Naudi and Reid as Trustees of the Bankrupt Estate of Albarouki v Albarouki
[2018] FCCA 1295
•22 May 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| NAUDI & REID AS TRUSTEES OF THE BANKRUPT ESTATE OF ALBAROUKI v ALBAROUKI | [2018] FCCA 1295 |
| Catchwords: BANKRUPTCY – Application by respondent to transfer proceedings to the Family Court – where applicant trustees have made application to set aside property transactions pursuant to ss.120 and 121 of Bankruptcy Act – where consent property orders were made in the Family Court – where trial in this Court imminent – where unexplained delay in making application for transfer – application dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.35A(1), 120 and 121 Family Law Act 1975 (Cth), ss.79(1) & 79(1)(b) & 79A and 39(1A) |
| Cases cited: Macks v Edge (2006) 156 FCR 302 Re Sabri; Ex parte Sabri v Brien (1995) 60 FCR 131 |
| Applicant: | ROBERT WILLIAM NAUDI AND STUART GEORGE REID IN THEIR CAPACITIES AS JOINT AND SEVERAL TRUSTEES OF THE BANKRUPT ESTATE OF NIDAL ALBAROUKI |
| Respondent: | SHARON BUSHRA ALBAROUKI |
| File Number: | ADG 92 of 2017 |
| Judgment of: | Judge Heffernan |
| Hearing date: | 3 May 2018 |
| Date of Last Submission: | 3 May 2018 |
| Delivered at: | Adelaide |
| Orders made on: | 3 May 2018 |
| Reasons published on: | 22 May 2018 |
REPRESENTATION
| Counsel for the Applicant: | Ms G Walker |
| Solicitors for the Applicant: | DW Fox Tucker Lawyers |
| Counsel for the Respondent: | Mr P Britten-Jones |
| Solicitors for the Respondent: | Brander Smith McKnight |
ORDERS
The respondent’s application to transfer the proceedings to the Family Court of Australia is dismissed.
The respondent, Sharon Bushra Albarouki, is to make discovery on oath on or before 10 May 2018.
The respondent, Sharon Bushra Albarouki, pay the applicant Trustee in Bankruptcy’s costs of the application dismissed today.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 92 of 2017
| ROBERT WILLIAM NAUDI AND STUART GEORGE REID IN THEIR CAPACITIES AS JOINT AND SEVERAL TRUSTEES OF THE BANKRUPT ESTATE OF NIDAL ALBAROUKI |
Applicant
And
| SHARON BUSHRA ALBAROUKI |
Respondent
REASONS FOR JUDGMENT
On 3 May 2018, I made orders dismissing the respondent’s application to transfer these proceedings to the Family Court of Australia and requiring the respondent to make discovery on oath. These are my reasons for those orders.
By her Application in a Case, dated 14 February 2018, the respondent sought orders that these proceedings be transferred to the Family Court of Australia pursuant to s.35A(1) of the Bankruptcy Act 1966 (Cth) (‘the Bankruptcy Act’). That section provides as follows:
“(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.”
The application was supported by an affidavit of the respondent’s solicitor. That affidavit asserts that the subject matter of the applicant’s proceedings, namely the transfer of three properties from the now bankrupt Nidal Albarouki to his wife, the respondent, in 2013, are not voidable transactions by virtue of ss.120 and 121 of the Bankruptcy Act as alleged by the applicant trustee.
This is because of:
i)an alleged agreement between the bankrupt and the respondent in November 2012 to transfer the properties to the respondent;
ii)an alleged binding financial agreement between the bankrupt and the respondent signed in April 2013; and
iii)consent orders in relation to those properties in the Family Court pursuant to s.79(1) of the Family Law Act 1975 (Cth) (‘the Family Law Act’) made on 30 July 2013.
The respondent’s position is that even if the earlier transfers had not occurred, the properties would not have been available to the creditors of the bankrupt estate because of the effect of the consent orders made by the Family Court. In the event that I was to make orders sought by the applicant trustees, setting aside the consent orders, it was submitted that an inevitable consequence would be that the respondent would make an application in the Family Court of Australia, pursuant to s.79(1) of the Family Law Act to alter the interests of the trustees in bankruptcy vested in them as a result of any orders in these proceedings.
The respondent submits that these proceedings should be transferred to the Family Court so as to avoid this Court making orders inconsistent with the consent orders made in the Family Court, and in order to avoid a multiplicity of actions.
Mr Britten-Jones, for the respondent, referred me to the decision of Besanko J in Macks v Edge[1], a matter with some similarities to the facts of this case. In that matter, his Honour found that the Federal Court had jurisdiction to hear the trustee’s claim, but no jurisdiction to hear Mrs Edge’s claim because it was dependent on the provisions of the Family Law Act. In contrast, the Family Court had jurisdiction to hear and determine both claims.[2]
[1] (2006) 156 FCR 302.
[2] Ibid at [42].
His Honour observed that the existence of orders in the Family Court was a powerful consideration pointing in favour of transfer to that Court in order to avoid a conflict of orders between Courts. I was also referred to three further decisions of the Federal Court to similar effect.[3]
[3] In Re Sabri; Ex parte Sabri v Brien (1995) 60 FCR 131; Official Trustee in Bankruptcy v Higgins (2000) 109 FCR 1; Combis v Jensen (2009) 179 FCR 150.
Of course, one distinguishing feature between the Federal Court and this Court is that the Federal Court does not have jurisdiction with respect to property matters under the Family Law Act, whereas this Court does.
The respondent submitted that the consent orders in the Family Court were final orders, valid unless and until set aside, and that the effect of s.79A of the Family Law Act means that it is only in limited circumstances that a final property order will be varied or set aside.
It was submitted that it was fatal to the applicant’s opposition to transfer that no application had been made by them in the Family Court to set aside those consent orders. In that regard, it was submitted that it was not to the point that the applicants rely in these proceedings on the property transfers of April 2013, which predated the consent orders, because the transfer is deemed to have taken effect by reason of the Court orders in the Family Court and not the consent of the parties, even if that consent amounted to a contract between them.[4]
[4] Official Trustee in Bankruptcy v Mateo (2003) 127 FCR 217 at [133].
It was submitted that it would be more efficient and less costly for both matters to be heard in the Family Court.
For the applicants, Ms Walker submitted that the power to transfer under s.35A of the Bankruptcy Act is discretionary and that factors impacting on the discretion include:
a)Whether proceedings in the Family Court, are on foot, or merely foreshadowed;
b)Whether foreshadowed Family Court proceedings are contingent on the outcome of the subject proceedings;
c)Whether the matters sought to be determined by the Family Court are a necessary element or pre-condition for these proceedings;
d)The timeliness within which the application for transfer has been made; and
e)The status of the proceedings in this Court.
Further, the applicant submitted that where a party has invoked the jurisdiction of a competent Court, it has a prima facie right to have the claim heard and determined in that Court.[5]
[5] Combis, op cit, at [57].
The lateness of the application, given the impending trial date in these proceedings of 14 May of this year, gave rise to considerations of the kind referred to in Aon Risk Services Australia Ltd v Australian National University.[6]
[6] (2009) 239 CLR 175.
For that reason, to the extent that there was any prejudice caused to the respondents by a refusal to transfer the proceedings, this was properly to be borne by her because of the delay in making the application. It was submitted that there are no proceedings on foot in the Family Court and that any foreshadowed application by her is entirely contingent upon the outcome of these proceedings. The respondent will not be prevented from making a later application in the Family Court and could, had she been better organised, have made an alternative pleading in this matter seeking the relevant orders in the event that they were necessary. The delay in making the application is significant and unexplained, this matter having been listed for trial in August of 2017, and a delay in serving this application of over a month.
Conversely, it was submitted that if the trial date is vacated and the proceedings transferred, then the applicant will experience significant prejudice, their inquiries indicating that a trial listing in the Adelaide Registry of the Family Court would not be possible in under 12 months. In addition, the trustees will not be able to finalise their obligations under the Bankruptcy Act until after this matter has been determined, and the creditors will accordingly suffer prejudice.
Consideration
I am not satisfied that the respondent has provided an adequate explanation for the delay in making the application for transfer of proceedings. There is no apparent reason why such application could not have been made prior to the trial being listed. Further, this Court has jurisdiction in property matters under s.79 of the Family Law Act,[7] and as a result can make orders pursuant to s.79(1)(b).
[7] See the definition of ‘matrimonial causes’ in the Bankruptcy Act and s.39(1A) of the Family Law Act.
I am satisfied that the trustees would suffer prejudice if the trial were to be vacated and this matter transferred. I refuse the application to transfer these proceedings. I am further satisfied that the purported discovery on oath by the solicitor for the respondent is insufficient. It is the respondent herself who should be deposing to relevant documents in her possession, power and control.
I have for that reason ordered her to do so and make the orders to be found at the beginning of these reasons.
I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Judge Heffernan
Associate:
Date: 22 May 2018
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