FEDERAL COURT OF AUSTRALIA

Carter (Trustee) in the matter of Vos (Bankrupt) v Vos [1999] FCA 1703

PRACTICE AND PROCEDURE – Jurisdiction – Bankruptcy ‑ Family Court orders that money held in trust be transferred to wife ‑ Application by husband’s trustee in bankruptcy for declaration that money vested in trustee ‑ Application to transfer proceedings to Family Court ‑ Whether discretion to transfer should be exercised ‑ Likelihood of appearance of conflict between Family Court and Federal Court orders if matter not transferred ‑ Whether Family Court better equipped to determine whether wife has equitable interest in money.

Bankruptcy Act 1966 s 35A(1)

Re Sabri; Ex parte Sabri v Brien (1995) 60 FCR considered

BRUCE JAMES CARTER as Trustee for the Bankrupt Estate of JOHANNES CORNELIS VOS v ELAINE MARY VOS

S 7173 OF 1999

SUNDBERG J

29 NOVEMBER 1999

ADELAIDE

IN THE MATTER OF THE BANKRUPT ESTATE OF

JOHANNES CORNELIS VOS

THE COURT ORDERS THAT:

1.                  The proceeding in the Court numbered S7173 of 1999 be transferred to the Darwin Registry of the Family Court.

2.                  The applicant pay the respondent’s costs of the motion notice of which was filed on 25 October 1999.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE MATTER OF THE BANKRUPT ESTATE OF

JOHANNES CORNELIS VOS

REASONS FOR JUDGMENT

1                     Johannes Cornelius Vos and the respondent were husband and wife.  Since 1996 they have been involved in a property dispute in the Family Court of Australia at Darwin.  On 10 September 1998 the Family Court made orders restraining the husband from dealing with property owned by him or by companies or entities associated with him.  It appears that with the consent of the Family Court two properties of which the husband was registered proprietor were sold.  It was a condition of the sale that the proceeds were deposited in the trust account of De Silva Hebron, the wife’s solicitors in the Family Court proceedings.  The properties were 23/40 Cullen Bay, Darwin and Lot 5816 Cullen Bay, Darwin.  The amount referable to the first property is approximately $90,757 and that referable to the second is $172,883.

2                     On 17 August 1999 the Family Court made orders which included the following:

“1.       That the husband pay the wife, or as she shall in writing direct, by 4 pm on 29 October 1999 the sum of $823,038.

2.                  That in the event that the husband fails to comply with order 1 hereof then the husband pay to the wife interest on so much as is outstanding to the wife in accordance with order 1 hereof, from time to time, at the rate specified in the Family Law Rules

3.                  That in order to partially satisfy his obligations pursuant to order 1 hereof the husband do all acts and things and sign all documents and writings necessary to assign to the wife all of the money held in trust being the balance of the proceeds of sale of 23/40 Cullen Point ($172,883).

4.                  That in the event that the husband fails to comply with order 1 hereof then in order to further partially satisfy his obligations pursuant to order 1 hereof the husband do all acts and things and sign all documents and writings necessary to transfer to the wife all of the husband’s right title and interest in unit 1, 4 Shepherd Street, Darwin (value $315,000) free of all encumbrances.”

There appears to be some confusion as to the amount of the proceeds of sale of 23/40 Cullen Point and Lot 5816.  The applicant’s evidence is as I have set it out in paragraph 1.  According to O’Ryan J, who has control of the Family Court proceedings, the $172,883 is referable to 23/40 Cullen Point.  For present purposes nothing turns on who is correct.

3                     On 6 September 1999 the applicant was appointed trustee of the husband’s bankrupt estate.  By application made 22 September 1999 the applicant sought in the Federal Court a declaration that the amount held in the solicitors’ trust account, representing the proceeds of sale of the two properties, vested in him by force of s 58 of the Bankruptcy Act 1966 (“the Act”) and forms part of the divisible property of the bankrupt, and an order that the wife direct her solicitors to pay the money to the applicant.  The bankrupt had not, prior to 6 September, complied with the Family Court’s orders.  The applicant also sought a declaration that unit 1, 4 Shepherd Street, Darwin vested in him by force of s 58 and forms part of the divisible property of the bankrupt.

4                     On 25 October 1999 the wife applied to the Federal Court for an order that the proceeding in this Court be transferred to the Family Court in Darwin.  From the affidavit of the wife’s solicitor sworn in support of the transfer application, it appears that O’Ryan J has laid down a timetable to enable all outstanding issues, including those arising from the bankruptcy, to be finalised.  His Honour made orders requiring the parties, including the applicant in this Court, to file applications, affidavits and submissions within specified times.  I have not seen a copy of this order.  The matters are to be heard on 10 December 1999.

5                     The matter before me today is the application to transfer the proceeding in this Court to the Family Court.  Section 35A(1) of the Bankruptcy Act 1966 provides that

“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.”

Sub‑section (4) provides that where a proceeding is transferred to the Family Court, that Court has jurisdiction to hear and determine the proceeding.

6                     The question is whether it is more appropriate for this dispute to be determined in this Court or in the Family Court.  In support of a transfer counsel for the wife relied on a number of decisions on s 35A, the main one being Re Sabri; Ex parte Sabri v Brien (1995) 60 FCR 131.  In that case, property was transferred from the husband to the wife pursuant to orders of the Family Court.  An application was later made in the Federal Court by the husband’s trustee in bankruptcy for orders that the wife retransfer the property to the trustee.  Davies J held that the matter should be transferred to the Family Court for two reasons.  The first was that if the Federal Court were to make orders in favour of the trustee, those orders would appear on their face to conflict with the order of the Family Court.  Such appearance of conflict should be avoided where possible, and that would be achieved by a transfer to the Family Court.  The second reason was that it was “not inconceivable” that the wife might have a claim to an equitable interest in the property which a bankruptcy court would recognise.  That was an issue with which the Family Court could readily deal.

7                     Both reasons in Sabri are in my view applicable to the present case.  I accept that there will be no actual conflict between the Courts’ orders, and that there was a greater appearance of conflict in Sabri than in this case.  But the appearance is there, because the Family Court’s order is that the husband assign to the wife the money in the trust account.  The effect of the order sought by the applicant is that that money will vest in the applicant and will not pass to the wife.  Secondly, in the Family Court proceedings the wife claims, as against the husband and the applicant, an equitable interest in the money.  This is an issue which could more easily be dealt with by the Family Court.  That Court has heard evidence in relation to the circumstances under which the properties were acquired, and has made findings on the contribution made by the wife to the accumulation of the assets of the marriage, including the properties in question.  O’Ryan J’s reasons for judgment were in the material before me.  The Family Court is therefore better equipped to hear argument and make findings as to whether the wife has an equitable interest in the money.  The case for a transfer based on the wife’s claim to an equitable interest is stronger than the comparable ground in Sabri, because in that case the wife had not in fact made a claim.  Davies J merely said it was “not inconceivable” that she might have a claim to an equitable interest.  Counsel for the applicant contended that Sabri was distinguishable because in this case the family law proceedings were, for all practical purposes, complete.  That may be so, but it appears also to have been the case in Sabri.

8                     Accordingly, the matter should be transferred to the Family Court in Darwin.  The applicant must pay the costs of the transfer motion.

Associate:

Dated:              29 November 1999