Re: Maas, Nicholas Christopher and Ex Parte: Maas, Jill Elizabeth

[1997] FCA 625

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - application by wife for annulment of husband’s bankruptcy consequent upon the acceptance of a debtor’s petition - property proceedings pending in Family Court - transfer of annulment application to Family Court.

Bankruptcy Act 1966, ss 35A, 153B.

RE: NICHOLAS CHRISTOPHER MAAS
EX PARTE: JILL ELIZABETH MAAS v RICHARD CAMPBELL BRIEN & ORS

No. NG 7422 of 1997

JUDGE:	WHITLAM J
PLACE:	SYDNEY
DATE:	17 JULY 1997

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	)  No. NG 7422 of 1997
)
GENERAL DIVISION	)

RE:

BETWEEN:

NICHOLAS CHRISTOPHER MAAS
Bankrupt

JILL ELIZABETH MAAS
Applicant

  AND:             

RICHARD CAMPBELL BRIEN & ORS
Respondents

JUDGE:	WHITLAM J
PLACE:	SYDNEY
DATE:	17 JULY 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. This proceeding be transferred to the Family Court of Australia.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	)  No. NG 7422 of 1997
)
GENERAL DIVISION	)

RE:

BETWEEN:

NICHOLAS CHRISTOPHER MAAS
Bankrupt

JILL ELIZABETH MAAS
Applicant

  AND:             

RICHARD CAMPBELL BRIEN & ORS

Respondents

JUDGE:

WHITLAM J

PLACE:

SYDNEY

DATE:

17 JULY 1997

REASONS FOR JUDGMENT

This is an application under s 35A of the Bankruptcy Act 1966 (“the Act”) to transfer a proceeding pending in this Court to the Family Court. The proceeding in question is an application made by a wife under s 153B of the Act for an order annulling her husband’s bankruptcy. The husband became bankrupt upon the acceptance of a debtor’s petition.

Family Court Proceedings

The applicant, Jill Elizabeth Maas, and the bankrupt, Nicholas Christopher Maas, were married on 14 August 1976.  They separated on 31 August 1993.

In December 1995 the bankrupt resigned from his employment as managing director of Upjohn Pty Ltd. On 22 February 1996 the applicant commenced proceedings against the bankrupt in the Family Court seeking property orders under s 79 of the Family Law Act 1975. An interim order was made by consent in those proceedings on 18 April 1996, restraining the bankrupt from disposing of the sum of $100,000 in a specified bank account.

On 18 April 1996 the bankrupt also produced to the Family Court a deed purporting to have been made that very day between the bankrupt and a company called K.D. Sales Force Specialists Pty Ltd (“K.D. Sales Force”).  This deed acknowledges that the bankrupt lent the sum of $126,000 to K.D. Sales Force on 18 December 1995 and provides that the “loan shall be repayable ... upon the expiration of ten years from the date of this agreement”.  The bankrupt’s defacto spouse, Krishna Devi Bassi is the sole director of K.D. Sales Force. 

The applicant applied to the Family Court on 30 July 1996 for an order that the bankrupt sign an authority required by her solicitors “to obtain information as to the benefits to which the [bankrupt] is entitled in the Upjohn Foreign Service Employee Pension Plan and in relation to stock options held by the [bankrupt] in Pharmacia & Upjohn Inc. or any associated company”.  On 5 September 1996 the Family Court made that order on terms that, in the event that the bankrupt refused or failed to sign such authority, it may be signed on his behalf by a Registrar of the Family Court at Sydney.  The bankrupt failed to sign an authority, which was in due course signed by a Registrar on 24 October 1996.  The authority is not in evidence, but the applicant’s solicitors evidently forwarded such a document on 1 November 1996 to a Mr Mark Durham.  On 20 November 1996 Pharmacia & Upjohn Asia Ltd’s chief legal counsel wrote from Hong Kong to the applicant’s solicitors, declining to disclose the requested information “without either a direction from Mr Maas or a court order enforceable in the location of the information”.

Meanwhile, on 19 November 1996 the bankrupt filed in the Family Court proceedings his statement of financial circumstances.  An attachment to that statement set out details of his retirement package, his sale of stock options and his superannuation rights.  It stated that the bankrupt had received a termination package for a net amount of $359,000 in December 1995.  It further stated that he had obtained $208,397.27 as the result of the exercise of various stock options on 18 December 1995 and that he had invested $US156,000 of the proceeds in redeemable preference shares of a Western Samoan company called DDD Management Ltd.  The statement claimed that these shares had been redeemed for the sum of $US156 and that the bankrupt had incurred a tax liability of approximately $110,113 as a result of the exercise of the stock options.  The bankrupt disclosed a benefit under the Upjohn Foreign Service Employees Pension Plan, the value of which was said not to be currently ascertainable but which was estimated to be worth $US12,000 per annum from the age of fifty-five.

The Family Court made further interim orders on 28 November 1996.  The earlier order restraining disposition of funds in the specified bank account was varied to permit the payment of mortgage instalments on the jointly-owned residential property occupied by the applicant and the payment of a costs order made in favour of the applicant.  Fresh orders were made restraining the bankrupt from disposing of any assets or funds (save for an amount of $3,500 per month) or from expending any moneys on a boat owned by K.D. Sales Force, and requiring that any payments in reduction of the loan made to K.D. Sales Force be held in a bank account nominated by the applicant.

On 17 March 1997 the applicant filed in the Family Court an amended application for final orders. In addition to the property orders under s 79 of the Family Law Act, the application seeks orders under s 85 of that Act setting aside the disposition of a boat to K.D. Sales Force and of a motor vehicle to Ms Bassi. Also on 17 March 1997 the applicant’s solicitors received a notice from the bankrupt’s solicitor that he had ceased to represent the bankrupt in the Family Court proceedings.

The Husband’s Bankruptcy

The bankrupt completed his statement of affairs on 17 March 1997 and filed it with the Official Receiver on 18 March 1997.  The debtor’s petition is not in evidence but, as I have mentioned, it was accepted on 20 March 1997.  Nor is there evidence of the date upon which Richard Brien, the trustee of the bankrupt’s estate, signed a consent to act. 

The bankrupt’s former solicitor now acts for Mr Brien.  On 27 March 1997 he faxed to the applicant’s solicitors a copy of Mr Brien’s application for leave to intervene in the Family Court proceedings.  The Family Court made an order on 1 April 1997 giving Mr Brien leave to intervene. 

On 8 April 1997 the applicant’s solicitors received from Mr Brien’s solicitor a copy of the bankrupt’s statement of affairs.  This led to the applicant filing an application for annulment in this Court on 17 April 1997.  Her affidavit in support deposed to the course of proceedings in the Family Court which I have set out above.  She also relies on certain particulars set out in the bankrupt’s statement of affairs.

In Part A of his statement, the bankrupt listed amongst his assets the sum owed to him by K.D. Sales Force as only $71,000; yet, on the liabilities side, he described K.D. Sales Force and Ms Bassi as unsecured creditors in respect of, respectively, a loan of $22,000 in May 1996 and a loan of $20,000 between December 1996 and March 1997.  In Part B of the statement, the bankrupt disclosed in his income details that he had the use of a motor vehicle owned by Ms Bassi and that K.D. Sales Force (by whom he was not employed) made a superannuation contribution for his benefit.  Also in Part B the bankrupt stated that he was the appointor of a trust called The Lime Street Trust which had been established for less than twelve months and which had assets with a market value of $50,000.  Under the details of his financial position the bankrupt stated that he had disposed of a motor vehicle to Ms Bassi in January 1996 for a sum of $45,000.  (This would appear to be one of the dispositions challenged in the application filed in the Family Court on 17 March 1997.)

The application for annulment specifies the grounds on which it is made as follows:

“(a)that the presentation of the debtor’s petition by Nicholas Christopher Maas constituted an abuse of process having regard to the proceedings which had been instituted in the Family Court of Australia at Sydney (No. SY3109/96) by his wife Jill Elizabeth Maas for property orders;

(bthe debtor’s petition should not have been accepted by ITSA as the Statement of Affairs filed by Nicholas Christopher Maas was not adequate to disclose that he was unable to pay his debts as they fell due.”

It may be noted that the bankrupt’s statement of affairs shows assets exceeding liabilities in value.  However, the bankrupt lists first among what he believes to be the causes of his bankruptcy the orders made by the Family Court “restraining use of my funds”.

Mr Brien opposes the transfer of the annulment application to the Family Court.  He has filed a report dated 26 May 1997 in accordance with r 57(3) of the Bankruptcy Rules.  This report attaches a copy of Mr Brien’s report to creditors dated 13 May 1997 which was evidently sent with the notice of a creditors’ meeting to be held on 22 May 1997.  In the report to creditors Mr Brien acknowledged that his investigation had been greatly assisted by the Family Court proceedings.

It is apparent that Mr Brien is still in the early stages of ascertaining the bankrupt’s assets and liabilities. Already, however, it seems that he has received counsel’s advice that the transfer of the motor vehicle to Ms Bassi and the loan to K.D. Sales Force are void against him under the Act. Mr Brien says that the transaction in the Western Samoan shares requires further investigation, as do (inter alia) the interests in the Upjohn Foreign Service Employees Pension Fund (which appears to be administered in Guernsey) and the Lime Street Trust.

Counsel for the applicant draw attention to the approach normally taken by the Family Court in the exercise of its discretion in proceedings under s 79 of the Family Law Act, especially the so-called “section 75(2) factors”. These will include the bankrupt’s “income, property and financial resources” and “eligibility ... for a pension ... under any superannuation fund”. So too the transactions that may be void against the bankrupt’s trustee are already or may be made the subject of challenge under s 85 of the Family Law Act.  Thus there are, it is said, issues and factual matters common to the proceedings on foot in both courts.  In particular, counsel say (without contradiction by their opponents) that a great many subpoenas have been issued already in the Family Court for the purpose of ascertaining the bankrupt’s assets.

On the other hand, counsel for Mr Brien emphasize the discrete nature of the application for annulment.  Such an application must be determined before property orders can be made by the Family Court.  The question for determination will then be, it is said, not whether the bankrupt’s assests exceeded his liabilities at the time he presented his petition, but whether he was at that time able to meet his debts as they fell due.

Mr Brien’s counsel also foreshadow the necessity for ongoing applications under the Act, which would have to be made to this Court. But this submission begs the question whether the bankruptcy is to continue.

This is not a case, such as Re Sabri; Ex parte Sabri v Brien (1995) 60 FCR 131, where there is a possibility of conflict between orders made by this Court and the Family Court. Decisions on other applications under s 35A of the Act are, in any event, of limited usefulness. As Lindgren J observed in Re Sharpe; Ex parte Powell v Donnelly (unreported, 17 October 1996 at p 15), “... s 35A confers a discretion, and, in the context of discretionary assessments, no two cases are identical”.

However, in the present case, like Lindgren J in Sharpe, considerations of efficiency and economy of judicial administration persuade me that the case is an appropriate one for transfer.  I need not repeat what Lindgren J said (at pp 19-20) about such considerations many of which, I think, apply too in the present case.  I would only add to those considerations the advantage of having one court (or better still, one judge) control the use that may be made in one set of proceedings of information or documents that are required to be disclosed in another set of proceedings: Harman v Secretary of State for Home Dept [1983] 1 AC 280, Crest Homes PLC v Marks [1987] AC 829; and Springfield Nominees Pty Ltd v Bridgeland Securities Ltd (1992) 38 FCR 217. In the present case there will be a substantial overlap with the issues in the Family Court proceedings, particularly in relation to the bankrupt’s cash resources and liquidity when he presented the debtor’s petition.

I will make an order that this proceeding be transferred to the Family Court.  I have not been asked to make an order as to costs.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Whitlam

Associate:

Dated:            17 July 1997

Counsel for the Applicant:	P.I. Rose QC and A.A. Robins
Solicitors for the Applicant:	Farmer Campbell Edmunds
Counsel for the Trustee:	M.D. Broun QC and J.T. Johnson
Solicitor for the Trustee:	Ross Koffel
Date of Hearin	27 May 1997
Date of Judgment:	17 July 1997