Horne (Trustee), in the matter of Tebb (Bankrupt) v Tebb

REASONS FOR JUDGMENT 1 This is an interlocutory application brought by the first respondent ("Mrs Tebb") seeking an order under s 35A of the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act") that the proceeding be transferred to the Family Court of Australia. The application was heard today in conjunction with a first directions hearing. There is a proceeding issued by Mrs Tebb in the Family Court ("the Family Court proceeding"). The order sought by Mrs Tebb is designed to facilitate this proceeding being heard and determined by the Family Court together with the Family Court proceeding. 2 I will commence by explaining the nature of this proceeding and that in the Family Court. 3 On 16 February 2011, a sequestration order was made against the estate of Mrs Tebb's husband, Robert Tebb. The applicants ("the Trustees") became the trustees of Mr Tebb's bankrupt estate. The second respondent is the Registrar General for New South Wales, exercising powers under the Real Property Act 1900 (NSW) and joined solely for the purpose of facilitating those orders sought by the Trustees dealing with the transfer of real property. The second respondent did not appear, however material before me indicates the second respondent's general intention to not appear and to submit to any order the Court may make. 4 The Trustees' application filed in this proceeding seeks various orders and declarations with respect to the property of Mr Tebb. The relief sought falls into two categories. First, declarations and orders specifying that particular property has vested in the Trustees by relation back or under the avoidance provisions of the Bankruptcy Act ("the primary relief"). Second, relief to give effect to any declarations made, including orders to effectuate the transfer of property to the Trustees and orders directed to facilitate the sale of property by the Trustees ("the secondary relief"). 5 As part of the primary relief sought by the Trustees, issues arise as to whether Mr and Mrs Tebb were parties to a partnership and, if so, the property of that partnership and the extent of Mrs Tebb's beneficial interest in such property. The alleged partnership property includes properties in New South Wales as follows: a property on the Princes Highway, Nowra ("the Princes Highway property"); a property in Norfolk Avenue, South Nowra ("the Norfolk Avenue property"); a property in Lidco Street, Arndell Park ("the Lidco Street property"); and a property in Frost Street, Campbelltown ("the Frost Street property"). 6 The Trustees also relevantly seek a declaration that a property in Georges River Road, Kentlyn ("the Kentlyn property"), has vested in the Trustees. The Kentlyn property was the matrimonial home of Mr and Mrs Tebb until their separation. Mr and Mrs Tebb were first separated in October 2009. After a short reconciliation, they separated again in July 2011. Mrs Tebb resides at the Kentlyn property with her three children. 7 The Family Court proceeding was issued on 7 May 2013 and is currently pending in the New South Wales Registry of that court. That proceeding is listed on 9 July 2013 for what I would presume to be a preliminary hearing. 8 In the Family Court proceeding, Mrs Tebb seeks financial or property orders against the Trustees. The orders sought include orders made pursuant to s 79(1) of the Family Law Act 1975 (Cth) ("the Family Law Act"). That provision states: (1) In property settlement proceedings, the court may make such order as it considers appropriate: (a) in the case of proceedings with respect to the property of the parties to the marriage or either of them--altering the interests of the parties to the marriage in the property; or (b) in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the marriage--altering the interests of the bankruptcy trustee in the vested bankruptcy property; including: (c) an order for a settlement of property in substitution for any interest in the property; and (d) an order requiring: (i) either or both of the parties to the marriage; or (ii) the relevant bankruptcy trustee (if any); to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines. 9 Section 79(1) orders are sought by Mrs Tebb that each of the following properties are wholly owned by her: the Lidco Street property; the Frost Street property; and the Kentlyn property. Additionally, Mrs Tebb seeks orders that the Norfolk Avenue and Princes Highway properties be sold. 10 She also seeks an order from the Family Court under ss 30 and 104 of the Bankruptcy Act for the review of the Trustees' decision to reject a proof of debt provided by her. The proof of debt is said to relate to contributions made by Mrs Tebb to the alleged partnership. 11 The Court is empowered by s 35A(1) of the Bankruptcy Act to transfer a bankruptcy proceeding pending in this Court to the Family Court. Mrs Tebb pressed her application for transfer by reference to that provision. Section 35A also empowers the Family Court to deal with the proceeding transferred to it. Section 35A provides as follows: (1) Subject to subsection (2), where a proceeding is pending in the Federal Court, the Federal Court may, on the application of a party to the proceeding or of its own motion, transfer the proceeding to the Family Court. (2) A proceeding that is pending in the Federal Court at the commencement of this section shall not be transferred to the Family Court unless the parties to the proceeding consent to the transfer. (2A) If a proceeding is pending in the Federal Circuit Court, the Federal Circuit Court may, on the application of a party to the proceeding or on its own initiative, transfer the proceeding to the Family Court. (3) Subject to subsection (4), where a proceeding is transferred to the Family Court: (a) the Family Court has jurisdiction to hear and determine the proceeding; (b) the Family Court also has jurisdiction to hear and determine matters not otherwise within its jurisdiction (whether by virtue of paragraph (a) or otherwise): (i) that are associated with matters arising in the proceeding; or (ii) that, apart from subsection 32(1) of the Federal Court of Australia Act 1976, the Federal Court would have had jurisdiction to hear and determine in the proceeding; (c) the Family Court may, in and in relation to the proceeding: (i) grant such remedies; (ii) make orders of such kinds; and (iii) issue, and direct the issue of, writs of such kinds; as the Federal Court could have granted, made, issued or directed the issue of, as the case may be, in and in relation to the proceeding; (d) remedies, orders and writs granted, made or issued by the Family Court in and in relation to the proceeding have effect, and may be enforced by the Family Court, as if they had been granted, made or issued by the Federal Court; (e) appeals lie from judgments of the Family Court given in and in relation to the proceeding as if the judgments were judgments of the Federal Court constituted by a single Judge, and do not otherwise lie; and (f) subject to paragraphs (a) to (e) (inclusive), this Act, the Federal Court of Australia Act 1976 , and other laws of the Commonwealth, apply in and in relation to the proceeding as if: (i) a reference to the Federal Court (other than in the expression "the Court or a Judge") included a reference to the Family Court; (ii) a reference to a Judge of the Federal Court (other than in the expression "the Court or a Judge") included a reference to a Family Court Judge; (iii) a reference to the expression "the Court or a Judge" when used in relation to the Federal Court included a reference to a Family Court Judge sitting in Chambers; (iv) a reference to a Registrar included a reference to a Registrar of the Family Court; and (v) any other necessary changes were made. Note: Rules of Court made under the Family Law Act 1975 (rather than Rules of Court made under the Federal Court of Australia Act 1976 ) apply in relation to proceedings transferred to the Family Court under this section. (4) Where any difficulty arises in the application of paragraphs (3)(c), (d) and (f) in or in relation to a particular proceeding, the Family Court may, on the application of a party to the proceeding or of its own motion, give such directions, and make such orders, as it considers appropriate to resolve the difficulty. (5) An appeal does not lie from a decision of the Federal Court or the Federal Circuit Court in relation to the transfer of a proceeding under this Act to the Family Court. 12 Mrs Tebb contended that this proceeding and the Family Court proceeding relate to substantially the same assets and would require the determination of many of the same issues. Whilst the Federal Court can determine the Trustees' claims and, thus, the extent to which disputed property has vested in the Trustees, it is only the Family Court that can determine whether and to what extent the Trustees' interests in any vested bankruptcy property should be altered pursuant to the power given to the Family Court by s 79(1) of the Family Law Act. 13 Mrs Tebb therefore contended that, to avoid the inefficiencies and additional costs caused by an overlap of litigation between the same parties and the potential for the appearance of conflict as between any orders made by this Court and those of the Family Court, this proceeding should be transferred to the Family Court, which is the only court that can deal with all of the relief sought by both the Trustees and Mrs Tebb. 14 Mrs Tebb's submissions were based upon the presumption that if this proceeding is transferred to the Family Court, it will be treated by that court as a related proceeding to the Family Court proceeding and dealt with in a coordinated manner, which efficiently resolves both proceedings. I accept that such a presumption is a fair basis upon which I should consider this application. 15 The factors relied upon by Mrs Tebb are supported by various observations made in similar circumstances by other judges of this Court: see Combis v Jensen (No 2) (2009) 181 FCR 178 at [58], [60] and [64] (Collier J); and see Beaman v Bond [2013] FCA 534 at [27] and [31] (McKerracher J). 16 I agree that the issues of efficiency, economy and comity raised by Mrs Tebb are persuasive factors which support the grant of her application. To some extent, the Trustees recognised the force of those arguments and contended that the application for transfer should be adjourned rather than dismissed. The Trustees contended that this Court should hear and determine the primary relief sought by them and that once that was done, the proceeding could be transferred to the Family Court so that the secondary or consequential relief sought by the Trustees could be dealt with in tandem with the relief sought by Mrs Tebb in the Family Court. 17 The Trustees contended that dividing the matter in that way would allow this Court to identify the interests of the Trustees in the disputed property. Upon that platform, the consequential orders, including any adjustment to the interests of the Trustees which may be made pursuant to s 79 of the Family Law Act, could be made by the Family Court. 18 Although the case put by the Trustees has some initial attraction, I am not persuaded that the approach suggested overcomes the duplication of effort and the other inefficiencies which a transfer of the proceeding should avoid. 19 I accept that the starting point for both this Court and the Family Court, under s 79(1) of the Family Law Act, is the identification of the existing legal and equitable interests of the parties in the disputed property: see Sebastian v Sebastian (No 5) [2013] FamCA 191 at [140]-[144] (Young J). However, the evidence necessary for the determination of the existing interests of the parties to the disputed properties is also likely to be relevant to issues which may arise in relation to whether those interests should be adjusted under s 79(1) of the Family Law Act. Whilst the determination of the identification of the interests and any adjustment of them may each be dealt with as separate questions, there will likely be, as the Trustees acknowledged, an overlap in the evidence relied upon in support of each question. It is preferable, in my view, that any such overlap be avoided and particularly so where that would involve the duplication of evidence in two different courts. 20 Unlike the circumstances considered by Besanko J in Macks v Edge (2006) 156 FCR 302 at [42], the proceeding in this Court is not advanced and there is no capacity for the proceeding in this Court to dispose of the need for the proceeding in the Family Court to be pursued. 21 Having taken into account each of the considerations relied upon by the Trustees, in my view, the relevant considerations favour the grant of Mrs Tebb's application. Paramount amongst those considerations is the capacity of the Family Court to resolve all claims for relief and, in doing so, exercise case management powers which will permit the efficient disposition of related issues. 22 Mrs Tebb seeks an order that, on being transferred to the Family Court, this proceeding be heard together with the Family Court proceeding. I am not prepared to supplement the order for transfer with such an order. While such a course may be sensible, that is a matter for the Family Court, not this Court. 23 In the light of my conclusions, I will make orders that: