Matech & Matech (No 2)
[2018] FamCA 1029
•7 December 2018
FAMILY COURT OF AUSTRALIA
| MATECH & MATECH (NO. 2) | [2018] FamCA 1029 |
| FAMILY LAW – PROPERTY – interim property – whether court has jurisdiction as a result of husband’s bankruptcy – Court finds jurisdiction enlivened – whether to set aside or vary orders under Rule 17.02 of the Family Law Rules 2004. |
| Family Law Act 1975 (Cth) Bankruptcy Act 1966 (Cth) |
| Matech & Matech [2018] FamCA 270 |
| APPLICANT: | Ms Matech |
| RESPONDENT: | Mr Matech |
| FILE NUMBER: | BRC | 2432 | of | 2018 |
| DATE DELIVERED: | 7 December 2018 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Baumann J |
| HEARING DATE: | 19 July 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr P Hackett |
| SOLICITOR FOR THE APPLICANT: | Evans & Company Family Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr C Coulon |
| SOLICITOR FOR THE RESPONDENT: | Murdoch Lawyers |
IT IS NOTED that publication of this judgment by this Court under the pseudonym Matech & Matech has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 2432 of 2018
| Ms Matech |
Applicant
And
| Mr Matech |
Respondent
REASONS FOR JUDGMENT
Introduction
On 3 April 2018, for reasons given orally and subsequently published (see Matech & Matech [2018] FamCA 270) the Court made orders (“the said orders) on an application by the wife, Ms Matech, heard in the absence of an appearance by the husband, Mr Matech, who was overseas at the time. The husband had, as an unrepresented litigant, filed material which the Court had considered.
The Reasons delivered identified that the Court regarded the application by the wife to be for enforcement of a financial agreement between the parties dated 26 July 2005 (“the said financial agreement”) which the wife says is a binding financial agreement. Under s.90KA of the Family Law Act 1975 (“the Family Law Act”) the Court “may order that the agreement, or a specified part of the agreement, be enforced as if it were an order of the Court”.
When the said orders were made on 3 April 2018, the Reasons make clear they were made for a short period, on the expectation that the husband would return to Australia and expect to be heard. The proceedings were initially adjourned to 16 May 2018 to allow that to occur.
On 1 May 2018 the husband filed an Application in a Case seeking, inter alia, a stay of the said orders pending determination of whether the Court has jurisdiction. Having raised the issue, arguments as to jurisdiction were advanced on 19 July 2018 by Mr Coulson of Counsel for the husband and Mr Hackett of Counsel for the wife. Before dealing with other issues advanced in the now competing applications, the issue of jurisdiction needs to be determined. If affirmed, the husband seeks other orders, as does the wife.
The husband’s argument on jurisdiction
The context to the husband’s argument is that some years after the said financial agreement was entered into, and whilst the parties were in an intact marriage, the husband became bankrupt on 6 November 2012. The husband’s bankruptcy was discharged by effluxion of time on 5 November 2015 – some two years before the parties separated on 10 December 2017 after a marriage of 12 years.
The said financial agreement was entered into before the marriage, such that s.90B of the Act applies. Section 90DA(1) to (5) provides:
(1)A financial agreement that is binding on the parties to the agreement, to the extent to which it deals with how, in the event of the breakdown of the marriage, all or any of the property or financial resources of either or both of the spouse parties:
(a)at the time when the agreement is made; or
(b)at a later time and before the termination of the marriage by divorce;
are to be dealt with, is of no force or effect until a separation declaration is made.
Note:Before the separation declaration is made, the financial agreement will be of force and effect in relation to the other matters it deals with (except for any matters covered by section 90DB).
1A)Subsection (1) ceases to apply if:
(a)the spouse parties divorce; or
(b)either or both of them die.
Note:This means the financial agreement will be of force and effect in relation to the matters mentioned in subsection (1) from the time of the divorce or death(s).
(2)A separation declaration is a written declaration that complies with subsections (3) and (4), and may be included in the financial agreement to which it relates.
(3)The declaration must be signed by at least one of the spouse parties to the financial agreement.
(4)The declaration must state that:
(a)the spouse parties have separated and are living separately and apart at the declaration time; and
(b)in the opinion of the spouse parties making the declaration, there is no reasonable likelihood of cohabitation being resumed.
(5)In this section:
‘declaration time’ means the time when the declaration was signed by a spouse party to the financial agreement.
‘separated’ has the same meaning as in section 48 (as affected by section 49).
The husband’s argument contends that:
a)the obligations to pay monies or transfer property under the said financial agreement give rise to a debt provable in bankruptcy in terms of s.82 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) which provides as follows:
(1)Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
(1A)Without limiting subsection (1), debts referred to in that subsection include a debt consisting of all or part of a sum that became payable by the bankrupt under a maintenance agreement or maintenance order before the date of the bankruptcy.
(2)Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy.
(3)Penalties or fines imposed by a court in respect of an offence against a law, whether a law of the Commonwealth or not, are not provable in bankruptcy.
(3AA)An amount payable under an order made under section 1317G of the Corporations Act 2001 is not provable in bankruptcy.
(3AB)A debt incurred under any of the following is not provable in bankruptcy:
(a)Part 4-1 of the Higher Education Support Act 2003 (HELP debts);
(aa)Part 2AA.3 of the Social Security Act 1991 (student start-up loan debts);
(ab)Division 3 or 4 of Part 2 of the Student Assistance Act 1973 (ABSTUDY student start-up loan debts);
(b)Part 3.1 of the Trade Support Loans Act 2014 (trade support loan debts).
(3A)An amount payable under an order made under a proceeds of crime law is not provable in bankruptcy.
(3B)A debt is not provable in a bankruptcy in so far as the debt consists of interest accruing, in respect of a period commencing on or after the date of the bankruptcy, on a debt that is provable in the bankruptcy.
(4)The trustee shall make an estimate of the value of a debt or liability provable in the bankruptcy which, by reason of its being subject to a contingency, or for any other reason, does not bear a certain value.
(5)A person aggrieved by an estimate so made may appeal to the Court not later than 28 days after the day on which the person is notified of the estimate.
(6)If the Court finds that the value of the debt or liability cannot be fairly estimated, the debt or liability shall be deemed not to be provable in the bankruptcy.
(7)If the Court finds that the value of the debt or liability can be fairly estimated, the Court shall assess the value in such manner as it thinks proper.
(8)In this section, liability includes:
(a)compensation for work or labour done;
(b)an obligation or possible obligation to pay money or money's worth on the breach of an express or implied covenant, contract, agreement or undertaking, whether or not the breach occurs, is likely to occur or is capable of occurring, before the discharge of the bankrupt; and
(c)an express or implied engagement, agreement or undertaking, to pay, or capable of resulting in the payment of, money or money's worth, whether the payment is:
(i)in respect of amount--fixed or unliquidated;
(ii)in respect of time--present or future, or certain or dependent on a contingency; or
(iii)in respect of the manner of valuation--capable of being ascertained by fixed rules or only as matter of opinion.
b)this is so, because the contingent debt or liability attached to the husband at the date of bankruptcy (s.82(8)(c)(ii)); and
c)by operation of s.153 of the Bankruptcy Act this contingent liability is released and all the wife’s rights merged in the bankruptcy, to a right to lodge a proof of debt. The husband contends that the liability is discharged.
Conclusion on jurisdiction
I am not persuaded by the creative and forceful submissions of Counsel for the husband because:
a)in my view, at the date of bankruptcy, and as the parties were in an intact relationship where neither divorce nor separation had occurred, the wife’s rights were contingent. There is no evidence that the husband asserted, to his Trustee in Bankruptcy, that he had contingent liabilities to the wife under the financial agreement and therefore the Trustee’s obligations under s.82(4) were not activated;
b)in any event, the contingent liability at the date of the act of bankruptcy was incapable of proper estimation. This is because, the estimate could only be made when the capacity to enforce arose – namely post separation and after a separation declaration required by s.90DA of the Family Law Act. In my view, post physical separation on 10 December 2017, the husband’s actions in signing and producing a “Termination Agreement” in furtherance of his offers to vary the terms of the property division (noting as well that he also arranged for consent orders to be prepared), combine, in my view, to operate as a “separation declaration”. The requirements of s.90DA(4) were satisfied – noting that the Family Law Act does not prescribe the form of a separation declaration or, even, that the document must be a “declaration” sworn in front of a qualified witness. I was directed to no authority to assist me in this regard, and I adopt a literal interpretation of the provision; and
c)I am persuaded by the arguments of Counsel for the wife, effectively that to give s.90DA its proper meaning and effect, the financial agreement had no force and effect during the husband’s bankruptcy and, as a consequence, the discharge provisions in the Bankruptcy Act did not operate.
The Family Law Act does not prescribe that a binding financial agreement is terminated by bankruptcy. The only grounds for termination are prescribed by s.90J.
Section 90K sets out the circumstances in which the Court may set aside a financial agreement, namely:
The question whether a financial agreement or a termination agreement is valid, enforceable or effective is to be determined by the court according to the principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts, and, in proceedings relating to such an agreement, the court:
(a)subject to paragraph (b), has the same powers, may grant the same remedies and must have the same regard to the rights of third parties as the High Court has, may grant and is required to have in proceedings in connection with contracts or purported contracts, being proceedings in which the High Court has original jurisdiction; and
(b)has power to make an order for the payment, by a party to the agreement to another party to the agreement, of interest on an amount payable under the agreement, from the time when the amount became or becomes due and payable, at a rate not exceeding the rate prescribed by the applicable Rules of Court; and
(c)in addition to, or instead of, making an order or orders under paragraph (a) or (b), may order that the agreement, or a specified part of the agreement, be enforced as if it were an order of the court.
Neither party has made an application to set aside the financial agreement and the husband has not asserted that the financial agreement did not comply with the requirements necessary to make it binding.
For the reasons set out, I am satisfied the Court has the jurisdiction to consider the enforcement application of the wife.
If the Court has jurisdiction, should the order of 3 April 2018 be set aside?
Counsel for the husband submitted that if the Court affirms jurisdiction (which it does), the orders should be set aside pursuant to Rule 1.11 of the Family Law Rules 2004 and that the wife’s application filed 1 March 2018 should be dismissed.
Such an application is best considered not under Rule 1.11, but Rule 17.02(a) which provides the Court may at any time vary or set aside an order if “it was made in the absence of a party”. Although the husband had filed a Response, in the circumstances of the hearing on 3 April 2018, I regard it as fair to find the orders were made in the absence of the husband. As a result, the discretion to vary or set side is enlivened.
In respect of the orders made, nothing in the submissions or the further evidence of the husband persuades me that the interim orders to:
a)permit the wife to have sole use and occupation of the B Street unit (order 1); and
b)require the husband to pay the outgoings on the unit (order 2); and
c)require the husband to maintain payments on the wife’s motor vehicle (order 3); and
d)the injunctions, broad as they are, set out in order 4(a), (b)(i) and (c). I deal below with the injunctions made and set out in order 4(b)(ii) and (iii); and
e)the discovery requirements set out in order 5,
should at this time be set aside or varied.
In my view, the discretion to vary or set aside:
a)the injunctions in order 4(b)(ii) and (iii); and
b)the payment of $100,000 under order 6,
both require more details reasons, which follow.
The husband’s evidence and submissions
At the time the said orders were made on 3 April 2018, they were made to ensure that, until further submissions or evidence (including from the husband via the further discovery ordered), the wife’s interests under the financial agreement which she sought to enforce, were protected.
The husband’s financial arrangements have a level of complexity. I accept, as a property developer, he does “deals” and the strategies associated with buying, selling and obtaining building and development approvals take time. I also accept that momentum in these activities needs to be preserved.
The further evidence of the wife and her solicitor Mr Brandon reveal, on its face, a either delay by or refusal of the husband, since the orders were made, to make full and complete discovery so that both the wife and the Court is left with some concerns about what capacity the husband has to pay the sum ordered of $100,000 to the wife and whether the injunctions at order 5(b)(ii) and (iii) do have the effect of unreasonable restraint on the husband, putting at risk, he says, the operation of his business. I accept other parties, it is asserted, are involved in the business empire – including the husband’s daughter and third party lenders.
The husband says, for example, the inability to deal with the G Street property, places his whole business enterprise at risk.
The history of the parties’ marriage suggests that the wife was not intimately involved in day to day business dealings. At first blush, this is at least demonstrated where the husband’s bankruptcy in 2012 did not cause the wife to also seek the protection of the laws of bankruptcy. As a result of her lack of knowledge; her mistrust of the husband and what she asserts are some unreasonable threats by the husband to take actions affecting her rights under the financial agreement, it is entirely reasonable for the wife to seek to ensure her ultimate position and entitlements are not the subject of unilateral actions by the husband. That, in the past, the husband seemed to exercise unfettered control, is not a reason, when the marriage has broken down, to allow that to continue.
At the same time, a proper balance, in a business environment where agility is likely to be a benefit, must be struck between the needs for the wife to fairly protect her entitlements and the husband’s right to manage the business and the substantial liabilities which exist on his material.
On this basis, I am persuaded that the order injuncting the husband (although he may do so on 60 days’ notice to the wife) from “dealing with any item of property including by sale, transfer, assignment or encumbrance” (order 4(b)(ii)) or the restriction of bank account transactions to a single $5,000 payment or multiple transactions exceeding $15,000 in 24 hours (order 4(b)(iii)) are unworkable.
On the husband’s current (yet untested evidence), it is not clear what source is available for the payment to the wife ordered of $100,000.
In the circumstances, subject to further submissions, the Court’s intention is to either vary or set aside those orders pursuant to Rule 17.02(1)(a), but to replace the injunctive orders with order which might be more workable.
The Court is aware that listed today for consideration is an Application in a Case filed on 1 November 2018 by the wife seeking that she be released from her Undertaking provided not to enforce the said orders, and now seeks to have the Court make orders, by way of enforcement, sought in her Response to the Application in a Case filed 5 July 2018. I am, at the time of preparation of these Reasons, unaware whether the husband (who is now unrepresented) has filed a Response to the Applications in a Case.
The Court proposes to give the parties an opportunity today, before dealing with the wife’s Application in a Case, to consider these Reasons. It may be possible to negotiate a substitute order that strikes a balance between the wife’s proper claim for enforcement and the husband’s desire to ensure his business can be the source of each party’s just entitlements.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Baumann delivered on 7 December 2018
Associate:
Date: 7 December 2018