Valder & Saklani (No 3)

Case [2023] FedCFamC1F 98

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Valder & Saklani (No 3) [2023] FedCFamC1F 98

File number(s): CAC 2098 of 2016
Judgment of: CHRISTIE J
Date of judgment: 24 February 2023
Catchwords: FAMILY LAW – PROPERTY – Where the Full Court remitted the matter for hearing – Where an order was made  in the NSW Supreme Court for equitable compensation to be paid by the husband to a third party (the applicant) - Where the husband became bankrupt on his own petition – Where the husband and wife entered into consent orders  in this Court after Supreme Court orders for the husband to pay equitable compensation were made – Where the applicant was granted leave by the Federal Court of Australia to commence proceedings in this Court on behalf of the husband’s creditors– Where the wife sold an asset transferred to her in the consent orders to third parties – Where the third parties assert they are bona fide purchasers – Where the applicant asserts the transactions by the husband to the wife through consent orders without informing the court of the orders relating to equitable compensation constitute a miscarriage of justice – Where the applicant asserts the subsequent transfer to the third and fourth respondent by the wife should be set aside as a transaction likely to defeat an anticipated order– Where the husband asserts the applicant is not a creditor upon his discharge from bankruptcy – Where the applicant is successful in her s 79A claim – Where the applicant is successful under s 106B – Where the interests of the third and fourth respondents should be protected – Where it is just and equitable to order sale of land in question – Where the applicant should be paid her equitable compensation from the sale of the land – Where the remaining assets of the husband and wife are to be divided as agreed between them.
Legislation:

Bankruptcy Act 1966 (Cth) ss 58, 153

Family Law Act 1975 (Cth) ss 75, 79, 79A, 106B

Family Law Rules 2004 (Cth)
Cases cited:

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

Cantrell & North (2020) FLC 93-976; [2020] FamCAFC 175

Chorn and Hopkins (2004) FLC 93-204; [2004] FamCA 633

Harris v Caladine (1991) 172 CLR 84; [1991] HCA 9

John Alexander’s Clubs & Anor v White City Limited (2010) 241 CLR 1; [2010] HCA 19

Official Trustee in Bankruptcy v Donovan and Donovan and Stevens (1996) FLC 92-703; [1996] FamCA 58

Public Trustee v Gilbert (1991) FLC 92-211; [1991] FamCA 10

Re Pen-y-van Colliery Company (1877) 6 CHD 477

Semmens v Commonwealth  (1989) 13 Fam LR 715

Trustee of the Bankrupt Estate of Hicks & Hicks [2019] FamCA 695

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

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

Valder v Saklani (2013) (omitted)
Division: Division 1 First Instance
Number of paragraphs: 163
Date of hearing:

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AGLC
Valder & Saklani (No 3) [2023] FedCFamC1F 98
Case
[2023] FedCFamC1F 98
Decision Date

CaseChat Overview and Summary

This case involved Ms Valder who sought to recover equitable compensation from Mr B Saklani, which was originally determined payable by the Supreme Court of New South Wales. The matter came before the Family Court of Australia, where the primary legal issues were whether Ms Valder was a creditor or an interested party affected by the consent orders made in 2013 between Mr and Ms Saklani, and if so, whether those orders should be set aside due to a miscarriage of justice. The court also had to determine whether the provisions of the Bankruptcy Act affected Ms Valder's entitlement to recover the debt and if the provisions of section 106B of the Family Law Act 1975 applied.

The Family Court of Australia examined the evidence presented by the parties and considered the relevant legal provisions, including sections 58(3) of the Bankruptcy Act and sections 79A and 106B of the Family Law Act 1975. The court determined that Ms Valder was indeed a creditor and an affected party and that there was a miscarriage of justice due to the failure to disclose relevant information. The court exercised its discretion to set aside the consent orders and ordered that the F Town property be made available to satisfy Ms Valder's debt. The court also found that the provisions of the Bankruptcy Act did not affect Ms Valder's entitlement to recover the debt, and that the provisions of section 106B of the Family Law Act 1975 applied.

The court ordered that the disposition of the F Town property by Ms Saklani to her son and daughter-in-law be set aside and that the property be made available to satisfy Ms Valder's debt. The court also ordered that the third and fourth respondents, Ms Saklani's son and daughter-in-law, be joined as parties to the proceedings.

Orders

Orders of the court

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Background

Background to the litigation

This long running case is primarily concerned with a debt which the Supreme Court of New South Wales found payable to Ms Valder by Mr B Saklani and whether that debt might be recovered by order of this Court.BACKGROUND The chronology is key. In 2013 the Supreme Court of New South Wales determined that Ms Valder, was entitled to be paid equitable compensation by Mr B Saklani. On 13 November 2013 Mr B Saklani and his wife, Ms Saklani, entered into financial consent orders in this Court. The Application for Consent Orders did not mention the liability created by the Supreme Court orders. The effect of those consent orders was a transfer of real property from Mr & Ms Saklani as joint tenants to Ms Saklani. The land involved was a parcel of rural land against which Ms Valder had made an equitable claim in the NSW Supreme Court proceedings. There were several dwellings on the land at G Street, F Town, New South Wales (…) (“the F Town property” or “F Town”). They included the E Property, where Ms Valder had at one time resided, the H Property, where Ms Saklani lived at the time of the consent orders and the J Property where Mr B Saklani lived at the time of the consent orders. In March 2015 Mr B Saklani became bankrupt on his own petition and in March 2018 he was released from bankruptcy. He argues that the judgment debt of Ms Valder was released when his bankruptcy ended. Before Mr B Saklani was released from his bankruptcy, Ms Valder applied for leave to commence proceedings to recover her equitable compensation and legal costs from Mr B Saklani, such sums to be held on behalf of Mr B Saklani’s creditors. In November 2016 an order of the Federal Court of Australia granted the applicant leave to bring proceedings in the Family Court of Australia (as it was then known). Ms Valder says the failure to disclose her interest as a creditor or person who may be affected by an order when applying for consent orders would satisfy this Court that the consent orders of 13 November 2013 should be set aside. To that end she filed an application in this Court on 19 December 2016. She named Ms Saklani as the first respondent. On 17 May 2019 Mr B Saklani was joined as second respondent. While Ms Valder’s application was pending, the wife transferred her interest in real property she received pursuant to the consent orders to third parties, including, in respect of the F Town property, her son and daughter-in-law. Ms Valder seeks an order to set aside that disposition of real property. On 24 May 2022, Altobelli J made orders joining Ms Saklani’s son, Mr C Saklani, the third respondent, and his wife Ms D Saklani, the fourth respondent, to the proceedings. On 4 July 2022, the third respondent filed an application in a proceeding seeking that that order be discharged. The Court dismissed this application and the third and fourth respondents remained as parties to these proceedings. Until the first day of the trial, the third and fourth respondents had declined to participate as parties and filed affidavits in Ms Saklani’s case. They appeared at the final hearing.

Evidence

Evidence Before The Court

The wife retained a life estate in the F Town property on its transfer to her son and daughter in law and as at the date of this hearing both she and Mr B Saklani continue to live on the property. Mr C Saklani and Ms D Saklani live elsewhere.THE EVIDENCE The applicant relied upon:(a)a Case Outline Document (exhibit 1);(b)an Amended Initiating Application filed 26 April 2022;(c)an affidavit of Mr K filed 12 October 2022; (d)an affidavit of Mr L filed 2 December 2022;(e)an affidavit of Ms Valder filed 6 December 2022; and(f)a joint statement of Mr L and Mr M filed 8 December 2022 (exhibit 3). The applicant also tendered and relied upon various other documents. The first respondent relied upon:(a)a Case Outline Document (exhibit 2);(b)a minute of orders sought (exhibit 18);(c)an Amended Response to Initiating Application filed 24 May 2022;(d)an affidavit of Ms Saklani filed 8 December 2022; (e)an affidavit of Mr C Saklani filed 8 December 2022;(f)an affidavit of Ms D Saklani filed 8 December 2022; and(g)an affidavit of Mr M of 5 December 2022. The first respondent also tendered and relied upon various other documents. The second respondent relied upon:(a)a Case Outline Document (exhibit 4);(b)a minute of orders sought (exhibit 19);(c)written submissions (exhibit 4); and(d)an affidavit of Mr B Saklani filed 9 December 2022. The second respondent also tendered and relied upon various other documents. The third and fourth respondents did not file any material in their own case but tendered and relied on various other documents which became exhibits in the proceedings. I was assisted by written submissions filed on behalf of the applicant, first and second respondents and the oral submissions on behalf of each of the parties.THE LAW The applicant was permitted to bring proceedings in this Court as a consequence of her application for leave to the Federal Court of Australia under s 58(3) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”). Section 58(3) provides:Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:(a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding. The applicant relies upon the provisions of s 79A of the Family Law Act 1975 (Cth) (“the Act”) and s 106B of the Act to make available property which once belonged to one or both of the parties to the marriage to satisfy her debt. Section 79A of the Act operates to create a discretion to set aside final orders, including orders made by consent, if the provisions of the section are engaged. Section 79A provides:(1) Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that:(a) there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or(b) in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out; or (c) A person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order; or (d) In the circumstances that have arisen since the making of the order, being circumstances of an exceptional nature relating to the care, welfare and development of a child of the marriage, the child or, where the applicant has caring responsibility for the child (as defined in subsection (1AA)), the applicant, will suffer hardship if the court does not vary the order or set the order aside and make another order in substation for the order; or (e) A proceeds of crime order has been made covering property of the parties to the marriage or either of them, or a proceeds of crime order has been made against a party to the marriage; The court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside. ….(2)In the exercise of its powers under subsection (1), (1A) or (1C), a court shall have regard to the interests of, or against, as the case may be, the estate of the deceased party. …(4)For the purpose of this section, a creditor of a party to the proceedings in which the order under s 79 was made is taken to be a person whose interests are affected by the order if the creditor may not be able to recover his or her debt because the order has been made.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

In making orders for the adjustment of property pursuant to s 79 it is necessary to consider the matters in s 79(4) and any relevant matters in s 75(2) of the Act.CONSIDERATION The issues in this case, framed by the relief each party seeks and the evidence which has been filed in support, appear to be as follows:(a)Was Ms Valder a creditor or person affected by the final consent orders between Mr and Ms Saklani made on 13 November 2013 in the Family Court of Australia?(b)Was there a miscarriage of justice in the making of the final consent orders between Mr and Ms Saklani? A related question is whether the Family Court should have been informed of the existence of the Supreme Court proceedings and the order for equitable compensation and costs?(c)If there was a miscarriage of justice, should the discretion which is created by s 79A of the Act be exercised to set aside the final orders?(d)Is delay between the time when Ms Valder became aware of the existence of the consent orders and the time she commenced proceedings relevant to the exercise of discretion?(e)Do provisions of the Bankruptcy Act function to end the entitlements of a creditor (here Ms Valder) after the bankrupt has been released from bankruptcy? (f)Is it significant to Ms Valder’s claim that the F Town property was not part of the “property of the bankrupt” at the time he became bankrupt?(g)What is the significance of Ms Saklani’s knowledge of the existence of a liability to Ms Valder in the determination both as to whether there has been a miscarriage of justice and then whether the orders should be set aside?(h)In determining whether to exercise the discretion to set aside the orders, what is the significance of the potential diminishment of the pool of assets available to the wife having regard to the history of her contributions – put another way, how should the interests of a creditor of one spouse be balanced against the interests of the other spouse?(i)Are the provisions of s 106B of the Act engaged?(j)If the provisions of s 106B are engaged, how should the discretion be exercised?(k)Are Mr C and Ms D Saklani bona fide purchasers or other interested persons? If so, how should the Court have regard to their interests? There is overlap between the subject matter in the above list of issues since it is not possible to consider whether the discretion to set aside orders should be exercised without taking into account the merits of the s 106B argument or s 79 claim, or the status of the debt said to be owed to Ms Valder. In Valder and Saklani (2021) FLC 94-042 the Full Court of the Family Court of Australia accepted that Ms Valder was a creditor and/or a person whose interests would be affected by the making of an order. As a consequence, she is a person who would have been entitled to become a party to proceedings in which an application was made for an order under s 79 of the Act. In 2022 the High Court of Australia dismissed an application for special leave by Mr B Saklani stating there was no reason to doubt the correctness of the decision of the Full Court.