Megalos and Katsaros & Ors
[2015] FamCA 1094
•9 December 2015
FAMILY COURT OF AUSTRALIA
| MEGALOS & KATSAROS AND ORS | [2015] FamCA 1094 |
| FAMILY LAW – ENFORCEMENT – Whether consent property order bind one or other of two companies (now in liquidation) who were parties to the property proceedings and the settlement FAMILY LAW – CORPORATIONS – Trustee in Bankruptcy seeks leave pursuant to s 471B of the Corporations Act 2001 (Cth) to enforce property orders against a liquidator FAMILY LAW – JURISDICTION – Questions of original jurisdiction under Corporations Act 2001 (Cth) and Bankruptcy Act 1966 (Cth) and accrued jurisdiction in equity FAMILY LAW – BANKRUPTCY – Application for payment of monies by the Liquidator and further discovery from the two companies in liquidation – Application by the Liquidator for enforcement proceedings to be stayed until such time as s 471B or s 500(2) of the Corporations Act 2001 (Cth) leave is granted |
| Family Law Act 1975 (Cth) |
Corporations Act 2001 (Cth) ss 471B, 511
Bankruptcy Act (Cth) ss 35A, 134(4)
| Warby v Warby (2001) 166 FLR 319 Mr Timothy North SC in his paper ‘A Consideration of Aspects of the Jurisdiction and Powers of the Family Court of Australia’ presented in May 2015 - North Queensland Law Association Conference, Queensland |
Tyler, Young & Croft Fisher and Lightwood’s Law of Mortgage, Lexis Nexis, 3rd Australian Edition 2014, page 51
| APPLICANT: | Ms Megalos |
| 1st RESPONDENT: | Mr Katsaros |
| 2nd RESPONDENT: | Mr B Katsaros |
| 3rd RESPONDENT: | C Pty Ltd (ACN …) |
| 4th RESPONDENT: | D Pty Ltd (ACN …) |
| 5th RESPONDENT: | E Pty Ltd (ACN …) |
| 6th RESPONDENT: | F Pty Ltd (ACN …) |
| 7th RESPONDENT: | Mr Calas as Trustee of the Bankrupt Estate of Ms Megalos |
| FILE NUMBER: | MLC | 6793 | of | 2012 |
| DATE DELIVERED: | 9 December 2015 |
| PLACE DELIVERED: | Hobart |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Benjamin J |
| HEARING DATE: | 20 October 2015 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Hall |
| SOLICITOR FOR THE APPLICANT: | Ronald Segal & Associates |
| COUNSEL FOR THE 1ST RESPONDENT: | In person and excused |
| SOLICITOR FOR THE 1ST RESPONDENT: |
| COUNSEL FOR THE 2ND RESPONDENT: | In person and excused |
| SOLICITOR FOR THE 2ND RESPONDENT: |
| COUNSEL FOR THE 3RD RESPONDENT: | Ms Andrea Mapp |
| SOLICITOR FOR THE 3RD RESPONDENT: | Ascot Solicitors |
| COUNSEL FOR THE 4TH RESPONDENT: | Ms Andrea Mapp |
| SOLICITOR FOR THE 4TH RESPONDENT: | Ascot Solicitors |
| COUNSEL FOR THE 5TH RESPONDENT: | Excused |
| SOLICITOR FOR THE 5TH RESPONDENT: |
| COUNSEL FOR THE 6TH RESPONDENT: | Excused |
| SOLICITOR FOR THE 6TH RESPONDENT: | |
COUNSEL FOR THE 7TH RESPONDENT: | Mr Peter Fary |
| SOLICITOR FOR THE 7TH RESPONDENT: | Zervos Lawyers |
Orders
Pursuant to s 471B of the Corporations Act 2001 (Cth) the seventh respondent is granted leave to pursue and continue proceedings in this Court against the liquidators for the D Pty Ltd and C Pty Ltd (the third and fourth respondents).
The Court declares that the property at G Street, Suburb H (namely G Street, 1 and 2 I Street, Suburb H) were appropriated in favour of the applicant wife to discharge the first respondent’s obligations pursuant to amounts respectively attributed under order 2 made 7 December 2012 and is thereby charged with the satisfaction of that obligation.
Pursuant to the provisions of the Bankruptcy Act 1966, the Court declares that all monies received by the liquidator for the D Pty Ltd and C Pty Ltd (the third and fourth respondents) in relation to the sale of G Street Suburb H (namely G Street, 1 and 2 I Street, Suburb H) are held in trust for the benefit of the seventh respondent as trustee for the bankrupt estate of the applicant wife.
These proceedings be listed for further mention before the Court in Melbourne on 27 January 2016 at 4.00pm for further determination of the orders sought by the Trustee in Bankruptcy filed 16 October 2015.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Megalos & Katsaros and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: MLC 6793 of 2012
| Ms Megalos |
Applicant
And
| Mr Katsaros And Mr B Katsaros And C Pty Ltd (ACN …)(In Liquidation) And D Pty Ltd (ACN …) (In Liquidation) And E Pty Ltd (ACN …) And F Pty Ltd (ACN …) And Mr Calas as Trustee of the Bankrupt Estate of Ms Megalos |
Seventh Respondent
REASONS FOR JUDGMENT
INTRODUCTION
This is a dispute between the Mr Calas (‘the Trustee in Bankruptcy’) who is the trustee of the Bankrupt estate of Ms Megalos, and Mr J and Mr K (‘the Liquidators’) who are liquidators of the companies C Pty Ltd (in Liquidation)(‘C’), and D Pty Ltd (in Liquidation)(‘D’). [1]
[1] Affidavit of Mr J filed 1 December 2014 paragraphs 9, 10 & 11
Some real property owned by C and D has been sold by the liquidators; the Trustee claims that the net proceeds of sale of such properties are secured in favour of the Ms Megalos (‘the wife’) and as such are secured and payable him as Trustee of her bankrupt estate.
The underlying questions are:-
a)how did this commercial dispute find its way to the Family Court;
b)what is the dispute, and what are the sources of this Court’s jurisdiction and power;
c)should it remain in this Court;
d)if not, to which court may or should it be sent and pursuant to exercise of which power; and
e)if it is to remain in this Court, what are the issues and how are they determined.
The reason this commercial dispute found its way to the Family Court
In July 2012 the wife commenced proceedings for property adjustment under the Family Law Act 1975 (‘the Act’) seeking orders against Mr B Katsaros (‘the husband’).
In those proceedings Mr Katsaros (her ‘brother-in-law’) was later joined as a party and he is the second respondent.
In addition, C Pty Ltd, D Pty Ltd, E Pty Ltd and F Pty Ltd (collectively called ‘the four companies’) were also joined as parties and are the third, fourth, fifth and sixth respondents, respectively. The wife asserted that the four companies were either the alter egos of the husband or at least part property of the husband.
During November 2012 the parties negotiated a property settlement and on 7 December 2012 consent orders were made in these proceedings (‘the consent orders’). The consent orders were drafted by Ms L, who was solicitor representing the husband, brother-in-law and the four companies. On application the wife and of Ms L (as solicitor appearing for the husband, the brother-in-law and the four companies) those consent orders were made and provided for adjustment of property.
At the time of the consent orders, D owned property G Street, Suburb H.
On 22 August 2014 D and C went into liquidation and the Liquidators were jointly and severable appointed.
The Liquidators asserted that D owned a two thirds share of a property at G Street, Suburb H and that the other one third was owned by M Pty Ltd. That Suburb H property as sold for $350,000 and D share of the sale of that property was said to be $233,333.33. One of the Liquidators, Mr J, deposed that the Suburb H property was subject to liabilities to N Pty Ltd of $93,333.33 and to Mr O of $133,270 which would extinguish any claim the Trustee had to those monies.
The Trustee in Bankruptcy[2] asserted that the effect of the consent orders made on 7 December 2012 or, in the alternative, the agreement upon which that order was based, created an equitable charge or an equitable lien in favour of the wife over the proceeds of sale of the property at G Street, Suburb H pursuant to order 2 made on 7 December 2012. That order provided:-
2.The husband will pay into a trust account in the name of the wife the sum of $500,000, the initial sum being the sum of $300,000 to be paid from the proceeds of the sale of [C Pty Ltd] of [P Street, Suburb Q] (and any shortfall on or about the proceeds of sale) by [D] in respect of property [G Street, Suburb H]. This money will be used to purchase a town house to be developed by or on behalf of the husband to the value of $500,000. It will be no smaller than a two bedroom home unit with an area or suburb to be reasonably selected by the wife. The property will be registered in the name of the wife but shall be accommodation for her and [the child] until such time as [the child] has attained the age of thirty years, his birthday being [… 2002], after which the home will rest absolutely in the wife. I note the agreement between the wife and the husband that the wife will execute an irrevocable will providing that she leaves the whole of her estate to the son and will re-execute the will if she enters into a de facto relationship or remarries.
[2] The Seventh Respondent.
In July 2014 the wife commenced spousal maintenance proceedings and enforcement of the property orders in this court. This was quickly followed by her bankruptcy and the liquidation of the subject companies.
What is the dispute, and what are the sources of this Court’s jurisdiction and power?
The Trustee in Bankruptcy seeks:-
a)Leave to commence the proceeding pursuant to s 471B of the Corporations Act 2001 (Cth) (‘the Corporations Act’);
b)A declaration pursuant to the Corporations Act that the order or the agreement create an equitable charge or equitable lien over either the net proceeds of sale of the property or the sum of up to (presumably $300,000) within the net proceeds of sale of the property. This is given that the property P Street, Suburb Q was sold and there were no funds available for distribution from that property; and
c)Discovery as to the payment of the proceeds of sale of the Suburb H property.
The Liquidators opposed these orders and sought:-
a)The transfer of these proceedings to the Federal Court or to the Supreme Court of Victoria; and
b)That if the proceedings remained in this court, that no leave be granted to enable the Trustee to continue these proceedings.
Pursuant to s 79(12) of the Family Law Act 1975 (Cth) (‘the Family Law Act’) leave had been earlier granted to the wife to participate in these proceedings and appear by solicitor. This was because it was asserted by her that, despite the fact that she was bankrupt, if these funds were recovered it would be likely that there would be a significant distribution to her from the Trustee in Bankruptcy and as such she had an interest in the outcome of the proceedings.
Given that the current issues only relate to a dispute between the Trustee of the wife’s bankrupt estate and the Liquidators for C and D, the husband and the brother-in-law were excused from participating in this aspect of the continuing dispute.
As to the fifth and sixth respondents, no orders were being sought against them. They did not appear.
THE EVIDENCE
Each of the parties provided written submissions in relation to the proceeding namely:-
·The Trustee in Bankruptcy’s submissions prepared by Peter Fary of Counsel dated 19 October 2015 (in that submission he excluded the reference to the property P Street, Suburb Q);
·The Liquidators’ submissions prepared by Andrea Mapp of Counsel dated 19 October 2015; and
·The wife’s submissions prepared by Mr John Hall of counsel dated 13 July 2015.
The parties relied upon the consent order made 7 December 2012 together with the consent document signed by the parties and dated 4 December 2012 consisting of 4 pages which was part of the court record.
The parties also referred to the affidavit of the liquidator, Mr J, sworn and filed 1 December 2014 and in particular paragraphs 9 to 14. It is not in issue that the Liquidators have been appointed to liquidate C and D.
The parties relied upon an affidavit of Mr R[3] sworn and filed 12 December 2014, in particular Exhibits AO3, AO4 and AO5 to confirm that the property at G Street, Suburb H, Victoria was sub-divided by plan of sub-division … on 10 May 2014 into three lots namely, G Street Suburb H, 1 I Street, Suburb H and 2 I Street, Suburb H.
[3] Solicitor for the Trustee in Bankruptcy
The Trustee in Bankruptcy relied upon a part of the affidavit of the wife sworn 9 July 2014 and filed 10 July 2014, in particular paragraphs 23 to 33. This was to provide the context of the orders made on 7 December 2012.
The Trustee tendered[4] in evidence letters by Ms L, the first being a fax and the second being the original of that fax sent 5 November 2012, but amended in terms of the address of the Court whereby Ms L asserted:-
We now act for [the husband] and the other parties named as respondent’s thereto namely [the brother-in-law], C Pty Ltd, E Pty Ltd, D and F Pty Ltd.
[4] Exhibit 1.
In that letter Ms L reported that the parties had reached an agreement and it has been requested that the matter be listed on 7 December 2015, presumably so that the agreement could be considered in the context of the consent order.
On 5 December 2012 a copy of the minute of consent orders completed by the husband and wife were forwarded to the Court.
The court order reveals that on 7 December 2012, before me, an application was made to the Court and upon hearing the wife in person and Ms L for the respondents (emphasis added) that the orders ought to be made.
I am satisfied, on that evidence, that Ms L acted for the husband, the brother-in-law and expressly on behalf of the companies when the orders were made.
HISTORY OF THESE PROCEEDINGS
After the orders were made in December 2012 it is clear that the wife had hoped that this would be the end of the proceedings.
However, an initiating application was filed on behalf of the wife on 10 July 2014 naming the husband, the brother-in-law, and the four companies, C Pty Ltd, D Pty Ltd, E Pty Ltd and F Pty Ltd, as respondents. In that application the wife sought enforcement of the property order and also the enforcement of a spouse maintenance order. The wife relied upon an affidavit filed by her sworn 9 July 2014 and filed 10 July 2014.
On 9 August 2014 a Sequestration Order was made against the wife and Mr Calas was appointed as her Trustee in Bankruptcy of her property.
As indicated earlier, on 22 August 2014 D Pty Ltd and C Pty Ltd were placed into liquidation.
On 1 December 2014, Mr J, one of the Liquidators of C and D filed an affidavit providing information to the Court.
On 3 December 2014 the husband filed a response to the application initiating proceedings together with an affidavit.
On 12 December 2014 the Trustee in Bankruptcy filed an application in a case seeking orders in relation to the sale of property, including the proceeds of sale of G Street Suburb H and other proceeds of sale. The Trustee sought an injunction restraining the respondents (including the Liquidators) from dealing with the property. That application was supported by an affidavit of the Trustee’s solicitor Mr R.[5]
[5] Filed the 16 October 2015.
The proceedings came before Bennett J on 16 December 2014 and were adjourned for interim hearing before me on 15 January 2015. Consent orders were made in relation to the holding of monies from the sale of properties in a trust account of Ascot Solicitors (the solicitors for the Liquidators) and a direction was made to file material.
On 15 January 2015 the Trustee in Bankruptcy was joined as a party to these proceedings. At the same time orders were made appointing the Liquidators as parties to the proceedings. Consent orders were made in relation for the retention of proceeds of sale of the property.
On 27 February 2015 the wife was granted leave pursuant to s 79(12) of the Family Law Act to make submissions and appear in these proceedings.
On 28 April 2015 the Trustee in Bankruptcy filed a response to an application in a case seeking a transfer of the funds in relation to the sale of properties by the Liquidators.
The matter came before the Court on 4 May 2015 and at that time the Trustee in Bankruptcy set out a statement of its claim (court document 54). In that statement of claim the Trustee asserted, amongst other things, that the proceeds of sale of a number of properties, including G Street, Suburb H, were in fact property of the secured property (in some undefined form) of the wife and therefore vested in the Trustee in Bankruptcy by reason of the Sequestration Order.
In his response to initiating application, filed 6 May 2015, the Trustee in Bankruptcy, sought the release of the funds in respect of the sale of the property (or parts of the property) at G Street, Suburb H be paid to them.[6]
[6] Response to Initiating Application filed 11 August 2015 – document 60.
On 25 June 2015 the Liquidators filed a Defence in which they asserted that no such security was created by the consent orders.[7]
[7] Defence filed 25 June 2015 document 62.
On 16 October 2015 the Liquidators filed an application seeking stay of the proceedings pursuant to s 500(2) of the Corporations Act until leave was granted for the commencement of proceedings pursuant to s 491(B) of the Corporations Act. Further, the Liquidators sought the transfer of the proceedings as between the Trustee in Bankruptcy and the Liquidators to a court pursuant to s 9 and s 58AA of the Corporations Act. This was to be either to the Federal Court or to a State Supreme Court.
In these reasons any statement of fact is to be regarded as a finding of fact unless the contrary is clear from the context of the statement.
What is the dispute, and what are the sources of this Court’s jurisdiction and power?
The issues in dispute are outline above.
As to jurisdiction and power, counsel for the Liquidators’ initial submission was that there needed to be finality of the proceedings or there was such finality insofar as D, C and the Liquidators were concerned, and as such this Court had no jurisdiction to re-visit those orders. In particular the proceedings against the companies were dismissed. The only thing remaining was the wife’s enforcement against the husband.
This in many ways begs the question as to the effect of order 2 of the consent orders insofar as D is concerned.
The wife’s enforcement application was taken over and enhanced by the Trustee. He sought a declaration as to the meaning order of order 2 and discovery for the purpose of that enforcement.
It was uncontroversial that the wife was in the process of terminating the instructions of her then solicitor and she entered into direct negotiations with the husband (through his solicitor) to settle the matter. Ms L sent a facsimile to the Registry of the Court on 5 November 2012[8] in which he asserted:-
We now act for [the husband] and the other parties named as respondents thereto namely [the brother in law, C Pty Ltd, E Pty Ltd, D Pty Ltd and F Pty Ltd] who are named as second to sixth respondents accordingly.
[8] Exhibit 1.
It is clear that Ms L was representing the husband and, more relevantly for these proceedings, the companies which were subsequently placed in liquidation.
The Ms L informed the Court that an agreement had been reached and on 5 December 2012 and he indicated that consent orders had been completed by the parties for the attention of the Court. When the matter came before the Court the Court heard from Ms L who was representing ‘the respondents’.
Orders were made as are set out earlier in these reasons. Order 7 was a standard order dismissing all outstanding applications and noting that the proceedings against the parties were dismissed (this must mean otherwise dismissed).
In so far as the proceedings before me on 20 October 2015 were concerned, it was not to vary or set aside those orders under s 79A of the Family Law Act, it was simply an enforcement and an application by the Trustee in Bankruptcy as to whether the orders made in December 2012 created an equitable lien or an equitable charge.
The meaning and/or effect of the order or the agreement upon which it was based would need to be known by the Trustee in Bankruptcy and the Liquidators.
Jurisdiction in respect of civil matters arising under the Corporations Act is conferred on the Family Court with respect to civil matters, pursuant to s 1337C of the Corporations Act. Further, s 58AA of that Act provides that the Family Court is defined to mean both any court and more specifically a ‘Court’ within the meaning of that Act.
As such this Court clearly has original jurisdiction in relation to proceedings under the Corporations Act.
It was submitted on behalf of the Liquidators that this Court ought not to do so because this was a not in essence a ‘family law’ proceeding. The Parliament has vested power in this court and that this is associated with the enforcement of an order of this court seems more of a reason to retain jurisdiction rather than transfer jurisdiction to another Court.
Counsel for the Liquidators raised some issue that the consent order was made by me. I did not understand the nature of that submission and I asked if it was an application that I should disqualify myself on some basis. I stood the proceeding down to enable counsel for the Liquidators to consider the submission and take instructions. On her return counsel informed me:-
No, we don’t wish to seek that you recuse yourself at all. I just wanted to clarity that with my client because it was raised.[9]
[9] As to the submission see Transcript of Proceedings dated 20 October 2015 at page 23 lines 4 to 31 and as to the response see page 26 at lines 25 to 26.
It was simply a matter of construing the meaning of an order, prepared by the parties and including the companies the subject of liquidation, as to whether an equitable charge or equitable lien was created by it or the underlying agreement.
Whilst this Court has some equitable jurisdiction in various areas such as binding financial agreements and the like, and clearly has original jurisdiction under the Family Law Act, it does not have a general equitable jurisdiction. In that context it was submitted by counsel for the Liquidators that such a lacuna in jurisdiction ought to lead to a transfer of this proceeding to the Federal Court or the State Supreme Court.
However, regarding the exercise of the equitable jurisdiction, I am satisfied given the facts outlined elsewhere in these Reasons and given the circumstance that all relevant parties are before the Court in this case, this issue falls within the accrued jurisdiction of the Court.
Counsel for the Trustee in Bankruptcy submitted that absent section 1337C of the Corporations Act, the Family Court had both accrued and associated jurisdiction to hear the application for leave. In support of this submission he relied upon section 33 of the Family Law Act which he said:-[10]
confers jurisdiction on the Court in respect of matters not otherwise within the jurisdiction expressed by this Act and that as a consequence where a Commonwealth Act creates jurisdiction that’s not expressly conferred on the Family Court the Family Court has associated jurisdiction …
[10] Transcript of Proceedings dated 20 October 2015 page 12 lines 39-43.
In relation to the question of the Courts accrued jurisdiction counsel for the Trustee in Bankruptcy submitted:-[11]
…its quite plain that the jurisdiction conferred with respect to matrimonial causes includes jurisdiction to make declarations with respect to equitable rights and that is done in almost every case in proceedings for a property adjustment because the very first step that the court must undertake is to ascertain he property of each of the parties to the marriage and … has power to give effect to that determination under s 78 of the Family Law Act. So, in my submission, it’s not right to say that this court doesn’t have jurisdiction to make orders or declarations with respect to equitable interests in property.
[11] Ibid at page 13 lines 16 to 23.
Further counsel for the Trustee in Bankruptcy went on to say that, in relation to the Court determining the equitable and legal rights between the parties in a property case, the Trustee in Bankruptcy in these proceedings, in as sense, is the person in whom the rights given to the wife were vested. He said that if it were simply an enforcement application by the wife against the companies, putting aside the liquidation context, it would be within the original jurisdiction of this Court to determine whether or not the property held by the companies was subject to a charge created by the orders that were made by the Court. He said this would need to be done in order to resolve the question of whether the wife should be paid ahead of other secured creditors.
Counsel for the Trustee in Bankruptcy submitted that the claim against the legal and equitable property held by the companies was a matrimonial cause because it falls within the definition of s 4(1)(f) of the Family Law Act and that the enforcement proceedings came within that definition.
This Court had accrued jurisdiction and in Warby v Warby (2001) 166 FLR 319 the Full Court that there are a number of questions to be posited namely:-
a)what the parties have done;
b)the relationships between or among them;
c)the laws which attach rights or liabilities to their conduct and relationships;
d)whether the claims are part of the single justiciable controversy and in determining that question whether the claims are ‘attached’ or not ‘severable’ or ‘disparate’;
e)whether the claims are non severable from a matrimonial cause and arise out of a common substratum of facts; and
f)whether the Court has the power to grant appropriate remedies in respect to the ‘attached’ claims.”
The Full Court said at paragraph 79:-
We have formed the view that as a matter of law, the Family Court of Australia is not restricted to the determination of a family law claim or proceeding; it may exercise accrued jurisdiction to determine the non-Federal aspects of a justiciable controversy of which the family law claim or cause of action forms a part. The factual circumstances of the case will determine whether the jurisdiction arises and whether it is appropriate to exercise the jurisdiction.
I have described the facts and context elsewhere in these reasons. In this matter the various claims are part of a single justiciable controversy and as such are attached and are not reasonably severable from the enforcement application, and this court has the power to grant the remedies in respect of the attached claims.
There has been some recent discussion as to whether these so called Warby factors are indeed the correct test[12]. However, for a court of first instance it is generally wise to follow the guidance from the Full Court
[12] Mr Timothy North SC in his August 2015 paper entitled ‘A Consideration of Aspects of the Jurisdiction and Powers of the Family Court of Australia’.
The power that the Court has under the Family Law Act including the powers (if necessary in the future) by way of enforcement of orders and as the parties are all parties to these proceedings, there is no reason why the equitable jurisdiction of either the Federal Court or a State Supreme Court cannot be applied.
Counsel for the wife, in adopting the submissions of counsel for the Trustee, rightly submitted that the Family Court was in fact uniquely placed to deal with this matter given its broad range of issues and the overlapping of corporations law, bankruptcy law, property law and family law.
One of the submissions made by counsel for the Liquidators was that the proceedings be transferred, inter alia, to the Federal Court.
The only discrete form of power to which I was taken with regard to such a transfer of the proceedings to the Federal Court, in relation to the corporations aspect was s 1337J of the Corporations Act. This section provides for transfer if ‘that the relevant proceeding arises out of, or is related to, another proceeding pending in the Federal Court or another State or Territory court and that the court in which the other proceeding is pending is the most appropriate court to determine the relevant proceeding’.
In this case there is no evidence of another proceeding pending in the Federal Court or State Supreme Court.
As such I was taken to no power under the Corporations Act to enable such a transfer should I have considered it appropriate, which I did not.
The final basis upon which counsel for the Trustee in Bankruptcy submitted that this Court had jurisdiction was pursuant to s 35A of the Bankruptcy Act 1966 (Cth) (‘the Bankruptcy Act’). He asserted that this section conferred jurisdiction on this Court and the Federal Court in proceedings where the Trustee in Bankruptcy of a party to the marriage is a party to the proceedings.
Section 35A of the Bankruptcy Act provides:-
Transfer of proceedings to Family Court
(1)Subject to subsection(2), where a proceeding is pending in the Federal Court, the Federal Court may, on the application of a party to the proceeding or of its own motion, transfer the proceeding to the Family Court.
(2)A proceeding that is pending in the Federal Court at the commencement of this section shall not be transferred to the Family Court unless the parties to the proceeding consent to the transfer.
(2A)If a proceeding is pending in the Federal Circuit Court, the Federal Circuit Court may, on the application of a party to the proceeding or on its own initiative, transfer the proceeding to the Family Court.
(3)Subject to subsection (4), where a proceeding is transferred to the Family Court:
(a)the Family Court has jurisdiction to hear and determine the proceeding;
(b)the Family Court also has jurisdiction to hear and determine matters not otherwise within its jurisdiction (whether by virtue of paragraph (a) or otherwise):
(i)that are associated with matters arising in the proceeding; or
(ii)that, apart from subsection 32(1) of the Federal Court of Australia Act 1976 , the Federal Court would have had jurisdiction to hear and determine in the proceeding;
(c)the Family Court may, in and in relation to the proceeding:
(i)grant such remedies;
(ii)make orders of such kinds; and
(iii)issue, and direct the issue of, writs of such kinds;
as the Federal Court could have granted, made, issued or directed the issue of, as the case may be, in and in relation to the proceeding;
(d)remedies, orders and writs granted, made or issued by the Family Court in and in relation to the proceeding have effect, and may be enforced by the Family Court, as if they had been granted, made or issued by the Federal Court;
(e)appeals lie from judgments of the Family Court given in and in relation to the proceeding as if the judgments were judgments of the Federal Court constituted by a single Judge, and do not otherwise lie; and
(f)subject to paragraphs (a) to (e) (inclusive), this Act, the Federal Court of Australia Act 1976 , and other laws of the Commonwealth, apply in and in relation to the proceeding as if:
(i)a reference to the Federal Court (other than in the expression "the Court or a Judge") included a reference to the Family Court;
(ii)a reference to a Judge of the Federal Court (other than in the expression "the Court or a Judge") included a reference to a Family Court Judge;
(iii)a reference to the expression "the Court or a Judge" when used in relation to the Federal Court included a reference to a Family Court Judge sitting in Chambers;
(iv)a reference to a Registrar included a reference to a Registrar of the Family Court; and
(v)any other necessary changes were made.
Note: Rules of Court made under the Family Law Act 1975 (rather than Rules of Court made under the Federal Court of Australia Act 1976 ) apply in relation to proceedings transferred to the Family Court under this section.
(4) Where any difficulty arises in the application of paragraphs (3)(c), (d) and (f) in or in relation to a particular proceeding, the Family Court may, on the application of a party to the proceeding or of its own motion, give such directions, and make such orders, as it considers appropriate to resolve the difficulty.
(5)An appeal does not lie from a decision of the Federal Court or the Federal Circuit Court in relation to the transfer of a proceeding under this Act to the Family Court.
Counsel for the Trustee in Bankruptcy asserted that:-[13]
… the other aspect of this case, of course, is the bankruptcy aspect, which is that a trustee in bankruptcy has been made a party to the proceeding asking the court to make orders with respect to the bankruptcy and the vested bankruptcy property, which, in my submission, in this case, includes the rights under the orders made in December. That is not a proceeding which could even be determined by the Supreme Court.
Transcript of Proceedings dated 20 October 2015 at page 14 lines 27 to 32.[13]
He went on to say that:-[14]
The Full Court of the Federal Court has confirmed that a proceeding with respect to the vested bankruptcy property is a special federal matter which, if issued or transferred to the Supreme Court, would have to go back to a Federal Court; we would say this court, of course. So the Supreme Court, in my submission, is not an appropriate court to deal with the matter in any event. But this court has jurisdiction quite separately from all the other heads of jurisdiction under section 35A of the Bankruptcy Act.
[14] Ibid at lines 34 to 40.
Therefore the submission was, and I accept, that the Family Court is particularly well placed to determine these types of applications. Some of the issues could not be decided by the Supreme Court given the powers contained in s 35A of the Bankruptcy Act.
This is a uniquely appropriate for determination by this court given its powers under the Family Law Act and the nature of the order, the powers under the Corporations Act and the particular powers under the Bankruptcy Act. The Full Court in the decision of C Pty Ltd and Ors & PGW as Liquidators of S Pty Ltd (in Liq) [2011] FamCAFC 231 said:-
72. His Honour’s conclusion was based on the proposition that both the s 79 proceedings and the winding up proceedings are matrimonial causes, and the guarantee proceedings are related to them. Mr and Mrs Rand though make two submissions, first, they say the winding up proceedings are not a matrimonial cause but even if they are, the guarantee proceedings are too remote from the winding up proceedings to “enliven” paragraph (f). Secondly, the guarantee proceedings are too remote from the completed s 79 proceedings to be a matrimonial cause.
73. As to the winding up proceedings there is no doubt that the Family Court of Australia has jurisdiction to hear them under the power vested in it under s 1337C of the Corporations Act. However, that does not prevent those proceedings from also being a matrimonial cause relying on paragraph (f). That issue though, and the question of the remoteness of the guarantee proceedings from the s 79 proceedings depends on the meaning of the phrase “in relation to” in paragraph (f).
74. That phrase has received a good deal of attention from the High Court, and two decisions in particular were cited to us by the appellant’s senior counsel, namely Perlman v Perlman (1984) 155 CLR 474 and Kennon v Spry (2008) 238 CLR 366. In the former case, Gibbs CJ said this (at 484-485):
The words “in relation to” import the existence of a connexion or association between the two proceedings, or in other words that the proceedings in question must bear an appropriate relationship to completed proceedings of the requisite kind… An appropriate relationship may exist if the order sought in the proceedings in question is consequential on or incidental to a decree made in the completed proceedings (so that, e.g., an application by a divorced wife for a settlement and transfer of property is a proceeding in relation to the completed proceedings for the divorce) …Proceedings brought to revoke an approval, in the limited circumstances permitted by s. 87(6) of the Act, would be proceedings in relation to the completed proceedings for the approval. However, an application to enforce the maintenance agreement in the present case (i.e., the deed) was not consequential on or incidental to the order approving of the maintenance agreement and it did not vary, reverse or otherwise affect the order giving the approval… Although a grant of approval was a condition of the efficacy of the maintenance agreement, the subject of the present proceedings is not the approval but the agreement. There is a connexion between the present proceedings and the deed, since the present proceedings are brought to enforce the deed; there is none, except of a remote and indirect kind, between the present proceedings and the proceedings brought to obtain the approval. So far as the present proceedings are concerned, the proceedings brought to obtain the approval simply form part of the historical background. The proceedings in the present case are not proceedings in relation to the proceedings for the approval. (authorities and footnotes omitted)
75. In the latter case, Kiefel J said this (at 440):
The expression “in relation to” is of wide and general import and should not be read down in the absence of some compelling reason for doing so. As Toohey and Gummow JJ said in PMT Partners Pty Ltd (In liq) v Australian National Parks and Wildlife Service, the words are prima facie broad and designed to catch things which have a sufficient nexus to the subject. The question of nexus is dependent upon statutory context. Amongst the examples given by their Honours was the consideration given by Gibbs CJ, in Perlman v Perlman, to the meaning of the words “in relation to” in the Family Law Act with reference to two sets of proceedings. His Honour said that they “import the existence of a connection or association between the two proceedings, or in other words that the proceedings in question must bear an appropriate relationship to completed proceedings of the requisite kind”. (footnotes omitted)
76. It seems to us that in applying these tests there can be no question that the winding up proceedings are related to the completed s 79 proceedings. Indeed, the winding up order was made in those s 79 proceedings. However, the real issue is as to the guarantee proceedings vis a vis the s 79 proceedings. The questions to be asked are what is the relationship between these two sets of proceedings, is it of the appropriate kind, and are they too remote? Mr Feller says that the examples given by Gibbs CJ in Perlman where the connection is insufficient, apply here. However, we do not agree. In our view the connection is that the guarantee proceedings are a necessary part of the winding up process that ensures that the orders made pursuant to s 79 of the Act are able to be adhered to. They are clearly interrelated in the requisite way. The orders sought are “consequential on or incidental to a decree made in the completed proceedings”. If not carried out correctly, they have the potential to affect the orders made in the s 79 proceedings by diluting the wife’s entitlement pursuant to those orders. That distinguishes this case from the examples given by Gibbs CJ in Perlman in the paragraph quoted above. As such there can also be no question of remoteness.
77. We agree with the submissions of the senior counsel for the Liquidator that “[t]he Guarantee Proceedings go to the heart of the findings of Rowlands J as regards the Wife’s interests. The parent’s claim effectively seeks to remove a substantial sum from [the available assets] and give it to the parents, by reason of their debt being discharged”.
78. The senior counsel for Mr and Mrs Rand submitted that the subsequent proceedings could not affect the s 79 order because the percentage entitlement of the wife was fixed. However, that misses the point. Consistent with authority, it is the “real impact in money terms” that is the foundation of a just and equitable result rather than the percentage division itself. The percentage entitlement of the wife was designed to achieve a particular outcome for her, yet if the guarantee proceedings are unsuccessful that outcome will not be able to be achieved. That is the relevant issue.
79. We do not consider that this approach infringes on the caution expressed in R v Ross-Jones; Ex Parte Green (1984) 156 CLR 185 that the purpose of the proceedings is not determinative of whether or not there is the requisite relationship.
80. Thus the necessary connection is established and we do not consider that his Honour erred in finding that the guarantee proceedings are a “matrimonial cause”, and therefore within the original jurisdiction of the Family Court under s 31(1)(a) of the Act.
Given that background I am satisfied that the Court has jurisdiction to hear this application.
In these reasons I have outlined the issues in dispute and I have considered the sources of this Court’s jurisdiction and power. In that context I have determined that the matter should remain in this Court.
The issues to be determined are:-
Leave pursuant to s 471B of the Corporations Act.
An issue in this case is whether the companies or one of them in liquidation hold funds which are subject to an equitable lien or equitable charge in favour of the wife and consequently her Trustee.
It was submitted on behalf of the Liquidators that this could be dealt with by way of a proof of debt. The Liquidators had already rejected the Trustee in Bankruptcy’s assertion that there was some priority in relation to a claim by the Trustee in Bankruptcy and opposed the granting of leave.
If the proceeds of sale or the net value of the sale of G Street, Suburb H is secured by reason of either the order or the agreement upon which it was based, then it is not the property available to the Liquidator for either their fees or for distribution.
Section 471B of the Corporations Act provides:-
471B Stay of proceedings and suspension of enforcement process
While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:
(a)a proceeding in a court against the company or in relation to property of the company; or
(b)enforcement process in relation to such property;
except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.
The section provides that the Court may grant leave and that the Court has discretion in granting leave.
In Hewson & Douglas Pty Ltd (in Liq) [1993] 2 Qd R 375 Derrington J in confirmed that leave was required to commence proceedings in Queensland against a company incorporated in another State. He ordered the company to be wound up and in doing so confirmed that Supreme Court of Queensland had jurisdiction to grant such leave.
In the matter of Motor ACN 005 188 054 Pty Ltd(in Liq) [2006] FCA 1497, Young J said at paragraph 5:-
I am satisfied that it is an appropriate case to grant leave under s 471B. The question for the Court is whether there is a real dispute which involves serious questions and whether the action will impede the orderly winding-up of the company or cause prejudice to other creditors. Relevant factors include the nature of the claim, including whether the claim involves any proprietary elements such as a claim for a lien, and the stage at which the proceedings have reached when the company is placed in liquidation. It is also relevant whether there is a real prospect that the liquidator would reject any proof of debt so that the claimant would have to press its case in an appeal to the Court. Having regard to the stage of these proceedings and the nature of the claims raised, it is appropriate to grant leave. Cases that support that view include Ogilvie-Grant v East (1983) 7 ACLR 669 at 672 and Re Hewson and Douglas Ltd (in liq) [1993] 2 Qd R 375.
In Commonwealth v Davis Samuel Pty Ltd [No 5] (2008) 68 ASCR 336 Refshauge J stated:-
[34] One significant issue, perhaps relevant in this case, is that where a person, the applicant, seeks to recover their own property from the company, the court will normally grant leave as of right: Re David Lloyd & Co (1887) 6 Ch D 339 at 244; OD Transport (Aust) Pty Ltd (in liq) v Od Transporty Pty Ltd, above, at FCR 294.
[35] This is because such a claim cannot be accommodated within the regime relating to proofs of debts established by the Corporations Act. This includes, as is particularly relevant to these proceedings, a claim by a plaintiff that the defendant company in liq holds property in trust for the plaintiff. In these circumstances, leave would ordinarily be granted Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2006] NSWSC 1002 at [40].
In this case the Trustee in Bankruptcy submitted a claim for a proprietary interest. If the Trustee in Bankruptcy is correct in their submissions then it is a matter where leave, given that circumstance, is warranted.
I accept the submissions of counsel for the Trustee in Bankruptcy that the wife’s trustee’s claim is to a proprietary interest and ‘cannot be accommodated within the regime of proof of debt’ and that the wife’s Trustee’s claim concerns interpretation and enforcement of an order of the Family Court.
Without such leave the Trustee in Bankruptcy would not have any obvious remedy given his obligations under the Bankruptcy Act and given that the application before the Court is a discrete question and interpretation and can be dealt with quickly. I accept the submission that it is in the interest of justice that it ought to be determined.
In relation to s 41CB of the Family Law Act counsel for the Liquidators submitted that while the bankruptcy trustee is a party to the marriage, the Liquidator and the companies in liquidation have not been determined to be a party to the marriage”.[15] On this basis counsel argued there was no matrimonial cause as against the companies in liquidation.
[15] Ibid at page 19 lines 32 to 35.
However, if as in this case, there is an equitable lien or charge on property then given the application to enforce the consent order and the participation of the companies in the creation of the agreement and the consent order, I am not persuade by this submission.
Her second point was that the proceedings against the companies were dismissed because of the orders made in December 2012 and as a consequence an issue estopple arises. That is, that with these December 2012 orders, they are as between the husband, wife and the other parties, at that time.
There is no issue estopple as it is the enforcement of the order against property which is, or may be, that of the wife against one of the parties to the consent orders. The issue is not being re-agitated.
Counsel submitted that the Liquidators’ position is that there is no matrimonial cause as between the Liquidator, the companies in liquidation and the Trustee in Bankruptcy and/or the wife.[16] Counsel for the Liquidators submitted that there has been an assumption that this is a matrimonial cause, but argued it is not, and says at best it is a claim from the wife as against the husband for failure to comply with the orders under s 79 of the Family Law Act. She says that there has been no application to enforce orders against the husband, but rather against the companies in liquidation. She submitted that if there is to be an argument, the “argument would be better suited in a court of equity and go through the processes under the Corporations Act.”[17] In respect to the assertion that there has been a determination under section 78 of the Family Law Act, counsel for the Liquidator noted that there was no declaration made at the time of the 2012 orders. She argued it was simply an order that the husband shall pay the wife.
[16] Ibid at lines 45 to 46.
[17] Ibid at page 20 lines 4 to 6.
This submission can be rejected for the same reason as I outlined above in that there is an equitable lien or charge on property, given the application to enforce the consent order and the participation of the companies in the creation of the agreement and the consent order.
As such leave will be granted and I will order accordingly.
The alleged equitable interest
It is the case on behalf of the Trustee in Bankruptcy that the orders create an equitable interest in favour of the wife in relation to G Street, Suburb H:-
By way of an equitable charge arising from the terms of [that order].
It was submitted, and I accept, that interest arose at the time the order was made. The companies were represented at the time the orders were made and consented to those orders. For the reasons I have set out as follows I am satisfied that the Liquidators took the property subject to the subsisting and existing equitable interests of the wife created by the orders of 7 December 2012.
In her proceedings the wife had joined the companies, the subject of the liquidation, and asserted that they were either properties of the husband or at least in part his alter ego.
The wife compromised her proceedings in relation to the broader entitlements that she may or may not have had under s 79 of the Family Law Act on the basis of the terms contained in order 2 of the December 2012 orders.
At that time D owned G Street, Suburb H which was divided into those three lots. A proper construction of the meaning of order 2 is that the husband would pay the sum of $500,000 into a trust account to enable the construction of a home for the wife to the value of $500,000 (subject to conditions). The initial sum of $300,000 was to be paid from the proceeds of the sale by C of property at P Street, Suburb Q.
If there was any shortfall then that was made up out of the proceeds of sale by D in respect of the then whole property at G Street, Suburb H which was then sub-divided into three properties.
Therefore as a party to that settlement, F Holdings created either an equitable charge or an equitable lien on the net proceeds of sale after any registered mortgage at that time, of those properties and presumably less the sub-division costs and less the legal fees, agents’ commissions and the like on the sale.
Deane J’s said in Hewitt v Court [1983] 149 CLR 639 at 668:-
…It is adequate for present purposes that I identify what I consider to be the circumstances which are sufficient for the implication, independently of agreement, of an equitable lien between parties in a contractual relationship. Those circumstances have, to some extent, been indicated in what has been said above. They are: (i) that there be an actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or promise of payment either of consideration in relation to the acquisition of the property or of an expense incurred in relation to it (see Middleton v. Magnay [12] ; Whitbread & Co. Ltd. v. Watt [13] ; Combe v. Lord Swaythling [14] Q
Pursuant to the earlier agreement, the wife asked the Court to note that she would withdraw the caveats on the properties except in relation to P Street, Suburb Q which caveat would be withdrawn upon the payment of $300,000 referred to earlier in the orders.
By reason of that agreement at least C (as owner of that P Street property) acknowledged that the wife had a caveatable interest and was entitled to use that to secure her interest in that property.
Having regard to the matters contained in the wife’s affidavit[18] this settlement was prepared by lawyers for the companies and for the husband and the brother-in-law. It was clear from the agreement and orders that there was an intention by all parties to create security for the wife.
[18] At paragraphs 23 to 33.
This is not a re-agitation of proceedings pursuant to s 79 of the Family Law Act; this was simply an interpretation of the order given the circumstances that have followed since that time and in the light of an enforcement application.
In relation to there being some equitable interest in the proceeds of sale, which give priority counsel for the Liquidators said:-[19]
… the difficulty with that proposition is those orders are only enforceable as against the husband. The proceedings and the orders … 2012 were dismissed as against the company there was no requirement of the company to comply with those orders. The obligation was as against the husband, not the companies in liquidation and that is why it is not the appropriate jurisdiction for the argument to be run. She submitted that if there are claiming some type of interest in the liquidations, they have to go through the appropriate mechanisms under s 471 of the Corporations Act.
[19] Transcript of Proceedings dated 20 October 2015 at page 20 lines 35 to 41.
The orders are being enforced against the fourth respondent through the Liquidators as that company by way of the December 2012 consent orders and underlying agreement gave that lien or charge
I am satisfied that the consent order and/or agreement created an equitable charge and/or an equitable lien. As such I will make the orders as sought by the Trustee in Bankruptcy.
In terms of the question of the equitable lien or charge it is clear that under s35 of the Bankruptcy Act with the Trustee in Bankruptcy being a party to the proceedings that the Family Court has jurisdiction in relation to any matter connected with or arising out of the bankruptcy of the wife.
I accept the submission of counsel for the Trustee in Bankruptcy that the orders made in respect of the relevant companies were within the power of the Family Court, although I am not exercising powers under Part VIIIAA of the Family Law Act.
This is simply an analysis of the orders that the parties themselves asked the court to make. This application is not intended to change the status of those orders but merely to reflect what it is that those orders mean from an objective point of view.
There is no issue that the wife’s property and her rights in respect of enforcement of orders vested in the trustee once she became a bankrupt. In Official Trustee in Bankruptcy v Mateo [2003] FCAFC 26 the Full Court of the Federal Court comprising of Wilcox, Branson and Merkel JJ stated that:-
…the effect of a transfer order under s79 of the Family Law Act is to vest in the beneficiary of the order and equitable state in the property interest that is the subject of the order …
In this case this was not a transfer order but it did create what is likely to be a charge. In Fisher and Lightwood’s Law of Mortgage, Tyler, Young & Croft, Lexis Nexis, 3rd Australian Edition 2014 page 51 the learned authors said:-
2.3An ordinary charge may be created in either of the following ways:
(a)by a charge or direction in a settlement, will or other instrument, whereby real or personal property is expressed or constructively made liable or specifically appropriated to the discharge of a debt, portion, legacy or other burden, or declared to be subjected to a charge for securing the same; no debt is implied, but a right or realisation by judicial process is conferred; or
(b)by the appropriation to the discharge of a debt of a specific thing in action or chattels, which either are, at the time of appropriation, or may, or will thereafter be in the hands of the third person: see Swiss Bank Corp v Lloyds Bank Ltd [1982] AC 584 at 594-596; [1980] 1 All ER 419 at 426. For a trust by way of securities see Re Bond Worth [1980] Ch 228 at 250; [1079] 3All ER 919 at 940, and compare Carreras Rothmans Ltd v Freeman Matthews Treasure Ltd [1985] Ch 207 at 227; [1985] 1 All ER 155 at 169.
As submitted on behalf of counsel for the trustee in Re Crown Meats Pty Ltd (in liq) [2013] VSC 118 (5 April 2013) Robson J concluded that Family Court orders had created a charge over property that prevailed over the liquidator saying:-
Equitable charge
33Turning to the legal principles, Mrs Wieselmann relies on Porter v Bonarrigo a decision of Vickery J where His Honour thoroughly considers relevant authorities dealing with the establishment of an equitable charge. Justice Vickery held that an equitable charge is created when property is expressly or constructively made liable to the discharge of a debt of some other obligation and that the charge thereby created confers on the chargee a right of realisation by judicial process, such as an order for sale. His Honour cited Swiss Bank Corp v Lloyds Bank Ltd, Re Cosslett (Contractors) Ltd, AVCO Financial Services v White, and Re Bruynius[20]. In Palmer v Carey, a decision of the Privy Council on an appeal from the High Court of Australia, Lord Wrenbury described the law as to equitable assignment as follows: [footnotes omitted]
The law as to equitable assignment, as stated by Lord Truro in Rodick v. Gandell, is this: “The extent of the principle to be deduced ... is, that an agreement between a debtor and a creditor that the debt owing shall be paid out of a specific fund coming to the debtor, or an order given by a debtor to his creditor upon a person owing money or holding funds belonging to the giver of the order, directing such person to pay such funds to the creditor, will constitute a valid equitable charge upon such fund, in other words, will operate as an equitable assignment of the debts or fund to which the order refers”.
An agreement for valuable consideration that a fund shall be applied in a particular way may found an injunction to restrain its application in another way. But if there be nothing more, such a stipulation will not amount to an equitable assignment. It is necessary to find, further, that an obligation has been imposed in favour of the creditor to pay the debt out of the fund.
34 The Family Court’s orders did not expressly refer to any constructive trust, or charge or lien, or any proprietary interest or security interest. Nevertheless, paragraph 5 of the orders relevantly provided that if the debts (relevantly owed by Dakiri to Mrs Wieselmann) were unpaid, the relevant respondents should sell the Cahill Street Property and the proceeds be paid to Mrs Wieselmann in satisfaction of the debts owed to her by Mr Wieselmann and Dakiri.
35 In my view, although the orders did not expressly refer to payment of the debts “out of the proceeds of sale”, this was implied, so that the orders contemplated an irrevocable direction to pay the proceeds of sale of the Cahill Street Property to Mrs Wieselmann. In my opinion, this should be construed as conferring on Mrs Wieselmann a proprietary interest in the Cahill Street Property, by way of charge, to secure Dakiri’s debt to her.
36 I am satisfied that an equitable charge over the properties was created by the order for the reasons given above and in the light of the authorities I have referred to.
37 Accordingly, I propose to order that the liquidators are justified in treating Mrs Wieselmann as holding an equitable charge over the Cahill Street Property, so that the net proceeds of sale (after deducting the Universal Distributing claims) are payable to her.
[20] This sentence was not in the submissions but is part of the reasons in this case.
Given this analysis of the law, which I accept, I am satisfied that whilst the order did expressly refer to the payment out of the proceeds of sale, and although not specifically asserted, I am satisfied that the effect of the orders, to which the companies were parties, give rise to an equitable charge in respect of the proceeds of sale subject to any registered mortgage on the property at that time and subject to the normal expenses of sale such as real estate agent’s commission and legal costs of the sale etc.
I also accept that a lien may also arise in circumstances where there is such a promise of payment and the property is specifically identified.
Section 134(4) of the Bankruptcy Act deals with powers exercisable with the discretion of a trustee. Sub section 4 provides in particular:-
(4)A trustee may at any time apply to the court for directions in respect of a matter arising with the connection of the administration of the estate.
‘The Court’ is defined as a court having jurisdiction under this Act and the Family Court has jurisdiction pursuant to s 35 of the Bankruptcy Act, as this is a matter where the Trustee in Bankruptcy is a party to proceedings for enforcement of a Family Court order.
As such I am satisfied that the Family Court has jurisdiction and power to make a declaration within the meaning of s 134(4) of the Bankruptcy Act as to the nature of the equitable charge or equitable lien.
The Liquidators for the third and fourth respondents oppose the assertion that the orders of the Family Court made in December 2012 give rise to that equitable charge or equitable lien.
The Court has jurisdiction under the Corporations Act, as referred to earlier, and has power to make that determination under the Corporations Act having regard to s 511 of the Corporations Act which provides:-
Application to Court to have questions determined or powers exercised
(1)The liquidator, or any contributory or creditor, may apply to the Court:
(a) to determine any question arising in the winding up of a company; or
(b) to exercise all or any of the powers that the Court might exercise if the company were being wound up by the Court.
(1A)APRA may apply to the Court under subsection (1) in relation to a company that is a friendly society within the meaning of the Life Insurance Act 1995 and which may be wound up voluntarily under subsection 180(2) of that Act.
(2)The Court, if satisfied that the determination of the question or the exercise of power will be just and beneficial, may accede wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just.
See Young v ACN 081 162 512 (formerly Dallen Design Pty Ltd) and Another (2005) 218 ALR 449.
Accordingly, and given these reasons, this Court will be making the declaration sought by the Trustee in Bankruptcy and will so order.
I certify that the preceding one hundred and thirty one (131) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on 9 December 2015.
Associate:
Date: 9 December 2015
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