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Segler v Child Support Registrar [2009] FMCA 41 (23 February 2009)

Last Updated: 24 February 2009

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SEGLER v CHILD SUPPORT REGISTRAR

BANKRUPTCY – Application to discharge child support debt – whether Court has jurisdiction – extent of power to discharge child support debt – whether limited to arrears at time sequestration order issued.

BANKRUPTCY – Application to discharge child support debt – matters for consideration in determining application – income, expenses, assets, liabilities and conduct.

Bankruptcy Act 1924 (Cth), s.121(1)(c)
Bankruptcy Act 1966 (Cth), ss.5, 27, 35, 35A, 35B, s.40(1)(g) & (3)(b) and (f), 82(1), 82(1A), 82(2), 153(1), 153(2)(c), 153(2A)
Bankruptcy Act 1869 (UK), s.31
Bankruptcy Amendment Act 1980 (Cth), s.75(1)
Bankruptcy Amendment Bill 1979
Bankruptcy Amendment Bill 1979, Explanatory Memorandum
Bankruptcy Legislation Amendment Act 1996, Schedule 1, Items 108, 109, 182, 446 and 453
Child Support (Assessment) Act 1989 (Cth)
Child Support (Registration and Collection) Act 1988 (Cth)
Constitution, s.75
Deserted Wives and Children Act 1901(NSW)
Family Law Act 1975 (Cth)

Coventry & Ors v Charter Pacific Corporation Ltd & Anor (2005) 227 CLR 234; [2005] HCA 67
Dewe v Dewe; Snowdon v Snowdon [1928] P 113
Federated Engine-Drivers & Firemen’s Association v Broken Hill Proprietary Co Ltd [1911] HCA 31; (1911) 12 CLR 398
Opie v Opie [1951] HCA 47; (1951) 84 CLR 362
Paquine v Snary [1909] 1 KB 688
Re Boulton; Ex parte Construction, Forestry, Mining and Energy Union (1998) 73 ALJR 129
Re Canobbio (1943) 13 ABC 238
Re Carter; Ex parte Official Receiver (1941) 12 ABC 193
Re Frankel (1959) 19 ABC 10
Re Hawkins; Ex parte Official Receiver [1892] 1QB 890
Re Morris [1897] VicLawRp 117; (1974) 22 FLR 460
Re Partridge; Ex parte Maidens-Fuller (1945) 13 ABC 185
Re Reilly; Ex parte Debtor [1979] FCA 2; (1979) 36 FLR 268
Re Stewart; Ex parte Stewart (1995) 60 FCR 68
R v Bolton [1835-1842] All ER Rep 73
Victor v Victor [1912] 1 KB 247

Bacon’s Abridgement (5th Edn), Vol.1
DC Pearce “Bankruptcy and Arrears of Maintenance” (1969) 43 ALJ 560
PP McQuade and MGR Gronow, McDonald, Henry and Meek, Australian Bankruptcy Law and Practice (Sydney: Law Book Co, 1996)

Applicant:
MARTIN LEE SEGLER

Respondent:
CHILD SUPPORT REGISTRAR

File Number:
PEG 230 of 2007

Judgment of:
Lucev FM

Hearing date:
29 May 2008

Date of Last Submission:
29 May 2008

Delivered at:
Perth

Delivered on:
23 February 2009

REPRESENTATION

Counsel for Mr Segler:
In person

Counsel for the Respondent:
Ms I. McCormick

Solicitors for the Respondent:
Australian Government Solicitor

DECLARATIONS AND ORDERS

(1) The Court declares that:
(2) In relation to the determination of whether or not to discharge the Applicant’s child support debt the Court is entitled to consider the Applicant’s income, expenses, liabilities and assets, and the Applicant’s conduct prior to the date of the Applicant’s bankruptcy, during the period of the Applicant’s bankruptcy, and since the Applicant’s discharge from bankruptcy.
(3) The matter will be adjourned to 10.00am on 6 March 2009 for further directions.
FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

PEG 230 of 2007

MARTIN LEE SEGLER

Applicant


And


CHILD SUPPORT REGISTRAR

Respondent


REASONS FOR JUDGMENT

Introduction

  1. The applicant, Mr Segler, has a child support debt[1] which he asks this Court to discharge under s.153(2A) of the Bankruptcy Act 1966 (Cth).[2]
  2. Two preliminary issues arise for determination by the Court.

The preliminary issues

  1. There are two preliminary issues in this matter:
    1. whether the discharge of a child support debt is a matter within the jurisdiction of this Court and, if the Court has jurisdiction, to what extent it can order discharge of a child support debt;[3] and
    2. if the Court has jurisdiction, whether, in determining whether or not to discharge a child support debt following bankruptcy, the Court must consider:
      1. Mr Segler’s income, expenses, liabilities and assets during the period of bankruptcy only; or
      2. Mr Segler’s income, expenses, liabilities and assets at the present day.[4]

Background facts

  1. The relevant facts are largely undisputed and are set out hereunder.

Child Support Agreement

  1. A child support debt arose from a Child Support Agreement[5] made between Mr Segler and Ms Karen Sandra Carey-Hazell on 9 August 1991 in relation to their two children born 26 July 1988. [6] Ms Carey-Hazel is not a party to these proceedings.
  2. The CS Agreement was lodged with the Family Court of Western Australia[7] on 15 August 1991.[8]

Bankruptcy history

  1. A sequestration order was made against Mr Segler on 19 September 2001. At that time Mr Segler had unpaid child support arrears of $26,022.97 and late payment penalties of $3,478.19.[9]
  2. Mr Segler was discharged from bankruptcy on 20 September 2004.[10]
  3. Mr Segler was not discharged from his child support debt of $26,022.97, but his late payment penalties were remitted.[11]

Prior Proceedings in the Family Court of WA

  1. On 10 April 1996 Mr Segler applied to the Family Court of WA concerning the child support for which he was then liable. In a judgment handed down by the Family Court of WA on 29 January 1997 Mr Segler’s application to vary the CS Agreement to discharge child support arrears was dismissed.[12]
  2. On 18 June 1996 Ms Carey-Hazell filed an enforcement application in the Family Court of WA seeking to recover child support arrears accrued to 30 September 1995. On 9 August 1996 Mr Segler lodged an application against the Child Support Registrar[13] with the Family Court of WA seeking a stay of a collection order. On 10 September 1996 the Family Court of WA refused to grant Mr Segler a stay and dismissed Ms Carey-Hazell’s application for enforcement.[14]
  3. Mr Segler commenced proceedings in the Family Court of WA against Ms Carey-Hazell in November 2004, seemingly to discharge at least part of his child support debt.[15] The application was argued, and a draft judgment issued from the Family Court of WA, as a consequence of which Mr Segler gave notice of his intention to file a notice of discontinuance of the application.[16]
  4. On 2 September 2005 the CS Registrar commenced enforcement proceedings against Mr Segler in the Family Court of WA in relation to an alleged child support debt of $104,189.79 as at 18 August 2005.[17] Orders issued by consent in relation to the CS Registrar’s enforcement proceedings in the following terms:
  5. The CS Registrar states that Mr Segler has not complied with these orders except for making one payment of $1,000. The CS Registrar has not elected to commence contravention proceedings.[19]
  6. Mr Segler lodged an application in the Family Court of WA against Ms Carey-Hazell on 25 November 2005 seeking to amend the CS Agreement and discharge the child support debt. Mr Segler’s application was dismissed on 14 February 2006.[20]

The child support debt sought to be discharged

  1. Mr Segler applied on 19 November 2007 to have the whole of his child support liability, of $162,806.27, discharged.
  2. In an Amended Application filed on 26 February 2008, Mr Segler seeks to discharge two amounts of child support debt. Firstly, child support arrears and late payment penalties of $29,053.56 accrued up to the date of sequestration on 19 September 2001. Second, $64,471.62 for child support arrears and late payment penalties accumulated between 19 September 2001 and 20 September 2004 when Mr Segler was discharged from bankruptcy.

Jurisdiction Issue

Jurisdiction generally

  1. The Federal Court and this Court have jurisdiction in bankruptcy under s.27, exclusive of the jurisdiction of all other courts, with the exception of the jurisdiction of the:
    1. High Court under s.75 of the Constitution; and
    2. the Family Court under ss.35 and 35A.
  2. The Federal Court and this Court may transfer a proceeding under the Bankruptcy Act to the Family Court or the Family Court of WA.[21]

Discharge from liability for the child support debt

  1. The parties agree that the Court has jurisdiction to make an order discharging Mr Segler from the child support debt. Consent alone does not confer jurisdiction on the Court,[22] and it is the Court’s first duty to be satisfied that it has jurisdiction to deal with the subject matter of the proceedings.[23]
  2. In this matter the Court is satisfied, and agrees with the parties, that it has jurisdiction under the Bankruptcy Act to make an order discharging Mr Segler’s child support debt because:
    1. section 153(1) provides power for a general discharge, subject to the other provisions of the section;
    2. section 153(2)(c) provides that the discharge of a bankrupt does not release the bankrupt from any liability under a maintenance agreement or maintenance order, subject to any order of the Court made under s.153(2A);
    1. section 153(2A) gives the Court a discretion in discharging a bankrupt from bankruptcy to release the bankrupt from liability to pay arrears due under a maintenance agreement or maintenance order to the extent, and subject to any conditions, that the Court thinks fit;
    1. section 82(1A) provides that a child support debt of the type incurred by Mr Segler is a debt provable in bankruptcy;
    2. section 40(3)(b) provides that, for the purposes of s.40(1)(g), a judgment or order that is enforceable as or in the same manner as a final judgment obtained in an action is deemed to be a final judgment, and the proceedings in which the judgment or order was obtained is deemed to be the action in which it was obtained; and
    3. section 40(3)(f) provides that, for the purposes of s.40(1)(g), an order made after its commencement (on 16 December 1996)[24] for the payment by a person of arrears of maintenance is deemed to be a final order against that person.
  3. The Court therefore has jurisdiction to, at least, discharge a bankrupt, and in so doing, release the bankrupt from liability to pay a child support debt under a maintenance agreement or maintenance order, either in whole or in part and subject to conditions. For present purposes, it does not appear to be disputed that Mr Segler’s child support debt arises from a maintenance agreement or maintenance order.[25]
  4. The real question which arose in this case was the extent of the power to make an order under that jurisdiction, and whether it was limited to child support debts provable in the bankruptcy at the time the sequestration order issued or extended to child support debts incurred after the sequestration order issued. In this respect, the parties differ.
  5. Mr Segler’s position was that:
    1. section 153(2A) does not qualify the Court’s ability to only discharge debts provable in bankruptcy;
    2. section 153(2A) is an amendment, and extends what was previously a more limited provision;
    1. the words “to such extent, and subject to such conditions as the Court thinks fit” give the Court unfettered discretion; and
    1. section 153(2A) does not provide that it is subject to s.153(1).
  6. The CS Registrar says that a child support debt during the period of bankruptcy is not a provable debt, and argues that the power under s.153(2A) is limited to debts provable in bankruptcy up until the date of sequestration.
  7. The CS Registrar cites Re Stewart; Ex parte Stewart[26] in which the Federal Court said:
  8. The CS Registrar says that in Stewart the Federal Court did not suggest that child support debts could be discharged after the date of entry into bankruptcy, and in that case, the child support debt was only discharged up to the date of entry into bankruptcy.
  9. The CS Registrar further says no case law, policy reason, public interest reason or section of the Bankruptcy Act supports the proposition that the Court’s jurisdiction to discharge child support debt extends to more than the provable debt in bankruptcy.
  10. The CS Registrar submits that the existence of s.153(2A) shows that there may be some situations where maintenance liabilities should be discharged as at the date of sequestration but that the Court should only do so where the public interest would best be served by such an order.
  11. To determine this dispute it is necessary for the Court to examine the relevant provisions of the Bankruptcy Act, and their historical and legislative antecedents in more detail.

Relevant legislation

  1. Section 153 provides as follows:
  2. In relation to a debt provable in bankruptcy s.82(1) and (1A) provide that:
  3. Section 40(1)(g) and (3)(b) and (f) provide as follows:
  4. Section 5 contains the following relevant definitions:

Legislative history

An ancient verity

  1. That a husband must support his wife and children was an ancient verity. Bacon’s Abridgement said that:
  2. In Australia the ancient verity has been varied by legislation, both Commonwealth and State, relating to deserted wives and children, maintenance and marriage, and, in recent decades, the Family Law Act 1975 (Cth),[29] the Child Support (Assessment) Act 1989 (Cth) and the Child Support (Registration and Collection) Act 1988 (Cth). Additionally, bankruptcy legislation has been amended so that a bankrupt’s child support debts can be discharged by an appropriate court.
  3. The question remains, however, to what extent, and in this regard an examination of the legislative history is helpful.

English Bankruptcy Acts pre-1924

  1. The position in England prior to 1924 (the date of the enactment of the first Commonwealth bankruptcy legislation) was that maintenance debts and arrears were not debts for the purposes of bankruptcy.[30]

Australian position pre-1924

  1. Consistent with the position in England, the position in Australia prior to 1924 was that maintenance debts and arrears were not debts for the purposes of bankruptcy.[31]

Bankruptcy Act 1924 – s.121(1)(c)

  1. Section 121(1)(c) of the Bankruptcy Act 1924 (Cth)[32] provided that an order of discharge did not “release a bankrupt from any liability...under an affiliation or maintenance order,...except to such an extent and under such conditions as the Court expressly orders in respect of that liability...”.
  2. Section 121(1)(c) of the Bankruptcy Act 1924 was dealt with in several judgments of the former Federal Court of Bankruptcy. In Re Carter; Ex parte Official Receiver[33] it was held that a wife’s alimony was not provable in the bankruptcy of her husband, but an order of the Supreme Court of New South Wales in its divorce jurisdiction for the maintenance of the children of the marriage was provable in bankruptcy. The Federal Court of Bankruptcy relied upon s.121(1)(c) of the Bankruptcy Act 1924, and said that its provisions:
  3. In Re Canobbio[35] the Federal Court of Bankruptcy did not accept the view adopted in Carter. In Canobbio the Federal Court of Bankruptcy said:
  4. In Canobbio the Federal Court of Bankruptcy annulled its earlier sequestration order on the basis that the wife’s claim for arrears of maintenance was not a provable debt, it being the only liability sought to be proved against the husband in bankruptcy.
  5. Canobbio therefore continued to follow the line that arrears of maintenance were not provable in bankruptcy, but adopted the view that s.121(1)(c) of the Bankruptcy Act 1924 allowed the Federal Court of Bankruptcy to reduce or qualify a liability, even if that liability was not a provable debt.
  6. In Re Frankel[37] Mr Frankel had been committed to prison for non-compliance with an order made by a New South Wales Children’s Court under which he was ordered to pay arrears of maintenance to his wife. He sought to be discharged from prison on the basis that his subsequent bankruptcy entitled him to be discharged from custody under provisions of the Bankruptcy Act 1924. The Federal Court of Bankruptcy held that arrears of maintenance could not be the subject of proof and was not constituted a debt for the purposes of bankruptcy.[38] Mr Frankel remained in prison.[39]
  7. In Re Partridge; Ex parte Maidens-Fuller[40] the Federal Court of Bankruptcy distinguished Canobbio (where arrears of maintenance were due and payable under an order of a Victorian Court of Petty Sessions) and held that a judgment entered in the New South Wales District Court, which was a court of record, for a certified amount due under a maintenance order, which judgment was enforceable as a final judgment in an action, converted the husband’s liability for maintenance under the order into a judgment debt, and thus the wife was a creditor with a provable debt under the Bankruptcy Act 1924.[41]
  8. In Opie v Opie[42] the High Court determined that a judgment under State maintenance legislation, being a judgment entered in a District Court for the purposes of enforcing a maintenance order, was not a final judgment “in an action”, and therefore not a final judgment for the purposes of the issuance of a bankruptcy notice under the Bankruptcy Act 1924.[43]
  9. In Re Morris[44] the question was whether arrears of maintenance accrued, under State maintenance legislation, before the making of a sequestration order constituted a debt provable in bankruptcy under the Bankruptcy Act, and, if so, in what circumstances and to what extent.[45] Although not a case under the Bankruptcy Act 1924 it was necessary for judgments under the Bankruptcy Act 1924 to be considered.[46] Having reviewed the legislative and case law history, the Federal Court of Bankruptcy in Morris preferred the view taken in Canobbio to that taken in Carter. It did so because, having referred to the antecedent English and New South Wales bankruptcy provisions, the Federal Court of Bankruptcy agreed with what was said in Pearce –Arrears of Maintenance:
  10. In Morris the position as it stood prior to the enactment of the Bankruptcy Act was summarised as follows:

Bankruptcy Act 1966

  1. The Bankruptcy Act was proclaimed to take effect from 4 March 1968.

Bankruptcy Act 1966 – s.153

  1. Section 153(1) remains unchanged since 1968.
  2. Section 153(2) as enacted in 1968 provided that the discharge of a bankrupt from a bankruptcy does not:
  3. A review of the Parliamentary Debates indicates that this provision did not excite the attention of the Parliament.
  4. The Report of the Committee Appointed by the Attorney-General of the Commonwealth to Review the Bankruptcy Law of the Commonwealth[49] observed as follows with respect to the provision which would become s.153(2)(c) upon passage of the Bankruptcy Act in 1968:
  5. In Morris the Federal Court of Bankruptcy said that s.121(1)(c) of the Bankruptcy Act 1924 was “the equivalent of s.153(2)(c)”[51] of the Bankruptcy Act. In Morris it was held that arrears were not provable and there was no debt within the meaning of s.82(1), nor any liability within the meaning of s.82, which did not include liability to a court of a person bound by a maintenance order, save where judgment had been entered.[52] Based on the provisions of the relevant State maintenance legislation (which it is unnecessary to set out here) it was held in Morris, based on the judgment in Partridge, that entry of the judgment converted the obligation under the maintenance order into a debt and the wife into a creditor.[53] In Morris powers conferred under the relevant State maintenance legislation to discharge, suspend, vary or annul maintenance orders, even where there was default, were held not to be available where a liability for arrears had become a judgment debt.[54]
  6. In Morris the Federal Court of Bankruptcy also held that where at the date of bankruptcy there were arrears but no judgment entered there was no provable debt nor creditor, and that any judgment subsequently obtained was not one to which the bankrupt would become subject to by reason of an obligation incurred before the date of the bankruptcy within the meaning of s.82(1), because the obligation is one inter partes and not an obligation of the type imposed by a maintenance order, with the consequence that the debt would not be provable.[55]
  7. In Morris the Federal Court of Bankruptcy concluded that the arrears of maintenance would only constitute a provable debt to the extent to which they were the subject of a judgment entered under the provisions of the relevant State maintenance legislation “before the date of bankruptcy”.[56]
  8. The current form of s.153(2) and (2A) is a consequence of amendments in 1980 which:
    1. extended the non-release of liability under s.153(2)(c) to a maintenance agreement; and
    2. put the provisions concerning conditional release from liability in a separate sub-section, s.153(2A), to which s.153(2)(c) was subject.[57]
  9. The Explanatory Memorandum to the Bankruptcy Amendment Act 1980 referred to these changes and said that under the amendments:
  10. The Explanatory Memorandum also noted that “maintenance order” and “maintenance agreement” were both now to be defined in the Bankruptcy Act.[59]
  11. Section 153 remains unamended in relevant respects since the 1980 amendments.
  12. The authors of Australian Bankruptcy Law and Practice,[60] having noted the traditional position with respect to the obligation of a husband to his wife and children in respect of maintenance, go on to observe that:
  13. It is unnecessary for present purposes to detail the legislative history of the definitions of “maintenance agreement” and “maintenance order”. It suffices to observe that:
    1. the CS Agreement is a maintenance agreement as defined; and
    2. the September 2005 Orders of the Family Court of WA include a maintenance order as defined.

Bankruptcy Act – s.82

  1. In Coventry & Ors v Charter Pacific Corporation Ltd & Anor[62] the High Court dealt with the history of s.82, tracing it back through s.81 of the Bankruptcy Act 1924 (and its colonial antecedents) to a variety of 19th century English statutes,[63] but most importantly to s.31 of the Bankruptcy Act 1869 (UK) in which s.82 finds its origin.[64]
  2. Although Coventry turned upon the meaning of s.82(2)[65] and whether the relevant demand was provable in bankruptcy, the High Court made a number of relevant general observations. They included:
    1. it is upon the definition of the concept of debt provable in bankruptcy that the provisions for the effect of discharge from bankruptcy in s.153 hinge;[66]
    2. section 82(1A) is an extension to the concept of debts provable in bankruptcy so as to include the particular obligations arising under maintenance agreements or maintenance orders, in the context of debts and liabilities provable in bankruptcy that are otherwise identified in very wide terms;[67]
    1. that s.82 “shows that not all claims are provable in bankruptcy” and that the content given to what is provable in bankruptcy “is to be fixed by reference to the operation of other provisions of the statute”;[68] and
    1. that “[s]ome claims stand outside the reach of the statute”, and that the Bankruptcy Act, considered in the context of its history, did not provide for a bankrupt to be freed from every kind of debt or liability.[69]
  3. Although, as indicated above, these observations were made in the context of a case which turned upon s.82(2), they can be applied more generally to a consideration of what debts are provable in bankruptcy, and what debts may be discharged from bankruptcy, and when any discharge might be operative.
  4. Section 82(1A) was inserted into the Bankruptcy Act by the Bankruptcy Amendment Act 1980. At that time it was in the following form:
  5. The 1980 amendments included in provable debts periodical sums which became payable within a year before the date of the bankruptcy and a lump sum which became payable before the date of the bankruptcy under a maintenance agreement or maintenance order.
  6. The 1980 form of s.82(1A) was repealed in 1996 and replaced with the current provision.[70]
  7. The effect of the 1996 amendment under the Bankruptcy Legislation Amendment Act 1996 (Cth) was to provide for the same debts to be provable in any bankruptcy without the 12 month limitation.[71] The Explanatory Memorandum provided that:
  8. By reason of the 1996 amendments s.82(1A) applies to debts under maintenance agreements or maintenance orders current on or after 16 December 1996 regardless of when the agreement or order was made.[73]

Bankruptcy Act – s.40

  1. The relevant history of s.40(1)(g) and (3)(b) is set out in the following extract from Morris:
  2. It is not necessary to repeat what has been set out above from the judgment in Morris in relation to s153: it suffices to say that much of what is set out might equally be set out in relation to s.40.[75]
  3. The terms of s.40(3)(f) plainly evince a Parliamentary intention that a maintenance order made under the Family Law Act be deemed to be a final order against the person obliged to pay maintenance under the order.

Analysis of Jurisdiction Issue

  1. Examined together, but otherwise in isolation from the remaining provisions of the Bankruptcy Act, s.153(2)(c) and (2A) might arguably allow the Court to release Mr Segler from his child support debt, and do so at any time, in any amount and subject only to such conditions, if any, as might be imposed by the Court. A release on that basis might be said to be a result which reflected the legal position as outlined in Canobbio. So examined, s.153(2)(c) and (2A) are not sufficiently dissimilar in effect to s.121(1)(c) of the Bankruptcy Act, 1924 to warrant an outcome different to that in Canobbio.[76]
  2. As late as 1974 a maintenance debt was not provable in bankruptcy without judgment because s.40(3)(b) was not engaged and there was no debt provable under s.82(1).[77] But where there was judgment entered before the date of bankruptcy a maintenance debt was provable in bankruptcy.[78]
  3. The effect of the various amendments to ss.82 and 153 in 1980 and 1996 was to:
    1. extend the non-release of liability to maintenance agreements;[79]
    2. make provable in bankruptcy any sum payable under a maintenance agreement or maintenance order before the date of the bankruptcy;[80] and
    1. make a maintenance order under the Family Law Act a final order against the person to whom it applied.[81]
  4. The effect of those amendments, together with the earlier introduction of s.40(1)(g) and (3)(b), is to effectively reverse by statutory amendment the position as it stood at the time Canobbio was determined. Now maintenance agreements and maintenance orders are provable in bankruptcy for any sum payable before the date of the bankruptcy.
  5. In the Court’s view an examination of ss.40(1)(g) and (3)(b) and (f), 82(1) and (1A) and 153(2)(c) and (2A), together with the relevant definitions in s.5, shows that Parliament has intended those provisions to operate so as to:
    1. extend non-release liability from maintenance debts;
    2. make provable in bankruptcy maintenance debts the subject of maintenance orders or maintenance agreements before the date of bankruptcy; and
    1. limit the maintenance debt dischargeable to that provable in the bankruptcy, that is, maintenance debt as at the date of bankruptcy.
  6. The above interpretation is consistent with the observations of the High Court in Coventry concerning s.82, namely, that s.82(1A) extends the concepts of debt provable in bankruptcy to the obligations arising under maintenance orders and maintenance agreements, in the context of debts and liabilities provable in bankruptcy,[82] and that it is upon that concept of debt provable in bankruptcy that the discharge provisions hinge.[83]
  7. The Court therefore concludes that any discharge of a maintenance debt (such as Mr Segler’s child support debt) must be limited to debts provable in bankruptcy up until the date of sequestration.
  8. Both Morris and Stewart also generally support the contention that any discharge of a maintenance debt can only be of a provable maintenance debt as at the date of bankruptcy.[84]

The Discharge Issue

  1. The discharge issue arises because the Court has jurisdiction to discharge Mr Segler’s provable child support debt as at the date of sequestration.

Mr Segler’s position

  1. Mr Segler submits that in determining whether or not to discharge the child support debt the Court must only consider his income, expenses, liabilities and assets during the period of bankruptcy.
  2. Mr Segler says that the making of a discharge order is discretionary,[85] and that the discretion is to be exercised according to the “same principles which were applicable to the discharge by the Court of a bankrupt from bankruptcy.”[86]
  3. The authorities referred to by Mr Segler do not assist the proposition that in determining whether to discharge the child support debt the Court must have regard to his income, expenses, liabilities and assets during the period of bankruptcy only. In both Stewart and Re Reilly; Ex parte Debtor[87] the Federal Court took into account a number of matters, before, during and after the period of bankruptcy in determining whether or not to discharge a debt.

CS Registrar’s position

  1. The CS Registrar argues that the Court must consider Mr Segler’s current financial position in determining whether to discharge the debt and that this proposition is supported by Stewart. The CS Registrar says that in Stewart, the Court considered current income, expenses, assets and liabilities in determining the application for discharge. The CS Registrar submits that Reilly lends general support to the proposition that Mr Segler’s financial situation at the time of the hearing should be considered when assessing whether to discharge the child support debt.
  2. The CS Registrar argues that the Court may be led into error if it considers Mr Segler’s income at the commencement or during his bankruptcy because the Court may effectively be considering a quasi-departure application or a quasi-appeal.

Case law

  1. In Reilly a discharge was granted to the bankrupt. The Federal Court examined the entirety of the circumstances leading to the bankruptcy, including:
    1. significant voluntary payments of $150 every week out of a net salary of $158 by the then debtor;
    2. the conduct and financial history of the bankrupt during bankruptcy, and
    1. the bankrupt’s current circumstances at the time the application for discharge was considered.
  2. The Federal Court said that:

and, further the Federal Court said:

It has been said by the authorities more than once that unless the court is satisfied that a man in receipt of income derived from his earnings or otherwise will be able to provide support for himself and his dependants to live on, or is satisfied that he is likely to inherit or otherwise succeed to property, it ought not to impose unduly burdensome conditions so that he cannot improve his position in life and remove all incentive for exertion on his part.[89]
  1. The Federal Court concurred with earlier English authority that a bankrupt is not a slave or chattel of his creditors.[90]
  2. In Reilly, the Federal Court paid particular regard to the bankrupt’s conduct during his time as a pre-bankruptcy debtor, and in observing that he was entitled to make a fresh start in life unfettered by his bankruptcy,[91] said:
  3. In Stewart the Federal Court said that the comments made in Reilly about the considerations that the Court must have regard to as to whether a bankrupt should receive a discharge were:
  4. The Federal Court in Stewart did not think that the circumstances in Reilly were directly applicable in Stewart which concerned, unlike Reilly, an application for discharge from a child support debt. However:
  5. Having noted the importance of the exception of maintenance liability from the general operation of s.153(1) of the Bankruptcy Act as reflecting Parliament’s view that enforcement of maintenance liabilities ought to be satisfied, and that there was “a real interest in seeing such obligations discharged”,[95] the Federal Court said that the existence of s.153(2A):
  6. The Federal Court in Stewart made reference to the observations in Reilly concerning the ability of a bankrupt to support himself or herself and his or her family, and the tension between various kinds of family units, particularly second or subsequent family units including de facto relationships and blended families, and in the context of the circumstances of Stewart, which involved a second family said:

Discharge issue – analysis

  1. In order to determine whether Mr Segler has the ability to discharge the arrears the Court considers that it is self-evident that Mr Segler’s current ability to discharge the arrears must be considered, essentially for the reasons set out in the quote from Stewart in the preceding paragraph.[98] Therefore, the position adopted by the CS Registrar is evidently correct, but for reasons which follow, not complete.
  2. The Court considers that it is necessary, when exercising its discretion and in assessing the interests of the custodial parent and the children as well as the public interest, to have regard to Mr Segler’s financial position, not only during the period of bankruptcy (the position he contends for), but also prior to his bankruptcy, when the child support debts in question[99] actually accrued. Further, having regard to the importance of compliance with the intent of child support legislation,[100] there must be a public interest consideration related to compliance involved in the exercise of the discretion as to whether a child support debt is discharged, and, therefore an examination of the conduct of an applicant for discharge of a child support debt is warranted, such conduct to include conduct before, during and after bankruptcy.[101]
  3. In all of the above circumstances the Court concludes that in determining whether to discharge a child support debt the Court is entitled to consider Mr Segler’s:
    1. income, expenses, liabilities and assets; and
    2. conduct,

prior to the date of his bankruptcy, during the period of his bankruptcy, and since his discharge from bankruptcy.

Conclusion, orders and declarations

  1. The Court therefore concludes that:
    1. it has jurisdiction to discharge Mr Segler’s child support debt;
    2. any discharge is limited to debts provable in bankruptcy up until the date of sequestration.
  2. In relation to its determination of whether or not to discharge Mr Segler’s child support debt the Court is entitled to consider Mr Segler’s income, expenses, liabilities and assets, and Mr Segler’s conduct prior to the date of Mr Segler’s bankruptcy, during the period of Mr Segler’s bankruptcy, and since Mr Segler’s discharge from bankruptcy.
  3. There will be declarations to reflect the above conclusions.

Further Directions

  1. The matter will be adjourned to 10.00am on 6 March 2009 for further directions.

Costs

  1. The Court will hear the parties as to costs.

I certify that the preceding one hundred and four (104) paragraphs are a true copy of the reasons for judgment of Lucev FM

Associate: Sandra Gough


Date: 23 February 2009

[1] Wherever possible the phrase “child support debt” has been used in these Reasons for Judgment to describe the debt which Mr Segler applies to have discharged, rather than the more general “maintenance debt” which can refer to debts other than child support debts.
[2] “Bankruptcy Act.” In these Reasons for Judgment all references to sections of an Act are to the Bankruptcy Act unless otherwise indicated.
[3] “Jurisdiction Issue”. The issue of the extent to which the Court can order discharge of a child support debt was not part of the two issues for argument at hearing (see the Court’s Orders of 23 April 2008), but the parties agreed that the Court had jurisdiction to discharge a child support debt, and the real issue for argument at hearing became the extent of the power to discharge a child support debt.
[4] “Discharge Issue”.
[5] “CS Agreement.”
[6] Affidavit of Reginald Keith Parnell, filed 5 May 2008, para.10 and annexure RKP 1. (“Mr Parnell’s 5 May 2008 Affidavit”).
[7] “Family Court of WA”.
[8] Affidavit of Reginald Keith Parnell sworn 15 May 2008, para.13 (“Mr Parnell’s 15 May 2008 Affidavit”).
[9] Mr Parnell’s 15 May 2008 Affidavit, para.40.
[10] Mr Parnell’s 15 May 2008 Affidavit, para.46.
[11] Mr Parnell’s 15 May 2008 Affidavit, para.50.
[12] Mr Parnell’s 15 May 2008 Affidavit, paras.27 and 34.
[13] “CS Registrar”.
[14] Mr Parnell’s 15 May 2008 Affidavit, paras.29, 32 and 33, and Annexure RKP 4 to Mr Parnell’s 11 March 2008 Affidavit.
[15] Mr Parnell’s 15 May 2008 Affidavit, para.47, and Annexure RKP 8 to Mr Parnell’s 11 March 2008 Affidavit.
[16] Mr Parnell’s 15 May 2008 Affidavit, para.47, and Annexure RKP 8 to Mr Parnell’s 11 March 2008 Affidavit.
[17] Mr Parnell’s 15 May 2008 Affidavit, para.52.
[18] Mr Parnell’s 15 May 2008 Affidavit, paras.53, 55 and 58 (“the September 2005 Orders”).
[19] Mr Parnell’s 15 May 2008 Affidavit, paras.59 and 61.
[20] Mr Parnell’s 15 May 2008 Affidavit, paragraph 56.
[21] Sections 35A and 35B.
[22] R v Bolton [1841] EngR 193; [1835-42] All ER Rep 71 at 73 per Lord Denman CJ (“Bolton”).
[23] Bolton at 73-74 per Lord Denman CJ; Federated Engine-Drivers & Firemen’s Association v Broken Hill Proprietary Co Ltd [1911] HCA 31; (1911) 12 CLR 398 at 415 per Griffith CJ (“FEDFA”). See also FEDFA at 428 per Barton J and 454 per Isaacs J and Re Boulton; Ex parte Construction, Forestry, Mining and Energy Union (1998) 73 ALJR 129 at 133 per Kirby J.
[24] Bankruptcy Legislation Amendment Act 1996 (Cth) (“Bankruptcy Amendment Act 1996”), Schedule 1, Items 108, 109 and 446.
[25] As defined in s.5, and set out below at para.34.
[26] (1995) 60 FCR 68 (“Stewart”).
[27] Stewart at 79 per Cooper J
[28] Bacon’s Abridgement (5th Edn), Vol.1. at page 448, citing the argument of Lord Chief Baron Hale in Manby v Scott.
[29] “Family Law Act”.
[30] Victor v Victor [1912] 1 KB 247 distinguishing between annuities payable under a contract or deed upon separation, which were provable debts in bankruptcy, from alimony under orders of the Divorce Court on judicial separation, which were not debts provable in bankruptcy: see at 252 per Cozens-Hardy MR and 252-253 per Fletcher Moulton LJ; Dewe v Dewe; Snowdon v Snowdon [1928] P 113 at 119-120 per Lord Merrivale; Paquine v Snary [1909] 1 KB 688 at 690 per Vaughan Williams LJ.
[31] DC Pearce “Bankruptcy and Arrears of Maintenance” (1969) 43 ALJ 560 at 562 (“Pearce – Arrears of Maintenance”).
[32] “Bankruptcy Act 1924”.
[33] (1941) 12 ABC 193 (“Carter”).
[34] Carter at 200 per Lukin J.
[35] (1943) 13 ABC 238 (“Canobbio”).
[36] Canobbio at 243-244 per Clyne J.
[37] (1959) 19 ABC 10 (“Frankel”).
[38] Frankel at 12 per Clyne J.
[39] Frankel at 13 per Clyne J.
[40] (1945) 13 ABC 185 (“Partridge”).
[41] Partridge at 187-188 per Clyne J.
[42] [1951] HCA 47; (1951) 84 CLR 362 (“Opie”).
[43] Opie at 372-373 per Dixon and Williams JJ, and 374-375 per McTiernan J.
[44] [1897] VicLawRp 117; (1974) 22 FLR 460 (“Morris”).
[45] Morris at 461 per Riley J.
[46] Much of the preceding and subsequent history of the relevant legislation and case law in these reasons for judgment reflects the careful and considered reasons for judgment in Morris, which obviously owe a debt to the scholarship in Pearce – Arrears of Maintenance.
[47] Pearce –Arrears of Maintenance at 562 (cited in Morris at 464 per Riley J).
[48] Morris at 466 per Riley J.
[49] “Clyne Committee Report”.
[50] Clyne Committee Report at para.237.
[51] Morris at 470 per Riley J.
[52] Morris at 470-471 per Riley J.
[53] Morris at 471 per Riley J.
[54] Morris at 471 per Riley J.
[55] Morris at 471 per Riley J. Morris was decided before the inclusion of s.82(1A).
[56] Morris at 471-472 per Riley J.
[57] Bankruptcy Amendment Act 1980 (Cth), s.75(1) (“Bankruptcy Amendment Act 1980”).
[58] Bankruptcy Amendment Bill 1979, Explanatory Memorandum, page 90 (“1979 Explanatory Memorandum”).
[59] 1979 Explanatory Memorandum, page 90. See now the definitions in s.5 of the Bankruptcy Act set out at para.34 above.
[60] PP McQuade and MGR Gronow, McDonald, Henry and Meek, Australian Bankruptcy Law and Practice (Sydney: Law Book Co, 1996) (“ABLP”).
[61] ABLP at para. 153.2.15.
[62] (2005) 227 CLR 234; [2005] HCA 67 (“Coventry”).
[63] Coventry CLR at 243-246 per Gleeson CJ, Gummow, Hayne and Callinan JJ; HCA at paras.22-27 per Gleeson CJ, Gummow, Hayne and Callinan JJ.
[64] Coventry CLR at 246 per Gleeson CJ, Gummow, Hayne and Callinan JJ; HCA at para.27 per Gleeson CJ, Gummow, Hayne and Callinan JJ. See also Coventry CLR at 253 per Gleeson CJ, Gummow, Hayne and Callinan JJ; HCA at para.51 per Gleeson CJ, Gummow, Hayne and Callinan JJ, observing that “the drafting of the relevant provisions of the Bankruptcy Act 1966 [is] for all practical purposes identical to the statutory language considered in those [19th century English] cases.
[65] Coventry CLR at 238 per Gleeson CJ, Gummow, Hayne and Callinan JJ; HCA at para.5 per Gleeson CJ, Gummow, Hayne and Callinan JJ.
[66] Coventry CLR at 241 per Gleeson CJ, Gummow, Hayne and Callinan JJ; HCA at para.17 per Gleeson CJ, Gummow, Hayne and Callinan JJ.
[67] Coventry CLR at 243 per Gleeson CJ, Gummow, Hayne and Callinan JJ; HCA at para.20 per Gleeson CJ, Gummow, Hayne and Callinan JJ.
[68] Coventry CLR at 253 per Gleeson CJ, Gummow, Hayne and Callinan JJ; HCA at para.50 per Gleeson CJ, Gummow, Hayne and Callinan JJ.
[69] Coventry CLR at 257 per Gleeson CJ, Gummow, Hayne and Callinan JJ; HCA at para.70 per Gleeson CJ, Gummow, Hayne and Callinan JJ.
[70] See para.32 above.
[71] Bankruptcy Legislation Amendment Act 1996 (Cth) (“Bankruptcy Amendment Act 1996”), Schedule 1, Item 182.
[72] Bankruptcy Amendment Bill 1979, Explanatory Memorandum, para.75.2.
[73] Bankruptcy Amendment Act 1996, Schedule 1, Item 453.
[74] Morris at 467-469 per Riley J.
[75] See especially paras.55-57 above.
[76] Morris at 464 per Riley J.
[77] Morris at 470 per Riley J.
[78] Morris at 471-472 per Riley J.
[79] Section 153(2)(c).
[80] Section 82(1A).
[81] Section 40(3)(f).
[82] Coventry CLR at 243 per Gleeson CJ, Gummow, Hayne and Callinan JJ; HCA at para.20 per Gleeson CJ, Gummow, Hayne and Callinan JJ.
[83] Coventry CLR at 241 per Gleeson CJ, Gummow, Hayne and Callinan JJ; HCA at para.17 per Gleeson CJ, Gummow, Hayne and Callinan JJ.
[84] Morris at 472 per Riley J; Stewart at 80 per Cooper J.
[85] Applicant’s discharge submissions, para.1.
[86] Applicant’s discharge submissions, para.2 citing Stewart at 78 per Cooper J.
[87] [1979] FCA 2; (1979) 36 FLR 268 (“Reilly”).
[88] Reilly at 278 per Lockhart J.
[89] Reilly at 279-280 per Lockhart J.
[90] Reilly at 280 per Lockhart J citing Re Hawkins; Ex parte Official Receiver [1892] 1QB 890 at 893 per Vaughan Williams J.
[91] Reilly at 280 per Lockhart J.
[92] Reilly at 280 per Lockhart J.
[93] Stewart at 78 per Cooper J.
[94] Stewart at 79 per Cooper J.
[95] Stewart at 79 per Cooper J.
[96] Stewart at 79 per Cooper J.
[97] Stewart at 79 per Cooper J.
[98] See also Reilly at 278-280 per Lockhart J.
[99] See the conclusion reached at para.81 above.
[100] Reilly at 278 per Lockhart J; Stewart at 79 per Cooper J.
[101] Cf. Reilly.

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