Ejje & Ejje

[2002] FamCA 1003

[2002] FamCA 1003

FAMILY LAW ACT 1975

IN THE FULL COURT

OF THE FAMILY COURT OF AUSTRALIA                   Appeal No. EA 66 of 2002

AT SYDNEY  File No. SY 8055 of 1994

BETWEEN:

NAZIH   EJJE

Appellant Husband

- and -

SEHAM   EJJE

Respondent Wife

REASONS FOR JUDGMENT OF THE FULL COURT

BEFORE:  Finn, Coleman and Mullane JJ.

HEARD:  24 October 2002

JUDGMENT:  22 November 2002

APPEARANCES:

Mr Bernie of Counsel (instructed by Samir’s Multicultural Legal Services, PO Box 100, LAKEMBA   NSW   2195) appeared on behalf of the Appellant Husband.

Mr Johnston of Counsel (instructed by the Legal Aid Commission of New South Wales, 323 Castlereagh Street, SYDNEY   NSW   2000) appeared on behalf of the Respondent Wife.

APPEAL SUMMARY

MATTER:  EJJE

APPEAL NUMBER:          EA 66 of 2002 (SY 8055 of 1994)

CORAM:  Finn, Coleman and Mullane JJ
DATES OF HEARING:      24 October 2002
DATE OF JUDGMENT:     22 November 2002

CATCHWORDS: BANKRUPTCY – husband declared bankrupt by own petition - whether injunctions made to secure enforcement of property settlement orders sustainable – s 58(3) Bankruptcy Act 1966 – s 114(3) Family Law Act 1975

CASES: Clyne v Deputy Commissioner of Taxation and Others (1984) 154 CLR 589; Guirguis v Guirguis and Official Trustee in Bankruptcy (1997) FLC 92-726.

This was an appeal by the husband against orders made by Lawrie J.  The order, which is the subject of the husband’s appeal, is most conveniently explained after setting out the factual background to this matter.

In March 1998 Steele J made orders in proceedings between the husband and the wife which required the husband to pay to the wife $70,000 by way property settlement and which also restrained the husband from leaving Australia and required him to deposit his passport with the Registrar of the Sydney Registry of this Court, who was to retain the passport pending written notice from the wife that all moneys payable pursuant to Steele J’s orders had been paid. 

In June 1998 the husband was declared bankrupt on his own petition.  In October 2001 the husband filed an application seeking to vary the orders made by Steele J to provide that he be restrained from leaving Australia “except upon the approval of the Insolvency and Trustee Services Australia” and that his passport be released to the Insolvency and Trustee Services Australia.  Judicial Registrar Johnston dismissed the husband’s application in December 2001.

Thereafter the husband filed an application to review the decision of the Judicial Registrar.  That application was dismissed by Lawrie J on the basis that the he had not established any basis for the variation of Steele J’s orders.  It is Lawrie J’s order dismissing the husband’s application which is the subject of the husband’s appeal.

On appeal it was submitted for the husband that the effect of the Bankruptcy Act 1966 was to transfer the wife’s right to be paid by the husband to a right to prove a debt against the bankrupt’s estate, and thus the injunctions made by Steele J to secure enforcement of the husband’s liability to make a payment to the wife were no longer enforceable.

HELD in allowing the appeal and setting aside the restraining orders made by Steele J:

1. The Full Court held that once the husband was relieved by his bankruptcy of the obligation to pay the wife the sum of $70,000 by way of property settlement, the orders made by Steele J were no longer sustainable and must be discharged.  Clyne v Deputy Commissioner of Taxationand Others (1984) 154 CLR 589 applied.

1. The Full Court noted however that the discharge of the orders would not mean that the husband is free to leave Australia or to have possession of his passport.  There are provisions in the Bankruptcy Act 1966 which prevent the husband from leaving Australia without the consent of his Trustee in Bankruptcy or in certain circumstances (ss 139ZU and 272 of the Bankruptcy Act).  There is also a provision which requires the surrender of the husband’s passport to his Trustee (s 77 of the Bankruptcy Act).

Costs Certificates granted

REPORTABLE

Introduction

1. This is an appeal by the husband against orders made by Lawrie J on 4 July 2002.  The orders in question can most conveniently be described after we have set out the factual background to this matter.

1. On 11 March 1998, Steele J made orders in proceedings between the husband and the wife which required, amongst other matters, that by way of property settlement the husband should pay to the wife the sum of $70,000 within 28 days (Order 10).  His Honour’s orders further provided that pending payment of the sum of $70,000, the husband was (again, amongst other things), restrained from leaving Australia (Order 11(b)) and required to deposit his passport with the Registrar of the Sydney Registry of the Court, who was to retain the passport pending written notice from the wife that all moneys payable pursuant to Steele J’s orders of 11 March 1998 had been paid (Order 11(c)).

1. On 25 June 1998, Steele J made some further orders amending pursuant to the slip rule his orders of 11 March 1998.  Those amendments are not relevant for present purposes.

1. On 12 June 1998, the husband was declared bankrupt on his own petition.  (We understand that there has been no application to set aside, or other challenge to, the husband’s bankruptcy).

1. On 31 October 2001, the husband filed an application (together with a supporting affidavit) in the Sydney Registry of this Court seeking orders which would vary Order 11 of the orders made by Steele J on 11 March 1998 in the following way (at Appeal Book p.24):

   11.(b)By adding the words “except upon the approval of the Insolvency and Trustee Services Australia”.

   11. (c)By deleting the first four lines of the order and be substituted as follows:

   “That the Respondent (sic) current passport held with the Registrar of the Sydney Registry be released forthwith to the Insolvency and Trustee Services Australia”.

1. The husband’s application was opposed by the wife.

1. On 14 December 2001, Judicial Registrar Johnston dismissed the husband’s application.  We have not been provided with a copy of the Judicial Registrar’s reasons for judgment.

1. On 18 December 2001, the husband filed an application to review the decision of the Judicial Registrar.  That application was heard by Lawrie J on 22 February 2002.  Her Honour reserved her judgment.

1. On 4 July 2002, her Honour delivered her judgment and made an order dismissing the husband’s application for review of the Judicial Registrar’s decision.

1. In the course of her judgment, her Honour explained the husband’s case before her and her reasons for rejecting his application in the following terms:

   8.It was put on behalf of the husband that because he was now a bankrupt that the Family Court should no longer play any part in enforcing the orders.  He said that the injunction against leaving Australia and the holding of his passport were by way of enforcement of the orders of Justice Steele.

   9.The history of this matter is that shortly before the separation, the husband liquidated all the matrimonial assets and took the proceeds to Lebanon where he purchased two shops.  He has not complied with the order of Justice Steele.  He says now that the shops have been sold by his sister and he cannot pay the wife unless he goes to Lebanon in person to resolve “the dispute” which he claims he has with his sister.  He makes no suggestion for any alternative security for the payment of the sum ordered.  He has been advised by the Registry of the availability of Section 79A in the event that he can establish that he cannot comply with the orders.  He has made no such application.

   …

   11.This is not a matter where the wife is seeking any additional enforcement orders.  The orders themselves provide the practical security for the payment by requiring the husband to pay if he wishes to leave Australia.

   12.The husband has made no payment under the order.  He has sought to leave Australia before.  He says that he has an offer of a job in Saudi Arabia for which he needs to have his passport.  His evidence of this is an annexed photocopy of a printed form of contract in Arabic filled in with his name printed in English and the word “Supervisor” and “$4,000” filled in.  The original document has not been provided to the Court.  There is no evidence from the putative employer.  I am not satisfied that a job offer has been made.

   13.The husband has not established any basis for the variation of the order as sought in his application.

   14.The application for a review is therefore dismissed.

1. It is her Honour’s order of 4 July 2002 dismissing the husband’s application for a review which is the subject of this appeal.

1. The sole ground contained in the husband’s Notice of Appeal (which was filed on 23 July 2002) is that her Honour “failed to consider the effects of the provisions of the Bankruptcy Act”.

1. It became clear from the submissions of Counsel for the husband that what was being asserted by that ground of appeal was that the effect of the husband’s bankruptcy was that all unsecured debts of the husband, such as the debt to the wife for property settlement, had become debts provable in the bankruptcy and could no longer be enforced by the creditors. In support of this proposition, reliance was placed by Counsel for the husband on the provisions of s 58(3) of the Bankruptcy Act 1966 (Cth) and also on the decision of the High Court in Clyne v Deputy Commissioner of Taxation and Others (1984) 154 CLR 589.

1. Section 58(3) is in the following terms:

   s 58(3)Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:

   (a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or

   (b)except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.

1. The exceptions to s 58(3) have no relevance in the present case.

1. The passage from the joint judgment of Gibbs CJ, Murphy, Brennan and Dawson JJ in Clyne v Deputy Commissioner of Taxation on which particular reliance was placed by Counsel for the husband is as follows (at 594-595):

   The effect of the bankruptcy however is that the debtor is no longer obliged to pay his creditors; indeed he is disabled from doing so.  If he offered payment they could not safely accept it; their right is a right of proof against the estate.

1. In light of this statement by the High Court, it was submitted on behalf of the husband, that the scheme or effect of the Bankruptcy Act had transferred the wife’s right to be paid by the husband to a right to prove a debt against the bankrupt’s estate, and thus the orders or injunctions made to secure enforcement of the husband’s liability to make a payment to the wife were no longer sustainable.

Conclusion

1. Although not entirely free from doubt, we think that the better view must be that the orders of Steele J restraining the husband from leaving Australia and requiring him to surrender his passport were made pursuant to s 114(3) of the Family Law Act 1975, which is in the following terms:

   A court exercising jurisdiction under this Act in proceedings other than proceedings to which sub-section (1) applies may grant an injunction, by interlocutory order or otherwise (including an injunction in aid of the enforcement of a decree), in any case in which it appears to the court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the court considers appropriate.

1. But whatever the source of power for the orders in question, we think it clear that once the husband was relieved by his bankruptcy of the obligation to pay the wife the sum of $70,000 by way of property settlement, then having regard to what was said by the High Court in Clyne v Deputy Commissioner of Taxation concerning the effect of bankruptcy on the bankrupt’s obligations to his or her creditors, those orders (being Orders 11(b) and (c) of 11 March 1998) are no longer sustainable and must be discharged.

1. The discharge of those orders will not mean that the husband is free to leave Australia or to have possession of his passport. There are provisions in the Bankruptcy Act which prevent him leaving Australia without the consent of his Trustee in Bankruptcy or in certain circumstance, the Federal Court (see s 139ZU and s 272 of the Bankruptcy Act). There is also a provision which requires the surrender of his passport to his Trustee (see s 77 of the Bankruptcy Act). We propose to direct the Registrar to forward the husband’s passport to the Trustee in Bankruptcy.

1. Finally, we mention that we consider that there is no issue but that the husband had standing (notwithstanding his bankruptcy) to make the application for the discharge of the orders in question.  (See Guirguis v Guirguis and Official Trustee in Bankruptcy (1997) FLC 92-726).

Costs of the appeal

1. In light of the submissions received from both Counsel at the conclusion of the hearing of the appeal, we propose to grant both parties certificates under the Federal Proceedings (Costs) Act 1981 in respect of their costs incurred in the appeal.

Orders

1. That the appeal from the orders of the Honourable Justice Lawrie made 4 July 2002 be allowed.

2. That Orders 11(b) and 11(c) of the orders made by the Honourable Justice Steele on 11 March 1998 be set aside.

3. That the Registrar of the Family Court of Australia (Sydney Registry) is directed to forward the husband’s passport to the Official Trustee in Bankruptcy, care of the Insolvency and Trustee Service Australia, New South Wales Branch, 10^th Floor, 255 Elizabeth Street, Sydney, NSW, 2000.

4. That the Court grants to the Appellant Husband a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the Appellant Husband in respect of the costs incurred by the Appellant Husband in relation to the appeal.

5. That the Court grants to the Respondent Wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the Respondent Wife in respect of the costs incurred by the Respondent Wife in relation to the appeal.

I certify that the preceding  22   paragraphs
are a true copy of the reasons for judgment
of this Honourable Full Court

…………………………
Associate