Property – bankrupt de facto partner precluded from making submissions as to existing equitable proprietary interest

In Walford & Bantock and Anor [2020] FamCAFC 210 (21 August 2020) the Full Court (Ainslie-Wallace, Watts & Austin JJ) heard a case in which a de facto husband had brought property adjustment proceedings while the de facto wife was bankrupt.

As ss90SM(15) and (16) prevents a bankrupt from making submissions as to vested property without leave and where the bankrupt must establish “exceptional circumstances” for such leave, the bankrupt unsuccessfully argued that she should be granted leave to make submissions as to her having an equitable interest in the de facto husband’s real property.

Austin J said (from [16]):

“[The de facto husband, respondent] … seeks an order granting him exclusive title to the home so … he denies that the applicant enjoys any equitable interest in the home…

[17] If the [de facto wife] applicant is subsequently found not to have any equitable interest in the home then any share in its title which is settled upon her by an adjustment order made in the exercise of discretion under Part VIIIAB of the Act does not constitute ‘after-acquired property’ under the Bankruptcy Act and did not vest in the trustee. The reason for the distinction is that the applicant’s proprietary interest in the home is only created by the Court’s ultimate exercise of statutory discretion; not recognised by the fulfilment of an equitable cause of action (…)

[20] (…) The embargo under s90SM(15) of the Act only precludes the applicant from making submissions at trial ‘in connection with’ any existing equitable proprietary interest she enjoys in the home, as that would be ‘vested bankruptcy property’ and therefore the exclusive province of argument between the trustee and the respondent. The applicant is not precluded by the ruling from making final submissions about her entitlement to non-vested property under the provisions of Part VIIIAB of the Act.

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[23] Not only is the appealed order interlocutory in nature, it … pertains to practice and procedure … Accordingly, particular caution should be exercised in granting leave to appeal from it (…)”

Watts and Ainslie Wallace JJ agreed, dismissing the application for leave to appeal.

Robert Glade-Wright is the founder and senior editor of The Family Law Book, a one-volume loose-leaf and online family law service (thefamilylawbook.com.au). He is assisted by Queensland lawyer Craig Nicol, who is a QLS Accredited Specialist (family law).

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