Valera Pty Ltd v Walker

HIS HONOUR : For the reasons I gave in dealing with the third plaintiff's claim on the summons, I am not satisfied that the third cross-defendant has yet become a bankrupt. It is possible and indeed probable that he will become a bankrupt. It is possible that he has already become a bankrupt or will become a bankrupt today, in which case his bankruptcy will be deemed to have commenced from the first instant of today after midnight. That would have implications for what order can be made under s 20 of the Property (Relationships) Act 1984 (NSW).

If the plaintiff has become bankrupt or becomes bankrupt as from the first instant of today, the cross-claimant's claim would only be stayed by virtue of s 58(3) of the Bankruptcy Act 1966 (Cth) if her claim is in respect of a provable debt.

I have not had the benefit of argument as to whether a claim for relief under s 20 of the Property (Relationships) Act is a claim in respect of a provable debt, but there is authority that it is not (see Byczko v Sheahan [2005] FMCA 169).

Prima facie the claim for relief under the Property (Relationships) Act would not be a provable debt as the defendant's liability would not arise by reason of an obligation incurred before the date of bankruptcy. The rights arising under s 20 arise on the making of the order under that section (see Fisher v Fisher (1986) 161 CLR 438 at 453).

If, as I take to be the case, the third cross-defendant is not presently bankrupt then I accept that there is likely to be a significant change to the financial circumstances of the third cross-defendant (see s 20(1)(a)). Before adjourning the application pursuant to s 21 on that ground, I would need to be satisfied that an order that the court could make with respect to the property of the parties, or either of them, if that change in financial circumstances occurs is more likely to do justice between the parties, than an order that the court could make today. Even if satisfied of that, the power to adjourn is still discretionary.

If, as I think is the case, an order under s 20 is not a provable debt, then any order that is made could only be enforced against property that does not vest in the trustee, or in respect of property to which the third cross-defendant, assuming he becomes bankrupt, may again become entitled if he is discharged from bankruptcy or the bankruptcy is annulled.

In those circumstances I do not see that an order that the court could make at some time in the future would be more likely to do justice between the parties than an order that the court could make today. It may well be that the evidence of the third cross-defendant's assets and liabilities is inadequate which will create significant difficulties in deciding what order should be made, if any, under s 20. But that does not seem to me to be a sufficient reason for adjourning the proceedings. Orders have been made for the service of evidence. Whilst the third cross-defendant is presently incarcerated, he has had legal representation. I am not satisfied that he would not have been able to put on any necessary evidence prior to the hearing.

In the circumstances I refuse the application for the adjournment.