Re DOnofrio, N. v Ex Parte Blyth, Robert George

[1983] FCA 241

Re: MR N. D'ONOFRIO
Ex parte: ROBERT GEORGE BLYTH (1983) 76 FLR 136
No. 440 of 1983
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF SOUTH AUSTRALIA
Fisher J.(1)

CATCHWORDS

Bankruptcy - Notice of Opposition - Ability of debtor to pay debts as they fall due - Interest as joint tenant in matrimonial home - Whether such interest a "readily realizable asset".

BANKRUPTCY ACT 1966 s.52(2)(a),

LAW OF PROPERTY ACT (S.A.) 1936 ss.69(1), 69(2), 70

Bankruptcy - Notice of opposition - Ability of debtor to pay debts as they fall due - Joint interest of debtor in matrimonial home - Whether such interest is a "readily realisable asset" - Bankruptcy Act 1966 (Cth), s. 52(2)(a) - Law of Property Act 1936 (S.A.), ss 69(1), 69(2), 70 - Family Law Act 1975 (Cth), s. 114.

HEADNOTE

The petitioning creditor sought a sequestration order against the estate of the debtor based on a judgment debt in the sum of $1,727.30. The debtor by notice of opposition opposed the making of the sequestration order on the grounds that he was, pursuant to s. 52(2)(a) of the Bankruptcy Act 1966 (Cth), able to pay his debts. The debtor's principal asset was the matrimonial home jointly owned with his wife which was valued at $72,500.00 and encumbered by a mortgage to secure a loan of $5,807.87. The debtor argued that the court should be satisfied that he was able to pay his debts by the sale or pledge of his interest in the matrimonial home and in particular referred to his right to apply to the Supreme Court for an order for its sale or partition under the provisions of the Law of Property Act 1936 (S.A.). Evidence was given that the debtor's wife would strongly oppose the sale of the matrimonial home.

Held: (1) The interest of the debtor in the matrimonial home is not a "readily realisable asset" as:

(a) Section 70 of the Law of Property Act 1936 (S.A.) grants the Supreme Court a discretion in respect to applications for partition or sale to defer a time for implementing the sale and that in considering the home in which the debtor's wife and children reside, there could hardly be a stronger case for the court deferring the sale as long as possible;

(b) The power to institute proceedings for partition or sale in the Supreme Court will be ousted if proceedings are instituted in respect of the matrimonial home by the debtor's wife pursuant to the Family Law Act (1975) (Cth).

Sandell v. Porter (1966) 115 CLR 666; Expo International Pty Ltd v. Chant (1979) 2 NSWLR 820; Bank of Australasia v. Hall (1907) 4 CLR 1514; Re Mottee (1977) 29 FLR 406; Tansell v. Tansell (1978) 19 SASR 165, referred to.

(2) The debtor has failed to satisfy the court that he has a "readily realisable asset" which is available to pay his debts and accordingly, the notice of opposition must be dismissed.

HEARING

Adelaide, 1983, August 29; September 6, 19. #DATE 19:9:1983

CREDITOR'S PETITION.

A. Nicholson, for the petitioning creditor.

M.R. Burnett, for the debtor.

Cur. adv. vult.

Solicitor for the petitioning creditor: Fisher Jeffries.

Solicitor for the debtor: Gun & Davey.

J.J.I.

ORDER

1. The notice of opposition of Mr. N. D'onofrio to the making of a sequestration order against his estate is dismissed.

2. Mr. N. D'onofrio is to pay the costs of Robert George Blyth, the petitioning creditor, the same to be taxed if not agreed.

Orders accordingly.

JUDGE1

In this matter Robert George Blyth ("the petitioning creditor") seeks a sequestration order against the estate of Mr. N. D'onofrio ("the debtor") based on a judgment debt in the sum of $1,727.30. The debtor opposes the making of the order on the ground set out in a notice of opposition, namely that he is solvent. The matter has proceeded on the basis that he is contending, in the words of s.52(2)(a) of the Bankruptcy Act 1966 ("the Act") that he can satisfy me that he is able to pay his debts.

In his affidavit filed in support of his notice of opposition the debtor stated his assets as money in the bank $55.83, a Ford Falcon sedan which he valued at $600 and an interest as joint tenant with his wife in a dwelling-house. This house was occupied as the matrimonial home by the debtor, his wife and two dependent children. By consent the debtor tendered a certificate by a licensed valuer valuing the dwelling-house at $72,500 and indicating that it could be sold within a period of four weeks from instructions. It was also established that the house was mortgaged to the Commonwealth Bank of Australia to secure $5,807.87 on a housing loan.

The debtor is employed as a meat process worker with gross wages of $257 per week. He has no creditors other than the Commonwealth Bank and the judgment debt, and his only outgoings are household expenses, rates and taxes and mortgage repayments.

The debtor gave evidence at the hearing which confirmed the facts deposed to in his affidavit except that he said that the household furniture was the property of his wife, whereas in his affidavit he claimed that it was owned jointly by them. The monthly payments under the mortgage were $160 and he said that he was unable to borrow a further amount on the security of his dwelling-house to pay the petitioning creditor. The matter proceeded on the basis that he could not obtain money by "mortgage or pledge of his assets within a relatively short time" (see Sandell v Porter and Another (1966) 115 C.L.R. 666 at page 670.

However counsel for the debtor contended that I should be satisfied that he was able to procure money to pay his debts by realization by sale of his assets, namely his interest in the dwelling-house within a relatively short time. As is apparent counsel relied upon and accepted as applicable the text stated by Barwick C.J. in Sandell v Porter supra at page 670 as follows:

"Insolvency is expressed in s.95 as an inability to pay debts as they fall due out of the debtor's own money. But the debtor's own moneys are not limited to his cash resources immediately available. They extend to moneys which he can procure by realization by sale or by mortgage or pledge of his assets within a relatively short time - relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor."

The debtor however is not the sole owner of the dwelling-house but only of an undivided moiety therein. There is no evidence before me as to the amount which could be realized by sale of such an interest, even assuming that it is marketable and there is no evidence of the length of time it would take to sell this interest. All of the evidence is as to the market value of and the time it would take to sell the dwelling-house. The debtor gave evidence to the effect this his wife was strongly opposed to the sale of the family home and that they had no alternative accomodation. Despite this state of affairs, counsel for the debtor contends that his client is to be taken as solvent because he has an "unassailable right" to compel a sale and division of the proceeds thereof between his wife and himself. It was said that he therefore should be considered as being notionally able to procure moneys by realization, of his assets within a relatively short time.

However, in my opinion the interest of the debtor in the dwelling-house is not, in the words of Needham J. in Expo International Pty. Ltd. v Chant (1979) 2 N.S.W.L.R. 820 at page 839, a "readily realizable asset", assuming it is realizable at all. Both counsel accepted that I should determine the matter in accordance with the text enunciated by Barwick C.J. in Sandell v Porter and Another, even though the statutory provision there under consideration was "inability to pay debts as they fall due" out of the debtor's own money. Counsel for the debtor based his contentions almost exclusively upon the debtor's right to apply to the Supreme Court for a partition or sale of the dwelling-house and division of the proceeds of such sale. This right was originally provided by the old Partition Act 1881 and is now to be found in s.69 and s.70 of the Law of Property Act (S.A.) 1936. The essential provisions are as follows:
69. (1) On any application for partition the court may order a partition of the said land or other property, and may give all necessary or proper consequential directions.
(2) On any such application if it appears to the court that, by reason of the nature of the property, or of the number of the parties interested or presumptively interested therein, or of the absence or disability of some of those parties, or of any other circumstance, a sale of the property and a distribution of the proceeds would be more beneficial for the parties interested than a division of the property between or among them, the court may, if it thinks fit, on the request of any of the parties interested, and notwithstanding the absence, dissent or disability of any others of them, direct a sale of the property accordingly, and may give all necessary or proper consequential directions.
70. On any application for partition, if the party or parties interested individually or collectively, to the extent of one moiety or upwards in the property, request the court to direct a sale of the property and a distribution of the proceeds, instead of a division of the property between or among the parties interested, the court shall, unless it sees good reason to the contrary, direct a sale of the property accordingly, and shall give all necessary or proper consequential directions."

It was accepted that judicial decisions have determined that, notwithstanding the words "unless it sees good reason to the contrary" the applicant has in the circumstances an absolute right to sale, notwithstanding his wife's strong opposition thereto. The court's discretion is limited to deferring for a time the implementing of the order for sale (see Peck v Peck (1965) S.A.S.R. 293 at page 300). In circumstances such as the present where the court is considering the home in which the wife and dependent children reside, there could hardly be a stronger case for deferring the sale as long as possible. Thus it can not be said that the dwelling-house is readily realizable or can be realized "within a relatively short time".

In Bank of Australasia v Hall (1907) 4 C.L.R. 1514 at page 1543 Isaacs J. used the following words as indicating the state of realizability required, namely

"If that property is in such a position as to title or otherwise that it could be realized in time to meet the indebtedness as the claims mature."

It can not be contended that an asset which will not be sold until a court exercises its discretion to direct a sale is in an appropriate "position as to title or otherwise". As Riley J. said in Re Mottee (1977) 29 F.L.R. 406 at 412 in reference to the sale of a half interest as joint tenant in the matrimonial home "the realization of that interest was at the time a remote prospect".

There is however an even more difficult hurdle for the debtor to surmount, namely the likely limitation on the jurisdiction of the Supreme Court to order a sale of the dwelling-house. In Tansell v Tansell (1978) 19 S.A.S.R. 165 two of the judges of the Supreme Court of South Australia was of the opinion that they had no jurisdiction under the Law of Property Act 1936 if proceedings were initiated in the Family Court for exercise of its powers and in particular its powers under s.114 of the Family Law Act 1975. As Bray C.J. said on page 173

"I cannot think that the Federal Parliament could have intended either that there should be concurrent proceedings in the State and Federal courts leading to diametrically opposed conclusions or that a spouse who is faced with the prospect of the matrimonial home being sold over his or her head, albeit in accordance with legal title, should be without the redress which he or she formerly enjoyed, at least when an arguable case of fault justifying principal matrimonial relief could have been presented to the Court.
. . .
I hold then, that the jurisdiction of this Court will be ousted by a valid application to the Family Court affecting the subject matter of the present application."

This view is sufficiently in accord with that of Jacobs J. on page 191 of Tansell v Tansell to satisfy me that an application by the wife of the debtor to the Family Court would deny the Supreme Court jurisdiction to entertain the debtor's action in the Supreme Court. On the evidence before me I must accept that the wife would do everything possible to prevent a sale. The Supreme Court would in the circumstances almost certainly stay the debtor's application to give her an opportunity to proceed in the Family Court. In this matter I am only required to be satisfied by the debtor that he can procure money within a short period of time. I need not look further into the procedural aspects of the manner in which the wife could approach the Family Court.

The debtor has failed to satisfy me that he has a readily realizable asset which is available to pay his debts. In fact he has not convinced me that I should accept that he, as the owner of an undivided moiety in the matrimonial home, has a realizable asset. This notice of opposition must be dismissed with costs.