Rajavade & Rajavade (No 4)
[2023] FedCFamC1F 349
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Rajavade & Rajavade (No 4) [2023] FedCFamC1F 349
File numbers PAC 2172 of 2022 and PAC 1041 of 2019 Judgment of WILSON J Date of judgment 10 May 2023 Catchwords FAMILY LAW – ARBITRATION – BANKRUPTCY – husband’s sequestration order made after the filing of his unsuccessful application to set aside award but before orders were made dismissing the husband’s application to set aside the award – consequences of husband’s bankruptcy – wife seeking costs against husband’s solicitor – whether solicitor liable for costs – held, no. Legislation Bankruptcy Act 1966 (Cth) ss 58(1), 60 and 116
Family Law Act 1975 (Cth) ss 13E and 13H
Cases cited British South Africa Co v Companhia de Mocambique [1893] AC 602
Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545
Bullock v Goodluck and Transport Commission (1983) 48 ALR 217
Faulkner v Bluett (1981) 52 FLR 115
Moss v Eaglestone (2011) 83 NSWLR 476
Paviello & Paviello [2022] FedCFamC1F 592
Rajavade & Rajavade (No 2) [2023] FedCFamC1F 39
Rajavade & Rajavade [2023] FedCFamC1F 32
Division Division 1 First Instance Number of paragraphs 59 Date of last submissions 21 April 2023 Date of hearing 24 March and 21 April 2023 Place Melbourne Solicitors for the applicant Huk Legal Services Pty Ltd Solicitors for the respondent Harish Prasad & Associates Solicitors for the intervener Wallmans Lawyers ORDERS
PAC 2172 of 2022
PAC 1041 of 2019FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN MR RAJAVADE
Applicant
AND MS RAJAVADE
Respondent
MR SPENCER AS TRUSTEE OF THE BANKRUPT ESTATE OF MR RAJAVADE
Intervener
order made by
WILSON J
DATE OF ORDER
10 May 2023
THE COURT ORDERS THAT –
1.The wife's application for Mr Warraich to pay her indemnity costs is dismissed.
2.The trustee's application for the wife to pay the trustee the sum of $121,046.75 is refused.
3.I adjourn the further hearing of this proceeding to 10:00am on 26 May 2023 for mention in the National Arbitration List.
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 a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
WILSON J
INTRODUCTION
The wife seeks her costs of the unsuccessful application brought by the husband to set aside the arbitral award.
She seeks indemnity costs against the husband’s solicitors.
On 29 November 2022 a sequestration order was made against the husband.
CHRONOLOGICAL SETTING
The relevant chronology in this proceeding commenced on 18 June 2021 after the arbitrator extended the date on which the arbitral award was to be published so on that day I made an order by consent adjourning the proceeding to the National Arbitration List on 12 July 2021.
The award was published on 23 June 2021.
On 6 July 2021 the wife applied to register the award.
On 12 July 2021 I ordered by consent under s 13H of the Family Law Act that the award be registered, which it was.
On 26 April 2022 the husband filed an application to set aside the award dated 23 March 2022. That application was prepared by the husband’s solicitor, Imran Warraich.
On 6 May 2022 the respondent appeared before me (but not the wife) so I adjourned the further hearing of this proceeding to 6 June 2022.
The husband filed an affidavit made 1 June 2022. It was prepared by Mr Warraich whose details appeared on page 4 of that affidavit.
The appearance ordered on 6 May 2022 to be conducted 6 June 2022 was adjourned to 8 June 2022.
On 8 June 2022 the wife made an affidavit in relation to her own application for orders enforcing the award. That application was prepared by Mr Sirohi of Harrish Prasad, solicitors.
On 17 June 2022 this proceeding came before me at which time Mr Warraich appeared but no appearance was entered by the wife so I adjourned the proceeding to 28 June 2022.
The proceeding was further adjourned to 14 July 2022.
On 5 July 2022 Mr Sirohi, the wife’s solicitor, made an affidavit in support of the wife’s enforcement application.
On 28 July 2022 the husband made another affidavit in support of his application to set aside the award. In it he complained that his previous solicitors did not follow his instructions with the consequence, so he said, that he had been “greatly disadvantaged by this Arbitration Award”. That affidavit did not bear the professional details of Mr Warraich.
On 15 August 2022 this proceeding came before me in the National Arbitration List. I made consent orders requiring the parties to file points of claim and points of defence, all to be completed by 31 August along with the filing of any further affidavit material and submissions by 28 September 2022 with a view to an interlocutory contested application being heard on 3 October 2022.
The husband duly filed points of claims on his setting aside application by the date ordered. Those were prepared by Mr Warraich.
The wife duly filed points of defence in relation to the setting aside application by the date ordered. Those were prepared by Mr Sirohi.
Mr Warraich filed his client’s submissions on the husband’s setting aside application on 28 September 2022, as ordered.
On 28 September 2022 Mr Sirohi on behalf of the wife filed her case outline resisting the husband’s application to set aside the award.
On 5 October 2022, both solicitors appeared before me and orders were pronounced, although not by consent, for the filing and serving of any additional affidavit material on 19 and 26 October respectively with the proceeding being adjourned to 2 November 2022.
The husband filed an additional affidavit prepared by Mr Warraich on 19 October 2022.
The wife filed an additional affidavit on 27 October 2022 prepared by Mr Sirohi.
The proceeding could not be heard on 2 November 2022 so I adjourned it to 17 November 2022.
On 17 November 2022 Mr Warraich and Mr Sirohi appeared before me at which time I told the parties I would decide the competing applications on the papers.
THE HUSBAND’S BANKRUPTCY
At no stage in the period between the making of the s 13E order in this case on 23 November 2020 referring this proceeding to arbitration and 29 November 2022 being the date of the sequestration order did either solicitor inform me that an application was before the Federal Court of Australia in the New South Wales Registry in which C Lawyers, as creditors, sought a sequestration order against the estate of the husband. If Mr Warraich, as the husband’s solicitor in the application before me, was aware of the proceeding NSD684 of 2022 in the Federal Court of Australia, as an officer of the court he was duty bound to have disclosed that information to me the moment it came to his attention. The husband, as a litigant in the proceeding before me, was under a duty to disclose all documentation relevant to the proceeding in the Federal Court of Australia.[1] Not knowing what Mr Warraich knew as at 29 November 2022 on the matter of his client’s bankruptcy, I am unable to say whether or not Mr Warraich dutifully discharged his duty to the court. But I can say that the husband seriously breached the duty of disclosure he owed the court in accordance with my decision in Paviello & Paviello.
[1] Paviello & Paviello [2022] FedCFamC1F 592.
Pursuant to the orders made by a Registrar of the Federal Court of Australia on 29 November 2022, a sequestration order was made on that day against the estate of the husband and Mr Spencer was appointed as the husband’s trustee-in-bankruptcy.
Pursuant to the provisions of the Bankruptcy Act, the making of a sequestration order caused proceedings in which the husband was involved to stop. Thereafter, any proceeding in which the husband was a respondent or defendant (if in a common law court) could only be enlivened by order of the court.[2]
[2] Bankruptcy Act 1966 (Cth) s 60(2).
Accordingly, by force of the order made on 29 November 2022, this proceeding came to a halt requiring –
(a)the wife to obtain leave to proceed against the bankrupt in relation to her enforcement application, an application in which the trustee-in-bankruptcy was most likely interested; and
(b)the trustee to decide whether to proceed with the husband’s application to set aside the arbitral award.
Instead, this proceeding went forward as if the sequestration order had not been made.
On 2 December 2022 the husband himself sent an email to my associates. It was in such cryptic form that I was not made aware of its contents until 28 April 2023. The email stated as follows –
Hi,
I have three court case are going on:
1. PAC2172/2022
2. PAC1041/2022
3. […]
I am waiting for the final orders for file PAC2172/2022 and PAC1041/2022, and as per the order released on 17th November all application can be put on hold but on 29th November, court made order for application […].
so I am waiting for application PAC2172/2022 and PAC1041/2022 outcome, can you please give me an update on the next steps or procedure.
looking forward to hearing from you soon.
Thank you for your time in advance.
Regards,
[Mr Rajavade]
M: […]
On 10 December 2022 the husband sent another email to my associates. Aside from the fact that he should not have been communicating directly with my associates as he had retained Mr Warraich as his solicitor, on 28 April 2023 I learned for the first time of his email dated 10 December 2022. It was equally cryptic. It stated as follows –
Dear all,
Apologies for the last email, I was not aware that I have to include everyone in the email.
I have three court case are going on:
1. PAC2172/2022
2. PAC1041/2022
3. […]
The timeline and brief description of my all court application are as below:
•I did apply for my divorce application in 2019, and it was sorted out at that time by Solicitor [Mr D].
•After that my property settlement application was started by the same solicitor, during this time we found out that my ex-wife has multiple accounts in different banks and they moved money from our joint accounts to those accounts and at the end it was withdrawn on many occasions.
•With this information, [Mr D] applied for the forensic report of their account to clear all the matter and we found out from the forensic report that they moved a large amount of money from our joint account to their personal account without my permission and informing me.
•During this process, I was been unsatisfied with the punctuality of [Mr D] on my court matter and then I change my advocate from [Mr D] to [Mr E] in June 2020.
•During Covid, it took a lot of time to even process my application. But when the court became normal as before in 2021 then I found out that the settlement award was being processed.
•During this award process, I found out that [Mr E] didn’t investigate properly about all the accounts and especially the forensic report which was crucial in this situation. I was telling [Mr E] many times via email and personal appointment to investigate the matter properly and then go for the award settlement but with lack of investigation and in my understanding my ex-wife lawyer and my lawyer did the settlement internally without informing anything to me, and in my eye they did fraud to me in the property settlement application.
•When I found out that I moved to third lawyer Mr. Imran Warraich with hope that this time it will work out in a fair manner. But during this time [Mr E] put the court case on me for the outstanding invoice amount and I was told that I don’t have sufficient money to pay you because the award hasn’t been finalized in a fair manner and I don’t have any money to pay you.
•Since November 2018, I have been living outside of my home, without any money, I have only money which I am earning on my full time job, and due to satisfactory service form [Mr E] and moreover he did file this award in a way that I will be on the losing side, due to this reason I am not paying any money and non the less I don’t have money to pay him.
•In my property application, it was been ordered that all the application will going to review at same time but I am waiting for the final orders for file PAC2172/2022 and PAC1041/2022, and as per the order released on 17th November all application can be put on hold but on 29th November, court made order for application […] so I am waiting for application PAC2172/2022 and PAC1041/2022 outcome, can you please give me an update on the next steps or procedure.
•I also filed the OLSC complaint against [Mr E] on this matter and the complaint number for this is […].
•It is kind request of you all to take this matter in consideration and give me updates and details on the next step from this point.
•On this matter is you need more information than please contact my lawyer Mr. Imarn Warraich (email: […], M: […])
Looking forward to hearing from you soon.
Thank you for your time in advance.
Regards,
[Mr Rajavade]
M: […]
The trustee-in-bankruptcy had assumed control of this litigation on behalf of the husband by 10 December 2022. The husband had no standing to write to me either on 2 or 10 December 2022.
Having no knowledge of the husband’s bankruptcy, on 3 February 2023 I handed down reasons dismissing the husband’s application to set aside the arbitral award.[3] Various superficial errors appeared in those reasons which were subsequently corrected.[4]
[3] Rajavade & Rajavade [2023] FedCFamC1F 32.
[4] Rajavade & Rajavade (No 2) [2023] FedCFamC1F 39.
As the husband’s application to set aside the arbitral award was dismissed, based on the information then available to me (there being no other information brought to my attention about the husband’s bankruptcy) I affirmed the arbitrator’s orders that commanded the husband to execute documents to give effect to paragraphs 2.1 and 2.2 of the award.
Had I been informed of the husband’s bankruptcy on 29 November 2022, the better approach would have been to refuse to determine the husband’s setting aside application until the trustee‑in-bankruptcy had formed a view about how to proceed with the husband’s bankrupt estate. That did not occur until later.
After the wife brought her application for costs dated 17 February 2023 consequent upon the husband’s failure in his application to set aside the award, the details of the husband’s bankruptcy came to light.
On 24 March 2023 this proceeding came before me pursuant to judgment orders made by me on 22 March 2023. Mr Sirohi appeared for the wife, Mr Warraich did not appear and Mr Sankey, solicitor, appeared for the trustee-in-bankruptcy. Mr Sankey informed me that the husband presented his own petition in bankruptcy. It seemed that may not have been correct in view of the orders made on 29 November 2022 in which it was recorded that a petitioning creditor obtained orders for the sequestration of the husband’s estate. At all events, the following exchange took place –
HIS HONOUR – Well, let me just bring you up to date, and stop me if you’re already across this, but it turns out that after the date of the presentation of the bankrupt’s own petition, he – seemingly without reference to the trustee – pressed for an application to review the arbitral award. Now, there’s a debate about whether he had standing to do that, and the solicitor then representing him put together costs – I beg your pardon, put together submissions and affidavits and various things at a time when the bankrupt’s status was in doubt. First things first, what do you say about the legitimacy of the bankrupt, knowing that he was in fact bankrupt and had trustees representing him, participating in this arbitration challenge after his bankruptcy? Did he have standing to do it?
MR SANKEY – Well, I haven’t seen the arbitral award and what it deals with, but if it deals with property which vests pursuant to section 58 of the Act, which I suspect it does in part, at least - - -
HIS HONOUR – Yes, it does.
MR SANKEY – - - - then he wouldn’t have had standing because that property would be vested in the trustee for the benefit of creditors. If it dealt with matters that sit outside – so property matters that sit outside the operation of section 58 – for instance, superannuation and so on – then it may well be that he did have standing in respect of that limited component, but we haven’t been provided with any material and I don’t have access to the portal to investigate what the award dealt with. So I think the answer is he probably had limited standing, but certainly not standing to be heard, for instance, in respect of the real property interests.
I requested Mr Sankey to investigate matters, then to file and serve affidavit material and submissions about the issues raised by the husband’s bankruptcy. I adjourned the proceeding to 21 April 2023.
By application in a case filed 18 April 2023 the trustee-in-bankruptcy addressed certain legal and factual matters. In précis form, they were as follows –
(a)pursuant to s 58(1) of the Bankruptcy Act, upon a debtor becoming bankrupt the property of the debtor vests in the Official Trustee;
(b)pursuant to s 60 of the Bankruptcy Act, a bankrupt may continue in his own name a personal injuries claim or an action in respect of the death of, relevantly, his spouse or family member;
(c)s 116 of the Bankruptcy Act made provision for events relevant to this case;
(d)s 60 is silent as to whether a bankrupt can commence a proceeding after the date of his bankruptcy;
(e)in order for a bankrupt to commence a proceeding under s 60, the bankrupt must establish that the right to sue has been retained by the bankrupt and that the right has not vested in the bankrupt estate;[5]
[5] Faulkner v Bluett (1981) 52 FLR 115.
(f)choses in action are prima facie included as property in the bankrupt’s estate[6] for the purposes of s 116(2)(g);
(g)if a bankrupt is to commence a proceeding which is exempt under s 116(2)(g) of the Bankruptcy Act, the proceeding must be capable of going forward without reference to the bankrupt’s right to the property that is divisible among creditors;[7]
(h)only the claim permitted to proceed by operation of s 116(2)(g) may proceed and all other claims must be struck out;[8]
(i)for the bankrupt in this case to continue to participate in his challenge to the arbitral award, the bankrupt was required to establish that the right to continue with this proceeding did not vest in the trustee;
(j)the arbitral award determined that the bankrupt was the owner of the bankrupt’s superannuation entitlements;
(k)s 116(2)(g) may prevent the bankrupt from seeking to challenge that finding;[9]
(l)the arbitral award determined that the bankrupt was to transfer the bankrupt’s motor vehicle to the wife;
(m)by operation of s 116(2)(ca) of the Bankruptcy Act the bankrupt may be prevented from challenging that order;
(n)applying the holding in Bullock v Goodluck, if the value of the vehicle was less than $8,500, then the bankrupt may be prevented from challenging the order for the transfer of the motor vehicle; and
(o)the vehicle was said to be worth $2,500 and so it was not property that vested in the trustee.
[6] Moss v Eaglestone (2011) 83 NSWLR 476 (Allsop P).
[7] Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545, 548.
[8] Bullock v Goodluck and Transport Commission (1983) 48 ALR 217, 224.
[9] While not expressly stated, I infer that was for the reason that property vested in the trustee.
Significantly, the solicitor for the trustee made only an oblique submission about the husband’s standing in this case to continue with the husband’s application to set aside the arbitral award. Mr Sankey’s submissions were highly qualified, premised for the most part on whether the husband’s property vested in the trustee upon the husband’s bankruptcy. Mr Sankey submitted that the husband’s superannuation was not touched by the operation of s 58 of the Bankruptcy Act. However, other property vested in the trustee, or at least that was Mr Sankey’s preliminary view. That said, Mr Sankey did not make and file the affidavit I ordered him to file so his submissions were necessarily imprecise and not based on facts.
The award in this case dealt with, among other things, the husband’s interest in the real property at F Street, Suburb G in the state of New South Wales. The husband was ordered to do all things and sign all documents to cause the transfer of his interest in that property to the wife. Pursuant to paragraph 6 of the arbitrator’s orders, the husband was declared the owner of certain real property in Country H as well as funds in Australian and Country H banks, a car and superannuation.
The money in domestic Australian bank accounts was most likely to have vested in the husband’s trustee. The husband’s interest in the Suburb G property was likely to have vested in the trustee in this case.
The husband’s money in an Australian bank account was likely to have vested in the trustee in this case.
Without knowing more about the husband’s money in Country H bank accounts, it is not possible to definitively state whether those funds vested in the trustee. However, at first blush it is unlikely that those funds vested in the trustee. Real property located in Country H is unlikely to have vested in the trustee and an Australian court has no power to make orders in rem against real property in a foreign jurisdiction.[10]
[10] British South Africa Co v Companhia de Mocambique [1893] AC 602.
In this case the sequestration order was made on 29 November 2022. All steps taken by the parties’ respective solicitors in preparing affidavits, amended applications and submissions had been completed by the date on which the sequestration order was made. For that matter, on 17 November 2022 when I reserved my decision on the husband’s application to set aside the arbitral award, the sequestration order had not been made. That order was made 12 days later.
It was highly likely that the petitioning creditor on whose bankruptcy petition the sequestration order was made had served process on the husband in connection with his subsequent bankruptcy by the time the husband’s application to set aside the arbitral award was before me, although on the facts presently available I am unable to pinpoint any exact time for that.
Equally, I am unable to say (based on information presently available) whether the husband informed Mr Warraich that the husband had been served with the petitioning creditor’s documentation on which the sequestration order was ultimately based at any stage when Mr Warraich was representing the husband before me. It is conceivable that the husband kept that information from Mr Warraich. On the other hand, it is equally conceivable that the husband sought Mr Warraich’s assistance in staving off the petitioning creditor’s endeavours to bankrupt the husband. But even if the husband had in fact retained Mr Warraich to assist in the husband’s opposition to the petitioning creditor’s steps to bankrupt the husband, that did not mean that Mr Warraich became liable for an indemnity costs order for doing no more than acting on the husband’s instructions in applying to set aside the arbitral award. Further, now that the husband is a bankrupt, it is not competent for me to make a costs order against him without first hearing from his trustee-in-bankruptcy.
The trustee made no submissions about the appropriateness or otherwise of an order for indemnity costs being made.
On 21 April 2023 Mr Warraich sent an email to my associates. It was as follows –
Dear Associate,
It is very respectfully submitted that I am unable to attend these proceedings on the following grounds:
1.I am overseas due to some very urgent personal family commitments.
2.I don’t have access to attend the hearing as no computer access and technology available.
3.I won’t be able to attend further hearing until end of May 2023.
4.I also need more time to present my legal position and the scope of my retainership with the client as no clear instructions so far.
5.I request the honourable court to excuse my attendance for want of natural justice to be heard.
6.I wish to put forth detailed Affidavit in this matter to explain the chronology and facts of the case.
It is very humbly requested to excuse me from the today’s hearing on the pretext of the grounds as above.
Thanking you in anticipation.
Regards
IMRAN WARRAICH
Principal Solicitor
No detail was given about the alleged “very urgent personal family commitments”, nor where he went nor why he allegedly had no access to emails when he sent an email from his firm’s email address on 21 April 2023. Be that as it may, he said he needed until the end of May before being able to address this issue. In view of my preliminary conclusion that no basis existed for an indemnity costs order against Mr Warraich, it seems to me that the limited estate available in this case should not be further depleted by further hearings.
I dismiss the wife’s application for an indemnity costs order against Mr Warraich.
THE WIFE’S ENFORCEMENT APPLICATION
From the date on which the arbitrator handed down his award, the wife has been pressing for the husband to do as he was ordered pursuant to paragraph 2.1 of the arbitral award. The wife was ordered to pay the husband the sum of $121,046.75.[11]
[11] Paragraph 2.3 of the orders made by the arbitrator.
The trustee has sought an order before me giving effect to paragraph 2.3 of the arbitrator’s award requiring the wife to pay to the trustee the sum of $121,046.75.
Yet the trustee has not volunteered to transfer to the wife what had been the husband’s interest in the Suburb G property. The order for the husband to transfer his interest in the Suburb G property was part of the just and equitable alteration of property interests, one component of which corresponded with the wife’s payment to the husband of the sum of $121,046.75. In other words, those obligations were to be reflexive one being done in return for the other. However, since the making of the award, and the emergence of the trustee, the transfer by the husband of his interest in the Suburb G property in accordance with paragraph 2.1 of the arbitral award has become impossible. The trustee has been appointed. His duties include gathering assets for distribution on a pari passu basis for the benefit of unsecured creditors.
No information is presently before me about the bankrupt estate of the husband, including his creditors. The trustee is not permitted to comply with paragraph 2.1 of the arbitral award if the effect of so doing is to confer upon the wife the distribution of the major assets in such manner that other unsecured creditors are denied a distribution in the husband’s bankruptcy. Equally, it is not just and equitable for me to order the wife to pay the husband $121,046.75 in circumstance where she gains nothing for that payment because the husband’s interest in the Suburb G property is ratably divided among his unsecured creditors.
I refuse to make the order sought by the trustee at this point in time. Whether I make the order at all remains to be seen.
WHERE TO FROM HERE
Having regard to my conclusions expressed above, it seems to me to be desirable for Mr Sirohi and Mr Sankey to consider their clients’ positions and to mention the way this case is to proceed on an ongoing basis in 14 days’ time. The trustee will be required to pursue his duties under the Bankruptcy Act. That will probably be done in a court other than this court. In those circumstances the orders I make are as follows –
(a)I dismiss the wife’s application for Mr Warraich to pay her indemnity costs;
(b)I refuse the trustee’s application for the wife to pay the trustee the sum of $121,046.75; and
(c)I adjourn the further hearing of this proceeding to 10:00am on 26 May 2023 for mention in the National Arbitration List.
I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 10 May 2023
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