Official Trustee in Bankruptcy v Higgins - [2000] FCA 1850

FEDERAL COURT OF AUSTRALIA
Official Trustee in Bankruptcy, the Trustee of the Property of Phillip Martin Higgins v Higgins [2000] FCA 1850
BANKRUPTCY – application to set aside a transfer of property from a husband to his wife – whether the provisions of the Bankruptcy Act relating to voidable dispositions are subservient to the Family Law Act – where the transfer was made pursuant to orders of the Family Court
JURISDICTION – bankruptcy – whether the Federal Court has jurisdiction to set aside a transfer of property – whether, as a matter of discretion, the Federal Court should transfer the matter to the Family Court – where the transfer was made pursuant to orders of the Family Court – where the transferor subsequently became a bankrupt
Family Law Act 1975 ss 79 & 79A
Bankruptcy Act 1966 ss 35A & 120
Re Sabri; Ex parte Brien v Australia and New Zealand Banking Group Ltd (1996) 21 Fam LR 213 cited
Silvera v Savic (1999) 46 NSWLR 124 cited
Re Baxter; Ex parte Official Receiver v Baxter (1986) 10 FCR 398 not followed
Re Sabri; Ex parte Sabri v Brien (1995) 60 FCR 131 followed
Noakes v Harvey Holmes & Son (1979) 26 ALR 297 followed
IN THE MATTER OF PHILIP MARTIN HIGGINS
OFFICIAL TRUSTEE IN BANKRUPTCY, THE TRUSTEE OF THE PROPERTY OF PHILLIP MARTIN HIGGINS, A BANKRUPT v DIANE TRACEY HIGGINS
N7800 OF 2000
TAMBERLIN J
SYDNEY
15 DECEMBER 2000

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

7800 OF 2000

IN THE MATTER OF PHILLIP MARTIN HIGGINS

BETWEEN:

OFFICIAL TRUSTEE IN BANKRUPTCY, THE TRUSTEE OF THE PROPERTY OF PHILLIP MARTIN HIGGINS,
A BANKRUPT
APPLICANT

AND:

DIANE TRACEY HIGGINS
RESPONDENT

JUDGE:

TAMBERLIN J

DATE OF ORDER:

15 DECEMBER 2000

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.The application is transferred to the Family Court of Australia.
2.The costs of the proceeding in the Federal Court are to be costs in the cause of the trustee’s application which is the subject of the transfer.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

7800 OF 2000

IN THE MATTER OF PHILLIP MARTIN HIGGINS

BETWEEN:

OFFICIAL TRUSTEE IN BANKRUPTCY, THE TRUSTEE OF THE PROPERTY OF PHILLIP MARTIN HIGGINS,
A BANKRUPT
APPLICANT

AND:

DIANE TRACEY HIGGINS
RESPONDENT

JUDGE:

TAMBERLIN J

DATE:

15 DECEMBER 2000

PLACE:

SYDNEY

REASONS FOR JUDGMENT

The Motion before me arises in an application for a declaration that a transfer of residential property (“the property”) by Phillip Higgins, the bankrupt husband of the respondent, to the respondent is void as against the applicant trustee.
The question for determination on the Motion is whether the Federal Court has the power to order a transfer of the property to the applicant without Consent Orders made under s 79 of the Family Law Act 1975 on 11 October 1999 (“the Consent Orders”) in the Manly Local Court have been set aside. The…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2000] FCA 1850
Decision Date: 15 DECEMBER 2000

CaseChat Overview and Summary

The matter before the court involved the Official Trustee in Bankruptcy, who sought to have certain property transferred to the trustee for the benefit of the bankrupt's creditors. The dispute centred around a property transfer agreement made between Phillip Martin Higgins, the bankrupt, and Diane Tracey Higgins, the respondent, who was also his wife at the time. The dispute arose from the property transfer agreement made on 11 October 1999, where Phillip Martin Higgins transferred his interest in the property to Diane Tracey Higgins as part of consent orders made in family court proceedings. The Official Trustee in Bankruptcy sought to have the transfer set aside as a preference to one creditor, Diane Tracey Higgins, over others, as Phillip Martin Higgins was unable to pay his debts at the time of the transfer.

The legal issues before the court were whether the transfer of the property constituted a preference under the Bankruptcy Act 1966 (Cth), and if so, whether the court could set aside the transfer under s 79A of the Family Law Act 1975 (Cth). The court also needed to determine if it had the jurisdiction to transfer the proceeding to the Family Court of Australia under s 35A of the Family Law Act.

The court found that the transfer of the property did constitute a preference under the Bankruptcy Act as Phillip Martin Higgins was unable to pay his debts at the time of the transfer. However, the court held that it did not have jurisdiction to set aside the transfer under s 79A of the Family Law Act, as this section did not confer jurisdiction to the court. The court further held that it could transfer the proceeding to the Family Court of Australia under s 35A of the Family Law Act, as this section allowed the court to transfer proceedings on its own motion.

In conclusion, the court found that the application should be transferred to the Family Court of Australia, and that the costs of the proceedings in the Federal Court should be costs in the cause of the trustee's application that was the subject of the transfer.

Orders

Orders of the court

1. The application is transferred to the Family Court of Australia.

2. The costs of the proceeding in the Federal Court are to be costs in the cause of the trustee’s application which is the subject of the transfer.

Note:

Background

Background to the litigation

The parties have agreed on the following Statement of Facts. “STATEMENT OF AGREED FACTS1.On 29 October 1990, by Real Property Act 1900 (NSW) Transfer Z307897 (“First Transfer”) the property described in Folio Identifier 2/7934546, being legal title to property known as 28 Peppermint Grove, Engadine, NSW (“Property”) was transferred from the NSW Land and Housing Corporation to Phillip Martin Higgins (“Bankrupt”) and to Diane Tracey Higgins (“Respondent”) as joint tenants as to two-thirds, and to Myrtle Olive Bloomfield as to the remaining one-third share, as tenants-in-common.2.The Bankrupt was, at all relevant times, a director of a company styled Comsite Glass & Glazing Pty Limited (“Comsite”).3.Before September 1999, the Deputy Commissioner of Taxation (“DCT”) prepared and issued to the Bankrupt a Director Penalty Notice complying with the Income Tax Assessment Act 1936 (Cth) (“Director Penalty Notice”) for the amount of $136,616.22 (“Director Liability”).4.Before September 1999, the Bankrupt received the Director Penalty Notice.5.The Bankrupt failed within 14 days of receipt of the Director Penalty Notice, to:(a)place Comsite into voluntary administration; or(b)place Comsite into liquidation; or(c)discharge the taxation liability of Comsite to the DCT.6.By September 1999 and as a result of not complying with the Director Penalty Notice, the Bankrupt became personally liable to the DCT for the Director Liability, as a debt due to the Commonwealth (“Director Liability”).7.On 11 October 1999, the Bankrupt commenced proceedings against the respondent in the Local Court of NSW at Manly, exercising jurisdiction under the Family Law Act 1975 (Cth), in proceedings 125/990152 (“Family Court Proceedings”).8.Pursuant to the Family Court Proceedings and on 11 October 1999, the Bankrupt and the Respondent filed in the Family Court Proceedings an Application for Consent Orders pursuant to Order 14 Rule 2 of the Family Law Rules (“Application”).9.Pursuant to the Application the bankrupt and the Respondent submitted consent orders to Manly Local Court providing that, inter alia, within 30 days of the making of those orders or such other date agreed in writing, the Bankrupt would do all the necessary acts and things and sign all necessary documents to transfer to the Respondent the whole of the Bankrupt’s right, title and interest in the Property (“Consent Orders”).10.The Local Court of NSW at Manly granted the Application, and made the Consent Orders on 11 October 1999.11.The Bankrupt transferred the whole of his interest in the Property to the Respondent on or about 24 January 2000, pursuant to the Real Property Act 1900 (NSW) Transfer 6507510 (“Second Transfer”).12.The Respondent gave no consideration for the interest in the Property which was transferred to her pursuant to the Second Transfer unless the Consent Orders, or the consent underlying them constitutes consideration.13.At the time of making the Consent Orders, the Bankrupt was unable to pay his own debts, including the Director Liability, from his own moneys as and when they fell due.14.At the time of lodging the Second Transfer, the Bankrupt was unable to pay his own debts, including the Director Liability, from his own moneys as and when they fell due.15.At the time of registration of the Second Transfer, the Bankrupt was unable to pay his own debts, including the Director Liability, from his own moneys as and when they fell due.16.On 11 February 2000, Phillip Martin Higgins (“Bankrupt”) became bankrupt, upon the acceptance of the Bankrupt’s Debtor’s Petition by the Official Receiver (“Debtor’s Petition”).17.At the time of filing, the Debtor’s Petition was accompanied by the statement of the Bankrupt’s Affairs, signed by the Bankrupt on 10 February 2000 (“Statement of Affairs”) …18.The Bankrupt and the Respondent are currently married, and reside at the Property.”SUBMISSIONS

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

TAMBERLIN J

In the course of submissions reference was also made to s 22 of the Federal Court of Australia Act 1976 which requires this Court to avoid multiplicity of proceedings and to grant all remedies to which any of the parties appears to be entitled in respect of any claim properly brought forward in the proceeding. That section, however, does not confer jurisdiction on this Court and could not, of course, confer jurisdiction to set aside the Consent Orders under s 79A of the Family Law Act: cf Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 489. Nor could s 22 require this Court to make orders under the Act where it considers that it is more appropriate that a bankruptcy proceeding should be transferred under s 35A to the Family Court. The Court can transfer on its own motion under that section.CONCLUSION The application should be transferred to the Family Court of Australia. The costs of the proceedings in this Court should be costs in the cause of the trustee’s application that has been transferred.

Ratio Decidendi

Legal Principle Established

Established by: TAMBERLIN J

Full text does not contain this section.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	7800 OF 2000

BETWEEN:	OFFICIAL TRUSTEE IN BANKRUPTCY, THE TRUSTEE OF THE PROPERTY OF PHILLIP MARTIN HIGGINS, A BANKRUPT APPLICANT
AND:	DIANE TRACEY HIGGINS RESPONDENT
JUDGE:	TAMBERLIN J
DATE OF ORDER:	15 DECEMBER 2000
WHERE MADE:	SYDNEY

JUDGE:	TAMBERLIN J
DATE:	15 DECEMBER 2000
PLACE:	SYDNEY