Macdermott & Grant
[2022] FedCFamC1F 997
Federal Circuit and Family Court of Australia
(DIVISION 1)
Macdermott & Grant [2022] FedCFamC1F 997
File number(s): ADC 5291 of 2019 Judgment of: BERMAN J Date of judgment: 15 December 2022 Catchwords: FAMILY LAW – APPLICATION IN A PROCEEDING – Where the respondent is a bankrupt – Where the respondent had no knowledge of the final orders made in Chambers – Where the respondent brought an Application in a Proceeding seeking to set aside final orders –Consideration of whether the respondent had a right to be heard under s 79 of the Family Law Act – Consideration of s 79(12) and s 79(13) of the Family Law Act – Where following the discharge in bankruptcy, there is more than $1 million surplus – Where the final orders do not deal with superannuation – Where the final orders provide that the respondent receives nothing – Consideration of exceptional circumstances – Orders.
FAMILY LAW – PRACTICE AND PROCEDURE –Final orders – Where proceedings commenced prior to the respondent being declared a bankrupt – Where the applicant and the second respondent trustee reached agreement – Where final orders were made in Chambers with no need for appearances – Where the respondent seeks to set aside final orders – Where the respondent was not given the opportunity to be heard – Consideration of Taylor v Taylor (1979) 143 CLR 1 – Consideration of the Court’s ability to set aside an order where a person has not been given the opportunity to appear and present his/her case – Orders.
Legislation: Bankruptcy Act 1966 ss 58, 60, 60(2), 60(3), 60(4), 116, 116(2)
Family Law Act 1975 (Cth) part VIIAA, ss 75(2)(ha), 79, 79(1), 79(1)(b), 79(12), 79(13), 79A
Federal Circuit and Family Court of Australia(Family Law) Rules 2021 (Cth) r 10.13
Cases cited: Badenoch & Faldyn (No 2) [2022] FedCFamC2F 794
Cummings v Claremont PetroleumNL (1996) 185 CLR 124
O’Neill v O’Neill & Ors (1998) FLC 92-811
Sloan & Sloan [2018] FamCA 610
Taylor v Taylor (1979) 143 CLR 1
Wallmann & Wallmann (1982) FLC 91-204
Yunghanns & Yunghanns & Ors (1999) FLC 92-836
Division: Division 1 First Instance Number of paragraphs: 83 Date of hearing: 7 December 2022 Place: Adelaide Counsel for the Applicant: Mr Tredrea Solicitor for the Applicant: C M Tucker & Associates Counsel for the First Respondent: Ms Anderson Solicitor for the First Respondent: Withnalls Lawyers Counsel for the Second Respondent: Mr Craven Solicitor for the Second Respondent: Andreyev Lawyers ORDERS
ADC 5291 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS MACDERMOTT
Applicant
AND: MR GRANT
First Respondent
MR INNES (AS TRUSTEE FOR THE BANKRUPT ESTATE OF MR GRANT)
Second Respondent
order made by:
BERMAN J
DATE OF ORDER:
15 december 2022
THE COURT ORDERS THAT:
1.The final orders made on 4 October 2022 be set aside.
2.The Amended Application in a Proceeding filed 28 November 2022 and the Response to Application in a Proceeding filed 6 December 2022 be dismissed.
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 a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Berman J
Introduction
By Initiating Application filed 3 December 2019, Ms Macdermott (“the applicant”) sought final orders for settlement of property. The Initiating Application was the subject of an Amended Initiating Application filed 26 November 2020.
By Response to Initiating Application filed 5 February 2020, Mr Grant (“the respondent”) joins issue with the orders sought by the applicant. The orders sought by the respondent were subject to an Amended Response to Initiating Application filed 21 March 2021.
The respondent was made bankrupt by an Order of 21 May 2020, consequent upon the commission of an act of bankruptcy on 11 October 2019.
Mr Innes was appointed as the respondent’s trustee in bankruptcy (“the trustee”) and was joined to the proceedings on or about 31 August 2021 for the purpose of supporting the Application in a Case filed 16 September 2021 seeking to facilitate the sale of rural land held by B Trust and plant and equipment held by D Family Trust. In addition, the trustee sought a declaration that the assets of B Trust and D Family Trust are property of the marriage and available for division between the parties.
On 4 October 2022 at 12.34 pm, my chambers received an email attaching several documents from the trustee’s solicitors. The email communication set out as follows:-
Dear Associate,
We confirm that we act for acts for [sic] [Mr Innes] (in his capacity as the trustee for the Bankrupt Estate of [Mr Grant]). Ms Tucker of CM Tucker & Associates acts for the applicant wife, [Ms Macdermott] and has been copied into this email.
Please find attached the following:
1. Letter from Andreyev Lawyers;
2. Final Orders signed by [Ms Macdermott] and [Mr Innes]; and
3. A copy of the Final Orders in Word format for engrossing.
If you require any further information from the parties, please let us know.
Yours faithfully,
Catherine Fairlie
The letter referred to in the email communication is set out as follows:-
Dear Associate,
[Macdermott & Grant] | ADC5291/2019
We refer to the above matter.
Andreyev Lawyers acts for [Mr Innes] (in his capacity as the trustee for the Bankrupt Estate of [Mr Grant]). Ms Tucker of CM Tucker & Associates acts for the applicant wife, [Ms Macdermott].
We advise that the [sic] [Ms Macdermott] and [Mr Innes] have reached a final agreement in relation to the non-superannuation property of the marriage.
We enclose a copy of the Final Orders agreed between the parties, together with a Word version of the same.
The parties submit that the agreed settlement is a just and equitable outcome and request that the Court make Orders in accordance with the Consent Minute signed by [Ms Macdermott] and [Mr Innes].
If you have any questions or require any further information from the parties, please let us know.
Yours faithfully,
ANDREYEV LAWYERS
As discussed, the correspondence included a proposed minute of order (“the proposed orders”) signed by the applicant and the trustee.
It is acknowledged that the respondent did not have notice of either the email correspondence forwarded to my chambers, the letter, or the proposed orders.
The applicant and the trustee intended that the proposed orders, if made, would finalise all claims between them. An important consideration is that the applicant, the respondent and the trustee in his capacity as second respondent, are named in the proposed orders.
Whilst the Andreyev Lawyer’s letter refers to the non-superannuation property, the proposed orders have the effect of protecting the applicant’s superannuation from any claim of the respondent.
The request was that the proposed orders should be considered in chambers with there being no need for an appearance by, or on behalf of, the parties being the applicant and the trustee as set out in the Notations.
Whist not considered as a party for the purpose of the proposed orders, I consider that the respondent had standing to maintain a claim on his own behalf. See O’Neill v O’Neill & Ors (1998) FLC 92-811 (“O’Neill”).
Notation M in the proposed orders sets out the extent of the pool of assets as follows:-
•Proceeds of the sale of land held in the [B Trust] (held in CM Tucker & Associates Trust Account) in the amount of $2,858,366.38;
•Funds withheld at settlement of the sale of the [B Trust] Land for creditors (held in [K Solicitors Trust Account]) in the amount of $437,380.00 (the [K Solicitors] Funds);
•Proceeds of sale of the land at [L Street, F Town] held in the [D Family Trust] (held in CM Tucker & Associates trust account) in the amount of $141,104.97;
•Proceeds of the sale of plant and equipment held in the [D Family Trust] (held in CM Tucker & Associates trust account) in the amount of $172,532.33;
•Nominal savings in each of the parties’ sole names;
•[The respondent]’s superannuation; and
•The Business.
For the purposes of this judgment, it is a reasonable calculation that as set out at Notation M of the proposed orders, the pool of net non-superannuation assets is in the total sum of $3,609,383.68.
The agreed liabilities are set out in Notation N of the proposed orders as follows:-
•Debt owed to [M Pty Ltd] in the amount of $67,380;
•Debt owed to [N Pty Ltd] in the amount of $133,813.81;
•Debt owed to [P Company] in the amount of $360,000;
•Debt owed to ANZ (but assigned to [Q Group]) in the amount of $41,250.87;
•Debt owed to [R Legal] in the amount of $3,272.73;
•Debt owed to [S Legal] in the amount of $80,000;
•Debt owed to RevenueSA – ESL in the amount of $2,219.85;
•Debt owed to [T Pty Ltd] in the amount of $44,152.78;
•Debt owed to [U Accounting] in the amount of $46,539.02;
•Debt owed to [V Pty Ltd] in the amount of $463,819.51;
•Further undetermined amounts to unsecured creditors who yet to provide information to the Bankruptcy Trustee;
•Debt owed Sheriff’s Office of Adelaide in the amount of $8,989.60, in accordance with the invoice dated 15 December 2021; and
•[W Legal’s] costs of $2,119.98 in accordance with the invoice dated 26 July 2022 on account of outstanding invoice numbered […02].
In the affidavit of the trustee filed 2 November 2022, annexure MI-2 sets out the trustee’s position that in broad terms, the sum of $1,963,704.71 is required to annul the respondent’s bankruptcy.
Whilst it is not necessarily agreed, it is likely that the property of the parties at the time of presentation of the proposed orders was about 1 to 1.6 million dollars after the payment out of sufficient funds to settle the respondent’s creditors.
Notations O and P of the proposed orders acknowledge the significant contributions made by each of the parties to the relationship but in particular, that the respondent’s family had contributed the land that at the time of sale was worth over 8 million dollars.
A clear contention between the applicant and the respondent is the applicant’s assertion that she was neither aware of the debt incurred by the respondent, nor was she involved.
The agreement struck between the applicant and the trustee is that the property of the parties would be apportioned as to 60 per cent in favour of the trustee and 40 per cent in favour of the applicant. Other than the annulment of the respondent’s bankruptcy, there is no provision in the proposed orders, or description in the notations, which would suggest the respondent will receive any settlement sum.
Whilst it is difficult to opine the exact basis for the broad agreement reached between the applicant and the trustee, the submissions of the applicant’s counsel are that a 60/40 division of the property is not unreasonable taking into account the circumstances of the parties and their respective contributions and the ongoing care of the children.
A relevant consideration is that the proposed orders are intended to deal with the non‑superannuation property only of the parties although, paragraph 8(e) specifically provides for the applicant to retain:-
e)All monies, savings, shares and investments, including any life assurance or superannuation benefits in her name or due or accruing to her and to which she may become entitled;
In summary, the agreement struck between the applicant and the trustee is founded upon a view that the respondent should bear responsibility for the liabilities that he purportedly incurred. As discussed, the respondent holds an opposite view and considers that the various liabilities should be treated as joint liabilities of the parties.
Background
As a consequence of the correspondence received, consideration was given to the orders being made in chambers and final orders were made in terms of the proposed orders on 4 October 2022 (“the final orders”).
By email communication on 5 October 2022 at 1.17 pm, chambers was advised of the following:
Dear Associate,
We act for [Mr Grant], the respondent husband, in the above matter.
An Application in a Proceeding was filed on behalf of our client on Wednesday 21 September 2022. Given the two public holidays, our client had been waiting for the Application to be allocated a date.
On checking the Courts Portal this morning, the matter has been closed and final orders made in Chambers 04 October 2022 following an application by the applicant wife [Ms Macdermott] and second respondent [Mr Innes] (in his capacity as trustee for the bankrupt estate of [Mr Grant]).
The Application in a Proceeding has not been listed or heard.
[Mr Grant] is a party to the proceedings and did not consent or sign any application for final orders, nor was he made aware of the final orders. He did not consent to the making of any order in his absence.
Rule 10.13 (1)(a) allows the Court to vary or set aside an Order if it was made in the absence of a party.
In the circumstances we seek urgent liberty for the matter to be relisted for consideration of the Application in a Proceeding.
Kind regards,
Shelley Anderson
The respondent’s solicitors filed an Application in a Proceeding sealed on 4 October 2022 at 4.44 pm. There had apparently been a delay in the sealing of the Application given that it was signed on 21 September 2022.
The orders sought in the Application in a Proceeding seek that various liabilities be paid but in particular, a sum as may be required to annul the respondent’s bankruptcy.
The respondent’s affidavit filed in support of the Application in a Proceeding refers to an “Update Report to Creditors from [X Accounting], the trustee in bankruptcy”[1] dated 1 September 2022. The report referred to an agreement that had been reached between the trustee and the applicant such that she would receive 40 per cent of the matrimonial property (exclusive of superannuation) with the balance to be used to payout the creditors and the trustees’ fees.
[1] Respondent’s affidavit filed 12 September 2022, paragraph 7.
The respondent makes significant complaint in his affidavit that the liabilities the applicant seeks to be the responsibility of the respondent, should be considered as the joint liabilities of the parties.
The respondent further complains of concerns as to the manner in which the property was sold and how funds received were disbursed.
At the time of the filing of the Application in a Proceeding, the respondent did not know that the purported agreement between the applicant and the trustee had been reduced to a proposed Minute of Order, nor that it had been signed and forwarded to the Court for approval and to be made in chambers.
Should the order be set aside?
The Application in a Proceeding sealed on 4 October 2022, makes no mention of the final orders. As considered, the Application was filed in response to the respondent receiving the trustee’s report which advised the creditors that an agreement had been reached with the applicant.
By Amended Application in a Proceeding filed 28 November 2022, the respondent sought that the final orders be set aside. The balance of the orders sought in the Application in a Proceeding sealed on 4 October 2022, were included subject to minor amendment.
By Response to Application in a Proceeding filed 6 December 2022, the applicant contends that the Application in a Proceeding sealed on 4 October 2022 and the Amended Application filed 28 November 2022 should be dismissed.
It is a relevant consideration that the proceedings were commenced by the applicant and were subject to a response being filed by the respondent before he was declared a bankrupt.
A trustee in bankruptcy cannot be an applicant under s 79 of the Family Law Act 1975 (Cth) (“the Act”) and therefore a trustee must be joined. Section 60 of the Bankruptcy Act 1966 (Cth) (as amended) (“the Bankruptcy Act”) provides for a stay of proceedings in the following terms:
Stay of legal proceedings
(1)The Court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit:
(a) …
(b)stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this subsection, against the person or property of the debtor:
(i)in respect of the non‑payment of a provable debt or of a pecuniary penalty payable in consequence of the non‑payment of a provable debt; or
(ii)in consequence of his or her refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt; …
(2)An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
(3)If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.
…
Accordingly, the first requirement is for a trustee who is joined to the proceedings is to make an election as to whether to prosecute or discontinue.
Section 60(3) of the Bankruptcy Act enables a non-bankrupt spouse to force the trustee to make an election.
In the current proceedings, the trustee has elected to maintain his involvement as is apparent from orders sought in interlocutory proceedings and by a preparedness to engage with the respondent in concluding the s 79 property settlement proceedings by way of a Consent Minute of Order.
Section 79 proceedings are personal to the bankrupt and do not vest pursuant to s 58 of the Bankruptcy Act.
In the current proceedings, the applicant would argue that the right of the respondent to seek orders for property settlement and division is nonetheless caught by s 60(4) of the Bankruptcy Act which sets out as follows:-
(4)Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of:
(a) any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or
(b)the death of his or her spouse or de facto partner or of a member of his or her family.
The applicant’s counsel argues that the respondent does not have standing to bring his Amended Application in a Proceeding seeking to set aside the final orders made and then if successful, to seek other orders that would enable his bankruptcy to be discharged.
In Cummings v Claremont PetroleumNL (1996) 185 CLR 124 (“Cummings”), the High Court held that the bankrupt had no right to bring or prosecute proceedings.
In Cummings, the bankrupt was seeking to appeal a decision. The Court found that it was a matter for the trustee in bankruptcy but not the bankrupt. Consideration was given to the extent of the provable debts and whether there is likely to be a benefit to the bankrupt over and above the extent of the bankrupt estate.
The point is set out with precision in O’Neill at 85,177-8 as follows:-
89.However, and perhaps somewhat anomalously, the Full Court decision in Guirguis has established that in light of the High Court decision in Cummings, a bankrupt spouse cannot appeal property settlement orders unless he or she can establish some interest in the property which is the subject of the orders, and such interest will not be able to be established if the property which is the subject of the orders is vested or will vest on receipt in the trustee in bankruptcy. The fact that a successful appeal may result in a surplus in which the bankrupt would have a contingent interest will apparently not provide the bankrupt with the necessary interest to institute an appeal in his or her own name.
The Full Court considered that the above outcome was “not an entirely satisfactory situation”. (see O’Neill at [90]).
In O’Neill, following a review by the Full Court of a number of decisions on point, the Full Court considered the authorities and said:-
87.…have established that a bankrupt spouse may institute and prosecute an application for property settlement under s.79 (or to vary or set aside a property settlement under s.79A of the Family Law Act 1975).
The point to be considered is whether the bankrupt would have a sufficient interest in the order to give him the necessary standing.
It is clear from the letter, the proposed orders and the submissions made by the applicant’s counsel that the proposed orders did not, nor intended to deal with the wife’s superannuation interests. Pursuant to s 116 of the Bankruptcy Act, a superannuation interest is considered property that does not extend to property which is divisible amongst creditors and therefore it is regarded as non-vested bankruptcy property in which the respondent retains an interest.
In Badenoch & Faldyn (No 2) [2022] FedCFamC2F 794 (“Badenoch & Faldyn (No 2)”), Austin J considered that:-
47.… . It follows that s 79(12) of the Act prevents the bankrupt party from making submissions unless he or she has leave or unless there is property of the bankrupt that has not vested, or at the least, there is non-divisible property that can be retained by the bankrupt pursuant to s 116 of the Bankruptcy Act
In Sloan & Sloan [2018] FamCA 610 (“Sloan”), Gill J considered that:-
24.However, the weakness in relation to the current case is illustrated by her concession that the Husband could continue in relation to the superannuation component of the claim. The adjustment of parties’ superannuation interests is, like real estate, shareholdings or cash, within the ambit of property within both ss 79 and 90SM of the Family Law Act 1975. While there may be distinctions in how a Court deals with these different types of property, an adjustment falls to be determined in relation to them as a single discretion. They are each the objects of the same overarching discretion, a discretion that does not allow for different items of property to be considered in isolation from others, particularly given that any adjustment must be considered to be just and equitable in relation to the whole of the considerations contained within ss 79 and 90SM, not simply the considerations applied to a fraction of the property of the parties.
25.The effect of these considerations is that the right to litigate, in this case pursuant to s 79, has not vested in the trustee. Further, given that aspects of that right concern property that will not form a part of the estate available for distribution to the creditors, but rather will deal with interests that will lie with the bankrupt, the issue of standing identified in Cummings does not stifle the Husband’s proceedings in this case. That means that these considerations do not see the ending of the Husband’s application.
(Emphasis in original)
Paragraphs [24] and [25] of Sloan were considered in Badenoch & Faldyn (No 2) by Austin J who set out that:-
56.The effect of such a finding is that the bankrupt party would be entitled to seek orders in relation to the superannuation and make submissions in the s 79 hearing which would otherwise take place between the other party and the trustee in bankruptcy. There would not be two such hearings with one as to superannuation and another as to the balance of the property.
It is also conceded that but for the terms of the final orders, there is sufficient property for the respondent’s bankruptcy to be annulled leaving a surplus of between 1 and 1.6 million dollars. I do not ignore the contention of the applicant that she considers there is merit in her rationale that underpins the orders that it is reasonable for her to receive the balance of the property as represented by an apportionment of 40 per cent to her and 60 per cent to the trustee.
The applicant specifically denies that the liabilities that form the bankrupt estate should be borne by the respondent representing 60 per cent of the property of the parties.
Section 79(1) of the Act provides for the alteration of the property interest in the following terms:-
(1)In property settlement proceedings, the court may make such order as it considers appropriate:
(a)in the case of proceedings with respect to the property of the parties to the marriage or either of them -- altering the interests of the parties to the marriage in the property; or
(b)in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the marriage -- altering the interests of the bankruptcy trustee in the vested bankruptcy property;
Clearly the proceedings are in respect of s 79(1)(b) of the Act.
Section 79(12) of the Act provides:-
If a bankruptcy trustee is a party to property settlement proceedings, then, except with the leave of the court, the bankrupt party to the marriage is not entitled to make a submission to the court in connection with any vested bankruptcy property in relation to the bankrupt party.
Section 79(13) of the Act provides:-
The court must not grant leave under subsection (12) unless the court is satisfied that there are exceptional circumstances.
It is an appropriate observation that the final orders sought to be maintained by the applicant, and the orders sought on an interim basis by the respondent, would result in the annulment of the respondent’s bankruptcy.
Whilst not a matter that needs to be considered at this stage, were the final orders to remain, the respondent’s bankruptcy would be annulled and there would thereafter be no impediment to him bringing an application pursuant to s 79A of the Act, likely limited to the surplus but not necessarily so.
Equally, there would be no impediment to the applicant seeking an order that brings to account s 75(2)(ha) of the Act, namely:-
the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant;
In Wallmann & Wallmann (1982) FLC 91-204, in considering the treatment of any surplus, the Court found at page 77,076 as follows:-
It would seem manifestly unjust that a party should lose the right to claim against any possible surplus by virtue of the Trustee having the capacity to strike out that party’s application for property settlement on the sequestration of the other spouse’s estate prior to any such surplus being ascertained. I do not think this is a result intended by the legislature, and I am mindful of the provisions of the recently inserted sec. 15AA(1) of the Commonwealth Acts Interpretation Act which says “In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object”.
Section 79(12) and (13) of the Act emphasised that a bankrupt party is not entitled to make a submission to the Court without leave of the Court and that such leave should not be given unless there are exceptional circumstances.
What may amount to exceptional circumstances has been considered to require a careful consideration of the facts and circumstances of each case.
It is observed that the respondent has not brought an application seeking leave to be heard. It is however, inherent in his application seeking to set aside the final orders and to seek other interlocutory relief.
It is conceded that a copy of the proposed orders was not provided to the respondent. He was not given formal notice that a proposed orders would be filed for sealing nor was he consulted by his trustee. The proposed orders went beyond the discharge and annulment of the respondent’s bankruptcy. They sought to deal with the surplus in circumstances where it is not suggested by the trustee or the applicant that all other things being equal, the respondent would not have had a right to be heard.
The overarching consideration as found by reference to s 116(2) and s 60(2) and (3) of the Bankruptcy Act together with s 79(11) and (12) of the Act, arises from the early jurisprudence pertaining to the preservation of the substantive rights of third parties.
To some extent, that principle has been delineated by a consideration of s 75(2)(ha) of the Act and Part VIIIAA of the Act.
Nonetheless, what underpins the restriction of the right of the bankrupt to become involved in the proceedings is that in doing so, the ability of the third party creditors that comprise the respondent’s bankrupt estate, should be put to the least inconvenience and delay. Once a declaration of bankruptcy is made, the individual creditors are no longer able to pursue the respondent. Their rights are subsumed by the trustee.
A significant issue is whether there is sufficient property that would enable the creditors who, form the bankrupt estate by their lodgement of a provable debt and the fees of the trustee, can be met.
Again, subject to whatever strategy may be adopted by the applicant, it is a reasonable contention that the respondent’s bankruptcy could be annulled and that there would be surplus of a sufficient sum for consideration.
The trustee could have brought his own application to seek that sufficient money be made available from the funds held in the applicant’s solicitors trust account to discharge the respondent’s bankruptcy and thereafter, for the trustee to cease his involvement. No issue of jurisdiction would thereafter arise.
It would also be open to the trustee to adopt the Amended Application in a Proceeding. The trustee has not indicated an intention to do so.
I consider therefore, that the circumstances of this case are exceptional and that the respondent should have leave to be heard.
Even if exceptional circumstances was not be a proper finding, the decision of Taylor v Taylor (1979) 143 CLR 1, is authority for the proposition that there is an inherent power to set aside an order made where a person has not been given an opportunity to appear and present his case.
The agreement reached between the applicant and the trustee was fundamental to the respondent, not as to the property agreed to be provided to the trustee sufficient to annul the respondent’s bankruptcy but rather, as to the further consideration by the trustee of the purported resolution of the proceedings which, had the effect of the applicant retaining the balance of the surplus proceeds. The respondent did not have an opportunity to dispute the applicant’s case, call his own evidence or assert that there is another alternate position namely, that the liabilities that comprise his bankrupt estate should in whole or in part be considered as liabilities of the parties.
The Court has inherent jurisdiction to set aside orders made in circumstances where both sides have not been given an opportunity to be heard. The principle underpins r 10.13 of the Federal Circuit and Family Court of Australia(Family Law) Rules2021 (Cth) (“the Family Law Rules”) in the following terms:
Varying or setting aside orders
(1) The court may at any time vary or set aside an order, if:
(a) it was made in the absence of a party; or
…
In that regard, the Court always has jurisdiction and a person in the position of the respondent always has standing to bring proceedings to consider the issues of jurisdiction and standing. In Yunghanns & Yunghanns & Ors (1999) FLC 92-836 (“Yunghanns”), the Court considered whether the Court had the requisite jurisdiction to make an interlocutory order before it embarked upon a consideration of what order should be made.
In Yunghanns the Court found at 85,697 as follows:-
Held, granting leave and allowing the appeal:
1. The essential principles, relative to the determination of this appeal, arising from the decisions of the High Court in R v Ross-Jones; Ex parte Green (1984) FLC 91-555; (1984) 156 CLR 185 and DMW and Anor v CGW (1982) FLC 91-274; (1982) 151 CLR 491 are:-
(1)Before making orders in proceedings (including interlocutory orders) the Family Court of Australia, as a court of limited jurisdiction, must be satisfied:
(a)that it has jurisdiction to make those orders in the proceedings; and
(b)that it is appropriate to exercise that jurisdiction by making those orders on the facts of the case as then known to it.
(2)The Court always has jurisdiction to entertain proceedings for the purpose of and up to the point of deciding whether it has jurisdiction to make the orders sought in the proceedings.
…
In the circumstances of this case, irrespective of other considerations, I find that the respondent was not given an opportunity to be heard in circumstances where he was entitled and should have been given the opportunity to be heard. As such, I propose to set aside the final orders made on 4 October 2022.
Following on from that consideration, I do not consider that the respondent has satisfied the threshold question as to whether leave should be given enabling him to be heard in respect of the balance of the orders sought.
It is regrettable that the parties have come full circle but it should not be beyond their separate abilities to explore a resolution of the proceedings rather than put themselves at risk of incurring litigation costs which may overwhelm an ever diminishing surplus pool.
I make Orders as appear at the commencement of these reasons.
I certify that the preceding eighty-three (83) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 15 December 2022
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