Re: Page, R.A. v Ex parte: Worrell, I.W
[1989] FCA 102
•13 JULY 1989
Re: RONALD ALLAN PAGE
Ex parte: IVOR WORRELL, Trustee of the Estate of RONALD ALLAN PAGE
No. Qld E878 of 1988
FED No. 102
Bankruptcy - Trusts
COURT
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND
Pincus J.(1)
CATCHWORDS
Bankruptcy - order of Family Court for payment of debt - debtor subsquently bankrupt - debt to be paid out of fund - whether order has effect after bankruptcy.
Trusts - order of Court to pay debt out of fund - whether creditor has interest in fund.
Bankruptcy Act 1966, s.58(1), s.58(5A)
HEARING
BRISBANE
#DATE 16:3:1989
Counsel for the Applicant: P. Roney
Solicitors for the Applicant: Macfie Curlewis & Spiro
Counsel for the 1st Respondent: G. Martin
Solicitors for the 1st Respondent: Conwell Kirby & Lilley
Solicitors for the 2nd Respondent: Nicol Robinson & Kidd
ORDER
The sum held in trust in consequence of the order of the Family Court dated 20 May 1988 (in proceedings between the bankrupt and his wife) with respect to certain proceeds of sale forms part of the estate of the bankrupt.
The costs of the applicant of and incidental to the proceedings for a declaration be taxed and paid by the first respondent, Australia and New Zealand Banking Group Limited.
NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
JUDGE1
This is an application by the trustee in bankruptcy of the estate of Ronald Alan Page for a declaration as to the extent and nature of the bankrupt's estate, and in particular, whether the proceeds of the sale of a property situated at 9 Sherwin Avenue, Castle Hill, New South Wales, form part of the estate of the bankrupt.
On 20 May 1988, the Family Court of Australia in Hobart made an order by consent that the debtor's wife withdraw a caveat on the property situated at Castle Hill and:
"THAT the husband's share of the balance of the proceeds of sale of the said premises be paid to his solicitors, Nicol Robinson & Kidd, to be held by them upon trust for the parties and be applied as follows:-
(a) in discharge of the mortgage to the Commonwealth Bank of Australia and National Australia Banking Corporation of Australia Limited registered on the Title to the premises situate at 12 Gladewood Drive, Daisy Hill in Queensland.
(b) in discharge of the husband's debt to the ANZ Banking Group, referred to in paragraph 19 of the husband's Affidavit sworn on the 12th day of May 1988; and
(c) as to any balance, to the wife by way of partial property settlement."
Settlement of the sale of the Castle Hill property took place on the 22 July 1988. Mr Page became bankrupt on the 27 July 1988 by presenting a debtor's petition, in consequence of the acceptance of which the applicant became trustee of the bankrupt's estate.
As at 11 August 1988, $7,023.37 remained in the trust account of Messrs Nicol Robinson & Kidd, who also held the title deeds to the Castle Hill property. The mortgage referred to in para.3(a) of the Family Court order has been discharged. The first respondent, Australian and New Zealand Banking Group Limited, has obtained judgment for $11,152 against the bankrupt, and claims it is owed $15,600 in all.
The application also seeks a declaration as to the debtor's interest in the Daisy Hill property mentioned in the order, but as I understand it there is no dispute as to that matter; I therefore do not propose to make any declaration about it. The question raised about the Castle Hill proceeds is not merely one of the ascertainment of proprietary interests in the sum in question ($7,023.37). To resolve the problem, it is necessary to consider whether the Family Court's order remains effective simply because it is an order authorised by statute.
Under s.58(1) of the Bankruptcy Act 1966, the property of the bankrupt vested on bankruptcy in the applicant trustee. Section 58(5A) of the Act deals with liabilities under maintenance agreements and maintenance orders, subsisting at the date of bankruptcy. It reads as follows:
"Nothing in this section shall be taken to prevent a creditor from enforcing any remedy against a bankrupt, or against any property of a bankrupt that is not vested in the trustee of the bankrupt, in respect of any liability of the bankrupt under:
(a) a maintenance agreement or maintenance order (whether entered into or made, as the case may be, before or after the commencement of this subsection); or
(b) a pecuniary penalty order or interstate pecuniary penalty order."
The order in favour of a bank is not a "maintenance order" as defined in s.5(1) of the Bankruptcy Act since it is not an "order with respect to the maintenance of a person". The nature of an order of this kind was discussed by the Full Court of the Family Court in the case of Zdravkovic (1982) FLC 77,202 at p 77,206. The Court said:
"An order requiring the discharge by payment of a debt owing by the parties or one of them to a third person is not a settlement of property on such third person if such an order is made as a condition or a term of an alteration of the parties' interests in their property or the property of either of them ..."
The Court went on to hold, in effect, that the making of such an order is within power, on the proper construction of the Act. It was not contended before me that the order was beyond jurisdiction. Since it was made by a superior Court and has not been set aside, it must be taken to be within jurisdiction: Cameron v. Cole (1944) 68 CLR 571, Wilde v. Australian Trade Equipment Co Pty Ltd (1980) 145 CLR 590 at 602.
I agree, with respect, with the view expressed in Zdravkovic that such an order as this is not a settlement of property on the creditor. The first respondent did not, by virtue of the order, obtain any interest of a proprietary kind in the money ordered to be paid to the solicitors. The beneficiaries under the trust were expressed to be the "parties", meaning the bankrupt and his wife, but the trust was not intended to be an equal one. In my opinion, the right, if any, of the creditor (the first respondent) is simply one to have the order of the Family Court carried out. The whole proprietary interest in the money held in trust was vested beneficially in the husband and wife, by force of the Family Court's order.
The simplest contention in favour of the trustee is that the use of the money to discharge the debt in accordance with the order of the Family Court would be inconsistent with the requirements of s.58(1) and ancillary provisions of the Act. The argument gains a little, in my opinion, from the inclusion in the Bankruptcy Act of s.58(5A) referred to above. That provision would be unnecessary if the intention were that any order made in divorce proceedings requiring the making of a payment by or on behalf of a bankrupt survived bankruptcy. More particularly, the expression in s.58(5A) "or against any property of a bankrupt that is not vested in the trustee of the bankrupt" would be unnecessary if the legislature contemplated that orders made in divorce proceedings could, in general, be enforced against the bankrupt's property which would otherwise have vested wholly in the trustee.
The Family Court order did not dissect the proceeds with which it dealt in such a way as to enable one to say that a particular part of the proceeds was, from the outset, held upon trust for one of the parties rather than the other. It appears to me, however, that once the requirements of part (a) of the order were satisfied (as they were here), then if one were to ask whose was the beneficial interest in the remaining money, being insufficient to discharge the debt mentioned in (b), the answer must be that it was the husband's.
The only other possible views as to the money in category (b) are, firstly, that it was the property, beneficially, of both husband and wife, and, secondly, that it was the husband's subject to an obligation to pay the debt.
The first of these alternative possibilities was suggested by Mr Martin, who appeared for the first respondent (not for the wife). It is true that the opening part of the order speaks of the fund as being held "upon trust for the parties", but subsequent provisions, and in particular para.(c), make it clear that the beneficial interests were not intended to be in equal shares. It is not, at least speaking generally, a possible legal situation that there was no beneficial interest in the money mentioned in (b) prior to discharge of the debt mentioned therein, and it seems to me that the wife had no proprietary interest in that money.
As to the other possible solution, this involves adopting the view that the money mentioned in (b) was only in a limited sense the husband's property, the limitation being the obligation to pay the debt. But it seems clear that obligation was not an "equity" so as to limit the trustee's right. The first respondent had, before payment to it, no interest in the moneys mentioned in (b): Comptroller of Stamps (Victoria) v. Howard-Smith (1936) 54 CLR 614 at 623, 624.
In the end, then, the only means whereby the first respondent can succeed is on the argument that the order of the Family Court, made with the authority of the relevant statute, overrides the obligation created by the Bankruptcy Act. In my opinion, that is not so, as a matter of construction of the order. What order (b) contemplates is that out of a portion of the fund, in which portion the only beneficial interest is that of the husband, a debt due by the husband shall be paid. Since, before payment of the debt was effected, the husband lost his interest in the relevant portion of the fund by virtue of the Bankruptcy Act, the order ceased to operate on the money in question. The result is in accordance with the general intention of the Bankruptcy Act that a bankrupt's property shall not, after bankruptcy, be applied in satisfaction of one unsecured creditor's debt to the exclusion of that of others.
It will therefore be declared that the sum held in trust in consequence of the order of the Family Court dated 20 May 1988 (in proceedings between the bankrupt and his wife) with respect to certain proceeds of sale forms part of the estate of the bankrupt. It will be further ordered that the costs of the applicant of and incidental to the proceedings for a declaration be taxed and paid by the first respondent, Australia and New Zealand Banking Group Limited.
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