The situation of the bankrupt, however, is quite different. Although s 60 of the Bankruptcy Act provides that any action commenced by the bankrupt prior to the bankruptcy is stayed until the trustee elects to either prosecute or discontinue, that does not preclude the bankrupt from bringing or continuing an application under the Family Law Act for settlement of property.
It appears from what is referred to in Williams on Bankruptcy , 18th ed., p 318 as "the common law of bankruptcy" that a claim for settlement of property under the Family Law Act is not a right which vests in the Official Receiver. In Coffey v Bennett [1961] VR 264, Scholl J considered an application by a bankrupt under Pt IV of the Administration and Probate Act 1958. His Honour said in the course of his judgment (at p 266):
… in my opinion, the right to sue for maintenance out of an estate is, notwithstanding the possible implications of a New Zealand decision and New South Wales decision to which I was referred by Mr Stephen, a personal right not capable of assignment by a statutory claimant or of assignment by operation of law to his trustee in bankruptcy at any rate. No one, I venture to think, ever heard of a stranger to the testator coming to the court as an application for testator's family maintenance and suing for such as the assignee of a right vested by the Administration and Probate Act in the widow or a child of the testator, any more than anyone ever heard of an assignee of the rights of a deserted wife or child suing as such assignee for maintenance under the Maintenance Act or under the Marriage Act.
Similar considerations would apply in relation to applications for settlement of property by an undischarged bankrupt under the Family Law Act .
Section 79 of the Family Law Act empowers this Court to make orders by way of settlement of property "for the benefit of" a party to the marriage. Counsel for the wife has submitted that no order should be made in circumstances of this case as any fruits falling to the husband would pass to the Official Receiver by virtue of s 58 of the Bankruptcy Act . I reject counsel for the wife's argument. The fact of the bankruptcy is a matter for which this Court must have general regard. The fact of the bankruptcy may have importance in considering, in particular, the factors under s 75(2) of the Family Law Act as imported by s 79(4) of the Act. But it would be quite wrong for the husband to be placed in a worse position solely because of his bankruptcy, or for the wife to be placed in a better position merely because the fruits of the husband's application be applied to effect a discharge of his just debts. In the present case, the husband wishes to apply the proceeds of the application towards to bankruptcy in the hope of obtaining an early discharge. Thus an order for property settlement would be for his benefit in any event.
6 See also Audet v Audet; Official Trustee in Bankruptcy (1994) 19 Fam LR 291; O'Neill v O'Neill (1998) 23 Fam LR 326. Similar considerations apply to proceedings for de facto property adjustment under s 20. Contrary to my initial view, I do not consider that Ms Morkaya must be deemed to have abandoned her de facto property proceedings, and I cannot stay them on that basis.
7 However, the course of her prosecution of the proceedings has been tortuous. There have been repeated failures on her part to comply with directions and to have the matter ready and there is no foreseeable prospect that this will change. The proceedings have not been prosecuted with due dispatch [cf UCPR r 12.7]. Although, in accordance with the authorities to which I have referred, Ms Morkaya has standing to prosecute them, at this stage she would be doing so for the benefit of her bankrupt estate, when the trustee has elected to abandon them. As a bankrupt, she is not amenable to an adverse costs order. In my view, given her delays, defaults, and bankruptcy; the absence of benefit for Ms Morkaya personally; and that (as will appear below) Mr Parkinson will not be entitled to prosecute his cross-claim - it would be oppressive of Mr Parkinson to permit the proceedings to continue, and I propose to stay them on that ground.
8 Ms Morkaya says that she wishes to apply to set aside the bankruptcy. The proceedings before me have been adjourned on several occasions, since the sequestration order was made, to enable Ms Morkaya to make an application to that effect, but it has not yet happened. Although it seems to me that there has been ample opportunity for any such application to be made, nonetheless I will preserve the possibility that these proceedings could be resurrected by Ms Morkaya, by staying them only until further order, on the basis that if the bankruptcy is annulled, or circumstances otherwise change, then it would be open to her to apply to this Court to have the stay lifted [cf Bendigo Bank Ltd v Demaria [2001] VSC 218, [34]-[38] (McDonald J); Finikiotis v Knight Frank (SA) Pty Ltd [2001] FCA 1733 (Gray, Dowsett and Stone JJ)].
9 Mr Parkinson's cross-claim, and his claim in the corporations proceedings, are, as I have recorded, claims for damages for pecuniary loss. The debts which he claims, if established, would be provable debts in Ms Morkaya's bankruptcy. Bankruptcy Act, s 82(1), provides:
(1) All debts and liabilities present or future, certain or contingent to which a bankrupt is subject to the date of the bankruptcy or to which he or she may be become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy are provable in his or her bankruptcy.