Re Sabri, Anwaya & Anor v Brien, Richard Campbell
[1995] FCA 916
•25 Oct 1995
C A T C H W O R D S
BANKRUPTCY - application to transfer proceedings to Family Court of Australia - orders of Family Court as to property settlement made within relation back period of sequestration order - claim that property the subject of property settlement vested in the bankrupt's trustee prior to the making of settlement orders by the Family Court - whether discretion to transfer should be exercised - likelihood of appearance of conflict between Family Court and Federal Court orders if matter not transferred - jurisdiction of Family Court in a matter transferred pursuant to s.35A(1) Bankruptcy Act 1966 (Cth) discussed.
Bankruptcy Act 1966 (Cth) - s.35A(1)
Family Law Act 1975 (Cth) - s.79
Ascot Investments Pty Limited v Harper (1981) 148 CLR 337
Re Chemaisse v Commissioner of Taxation (1990) 13 Fam LR 724
Corke v Corke (1994) 121 ALR 320
Deputy Commissioner of Taxation v Swaine (1988) 20 FCR 507
Re Sellen; Ex parte Shirlaw, (1989) 13 Fam LR 324
RE ANWAYA SABRI; EX PARTE DIANA SABRI v
RICHARD CAMPBELL BRIEN and AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
NO NB 3010 of 1993
Davies J
25 October 1995
Sydney
IN THE FEDERAL COURT OF AUSTRALIA )
)
BANKRUPTCY DISTRICT OF THE ) No NB 3010 of 1993
)
STATE OF NEW SOUTH WALES )
)
GENERAL DIVISION )
RE: ANWAYA SABRI
Bankrupt
EX PARTE: DIANA SABRI
Applicant
RICHARD CAMPBELL BRIEN
First Respondent
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Second Respondent
Coram: Davies J.
Date: 25 October 1995
Place: Sydney
MINUTES OF ORDER
THE COURT ORDERS THAT:
The proceedings commenced by the application filed 13 June 1995 in proceedings NB3010/93 be transferred to the Family Court of Australia pursuant to s.35A(1) Bankruptcy Act 1966 (Cth).
The costs of the motion to transfer be costs in the cause of the proceedings transferred.
The costs which have been reserved in the proceedings be reserved to the Judge dealing with the matter in the Family Court.
Leave be granted to the Applicant to amend the Statement of Claim by substituting for the words "and Second Respondents" the word "Respondent" at the end of prayer (1) in paragraph 11 of the Statement of Claim.
The Second Respondent be excused from further participation in these proceedings.
The Applicant pay the Second Respondent's costs of the proceedings as agreed or taxed.
THE COURT NOTES THAT:
The Applicant and the Second Respondent agree that any interest which the Applicant may be found to be entitled to in the property comprised in Certificate of Title Folio Identifier 7/27041 ("the Property") is subject to the mortgage granted to the Second Respondent dated 1 June 1993 registered as dealing No. I482244 over the Property insofar as the same secures the loan of $80,000.00 advanced to the First Respondent by the Second Respondent in or about 1 June 1993, any unpaid interest thereon which has since accrued due or which may in the future be or become due and for any future costs and expenses of enforcing the mortgage;
Subject to being excused from further participation in these proceedings, the Second Respondent consents to such order as the Court may make consistent with the agreement noted at (7) above save any order as to costs.
NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
BANKRUPTCY DISTRICT OF THE ) No NB 3010 of 1993
)
STATE OF NEW SOUTH WALES )
)
GENERAL DIVISION )
RE: ANWAYA SABRI
Bankrupt
EX PARTE: DIANA SABRI
Applicant
RICHARD CAMPBELL BRIEN
First Respondent
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
Second Respondent
Coram: Davies J.
Date: 25 October 1995
Place: Sydney
REASONS FOR JUDGMENT
This is an application for transfer of proceedings to the Family Court of Australia. The Court is given a discretion under s.35A of the Bankruptcy Act 1966 (Cth) to make such an order if it thinks it proper to do so.
The subject matter of the principal proceedings concerns property that was registered in the name of the bankrupt, Mr Anwaya Sabri. On 1 June 1993, consent terms of settlement were filed in the Family Court and provided, inter alia:
"1. That the wife pay to the husband the sum of $80,000.00 within two (2) months of the date hereof and upon payment thereof, the husband shall do all acts and sign all necessary documents in order to transfer to the wife all his right title and interest in the former matrimonial home being the whole of the land contained in Certificate of Title of Title Folio Identifier 7/27041 and known as 336 - 341 Horsley Road Horsley Park in the State of New South Wales.
2. That in the event that the wife fails or neglects to pay to the husband the said sum of $80,000.00 within the said period, the husband shall do all acts and signs all necessary documents in order to effect a sale of the said former matrimonial home at a price to be agreed by the parties and failing agreement at a price determined by the nominee of the President, for the time being, of the Real Estate Institute or its successor and upon such sale the proceeds thereof shall be paid as follows:
(a)in respect of Agent's Commission including any auction fees;
(b)in respect of legal costs and disbursements on the sale;
(c)the sum of $80,000.00 to the husband;
(d)the balance to the wife."
Pursuant to Order 31 rule 8 Family Law Rules, those consent terms of settlement became the subject of an order of the Family Court made 16 June 1993. The order provided inter alia:
"1.That, by consent and pursuant to Order 31 rule 8 of the Family Law Rules, Orders, Declarations and Notations be made in terms of the document titled `Terms of Settlement' marked as Exhibit `1', as attached hereto."
A creditor's petition had been issued against Mr Sabri on 27 October 1992 but it was not served until 14 October 1993. A sequestration order was made on 19 November 1993 and it is not in dispute that the period of relation back period in accordance with s.115 of the Bankruptcy Act commenced on 1 September 1992.
These proceedings are brought by the Trustee seeking orders that Mrs Diana Sabri retransfer the property to Mr Sabri's Trustee in Bankruptcy. The Trustee places reliance upon s.58(1) and ss. 115 and 116 alleging that the property is by virtue of the Bankruptcy Act deemed to have been the property of the bankrupt and to have vested in the Trustee as from the date on which the relation back period commenced.
Reliance is also placed on s.120(1), it being alleged that there was a voluntary settlement within two years of the bankruptcy and upon s.121, it being alleged that there was a disposition of property with intent to defraud creditors.
I need not go into any of the issues relating to those matters. It is sufficient that the facts suggest that the Trustee has an arguable case. The question arises, however, as to whether the dispute should be heard in this Court or in the Family Court. There are, I think, two reasons why the matter would more appropriately be heard in the Family Court.
The first is that, if this Court were to make orders in favour of the Trustee, it is likely that those orders would appear, on the face of them, to conflict with the order of the Family Court. Mr Thomson, counsel for the Trustee, has submitted that there would in fact be no actual conflict, for the orders would have been made under different statutes and would each have different effects. Nevertheless, on the face of the matter, if an outsider, not knowing either the terms of the Family Law Act 1975 (Cth) or the terms of the Bankruptcy Act, simply looked at the two orders, there would certainly be a likelihood of an appearance of conflict.
Matters of conflict should, if possible, be avoided. If this matter can be transferred to the Family Court so that all orders in relation to the matter are made by the Family Court, then the potential for an appearance of conflict will disappear.
The second reason that supports the transfer is that the property was originally registered in the name of Mr Sabri alone and, although the matter has not been pleaded, it is not inconceivable that if the facts are looked at in greater detail, the wife, Mrs Sabri, could have a claim to an equitable interest in the property which a bankruptcy court would recognise. That is an issue with which the Family Court could readily deal. The Family Court could also make any necessary orders in relation to the consent order of 16 June 1993 if it thought it appropriate to do so.
Mr J.T. Johnson, counsel for Mrs Sabri, said that the principle discussed in Corke v Corke (1994) 121 ALR 320 was applicable in a case such as the present. I should merely state that my present view is that that case concerned s.123(6) of the Bankruptcy Act, a section which does not apply in the present case. If the relation back provisions are applicable, in my view there would be no difficulty in their operation by virtue of there having been a disposition in the meantime. I think the Court would not make an order on the application of the Trustee in the circumstance where a disposition had been made in good faith and for a valuable and proper consideration. There is no such condition stated in the relation back provisions but, as I understand it, the Court implies such a condition. It is stated expressly for example in s.120(7). There would, in the present case, certainly be an argument that the $80,000 that the wife was ordered to pay was not adequate consideration in the sense that the transaction was not in good faith or without notice.
For the reasons I have given, I think that the matter should be transferred to the Family Court. What I would take the opportunity to observe, however, is that the Family Court, when it exercises jurisdiction in the transferred matter will be exercising the jurisdiction of the Federal Court and will be bound to apply the principles of the Bankruptcy Act and to give those principles their full force and effect. Discretionary powers such as are conferred upon the Family Court by s.79 of the Family Law Act 1975 (Cth) will not be applicable. This approach was stated clearly enough in Ascot Investments Pty Limited v Harper (1981) 148 CLR 337. At 354, Gibbs J, with whom Stephen, Aickin and Wilson JJ agreed, said:-
"The authorities to which I have referred establish that in some circumstances the Family Court has power to make an order or injunction which is directed to a third party or which will indirectly affect the position of a third party. They do not establish that any such order may be made if its effect will be to deprive a third party of an existing right or to impose on a third party a duty which the party would not otherwise be liable to perform. The general words of ss 80 and 114 must be understood in the context of the Act, which confers jurisdiction on the Family Court in matrimonial causes and associated matters, and in that context it would be unreasonable to impute to the Parliament an intention to give power to the Family Court to extinguish the rights, and enlarge the obligations, of third parties, in the absence of clear and unambiguous words. It can safely be assumed that the Parliament intended that the powers of the Family Court would be wide enough to prevent either of the parties to a marriage from evading his or her obligations to the other party, but it does not follow that the Parliament intended that the legitimate interests of third parties should be subordinated to the interests of a party to a marriage, or that the Family Court should be able to make orders that would operate to the detriment of third parties. There is nothing in the words of the sections that suggests that the Family Court is intended to have power to defeat or prejudice the rights, or nullify the powers, of third parties, or to require them to perform duties which they were not previously liable to perform."
Gibbs J added (at 355):-
"Except in the case of shams, and companies that are mere puppets of a party to a marriage, the Family Court must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it."
These passages were cited with approval in Deputy Commissioner of Taxation v Swaine (1988) 20 FCR 507. At 514 the Court said:-
"A sequestration order reflects a right of a creditor, and creates rights as between a debtor and his creditors and trustee. The Family Court, in the pursuit of its duty (in an appropriate case) to adjust rights as between the parties to a marriage, has no power to deprive the other parties of their rights. Its power to deal with the property of the parties over whom it has jurisdiction must start with the property that is theirs, not with property that the law (whether the Bankruptcy Act or some other law) has vested in another."
Those principles have been applied in other cases. There was a decision of my own in Re Sellen; Ex parte Shirlaw, (1989) 13 Fam LR 324. The Family Court itself expressed the same principles in Re Chemaisse v Commissioner of Taxation (1990) 13 Fam LR 724 at 733. Accordingly, the Bankruptcy Act must be given its full effect.
Notwithstanding that the law to be applied will be the law applicable in bankruptcy, for the reasons I have mentioned I think that there are two sufficient reasons to transfer the matter to Family Court. One is the reason of conformity. The Family Court has made an order and any appearance of conflict should be avoided. The second is that there should be an investigation as to whether Mrs Sabri has any interest in the property which a bankruptcy court will recognise.
For those reasons I shall order that the matter be transferred to the Family Court of Australia. I will order that the costs of this motion be costs in the cause of the Trustee's application that has been transferred. The costs which have been reserved shall be reserved to the Judge dealing with the matter in the Family Court.
And I will make orders in accordance with the short minutes.
I certify that this and the 6 preceding pages
are a true copy of the reasons for judgment herein of
the Honourable Justice Davies.
Associate:
Date: 25 October 1995
Counsel for the applicant: J.T. Johnson
Solicitors for the applicant: Phillip A. Wilkins &
Associates
Counsel for the Trustee
in Bankruptcy: J.T. Thomson
Solicitors for the Trustee
in Bankruptcy: Dibbs Crowther & Osborne
Date of hearing: 25 October 1995
Date of judgment: 25 October 1995
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