Re Baxter; Ex parte Official Receiver v Baxter

[1986] FCA 117

Re: TREVOR WALTER BAXTER
Ex Parte: THE OFFICIAL TRUSTEE IN BANKRUPTCY
And: CONSTANCE BERYL BAXTER
No. 85 of 1971
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

EXERCISING FEDERAL JURISDICTION IN BANKRUPTCY
BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA
Northrop J.(1)

CATCHWORDS

Practice and procedure - Bankruptcy - application by Official Trustee - orders sought inconsistent with previous order made by Family Court - whether Federal Court should refrain from determining application while Family Court order remains in existence.

Bankruptcy Act 1966 ss.55, 116, 134

Family Law Act 1975 ss.78, 92

Re Bedford; Ex parte Official Receiver (1968) 12 FLR 309

Re Mottee; Ex parte Mottee v. Official Receiver (1977) 16 ALR 129

Re Trigg; Ex parte Trigg and Official Receiver (1978) 25 ALR 207

Re K. Piper (Deceased) (1960) SRNSW 328

Luxton v. Luxton (1968) 12 FLR 382

Holley v. Holley (1982) AFLC 77,431 (Case No. 91-257)

Ascot Investments Pty. Ltd. v. Harper (1981) 148 CLR 337

HEARING

MELBOURNE

#DATE 10:4:1986

JUDGE1

The matter before the Court raises a question of small scope but of importance relating to possible conflicts between orders of the Family Court of Australia and orders of the Federal Court of Australia. The matter comes before the Federal Court pursuant to an application by the Official Trustee in Bankruptcy, "the Trustee", in which the Trustee is seeking directions under sub-section 134(4) of the Bankruptcy Act 1966. The facts giving rise to the question are not in dispute and can be stated in summary form.

1. Constance Beryl Baxter, "the wife", and Trevor Walter Baxter, also known as John Baxter, "the husband", were married in December 1952. In September 1959, they entered into a terms contract with the Housing Commission, Victoria, to purchase as joint tenants land at Geelong on which a dwelling was erected, "the house", for 3,601 pounds ($7,202). That terms contract has not been completed. The house is valued at present at over $40,000. On 15 March 1971, the husband became bankrupt upon the presentation of his own petition under s.55 of the Bankruptcy Act. On 15 March 1976, he was discharged from his bankruptcy by operation of law. In August 1972, the husband left the house and has not returned. The wife has not seen him since late in the year 1972. After his departure from the house, the wife continued to reside in the house with the infant children of the marriage who have since become adults and have left the house. The wife continues to reside in the house. Since 1972, she has paid to the Housing Commission all moneys due and payable under the terms contract. Some $1,700 remains to be paid to the Housing Commission.

2. As a result of the bankruptcy of the husband, the Trustee claims that the equity of the house is owned by himself and the wife as tenants in common in equal shares. In March 1973, the Trustee lodged a caveat in the Titles Office to protect his interest in the house. In July 1978, the Trustee served notice on the Housing Commission of his interest in the land and requiring the Housing Commission, upon completion of the terms contract, to transfer the house to the Trustee and the wife as tenants in common in equal shares. In June 1984, the wife made application to the Family Court for orders under the Family Law Act 1975 with respect to the house. A copy of the application and a copy of the two affidavits filed in support of the application were served on the Trustee. The Trustee did not seek leave to appear on the hearing of the application. On 22 October 1984, the Family Court, constituted by Walsh J., made the following orders and declaration:-
   
   

"IT IS ORDERED

(1) That service of the wife's application seeking an order for property settlement filed on the 11th day of July, 1984, be dispensed with.

IT IS DECLARED

(2) That the wife is the sole proprietor of the equity in the property situate at and known as 22 Dearborn Avenue, Corio in the State of Victoria being the whole of the land more particularly described in Certificate of Title Volume 8473 Folio 569 (the house).

IT IS FURTHER ORDERED

(3) That the husband forthwith transfer and assign to the wife all his estate and interest in Contract of Sale dated the 22nd day of September, 1959, made between the husband and the wife as purchasers and the Housing Commission Victoria as vendor and in the land more particularly described in Certificate of Title Volume 8473 Folio 569 and such transfer and assignment be subject to the obligations of the husband and wife as purchasers under the said Contract of Sale to the said Housing Commission Victoria and the wife forever indemnify the husband in respect of such obligations.

That pursuant to Section 84 of the Family Law Act 1975, the Registrar of the Family Court of Australia at Melbourne is hereby appointed to execute all deeds and documents in the name of the husband and do all acts and things necessary to give validity and operation to all such deeds and documents so as to effect such a transfer and assignment to the wife of all the husband's estate and interest in the said property and the said Contract of Sale."

1. In the application under sub-section 134(4) of the Bankruptcy Act, the Trustee is seeking directions on the questions of whether:-
   
   

(1) the interest of the husband in the house vested in the Trustee as property of the husband divisible amongst the creditors of the husband notwithstanding the order of the Family Court of 22 October 1984, and

(2) the said order has had any or may have any effect on the interest of the Trustee in the house.

1. The application was served on the wife. Counsel for the parties have requested the Court to decide the preliminary question of whether the Federal Court should proceed to hear and determine the application on its merits. The Court has agreed to that course.

2. It appears that the declaration made by the Family Court was made pursuant to s.78 of the Family Law Act 1975. Sub-sections 78(1) and (3) are set out in full:-
   
   

"78. (1) In proceedings between the parties to a marriage with respect to existing title or rights in respect of property, the court may declare the title or rights, if any, that a party has in respect of the property.

...

(3) An order under this section is binding on the parties to the marriage but not on any other person."

Sub-section 78(2) empowers the Family Court, where it has made a declaration under sub-section 78(1), to make consequential orders. Orders numbered 3 and 4 of the orders made by the Family Court were made pursuant to that sub-section.

1. Upon the husband becoming bankrupt on 15 March 1971, his interest in the house vested in the Trustee and became property divisible amongst his creditors; see sections 58 and 116 of the Bankruptcy Act. There is nothing to suggest that at that time he held his interest in the house in trust for the wife; see paragraph 116(2)(a) of the Bankruptcy Act. There is authority for the view that subsequent orders under matrimonial legislation do not affect the title of the Trustee once property has vested in him; see Re Bedford; Ex parte Official Receiver (1968) 12 FLR 309, Re Mottee; Ex parte Mottee v. Official Receiver (1977) 16 ALR 129 and Re Trigg; Ex parte Trigg and Official Receiver (1978) 25 ALR 207. See also Luxton v. Luxton (1968) 12 FLR 382. In Holley v. Holley (1982) AFLC 77,431 (Case No. 91-257), a Full Court of the Family Court constituted by Evatt C.J., Marshall SJ and Strauss J., expressed the view that where the title to land had vested in a trustee of a deed of assignment entered into pursuant to the provisions of the Bankruptcy Act, s.78 of the Family Law Act did not empower the Family Court to make declarations under s.78(1) since the trustee under the assignment was not a party to a marriage and that accordingly, the Family Court was entitled to refuse to entertain a claim under s.78.

2. From this summary of the law, there is much force in the contention by counsel for the Trustee that the Family Court had no power to make the declaration which it did on 22 October 1984. The material before the Family Court disclosed that the husband had been made bankrupt in 1971 and that the terms contract for the purchase of the house had been entered into before that date. Nevertheless, the Family Court made the declaration and orders set out above.

3. It should be noted that under the Family Law Act, the Trustee could have applied to the Family Court for leave to intervene in the application by the wife and if leave had been granted, he would have been deemed to be a party to those proceedings; see s.92 Family Law Act. If the Trustee had so applied, the attention of the Family Court would have been drawn to the provisions of sections 55 and 116 of the Bankruptcy Act and the authorities referred to earlier in these reasons. Despite knowledge of the application by the wife, the Trustee did not seek leave to intervene in the proceedings before the Family Court. For the purpose of determining the question before me, I make it clear that I do not rely in any way upon the failure of the Trustee to seek leave to intervene in the Family Court proceedings.

4. The relevant facts are simple. By order, the Family Court has made a declaration that the wife is the sole proprietor of the equity in the house. That order has not been set aside. The Trustee is making an application to the Federal Court for orders which would be inconsistent with and contradictory to the order of the Family Court. The question is whether the Federal Court should refrain from hearing and determining the application of the Trustee under the Bankruptcy Act while the Family Court order remains in existence. In my opinion it should.

5. The general rule is that once an order of a Court has been entered, except by way of appeal, no Court has power to review that order; generally see Halsbury's Laws of England, Fourth Edition, Vol.26, para.556. See also Re K. Piper (Deceased) (1960) SRNSW 328.

6. Counsel for the Trustee has contended that the order of the Family Court cannot bind the Trustee; see sub-section 78(3) of the Family Law Act. He contended that at the time the Family Court order was made, the husband had no interest, whether in law or in equity, in the house, therefore there was no jurisdiction or power in the Family Court to make the declaration under sub-section 78(1) of the Family Law Act. In these circumstances, he contended, the Federal Court should proceed to hear and determine the application brought by the Trustee under the Bankruptcy Act and to consider the conflicting equities of the wife and the Trustee; see s.116 of the Bankruptcy Act.

7. In my opinion, those contentions should not be accepted. If the Federal Court proceeded to hear and determine the application, of necessity, conflicting orders would be made. The Family Court order may not be binding upon the Trustee, but until it is set aside, it is binding upon the wife. Any order of the Federal Court made in the application by the Trustee would be binding upon the wife. That illustrates the practical results arising from conflicting judgments. The Federal Court has no jurisdiction or power to set aside the order of the Family Court.

8. Even though the order made by the Family Court on 22 October 1984 may have been beyond the power of that Court to make, and I express no view on that question, nevertheless the order remains in existence. That order could have been set aside on appeal; compare Ascot Investments Pty. Ltd. v. Harper (1981) 148 CLR 337 per Gibbs J. at p 356. Until the order of the Family Court is set aside, it must be given full faith and credit. Otherwise, inconsistent orders of the Family Court and the Federal Court could place the wife as well as the Housing Commission in an impossible position. What Court order should the Housing Commission observe when it transferred the land on the completion of the terms contract?

9. In all the circumstances, the Federal Court should refrain from hearing and determining the application of the Trustee while the order of the Family Court remains in existence.