Raizzog & Raizzog

[2007] FamCA 1004

FAMILY COURT OF AUSTRALIA

RAIZZOG & RAIZZOG AND ANOR [2007] FamCA 1004

FAMILY LAW – PROPERTY SETTLEMENT – husband’s bankruptcy during the course of the proceedings – adjournment applications on behalf of the Trustee and by the husband – s 79(11) – hearing adjourned

APPLICANT: MR RAIZZOG

FIRST RESPONDENT: MRS RAIZZOG

SECOND RESPONDENT: MR SELANI

FILE NUMBER: BRF 4424 of 2003

DATE DELIVERED: 20 June 2007

PLACE DELIVERED: Brisbane

JUDGMENT OF: The Honourable Justice Jordan

HEARING DATES: 13 November 2006, 19 and 20 June 2007

REPRESENTATION

THE APPLICANT: Appeared on his own behalf (his solicitor having withdrawn on 19 June 2007)

SOLICITOR FOR THE APPLICANT AND TOWN AGENT FOR THE TRUSTEE IN BANKRUPTCY: Mr Smith from Smith & Associates, Brisbane, Qld, withdrew on 19 June 2007

THE FIRST RESPONDENT: Appeared on her own behalf

THE SECOND RESPONDENT: Appeared on his own behalf (through Interpreter)

Orders

IT IS ORDERED THAT

1. The final hearing of this matter be adjourned part-heard before the Honourable Justice Jordan to a date to be fixed on the next mention of the matter.

1. The matter be listed for mention at 9.30 am on 23 August 2007 before the Honourable Justice Jordan.

1. Costs be reserved.

IT IS DIRECTED THAT

1. The Registrar of the Family Court of Australia at Brisbane arrange for service by post of a copy of this order upon Messrs KordaMentha, …, forthwith.

1. Should the Trustee intend to seek leave to intervene in these proceedings, the Trustee should do so by filing an application to that effect on or before 13 August 2007.

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice Jordan delivered this day will for all publication and reporting purposes be referred to as Raizzog & Raizzog & Anor.

FAMILY COURT OF AUSTRALIA AT BRISBANE  

FILE NUMBER: BRF4424/2003

MR RAIZZOG

Applicant

And

MRS RAIZZOG

First Respondent

And

MR SELANI

Second Respondent

REASONS FOR JUDGMENT

EX TEMPORE

1. Ladies and gentlemen, I understand that some progress may have been made.  However, I think it is appropriate that I draw everyone's attention to a potential difficulty.  I have made it abundantly clear to everyone that I wanted to do my very best to have this case heard as best we could, as soon as we could, so that the matter might be finalised and the parties able to get on with their lives.

2. Yesterday, Mr Smith appeared as agent for the Trustee in Bankruptcy and filed an affidavit which attached a sequestration order made in the Federal Magistrates Court on 4 April 2007 and a copy of correspondence dated 18 June 2007, which indicated that they were aware of the family law proceedings and stated that:

   "Given the trial is to commence tomorrow, the Trustees wish to adjourn the hearing, to enable sufficient time to consider the options available in progressing the matter further.  Accordingly, you are instructed to lodge an application to adjourn the matter on these grounds.  It is understood that the Bankrupt has made contact with you directly regarding the above and you have commenced preparing the necessary documentation to have the matter adjourned."

3. I heard the application for an adjournment yesterday and, for reasons that will appear on the record, I refused that adjournment application.  Mr Smith sought leave to withdraw and I then heard from the husband personally who, at the commencement of proceedings, raised similar issues to those raised by Mr Smith in terms of the adjournment.

4. It is fair to say that Mr Smith in his submissions, and the husband in his submissions, focused primarily on issues relating to prejudice to the husband of requiring the matter to proceed and the asserted lack of prejudice to the wife and the grandfather if the matter was adjourned.  As the record will indicate, I focused on the interests of the parties in hearing and determining that application and, in the end result, dismissed the oral application made by Mr Smith.  I received a further submission from the husband in the witness box about the difficulties created for him and indicated that I wanted the trial to proceed.  I made some arrangements to ensure that the husband had access to, and copies of, documents and that is how the matter came before the Court today.

5. In dealing with the matter in that way and having regard to the nature of the submissions in the case, particularly the submissions coming from Mr Smith, who, I had occasion to comment upon, had perhaps placed himself in a compromised position, because he was making submissions which appeared to be more in relation to the husband's case than to the interests of the trustee.  However, perhaps as a result of that distraction, I may have failed to properly address the situation vis-à-vis the trustee. 

6. I now have a copy of a further letter from the trustee today.  It is a copy of a letter that was apparently in the possession of the husband.  I am not to know whether KordaMentha, who are the trustees, have endeavoured to send the original of this document to the Family Court.  It is addressed "Family Federal Court of Australia.  Attention:  The Honourable Justice Jordan", but, in any event, the fact of the matter is, I now have notice of that letter and included in the context of that letter are the following relevant observations:

   "We have instructed solicitor Luke Smith … to seek an adjournment of the proceedings to provide the Trustees sufficient time to properly consider all relevant matters and seek independent legal advice for the purpose of an expeditious resolution of the dispute, and to meet our legislative obligations to creditors of the Bankrupt Estate. 

   We respectfully consider that such an adjournment is necessary due to the following:-

   (1)       The Trustees do not have access to the Bankrupt's file of legal proceedings which is in the possession of Smith's former firm, Hemming & Hart Lawyers due to significant unpaid legal fees …The Trustees are not in a position to consider any options or to obtain legal advice without the file, which we are currently endeavouring to obtain;

   (2)       The Trustees did not receive correspondence regarding the proceedings until 7 June and have not had sufficient time to make satisfactory enquiries or investigations in respect to the limited information available."

7. The trustee then talks about the need to obtain relevant information about the value of matrimonial property, the wish to explore options of resolution, the fact that there are significant funds held in trust at Hemming & Hart, and finally:

   "Failure to secure an adjournment of the proceedings may adversely prejudice the rights of the creditors in the Bankrupt Estate in the absence of sufficient information and time for the Trustees to access vital information and mediate negotiations between all parties.  Accordingly, this may jeopardise the Trustees' ability to maximise any return to creditors of the Bankrupt Estate."

   RECORDED : NOT TRANSCRIBED

8. When one focuses on the interest of the trustee as opposed to the competing interests of the parties themselves, I need to refer myself to the provisions of the Family Law Act and s 79(11) says:

   "If -

   (a)an application is made for an order under this section in proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them; and

   (b)either of the following subparagraphs apply to a party to the marriage:

   (i)when the application was made, the party was a bankrupt;

   (ii)after the application was made but before it was finally determined, the party became a bankrupt; and

   (c)the bankruptcy trustee applies to the court to be joined as a party to the proceedings; and

   (d)the court is satisfied that the interests of the bankrupt’s creditors may be affected by the making of an order under this section in the proceedings;

   the Court must join the bankruptcy trustee as a party to the proceedings.

   (12)  If a bankruptcy trustee is a party to property settlement proceedings, then, except with leave of the court, the bankrupt party to the marriage is not entitled to make a submission to the court in connection with any vested bankruptcy property in relation to the bankrupt party."

9. Of course, it is pertinent to observe that the trustee has not, in fact, at this stage, applied to be joined as a party, and one of my concerns yesterday was that there was no formal application, no material or the like placed before the Court by the trustee.  However, what the trustee is evidencing, albeit in a very sloppy way, in my view, by copy correspondence handed up through the solicitor for the husband, and then through the husband himself, is that they have had insufficient time to properly consider their position, which would include properly considering the option of whether or not they need to be joined.

10. My concern is that if, in the face of that notice, I fail to give the trustee the opportunity to seek leave to intervene and bring the appropriate application, then I may be leading myself into error in making orders that cannot be sustained, or may be set aside by application or by appeal, and although I encouraged the parties to negotiate, they may be in the process of trying to negotiate a resolution which may not be able to be sustained in the face of the husband's bankruptcy.

11. I have had brief reference, in the time I have been considering this whilst the case was stood down, to some of the annotations in the Butterworth service.  I hope to be in a position to provide a more definitive answer if it is required, but I note in paragraph 79.355 the following annotation appears:

    "If the non-bankrupt spouse seeks orders against a bankrupt spouse (or a spouse who becomes bankrupt during the currency of property proceedings) or is or becomes subject to a personal insolvency agreement then provided the orders sought by the non-bankrupt spouse have the potential to effect the claims of creditors the court must join the trustee in bankruptcy as a party to the proceedings.  The trustee will remain a party unless discharged until the conclusion of the proceedings and may be replaced by any subsequent bankruptcy trustee appointed in his/her place. 

    The bankrupt spouse is not entitled to make submissions in respect of property which has vested in the trustee in bankruptcy except with leave of the court.  Leave will only be granted in exceptional circumstances.  The bankrupt spouse would be entitled without leave to make submissions about exempt property, superannuation or financial resources. 

    If the respondent is a bankrupt at the time of the hearing of the s 79 application, he or she will have no property that can be the subject of an order under s 79, since under the Bankruptcy Act his or her property will have vested in the Official Trustee in Bankruptcy."

12. As I say, I am having some research undertaken and I am continuing in my research, but I have become sufficiently concerned that I did not want to allow the parties to engage in, perhaps, a genuine effort to resolve the matter if, legally, they may not be able to resolve it because of the combination of the provisions of the Bankruptcy Act and the Family Law Act.

13. In terms of the Court’s position, in light of the affidavit of Mr Smith filed by leave yesterday and Exhibit 4 in these proceedings, it seems to me that the Family Court must act in comity with other Courts and institutions under Federal legislation and that I do need to give the Trustee in Bankruptcy the opportunity to conduct investigations, consider its position and determine whether or not it needs to be joined in these proceedings and/or to undertake proper investigations which may enable the trustee with the parties to resolve the matters.

14. My current view is that to continue with these proceedings and perhaps to continue with the negotiations may well be an exercise in futility and that I really should adjourn the proceedings.  I note in the letter, Exhibit 4, the trustee would hope that, within a period of two months, they may have at least conducted investigations sufficient to enable them to make decisions and consider whether or not they should seek leave to intervene in these proceedings.

15. This is an entirely regrettable turn of events but, on the face of it, it would appear that the turn of events is beyond the control of any of the parties and the Court and although, in a sense, the wife becomes the victim of the husband's failure to meet his commercial obligations, it seems that the institution of the bankruptcy proceedings by the third party is at arm's length and, at this stage, I have no reason to reject the broad proposition that it is certainly not a step in the process that was sought or welcomed by the husband himself.  That step having been taken by third parties, I cannot be satisfied that it is appropriate that I deal with the property of the parties, the property of the husband.  I may make determinations which purport to vest title to property in the husband or to take some of the property that the trustee might want to argue is the husband's and give it to the wife, when there are the interests of third parties and other creditors now to be considered as a result of the sequestration order.  It is the last thing I wanted, it is the last thing the parties need or this Court needs, but I have concluded that, in all of those circumstances, I am really bound to take that precaution.

    RECORDED : NOT TRANSCRIBED

16. I propose to mention it in, say, two months, and if the trustee does not elect to be joined in that two months, when the matter comes back in two months, I can proceed knowing that I have complied with the letter and the spirit of the legislation and given the trustees protecting the interest of the creditors the opportunity to be heard in these proceedings.  I do acknowledge that, by adjourning it for two months and if the matter is to proceed, it will then be necessary to allocate fresh dates and that will be many months ahead.

    RECORDED : NOT TRANSCRIBED

17. I would propose to list the matter for mention at 9.30 am on Thursday, 23 August 2007, and I will adjourn the applications of each of the parties, reserve the question of costs, direct that the Registrar of the Family Court at Brisbane arrange for service of a copy of this order upon Messrs KordaMentha forthwith and direct that, should the trustee intend to seek leave to intervene in these proceedings, the trustee should do so by filing an application to that effect on or before 13 August 2007.

18. I hand back the market appraisals which may be produced on the next occasion and I can indicate to the parties, if the Trustee in Bankruptcy does not seek to be joined, it would be my intention to give this matter absolute priority, to retain conduct of the matter myself, mention of the matter, and subject to any changes, I would propose to continue to proceed to deal with the matter in the way I had indicated this morning.

    RECORDED : NOT TRANSCRIBED

19. In the letter that the trustees have written, it is estimated they need about two months to conduct necessary enquiries to enable them to determine whether they should participate in these proceedings.  I have given them, effectively, what they request.  If the trustees come back on the 23^rd and say "We have not made up our mind", then I am going to press on because I can say, well, you asked for that time, I have given you what you asked to protect the interests of third parties, and the priority of this Court to fulfil its obligations to the parties before it would then outweigh the unidentified interests of the creditors.  I have every sympathy for everyone in this room that this is just a nightmare that will not go away and people's lives are on hold.  I see the injustices that have been operating in this case because of delay.  Justice delayed is justice denied.  I am well aware of that and I intend to do all I can, even look at options of reworking the calendar, so that I can get to the hearing of this matter and give everyone an outcome as soon as is humanly possible.

    RECORDED : NOT TRANSCRIBED

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Jordan

Associate: 

Date: