Redmond and Redmond and Anor

[2014] FamCA 678

FAMILY COURT OF AUSTRALIA

REDMOND & REDMOND & ANOR [2014] FamCA 678

FAMILY LAW – PROPERTY – Interim – where the husband made an application for parenting orders and property adjustment orders – where the husband was made bankrupt before the proceedings were finalised – where the wife and the intervenor make an application for final property adjustment orders by consent – where the husband opposes property adjustment orders being made before a trial taking place to determine disputed factual issues – where it is found not to be just and equitable to make such orders at this interim hearing – application dismissed.

Family Law Act 1975 (Cth)
Bankruptcy Act 1966 (Cth)

APPLICANT: Mr Redmond

RESPONDENT: Ms Redmond

INTERVENOR: Official Trustee in Bankruptcy, the Bankrupt Estate of Mr Redmond

FILE NUMBER: BRC 4493 of 2011

DATE DELIVERED: 21 August 2014

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Forrest J

HEARING DATE: 12 May 2014

REPRESENTATION

FOR THE APPLICANT: The Applicant in Person

FOR THE RESPONDENT: The Respondent in Person

SOLICITOR FOR THE INTERVENOR:

Mr Rodgers

Rodgers Barnes & Green

Orders

1. The joint oral application of the Respondent and the Intervenor for the making of final property adjustment orders by consent is dismissed.

2. The competing applications for property adjustment orders in these proceedings as between the applicant, the respondent and the intervener, be listed for hearing along with the parenting orders proceedings over three days on 29, 30 and 31 October 2014, commencing at 10.00 am on that Wednesday.

3. The affidavit of evidence in chief to be filed and served by the applicant Mr Redmond on or before Friday, 26 September 2014 shall also include any further evidence he intends to rely upon in respect of the property adjustment application.

4. On or before Friday, 26 September 2014 the applicant Mr Redmond shall inform the respondent Ms Redmond and the solicitors for the intervener of which other affidavits of evidence in chief already filed he intends to rely upon at the competing property adjustment application and in respect of any of the affidavits filed by the applicant Mr Redmond in both the parenting orders proceedings and the property adjustment orders proceedings upon which he intends to rely at the trial that he has not yet served upon the intervener he shall cause copies to be served on the intervener by that same date, Friday, 26 September 2014.

5. The respondent Ms Redmond shall include in her affidavit of evidence in chief to be filed pursuant to previous direction on or before Friday 3 October 2014, any additional evidence upon which she intends to rely in the property adjustment orders proceedings, and to the extent that any evidence upon which she intends to rely at the parenting orders proceedings and the property adjustment proceedings has not yet been served on the intervener, she shall cause same to happen on or before that same day, Friday, 3 October 2014.

6. On or before 3 October 2014 the intervener shall file and serve on the applicant Mr Redmond and the respondent Ms Redmond any further evidence upon which he intends to rely at the trial of the competing property adjustment orders application.

7. The affidavit that previous directions provided the applicant Mr Redmond to be able to file and serve on or before Friday, 10 October 2014 to matters strictly in reply, shall also include any matters Mr Redmond deposes to strictly in reply to matters raised in the property adjustment orders proceedings as well as the parenting orders proceedings.

8. The minute of orders each of the parties was previously directed to file on or before Friday, 23 October 2014 shall include all orders each party seeks in the property adjustment orders proceeding as well as the parenting orders proceedings and a copy of such minute of orders shall be served on each of the other parties also on that day, Friday, 23 October 2014.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Redmond & Redmond has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 4493 of 2011

Mr Redmond

Applicant

And

Ms Redmond

Respondent

And

Official Trustee in Bankruptcy,
the Bankrupt Estate of Mr Redmond

Intervenor

REASONS FOR JUDGMENT

1. Parenting orders proceedings and property adjustment orders proceedings between Mr Redmond and Ms Redmond were commenced by Mr Redmond in the Federal Magistrates Court (as it then was) in 2011. Before being finalised in that Court those proceedings were transferred to this Court. However, prior to either the parenting orders dispute or the property adjustment orders dispute being finalised in this Court, Mr Redmond was made bankrupt by an unsecured creditor on 5 February 2014.

2. Soon after Mr Redmond’s bankruptcy, the Official Trustee in Bankruptcy in Mr Redmond’s bankrupt estate applied to be joined as a party to the property adjustment proceedings and, pursuant to s 79(11) of the Family Law Act 1975 (Cth) (“the Act”), was joined as a party to these proceedings.

3. On 12 May 2014, when the matter was listed before me for the determination of competing interim applications in respect of the parenting orders proceedings, solicitors representing the Official Trustee in Bankruptcy appeared and, along with Ms Redmond (who is herself a practising solicitor but who appeared without legal representation) made submissions to the Court that final orders be made in the property adjustment proceedings in terms of a draft Minute of Order signed by Ms Redmond and also by the solicitors for the Official Trustee in Bankruptcy.  Mr Redmond (who is himself also a former practising solicitor who, I understand, voluntarily surrendered his practising certificate) opposed any property adjustment orders being made at all on that day without a trial having taken place to determine disputed factual issues.

4. After hearing oral submissions that day, I reserved my judgment to consider whether I could do what I was being asked to do by the wife and the Official Trustee in Bankruptcy and, if I determined that I could, whether I should do it.

5. The husband commenced proceedings seeking property adjustment orders pursuant to s 79(1) of the Act. At the time he commenced the proceedings he was not bankrupt. He was clearly seeking orders altering the interests he and the wife held in property either solely or jointly. Pursuant to s 79(1), this Court may make such order as it considers appropriate altering the interests of the parties to a marriage in their property, owned individually by either of them or jointly by both of them. Of course, the Court shall not make an order under s 79 unless it is satisfied that it is just and equitable to do so, in all the circumstances (s 79(2)).

6. At the commencement of the property adjustment orders proceedings, the parties had various interests in property. Significantly, their former jointly owned home was sold and the net proceeds of sale were invested through the firm of solicitors for whom the wife works, in the names of the husband and the wife. Some amounts have been paid out by agreement to each of the husband and the wife from those funds, but as at 12 May 2014 there was $437,367.79 still invested in joint names.

7. On the material presented to the Court by the wife and the solicitors for the Official Trustee in Bankruptcy, the former matrimonial home appears to have been the most significant jointly owned property of the parties. There appears also to have been some furniture and household items that had been in their former home that was also jointly owned. Each of the husband and the wife though, had interests in other property, not jointly owned. They also had their own superannuation interests in various superannuation funds. Each had liabilities owed solely by them. Upon the sale of their former home and discharge of the mortgage liability attached to that property, they no longer had any joint liabilities.

8. Of course, by operation of s 58(1)(a) of the Bankruptcy Act 1966 (Cth) the property of a bankrupt (save for some exemptions provided for, such as superannuation interests) vests in his or her trustee in bankruptcy at the moment the person becomes a bankrupt. Accordingly, upon Mr Redmond’s bankruptcy three categories of “property” existed to be dealt with in the property adjustment proceedings, namely:

   (i)Property of the wife;

   (ii)Property vested in the Trustee in Bankruptcy;

   (iii)Property of the husband exempted from vesting in the Trustee in Bankruptcy.

9. Those three categories of property are all potentially subject to the power of this Court to make such order as it considers appropriate. Section 79(1)(a) gives the Court the power to alter the interests of the parties to the marriage in the property that remains property of the wife and the property that remains property of the husband and s 79(1)(b) gives the Court the power to alter the interests of the Trustee in Bankruptcy in the vested bankruptcy property. That power to make an order that the Court considers appropriate includes power to make an order requiring either or both of the husband and wife or the Trustee in Bankruptcy to make “for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines”.

10. To be clear, that power includes the power to make an order that a Trustee in Bankruptcy make such settlement or transfer of vested bankruptcy property to the wife or to the husband as the court determines, subject to the order being considered “appropriate” by the Court and also the Court being satisfied that such an order is “just and equitable” in all the circumstances (s 79(2)). In addition, the Court must take into account the matters set out in s 79(4) of the Act in considering what order, if any, should be made.

11. A non-bankrupt spouse can, therefore, seek orders permitting her to retain all of her own property as well as transfers to, or settlement upon her of some of the vested bankruptcy property and the bankrupt spouse’s exempt property. The bankrupt spouse can similarly, seek orders permitting him to retain all of his exempt property as well as transfers to, or settlement upon him of some of the vested bankruptcy property and the non-bankrupt spouse’s property. The Court has no direct power to make an order that either spouse transfer to, or settle upon the Trustee in Bankruptcy any property, but should an order be made against the non-bankrupt spouse or the Trustee in Bankruptcy for property to be transferred to, or settled upon the bankrupt spouse before he is discharged from his bankruptcy, any such property being “after acquired property” would also immediately then vest in the Trustee in Bankruptcy. Of course, that would not apply to any superannuation splitting order made in favour of the bankrupt husband as against the wife’s superannuation interests whilst those interests remain within the accumulation phase, unable to be lawfully accessed by the husband before the likely date of his discharge from bankruptcy.

12. The material put before the Court by the wife and the solicitors for the Trustee in Bankruptcy supports a view that the husband’s half share of the jointly invested funds, namely $218,683, vested in the Trustee on his bankruptcy. Further, the bankrupt husband retains a motor car in his possession that may still be subject to claim by the Trustee in Bankruptcy, some personal possessions, and his superannuation that is also exempt from the vesting provisions.

13. As for the husband’s liabilities, the wife and the solicitors for the Trustee in Bankruptcy assert that they include debts disclosed in the Husband’s Statement of Affairs (in the bankruptcy) of $109,300, a debt of $190,000 to a private school in Region C for costs he was ordered to pay the school in the Supreme Court in respect of litigation between them, child support liability of $4,396 and some unquantified liability to the wife in respect of unpaid costs he was ordered to pay her.

14. Prima facie, on the material of the wife and the Trustee in Bankruptcy, there is insufficient vested bankruptcy property for the Trustee in Bankruptcy to meet all of the husband’s debts. However, notwithstanding that fact, the terms of the minute of order submitted to the Court by the wife and the solicitor for the Trustee in Bankruptcy provide for the wife to receive all of the vested bankruptcy property save for the sum of $50,000 to be retained by the Trustee in Bankruptcy for the payment of the husband’s creditors.

15. The solicitor for the Trustee in Bankruptcy and the wife both submitted that I should make orders in the terms of the minute of order handed up to the Court. Doing so would leave the husband retaining his exempt property – some furniture and household possessions, possibly his motor car and his superannuation interest said to be valued at $24,000. On the other hand, it would leave the wife retaining $387,366 of the invested funds, a real property of her own in which she has $36,000 equity, furniture and household contents, jewellery, superannuation interests worth around $51,000 and a beneficial interest in a testamentary trust that has been valued at around $180,000.

16. In short, the wife and the solicitor for the Trustee in Bankruptcy submitted that the Court should be satisfied that the terms of the minute of order represent an appropriate s 79 property adjustment order that the Court would be satisfied in the circumstances is just and equitable. They inform the Court that they have negotiated with each other the proposed terms as “a final resolution of the outstanding Part VIII applications before the Court”.

17. They submitted that the bankrupt husband has no right to make any submissions to the Court, relying on s 79(12) and (13) of the Act in support of that submission.

18. Section 79(12) provides that the bankrupt spouse is not entitled to make a submission to the Court “in connection with any vested bankruptcy property in relation to the bankrupt party” where the Trustee in Bankruptcy is a party to the proceedings, “except with the leave of the court”. Section 79(13) prohibits the Court from granting leave to the bankrupt spouse to make any such submissions unless satisfied that there are “exceptional circumstances”.

19. In this case, Mr Redmond submitted that the circumstances are “exceptional” and that he should be able to make submissions as to the vested bankruptcy property. Although, with respect, I did not consider that Mr Redmond was able to articulate his oral submissions very well at all, I understood his submissions to be, in essence, that there is significant factual dispute between him and the wife about many matters relevant to the determination of appropriate property adjustment orders that are just and equitable in the circumstances, including valuation of property (presumably of the wife) and other matters that must be considered pursuant to s 79(4) in determining what orders should be made. He submitted that the terms proposed by the wife and the solicitor for the Trustee in Bankruptcy significantly “inflate” the wife’s contributions and “devalue” his. He does not consent to orders being made in the terms proposed by the other two parties.

20. Ultimately, I consider I can determine the application before me without having to express satisfaction at this point in time that there are “exceptional circumstances” that justify granting leave to the bankrupt spouse to make submissions “in connection with any vested bankruptcy property in relation to the bankrupt party”. The Court’s mandate is to make property adjustment orders where it considers property adjustment is indeed just and equitable in the circumstances. Any orders the Court does make in exercising its s 79 power must be appropriate and considered to be just and equitable in the circumstances, particularly having regard to the matters mandated to be considered pursuant to s 79(4). Those matters include matters of contribution and also the matters set out in s 75(2), in so far as they are relevant. Those s 75(2) matters include, amongst many other things, “the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant”.

21. Where there is no agreement between the bankrupt spouse, the non-bankrupt spouse and the Trustee in Bankruptcy as to the terms of orders to be made in respect of property of the non-bankrupt spouse, property of the bankrupt spouse and the vested bankruptcy property, in circumstances where I am informed that there is significant factual dispute about many of the relevant factual matters and where the Court is told that there are creditors of the husband who are owed around $300,000, I am simply not in a position to determine satisfaction, in what is effectively a summary proceeding, that the orders I am clearly being asked to make as final orders by only two out of the three parties whose rights such final orders would seriously impact upon (not to mention the interests of the husband’s creditors that I must also consider) are appropriate and also just and equitable. Each of the parties has a right for the evidence they adduce to be properly considered and weighed, and each has a right to test the evidence of the other as part of that process. A spouse party to property adjustment proceedings does not lose the right to be treated with procedural fairness, or the right to seek orders as against the property of the other spouse, on becoming bankrupt during the course of and prior to the finalisation of those proceedings.

22. Accordingly, I will not at this point in time make orders in terms of the signed minute of order handed to the Court by the wife and the solicitor for the Trustee in Bankruptcy and I will formally dismiss what was an oral application for such orders to be made. The competing property adjustment orders applications will continue to proceed to trial. Trial directions will necessarily now have to be made to ready the matter for final hearing. This is by no means a pre-judgment that such orders would not ultimately be made. If they were considered appropriate and just and equitable after a full hearing where all of the evidence adduced by the parties is subject to testing, consideration and proper weighing by the Court then, of course, orders like that could still be made. That determination though, is for another day.

I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 21 August 2014.

Associate:

Date:  21 August 2014