Freer & Freer

[2008] FamCA 131

FAMILY COURT OF AUSTRALIA

FREER & FREER [2008] FamCA 131

FAMILY LAW – STAY – application by respondent pending Supreme Court proceedings – in the alternative that trial be vacated – application dismissed.

FAMILY LAW – COSTS – application by applicant and trustee in bankruptcy – application granted.

Family Law Act 1975 (Cth)
Bankruptcy Act 1966 s 153B

Prince & Prince (1984) FLC 91-501

APPLICANT: Mrs Freer

RESPONDENT: Mr Freer

TRUSTEE IN BANKRUPTCY: Mr Smith

INTERVENOR: Mr Rickards

FILE NUMBER: ADF 1629 of 2005

DATE DELIVERED: 15 February 2008

PLACE DELIVERED: Adelaide

JUDGMENT OF: Strickland J

HEARING DATE: 15 February 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Berman

SOLICITOR FOR THE APPLICANT: Lynch Meyer

COUNSEL FOR THE RESPONDENT: Mr Swan

SOLICITOR FOR THE RESPONDENT: Swan Lawyers

COUNSEL FOR THE TRUSTEE IN

BANKRUPTCY:

Mr Gretsas

SOLICITOR FOR THE TRUSTEE IN

BANKRUPTCY:

Gretsas & Associates

COUNSEL FOR THE INTERVENOR: Mr Howe

SOLICITOR FOR THE INTERVENOR: Howe Martin & Associates

Orders

1. That the Application in a Case filed by the husband on 28 December 2007 be dismissed and removed from the active pending cases list.

2. That the husband pay to the wife’s solicitors on behalf of the wife and the Trustee in Bankruptcy the sum of ONE THOUSAND SEVEN HUNDRED AND FIFTY DOLLARS [$1,750.00] each by way of costs, such total amount of THREE THOUSAND FIVE HUNDRED DOLLARS [$3,500.00] to be paid within three [3] months.

3. That in the event that the husband wishes to make an application for leave to make submissions in the property settlement proceedings any such application is to be filed and served together with a supporting affidavit by 4:00pm on 20 February 2008.

4. That further consideration be adjourned to 11:30am on 21 February 2008.

IT IS NOTED that publication of this judgment under the pseudonym Freer & Freer is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: ADF 1629 of 2005

MRS FREER

Applicant

AND

MR FREER

Respondent

AND

MR SMITH

Trustee in Bankruptcy

AND

MR RICKARDS

Intervenor

REASONS FOR JUDGMENT

1. I have before me an application by the husband filed on 28 December 2007 seeking:

   “That all Family Court proceedings in this matter be stayed pending the final determination of Supreme Court proceedings, being action number …; in the alternative, that the trial date scheduled to commence on 25 February be vacated.”

2. That is an application which is opposed by the wife and the husband's trustee in bankruptcy.  Mr Howe, who appears for the intervenor Mr Rickards, has indicated that his client does not make any submissions in relation to that application, in the sense of the merits of it, but Mr Howe has put to me that his client's personal circumstances would be improved and make it easier for him to appear and be involved in the proceedings, as he wants to be, if there was even an adjournment of the matter.  But his client does not make a separate application for the current listing to be vacated.

3. This case is listed in this Court to commence not before 25 February 2008.  It is in a pool of cases.  As I have said there is some element of doubt in any event as to whether it will be reached in this list.  However, as of today, it is still in that pool, and I have to proceed on the basis that it could very well be reached.

4. This application first came before me on 30 January 2008 when I had before me an extensive affidavit of the husband.  I heard submissions on that day but determined that I needed further information, particularly in relation to the Supreme Court proceedings that were on foot and also, perhaps more importantly, some indication as to the precise steps which the husband would have to undertake and be successful in relation to for him to reach a point where his bankruptcy was annulled and he could, as of right, appear in these property settlement proceedings and pursue the matter in that way, because, as I understand it, that is ultimately what the husband wishes to achieve by this application.

5. There has now been a further affidavit filed by the husband, which I have read.  That was filed on 1 February 2008.  Separate to that, I have received written submissions on behalf of the trustee in bankruptcy, which have been very helpful in taking me to the relevant provisions of the Bankruptcy Act and highlighting the steps the trustee sees would have to take place before the bankruptcy could be annulled.

6. In any event, the application is being pursued today.  It is still opposed, as I have indicated.  Mr Haines QC, in support of the application, has referred me to the relevant authority of Prince & Prince (1984) FLC 91-501. My view of that case, though, is that it is attuned to the principle that you need to sort out the asset pool before you can proceed in this Court and, if there are proceedings in other courts and those proceedings impact upon the asset pool, then this Court would need to wait until those proceedings are finalised.

7. As a general proposition, I do not think anyone could quibble with that but, that is not the case here.  What is being sought is a stay to allow the husband to reach a point through other proceedings where he can appear in his own right.  In that regard I accept that what he would have to do is to successfully negotiate the steps that are set out in the written submission of Mr Gretsas.

8. Firstly, the husband would have to be successful in the current proceedings that he has before the Supreme Court.  Just pausing there, it seems that those proceedings are close to settlement and the result will be a payment of some amount in damages to the husband.  Apparently the amount has been agreed upon but the terms of settlement have not, and that is what the husband tells me in his affidavit that is now before me.  Mr Haines says that he is not able to inform me of the amount that has been agreed, because he is not acting for the husband in those proceedings.  That is unfortunate because, as is apparent to me - and I think is clear to everyone - one way that the husband could achieve the result that he seeks is if he receives sufficient from the settlement of those proceedings, or a judgment in those proceedings if it did not settle, for him to, in effect, pay off all the debts and thereby terminate the bankruptcy.

9. However, the husband has not revealed what the amount is.  That may be because of still negotiating the terms of settlement but, whatever the position is, I then have no choice but to proceed on the assumption that the amount the husband is looking to achieve would not be sufficient to pay out the debts associated with his bankruptcy.  Otherwise I would have expected the husband to at least put that as a general proposition to me.  Instead he has addressed in his own affidavit the steps that he would still have to undertake to annul his bankruptcy after successfully finalising the current Supreme Court proceedings.

10. On that basis, the first step is that the husband has to finalise those current proceedings.  Then he would have to in some way address the judgments obtained by the creditors consequent upon the Supreme Court proceedings in the early 1990s.  The husband does not explain in his affidavit material how he would propose to do that.  The logical way is to in some way pay out those debts, but that does not seem to be open to the husband.  He would have to pursue proceedings in relation to those judgments and, as Mr Gretsas has put to me, he would have to set them aside and then, if he was successful in that process, he would be in a position, it seems, to make an application to annul his bankruptcy.

11. The husband has identified Section 153B of the Bankruptcy Act 1966 as the basis for an annulment of his bankruptcy. What Section 153B provides is as follows:

    “If the court is satisfied that a sequestration order ought not to have been made, the court may make an order annulling the bankruptcy.”

12. However, I accept that for the husband to reach the point where he could satisfy the court that the sequestration ought not to have been made, he would have had to have set aside the judgments obtained by the creditors which led to his bankruptcy. There is nothing that is put to me in any affidavit material or submissions as to any other way that that result could follow. Further as Mr Gretsas has pointed out, even satisfying the court in that regard would not result in the bankruptcy being annulled because the husband would still have to convince a court that he was solvent, and Mr Gretsas has pointed out that there are significant other debts that the husband has and there is also the trustee in bankruptcy's own costs, which would all have to be taken into account. There would have to be, presumably - and I accept this from Mr Gretsas - undertakings given about those fees. On the current evidence before me, I cannot see how the husband could be successful in that exercise, but I cannot exclude that entirely. Thus I have to allow for the possibility, albeit unlikely, that the husband could satisfy the court under Section 153B and achieve an annulment.

13. The next relevant point about that, for the purposes of this application, is the time that that is all going to take.  Mr Gretsas suggests that it would be many years before the husband would be in a position where he achieved, if successful at each stage, an annulment of the bankruptcy such that he could appear in his own right in the property settlement proceedings in this court.  As Mr Berman rightly pointed out, there was no issue taken by the husband with this submission, and that is important in terms of the prejudice that the wife would suffer if this application before me was granted.

14. I am satisfied that if these proceedings were stayed or an adjournment was granted, and these property settlement proceedings were then left to await the outcome of this process that I have just taken everyone through, there would be a period of many years involved.

15. What then would be the prejudice to the wife in that circumstance and, on the other side of the coin, what is the advantage to the husband in allowing that to occur?  Dealing with the latter first, if the husband was successful in annulling his bankruptcy by setting aside those judgments obtained by the creditors in the 1990s, then the trustee in bankruptcy would no longer stand in the husband's stead and the husband would appear in his own right in the property settlement proceedings, but beyond that I cannot see that there is any advantage to the husband.  The asset pool does not change, save and accept for one possibility which I will mention in a moment, and the liabilities would not change.  If the husband had reached that point, he would have been successful in setting aside the judgments, so there would be no liability there.  I cannot see that there is any liability, for example, that would need to be then brought into account in the property settlement proceedings.

16. In terms of assets, there is the possibility of the asset pool increasing by the amount of any damages that the husband achieves in the Supreme Court proceedings that he has on foot, or any others that he might institute, but that does not help the husband in his application because, as Mr Berman has said, his client has made it quite clear, and continues to make it clear, that she, the wife, does not seek to include in the asset pool the fruits of any litigation that the husband might achieve.  She says that he can retain any damages awarded.

17. Thus the effect of making the orders sought by the husband would provide no advantage to the husband in terms of the asset or liability pool.  The only advantage is that he would be able to run his own case.  However, there would be significant prejudice to the wife.  I am told that, in effect, the assets for division are the former matrimonial home and shares in a company.  I am told - and it is consistent with my reading of the file - that the husband resides in the home - the wife does not - and thus the wife would be prevented from accessing one of the major assets of the marriage which would be the subject of the property settlement proceedings for many years to come.  In the meantime, though, on that scenario the husband would presumably continue to reside in the matrimonial home and he would be the one who would enjoy the benefit of that asset.

18. Thus in my view there would be significant prejudice to the wife if this application was granted, with the only benefit that I can see of the husband being able to run his own case in the property settlement proceedings.  For those reasons I dismiss the husband’s application.

19. I now have an application for costs, firstly by the wife and secondly by the trustee in bankruptcy, in relation to these proceedings.  The amount sought by each party is $2,357.00.  Mr Haines has indicated he cannot put anything to me in opposition to the fact that there is a basis for costs to be ordered, and he is certainly right there, because of course the applicant has been wholly unsuccessful.  Thus there are circumstances justifying an order for costs.

20. In terms of the amount sought, Mr Haines has made the comment that the amounts seem excessive. 

21. I have the option to make an order that the costs be taxed if they cannot be agreed or I can fix an amount today.  My practice is always to attempt to do the latter, to save the parties the costs and the time and the trouble in attending on a taxation.  I appreciate that there is always the option for the costs to be agreed, but I cannot assume that that is necessarily going to happen in this case.  Thus I will fix the costs.

22. The husband has the ability to seek leave to make submissions in the property settlement proceedings in exceptional circumstances.  I am told by Mr Haines that the husband wishes to make such an application and indeed, as has been pointed out to me in an affidavit filed by the husband on 29 October 2007, he deposed to wanting to take such a course.  He needs, though, to make a formal application and to file an affidavit setting out the basis on which he seeks leave and addressing, obviously, the question of exceptional circumstances.  There is no such affidavit yet before the court.

23. I want that application dealt with before this trial commences, thus I need to put everyone on a short time frame for this to be done.

I certify that the preceding
23 numbered paragraphs are
a true copy of the reasons herein of the
Honourable Justice Strickland
the 15^th day of February 2008.

……………………………………….
Associate