McCormack and McCormack and Anor and Peakes and Peakes and Anor

[2009] FMCAfam 1250

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MCCORMACK & MCCORMACK & ANOR  and PEAKES & PEAKES & ANOR [2009] FMCAfam 1250

FAMILY LAW – Matrimonial cause – application for approval of consent orders that wife purchase husband’s interest in matrimonial home form husband’s trustee in bankruptcy – no intention of the husband and wife to separate – refusal to make orders sought.

Family Law Act 1975, s.79

Huen v The Official Receiver (2008) FCAFC 117

Applicant: MS MCCORMACK

First Respondent: MR MCCORMACK

Second Respondent: MR MARCHBANKS

File Number: BRC 7825 of 2009

Applicant: MS PEAKES

First Respondent: MR PEAKES

Second Respondent: MR MARCHBANKS

File Number: BRC 7829 of 2009

Judgment of: Wilson FM

Hearing date: 9 November 2009

Date of Last Submission: 9 November 2009

Delivered at: Brisbane

Delivered on: 9 November 2009

REPRESENTATION

Counsel for the Applicant: N/A

Solicitors for the Applicant: Cusack Galvin & James

Counsel for the First Respondent: N/A

Solicitors for the First Respondent: Cusack Galvin & James

Counsel for the Second Respondent: N/A

Solicitors for the Second Respondent: O’Loughlins Lawyers

And

Counsel for the Applicant: N/A

Solicitors for the Applicant: Cusack Galvin & James

Counsel for the First Respondent: N/A

Solicitors for the First Respondent: Cusack Galvin & James

Counsel for the Second Respondent: N/A

Solicitors for the Second Respondent: O’Loughlins Lawyers

ORDERS

1. That the Initiating Application (Family Law) filed 3 September 2008 be dismissed.

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

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRC 7825 of 2009

MS MCCORMACK

Applicant

And

MR MCCORMACK

First Respondent

MR MARCHBANKS

Second Respondent

BRC 7829 of 2009

MS PEAKES

Applicant

And

MR PEAKES

First Respondent

MR MARCHBANKS

Second Respondent

REASONS FOR JUDGMENT

1. In each of these matters the applicant seeks an order purportedly pursuant to s.79 of the Family Law Act1975. That section applies to ‘property settlement proceedings’. That, in turn, is a defined term in section 4 of the Family Law Act. It means:

   Proceedings with respect to:

   (a) the property of the parties to marriage or either of them, or

   (b) the vested bankruptcy property in relation to a bankrupt party to a marriage.

2. In the present case, each of the first respondents, being the husband to each marriage, is bankrupt.  The second respondent is their trustee in bankruptcy, in each case.  The proceedings are brought with respect to the vested bankruptcy property being each husband’s interest in the former matrimonial home.  It, therefore, falls within the definition of ‘property settlement proceedings’.  However, for the court to have jurisdiction in the matter, it is also necessary for the proceedings to satisfy the definition of ‘matrimonial cause’, a term also defined in the Act. 

3. The two limbs of that definition relevant for present purposes are s.(ca) and (cb).  The most relevant seems to be s.(cb).  The question is whether or not these proceedings “arise out of the marital relationship”.  Each husband was made bankrupt due to a business venture that did not succeed.  In each case the bankruptcy of the husband had the effect that his interest in the former matrimonial home vested in his trustee in bankruptcy. In each case, the husband had secured borrowings pertaining to the business venture against the former matrimonial home.  A compromise that has been reached between the respective applicants and the husband’s trustees in bankruptcy, for the applicants to purchase that share of the property comprising the matrimonial home that has vested in their respective husband’s trustee in bankruptcy.

4. It is difficult to see how those transactions arise out of the marital relationship.  They arise from a commercial dealing that has failed.  The fact that one party to a marriage is purchasing an interest in property (in which he or she already holds an interest) from the trustee in bankruptcy of the other does not, to my mind, mean that the proceedings arise out of the marital relationship. 

5. In those circumstances I am not satisfied that the matter before the court satisfies the definition of matrimonial cause.  Even if it did, the court retains a discretion as to whether to make a property settlement order.  If the only purpose of making such an order was to save one party to the transaction stamp duty, which was advanced by the solicitor for the applicants as a reason why the orders were sought, that does not to my mind justify the court exercising its discretion in favour of making an order.

6. It seems, in the present case, that the parties, namely, the applicant and the second respondent in each case, have reached a binding compromise.  Each applicant will receive her husband’s interest in the matrimonial home upon her paying the agreed sum of money.  The trustee will then have no further interest in that property.  The parties will then resume their marital relationship and continue to hold the matrimonial home as an asset, albeit in a different ownership structure.  Should proceedings ever eventuate between the parties for property settlement orders properly described, then the circumstances in which the wife acquired her further interest in the matrimonial home and the amount of money that she paid can be take into account in such proceedings.

7. There is no need, in order to perfect the compromise that has been reached between the trustee in bankruptcy and the applicant in each case, for the order sought to be made.  It is contended that the procedure adopted in this case finds support in the decision of the Full Federal Court in Huen v The Official Receiver (2008) FCAFC 117. However, in that case there was a disputed entitlement to a beneficial interest in a property, and the court was prepared to make a declaration of constructive trust. What sets that case aside from this case is the quite clear correlation between the proceedings as between one party to the marriage and the trustee in the bankruptcy, and the proceedings between the parties inter se in the Family Court. That is made apparent by the chronology set out in paragraphs [2] and [10] of their Honours’ reasons for judgment.

8. In this case neither of the parties intend to separate, and the only reason, it seems to me, for the seeking of an order is to provide the parties with some perceived comfort of a court order which, as I have said, is not necessary, or to minimise their exposure to taxes, which, as I have said, is not an appropriate exercise of the court’s discretion.  I, therefore, decline to make the orders sought in each case.

I certify that the preceding eight (8) paragraphs are a true copy of the reasons for judgment of Wilson FM.

Associate:  Lynnette Chin

Date:  26 November 2009