Re Frank Joseph Lamacchia, Bankrupt [1995] FCA 756

FEDERAL COURT OF AUSTRALIA ) BANKRUPTCY DISTRICT OF ) NEW SOUTH WALES ) No QB 825 of 1994 BANKRUPTCY DIVISION ) RE: FRANK JOSEPH LAMACCHIA Bankrupt CORAM: SACKVILLE J. PLACE: SYDNEY DATE: 12 SEPTEMBER 1995 REASONS FOR JUDGMENT There are two matters before the Court. The first is an application filed on 17 July 1995 on behalf of the bankrupt's wife, Jane Mary Lamacchia. Ms Lamacchia seeks an order that a notice under s.139ZQ of the Bankruptcy Act 1966 (Cth) ("the Act"), issued by Michael Patrick Johnson to her on 9 December 1994, be set aside. Consequential orders are also sought in the application. The reference to the notice under s.139ZQ is to the notice that appears as annexure A to the affidavit of Ms Lamacchia, sworn 11 July 1995. The substance of that notice is as follows: "I consider that the transaction whereby the bankrupt transferred the property [at 39 Barton Avenue, Haberfield] to you under a transfer is void by reason of the following facts and circumstances: 1.The bankrupt became bankrupt on 27 April 1994 on the application of Keith Oliver Bellette and Pina Bellette. Mark Trevor Manteit was appointed Trustee in Bankruptcy. The act of bankruptcy occurred on 17 February 1994. 2.The bankrupt was previously the joint proprietor of the property free from encumbrances and mortgages. 3.In the bankrupt's Statement of Affairs at paragraph 21 he indicates that he had difficulty paying his debts in March 1992. From March 1992 to 10 June 1993, you lived with the bankrupt, he being the provider and you being the homemaker. During that time you were husband and wife. 4.By Order of the Family Court made on the application of the bankrupt on 10 June 1993, the bankrupt agreed to transfer his right, title and interest in the property to you for no consideration. In the application in support of property settlement the bankrupt failed to disclose the debts owed by him, legal proceedings instituted by creditors against him, and under estimated the value of the property. The bankrupt's interest in the property was disclosed as being valued at $140,000. 5.At the date of making the Order for transfer of the bankrupt's interest in the property to you the property was in fact valued at $484,000. 6.On or about 21 January 1992 a debt was incurred by the bankrupt with Keith Oliver Bellette and Pina Bellette and on 22 September 1993 judgment was entered against the bankrupt in the amount of $52,659.75. 7.No evidence has been provided to the Trustee in Bankruptcy that the actual value of the property was $140,000 and that the debts of the bankrupt were disclosed to the Family Court. 8.No evidence has been provided to the Trustee in Bankruptcy, after enquiry by him, as to any consideration passing between you and the bankrupt for the transfer by the bankrupt to you of his half share in the property or that matters in your knowledge were properly put before the Family Court. 9.The bankrupt was in financial difficulties in March 1992 and at that time you were living with him as his wife and that information would have been within your knowledge. 10.No consideration has been given by you to the bankrupt for the transfer of his interest in the property. 11.You were [aware] or ought to have known of the proceedings against the bankrupt. 12.At the date the Family Court order was made you and the bankrupt were still living at the property. 13.The transfer of the property is void against the Trustee in Bankruptcy as Trustee of the Estate of the bankrupt as a settlement in terms of Section 120(1) of the Bankruptcy Act, 1966. 14.The transfer of the property is also void as against the Trustee in Bankruptcy as Trustee of the Estate of the bankrupt in terms of Section 121(1) of the Bankruptcy Act, 1966. 15.Payment is required to be made 14 days after service of this Notice upon you, either by cash or by bank cheque made payable to the Trustee in Bankruptcy. Alternatively, this notice shall be taken to be complied with if half of the interest in the property being Folio Identifier 51/3855 together with all improvements erected thereon is transferred by registered transfer to the Trustee in Bankruptcy." The second application is made on behalf of the Trustee of the bankrupt estate of Frank Joseph Lamacchia. The Trustee seeks, inter alia, a declaration that the disposition of the bankrupt's interest in the property at Haberfield, which is the same property referred to in the s.139ZQ notice, is void as against him, pursuant to s.120 of the Act. Mr Johnson, who appears on behalf of the Trustee, seeks an order that both matters be referred to the Family Court of Australia pursuant to s.35 of the Act. There is no dispute that s.35 empowers the Court to make such an order. Mr Aldridge, on behalf of Ms Lamacchia, asks the Court to determine what, in substance, is a preliminary question of law arising out of Ms Lamacchia's application to set aside the notice under s.139ZQ of the Act. Mr Aldridge's preliminary contention is that the notice is invalid, because it cannot operate while a valid order of the Family Court remains in force which has not been set aside. Mr Aldridge accepts that other issues may arise on the application to set aside the notice that will require the determination of some issues of fact. I have been informed that an application has been filed by the Trustee in the Family Court. That application is to set aside the orders that were made by the Family Court in respect of the property at Haberfield. As I follow the application to the Family Court, it is based upon the contention that the orders were sought and obtained by the bankrupt and Ms Lamacchia as a means of avoiding or evading the application of the consequences of bankruptcy. It will clearly be necessary for the Family Court to deal with a number of factual issues relating to that transaction. If the preliminary point of law referred to by Mr Aldridge is not resolved in his favour, those factual issues are likely to be relevant to the application to set aside the notice under s.139ZQ of the Act. In the circumstances it seems to me that the appropriate course is for both applications to be referred to the Family Court. It may be that the Family Court will resolve the matters on the facts. If so, it will be unnecessary to deal with the so-called preliminary issue of law identified by Mr Aldridge. The Family Court, on the other hand, may take the view that it will dispose of that issue along with the others that arise in the proceedings. In any event it seems to me that the more convenient course is for all these matters to travel together. This will allow for a more orderly and expeditious determination of the questions that arise. I should add that I have been informed that the Trustee has given an undertaking not to act upon the notice issued until the determination of the proceedings in the Family Court. Mr Aldridge did not suggest that this undertaking was insufficient to protect his client's position pending the resolution of those proceedings. Accordingly, it seems to me that the appropriate course is for both the application of the Trustee, filed 11 September 1995, and the application of Ms Lamacchia, filed 17 June 1995, in matter number QB 825 of 1994, to be transferred to the Family Court. Both matters will then be within the control of the Family Court. Should that court decide that there is some specific issue that should be ultimately determined by this Court, once the facts have been ascertained, an appropriate order could be made transferring the proceedings, in whole or in part, back to this Court. However, that will be something for the Family Court to consider in the light of the proceedings before it. Neither party disputes that I should order that the costs of the applications determined by me today should be reserved for further order of the Family Court. I certify that this and the preceding 5 pages are a true copy of the Reasons for Judgment of the Honourable Justice Sackville. Associate: Dated: 20 September, 1995 Heard:12 September, 1995 Place: Sydney Decision: 12 September, 1995 Appearances:Mr J. Johnson, instructed by Sally Nash & Co, Solicitors, appeared for the Trustee. Mr M.R. Aldridge, instructed by Spooner & Hall, Solicitors, appeared for Ms Lamacchia.