Mitchell v McGillivray

introduction 1 This is an application pursuant to s 153B of the Bankruptcy Act 1966 (Cth) ("the Act") for annulment of the bankruptcy of the first respondent which arose out of the acceptance of his own petition (by the Official Receiver) on 16 May 2000. In her principal application the applicant sought, in the alternative, an order for transfer of the application for annulment to the Family Court of Australia. She also sought interlocutory relief in the form of such a transfer order. Only the issue of such transfer is before the Court.

factual and procedural background 2 The applicant is the former wife of the first respondent. On 26 May 1995 certain consent orders were made by the Family Court of Western Australia in proceedings with respect to the property of the parties. On 11 November 1996 the applicant filed an application under s 79A of the Family Law Act 1975 (Cth) seeking orders that those consent orders be set aside, that an order for property settlement be made in lieu of those orders, and that ancillary orders including an Anton Pillar order and other injunctions be made against the first respondent and entities associated with him. There is in evidence an Anton Pillar order made by the Family Court of Western Australia on 21 November 1996. 3 Until later in these reasons (at a point which I will then identify) I will not distinguish between the Family Court of Western Australia and the Family Court of Australia. The former is a State court established by the Family Court Act 1975 (WA) and continued in existence by s 9(1) of the Family Court Act 1997 (WA). The establishment of the Family Court of Western Australia can be seen to have been anticipated by s 41 of the Family Law Act 1975 (Cth). A problem in this matter, although not an insoluble one, arises out of the fact that s 153B of the Act empowers the Federal Court to transfer the principal application to "the Family Court", but s 5(1) of the Act defines the Family Court as meaning "The Family Court of Australia". As a matter of convenience, I shall for the time being not distinguish between the two Family Courts on the assumption that if the principal application is transferred to the Family Court of Australia, it can be heard by the same judge who is hearing the matrimonial cause referred to immediately above. So far as is relevant in this matter, I think that it is reasonably clear that the Family Court of Western Australia, in hearing and determining that matrimonial cause, will be exercising federal jurisdiction conferred by s 41(3) of the Family Law Act 1975 (Cth), being jurisdiction which is relevantly co-extensive with the jurisdiction of the Family Court of Australia. 4 Section 79A of the Family Law Act confers power on the Family Court, in its discretion, to vary an order under s 79 of that Act in respect of property if the Family Court is satisfied that there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence, the giving of false evidence or any other circumstance. There are other grounds for such variation. 5 In an affidavit sworn in support of her present application, the applicant gives details of a history of many interlocutory matters within the matrimonial dispute arising out of the s 79A application. They include evidence that the first respondent, his present wife and his son were found to have committed contempt of court by not complying with certain orders made by the Family Court on 8 September 1997. The first respondent was sentenced to four months imprisonment and the other two persons were sentenced to three months imprisonment. They have served those sentences. The contempt of court arose out of particular transactions which they caused to be carried out by a company called Fauna Holdings Pty Ltd, which is the trustee of a trust known as the Preservation Trust. According to the first respondent's statement of affairs, filed with his petition, he (or a member of his family) has or had an interest in that trust in the 5 years preceding presentation of his petition. The orders made on 8 September 1997 included an injunction restraining Fauna Holdings Pty Ltd from dealing with its assets. 6 On 27 January 1999 the Family Court made provision for the distribution of the proceeds of the sale of a property in Mosman Park which was the only asset of Fauna Holdings Pty Ltd that had not been disposed of. On 1 May 2000 the directors of Fauna Holdings Pty Ltd (the first respondent's present wife and his son) placed Fauna Holdings Pty Ltd into voluntary administration. 7 It is clear from the evidence before the Court that there has been a long history of interlocutory disputes in the litigation between the parties in the Family Court. 8 The applicant swears that the first respondent has at all times made it clear to her that he will do anything to ensure that she does not receive a financial settlement from him. On a prima facie basis, there appears to be some evidence to support an inference that that is the first respondent's intention. 9 On 15 May 2000 the applicant filed an application in the Family Court seeking an interim order restraining the first respondent from filing a debtor's petition in bankruptcy. Notice of that proposed application had been given to the first respondent's then solicitors on 12 May 2000. The application was listed for hearing by the Family Court on 19 May 2000. On 16 May 2000 the first respondent presented the debtor's petition referred to above. 10 The first respondent opposes the transfer to the Family Court of the application for annulment of his bankruptcy. The position of second respondent, the Official Trustee in Bankruptcy, is that he neither consents to nor opposes such a transfer. The second respondent has, through his solicitors, filed a helpful outline of submissions which draws attention to two of the relevant authorities. 11 The applicant and the first respondent have each filed a detailed outline of submissions. I have read those respective submissions and have taken into account those which I consider to be relevant to the question of transfer of this application to the Family Court. I do not propose to summarise the various submissions, but I shall refer to them where appropriate. 12 The first respondent, in his written submissions, contends that the applicant's claim in the Family Court proceedings is at best contingent and he makes various submissions about those proceedings. I think that it is sufficient for me to note that the applicant has a substantive application before the Family Court which has yet to be heard. 13 Next the first respondent makes certain submissions about whether the Family Court would have power to annul the bankruptcy and whether the applicant has standing to bring this application for annulment. In my view, it is quite clear from s 35A of the Act that the Family Court has, relevantly, as much jurisdiction and power as the Federal Court to grant an annulment, under s 153B of the Act, of the first respondent's bankruptcy. If the principal application is transferred to the Family Court, then it will be for that court to deal with the merits which the first respondent seeks to raise on this transfer application. That will include the question of the applicant's standing. I note that the evidence suggests that the applicant is a creditor of the first respondent in respect of costs which have been ordered in her favour against him. I turn to the matters which usually guide the exercise of the discretion to transfer a matter such as this to the Family Court. 14 Various authorities have been cited by the parties. One which I have found most helpful in the disposition of this matter is that of Lindgren J in Re Sharpe (unreported, Federal Court of Australia, 17 October 1996). At p 19 of his Honour's reasons there appears the following passage: "At the end of the day, considerations of efficiency and economy of judicial administration persuade me that the case is an appropriate one for transfer. There remain to be determined in the Family Court issues touching the nature and extent of the assets and liabilities, income and expenditure of the Husband. These issues are directly relevant to the first matter to be determined in the present proceeding, namely, whether the debtor's petition ought not to have been presented or ought not to have been accepted by the Registrar. While the issues remaining to be determined in the Family Court proceeding may not be identical with those which will arise in this proceeding, there will be substantial overlap." 15 In my view, the question of whether the bankruptcy of the first respondent should be annulled will probably in large measure turn upon his financial position as at the date when he presented his petition. The disposition of the application under s 79A will probably involve the Family Court considering the first respondent's financial history over a period stretching back as far as 1995 when the consent orders were made. This will probably include an assessment of his financial position when he filed his petition. I think that it would be undesirable for two courts to be engaged in a substantial part of that exercise. Furthermore, as Whitlam J noted in Re Maas; Ex parte Maas (unreported, Federal Court of Australia, 17 July 1997), there is the advantage of one court controlling the use which may be made in one set of proceedings of information or documents that are required to be disclosed in another set of proceedings. On a prima facie basis, it seems that the first respondent's financial affairs are and have been intertwined with various other entities and persons. The applicant maintains that the first respondent was not insolvent when he presented his petition and that he has misstated his financial position in his statement of affairs. The first respondent disputes this. It is likely that discovery of documents will loom large in both applications. 16 The applicant's undisputed submission is that proceedings in the Supreme Court of Western Australia involving the administration of Fauna Holdings Pty Ltd have been transferred from the Supreme Court to the Family Court, on the basis that the two sets of proceedings overlap and that the Family Court is the appropriate forum. The applicant alleges that Fauna Holdings Pty Ltd is the alter ego of the first respondent. I think that the interrelationship between the affairs of the first respondent and those of Fauna Holdings Pty Ltd, and the fact that those two sets of proceedings are to be heard together in the Family Court weigh against the principal application in this matter being heard in this Court. 17 I note that the creditors of the first respondent have been served with these proceedings, and that none has chosen to appear and oppose the application for transfer. 18 Given the evidentiary overlap referred to earlier in these reasons, and giving due weight to considerations of efficiency and economy of judicial administration, I consider that it is more appropriate and otherwise in the interests of justice for this application to be transferred to the Family Court. 19 I now return to the matter referred to in para 3 above, namely, whether the fact that the Family Court of Australia and the Family Court of Western Australia are different courts should, in the exercise of my discretion, cause me not to make such a transfer order. I do not think so. I take judicial notice of the fact that all of the judges of the Family Court of Western Australia are also judges of the Family Court of Australia. In those circumstances, I can see no reason why the one judge (if he or she saw fit) should not hear all of the evidence and in doing so simultaneously exercise the jurisdiction of both courts. The respective decisions and orders might then be made separately in the exercise of the relevant, but separately-conferred, federal jurisdiction. Alternatively, the Family Court of Australia, once this matter is transferred to it, might transfer it to the Family Court of Western Australia under s 5(4) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) if it saw fit. The definition of "the Supreme Court of a State" in that subsection includes a State Family Court - see s 3(2). 20 In any event I am satisfied that if I make the transfer order there is a very strong probability that the proceedings so transferred will be heard and determined by the judge who hears the matrimonial cause to which the applicant and the first respondent are parties. 21 I propose to make orders as follows: 1. The proceedings commenced by the application filed on behalf of the above-mentioned applicant on 1 December 2000 in application W7099 of 2000 be transferred to the Family Court of Australia pursuant to s 35A(1) of the Bankruptcy Act 1966 (Cth). 2. The costs of the application to transfer be costs in the cause of the proceedings transferred. 3. Any costs which have been reserved in the proceedings be reserved to the Judge dealing with the matter in the Family Court of Australia.