Trustee for the Bankrupt Estate of Vranic and Vranic & Ors - [2010] FamCA 1014

FAMILY COURT OF AUSTRALIA

TRUSTEE FOR THE BANKRUPT ESTATE OF VRANIC & VRANIC AND ORS

[2010] FamCA 1014

FAMILY LAW – JURISDICTION – Bankruptcy – where husband and wife commence s 79 property proceedings prior to commencement of Bankruptcy and Family Law Legislation Act 2005 – where husband becomes bankrupt after commencement of Bankruptcy and Family Law Legislation Act 2005 – whether Court has jurisdiction to make orders concerning property vested in Trustee of the husband’s property – Joinder of trustee

APPLICANT:

Mr P as trustee in bankruptcy of the Property of Mr Vranic

FIRST RESPONDENT:

Ms Vranic

SECOND RESPONDENT:

Mr Vranic

THIRD RESPONDENT:

Ms Muncic

FOURTH RESPONDENT:

M Pty Limited

FILE NUMBER:

SYF

6740

2002

DATE DELIVERED:

12 November 2010

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

The Hon. Justice Cohen

HEARING DATE:

25 October 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr J.T. Johnson

SOLICITOR FOR THE APPLICANT:

Sally Nash & Co

COUNSEL FOR THE FIRST RESPONDENT:

Mr Rayment QC

SOLICITOR FOR THE FIRST RESPONDENT:

Oliveri & Attorneys

SECOND, THIRD & FOURTH RESPONDENTS:

No appearance

Orders

That Mr P as trustee of the bankrupt estate of Mr Vranic be joined as the Fourth Respondent being party to the proceedings as amended for orders pursuant to s 79 of the Family Law Act initiated by the wife by filing on 19 December 2002 an Application for Final Orders.
That the wife shall within 14 days file and serve upon each respondent a memorandum specifying the final orders she seeks against each respondent.
That the matter is stood over to 10am on 16 November 2010 for directions for further conduct of the said proceedings.
That paragraph one (1) of the application by the said Trustee filed 25 August 2010 is hereby dismissed.
That costs are reserved.

IT IS NOTED that publication of this judgment under the pseudonym Trustee for the bankrupt estate of Vranic & Vranic and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 6740 of 2002

MR P as TRUSTEE FOR THE BANKRUPT ESTATE OF MR VRANIC

Applicant

And

MS VRANIC and ORS

Respondents

REASONS FOR JUDGMENT

The wife has brought s 79 proceedings against the husband, Ms Muncic and a company M Pty Limited (M Pty Ltd). She commenced these in 2002. She alleges Ms Muncic holds property including the shares in M Pty Ltd for the husband and that M Pty Ltd, which at face value she controls, also holds property which is really his. After judgment was reserved and before it was delivered, the husband became bankrupt. The sequestration order was made on 3 May 2010. Counsel for the Trustee informs me that the bankruptcy commenced on 4 August 2009. The property of the husband which is available for division among his creditors vested in the Trustee in Bankruptcy of the husband’s property on the commencement date; 4 August 2009. The delay in filing the Notice of Appearance and Application do not attract any criticism to the present Trustee. It may to his predecessor.
On 20 August 2010 the Trustee filed a Bankruptcy - Notice of Appearance, then on 25 August 2010 filed an Application in a Case. This application seeks that leave be granted to the Trustee to intervene in the s 79 proceedings so he can argue that the Family Court of Australia has no jurisdiction to make orders pursuant to s 79 of the Family Law Act affecting the ownership of any property which vested in the Trustee on or after 9 August 2009. I do not know whether the bankruptcy commenced on 4 or 9 August but at this stage the precise date is not important.
The Trustee, in effect, wishes to argue that any property previously held by the husband or in trust for him is, on or after that date; that is, all the previous property of the husband, except superannuation, which otherwise would be divisible under s 79, is no longer available for division between the husband, or more properly the Trustee, and the wife. This does not mean that property vested in the wife could not be divided under s 79 between the wife and, effectively, the Trustee. Significantly, the Application made by the Trustee is to intervene for the limited purpose of arguing his stance without otherwise becoming a party to the s 79 proceedings.
The Application, on its face, indicates the Trustee’s contention that once the husband became a bankrupt, the Family Court Australia had no jurisdiction pursuant to s 79 of the Family Law Act to settle on the wife what was before bankruptcy property of the bankrupt husband.
This might seem to be a surprising contention in view of subs. 79(11) of the Family Law Act which provides that where a party to a marriage becomes bankrupt after a s 79 application is made but before it is determined and the bankruptcy trustee applies to be joined in the s 79 proceedings, the Court must join him if it is satisfied that it might otherwise make an order which is adverse to the interests of the creditors of the bankrupt. The Trustee’s contention is that no such order can be made because the Court has no jurisdiction to deal with what was the bankrupt’s property and now is vested in the Trustee because of the transitional provisions by which subss 79(11), (12) and (13) and an amendment to the definition of “matrimonial cause” in subs. 4(1) have come into force.
One might think that subs. 79(11) is simply redundant if it is designed to deal with property which vested absolutely in the trustee after bankruptcy. Subs. 79(11) could be relied on by a trustee in three other situations which I can contemplate. One is if there is a dispute between husband and wife, or even no dispute, where the legal title was vested in a spouse immediately before his or her bankruptcy but the parties agree or the other spouse claims that wholly or to some extent the other spouse has an equitable interest in it. The other prospect is if, pursuant to s 79, there are grounds to consider the possibility of the bankrupt spouse having had, immediately before bankruptcy, an equitable interest in property of which the other spouse holds the legal estate. The third possibility is where the Court should consider whether to transfer property of the non-bankrupt spouse to the bankrupt spouse because of the bankrupt spouse’s contributions to property the non-bankrupt spouse holds; property which may become immediately vested in the trustee but which may nevertheless benefit the bankrupt spouse by increasing the worth of his or her bankrupt estate, making early discharge possible or easier. One would regard the Trustee as having a right to become a party in s 79 proceedings without the need for subs. 79(11).
Nevertheless, the amendments to the Act now permit the Court to determine a just division of property between a non-bankrupt spouse, the Trustee of the bankrupt spouse, the bankrupt’s creditors, and children of the marriage. What was previously not possible is now possible; that is, settlement of property vested in a trustee on the non-bankrupt spouse and children of the marriage.
By way of response to the Trustee’s application on the 21 October 2010 the wife filed an Application in a Case seeking to join the Trustee as a party in the s 79 proceedings. Senior Counsel who appeared for her, Mr Rayment QC, had earlier indicated this was her intention. Mr Rayment argues that by having appeared and having made his application the Trustee has already been joined as a party in the s. 79 proceedings but, if not, that he should be joined. He relied on the Family Court Rules to support his submission about joinder and the application for joinder.
The Trustee’s response is that he does not wish to become a party. If joinder under the rules rather than on his application under subs. 79 (11) is an option, he argues that there is no point in it because it does not give the Family Court jurisdiction to deal with the bankrupt estate. I must say that in the alternatives I have already referred to where the Court may have to consider a transfer of the non-bankrupt spouse’s property to the bankrupt spouse, joinder would be appropriate to bind the trustee and bankrupt spouse to the Court’s decision.
By agreement, Mr Rayment QC for the wife addressed the Court before Mr J.T. Johnson of Counsel addressed on behalf of the Trustee. I shall record only the relevant arguments of each. The issue of joinder outside subs. 79(11) involves the issue of jurisdiction of the Court to make orders under s 79 which affect the property of a bankrupt. Both the issue of joinder and the issue of jurisdiction were argued interdependently.
Because of the Trustee’s approach to the dispute, the scope of the issues is quite limited and some of the wife’s argument going to jurisdiction does not need to be analysed. The Trustee accepted its correctness but said that the transitional provisions of the act which introduced the relevant amendments; the Bankruptcy and Family Law Legislation Amendment Act 2005 (Amendment Act) mean that the amendments do not apply in this case because they only apply to proceedings instituted after the commencement date of the relevant amendments. Mr Johnson submits that the proceedings were instituted before this date.
There are two relevant parts of Schedule 1 to the Amendment Act. Schedule 1 commenced on 18 September 2005, so both parts did too. Part 1 contains the amendments and Part 2 provides for their application. The Trustee argues that because the wife commenced the property proceedings against the husband in 2002, the Amendment Act amendments do not apply to the s 79 proceedings which he asserts were instituted in 2002 and it is these amendments alone which give the Family Court jurisdiction to make orders for the disposition of the bankrupt property of the husband which, from the husband’s act of bankruptcy in 2009, have vested in the Trustee. The Family Court, it is said, cannot make any orders against him in favour of the wife. The property over which Ms Muncic or M Pty Ltd have the legal title, if they hold it on trust for the husband, is now vested in the Trustee, so, whether the Trustee is or is not a party to the s 79 proceedings, the Court cannot make orders settling this property on the wife.
The argument of the wife that the Trustee should be joined under the Rules or has, by his actions, become joined and that the Court has jurisdiction over the husband’s bankrupt property is:
a)In Part 1 of Schedule 1 to the Amendment Act, the definition of “matrimonial cause” in the Family Law Act was expanded by Item 12 to include paragraph (cb) “proceedings between: (i) a party to a marriage; and (ii) the bankruptcy trustee of a bankrupt party to the marriage; with respect to any vested bankruptcy property in relation to the bankrupt party, being proceedings: (iii) arising out of the marital relationship;…” A definition; “vested bankruptcy property”, was introduced into the Act by item 17 of Part 1. It is property which was that of the bankrupt but which by virtue of the bankruptcy has vested in the trustee in bankruptcy.
b)By Item 27 of Part 1 the subs. 79 (1) which was in force has been repealed and substituted by a subs. 79 (1) which includes in the power of the Court the power to make orders in property settlement proceedings: “(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”.
c)Item 47 of Part 1 adds subss (11) to (17) inclusive to s 79. Subs. (11) permits the Trustee to apply to be joined and, on his application, he has a right to be joined. Subs. 79(12), it is submitted by Mr Rayment, stands alone from subs. 79(11). It provides “if a bankruptcy trustee is a party to property settlement proceedings” there is a restriction on the bankrupt party making submissions to the Court. He says that this is the case whether or not the trustee became a party pursuant to subs. 79(11). He can be joined other than by reliance on subs. 79(11).
d)Part 2 of Schedule 1 to the Amendment Act contains only 1 clause; item 60. Only clauses (1) and (3) are relevant. They provide:
(1)Subject to subitems (2) and (3), the amendments of the Family Law Act 1975 made by this Schedule, to the extent to which they relate to bankruptcies… apply in relation to:
a)bankruptcies for which the date of the bankruptcy is after the commencement of this item; and
b)…
(3) The following provisions:
a)Subsection 79(11), (12) and (13) of the Family Law Act 1975 as amended by this Schedule;
b)…
c)The definitions inserted in subsection 4(1) of the Family Law Act 1975 by this Schedule, to the extend to which those definitions relate to subsections 79(11), (12) and (13) of the Family Law Act 1975 as amended by this Schedule;
apply to proceedings instituted after the commencement of this item, whether the date of the bankruptcy is before, on or after the date of the commencement of this item”.
e)Thus, ordinarily the amendments created by the Amendment Act apply to bankruptcies which commenced after the date on which Schedule 1 came into force. There is an exception to this created by item 60(3). This exception is irrelevant here because this is not an application to which subs. 79(11) is relevant because the application is by the wife to join the Trustee under rule 6.03 of the Family Court Rules, not by the Trustee to be joined under subs. 79(11). Joinder by the wife makes items 60(1), 12, 17, and 27 of the Amendment Act applicable, thereby giving jurisdiction to the Court and making the joinder of practical value. Although item 60(3), and by it the amended meaning of “matrimonial cause”, also gives the Court jurisdiction to make orders against the Trustee, it does not matter that such orders might otherwise have been made against the trustee if the proceedings had been instituted after item 60 came into force on 18 September 2005 irrespective of the date of bankruptcy. By this submission, he advances as the meaning of the words “The following provisions: apply to proceedings instituted after the commencement of this item, whether the date of the bankruptcy is before, on or after the date of commencement of this item” as extending the provisions to any proceedings instituted after 18 September 2005 irrespective of the date of the bankruptcy, thereby extending their application to bankruptcies which commenced before 18 September 2005 (see TS p.19.5-.10 for 25 October 2010).
f)Mr Rayment submitted that Mr Johnson’s argument is that a Trustee can be joined as a party if he makes an application pursuant to subs. 79(11) but cannot otherwise be joined, and that this argument is erroneous because a trustee can be joined by a party if the party applies to join him and in those circumstances the joinder is pursuant to the Family Law Rules (rule 6.03). It was argued that his interpretation of the amendments should be accepted because the amendments are beneficial, their aim being to allow division of property under s 79 which takes into account the rights of the non-bankrupt spouse, the children of the marriage, and the bankrupt’s creditors, something which was made clear by Mr Ruddock MP, the Attorney-General, when he made the applicable second reading speech on 17 February 2005.
g)Mr Rayment argues that as the bankruptcy commenced in August 2009 and on its commencement the Trustee became possessed of all the husband’s assets then available for division between the parties under s 79, but that ss 4(1) and 79 amendments made pursuant to the Amendment Act became part of the Family Law Act when Schedule 1 Parts 1 & 2 came into effect on 18 September 2005, so the Family Court had gained the relevant jurisdiction by the time the husband became bankrupt and there is no reason based on lack of jurisdiction to refuse to join the Trustee or regard him as a party to the s 79 proceedings if, by his actions, he has become otherwise joined.
h)So far as the Trustee relies on the first instance decision in Etrard & Etrard and Ors [2009] FamCA 167 (17 February 2009), that decision should not be followed if it means only that no order could be made against a trustee because he had not applied to be a party and no-one had sought to join him. It is, he says, distinguishable from the present case because here, the wife has applied to join the Trustee. The Trustee was not a party and nobody had applied to join him in Etrard & Etrard and Ors. If her Honour’s decision means that no order could be made against the Trustee unless it is made after he has applied to be joined pursuant to subs. 79(11) in the circumstances where the proceedings to which he applied to be joined were initiated after the amendments to s 79 came into force, that interpretation of the Act is said to be erroneous.
i)It is submitted that the Trustee has become a party because, on 20 August 2010, the Trustee made the application which has, in part, resulted in the proceedings I am here deciding. It is submitted that the Court ought to decide that the Trustee has been joined by looking at what he has actually done rather than what he seeks. The wife says that by filing his application pursuant to Rule 6.01(a) the Trustee became a party because that rule provides that “A party includes … (a) an applicant in a case” and the Trustee was the applicant in his Application in a Case despite it being part of his application that he be heard without becoming a party. In addition, he has asked for orders and obtained some interlocutory orders, both of which make him a party.
j)If he has not become a party already, he should be joined because the wife should be entitled to some of the bankrupt property of the husband which is now vested in the Trustee and the Trustee ought to be bound by the decision of the Family Court of Australia. If he is not bound, the s 79 proceedings will largely have been in vain.
k)The reference to “proceedings instituted after the commencement of this item” in item 60(3)(c) is not limited to the commencement of the principal proceedings by the wife against the husband in 2002. Proceedings include applications within proceedings, such as applications to join a person as a party. Thus subs. 4 (1) was amended by adding paragraph (cb) to give jurisdiction to the Family Court of Australia to determine a claim by the wife against the husband’s trustee in bankruptcy because, by item 60(3) (c), it applies to the application by the wife to join the trustee formally made on 21 October 2010 or alternatively, the Trustee’s own Application in a Case of 20 August 2010, because these applications were made and are proceedings instituted after the commencement of item 60 on 18 September 2005.
l)The effect of the application of paragraph (cd) in the definition of “matrimonial cause” in subs. 4(1) of the Act is that the amendment to subs. 79(1) of the Act made by the Amendment Act can be effective because the Family Court has jurisdiction to make orders against a trustee in bankruptcy to divest him of bankrupt property.
Mr Johnson’s submission for the Trustee are:
a)Etrard & Etrard and Ors [2009] FamCA 167 (17 February 2009) is the only case in point. The trial judge found that the Court does not have jurisdiction in a situation like that here and I should follow it.
b)The Notice of Appearance which the Trustee filed should be understood in the context of the Trustee’s subsequent application and the Court should hold that that application was to assist the Court to avoid error rather than seek orders to his advantage.
c)The proceedings to which Item 60(3) would need to apply to give the Family Court jurisdiction to make orders against the Trustee were initiated in 2002. The definition inserted into “matrimonial cause” by Item 12 which makes proceedings arising out of the marital relationship between a party to the marriage and the bankruptcy trustee of that party’s spouse over vested bankruptcy property a matrimonial cause only applies to s 79 proceedings to permit orders for settlement of property under s 79 against a bankruptcy trustee which are commenced after item 60 came into force ie: after 18 September 2005.
d)Subs. 79(11) means that the Trustee can only be joined on his own application. If this were not the case, it is said that the Court could make orders against bankruptcy property and against the trustee who holds it without notice to the trustee.
e)The amendment to subs. 79(1) does not apply because, by Item 60(3), the amending legislation does not operate in proceedings where the initiating process has been instituted before item 60 came into effect. The Court cannot make orders against the trustee because the amendments created by items 12 and 27 and others do not operate to give jurisdiction or power to make such orders.
f)The Explanatory Memorandum to the Bankruptcy and Family Law Legislation Amendment Bill 2005 (Explanatory Memorandum) indicates the way that item 60 should be interpreted. It is that the amendment to “matrimonial cause” should be read as limited in its application to s 79 proceedings initiated after the item commenced, ie 18 September 2005, and that there is therefore no jurisdiction in the Family Court to make orders which bind the Trustee in bankruptcy and the bankrupt property vested in him by virtue of the bankruptcy because the s 79 proceedings were initiated in 2002 (see TS p 44.10-.25 for 25 October 2010). Clause 115 of the Explanatory Memorandum says “Sub item (3) provides that for the provisions set out in the sub item (which relate to joining the bankruptcy trustee as a party to proceedings for alteration of property interests under s.79), they apply to family law proceedings instituted after the commencement of the item,…”.

I do not agree with the submissions made by Counsel for the Trustee. I am of the opinion that the effect of the legislation is, in the circumstances here, the same as the result contended for on behalf of the wife. With respect to the trial judge in Etrard & Etrard and Ors, I do not agree with the decision and, because I am not in sufficient doubt that the effect of the Amendment Act is different from that found to be the case by her Honour, judicial comity, which Mr Johnson said I should uphold, is not a sufficient reason to avoid reaching my differing conclusion.
Her Honour, in paragraph 27 of the judgment in Etrard, says “By virtue of item 60(3)(c) of the Amending Act, the subs. 4(1) amendments apply to bankruptcies both before and after 18 September 2005 in proceedings commenced after 18 September 2005 only if the Trustee applies to be joined as a party to the proceedings”. I do not agree with this statement of the applicable law. It is my view that a trustee has a right to be joined if he applies under subs. 79(11), provided the s. 79 proceedings were commenced after 18 September 2005, but that there are other bases for joinder of a bankruptcy trustee which allow s79 orders to be made against the trustee and bankrupt property.
In attempting to interpret the amendments made by the Amendment Act, insufficient attention has been given to the precise wording of item 60 or to paragraphs 113 and 115 of the Explanatory Memorandum. This has led to a failure to appreciate an essential aspect of the amendments. It is that item 60(1) has general application to the amendments to the Family Law Act achieved by the Amendment Act, with the exceptions of relevance here being subss 79(11), (12) & (13). Pursuant to item 60(1), using the unambiguous language of paragraph 113, “generally, the … amendments apply to bankruptcies for which the date of the bankruptcy is after”18 September 2005. With subss (11), (12) and (13) of s. 79, item 60(3) (a) and (c) applies. The result is that the extension of the definition of “matrimonial cause” created by the inclusion in it of paragraph (cb) does not apply to subss 79(11), (12) and (13). Subss 79 (11), (12) and (13) themselves come into effect after item 60 commenced, ie after 18 September 2005, but only in instances where the proceedings were instituted after that date. Paragraph 113 says of the legislative intention, “with sub items (2) and (3) in relation to bankruptcies, the amendments will only apply where the family law proceedings are commenced after the commencement of the Bill” in contrast to 60(1) which applies to proceedings irrespective of when they commenced, provided the bankruptcy commenced after the commencement of the item.
Items 12, 17 and 27 of Schedule 1 all commenced on 18 September 2005. All apply to bankruptcies which commenced after this date as a result of Item 60 (1). Item 12 includes paragraph (cb) in the definition of “matrimonial cause” in subs. 4(1) of the Family Law Act. Paragraph (cb) makes proceedings between a party to a marriage and a bankruptcy trustee of a bankrupt party to the marriage a matrimonial cause, thereby investing the Family Court with jurisdiction in such proceedings.
Item 17 adds the definition of “vested bankruptcy property” to subs. 4(1) of the Act. The definition ensures that the property held by a trustee in bankruptcy because it is vested in him under the Bankruptcy Act 1966 is all available to be dealt with under s 79 of the Family Law Act.
Item 27 creates the amendments to subs. 79(1) of the Family Law Act which permits the Court to make settlement orders in favour of a spouse of a bankrupt and / or the bankrupt and / or a child or children of their marriage from bankrupt property vested in the bankrupt’s trustee in bankruptcy, thereby altering the trustee’s interest in that property.
It is not the case that item 60(3)(c) brings paragraph (cb) into subs. 4(1) of the definition of “matrimonial cause” only in instances where the proceedings were instituted after item 60 commenced. It does this only “to the extent to which” (cb) relates to subss 79(11), (12) and (13). Thus, in proceedings which were instituted before 18 September 2005, a trustee has no right of joinder pursuant to subs. 79(11) even if he applies for it and the Court is satisfied that if it makes a s 79 order for settlement of property the interests of the bankruptcy creditors may be affected either adversely or beneficially. In such a case, the bankrupt spouse will not lose the right he or she would have in all but exceptional circumstances to make submissions to the Court about property which at the time is vested in the trustee due to the bankruptcy. Subs. 4(1) as amended by inclusion of (cb) in the definition “matrimonial cause” will only give jurisdiction to the Court to make an order joining the Trustee as of right pursuant to subs. 79(11) with the consequences provided by subss 79(12) and (13) of the proceedings in proceedings instituted after 18 September 2005.
As the Trustee is not seeking to become a party to the s 79 proceedings pursuant to subs. 79 (11), it does not apply. However, the wife is seeking to join the Trustee and alternately claims he has become a party by his own intermeddling. If he becomes party or is already a party, subss 79(12) and (13) will apply if the proceedings in which he is a party were instituted after 18 September 2005. “Party” in subss 79(12) and (13) is not stated to be limited to a party who has been joined pursuant to subs. 79(11), so must include a bankruptcy trustee party irrespective of the way he became a party.
For joinder of the Trustee to have any practical effect other than to permit him to argue that he should or should not be joined, the proceedings in which the Trustee would become a party would be those instituted in 2002, not those to which he was added by proceedings instituted by the wife to add him as a party on 21 October 2010. Rule 6.01(a) provides that an applicant in a case is a party in the case. Rule 6.01(d) provides that an intervener in a case is a party. Rule 6.02(1) provides that any person whose rights may be directly affected by an issue in a case must be included as a party to the case if his participation as a party is necessary to permit the Court to decide all issues in dispute.
The Trustee is the holder of property to which the wife is claiming entitlement by settlement upon her in circumstances where “matrimonial cause” and s 79(1), both as amended, prima facie permit an order to be made in favour of a wife against a trustee if the bankruptcy commenced after 18 September 2005. The Trustee should be made a party at the wife’s behest, unless he is already a party, if the Court has jurisdiction to make orders affecting his holding of bankrupt property and there is nothing in Item 60 which prevents the wife from joining him and subs. 79(11) says nothing to suggest he may only become a party if he applies under that subsection to become one.
It is appropriate for the Trustee to be a party to the s 79 proceedings because only if he is a party can orders of the Court bind him, provided the Court also has jurisdiction to make orders against him due to the terms of Item 60(1); ie, because the bankruptcy occurred after 18 September 2005 and, by the time the bankruptcy occurred, the definition of “matrimonial cause” included s 79 proceedings between a party to a marriage and a bankruptcy trustee for the other party to the marriage in relation to the bankrupt property vested in him.
Nevertheless, subss 79(12) and (13) will not apply to s 79 proceedings in which the Trustee is a party because these proceedings were instituted in 2002. This is despite the fact that they were not instituted against him until 2010 and despite the fact that subs. 4(1) of the Family Law Act contains a definition of “proceedings” which would include the wife’s application made on 21 October 2010. If the wife’s application of October 2010 is the “proceedings” to which “proceedings” in Item 60(3) refers, that item would apply only to those proceedings and only in the proceedings brought in October 2010 to join the Trustee as a party would subs. 79(12) and (13) be applicable. Only if the Trustee becomes a party to the principal proceedings under s 79 as a result of the joinder application or because he has become a party to them as a result of his involvement in them could the Trustee be said to have become a party to proceedings instituted in 2002.
To add the Trustee as a party after a case has started, the wife should comply with Rule 6.03(2) by amending the initiating application to add the Trustee’s name to it as the 4th respondent and including the orders she seeks against him and filing any affidavit which is necessary to add to the current evidence to support those orders and serving the Trustee with all relevant documents. If the Trustee is already a party, there is no need for the wife to add the Trustee as a party but she will still need leave to amend her initiating process by adding the Trustee’s name as the 4^th respondent and the orders she seeks against him and to file and serve these and her further affidavit evidence in support of these orders.
Part IX of the Act, in particular s 92, provides that in proceedings; that is, initiating proceedings or incidental proceedings, any person may apply for leave to intervene. The section permits the Court make an order permitting the person to intervene in proceedings. Subs. 92(3) provides that where a person intervenes in any proceedings as a result of a grant of leave he shall become a party to the proceedings with all the rights, duties and liabilities of a party. Despite attempting to intervene in either interlocutory or principal proceedings, a person cannot pursuant to s 92 become a party without leave of the Court. An overall reading of the Act leads to the conclusion that a person may make an application to intervene and therefore become a party to the limited extent of that application without leave but without ever becoming a party to the substantive proceedings, whether interlocutory or final. Leave by the Court to become a party would be directed at becoming a party in proceedings where issues beyond leave to become a party are decided. Leave is necessary to be a party to such proceedings. Accordingly, rule 6.01(a) which suggests a person can become a party in substantive proceedings by merely filing an Application in a Case is void to the extent of that suggestion due to its inconsistency with the precise terms of s 92 of the Act.
Here the Trustee’s application is to be granted leave to intervene “in the proceedings” without becoming a party to the s 79 dispute for the purpose of arguing that the Court has no jurisdiction over the bankruptcy property vested in him which was previously the husband’s property. In this instance, the property would include all but the husband’s superannuation. In reality, the Trustee is, by his application, attempting to argue that the Court cannot deal with property which was once that of the husband and which is now vested in him as a result of the husband’s bankruptcy so he can keep the property and is not bound by the amended subs. 79(1). His wish to not become a party, yet to be heard to his advantage and the wife’s disadvantage, is so he can avoid being bound as a party if his argument about jurisdiction fails. His argument is not a side issue. It goes to the principal proceedings because it involves significant property which the Act prima facie permits to be available for settlement under s 79. On his affidavit evidence, the valuable property he holds, being shares in A Pty Limited and C Pty Limited, appears to have a combined net value of about $1.34 million to the Trustee.
There are significant claims by alleged creditors of the husband. The husband’s statement of affairs indicates they are owed more than $1.6 million. However, the wife says that many of these claims are part of a general attempt by the husband to deprive her of her rights under s 79 of the Act and that many of the alleged creditors are not genuine and will fraudulently hold any dividend they receive for the husband. She wishes to test their claims. She could do this by taking steps in the Federal Court but says that it is more appropriate in view of the proceedings in the Family Court of Australia to be able to test the creditors claims because, in addition, she can at the same time, if the Court has jurisdiction, claim some of the assets of the bankruptcy held by the Trustee, under s 79. This appears to me to be a rational and appropriate stance which will allow her rights to be determined both earlier and at less cost to all parties and prospective parties.
The Trustee should be granted leave to intervene if there is jurisdiction to make orders against him and the bankrupt property vested in him because it is proper for him to be able to make the submissions about jurisdiction he wishes to make and because he has been heard to make them already. In reality, he has intervened to argue that the orders the wife seeks should not be made. In arguing this, he is seeking to gain the benefit of his argument yet suffer no detriment if he fails, except as to costs of the application for leave and of the argument he wishes to advance. If he is unsuccessful in his argument about jurisdiction, he should become a party to the s 79 proceedings to permit justice to be done to all concerned in them including the creditors of the husband, whether genuine or not, the husband himself and the wife. If s 79(1) allows orders to be made against the Trustee, if he is not a party they will not bind him. The Act, by subs. 79(2), requires that justice be done when orders are made under s 79. It cannot be done unless the Trustee becomes a party.
The intervention the Trustee seeks could only be in the principal proceedings to argue that I do not have jurisdiction to make orders in them against certain property. He could be granted leave to intervene in those proceedings. Despite his stance, if leave is granted there would be no limit on the extent of his rights, duties and liabilities as a party, due to the terms of subs. 92(3), unless the Court decides otherwise. If I have jurisdiction, refusal to decide otherwise would advance the policy of the 2005 amendments which clearly intend to give the spouse of a bankrupt, among others, access to property vested in the trustee in bankruptcy and to give the trustee, and through him the bankruptcy creditors, a right to be heard on the essential aspect of s 79 orders, particularly because they are to be just and equitable in all the circumstances (s 79(2)). It should not be overlooked that if the Trustee is not a fully obligated party to these proceedings, the Court would be in an unacceptable situation because it could not make orders which are just and equitable. Even if it knew the precise extent of the gross assets held by the Trustee in the husband’s bankruptcy and the precise claims of his creditors and could take these factors into account in making orders against the husband in favour of the wife notwithstanding that the husband actually holds no assets, the wife would not be able to prove as a creditor in the bankruptcy because the judgment debt would have arisen after the date of bankruptcy. If it would be just to transfer the property held by the wife to the husband the Court could do so, thereby benefiting his creditors. However, if completion of the proceedings is adjourned until the husband is discharged from bankruptcy, it would be the husband who would be benefited by the adjournment. The only situation which will allow fairness to all in the light of the legislative intent is for the trustee to be a party without any relevant limits on his rights and liabilities.
Evasion of the intention of the legislation clearly demonstrated by the amendment to subs. 79(1) of the Family Law Act made in 2005 is something a trustee should not attempt. He has obligations both under the Bankruptcy Act and the Family Law Act. The Attorney-General’s Second Reading Speech of 17 February 2005 and paragraphs 113 and 115 of the Explanatory Memorandum make the intention of the Amendment Act clear. It is to divide the property between spouses, their children and the creditors in a just manner where one spouse has become bankrupt after the commencement of item 60 of the Amendment Act. Only if the Trustee is a party to s 79 proceedings is such a division both possible and effective.
The Attorney-General said in his speech:
“The amendments in schedule 1 will enable concurrent bankruptcy and family law proceedings to be brought together in a court exercising family law jurisdiction, to ensure that all issues are deal with at the same time. This is achieved by giving courts exercising family law jurisdiction additional jurisdiction to deal with bankruptcy matters that are run concurrently with a family law financial matter, and by facilitating the bankruptcy trustees’ and third party creditors’ involvement in family law proceedings. By merging the courts’ jurisdiction on bankruptcy and family law matters in cases where these areas interact, the amendments will allow the courts exercising family law jurisdiction to consider the non-financial contributions of a non-bankrupt spouse to the acquisition of family property.
Under the schedule 1 amendments, the trustee in bankruptcy can be a party to property or spousal maintenance proceedings under the Family Law Act 1975, and the court will have jurisdiction over property that has become vested bankruptcy property. The court will be able to make an order against the relevant bankruptcy trustee as part of the property adjustment order, allowing the trustee effectively to stand in the shoes of the bankrupt spouse.
The effect of these amendments will be to offer procedures and protection to the non-bankrupt spouse that were not previously available. At the same time, the court can be on notice about the interests of creditors of a bankrupt spouse and can take those interests into accounts in determining family property or spousal maintenance orders”.
The Attorney-General obviously expected a bankruptcy trustee to seek to become a party to s 79 proceedings where the bankrupt is one of the parties to the relevant marriage. He certainly expected the non-bankrupt spouse to be protected as against creditors of the bankrupt to a degree which is just in the particular circumstances and the creditors’ interests to be taken into account through their representation in the s 79 proceedings by the trustee. The only way this overall situation; that which the Attorney-General describes as a bringing together of family law and bankruptcy proceedings, is to preserve the right of the non-bankrupt spouse to join the trustee if the trustee does not apply to be joined. This can only occur if the 2005 amendments have no effect on the right, in reliance on rules 6.02 and 6.03, of a party to s 79 proceedings to join such other person who is or might be affected by and / or of whom he or she claims should be bound by s 79 orders. These amendments have the effect of giving jurisdiction and power to make orders disposing of bankrupt property vested in the trustee against the trustee and which are enforceable against him in furtherance of the legislative intention of the Amendment Act. The Family Law Act and Amendment Act should both be interpreted to promote the objects of these Acts.
That the preservation and balancing of the conflicting rights of the spouse and children of a bankruptcy and the bankrupt’s creditors is the object of the Act is reinforced by the Explanatory Memorandum which includes, in paragraph 113:
“This will allow the bankruptcy and family law proceedings to be brought together which is the intention of the Bill”.
Paragraph 115 repeats this with even more emphasis on the intention to deal with all relevant rights in the one set of proceedings. Its words are:
“… the intention of the provision is to allow bankruptcy and family law proceedings to be brought together so that all the issues can be dealt with at the same time.”
The bankruptcy proceedings which would be involved here would be the determination of the rights or persons who are claiming to be creditors and the apportionment of the bankrupt property between the wife and the creditors in a manner which is just and equitable.

In reliance on the aids to statutory interpretation which I have referred to; aids which are to be used to interpret the Family Law Act without any need for a prior conclusion that the words of the statute are, without them, unclear or ambiguous provided the interpretation is reasonably available from a natural reading of the words, it must be that the Amendment Act does not eliminate the right of a party to seek and obtain leave to join someone pursuant to the Family Court Rules when justice requires such joinder because it will be of practical utility and that subs. 79(11) does not remove the right of a party to a marriage to seek and obtain such leave to so join a trustee in bankruptcy of that party’s bankrupt spouse. Nor do I think subs. 79(11) and item 60 prevent a trustee seeking leave to be joined pursuant to s 92 of the Family Law Act or make such joinder ineffective (see s. 15AB of the Acts Interpretation Act 1901 (Cth) and CIC Insurance Ltd v Bankstown Football Club Ltd (1995-7) 187 CLR 384 at 408 and Newcastle City Council v GIO General Ltd (1997) 191 CLR 85 at 113 per McHugh J for the use of external evidence to interpret statutory meaning).
The fact that the Trustee would have had higher right to be joined as a party which would prevent the husband from being heard if the principal proceedings had been initiated after 18 September 2005 but does not have such a right to do so because they were commenced in 2002 does not prevent him from being joined as a party at the behest of the wife pursuant to rules 6.02 and 6.03 nor would it prevent him seeking and gaining leave to be joined pursuant to s 92 of the Act.
Because my view of the effect of s 92 is that to intervene in s 79 proceedings leave must first be granted, I am not of the view that the Trustee by his application and by arguing it has actually become a party to those proceedings. He has merely applied to become a party to the s 79 proceedings. He would have to be given leave to actually intervene in them. I shall grant the wife leave to add the Trustee as the fourth respondent so there is no need to give the Trustee leave to intervene and no need to declare that, in intervening, he has all the rights, duties and liabilities of a party. As a party joined by the wife he has these rights and obligations. If I had not granted leave to the wife to join the Trustee, I would have granted him leave to intervene without limiting his rights, duties and liabilities as a party. My choice to accede to the wife’s application rather than take this course is based on a little uncertainty that leave would actually make him an intervener rather than any view that his attempt at limited intervention did not amount to an attempt to intervene in the s 79 proceedings.
Because the matter is both part heard and complicated and the Trustee has had access to many documents which have formed part of the proceedings I shall stand the matter over for mention for directions for the further conduct of the proceedings rather than attempt to make the comprehensive directions which may or may not be necessary to permit all parties to know where they stand without further consultation with them.
As I am of the view that because of the clear words of the Amendment Act and paragraph 113 of the Explanatory Memorandum, subs. 79(12) does apply because the s 79 application was instituted before item 60 commenced, the husband still retains the right to be heard.
I shall make orders which accord with the above.

I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cohen delivered on 12 November 2010.

Associate:

Date: 12 November 2010