Malta & Malta and Ors (No. 3)

[2008] FamCA 748

FAMILY COURT OF AUSTRALIA

MALTA & MALTA AND ORS (No. 3) [2008] FamCA 748

FAMILY LAW – BANKRUPTCY – of one party to the marriage - Rights of creditors – whether they should be preferred

FAMILY LAW – PROPERTY - Settlement in relation to marriage  - Contributions – existence of any interest in farming property

Bankruptcy Act 1996 (Cth)
Family Law Act 1975 (Cth)

Australian Securities and Investments Commission and Rich (2003) FLC 93-171
Biltoft and Biltoft (1995) FLC 92-614
Coghlan and Coghlan (2005) FLC 93-220
Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143
The Marriage of Rowell; Deputy Commissioner of Taxation (Intervenor) (1989) FLC 92-026

APPLICANT: MS MALTA

RESPONDENT: MR MALTA

SECONDNAMED RESPONDENT: GOULBURN-MURRAY RURAL WATER AUTHORITY

PETITIONER: MR TRIM

R GROUP PTY LTD

FILE NUMBER: MLF 4121 of 2002

DATE DELIVERED: 3 September 2008

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: 1 SEPTEMBER 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR HERBERT

SOLICITOR FOR THE APPLICANT: NEEDHAM LEGAL & FINANCIAL PTY LTD

COUNSEL FOR THE RESPONDENT: MR INDOVINO

SOLICITOR FOR THE RESPONDENT: ACQUARO & CO

COUNSEL FOR THE PETITIONER: MR SANGER

SOLICITOR FOR THE PETITIONER: WATKINS BOAG O’CONNOR & DUNNE

COUNSEL FOR R GROUP PTY LTD: MS HISHON

SOLICITOR FOR R GROUP PTY LTD: DEACONS LAWYERS

Orders

1. That a sequestration order be made against the estate of Ms Malta (“the wife”).

2. That by 4 pm on 16 October 2008 pursuant to section 79 of the Family Law Act 1975, the husband pay to the trustee of the wife’s estate the sum of $210,000.00.

3. That contemporaneously with the payment of the sum referred to in paragraph 2 of these orders, the trustee do all acts and things required and sign any necessary document to:

   (a)transfer to the husband at the expense of the husband, all of the interest of the wife in the vacant real property in the names of the husband and wife at M and being the whole of the land described in Certificate of Title Volume … Folio … (the M land);

   (b)transfer to the husband at the expense of the husband, all of the interest of the wife in the diversion licence represented by water shares held by the husband and the wife in Goulburn Murray Rural Water Corporation (the water shares);

   (c)withdraw any caveat, at the expense of the trustee of the wife’s estate, lodged by or on behalf of the wife affecting the land described in Certificates of Title Volume … folios …1, …2 and …3 and Volume … Folio … (the caveats over the B Land); and

   (d)transfer to the husband at the expense of the husband, the shareholding of the wife in BN Pty. Ltd. (the BN Company Shares)

4. That if for any reason, a trustee of the wife’s estate is not or cannot be appointed by 4 pm on 16 October 2008 or the appointed trustee is unable to execute either of the documents referred to in paragraph 3 of these orders, then, pursuant to section 106A of the Family Law Act 1975, a Registrar of the Court from the Melbourne Registry execute each of the said documents prepared by and at the expense of the husband in the name of the wife upon production to that registrar of:

   (a)an affidavit by the solicitor for the husband that the said documents cannot be so executed because of either of the reasons set out in this paragraph; and

   (b)evidence that the husband or some person on his behalf has paid into the said solicitor’s trust account the sum of $210,000 with irrevocable instructions that the sum is to be held for payment out to the said trustee at the time that the trustee is in a position to gather in the estate of the wife.

5. That if the husband fails to   comply with paragraph 2 hereof, then the husband and the trustee of the wife’s estate do all things required and sign any necessary document to sell the M land and the water shares by private sale and upon the settlement of the sales, the proceeds be disbursed as follows:

   (a)first, to pay all costs, commissions and expenses of each of the sales;

   (b)secondly, to pay to the trustee of the wife’s estate the sum of $210,000; and

   (c)thirdly, to pay the balance to the husband.

6. That the husband and the trustee of the wife’s estate have liberty to apply in respect of the terms and conditions of any sale and the execution of any document to give effect to these orders.

7. That the injunctions relating to the disposal of the water shares are forthwith discharged.

8. The Applicant Creditor’s costs and those of the supporting creditor including all reserved costs be paid from the wife’s estate in accordance with the Bankruptcy Act 1966.

9. That all extant applications be otherwise dismissed and all proceedings be removed from the list of cases awaiting a hearing.

10. Certify for the attendance of counsel and solicitor appearing as counsel.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 4121  of 2002

MS MALTA

Applicant Wife

And

MR MALTA

Respondent Husband

And

GOULBURN-MURRAY RURAL WATER AUTHORITY

Secondnamed Respondent

And

MR TRIM

Petitioner

And

R GROUP PTY LTD

REASONS FOR JUDGMENT

1. These proceedings have been conducted since 2002. They involve not only the husband and the wife but also a creditor pursuing the wife with a bankruptcy petition. That petition began in the Federal Magistrates Court and was transferred here because of the s 79 proceedings under the Family Law Act 1975 (Cth) (“the Act”).

2. The parties together with others who had no involvement in this case have been litigating in the Supreme Court of Victoria.  That has all now come to an end.  All of that litigation has left me with two tasks:

   (a)first, to determine the division of property between the husband and the wife; and

   (b)secondly, to determine the question of whether or not to sequestrate the wife’s estate.

3. The issues in the first task relate predominantly to what is in the pool for division.  Much of the litigation in this Court and in the Supreme Court of Victoria has been about a farm property of 150 acres at B.  The wife says that the husband has an interest in it.  The husband says it was owned by a family trust but that it too has now been indirectly lost to creditors in the sense that a substantial borrowing by a company involving his family has been made to enable the sale by the liquidator to be avoided.  The creditor most interested is the liquidator of the R Group.  That creditor says that the B property does not belong to the husband or wife.  The petitioner for bankruptcy against the wife had an interest in the outcome of these proceedings as well as the wife.  If the B property formed part of the pool of assets for division then the prospect of the wife’s entitlement to assets would increase. 

4. The issue in the second task is whether the necessary proofs have been established to justify the Court sequestrating the wife’s estate.

Background

1. The husband was born in April 1957 and is aged 51.  The wife was born in January 1961 and is aged 47.  The husband is currently unemployed.  The wife is currently a teacher.

2. The parties married in September 1991.  There is one child of the marriage, a daughter who was born in August 1993.

3. The parties separated on 28 January 2002 and a divorce was granted on 16 April 2003. 

4. The child has lived with the wife since separation.  In late 2002, the wife and the child moved to Adelaide and have been there ever since.  The husband’s contact with the child on a face to face basis occurs when he organises flights to and from Adelaide approximately four times per year at his expense.  Those expenses are significant for someone unemployed.  The husband otherwise does not pay child support.  In reality, the wife is the financial supporter of the child along with the taxpayers of Australia.

5. Before the parties married, the husband had an interest in a farming property which is at B.  It is this property which is the controversial land.  That property was originally acquired by the husband’s migrant parents and as they grew older, the husband acquired their interests.  The fundamental question however was whether that acquisition was in the husband’s own right or whether it was in his capacity as a trustee.  I shall return to that subject.

6. The evidence also indicates that when the wife came into the relationship, she had nominal assets.

7. The parties lived in Victoria throughout their relationship and the husband still lives there as does his family.  The wife as I have pointed out now resides in South Australia and her family are there as well.

The proceedings

1. The wife commenced the proceedings on 3 July 2002 filing an application seeking parenting orders and an undefined division of property.  The husband responded on 6 August 2002 seeking parenting orders and also undefined division of property.  In those same initial proceedings, the husband sought some interim injunctive orders concerning R Group Pty Ltd.  That company was the trustee of the Malta Family Trust.

2. My understanding on the evidence is that the husband had always asserted that the Malta Family Trust owned the farm property.

3. There was a second company called BN Pty Ltd of which the husband and wife are the shareholders and directors.  Injunctive orders were sought against the wife in relation to the disposal or dealing with that company.  The exact involvement of BN Pty Ltd in the lives of the parties is unclear but there is no evidence to suggest that it had any assets of value.  It is however part of the “tidying up” process that needs to be completed. 

The trial commences

1. Notwithstanding this proceeding had been in our system for years, the wife did not prepare material in preparation for a final hearing. I have already given reasons for judgment in relation to the refusal of an adjournment. On the first day of the trial, counsel for the wife led evidence in chief in a very general way that would give rise to establish the matters set out in s 79 of the Act. No evidence was then led in relation to the solvency position of the wife concerning the bankruptcy petition. Because the case was not completed on the first day, I adjourned it for just over a week. I ordered that the wife file any affidavit material upon which she intended to rely so that her evidence in chief could be expanded if necessary to cover the assertion that she was making and to which I shall return.

2. When the case resumed on 1 September 2008, the wife filed an affidavit which did little to advance the evidence in chief that she had previously led.  She also sought to rely upon two affidavits.  One affidavit was by her brother and the other was an affidavit by Mr S who is an accountant.  The evidence of Mr S added nothing of probative value.  He said that he had not represented the wife personally but “offered her assistance and attended hearings as a McKenzie Friend”.  Mr Herbert of counsel for the wife indicated when I discussed the probative value of the affidavit that the wife was no longer relying upon it.  I have otherwise ignored it.

3. The affidavit of the brother of the wife referred to his financial assistance of the wife which is quite significant in financial terms.  Mr Herbert indicated that that evidence was not to be relied upon either.

4. A significant part of the wife’s case has been the claim about the husband’s interest in the B farm property.  No other affidavit from a previous interlocutory hearing was produced to show that that had been a property asserted to be now held by or for the husband pursuant to some trust arrangement.  The evidence of the wife to which I shall later refer fell well short of establishing any such trust or any similar sort of relationship with that land.

5. The husband relied on an affidavit which was filed on 15 August 2008. 

6. The petitioning creditor relied upon the original material filed in the Federal Magistrates Court and an updated affidavit of the solicitor acting on behalf of the petitioner as to the level of costs that had been incurred.  That becomes relevant on the question of the petitioner’s entitlement to costs for having brought the petition in the first place. 

The parties’ history in relation to the disputed issues

1. The husband said that throughout the relationship, the B property was used by both he and the wife for income generation.  He said both worked on the farm.

2. The wife’s evidence was that in the middle 1990s the husband’s parents moved off the farm.  When the relationship first commenced, she worked as a relief teacher.  She was offered full-time work in her profession but she said the husband wanted her to stay at home and be occupied there.  She said she worked on the farm and oversaw the seedling management and helped with the harvest of the plants and hoeing of the land.  She said she worked in the shed and loaded the equipment.  She gave an example of the fact that she employed 10 to 12 woman on the seed beds and the husband’s only response to that was that she was inaccurate on the number of women involved.  In relation to her tasks of harvest the husband’s only observation was that it was for a very limited of time each season. 

3. The wife pointed to the fact that the parties had the benefit of a bookkeeper. 

4. The wife was then given an opportunity to give evidence about the contentious issue of the ownership of the farm.  The highest she could put her case was that she believed that the husband had been involved in a variety of transactions.  She said that there were discussions and there was “talk of payments”.  This included the building of a home for the parents who had moved off the farm.  She was unable to provide any details about what payments were made or who paid for the building of the home.  She said she was “under the impression” that she and the husband were the owners of the farm.  She made reference to the fact that the husband’s brother was paid out.

5. None of that evidence establishes anything of significance having regard to what occurred later in the Supreme Court of Victoria.

The government buys out the parties

1. Sometime around 1993, the Federal Government created a buy-out scheme.  The wife said that an offer was made to buy the shares in the business and the husband took up the offer.  That had the effect of stopping planting on that farm but she said the husband grew elsewhere.  She said the other place where the husband grew was a leased property.

The mortgage of the land

1. By about 1996, it is clear that the title to the B farm was in the name of the husband.  Some time between then and 1999, the land was mortgaged.  The mortgage seems to have been for $501,000.  The husband’s evidence was that both parties agreed to take out a mortgage on the farm and those monies were used to refinance the loan that enabled the land to be bought from the husband’s parents in the first place and to buy the block of land which is now the land in M in the pool of assets for division.  The husband also said that the money was used to pay for a business that the wife and he had established, which was a shop. 

2. The husband was considerably challenged about what happened to this money although the wife offered no explanation in her own evidence.  The husband was cross-examined about the prospect of being able to produce documents from ten years or more ago about all of this.  In my view, it would have been pointless having regard to the subsequent Supreme Court proceedings.  I find that the $500,000 was used as the husband described. 

3. It is not entirely clear and no evidence was led about who executed the original mortgage.  What was put in evidence was that on 4 October 1999 a mortgage was executed by the husband in favour of ABC Nominees Proprietary Limited.  Although it was not specifically stated, that company has something to do with the firm A B and C which is a firm of solicitors.  The company initials bear that resemblance and its address is the same as the solicitors on the document.

4. Importantly for my purposes, the mortgage notes that it was for $501,000 being the same sum as was the consideration in the mortgage of the same date between the same company and the husband and wife. 

5. This mortgage was ultimately to bring about the end of the family trust interest in the B farm.

6. The husband conceded that the wife and he were jointly liable for the mortgage.  He was adamant that the money was borrowed to set up the shop business.  I accept the husband’s evidence about that.

7. The husband was asked about an injunction in April 2006 restraining him from dealing with any of the property and in particular, the mortgage.  He thought it was 2002.  He said that his understanding was that the injunction was to preclude him from prejudicing the asset position of the parties.  He said his understanding and advice was that there was no change to the indebtedness and as the mortgage period had expired, it had to be either repaid or renewed.  He conceded that in November 2000, the mortgage was transferred to a new entity.  When pressed about why he executed the subsequent document, his answer was simple.  He said this was a three year revolving loan and it was either lose the farm or renew the loan.  He thought that it took pressure away from the wife by his execution of the document.

8. Although it was clearly being put to the husband that he had breached the orders of the Court, I am not satisfied that it makes any difference to the outcome of this case.

9. What occurred soon thereafter was that the payments under the mortgage were not met and litigation in relation to the B farm began.  Before turning to that however it is important to understand about the parties’ shop business to which I have already referred and which I found was bought from the $501,000.

10. The husband’s position was that in about 1996, they had decided to set up the business under a franchised arrangement.  In his evidence in cross-examination, the husband said that the wife’s family had connections with the franchise.  He said that whilst he assisted the wife with financial and bookwork matters, the wife was substantially the one conducting the business.  His assertion was that the wife ran the business into the ground following separation and that she disposed of stock.  He pointed to the fact that it was her decision to place the business in liquidation in about April 2003.  There were significant sums of money outstanding including superannuation contributions to employees and creditors for stock.  None of this evidence was challenged.

11. The husband was asked a number of questions as was the wife about the way in which the banking arrangements were conducted.  The wife’s position was that money was put into an account from the farm.  Where that money came from and what its relevance was escapes me.  However, the wife indicated in her evidence in chief that the business was not making money and she was certainly not making ends meet.  To that extent, I find that the business was made viable during the period of its operation by contributions from the parties’ resources outside of it.

12. The business was formally owned by R Group Pty Ltd.  When the business was in financial trouble and at a time when the parties had separated, the wife appointed an administrator for the R Group company.  That was 4 April 2003.

13. The husband said that he had held the B farm property on trust for the Malta Family Trust.  R Group Pty Ltd was the trustee of that trust.  It takes little imagination to see that as the parties had set up the shop as being owned by R Group Pty Ltd in its capacity as the trustee of the family trust, the liquidators were going to chase assets of the trust.  The problem was that the husband held the B property on trust for the Malta Family Trust notwithstanding the title to the property was in his name.

1. Proceedings were then commenced in the Supreme Court of Victoria in 2004 in relation to the liquidators getting control of the B farm.  Mandie J made an order on 9 August 2004, by consent, declaring that the farm property was deemed to be held on trust for R Group Pty Ltd and that the company was entitled to be indemnified in respect of debts incurred by it in its capacity as the trustee of the family trust.  It is noted that the wife did not consent to those orders however she did not oppose them either.

2. The orders of Mandie J in so far as they are relevant to the proceedings before me were:

   1.[R] Group Pty Ltd (in liquidation) (“[R Group]”) is the trustee of the [Malta] Family Trust.

   2.[R Group] was at the time when it incurred the debts referred to in paragraph 12 of the points of claim, the trustee of the [Malta] Family Trust.

   3.The Firstnamed Defendant (the husband) holds the land (the [B] farm) on trust for [R Group] as trustee of the [Malta] Family Trust.

   4.[R Group] is entitled to be indemnified in respect of debts incurred by it as trustee of the [Malta] Family Trust out of the land, the plant and equipment and the business.

   5.[R Group’s] right of indemnity is secured by an equitable lien over the land, the plant and equipment and the business.

   6.The Firstnamed Defendant (the husband) transfer all of his right, title and interest in the land to [R Group].

   7.The Plaintiffs recover possession of the land, the plant and equipment and the business.

3. The wife was cross-examined about these proceedings.  She conceded she had sought the intervention of the liquidators in the first place.  However, it was vaguely put by her counsel in the opening stages of the hearing that the order of Mandie J was not something that bound her because she had not consented.  She certainly did not but three things must be said about that:

   (a)      She did not oppose the orders;

   (b)      She was represented by legal practitioners; and

   (c)The order is still an order of a court which binds all who may be affected by it.

   During all of this time, the wife had lawyers acting for her but, perhaps because of her parlous position, they were not paid.  It was one of these lawyers who became the petitioning creditor who moved to take her to court over the unpaid costs.

Bankruptcy proceedings against the wife

1. On 23 May 2007, before Federal Magistrate McInnis, the wife faced proceedings in which her former solicitor Mr Trim was her creditor.  Mr Trim filed a petition on 28 September 2006.  He claimed that the wife owed him an amount of $23,849.30 for “legal costs and disbursements rendered to the Respondent Debtor”.

2. The basis upon which the petition rested was succinctly set out in paragraph 4 of the petition.  It says:

   The following act of bankruptcy was committed by the respondent debtor within six months before the presentation of this petition:  the respondent debtor, having been required by a special resolution of a meeting of creditors passed on 22 March 2006 to present a debtor’s petition within 7 days failed without sufficient cause to present a debtor’s petition on or before 29 March 2006.

3. It was common ground between the parties that there was a creditors’ meeting and significant liabilities were asserted to be due by the wife.  She said to me that the list of creditors was prepared by Mr S.  The evidence established that the wife was required by the creditors meeting to present the petition but she did not do so.  In a poignant question, counsel for the husband asked why she did not present the bankruptcy petition. Her response was enlightening.  She said:

   Mr [S] dealt with it.  I don’t understand this.  I don’t profess that I do.

4. In the Federal Magistrates Court, it was argued by the wife who opposed the petition that the act of bankruptcy relied upon was flawed and defective.  According to the judgment of McInnis FM, criticism was made of the motion referred to at the meeting of creditors and a dispute raised as to whether or not the requisite majority was present to vote for the motion.  His Honour said that the wife argued that she did not have any contractual relationship with Mr Trim and did not authorise, instruct or request him to incur legal costs and disbursements.  She therefore disputed her indebtedness.  According to McInnis FM, more importantly, the wife claimed to be solvent because she would be able to meet her debts from her entitlement in the matrimonial pool of assets. 

5. At no time in the proceedings before me has it been now asserted by the wife that the petition was flawed and defective.  It has not been suggested at any time any longer that the wife did not have a contractual relationship with Mr Trim.  Her whole argument has predominantly been that if the land at B is part of the pool of assets and she has some entitlement to it, she is solvent.

6. McInnis FM transferred the proceedings to this Court.  The provisions of the Bankruptcy Act 1996 (Cth) give this Court jurisdiction to determine a matter otherwise transferred to it.  No-one has taken objection to the jurisdiction.

7. Thus, the wife was facing bankruptcy but delayed the outcome of that on the basis of her solvency argument.  In the proceedings before me, she was cross-examined about her solvency and she acknowledged little about her indebtedness.  Her evidence was very unsatisfactory.  She said that she vaguely remembered the creditors meeting in 2006 and that Mr S was assisting her.  She was asked whether she owed Mr S money and she said that she did not owe him money “personally”.  When asked whether she had ever declared something to the contrary, she said she did not think so.  She was later reminded that in an affidavit sworn in this Court, she said she owed Mr S $71,000.  Her only response when being so reminded was that she was aware of it when the affidavit was signed and by inference, not now.  Having regard to the fact that the wife is an intelligent, articulate professional, I have great difficulty in accepting that answer.

8. A significant line of cross-examination by counsel for the husband was to take the wife through the list of creditors presumably put to the creditors meeting.  When asked about each one of them, her response was varied.  In some cases she said that her family dealt with the indebtedness and that she did not know what they had done and in others that they were simply debts to solicitors.  When asked about a finance company, she said it was a debt “imposed” on her.  There was reference to court orders and money owing to her father and brother.  One of the creditors was her own solicitor in these proceedings and about that debt she seemed to have no knowledge.  At that time, I inquired as to whether there was any conflict of interest and was assured by Mr Herbert that there was not.  As for a solicitor who had previously represented her in the court, one of them had been paid out.  There was a car dealer but she conceded that that was her brother.  There was a professional who was an associate of Mr S.  About that she knew little.

9. When asked whether she could acknowledge the totality of the indebtedness as $293,575, she was unable to say.

10. It was then brought to her attention that there was a bundle of costs incurred in a variety of proceedings and she acknowledged that those were still outstanding.  Most of the responses were along the lines that she did not recall the debt.  When asked about affidavit material filed as recently as two weeks ago from the two creditors who participated in these proceedings, she said she had not read the affidavits.

11. Combined with the creditors claiming money at the meeting in 2006, there have been significant orders for costs against the wife in this court and in the Supreme Court.  On my calculations based on the evidence, the debt is at least $528,000.  Based upon that rough calculation, the wife was asked whether she thought that she was insolvent.  Her response was to say that “if you look at it that way, yes”, she was.  There is no other way that I can look at it and there was no other evidence proffered by the wife to suggest that she has access to funds other than from the pool of assets nor any offer to resolve the indebtedness in any other way.

12. In his evidence, the husband said that notwithstanding the fact that the wife had supported the involvement of the liquidator arising out of the R Group and the order of Mandie J, she commenced proceedings on 27 April 2005 to set aside the order of his Honour.  However, that proceeding fell dormant.

13. The matter came to me on 20 December 2007.  It had been fixed by Registrar Mestrovic who made specific orders about the filing of material.  At that hearing, the husband was represented by his solicitor and counsel appeared for the petitioning creditor.  A solicitor appeared on behalf of the liquidators of the R Group.  On that particular morning, Mr S attended and handed a letter attached to which was a medical certificate indicating that the wife could not attend.  Registrar Mestrovic had made specific orders for the wife’s attendance at the court.  It was to be noted that in previous proceedings in this Court having regard to the fact that the wife was living in South Australia, she had been given permission to attend by telephone but specifically not on this occasion.  I declined to involve Mr S at all and made orders.  Before making the orders I made the following observation:

    We have a classic stand-off in which neither party is moving in respect of those proceedings as a consequence of which this Court does not have the capacity to deal with the case.  I propose to rectify that problem.  It is to be noted that the registrar in October 2007 endeavoured to push the case along by requiring the wife to file material setting out what steps she had taken.  She has failed to file any material.  I am now proposing that she will have just over one month notwithstanding the Christmas period to take the steps that will bring the Supreme Court proceedings to a head and she will be required by my orders to set out what steps she has so taken.  In the letter to which I earlier referred which purports to be from the wife, she says she now has two barristers and a solicitor willing to act for her.  If that is so, the professionals need to move quickly.

14. I then made orders adjourning the proceedings to February, requiring the wife to attend personally or by legal representative and:

    That by Monday 28 January 2008, the wife take all necessary steps to activate the prosecution of her proceedings in the Supreme Court of Victoria to set aside the orders of the Honourable Justice Mandie made on 9 August 2004.

15. The wife did file an affidavit saying that she had activated the Supreme Court proceedings.

16. Ultimately and for reasons that no longer matter, Robson J in July 2008 in the Supreme Court of Victoria finalised the matter.  On that day, according to the husband and not disputed by the wife, his Honour dismissed the wife’s interlocutory application to set aside the orders of Mandie J.  His Honour ordered significant costs against the wife on an indemnity basis. 

17. It must be said therefore that the wife has run her race in respect of any argument about the ownership of the B land.  Notwithstanding the legal title to the land being in the name of the husband, the true owner was the trust and the liquidators now have entitlement to control pursuant to the orders of Mandie J.

18. Counsel for the wife raised the fact that the orders of Mandie J had not been carried out.  He pointed to the fact that the title is still in the name of the husband.  There are two points to be made about that.  The first is that regardless of what might have happened subsequently to August 2004, the declaration of ownership is clear in the orders of the Supreme Court.  If in fact there has been some evidence since then that the husband has become the owner, it was certainly not placed before me.  The second issue is that the husband says and I accept, he has not been able to transfer the property because the wife has lodged caveats.  The liquidator desires those caveats removed and no doubt so does the husband.

E Pty Ltd

1. After the orders were made by Mandie J, an arrangement was made between the husband, his mother and brother with the liquidators under which, for the payment of $450,000, they would transfer their rights of indemnity and not pursue a sale of the farm property as was anticipated by Mandie J’s orders.  The affidavit material shows that the arrangement was one at arm’s length.

2. The husband went on to say that a company named E Pty Ltd paid the liquidators $450,000 in return for requiring him to transfer the title to the farm property subject to the existing mortgage.  What the husband did not say however was that E Pty Ltd is a company the sole director, secretary and shareholder of which is his brother.  The husband made no reference to that in his affidavit of evidence in chief and throughout his evidence, sought to distance himself from any possible impropriety about his brother’s involvement in that company.  The wife said that she was not aware of the interest of the husband’s brother. When the wife was questioned by counsel for the petitioning creditor, she said that the husband’s brother was a tradesman but the last time she saw him was 2000 or 2001.  She said she thought he had no business acumen.  She believed that the money from E Pty Ltd in reality came from the husband.  When asked what she knew, she said she knew nothing.  She conceded she had never seen bank statements.

3. The husband gave evidence thereafter about his brother’s involvement.  He said that he did not know about the directorship or the shareholdings of E Pty Ltd and he certainly did not have any interest in E Pty Ltd or in the farm.

4. Whatever the innuendo, there is no evidence to suggest that the husband has an interest in E Pty Ltd and consequently, no interest in the farm.

5. There is therefore no evidence to persuade me that the legal position is other than that as described by Mandie J in his Honour’s orders of 2004.

6. Counsel for the wife said he could not challenge the position of the declarations of Mandie J but what he did want to argue was that the case for the wife was that the B farm was held in trust by persons or entities for the husband.  There is no evidence of that either.

Wastage

1. Each party pointed to the wasting of assets by the other.  None of this became an issue of relevance.  From the husband’s perspective, the wife had lost the shop business and had unsuccessfully run up costs in unreasonable litigation.  The wife’s counsel commenced her case saying the wife had been poorly represented.  She has had numerous lawyers as will be evident from the list of unpaid creditors.  In her words, she did not understand about the Supreme Court and the bankruptcy proceedings and she was guided by the retired accountant Mr S.  He assisted her with the affidavit material.  Sadly it seems much of her approach was misguided.  The real issue that she was putting before me had no prospect of success because there was no evidence to support it.  Discovery had been ordered in previous interlocutory proceedings yet it seems not pursued.  At no time was an application made to join E Pty Ltd or any other members of the husband’s family.  They were not sought to be subpoenaed.

2. From the wife’s perspective, the husband had not assisted either.  He had been in prison for evasion of taxes and imposed with fines which I understand amounted to $2 million and which were unpaid.  However, apart from what appears to be the loss of any incentive to work, there is no evidence that the wife can point to which shows a significant loss in the pool of assets.

3. I have read a judgment previously of Hansen J in the Supreme Court of Victoria in which his Honour noted that the husband and wife were participants in the arrangement with their accountant to remove the husband from the company shareholding because of the impending imprisonment on the tax charges.  On that basis, any wastage argument against the husband cannot succeed.

4. What was common ground was that I should follow the four step process. I propose to do that.

5. That is the process set out by the Full Court in Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 at 78,386 where the Full Court said:

   Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case.

6. The first step therefore is to determine the pool of assets.

The pool

1. The husband said the pool should be:

   The water licence shares  $261,000

   M land  130,000

   Husband’s superannuation      48,138

   Sub total  $439,138

   Less

   Bendigo Bank mortgage debt     90,000

   Net equity  $349,138

2. There was no dispute about the values of the items to which I have just referred.

3. The wife gave some evidence about her own superannuation.  I propose to ignore that on the basis that there is no evidence of value even if I accepted the wife’s vague indication that it was about $5000-6000.

The husband’s superannuation

1. Although the husband put the superannuation in the table of assets as I have done above, his counsel asked me to treat it more as a resource. If I was to take that course, I would then have to factor the superannuation into the equation pursuant to s 75(2) of the Act. Mr Indovino of counsel on behalf of the husband suggested that if I was to take that course then an appropriate adjustment would be about 5 per cent in favour of the wife.

2. The position of the husband was supported to a very large degree by counsel for the wife.

3. In Coghlan and Coghlan (2005) FLC 93-220 the Full Court dealt with superannuation in some detail. The Court looked at ss 90MC and 90MS and said that s 90MC does no more than confer jurisdiction on the relevant courts to make orders in relation to superannuation interests in proceedings with respect to the property of parties to a marriage and s 90MS does no more than provide that superannuation interests are but another species of asset in relation to which orders could be made in proceedings.

4. The Court looked at the definitions of property and examined how superannuation should be treated.  They walked through the various options relating to splitting orders. 

5. Importantly for my purposes, the following paragraph needs to be contemplated:

   61.Nothing we have said in this judgment would prevent a Court in the exercise of its discretion from including a superannuation interest as an item of property in the list of property which is drawn as “the first step” in the determination of proceedings under s 79, whether or not a splitting order is sought in those proceedings. This approach could be adopted where the parties agree that it should be adopted, or where the Court is satisfied that the superannuation interest is indeed property within the meaning of the definition of property contained in s 4(1), or if the interest is not within that definition, but is of relatively small value in the context of the value of the other assets in the case, or there are features about the interest which leads the Court to conclude that this would be an appropriate approach.

1. The unusual feature of this case is that the approach each party suggests should be adopted, has common ground.  It is important to note that the Full Court said that a trial judge “could” take the approach if that was the way the parties wanted the proceedings conducted.  The Full Court also made reference to the fact that the Court ultimately had to decide what was the “appropriate” approach having regard to the responsibilities to still make a determination as between the parties which was just and equitable to them both.

2. Treating the superannuation as a separate form of asset significantly reduces the quantum for division between the parties.  However, having regard to the fact that it is a significant piece of relevant property, to ignore it would be not only unreasonable but unfair to the wife.  I have put out of my mind that fact that the wife would not benefit one way or the other because of the orders I propose to make which ultimately mean that her creditors will benefit only from whatever she receives from this settlement.  Counsel for the husband conceded that an adjustment of 5 per cent should be made in her favour and on the pool to which I have referred, that 5 per cent is only $17,000 whereas the superannuation is worth $48,000.  The husband is 51 years of age and therefore not immediately entitled to retire and even if he could retire at the earliest available opportunity, there is no suggestion that he would do so.  However I have noted that the superannuation is in a commercial fund and there was no evidence to suggest that the fund will significantly drop in value and even if no further adjustment or addition is made to it, I think I am entitled to conclude that it will probably at least grow to some extent.  To effectively make an allowance in favour of the wife of only $17,000 when the husband has access to $48,000 within the next 10 or 15 years seems to me to be unreasonable.  In those circumstances, I think the only fair way of dealing with the superannuation is to add it in to the pool of assets and treat it as if is was property in the traditional sense.  That is what I propose to do.

3. The final issue relates to the question of the debt to Bendigo Bank.  The unchallenged evidence of the husband is that during the marriage, his mother took out a mortgage with the Bendigo Bank in the sum of $100,000 secured against her home property and provided it to the parties to pay debts and to use in the shop business.  The husband said he had been servicing the loan directly to the Bendigo Bank since separation with assistance from his mother and his brother.  The debt is in the name of BN Pty Ltd and if the husband takes over the currently valueless shares of that company, he will have to take the responsibility for the debt.  The fact that there is security over the husband’s mother’s home is not a matter about which I think I should be concerned.  Importantly however, the husband asserted that it was a debt incurred during the marriage.  That evidence was unchallenged.

The $90,000 debt

1. The husband urges me to take the $90,000 from the total assets and for him to indemnify the wife in respect of any liability.  At face value, that is not only what would normally happen in a property dispute between husband and wife but it sounds simple. 

2. However, if I permitted the whole of the $90,000 to be paid “off the top” of the pool, it is the same as saying that each party is contributing 50 per cent towards the total debt.  To do so would mean that the wife was paying a creditor half of their debt. 

3. Here, the unchallenged evidence of the husband is as follows:

   My mother has lodged a caveat on the [M] property as her property has been secured by way of a mortgage with the Bendigo Bank in the sum of $100,000 which money the wife and I had used during our marriage to pay debts and to use for the [shop] business.

4. At first blush, it would appear that the $90,000 was lent to the husband and the wife by the husband’s mother.  The husband’s mother borrowed that sum of money herself by securing her home with a mortgage to the Bendigo Bank.  No asset of the parties was secured. The husband’s mother is therefore an unsecured creditor but unsecured on the husband’s evidence against whom? 

5. The husband says:

   It is a debt which is in the name of [BN] Pty Ltd.

   That is, BN Pty Ltd owes the money to the husband’s mother notwithstanding the husband and/or BN Pty Ltd has been paying the debt and accepting responsibility for it to the Bendigo Bank.  On that evidence, the debtor is BN Pty Ltd and the creditor is the husband’s mother.  No debt or right of indemnity is claimed by BN Pty Ltd in these proceedings against the wife. 

6. Does a payment “off the top” of the pool of the husband and the wife to the husband’s mother for and on behalf of BN Pty Ltd amount to a preference to the husband’s mother over other creditors in respect of the insolvency of the wife?  If the mother took action against BN Pty Ltd, on the evidence that I have, she could not recover.  That is because BN Pty Ltd has no value.  If she took action against the wife, she would be facing the same financial situation as other creditors.  If the mother took action against the husband and the wife jointly, any right of indemnity of the husband against the wife if he were solely responsible for the debt would have to be recovered in bankruptcy because otherwise, the husband would be given a preference over other creditors.

The responsibility of the Court

1. In The Marriage of Rowell; Deputy Commissioner of Taxation (Intervenor) (1989) FLC 92-026 the Full Court said:

   The first step accordingly in any property proceedings is to ascertain the property of the parties and to ascribe that property a value.  In doing so, the Family Court has, in my view quite properly in the past, taken into account liabilities of the parties and made orders which operated on the net value of the property so found.  Family Law does not operate in a vacuum. By that I mean that the legitimate rights of third parties are not ignored when determining the rights to property between the husband and the wife inter se… (emphasis mine)

2. In Australian Securities and Investments Commission and Rich (2003) FLC 93-171 O’Ryan J set out that after identifying and valuing liabilities to arrive at the net property:

   36.      …The Court will deduct the amounts owed to unsecured creditors in order to arrive at the net property of the parties

3. This might be seen as the practice normally.

4. In Biltoft and Biltoft (1995) FLC 92-614 at 82,125 however, the Full Court said that that position might not always be the case:

   …because of the circumstances surrounding the incurring of the liability it ought in justice and equity be wholly or partly disregarded in determining the appropriate order under section 79 as between the parties to the marriage. Such a result could be reached where a spouse has incurred a liability in deliberate or reckless disregard of the other party’s potential entitlement under section 79…

5. In other words, nothing requires the Court to ensure that a creditor has priority over a spouse and whilst the rights of a creditor cannot be ignored, their debt is something which not only must be taken into account but also balanced against the rights of a spouse.

6. The unusual feature of this case is that I am also dealing with the starting point for the creditors so I am in a much stronger position than usual to anticipate what might happen about them being paid. Having regard to the fact that I know of the wife’s insolvency, the types of creditors that she faces and the prospects of those creditors being paid, it would be totally inappropriate to give one creditor what seems on the face of it, a very significant preference over others.

7. Accordingly, I decline to add the $90,000 into the pool as a liability.

8. The equity for division between the parties is therefore $439,138.

Contributions

1. The second step referred to in Hickey, supra, relates to the assessment of the contributions and giving them weight. 

2. Section 79(2) says that the Court shall not make an order under the section unless it is satisfied that in all the circumstances, it is just and equitable to make the order. That has a significant impact upon my earlier comments in relation to the question of the $90,000 debt.

3. Section 79(4) requires me to consider and take into account:

   (a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and

   (b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and

   (c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and

   (d)the effect of any proposed order upon the earning capacity of either party to the marriage; and

   (e)the matters referred to in subsection 75(2) so far as they are relevant; and

   (f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and

   (g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.

4. The husband’s position was that in terms of assessment, I should deem the contributions to have been equal notwithstanding any arguments that might be raised about wastage and the matters to which I have earlier referred. The wife’s position was that I should not follow a traditional path but rather, take $100,000 as a settlement for the child and add back a further $200,000 from the husband’s share because of his conduct. I reject that position as inappropriate on the evidence because I have no understanding of the needs of this child. More importantly it would not be just and equitable having regard to the matters to which I have just referred in s 79(4).

5. Having regard to the evidence I have referred to in paragraphs 9, 10, 36 and 37, I am satisfied that the contributions have been equal.  Whilst there may have been some significant contribution by the husband at the commencement of the relationship greater than the wife, it has had little or no impact on the pool of assets that is now left.  Both parties have contributed to the significant reduction of the pool and not necessarily in a deliberate way.  In the circumstances, it is impossible for me to see any distinction between the parties’ contributions. 

6. Section 79(4)(e) requires me to take into account the matters set out in s 75(2) of the Act.

7. The husband is 51 years of age and the wife 47.  I have no evidence about the health of either of them other than a statement by the husband that he is suffering depression and that is affecting his capacity to work.  The nature and extent of any health problems is otherwise unknown and I decline to take that issue into account.  There is evidence arising from cross-examination from the wife that she does not suffer any health problems.

8. In respect of the income of the parties, I am satisfied that there is little difference between them.  The wife earns more than the husband but it is not of such a significantly greater sum to warrant any adjustment in favour of the husband.  Neither party has property of any significance and each has the benefit of some sort of financial resource in their respective families.  In relation to the husband, he is living with his brother and is assisted by his mother from time to time and his evidence is replete with statements that his family have assisted him financially.  For her part, the wife has an enormous amount of assistance from her brother and her other siblings in Adelaide including the provision of reduced rent on a property that the family seems to have purchased recently.  In those circumstances there is no distinction between the parties.

9. I have also contemplated the physical and mental capacity of each of the parties for appropriate gainful employment.  The wife has clearly got on with her life and has now employment which enables her to support herself to some degree.  The husband for his part seems to be capable of working having regard to the fact that he has been in the building industry and told me that he has been able to do research on the internet in relation to vegetable market movements.  Whether that will ever turn into something from which he can earn a living, remains to be seen but there was no indication that he was otherwise incapable of pursuing work.

10. A very significant feature in this case is the fact that the wife has the responsibility for the care and control of the parties’ child who is just 15 years of age. The wife is substantially responsible for her financial support. The husband pays child support as he would say, according to the Child Support Agency assessment. Section 79(4)(g) requires me to take into account any child support under the assessment that a party such as the husband might make. It is also a provision repeated in s 75(2)(na). It is not just the question of the assessment that matters. Assessments are often times artificial. The interesting question is whether the needs of a child are being met from the joint resources of the parents regardless of the assessment. In this case, the husband does not have an income that could otherwise provide for the needs of the child and as a consequence, the financial burden is significantly falling upon the wife and the taxpayers of Australia. However, the husband is funding air travel for the child to maintain what is clearly an important relationship between he and the child. As the husband put it, it was the wife’s choice to move away from the area where he and his family live. I take into account the fact that he is making that contribution and effort to maintain his personal relationship with his daughter.

11. I know little about the commitments of each of the parties other than what I heard in evidence as neither party filed a financial statement containing any detail.  I take into account however that each has limited income and will have very little by way of resources and assets as a result of the orders I propose to make.  Neither party as I understand it has formed any new relationship nor has any responsibility for the support of any other person.

12. Both parties are the recipients of Commonwealth benefits and there is no prospect that I can see in the future that that will change.  Nothing I can do in the orders having regard to the size of the pool will make any difference in respect of that issue.

13. I am entitled to take into account the standard of living that in all of the circumstances is reasonable.  Without the assistance of the families of each party, they would have to be substantially worse off than they are currently. 

14. There is no application for maintenance before me but I am still entitled to take into account how someone could increase their earning capacity by enabling that person to improve their financial position.  Neither party gave any indication of a desire to take that course of action.

15. I have contemplated the problem set out in s 75(2)(ha) relating to the orders I make in relation to creditors.  In relation to the wife, it would clearly seem that there is nowhere near enough in the entitlement of the wife to enable her to satisfy all of her creditors.  On the other hand, I have been told that the husband has a debt to the Australian Taxation Office of something in the vicinity of $2 million and there is no prospect that he will be able to pay that.  Whether anybody bothers to enforce that debt is a matter beyond my control.

16. This is a long marriage but that has not affected their earning capacity. 

17. I have taken into account that not only is it the wife’s wish to remain responsible for the child’s care but the fact that she has little choice but to undertake that task without financial assistance from the husband.

18. As I have pointed out, there is no person with whom either party is cohabiting other than the fact that the husband is living with both his mother and his brother at various times and they are providing him with some form of support.

19. The terms of the orders that I make are sadly insignificant in the lives of these parties.  Had their respective paths taken a different course, they might be significantly more well off than they are currently.  However, I can only deal with the assets as the evidence provides and in the circumstances, any adjustment will make little difference to their respective lives.  I have taken into account that because of the litigation which unfortunately involved the husband, his costs will eat up most of the capital he would be entitled to under these orders.  I also take into account that the husband may end up being solely responsible for the $90,000 debt.

20. One of the difficult issues in this case having regard to the bankruptcy jurisdiction that I am being asked to exercise is the fact that any order I make in favour of the wife may very well end up in the hands of a very few people particularly having regard to the costs of the petitioning creditor. As such, to make an adjustment of a modest sum in favour of the wife in this case would have little, if any, value for the wife. Her sum on all of the evidence I have seen, will end up in the hands of the creditors. Even so, there is little between the parties of difference when I balance up all of those factors. In my view, there is no basis for an adjustment under s 75(2) of the Act in this case.

21. Accordingly, the equity of $439,138 should be divided equally.  That means each should receive $219,569.  As the husband’s superannuation is not necessarily worth the sum in the pool today, that is, it may be higher or lower, I propose to order the husband to pay to the wife $210,000 if he desires to keep the other remaining assets.

22. In relation to the fourth step in the process, stepping back from the calculations and the assessments I have made, it is important to recognise that it is not the percentage division that must be just and equitable but rather the underlying value of that percentage.  In this case, I am satisfied that an equal division of the pool of assets ignoring the $90,000 debt and including the superannuation in that pool as an asset is just and equitable in the circumstances. 

23. Mr Indovino urged me to allow 90 days for the family to raise the money.  In my view that is unnecessary.  The family can either borrow the funds or they cannot and I see no reason in the circumstances why as the creditors have waited this long, they should not be entitled to close this case down as quickly as possible.  I propose to allow 42 days for the husband to obtain the necessary funds after which, the assets can be sold apart from the husband’s superannuation and the necessary adjustments then be made. 

Other orders

1. I have already indicated that this case has had an enormous amount of litigious activity.  One of the proceedings to which I have not referred was an action relating to the irrigation water licences or rights.

2. Initially, water rights as they were called were attached to the land.  Apparently by adjustment of some legislative activity, the rights became shares and were then held by the owners of the land.  Notwithstanding all of the activity associated with the B farm, it seems that the parties have had the entitlement to the shares.  There was significant evidence about a dispute between the parties over who was paying the necessary annual fees in relation to those licences but in the end, it seems to me to make little difference.  The amount involved was of little significance to make any adjustment and that is why I have ignored it.

1. However, during the litigation, it transpired that the water shares authority was making moves to permit the disposal of the shares and injunctions were made against them by this Court.  As there is now no basis for those orders any longer I propose to discharge the injunctions.  The Court also made an order in respect of the water authority that they be entitled to costs against the wife.  Sadly, that order will have to run the vagaries of the bankruptcy position of the wife.

The bankruptcy position.

1. I have already set out the factual details about the petitioning creditor and the tortuous history that this case has endured. The wife has all but conceded that without the B property belonging to the husband and hence being placed in the pool of assets for division, she is insolvent.

2. There was discussion at the end of the hearing about the prospect that the parties could sort out an arrangement that might avoid an order for the sequestration of the wife’s estate. However, to do so would mean that I would be potentially required to make orders that might affect other creditors including ignoring those who have been waiting a long time as well as those more recent who may make a claim as a result of orders for costs against the wife. I indicated and counsel all agreed that it would be inappropriate for that to occur.

3. Under s 52(4) of the Bankruptcy Act 1966, (Cth), a creditor’s petition lapses at the expiration of the period of 12 months commencing on the date of presentation of the petition unless, before the expiration of that period, a sequestration order is made or the petition is dismissed or withdrawn. That period of 12 months may be extended at the discretion of the Court for a period expiring no later than 24 months after the date of presentation of the petition. In this case, I have already made orders earlier in 2008 extending the creditor’s petition. The petition is extant as at the date of the orders I now propose to pronounce.

4. In respect of that petition, Rule 4.02 of the Bankruptcy Rules specifies the form of a bankruptcy petition and the contents of the affidavit verifying the petition. Rule 4.06(1) specifies the affidavits that must be filed by a creditor before the hearing of a creditor’s petition. I am satisfied that all of those matters have been proved.

5. Under s 52(1) of the Bankruptcy Act, at the hearing of a creditor’s petition, the Court must require proof of:

   (a)the matters stated in the petition;

   (b)service of the petition; and

   (c)the fact that the debt on which the petitioning creditor relies is still owing.

6. In this case on the evidence before me most of which is unchallenged, I find that an act of bankruptcy was committed by the wife as the debtor, within six months before the presentation of the petition before me and having been required by a special resolution of a meeting of creditors passed on 22 March 2006 to present a debtor’s petition within seven days failed, without sufficient cause, to present a debtor’s petition on or before 29 March 2006.

7. I further find that in respect of her written defence to that claim, the wife is insolvent and unable to meet her debts from her own assets and resources notwithstanding the orders I now make in respect of her entitlement under the Family Law Act 1975.

8. I am also satisfied as to the appropriate service of the petition and that has not been an issue of argument before me.

9. I am satisfied that the particular debt of Mr Trim, the Petitioning Creditor who brought the petition, is still outstanding and unpaid.

10. No other submission was put to me nor was there any other evidence to point to a basis under s 52(2)(b) of the Bankruptcy Act that might give rise to a sufficient cause not to make a sequestration order.

11. It is appropriate in the circumstances therefore to make a sequestration order against the estate of the wife.

12. Counsel for the petitioning creditor sought his costs. The provisions of s 109(1)(a) of the Bankruptcy Act apply in a case such as this and I see no reason to depart from that position. I propose to make such an order.

13. In respect of the R Group, a notice of appearance was filed on their behalf on 16 November 2006 in the Federal Magistrates Court. Thereafter and throughout that Court’s proceedings, the liquidators are shown as “supporting creditors”.

14. They have been an integral part of this process because they were defending the potential application of the wife to drag back into the pool of assets, the B Farm.

15. To the extent that the Bankruptcy Act provides that the supporting creditor should have their costs covered, their costs should be so covered.

I certify that the preceding One Hundred and Thirty Eight (138) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  2 September 2008