Masih & El Saeid (No 2)
[2023] FedCFamC1F 939
•3 November 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Masih & El Saeid (No 2) [2023] FedCFamC1F 939
File number(s): SYC 2986 of 2012 Judgment of: HARPER J Date of judgment: 3 November 2023 Catchwords: 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 extent of $200 per week – Orders made for husband to pay wife $200 per week for period of two years.
Legislation: Bankruptcy Act1966 (Cth) Pt VI, Div 4B, ss 5(1), 58(1), 58(6), 60, 116(1), 116(2), 134
Family Law Act1975 (Cth) Pts VIII, VIIIA, VIIIB, Div 3, ss 4(1), 34, 39(1), 74, 75, 79, 90XS
Bankruptcy Regulations 2021 (Cth) reg 30
Cases cited: Aitken & Aitken (2023) FLC 94-142; [2023] FedCFamC1A 69
Anson & Meek (2017) FLC 93-816; [2017] FamCAFC 257
B Pty Ltd & Sykes (2013) 50 Fam LR 71; [2013] FamCA 359
Bagheri & Goudarzi [2017] FamCAFC 96
Bagshaw v Scott (2002) 126 FCR 27; [2002] FCAFC 362
Barnell & Barnell (2020) FLC 93-961; [2020] FamCAFC 102
Barre & Barre [2021] FamCA 101
Benson & Drury (2020) FLC 93-998; [2020] FamCAFC 303
Biddick & Etier [2018] FamCA 744
Boensch v Pascoe [2007] FCA 1977
Bryson & Pember [2013] FamCA 43
Bunyon & Lewis (No 3) [2013] FamCA 888
Commissioner of Taxation of the Commonwealth of Australia v Myer Emporium Ltd (1987) 163 CLR 199; [1987] HCA 18
Cummings v Claremont Petroleum NL (1996) 185 CLR 124; [1996] HCA 19
Dickons v Dickons (2012) 50 Fam LR 244; [2012] FamCAFC 154
Duckworth v Water Corp (2012) 261 FLR 185; [2012] WASC 30
Ellis v Torrington [1920] 1 KB 399
El Saeid & Masih [2019] FamCA 497
El Saeid & Masih [2019] FamCA 766
El Saeid & Masih [2020] FamCAFC 150
Faldyn & Badenoch (No 2) [2022] FedCFamC1A 204
Fields & Smith (2015) FLC 93-638; [2015] FamCAFC 57
Fuller v Beach Petroleum NL (1993) 43 FCR 60
G and G (2000) FLC 93-043; [2000] FamCA 1075
Garrett v Commissioner of Taxation (2015) FCR 226; [2015] FCA 665
Glover & Webster (2021) 64 Fam LR 482; [2021] FedCFamC1A 69
Grunseth & Wighton (2022) FLC 94-099; [2022] FedCFamC1A 132
Guirguis v Guirguis and Official Trustee in Bankruptcy (1997) FLC 92-726
Harris v Caladine (1991) 172 CLR 84; [1991] HCA 9
Horrigan & Horrigan [2020] FamCAFC 25
Jabour & Jabour (2019) FLC 93-898; [2019] FamCAFC 78
Kowalski and Kowalski (1993) FLC 92-342
Macdermott & Grant [2022] FedCFamC1F 997
Mallet v Mallet (1984) 156 CLR 605; [1984] HCA 21
Masih & El Saeid (No 3) [2021] FamCA 577
Masih & El Saeid (No. 2) [2021] FamCA 292
Masih & El Saeid [2019] FamCA 234
Masih & El Saeid [2020] FamCA 238
Masih & El Saeid [2020] FamCAFC 152
Masih & El Saeid [2021] FamCA 60
Masih & El Saeid [2022] FedCFamC1F 515
Meadows & Meadows (No. 3) [2020] FamCAFC 124
Meriton Apartments Pty Limited v Industrial Court of New South Wales (2008) 171 FCR 380; [2008] FCAFC 172
Nevins & Urwin (2022) FLC 94-084; [2022] FedCFamC1A 57
Norman & Norman [2010] FamCAFC 66
O’Neill v O’Neill (1998) FLC 92-811; [1998] FamCA 67
Page & Page (No. 2) (1982) FLC ¶91-241
Re Buckle (1969) 15 FLR 460
Re Gillies; Ex parte Official Trustee in Bankruptcy v Gillies (1993) 42 FCR 571; [1993] FCA 409
Re Hawkins, Ex Parte Worrell (1996) 71 FCR 371; [1996] FCA 1169
Re Lofthouse (2001) 107 FCR 151; [2001] FCA 25
Re St Gregory’s Armenian School Inc (in liq) (No 2) (2020) 357 FLR 218; [2020] NSWSC 1601
Robertson v Deputy Federal Commissioner of Taxation (2003) 53 ATR 824; [2003] FCA 944
Rochfort v Battersby (1849) 2 HLC 388
Samootin v Shea [2010] NSWCA 371
Sloan & Sloan [2018] FamCA 610
Southern & Southern [2019] FamCA 1002
Stanford & Stanford (2012) 247 CLR 108; [2012] HCA 52
Trent & Rowley [2014] FamCA 447
Zao & Lee [2019] FamCAFC 169
Division: Division 1 First Instance Number of paragraphs: 119 Date of last submission/s: 5 July 2023 Date of hearing: 15–18 May 2023 Place: Sydney Counsel for the Applicant: Mr Cummings SC Solicitor for the Applicant: Diamond & Conway Lawyers Counsel for the First Respondent: Mr Friedlander Solicitor for the First Respondent: Sunfield Chambers Solicitors & Associates Solicitor for the Second Respondent: Ms Ferris of Watson Web ORDERS
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.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Masih & El Saeid has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
INTRODUCTION
These are property adjustment proceedings under Pt VIII of the Family Law Act1975 (Cth) (“the Act”) between the Applicant, Mr A Masih (“the husband”) and the Respondent, Ms El Saeid (“the wife”).
The wife is currently bankrupt.
The Trustee in Bankruptcy for Ms El Saeid (“the trustee”) filed a notice of appearance, was joined as a party and was represented at the final hearing.
There was no dispute about the form and composition of the balance sheet, which became Exhibit 14, as follows:
Ownership Description Agreed value ASSETS 1. Husband Property situated at I Street (“Suburb J”) $5,100,000 2. Husband Property situated at UU Street (“Suburb SS”) $1,350,000 3. Husband Funds in FF Bank account …18 $3,041 4. Husband Company WW Shares (…) (@ $3.08 per share 15.3.2021) $19,412 5. Husband Motor Vehicle 1 $3,000 6. Husband Motor Vehicle 2 $13,300 Total $6,488,753 LIABILITIES 8. Husband Balance of National Australia Bank loan secured by title of Suburb J $536,958 9. Husband FF Bank loan secured by title of Suburb SS $352,000 10. Husband Amount owing to LL Pty Ltd $834,094 11. Husband Amount owing to Mr B Masih $196,430 12. Husband Sydney Water – arrears of water rates on Suburb J $2,445 13. Husband Capital Gains Tax on sale of Suburb SS Property $225,000 Total $2,146,927 SUPERANNUATION Member Name of Fund Type of Interest Agreed value 14. Husband Superannuation Fund 1 Accumulation $44,585 Total $44,585 NET POOL (INCLUDING SUPERANNUATION): $4,386,411
The wife has substantial debts which I will explain shortly. I have excluded a motor vehicle attributed to the wife, in light of the absence of any independent evidence of its value, the de minimis value of $5,000 given by the wife, and the fact no claim is made about it.
Self-evidently, and it was common ground, all the assets are owned by the husband, and he is subject to all the liabilities, other than those of the wife to be dealt with in the course of her bankruptcy.
The husband contends there should be no property adjustment pursuant s 79 of the Act. He seeks vacant possession of the former matrimonial home, which he owns, together with delivery up of various personal items. The husband’s final proposed Minute of Order is detailed in Annexure “A”, set out at the conclusion of this judgment.
The wife’s ultimate proposed Minute of Orders became Exhibit 21 (set out in Annexure “B”). She sought a payment from the husband of $3,360,000 within 28 days of the orders, in default of which Suburb J be sold. I will call this her “property claim”. She also sought payment of spousal maintenance in the sum of $200 per week for two years. I will call this her “maintenance claim”. In her Case Outline filed 9 May 2023 she also sought child support departure orders but these were not pressed by the end of the trial.
I have concluded that the wife’s property claim fails and there should be no property adjustment for three reasons, which can be summarised as follows. Firstly, by reason of her bankruptcy, the wife has no standing to prosecute her property claim because she can establish no sufficient interest in the outcome. Secondly, in the circumstances of this case, where the debts provable in the wife’s bankruptcy are almost entirely comprised of costs owing to her former lawyers in relation to an unsuccessful threshold determination of claims she brought against assets or businesses of third parties, together with costs orders made in favour of the same third parties and the husband, the just and equitable requirement in s 79(2) of the Act cannot be satisfied where the only assets are those of the husband. Thirdly, assuming in the wife’s favour that the previous two reasons are wrong, on any assessment of contributions, the wife would not be entitled to any adjustment sufficient to exceed the debts provable in her bankruptcy; indeed these would be likely to continue to exceed her putative entitlement by a considerable margin; for this reason also there can be no satisfaction of the just and equitable requirement.
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.
A schedule of the wife’s debts provable in her bankruptcy became Exhibit 11. The schedule is attached to this judgment as Annexure “C”. It shows that when interest is taken into account the total of the wife’s unsecured debts is in the order of $2,036,647 (rounded). All the debts are either for legal fees owed by the wife to legal practitioners who have represented her in the proceedings from time to time or costs orders against her in these proceedings. There have been costs orders against the wife totalling at least $505,105 of which approximately $276,374 is payable to the husband, exclusive of interest. There was no dispute that these were debts provable in the wife’s bankruptcy.
PROCEDURAL HISTORY
This matter has a long history in this Court with respect to both parenting and property proceedings. A broad outline of the procedural history in this matter is set out at in Masih & El Saeid (No. 2) [2021] FamCA 292 at [6]–[22] (“Masih & El Saeid (No. 2)”). For the purposes of this judgment the following matters are relevant.
The husband commenced proceedings in the Family Court of Australia (as it then was) on 23 May 2012 by way of Initiating Application seeking parenting orders. He filed an Amended Initiating Application on 2 June 2015 seeking both parenting and property orders which he relied upon at the final hearing. The wife filed a Response to Final Orders on 13 July 2012 seeking both parenting and property orders, including an order for spouse maintenance. She filed an Amended Response on 28 May 2018, upon which she relied at trial.
The trial of the parenting proceedings took place in May and June 2018 and final orders were made on 16 April 2019 (Masih & El Saeid [2019] FamCA 234). The parenting orders were successfully appealed on 25 June 2020 and remitted for rehearing (Masih & El Saeid [2020] FamCAFC 152). No rehearing of parenting issues took place. Further final parenting orders were made by consent on 15 February 2021 (Masih & El Saeid [2021] FamCA 60).
On 20 February 2017, Rees J considered it appropriate for a separate hearing to take place to determine certain threshold issues. The wife filed an Amended Point of Claim on 1 March 2017 wherein she contended that certain assets held by third party entities should be considered property of the husband and accordingly certain transactions should be set aside pursuant to s 106B of the Act. A hearing took place over six days in March 2018 and a further day on 23 July 2019, before Loughan J. On 25 July 2019, Loughan J delivered judgment. The wife was wholly unsuccessful and her points of claim were dismissed (El Saeid & Masih [2019] FamCA 497). The wife’s appeal to the Full Court on 19 May 2020 was unsuccessful (El Saeid & Masih [2020] FamCAFC 150). The remaining issues in the property proceedings were otherwise stood over.
By way of Amended Application in a Proceeding filed 30 September 2019, the wife sought an order for interim property distribution in the sum of $120,000 for the funding of her prospective legal fees. The wife further sought relief from an order and undertaking made on 9 June 2015 which gave priority to any funds received to her former solicitor, Mr JJ who was owed $324,344 by the wife for legal work performed. Loughan J held that the husband did not possess sufficient funds to satisfy the payment sought by the wife. Further, the Court was not satisfied that there was sufficient justification to alter the rights of Mr JJ (El Saeid & Masih [2019] FamCA 766). Loughan J subsequently made an order requiring the wife pay the husband’s costs incidental to her Amended Application in a Proceeding on a party/party basis (Masih & El Saeid [2020] FamCA 238).
On 12 May 2021, I ordered the wife to pay the husband’s costs with respect to a number of interim proceedings whose costs remained reserved, in the fixed sum of $16,674 and the wife to pay the third parties, who had previously been joined to the proceedings, costs fixed in the sum of $175,012.72 (Masih & El Saied (No. 2)). I made costs orders in favour of the husband in the fixed sum of $160,000 on 5 August 2021 (Masih & El Saeid (No 3) [2021] FamCA 577). I made further costs orders in favour of the husband fixed in the amount of $15,000 on 20 July 2022 (Masih & El Saeid [2022] FedCFamC1F 515).
On 12 April 2022, the wife’s trustee in bankruptcy filed a notice submitting to any order the Court may make.
The trial of the property dispute took place over four days commencing on 15 May 2023. The husband was represented by senior counsel and solicitors. The wife was also represented by solicitors and counsel. The trustee appeared by a solicitor.
On 23 May 2023 orders were made in chambers for the parties to file and serve written submissions with respect to the wife’s standing in light of her bankruptcy to pursue or continue any application for property adjustment orders pursuant to s 79 of the Act by no later than 20 June 2023. The time for the filing of written submissions was extended to 5 July 2023 with judgment standing reserved from 6 July 2023.
MATERIAL RELIED UPON
According to his case outline filed on 30 July 2021, the husband relied upon:
(a)Further Amended Initiating Application filed 2 June 2015;
(b)Affidavit of the husband filed 11 April 2023 and annexures;
(c)Financial Statement of the husband filed 11 April 2023; and
(d)Affidavit of Mr B Masih filed 11 April 2023.
As set out in her case outline, the wife relied upon:
(a)Amended Response to Final Orders filed 28 May 2018;
(b)Affidavit of the wife filed 17 April 2023 and annexures; and
(c)Financial Statement of the wife filed 17 April 2023.
The wife filed an Amended Financial Statement on 16 May 2023 on which she sought to rely.
Both spouse parties were cross-examined. I formed the view that the husband was generally a measured and reliable witness. The husband’s brother was also cross-examined. I also found him to be generally reliable.
On the other hand, I found the wife to be an unsatisfactory witness. The wife’s primary language is a language other than English and she used a Court appointed interpreter for the duration of the final hearing. She often failed to answer questions directly. She made implausible claims. For example, as part of her case, she denied that Mr P, with whom she has had, since separation from the husband, a relationship and a child, was any longer her partner or a source of financial support. However, she conceded that on the second day of trial she had telephoned him and he promptly came to the Court precincts to provide her with cash (Transcript 16 May 2023, p.138 lines 4–30). I treat the wife’s evidence with caution.
Both the husband and wife filed further written submissions pursuant to the orders made on 23 May 2023, upon which they sought to rely.
The documents which were tendered and received into evidence are set out at Schedule 1 to these reasons.
PART VIII OF THE ACT
As originally constituted the proceedings were comprised of two matrimonial causes as defined in s 4(1) of the Act.
The first was the maintenance claim being “proceedings between the parties to the marriage with respect to the maintenance of one of the parties to the marriage” namely, the wife (s 4(1) of the Act). This falls within para (c) of the definition of “matrimonial cause”. In my view the bankruptcy of the wife did not change this because the maintenance claim was and is a claim for income, as a I explain later, not a claim in respect of property. It is also not a matrimonial cause falling within the definition in para (caa), which would be proceedings between the wife and her trustee in respect of her maintenance.
The second was a matrimonial cause falling within para (ca) of the definition, that is, “proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them”, being proceedings “arising out of the marital relationship”. The bankruptcy of the wife did not change this because the proceedings continued to be “with respect to” the property of the husband.
I will discuss the property claim first.
Section 79(1) provides:
(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;
including:
(c)an order for a settlement of property in substitution for any interest in the property; and
(d) an order requiring:
(i) either or both of the parties to the marriage; or
(ii) the relevant bankruptcy trustee (if any);
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.
“Property settlement proceedings” are defined in s 4(1) of the Act as follows:
(a) in relation to the parties to a marriage–proceedings with respect to:
(i) the property of the parties or either of them; or
(ii)the vested bankruptcy property in relation to a bankrupt party to the marriage;
“Vested bankruptcy property” in the Act means, in relation to a bankrupt spouse, “property of the bankrupt that has vested in the bankruptcy trustee under the Bankruptcy Act1966. For this purpose, property has the same meaning as in the Bankruptcy Act 1966” (s 4(1) of the Act).
There is a difference in the wording of the definition of “property of the parties” within the Act and “property” within the Bankruptcy Act. In s 4(1) of the Act, “property” is relevantly defined in relation to the parties to a marriage or either of them as “property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion”.
“Property” is defined in s 5(1) of the Bankruptcy Act to mean:
real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property.
Section 79(2) of the Act provides that “[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”.
Section 79(4) sets out the considerations to be taken into account in determining what order, if any, should be made. I will return to these provisions later in these reasons.
In essence then, the property claim is a matrimonial cause based on a statutory right to claim alteration of the property interests of the parties to the marriage or either of them, by invoking the exercise of the Court’s discretion based upon a consideration of contributions of both parties and satisfaction that any order would be appropriate, just and equitable.
It is also important to remember that having regard to the language of both s 79(1) and s 79(2) of the Act, the Court is required to make orders which are not only “just and equitable” but also “appropriate” (Zao & Lee [2019] FamCAFC 169 at [48]; Aitken & Aitken (2023) FLC 94-142 at [59]).
STANDING
At trial, no party raised any issue with the wife’s standing to pursue either her property or maintenance claims against the husband after bankruptcy. The trustee, though represented, took no part in the proceedings, apart from making clear to the Court that the wife’s bankrupt estate had no assets, and thus nothing from which the trustee could be remunerated.
It seems to me that before the Court determines to exercise a statutory jurisdiction in favour of a party, it must be satisfied that party has standing to agitate the question before the Court at the time the Court is asked to exercise the discretion. If the party lacks standing the proceedings brought or maintained by that party are incompetent, as explained below. Just as jurisdiction cannot be conferred by parties agreeing or assuming there is jurisdiction, a deficiency in standing cannot be cured by agreement or acquiescence of the parties (cf Bunyon & Lewis (No 3) [2013] FamCA 888 at [148]; Harris v Caladine (1991) 172 CLR 84 at 133). After the conclusion of the trial the Court sought submissions on the question of the wife’s standing. The husband argued the wife did have standing. So did the wife. The trustee made no submissions on the question. Neither spouse party argued a deficiency in standing could be cured by agreement or acquiescence. Although it was common ground between the parties that the wife had standing, in my view this is incorrect, in respect of her property claim, for reasons which will be explained.
In summary both spouse parties agreed that the trustee had determined to pursue the claim by written election for the purposes of s 60(2) of the Bankruptcy Act and that the wife’s property claim is not “property” within the Bankruptcy Act which has vested in the trustee. Accordingly, so the argument went, the wife had standing to prosecute her property claim. Thus, both spouse parties assumed the wife’s standing to pursue her claim after bankruptcy derived from a conclusion that her property claim was not property, nor property which had vested in the trustee. It was also part of the wife’s submissions that on a just and equitable property division, her entitlement to part of the available assets would pay out her creditors, discharge her from bankruptcy and leave a surplus from which she could find fresh accommodation with the children.
Sections 58(1) and 58(6) of the Bankruptcy Act provide as follows:
(1) Subject to this Act, where a debtor becomes a bankrupt:
(a)the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and
(b) after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.
…
(6) In this section, after-acquired property, in relation to a bankrupt, means property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt.
(Emphasis in original)
In addition to the definition of “property”, the expression “the property of the bankrupt” is defined in s 5(1):
(a) except in subsections 58(3) and (4):
(i) the property divisible among the bankrupt’s creditors; and
(ii) any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt; and
…
I should record here that it was uncontroversial before me that if the wife succeeded in obtaining orders dividing property in her favour, her entitlement would vest in the trustee as after acquired property divisible among her creditors pursuant to s 58(1)(b). In fact, it was undisputed that, putting to one side for the moment the wife’s right to claim, there was, and could be, no property in the wife’s bankrupt estate divisible among her creditors, other than after acquired property in the form of any property received under an adjustment ordered by this Court.
Section 116(1) of the Bankruptcy Act prescribes property that is divisible among the creditors of a bankrupt, relevantly:
(1) Subject to this Act:
(a)all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; and
(b) the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge; and
(c) …
is property divisible amongst the creditors of the bankrupt.
Subsection 116(2) of the Bankruptcy Act excludes a range of property from s 116(1), none of which is presently relevant.
Next, the operation of s 60 of the Bankruptcy Act must be addressed. Subsections 60(2), (3), (4) and (5) are in the following terms:
(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.
(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.
…
(5) In this section, action means any civil proceeding, whether at law or in equity.
(Emphasis in original)
The wife did not contest the application of s 60 of the Bankruptcy Act to her property claim and her maintenance claim. Although it was common ground that the trustee had made a written election, the husband argued that since the wife’s property claim was not property which had vested in the trustee, s 60(2) was not engaged. No reference was made to the maintenance claim.
If the wife’s property claim is not property, in the form of a chose in action, which has vested in her trustee, the husband’s contention about s 60 might have some superficial attraction. But the settled weight of authority is contrary to his argument, irrespective of whether the wife’s property claim has vested in the trustee.
Section 60(2) applies to an “action” and s 60(3) requires an election by the trustee in relation to the “action”. Section 60(2) and s 60(3) are complementary to s 58, applying only to proceedings on foot when a bankruptcy commences (Boensch v Pascoe [2007] FCA 1977 at [22] (per Buchanan J)).
There is ample and consistent authority that the broad definition of “action” (“any civil proceeding, whether at law or in equity”) in s 60(5) means that s 60(2) and s 60(3) require consideration in every civil proceeding, to give some protection to the bankrupt’s creditors and to protect respondents to a bankrupt’s proceedings from incurring unrecoverable costs. Gray J explained the reasons in Re Lofthouse (2001) 107 FCR 151 (“Lofthouse”) and concluded:
20.In my view, s 60 has been enacted deliberately as a broad provision, so as to encompass any proceeding brought by a bankrupt before bankruptcy. The exceptions have been expressed quite narrowly. The intention is that, once a bankruptcy occurs, no further costs should be incurred in a proceeding unless the trustee in bankruptcy makes an election to continue the proceeding …
This broad interpretation of s 60(2) and s 60(3) has been embraced in numerous decisions since Lofthouse, such as Meriton Apartments Pty Limited v Industrial Court of New South Wales (2008) 171 FCR 380 where Branson J said:
8.… [subsections 60(2) and (3)] are binding on all Australian courts. The status of a proceeding commenced by a person who subsequently becomes bankrupt is a matter which must necessarily be addressed by the court in which the proceeding has been commenced …
In Duckworth v Water Corp (2012) 261 FLR 185 Edelman J followed Lofthouse at [43]–[44]. In Garrett v Commissioner of Taxation (2015) FCR 226 after a careful review of the authorities, Kenny J at [21] and [31]–[35] held the word “action” should be broadly construed and apart from actions to which s 60(4) applies, s 60(2) covers all actions commenced by a bankrupt whether or not the action has a connection to the estate (followed in Re St Gregory’s Armenian School Inc (in liq) (No 2) (2020) 357 FLR 218 at [27]–[50] to hold interlocutory processes in the Supreme Court of NSW were stayed pursuant to s 60(2)).
It has also been held that s 60 of the Bankruptcy Act applies to proceedings in this Court under the Act (Bagheri & Goudarzi [2017] FamCAFC 96 at [8]–[10]) for example, to applications pursuant to s 79 (Sloan & Sloan [2018] FamCA 610 at [42] (“Sloan”); Biddick & Etier [2018] FamCA 744 at [9]) and by me in proceedings to enforce a binding financial agreement (Barre & Barre [2021] FamCA 101 at [170]–[173] (“Barre”)). A Response can continue as separate proceedings in circumstances in which an Initiating Application is dismissed as a result of the operation of s 60 (Trent & Rowley [2014] FamCA 447 at [38]; Barre at [171]). In short, the “action” in this Court is the proceeding to determine a matrimonial cause.
I do not accept the husband’s argument that s 60(2) is not engaged. Consequently, upon the wife becoming bankrupt, the continued prosecution of her property and maintenance claims required an exercise of discretion by the trustee pursuant to s 60. As noted, this has happened. Accordingly, no stay pursuant to s 60(2), or abandonment pursuant to s 60(3), affected the wife’s application for property adjustment.
But beyond the operation of s 60(2) or s 60(3), it might be thought the arguments of the spouse parties require a close consideration of what property passes to the trustee as vested bankruptcy property of the wife. In the circumstances of this case, the only contender is her property claim. Her maintenance claim raises different considerations, and I will deal with it separately later in these reasons. Her property claim vested in the trustee if it is “property” according to the definition of property in the Bankruptcy Act, not the definition in the Act. It could be property which passed to the trustee if it is properly understood as a chose in action in the form of a right of action, such as “a bare right of action, a bare power to bring an action”, to use the wording of Scrutton LJ in Ellis v Torrington [1920] 1 KB 399 at 411.
The Bankruptcy Act definition of “property” (above at [52]) is very wide. It is an inclusive, not exclusive, definition embracing “personal property of every description” and includes “any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any property”. In Re Buckle (1969) 15 FLR 460 at 466 Gibbs J (as he then was) observed:
… The word “property” is of wide import, and in its context in s. 166 of the Bankruptcy Act 1966-1968 is to be understood in the light of the principle, established for centuries and still applicable subject to specific statutory exception, that the creditors are to have the benefit of “every beneficial interest which the bankrupt has”, “every species of right, or which by any possibility profit can be made”…
(Citations omitted)
In Fuller v Beach Petroleum NL (1993) 43 FCR 60 Hill J said at 70 the definition is “indicative and descriptive of every possible interest which a party can have in property”, and “clearly includes not only tangible things but debts, choses in action and any other rights or interest of a proprietary kind”.
However, it has been consistently held in this Court and the Full Court that the right to claim an alteration of property interests pursuant to s 79 is personal to the bankrupt spouse and does not vest in the trustee; it is not property which vests in a trustee in bankruptcy, even if it produces after acquired property (Page & Page (No. 2) (1982) FLC ¶91-241 (“Page”); O’Neill v O’Neill (1998) FLC 92-811 (“O’Neill”); Bryson & Pember [2013] FamCA 43 at [25]–[37]; B Pty Ltd & Sykes (2013) 50 Fam LR 71 at [27]–[28]; Southern & Southern [2019] FamCA 1002 at [96]–[99] (“Southern”); Barre at [187]–[198]; Macdermott & Grant [2022] FedCFamC1F 997). On the other hand, there is authority that claims under Pt VIIIA of the Act to set aside a financial agreement pursuant to s 90K, or enforce such an agreement pursuant to s 90KA, do vest in the trustee (Southern; Barre). Since neither party contested this position, and it has been apparently settled for many years, this matter is not an appropriate place to determine whether it is a position from which the Court should depart. I will assume it is correct.
However, this does not determine the issue of standing. After the decision in Page, but before O’Neill, the High Court delivered the well-known decision in Cummings v Claremont Petroleum NL (1996) 185 CLR 124 (“Cummings”) which concerned whether a right of appeal was property and the standing of a bankrupt appellant. The majority made their determination on the basis of standing not whether a right of appeal was “property”. They said at 134:
… If the postulated appeal relates to property that became vested in the trustee on the bankruptcy, or if the postulated appeal relates to a claim by the bankrupt for money or property that would be vested on recovery in the trustee, the right to appeal is vested in the trustee … But it does not follow that a right of appeal against a money judgment entered in an action against a bankrupt is property of the bankrupt and, on that account, vested in the trustee …
(Emphasis in original)
They continued at 135–136:
… None of the three cases cited in Boaler v Power [[1910] 2 KB 229 (“Boaler v Power”)] related to litigation in which judgment has been sought or entered against a bankrupt. Boaler v Power itself was a case in which the bankrupt was seeking to impeach judgments in actions brought to enforce proprietary rights which, if they existed, were vested in the trustee. Neither Boaler v Power nor the cases cited establish the affirmative proposition that a right to appeal is property. They do establish the negative proposition that a bankrupt has no right to bring or prosecute proceedings to protect, enhance or add to the property of which he has been divested on bankruptcy (See Rochfort v Battersby (1849) 2 HLC 388 at 406, 409 and Heath v Tang [1993] 4 All ER 694 …). WR Henry & Son v Hodge was wrongly decided. If Boaler v Power were taken as authority for the proposition that a right to appeal in an action brought to enforce a liability of the defendant is property of the defendant, it too would be wrongly decided. But Boaler v Power is explicable as a case relating to proceedings brought by a bankrupt to protect or enforce rights in or to property vested in his trustee. But that is not the present case.
The appellants, believing that they had to escape from the proposition that the right to appeal in the present case was property, contended that that “property” was not vested in their trustee but was analogous to those 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 (Beckham v Drake (1849) 9 ER 1213; Rose v Buckett [1901] 2 KB 449 at 454; Davies v English, Scottish & Australia Bank Ltd (1934) 7 ABC 210 a 214; Coffey v Bennett [1961] VR 264 at 266). As the right to appeal in this case was not “property” within the meaning of that term in s 58(1), the appellants’ submissions miss the point.
(Footnotes inserted)
Then at 137–138:
…
So far as a judgment entered in an action against a bankrupt creates or evidences a provable debt, we respectfully agree that the bankrupt has no financial interest which would confer locus standi to appeal in his own name against the judgment. That is because it is fundamental to the law of bankruptcy that the bankrupt is divested of both his interest in his property and liability for his provable debts.
Of course, a money judgment entered against a bankrupt has the effect of increasing the amount of the debts provable in his estate. But it is immaterial that, if an appeal against the judgment were successful, there would or might be a surplus in the estate after the remaining creditors are paid. A bankrupt’s contingent interest in a surplus does not give him an interest which would allow him to sue to enforce proprietary rights and, that being so, it cannot give him an interest to appeal to minimise liabilities. If the bankrupt cannot appeal against such a judgment, does his trustee have the power to do so? The powers of a trustee are defined by s 134. By sub-s (1)(j), the trustee is authorised to “bring, institute or defend any action or other legal proceeding relating to the administration of the estate”. That is an ample power to permit the trustee to institute an appeal against a judgment entered against a bankrupt that affects the administration of the estate ...
(Footnotes omitted)
The majority made clear that in private law litigation the competence of proceedings is dependent on standing, which is itself defined by a sufficient interest in the outcome. Although not referring specifically to Cummings, the NSW Court of Appeal explained the scope and fundamental nature of this understanding of locus standi in Samootin v Shea [2010] NSWCA 371 (“Samootin”):
63. It is a fundamental principle on which the legal system operates that a question can be brought for determination before the Court only by a person who has standing to raise that question.
64. Any proceedings that are brought by a person who lacks standing are incompetent. Apart from situations where a statute confers standing on a particular type of person, court proceedings that seek to enforce rights in private law, can only be brought by a person who has a real interest in having the question determined. Case law concerning particular types of causes of action can provide more specific guidance as to what counts as a “real interest” for the purpose of that cause of action. In proceedings to determine a question in public law there is also a requirement that a plaintiff have standing, though different tests can apply to standing to bring proceedings that seek to determine questions in public law than applies in private law.
(Citations omitted)
Cummings was followed by the Full Court in Guirguis v Guirguis and Official Trustee in Bankruptcy (1997) FLC 92-726 (“Guirguis”). In the later decision in O’Neill at [70]–[72], following a review of a number of decisions including Guirguis, the Full Court accepted that any property received by the bankrupt wife would vest in her trustee by virtue of s 58(1)(b) of the Bankruptcy Act, and consequently in light of Cummings and Guirguis,a bankrupt could not then show a sufficient interest in the eventual outcome to give her standing to institute an appeal. This was also followed again recently in Glover & Webster (2021) 64 Fam LR 482.
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 point
87. 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]).
Even though in the present case it is not a right of appeal which is under consideration, the reasoning in Cummings makes clear that even if the wife’s property claim did not vest in the trustee, this does not determine the question of her standing to continue the action. Since any order in her favour will result in “after-acquired property” which vests in the trustee, not the wife, from where does her standing derive? It cannot be her contingent right to any surplus because Cummings, and subsequent authorities, make clear this does not confer standing. Several recent decisions in this Court explain why the wife does not have standing in the circumstances of this case.
In Sloan the wife challenged the standing of a bankrupt husband to pursue a property claim. Gill J said that:
21. It was put for the Wife that Cummings rejected the standing of the bankrupt to bring or prosecute proceedings to add to the vested property. In aid of this the Wife relied upon the operation of s 58 of the Bankruptcy Act, which deals with the vesting of after-acquired property of a bankrupt “as soon as it is acquired by, or devolves on, the bankrupt”. That is, the outcome of the action by the Husband, if successful, will augment the property available for division by the Trustee. It was put that whether or not the claim is personal to the Husband, if the effect of the litigation is to generate after-acquired property then, absent the Trustee in bankruptcy exercising the right to pursue the action, there was no basis on which the bankrupt could.
22. For the Wife it was put that the Husband can pursue relief in relation to superannuation only (on the basis that such would not be available for division amongst the creditors pursuant to s 116 of the Bankruptcy Act).
23. If the Husband’s application was such as it only touched upon matters that would affect the quantum of the estate, in the sense that it would augment what was available pursuant to s 116 of the Bankruptcy Act for the creditors, then the Wife’s argument in relation to standing appears good.
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.
(Emphasis in original)
In Sloan, the bankrupt spouse retained standing because he could claim in respect of superannuation. By the terms of s 90XS of the Act, claims for a splitting or flagging order can only be brought in s 79 proceedings, even though the Court’s powers to do so are conferred by Div 3 of Pt VIIIB of the Act. Although a superannuation interest is to be “treated” as property for the purposes of para (c) and para (ca) of the definitions of a “matrimonial cause”, superannuation interests are not property divisible among creditors, fall outside a bankruptcy administration and the trustee has no interest in the outcome of a superannuation split because orders made under Div 3 cannot result in after acquired property which vests in the trustee. Consequently, the bankrupt spouse had a sufficient interest in the s 79 proceedings to support his standing to continue them.
In Faldyn & Badenoch (No 2) [2022] FedCFamC1A 204 (“Fadyn”) Aldridge J, constituting the Full Court, considered the position of a bankrupt spouse party to proceedings seeking property adjustment orders pursuant to s 79 of the Act and said:
36. The premise in this ground of appeal is that, in the circumstances of this case, the appellant continued to have rights under s 79 of the Act to obtain property settlement orders despite his bankruptcy. In particular, he asserted that he could receive a division of the first respondent’s “concealed assets” because they were not vested assets.
37. In my opinion, both contentions are wrong and misconceived.
His Honour continued:
44. Both s 79(11)(c) and s 79(11)(d) applied in this matter. Therefore, the appellant was not entitled to “make a submission to the court in connection with any vested bankruptcy” without the leave of the court (s 79(12)). Such leave is to be given only in exceptional circumstances (s 79(13)).
45. The phrase “vested bankruptcy property” is a reference to property that has vested in the trustee under the Bankruptcy Act (s 4 of the Act).
46. The effect of these provisions is that unless there is some property of the bankrupt that has not vested in the trustee, the bankrupt party cannot, in the absence of leave, make any submissions at all: he or she has no right to be heard at all.
47. The division of property that takes place in relation to the vested bankruptcy property is the division of that property along with the other property of the non-bankrupt party. The bankrupt has no interest in the outcome of those proceedings. 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.
48. There is no suggestion of any such property here, so that the only division of property that can occur is that between the respondents and the Trustee, on which the appellant, absent leave, has no right to be heard. That includes any issue of “concealed property”.
49. It is implicit in the appellant’s submissions that he has retained a right to seek orders against non-vested property, namely, other property owned by the first respondent or as he particularly put it, her “concealed property”. That is not correct.
50. The bankrupt’s right to seek orders, that is, where proceedings have commenced, which includes seeking property orders by way of a response, is prescribed by s 60(2) of the Bankruptcy Act. The decision to maintain the proceedings is for the trustee in bankruptcy to determine, not the bankrupt.
51. The bankrupt contended that his right to commence proceedings did not vest in the Trustee and that it followed he had a right to pursue the “concealed property”. The first point is correct (see Sloan & Sloan [2018] FamCA 610 (“Sloan”)) but the second is not.
52. The position is analogous to the facts in Cummings v Claremont Petroleum NL (1996) 185 CLR 124. There the appellants sought to appeal against judgments that had been given against them and the question was whether the right to appeal had vested in their trustee in bankruptcy. At 139, Brennan CJ, Gaudron and McHugh JJ said:
In this case, although we would not regard the right to appeal as property of the respective bankrupt appellants, the decision reached by the majority of the Full Court of the Federal Court was correct. The bankruptcy of the appellants leaves them without such an interest in the judgment against them as would support their institution of an appeal in their own names.
53. It makes no difference if the proposed appeal by the bankrupt would lead to a surplus in the bankrupt estate (at 138).
…
57. Here there is no property in which the bankrupt has retained an interest and his right under s 79 is entirely devoid of content.
Aldridge J accepted as correct the proposition that the husband’s right to claim did not vest in his trustee. The reasoning in Sloan and Faldyn make clear why the wife had no standing in relation to her property claim after she became bankrupt. As Aldridge J points out, in the absence of non-vested property retained by the bankrupt or at least non-divisible property that can be retained by the bankrupt pursuant to s 116 of the Bankruptcy Act, such as a superannuation interest, the bankrupt can have no standing.
In my view the wife, in the circumstances of this case, had no standing to continue her property claim once she became bankrupt. There is no vested bankruptcy property or property such as superannuation or other property not divisible among the wife’s creditors. A contingent surplus from any property division would not confer standing upon her in relation to her property claim. As already noted, the trustee did not press the wife’s claim for the benefit of creditors, despite determining to pursue it under s 60 of the Bankruptcy Act, nor did they rely upon s 134(1)(j) as a power to pursue the action. I note this was the power expressly referred to by the High Court in Cummings as a basis for the trustee to continue an action and by reason of s 35 of the Bankruptcy Act, this Court has jurisdiction in bankruptcy “in relation to any matter connected with, or arising out of, the bankruptcy” of the wife. The legal representation of the wife did not purport to appear also for the trustee who was separately represented. For this reason, the wife’s property claim should be dismissed.
However, there is the wife’s maintenance claim. This is a separate matrimonial cause (para (ca) of the definition) and raises different issues. Little was said about it in submissions, except in the context of s 75(2) factors, for the purposes of the property claim. No submissions were directed to whether the existence of the maintenance claim had any impact upon the wife’s standing.
The Bankruptcy Act distinguishes between income and property, in the form of capital or otherwise. Division 4B of Pt VI provides for a code to allow a bankrupt to retain income subject to the trustee assessing the bankrupt for a contribution of such income towards unsecured creditors.
In Re Gillies; Ex parte Official Trustee in Bankruptcy v Gillies (1993) 42 FCR 571 (“Gillies”) French J (as he then was) held that after acquired income of a bankrupt does not vest in the trustee. This decision has been followed many times. Section 139L of the Bankruptcy Act specifies that “income”, in relation to a bankrupt, “has its ordinary meaning, subject to the following qualifications”. None of the qualifications are presently relevant. In Re Hawkins, Ex Parte Worrell (1996) 71 FCR 371 (“Re Hawkins”), Spender J followed Gillies in considering a maintenance agreement entered into between spouses which provided for four payments of $50,000, totalling $200,000. After two payments the wife was declared bankrupt. Spender J pointed out at 377 that “'[i]ncome, according to ordinary usages and concepts' in s 139L of the Act does not necessarily require recurrence or periodicity”, citing Commissioner of Taxation of the Commonwealth of Australia v Myer Emporium Ltd (1987) 163 CLR 199 at 218, although recurrence may be a feature of a regular payment which indicates its character as income. But Spender J pointed out “[t]he character of maintenance is money for the provision of current needs. It is conventionally paid periodically while the need for it exists” (at 377). He concluded that “[i]t is consistent with 'the common law of bankruptcy' that an entitlement to payment on account of maintenance should be treated as income” (at 377), by which he appeared to mean income “in its ordinary meaning”.
The question therefore is whether weekly spouse maintenance payments of $200 to the wife ordered pursuant to s 74 of the Act should be characterised as income which does not vest in the trustee. In my view they are properly characterised as income, consistently with Re Hawkins. Since this income does not vest in the trustee, I see no basis to conclude the wife’s maintenance claim could be property in the form of a chose in action which vested in the trustee. The maintenance claim could not enhance the bankrupt estate. Furthermore, unlike the superannuation claim in Sloan, the wife’s maintenance claim is a separate matrimonial cause which can be brought separately to proceedings under s 79, in other words, it is not part of the one exercise of discretion altering property interests, even though it is brought under Pt VIII and requires consideration of s 75(2) factors, as does the property claim. However, it falls outside the purview of the trustee, analogously to the claim to a superannuation split as considered in Sloan. For this reason, the maintenance claim gives the wife a sufficient interest in the outcome of the proceedings to sustain standing only in relation to that claim.
I conclude that, after her bankruptcy, the wife herself had no standing to continue the property claim in the absence of non-vested property or other property not divisible among creditors, but retained standing to pursue her maintenance claim. I note that it has long been thought there is no difficulty in principle, in an appropriate case, in according standing concurrently to a bankrupt and to the bankrupt’s trustee in bankruptcy (United Telephone Co v Bassano (1886) 31 Ch D 630; McCallum v FCT (1997) 75 FCR 458 at 475).
APPROPRIATE, JUST AND EQUITABLE OUTCOME
In light of the fact that the final hearing took place over four days, and the question of contributions was the subject of evidence and argument, and against the possibility that my conclusions about standing are incorrect, I will express my view about application of the provisions of s 79 of the Act.
The High Court in Stanford & Stanford (2012) 247 CLR 108 (“Stanford”) made clear that in making any property adjustment the Court must be separately satisfied pursuant to s 79(2) that it would be just and equitable to make the order, as well as taking account of the matters specified in s 79(4). The High Court commented on the meaning of “just and equitable” as follows:
36. The expression "just and equitable" is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.
(footnotes omitted)
Stanford confirmed:
(1)that the question of whether it is just and equitable to make an order “is not to be answered by assuming that the parties’ rights or interests in marital property are or should be different from those that then exist”, in other words, at the time when the discretion may be exercised (at [39]); and
(2)“[t]o conclude that making an order is ‘just and equitable’ only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act” (at [40]).
Unlike many cases which come before this Court it was not common ground that any property adjustment would be just and equitable. The Court is required therefore to form a view as to whether any property adjustment would be just and equitable as well as appropriate. The husband claims no adjustment of property interests, access to his own property at Suburb J, and the return of some personal items. The wife’s central contention is that she should receive a large proportion of the husband’s assets to allow her to pay her creditors, be released from bankruptcy and receive a surplus. I am satisfied that s 79(2) could not be satisfied in this case in making the orders sought by the wife. This conclusion becomes almost self-evident when the characteristics of the property pool and the nature of the source of the wife’s debts are examined.
As noted, the property pool is comprised entirely of assets of the husband. The two parcels of real estate, Suburb J and Suburb SS, were brought to the marriage by the husband. He alone has serviced the liabilities secured against those properties. There was no dispute that the wife’s creditors are the husband himself, and third parties who enjoy the benefit of costs orders in their favour against the wife and her own previous lawyers who acted for her in respect of applications which failed against the husband, and the third parties. None of these debts can be considered joint liabilities. They were all incurred by the wife after separation, pursuing aspects of failed litigation in these proceedings against the husband and those third parties. No tenable basis has been put forward by the wife that the husband’s assets should be made available to the trustee to discharge some or all of such debts.
In those circumstances, I am not satisfied that any property adjustment in favour of the wife could satisfy s 79(2) or would be appropriate within s 79(1).
Having reached that conclusion, it is unnecessary to form a view about the justice and equity of any proposed outcome by reference to the matters in s 79(4), in particular contributions. However, in case I am wrong in my conclusion about s 79(2), I record my view that an assessment of contributions would lead to no different outcome, for the following reasons.
Assumptions about equality of contributions should not be made, and there is no assumption that equal division is the starting point for any exercise of the Court’s discretion (Mallet v Mallet (1984) 156 CLR 605 at 610, 613, 625, 635–636, and 646–647 (“Mallet”)). Contributions are to be assessed on an overall basis (Norman & Norman [2010] FamCAFC 66; Kowalski and Kowalski (1993) FLC 92-342; G and G (2000) FLC 93-043), and holistically (Jabour & Jabour (2019) FLC 93-898 at [31]–[87]; Horrigan & Horrigan [2020] FamCAFC 25 at [35]–[49] (“Horrigan”); Barnell & Barnell (2020) FLC 93-961 at [30]–[43]; Benson & Drury (2020) FLC 93-998 at [35]).
In Dickons v Dickons (2012) 50 Fam LR 244 at [21] the Full Court summarised the correct approach as follows:
21. Those same principles can be expressed as saying that the requirements of the section are met by approaching the assessment of contributions holistically and by analysing the nature, form, characteristics and origin of the property currently comprising that to which s 79 applies, and, in turn, analysing the nature, form and extent of the contributions (of all types) contemplated by s 79. That task is also undertaken by reference to the nature and form of the particular marriage partnership manifested by the particular circumstances of this particular marriage. Is it, for example, a relationship, as Deane J put it in Mallett at 640-641 “...where the parties have adopted the attitude that their marriage constituted a practical union of both lives and property...” or is it, for example, a union where parties lived very separate domestic and financial lives?
The length of the marriage is a relevant matter. In Horrigan, the marriage lasted eight years. The Full Court said “[i]nevitably the length of the relationship under consideration informs the holistic assessment of contributions” (at [48]).
Where the marriage is relatively short, initial contributions can take on a critical importance. In Anson & Meek (2017) FLC 93-816 at [181] (adopted by the Full Court in Grunseth & Wighton (2022) FLC 94-099 at [73]), the Full Court (Aldridge and Cleary JJ) explained:
181. If the point is that, where there is a short marriage, where there are no children and where the parties’ contributions to their assets and to the welfare of the family from the commencement of the relationship to the time of the hearing is equal, any disparity in initial financial contributions is of critical importance in determining the overall contributions of the parties, then such a position is easily arrived at by the application of principle alone.
The parties were married for some seven years. The assets presently in the matrimonial pool were all brought to the relationship by the husband. The husband made the only financial contributions both initially and during the relationship. The wife made contributions as homemaker, and carer of the children. I accept the husband made some contributions of a similar kind, but the wife made the greater contributions in this regard. An attitude that the marriage constituted a practical union of both lives and property appeared to be absent (Mallet at 640–641). The wife claimed that she was subjected to coercive control or family violence which made her contributions significantly more arduous. As noted, I found her generally to be an unsatisfactory witness. Here I note in particular that she made allegations in her trial affidavit about abuse or violence which made no appearance in an affidavit sworn in 2012 just after separation. I treat her evidence in this regard with caution.
The parties have been separated since March 2012, more than ten years, a period longer than the marriage. In that time the wife has been the primary carer of the children, and there was no dispute that the husband has not parented the children since 2017. The wife has continued to be a homemaker for the children. I have considered these contributions and accept they are not to be treated as less important or valuable than other contributions (Fields & Smith (2015) FLC 93-638 at [187]).
The wife and the children have continued to live in Suburb J, while the husband has serviced the mortgage secured against it, as well as paid the other expenses associated with the property, although the wife claimed he stopped paying gas and electricity in 2015. The wife has paid no rent. The wife’s occupation of the former matrimonial home should be considered to be an indirect contribution by the husband, being the spouse not in occupation (Meadows & Meadows (No. 3) [2020] FamCAFC 124 at [152]).
The husband has the parcels of real estate, some superannuation but works only part time. The wife has no assets or superannuation, and care of the children, two of whom have special needs. She has limited English and diminished prospects of employment. I infer she can look to Mr P for support to some degree. In her affidavit she conceded she looks to him for money to fund daily expenses.
As already pointed out above, an interest in a contingent surplus in her bankruptcy is not sufficient to give the wife standing in relation to the property claim. However, a contingent surplus could be taken into account under s 79(4)(e) (s 75(2)(o) of the Act). Here the logical problem is that any contingent surplus could only result if an order was made as the wife proposes. After a separation of more than a decade, I am not satisfied that the wife’s future needs could militate in favour of any adjustment in her favour which could lead to a surplus in her bankruptcy.
For the purposes of s 79(4), on an overall holistic assessment of contributions, I am not persuaded the wife’s claim to a division of assets of 60 per cent in her favour finds any support in the evidence, nor am I persuaded any percentage division in her favour is supported by the evidence.
I am unable to conclude there is any appropriate division of property which would result in a surplus in the hands of the wife, taking account of the size and nature of her debts. Even if a modest percentage adjustment were assumed in the wife’s favour, any order dividing the husband’s property in her favour could not place any property in her hands. It would all pass to her trustee for the benefit of creditors, one of whom is the husband himself. I repeat the matters in [101] above. The only arguable benefit to the wife would be that her creditors receive a partial dividend. But this would bestow no tangible benefit upon the wife herself because, in any event, upon discharge from bankruptcy she will be released from all debts proved in the bankruptcy, including debts owed to the husband, whether her creditors receive something or nothing. Again I am not persuaded it would be appropriate to divide the husband’s assets to deliver to him a partial dividend for his provable debts in the wife’s bankruptcy. I am unable to conclude in those circumstances that it would be appropriate or just and equitable to make any order adjusting property.
Accordingly, orders should be made as the husband proposes for possession of Suburb J. The wife will have to find alternative accommodation so 90 days should be allowed for this to happen.
The husband also sought orders concerning the contents of Suburb J. I decline to make such orders. There was no up to date evidence of what is actually located in the premises and the father has not been present since an inspection in May 2022. It is not possible for the Court to form a clear view about what personal items and furniture remain in the premises or what may have been added or removed by the wife in the last decade, nor determine ownership of any personal items.
SPOUSE MAINTENANCE
I have already referred to the wife’s spouse maintenance claim for $200 per week for two years.
I am satisfied that the wife is unable to support herself adequately because she is bankrupt and has care of the children of the marriage. I am also satisfied the husband is reasonably able to maintain the wife to the extent of $200 each week for two years, bearing in mind his profession as a medical practitioner. I consider it appropriate to order the husband to pay $200 each week for two years.
COSTS
The husband has sought costs. These reasons make clear that in my view the wife’s application for property adjustment, if not spousal maintenance, was misconceived. It is an example of the very type of situation which bankruptcy laws have striven to avoid. In other words, it has caused one of the wife’s creditors, the husband, material additional costs and exposed the bankrupt estate to potential additional liability. In light of her bankruptcy, it may be doubted that there is any practical purpose in a costs order against the wife. However, I will make provision for an application for costs if any party chooses to pursue them.
I certify that the preceding one hundred and nineteen (119) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 3 November 2023
SCHEDULE 1 – DOCUMENTS TENDERED AND RECEIVED INTO EVIDENCE
Exhibit Label Document Tendered by 1 Document setting out objections ruled on regarding the husband’s material Husband 2 Document setting out objections and rulings regarding wife’s material Wife 3 Husband’s proposed minute of order Husband 4 Insurance policy documents from ZZ Insurance Wife 5 Financial statements for the KK Pty Ltd for the years 2018, 2019, 2020, 2021 Wife 6 Insurance policy documents from AE Insurance Wife 7 Handwritten documents Husband 8 Medical documents from Dr AH relating to the wife Husband 9 Statement of Mr B Masih Husband 10 Letter from YY Lawyers dated 19 June 2015, limited to the first and second paragraphs Husband 11 Schedule of debts noting that all figures are agreed except the figure $152,095.07 Husband 12 Letter from the husband’s solicitor to the wife’s solicitors dated 20 April 2023 Husband 13 Notes of Dr F pertaining to the mother dated 24 June 2003 Husband 14 Joint balance sheet Husband 15 Account balance summary period 23 October 2010 until 22 November 2010 Husband 16 Letter from husband’s solicitor to wife’s solicitor dated 26 April 2023 Husband 17 Bundle of transcripts from 29 May 2018, 30 May 2018, 31 May 2018 and bundles of costs order judgments dated 6 July 2015, 12 May 2021 and 5 August 2021 Husband 18 Affidavit of Ms El Saeid filed 3 April 2017 Husband 19 Affidavit of Ms El Saeid filed 9 May 2018 Husband 20 Affidavit of Ms El Saeid sworn 12 July 2012 Husband 21 Wife’s minute of proposed orders Wife 22 Schedule of agreed historical valuations Husband
ANNEXURE “A” – HUSBAND’S PROPOSED FINAL MINUTE OF ORDERS
1.That the orders sought by the wife be dismissed.
2. In the event the Court makes any order for payment from the Husband to the Wife all sums payable to the Husband pursuant to costs order made in the schedule “A” hereto be paid to the Husband from any such sum and set off against the monies that would otherwise be payable to the Wife.
3. That on or before the expiration of 56 days from the date of these orders the Husband have exclusive occupancy of the property [I Street], [Suburb J] (“the [Suburb J] Property”).
4. That on or before the expiration of 56 days from the date of these orders the Wife vacate the [Suburb J] [P]roperty.
5. That on or before the expiration of 56 days from the date of these orders the Wife deliver all keys to the [Suburb J] Property (including keys to the basement area and boatshed) along with the remote-control devices to open the garage doors to the offices of [Z Real Estate] of [AM Street], [Suburb XX].
6. The Wife is restrained from removing any fixture, furniture or item of property from the [Suburb J] property including but not limited to the items listed in annexure “B” herein.
7. The Wife be at liberty to remove from the [Suburb J] property clothing and personal effects of the Wife, [Mr P], [R], [Q] or the child of the Wife and [Mr P] and the items listed in Annexure “C” hereto.
8. That 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.
9. That within 14 days of the Wife’s vacation of the property the Wife provide to the Husband’s solicitor her new residential address.
Annexure “A”
1. Cost order made by [a] Senior Judicial Registrar on 22 April 2022 in the sum of $1,560.
2. Cost order made by Justice Harper on 20 July 2022 in the sum of $15,000.
3. Cost order made by [a] Judicial Registrar on 10 February 2023 in the sum of $3,250.
4. Cost order made by [a] Judicial Registrar on 1 March 2023 in the sum of $1,199.21
Annexure “B” – List of items that the Wife can remove from the [Suburb J Property]
1. All beds including the bed situated in the bottom level bedroom.
2. All televisions except the large […] TV.
3. The three large pieces of […] furniture in the rumpus room.
4. The white fridge in the rumpus room (not the [fridge] installed in the kitchen).
5. 1 microwave.
6. 1 vacuum cleaner.
7. The treadmill.
8. All gym equipment.
9. The […] lounge in the living room and […] sofa in the rumpus room.
10. All laptop computers.
11. 1 heater.
12. 4 sets of linen/bedding ie., 4 sets of sheets, blankets and doona.
13. 4 towels.
14. 6 plates, 6 cups, 6 saucepans or frypans.
Annexure “C”
1. Large […] dining table and 12 accompanying chairs.
2. […] coffee table in living room.
3. Large […] chair in the foyer.
4. Washing machine and dryer in laundry.
5. The […] dresser, mirror and chest of drawer.
6. The large brown chest of drawers.
7. The large brown timber tallboy.
8. The […] refrigerator in kitchen.
9. The desks situated in the former study/office.
10. The furniture items and pictures formerly situated in the study including large book cupboard drawers, desk and chair.
11. The 3 […] stools in the kitchen.
12. The satellite dish and antennas situated on the roof.
(per the original)
ANNEXURE “B” – WIFE’S PROPOSED FINAL MINUTE OF ORDERS
1. That the Husband pays to the Wife withing 28 days a sum of three million three hundred and sixty thousand dollars ($3,360,000).
2. That in the event that the sum referred to in Order 1 above is not paid within 28 days, the Husband pays to the Wife interests on the sum as prescribed by the Family Law Act 1975 and calculated on a daily basis until such payment is received by the Wife.
3. If the sum referred to at Order 1 above is not paid withing the 28 days, then the Husband do all things and sign all documents necessary to cause the real property located at [I Street], [Suburb J] NSW be sold on the terms as follows:
a.That the parties by agreement appoint a sales agent nominated by Real Estate Institute of New South Wales to conduct the sale of [Suburb J Property];
b. That a public auction to take place by no later than 12 weeks after the date of these orders;
c. That the reserve price be $5,100,000; and
d. That the Wife be paid from the sale proceeds of the [Suburb J] property the sum referred to in Order 1 above.
4. That the parties otherwise be declared respectively the owner of all property in their names, possession, or control.
5. That the Husband pays spousal maintenance to the Wife in the sum of $200 per week for 2 years from the date of this order.
6. That the parties will do all act and sign all documents to give effect to the above Orders.
ANNEXURE “C” – WIFE’S SCHEDULE OF DEBTS PROVABLE IN BANKRUTPCY
Order Amount Interest on order to Date of Bankruptcy Amount of order plus interest Total 24 June 2015 Registrar $400 $186.23 $586.23 28 January 2020 Justice Loughnan $1,320 $153.33 $1,473.33 12 May 2021 Justice Harper $16,674 $571.26 $17,245.26 5 August 2021 Justice Harper $160,000 $3,208.77 $163,208.77 31 August 2021 Senior Registrar $4,000 $62.84 $4,062.84 21 January 2021 (Additional Respondents) Justice Loughnan $1,320 $153.33 $1,473.33 12 May 2021 (Additional Respondents) Justice Harper $175,012.72 $5,995 $181,007.72 $368,057.48 Order in favour of Mr JJ – Order of Justice Aldridge 9 June 2015 refers to Supreme Court Assessment $324,244.87 $152,095.07 $476,339.94 $476,339.94 Amounts claimed in Itemised Costs Accounts Order 6 July 2015 (Husband) – Justice Aldridge (Husband) $47,708.87 Order 6 July 2015 (Husband) – Justice Aldridge (Additional Respondents) $23,522.92 Order 5 August 2021 – Justice Harper (Husband) $22,749.25 $146,368.61 Add proof of debt amount of YY Lawyers $1,166,915.28 less disbursements in proof of debt of Mr JJ amount $321,034.52 $845,880.76 Amount claimed by MR P $120,000 Total: $2,036,646.79
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