Melnik v Melnik [2005] FCAFC 160 (16 August 2005)

Last Updated: 16 August 2005

FEDERAL COURT OF AUSTRALIA

Melnik v Melnik [2005] FCAFC 160

BANKRUPTCY – orders made against husband in Family Court – husband became bankrupt on own petition without satisfying orders – wife commenced contravention proceedings in respect of the orders – whether such proceedings were ‘in respect of a provable debt’ and therefore contrary, without leave, to s58(3) of the Bankruptcy Act 1966 (Cth) - whether such proceedings were ‘in respect of the non-payment of a provable debt’, or ‘in consequence of his failure to comply with an order ... for the payment of a provable debt’, and therefore liable to be stayed pursuant to s 60(1)(b) of that Act


Family Law Act 1975 (Cth) s 112AD(1)
Bankruptcy Act 1966 (Cth) s 27, s 58(3), s 60(1)



Storey v Lane [1981] HCA 47; (1981) 147 CLR 549 applied
Re Sutherland-Cropper (1985) 11 FCR 156 discussed
Re McMaster; Ex parte Mc Master [1991] FCA 598; (1991) 105 ALR 156 discussed
Tarea Management (North Shore) Pty Ltd (in liq) v Glass (1991) 99 ALR 549 discussed
In the marriage of Moncada, G.M. and Moncada, R. (1984) FLC 91-524 discussed








JOSEPH MORRIS MELNIK v AMANDA CATHERINE MELNIK

No QUD 209 of 2004



SPENDER, HILL and FINN JJ
16 AUGUST 2005
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD 209 OF 2004

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	JOSEPH MORRIS MELNIK APPELLANT
AND:	AMANDA CATHERINE MELNIK RESPONDENT
JUDGES:	SPENDER, HILL and FINN JJ
DATE OF ORDER:	16 AUGUST 2005
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The time within which to seek leave to appeal the orders of Federal Magistrate Baumann of 3 February 2004 be extended to 20 October 2004, and the applicant have leave to appeal those orders.

2.	The orders of Federal Magistrate Baumann made on 3 February 2004 be set aside.
3.	Any legal process which would or may have the effect or purpose of committing the appellant to imprisonment under the order of the Carmody J in the Family Court of Australia of 21 October 2004, including the issue of any warrant of commitment thereunder, be stayed.
4.	The respondent pay the appellant’s costs of this application, to be taxed if not agreed.

THE COURT DECLARES THAT:

1. It was not competent for the respondent to commence contravention proceedings in the Family Court of Australia on 26 August 2003 in respect of the non-payment of $79,000 ordered to be paid by Jerrard J on 23 August 2000, nor to take the further steps taken by her in those proceedings.

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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD 209 OF 2004

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	JOSEPH MORRIS MELNIK APPELLANT
AND:	AMANDA CATHERINE MELNIK RESPONDENT

JUDGES:	SPENDER, HILL and FINN JJ
DATE:	16 AUGUST 2005
PLACE:	BRISBANE

REASONS FOR JUDGMENT

THE COURT:

1 This application is a small part of what has been described as ‘a long-running and acrimonious property dispute’ in the Family Court of Australia, between Joseph Melnik ("the applicant") and Amanda Melnik ("the respondent"), who are former spouses. The central question concerns the interaction of s 58(3) and s 60(1) of the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act") on proceedings brought in the Family Court under s 112AD of the Family Law Act 1975 (Cth) ("the Family Law Act"), in respect of sums ordered to be paid by the applicant in proceedings in that Court to the respondent.

2 On 23 August 2000 Jerrard J in the Family Court made a number of orders directed to the applicant, including:

‘2. That the HUSBAND pay the WIFE the sum of $79,000.00 within 2 months of the date of publication of this judgment.’

3 Jerrard J found that the applicant was a beneficial owner of a half share in an apartment in Tel Aviv and was the equitable owner of a fund of about $145,000 which he had transferred to Israel in his mother’s name in 1999 after the settlement of the sale of the former matrimonial home. Jerrard J said:

‘The sum Mr Melnik will be ordered to pay to his wife will be the total of:

• $56,000.00
• (Arrears of spousal maintenance) $13,900.00
• (Assessed, ordered costs) $ 9,000.00

$78,900.00
________
I will round this off to $79,000.00.’

4 The applicant has failed to comply with that order.

5 The applicant presented his own petition for bankruptcy on 13 February 2001. On 26 August 2003 the respondent filed contravention proceedings pursuant to s 112AD of the Family Law Act in the Family Court, alleging, amongst other things,

‘... 2. That the Respondent deliberately and intentionally did not pay the Wife the sum of $79,000.00 within two (2) months of 23 August 2000 pursuant to Order 2 of the Orders made 23 August 2000.’

6 On 8 December 2003 the applicant filed an application in the Federal Magistrates Court which sought to enjoin the respondent from pursuing that application in the Family Court. That application was dismissed, with costs, by Federal Magistrate Baumann on 3 February 2004, who on that day pronounced his orders. It appears that His Honour gave reasons ex tempore and, on 12 November 2004, published those reasons for dismissing the applicant’s application to the Federal Magistrates Court in writing.

7 On 15 September 2004 Carmody J, in the Family Court, found that the applicant had contravened a final s 79 order for the payment of money, and adjourned the penalty for that non-compliance and the question of the penalty for that non-compliance until 21 October 2004. Carmody J ordered:

‘... 4. Upon my finding that the RESPONDENT contravened par (2) of the Order of Justice Jerrard made in this Court on 23 August 2000 without reasonable excuse as alleged in paragraph 2 of the Form 48 filed by the APPLICANT on 27 August 2003, the question of the RESPONDENT’s penalty for such contravention be adjourned 21 October 2004 at 2.15 pm.’ (Original emphasis.)

8 On 20 October 2004, the applicant filed this application seeking to challenge the orders of Federal Magistrate Baumann of 3 February 2004, which was some seven and a half months after judgment, but a little more than three weeks before the Federal Magistrate published his written reasons for judgment.

9 On 21 October 2004, Carmody J ordered the applicant be sentenced to three months imprisonment for contravention of the payment order, but ordered that the issue of a warrant of commitment be stayed, pending the determination of the applicant’s application to the Federal Court of Australia for leave to appeal the decision of Federal Magistrate Baumann made on 3 February 2004 and, if successful, the determination of that appeal.

10 The proceedings before this Court are, as it turns out, an application for an extension of time within which to seek leave to appeal from the judgment of Federal Magistrate Baumann on 3 February 2004, dismissing the application by Mr Melnik filed on 8 December 2003, and ordering him to pay the costs of the application.

11 The application filed in the Federal Magistrates Court on 8 December 2003 sought final orders as follows:

‘1. An order restraining Amanda Catherine Melnik from pursuing her further amended application filed in the Family Court of Australia at Brisbane on the 10^th October, 2003 seeking to have the Applicant dealt with for contempt of court insofar as that application relates to non payment of a provable debt or in consequence of his refusal or failure to comply with an order of the court for the payment of a provable debt.

2. An order pursuant to s.60(1)(b) of the Bankruptcy Act 1966 restraining the Respondent from pursuing Application 1(b) in her said Amended Form 47 Application seeking to have the Applicant dealt with by the Family Court for contempt of court by allegedly putting certain property beyond the reasonable means of the Respondent to enforce financial orders made in her favour in the Family Court on the 23^rd August, 2000.

3. An order restraining Amanda Catherine Melnik from pursuing her application filed in her Further Form 48 Application for contravention orders filed on the 26^th August 2003 in the Family Court of Australia at Brisbane insofar as that application relates to alleged failure by the Applicant to pay certain monies pursuant to court orders.’

The relief claimed in pars 1 and 3 of that application are directly relevant to this present application.

12 Counsel for each party agreed in the hearing before this Court that the orders made by Federal Magistrate Baumann on 3 February 2004 were interlocutory, and therefore leave to appeal was required. Since the application to this Court was filed on 20 October 2004, some seven and a half months after judgment was pronounced, an extension of time within which to seek leave to appeal is therefore required.

13 If, contrary to the judgment of the Federal Magistrate, the respondent to this application should have been restrained from pursuing her contravention proceedings, it is clear that a substantial injustice might occur. The delay in bringing this application is in large measure explained by the decision by the applicant to seek to defend the contravention proceedings, rather than seek leave to appeal, within time, the orders of Federal Magistrate Baumann. The contravention proceedings were heard on 12, 13 and 14 July 2004.

14 It is clear, therefore, that if in fact Federal Magistrate Baumann was in error in declining to restrain the respondent from pursuing the contravention proceedings, an extension of time within which to seek leave to appeal, and leave to appeal, should be granted.

15 The central question on this application, therefore, is whether the effect of s 58(3) and s 60(1)(b) was that the contravention proceedings filed 26 August 2003 in the Family Court should not have been commenced, and should not have been continued, the applicant having presented his own petition for bankruptcy on 13 February 2001.

16 Section 112AD of the Family Law Act relevantly provides:

‘(1) If a court having jurisdiction under this Act is satisfied that a person has, without reasonable excuse, contravened an order under this Act, the court may make an order for the imposing, in respect of the person, of one or more of the sanctions available to be imposed under subsection (2), being a sanction or sanctions that the court considers to be the most appropriate in the circumstances.
...
(2) The sanctions that are available to be imposed by the court are:

(a) to require the person to enter into a bond in accordance with section 112AF; or

(b) to impose a sentence by order on the person, or make an order directed to the person, in accordance with section 112AG; or

(c) to fine the person not more than 60 penalty units; or

(d) subject to subsection (2A), to impose a sentence of imprisonment on the person in accordance with section 112AE.
...’

17 Section 58(3) of the Bankruptcy Act provides:

‘Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:

(a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or

(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.’

18 The contravention proceedings in the Family Court commenced by the respondent on 26 August 2003 are not proceedings to enforce a remedy against the person of the bankrupt in respect of a provable debt within s 58(3)(a) of the Bankruptcy Act. Imprisonment for contempt is not a "remedy" within s 58(3)(a) of the Bankruptcy Act.

19 Section 60(1) of the Bankruptcy Act provides:

‘The Court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit:

(a) discharge an order made, whether before or after the commencement of this subsection, against the person or property of the debtor under any law relating to the imprisonment of fraudulent debtors and, in a case where the debtor is imprisoned or otherwise held in custody under such a law, discharge the debtor out of custody; or

(b) stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this subsection, against the person or property of the debtor:

(i) in respect of the non-payment of a provable debt or of a pecuniary penalty payable in consequence of the non-payment of a provable debt; or
(ii) in consequence of his or her refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt;

and, in a case where the debtor is imprisoned or otherwise held in custody in consequence of the non-payment of a provable debt or of a pecuniary penalty referred to in subparagraph (i) or in consequence of his or her refusal or failure to comply with an order referred to in subparagraph (ii), discharge the debtor out of custody.’

20 Federal Magistrate Baumann noted that Jerrard J of the Family Court made an order requiring the applicant to pay the respondent $79,000 by 23 October 2000, and ‘[t]he applicant was not relieved of payment by appeal or otherwise before he chose to file a debtor’s petition on [13] February 2001.’

21 In an important finding, and one not challenged in this appeal, his Honour noted:

‘On his sequestration of [13] February 2001, the debt due to the respondent of $79,000 became a debt provable in the bankrupt estate of the applicant by reason of Section 82 of the Bankruptcy Act 1966 ... .’

22 His Honour referred to what he described as ‘[a] seminal issue’ raised by the respondent, who submitted that the power to stay proceedings under s 60(1)(b) of the Bankruptcy Act was not available as she had not commenced legal proceedings against the applicant ‘in consequence of his refusal or failure to comply with an order of the court for the payment of a provable debt.’

23 In addition, his Honour noted that the respondent said that the application to the Family Court was not seeking in any way to enforce a provable debt, but rather to have the applicant dealt with in respect of alleged contraventions and contempts ‘which arose before the date of bankruptcy.’

24 Federal Magistrate Baumann noted that some of the allegations particularised conduct of the applicant other than a failure to make payment of the funds ordered. His Honour referred to the observations of Gibbs CJ in Storey v Lane [1981] HCA 47; (1981) 147 CLR 549 at 556:

‘... the effect of the provision [referring to s 60(1)(b)] is to empower the court to relieve a debtor, against whom a petition has been presented, from process (civil or criminal) instituted against him because of his failure to pay a provable debt.’

yet seemed to suggest that this observation had no application to the contravention proceedings.

25 Federal Magistrate Baumann referred to the submissions on behalf of the applicant that:

‘... there is a clear nexus between the non-payment of the debt and the pending applications before the Family Court of Australia. He says the respondent should have sought leave from this Court to commence those proceedings in the Family Court of Australia because they are proceedings "in respect of a provable debt" or seek to enforce "any remedy against the person or the property of the bankrupt in respect of a provable debt".’

26 The judgment of Federal Magistrate Baumann rejected these contentions. His Honour held:

‘The proceedings are brought because the respondent alleges the applicant:- "intentionally failed" or- "made no reasonable attempt to comply" with the order made on 23 August 2000 within the meaning of those words given by Section 112AB of the Family Law Act 1975. The alleged contravention occurred prior to the applicant’s bankruptcy and that is, in my view, an important factor to consider...’

His Honour later said:

‘... in my view, the express provisions of Section [60(1)(b)] and the legislative intent was not designed to provide some form of blanket immunity for debtors who subsequently become bankrupt, whether on their own petition or otherwise, from answering serious charges about their conduct before they became sequestrated.’

27 The question in issue is a matter of construction.

28 In our judgment, Federal Magistrate Baumann was in error in concluding that the proceedings commenced in the Family Court subsequent to the bankruptcy of the applicant were not proceedings ‘in respect of’ a provable debt. The contravention proceedings were (relevantly) instituted because the applicant failed to pay the $79,000 ordered to be paid by Jerrard J on 23 August 2000.

29 In Storey v Lane, the applicant was convicted under s113 of the Industrial Conciliation and Arbitration Act 1961 (Qld) ("the Industrial Act") of having paid a lesser amount of wages than that prescribed by an award, and of having failed to pay an employee an amount of holiday pay. Section 97(5) of the Industrial Act provided that the Court shall, in addition to any penalty imposed upon a defendant, ‘order the payment by him of all moneys earned by the employee ... during any period of employment or, if payable, in respect of any holiday or leave ... which have become due.’ The Court fined the appellant, ordered him to pay costs and to pay the amount of wages underpaid and holiday pay. The applicant defaulted in payment and was committed to prison under The Justices Act of 1886 (Qld). He was taken into custody. After the orders under the Industrial Act were made but before the applicant was committed to prison, he filed a debtor’s petition under the Bankruptcy Act. He then applied to the Supreme Court for an order under s60(1) to discharge him from custody. At the hearing, the constitutional validity of s60 was challenged and the matter was removed to the High Court under the Judiciary Act 1903 (Cth).

30 Gibbs CJ in Storey v Lane at 555, said of s 60(1)(b):

‘...The legal process which may be stayed is process instituted against the person or property of the debtor in respect of the non-payment of a provable debt or of a pecuniary penalty payable in consequence of the non-payment of a provable debt, or in consequence of his refusal or failure to comply with an order of a court for the payment of a provable debt.’ (Emphasis added.)

And later:

‘... the effect of the provision is to empower the court to relieve a debtor, against whom a petition has been presented, from process (civil or criminal) instituted against him because of his failure to pay a provable debt. The objects of the paragraph are to ensure that if a sequestration order is (or has been) made against the estate of the debtor his assets will be available for administration in the interest of his creditors generally, to prevent one creditor, who has the right to enforce payment of his debt under some other law, from exercising that right so as to gain an advantage over other creditors, and to protect the debtor from punishment because he has not paid the debt when payment might be a breach of the bankruptcy law.’

31 In Re Sutherland-Cropper (1985) 11 FCR 156, Beaumont J was concerned with circumstances where a bankrupt (who had presented his own petition on 26 March 1984) had been convicted in the Local Court on 13 July 1984 of an offence of obtaining property by false pretences in respect of an airline ticket. The offence had occurred in October 1983. Sentencing was deferred upon his entering into a recognisance to be of good behaviour, one of the conditions of which was that he pay compensation to the travel agent in the amount of the cost of the ticket. He failed to pay the compensation within the required time and was called up for sentence. He applied to the Federal Court for an order:

‘That any legal process against the applicant whereby he is called upon to appear for sentence or in any way to receive sentence in respect of his conviction for false pretences, except any such process issued or continued by reason of his failure to be of good behaviour during the period of two years from 13 July 1984 pursuant to his recognizances of that date, be permanently stayed.’

32 Beaumont J held that the proceedings in the Local Court were not in consequence of failure to comply with an order for the payment of a provable debt within the terms of s 60(1)(b)(ii) of the Bankruptcy Act. They were proceedings in order to sentence the bankrupt for a breach of a condition of his recognisance. However, his Honour held that the application before the Local Court could properly be described as a process ‘in respect of the non-payment of provable debt’.

33 Beaumont J, at 161, said of the phrase "in respect of":

‘... It has been said that the phrase has the "widest possible meaning of an expression intended to convey some connection or relation between the two subject matters to which the words refer" (per Mann CJ in Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110 at 111; and see State Government Insurance v Rees [1979] HCA 52; (1979) 144 CLR 549 at 561).

The question is thus one of nexus. In my opinion, the application now before the Local Court does have a sufficient nexus with the non-payment of debt owed to Kuoni to justify its description as a process against the person of the debtor "in respect of" the non-payment of the debt. True it is, as the respondent contends, that the offence involved is one of obtaining property by false pretences and the process now in train is for sentence for that offence. But the breach of the condition of the recognisance to pay compensation is the circumstances which has activated the sentencing process. Without that breach, the question of sentence would not have now arisen for consideration, and it must follow that the current process should be seen as something instituted against the bankrupt "with respect to" that debt.’
(Emphasis added.)

His Honour granted the stay.

34 In Re McMaster; Ex parte Mc Master [1991] FCA 598; (1991) 105 ALR 156, Hill J was concerned with circumstances not dissimilar to the present. The applicant wife in those proceedings was a creditor in the bankrupt’s estate in the amount of $18,358, which sum was the result of an application for property settlement made by her to the Family Court of Australia. Nicholson CJ had made an order on 18 May 1990 for the payment by the bankrupt to the wife of that amount. The bankrupt presented his own petition on 31 May 1990. It was not suggested that the bankrupt filed his own petition for an improper purpose in order to defeat the rights of the wife to the property settlement. The wife sought the leave of the Federal Court pursuant to s 58(3)(b) of the Bankruptcy Act to commence proceedings pursuant to s 79A of the Family Law Act against the bankrupt to set aside or vary the order made by Nicholson CJ, and in lieu thereof, to obtain an order that the wife be entitled to 70 percent of the value of the bankrupt’s superannuation benefit when vested in him, or $12,600 plus interest to be paid to her upon the vesting of the superannuation benefit in the bankrupt, as well as incidental orders.

35 Hill J held, at 159:

‘Notwithstanding submissions to the contrary by the bankrupt, I am of the view that the proceedings contemplated to be brought in the Family Court were proceedings "in respect of" the provable debt. Just as in s 60 of the Act, so too in s 58, the words "in respect of" will be given a wide meaning: cf Tarea Management (North Shore) Pty Ltd (in liq) v Glass (1991) 28 FCR 93 at 100. As was said by Mann CJ in Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110 at 111, the words "in respect of" have the "... widest possible meaning of any expression intended to convey some connection or relation between the two subject matters to which the words refer".’

His Honour later said:

‘The question then remains whether leave should in the present case be given.’

and his Honour found in the circumstances that the Court should not exercise its discretion to give leave to the wife to commence the proposed proceedings.

36 In Tarea Management (North Shore) Pty Ltd (in liq) v Glass (1991) 99 ALR 549, the leading judgment in the Full Court was given by Hill J, with whom Lockhart and Einfeld JJ agreed. The respondent in that appeal had been convicted of two offences of applying cheques for purposes other than a purpose of the company of whom he was a director. He was fined. Under s 229(6) of the Companies Code 1991 (NSW), he was also ordered to pay two amounts, which included the amounts for which the cheques were drawn, in compensation to the company. The order could be enforced as if it were a judgment of that court.

37 The respondent applied to the Federal Court for an order against the company under s 60(1)(b) of the Bankruptcy Act for the stay of any proceedings to enforce the order for the payment of compensation to it. Beaumont J at first instance ordered that the Local Court proceedings be stayed until further order. In dismissing the appeal, Hill J said at 552:

‘...It is at the heart of the modern bankruptcy law that upon a person becoming a bankrupt the remedies against that person and his property by creditors are taken away and there is substituted a right to prove against the estate which vests in the bankrupt’s trustee. The debt is, at least provisionally, merged in an equitable execution: Clyne v DCT [1984] HCA 44; (1984) 55 ALR 143; 154 CLR 589 at 594 and cases there cited.’

38 His Honour referred to the explanatory memorandum which accompanied the Bankruptcy Amendment Bill 1979 (Cth), where one of the purposes of those amendments was:

‘... to ensure that bankrupts are not held in custody for the non-payment of debts provable in bankruptcy;...’

39 Of these amendments, Gibbs CJ in Storey v Lane had said at 554-555:

‘The parliament clearly intended, by the amendment made to s. 60(1) in 1980, to give the courts of bankruptcy a wider power than had been vested in them by the sub-section in its original form – a power that had become necessary by reason of the enactment of legislation making it an offence to fail to pay certain civil debts, empowering the courts to order the offender to pay the debt and providing for the imprisonment of the offender if the order were not obeyed...’

40 Hill J held that the mere fact that a bankrupt has been discharged did not preclude the making of an order under s 60(1) of the Bankruptcy Act, applying Re Rooney; ex parte Rooney (1986) 68 ALR 487. His Honour further noted:

‘It is sufficient if the legal process be one that is in respect of the non-payment of a debt which is provable.’

41 Reference should also be made to a judgment of a single judge of the Family Court, Baker J, In the marriage of Moncada, G.M. and Moncada, R. (1984) FLC 91-524 ("Moncada"). Baker J was concerned with circumstances where the Family Court of Western Australia had ordered the husband, in November 1980, to pay $35,000 to the wife by way of property settlement within one month. No payment was made. On 4 March 1981 the husband filed a debtor’s petition under the Bankruptcy Act and was bankrupt from that day. In 1983 the wife brought contempt proceedings against the husband in respect of the husband’s breaches of the order of the Family Court of Western Australia.

42 Baker J dismissed the application of the wife that the husband be punished for contempt. His Honour said at 79,233:

‘I am convinced, as I have said, for the reasons previously given that the husband has either available or within his control assets in excess of $70,000 and to that extent therefore his debtor’s petition, in my view, was a sham. Although that matter may ultimately be investigated by the Bankruptcy Court, can the husband be found guilty of contempt while ever he is an undischarged bankrupt?

Unfortunately for the wife, however, subsec. (3)(a) of sec. 58 of the Bankruptcy Act applies to the facts of the case before me. The order of the Family Court of Western Australia requiring the husband to pay to the wife the sum of $35,000 is a judgment debt and enforceable as such. The said debt which is for a liquidated sum is clearly a provable debt under the Bankruptcy Act and forms part of the husband’s liabilities as set out in his statement of affairs.

I am satisfied therefore that it is not competent for the wife to enforce any remedy either against the person or the property of the bankrupt in respect of the said order.

She may commence legal proceedings in respect of the provable debt pursuant to sec. 58(3)(b) of the Bankruptcy Act provided she first obtains leave of the Bankruptcy Court but on the evidence before me no such leave has so far been obtained. For these reasons therefore the wife’s application must fail in respect of the orders of the Family Court of Western Australia dated 19 November 1980 registered in this Court.’

43 His Honour’s judgment seems to accept that imprisonment for contempt is a "remedy against the person of the bankrupt" within s 58(3)(a) of the Bankruptcy Act, but because that remedy was sought in respect of what is "clearly a provable debt", an application for that remedy, without leave, is incompetent pursuant to s 58(3)(a).

44 In par 18 above, we have expressed the view that imprisonment for contempt is not a "remedy" against the person of a bankrupt. We agree with Baker J in Moncada that the ‘order ... requiring the husband to pay to the wife the sum of $35,000 is a judgment debt and enforceable as such’, and that ‘the said debt ... is clearly a provable debt under the Bankruptcy Act’.

45 In our opinion, the application by the wife in Moncada that the husband be punished for contempt was ‘legal process ... against the person ... of the debtor ... in respect of the non-payment of a provable debt’, within s 60(1)(b)(i) of the Bankruptcy Act, and also fell within s 60(1)(b)(ii) of the Bankruptcy Act, being ‘legal process ... against the person of the debtor ... in consequence of ... refusal or failure to comply with an order of a court ... for the payment of a provable debt’. It would therefore have been competent for Baker J to stay the application that the husband be punished for contempt, pursuant to s 60(1)(b) of the Bankruptcy Act. His Honour was, in our respectful view, correct in finding that, without the leave of the Court, it was not competent, pursuant to s 58(3)(b) of the Bankruptcy Act, for the wife to commence, or to take any fresh step in the application that the husband be punished for contempt, that being ‘a legal proceeding in respect of a provable debt’.

46 Despite the acrimonious nature of litigation between the parties in the present matter over many years, it has never been alleged that the debtor’s petition of Mr Melnik was a sham.

47 In our judgment, the contravention proceedings initiated by the respondent in the Family Court of Australia were proceedings ‘in respect of a provable debt’: s 58(3)(b) of the Bankruptcy Act. Further, those proceedings were proceedings ‘in respect of the non-payment of a provable debt’, within s 60(1)(b)(i), and also were proceedings ‘in consequence of his... refusal or failure to comply with an order of the [Family Court] ... for the payment of a provable debt’, within s 60(1)(b)(ii).

48 In the absence of the leave of the Court, it was not competent for the respondent to commence the contravention proceedings on 26 August 2003, because those proceedings were ‘legal proceeding[s] in respect of a provable debt’: s 58(3) of the Bankruptcy Act. Further, it was not competent for the respondent to take any fresh step in those contravention proceedings. The "Court" in s 58(3) is the Federal Court of Australia or the Federal Magistrates Court: see s 27(1) of the Bankruptcy Act.

49 It was faintly argued for the respondent on this application that implicit in the orders of Federal Magistrate Baumann was the grant of leave to initiate and take further steps in the contravention proceedings in the Family Court. No such leave was ever sought, and certainly none was granted. It was therefore not competent for the respondent to initiate or continue those proceedings. Further, those proceedings should have been stayed by Federal Magistrate Baumann, pursuant to s 60(1)(b) of the Bankruptcy Act.

50 For the above reasons, the orders made by Federal Magistrate Baumann on 3 February 2004 should be set aside

51 It is not competent for this Court to set aside the order of Carmody J that Mr Melnik be imprisoned. Carmody J ordered:

‘... 4. The operation of the sentence of imprisonment and issue of a warrant of commitment be stayed pending:

(a) the determination of the respondent’s Application to the Federal Court of Australia for leave to appeal the decision of Federal Magistrate Baumann of the Federal Magistrates Court made on 3 February 2004 and, if successful, the determination of that appeal; and

(b) the determination of any appeal by the respondent to the Full Court of the Family Court filed on or before 18 November 2004 against the decision of Justice Carmody made on 15 September 2004 or the orders made by Justice Carmody on 21 October 2004; or

(c) until further order.’

52 It is competent for this Court, pursuant to s 60(1)(b) of the Bankruptcy Act, to order that any legal process which would or may have the effect or purpose of committing the appellant to imprisonment pursuant to the orders of Carmody J of 21 October 2004, including the issue of any warrant of commitment thereunder, be stayed, and for the reasons herein it is appropriate to do so.

53 It is also appropriate for this Court to declare it was not competent for the respondent to commence contravention proceedings in the Family Court on 26 August 2003 in respect of the non-payment of the $79,000 ordered to be paid by Jerrard J on 23 August 2000, nor to take the further steps taken by her in those proceedings.

54 There is no reason why the usual order as to costs should not apply.

I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Spender, Hill and Finn JJ.

Associate:

Dated: 16 August 2005

Counsel for the Applicant:	Mr Robert Bain QC, with Mr Philip Looney
Solicitor for the Applicant:	John C. Dennett
Counsel for the Respondent:	Mr Peter Hackett
Solicitor for the Respondent:	Bruce Dulley Lawyers
Date of Hearing:	1 March 2005
Date of Judgment:	16 August 2005