Etrard & Etrard & Ors
[2009] FamCA 167
•17 February 2009
FAMILY COURT OF AUSTRALIA
| ETRARD & ETRARD AND ORS | [2009] FamCA 167 |
| FAMILY LAW – Jurisdiction – where husband and wife commence s 79 property proceedings prior to commencement of Bankruptcy and Family Law Legislation Act 2005 – where husband becomes bankrupt after commencement of Bankruptcy and Family Law Legislation Act 2005 – whether Court has jurisdiction to make orders concerning property vested in Trustee of the husband’s property - for proceedings commenced on or before 18 September 2005 it is the Trustee’s application to be joined as a party and the joinder order by reason of which the s 4(1) amendments to the definition of “matrimonial cause” apply – where Trustee declines to make joinder application Family Court has no power to make order against vested property - by virtue of husband’s bankruptcy his debt to the Deputy Commissioner of Taxation is converted to a right to share in the distribution of the estate |
| Bankruptcy Act 1966 ss 35, 55, 58, 82, 115(2), 120, 121, Family Law Act 1975 (Cth) ss 79, 79A., 79(1)-(17), 79(5), Bankruptcy and Family Law Legislation Amendment Act 2005 ss 60, 60(1) (2), (3), 60(2)(c), 79(11), (12), (13) (14), (15), (16), (17), Pt II, s 1 Family Law Amendment Act 2005 (Cth) No 98 of 2005, s 79(10A) |
| Clyne v Deputy Commissioner of Taxation (1988) 154 CLR 589 Deputy Commissioner of Taxation and Kliman (2002) FLC 93-113 Trustee of the Property of G Lemnos, A Bankrupt and Lemnos and Lemnos [2009] FamCAFC 20 |
| APPLICANT: | Ms Etrard |
| FIRST RESPONDENT: | Mr Etrard |
| SECOND RESPONDENT: | N Etrard |
| THIRD RESPONDENT: | Trustee of the Property of Mr Etrard, a Bankrupt |
| FIRST INTERVENER: | Deputy Commissioner of Taxation |
| SECOND INTERVENER: | M Pty Limited |
| FILE NUMBER: | (P)NCF | 1315 | of | 1998 |
| JUDGMENT DELIVERED: | 17 February 2009 |
| CORRIGENDUM: | 26 February 2009 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Newcastle |
| JUDGMENT OF: | The Hon. Justice Ryan |
| HEARING DATES: | 12 February 2008, 23 June 2008 and written submissions |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Gersbach and Mr Austin |
| SOLICITOR FOR THE APPLICANT: | Slater & Gordon |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Hamilton |
| SOLICITOR FOR THE FIRST RESPONDENT: | Braye Cragg Solicitors |
| SOLICITOR FOR THE SECOND RESPONDENT AND SECOND INTERVENER: | Attwaters |
| COUNSEL FOR THE THIRD RESPONDENT: | Mr Levick |
| SOLICITOR FOR THE THIRD RESPONDENT: | Sally Nash & Associates |
| COUNSEL FOR THE FIRST INTERVENER: | Mr Lethbridge S.C. and Ms Burns |
| SOLICITOR FOR THE FIRST INTERVENER: | Australian Taxation Office |
CORRIGENDUM
IN THE FAMILY COURT OF AUSTRALIA
BETWEEN: MS ETRARD
Applicant
AND: MR ETRARD
First Respondent
AND ORS
JUDGE:RYAN J
DATE OF ORDER: 17 FEBRUARY 2009
WHERE MADE: NEWCASTLE
CORRIGENDUM 26 FEBRUARY 2009
On page 6 paragraph 13 of the Reasons for Judgment delete the word “[first name]” and insert the word “[first name]”.
On page 18 paragraph 28 of the Reasons for Judgment delete “item 60(2)(c)” and insert “item 60(3)(c)”.
On page 18 paragraph 29 of the Reasons for Judgment delete “item 60(2)(c)” and insert “item 60(3)(c)”.
I certify that the preceding 3 numbered paragraphs
are a true copy of the Corrigendum to the Reasons
For Judgment herein of the Honourable Justice Ryan.
Associate:
Dated: 26 February 2009.
Orders
On the occasion these proceedings are next before this Court, the parties shall present any further submissions and proposed minutes of orders as to:
(a)the course to be taken in relation to the future conduct of the extant s 79 FLA proceedings; and
(b)the form of order to give effect to the findings contained in these reasons; and
(c) which, if any of the injunctive and other interlocutory orders should continue and those which should be discharged; and
(d)as to costs.
IT IS NOTED that publication of this judgment under the pseudonym Etrard & Etrard and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: (P)NCF1315 of 1998
| MS ETRARD |
Applicant
And
| MR ETRARD |
First Respondent
And
| N ETRARD |
Second Respondent
And
| TRUSTEE OF THE BANKRUPT ESTATE OF MR ETRARD, A BANKRUPT |
Third Respondent
And
| DEPUTY COMMISSIONER OF TAXATION |
First Intervener
And
| M PTY LIMITED |
Second Intervener
REASONS FOR JUDGMENT
I have previously delivered two judgments in these proceedings regarding a series of interlocutory issues. This judgment, which concerns jurisdiction and standing, should be read in the context of my earlier decisions. Although the factual matrix of the proceedings is outlined in my earlier decisions, it is appropriate to briefly set out here those events relevant to the jurisdiction and standing issues. These issues arise because during the currency of multi-party s 79 proceedings the husband became bankrupt on his own petition. As a consequence of the husband’s bankruptcy, the Trustee of his bankrupt estate asserts that the Deputy Commissioner of Taxation, who has intervened in these proceedings, has lost standing to pursue its claim for payment by the husband of a judgment debt. Also that by virtue of the 2005 amendments to the Bankruptcy Act1966 (“BA”) and Family Law Act1975 (“FLA”) contained in the Bankruptcy and Family Law Legislation Amendment Act 2005 (“Amending Act”), this Court lacks jurisdiction to determine the s 79 proceedings in so far as these impact upon property vested in the Trustee.
Background facts
Prior to the husband and wife’s separation, P Pty Limited, of which the husband and wife were sole directors and shareholders, transferred assets worth approximately $2 million to the E Family Trust. These transactions triggered an Australian Taxation Office (“ATO”) audit following which the ATO issued amended notices of assessment to the husband and wife for the 2000 and 2001 taxation years.
In April 2003 the husband and wife separated.
On 29 August 2003 the wife commenced s 79 FLA proceedings for the adjustment of property.
In December 2004 the Deputy Commission of Taxation obtained judgment in the District Court of New South Wales against the wife for $627,730.97.
In June 2005 the Deputy Commissioner of Taxation obtained judgment against the husband in the Supreme Court in Queensland for $2,642,471.51.
Neither the husband nor the wife paid the Deputy Commissioner of Taxation the monies due pursuant to these judgments.
On 3 July 2007 the Deputy Commission of Taxation issued a Bankruptcy Notice against the wife.
On 3 July 2007 the Deputy Commissioner of Taxation issued a Bankruptcy Notice against the husband.
When neither the husband nor the wife complied with the respective demands for payment, on 15 October 2007, in the Federal Magistrates Court, the Deputy Commissioner of Taxation issued a Creditor’s Petition against each of them.
On 26 October 2007 the Deputy Commissioner of Taxation intervened in these proceedings. Essentially, the Deputy Commissioner of Taxation seeks to ensure that the husband and wife’s respective taxation liabilities are taken into account in these s 79 proceedings and orders are made requiring the husband and the wife to pay to the Deputy Commissioner of Taxation the amounts due for their personal taxation debts. See for example Deputy Commissioner of Taxation and Kliman (2002) FLC 93-113.
On 12 December 2007 the parties, including M Pty Limited which is a private family company and the Deputy Commissioner of Taxation agreed to a series of orders by reason of which the husband and wife would sell a property registered in the husband’s sole name. Through a series of directions it was agreed the husband and wife’s son, N Etrard, would purchase this property. Through the valuation process, which was a precondition to the sale proceeding, the Deputy Commissioner of Taxation and the wife discovered that the husband had already transferred his interests in various water licences to N Etrard. Valued as a dry property, rather than with the attached water rights, produced a lower market value for the property. This discovery prompted further interim applications and ultimately a series of further interlocutory and asset preservation orders.
On 5 February 2008, without notice to the parties in these proceedings, the husband presented a Debtor’s Petition to the Official Receiver for the Bankruptcy District for the State of Queensland which, in accordance with s 55 BA, was accepted on that day. At that time Mr SB became Trustee of the husband’s property. In circumstances where there was a pending Creditor’s Petition s 115(2) BA provides that the date of the commencement of the husband’s bankruptcy is the time of commission of the earliest act of bankruptcy on which the Creditor’s Petition was based. That is 29 August 2007.
On 27 February 2008 as a result of the acceptance of the Debtor’s Petition the Federal Magistrates Court dismissed the Deputy Commissioner of Taxation’s Creditor’s Petition filed against the husband on 16 October 2007.
At the point when the Trustee’s submissions were filed, the trustee explained that the situation in relation to the husband’s bankrupt estate appeared to be:
·The husband’s interest as the sole registered proprietor of the property known as B property had vested in the Trustee.
·The husband’s 50 percent interest in the property U property had vested in the Trustee.
·The Deputy Commission for Taxation is a creditor of the husband’s bankrupt estate and has lodged a proof of debt in the bankruptcy.
·P Pty Limited is a creditor of the husband’s bankrupt estate and has lodged a proof of debt in the bankruptcy
·Pursuant to s 120 and/or s 121 BA the Trustee is likely to seek agreement for the retransfer of the husband’s interest in water licences previously transferred to N Etrard.
·The Trustee asserted an unspecified interest in the E Family Trust.
·The Trustee was continuing to investigate whether it had an interest in M Pty Limited.
·The husband’s interest in a loan/chose in action said to exist between the husband and the wife.
Jurisdiction
The Trustee contends if possible all matters in issue between the parties should be dealt with in the one court. With this approach the other parties are in agreement.
The Trustee is the only party to the proceedings who puts the Court’s jurisdiction to determine the s 79 adjustment of property proceedings between the Trustee of the husband’s bankrupt estate and the wife in issue. The husband and N Etrard are silent on the issue. The wife and Deputy Commissioner assert that by virtue of the Amending Act the Court has FLA jurisdiction to deal with such property as has vested in the Trustee.
In support of his submission the Trustee says, for reasons not explained in the Explanatory Memorandum, the transitional provisions contained in item 60 of Pt II of Sch 1 to the Amending Act differ between the amendments which were made to, relevantly, s 79(11–13) and (17) on the one hand and the amendments otherwise made to s 79 FLA. As I understand the gravamen of the submission the Trustee says that in circumstances in which the Trustee does not seek to invoke its s 79(11)(c) right to apply to be joined as a party to these s 79 proceedings, or otherwise submit to the Court’s jurisdiction, at present the Court may only deal with such of the husband’s property as has not vested in the Trustee and otherwise pursuant to s 79(5) FLA must adjourn until the husband is discharged from bankruptcy. The significance of the later date is that it will be at this point any surplus will become available for distribution between the husband and wife.
The commencement dates of the various provisions of the Amending Act are found in its s 2. The effect of s 2 is that the provisions contained in schedule 1 commenced on 19 September 2005, schedule 2 provisions in 18 March 2005 and schedules 3, 4 and 5 on 15 April 2005.
This means that the s 35 BA amendments contained in schedule 1 commenced on 19 September 2005. Relevantly s 35 gives the Family Court jurisdiction in bankruptcy where the trustee of a bankrupt husband and/or wife is a party to property settlement or spousal maintenance proceedings:
(1)If, at a particular time:
(a) a party to a marriage is a bankrupt; and
(b) the trustee of the bankrupt's estate is:
(i) a party to property settlement proceedings in relation to either or both of the parties to the marriage; or
(ii)an applicant under section 79A of the Family Law Act 1975 for the variation or setting aside of an order made under section 79 of that Act in property settlement proceedings in relation to either or both of the parties to the marriage; or
(iii)a party to spousal maintenance proceedings in relation to the maintenance of a party to the marriage;
then, at and after that time, the Family Court has jurisdiction in bankruptcy in relation to any matter connected with, or arising out of, the bankruptcy of the bankrupt.
(2)Subsection (1) does not limit the Family Court's jurisdiction under s 35A.
(3)In this section:
"property settlement proceedings” has the same meaning as in the Family Law Act 1975 .
"spousal maintenance proceedings" means proceedings under the Family Law Act 1975 with respect to the maintenance of a party to a marriage.
The s 35 BA amendments do not effect this Court’s jurisdiction established on transfer of proceedings pursuant to s 35A BA by either the Federal Court or Federal Magistrates Court.
Sections 12 -17 of the Amending Act are contained in schedule 1 and thus also commenced on 19 September 2005. Because these proceedings do not involve maintenance I have not set out those amendments to subsection 4(1) made by Item 11. Sections 12 -17 of the Amending Act are out below:
12Subsection 4(1) (after paragraph (ca) of the definition of matrimonial cause )
Insert:
(cb)proceedings between:
(i)a party to a marriage; and
(ii)the bankruptcy trustee of a bankrupt party to the marriage;
with respect to any vested bankruptcy property in relation to the bankrupt party, being proceedings:
(iii)arising out of the marital relationship; or
(iv) in relation to concurrent, pending or completed divorce or validity of marriage proceedings between the parties to the marriage; or
(v)in relation to the divorce of the parties to the marriage, the annulment of the marriage or the legal separation of the parties to the marriage, being a divorce, annulment or legal separation effected in accordance with the law of an overseas jurisdiction, where that divorce, annulment or legal separation is recognised as valid in Australia under section 104; or
13Subsection 4(1)
Insert:
"personal insolvency agreement" has the same meaning as in the Bankruptcy Act 1966.
14Subsection 4(1)
Insert:
property settlement proceedings means proceedings with respect to:
(a)the property of the parties to a marriage or either of them; or
(b)the vested bankruptcy property in relation to a bankrupt party to a marriage.
15Subsection 4(1) (after paragraph (a) of the definition of property settlement or spousal maintenance proceedings)
Insert:
(aa)the vested bankruptcy property in relation to a bankrupt party to a marriage or;
16Subsection 4(1)
Insert:
trustee, in relation to a personal insolvency agreement, has the same meaning as in the Bankruptcy Act 1966.
17Subsection 4(1)
Insert:
vested bankruptcy property, in relation to a bankrupt, means property of the bankrupt that has vested in the bankruptcy trustee under the Bankruptcy Act 1966. For this purpose, property has the same meaning as in the Bankruptcy Act 1966.
The new s 79(1) – (17) FLA is set out below. Because of their significance ss 79(11)-(12) are highlighted.
S 79 (1) Repeal the subsection, substitute:
Alteration of property interests
(1)In property settlement proceedings, the court may make such order as it considers appropriate:
(a)in the case of proceedings with respect to the property of the parties to the marriage or either of them--altering the interests of the parties to the marriage in the property; or
(b) in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the marriage--altering the interests of the bankruptcy trustee in the vested bankruptcy property;
including:
(c)an order for a settlement of property in substitution for any interest in the property; and
(d)an order requiring:
(i)either or both of the parties to the marriage; or
(ii)the relevant bankruptcy trustee (if any);
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.
(1A)An order made under subsection (1) in property settlement proceedings may, after the death of a party to the marriage, be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(1B)The court may adjourn property settlement proceedings, except where the parties to the marriage are:
(a)parties to concurrent, pending or completed divorce or validity of marriage proceedings; or
(ba)parties to a marriage who have divorced under the law of an overseas country, where that divorce is recognised as valid in Australia under section 104; or
(bb)parties to a marriage that has been annulled under the law of an overseas country, where that annulment is recognised as valid in Australia under section 104; or
(c)parties to a marriage who have been granted a legal separation under the law of an overseas country, where that legal separation is recognized as valid in Australia under section 104;
on such terms and conditions as it considers appropriate, for such period as it considers necessary to enable the parties to the marriage to consider the likely effects (if any) of an order under this section on the marriage or the children of the marriage, but nothing in this subsection shall be taken to limit any other power of the court to adjourn such proceedings.
(1C)Where the period for which a court has adjourned property settlement proceedings as provided by subsection (1B) has not expired and:
(a)divorce or validity of marriage proceedings are instituted by one or both of the parties to the marriage; or
(ba)the parties to the marriage have divorced under the law of an overseas country and the divorce is recognised as valid in Australia under section 104; or
(bb)the marriage is annulled under the law of an overseas country and the annulment is recognised as valid in Australia under section 104; or
(c)the parties to the marriage are granted a legal separation under the law of an overseas country and the legal separation is recognized as valid in Australia under section 104;
a party to the first‑mentioned proceedings may apply to the court for the hearing of those proceedings to be continued.
(2)The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
(4)In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e)the matters referred to in subsection 75(2) so far as they are relevant; and
(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
(5)Without limiting the power of any court to grant an adjournment in proceedings under this Act, where, in property settlement proceedings, a court is of the opinion:
(a)that there is likely to be a significant change in the financial circumstances of the parties to the marriage or either of them and that, having regard to the time when that change is likely to take place, it is reasonable to adjourn the proceedings; and
(b)that an order that the court could make with respect to:
(i)the property of the parties to the marriage or either of them; or
(ii)the vested bankruptcy property in relation to a bankrupt party to the marriage;
if that significant change in financial circumstances occurs is more likely to do justice as between the parties to the marriage than an order that the court could make immediately with respect to:
(iii)the property of the parties to the marriage or either of them; or
(iv)the vested bankruptcy property in relation to a bankrupt party to the marriage;
the court may, if so requested by either party to the marriage or the relevant bankruptcy trustee (if any), adjourn the proceedings until such time, before the expiration of a period specified by the court, as that party to the marriage or the relevant bankruptcy trustee, as the case may be, applies for the proceedings to be determined, but nothing in this subsection requires the court to adjourn any proceedings in any particular circumstances.
(6)Where a court proposes to adjourn proceedings as provided by subsection (5), the court may, before so adjourning the proceedings, make such interim order or orders or such other order or orders (if any) as it considers appropriate with respect to:
(a) any of the property of the parties to the marriage or of either of them; or
(b)any of the vested bankruptcy property in relation to a bankrupt party to the marriage.
(7)The court may, in forming an opinion for the purposes of subsection (5) as to whether there is likely to be a significant change in the financial circumstances of either or both of the parties to the marriage, have regard to any change in the financial circumstances of a party to the marriage that may occur by reason that the party to the marriage:
(a) is a contributor to a superannuation fund or scheme, or participates in any scheme or arrangement that is in the nature of a superannuation scheme; or
(b)may become entitled to property as the result of the exercise in his or her favour, by the trustee of a discretionary trust, of a power to distribute trust property;
but nothing in this subsection shall be taken to limit the circumstances in which the court may form the opinion that there is likely to be a significant change in the financial circumstances of a party to the marriage.
(8)Where, before property settlement proceedings are completed, a party to the marriage dies:
(a)the proceedings may be continued by or against, as the case may be, the legal personal representative of the deceased party and the applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings;
(b)if the court is of the opinion:
(i)that it would have made an order with respect to property if the deceased party had not died; and
(ii)that it is still appropriate to make an order with respect to property;
the court may make such order as it considers appropriate with respect to:
(iii)any of the property of the parties to the marriage or either of them; or
(iv) any of the vested bankruptcy property in relation to a bankrupt party to the marriage; and
(c)an order made by the court pursuant to paragraph (b) may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(9)The Family Court, or a Family Court of a State, shall not make an order under this section in property settlement proceedings (other than an order until further order or an order made with the consent of all the parties to the proceedings) unless:
(a)the parties to the proceedings have attended a conference in relation to the matter to which the proceedings relate with a Registrar or Deputy Registrar of the Family Court, or a Registrar or Deputy Registrar of the Family Court of that State, as the case may be;
(b)the court is satisfied that, having regard to the need to make an order urgently, or to any other special circumstance, it is appropriate to make the order notwithstanding that the parties to the proceedings have not attended a conference as mentioned in paragraph (a); or
(c)the court is satisfied that it is not practicable to require the parties to the proceedings to attend a conference as mentioned in paragraph (a).
(10)The following are entitled to become a party to proceedings in which an application is made for an order under this section:
(a)a creditor of a party to the proceedings if the creditor may not be able to recover his or her debt if the order were made;
(b)any other person whose interests would be affected by the making of the order.
(10A)Subsection (10) does not apply to a creditor of a party to the proceedings:
(a)if the party is a bankrupt--to the extent to which the debt is a provable debt (within the meaning of the Bankruptcy Act 1966 ); or
(b)if the party is a debtor subject to a personal insolvency agreement--to the extent to which the debt is covered by the personal insolvency agreement.
(11)If:
(a)an application is made for an order under this section in proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them; 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 it is 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.
(12)If a bankruptcy trustee is a party to property settlement proceedings, then, except with the leave of the court, the bankrupt party to the marriage is not entitled to make submission to the court in connection with any vested bankruptcy property in relation to the bankrupt party.
(13)The court must not grant leave under subsection (12) unless the court is satisfied that there are exceptional circumstances.
(14)If:
(a)an application is made for an order under this section in proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them; and
(b)either of the following subparagraphs apply to a party to the marriage (the debtor party ):
(i)when the application was made, the party was a debtor subject to a personal insolvency agreement; or
(ii)after the application was made but before it is finally determined, the party becomes a debtor subject to a personal insolvency agreement; and
(c)the trustee of the agreement applies to the court to be joined as a party to the proceedings; and
(d) the court is satisfied that the interests of the debtor party's creditors may be affected by the making of an order under this section in the proceedings;
the court must join the trustee of the agreement as a party to the proceedings.
(15)If the trustee of a personal insolvency agreement is a party to property settlement proceedings, then, except with the leave of the court, the party to the marriage who is the debtor subject to the agreement is not entitled to make a submission to the court in connection with any property subject to the agreement.
(16)The court must not grant leave under subsection (15) unless the court is satisfied that there are exceptional circumstances.
(17)For the purposes of subsections (11) and (14), an application for an order under this section is taken to be finally determined when:
(a)the application is withdrawn or dismissed; or
(b)an order (other than an interim order) is made as a result of the application.
For the purposes of the introduction of the Amending Act, s 60 provides as follows:
60 Application of amendments
(1)Subject to subitems (2) and (3), the amendments of the Family Law Act 1975 made by this Schedule , to the extent to which they relate to bankruptcies or personal insolvency agreements, apply in relation to:
(a)bankruptcies for which the date of the bankruptcy is after the commencement of this item; and
(b)personal insolvency agreements executed before, at or after the commencement of this item.
(2) The following provisions:
(a)subsections 74(2), (3) and (4) of the Family Law Act 1975 as amended by this Schedule;
(b)subsection 74(8) of the Family Law Act 1975 as amended by this Schedule, to the extent to which that subsection relates to subsection 74(2) of the Family Law Act 1975 as amended by this Schedule;
(c)the definitions inserted in subsection 4(1) of the Family Law Act 1975 by this Schedule, to the extent to which those definitions relate to subsections 74(2), (3) and (4) of the Family Law Act 1975 as amended by this Schedule;
apply to proceedings instituted after the commencement of this item, whether the date of the bankruptcy is before, on or after the date of commencement of this item.
(3) The following provisions:
(a)subsections 79(11), (12) and (13) of the Family Law Act 1975 as amended by this Schedule;
(b)subsection 79(17) of the Family Law Act 1975 as amended by this Schedule, to the extent to which that subsection relates to subsection 79(11) of the Family Law Act 1975 as amended by this Schedule;
(c)the definitions inserted in subsection 4(1) of the Family Law Act 1975 by this Schedule, to the extent to which those definitions relate to subsections 79(11), (12) and (13) of the Family Law Act 1975 as amended by this Schedule;
apply to proceedings instituted after the commencement of this item, whether the date of the bankruptcy is before, on or after the date of commencement of this item.
Section 79(10), which is set out below, is introduced as part of the schedule 5 additional amendments provisions of the Amending Act. It is set out below.
1 At the end of section 79
Add:
(10)The following are entitled to become a party to proceedings in which an application is made for an order under this section:
(a)a creditor of a party to the proceedings if the creditor may not be able to recover his or her debt if the order were made;
(b)any other person whose interests would be affected by the making of the order.
This means relevantly that in this case the:
·Subsection 4(1) amendments to the definition of matrimonial cause do not apply to the extent those definitions concern s 79(11), (12) and (13).
·The new s 79(1) inserted by the Amending Act applies to bankruptcies after 18 September 2005 and therefore potentially applies in this case.
·Section 79(10) commenced operation on 15 April 2005 and applies.
·Section 79(10A) was introduced by the Family Law Amendment Act 2005 (Cth) No 98 of 2005 and commenced operation on 19 September 2005 and applies.
·Sections 79(11), (12) and (13) apply to proceedings commenced after 19 September 2005 and do not apply.
·For completeness, s 75(2)(ha) applies in relation to bankruptcies after 19 September 2005 and therefore applies.
In response to the Trustee’s submissions, the Deputy Commissioner of Taxation submits the effect of s 60(1) is that the Amending Act applies to bankruptcies occurring after the amendments, subject to the exceptions set out in subsections (2) and (3). Section 60(3), it is submitted, only excludes the operation of s 79(11), (12), (13) and (17). The exclusion of s 79(17) is confined to that subsection only insofar as it relates to subsection (1). Accordingly, and relevantly, the Deputy Commissioner of Taxation submits that s 79(1), (2), (4), (5), (10) and (10A) of the FamilyLaw Act applied to the present case.
Conclusion as to jurisdiction
As I perceive it the flaw to the submission made on behalf of the Deputy Commissioner of Taxation is that for the ss 79(1), (2), (4), (5), (10) and (10A) amendments to have a jurisdictional foundation the subsection 4(1) changes to the definition of “matrimonial cause” must be operative. By virtue of item 60(2)(c) of the Amending Act, the s 4(1) amendments apply to bankruptcies both before and after 18 September 2005 in proceedings commenced after 18 September 2005 only if the Trustee applies to be joined and is joined as a party to the proceedings. Put another way the position appears to be that for proceedings commenced on or before 18 September 2005 it is the Trustee’s application to be joined as a party and the joinder order by reason of which the s 4(1) amendments apply. The Trustee thus concedes jurisdiction to the Court to potentially retrospectively affect the unsecured creditors.
It follows that I do not accept the Deputy Commissioner of Taxation and the wife’s submissions that the effect of s 60(2)(c) of the Amending Act is that the exceptions contained in ss (2) and (3) is to merely exclude matters of practice and procedure. Interpreting the Amending Act in the manner contended for by the Deputy Commissioner of Taxation potentially offends the rule that legislation is not retrospective.
Standing
The Trustee contends that by operation of s 58 BA (subject to s 59A BA), the husband’s property vested in the Trustee, in effect retrospectively, to 29 August 2007. From that time the rights of all creditor’s were regulated in accordance with the provisions of the BA and, in the circumstances of this case, the husband’s unsecured creditors’ rights are converted into a right to prove in the administration of his bankrupt estate [s 82 BA] and share rateably with other unsecured creditors in accordance with the priorities contained in s 109 BA.
By virtue of s 58(3) BA an unsecured creditor cannot commence legal proceedings or take a fresh step in existing proceedings against the bankrupt unless granted leave pursuant to s 58(3)(b) BA. It is noteworthy that for the purpose of s 58(3) the “property of the bankrupt” includes property which is excluded from the bankrupt estate [s 5(1) BA]. The Deputy Commissioner of Taxation does not have s 58(3)(b) BA leave.
I agree that the as far as the husband’s bankrupt estate is concerned the effect is that the Deputy Commissioner of Taxation is concerned the debt owed by the husband, by virtue of his bankruptcy, has been converted to a right to share on the distribution of his bankrupt estate now vested in the Trustee. Clyne v Deputy Commissioner of Taxation (1988) 154 CLR 589. Consequently in so far as the Deputy Commissioner of Taxation was given leave to pursue action involving the husband’s now vested property it is spent.
The effect of my findings is that the worthy aims achieved by the Amending Act as discussed in the recent decision of Trustee of the Property of G Lemnos, A Bankrupt and Lemnos and Lemnos [2009] FamCAFC 20 are not to be made available to the parties in these proceedings.
Having regard to my findings when the matter is next before me I invite submissions in relation to:
(a)the course to be taken in relation to the future conduct of the extant s 79 FLA proceedings; and
(b)the form of order to give effect to my finding’s; and
(c) which, if any of the injunctive and other interlocutory orders should continue and those which should be discharged.
I would also invite submissions with respect to costs.
I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan
Associate:
Date: 17 February 2009
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