• Specific Year
    Any

Robb, Lucy --- "With All My Worldly Goods I Thee Endow: A Review of the Attorney-General's Proposed Reform of Bankruptcy Law" [2003] SydLawRw 16; (2003) 25(3) Sydney Law Review 361

[*]The Form of Solemnization of Matrimony’ in The Book of Common Prayer and Administration of the Sacrements, Church of England.

[**] Bankruptcy Act 1966 (Cth); Family Law Act 1975 (Cth).

[†] Final year student, Faculty of Law, University of Sydney.

[1] The problem has been identified in a number of reports by different government bodies, including the Australian National Audit Office, The Management of Tax Collection, No 23 1999/2000 (hereafter ‘ANAO Report No 23’): <http://www.anao.gov.au> Senate Economics References Committee, Operation of the Australian Taxation Office (Canberra, AGPS, 2000) and the Annual Report 1999/2000 of the Commissioner of Taxation: <http://ato.gov.au/content/asp?doc=/content/corporate/anrep2000.html> .

[2] ANAO Report No 23, id at para 50.

[3] Under the Bankruptcy Act 1966 (Cth) (hereinafter Bankruptcy Act), ‘associated entities’ refers to companies (s5B); natural persons, for example the bankrupt’s close relatives, agents, employees, trustees or solicitors (s5C); partnerships (s5D), and trusts (s5E).

[4] Joint Taskforce on The Use of Bankruptcy and Family Law Schemes to Avoid Payment of Tax (hereinafter ‘Report of the Taskforce’) (2 May 2003): <http://www.law.gov.au/www/legalservicesHome.nsf> .

[5] Ibid. The Taskforce also produced an issues paper which is available at <http://www.itsa.gov.au/dir288/itsaweb.nsf/docindex/reform->reviews->reviews?opendocument>.

[6] The term ‘avoidance provisions’ is used in this article to refer to ss120, 121 and 122 of the Bankruptcy Act.

[7] See Penelope Carruthers, ‘Bringing the High Flyers Back to Earth? Sections 120 and 121 of the Bankruptcy Act’ (1995) 25 Western Australian Law Review 88 at 100.

[8] Australian Law Reform Commission, General Insolvency Inquiry Report No 45, Vol 1 (1988) at para 1.

[9] Ibid.

[10] Id at para 282.

[11] Report of the Taskforce, above n5 at para 4.29.

[12] Report of the Taskforce, ‘Recommendation 3’, above n5 at para 4.37.

[13] See below for a discussion of the circumstances in which a transaction will be considered voidable.

[14] Emphasis added.

[15] Bankruptcy Act s5.

[16] Emphasis added.

[17] For example, the trustee will not have access to the bankrupt’s clothing, necessary household items or his or her main form of transportation.

[18] See R P Meagher, W M C Gummow & M J Leeming, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (4th ed, 2002) chapter 3, for an explanation of the rules.

[19] Salomon v Salomon & Co Ltd [1897] AC 22.

[20] Lee v Lee’s Air Farming Ltd [1960] 3 All ER 420.

[21] Although, if the bankrupt owns shares in the company those shares will vest in the trustee under s58 of the Bankruptcy Act and the trustee will gain access to the company’s property by that means.

[22] H Ford & W Lee, Principles of the Law of Trusts (3rd ed, 1996) at 47.

[23] Calverly v Green [1984] HCA 81; (1984) 155 CLR 242.

[24] Ibid.

[25] Ibid.

[26] Section 122 of the Bankruptcy Act relates to preferential transfers of property to creditors. The origins of s122 will not be considered here because the definition of ‘associated entities’ under s5 of the Bankruptcy Act does not include creditors. Consequently, s122 has no application to the transactions currently under review.

[27] For a general history of bankruptcy law, see Dennis Rose, Lewis’ Australian Bankruptcy Law (11th ed, 1999) chapter 2. Also, PT Garuda Indonesia Ltd v Grellman [1992] FCAFC 188; (1992) 35 FCR 515.

[28] Lewis’ Australian Bankruptcy Law, id at 14.

[29] 32 Vic, c 71.

[30] 5 Vic, c 19.

[31] 51 Vic, c 19, s91.

[32] Although the wording was copied verbatim from s47 of the Bankruptcy Act 1883 (UK), which was a re-enactment of the 1869 statute.

[33] As a consequence, property transfers now fall under the ambit of the Act, even if they were only intended to be temporary, or the property was intended to be dissipated. This differs from the position under the old section: see, for example, Barton v Official Receiver (1983) 52 ALR 95.

[34] It was inserted into the Commonwealth Act upon the recommendation of the Committee appointed by the Attorney General of the Commonwealth to review the bankruptcy laws of the Commonwealth (Clyne Committee).

[35] Conveyancing Act 1919 (NSW) s37A; Property Law Act 1958 (Vic) s172; Law of Property Act 1969 (WA) s86; Mercantile Act 1867 (Qld) s46; Conveyancing and Law of Property Act 1884 (Tas) s40.

[36] 13 Eliz 1, c 5.

[37] Quoted in Cannane v Cannane Pty Limited (1998) 192 CLR 557 at para 37 (Gummow J).

[38] For a more detailed comparison of the old and new law, see Prentice v Cummins (No 5) [2002] FCA 1503.

[39] This appears to be a codification of the common law position under the old s121. See, James Edelman, ‘The Meaning of Fraud in Insolvency and Bankruptcy Law: A 400 Year Old Riddle’ (2000) C&SLJ 97.

[40] Williams v Lloyd [1934] HCA 1; (1933) 50 CLR 341 at 374 (Dixon J).

[41] Brady v Stapleton [1952] HCA 62; (1952) 88 CLR 322 at 333 (Dixon CJ, McTiernan & Fullagar JJ).

[42] Bankruptcy Act s120.

[43] Bankruptcy Act s121.

[44] Bankruptcy Act s122.

[45] Above n27.

[46] PT Garuda Indonesia Ltd v Grellman, above n28.

[47] [2003] HCA 36 at 30.

[48] Above n34.

[49] Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372 at 417.

[50] Bankruptcy Act s120(3).

[51] It is unclear to what extent a spouse’s unremunerated domestic work may amount to valuable consideration for the purposes of s120. Section 120(5) provides that factors such as the relationship between the parties, or their mutual love, shall not be taken into account. However, domestic labour, such as shopping, cooking and cleaning, which does have a market value, may be relevant: Mateo v Official Trustee in Bankruptcy [2002] FCA 344. If so, the trustee will be required to reimburse the non-bankrupt spouse for the full amount of his or her consideration. If the value of the work exceeds the market value of the asset, title will not vest in the trustee at all.

[52] Bankruptcy Act s121(1)(b)(i).

[53] Bankruptcy Act s121(1)(b)(ii).

[54] Cannane, above n38 at para 10.

[55] Bankruptcy Act s121(2).

[56] Carruthers, above n8 at 99.

[57] Above n41.

[58] Id at 361.

[59] Although contrast the case of Re Butterworth; ex parte Russell [1880] UKLawRpCh 156; (1882) 14 Ch D 588, in which the Court decided that the transaction was fraudulent in substantially the same circumstances.

[60] There are equivalent provisions in state and territory legislation. See, for example, Division 2 of the Property (Relationships) Act 1984 (NSW).

[61] In the Marriage of Fisher [1986] FamCA 35; (1986) 82 FLR 421 at 434.

[62] In the Marriage of Carter [1981] FamCA 18; [1981] FLC 91-061.

[63] Ibid.

[64] In the Marriage of Aroney [1979] FamCA 62; [1979] FLC 90-709 at 78-785.

[65] [1979] FLC 90-605.

[66] Ibid.

[67] In the Marriage of Hirst and Rosen [1982] FamCA 22; [1982] FLC 91-230 at 77, 251.

[68] Mallet v Mallet (1984) 156 CLR 605 (hereinafter Mallet).

[69] ANAO Report No 23, above n2.

[70] Id at chapter 3.

[71] Id at para 50.

[72] Ashton v Prentice (Federal Court of Australia, Hill J, 23 October 1998).

[73] Curruthers also suggests that the Court may have regard to factors such as the magnitude of the risk of the new venture, the total value of the disposed property and the extent to which the transferor continues to enjoy the disposed property. Above n8 at 99.

[74] Bankruptcy Act s121(3).

[75] Cannane, above n38 at para 30.

[76] Ex parte Mercer; In re Wise [1886] UKLawRpKQB 72; (1886) 17 QBD 290 at 299–300.

[77] Even if they did, their claim would be barred after six years: for example, Limitation Act 1969 (NSW) s6.

[78] There are some exceptions, for example banks and other lending institutions are required to fulfill prudential requirements.

[79] See, for example, the extract from Williams, above n59.

[80] Crabtree v Crabtree (No 2) [1964] ALR 820 at 821.

[81] W Blackstone, Commentaries on the Laws of England, Vol 1 (1965) at 421; Moss v Moss (orse. Archer) [1897] UKLawRpPro 23; [1897] P 263 at 267.

[82] ALRC, above n9 at paras 4.29–4.31.

[83] Separate ownership of property has always existed for de facto and same-sex couples.

[84] For a general history, see Lee Holcombe, Wives and Property (1983).

[85] For example, in NSW, a conveyance of land to two or more people now creates a tenancy in common: Conveyancing Act 1919 (NSW) s26.

[86] Henry A Finlay, Family Law in Australia (5th ed, 1997) chapter 32.

[87] Otto Kahn-Freund wrote, ‘the normal behaviour of husband and wife or parents and children towards each other is beyond the law — as long as the family is healthy. The law comes in when things go wrong.’ See Otto Kahn-Freund, preface to John Eekelaar, Family Security and Family Breakdown (1971) at 7, cited in Regina Graycar & Jenny Morgan, The Hidden Gender of Law (2nd ed, 2002). Contrast Kahn-Freund’s view with that of K O’Donovan, ‘Divisions and Dichotomie’ in Sexual Divisions in Law (1985), which argues that there are many direct and indirect invasions of family life by the law.

[88] Mallet, above n69 at para 2 (Gibbs CJ).

[89] Domestic labour alone does not create an interest in the family property: Burns v Burns [1984] Ch 317 at 330–331. See, for example, Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137, in which the material factor appeared to be the pooling of the couple’s financial resources.

[90] See, for example, Ayres v Evans (1981) 56 FLR 335.

Download

No downloadable files available