Taylor v Taylor

[1999] FCA 270

In the Matter of Pauline Ann Taylor
Pauline Ann Taylor v Russell Harry Taylor and Joy Yvonne Taylor
No. QG 7443 of 1998
In the Matter of Pauline Ann Taylor
Russell Harry Taylor and Joy Yvonne Taylor v Pauline Ann Taylor
No. NG 8320 of 1998
[1999] FCA 270
Number of pages - 11
Bankruptcy

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

KATZ J

Bankruptcy - application to set aside bankruptcy notice - whether Court should "go behind" judgment of Full Court of Family Court - whether order of Full Court of Family Court resulted from miscarriage of justice - whether Court should transfer hearing of creditors' petition to Family Court.

Bankruptcy Act 1966 (Cth) s35A

Webb v Hunter (1995) 59 FCR 24, cited

Re David; Ex parte Lahood (1979) 27 ALR 306, followed

Wilson v Wilson (1967) 69 SR (NSW) 23, applied

Hembury v Chief of General Staff (1998) 155 ALR 514, cited

Robins v National Trust Co Ltd [1927] AC 515, applied

Re Sabri; Ex parte Sabri v Brien (1995) 60 FCR 131, applied

Zdravkovic v Zdravkovic (1982) FLC ¶ 91-220, considered

SYDNEY, 18 February 1999 (hearing), 22 March 1999 (decision)

#DATE 22:3:1999

Appearances

Counsel for Pauline Ann Taylor: B. De Buse

Solicitors for Pauline Ann Taylor: H Drakos and Company:

Counsel for Russell Harry Taylor and

Joy Yvonne Taylor: P. Braham

Solicitors for Russell Harry Taylor and

Joy Yvonne Taylor: Colin Biggers & Paisley

QG 7443 of 1998

THE COURT ORDERS THAT:

1. The applicant's motion for transfer of the proceeding to the Family Court be dismissed.

   2. The applicant's application to set aside bankruptcy notice NN2063/98 be dismissed.

   3. The applicant pay the respondents' costs of the proceeding.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

NG 8320 of 1998

THE COURT ORDERS THAT:

1. The applicant's motion for transfer of the proceeding to the Family Court be dismissed.

   2. The applicant pay the respondents' costs of the motion.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

KATZ J

1. There are pending in this Court two proceedings to which the parties are (on one side of the record) Pauline Ann Taylor ("the debtor") and (on the other) both Russell Harry Taylor and Joy Yvonne Taylor ("the creditors"). (It may be as well to mention immediately that the debtor is the former daughter-in-law of the creditors and that Graham Harry Taylor ("the husband"), to whom I will later refer, is both the debtor's former husband and the son of the creditors.)

2. The first in time of those two proceedings was commenced by an application filed by the debtor on 4 November 1998, seeking, among other things, to set aside a bankruptcy notice served on her by the creditors on 14 October 1998. (It is only that aspect of the application of 4 November 1998 which remains outstanding, the other aspects of it having been abandoned before me by the debtor.)

3. The ground of the application was that the debtor had such a counter-claim, set-off or cross demand as is referred to in par 40(1)(g) of the Bankruptcy Act 1966 (Cth) ("the Act"). However, the affidavit sworn by the debtor and filed in support of the application gave no colour to such a ground. (In that respect (at least), there was non-compliance by the debtor with O 77, r 13, of the Federal Court Rules.) So far as it is possible to infer it from the debtor's affidavit, given that it (like a later affidavit of hers which I will also mention below) was, not only disorganised, but also unintelligible in some places and self-contradictory in others, the debtor's then case for setting aside the bankruptcy notice was not that the debtor had such a counter-claim, set-off or cross demand as is referred to in par 40(1)(g) of the Act, but simply that the debtor expected shortly to be able to pay the sum demanded in the bankruptcy notice. Her expectation was based upon the fact that she then had on foot property settlement proceedings against the husband in the Family Court, which proceedings she expected to be resolved relatively soon in her favour and to result in her receiving a property settlement from which she could easily pay the sum demanded in the bankruptcy notice. (I mention now that those proceedings are presently listed for hearing in the Family Court for three days beginning on 29 March 1999.)

4. The debtor's setting-aside application provoked a notice of intention by the creditors to oppose it (although not the affidavit in support required by O 77, r 11(2)(c) of the Federal Court Rules). The grounds of the opposition were (relevantly) stated to be that the application did not disclose any basis for the relief sought and (not surprisingly, given the terms of her supporting affidavit) that the debtor did not have a counter-claim, set-off or cross-demand against the creditors. The notice was filed on 13 November 1998.

5. The second in time of the two proceedings to which I referred in the opening paragraph of these reasons for judgment was commenced by a petition filed by the creditors on 24 November 1998 for the sequestration of the debtor's estate by reason of her failure to comply with the requirements of the bankruptcy notice. Given that, when the recipient of a bankruptcy notice has made timely application for its setting aside on the ground of having such a counter-claim, set-off or cross demand as is referred to in par 40(1)(g) of the Act, subs 41(7) of the Act automatically extends the time for compliance with the notice until the determination of that application, the creditors' petition had presumably been based on a view that the debtor's application filed on 4 November 1998 had been a nullity, given the terms of the debtor's supporting affidavit: compare the discussion in Webb v Hunter (1995) 59 FCR 24 at 29-30 (Burchett, Carr and Tamberlin JJ) (although the relevant legislative provisions were somewhat different at that time). Whether or not that had been the creditors' view was not explored before me.

6. In each of the two proceedings pending in this Court which I have described above, the debtor has made application, which application is opposed by the creditors, that the proceeding be transferred to the Family Court pursuant to the power conferred upon this Court by subs 35A(1) of the Act. I have heard full argument on both of those applications.

7. Further, recognising the possibility that her application to transfer the proceeding involving the application to set aside the bankruptcy notice might fail, the debtor has also sought, in that eventuality and as a fall-back position only, that I should now determine on a final basis her application to set aside the bankruptcy notice. That application is not now sought to be made on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in par 40(1)(g) of the Act, but is rather sought to be made on the ground that this Court should "go behind" the judgment upon which the bankruptcy notice had been based. The creditors were content that, if I dismissed the debtor's application to transfer the proceeding involving the application to set aside the bankruptcy notice, I should now determine on a final basis her application to set aside the bankruptcy notice. Further, while they opposed her application to set aside the bankruptcy notice, they were also content that she should be permitted to argue her application on the ground upon which it is now sought to be made, an attitude on the creditors' part which necessarily implied their acceptance of the proposition that, if the bankruptcy notice were now to be set aside, then their creditors' petition must be dismissed. Accordingly, I heard full argument on the application to set aside the bankruptcy notice as well.

8. I can dispose immediately and briefly of the debtor's application to transfer to the Family Court the proceeding in which she has applied to set aside the bankruptcy notice. Given that I have already heard full argument on the merits in that proceeding and am in a position now to give a final decision in it, there can be no justification whatever for its transfer to the Family Court. Indeed, if I were to transfer that proceeding to the Family Court, it would only be necessary for that Court to rehear the argument which I have already heard and, what is more, its decision in the matter would, no doubt, not be given until some time from now. Accordingly, I decline to transfer that proceeding to the Family Court.

9. As to the debtor's application to transfer to the Family Court the proceeding involving the creditors' petition, I have decided to postpone consideration of that application until I have determined her application to set aside the bankruptcy notice. I have done that because if I should decide to set aside the bankruptcy notice, then it will inevitably follow, given the attitude of the creditors to which I have already referred above, that I will dismiss the creditors' petition based upon that bankruptcy notice, rather than transferring to the Family Court the proceeding involving the creditors' petition. It is only if I should decide not to set aside the bankruptcy notice that it will be necessary for me to decide whether to transfer to the Family Court the proceeding involving the creditors' petition.

10. I turn then to the debtor's application to set aside the bankruptcy notice.

11. The bankruptcy notice was based on a judgment of a Full Court of the Family Court (Barblett ACJ and Ellis and Maxwell JJ) obtained by the creditors against (relevantly) the debtor on 9 July 1977. By that judgment, the Full Court had ordered, among other things, that the debtor and the husband "forthwith pay the sum of $111,000.00 to" the creditors. According to the bankruptcy notice, since the date of the Full Court's order, either payments had been made or credits had been allowed or both to the extent of $73,500, so that there remained owing by the debtor to the creditors a debt of $37,500.

12. I have already mentioned that the debtor seeks that I "go behind" that judgment. In order the better to deal with the debtor's argument in that respect, it is necessary that I should set out certain matters of fact which had occurred before the Full Court's judgment of 9 July 1997. Those I have drawn as best I can from the affidavits read before me by the debtor, without substantial objection by the creditors, and from the documentary evidence tendered before me by the debtor, without any objection by the creditors. (The creditors, incidentally, did not go into evidence before me.) There are some difficulties in divining the material facts, particularly in so far as they are required to be drawn from the affidavits read, given the difficulties with the debtor's two affidavits to which I have already adverted.

13. On 30 December 1989, the debtor and the husband were married. On 21 June 1990, their only child was born. On 30 December 1993, the marriage between the debtor and the husband broke down irretrievably and they separated. (The debtor and the husband were subsequently divorced, but I am unaware of the date upon which that occurred.)

14. Before the separation of the debtor and the husband, in or about July of 1993, the creditors had lent to the debtor and the husband jointly the sum of $111,000. The loan was interest free and was made to assist in the purchase of a matrimonial home. After the separation, in July of 1994, the matrimonial home was sold and the net proceeds of the sale, being about equal to the amount of the loan, were paid into the trust account of Clayton Utz, the solicitors for the husband in proceedings in the Family Court between the husband and the debtor.

15. On 17 November 1994, the creditors began proceedings against the debtor and the husband in the New South Wales Supreme Court in connection with the loan which they had made to them, alleging, among other things, that it had been repayable upon sale of the matrimonial home. Those proceedings, in which the husband did not oppose the granting of the relief sought, were subsequently transferred to the Family Court for determination, pursuant to the cross-vesting legislation (on whose application, if any, I am unaware). It is probably as well to mention now the relief which was sought in those proceedings. Relevantly, it was as follows:

"(1) A declaration that the sum of $114,819.97 deposited in the trust account of Messrs Clayton Utz, Solicitors and Attorneys, on trust for the Defendants, is charged in favour of the Plaintiffs with repayment to them of the sum of $111,000.00.

(2) An order that the Defendants do all such things and execute such documents which are necessary or sufficient to cause Messrs Clayton Utz, Solicitors and Attorneys, to pay to the Plaintiffs the sum of $111,000.00 from moneys held by them on trust for the Defendants.

(3) An order that, pending compliance by the Defendants with order (2) hereof, the Defendants by themselves, their servants or agents or howsoever otherwise be restrained from disposing of or in any other way howsoever dealing with the said sum of $114,819.97 held upon trust for the Defendants by Messrs Clayton Utz, Solicitors and Attorneys.

(4) Further or in the alternative, a declaration that the Defendants are indebted to the Plaintiffs in the sum of $111,000.00

(5) An order that the Defendants forthwith pay the sum of $111,000.00 to the Plaintiffs."

16. On 5 April 1995, in connection with custody proceedings then pending in the Family Court and brought by the debtor against the husband, Lindenmayer J made the following orders:

"...

2. That the husband pay or cause to be paid to the solicitors for the wife within 14 days of this date the sum of $37,500.00 and that he be at liberty to cause that sum to be paid from the proceeds of sale of the former matrimonial home of the parties presently held in trust by the solicitors for the husband.

3. That upon receipt of the said sum of $37,500.00 the solicitors for the wife lodge the same in their trust account with liberty to draw upon the same for the sole purpose of paying the legal costs and outlays of the wife incurred or to be incurred in these proceedings as and when they fall due for payment.

4. That the question of how if at all the said payment to the wife should be taken into account in any proceedings hereinafter instituted between the husband and wife for orders in relation to property and maintenance be reserved for consideration by the court hearing and determining any such proceedings."

The husband complied with the order numbered 2, availing himself of the liberty referred to therein.

17. On 14 July 1995, the custody proceedings referred to in the preceding paragraph were resolved in favour of the debtor by a single Judge of the Family Court and an appeal by the husband from that decision to a Full Court of the Family Court was dismissed with costs in February 1996.

18. On 18 December 1996, the creditors' transferred proceedings were determined by Hilton J. It would appear from his Honour's reasons for judgment that the debtor, who was represented at the hearing of the proceedings by Senior Counsel, had defended them upon two bases: first, that the $111,000 the subject of the proceedings had not been advanced; and, secondly, that if it had been advanced, it had been advanced either as a gift or a loan to the husband only. Hilton J said that the resolution of the matter "relies purely on the credibility of the witnesses". He characterised the debtor's evidence as having been "contradictory and evasive" and said that she "did not impress" him "at all as a witness who had any proper recollection of the facts and on occasions was contradictory in her evidence". The creditors, on the other hand, who were both cross-examined "rather searchingly" by the debtor's counsel, were "not shaken" and were "honest witnesses". He found that the debtor was jointly liable with the husband to the creditors in respect of the $111,000, which had been advanced as a loan. He did not, however, make an order that that the debtor and the husband pay the sum of $111,000 to the creditors, although, as has already appeared from the prayers for relief in the statement of claim set out above, such an order had been sought by the creditors. He merely declared instead that "the monies [sic] in the trust account of Messrs Clayton Utz, Solicitors and Attorneys on trust for" the debtor and the husband "are held on trust for" the creditors.

19. It is apparent from his Honour's reasons for judgment that he believed (correctly) that the moneys in the Clayton Utz trust account had been reduced by $37,500, as a result of the decision of Lindenmayer J on 5 April 1995. It is also apparent from his Honour's reasons for judgment that he was under the mistaken impression that Lindenmayer J had "ordered that the husband provide to the wife's solicitors the sum of $37,500 from the fund that was held in trust by the parties' solicitors". In fact, Lindenmayer J had not so ordered the husband; he had merely ordered that the husband provide the sum involved and that he "be at liberty to cause that sum to be paid from the proceeds of sale of the former matrimonial home of the parties presently held in trust by the solicitors for the husband" (my emphasis).

20. Hilton J was also aware that, although they had claimed an entitlement to the net proceeds of the sale of the matrimonial home before Lindenmayer J had made his orders of 5 April 1995, the creditors had taken no steps to attempt to prevent the making of any orders by Lindenmayer J which could have the effect of diminishing those net proceeds. Hilton J was obviously troubled by the creditors' inactivity in that respect, which he considered might have reflected adversely upon their claim that the sum of $111,000 had been a loan to the debtor and the husband. However, in the end, Hilton J decided to draw no inference adverse to the creditors from their inactivity in that respect, concluding that it was "due to ignorance or unpreparedness" that they had not opposed the debtor's application before Lindenmayer J. The male creditor, who, Hilton J had found, was an "honest" witness, had given evidence that "things [in the wife's application before Lindenmayer J] happened too quickly and it was all over before he realized it". Hilton J said that that "explanation does not sit uneasily with me".

21. The effect of the declaratory order made by Hilton J was thus that the net proceeds of the sale of the debtor's and the husband's former matrimonial home, minus the $37,500 already paid to the debtor, were held on trust for the creditors.

22. Hilton J's decision provoked an appeal by the creditors to a Full Court of the Family Court and that Court, on 9 July 1997, added to Hilton J's declaration the coercive order referred to in par 11 of these reasons (which order is the one that I am asked to "go behind"). The debtor appeared on that appeal, but in person, rather than by counsel, as she had before Hilton J. As to the Full Court's reasons for adding to Hilton J's declaratory order the coercive order which I am asked to "go behind", the debtor did not favour me with them.

23. The principles upon which I should decide whether to "go behind" the relevant order of the Full Court are not novel. They are conveniently set out in the reasons for judgment of Lockhart J in Re David; Ex parte Lahood (1979) 27 ALR 306 at 307-09. His Honour there said,

"The debtor asks this court to go behind the judgment and to dismiss the petition.

The court, on the hearing of a petition, has jurisdiction to go behind the judgment on which the petitioning creditor's claim is based in various circumstances. One instance is 'where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner': per Barwick CJ in Wren v Mahony (1972) 126 CLR 212 at 225; [1972] ALR 307 at 314.

The court will not inquire into the validity of a judgment debt as a matter of course: 'Circumstances tending to show fraud or collusion or miscarriage of justice or that a compromise was not a fair and reasonable one, in the sense that even if not fraudulent it was foolish, absurd and improper, or resulted from an unequal position of the parties ... offer occasions for the exercise by the Court of Bankruptcy of its power to inquire into the consideration for the judgment': per Barwick CJ in Wren v Mahony (126 CLR at 223; [1972] ALR at 313).

...

In the circumstances the debtor asks the court to go behind the judgment and inquire into the validity of the judgment debt.

The following passage from the judgment of Fullagar J in Corney v Brien (1951) 84 CLR 343 at 356-7; [1951] ALR 525 at 532, is apposite:-

'No precise rules exist as to what circumstances call for an exercise of the power, but certain things are, I think, clear enough. If the judgment in question followed a full investigation at a trial on which both parties appeared, the court will not reopen the matter unless a prima-facie case of fraud or collusion or miscarriage of justice is made out. In Re Flatau; Ex parte Scotch Whisky Distillers Ltd (1888) 22 QBD 83 at 86. Fry LJ said: 'This power has never, so far as I am aware, been extended to cases in which a judgment has been obtained after issues have been tried out before a court.''

In Wren v Mahony Menzies J said (126 CLR at 233; [1972] ALR at 319):-

'... it has been repeatedly said that, when a judgment has been given in open court against a person who is represented, it is only in exceptional cases that the Court of Bankruptcy should exercise its discretionary power: see for instance Re Flatau; Ex parte Scotch Whisky Distillers Ltd (1888) 22 QBD 83 and Re Howell (1915) LJKB 1399.

'In the former case Lord Esher MR said at p 85: 'It is not necessary now to repeat that, when an issue has been determined in any other court, if evidence is brought before the Court of Bankruptcy of circumstances tending to show that there has been fraud, or collusion, or miscarriage of justice, the Court of Bankruptcy has power to go behind the judgment and to inquire into the validity of the debt. But that the Court of Bankruptcy is bound in every case as a matter of course to go behind a judgment is a preposterous proposition.' Fry LJ said at p 86:... 'It is true that in some cases the Court of Bankruptcy has gone behind a judgment, when it has been obtained by fraud, collusion, or mistake. But this power has never, so far as I am aware, been extended to cases in which a judgment has been obtained after issues have been tried out before a court.''

Although Menzies J dissented, together with Walsh J, from the decision of the majority of the court in Wren v Mahony, the passage which I have cited is not inconsistent with the reasons for judgment of Barwick CJ, with whom Windeyer and Owen JJ agreed.

The debtor has not established a prima facie case of fraud or collusion or miscarriage of justice."

(No reason appears, incidentally, to think that the occasions when a court will "go behind" a judgment differ, depending upon whether it is asked to do so at the creditor's petition stage (as in David) or at the bankruptcy notice stage (as in the present case).)

24. Applying those principles to the present case, this case is one in which the order by the Full Court now sought to be impeached by the debtor was made after a hearing on the merits at which the debtor appeared, albeit unrepresented. (Of course, as I have already mentioned, the debtor was represented at the hearing before Hilton J and it was at that hearing that the findings were made which appear to me to have made inevitable the order made by the Full Court.) No such suggestion having been made by the debtor, I can put to one side immediately any question of the making of that order having been the result of either fraud or collusion.

25. Although the debtor did not expressly submit before me that justice had miscarried before the Full Court, I proceed on the assumption that her submissions sought to bring themselves under that general heading and that the question therefore arises whether she has made out a prima facie case that the making of the Full Court's order resulted from a miscarriage of justice.

26. The debtor's argument of such miscarriage depended upon Lindenmayer J's having made, on 5 April 1995, his order numbered 2 (set out in par 16 above) and upon the husband's having complied with that order by causing the sum of $37,500 to be paid to the debtor's solicitors from the net proceeds of the sale of the former matrimonial home. The debtor submitted that I should conclude that the Full Court made its order for the repayment of the sum of $111,000 either in ignorance of the fact that the sum of $37,500 had already been paid out of the husband's solicitors' trust account or in ignorance of the fact that the creditors had acquiesced in such payment.

27. In my view, the debtor has not made out a prima facie case of miscarriage of justice resulting in the order of the Full Court which she seeks to impeach.

28. First, I would regard it, practically speaking, as an indispensable part the debtor's making out, even on a prima facie basis, a case that the Full Court had been unaware of some fact when it made its order that she establish what were the reasons for judgment given by the Full Court. That she has not deigned to do.

29. Secondly, in any event, I would infer that the Full Court was aware of the facts of which it is alleged by the debtor to have proceeded in ignorance. I would draw such inference from the terms of the reasons given by Hilton J for the very judgment which was under appeal to the Full Court, of which terms the Full Court would obviously have been fully aware. As I have already pointed out above, it was at least apparent from Hilton J's reasons that the sum of $37,500 had already been paid out of the husband's solicitors' trust account by the time of his decision. Further, it was also apparent that the creditors had taken no steps to attempt to prevent the making of the orders by Lindenmayer J which had permitted that payment out to occur. (It is true that Hilton J had been under the mistaken impression that Lindenmayer J's orders had required that payment to occur, rather than permitted it, but that is an immaterial error for present purposes.)

30. Thirdly, even if the Full Court had been unaware of the facts of which it is alleged by the debtor to have been unaware, I am unable to see what difference that would have made to its order. Hilton J had already held at trial that the debtor "is liable as a joint borrower" of the sum of $111,000 and all that the Full Court's order did was to give effect to that holding in the most direct way possible, namely, by ordering the repayment of that debt. The fact (if it be the fact) that the creditors had acquiesced in the diminution of a fund from which that debt could otherwise have been paid to them would not have justified a conclusion that the debt itself had been correspondingly diminished.

31. Finally, I have thus far proceeded upon the assumption that proof that the Full Court had proceeded, when making its order now impeached, in ignorance of certain facts is capable of establishing a miscarriage of justice in the relevant sense, but I am by no means sure that that assumption is correct. Although, as is apparent from the passages in the reasons for judgment of Lockhart J in David's Case which I have already quoted above, the notion of miscarriage of justice is used in connection with attempts in bankruptcy proceedings to "go behind" judgments, I have not found any discussion of the particular sense in which that notion is being relevantly used. In Wilson v Wilson (1967) 69 SR (NSW) 23 at 35 (CA), in a passage referred to with implicit approval by Gummow and Callinan JJ in Hembury v Chief of General Staff (1998) 155 ALR 514 at 524 (HCA), Asprey JA said, "What will constitute a miscarriage of justice may vary ... with regard to the jurisdiction which has been invoked by the proceedings in question". Certainly, if the notion is used in the present context in the same sense in which it was used by Viscount Dunedin in Robins v National Trust Co Ltd [1927] AC 515 at 518 (JCPC), then merely to show that the Full Court had proceeded in ignorance of certain facts when making its order would not be enough to show a miscarriage of justice. His Lordship there said of the expression, "It means such departure from the rules which permeate all judicial procedure as to make that which happened not in the proper use of the word[s] judicial procedure at all".

32. The debtor not having made out a prima facie case of miscarriage of justice resulting in the Full Court's order, I decline to "go behind" that order and consequently dismiss the debtor's application to set aside the bankruptcy notice served on her by the creditors on 14 October 1998.

33. There remains now for consideration the debtor's application to transfer to the Family Court the proceeding involving the creditors' petition that her estate be sequestrated.

34. In her submissions before me, the debtor identified a number of matters upon which she relied to justify a transfer of the creditors' petition to the Family Court. I will deal in turn with each of those matters.

35. I have already mentioned above that the debtor has on foot property settlement proceedings against the husband in the Family Court, which proceedings are presently listed for hearing in the Family Court for three days beginning on 29 March 1999. Among the considerations relied upon by the debtor to justify a transfer of the proceeding involving the creditors' petition from this Court to the Family Court was that that proceeding was likely to be heard "as quickly in the Family Court [as in the Federal Court,] there being a hearing date set for 29 March 1999". The three days beginning on 29 March 1999 were, however, fixed by the Family Court, no doubt, upon the basis that they would involve only family law proceedings, not a bankruptcy proceeding as well, and I have no information which would permit me to conclude anything about when the Family Court would hear the creditors' petition if the proceeding involving that matter were transferred to it. If, then, speed of hearing is potentially a relevant consideration under subs 35A(1) of the Act, it is of no assistance one way or the other in resolving the present application.

36. The debtor also submitted that a transfer of the proceeding would "avoid[ ] the need for costly duplication by the involvement of a trustee ..." I expressed at the time of the oral hearing before me my difficulty in understanding that submission, a difficulty which reflection upon has not dissipated. It will not be the inevitable consequence of a decision by me not to transfer the proceeding involving the creditors' petition to the Family Court that I will make a sequestration order against the estate of the debtor. If the proceeding remains in this Court, it may well be that the debtor will apply successfully for an adjournment of the creditors' petition pending the completion of the Family Court proceedings or that she will avoid the making of a sequestration order altogether by establishing that for sufficient cause a sequestration order ought not to be made.

37. The debtor submitted that, if the creditors' petition were transferred to the Family Court, she could cross-examine the husband, in addition to the creditors, "as to the circumstances of the payment or non payment out of the trust monies [sic]". In so far as that submission relies upon the notion that the debtor would gain some forensic advantage by the fact that the Family Court, after a transfer, would be seized of two proceedings, rather than just one, I reject it. It implies that the creditors' petition against the debtor and the debtor's claim against the husband will somehow become fused into one free-for-all proceeding, to which there will be four parties, with rights of cross-examination by the debtor of the creditors and the husband which she would not have had if the two proceedings had each remained in separate courts. It is appropriate to repeat in that connection something said by Davies J in a case cited to me by the debtor in which his Honour decided to transfer a proceeding under subs 35A(1) of the Act. The case was Re Sabri; Ex parte Sabri v Brien (1995) 60 FCR 131 and his Honour said (at 133),

"[T]he Family Court, when it exercises jurisdiction in the transferred matter will be exercising the jurisdiction of the Federal Court and will be bound to apply the principles of the Bankruptcy Act and to give to those principles their full force and effect."

38. The debtor submitted, apparently in support of her transfer application, that "[T]here is a conflict between the orders of Lindenmayer J on 5 April 1995 and the findings and orders of Hilton J and on appeal the Full Court of the Family Court". Why the suggested conflict justified the transfer to the Family Court of the proceeding involving the creditors' petition did not become clear to me, but, in any event, the suggested conflict was illusory. I have already set out in par 16 above the orders made by Lindenmayer J on 5 April 1995. There can be no meaningful conflict between those orders, on the one hand, and any findings in subsequent reasons for judgments, on the other. In any event, no findings of the Full Court are before me, the debtor, as I have already mentioned, not having put them before me. As to a suggested conflict between the orders of Lindenmayer J, on the one hand, and the order of Hilton J summarised in par 18 above, on the other, there is none. The declaratory order of Hilton J applied to the moneys in the Clayton Utz trust account at the time it was made, which moneys had long since been reduced in quantum by $37,500 pursuant to Lindenmayer J's order, as Hilton J was aware. As to a suggested conflict between the orders of Lindenmayer J, on the one hand, and the order of the Full Court summarised in par 11 above, on the other, again, there is none, the orders dealing with entirely different topics. The former deals with interim costs as between the husband and the debtor, while the latter deals with a debt as between the husband and the debtor, on the one hand, and the creditors, on the other.

39. The only remaining matter put forward by the debtor in support of her transfer application was that she "can only recover [sic] such rights as she may have arising from any payment out of the trust monies [sic] against" the husband "in the Family Court". This matter reflects yet again the debtor's undue concentration upon the payment out of the Clayton Utz trust account of the sum of $37,500. It is difficult to see what "rights" the debtor has against the husband arising from that payment (which, after all, was made to her), since it was made pursuant to an order made by Lindenmayer J, but, whatever those rights may be, their existence does not persuade me that it is appropriate to transfer to the Family Court the proceeding involving the creditors' petition.

40. In the circumstances, I decline to transfer to the Family Court the proceeding involving the creditors' petition, permitting that Court to concentrate upon the debtor's property settlement proceedings against the husband. In those proceedings, that Court will, I assume, consider and determine the question, reserved by Lindenmayer J, of how, if at all, the payment of the sum of $37,500 to the debtor out of the Clayton Utz trust account should be taken into account as between the debtor and the husband. In doing so, it may be (I do not know) that it will be influenced by the outcome of the custody proceedings in connection with which that payment was made. Presumably, it will also take into account as between the debtor and the husband that there is pending against the debtor alone the creditors' petition in respect of the remaining $37,500 to be repaid on the loan made jointly to the debtor and the husband. In that connection, I note that there is authority of the Family Court that that Court may go so far as to order one party to a marriage to discharge a debt owed by both to a third person: see Zdravkovic v Zdravkovic (1982) FLC ¶ 91-220 at 77,205-06 (Pawley SJ and Strauss and Treyvaud JJ).

41. Having declined either to transfer to the Family Court the two proceedings sought by the debtor to be transferred to it or to set aside the bankruptcy notice served on her by the creditors, it is appropriate that I order her to pay the costs of her applications.