Srbinovska & Srbinovska (No 2)

Case [2025] FedCFamC1F 155

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Srbinovska & Srbinovska (No 2) [2025] FedCFamC1F 155

File number: SYC 754 of 2019
Judgment of: ALDRIDGE J
Date of judgment: 14 March 2025
Catchwords: FAMILY LAW – PROPERTY – BANKRUPTCY – Where the husband is bankrupt and the trustees in bankruptcy are parties – History of proceedings in the Supreme Court – Where there is a shortfall in funds required to annul the bankruptcy – Whether the trustees improperly distributed proceeds of sale – Where the dispersed sale proceeds do not form part of the pool of assets – Where there is one real property available for division – Where the wife made substantial contributions – Where there should not be any adjustment between the wife and the trustees – Property to be sold – Wife to retain 50 per cent of proceeds of sale – Trustees to retain 50 per cent of the proceeds of sale and repay to the wife any surplus following annulment of the bankruptcy.
Legislation:

Bankruptcy Act 1966 (Cth) s 120

Family Law Act 1975 (Cth) ss 4, 79, 80

Revised Explanatory Memorandum Family Law Amendment Bill 2005 (Cth)

Supreme Court Act 1970 (NSW) s 67

Cases cited:

Biltoft and Biltoft (1995) FLC 92-614; [1995] FamCA 45

Srbinovska & Srbinovska [2014] FamCA 592

Srbinovska & Srbinovska [2022] NSWSC …

Srbinovska & Srbinovska [2023] NSWSC …

Srbinovska & Srbinovska [2024] NSWSC …

Trustee of the Property of G Lemnos, a Bankrupt & Lemnos (2009) FLC 93-394; [2009] FamCAFC 20

Valder & Saklani (2021) FLC 94-042; [2021] FamCAFC 142

Walton, Raymond, Kerr on the Law and Practice as to Receivers and Administrators (Sweet & Maxwell; 17th edition, 1989)   
Division: Division 1 First Instance
Number of paragraphs: 93
Date of hearing: 27 and 28 November 2024
Place: Sydney
The Applicant: Litigant in person
The First Respondent: No appearance
Counsel for the Second and Third Respondents: Ms Holmes SC
Solicitor for the Second and Third Respondents: Polczynski Robinson

ORDERS

SYC 754 of 2019

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MS A SRBINOVSKA

Applicant
AND:

MR R SRBINOVSKA

First Respondent

MR ROMANO

Second Respondent

MR AMATO

Third Respondent

ORDER MADE BY:

ALDRIDGE J

DATE OF ORDER:

14 MARCH 2025

THE COURT ORDERS THAT:

VACANT POSSESSION

1.Within 60 days of the date of these orders, the applicant wife (“the wife”):

(a)Vacate the property situated at  B Street, Suburb M in the state of New South Wales being the whole of the land in folio identifier … (“the B Street property”);

(b)Leave the B Street property in good order and repair and in a presentable condition; and

(c)Provide vacant possession of the B Street property to the second and third respondents (“the trustees”).

2.Prior to providing vacant possession of the B Street property to the trustees, the wife is solely responsible for and must pay as and when they fall due, all outgoings and costs associated with the B Street property and must indemnify the husband and…

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AGLC
Srbinovska & Srbinovska (No 2) [2025] FedCFamC1F 155
Case
[2025] FedCFamC1F 155
Decision Date

CaseChat Overview and Summary

In Srbinovska & Srbinovska (No 2), the Federal Circuit and Family Court of Australia dealt with a complex property dispute involving bankruptcy and family law issues. The case involved a married couple who had separated and were engaged in litigation over the division of their property. The husband had become bankrupt, and the trustees in bankruptcy were parties to the proceedings. The central issue before the court was whether the trustees had improperly distributed the proceeds of sale of the parties' properties and whether the wife should receive any adjustment in the property settlement.

The court considered whether the dispersed sale proceeds formed part of the pool of assets available for division. Given that the dispersed sale proceeds did not form part of the pool of assets, the court had to determine how to divide the remaining property, which was one real property. The wife had made substantial contributions to the acquisition of the properties, and the court had to decide whether there should be any adjustment between her and the trustees. Ultimately, the court ruled that there should not be any adjustment between the wife and the trustees. The court ordered that the property should be sold, with the wife retaining 50 per cent of the proceeds of the sale. The trustees were to retain 50 per cent of the proceeds of the sale and repay to the wife any surplus following the annulment of the bankruptcy.

The court's decision highlights the importance of considering the specific circumstances of each case when dividing property in family law matters, particularly when bankruptcy is involved. The court's orders ensure that the wife receives a fair share of the proceeds from the sale of the property, while also taking into account the need to annul the husband's bankruptcy.

Orders

Orders of the court

SYC 754 of 2019

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS A SRBINOVSKA

Applicant

AND:

MR R SRBINOVSKA

First Respondent

MR ROMANO

Second Respondent

MR AMATO

Third Respondent

ORDER MADE BY:

ALDRIDGE J

DATE OF ORDER:

14 MARCH 2025

THE COURT ORDERS THAT:

VACANT POSSESSION

1. Within 60 days of the date of these orders, the applicant wife (“the wife”):

(a) Vacate the property situated at B Street, Suburb M in the state of New South Wales being the whole of the land in folio identifier … (“the B Street property”);

(b) Leave the B Street property in good order and repair and in a presentable condition; and

(c) Provide vacant possession of the B Street property to the second and third respondents (“the trustees”).

2. Prior to providing vacant possession of the B Street property to the trustees, the wife is solely responsible for and must pay as and when they fall due, all outgoings and costs associated with the B Street property and must indemnify the husband and the trustees in relation to those costs.

TRUSTEE FOR SALE

3. Pursuant to s 80(1)(e) of the Family Law Act 1975 (Cth), the second and third respondents are appointed as trustees for the sale of the B Street property.

CONDUCT OF SALE

4. Within 90 days of the date of these orders, the trustees are to do all acts and things and sign all documents necessary to list the B Street property for sale by private treaty:

(a) With an agent selected by the trustees as follows

(i) the trustees are to provide the names of three agents to the wife in writing;

(ii) the wife is to select one of the three nominated agents who shall then have the carriage of the sale; and

(iii) if the wife does not select one of the agents within 14 days of the list being provided to her, the trustees shall choose the agent to have the carriage of the sale;

(b) At a price nominated by the trustees in consultation with the agent;

(c) For an advertising campaign of the trustees’ choice, in consultation with the agent; and

(d) If an offer is made from a prospective purchaser where the purchase price is at or above 95 per cent of the list price, the offer must be accepted.

5. In the event a contract for sale is not entered pursuant to Order 4 within 30 days of the date the B Street property is listed for sale by private treaty in accordance with Order 4, then the B Street property is to be listed for auction, with the first auction to take place within 60 days of the date on which the B Street property is listed for auction:

(a) With an auctioneer selected by the trustees;

(b) With a reserve price nominated by the trustees in consultation with the agent and/or auctioneer; and

(c) In the event that the bidding does not reach the reserve price, the trustees must sell the property to any proposed purchaser who makes a bid or offer at or above 95 per cent of the reserve price.

6. In the event that the B Street property is not disposed of at auction in accordance with Order 5, the B Street property be re-listed for sale by private treaty for a further period of 30 days with a further auction to be held forthwith at the expiration of the 30 day period:

(a) The sale by private treaty is to be conducted as specified in Order 4;

(b) The auction is to be conducted as specified in Order 5; and

(c) The process specified in this order (Order 6) will be repeated until such time as the B Street property is sold.

PROCEEDS OF SALE

7. The proceeds of sale of the B Street property shall be paid in the following manner and priority:

(a) Payment of the agent’s commissions, auctioneer’s fees and advertising or other expenses payable on the sale;

(b) Payment of the legal costs and outlays relating to the sale;

(c) To pay all rates, electricity, water or other service accounts outstanding as at the date of sale;

(d) 50 per cent to the wife; and

(e) 50 per cent to the second and third respondents.

8. In the event the proceeds of sale paid to the second and third respondents in accordance with Order 7(e) above exceed the amount required to annul the bankruptcy, the surplus amount is to be paid to the wife.

OTHER ORDERS

9. Pending the sale of the B Street property, the parties are restrained from further charging, encumbering, creating, or increasing any liability secured against the property.

10. The parties do all acts and things and sign all documents necessary to give effect to these orders.

11. In the event that any party refuses or neglects to sign or execute and return a document within 48 hours of a written request to do so then a registrar may be appointed pursuant to s 106A of the Family Law Act 1975 (Cth) to execute such deed or instrument in the name of the party and to do all acts and things to give effect to these orders upon the registrar being provided with verification of such failure by way of affidavit.

12. Subject to these orders, each party shall otherwise be solely entitled to the exclusion of the other to all property and chattels of whatsoever nature and kind in their possession, ownership or control as at the date of these orders.

13. All outstanding applications are dismissed.

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

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

Background

Background to the litigation

I will deal first with a brief history of the matter before turning to the Supreme Court orders. That history will be severely truncated and deal only with matters relevant to the present issues. There were a number of complicated proceedings in various courts which are not directly relevant for present purposes.BACKGROUND The spouse parties married in 2001. They have three children who were aged 15, 19 and 21 at the time of the hearing. The evidence was that they separated in 2012, however they each continued to live in the B Street property. The husband became the registered proprietor of the G Street property in mid-1999. He transferred that interest to himself and the wife as joint tenants on 28 November 2002. On 31 May 2013 the spouse parties transferred all interests in the property to the wife. The husband and his mother became the registered proprietors of the E Street property, as joint tenants, on 17 July 1991. After the death of his mother, the husband became the sole owner. The husband transferred his interest in the E Street property to the wife on 31 May 2013. The husband acquired the B Street property as an inheritance from his mother and transferred his interest to himself and the wife as joint tenants on 13 July 2009. They transferred their interests in the property to the wife on 31 May 2013. The spouse parties commenced proceedings in the Family Court of Australia (as it then was) on or around 2 May 2013. Those proceedings were resolved by consent orders made on 7 May 2013, which required the husband to transfer his interests in the B Street, G Street and E Street properties to the wife. The three transfers dated 31 May 2013 gave effect to those orders. On 30 July 2014, on application of the husband’s brother, Foster J set aside the consent orders finding that the spouse parties had deceitfully failed to disclose a “prospective and pending third party interest” (Srbinovska & Srbinovska [2014] FamCA 592 at [42]). Justice Le Poer Trench dismissed an application by the wife to set aside the orders of Foster J on 18 May 2015. The trustees were appointed in June 2017 with the effective date of bankruptcy being in March 2016. At that time the Supreme Court proceedings involving the husband and the brother were part-heard before Robb J and further delays ensued as a result of the husband’s bankruptcy. In late 2018 the trustees filed a Notice of Motion seeking to cross claim against the wife who was also a party. They sought to set aside the transfers made pursuant to the May 2013 consent orders, which significantly had still not been reversed despite the setting aside of the consent orders. The wife was collecting rent from both the G Street and E Street properties. In late 2018, Ward CJ in Equity determined the cross claim and declared the transfers made on 31 May 2013 void pursuant to s 120 of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”). The wife was required to execute appropriate transfers to the trustees of what would have been the husband’s interest and declared that until those transfers were effected, the wife held that interest on trust for the trustees.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Section 79(1) of the Family Law Act 1975 (Cth) (“the Act”) provides:79 Alteration of property interests(1)In property settlement proceedings, the court may make such order as it considers appropriate:(a)in the case of proceedings with respect to the property of the parties to the marriage or either of them—altering the interests of the parties to the marriage in the property; or(b)in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the marriage—altering the interests of the bankruptcy trustee in the vested bankruptcy property;including:(c)an order for a settlement of property in substitution for any interest in the property; and(d) an order requiring:(i) either or both of the parties to the marriage; or(ii) the relevant bankruptcy trustee (if any);to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines. “Property” in relation to the parties to a marriage or either of them is relevantly described as meaning the “property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion” (s 4 of the Act). “Vested bankruptcy property” is defined as “property of the bankrupt that has vested in the bankruptcy trustee under the Bankruptcy Act 1966” (s 4 of the Act). Section 79, therefore, speaks in the present tense of the property of the parties, or either of them, or the vested bankruptcy property available at the time of the orders. This is because the section empowers the court to alter the interests in that property. Of course, in doing so it can order the payment of a lump sum of money (s 80 of the Act). There are appropriate provisions in the Bankruptcy Act for persons aggrieved by wrongful acts of trustees in bankruptcy to seek redress. The wife referred to a passage in the reasons of McGrath J in Srbinovska & Srbinovska [2023] NSWSC … where his Honour said:42Robb J concluded that [B Street] and [G Street] are to be registered jointly by [the wife] and the Trustees/Receivers as tenants-in-common and [E Street] is to be registered in the names of the Trustees/Receivers. That is so and implicitly recognised in the orders of Lindsay J. However, the rights of the two owners were subject to those orders, not the other way around. It follows that the only property capable of division is the B Street property (the remaining property and liabilities being removed from consideration by agreement). The wife and the trustees each have a one-half interest in it, and it has an agreed value of $2,050,000.IS IT JUST AND EQUITABLE TO EMBARK ON A PROPERTY DIVISION? In December 2018, Ward CJ in Equity ordered the wife to pay the costs of the trustees. Following assessment and review, these were assessed in the sum of $72,280.25. Interest has accrued and as at 28 November 2024, the amount owing was $100,233,70. In May 2022, Lindsay J ordered the wife to pay the trustees’ costs of the application for the sale of the E Street and G Street properties, and her unsuccessful cross-vesting application.