Southern and Southern and Ors - [2019] FamCA 1002

FAMILY COURT OF AUSTRALIA

SOUTHERN & SOUTHERN AND ORS

[2019] FamCA 1002

FAMILY LAW – PROPERTY – whether the right to apply for an order pursuant to s 90K(1) of the Family Law Act1975 (Cth) vested in the trustee in bankruptcy on bankruptcy – right found to vest pursuant to s 58(1) Bankruptcy Act 1966 (Cth) – application by discharged bankrupt for order pursuant to s 90K(1) of the Family Law Act1975 (Cth) dismissed.

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

APPLICANT:

Mr Southern

FIRST RESPONDENT:

Ms Southern

SECOND RESPONDENTS:

Mr B & Mr C (as Trustees in Bankruptcy)

THIRD RESPONDENT:

J Law Firm

FOURTH RESPONDENT:

E Pty Ltd atf E Trust

INTERVENOR:

Mr F Southern and Ms G Southern

INDEPENDENT CHILDREN’S LAWYER:

Legal Aid NSW

FILE NUMBER:

LEC

629

2011

DATE DELIVERED:

6 December 2019

PLACE DELIVERED:

Brisbane

PLACE HEARD:

Brisbane

JUDGMENT OF:

Hogan J

HEARING DATE:

7 February 2019 and
7 March 2019

REPRESENTATION

SOLICITOR FOR THE APPLICANT:

Jensens Solicitors & Attorneys

COUNSEL FOR THE FIRST

RESPONDENT:

Mr Belzamo

SOLICITOR FOR THE FIRST

RESPONDENT:

Hannigans

SOLICITOR FOR THE SECOND

RESPONDENT:

No appearance

SOLICITOR FOR THE THIRD

RESPONDENT:

Ms Treston of Queen’s Counsel on 7 February 2019 and Ms Hannigan, Solicitor on 7 March 2019

COUNSEL FOR THE FOURTH

RESPONDENT:

Mr Belzamo

SOLICITOR FOR THE FOURTH

RESPONDENT:

Hannigans

COUNSEL FOR THE INTERVENOR:

Mr O’Higgins

SOLICITOR FOR THE INTERVENOR:

Bluewater Lawyers

SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER:

Ms Lovell-Jones

Orders

IT IS ORDERED THAT

The Applicant’s application for an order setting aside the Financial Agreement entered into with the First Respondent on 23 August 2010 is dismissed.

AND IT IS FURTHER ORDERED THAT

In the event that any party seeks an order that the other party pay his or her costs:
(a)if thought necessary by a party, that party has leave to file a further affidavit by that party containing any evidence relevant to the issue of costs and one other affidavit in support of the same, provided that such affidavits are filed within twenty-eight (28) days of the date of this order; and
(b)any such party shall file and serve any written submissions in support of such application for costs within twenty-eight (28) days of today; and
(c)the party against whom an order for costs is sought shall, within a further fourteen (14) days thereafter, file and serve any brief written submissions in answer to the submissions filed and served by the party seeking costs; and
(d)the party seeking an order for costs shall file and serve any brief further written submissions within seven (7) days of its service, strictly in reply to the submissions served by the party against whom an order for costs is sought,
and any such application for costs shall be considered in Chambers.

Note: The form of the order is subject to the entry of the order in the Court’s records.

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

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: LEC 629 of 2011

Mr Southern

Applicant

And

Ms Southern

First Respondent

And

Mr B and Mr C as Trustees in Bankruptcy

Second Respondent

And

J Law Firm

Third Respondent

And

E Pty Ltd as trustee for E Trust

Fourth Respondent

And

Mr F Southern and Ms G Southern

Interveners

And

Independent Children’s Lawyer

REASONS FOR JUDGMENT

The First Respondent wife seeks that the Applicant’s application for orders setting aside a Financial Agreement into which they entered on 23 August 2010 be dismissed. The Applicant husband opposes that application; he is joined in this opposition by the Interveners (his parents).
The factual circumstances relevant to the determination of this application are as summarised below.

Overview of relevant facts

The Applicant and First Respondent married in 1996.
On about 15 December 2008, E Pty Ltd was incorporated: the Applicant was then its sole director and shareholder. It became the corporate trustee for the E Trust (the Trust), which had been established on about 10 July 2008.
It seems that, as at about 2008, the Deputy Commissioner for Taxation asserted that the Applicant owed $850,000.00 as a consequence of what the Applicant described as “disputed tax returns”.
The Applicant contends that, between about August 2009 and about May 2010, the Interveners provided $111,905.00 to E Pty Ltd; it appears that $75,000.00 of this was used as a deposit for the purchase of land undertaken by E Pty Ltd as Trustee for the Trust on about 23 September 2009: a farming business operated on the land was also purchased. It is asserted by the Applicant that the balance of the funds for this purchase were borrowed from a commercial lender which took security over the real property.
The Applicant asserts that, in about early 2010, he and the First Respondent sought legal advice about the debt to the Deputy Commissioner for Taxation; he asserts they were advised that an option was that they enter into an agreement pursuant to s 90C of the Family Law Act 1975 (Cth).
According to the First Respondent, she and the Applicant separated on about 4 June 2010: she said that they lived under the one roof until about 10 June 2013, when she and their youngest child left the former matrimonial home. However, the Applicant contends that separation occurred on about 10 June 2013.
It is agreed that, on 23 August 2010, the Applicant and the First Respondent entered into a Financial Agreement pursuant to s 90C of the Act (the Financial Agreement). It is not suggested that the Financial Agreement is not binding on the Applicant and the First Respondent. The Financial Agreement deals with how, in the event of the breakdown of their marriage, all or any of the property or financial resources of both of them at the time it was made, or at a later time and before the termination of the marriage by divorce, were to be dealt with.
The terms of the Financial Agreement include that the Applicant transfer his shares in E Pty Ltd to the First Respondent and she be sole director of the same; that she be appointed as the Principal of the Trust and that the Applicant indemnify her with respect to any debts of E Pty Ltd and the Trust: practically speaking, the Financial Agreement meant that the Applicant would take responsibility for the debts, by way of indemnity, and the First Respondent would receive the assets.
According to the written submissions prepared on the Applicant’s behalf[1]:
a)“the purpose of the BFA[2] on the husband’s application was to remove assets from his name to the name of the wife so that in the event claims were made on him to pay debts, including the ATO debt, there would be no monies available to pay the said creditors;” and
b)“the outcome of the BFA, that provided for all the assets to be transferred to the wife was not based on contribution or future need but rather on the need of both parties to minimise the outcome of a claim by the ATO for the amount of approximately $850,000;” and
c)“the sole beneficiary of the fraud committed by both parties by agreement was to avoid payment to creditors was and is the respondent wife…..[she] was fully aware of her role in the BFA process.”
[1] Filed 5 February 2019.
[2] Which is a reference to the Financial Agreement.
The Applicant asserts that, between about 27 January 2011 and 30 December 2011, the Interveners (his parents) provided a total of $244,500.00 to E Pty Ltd.
The Financial Agreement was of no force and effect until the divorce order, sought by the parties in an application filed on 7 December 2011, took effect on 25 March 2012.[3] From that date on, the Financial Agreement took effect to the extent to which it dealt with how all or any of the property or financial resources of either the Applicant or the First Respondent at the time it was made, or at a later time and before the termination of their marriage by divorce, were to be dealt with.[4]
[3] S 90DA(1A), Family Law Act 1975 (Cth).
[4] S 90DA(1A)(a) of the Family Law Act 1975 (Cth).
The Applicant became bankrupt on 14 December 2012 as a consequence of the filing of a debtor’s petition.
According to the Applicant, the real property and the farming business operated from it were sold to a third party in about May 2013 and the First Respondent retained the proceeds obtained from this sale.
In correspondence dated 8 May 2013, the Applicant’s then solicitor advised the trustees in bankruptcy that he had been instructed to commence proceedings to set aside the Financial Agreement; he also advised that he had been instructed that the First Respondent had breached the Financial Agreement.[5] Nothing in that correspondence asserted that the basis to be relied on in the foreshadowed application to set aside the Financial Agreement was that it had been entered into for the purpose, or a purpose which included the purpose, of defeating creditors.
[5] Exhibit 1, p 14.
On about 28 August 2013, the Applicant filed, in the Federal Circuit Court, an Initiating Application by which he sought only parenting orders.
On 29 May 2015 – that is, whilst he was an undischarged bankrupt – the Applicant filed an Amended Initiating Application by which he sought orders which included that, pursuant to s 90K(1) of the Act, the Financial Agreement be set aside.
In correspondence dated 21 October 2015, the Applicant’s trustees in bankruptcy sought provision of certain particularised information before they could “consent to the proceedings or otherwise (if applicable) or to make an election as to whether to become involved in such proceedings”; the correspondence also asserted that the administration of the bankrupt estate was currently without funds and that the bankrupt’s actions to date had resulted in the administration of the estate incurring significant costs and that, as a result, the trustee would not be unnecessarily involved in proceedings not consented to or actions that they were not funded for. The trustee also advised that “if the information and documents detailed above are not provided to me by the date specified, I will not be able to make a determination in relation to this matter and I will abandon any further involvement in the action.”
It is clear that the trustee in bankruptcy has not participated in the proceedings. According to the Applicant, this appears to be because the trustee’s research revealed that there was minimal equity in all of the property the subject of the Financial Agreement and it was not in funds to be able to pursue a claim to “…set aside the Financial Agreement”.[6]
[6] Case Outline filed on behalf of the Applicant on 5 March 2019.
The Applicant was discharged from his bankruptcy on 15 December 2015.
The Applicant has subsequently amended his Initiating Application such that, at the time of the hearing, the current document was his Further Second Amended Initiating Application filed 26 August 2016.
On 25 October 2016, the Interveners filed a Response in which they sought, amongst other things, an order that the Financial Agreement be set aside. However, this claim has not been pursued by them in the Further Amended Response filed 19 December 2018.
Thus, the only application by which an order setting aside the Financial Agreement is sought is that filed by the Applicant.
At present – as a consequence of Consent Orders made on 24 April 2018 – the First Respondent is restrained from using funds derived by E Pty Ltd from the sale of the farm and such funds are, as I understand it, currently held in trust on behalf of that company.

The First Respondent’s contentions

Counsel for the First Respondent submitted that, despite asserting that the Financial Agreement was obtained by fraud, the Applicant has failed to provide any sufficient particulars of the same in the points of claim filed on his behalf to date; he also submitted that, beyond asserting in the points of claim that:
a)his creditors were owed $3,000,000.00; and
b)as a result of the Financial Agreement they received nothing; and
c)the detriment to them was the total claimed and owing,
the Applicant has failed to further particularise his case that the Financial Agreement should be set aside because the Court would be satisfied that a party to it entered into it for a purpose of defrauding or defeating the creditors of that party. It was contended that, if what the Applicant was asserting amounted to an admission that he had entered into the Financial Agreement for that purpose, he ought not to be permitted to gain from such action.
Counsel for the First Respondent submitted that the Applicant did not have standing to commence the proceedings in which he sought relief pursuant to s 90K(1) of the Family Law Act because, at the time he amended the Initiating Application to seek such relief, he was a bankrupt. It was submitted that a consequence of the Applicant’s bankruptcy was that his right to seek relief pursuant to s 90K of the Family Law Act vested in his Trustee in Bankruptcy (the Bankruptcy Trustee) [7] and such right did not revert to the Applicant following his discharge from bankruptcy. It was also submitted that the Applicant’s interest in the Financial Agreement itself vested in the Bankruptcy Trustee and whatever interest he had in the property the subject of the Financial Agreement also vested in the Bankruptcy Trustee.
[7] Pursuant to s 58(1), Bankruptcy Act 1966 (Cth).
Counsel for the First Respondent also submitted that, as a consequence of his bankruptcy, the Applicant no longer had a financial interest in pursuing property adjustment proceedings under the Family Law Act and that this position had not changed simply because his bankruptcy ended.
It was submitted on behalf of the First Respondent that, unless the conclusions contended for on her behalf were adopted, there would be an anomaly in that, if the Applicant had commenced his proceedings seeking an order pursuant to s 90K of the Family Law Act before he became bankrupt and they were on foot during his bankruptcy, the same would be automatically stayed by operation of the relevant provisions of the Bankruptcy Act 1966 (Cth) but if, as here, he commenced proceedings after his bankruptcy commenced, they would not be stayed and he would be able to continue with them.

The Applicant’s position

The Applicant contends that his right to apply for an order pursuant to s 90K of the Family Law Act did not vest in his Bankruptcy Trustee because it is a personal right of his. It was submitted that this conclusion is supported by the fact that the Bankruptcy Trustee accepted that the Agreement provided for the Applicant’s equity and interest in then jointly owned real property to be transferred to the First Respondent such that, when bankrupt, the Applicant had no legal or equitable interest in the same.
The Applicant contends that, as his right to commence proceedings based on s 90K of the Family Law Act did not vest in his Bankruptcy Trustee but remained personal to him throughout his bankruptcy, he has standing to prosecute the claim pursuant to the same.

The Interveners’ position

The Interveners contend that the Applicant has standing to pursue the application for orders under s 90K of the Family Law Act. It was submitted on their behalf that, for the purposes of determining the question of standing, an application under s 90K of the Family Law Act is analogous to an application made pursuant to s 79 of the Family Law Act and, therefore, the same principles that have been held to apply to applications under s 79 of the Family Law Act should apply to applications pursuant to s 90K of the Family Law Act.
It was also submitted, by reference to the authorities discussed in the written submissions, that the weight of authority supported the view that the Applicant’s right to apply for an order under s 90K of the Family Law Act did not vest in his trustees in bankruptcy on him being made bankrupt because it is a personal right which remained with him. It was submitted that, whilst a bankrupt, he did not have standing to pursue an application under s 90K of the Family Law Act but, after his discharge from bankruptcy, his situation changed and his standing was in effect “re-enlivened” such that he was free to pursue the claim; and, as the right to apply for an order pursuant to s 90K of the Family Law Act did not vest in the bankruptcy trustees, there was no question of it ‘re-vesting’ in the Applicant after he was discharged from bankruptcy.
It was also submitted that, provided it was accepted that the Applicant’s right to seek orders pursuant to s 90K of the Family Law Act had not vested in the trustees in bankruptcy, it would not, in essence, matter if the proposition that the Applicant’s standing was “re-enlivened” was not accepted because he could simply discontinue his current application and file a new application for orders pursuant to s 90K of the Family Law Act.

Relevant provisions of the Bankruptcy Act 1966 (Cth)

It is clear that, by operation of s 58(1)(a) of the Bankruptcy Act 1966 (Cth), the property of the Applicant vested in his trustee in bankruptcy when he became bankrupt on 14 December 2012.
In s 5 of the Bankruptcy Act:
a)the word “property” is defined to mean: “real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property”; and
b)the phrase “the property of the bankrupt” is relevantly defined to mean: “the property divisible among the bankrupt’s creditors; and 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.”
Section 116(1) of the Bankruptcy Act relevantly provides that, subject to the Act:
a)all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge;[8] and
b)the 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 the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge,[9]
is property divisible amongst the creditors of the bankrupt.
[8] S 116(1)(a), Bankruptcy Act 1966 (Cth).
[9] S 116(1)(b), Bankruptcy Act 1966 (Cth).
Section 116(2) of the Bankruptcy Act particularises specific property to which s 116(1) of the Bankruptcy Act does not apply. Such exclusion includes any right of the bankrupt to recover damages or compensation:
a)for personal injury or wrong done to the bankrupt, the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt; or
b)in respect of the death of a spouse or de facto partner of the bankrupt or a member of the family of the bankrupt;
and any damages or compensation recovered by the bankrupt (whether before or after he or she became a bankrupt) in respect of such an injury or wrong or the death of such a person.[10]
[10] S 116(2)(g), Bankruptcy Act 1966 (Cth).
Having regard to authorities in which the nature of the rights encompassed by s 116(2)(g) of the Bankruptcy Act has been considered,[11] I consider that, if the Applicant’s right to seek an order pursuant to s 90K of the Family Law Act is property, it does not come within the exclusions prescribed by s 116(2) of the Bankruptcy Act.
[11] See, for example: Cox v Journeaux (No. 2) (1935) 52 CLR 713; Faulkner v Bluett (1981) 52 FLR 115; Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45

Relevant provisions of the Family Law Act 1975 (Cth)

Part VIII of the Family Law Act – entitled “Property, Spousal Maintenance and Maintenance Agreements” – does not apply to financial matters or to the financial resources to which a financial agreement that is binding on the parties to it applies.[12]
[12] s 71A(1)(a) & (b), Family Law Act 1975 (Cth).
As noted earlier, there is no suggestion that the Financial Agreement is not binding on the Applicant and the First Respondent; it had force and effect from 25 March 2012.
Section 90K(1) of the Family Law Act relevantly provides that a Court may make an order setting aside a financial agreement if, and only if, the Court is satisfied that a party to the agreement entered into the agreement for the purpose, or for purposes that included the purpose of defrauding or defeating a creditor or creditors of the party;[13] or with reckless disregard of the interests of a creditor or creditors of the party.[14]
[13] s 90K(1)(aa)(i), Family Law Act 1975 (Cth).
[14] s 90K(1)(aa)(ii), Family Law Act 1975 (Cth).

Overview

In order to determine whether the Applicant’s right to seek an order setting aside the Financial Agreement is property that vested immediately in the Bankruptcy Trustee on his bankruptcy, it is, I think, necessary to consider carefully the nature of that right and, for example, the basis on which it accrues.
This is because:
a)whilst there are a number of decisions of this Court at first instance and of the Full Court[15] that have determined that a right to bring an application for property settlement orders pursuant to s 79 or s79A of the Family Law Act are personal rights which do not vest in a bankrupt’s bankruptcy trustee – but remain with the bankrupt – the issue of a bankrupt’s ability to seek an order pursuant to s 90K of the Family Law Act has not previously been directly considered; and
b)the various rights created by the operation of the provisions of the Family Law Act do not necessarily possess the same characteristics or have the same nature as to compel a conclusion that the manner in which one is regarded or treated mandates the manner in which others must be regarded or treated.
[15] Page and Page (No 2) (1982) FLC 91-241; In the Marriage of Reed: Grellman (Intervener) (1989) 13 Fam LR 566; Audet v Audet; Official Trustee in Bankruptcy (Intervener) (1995) FLC 92-607; In the Marriage of O’Neill (1998) 23 Fam LR 326; Bryson & Pember [2013] FamCA 43; Sloan & Sloan [2018] FamCA 610.
In Official Trustee in Bankruptcy & Galanis & Anor[16] the Full Court of this Court dismissed an appeal against a finding that Court does not have jurisdiction to hear an application to set aside a financial agreement made by the trustee of a discharged bankrupt. I am not persuaded that in noting in [46], in the manner properly characterised by the Applicant’s legal representatives as being “in passing”, the Full Court expressed any view about whether the right to apply for an order pursuant to s 90K of the Family Law Act vests, on bankruptcy, in the trustee in bankruptcy or not.
[16] (2017) 56 FamLR 433
Further, lest it is thought that there has always been unanimity about the manner in which a bankrupt party’s rights pursuant to s 79 of the Family Law Act should be regarded, I note, in passing, that in Trent & Rowley[17] Cronin J expressed his view that “the decision of Page must be viewed with scepticism.”[18]
[17] [2014] FamCA 447.
[18] At [31].
In any event, if the rights a bankrupt has under s 90K of the Family Law Act and under ss 79 or 79A of the of the Family Law Act possesses the same characteristics or have the same nature, then I consider that I am bound to follow the earlier decisions of the Full Court and conclude that the Applicant’s right to seek an order setting aside the Financial Agreement did not vest in his bankruptcy trustee when he became bankrupt on 12 December 2012 but remained always with him: if this conclusion is reached, then the wife’s application to dismiss the Applicant’s application for orders pursuant to s 90K of Family Law Act must be refused.

The nature of the right to apply pursuant to s 90K of the Family Law Act

I think it useful, in considering the nature of the right to apply for an order pursuant to s 90K of the Family Law Act to set aside a financial agreement, to attempt to distil the nature of some interests which have previously been held not to vest in a trustee in bankruptcy and to consider the various reasoning underpinning such conclusions.
In Re Finn,[19] an undischarged bankrupt (who had an interest under the prior will of the testator) lodged a caveat against the grant of probate of the subsequent will. It was contended that undischarged bankrupt was incompetent as any beneficial interest he had in the estate must have passed to his trustee in bankruptcy. Lowe J held that the undischarged bankrupt’s interest was not of such a character as to pass to the official receiver under the provisions of the Bankruptcy Act. Lowe J formulated the question to be whether the right to lodge a caveat was property of the bankrupt within the meaning of the Bankruptcy Act; his Honour noted that, as the undischarged bankrupt’s claim was that he was entitled to an interest under a prior will of the testatrix, such interest could only become a proprietary right when it was determined that the latter will was invalid and the former will valid. His Honour concluded that the undischarged bankrupt’s claim far more resembled those considered in various cases, in which a mere possibility or expectancy of an interest in property, the chance of acquiring a benefit from a relative and the possibility of becoming the object of a power of appointment were all found not to be “property” within the meaning of the Bankruptcy Act, than cases where it had been concluded that there was a proprietary interest.
[19] [1942] VLR 125.
It seems to me that, unlike the position considered by Lowe J, the rights of parties to a financial agreement to the property and financial resources which are its subjects and to the enforcement of its terms do not require a prior determination to be brought into existence. They exist once the agreement is of force and effect.
In Coffey v Bennett,[20] Sholl J concluded that undischarged bankrupt alone could make an application for maintenance under the Administration and Probate Act1958 (Vic). He concluded that the right to sue for maintenance out of an estate was a personal right that was not capable of assignment by a statutory claimant or of assignment by operation of law to the claimant’s trustee in bankruptcy. Having commented, amongst other things, that no one ever heard of an assignee of the rights of a deserted wife or child suing as such assignee for maintenance under the Maintenance Act or under the Marriage Act, his Honour also said that these were cases of provisions made by the legislature through the courts, as a matter of public policy, in order to protect persons from hardship or possible destitution. Having commented to the effect that, whether or not benefits conferred by an order made for testators’ family maintenance were, when the order was made or thereafter, wholly or partly, “property” available for creditors, his Honour said, in essence, that as the right to make an application for an order under the Act depended on considerations which were wholly personal to an applicant (such as his or her relationship to the testator, the moral claim which he or she had on the testator’s bounty, the standard of maintenance the testator might have been expected to provide for the applicant and the applicant’s actual needs), only the person entitled, pursuant to the provisions of the Act, to seek such provision from the court could apply for the same and that, if such person was bankrupt, it was still the bankrupt who alone could apply.
[20] [1961] VR 264.
His Honour concluded this aspect of his Reasons by saying that: “It would introduce great mischiefs and difficulties into the operation of the legislation if assignees, whether by operation of the law or by act of the statutory claimant, could come to the court as applicant.” Such comments must, of course, be seen in the context in which they were made – a context which I consider is very different to that in which the court is asked to consider the rights of parties to a financial agreement, the rights of trustees in bankruptcy in discharge of their obligations to creditors of a bankrupt party to such agreement, the interplay between such rights and what I regard as a public policy consideration of ensuring that binding financial agreements are not used as vehicles by which the legitimate interests of creditors are defeated.
In Luxton v Luxton,[21] an undischarged bankrupt wife applied to the Supreme Court of Victoria for a declaration that she was jointly entitled with the husband to certain real property – the title to which was in his name only – and an order that the same be sold and she be paid half of the sale proceeds. She also sought, by way of interim relief, that the husband be restrained from disposing of any property until the proceedings were heard and determined. Her case was, in summary, that she had made the overwhelming financial contributions to the acquisition of the real property and the construction of the house on it and that she had also contributed her labours to the same, whilst the husband had made only limited financial contributions to the support of the family and had contributed only his labour to improve the value of the house and garden. It seems the wife had not asserted to the Official Receiver that she was entitled to any interest in the property.
[21] [1968] VR 540
The wife submitted that her right to apply to the Court pursuant to s 161 of the Marriage Act 1958 (Cth) (as amended by the Marriage (Property Act 1962)[22] did not vest in the official receiver but was a right personal to her which did not pass upon her bankruptcy to her trustee in bankruptcy. It was further argued that this right was analogous to the right considered by Sholl J in Coffey v Bennet (supra).
[22] At that time s 161 was in the following terms: “ 161 Questions between husband and wife as to property (1) In any question between husband and wife as to the title to or possession or disposition of property (including any question as to investment by one of moneys of the other without consent) either the husband or the wife or any person on whom conflicting claims are made by the husband and wife may apply to the Supreme Court or (at the option of the applicant irrespective of the value of the property in dispute) to the County Court. (2) In addition to and without in any way limiting the powers conferred by section 37 of the Supreme Court Act 1986 or section fifty of the County Court Act 1958 the Supreme Court or the county court (as the case requires) may, upon the application of any party to proceedings under this section, grant an injunction restraining any person from making any threatened or apprehended conveyance, assignment, sale, or other disposition of any property in question in the proceedings until the proceedings are heard and determined. (3) Subject to the next succeeding subsection but notwithstanding any other Act or law to the contrary the Court may make such order with respect to the title to or possession or disposition of the property in dispute (including any order for the sale of the property and the division of the proceeds of sale, or for the partition or division of the property) and as to the costs of and consequent on the application as it thinks fit and may direct any inquiry touching the matters in question to be made in such manner as it thinks fit.
McInerney J held that, in so far as the wife wanted to assert a claim founded on the statutory presumption created by s 161(4) of the Marriage Act,[23] she was the competent applicant – even though, if she succeeded, the official receiver would take whatever land then vested in her as a consequence of the exercise of the statutory discretion – and her trustee in bankruptcy was not competent to make an application under s 161 of the Marriage Act.
[23] which was to the effect that, in the absence of sufficient evidence of intention to the contrary and in the absence of any special circumstances which appeared to the Judge to render it unjust to do so, a husband and wife would be presumed to hold, as joint tenants, so much of any real property as consisted of a dwelling and its curtilage which the Judge was satisfied they, or either or both of them, had acquired during their marriage, or in contemplation of the same, wholly or principally for occupation as the matrimonial home.
His Honour said:
It was said long ago by Parke, B, in Beckham v Drake [1849] Eng R 843 (other citations omitted) that “The proper and reasonable construction appears to me to be, that the statute transfers not all rights of action which would pass to executors, (.. rights incapable of being converted into money…………), but all such as would be assets in their hands for the payment of debts, and no others – all which could be turned to profit, for such rights of action are personal estate. Of course the executor is assignee in law; and the nature of the office and duty of a bankrupt’s assignee requires that he should have them also”.
However, whilst McInerney J held that the wife’s right to make an application under s 161 of the Marriage Act was a right which did not vest in her trustee upon her bankruptcy, his Honour also held that her proprietary or contractual rights in respect of the subject real property did vest in the official receiver and that she was not a competent applicant under s 161 of the Marriage Act with respect to those rights.
In Page and Page (No 2)[24] Frederico J was asked to consider an application by an undischarged bankrupt husband for property settlement orders pursuant to s 79 of the Family Law Act. His Honour said, at 77,328:
Although sec. 60 of the Bankruptcy Act 1966 (Cth) provides that any action commenced by the bankrupt prior to the bankruptcy is stayed until the trustee elects to either prosecute or discontinue, that does not preclude the bankrupt from bringing or continuing an application under the Family Law Act for settlement of property.
It appears from what is referred to in Williams on Bankruptcy, 18^th ed., p. 318 as “the common law of bankruptcy” that a claim for settlement of property under the Family Law Act is not a right which vests in the official receiver.
[24] (1982) FLC 91-241.
His Honour said that similar considerations to those discussed by Sholl J at p. 266 in Coffey v Bennett applied in relation to applications for settlement of property by an undischarged bankrupt under the Family Law Act.[25]
[25] At pp. 77,328 & 77,329.
In Deputy Federal Commissioner of Taxation v Swain,[26] the Full Court of the Federal Court[27] was asked to consider an appeal against a decision to adjourn a summons to sequestrate the estate of the Respondent to enable property settlement proceedings under the Family Law Act between the Respondent and his wife to be determined in the Family Court. In so doing, and after simply referring to Coffey, Luxton and Page, the Court did no more than note that there was authority “to support the proposition that a sequestration order would be no bar to the maintenance by the respondent of a claim on his own behalf in the Family Court, any success of which could be recognised by a subsequent annulment.”[28]
[26] (1988) FLC 91-976.
[27] Davies, Lockhart and Burchett JJ.
[28] At p 77,058; said in the context where the respondent had asserted in the property settlement proceedings that he had a claim against his former wife for her share of the jointly owned matrimonial home and that, if he succeeded in this, he would be able to pay his debts.
In In the Marriage of Reed: Grellman (Intervener)[29] the Full Court of this Court[30] upheld the wife’s appeal against the trial judge’s decision to dismiss her property settlement application on the basis that all of the husband’s property had vested in this trustee in bankruptcy – with the consequence that there was no property in respect of which the Court could make an order pursuant to s 79 of the Family Law Act. The Court’s reasons contain the statement that “In any event, however, it would appear that the husband himself has the right to institute proceedings against the wife under s 79 of the Act and this right is not one which vests in the Official Receiver: see In the Marriage of Page (No 2)..”[31] [citation omitted]. The manner in which this apparent conclusion was expressed does not suggest that it was the subject of in-depth analysis.
[29] (1989) 13 Fam LR 566.
[30] Fogarty, Lindenmayer and Strauss JJ.
[31] At p 571.
In Audet v Audet; Official Trustee in Bankruptcy (Intervener),[32] Moss J considered whether the undischarged bankrupt husband’s rights to bring or defend an application pursuant to s 79A of the Family Law Act passed to his trustee in bankruptcy pursuant to ss 58(1)(a), 116(1)(a) or 116(1)(b) of the Bankruptcy Act. His Honour referred to authority that included Coffey and Luxton. Having noted that, in Swain, the Full Court of the Federal Court appeared to have accepted both Coffey and Luxton as authority for the proposition that bankruptcy was no bar to the maintenance by a bankrupt of a claim on his own behalf under the Family Law Act, his Honour concluded[33] that, in light of the decisions to which he had referred, it seemed clear to him (at least in the circumstances of the case with which he was dealing) that the bankrupt’s right to make an application pursuant to s 79A in respect of the Consent Orders into which he and the wife had earlier entered, or to defend her application to vary the same pursuant to s 79A, did not pass from him on and by reason of his bankruptcy, but remained vested in him. His Honour concluded that, as the right to institute a claim pursuant to s 79A of the Family Law Act remained vested in the bankrupt, only he or the wife could bring such proceedings.[34]
[32] (1995) FLC 92-607.
[33] At p 82,052.
[34] At p 82,053.
Given the manner in which Moss J expressed his consideration of the Full Federal Court’s discussion in Swain (namely, that it “appeared” that they accepted Coffey and Luxton for the proposition advanced) and with great respect to his Honour, I am not so confident that the Full Federal Court in Swain did more than simply note the existence of authority to support a proposition, especially where the consideration of the proposition went no further.
In Cummings v Claremont Petroleum NL and Another[35] the High Court affirmed the decision of the Full Federal Court that the bankrupt appellants had no standing to institute appeals against a Judgment entered against them following findings adverse to them in respect of the Respondents’ claim for damages for conspiracy to defraud, misleading and deceptive conduct, breach of fiduciary duty and breach of the South Australian Companies Code legislation. The appellants had become bankrupt whilst the decision at first instance was reserved.
[35] (1995-96) 185 CLR 124.
The majority (Brennan CJ, Gaudron and McHugh JJ) held that the bankrupt appellants’ right to appeal was not property which vested in the trustee. However, they also held that the bankruptcy of the appellants left them without sufficient interest in the property to support the institution of an appeal in their own names and that the contingent interest of a bankrupt in a surplus does not give a bankrupt the necessary interest to support an appeal.
The majority said, at p 133:
A right to appeal may be a substantive right, but it is another question whether such aright has the character of property. Some rights created by statute can constitute property but a right to appeal does not have the character of property merely because it is the creature of statute. A chose in action may be the property of the person entitled to enforce it…….

And at p 134:
If the postulated appeal relates to property that became vested in the trustee on the bankruptcy, or if the postulated appeal relates to a claim by the bankrupt for money or property that would be vested on recovery in the trustee, the right to appeal is vested in the trustee….
And at pp 135 and 136:
Neither Boaler v Power nor the cases cited establish the affirmative proposition that a right to appeal is property. They do establish the negative proposition that a bankrupt has no right to bring or prosecute proceedings to protect, enhance or add to the property of which he has been divested on bankruptcy.
And further at p 136:
The appellants, believing that they had to escape from the proposition that the right to appeal in the present case was property, contended that that “property” was not vested in their trustee but was analogous to those rights of action which do not pass to a trustee on bankruptcy because they are personal to the bankrupt and do not affect the quantum of the bankrupt’s estate.(51) As the right to appeal in this case was not “property” within the meaning of that term in s 58(1), the appellants’ submissions miss the point.
I note that Coffey v Bennett was one of the authorities included in footnote (51).
The minority (Dawson and Toohey JJ) held that the right to appeal was “property” within the definition of that term in the Bankruptcy Act and as such vested in the trustee (even though the appeal was against a judgment imposing a monetary obligation on the appellants).
Having referred to ss 5 and 116 of the Bankruptcy Act, their Honours remarked, at p 141, that “the intent of the Act is clear, namely, save for rights of action of a personal nature, everything answering the description of “property” vests in the trustee, including after-acquired property.”
Their Honours also said, at p 145:
…..The question is whether a right of appeal is ‘property” within the meaning of the Act. In bankruptcy legislation, a broad view has been taken of the meaning of ‘property. In Federal Commissioner of Taxation v Official Receiver (87)[36] Kitto J observed:
“[T]he unassignability of a right to be paid money does not necessarily exclude it from the category of property which vests in the official receiver under the Bankruptcy Act.”
Whilst the definition of “property” in the Act is cast in broad terms, it is a definition which requires consideration of what is meant by the word property itself. The answer to that question is not to be found directly within the definition. At the same time the scope of the word cannot be divorced from the context in which it appears.
[36] (1956) 95 CLR 300 at 327.
In Griffiths v Civil Aviation Authority[37], it was held that a right to bring proceedings to challenge a decision of the AAT about the bankrupt’s aviation licences was not “property”, nor was it “property divisible amongst the creditors” of the bankrupt’s estate: consequently, such right did not vest in the bankruptcy trustee pursuant to s 58(1) of the Bankruptcy Act but remained with the bankrupt.
[37] (1996) 137 ALR 521
As I read the reasons delivered by Einfeld J, his Honour considered that, as the matter concerned variations to personal licences held by the bankrupt which were of no value or use to the creditors whatsoever, it could not be said that the bankruptcy administration had a real interest in the proceedings.[38] He concluded that the “inherent nature of the right” of the licence was personal to the bankrupt and that it could not be considered to be “property” which vested in the bankruptcy trustee on the bankruptcy;[39] and that, “the reasoning adopted in the cases preserving to the bankrupt actions personal to the bankrupt which have no implications for the estate should be applied in the present appeal”; and that “Given its completely personal nature and the fact that it holds no interest for the estate whatsoever, the right of appeal in this case is not in my view “property” vesting in the trustee” upon the bankrupt’s bankruptcy.[40]
[38] At p 529.
[39] At p 530.
[40] At p 536.
As I read the reasons delivered by Cooper J, his Honour considered that the Bankruptcy Act was not concerned to “prevent the bankrupt enforcing rights which are personal to the bankrupt and irrelevant to the attainment of the statutory objects of the Act”[41] – such statutory objects including the vesting of the property of a bankrupt in a trustee so that the same may be divisible among the bankrupt’s creditors. Given this, his Honour thought that “a construction of the [Bankruptcy] Act which denies to a bankrupt the enjoyment of rights which do not affect the value of the bankrupt’s estate or the administration of the estate is to be avoided.”[42] Having remarked to the effect that the courts had always taken a “wide view” of the property which passed to a bankruptcy trustee on bankruptcy, his Honour remarked that “what was required was that the right was either one of a proprietorial nature, one affecting property of the bankrupt, or one affecting the due administration of the estate.”[43]
[41] At p 540.
[42] At p 540.
[43] At p 541.
In addition, Cooper J said, in discussing Luxton, that there the wife’s claim based on a statutory presumption created by a provision of the referred-to Act did not vest in her trustee in bankruptcy but “it would have been otherwise if the claim was based upon some proprietary or contractual right touching the property or estate for those rights and the right to enforce them would have vested in the trustee…”[44] He concluded that the statutory right in Griffiths – being in the nature of an appeal – did not affect any property which formed part of the bankrupt’s estate and which vested in the bankruptcy trustee as property of the bankrupt and, therefore, it did not fall within “property” as defined in the Bankruptcy Act.
[44] At p 542.
His Honour also said, at p 543:
There is a unity of object and purpose in the operation of ss 58, 60 and 116 of the Act if it is recognised that the consistent focus of attention is upon rights which the trustee can turn to advantage for the benefit of creditors or upon rights the exercise of which will adversely affect or delay the administration of the estate. It is these rights which fall within the definition of “property” in s 5 and the enforcement of which by action are stayed by s 60(2) upon a person becoming bankrupt. To interpret “property” for the purposes of s 5 in this way avoids the injustice of denying to the bankrupt the power to exercise a right in which the trustee has no interest and the exercise of which cannot operate adversely on the property of the bankrupt or the administration of the bankrupt’s estate.
In Guirguis v Guirguis and Official Trustee in Bankruptcy,[45] the wife sought the dismissal of the husband’s appeal against property settlement orders made in May 1996 on the basis that, as his Notice of Appeal against such orders had been filed after he became bankrupt, he had no standing to prosecute the appeal in his own name. She contended that this was the case because either:
a)the husband’s right to appeal was “property”, which had vested in his bankruptcy trustee; or
b)the husband had no interest in the property which was the subject of the orders against which his appeal had been filed as that property had vested in his bankruptcy trustee.
[45] (1997) FLC 92-726.
The husband contended that the right to appeal in the proceedings was a right that was personal to him and had not vested in his trustee.
The orders against which the husband appealed provided, in essence, that: real property owned by the parties be sold; the nett sale proceeds of the same be paid to the parties in equal shares (save that the funds to which the husband was entitled were to be applied to meet his outstanding maintenance arrears and to pay his outstanding liability to the “Australian Taxation Department”); as between the parties to the marriage, the husband was declared to be the sole owner of all property in his possession (which included any assets he held in Egypt, the United states of America, shares, furniture, jewellery and personal effects, motor vehicles and any cash or savings in his control) and the wife was declared to be the sole owner of all other property in her possession or control; the husband indemnify the wife against any claims that might be made against her by a credit provider arising out of motor vehicle leases or any other joint liability of the husband and the wife; and, in the event that the husband became entitled to a refund of any monies he had paid in relation to a tax assessment for specified financial years, he forthwith pay 50 per cent of the same to the wife.
Having been referred to authorities which included Audet, Page and Coffey, as well as Cummings, the Full Court of this Court[46] concluded that the husband did not have standing if his bankruptcy left him without such an interest in the judgment of the trial judge as would support his institution of an appeal in his own name. They said that, subject to the charge of the husband’s interests in the sale proceeds, his interest in the property vested in his trustee upon the making of the sequestration order.[47]
[46] Barblett DCJ, Ellis and Baker JJ.
[47] At p 83,792.
The Court considered that, in light of the declaration that the wife was the sole owner of all other property in her possession and control, the husband’s proposal on appeal that the jewellery, furniture and contents of a particular property be divided equally between himself and the wife amounted to a claim by him for property which would vest in his trustee if his appeal was successful; they considered that, consequently, his bankruptcy left him without the necessary interest to support the institution of an appeal in his own name. Further, given that the only assets out of which the indemnities ordered could be satisfied were assets which had vested in the husband’s trustee, his bankruptcy left him without the necessary interest to support the institution of appeal in his own name. The Court also concluded that the appeal did not “relate to matters personal to the husband.”[48]
[48] At p 83,792.
In In the Marriage of O’Neill[49] the Full Court of this Court[50] was asked to determine, as a preliminary point, whether the undischarged bankrupt wife had standing to appeal against orders made by Bell J on 30 January 1997 (at which time she had failed to appear). In submitting that her rights under the Family Law Act did not vest in the trustee, the wife relied on authority which included Audet, Page and Coffey.
[49] (1998) 23 Fam LR 326.
[50] Lindenmayer, Finn and Mushin JJ.
The Full Court said, at [68]:
Despite concerns which we have regarding the somewhat inconsistent state of the law concerning the right of the bankrupt to initiate family law property settlement proceedings and to appeal in the course of such proceedings (which concerns we will later discuss), we see no reason or justification for us not to follow the reasoning of the Full Court in Guirguis.
The Court referred to In the Marriage of Reed: Grellman (Intervener) and noted that the Full Court there reaffirmed that a bankrupt’s right to institute property settlement proceedings survived despite the bankruptcy and did not vest in the trustee.[51] The Court also noted that whilst the Full Court in Guirguis denied the bankrupt spouse the right to appeal property settlement orders, the Court did not purport to overrule authorities such as Page (No 2), Audet and Reed which established that a bankrupt spouse may institute and prosecute an application for property settlement proceedings under s79 or to vary or set aside a property settlement under s 79A of the Act.[52]
[51] At p 346.
[52] At p 347.
The Court said:
[88] Furthermore, the majority of the High Court in Cummings referred, without apparent disapproval, to the concept of “rights of action which do not pass to a trustee on bankrupt because they are personal to the bankrupt and do not affect the quantum of the bankrupt estate” (emphasis added) and cited Coffey v Bennett again without disapproval: at 136. Although there must be a question as to the meaning of the words which we have underlined in the passage just quoted, it would appear to remain good law that a bankrupt spouse may initiate and prosecute property settlement proceedings during the course of his or her bankruptcy – although any property acquired would have to vest in the trustee by virtue of s 58(1)(b) of the Bankruptcy Act 1966 (Cth) (apart from the limited classes of property exempted under s 116(2) of that Act).
[89] However, and perhaps somewhat anomalously, the Full Court decision in Guirguis has established that in light of the High Court decision in Cummings, a bankrupt spouse cannot appeal property settlement orders unless he or she can establish some interest in the property which is the subject of the orders, and such interest will not be able to be established if the property which is the subject of the orders is vested or will vest on receipt in the trustee in bankruptcy. The fact that a successful appeal may result in a surplus in which the bankrupt would have a contingent interest will apparently not provide the bankrupt with the necessary interest to institute an appeal in his or her own name.
[90] This in our view is not an entirely satisfactory situation. But we are not persuaded that we should not follow and apply Girguis in this case given that certain of the orders ultimately sought to be appealed in this case are so similar to those sought to be appealed in Guirguis and given also that Guirguis would seem correctly to apply the High Court decision in Cummings.
The Court held that, given that any property the wife received pursuant to her claim to obtain property that the husband had retained in his possession, ownership or control would vest in her trustee by virtue of s 58(1)(b) of the Bankruptcy Act, she did not have sufficient interest in the property the subject of the Orders to support the institution of an appeal in her name against the same and, consequently, she did not have standing to bring the appeal.
In Hill v Smithfield Service Centre[53] Austin J considered an application to discharge an examination summons issued pursuant to the Corporations Act 2001 on the basis that the applicant for the same was an undischarged bankrupt. His Honour held that the applicant’s statutory procedural right to examine persons under s 596A of the Corporations Act 2001 – being the capacity to take a proceeding for the issue of an examination summons - did not involve the exercise of a power over or in respect of property and, therefore, was not the “property of the bankrupt” for the purposes of the Bankruptcy Act and, consequently, it was not property which vested in the bankruptcy trustee. He concluded that, on becoming bankrupt, the applicant was not therefore, automatically divested of his right to take the proceeding.
[53] [2002] NSWSC 999; (2003) 21 ACLA 94.
In Bryson & Pember,[54] Forrest J considered whether the husband had standing to apply for orders pursuant to s 79 of the Family Law Act in circumstances where, having previously been made bankrupt on a debtor’s petition, the husband was discharged from the same a few months before he commenced proceedings for property settlement orders. The wife had submitted that the husband could not apply for property settlement orders because the right to make such an application was a right which had vested in his trustee when he became bankrupt and such right had not re-vested in him and/or he did not have standing to bring proceedings.
[54] [2013] FamCA 43
His Honour concluded that the right of the husband to apply for property settlement orders pursuant to s 79 of the Family Law Act was not capable of being assigned; to the extent that the husband was only seeking orders that the wife settle or transfer property she owned on or to him, it was not a chose in action because he was not seeking to enforce or claim an existing corporeal or incorporeal interest. His Honour considered the right to apply for orders pursuant to s 79 of the Family Law Act to be a right or cause of action that is personal, rather than proprietary, and, because this right is not a chose in action, found it did not vest in the bankruptcy trustee.
His Honour also said that, if he was wrong and the husband’s right to apply for property settlement orders pursuant to s 79 of the Family Law Act it is a chose in action, the preponderance of authority was to the effect that choses in action are property: however, even if this was the case, he considered that the right to apply for property settlement orders pursuant to s 79 of the Family Law Act did not vest in the bankruptcy trustee because it is a cause of action that is personal in nature such that, irrespective of whether it is a chose in action or not, it did not vest in the trustee.
In Sloan & Sloan,[55] Gill J considered whether the husband was able to continue property settlement proceedings given that he became bankrupt during the currency of the same. The wife asserted that he could not continue the litigation because any right he possessed to litigate the same had vested in his trustee in bankruptcy and, secondly, that by virtue of the vesting of his property in the trustee, he no longer had sufficient interest in the subject matter of the proceedings to have standing to continue to prosecute the same.
[55] [2018] FamCA 610.
His Honour said that it may be taken that, if the subject matter of the litigation is property that vests in the trustee, the right to litigate also rests in the trustee, but where the subject matter does not amount to property that vests in the trustee, then the right to litigate remains with the bankrupt. After discussing O’Neill and saying that it accepted the positon of Frederico J in Page that the right to litigate a s 79 application is a personal right that does not pass to the Trustee, his Honour said that “presumably (in the light of Cummings) this is because the right does not constitute property under the Bankruptcy Act 1966 (Cth).”

Further discussion and conclusions

I consider that there is a fundamental difference between the nature of the right to seek property settlement orders pursuant to s 79 of the Family Law Act and the nature of the right to seek orders under s 90K of the Family Law Act to set aside a Financial Agreement such that I am not bound to follow those decisions in which it has been held that a bankrupt’s right to apply for orders pursuant to s 79 of the Family Law Act does not vest in the trustee in bankruptcy but remains with the bankrupt despite bankruptcy.
The right to apply for orders pursuant to s 79 of the Family Law Act arises as a consequence of parties entering into a marriage: from that time on, each party to the marriage has the right to seek orders pursuant to s 79 of the Family Law Act and such right does not depend on the breakdown of the marriage or the making of a separation declaration or a divorce order becoming effective. The right is based on the existence of the marriage between the parties.
I consider that, in contrast, the right to seek an order setting aside a financial agreement under s 90K of the Family Law Act is based on or arises out of the existence of the financial agreement itself – a legislatively created and defined contract between the parties to it, by which they prescribe their agreement about the manner in which their financial matters and financial resources will be dealt in specified circumstances and the effect of which (if binding), once it comes into force and effect, is to oust the application of Part VIII of the Family Law Act vis-à-vis the financial matters and financial resources it deals with.
The existence of a financial agreement, on which the right to apply for an order setting it aside rests, determines the property of a bankrupt: the financial agreement cannot, in my view, be regarded as not being connected to the bankrupt’s property or as having no effect on the bankrupt’s estate. Similarly, the right to apply for an order setting a financial agreement aside cannot, in my view, be regarded as a thing in action that has no effect on the bankrupt’s estate. I also consider that the right to apply for an order pursuant to s 90K of the Family Law Act is a right that: affects the quantum of the bankrupt’s estate; is of value to the creditors; has implications for the bankrupt’s estate and is not irrelevant to attaining the statutory objects of the Bankruptcy Act; arises out of the bankrupt’s existing rights in the financial agreement and is a right that could be turned to a profit for the benefit of the bankrupt’s estate. I also consider that a bankrupt’s trustee in bankruptcy has a sufficient interest in the bankrupt’s right to litigate via an application for an order pursuant to s 90K of the Family Law Act to persuade me that such right constitutes a chose of action that is itself property for the purposes of the Bankruptcy Act.

I consider that, following the Financial Agreement coming into force and effect on 25 March 2012, the property of the Applicant included his right to property as determined by the terms of the Financial Agreement and a right to enforce the terms of the Financial Agreement and the right to seek to have it set aside. I consider such rights of enforcement and setting aside are rights which affect the Applicant’s property in the Financial Agreement and, therefore, they are rights of a proprietorial nature, choses in action and, taking the wide view that it is uncontroversial that courts have always taken in determining that property which passes to a bankruptcy trustee on a person’s bankruptcy, “property” for the purpose of s 58(1) of the Bankruptcy Act. Given this, I consider that the right to seek an order pursuant to s 90K of the Family Law Act vested in the Applicant’s Bankruptcy Trustee upon his bankruptcy.
As an aside, given that a financial agreement of the nature of the kind in this case is only operative after the parties to it execute a separation declaration or a divorce order is made, the concern expressed by Forrest J at [44] in Bryson (supra) does not necessarily arise. As the rights of parties to a financial agreement crystallise only on the occurrence of those event/s needed to make the same of force and effect, any bankruptcy of a party to the agreement that occurred before it became operative would not result in the right to apply for an order setting it aside vesting in the bankruptcy trustee because, at that time, the bankrupt would have no more than an expectancy of rights associated with an operative[56] financial agreement and no right of action to vest in the trustee. Hence, a party’s rights to seek an order pursuant to s 90K of the Family Law Act would be unaffected by a bankruptcy which predated the financial agreement, to which they were a party, coming into force and effect.
[56] In the sense of being in force and of effect.
I also note that my conclusion that the Applicant’s right to apply pursuant to s 90K(1) for an order setting aside the Financial Agreement vested in the bankruptcy trustee on 14 December 2012 does not mean that his right to apply for orders pursuant to s 90K(3) of the Family Law Act[57] so vested. This is because such right only comes into existence if the Financial Agreement is set aside. Given this, it seems to me that there is no inconsistency between the decision I have reached about the vesting of the right to apply for an order pursuant to s 90K of the Family Law Act and the conclusions reached by the Full Court in the decisions discussed earlier that a bankrupt retains the right to apply for property settlement orders pursuant to s 79 of the Family Law Act.
[57] Which is in the following term: “A Court may, on an application by a person who was a party to the financial agreement that has been set aside, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons.”
For the reasons expressed, I consider that the Applicant’s right to apply for an order pursuant to s 90K of the Family Law Act vested in his Bankruptcy Trustee on his bankruptcy on 14 December 2012 and, therefore, he does not have standing to prosecute an application to set aside the Financial Agreement on this basis. His application for orders pursuant to s 90K of the Family Law Act shall be dismissed.

I certify that the preceding one hundred and two (102) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hogan delivered on 6 December 2019.

Associate:

Date: 6 December 2019