Peterson & Davis
[2022] FedCFamC1F 402
•30 May 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Peterson & Davis [2022] FedCFamC1F 402
File number(s): PAC 1208 of 2016 Judgment of: CAMPTON J Date of judgment: 30 May 2022 Catchwords: FAMILY LAW – PROPERTY – Bankrupt applicant – Trustee-in-bankruptcy appointed – Where the real property of the relationship is vested property for the purposes of the bankruptcy – Where the applicant seeks leave to make submissions in the proceedings despite the trustee’s appointment pursuant to s 90SM(16) – Where the applicant has not demonstrated exceptional circumstances exist – Application for leave refused. Legislation: Bankruptcy Act 1966 (Cth), ss 55, 58, 116
Family Law Act 1975 (Cth), ss 44, 90SM, Pt VIIIAB
Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 (Cth), Item 86A
Cases cited: Hatcher v Cohn (2004) 139 FCR 425; [2004] FCA 1548
Walford & Bantock and Anor [2020] FamCAFC 210
Division: Division 1 First Instance Number of paragraphs: 33 Date of hearing: 30 May – 3 July 2022 Place: Sydney Counsel for the Applicant: Mr George Solicitor for the Applicant: Williamson & Learmonth Solicitors Counsel for the Respondent: Mr Schonell Solicitor for the Respondent: Adams & Partners Lawyers Counsel for the Second Respondent: Mr Marshall SC with Mr Eardley Solicitor for the Second Respondent: Mercantile Legal Services Counsel for the Third and Fourth Respondents: Mr Cook SC Solicitor for the Third and Fourth Respondents: McEvoy Legal ORDERS
PAC 1208 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS PETERSON
Applicant
AND: MR DAVIS
First Respondent
MR CUSSON
Second Respondent
MR B DAVIS (and another named in the Schedule)
Third Respondent
ORDER MADE BY:
CAMPTON J
DATE OF ORDER:
30 MAY 2022
THE COURT ORDERS THAT:
1.The applicant’s application for leave under ss 90SM(15) and (16) of the Family Law Act 1975 (Cth) to make submissions in relation to vested property is refused.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Peterson & Davis has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
CAMPTON J:
These proceedings have been listed for trial over five days before me commencing today.
I record the following matters for the purposes of the trial and these reasons:
(a)Ms Peterson (“the applicant”) and Mr Davis (“the respondent”) agree that the date of termination of their de facto relationship was 15 March 2010. In those circumstances the power of the Court to make orders as to adjustment of property subsequent to the terminated de facto relationship pursuant to s 90SM of the Family Law Act 1975 (Cth) (“the Act”) is enlivened, the relationship terminating on a final basis after 1 March 2009. The provisions of Item 86A of the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 (Cth) no longer having application, the affidavit material of the respondent contending a date of termination of the de facto relationship in 2006.
(b)That in circumstances where the applicant’s Initiating Application for s 90SM relief was filed on 17 March 2016, being greater than two years after the date of termination of the relationship, leave pursuant to s 44(6) of the Act was required to progress proceedings for property adjustment. An Order was made with the consent of the applicant, the respondent and the trustee of the applicant’s bankrupt estate (“the trustee”), being the second respondent to these proceedings, on 15 November 2016 granting leave to commence proceedings for property adjustment out of time pursuant to s 44(3) of the Act. It is agreed that such leave ought to have made reference to s 44(6) of the Act.
(c)The third and fourth respondents were joined to the proceedings on their application by way of an Order made on 15 November 2016.
(d)The proceedings were transferred from what was the Federal Circuit Court to the Family Court of Australia on 23 June 2017.
BACKGROUND
The proceedings listed for trial before me today have a torturous history.
The relevant facts to this application can be shortly stated. The applicant and respondent commenced cohabitation on 15 March 1999 and separated on 15 March 2010. There are three children of their relationship:
(a)Mr X, born in 2001 and aged 21 (“Mr X”);
(b)Mr Y, born in 2004 and aged 17 (“Mr Y”); and
(a)Ms Z, born in 2006 and aged 15 (“Ms Z”).
The parties entered into consent orders regulating the parenting of the children on 24 June 2011.
In 2002, during the course of their relationship, the applicant and the respondent acquired property at C Street, Suburb B (“the Suburb B property”).
By way of transfers dated 31 October 2008, the applicant and the respondent became the legal owners of properties at 1 N Street, D Town and 2 N Street, D Town (together, “the D Town properties”).
On 30 September 2011 the applicant filed a statement of affairs in support of a debtor’s petition for her own bankruptcy pursuant to s 55 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”).
On 5 October 2011 the official trustee in bankruptcy was appointed as trustee of the applicant’s bankrupt estate. On 2 February 2012 Mr Cusson (“the trustee”) was appointed trustee of the applicant’s bankrupt estate in place of the official trustee. The applicant was discharged from bankruptcy on 6 October 2014.
On 30 September 2011, the applicant signed and presented a petition for her own bankruptcy, recording her interests at law in a property located at C Street, the Suburb B property and the D Town properties.
On 6 October 2014, the applicant was discharged from bankruptcy.
THE CURRENT APPLICATION
Section 90SM(15) of the Act constricts the applicant’s involvement in property proceedings pursuant to s 90SM by restricting her capacity to make submissions in relation to property vested in the trustee by operation of s 58 of the Bankruptcy Act (“the vested property”).
This is an oral application made by the applicant for leave, pursuant to ss 90SM(15) and (16) of the Act, to make submissions in the course of s 90SM proceedings in connection with the vested property.
It is not the subject of contest that upon her discharge from bankruptcy, the applicant did not regain her interest in the vested property. That property remains vested in the trustee.
It is also not the subject of contest that one effect of the bankruptcy was to sever any joint tenancy between the applicant and respondent in the Suburb B property and the D Town properties. The trustee is currently registered at law as a tenant in common and in equal shares with the respondent in respect of each of the D Town properties, and owns at law one half of the balance of the proceeds of sale of the Suburb B property, being in the range of about $90,000.
There is little contest that the provisions of the Bankruptcy Act require the trustee’s remuneration and expenses in acting as trustee to be paid from the vested property prior to any distribution to unsecured creditors proven in the bankruptcy.
It is also not the subject of contest that any surplus in the bankruptcy would be payable to the applicant subject to any exercise of the s 90SM discretion by this Court.
There is no dispute that the applicant is required to seek the leave identified to make submissions in respect of the vested property. Although not clearly identified in the submissions made before me today, the property for adjustment as between each of the applicant and respondent is not substantial outside the real property identified in these reasons. The superannuation entitlements of each of the applicant and the respondent are not significant, and no superannuation splitting order is sought.
The applicant contends that exceptional circumstances exist in this case warranting a grant of leave for her to advocate a case as to the property vested in the trustee despite the engagement in the proceedings of that trustee.
It is evident that the applicant’s desire is an effort to inflate, as much as available by way of s 90SM adjustment purposes, any property entitlement she may achieve.
As raised during the course of submissions, in my view, the applicant faces no restriction on her ability to agitate for an interest in the non-vested property. On the evidence before me to date, that non-vested property appears to be:
(a)the respondent’s half interest at law in the proceeds of sale of the Suburb B property; and
(b)the respondent’s half interest at law, held as tenants in common by the respondent with the trustee, in the D Town properties, subject to any claim that the respondent may make seeking to divest himself of that legal interest because it is his case that he has no beneficial interest in the D Town properties. The third and fourth respondents contend in these proceedings that this Court has jurisdiction to hear and determine not only the consensual position between themselves and the respondent, but also the claim they make against the trustee in respect of the beneficial interests they claim in the D Town properties; and
(c)any surplus on the conclusion of the bankruptcy.
The embargo by way of s 90SM(15) precludes the applicant from making submissions at trial “in connection with” any existing legal or equitable property interest that she held at the time of the bankruptcy. That is what would be vested in the trustee. She is not precluded from progressing an entitlement to non-vested property under the provisions of Pt VIIIAB of the Act.
The Full Court in Walford & Bantock & Anor [2020] FamCAFC 210 heard an application for leave to appeal from the refusal of a primary judge to grant leave in the terms as sought by the applicant in this case. In the course of that Full Court decision, it was made clear that the interests that vest in the trustee caught by the provisions of either s 58 or s 116 of the Bankruptcy Act must have crystallised prior to the bankruptcy. That judgment of the Full Court, at paragraph 17, makes it clear that any exercise of discretion pursuant to Pt VIIIAB of the Act for the purposes of s 90SM(15) is not caught by what can be described as “after acquired property” by way of the Bankruptcy Act which does not vest in the trustee.
For the purposes of these proceedings, any interest of the applicant that may come into existence at the conclusion of the s 90SM trial by way of a discretionary exercise of power pursuant to Pt VIIIAB of the Act from the respondent’s current property interests (and not those of the trustee), or by way of a surplus on conclusion of the bankruptcy, do not fall within the compass of s 90SM(15). The applicant, as a discharged bankrupt, has capacity to make submissions as to this property and the restrictions imposed by the section would not apply to this subject matter.
As I understand the applicant’s case, she seeks a greater interest from the respondent’s share at law of the Suburb B property and the D Town properties. This impinges on the vested property.
In her Case Outline filed on 13 April 2020 and relied upon in part in support of this application for leave, the applicant contends that the exceptional circumstances that exist are that:
(a)The value of the bankruptcy initially was a modest sum; and
(b)She and the trustee’s interests are not aligned; and
(c)“All [the trustee] wants is a sum certain to terminate the bankruptcy where the applicant seeks proprietary interests in as many properties as are possible”; and
(d)Since the conclusion of the bankruptcy in 2014, the trustee has done little to administer the estate. There is a query in the submissions as to why the trustee was appointed as trustee at all; and
(e)When the property adjustment proceedings were commenced in 2016, the applicant was not a bankrupt and “what she was doing in these proceedings had to be obvious to all parties.”; and
(f)No party in the case has made any murmuring that she should not be entitled to make submissions.
Neither the Act nor the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) specify a definition of exceptional circumstances. Section 90SM(15) is mandatory in its terms. An “exceptional circumstance” is not a word of art. To my mind, exceptional circumstances require circumstances that are beyond ordinary (see e.g. Keifel J in Hatcher v Cohn (2004) 139 FCR 425 at [49]). All the relevant circumstances of the case must be examined to determine whether exceptional circumstances exist. In my view, no single factor needs to be exceptional. A combination of factors may be regarded as exceptional.
This is not a case where it is contended that the trustee will not be diligent in seeking all funds available are to be recovered. It is unknown whether there will be a surplus in respect of the bankrupt estate having regard to the uncertainty concerning the D Town properties. Nor is this a case where the trustee has not participated in the litigation.
It is a case where the trustee implicitly, by way of senior counsel today, contends that:
(a)The leave sought is opposed; and
(b)The trustee will perform and conduct his role consistently with the terms of his appointment pursuant to the relevant legislation.
In short, the facts in this matter, to my mind, are not out of the ordinary or exceptional.
The misgivings that the applicant has as to the trustee’s role, including that the trustee will not advance her interests in the property case, are simply not available on the evidence. I am confident that the trustee will advance contentions in relation to the vested property so as to maximise the value of that estate. That is the trustee’s function. There is no suggestion that the trustee will not discharge his obligations pursuant to the Bankruptcy Act.
I am not satisfied that the applicant has demonstrated that exceptional circumstances exist so as to warrant her having standing to make submissions in connection to the vested property. In my view, the trustee is the proper party to advance that part of the case.
In the circumstances, I refuse the leave sought by the applicant pursuant to ss 90SM(15) and 90SM(16) of the Act.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 6 June 2022
SCHEDULE OF PARTIES
PAC 1208 of 2016 Respondents
Fourth Respondent:
MS DAVIS
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