Cunningham (Trustee) v Gapes, in the matter of Gapes

1. The applicant is entitled to summary judgment pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act).
2. Pursuant to s 31(1)(f) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act), the Money as defined in paragraph 9 of the Statement of Claim filed on 14 November 2016: (a) is property divisible among the creditors of the Bankrupt pursuant to s 116 of the Bankruptcy Act; and (b) vested in the applicant on 12 March 2014 pursuant to s 58(1)(b) of the Bankruptcy Act.
3. The respondent do all acts and things necessary to transfer the Money to the applicant forthwith.
4. The respondent pay the applicant interest on the Money pursuant to s 51A of the Federal Court Act from 13 March 2014 to the date of judgment.
5. The respondent pay the applicant's costs on a party-party basis, to be taxed if not otherwise agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background 1 Before the Court is an interlocutory application for summary judgment filed on 20 April 2017. 2 Andrew Brian Gapes (the Bankrupt) was made a bankrupt on 17 January 2011. The applicant was appointed the trustee of the Bankrupt's estate. The respondent, Antonia Gapes, is the wife of the Bankrupt. 3 On 18 December 2013, the Bankrupt's mother, Neryl Ann Gapes (the deceased) died. A grant of probate was obtained in respect of the will of the deceased on 14 February 2014. The Bankrupt was a named executor and beneficiary of that will. 4 On 12 March 2014, in accordance with the terms of the deceased's will, the proceeds of a superannuation fund of the deceased were distributed to her beneficiaries, one of whom was the Bankrupt. The Bankrupt's share, being $87,900.33 (the Money), was apparently paid directly to the respondent, because (inter alia) at the time the Bankrupt did not operate a bank account in his own name. 5 In his substantive application and statement of claim filed on 14 November 2016, the applicant claims that, pursuant to s 58(6) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act), the Money is: a. after-acquired property, as it was acquired by the Bankrupt after the date of its bankruptcy; and b. divisible amongst creditors of the bankrupt. 6 The applicant seeks the following orders: 1. Pursuant to s 31(1)(f) of the Bankruptcy Act 1966 ('the Act'), a declaration that the Money: a. is, pursuant to s 116 of the Act, property divisible among the creditors of the Bankrupt; b. pursuant to s 58(1)(b) of the Act, vested in the Applicant on 12 March 2014; 2. [not pressed] 3. An order that the Respondent do all acts and things necessary to transfer the Money to the Applicant forthwith; 4. Costs; 5. Such further or other orders as the Court sees fit. 7 In the current interlocutory application, the applicant seeks the following orders: 1. Summary judgment pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) and Rule 26.1 of the Federal Court Rules 2011 (Cth). 2. Interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth) from 13 March 2014 to the date of judgment. 3. Costs. 4. Such further or other orders as the Court sees fit. 8 The key issue before the Court at the moment is whether the trustee is entitled to summary judgment, because, on the facts, and as a matter of law, the Money is uncontrovertibly divisible property within the meaning of s 58(6) of the Bankruptcy Act. The controversy before the Court stems from the fact that the Money paid to the Bankrupt derived from Money being the proceeds of the superannuation policy of the deceased with Colonial First State. 9 In summary, the applicant submits: The Bankrupt did not have an interest in the relevant superannuation policy, his mother did; The payment to the respondent was not from a regulated superannuation fund, but was in fact a distribution from the estate of the Bankrupt's mother pursuant to the terms of her will; If the Bankrupt did have an interest in or had received a relevant payment from a superannuation fund, then this would have been evidenced by a payment directly from such a fund, but that did not occur here; The respondent's submission - that the superannuation benefit was not intermingled with any other estate funds and so that somehow maintained the nature of it when the distribution was made from the estate - is not supported by the evidence, and is in any event flawed. The intermingling of funds, as one might come across in a tracing type case, has no relevance or application here; The case of Trustees of the Property of Morris (Bankrupt) v Morris (Bankrupt) [2016] FCA 846 can be distinguished because Ms Morris, being a dependent of the deceased (her late husband), was paid the benefits directly upon the favourable exercise of the discretion of the trustees of the two superannuation funds; On the respondent's argument, a bankrupt could avoid property being made divisible to creditors provided he or she could show that its genesis was from a third party's superannuation fund, irrespective how many hands such funds passed through; The Bankrupt was a residuary beneficiary under his mother's will, and as such he merely had a right to ensure that the personal representatives complete their duties. In that capacity he had no proprietary interest in any of the assets contained in the deceased estate; and The respondent is unable to point to a factual or evidentiary dispute that would justify a trial and cannot demonstrate a triable issue constituting a defence to the applicant's claim. 10 In summary, the respondent submits: The grant of probate of the deceased's estate separately identifies funds in the amount of $248,696.49 held by the deceased in a regulated superannuation fund; The funds were received by solicitors for the estate, not intermingled with any other funds and distributed separately to the beneficiaries of the deceased's will on 12 March 2014; The Money is directly and solely attributable to the funds held by the deceased in a superannuation fund and are accordingly a payment to the Bankrupt from that fund; Payment through an administrative mechanism of a solicitor, and the estate of a deceased person, does not alter the nature of the funds as a payment to the Bankrupt from a regulated superannuation fund; The payment to the respondent represents "a payment to the bankrupt from such a regulated superannuation fund received on or after the date of the bankruptcy" within the meaning of s 116(2)(d)(iv) of the Bankruptcy Act; The Money, by legislative definition, property which is excluded from the s 116(1) definition of the Bankruptcy Act for property divisible among creditors, and therefore does not vest in the trustee; The Money was received by the respondent at a time when the respondent was unaware that the bankruptcy of the Bankrupt had been extended; The Money has since been dispersed by the respondent; The substantive application as pleaded does not establish a basis upon which the respondent can be held liable for the debts of the Bankrupt or the failure of the Bankrupt to provide funds to the trustee; and It cannot be said that the respondent has "no reasonable prospect of success" and the application for summary judgment should be dismissed.