SCAVO & SCAVO

[2019] FCCA 471

FEDERAL CIRCUIT COURT OF AUSTRALIA

SCAVO & SCAVO [2019] FCCA 471

Catchwords:
FAMILY LAW – Property – standing – where the applicant is an undischarged bankrupt and his trustee in bankruptcy has decided not to intervene – whether a s.79(5) adjournment should be granted until the bankrupt is undischarged – whether the bankrupt has standing in relation to superannuation funds – where superannuation funds have been transferred from the fund to a party's bank account – whether these funds cease to be superannuation.

Legislation:

Bankruptcy Act 1966 (Cth), ss.5, 58, 60, 116, 149, 149A, 178

Family Law Act 1975 (Cth), ss.79, 117

Family Law Rules 2004, rr.6.17, 6.18, 6.19, 6.20

Federal Circuit Court Rules 2001, r.1.05

Income Tax Assessment Regulations 1997, reg.995.1.03 (now repealed)

Superannuation Industry (Supervision) Act 1993 (Cth)

Superannuation Industry (Supervision) Regulations 1974, reg.1.06

Cases cited:

C & C [2001] FamCA 548

Trent & Rowley [2014] FamCA 447

Applicant: MR SCAVO

Respondent: MS SCAVO

File Number: SYC 2101 of 2018

Judgment of: Judge Kemp

Hearing date: 21 February 2019

Date of Last Submission: 21 February 2019

Delivered at: Sydney

Delivered on: 4 March 2019

REPRESENTATION

Solicitors for the Applicant: Slattery Thompson Solicitors

Solicitors for the Respondent: Lane & O’Rourke Solicitors

THE COURT ORDERS THAT:

1. The proceedings be adjourned under s.79(5) of the Family Law Act 1975 (Cth) until 8 October 2019 at 9.30am for mention.

2. Seven (7) days prior to the adjourned date, the husband file, with the Court and serve on the wife, evidence of his discharge from bankruptcy.

3. Liberty to apply on 7 days’ written notice.

4. The wife’s costs of today be reserved.

IT IS NOTED that publication of this judgment under the pseudonym Scavo & Scavo is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYC 2101 of 2018

MR SCAVO

Applicant

And

MS SCAVO

Respondent

REASONS FOR JUDGMENT

Introduction

1. The applicant husband (“the husband”) seeks final property orders, as set out in his Amended Initiating Application filed on 1 June 2018, which were to the following effect:

   (1)That the monies from the sale of the property known as A Street, Suburb B (“the Suburb B property”) be divided equally between the parties; and

   (2)That the superannuation policies monies and the redundancy monies are to be divided equally between the parties.

2. The respondent wife (“the wife”), on the other hand, seeks final orders, as set out in her Response filed on 5 July 2018, which were to the following effect:

   (1)That the [husband’s] Amended Initiating Application be dismissed; and

   (2)Costs.

3. The matter for determination today, however, relates to a jurisdictional argument identified before the Court, as to the following matters:

   a)Does the husband have standing when the husband is an undischarged bankrupt and his Trustee in Bankruptcy has notified the Court that, after enquiry, the Trustee has decided not to intervene?

   b)When superannuation funds are transferred from the wife’s Superannuation Fund to her bank account, do they cease to be superannuation?

4. There are no children of the relationship to whom the provisions of the Family Law Act 1975 (“the Act”), currently, apply. 

5. The wife relies on the following:

   a)Her affidavit sworn and filed on 5 July 2018; and

   b)Her financial statement sworn on 1 July 2018 and filed on 5 July 2018;

6. The husband relies on the following:

   a)His affidavit sworn on 4 April 2018 and filed on 5 April 2018; and

   b)His financial statement sworn on 4 April 2018 and filed on 5 April 2018;

7. The following documents were tendered as exhibits in the proceedings:

Exhibit No	Document	Date	Tendered by
A	Letter from Slattery Thompson to Australia Financial Security Authority (“AFSA”).	1 November 2018.	Husband

Background facts

1. There are a number of, substantially, undisputed facts as follows:

   a)The husband was born on … 1956 and is, currently, 62 years of age.

   b)The wife was born on … 1953 and is, currently, 65 years of age.

   c)The husband was, previously, self-employed and earned around $600.00 net per week.  He stopped working in September 2016 following a knee replacement.  The husband said that he is now not in good health and is unable to work (see Annexure “A” to his affidavit). 

   d)The wife is, currently, a full time carer for her elderly mother.

   e)The parties met in 1975 and were married on …1977.  They, finally, separated on 14 June 2015 on the wife’s version and were divorced on … 2018.  On the husband’s version, the parties separated temporarily in 2005 and reunited in December 2006 before their final separation.  Accordingly, the parties’ relationship was for a period of some 38 years.

   f)There were 2 children of the marriage, namely, Mr C Scavo (“Mr C Scavo”) born … 1977 and Ms D Scavo (“Ms D Scavo”) born … 1983, currently, aged 35 years.  Mr C Scavo passed away on … 2003.

   g)The wife purchased the Suburb B property in her own name in 2003 for $320,000.00 on the husband’s version and for $310,000.00 on the wife’s version.  The husband asserted that the full amount was borrowed from a bank, however the wife said $15,000.00 had been provided by Mr C Scavo’s fiancé, at the time, “Ms E”, with the balance being borrowed from Westpac Banking Corporation Limited.

   h)The wife had paid the sums due under the mortgage on the Suburb B property from 2005 until its sale referred to in paragraph (r) below.  The Suburb B property was an investment property which was rented out to produce an income. 

   i)In around February 2015, the wife was made redundant from her employment at Employer F, where she had worked for some 7 years and received redundancy monies. 

   j)At about this time, in early 2015, the parties resided in rental accommodation at G Street, Suburb H (“the Suburb H property”).  The husband said that he had paid for all the food, household and rental expenses for the Suburb H property.  The wife said that, during the time the parties were living there, she paid the living expenses such as food, electricity, Foxtel and the telephone account, whilst the husband paid the rent.  The wife said that this arrangement was in place for the last 18 months of the parties’ relationship.

   k)On the wife’s version, the husband left the Suburb H property on 14 June 2015. 

   l)From February 2015 to September 2015, the wife received no income and lived off her redundancy monies.  She also paid the sum of $13,000.00 off her credit card debt, using her said redundancy monies. 

   m)From September 2015, the wife received Centrelink Newstart benefits.

   n)Following her employment, the wife had superannuation with Superannuation I amounting to about $103,000.00 (“the Superannuation Funds”).  This is also reflected in Annexure “A” to the wife’s affidavit, which states that her opening balance was $103,986.21.   

   o)In 2015, to meet expenses for herself, the husband and Ms D Scavo, the wife withdrew amounts of $13,000.00, $18,000.00 and $50,000.00, totalling $81,000.00 from her Superannuation Funds.

   p)On … 2016, the husband became bankrupt (see Exhibit “Court 1” made on 4 June 2018) and AFSA was appointed his Trustee in Bankruptcy. 

   q)In January 2017, the wife received a final payment from her Superannuation Funds of $23,313.90 (see the letter being Annexure “A” to her affidavit).  This letter states:  “The payment of $23,313.90 has been transferred to your nominated bank account.  The Super paid to you was your entire account balance with Superannuation I”.

   r)On 28 November 2017, contracts for the sale of the Suburb B property were exchanged and settlement was effected on 23 January 2018.  Annexure “E” to the wife’s affidavit shows that a Bank Cheque in favour of the wife to the value of $133,025.63 was payable on settlement.  This amount excluded the deposit figure of $48,500.00, noting that the purchase price of the Suburb B property was $485,000.00.

   s)On 5 April 2018, the husband commenced these proceedings, seeking interim and final property orders.

   t)On 7 May 2018, AFSA was made aware of these proceedings.

   u)The wife, currently, lives with Ms D Scavo.  She receives a Carer’s Pension of $586.00 per week and pays $710.00 per week in rent, with this rent expense, sometimes, shared with Ms D Scavo, when she could afford to meet it.

History of Litigation

1. The matter was brought before the Court for a first return date on 4 June 2018.  On that occasion, Mr Livers appeared for the husband and Mr Lane appeared for the wife.  The matter was adjourned to 20 September 2018 and directions were made in relation to the wife filing her Response and affidavit material.  The Court also made the following notations:

   a)It requests that the Official Trustee of the husband’s Bankrupt Estate give consideration to its position in light of its letter of 28 May 2018 and be able to advise both the parties and the Court, 7 days prior to the adjourned date, of its position.

   b)The Official Trustee’s position, in terms of a letter dated 28 May 2018, was that he was unable to confirm if he would seek to become a party.

   c)The Suburb B property was sold in the last 6 months and the mortgage paid out.  There was an equity of, approximately, $100,000.00 remaining.

2. On 20 September 2018, a Mr Laing appeared for the wife (although this may have been a typographical error and it was Mr Lane who, in fact, appeared), mentioning the matter on behalf of the husband.  The proceedings were adjourned to 31 October 2018, with the Court noting that: Exhibit “Court 1” made on that day was a letter from AFSA indicating its position, as the said trustee of the husband’s bankrupt estate.  

3. Exhibit “Court 1” contained AFSA’s position, as follows, noting the references to the “Applicant” are to the husband and the references to the “Respondent” are to the wife:

   The Official Trustee in Bankruptcy refers to the letter dated 31 May 2018 regarding the family law proceedings involving the above named bankrupt (the Applicant).

   After conducting preliminary investigations into the Applicant's claims to the sale proceeds of the Suburb B property (“the property”). The trustee advises that the Applicant has not been able to provide the trustee with any information or documents that sufficiently satisfies the trustee of his claim to the property. The Applicant has also failed to provide the trustee with information to dispute any of the claims made by the Respondent in their application.

   The trustee has reached a conclusion that in the absence of further information forthcoming from the Applicant the trustee does not propose to intervene in the proceedings as a party.

   In light of the Applicant's bankruptcy and pursuant to section 58 of the Bankruptcy Act 1966, any orders made transferring property, or for payment, or otherwise to the Applicant, will result in such property vesting in the trustee. Accordingly, in respect of the orders sought at paragraph 1 of the Application by the Applicant, if the Court were to make such orders (or any other orders) the trustee requests that any transfer or payment or otherwise be ordered to be made to the trustee.

   Please note that the bankrupt estate currently does not have any funds and as such the trustee does not intend to appear at the hearing on 20 September 2018

   However, the trustee would appreciate if the Court would provide a copy of any Orders made on 20 September 2018 to our office. The trustee undertakes to abide by any Court orders made in this regard.

   A copy of this letter has been sent to the Applicant and the Respondent's representatives.

4. On 31 October 2018, the proceedings were adjourned to 7 December 2018 for call-over.  Directions were made for both parties to file and serve a short case outline document in respect of each party’s position in terms of the identified jurisdictional issues, as set out in paragraph 4 above, together with the references to any authorities to be relied upon by 30 November 2018. 

5. On 30 November 2018, both parties forwarded, by email, their case outline documents to Chambers.

6. On 7 December 2018, Mr Nathan appeared for the husband and Mr Lane appeared for the wife.  The matter was set down for final hearing on 21 February 2019 and the husband was ordered to provide to the wife, copies of any documents sent to AFSA, referred to “as the additional document(s)” in his case outline, within 7 days of that date.

7. On the hearing on 21 February 2019, Mr Livers appeared for the husband and Mr Lane appeared for the wife.

The Law

1. Section 58(1) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) provides:

   (1)  Subject to this Act, where a debtor becomes a bankrupt:

   (a)  the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and

   (b)  after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.

2. The Court notes that “the property of the bankrupt” is defined in s.5 of the Bankruptcy Act as being

   (a)  except in subsections 58(3) and (4):

   (i)the property divisible among the bankrupt's creditors; and

   (ii)any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt; and

   (b)  in subsections 58(3) and (4):

   (i)the property, rights and powers referred to in paragraph (a) of this definition; and

   (ii)  any other property of the bankrupt

3. Subsections (3) and (4) of s.58 of the Bankruptcy Act state as follows:

   (3)Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:

   (a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or

   (b)except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.

   (4) After a debtor has become a bankrupt, distress for rent shall not be levied or proceeded with against the property of the bankrupt, whether or not the bankrupt is a tenant of the landlord by whom the distress is sought to be levied.

4. Section 60 of the Bankruptcy Act states in subsections (2), (3) and (4) as follows:

   (2)An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.

   (3)If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.

   (4)Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of:

   (a)any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or

   (b)the death of his or her spouse or de facto partner or of a member of his or her family.

5. The Court notes that while the wife referred to s.60 of the Bankruptcy Act above, (noting that she was unaware at the time of the commencement of these proceedings that the husband was already a bankrupt), that section does not apply as these proceedings were commenced after the husband had, in fact, become a bankrupt.

6. The wife submitted, and the Court accepts, that the husband had failed to disclose his bankruptcy status on several occasions; the first being on 5 April 2018 when he filed his Initiating Application seeking final and interim orders to restrain the wife from selling or otherwise disposing of the Suburb B property.  In that Initiating Application, the husband was required at Item 53 in Part G to disclose as to whether any party to the proceedings was bankrupt.  The husband failed to disclose, the fact, that he had been made bankrupt on 22 September 2016 and was, therefore, at that time, an undischarged bankrupt.  The wife, further, submitted that the husband filed an Amended Initiating Application on 29 May 2018 in which he sought a final order that the proceeds of sale of the Suburb B property should be divided equally between the parties and an interim order that: "the superannuation policies monies and the redundancy monies are to be divided equally between the parties."  Again, the husband failed to disclose, at Item 53, that he was an undischarged bankrupt.

7. The wife directed the Court to the Family Law Rules 2004 at 6.17, 6.18, 6.19 and 6.20 which require that a relevant party, who is a bankrupt, notify, in writing, the other party, the Trustee in Bankruptcy and the Court of the fact that they are bankrupt. The wife submitted that these Rules had not been complied with. Rule 1.05 of the Federal Circuit Court Rules 2001 provides that the provisions in Part 6.5 of the Family Law Rules 2004 (of which Rules 6.17, 6.18, 6.19 and 6.20 are a part), apply, with necessary changes, to family law proceedings in this Court.

8. The wife also submitted that the husband later filed a Further Amended Initiating Application, on 1 June 2018, in which he sought final orders in relation to the division of the proceeds of sale of the Suburb B property and final orders in relation to "superannuation policies monies" and “redundancy monies”.  On this occasion, at Item 53, the husband did, in fact, disclose that he was bankrupt.

9. When a bankrupt is discharged depends on the way in which he or she became bankrupt. Section 149(3) of the Bankruptcy Act provides, generally, that a bankrupt becomes, automatically, discharged at the end of the period of 3 years from the date on which the bankrupt filed his or her statement of affairs. Whilst no submissions were made as to the nature of the husband’s bankruptcy, Annexure “C” to the wife’s affidavit includes that the “Administration Type” of the husband’s bankruptcy was a “Debtor’s Petition” (as per s.55 of the Bankruptcy Act), also known as voluntary bankruptcy. Accordingly, the husband would have had to file a statement of affairs along with his Debtor’s Petition.

10. Section 149A of the Bankruptcy Act provides that the period before which a bankrupt is taken to be discharged may be extended when an objection has been made for his/her automatic discharge and such objection has not been withdrawn or cancelled.

11. While there was no specific evidence as to when the husband had filed his statement of affairs, noting the matters set out in paragraph 24 above, both parties’ legal representatives agreed that the husband would become, automatically, discharged from his bankruptcy on or about 23 September 2019. 

12. Pursuant to s.116(1) of the of the Bankruptcy Act, all property that belonged to or was vested in the husband at the commencement of his bankruptcy, or which had been acquired or was acquired by him or had devolved or devolved on him after the commencement of his bankruptcy and before his discharge, was property divisible amongst his creditors. Further, the husband’s capacity to exercise and to take proceedings for exercising all such powers in, over, or in respect of property as might have been exercised by him for his own benefit at the commencement of his bankruptcy or at any time, thereafter, and before his discharge was, similarly, property divisible amongst his creditors.

1. However, s.116(2) of the of the Bankruptcy Act excludes from property divisible amongst the husband’s creditors, certain types of property, including, relevantly, for today’s purposes, a payment to the husband under a payment split under Part VIIIB of the Act, where the eligible superannuation plan is a fund or scheme covered by the Superannuation Industry (Supervision) Act 1993 (Cth) (or an approved deposit fund or an exempt public sector superannuation scheme as defined in that Act) and the splittable payment involved is not a pension within the meaning of that Act (s.116(2)(d)(iva)) [emphasis added]. 

Arguments as to Standing

1. The husband submitted that, on 6 September 2018, AFSA determined not to intervene in this matter until the husband had provided it with information or documents that, sufficiently, satisfied it of his claim to the Suburb B property and provided AFSA with information to dispute any of the claims made by the wife in her Response.  The husband submitted that the further information had been provided to AFSA to allow the said trustee to so intervene. 

2. The wife maintained that where a bankruptcy trustee declines to exercise his or her power to sue, the bankrupt may apply to the Court and the Court is empowered to make such order as it thinks is just and equitable. The Court in that case, being the Federal Court of Australia or the Federal Circuit Court of Australia. This was provided for, as the wife submitted, in terms of s.178 of the Bankruptcy Act, which the Court notes has now been repealed. While that section has been repealed, it seems that the husband would still have the right to make such an application pursuant to Division 90-20 of the Insolvency Practice Schedule (Bankruptcy) being Schedule 2 to the Bankruptcy Act, as follows:

   Application for Court order

   (1)  Each of the following persons may apply for an order under section 90- 15:

   (a)  a person with a financial interest in the administration of the regulated debtor's estate;

   (b)  if the committee of inspection (if any) so resolves--a creditor, on behalf of the committee;

   (c)  the Inspector-General.

   (2)  If an application is made by a person referred to in paragraph (1)(b), the reasonable expenses associated with the application are to be taken to be expenses of the administration of the estate.

3. In terms of Division 90-20, the Court may make orders in relation to the estate administration of a bankrupt as set out in 90-15, as follows:

   (1)  The Court may make such orders as it thinks fit in relation to the administration of a regulated debtor's estate.

   Orders on own initiative or on application

   (2)  The Court may exercise the power under subsection (1):

   (a)on its own initiative, during proceedings before the Court; or

   (b)     on application under section 90-20.

   Examples of orders that may be made

   (3)Without limiting subsection (1), those orders may include any one or more of the following:

   (a)an order determining any question arising in the administration of the estate;

   (b)an order that a person cease to be the trustee of the estate;

   (c)an order that another person be appointed as the trustee of the estate;

   (d)an order in relation to the costs of an action (including court action) taken by the trustee of the estate or another person in relation to the administration of the estate;

   (e)an order in relation to any loss that the estate has sustained because of a breach of duty by the trustee;

   (f)an order in relation to remuneration, including an order requiring a person to repay to the estate of a regulated debtor, or the creditors of a regulated debtor, remuneration paid to the person as trustee.

   Matters that may be taken into account

   (4)Without limiting the matters which the Court may take into account when making orders, the Court may take into account:

   (a)whether the trustee has faithfully performed, or is faithfully performing, the trustee's duties; and

   (b)whether an action or failure to act by the trustee is in compliance with this Act and the Insolvency Practice Rules; and

   (c)whether an action or failure to act by the trustee is in compliance with an order of the Court; and

   (d)whether the regulated debtor's estate or any person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the trustee; and

   (e)the seriousness of the consequences of any action or failure to act by the trustee, including the effect of that action or failure to act on public confidence in registered trustees as a group.

   Costs orders

   (5)Without limiting subsection (1), an order mentioned in paragraph (3)(d) in relation to the costs of an action may include an order that:

   (a) the trustee or another person is personally liable for some or all of those costs; and

   (b)the trustee or another person is not entitled to be reimbursed by the regulated debtor's estate or creditors in relation to some or all of those costs.

   Orders to make good loss sustained because of a breach of duty

   (6)Without limiting subsection (1), an order mentioned in paragraph (3)(e) in relation to a loss may include an order that:

   (a)the trustee is personally liable to make good some or all of the loss; and

   (b)the trustee is not entitled to be reimbursed by the regulated debtor's estate or creditors in relation to the amount made good.

   Section does not limit Court's powers

   (7)This section does not limit the Court's powers under any other provision of this Act, or under any other law.

4. In the present case, the Court notes that the husband has not made any formal application under Division 90-20.

5. While the Court accepts that AFSA’s, current, position was not to intervene, the husband in terms of Exhibit “A”, has again requested AFSA consider intervention.  Mr Livers said that he had made contact with officers from AFSA who had indicated a few weeks ago that the husband’s request was being considered by an officer who was then on holidays.  Mr Livers’ enquiry with AFSA on 20 February 2019, indicated that the officer who had been on holidays had transferred his file to another officer and, as such, no response was yet available.  Mr Livers was of the view that it was still open for AFSA to intervene.   

6. The wife referred to the decision of the Family Court of Australia in Trent & Rowley [2014] FamCA 447, where Justice Cronin considered a number of authorities relevant to a bankrupt applicant seeking property orders. In that case, the relevant bankruptcy trustee had not yet determined whether to intervene. The applicant said, through his Counsel, that he had a hope that by seeking a property order that he could contribute any monies obtained to his bankrupt estate and, as a result of that, his time in bankruptcy might be reduced.

7. Mr Livers for the husband had, previously, suggested that given that the quantum of the husband’s creditors’ claims was small and that by receiving a property order in his favour, the husband could discharge those creditors and have a surplus left over for his own benefit. 

8. In Trent & Rowley, Cronin J concluded as follows (at paragraph 31):

   "Importantly, The Full Court in O'Neill [O’Neill & O’Neill & Tayper Ptyl and Kayhaven Pty Ltd and Likami Properties Pty Ltd [1998] FamCA 67] also said that the fact that a successful appeal could result in a surplus in which the bankrupt would have a contingent interest, would "apparently" not provide the bankrupt with the necessary interest to institute an appeal in his or her own name. The same must be said of an application to prosecute a case to seek an alteration of property interests. Thus, allowing the bankrupt to pursue a property alteration claim in the hope that any money might be given to his estate to reduce his time in bankruptcy cannot be permitted without reference to s178 of the Bankruptcy Act. [now repealed]"

9. Cronin J went on to, summarily, dismiss the husband’s application.  The wife submitted that, in this case, a fortiori, the husband did not have relevant standing in these proceedings and his application should be dismissed with costs.  The wife in her Response filed on 5 July 2018, as said, has sought orders to that effect.

10. In the circumstances, however, the Court is of the view that an adjournment should be granted under s.79(5) of the Act (as discussed below), which will also give further time for AFSA to consider its position.

11. Leaving aside the question of the husband’s standing, given AFSA’s position, the Court must still consider whether the husband can seek the orders that he does, as against the property identified. 

12. The property pool appears to consist of the balance of the sale proceeds of the Suburb B property.  The wife deposes that her superannuation and redundancy monies have now already been spent, for the purposes of meeting the living expenses for herself and Ms D Scavo.    

13. On the hearing, Mr Lane referred to some $100,000.00 being in the possession of the wife, as supported by her affidavit.  Mr Livers made no submissions to the contrary.  The wife’s financial statement filed on 5 July 2018 notes, at item 37, that she had a total of $131,836.00 in her bank account, at that time.  The amount of $100,000.00 seems to have been calculated from the $133,025.63 (referred to in paragraph 8(r) above) received from the sale of the Suburb B property less a Capital Gains Tax potential payment in the sum of $26,000.00 and less legal costs of about $15,000.00, leaving a sum of, approximately, $92,025.63.  The wife has provided no explanation as to how the deposit amount of $48,500.00, arising from the sale of the Suburb B property (referred to in paragraph 8(r) above), less the figure of $11,840.00 (being agent’s commission and selling fees set out in Annexure “F” to the wife’s affidavit), being $36,660.00 had been spent and what was left of it.

14. The Court accepts that the “property”, being the net proceeds of sale of the Suburb B property, would be divisible property vesting in AFSA as the trustee of the husband’s bankrupt estate and, therefore, the husband would have no standing to pursue the same. 

15. In relation to the monies redeemed from the wife’s Superannuation Funds, the husband maintained an argument that the monies constituted superannuation funds, excluded from the definition of divisible property which did not vest in AFSA and which were, otherwise, available for him to pursue. 

16. The husband said that, between September 2014 and September 2015, the wife withdrew from her Superannuation I Fund member number …29 and account number ….00, the following amounts of money: $9,340.42; $15,000.00; $18,000.00; $50,000.00 and $22,332.66, totalling the sum of $114,673.08, noting that this was greater than the sum asserted by the wife in paragraph 8(o) above.

17. On 13 October 2014, the Superannuation I, by its letter of that date, approved the rollover of the wife’s Superannuation I Pension account to her new fund.  This letter stated that the benefit was to be sent to the rollover fund.  The pension payment which was made on the 12 September 2014 was in the sum of $9,340.42, as referred to in paragraph 44 above.

18. The husband, further, submitted that the wife's withdrawals amounted to a superannuation income stream, which was then deemed a pension in accordance with sub regulation 1.06(1) of the Superannuation Industry (Supervision) Regulations 1974.  These withdrawals being account based pensions or a superannuation income stream.  Sub-regulation 1.06(1) provides:

    1.06  Meaning of pension (Act, s 10)

    (1) A benefit is taken to be a pension for the purposes of the Act if:

    (a)    it is provided under rules of a superannuation fund that:

    (i)     the standards of subregulation (9A) or 1.06A(2); and

    (ii)do not permit the capital supporting the pension to be added to by way of contribution or rollover after the pension has commenced; and

    (b)in the case of rules to which paragraph (9A)(a) applies and that meet the standards of subregulation (9A)—the rules also meet the standards of regulation 1.07D; and

    (c)in the case of rules to which paragraph (9A)(b) applies and that meet the standards of subregulation (9A)—the rules also meet the standards of regulation 1.07B.

19. The husband, also, referred to the Australian Taxation Ruling which states that if a superannuation fund Trustee has a liability to pay to a member a series of periodic payments that are related to each other over a period of time, such payments may constitute “superannuation income stream” payments and come within the definition of a superannuation income stream.  Further, the payments need not be paid at the same receiving intervals and may vary in amount.  In this Ruling, such a series of periodic payments that relate to each other over a period of time is a “superannuation income stream”, unless an election under Regulation 995.1.03 Income Tax Assessment Regulations 1997 has been made for such payments not to be treated as a superannuation income stream of payments.  Notwithstanding that this particular Regulation has been repealed, the relevant payments referred to by the husband occurred prior to 1 July 2017 and would appear not to be affected by that repeal.

20. On that basis, the husband submitted that the wife’s withdrawals constituted the payment of superannuation but were also in the nature of a pension payment.  As such, the husband’s submission, itself, amounted to a concession that such payments would not have been excluded from the property, otherwise, divisible to creditors under the Bankruptcy Act and, accordingly, the husband would have had no standing to pursue the same.

21. The wife, further, submitted that while no authorities could be located on this question, it would seem illogical to suggest that if a person receives a payment out of their superannuation fund, which they were entitled to receive and they deposited that payment to their bank account, that the funds would continue to have the character of superannuation. That is, the wife maintained that monies received from her superannuation fund had completely lost their character as superannuation monies and no longer fell within the Act’s definition of a “superannuation interest”.

22. It, therefore, follows, that at the time the husband filed his Amended Initiating Application seeking a share of the wife’s “superannuation monies”, the wife had no superannuation. 

23. The Court, further, notes that monies in a superannuation fund are under the control of the Trustee of that fund; the funds are entitled to concessional taxation treatment and they are only available to the member when certain conditions have been met. Once the funds are paid to the member they are no longer under the control of the Trustee, they are no longer subject to concessional taxation treatment and the person receiving the funds is unrestricted in the manner in which they may deal with those funds. Once superannuation monies are paid out to the recipient entitled to those monies, they are treated in a completely different manner than monies in a superannuation fund. Relevantly, the Court has no power to effect a superannuation splitting order under the Act, in those circumstances.

24. Accordingly, the Court accepts, for present purposes, that all of the funds presently available to the wife constituted “property”, otherwise, divisible between the husband’s creditors in his bankruptcy and the husband has, at present, no standing to pursue the same.

Section 79(5) of the Act

1. Section 79(5) of the Act provides:

   (5)    Without limiting the power of any court to grant an adjournment in proceedings under this Act, where, in property settlement proceedings, a court is of the opinion:

   (a)that there is likely to be a significant change in the financial circumstances of the parties to the marriage or either of them and that, having regard to the time when that change is likely to take place, it is reasonable to adjourn the proceedings; and

   (b)    that an order that the court could make with respect to:

   (i)the property of the parties to the marriage or either of them; or

   (ii)the vested bankruptcy property in relation to a bankrupt party to the marriage;

   if that significant change in financial circumstances occurs is more likely to do justice as between the parties to the marriage than an order that the court could make immediately with respect to:

   (iii) the property of the parties to the marriage or either of them; or

   (iv)the vested bankruptcy property in relation to a bankrupt party to the marriage;

2. The husband made an oral application for the Court to adjourn the matter under the above section, on the basis that it was likely that he would be, automatically, discharged on 23 September 2019.   The wife opposed the granting of that application for an adjournment.  

3. The husband has the potential to bring property proceedings within 12 months of the date of his divorce being effective, namely by … 2019. If the husband misses this deadline, he would need to seek the leave of the Court to file out of time. As Mr Lane conceded, such an application for leave is likely to be successful, given that for a substantial period of time, on the wife’s case, the husband lacked standing to bring his application, in any event. The only prejudice to the wife would be for her not to obtain a dismissal of the husband’s application, with the prospect of her seeking a costs order in her favour. However, as Mr Lane conceded that, even if a costs order was made, the husband, as an undischarged bankrupt, had no funds to meet the same. Mr Lane also conceded that the Court would have a jurisdictional issue as to the making of such a costs order against the husband as an undischarged bankrupt. This also leaves aside the question as to whether a costs order should be made in light of s.117(1) of the Act, in any event.

4. The Court has had regard to the elements outlined in s.79(5) of the Act and the Court is satisfied that there is likely to be a change in the financial circumstances of the husband and that that change would be a significant one, in that, upon his discharge from bankruptcy, he would have the potential to pursue the property orders that he, currently, seeks. The Court is also satisfied that the relevant change is likely to take place in September 2019, unless an application is made to object to the husband’s automatic discharge from bankruptcy. The Court is, further, of the opinion that once that relevant change occurs, the Court is more likely to be able to do justice between the parties, than it can at this stage (see Strickland J in C & C [2001] FamCA 548).

5. Accordingly, the Court will adjourn the matter to a date after the likely discharge of the husband from his bankruptcy and prior to the date expiring one year after the parties’ divorce had become effective, with an order requiring the husband to file and serve 7 days’ prior to the adjourned date, evidence of his discharge from bankruptcy.

6. Given that the Court is of the view that the proceedings should be adjourned until after the husband is automatically discharged, the Court will reserve the wife’s costs.

7. The adjourned date will be 8 October 2019 at 9.30am for mention.

I certify that the preceding fifty-nine (59) paragraphs are a true copy of the reasons for judgment of Judge Kemp

Associate: 

Date:  4 March 2019