FAMILY LAW – PROPERTY – Bankruptcy – Standing – Where the wife seeks orders for property adjustment of 60 per cent – Where the property pool is approximately $4.4 million – Where all of assets on the balance sheet are owned by the husband and no vested bankruptcy property or non-divisible property that can be retained by the bankrupt pursuant to s 116 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) – Where the wife owes creditors in excess of $2 million – Where the wife was declared bankrupt as a result of legal fees incurred and costs orders against her made in the course of the proceedings in favour of the husband and third parties – Where the husband is one of the wife’s creditors – Where the Trustee in the Bankruptcy for the wife filed a submitting appearance – Where there was no stay or abandonment of the proceedings pursuant to s 60(2) or s 60(3) of the Bankruptcy Act – Where parties agreed the wife’s right to claim property adjustment pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) was “personal” and not property which vested in her trustee – Where any order in favour of the wife would result in after acquired property which would vest in the trustee – Consideration given as to whether a contingent right to any surplus confers standing on wife to pursue claim pursuant to s 79 of the Act – Where both parties argued wife had standing – Held that wife had no standing to continue property claim after she became bankrupt – Where trustee did not pursue the wife’s claim on behalf of creditors using powers in the Bankruptcy Act – Where if wife did have standing an assessment of contributions and future needs would only result in any property vesting in the trustee for the benefit of the creditors – Where none of the wife’s debt could be considered joint liabilities – Court held that it would not be just or equitable to make any property adjustment in favour of the wife – No property adjustment made – Orders made for husband to have exclusive occupancy of former matrimonial home held solely in his name.
FAMILY LAW – PROPERTY – Spousal Maintenance – Where wife sought orders for weekly spousal maintenance for period of two years – Held spousal maintenance payments are to be characterised as income under the Bankruptcy Act – Spousal maintenance payments do not vest in trustee – Wife held to have sufficient interest in spousal maintenance claim to sustain her standing with respect to it – Court held wife is unable to adequately support herself and has care of the children of the marriage – Husband reasonably able to maintain wife to the…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Masih & El Saeid (No 2) [2023] FedCFamC1F 939
Case
[2023] FedCFamC1F 939
Decision Date
CaseChat Overview and Summary
The case of Masih & El Saeid (No 2) involved a dispute between the husband, Mr Masih, and the wife, Ms El Saeid, concerning property adjustment and spousal maintenance following their separation and divorce. The wife had been declared bankrupt and the Trustee in Bankruptcy for the wife had filed a submitting appearance. The wife sought a property adjustment of 60 per cent and spousal maintenance for a period of two years. The husband opposed the wife's claims.
The legal issues before the court were whether the wife had standing to pursue her claims for property adjustment and spousal maintenance after she had been declared bankrupt, and whether it would be just and equitable to make any property adjustment in her favour. The court had to consider the effect of the Bankruptcy Act 1966 (Cth) on the wife's claims under the Family Law Act 1975 (Cth).
The court held that the wife had no standing to continue her property claim after she became bankrupt as any order in her favour would result in after-acquired property vesting in her trustee. The court found that the wife's right to claim property adjustment was a personal right and did not vest in her trustee. However, the court held that it would not be just or equitable to make any property adjustment in favour of the wife given the circumstances of the case. The court ordered that the husband have exclusive occupancy of the former matrimonial home.
The court held that spousal maintenance payments were to be characterised as income under the Bankruptcy Act and did not vest in the trustee. The court found that the wife had standing to pursue her claim for spousal maintenance as she had a sufficient interest in the claim. The court held that it would not be just or equitable to make any property adjustment in favour of the wife, but it was just and equitable to make an order for spousal maintenance in the amount of $200 per week for a period of two years.
The court ordered that the husband pay the wife $200 per week for a period of two years as spousal maintenance. The court also ordered that the husband have exclusive occupancy of the former matrimonial home and that the wife vacate the property within 90 days. The court dismissed all other applications and responses.
Orders
Orders of the court
SYC 2986 of 2012
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:
MR A MASIH
Applicant
AND:
MS EL SAEID
First Respondent
TRUSTEE IN BANKRUPTCY FOR MS EL SAEID
Second Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
3 NOVEMBER 2023
THE COURT ORDERS THAT:
1. On or before the expiration of 90 days from the date of these orders the Applicant Husband (“husband”) have exclusive occupancy of the property I Street, Suburb J ("the Suburb J Property").
2. On or before the expiration of 90 days from the date of these orders the Respondent Wife (“wife”) vacate the Suburb J property.
3. On or before the expiration of 90 days from the date of these orders the wife deliver all keys to the Suburb J Property (including keys to the basement area and shed) along with the remote-control devices to open the garage doors to the offices of Z Real Estate of AM Street, Suburb XX.
4. Up until the time of the wife's vacation of the Suburb J Property, the wife maintain the Suburb J Property in a clean state and leave the property in good order.
5. Commencing no later than seven days from the date of these orders, the husband shall pay to the wife each week as spousal maintenance the sum of $200, with such payment to continue for two years from the date of the first payment.
6. Any application seeking an award of costs is to be filed and served with an affidavit in support within 21 days of the date of these orders, and in the event no application is filed within the time specified, there shall be no order as to costs.
7. All applications and responses be otherwise 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.
Background
Background to the litigation
However, I am satisfied that the maintenance claim is a claim for income falling outside the purview of the trustee, she has standing to pursue it and there should be an order for spouse maintenance in the amount of $200 per week for a period of two years as sought by the wife, for reasons which will be explained.BRIEF BACKGROUND The husband was born in 1962, presently 60 years of age and the wife was born in 1977, presently 45 years of age. In 1991 the husband purchased Suburb SS for $255,000. In 1993 he purchased Suburb J for $1,250,000. The parties met in Country X in 2005 and married in 2005. The wife immigrated to Australia in or around mid-2005. The parties have two children of the marriage, R born 2006 and Q born in 2009, collectively referred to as the children. R was diagnosed with developmental delay in early 2009 at age three. The wife had a third child with Mr P in 2016, AL. AL lives with the wife and has been diagnosed with autism. The spouse parties commenced cohabitation in Australia in mid-2005. The husband claimed they resided at an apartment in Suburb K until August 2005. The wife’s evidence is that they resided at Suburb J from mid-2005. Nothing turns on this difference. Suburb J became the former matrimonial home. The husband’s parents resided in Suburb J until his mother’s death in 2005. The husband’s brother also resided there until late 2005. The wife’s proficiency with English was disputed by the parties. In 2006 a swimming pool at the Suburb J property was renovated by the husband. In early 2008, the eldest child R commenced attending preschool five days a week, this was reduced to two days per week in May 2008. In or around 2008 the husband reduced his working hours to three days per week. The husband’s father recommenced living in the Suburb J property in 2012. The parties separated on 25 March 2012, and the husband vacated Suburb J. The husband moved into an apartment owned by his brother in Suburb K. The mother remained living in Suburb J where she currently resides with the children and AL. The parties agreed that the husband has not spent significant time with the children since April 2017. On 2 December 2021, a sequestration order was made by the Federal Circuit and Family Court of Australia (Division 2) and the wife was declared bankrupt. The petitioning creditor was a solicitor’s firm which formerly represented the wife in these proceedings, JJ Lawyers. According to the trustee’s Statutory Report to Creditors dated 1 March 2022, the wife had unsecured liabilities of $1,622,518. Of this amount, the trustee recorded that the largest known unrelated creditor is YY Lawyers owed an amount of $1,166,015 for outstanding legal fees. The trustee also noted that he was seeking to have a resolution passed by the wife’s creditors to approve $75,821.15 as an interim amount for his fees from the period 2 December 2021 until completion, and in the Statement of Estimated Position the trustee’s fees were included as $83,445.89.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
The Full Court in O’Neill discussed Guirguis and recognised the impact of Cummings in the following passages:86. However, what was said in … earlier authorities … in relation to the question of a bankrupt spouse’s interest in any surplus remaining after his or her bankruptcy, must now, in our view, be read subject to the High Court decision in Cummings. It would seem clear that the majority of the High Court in Cummings did not consider that the bankrupt’s interest in any surplus would operate to give the bankrupt the necessary interest in a money judgment such as would support the necessary institution of an appeal in the bankrupt’s name against the judgment …Conclusion in relation to the preliminary point87. The Full Court in Guirguis while denying a bankrupt spouse the right to appeal property settlement orders, did not purport to overrule the authorities such as Page (No.2), Audet and Reed which (following Coffey v Bennett) 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).88. Furthermore, the majority of the High Court in Cummings referred without apparent disapproval to the concept of “rights of action which do not pass to a trustee on bankruptcy because they are personal to the bankrupt and do not affect the quantum of the bankrupt estate” (underlining added), and cited Coffey v Bennett again without disapproval (at p.136). Although there must be a question as to meaning of the words which we have underlined in the passage just quoted, it would appear to remain good law that a bankrupt spouse may initiate and prosecute property settlement proceedings during the course of his or her bankruptcy– although any property acquired would have to vest in the trustee by virtue of s.58(1)(b) of the Bankruptcy Act (apart from the limited classes of property exempted under s.116(2) of that Act).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.(Emphasis in original) Six important points can then be drawn from the decision in Cummings, the authorities referred to in it and the later decisions just discussed. First, a distinction must be drawn between actions in which a bankrupt makes claims against or to recover property and actions in which the bankrupt is defending claims exposing them to further provable debts. Secondly, since Rochfort v Battersby (1849) 2 HLC 388 it has been established that a right of action of the first kind vests in the trustee, because, if successful, it may protect, enhance or add to the property of which the bankrupt was divested on bankruptcy, that is, the property in the bankrupt estate which then vests in the trustee on recovery, while the second kind does not, because it may merely result in a reduction of liabilities to which the bankrupt estate is exposed. Thirdly, and consistently with these basic principles, a right of appeal in respect of a judgment on a claim of the first kind is property which vests in the trustee, again because it may add to the property in the bankrupt estate, while a right of appeal from a judgment on a claim of the second kind is not property, again, because it may merely reduce the liabilities in the estate. Fourthly, standing in the proceedings and ownership of the right of action are separate, if overlapping, concepts; in other words, standing to recover or claim property derives from an interest in the outcome; so irrespective of whether a right of action remains with the bankrupt unvested in the trustee, the bankrupt has no standing to pursue an action which will add vested property to the bankrupt estate to be administered by the trustee because the bankrupt has no interest in that property (See Samootin at [86]–[90]). Fifthly, for the same reasons, even an unvested right of appeal does not give the bankrupt standing to bring the appeal. In other words, standing is not determined by reference to whether the right of appeal is property which vests in the trustee. Rather standing derives from an interest in the outcome. Sixthly, an interest in a contingent surplus is not a sufficient interest in the outcome to give the bankrupt standing to enforce proprietary rights (See also Bagshaw v Scott (2002) 126 FCR 27 at [26]–[30]; Robertson v Deputy Federal Commissioner of Taxation (2003) 53 ATR 824 at [22]–[23]).