was held in this case a bankrupt party to a marriage had standing to be heard on matters concerning non-vested assets. Counsel for the applicant husband further submitted that pursuant to the Act, sections 74, 75 and 83, the bankrupt spouse, by virtue of being a party to the marriage, has standing to bring or maintain an application with respect to the maintenance of a party and that the 2005 amendments to the Act, including section 74(2) and 83(1A) provide for the bankrupt’s trustee to join or commence such an action on his application, and upon satisfying the Court that the interests of the creditors may be affected. He further submitted that these sections operate such that the trustee in bankruptcy may be joined as a party to the proceedings under the Act, section 74 “..where he or she so applies” and the Court is satisfied that “..the interests of the bankrupt’s creditors are affected by an order.” (Family Law Act 1975 section 74(2) and (5)). If the trustee is joined then the bankrupt is prevented from making submissions in the proceedings without lease of the Court (s.74(3) and (6)). In short, these amendments concern circumstances whereby property vested in the trustee may be affected.
The trustee is not a “party” pursuant to s.74. Subsection 75(4) of the Act provides that a trustee is not included in the definition of a party to the proceedings under section 74. A party is defined as a party to the marriage. Section 83(1A), it is submitted by the husband’s counsel, operates to expand the category of potential applicants to include the trustee in bankruptcy so that the application can be, but does not have to be, made at the initiative of the trustee. Section 83(1A)(b) allows the trustee in bankruptcy to bring an application to vary a spousal maintenance order at his or her initiative. It doesn’t, however, preclude a bankrupt spouse from making such an application. It is further submitted that nothing in those sections precludes a bankrupt party from making or continuing to make an application to vary a spousal maintenance order, and the provisions operate to enable a trustee to be joined or make an application in circumstances where creditors rights may be affected.
The submissions of the respondent wife rely on the general proposition that a bankrupt spouse will have no standing in property proceedings, as property is considered to have vested in the trustee in bankruptcy. Counsel for the wife refers to an exception to the general proposition is set out in a decision of the Full Court of the Family Court of Australia in Rand v Rand (No.2) (2009) 41 Fam LR 668. In Rand’s case, the Full Court held that the bankrupt had standing to issue an appeal in relation to intellectual property rights. The bankrupt was granted standing on the basis that the order which the husband was appealing had imposed obligations upon the husband personally rather than upon the property vested in the trustee in bankruptcy. It was then further submitted on behalf of the wife that the central issue in determining whether the husband has standing to bring his application is whether an order that the husband pays spousal maintenance is an obligation purely against the husband personally, or an obligation that affects property vested in the trustee in bankruptcy. Counsel for the wife submitted that when the Court is exercising jurisdiction pursuant to s.74 of the Family Law Act 1975 in spousal maintenance proceedings, the Court, amongst other things, is required to take into account pursuant to s.75(2)(b):
“(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(n) the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party.”
Counsel further submits that the application bought by the husband on
5 November 2010 therefore requires assessment of property that is vested in the trustee, and it is therefore submitted that he has no standing to bring the application, and such an application must be brought by the trustee in bankruptcy. Counsel for the wife points out that the husband, in his submissions, relies on the decision in Pacelli. In this matter, Federal Magistrate Burnett held that the bankrupt husband had standing to bring the application with respect to property that had not vested in the trustee, which, in the case of Pacelli was the parties’ superannuation. Counsel then goes on to argue that the current matter can be distinguished from Pacelli’s case on the basis that the Court is required to consider property and financial resources that have vested in the trustee when exercising discretion pursuant to section 75(2) of the Act. The Court must consider more than just the current income of the husband. Further, counsel submitted on behalf of the wife that section 83(1A)(b) of the Act requires the bankruptcy trustee to bring an application for modification of an existing spousal maintenance order. The husband asserts that the effect of section 83(1A)(b) is to extend the class of potential applicant to apply to modify a spousal maintenance order. The wife disputes that assertion. The wording of section 83(1A)(b), it is said by counsel, does not state that if there is a bankrupt party to a marriage, the Court’s jurisdiction under section 83(1) may be exercised by the bankruptcy trustee or by a party to the marriage. It only refers to the bankruptcy trustee. It is submitted that the wording of section 83(1A)(b) suggests that the intent of Parliament was to limit applications brought to modify spousal maintenance orders, in a case where there is a bankrupt party to the marriage, solely to application made by the bankruptcy trustee.
The law
Section 83(1A) of the Family law Act 1975 states as follows:
The court’s jurisdiction under subsection (1) may be exercised:
(a) in any case—in proceedings with respect to the maintenance of a party to the marriage; or
(b) if there is a bankrupt party to the marriage—on the application of the bankruptcy trustee; or
(c) if a party to the marriage is a debtor subject to a personal insolvency agreement—on the application of the trustee of the agreement.
Section 74(2) of the Family law Act 1975 states as follows:
Power of court in spousal maintenance proceedings
(1) In proceedings with respect to the maintenance of a party to a marriage, the court may make such order as it considers proper for the provision of maintenance in accordance with this Part.
(2) If:
(a) an application is made for an order under this section in proceedings between the parties to a marriage with respect to the maintenance of a party to the marriage; and
(b) either of the following subparagraphs apply to a party to the marriage:
(i) when the application was made, the party was a bankrupt;
(ii) after the application was made but before the proceedings are finally determined, the party became a bankrupt; and
(c) the bankruptcy trustee applies to the court to be joined as a party to the proceedings; and
(d) the court is satisfied that the interests of the bankrupt’s creditors may be affected by the making of an order under this section in the proceedings;
the court must join the bankruptcy trustee as a party to the proceedings.
Conclusions and findings
With respect to the issue of standing, the authorities submitted by both parties support the view that, despite bankruptcy, a bankrupt party has standing to bring an application under the Family Law Act 1975, or applications, that are personal in nature. In broad terms, and as a matter of principle, bankruptcy is no bar to a bankrupt maintaining claims on his or her own behalf. I agree with the submissions made by counsel for the applicant husband that proceedings that are personal in nature are those which do not affect the quantum of the bankrupt estate, and that principle was recognised in Cummings v Clearmont Petroleum (1996) 185 CLR 124.
It seems to me that the crux of the argument relies on the interpretation of section 83(1A)(b), which allows the trustee in bankruptcy to bring an application to vary a spousal maintenance order, at his or her initiative if there is a bankrupt party to the marriage. It doesn’t, however, preclude a bankrupt spouse from making such an application. I am satisfied that the Court’s jurisdiction under subsection 83(1A)(a) may be exercised in any case in proceedings with respect to the maintenance of a party to the marriage. And that is the case in this matter. It also provides, under subsection 83(1A)(b), if there is a bankrupt party, as there is in this case, then an application can be made by the bankruptcy trustee. Furthermore, in the circumstances of the current application, vested property will not be affected. While the Court is required to consider or take into account the matters set out in s.75(2), it does not mean that the application affects the vested bankruptcy property. The 2005 amendments do not expressly address the situation involving the bankrupt’s non-vested property and applications personal to the bankrupt. It is therefore the position that the previous legal principles which allow a bankrupt party to prosecute a matter personal to him remain undisturbed. I am satisfied further, that there is nothing in the Act to preclude the bankrupt party from making the application, and the Act is silent on the issue of proceedings personal in their nature, and as they do not affect the vested property, then the matter can proceed.
With respect to the issue of joining the trustee in bankruptcy and the Registrar of the Child Support Agency, it is clear from the letters which have been served on each, with the husband’s application, that neither have any interest in being involved. The matter should be listed for a hearing accordingly.
I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Connolly FM
Date: 16 August 2011
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