Hurley and Hurley (No 2)

[2017] FamCA 19

FAMILY COURT OF AUSTRALIA

HURLEY & HURLEY (NO 2) [2017] FamCA 19

FAMILY LAW – Section 44(3) - Where the husband is bankrupt but consents to the wife instituting the proceedings for a property settlement well out of time over vested bankruptcy property - Where leave is not needed if the parties to the marriage consent - Where the bankrupt's trustee has no standing to argue that leave is necessary.

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

APPLICANT: Ms Hurley

RESPONDENT: The Trustee of the Bankrupt Estate of Mr Hurley

FILE NUMBER: MLC 10641 of 2016

DATE DELIVERED: 20 January 2017

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 11 January 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Melilli With Mr Sweeney

SOLICITOR FOR THE APPLICANT: Borchard & Moore

COUNSEL FOR THE RESPONDENT: Mr Crofts

SOLICITOR FOR THE RESPONDENT: Aitken Partners Pty Ltd

Orders

1. That save as to issues of costs, the application of the applicant seeking interim orders filed on 2 November 2016 is dismissed.

2. That save as to issues of costs, the response of the respondent seeking interim orders is dismissed.

3. That there be orders in terms of the minutes handed to the court on 11 January 2017 and the solicitors for the applicant engross the said minute and forward it to my Associate in a word format.

4. That the substantive orders sought by the application filed 2 November 2016 and the response thereto are otherwise adjourned to a directions hearing before a registrar at 9.30am on 6 March 2017.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Hurley & Hurley (No 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 10641  of 2016

Ms Hurley

Applicant

And

The Trustee Of The Bankrupt Estate Of Mr Hurley

Respondent

REASONS FOR JUDGMENT

1. Ms Hurley (the applicant) seeks an order under s 44(3) of the Family Law Act 1975 (Cth) (“the Act”) for “leave to commence” proceedings under both sections 78 and 79 of the Act (the property proceedings). It was initially thought that leave was necessary because the applicant was divorced from her husband, Mr Hurley (the husband) in 1998 and the court record (DGF4534/1997) shows that the divorce order made on 21 January 1998 “took effect” from 22 February 1998. Leave would therefore be necessary (subject to what follows below) if the property proceedings were not commenced before 21 February 1999.

2. However, there are two unusual features of this matter. First, it is submitted by the applicant that she does not require formal leave of the Court because the husband consents to her bringing the property application. Second, the husband who is an undischarged bankrupt, was made bankrupt in November 2013. Because of that bankruptcy, the applicant named the respondent to her application (both for the leave order but also the property proceedings) as the Trustee of the husband’s bankrupt estate (the Trustee). There is no extant application naming or relating to the husband or any application seeking orders against him.  The registrar will need to canvas with the parties whether, as a formality, he should be party in his own right.

3. The hearing before me occurred in the Judicial Duty List on 11 January with appearances from counsel representing both the applicant and the Trustee and each relied upon written submissions and affidavit material to which I only need to cursorily refer.

4. A critical document was tendered to the Court at that hearing. Leaving aside the various headings which arise from the fact that the initial receipt and ultimate printing of the document had come through a barristers’ clerk, it read:

   I consent to proceedings being issued to determine the wife’s property application. I have been served with the current proceeding.

5. The document just mentioned was dated 11 January 2017 and marked with an email time of 11.48 am. It refers to and acknowledges proceedings are listed for 11 January. The document’s significance goes to the issue of whether or not the wife needs the leave she initially sought because of the wording of s 44(3) to which I turn.

6. Section 44(3) is a complicated section of the Act because of various amendments that have been made to it but also because of the bankruptcy of the husband and because it draws in other sections. Accordingly, the most efficacious way of getting to the bottom of this issue is to re-cast it with only the relevant provisions set out.

7. Thus, s 44(3) reads:

   Where a divorce order has taken effect, proceedings between a party to a marriage and the bankruptcy trustee of a bankrupt party to the marriage with respect to vested property of the bankrupt party which are proceedings arising out of the marital relationship or in relation to completed divorce proceedings, shall not be instituted except by leave of the court or with the consent of both parties to the marriage, after the expiration of 12 months after the date on which the divorce took effect.

8. It is the words underlined that are the immediate focus of attention and whilst it might be thought that there is a legislative slip here, the section contemplates proceedings of the nature pursued by the applicant against, not the husband, but the bankruptcy trustee and if the time for issuing them has expired, either leave is required or consent is to be obtained from the bankrupt.

9. It is trite to say that the relevant provisions of the Act as to the alteration of property interests (s 79(12)) make clear that the husband has no entitlement to make a submission in connection with any vested bankruptcy property without leave of the court yet, it would seem, he can consent to those proceedings being instituted albeit the applicant is well out of time and, importantly in this case, without his trustee having an opportunity to object.

10. Section 44(3) provides the clear statement that, if the applicant is beyond the time period, proceedings shall not be instituted except with the consent of the parties to the marriage. That can only be read to mean that the court needs to look no further nor turn its mind to, why the delay has occurred. Those delay matters are no doubt relevant to the alteration of property interests but that is not the issue before me.

11. No submission was put by counsel for the Trustee to suggest that that interpretation is not correct. There were certainly murmurs of doubt about whether the document mentioned in paragraph [4] above was a form of consent but that is a matter to which I shall return.

12. To the extent there might be thought a problem about jurisdiction or power to take a consent from the spouses after proceedings have already been filed, again, s 44(3) provides the answer. It reads:

    The Court may grant such leave at any time, even if the proceedings have already been instituted.

13. Although that provision applies to the leave requirement category, it is inconceivable that it would not apply to cases involving consent.  Whilst the language of the provision is directed to the institution of proceedings, I do not accept that is limited to filing of the limited documents. The institution of the proceedings means that the court is being called upon to exercise its powers relevantly here, in relation to the alteration of property. The actual filing of the document is therefore of little consequence.

14. Notwithstanding what I have said earlier, in what appears to be an anomaly, a consideration of procedural fairness might be said to arise in relation to the Trustee but in this case, I consider that for two reasons, I do not need to address that.  First, the Trustee had the opportunity to address the question and was represented by counsel. Secondly, this case is about the right to institute proceedings; rights beyond that can be canvassed at any trial.

15. Undoubtedly, there is a specific distinction in this case between the proceedings that the wife wants to bring in this Court and those that the Trustee is contemplating (and would prefer) in another jurisdiction where contribution concepts considered in this court might be seen more in equity and trust concepts but there is also the specific and perhaps unique legislative requirement in this court to consider the future economic circumstances of the parties raised by s 75(2) of the Act which is not necessarily so easily apparent in the other jurisdiction. That dichotomy gives rise to questions of the applicant’s right to the opportunity to litigate as she wishes. There is no doubt she could argue her case in either jurisdiction but so can the Trustee. Interesting as that issue might be, I do not consider that I need to deal with it because of what follows.

16. There are proceedings over disputed property in the Supreme Court of Victoria (which have been stayed pending this Court’s determination) but for the reasons earlier set out, I am unable to see how s 44(3) of the Act can be read other than as I have described it. As such, it is unnecessary for me to canvass all of the submissions carefully crafted by the parties’ practitioners about other matters. It seems to me that I only have to do so if I reject the critical document identified as the husband’s consent to the institution of the proceedings.

17. I have marked the relevant document as an exhibit in the proceedings along with copies of affidavits tendered from proceedings in the Supreme Court of Victoria (even though I suspect no permission was sought from that Court for that to occur but it was not a matter of contention).

18. It is important to observe that the “consent” was only in the hands of the applicant’s practitioners at 11 am on the morning of the hearing. It was said, and neither admitted nor denied by counsel for the Trustee, that the document came from the husband. There is no suggestion here that the practitioners for the applicant are not reputable and responsible officers of the Court such that there is no reason not to rely upon what the Court was told. It does not seem to me that this was an issue of evidence because s 44(3) does not require proof. The husband and the applicant could have attended at the Court’s counter for issuing of her application and a clerical officer, knowing of the relevant wording of s 44(3) of the Act, would have taken and issued the application.

19. I am comforted by a number of other things. The Trustee has significant powers under the Bankruptcy Act 1966 (Cth) to investigate matters of the bankrupt’s affairs including requiring evidence on oath. The bankrupt could be (and in this case, I would suspect would be) a witness for the applicant having regard to the circumstances under which the applicant argues that the property is not vested bankruptcy property or that if it is, it should be transferred to her anyway by virtue of an agreement over 20 years ago. As such, this document could still be the subject of scrutiny. The husband is a lawyer by profession and regardless of what problems he may have had with financial matters, I should presume that as he is an officer of the court, he would not be a party to misleading this court.

20. Having said that, and perhaps for some comfort to the Trustee and the creditors of the husband, s 44(3AA) of the Act provides that if the proceedings are instituted using the consent of both parties as its basis, the court may dismiss the proceedings if satisfied that “because the consent was obtained by fraud, duress, or unconscionable conduct, allowing the proceedings to continue would amount to a miscarriage of justice”. That provision is important here. It has not been suggested that section applies.

21. As such, I am satisfied that the document tendered in evidence is indicative of the fact that the husband consents to the applicant instituting proceedings out of time. Based on those matters, the applicant does not need leave and her application should be listed for a directions hearing before a registrar as soon as possible. To the extent that it is necessary to say so, the issue in dispute does not appear to be complicated. If, at the foreshadowed directions list, the parties agree that it is ready for trial, inquiries can be made of the Case Management Judge for a listing. Whilst every case warrants attention, in this case, there are proceedings being held up in another court and mortgages being paid in circumstances where, depending upon the outcome, that may be unnecessary. In addition, on any view, the litigation costs of the bankrupt’s trustee are costs which will deplete money available for creditors.  This matter needs urgent attention.

22. There was agreement between counsel that if the finding was as I have set out, orders should be made that money currently in the Supreme Court be paid into a specific mortgage and the applicant be otherwise restrained from further borrowing against the property or disposing of it other than for a purpose designated in the order. It is also agreed that an order be made for the applicant to keep the Trustee informed of the mortgage details. Upon the relevant minutes being so provided, I shall sign the necessary orders.

23. The interim applications should otherwise be dismissed.

I certify that the preceding Twenty Three (23) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 20 January 2017.

Associate

Date:  20 January 2017