Lemnos & Lemnos

In the Family Court of Australia, Justice Le Poer Trench presided over proceedings involving Mrs Lemnos (the wife) as the first applicant and Mr M of F Company, Trustee of the property of Mr G Lemnos, a bankrupt (the Trustee), as the second respondent. The dispute concerned the division of matrimonial property, particularly the property at W, following the bankruptcy of Mr G Lemnos (the husband). The proceedings also involved three of the parties' children who sought orders regarding specific items of property, which were settled by consent.

The court was required to determine several key legal issues. These included the Family Court's jurisdiction to make property orders concerning assets vested in a bankruptcy trustee, the appropriateness of vesting property from the bankrupt estate in the wife, and whether a monetary order or a property transfer order was more suitable. The court also had to consider the wife's contributions to the marriage, any adjustments under section 75(2) of the Family Law Act 1975 (Cth) (the Act), and whether the husband's actions constituted "waste" of matrimonial assets as defined in *Kowaliw and Kowaliw*. Finally, the court needed to assess how to approach the consideration of section 75(2)(ha) of the Act, which pertains to the effect of proposed orders on creditors' ability to recover debts.

Justice Le Poer Trench reasoned that amendments to the *Bankruptcy Act 1966* (Cth) and the *Family Law Act 1975* (Cth) in 2005 conferred significant jurisdiction on the Family Court to deal with bankruptcy matters concurrently with family law proceedings. The court found that the wife had made substantial contributions to the marriage, both financially and in her role as homemaker and primary caregiver for the children, and that these contributions should be assessed as equal to the husband's at the time of trial. The court determined that the husband's actions in claiming tax deductions for the property at W while it was occupied as the family home constituted recklessness and negligence, and therefore the significant debt to the Australian Taxation Office should be attributed solely to him. Despite the substantial loss to creditors, the court found that the legislative framework required it to balance the wife's needs and contributions against the creditors' interests, without giving creditors automatic priority.

The court ordered that the property at W be sold, with the net proceeds of sale to be divided equally between the Trustee and the wife. The wife was also to receive the Lexus motor vehicle registered in the husband's name, which was vested in the Trustee. The wife was to retain her other assets, including her recently acquired property, furniture, jewellery, and savings, and remain liable for her existing debts. The court noted that while the outcome meant the Australian Tax Office, as the primary creditor, would suffer a significant loss, this was a consequence of the current legislative provisions designed to protect non-bankrupt spouses.