Lahiri & Saha

[2022] FedCFamC1F 271

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Lahiri & Saha [2022] FedCFamC1F 271

File number(s):

BRC 8518 of 2020

Judgment of:

JARRETT J

Date of judgment:

27 April 2022

Catchwords:

FAMILY LAW – BANKRUPTCY – Administration of property – Contribution of bankrupt and recovery of property – Recovery of property from party to transaction where void against trustee – Notice under s 139ZQ(1) Bankruptcy Act 1966 (Cth) – setting aside

FAMILY LAW – PRACTICE AND PROCEDURE – Trial of separate issues or questions

FAMILY LAW – PRACTICE AND PROCEDURE – Finalising a proceedings – Discontinuance – Leave to discontinue

Legislation:

Bankruptcy Act 1966 (Cth) ss, 5(1), 33(1)(c), 120(2), 120(3), 139ZQ, 139ZQ(5), 139ZS, 139ZS(1), 139ZS(1A), 139ZS(1A)(b)

Family Law Rules 2004 rule 10.02, 10.13

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 rule 10.10(1)

Cases cited:

Calafiore & Netia [2018] FamCAFC 220

Calafiore and Netia (2019) 60 Fam LR 60

Chamberlain (Trustee) v Tilbrook [2017] FCA 1586

Cook v Benson (2003) 214 CLR 370

Davidson v Official Receiver (2021) 17 ABC(NS) 610

Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344

O’Neill v Mann [2000] FCA 1680

R v Parker [2002] FCAFC 133

Radnor Enterprises Pty Ltd v Nicholls (as trustee of the Property of Boniface, a Bankrupt and Trustee of the Property of Ogston, a Bankrupt) (2017) 15 ABC(NS) 336

Sampson (Trustee) v Taboada [2017] FCA 79

Division:

Division 1 First Instance

Number of paragraphs:

99

Date of last submission/s:

19 April 2022

Date of hearing:

21, 25 February 2022

Place:

Brisbane

The Applicant:

Litigant in person

The First Respondent:

Litigant in person, by telephone link

Solicitor for the Second Respondent:

Stacks Law Firm

The Third Respondent:

Did not participate

ORDERS

BRC 8518 of 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MR LAHIRI

Applicant

AND:

MS SAHA

First Respondent

MR FELTOS

Second Respondent

D PTY LTD AS TRUSTEE FOR THE D PTY LTD SUPERANNUTION FUND
Third Respondent

ORDER MADE BY:	JARRETT J
DATE OF ORDER:	27 APRIL 2022

THE COURT ORDERS THAT:

1.The application for an extension of time within which to commence an application pursuant to s 139ZS(1A) of the Bankruptcy Act 1966 (Cth) be dismissed.

2.Paragraphs 1 (where it first appears), 1 (where it secondly appears), 17, 27, 28 and 37 of the application in a case filed by the first respondent on 24 March, 2021 be dismissed.

3.The application in case filed by the second respondent on 11 August, 2021 be dismissed.

4.Pursuant to rule 10.02(2)(b) of the Federal Circuit Court and Family Court of Australia (Family Law) Rules 2021, the applicant is granted leave to file a Notice of Discontinuance to discontinue:

(a)the Amended Initiating Application filed by the Applicant on 24 August, 2020 in part so far as it seeks relief against the Second Respondent, in his own capacity and in his capacity as trustee of the bankrupt estate of the First Respondent, Ms Saha, on the basis that there be no order as to costs against the Second Respondent and/or the First Respondent’s estate; and

(b)the Application in a Case filed by the Applicant on 19 August 2021 in whole.

WITH THE CONSENT OF THE APPLICANT AND THE SECOND RESPONDENT THE COURT FURTHER ORDERS THAT:

5.The applicant and second respondent are released from the undertakings particularised in the orders of Justice Baumann made on 7 August, 2020.

THE COURT FURTHER ORDERS THAT:

6.All outstanding applications and responses are adjourned to 2.15pm on 4 May, 2022 for case management hearing in the Federal Circuit and Family Court of Australia (Division 1) at Brisbane.

THE COURT NOTES THAT:

7.The applicant and the second and third respondents have agreed to settle all matters in dispute between them in this proceeding on terms that include the following:

8.The third respondent will pay the second respondent the sum of $853,875 (Settlement Sum).

9.The Settlement Sum will be paid directly from the net sale proceeds of sale of the property owned by the third respondent with folio identifier …, situated at FF Street, Suburb C NSW.

10.Upon receipt of the Settlement Sum, the second respondent will release the applicant and third respondent from any and all claims arising out of this proceeding and the bankrupt estate of the first respondent, including the notice dated 4 June 2020 to the third respondent under section 139ZQ of the Bankruptcy Act 1966 (Cth) and in respect of any costs orders made in favour of the second respondent in this proceeding.

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

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Lahiri & Saha has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

REASONS FOR JUDGMENT

JARRETT J:

1. In the context of broader property adjustment proceedings between the applicant and the first and second respondents, another judge of this Court has ordered that certain issues, described as “issues arising under the Bankruptcy Act”, be tried separately. The task of hearing and determining those issues has fallen to me.

2. The applicant and the first respondent were husband and wife.  They married in November, 2000 but are now divorced.  The applicant is currently 63 years old.  The first respondent is a medical professional although not currently practising.  She is currently 57 years old.  She is an undischarged bankrupt. 

3. The second respondent is the trustee of the first respondent’s estate in bankruptcy. 

4. The third respondent, D Pty Ltd, is the trustee of D Pty Ltd Superannuation Fund, a self-managed superannuation fund associated with the applicant and the first respondent.  The applicant and the first respondent were both directors of the third respondent but the first respondent lost her capacity to be a director of a company upon her bankruptcy on 30 September, 2016.  Consequently, the applicant is the sole director of the third respondent.

5. The applicant and the first respondent have one son who is currently 17 years old.  He appears to be suffering from some significant impairments to his mental health.  He is presently in the care of the New South Wales Department of Family and Community Services. The circumstances in which he came to be in that care are the source of much dispute and conflict between the applicant and the first respondent and the first respondent and the Department.  There has been significant litigation initiated by the first respondent in that regard.  The details are catalogued in the applicant’s affidavit filed on 3 July, 2020 and do not need recitation here. 

6. The issues concerning the parties’ child took up some of their focus in this application, especially that of the applicant.  However, as will appear from what follows, questions concerning the parties’ child are wholly irrelevant to that which I have to decide in this hearing. 

   This hearing

7. The ultimate issue for determination in the present hearing seems to concern the validity of a notice issued by the Official Receiver pursuant to s 139ZQ of the Bankruptcy Act 1966 (Cth) upon the second respondent’s application in the course of his administration of the first respondent’s estate in bankruptcy. The intended consequence of the determination of that issue is to put to rest whether certain real property, the title to which is presently in the name of the third respondent – the trustee of a superannuation fund controlled by the applicant – or its value, is property that is more properly part of the first respondent’s estate in bankruptcy rather than property available for division between the applicant and the first respondent in these property adjustment proceedings.

8. Before going further, it is necessary to say something about some procedural aspects of this application.  On 2 June, 2021 orders were made  that:

   the issues in dispute under the Bankruptcy Act 1966 (Cth) identified in these proceedings be listed for a discrete and separate hearing for not more than two (2) days commencing at 10.00am on 16 September 2021…”.

9. There was plainly power to make an order for a decision on any issue that arose in the proceeding: rule 10.13 of the Family Law Rules 2004 (which applied at the time the order was made), however the “issues in dispute” were not further defined, either in terms or by reference to any other document that might have assisted their identification.

10. Directions made on 8 July, 2021 provided for the parties to “file and serve any further affidavit material (including evidence of any witness) on which they intend to rely on by 4.00pm on 19 August 2021”.  A direction was made for the parties to notify each other if a party or any witness relied upon by a party was required for cross-examination.  The service of case outlines was directed.  The second respondent was directed to prepare a Court Book and for that to be filed and served by 9 September, 2021.

11. The index to the court file demonstrates that none of the parties complied with the directions.  Instead, the second respondent commenced an application to join the third respondent to the proceedings and for other orders.  The applicant did the same but sought orders which were by and large unintelligible.  The second respondent filed nothing.

12. On 3 September, 2021 the second respondent’s joinder application was heard and the third respondent was joined to the proceedings.  The parties seemed to have joined in the view that the hearing of the separate issues was not ready to proceed.  In any event, none of the parties had readied themselves for the hearing.

13. The hearing the Court anticipated would commence on 16 September, 2021 did not proceed.  On 16 September, 2021 the following orders were made:

    1. That the issues in dispute under the Bankruptcy Act 1966 (Cth) identified in these proceedings be listed for a discrete and separate hearing for not more than three (3) days commencing at 10.00am on 21 February 2022 in the Family Court of Australia at Brisbane.

    2. That any requests for disclosure of documents pursuant to rr 6.08, 6.09, 6.10, 6.13 and 6.14 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) shall be made no later than ninety (sic) (60) days prior to the first day of trial.

    3. That any subpoena for the production of documents shall be issued no later than ninety (90) days prior to the first day of the discrete hearing.

    4. That the Applicant, First Respondent, Second Respondent and Third Respondent file and serve any further affidavit material (including evidence of any witness) on which they intend to rely no later than thirty (30) days prior to the first day of discrete hearing.

    …

    6. That the Second Respondent shall prepare, file and serve a court book no later than twenty one (21) days prior to the first day of the discrete hearing.

    7. That the parties shall notify each other in writing no later than fourteen (14) days prior to the first day of the discrete hearing the names of the witnesses (other than the parties) required by them for cross examination.

14. Order 1 was authorised in a general sense by rule 10.10(1) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 which commenced operation on 1 September, 2021.  Directions were also made for the filing and service of case outlines, objections to evidence and the like.  Presciently, the judge ordered that “the parties be at liberty to apply if there is any issue that arises that puts in jeopardy the effective Hearing in February 2022.”

15. The record shows that neither the applicant nor the first respondent filed any affidavits of evidence to be used at the hearing.  Instead, the first respondent filed two applications for an adjournment of the hearing, one on 28 January, 2022 and the other on 18 February, 2022.  The applicant filed responses to those applications but sought orders that are difficult to understand.  His affidavit material focussed upon issues not relevant to the adjournment applications. 

16. I heard and refused the first adjournment application on 4 February, 2022.  I delivered ex tempore reasons for doing so. On that occasion the first respondent’s solicitors appeared and sought leave to withdraw. They had not given the requisite notices required by the Family Law Rules and so I refused that leave. Nonetheless, the first respondent appeared for herself at that hearing. There was no doubt that her then current lawyers were no longer acting for her. Regrettably, it took them until 15 February, 2022 to remove themselves from the record.

17. I refused the first respondent’s second application for an adjournment of the hearing on the morning fixed for the commencement of the hearing of the separate issues.  I gave reasons for doing so.  Her reasons for seeking the adjournment were essentially the same as those advanced in support of her earlier application.  She claimed that she was distracted from preparing the current application by other proceedings in which she was involved in the Supreme Court of New South Wales.  She also said that she had difficulty finding a lawyer although had located one in Brisbane.  Although she only sought an adjournment until May or June, she also deposed to having no funds with which to pay a lawyer.  The arguments she foreshadowed in the adjournment application all went to the legitimacy of her bankruptcy and the actions of the substituted petitioning creditor upon whose application the sequestration order was made against her estate.  Those arguments have long been put to rest in other places as the decisions to which I have referred later in these reasons show.  She also wished to cavil with the actions of her trustee in the administration of the estate, but it was difficult to see how those arguments could have an impact upon the issues raised for my determination.  An adjournment seemed, in the circumstances, futile.

18. One of the problems that emerges from trial directions that are made in the form that were made in this case on 16 September, 2021 is that the day by which an act might have to be completed will fall on a weekend.  That is not what happened here because a period of “no less than thirty days” for the filing of affidavits to be used at the hearing expired on Friday 21 January, 2022.  The second respondent, however, seems to have taken the view that the time for filing further evidence expired on Saturday, 22 January, 2022 which then permitted the second respondent to file his material on the next business day – 24 January, 2022.  The first respondent asserted that the second respondent was in breach of the trial directions as indeed she asserted all parties were.  She suggested that this too, was a reason to adjourn the hearing.  However, the second respondent’s default in this regard is minor and there is nothing in the complaint that the second respondent did not file his evidence on time.  That default did not justify an adjournment of the hearing, of itself or in combination with any other matters raised by the first respondent.

19. Sadly, however, the second respondent did not serve the Court Book he was directed to prepare in accordance with the Court’s directions.  It was not served until 18 February, 2022, the last business day before the commencement of the hearing before me.  It is a large document of 2330 pages, most of which is largely irrelevant.  But the first respondent was right to complain about the second respondent’s late compliance with that direction.  Indeed, she claimed not to have received it, but there is sworn evidence of it having been sent to her by email on 18 February, 2022 (affidavit of Ms EE filed 18 February, 2022) and I prefer that evidence to the unsworn claims made by the first respondent about its non-receipt.  Notwithstanding the volume of material contained in the Court Book (a lot of which consisted of the parties filed material) I did not and do not consider its late filing and service sufficient to justify an adjournment of the hearing.

20. Out of all of this there are three questions that immediately arise.  First, just what are the questions that have been identified to be heard and determined separately?  Second, what is the status of the “Court Book” and third, what is the evidence upon which the identified questions must be decided?

21. I will deal with questions two and three first as they are more easily answered than question one.

22. The Court Book was not tendered as an exhibit.  I do not consider that its content is evidence although it is a useful collection of the relevant materials filed by the parties over the course of these proceedings.  I make it clear however, that I have paid no regard to any material that is not an application or a response or some type of affidavit filed in these proceedings.  I specifically have not had any regard to any of the documents produced on subpoena as set out in volumes 3 and 4 of the Court Book.

23. The applicant and the first respondent did not have the benefit of legal representation.  I took it upon myself to read all of the affidavits that they have filed throughout the proceedings. 

24. I have read the affidavits of the applicant filed on 3 July, 6 August, 24 August, 21 October and 17 December, 2020; 9 February, 6 April, 30 April, 1 June and 19 August, 2021 and 3 February, 2022 (in the Parramatta Children’s Court).

25. I have read the affidavits of the first respondent filed on 20 September, 2019 (in the Supreme Court of New South Wales found in volume 2 of the Court Book), 23 July, 2020 (in the Federal Circuit Court of Australia as it was then known, also to be found in volume 2 of the Court Book), 24 March, 2021 (also filed on 2 February, 2021), 28 January, 2022 (refiled in a more complete form on 31 January, 2022) and 18 February, 2022.  There is also an affidavit dated 7 April, 2021 that appears to be unsworn and unfiled.  I have treated it as a submission because it does not appear to be sworn.  Additionally, at about 9.45am on the morning of the hearing before me, the first respondent sought to file a further affidavit.  Having regard to its content I declined to receive it as an affidavit but received it as a submission from the first respondent. Further, following some orders I made on 25 February, 2022 in circumstances I have recounted below, the first respondent filed a further affidavit on 18 March, 2022 deposed by her.  I have read that affidavit.

26. I have read the affidavits of the second respondent filed on 18 May and 11 August, 2021 and 24 January, 2022.  I have also read the affidavit of Mr GG filed on 6 August, 2020 relied upon by the second respondent.  Again, following the orders I made on 25 February, 2022 the second respondent filed a further affidavit by Mr Feltos on 25 March, 2022.  I have read that affidavit. 

27. The first respondent sought to cross-examine the second respondent and his witness.  I declined to permit that because the first respondent had not given the notice she was directed to give requiring those witnesses for cross-examination.

28. Counsel for the second respondent briefly cross-examined the first respondent.

1. Thus, the affidavits I have identified and the evidence given on cross-examination forms the evidence upon which I have to decide the issues in this case.

2. That leaves the first question I have identified earlier.  The issues for determination are not clearly spelled out in the orders made on 2 June, 2021 and 16 September, 2021 for the trial of the separate issue.  They should be.  The order for the separate determination of particular issues should be specific and set out the questions to be answered or issues to be determined.  If that is done, the issue for determination will be properly formulated and its resolution will inform the appropriate judgment, order or declaration to be made upon the resolution of the issue.  The formulation of the question or issue may also impact upon the need for leave to appeal in the event a party wishes to appeal the judgment, order or declaration. 

3. I have had regard to the amended initiating application filed on 20 August, 2020, the first respondent’s response to that amended application (described as a response to an application in a case) filed on 24 March, 2021 and an application in a case filed by the second respondent on 11 August, 2021.

4. Relevantly, in the amended initiating application, the applicant seeks the following orders:

   1A.An order pursuant to s. 139ZS of the Bankruptcy Act 1966 (Cth) setting aside the Notice under the hand of [Mr HH], as delegate to the Official Receiver, dated 4 June 2020, addressed to the Proper Officer of [D Pty Ltd] as trustee for the [D Pty Ltd Superannuation Fund] demanding that [D Pty Ltd] pay the wife's Trustee in bankruptcy the value of the [Suburb C] Property as described below.

   1B. Declarations that the following transfers are not void as against the wife's Trustee in bankruptcy; namely:

   (a)the transfer by the wife to the husband of a 1/100th share or interest of the legal title of the [Suburb C] Property described below on or about 15 October 2014, and

   (b)the transfer by the wife and the husband of all of their right, title and interest (including their respective equitable interests) in and to the [Suburb C] Property as described below to [D Pty Ltd] as trustee for the [D Pty Ltd Superannuation Fund] on or about 8 December 2014.

5. In her response filed on 24 March, 2021 the first respondent records that she agrees with orders 1A and 1B sought by the applicant as set out above.  She also sought 53 other orders against the applicant or the second respondent.  Her application for those orders has been dealt with, by and large, in a judgment delivered by another judge of this court on 31 August, 2021.  Many of the orders sought by her were dismissed on a summary basis.  However, more than half were “adjourned to a date to be fixed”.  Of those that were so adjourned, the following seem to bear upon the question of the first respondent’s bankruptcy and the issue of the legal and equitable ownership of the Suburb C property:

   1. Invoke the bankruptcy jurisdiction in these proceedings pursuant to section 79(1) of the Family Law Act.

   …

   17.Order that all notices and orders from AFSA obtained by the trustee (2nd respondent) since 30 September 2016, and the s 139ZQ notice of 4 June 2020 be set aside.

   …

   27.Declaration pursuant to section 78(1) and (2) of the Family Law Act 1975 (Cth) that the properties at [B Street Suburb C] and [R Street Suburb S] were held in trust by the applicant and 1st respondent for the [D Pty Ltd Superannuation Fund].

   28.Declaration pursuant to section 78(1) and (2) of the Family Law Act 1975 (Cth) that all sale of [D Pty Ltd Superannuation Fund] properties and assets since 30 September 2016 are invalid, NULL and VOID, and order reversal of the sales.

   …

   37.Extend time to make the 1st respondent’s self-managed superannuation fund compliant and regulated as a regulated fund until now.”

6. By his application in a case filed on 11 August, 2021 the second respondent seeks a range of orders.  The first of those for the joinder of the third respondent, was made on 3 September, 2021 as I have recounted above.  However, in circumstances which I shall shortly describe, at the commencement of the hearing before me, counsel for the second respondent said that the only orders his client now sought were an order dismissing the orders I have just identified above in the first respondent’s application in a case and the dismissal of the balance of his client’s own application in a case filed on 11 August, 2021.  In his most recently filed submissions, he seems now to seek that the second respondent be given leave to discontinue that application.

7. Relevant to the identification of the issues for determination is that as between the applicant and the second respondent a compromise has been reached.  The applicant and the second respondent ask me to make the following orders (and notations) with the consent of each of them:

   1.Pursuant to rule 10.02(2)(b) of the Federal Circuit Court and Family Court of Australia (Family Law) Rules 2021, the Applicant be granted leave to file a Notice of Discontinuance to discontinue:

   (a)the Amended Initiating Application filed by the Applicant on 24 August 2020 in part so far as it seeks relief against the Second Respondent, in his own capacity and in his capacity as trustee of the bankrupt estate of the First Respondent, [Ms Saha], on the basis that there be no order as to costs against the Second Respondent and/or the First Respondent’s estate; and

   (b)the Application in a Case filed by the Applicant on 19 August 2021 in whole.

   2.The Applicant and Second Respondent be released from the undertakings particularised in the Orders of Justice Baumann made on 7 August 2020.

   THE COURT NOTES THAT:

   The Applicant and the Second and Third Respondents have agreed to settle all matters in dispute between them in this proceeding on terms that include the following:

   3.The Third Respondent will pay the Second Respondent the sum of $853,875 (Settlement Sum).

   4.The Settlement Sum will be paid directly from the net sale proceeds of sale of the property owned by the Third Respondent with folio identifier … situated at [FF Street Suburb C].

   5.Upon receipt of the Settlement Sum, the Second Respondent will release the Applicant and Third Respondent from any and all claims arising out of this proceeding and the bankrupt estate of the First Respondent, including the Notice dated 4 June 2020 to the Third Respondent under section 139ZQ of the Bankruptcy Act 1966 (Cth) and in respect of any costs orders made in favour of the Second Respondent in this proceeding.

8. The effect of making those orders would see the funds held by the third respondent ostensibly as trustee of the parties’ superannuation fund depleted by the amount set out in the orders without any reference to the first respondent.  I will deal with whether I should make these proposed consent orders at the end of these reasons.

9. From the parties’ applications and responses, it is tolerably clear that the ultimate issues for determination are:

   (a)whether the notice issued pursuant to s 139ZQ of the Bankruptcy Act is valid; and if so

   (b)whether there is any basis to set it aside. 

   The factual background

10. A number of factual issues arise upon a consideration of the factual matrix revealed by the parties’ material.  I will set out that factual matrix now.

11. At the heart of the current issue for determination is a parcel of real property situated B Street, Suburb C.  The Suburb C property was purchased in 2004 by the first respondent for $585,000.  There is no suggestion that she purchased it for anything other than market value and I find that as at the date of its purchase, it had a market value of $585,000.

12. The title was registered in her name.  The evidence shows that following its purchase in 2004 the applicant and the first respondent lived in the Suburb C property with their son during their relationship.  The first respondent presently lives there and gave that as her address when she was sworn to give evidence before me.

13. The evidence demonstrates that the first respondent has a proclivity for litigation.  She has litigated extensively against the Department of Families, Disabilities and Community Services in relation to her son.  The catalogue of litigation is set out at [7] of the applicant’s affidavit filed on 3 July, 2020.  The decisions referred to there are matters of public record.  There have been subsequent applications by the first respondent to the New South Wales Court of Appeal arising from that litigation.

14. In addition, she has also pursued litigation against the owners of a neighbouring property that the first respondent alleged had maliciously damaged a property owned by her and the applicant. She has also litigated against a tenant of commercial premises owned by her, debt collectors in respect of a credit card debt, the JJ Company for defamation and KK Company for defamation. The details, including the references to the various decisions are set out in the applicant’s affidavit filed on 3 July, 2020 at [8]. They are also traversed in the second respondent’s affidavit filed on 11 August, 2021 at some length.

15. The various litigation was mostly unsuccessful and the first respondent collected a number of costs orders along the way.  The costs orders went largely unfulfilled. 

16. A bankruptcy notice was issued in 2014 and the first respondent committed an act of bankruptcy because she did not satisfy the bankruptcy notice according to its terms.  A sequestration order based upon that act of bankruptcy was subsequently made on 30 September, 2016.  The situation was a little complicated because although the first respondent satisfied the claims of the creditor that issued the bankruptcy notice, another creditor successfully applied to be substituted for the original creditor and prosecuted the creditor’s petition to a sequestration order. 

17. The bankruptcy proceedings were fraught.  I will not detail the intricacies of them other than to record that the detail is contained within a line of cases.  There are, sadly, many others and the history of the bankruptcy proceedings is chronicled in the second respondent’s affidavit filed on 18 May, 2021 at [4] – [23].  Suffice to say that it appears that the first respondent ran every argument available to her to appeal the making of the sequestration order or to achieve an annulment of her bankruptcy.  Her claims that she was solvent (and so a good or sufficient reason existed not to make a sequestration order against her estate) failed at every level.

18. The source of the debt upon which the substituted creditor was able to secure a sequestration order was litigation in the District Court of New South Wales.  The evidence establishes that on 6 August, 2014 the first respondent had 3 costs orders made against her in that litigation, aggregating $8,234.32.  On 17 September, 2014 she had a further costs order made against her for $7,000.  On 15 October, 2014 she transferred a 1% interest in the Suburb C property to the applicant for $5,000.  I accept that the $5,000 was paid by the applicant to the first respondent for the interest conveyed to him.  The second respondent seeks no relief in respect of this transfer.

19. The evidence also establishes that on 8 December, 2014 another costs order was made against the first respondent for $10,500.  On that same day the first respondent and the applicant transferred their interests in the Suburb C property to the third respondent with the apparent intention that the third respondent would hold the property as trustee for the superannuation fund.

    The s 139ZQ(1) notice at issue in these proceedings

20. A succinct explanation of the utility of s 139ZQ was given by the Full Court of the Federal Court of Australia in Davidson v Official Receiver (2021) 17 ABC(NS) 610 at [9]:

    Of particular relevance to the present appeal is s 139ZQ of the Act. This provision was introduced in 1992 as part of amendments affected by the Bankruptcy Amendment Act 1991 (Cth). Section 139ZQ provides an administrative mechanism for the recovery of sums of money, or property, transferred by a bankrupt under a transaction that is void against the trustee of a bankrupt estate: Halse v Norton [1997] FCA 673; 76 FCR 389 at 392 (Black CJ), 398-399 (Lee and Nicholson JJ). The issuing of a s 139ZQ notice has been variously described as an administrative “aid” or “shortcut” aimed at assisting a trustee in bankruptcy to recover property which the trustee claims to be entitled to: Verge (Trustee), in the matter of Underdown (deceased) (a bankrupt) v Fazio [2013] FCA 18 at [14] (McKerracher J).

21. It is as well to set out the terms of s 139ZQ of the Bankruptcy Act at this point:

    139ZQ Official Receiver may require payment

    (1)If a person has received any money or property as a result of a transaction that is void against the trustee of a bankrupt under Division 3, the Official Receiver:

    (a)if the Official Trustee is the trustee—on the initiative of the Official Receiver; or

    (b)       if a registered trustee is the trustee—on application by the trustee;

    may require the person, by written notice given to the person, to pay to the trustee an amount equal to whichever of the following is applicable:

    (c)       if:

    (i)the transaction is void against the trustee under section 128B or 128C; and

    (ii)the transaction is by way of a contribution to an eligible superannuation plan for the benefit of a person (the beneficiary) who may or may not be the bankrupt; and

    (iii)the beneficiary is a member of the eligible superannuation plan;

    whichever is the lesser of the following:

    (iv)the money or the value of the property received;

    (v)the beneficiary’s withdrawal benefit in relation to the eligible superannuation plan;

    (d)in any other case—the money or the value of the property received.

    (2)The notice must set out the facts and circumstances because of which the Official Receiver considers that the transaction is void against the trustee.

    (3)The notice may:

    (a)require the amount to be paid at a time or within a period set out in the notice; or

    (b)require the amount to be paid at such times, and in such instalments, as are set out in the notice.

    (4)After the Official Receiver has given a notice to a person under subsection (1), the Official Receiver may at any time, by a further notice given to the person, revoke or amend the first‑mentioned notice.

    (5)If the Official Receiver gives a notice under this section, the Official Receiver must send a copy of the notice to the bankrupt and, if a registered trustee is the trustee, to the trustee.

    (6)A notice to be given under this section to the Commonwealth, a State or a Territory, or to an authority of the Commonwealth, of a State or of a Territory, is taken to be duly given if it is given to a person who, by any law, regulation, appointment or authority, has the function of paying, or in fact pays, money on behalf of a Department of the Commonwealth, of that State or of that Territory, or on behalf of the authority, as the case may be.

    (7)If a person is required by a notice under this section to pay to the trustee the value of any property, the requirement is taken to be complied with if the property is transferred to the trustee.

    (8)An amount payable by a person to the trustee under this section is recoverable by the trustee as a debt by action against the person in a court of competent jurisdiction.

    (9)For the purposes of subparagraph (1)(c)(ii), disregard a benefit that is payable in the event of the death of a person.

    (10)     In this section:

    contribution has the same meaning as in Subdivision B of Division 3.

    eligible superannuation plan has the same meaning as in Subdivision B of Division 3.

    member of an eligible superannuation plan has the same meaning as in Subdivision B of Division 3.

    withdrawal benefit has the same meaning as in Subdivision B of Division 3.

22. In the course of the administration of the first respondent’s estate in bankruptcy, the second respondent caused the Official Receiver to issue a notice pursuant to s 139ZQ of the Bankruptcy Act on 4 June, 2020. The notice was addressed as follows:

    The Proper Officer
    [D Pty Ltd] ATF [D Pty Ltd Superannuation Fund]
    c/- [N Accounting]
    LL Street
    SUBURB MM

23. The evidence of the applicant is that he was never served with the notice. The second respondent does not contend that the applicant was served with the notice. There was no obligation upon the Official Receiver or the second respondent to serve that notice upon him. The applicant swears that the accountants named in the address of the notice told him they did not think they received the notice, because had they received it, they would have passed it on to him. No person from the accountants’ office was called to give that evidence. That does not establish that the Official Receiver did not give the third respondent the s 139ZQ(1) notice. I find that the Official Receiver gave that notice to the third respondent by sending it to the third respondent’s registered office.

24. I am also satisfied that the Official Receiver gave a copy of the notice to the first respondent as s 139ZQ(5) of the Act obliged it to do. The evidence of Mr Feltos filed on 25 March, 2022 establishes that fact. I reject the evidence of the first respondent to the contrary.

25. The notice required the third respondent to pay the amount of $853,875.00, “representing the value of the property received by you at the time of transfer from the Debtor”, to the second respondent or alternatively to transfer the first respondent’s interest in the Suburb C property to the second respondent.  The schedule to the notice recorded the facts upon which the Official Receiver considered that the transfer of the property to the third respondent was void, as it was required to do.  It provided:

    1.[Ms Saha] (‘the Debtor’) became bankrupt on 30 September 2016 pursuant to a sequestration order made in the Federal Circuit Court.

    2.[Mr Feltos] (‘the Trustee‘) is the trustee of the above administration.

    3.In making the Sequestration Order, the Court noted that pursuant to subsection 115(1B) of the Bankruptcy Act 1966 (Cth) (‘the Act’), the act of bankruptcy was committed by the Debtor on 18 November 2014.

    The Trustee's Investigations into the financial affairs of the Debtor have disclosed the following:

    4.On or around 13 March 2004, the Debtor purchased the property located at [BB Street, Suburb C] (Folio Identifier: …) (“the Property”) for an amount of $585,000.00 and was held by the Debtor as sole registered proprietor.

    5.The Property was encumbered by a mortgage (…85) registered on the title to the property.

    6.On 15 October 2014, the Debtor executed transfer document (…6D) and transferred a 1/100th interest in the Property to [Mr Lahiri] for listed consideration in the amount of $5,000.00.

    7.[Mr Lahiri] is the former husband of the Debtor.

    8.Pursuant to section 5 of the Act, [Mr Lahiri] is considered a related entity of the Debtor.

    9.Transfer document … was registered on the title to the Property on 3 December 2014.

    10.On 3 December 2014, a discharge of mortgage (…85) was registered on the title to the Property. According to historical land title searches, the property was unencumbered after this date.

    11.The Debtor maintained ownership of her 99/100ths interest in the Property at that time.

    12.On 8 December 2014, the Debtor and [Mr Lahiri] executed transfer document (…2W) and transferred her 99/100ths interest and his 1/100'h in the property to [D Pty Ltd] (ACN […]). The transfer document lists consideration in the amount of $0.

    13.The transfer document was registered on the title to the property on 22 December 2014.

    14.An ASIC search evidences the Debtor was a director and shareholder of [D Pty Ltd] as at 8 December 2014.

    15.Pursuant to section 5 of the Act, [D Pty Ltd] is considered a related entity of the Debtor.

    16.The Trustee’s investigations have revealed that [D Pty Ltd] is trustee of the [D Pty Ltd Superannuation Fund].

    17.The financial statements of the [D Pty Ltd Superannuation Fund] for the financial year ending 30 June 2015 evidences rental income derived from the Property. Based on the information available, the Property was transferred to [D Pty Ltd] in its capacity as trustee of the [D Pty Ltd Superannuation Fund].

    18.On 29 September 2017, [Mr Lahiri], in his capacity as the Director of [D Pty Ltd], caused a caveat to be registered on the title of the Property in the name of [D Pty Ltd] which prohibited the recording of any dealing on the Property's title by virtue of the stated facts that: “Assets in a Regulated Fund Are Protected”

    19.The Trustee submits that by executing transfer document … and effecting it by getting registered with the Land Titles office on 22 December 2014, [D Pty Ltd] gave consideration of less than the market value of the Property to the Debtor (‘the Transfer’).

    20.0n 29 May 2020, the Trustee obtained an appraisal of the Property from [NN Company] who estimated that the current value of the Property is in the range of $825,000.00 to $900,000.00.

    21.The Trustee claims that the Transfer is void pursuant to section 120 of the Act.

    22.Section 120 of the Act, which is contained in Division 3 of Part VI of the Act, provides as follows:

    [omitted from these reasons]

    23.Here, the Transfer is void pursuant to Section 120 of the Act because:

    a. The Transfer took place on 22 December 2014, being a date prior to 30 September 2016, being the date of bankruptcy;

    b.The Transfer took place on 22 December 2014, being within the period of five (5) years before the commencement of the bankruptcy, being 18 November 2014 and ending on 30 September 2016, being the date of bankruptcy:

    c.The Trustee submits that [D Pty Ltd] gave consideration of less than market value of the Property to the Debtor for the Transfer.

    Particulars:

    i. The Property was purchased by the Debtor in 2004 for consideration in the amount of $585,000.00.

    ii. Transfer document … lists consideration in the amount of $0.00 for the Transfer of the Property by the Debtor and [Mr Lahiri] to [D Pty Ltd].

    iii.The Debtor held a 99/100 interest in the Property as at the date of the Transfer.

    iv. The Property was unencumbered as at the date of the Transfer.

    d.The Transfer of the Property is not subject to any of the exemptions in section 120(2) of the Act.

    24.Accordingly, [D Pty Ltd] is indebted to the bankrupt estate to the value of $853,875.00 as set out in the table below:

Description

Amount ($)

Current value of the Property

(Based on average of appraisal obtained)

862,500.00

Less: Amount owed to Mortgagee at date of the Transfer

Nil

Net equity in the property

862,500.00

The Debtor’s interest in the Property (99%)

853,875.00

From the facts and circumstances set out above and having sighted prima facie evidence supporting those facts, I am satisfied that the Transfer is void against the Trustee pursuant to Section 120 of the Act.

1. Section 139ZS of the Bankruptcy Act provides:

   139ZS Power of Court to set aside notice

   (1)If the Court, on application by a person to whom a notice has been given under section 139ZQ or by any other interested person, is satisfied that this Subdivision does not apply to the person on the basis of the alleged facts and circumstances set out in the notice, the Court may make an order setting aside the notice.

   (1A)The application must be made:

   (a)not later than 60 days after the day the notice under section 139ZQ was given to the applicant; or

   (b)if the applicant is another interested person—not later than 60 days after the day the applicant became aware that the notice has been given.

   (2)A notice that has been set aside is taken not to have been given.

2. Having regard to the facts that I have set out above and the terms of s 139ZS of the Act, I make the following findings:

   (a)the applicant’s application pursuant to s 139ZS(1) is as an interested person rather than as a person to whom a notice has been given under s 139ZQ. I make that finding on the basis that the applicant did not receive the property the subject of the relevant transfer, it was the third respondent that received the property. The notice issued by the Official Receiver was not addressed to the applicant but rather, was addressed to the third respondent, as it ought to have been. The notice was not given to the applicant when it was issued by the Official Receiver and the correspondence from the second respondent to the applicant’s solicitors dated 17 June, 2020 makes it clear that the second respondent had not given a copy of the notice to the applicant; and

   (b)the applicant’s application pursuant to s 139ZS(1) was not made within the time limited by s 139ZS(1A). The time for the making of the application commenced to run when the applicant became aware that the notice had been given (see s 139ZS(1A)(b) of the Bankruptcy Act). Although he did not have a copy of the notice, he became aware that the notice had been given when the second respondent informed his solicitors by correspondence on 17 June, 2020 that it had been issued by the Official Receiver. The application to set aside the notice needed to be made not later than 60 days after 17 June, 2020. The applicant issued his amended initiating application seeking relief under s 139ZS(1) outside of that 60 day time period.

3. When the applicant filed his amended initiating application, he was represented by a lawyer. No application for the extension of the time provided for in s 139ZS(1A)(b) was made by him then, or now, although it is probably not surprising given the terms of the agreement reached between he and the second respondent reflected in the consent orders I am now asked to make. In the absence of an application to extend the time, the applicant’s claim for relief set out in order 1A of his amended initiating application would be doomed to fail.

4. The second respondent argues that in the event that the applicant’s amended initiating application against him is discontinued there will be no application before the court to set aside the s 139ZQ notice. However, although she does not say so in terms, the first respondent’s response to the amended initiating application can be seen as an application for such an order. She agrees with orders 1A and 1B in the amended initiating application. That can, and should in my view, be treated as an application by her for relief in the same terms as that sought by the applicant. To treat it in any other way would be unfair to the first respondent. However, even treating her response in that way does not overcome the failure to commence such an application within the time limited for that purpose.

5. To accommodate this difficulty, after hearing the parties on the issue, on 25 February, 2022 I made an order that:

   The first respondent’s response to an application in a proceeding filed on 24 March, 2021 be treated as if it were an application for an order pursuant to s 139ZS(1) of the Bankruptcy Act 1966 (Cth) to set aside the notice issued by the Official Receiver to the third respondent on 4 June, 2020.

6. I made directions for the first respondent to file an application for an extension of time within which to commence that application and directions for written submissions on that application.  I also took the opportunity to seek further written submissions from the parties about the effect, if any, of the decision in Cook v Benson (2003) 214 CLR 370 upon the outcome of this proceeding. My purpose for doing so appears later in these reasons.

7. My orders and directions met with mixed success. The first respondent did not file an application to extend the time within which to bring an application to set aside the s 139ZQ(1) notice by 11 March 2022, nor file an affidavit or submission in support of any such application. She did forward by email to my associate and the other parties an unfiled application in the evening of 18 March, 2022 in which she sought the following orders:

   1. An order pursuant to s139ZS of the Bankruptcy Act 1966 (Cth) setting aside the notice under the hand of [Mr HH], as delegate to the Official Receiver, dated 4 June 2020, demanding that [D Pty Ltd] pay trustee in bankruptcy for [Ms Saha] the value of the property at [BB Street Suburb C].

   2. The Court grants an extension of time pursuant to s 33(1)(c) of the Bankruptcy Act 1966 (Cth) to commence the application set out in order 1 hereof.

8. Earlier that day she had filed an affidavit affirmed by her on 24 February, 2022 and a financial statement. 

9. Anticipating that the unfiled application in a case sent by the first respondent would be filed, the second respondent filed a response to that application, a supporting affidavit and written submissions on 25 March, 2022.

10. The first respondent filed written submissions on 19 April, 2022.

11. Notwithstanding that the application in a case sent to my associate on the evening of 18 March, 20022 remains unfiled, I will treat the first respondent’s unfiled application in a case as the application in the case anticipated by my orders made on 25 February, 2022.

    The power to order an extension of time

12. When I made my orders on 25 February, 2022 I identified the source of power to make an order extending the time within which to bring an application to challenge the s 139ZQ(1) notice as found in s 33(1)(c) of the Bankruptcy Act. Counsel for the second respondent suggests in his written submissions that there is a conflict in the authorities as to whether that section does in fact supply the power to make such an order. Two authorities are said to be against the proposition: Sampson (Trustee) v Taboada [2017] FCA 79 and Chamberlain (Trustee) v Tilbrook [2017] FCA 1586.

13. Sampson v Taboada was an application by the respondents to certain proceedings to set aside default orders that had been made in their absence. The judgment in the principal proceedings was for a sum of money found to be due by the respondents to the applicant, the trustee of the respondents’ bankrupt estates, pursuant to a s 139ZQ notice issued to the respondents. The respondents sought orders setting aside the default judgment on the basis that they had a good reason for being absent from the hearing and they had a reasonably arguable challenge to the proceedings on the basis of a proposed application under the Administrative Decisions (Judicial Review) Act 1977 (Cth) to set aside the decision to issue the s 139ZQ notice (as opposed to setting aside the notice itself). Why that course was taken by the respondents was explained in their submissions, summarised by Burley J as follows at [30]:

    The focus of the respondents’ arguments was upon the decision of the Delegate of the Official Receiver (Delegate) to issue the Notice. Counsel for the respondent accepted that the provisions of section 139ZS of the Bankruptcy Act, and in particular subsection 139ZS(1A), precluded the respondents from mounting a challenge to the Notice under the Bankruptcy Act, because no application was made for an order setting the Notice aside within 60 days after it had been given to the respondents. As a consequence, counsel submitted that it was necessary, and appropriate, to seek orders under the ADJR Act for the decision of the Delegate to be set aside.

    (my emphasis)

14. As to this proposition, Burley J further recorded at [42]:

    Subsection 139ZS(1A) was introduced by amendment made to the Bankruptcy Act which was effective on 14 October 2015 (introduced by the Civil Law and Justice (Omnibus Amendments) Act 2015 (Cth)). The respondents accept, and it was not in dispute, that the mandatory language of that subsection is such that no application can be brought later than 60 days after the day the Notice under section 139ZQ was given. Nor is it in dispute that neither of the respondents sought to set aside the Notice.

    (my emphasis)

15. It is apparent from those passages that the question of an extension of time being granted to pursuant to s 33(1)(c) of the Bankruptcy Act to bring an application under s 139ZS(1A) was not considered, but rather assumed to be unavailable. The point was not the subject of argument and did not form any part of the ratio of the case given the way in which it was conducted by the respondents. 

16. In Chamberlain v Tilbrook Flick J dealt with an application by a trustee in bankruptcy for default judgment against a recipient of a s 139ZQ(1) notice for the amount claimed in the notice. After setting out the terms of s 139ZS, his Honour continued at [19]:

    Section 139ZS(1A) is expressed in mandatory terms such that no application may be made later than the 60 days there specified: Sampson (Trustee) v Taboada [2017] FCA 79 at [42] per Burley J.

17. It will again be observed that the question was not the subject of argument and the there was no pending application for an extension of time within which to challenge the s 139ZQ notice in that case. The remarks are, at best, obiter.

18. A contrary conclusion was reached in Radnor Enterprises Pty Ltd v Nicholls (as trustee of the Property of Boniface, a Bankrupt and Trustee of the Property of Ogston, a Bankrupt) (2017) 15 ABC(NS) 336. That case was the determination of a separate issue expressed in the following terms:

    Is the power to extend time conferred by s.33(1)(c) of the Bankruptcy Act 1966 (Cth) (Act) capable of extending the time limited by s.139ZS(1A) of the Act for the making of an application under s.139ZS(1) of the Act?

19. After considering the extensive arguments against the proposition underlying the question and applying the ordinary canons of statutory construction, Judge Manousaridis answered that question in the affirmative.  As to Sampson v Taboada, his Honour said:

    Finally, there is the decision of Burley J in Sampson v Taboada. In my opinion, his Honour cannot be taken to have considered, let alone to have decided, that s.33(1)(c) of the Act does not apply to s.139ZS(1A) of the Act. Counsel for the recipients of the s.139ZQ Notice that was issued in that case accepted that the language of s.139ZQ was such that no application could be brought after the 60 day period limited by s.139ZS(1A) expired. It does not appear, however, that is Honour was directed to s.33(1)(c) of the Act. Nor was his Honour directed to Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble where Carr J held that a challenge to the validity of a s.139ZQ Notice could be made under s.30 of the Act or collaterally in a defence to an action brought under s139QZ(8) of the Act.

20. Chamberlain v Tilbrook was decided after Radnor, but not surprisingly given the issues that Flick J had to decide, his Honour does not appear to have been referred to it.

21. Radnor is the only case which deals squarely with whether the power in s 33(1)(c) of the Bankrupcy Act can be employed to extend the time for bringing an application under s 139ZS(1)(a) of that Act. The reasoning is, with respect, persuasive and there is no apparent reason why it ought not be followed. It is not clearly wrong.

22. I am satisfied that s 33(1)(c) supplies sufficient power for the court to make an order extending the time within which an application pursuant to s 139ZS(1A) may be commenced.

    Should there be an extension?

23. The principles to be applied when considering an extension of time application are well known.  Most cases rely upon what was said by Wilcox J in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344. As counsel for the second respondent submits, the Hunter Valley approach was summarised by the Full Court of the Federal Court of Australia in R v Parker [2002] FCAFC 133 at [6]:

    [6] In the civil jurisdiction, Wilcox J discussed at some length the matters which, in his opinion, were deserving of consideration when considering an application for leave to extend the time within which to file a notice of appeal: see Hunter Valley Developments Pty Ltd v Cohen [1984] FCA 176; (1984) 3 FCR 344, a decision under the Administrative Decisions (Judicial Review) Act 1977 (Cth). The matters which attracted his Honour's attention were set out at 348-349:

    1. applications for an extension of time are not to be granted unless it is proper to do so; the legislated time limits are not to be ignored. The applicant must show an “acceptable explanation for the delay”; it must be “fair and equitable in the circumstances” to extend time;

    2. action taken by the applicant, other than by way of making an application for review, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished;

    3. any prejudice to the respondent in defending the proceedings that is caused by the delay is a material factor militating against the grant of an extension;

    4. however, the mere absence of prejudice is not enough to justify the grant of an extension; and

    5. the merits of the substantial application are to be taken into account in considering whether an extension of time should be granted.

24. The Hunter Valley approach has also been applied in this court: Calafiore & Netia [2018] FamCAFC 220 and in the Full Court: Calafiore and Netia (2019) 60 Fam LR 60.

25. Insofar as the first respondent is concerned, the evidence is that the first respondent was sent a copy of the s 139ZQ(1) notice on 5 June, 2020 – the day following its issue, by the Australian Financial Security Authority. The evidence is that it was sent to her place of residence. There is no reason to doubt this evidence. I find that she became aware that the s 139ZQ(1) notice had been given to the third respondent when the notice that was sent to her residential address would have been delivered in the ordinary course of the mail. Even if that finding is erroneous, I accept the second respondent’s submission that the very latest date upon which the first respondent became aware of the notice was when the applicant served her with his application to have that notice set aside as part of these proceedings. On any view of facts, the first respondent requires an extension of time under s 139ZS(1A) to set aside the notice.

26. The first respondent has given no evidence which explains her failure to bring an application to set aside the notice at all or alternatively which explains the delay in bringing an application under s 139ZS(1A) of the Act. Moreover, the first respondent has not made any submission as to the basis upon which the extension of time should be granted.

27. Whilst the second respondent points to no prejudice to him in the event that I was to grant the extension of time for which the first respondent now applies, I have determined to refuse the extension of time because:

    (a)the first respondent offers no explanation for her failure to commence an application to set aside the notice;

    (b)the time limits imposed by the legislation should not be ignored without good reason; and

    (c)in any event the merits of the first respondent’s proposed application do not warrant the grant of the extension.

    Merits of the proposed application

28. There is nothing about the form of the s 139ZQ(1) notice that suggests that it is not in accordance with that section. There is no want of form that invalidates the notice. The procedural requirements for the giving of the notice are made out on the evidence. It was given to the third respondent and a copy was given to the first respondent.

29. The court may set aside the notice if it is satisfied that Subdivision J of Division 4B of Part VI of the Bankruptcy Act does not apply to the recipient of the notice on the basis of the alleged facts and circumstances set out in the notice. I have set out the facts and circumstances alleged in the notice said to result in the power to issue a s 139ZQ(1) notice being engaged.

30. The evidence of the second respondent relied upon in this application establishes each of the facts relied upon in the notice.  The evidence establishes, and I find:

    (a)in 2004 the first respondent purchased the property located at BB Street, Suburb C (Folio Identifier: …) for an amount of $585,000.00.  She was registered as the sole registered proprietor of that property;

    (b)the Suburb C property was encumbered by a mortgage registered on the title to the property;

    (c)on 15 October, 2014 the first respondent transferred a 1/100th interest in the Suburb C property to the applicant for a consideration of $5,000.00, which was paid by him.  The transfer was registered on the title to the Suburb C property on 3 December, 2014.  The mortgage registered over the title to the Suburb C property was discharged on that day in the property thereafter, was unencumbered;

    (d)the applicant was a related entity of the first respondent for the purposes of the Bankruptcy Act (see definition in s.5 of that Act);

    (e)assuming that the applicant gave market value consideration for the interest transferred to him, the market value of the Suburb C property at that time was at least $500,000;

    (f)on 8 December, 2014 the first respondent and the applicant transferred their interests in the Suburb C property to the third respondent.  The transfer document, registered on the title to the Suburb C property on 22 December, 2014 recorded the consideration for the transfers as “$0”;

    (g)as at 8 December, 2014 the applicant was a director and shareholder of D Pty Ltd and, for the purposes of the Bankruptcy Act, that company was a related entity of the first respondent at that time;

    (h)the third respondent was at the relevant time, and continues to be the trustee of a superannuation fund named D Pty Ltd Superannuation Fund;

    (i)the Suburb C property was transferred to the third respondent in its capacity as trustee of the D Pty Ltd Superannuation Fund.  It is the first respondent’s case that that is so;

    (j)the market value of the Suburb C property at the time of the transfer of the applicant’s and the first respondent’s interests to the third respondent was not zero, but was at least $500,000; and

    (k)on 29 May, 2020 the second respondent obtained an appraisal of the value of the Suburb C property from NN Company.  That organisation estimated that the then current value of the Suburb C property was in the range of $825,000.00 to $900,000.00.

31. The second respondent’s case is that by executing the transfer and effecting it by registration on 22 December 2014, the third respondent gave no consideration, or consideration of less than the market value for the interest in the Suburb C property that was transferred to it. 

1. On its face, it appears that the transfer by the applicant and the first respondent of their interests in the Suburb C property to the third respondent was for no consideration.  The instrument of transfer records the consideration as such.  However, it is on this point that I asked for the provision of further submissions having regard to the decision of the High Court of Australia in Cook v Benson (2003) 214 CLR 370 which seemed to be against the second respondent’s case.

2. In Cook v Benson a bankrupt made 3 relevant payments – $20,000, $40,000 and $20,000 – from an amount of $96,192.36 which became payable to him in his capacity as a member of a certain retirement fund upon the termination of his employment. In total he received $96,192.36. He decided to roll-over an amount of $80,000 into other superannuation funds. Less than two years later he became bankrupt and the trustee of his estate commenced proceedings to recover the payments on the basis that they were void by reason of s 120 or alternatively s 121 of the Bankruptcy Act. The High Court determined that the trustee’s action failed. Relevantly, the majority (Gleeson CJ, Gummow, Hayne and Heydon JJ) said at paragraphs [20], [33] and [35] – [37] (footnotes omitted):

   [20] In the case of each of the “roll-over” transactions, the substance of what occurred was as follows. The first respondent applied for membership of a superannuation fund. The fund was administered by a trustee. The general scheme was that the trustee would receive the amount contributed by the first respondent and apply it in taking out a policy on the life of the first respondent and in making other forms of investment. The first respondent was entitled to death and retirement benefits in accordance with the terms of the deed governing the fund. The detail of the manner in which the value of the first respondent's entitlements varied from time to time is not a matter of relevance to the present appeal. Each of the three payments in question was made for the acquisition of the rights secured by the respective deeds of trust. Those rights were enforceable by the first respondent against the respective trustees.

   ..

   [33] In the present case, the payments in question were made pursuant to arm's-length, commercial transactions. The payments, at the direction of the first respondent, out of the funds due to him under the ISAS superannuation scheme, by way of contributions to other, commercially marketed, superannuation schemes, were made in return for the obligations, undertaken by the trustees of those schemes, to provide him with the rights and benefits to which he would in due course become entitled under the rules of each scheme. Those rights and benefits constituted substantial and valuable consideration for the contributions of the first respondent.

   …

   [35] Hely J, whose reasoning in this respect was supported by the appellant, denied the provision of valuable consideration by treating the case as analogous to a transfer of property to a trustee who agrees to hold it upon the terms of the trust and administer it accordingly. It may be accepted that, if the first respondent had simply paid $80,000 to a person to hold on trust for him, the trustee would not be a purchaser for valuable consideration. In such a case, no issue under s 120 would have arisen; the first respondent would have remained the beneficial owner of the $80,000 or the assets in which it had been invested, and the property of which he was the beneficial owner would have been available to his creditors. However, that is not what occurred in the present case. The trustees of the superannuation funds did not undertake to accept funds, hold them on trust for the first respondent, and administer them on his behalf. The rights and benefits to which contributors to the funds were entitled, although they might vary with the success or otherwise of the investment policies of the fund managers, were governed by the rules of the superannuation scheme. As Kiefel J pointed out, in at least one case those rights included a “capital guarantee”.

   [36] Hely J also referred to Tooheys Ltd v Commissioner of Stamp Duties (NSW). In that case, a deed, providing for the establishment of a pension scheme for the employees of a company, was made between the company and trustees. The company paid £50,000 to the trustees as an initial contribution to the fund. The deed was chargeable to stamp duty as a declaration of trust, and was therefore chargeable with the same duty as if it were an instrument of conveyance of the property comprised therein. It became necessary to consider the rate at which duty should be calculated. That turned upon whether the deed was the equivalent of a conveyance made upon a consideration in money or moneys worth of not less than the value of the property to which it related. The only parties to the dutiable instrument were the company and the trustees. Employees who might in the future become members of the fund would, upon joining, obtain rights by reason of the provisions of the deed, but they were not parties to it. Nor would they themselves be obliged to make contributions. The question of consideration arose in relation to the position as between the parties to the deed; that is to say, the company and the trustees. Dixon CJ said: “The company as the party directing the creation of the trust and the trustees as the parties creating the trust by the declaration of the trust obtained no consideration in money or money's worth.” The payment of £50,000 by the company to the trustees was not made in return for any property, or right, received by or conferred upon the company in return. On the other hand, in the present case the first respondent made contributions in return for the undertaking by the trustees of the funds of obligations to pay death, retirement or other related benefits, to him or his nominees, in accordance with the rules of the respective funds. He obtained consideration in money's worth in return for the payments.

   [37] There was a difference between the approach of the majority in the Full Court, and that of Hely J, to the identification of the property that was settled for the purposes of s 120. Beaumont and Kiefel JJ, consistently with the relief claimed by the appellant, treated the three payments of money as the relevant settlements of property, and enquired whether the first respondent had received valuable consideration for them. Hely J, on the other hand, observing that the amounts were applied in payment of premiums on policies of insurance on the life of the first respondent, identified the “settlement of the life policies on the trustees” as the relevant settlement of property, and enquired whether the trustees provided “valuable consideration for that settlement”. He answered that question in the negative, pointing out that the trustees held the life policies on trust, and that “a trustee who promises to receive and hold property transferred to him ... does not thereby give valuable consideration for the property transferred”. However, the settlements or dispositions of property which the appellant claimed to be void were the three payments of money, not the issue of the life policies. The Amended Statement of Claim made no reference to the life policies. It asserted that each of the payments of $20,000, $40,000 and $20,000 respectively was void as against the appellant, claimed declarations accordingly, and sought orders for repayment of those amounts. There is no reason to doubt that the property, and the only property, of which the first respondent divested himself by the impugned transactions was the $80,000. Once that is accepted, the question whether he received substantial and valuable consideration in return is to be answered in the affirmative. The first respondent never divested himself of the life policies, and they did not constitute the property which the appellant alleged was settled in terms of s 120. It is erroneous to ask what consideration the trustees gave for the life policies. The question is what consideration they gave for the $80,000.

3. Here, the transaction was not at arm’s length but was between related entities (as defined in the Bankruptcy Act). I am not sure that much turns upon that because if the evidence established that the transferee received consideration equivalent to market value for the interest transferred, s 120 of the Bankruptcy Act would not be engaged. The inquiry is focused upon the consideration given for the transfer of the relevant property.

4. Here, there is no evidence upon which I could find to the requisite standard that in return for the contribution represented by the value of the Suburb C property, the first respondent received valuable rights from the third respondent.  Cook v Benson stands for the proposition that a trustee of a superannuation fund (at least one at arm’s length from the contributor) can provide valuable consideration for a contribution or transfer which is represented by the rights and benefits that will accrue to a member in accordance with the trust deed of the superannuation fund commensurate with the contributions made.  In the present case, the deed establishing the trust of which the third respondent is trustee is not in evidence.  Nor is there any evidence of the rules of the fund.  I cannot infer that there would be benefits or entitlements flowing to the first respondent from the trust deed because on her own case, the fund is a non-complying superannuation fund, by which I take her to mean that it does not comply with the rules and regulations relating to such funds.  That is so, notwithstanding that there is in evidence financial statements for the fund that purport to record monetary entitlements for each of the applicant and the third respondent. 

5. The way in which the present form of s 120 of the Bankruptcy Act functions and the focus it directs to the value of the consideration given for a particular transfer was explained by the Full Court of the Federal Court of Australia in Anscor Pty Ltd v Clout (as Trustee in Bankruptcy of the estate of Dexter) (2004) 135 FCR 469. At [32] – [36] the Court said:

   32 The second change of present relevance is referable to the holding in Barton v Official Receiver [1986] HCA 44; (1986) 161 CLR 75 (‘Barton v Official Receiver’) that a person who claimed protection under the former s 120(7) as a person who had purchased from the disponee under the settlement ‘in good faith and for valuable consideration’ needed to show, in relation to consideration, only that he had given ‘consideration for his purchase “which has a real and substantial value, and not one that is merely nominal or trivial or colourable” ...’ (at 86). The new s 120(1), in contrast, is enlivened by nothing more than a transfer of property within the specified period under which ‘the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property’ (my emphasis): see the Explanatory Memorandum relating to the Bankruptcy Legislation Amendment Bill 1995 (‘the Explanatory Memorandum’), par 84.13; Official Trustee in Bankruptcy v Lopatinsky [2003] FCAFC 109; (2003) 30 Fam LR 499 at [94].

   33 In considering the questions raised by the appeal, it is important to note the following matters.

   34 First, since s 120(1) is triggered by a transfer for less than full consideration, if the transferor (later the bankrupt) sells land having a market value of $1 million for $950,000 at any time in the period beginning five years before the commencement of the transferor’s bankruptcy and ending on the date of the bankruptcy, the provision is activated. It matters not that the transferee was a purchaser in good faith and for valuable consideration. However, if the transfer took place more than two years before the commencement of the transferor’s bankruptcy, the provision does not operate if the transferee proves that, at the time of the transfer, the transferor was solvent: s 120(3) (a person is insolvent if, and only if, the person is unable to pay all the person’s debts, as and when they become due and payable: ss 5(2), 5(3).

   35 As noted earlier, in the present case, the Trustee does not seek to go back earlier than the two year period immediately before the commencement of Dexter’s bankruptcy on 26 March 1998, and therefore there is no scope for s 120(3) to operate.

   36 Second, s 120(1) requires the Court to be satisfied only that the value of the consideration was less than the market value of the property transferred as at the date of the transfer. Unlike s 120(4), s 120(1) does not require the Court to assign any particular value to the consideration. My views just expressed are in conformity with those of Merkel J in Victorian Producers Co-operative Co Ltd v Kenneth [1999] FCA 1488 at [23].

6. I find that the third respondent gave no consideration for the transfer to it of the first respondent’s interest in the Suburb C property when that transfer was made in December, 2014. I find that the transfer is void pursuant to s 120 of the Bankruptcy Act because:

   (a)the transfer took place prior to the first respondent’s date of bankruptcy;

   (b)the transfer took place on a date within the period of five years before the commencement of the first respondent’s bankruptcy; and

   (c)the value of the consideration given by the third respondent for the transfer was less than the market value of the interest in the Suburb C property that it received by way of the transfer.

7. Further, I find that none of the exemptions set out in s 120(2) of the Bankruptcy Act apply. Nor do the provisions of s 120(3) apply. The first respondent and the third respondent were related entities for the purposes of Bankruptcy Act at the time of the relevant transfer (see s 5(1) definition of related entity).  Given that the relevant transaction took place less than four years before the commencement of the first respondent’s bankruptcy, whether or not the first respondent was solvent at the time of the transfer is irrelevant.

8. I am satisfied that it would be an exercise in futility to grant an extension of time to permit the first respondent to prosecute an application under s 139ZS(1A) of the Bankruptcy Act. Even at an impressionistic level, such an application could not succeed.

   Discontinuance by the applicant

9. I have set out earlier the orders that have now been agreed between the applicant and the second respondent. The applicant applies for leave to discontinue his proceedings against the second respondent. The effect of that will be that the third respondent will pay to the second respondent the amount claimed in the s 139ZQ(1) notice. That payment will significantly deplete the amount available for distribution between the applicant and the first respondent in the property adjustment proceedings yet to be determined. In that sense the proposed discontinuance and the orders will work a disadvantage to the first respondent.

10. The court has the power to allow a discontinuance with leave pursuant to rule 10.02 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021. Leave to discontinue should be granted provided it may be done without injustice between the parties. The helpful submissions of counsel for the second respondent direct my attention to O’Neill v Mann [2000] FCA 1680 at [11] where Finn J said:

    [11](1) O22 r2 of the Rules specifies the circumstances in which a party making a claim for relief may discontinue the whole or any part of that claim (a) without the leave of the Court or the consent of any other party; (b) with the consent of any or all of the parties; and (c) with the leave of the Court. Subject to a qualification I will note below, where the leave of the Court is sought:

    “the court will, normally, at any rate, allow a plaintiff to discontinue if he wants to, provided no injustice will be caused to the defendant. It is not desirable that a plaintiff should be compelled to litigate against his will. The court should therefore grant leave, if it can, without injustice to the defendant, but in doing so should be careful to see that the defendant is not deprived of some advantage which he has already gained in the litigation and should be ready to grant him adequate protection to ensure that any advantage he has gained is preserved”: Covell Matthews & Partners v French Wools Ltd [1977] 1 WLR 876 at 879.

    The qualification is that inability completely to protect a respondent will not in all circumstances result in leave being refused. The matter remains one for the exercise of the Court's discretion in each case: SCI Operations Pty Ltd v Trade Practices Commission (1984) 53 ALR 283. The common device employed to protect a respondent is the imposition of terms on an applicant as a condition of the grant of leave: see eg Young, Austen & Young Ltd v British Medical Association [1977] 1 WLR 81. Those terms may be so onerous that an applicant for leave may not wish to accept them: Covell Matthews & Partners v French Wools Ltd [1978] 1 WLR 1477 at 1485.

11. Here, there is no suggestion that the first respondent has some advantage which she has already gained in the litigation of which she will be deprived if leave to discontinue is granted. The disadvantage I have identified above by reason of the payment by the third respondent to the second respondent is not sufficient to deny a grant of leave to discontinue. No basis is demonstrated in the material to think that the s 139ZQ(1) notice at issue is defective or void or should otherwise be set aside. It should operate as intended by the Bankruptcy Act.

    Disposition

12. It is appropriate to grant the applicant leave to discontinue his amended application against the second respondent.  The first respondent’s response to an application in a case filed on 24 March, 2021 insofar as she supports the orders sought by the applicant against the second respondent should also be dismissed.  Her application for the orders that I have set out earlier in these reasons concerning the “bankruptcy issues” should also be dismissed.  The injunctions in place between the applicant and the second and third respondent’s should be discharged as they are no longer necessary.

13. The second respondent’s application in a case should be dismissed in the circumstances set out above, rather than granting the second respondent leave to discontinue that application.

14. As between the applicant and the first respondent, the relief sought by the applicant in paragraph 3 of annexure “B” to his initiating application filed on 6 July, 2020 remains undetermined as does the first respondent’s claims in paragraphs 3, 18, 20, 21, 22, 23, 24, 25, 26, 29, 30, 31, 32, 36, 38, 39, 40, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51 and 53 of her response to an application in a case filed on 24 March, 2021.  The application should be listed for further directions to determine how those outstanding matters should be managed towards resolution.

15. I make orders accordingly.

I certify that the preceding ninety-nine (99) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jarrett.

Associate:

Dated:       27 April 2022