Warin & Warin (No 2)
[2021] FamCA 483
FAMILY COURT OF AUSTRALIA
| WARIN & WARIN (NO. 2) | [2021] FamCA 483 |
| FAMILY LAW – PRACTICE AND PROCEDURE – application to cross-examine affidavit deponents at an interlocutory hearing – no power conferred by Family Law Act, Family Law Rules or Family Law Regulations. FAMILY LAW – BANKRUPTCY – application to summarily terminate bankruptcy founded on a debtor’s petition – no power – s 106B of the Family Law Act not to be invoked summarily. FAMILY LAW – JOINDER – application granted. |
| Bankruptcy Act 1966 (Cth) Family Law Act 1975 (Cth) s 106B Family Law Regulations 1984 (Cth) Family Law Rules 2004 (Cth) rr 6.02, 15.09 |
| Calverley v Green (1984) 155 CLR 242 Dyer v Dyer [1788] 30 ER 42 Goodridge & Beadle (2017) 57 Fam LR 425 Muschinski v Dodds (1985) 160 CLR 583 Stanford v Stanford (2012) 247 CLR 108 The Trustees of the Property of Cummins (A Bankrupt) v Cummins (2006) 227 CLR 278 Warin & Warin [2020] FamCA 796 |
| APPLICANT: | Ms Warin |
| FIRST RESPONDENT: | Mr Warin |
| SECOND RESPONDENT: | Mr Stanton & Mr Basfield in their capacity as Trustees in Bankruptcy of the Bankrupt Estate of the Respondent Husband |
| FILE NUMBER: | MLC | 7368 | of | 2020 |
| DATE DELIVERED: | 6 July 2021 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Wilson J |
| HEARING DATE: | On the papers |
| DATE OF FINAL SUBMISSION: | 5 July 2021 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Not applicable |
| SOLICITOR FOR THE APPLICANT: | Vadarlis & Associates |
| COUNSEL FOR THE FIRST RESPONDENT: | Not applicable |
| SOLICITOR FOR THE FIRST RESPONDENT: | Sebastian Rubera & Associates |
| COUNSEL FOR THE SECOND RESPONDENT: | Not applicable |
| SOLICITOR FOR THE SECOND RESPONDENT: | Maddocks Lawyers |
Orders
Ms Inston is joined forthwith as the third respondent to this proceeding.
On or before 4pm on 5 August 2021 the wife must file and serve a statement of claim against all respondents in the form and to the details required for a statement of claim in the Federal Court of Australia.
On or before 4pm on 6 September 2021 each respondent must file and serve a defence to the wife’s statement of claim.
The wife’s application to examine the bankrupt, Mr Winsor and Ms Inston is dismissed.
The wife’s application on an interim basis to set aside the bankrupt’s bankruptcy is dismissed.
The listing on 6 August 2021 is vacated.
The further hearing of this proceeding is adjourned to 8 September 2021 at 10am for directions.
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 Warin & Warin 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 MELBOURNE |
FILE NUMBER: MLC 7368 of 2020
| Ms Warin |
Applicant
And
| Mr Warin |
First Respondent
And
| Mr Stanton & Mr Basfield in their capacity as Trustees in Bankruptcy of the Bankrupt Estate of the Respondent Husband |
Second Respondent
REASONS FOR JUDGMENT
Introduction
By application in a case dated 28 May 2021, the wife sought orders for three persons to be examined. She did not identify the source of power for such an order to be made. She also sought other relief.
Each person identified by the wife objected to orders being made for his or her examination. The parties sought a determination on whether an order for their examination should be made.
In addition, the wife sought an order under s 106B of the Family Law Act setting aside the sequestration order made in relation to the husband (who I shall call “the bankrupt”).
The wife sought an order for the joinder of Ms Inston.
The bankrupt contended that he had standing to be heard on this application notwithstanding the appointment of joint trustees-in-bankruptcy of the bankrupt’s bankrupt estate (“the trustees”) by orders made on 20 July 2020.
The trustees opposed the application for orders under s 106B setting aside the sequestration orders.
Synopsis
For the reasons that follow, in my judgment –
a)Ms Inston is joined forthwith as the third respondent to this proceeding;
b)the wife must file and serve a statement of claim within one month in the form and to the details required for a statement of claim in the Federal Court of Australia;
c)each respondent must file a defence to the wife’s statement of claim one month after the wife’s statement of claim is served upon the respondents;
d)the application to examine the bankrupt, Mr Winsor and Ms Inston is dismissed; and
e)to the extent that the wife applies on an interim basis to set aside the bankrupt’s bankruptcy, such interim application is dismissed.
Relevant factual setting
Certain facts germane to this case were recorded previously by me,[1] although this application involves additional material, the details of which were adduced through affidavits of the wife and her solicitor.
[1]Warin & Warin [2020] FamCA 796.
To her affidavit the wife exhibited a document styled “wife’s statement of allegations”. It was not a pleading and was narrative in nature, being more akin to submissions. Four allegations were recited in it, namely –
a)the funds for the purchase of B Street in paragraph 4 above could not have come from Ms Inston herself and on the balance of probabilities derive from the husband and or his entities within his control;
b)husband’s post-bankruptcy financial circumstances are no different to his pre-bankruptcy circumstances;
c)the husband’s bankruptcy is not genuine and in the period immediately preceding the husband’s bankruptcy he divested himself of funds which would otherwise be available to satisfy the $96,350 of debts relied up to base (sic) the bankruptcy; and
d)Mr Winsor failed to properly comply with the subpoenas addressed to him dated 25 September 2020 and 29 April 2021, those addressed to H Pty Ltd dated 26 March 2021 and 29 April 2021 and the subpoena to Winsor Group dated 4 May 2021.
The fourth allegation, relating solely to Mr Winsor, concerned the bankrupt’s accountant.
The wife’s solicitor, Amelia Vadarlis made two affidavits, each on 29 May 2021, one referrable to subpoena issues, the other more substantive affidavit being referrable to broader factual matters.
Examining subpoenae recipients
It is appropriate to address this issue last.
Joinder of Ms Inston
In paragraph 4 of her application in a case the wife sought an order for the joinder of Ms Inston.
Rule 6.02 of the Family Law Rules governs the inclusion of parties in a proceeding. A person must be included as a party to the proceeding if that person’s rights may be directly affected by an issue in the case and that person’s participation as a party is necessary for the court to determine all issues in dispute in the case.
Here, the wife seeks declaratory relief to the effect that Ms Inston owns the property at B Street, D Town on trust for the bankrupt or alternatively on trust jointly for the bankrupt as well as herself. Ms Inston made an affidavit sworn on 21 June 2021. In large measure that document is a submission. It does not comply with the requirement of Rule 15.09. Solicitors who prepare affidavits for use in this court should be aware of and fully conversant with the requirements of Rule 15.09 and they should not misuse an affidavit for a submission.
According to the wife’s solicitor, the bankrupt’s accountant, Mr Winsor, produced eight trust account receipts addressed to Ms Inston from her then solicitors, J Solicitors. The total of sums recorded in those trust receipts was $1,229,836.18. In paragraph 10 of the wife’s document entitled “wife’s statement of allegations” the wife refers to the sums identified in the eight trust account receipts and states –
10. Where these funds came from is unknown.
In paragraph 11 of the submissions dated 25 June 2021 prepared on behalf of the wife, it was argued that the property at B Street, D Town purchased in Ms Inston’s name in June 2019 “could not possibly have been purchased by Ms Inston herself”. It seemed plain enough that the wife was seeking to demonstrate that –
a)the whole or part of the funds to purchase B Street, D Town originated from an unknown source, most likely from the bankrupt prior to the date on which he petitioned for his own bankruptcy; or
b)Ms Inston provided funds for the purchase of B Street, D Town to the extent of $1,229,836.18.
As a joint contributor of funds to acquire real property, that person ordinarily obtains an equitable interest in the property[2] acquired. Having regard to the requirements of the Family Law Act construed by the High Court in Stanford v Stanford[3] I am required to determine the legal and equitable interests in property, relevantly here, B Street, D Town. Ms Inston’s interest in that property must be determined. Her rights might be directly affected by that issue in this case. In my view she is squarely a proper party who must be joined. I make an order that she becomes the third respondent.
[2] Calverley v Green (1984) 155 CLR 242, Muschinski v Dodds (1985) 160 CLR 583, The Trustees of the Property of Cummins (A Bankrupt) v Cummins (2006) 227 CLR 278 and Dyer v Dyer [1788] 30 ER 42.
[3] (2012) 247 CLR 108.
The time has come for the wife to prepare a statement of claim against all respondents to the standard appropriate to a statement of claim in the Federal Court of Australia, properly particularised. Such a pleading must be filed and served by 4pm on 5 August 2021. The respondents will have one month thereafter to file and serve their defence to that statement of claim. I order the respondents to file and serve a defence to the applicant’s statement of claim by 4pm on 6 September 2021.
Setting aside the bankruptcy
Paragraph 5 of the wife’s application in a case relates to her application for an order under s 106B of the Family Law Act setting aside the appointment of the trustees as the bankrupt’s trustees-in-bankruptcy.
In support of her application setting aside the bankruptcy,[4] in her document styled “wife’s statement of allegations” she asserted under allegation three that the bankrupt’s bankruptcy was not genuine. She said that in the period immediately preceding the presentation of his own petition, the bankrupt divested himself of funds capable of satisfying $96,350 worth of debts. In tables subjoined to paragraphs 34 and 36 of the statement of allegations document, the wife recorded payments bearing certain similarities to voidable dispositions or void dispositions under the Bankruptcy Act. However, not all such payments came from the bankrupt as some were from companies he owned or controlled. Ordinarily, a bankrupt’s trustee investigates payments that are amendable to recall.
[4] The wife did not descend into the detail of her application, especially whether she sought an order setting aside the making of the sequestration order based on the bankrupt’s own petition.
One of the trustees filed an affidavit affirmed 28 June 2021. In that affidavit Mr K rejected the contention that the bankrupt’s bankruptcy was not genuine. Mr K deposed to –
a)there being creditors to whom the bankrupt owed $29m prior to his presentation of his own petition;
b)transfers made by the bankrupt may have been undertaken to defeat the bankrupt’s creditors; and
c)investigations being conducted by the trustees leading to examinations of the bankrupt, Ms Inston, Mr Winsor and the bankrupt’s once co-director, namely his son.
The applicant’s amended initiating application contains paragraph 7 that is in identical terms to paragraph 5 of the wife’s application in a case. In both, orders under s 106B have been sought setting aside the bankrupt’s bankruptcy as interim or interlocutory orders. To my mind, such an application at an interim phase of this litigation is wrongheaded. I say that for several reasons. First, the trustees act in the interest of the general body of unsecured creditors. They have stated that creditors amounting to a dollar value of $29m exist, a very large sum of money. Dislodging the trustees’ appointment now by preferring the interests of the wife in this litigation and thereby prejudicing creditors owed $29m would be inimical to the statutory function trustees-in-bankruptcy serve. Second, the bankruptcy has been on foot since July 2020, almost a full year during which the trustees have already prepared a report to creditors and undertaken significant work on the bankrupt’s financial affairs. That effort would be wasted if their appointment were terminated in accordance with the wife’s application. Third, any such application should only be made after the hearing of a fully contested trial during which the whole factual matrix behind Ms Inston’s acquisition of B Street is canvassed especially –
a)the source of the sum allegedly paid by her of $238,000;
b)the ability of Ms Inston to service an indebtedness of $1m to C Limited and her ability to service monthly mortgage repayments of $5,204.43;
c)the loan advanced by Mr Winsor of $339,836; and
d)the unsecured loan of $890,000 from H Pty Ltd.
Fourth, the trustees possess certain coercive powers under the Bankruptcy Act which will be lost if their appointment is terminated.
In my view the wife’s interim application for the grant of orders under s 106B for the setting aside of the bankrupt’s bankruptcy must be dismissed. If she chooses to include in her statement of claim a contention that such orders should be made following the trial of this proceeding, then I will deal with the application at trial.
Examination
The wife sought orders for the examination of the bankrupt, Mr Winsor and Ms Inston. She did not identify the source of power to make such an order. After inviting her legal representatives to identify the source of power for the making of such an order, they submitted as follows –
1.The factual basis for the orders sought is that:
a.the Husband has filed an Affidavit and Financial Statement on 6 August 2020, after he filed his own petition for bankruptcy within the week after being served with the Wife’s Initiating Application filed 14 July 2020.
b.the Wife has, by the submissions filed 25 June 2021, set out a set of serious and cogent concerns as to the veracity of the information provided by the Husband. It can be assumed from the approach of the Trustee in Bankruptcy’s submissions that these concerns are not fanciful.
2.An order for the oral examination of the Husband does nothing more than require him to be available to answer questions about documents which he has sworn in the proceeding.
3.There is no formal provision in the Rules for such a process. Neither is there any formal provision which states that a deponent of any affidavit is to be available for cross-examination (rule 15.14 being the closest).
4.The power to order a party who has sworn an affidavit to be crossexamined is properly seen as an implied power of the Court (what was formerly referred to as its inherent jurisdiction to control its own processes). The Court has the power to make any order which enables it to discharge its functions as a Court.
5.Such proposition was clearly established by the plurality of the High Court in DJL v Central Authority [2000] HCA 17 per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ as follows (footnotes omitted):
[24]Section 21(1) of the Family Law Act provides that a court "to be known as the [Family Court] is created" by that statute. Original jurisdiction is conferred on the Family Court by s 31 and appellate jurisdiction by s 93A(1). Jurisdiction is also conferred by other statutes, including the Child Support Act (ss 101, 102, 105), the Bankruptcy Act 1966 (Cth) (s 35A), and the Trade Practices Act 1974 (Cth) (s 86B).
[25]The Family Court is thus not a common law court as were the three common law courts at Westminster. Accordingly, it is "unable to draw upon the well of undefined powers" which were available to those courts as part of their "inherent jurisdiction". The Family Court is a statutory court, being a federal court created by the Parliament within the meaning of s71 of the Constitution. A court exercising jurisdiction or powers conferred by statute "has powers expressly or by implication conferred by the legislation which governs it" and "[t]his is a matter of statutory construction"; it also has "in addition such powers as are incidental and necessary to the exercise of the jurisdiction or the powers so conferred". It would be inaccurate to use the term "inherent jurisdiction" here and the term should be avoided as an identification of the incidental and necessary power of a statutory court.
The wife’s solicitors made submissions about the power of this court to require a deponent to be cross-examined on an affidavit he or she has made. That much is true. That power is regularly exercised in the context of a trial. I examined the power in detail in Goodridge & Beadle.[5] However, the wife’s legal representatives were unable to point to a section of the Family Law Act, a rule under the Family Law Rules or a regulation under the Family Law Regulations pursuant to which I had power to require an interlocutory examination of a deponent of an affidavit. Even in a contested interlocutory injunction application it is most unusual for a deponent to be cross-examined.
[5] (2017) 57 Fam LR 425.
There being no foundation for the applications in paragraph 1, 2 and 3 of the wife’s application in a case, I dismiss those paragraphs.
Of course, my observations about examining the bankrupt, Mr Winsor and Ms Inston pursuant to family law legislation or subordinate legislation have no bearing on any application the trustees may make under the Bankruptcy Act.
Orders
The formal orders I make appear earlier in these reasons. I otherwise adjourn the further hearing of this proceeding to 8 September 2021 at 10am.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Wilson delivered on 6 July 2021.
Associate:
Date: 6 July 2021
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