Valder and Saklani and Anor
[2020] FamCA 502
•19 June 2020
FAMILY COURT OF AUSTRALIA
| VALDER & SAKLANI AND ANOR | [2020] FamCA 502 |
| FAMILY LAW – BANKRUPTCY – Where the applicant seeks to set aside consent orders between the respondent and second respondent – Where the applicant was a creditor to the bankrupt estate of the second respondent – Where the second respondent was since discharged from bankruptcy – Where the applicant does not have standing to seek an application under section 79A of the Family Law Act 1975 (Cth) – Application dismissed. |
| Bankruptcy Act 1966 (Cth) s 153 Family Law Act 1975 (Cth) s 79A |
| Boensch v Pascoe (2019) 375 ALR 15 Official Trustee in Bankruptcy & Gavalas and Anor (2017) 318 FLR 22 Todd v Official Receiver (1986) 14 FCR 177 |
| APPLICANT: | Ms Valder |
| 1st RESPONDENT: | Ms Saklani |
| 2nd RESPONDENT: | Mr B Saklani |
| FILE NUMBER: | CAC | 2098 | of | 2016 |
| DATE DELIVERED: | 19 June 2020 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Rees J |
| HEARING DATE: | 4 June 2020 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | In Person |
| COUNSEL FOR THE 1ST RESPONDENT: | Mr Laughton SC (written submissions only) |
| SOLICITOR FOR THE 1ST RESPONDENT: | Holmes Donnelly & Solicitors |
| COUNSEL FOR THE 2ND RESPONDENT: | Mr McGovern SC with Mr Batley (direct brief) |
| SOLICITOR FOR THE 2ND RESPONDENT: | In person |
Orders
IT IS ORDERED
That the Initiating Application filed 19 December 2016 be dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Valder & Saklani has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: CAC 2098 of 2016
| Ms Valder |
Applicant
And
| Ms Saklani |
First Respondent
And
| Mr B Saklani |
Second Respondent
REASONS FOR JUDGMENT
Ms Valder (“the applicant”) has filed an application in the Family Court of Australia seeking to set aside property orders made by consent between Ms Saklani (“the first respondent”) and Mr B Saklani (“the second respondent”) which were made on 13 November 2013. The first and second respondents were married to each other.
The applicant relies on the provisions of section 79A of the Family Law Act 1975 (Cth) (“the Act”). The applicant asserts that she has standing to make the application as:
…a person affected by an order made by a court under section 79 in property settlement proceedings.
The applicant asserts that she is a creditor of the husband and thus a “person affected.”
That assertion is denied by the first and second respondents.
HISTORY
Some background is needed to give context to the discussion which follows.
In August 2009, the applicant brought proceedings against the second respondent in the Supreme Court of New South Wales (“the Supreme Court”) claiming an order that the respondent transfer a property to her or a declaration that she had an interest in the property by way of constructive trust or charge or an order for payment of equitable compensation to her.
Judgment in those proceedings was delivered in February 2012. The applicant was unsuccessful. She appealed.
In July 2013, the Court of Appeal delivered judgment. The appeal was successful.
On 13 November 2013 the first and second respondents entered into consent orders in the Family Court which had the effect of transferring the second respondent’s interest in the subject property to the first respondent. The interests of the applicant as a substantial creditor of the husband was not disclosed in the application for consent orders, nor was the judgment of the Court of Appeal disclosed.
The second respondent appealed to the High Court of Australia.
The High Court dismissed his appeal with costs and remitted the matter to the equity division of the Supreme Court to determine the quantum of the applicant’s entitlement.
In September 2014, the Supreme Court quantified the applicant’s claim against the second respondent at $594,028.25 plus costs. The applicant asserts that, as at May 2017, the amount owed to her by the second respondent was in excess of $840,000.
In March 2015 the second respondent was declared bankrupt on his own petition.
The applicant lodged a proof of debt with the trustee in bankruptcy for a total of $594,028 plus $250,000 costs.
In September 2015 the trustee in bankruptcy issued a report to creditors. A copy of the report is tendered in the applicant’s case. In that report, the trustee in bankruptcy stated that the bankrupt would be discharged from bankruptcy in March 2018.
In 2016, the applicant sought leave in the Federal Court to file a section 79A application under the Act. Judgment in favour of the applicant was delivered in November 2016.
The application pursuant to section 79A was filed on 19 December 2016.
No application was made to extend the period of the bankruptcy.
The second respondent was discharged from bankruptcy in March 2018.
DISCUSSION
The contention to be determined is the contention of the second respondent in the following terms:
The second respondent was discharged from bankruptcy in March 2018 by operation of law under s149 Bankruptcy Act 1966 and he was thereby released from all his debts provable in the bankruptcy pursuant to section 153(1) Bankruptcy Act 1966, and in consequence the present proceedings are bound to fail.
The applicant and the respondents have all filed written submissions addressed to the contention.
The applicant relies on the statement of Kiefel CJ, Gageler and Keane JJ in Boensch v Pascoe (2019) 375 ALR 15:
Upon a person becoming bankrupt, s 58(1) of the Bankruptcy Act 1966 (Cth) vests in the trustee of the estate of the bankrupt property then belonging to the bankrupt that is divisible among the bankrupt's creditors together with any rights or powers in relation to that property that would have been exercisable by the person had the person not become a bankrupt. The property belonging to the bankrupt includes real or personal property and any estate or interest in real or personal property belonging to the person at the time of bankruptcy.
However, the applicant’s contention overlooks the fact that by the time the second respondent became bankrupt in March 2015, his interest in the subject property had already been conveyed to the first respondent pursuant to the consent orders and thus did not form part of his bankrupt estate.
The report to creditors, to which reference has been made earlier in these reasons, identified among “Options for Funding Further Investigations” the transfer to the first respondent of the bankrupt’s interest in real property. However, the trustee stated that the creditors would need to provide funds if further steps were to be taken in relation to that transfer.
Section 153 of the Bankruptcy Act 1966 (Cth) makes clear that:
…where a bankrupt is discharged from a bankruptcy, the discharge operates to release him or her from all debts (including secured debts) provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his or her security for the benefit of creditors generally.
The Full Court of the Family Court in Official Trustee in Bankruptcy & Gavalas and Anor (2017) 318 FLR 22 with approval referred to the statement of Spender J in Todd v Official Receiver (1986) 14 FCR 177:
The status of bankruptcy involves a curtailment of rights and abilities and exposes a bankrupt to quasi-penal consequences. It is conducive to the rehabilitative object of the bankruptcy law that, on discharge from his bankruptcy, the former bankrupt be restored to his full and former status without lingering disabilities and with his immunities unattenuated.
Accordingly, upon the discharge from bankruptcy of the second respondent, he was released from the debt to the applicant.
Thereafter, the applicant was not a creditor and was no longer “a person affected by an order” such as to give her standing to make an application pursuant to section 79A of the Act.
It is not necessary to determine the question raised by the second respondent whether the right to apply to set aside the consent orders is solely the right of the trustee in bankruptcy or a right that can be exercised by a creditor.
The applicant does not have standing to make the application and consequently her application will be dismissed.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 19 June 2020.
Associate:
Date: 19/06/2020
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