Turner v Turner & Official Trustee in Bankruptcy

[2001] FMCA 9

FEDERAL MAGISTRATES COURT OF AUSTRALIA

TURNER v TURNER  FIle No: BZ111/00

[2001] FMCA 9        

BANKRUPTCY AND FAMILY LAW – Application to annul wife’s Bankruptcy founded on Debtor’s petition – conduct of wife – ss55(2); s153B of Bankruptcy Act 1966; Re: MOTTEE (1977) 29 FLR 406; CLYNE v DEPUTY COMMISSIONER OF TAXATION (1984) CLR 589; RE: MONCADA (1986) 11 FCR 205; LUKIC & THE OFFICIAL TRUSTEE IN BANKRUPTCY (1996) FLC 92-719; GIBSON & OFFICIAL TRUSTEE IN BANKRUPTCY (unreported, FCA 2.3.98) all applied.

ApplicantREX DOUGLAS TURNER

First Respondent:  HELOINE EUSTEEN TURNER

Second Respondent  OFFICIAL TRUSTEE IN BANKRUPTCY

Delivered on:  13 February 2001    

Delivered at:  Brisbane

Hearing Date:  9 February 2001

Judgment of:  Baumann FM

REPRESENTATION:

Counsel for the Applicant:               Mr Burridge

Solicitors for the Applicant:             Payne Butler Lang

Counsel for the Respondent:       

Solicitors for the Respondent:        Mr Reardon

T/A Finemore Walters & Storey

ORDERS:

(1)That the bankruptcy of HELOINE EUSTEEN TURNER consequent upon the presentation of her own Petition on 29 August 2000 be annulled pursuant to s153B of the Bankruptcy Act.

(2)The Second Respondent’s costs to be agreed upon or taxed and expenses of the administration (including costs of reconveyance) be a first charge after the secured creditor on the property at 18 Woodbury Drive, South Kolan and that the Respondent shall execute such documents as may be reasonably required by the Second Respondent to perfect this charge after reconveyance of the said property, and to the extent of any deficiency in such property it be recoverable against the First Respondent..

(3)The First Respondent pay the Applicant’s costs of and incidental to this application as agreed and failing agreement, as taxed.

IN THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BRISBANE REGISTRY

No BZ111 of 2000 

{2001}FMC9

REX DOUGLAS TURNER

Applicant

And

HELOINE EUSTEEN TURNER

First Respondent

THE OFFICIAL TRUSTEE IN BANKRUPTCY

REASONS FOR DECISION

INTRODUCTION

1.This is an amended application filed 23 November 2000 by REX DOUGLAS TURNER (“the Applicant”) seeking an order that the Bankruptcy of his former wife HELOINE EUSTEEN TURNER (“the Respondent”) be annulled pursuant to s153B of the Bankruptcy Act (“the Act”).

2.The Respondent opposes the application.

3.The second Respondent, OFFICIAL TRUSTEE IN BANKRUPTCY, neither consents nor objects to the application for annulment.

CHRONOLOGY

4.The relevant history of this matter may conveniently be summarised as follows:

25.08.1979Parties married

22.06.1999Parties separated

21.08.2000Respondent signs Debtors Petition under s55(2) of Bankruptcy Act

24.08.2000Applicant files property proceedings in Family Court of Australia at Brisbane

28.08.2000Respondent presents Debtors Petition and Statement of Affairs

29.08.2000Petition accepted by Official Receiver

17.10.2000Applicant files application for annulment

26.10.2000Official Report published by second respondent.

I am satisfied the creditors have been given notice of this application as required by Rule 43.

EVIDENCE

5.The applicant relied upon his affidavits filed 17 October 2000 and 18 December 2000.  He gave further evidence and was subject to cross examination.  He was legally represented and written submissions were delivered.

6.The Respondent relied upon her affidavit filed 23 November 2000.  She gave further evidence and was subject to cross examination.  She was legally represented and written submissions were delivered.

7.The second Respondent had filed 2 affidavits by RODERICK ERNEST MUMFORD, Deputy Receiver, and he was not required for cross examination.  Mr Broadley was excused from participating in the proceedings beyond the reliance upon written submissions delivered and a reservation of right to be heard on a question of the second Respondent’s costs in the administration and these proceedings.  Both parties ultimately conceded that the Second Respondent’s costs should be paid as a first charge on the proceeds of the estate, after the secured creditor.

ISSUES

8.The applicant says that:

(a)He has standing to bring the application, as a person “aggrieved or interested in the matter” within the meaning of s306BA of the Act.

(b)The sequestration order “ought not to have been made” within the meaning of s153B of the Act the petition and “ought not to have been presented” by reason of the fact that its presentation by the Respondent was an abuse of the process of the Court.

(c)The Applicant asserts that the Respondent’s conduct in presenting the petition was an abuse of process based upon the following matters:

(i)the respondent was not insolvent at the time of the presentation of her petition, so there was no basis for doing so;

(ii)the respondent was guilty of material false disclosure on disclosure in her Statement of Affairs;

(iii)the timing of the presentation of the Petition – just 4 days after the filing of Family Court proceedings, is such as to lead to a clear inference the Petition was filed to frustrate the Family Court proceedings.

FINDINGS

9.As a general observation I found the evidence of the Respondent unconvincing.  Whilst she seemed to readily concede assertions put to her which were against her interest, such as

“The NRMA debt, is not my debt.”

“The property was owned by me and Mr Turner”

She was forthright in her statements that she considered all options and took legal advice, before filing for bankruptcy, and did so for the sole reason that she

“Couldn’t afford to pay her bills?”

10.Ultimately, apart from the respondent’s assertion that she couldn’t pay her bills, the findings on the evidence were generally supported by the evidence of the parties in that:

(a)The house was registered in the name of the Respondent although the purchase moneys represented joint funds from the sale of other property.  It seems the house was transferred into the name of the Respondent because of concerns about the NRMA debt.  The house has a value of approximately $149,000.00.

(b)The house is security for a loan of approximately $21,412.00 in favour of GE Finance & Insurance.  The Applicant has made arrangements for payment of an agreed instalment under the Mortgage and the Mortgagee is not pressing for payment in full at this time.

(c)The NRMA debt is not a debt of the Respondent.  It arises from an unsuccessful Magistrates Court action commenced by the Applicant in respect of a motor vehicle insurance claim.  The basis of the Respondent claiming it in her Statement of Affair as an unsecured debt for which she had legal responsibility, is flawed.  She says that she voluntarily accepted responsibility, for her husband’s debt.  The debt represented 77 % of the gross claimed unsecured debts of $24,633.00.

(d)The Receiver’s report indicates that the only unsecured creditor who ultimately lodged (and did not withdraw) a proof of debt was the Bank of Queensland for $1,686.00.  The Respondent conceded under cross examination that she was not being pressed to pay that debt.

11.The report of the Receiver dated 26 October 2000 reveals that the excess of assets over liabilities (including secured liabilities, and unsecured liabilities the subject of formal proof of debt) is over $125,000.00.

12.Whilst the Respondent says she was not aware of the commencement of Family Court proceedings by the Applicant at the time she presented her debtor’s petition, I am satisfied she was aware that proceedings were imminent.  The party’s negotiations, which had commenced shortly after separation in June 1999, had broken down.  She says she took advice from her solicitor as to her options and says she chose the “Bankruptcy option” so that she could pay her debts.  Somewhat surprisingly she says she had not considered the costs impact of the “Bankruptcy option”.  She conceded she wanted her husband (the Applicant) out of the house, but said she didn’t choose the “Bankruptcy option” as the quickest way to ensure that occurred.  In any event he remains in the home today.

13.The totality of the evidence leads me to the irresistible finding that the presentation by the Respondent of the Debtor’s Petition was conduct calculated to attempt to frustrate, or make more difficult, the probable proceedings of the Applicant under s79 of the Family Law Act.

14.In my view, the Applicant clearly has standing to bring this Application (Re: MOTTEE (1977) 29 FLR 406). If the presentation of the Debtors Petition amounted to an abuse of the process provided by s55 of the Act, it can be said that the “petition ought not to have been presented” within the meaning of s55 (see CLYNE V. DEPUTY COMMISSIONER OF TAXATION (1984) CLR 589 to 598.

15.I find the Respondent was not insolvent at the time she presented the Debtor’s petition and could not have reasonably believed she was insolvent, and further find that the presentation of the petition was designed to frustrate anticipated Family Court proceedings. As this is a purpose foreign to the purposes of s55 of the Act it is an abuse of the process provided by that section (see Re: MONCADA (1986)11 FCR 205; LUKIC & THE OFFICIAL TRUSTEE IN BANKRUPTCY (1996) FLC 92-719; GIBSON & THE OFFICIAL TRUSTEE IN BANKRUPTCY (unreported STEELE J, FAMILY COURT OF AUSTRALIA, 2.3.98).

16.The parties concede that the Trustee has acted reasonably since the presentation of the Debtor’s Petition and that the Second Respondent’s costs and expenses have been honestly and reasonably incurred.

I certify that the preceding (16) paragraphs are a true and correct copy of the Reasons for Judgment of Federal Magistrate Baumann

Associate
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