Melnik v Melnik
[2004] FMCA 805
•3 February 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MELNIK v MELNIK | [2004] FMCA 805 |
| BANKRUPTCY – Application to restrain respondent from enforcing a debt created by order of the Family Court of Australia – whether the respondent should have sought leave from this Court before commencing proceedings in the Family Court of Australia to enforce debt. |
Storey v Lane (1981) 61 FCR 591
Re Keogh ex parte Keogh v Director of Public Prosecutions (NSW) (1995) 61 FCR 591
Re Sutherland-Cropper (1985) 11 FCR 15
| Applicant: | JOSEPH MORRIS MELNIK |
| Respondent: | AMANDA CATHERINE MELNIK |
| File No: | BZ 649/2003 |
| Delivered on: | 3 February 2004 |
| Delivered at: | Brisbane |
| Hearing Date: | 3 February 2004 |
| Judgment of: | Baumann FM |
REPRESENTATION
| Solicitor for the Applicant: | Mr Cooper |
| Solicitors for the Applicant: | Primrose Couper Cronin Rudkin |
| Counsel for the Respondent: | Mr Coulsen |
| Solicitors for the Respondent: | Dulley & Crooke Family Lawyers |
ORDERS
That the application be dismissed
That the Applicant pay the Respondent’s costs, including reserved costs, of and incidental to this application as agreed or taxed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BZ 649 of 2003
| JOSEPH MORRIS MELNIK |
Applicant
And
| AMANDA CATHERINE MELNIK |
Respondent
REASONS FOR JUDGMENT
On 5 and 6 February 2004 proceedings commenced by the wife, Amanda Melnik ("the respondent"), in the Family Court of Australia are to be heard by a judge of that Court. The proceedings are:
a)An application filed on 26 August 2003 alleging a contravention of an order of the Family Court of Australia made on 23 August 2000, in that the husband, Joseph Melnik (“the applicant”), deliberately and intentionally did not pay the respondent the sum of $79,000 within two months of the date of the order, and
b)An application filed 10 October 2003 seeking to have the applicant dealt with for contempt of court.
On 8 December 2003, the applicant filed the current application in this Court seeking, in effect:
c)An injunction against the respondent from pursuing the contravention application -
“ insofar as that application relates to alleged failure by the applicant to pay certain moneys pursuant to court orders”
and,
d)Similarly, to restrain the respondent from pursuing the contempt application:-
“ insofar as that application relates to non-payment of a provable debt or in consequence of his refusal or failure to comply with an order of the Court for the payment of a provable debt.”
In these extempore reasons, it is not necessary to recite details of the long and bitter history of litigation which has engulfed these parties for some years. A more fulsome history is contained in my earlier decision in 2001. What is relevant for present purposes is to note that:
a)Jerrard J of the Family Court made an order requiring the applicant to pay the respondent $79,000 by 23 October 2000; and
b)The applicant was not relieved of payment by appeal or otherwise before he chose to file a debtor's petition on 7 February 2001.
On his sequestration of 7 February 2001, the debt due to the respondent of $79,000 became a debt provable in the bankrupt estate of the applicant by reason of Section 82 of the Bankruptcy Act 1966 (“the Act”). A seminal issue is raised by the respondent who says that the power to stay proceedings under Section 61B of the Bankruptcy Act is not available in this matter as the applicant has not commenced legal processes against the applicant (sic):-
“ in consequence of his refusal or failure to comply with an order of the court for the payment of a provable debt.”
The respondent says that the application to the Family Court of Australia is not seeking in any way to enforce a provable debt, but rather to have the applicant dealt with in respect of alleged contraventions and contempts:-
“ which arose before the date of bankruptcy.”
The applicant says all the proceedings commenced by the respondent flow from the failure to pay the funds in compliance with the order of the Family Court of Australia. That is not entirely correct, as a recording of the contempts particularise alleged conduct of the applicant other than a failure to make payment of the funds ordered. It seems, on the face of the application filed in this Court, that those actions were not meant to be covered by the order sought under section 61B.
Both Mr Cooper for the applicant and Mr Coulsen for the respondent provided me with well considered written submissions. I have read them carefully. I do not incorporate parts of those submissions in these reasons, but reserve the right to do so if I am required to publish these reasons for any purpose. Mr Cooper drew my attention to a range of authorities, including Storey v Lane (1981) 61 FCR 591, Re Keogh ex parte Keogh v Director of Public Prosecutions (NSW) (1995) 61 FCR 591 and Re Sutherland-Cropper (1985) 11 FCR 15. Mr Coulsen distinguished those cases from the current facts successfully, in my view. As Gibbs CJ said in Storey v Lane at 556:
“The effect of the provision is to empower the Court to relieve a debtor against whom a petition has been presented from process (civil or criminal) instituted against him because of his failure to pay a provable debt.”
The explanatory memorandum that had accompanied the Bill by which section 60 was amended nominated as purposes, amongst others, a purpose:
“ To overcome the use of criminal procedures to collect provable debts when bankruptcy proceedings have intervened”
and a purpose:
“ To ensure that the bankrupts are not held in custody for the non-payment of debts provable in bankruptcy.”
Mr Cooper says there is a clear nexus between the non-payment of the debt and the pending applications before the Family Court of Australia. He says the respondent should have sought leave from this Court to commence those proceedings in the Family Court of Australia because they are proceedings:
“ in respect of a provable debt”-
or seek to enforce:
“ any remedy against the person or the property of the bankrupt in respect of a provable debt” (see s58(3) of the Act)
I disagree. The proceedings are brought because the respondent alleges the applicant:-
“ intentionally failed”
or -
“ made no reasonable attempt to comply”
with the order made on 23 August 2000 within the meaning of those words given by Section 112AB of the Family Law Act 1975. The alleged contravention occurred prior to the applicant's bankruptcy and that is, in my view, an important factor to consider. The applicant has available to him an opportunity to raise evidence of "reasonable excuse" within the meaning of Section 112AC. The only sanctions available to the Family Court are set out in Section 112AD(2), and none of them could, in my view, be described as a “remedy available” to the respondent.
When a person brings such proceedings in a Court as a matter of public policy at least, the person is entitled to expect litigants will comply with its orders unless otherwise excused. I have little doubt that the respondent is, in part, motivated by the unfairness, as she sees it, of the applicant failing to pay her the funds ordered but, in my view, the express provisions of Section 61B and the legislative intent was not designed to provide some form of blanket immunity for debtors who subsequently become bankrupt, whether on their own petition or otherwise, from answering serious charges about their conduct before they became sequestrated.
The Family Court of Australia has a wide discretion as to the sanctions it can impose if it finds the applicant guilty of the contempt and/or the contravention is proven. As far as these proceedings are concerned, I propose for the reasons given to dismiss the application and, in my view, costs should follow the event.
Whilst it is clear that if the applicant wished to bring the proceedings to an end, he had to bring this application this Court, it is, in my view, important to record that he has been unsuccessful and in a court of this nature where parties do not voluntarily come here but they are brought here by way of an application, it seems to me appropriate that the applicant, unsuccessful in this action, should pay the respondent's costs of and incidental to the application to be taxed, including reserved costs, and that will be the order of the Court.
I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Baumann FM
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