Valder & Saklani (2022) FamCAFC 142

The case of Valder & Saklani [2021] FamCAFC 142 provides further assistance to practitioners in the area of interplay between family law and bankruptcy. 

The Appellant was a creditor of the bankrupt estate of the Second Respondent. 

Consent Orders were entered into between Ms Saklani, the First Respondent, and Mr Saklani, the Second Respondent. The parties were married at the time. 

The Appellant asserted that she was an unpaid creditor of the Second Respondent and thus a person affected by the Orders for the purpose of s 79A, and she was therefore entitled to apply to have the Consent Orders set aside. 

That application was summarily dismissed as Her Honour was of the view that whatever may have been the case at the time the application was filed, the Appellant no longer met the criteria of being a person affected by the Order because the Second Respondent had been discharged from the bankruptcy. 

The approach taken was that upon the discharge, the Second Respondent was released from the debt he owed the Appellant who thereby ceased to be a person affected by the Consent Orders. 

At paragraph 26, we are reminded:

“An application by a creditor under s 79A of the Act to set aside property settlement consent orders entered into by a bankrupt is such an application which requires leave from the Federal Court of Australia (“the Federal Court”), the [then] Federal Circuit Court of Australia and, where s 35 of the Bankruptcy Act applies, the Family Court of Australia (Fraser v Deputy Commissioner of Taxation (1996) 69 FCR 99).”

At paragraph 29:

“At the time the appellant commenced the proceedings in the Family Court she was entitled to do so. She was the creditor of a bankrupt estate which had been diminished by the operation of the consent orders. She had the requisite leave to commence the proceedings. As well as being “a person affected by an order” for the purposes of s 79A(1), the appellant is also a “party”, a “creditor” and a “person whose interests would be affected by the making of the instrument or disposition” for the purposes of s 106B(4AA)(a), (b) and (c) of the Act.”

The key concepts really then were the meaning of “creditor” in the various Acts and whether the fact that the trustee was a person affected or a creditor was also discussed. 

The court said:

“However, a discharge does not operate to revest in the bankrupt the property that had been vested in the trustee (Pegler v Dale (1975) 1 NSWLR 265; Daemar v Industrial Commission of New South Wales (No 2) (1990) 22 NSWLR 178). The bankrupt estate continues until it is annulled because the debts have been paid in full (s 153A of the Bankruptcy Act), by court order (s 153B of the Bankruptcy Act) or because the creditors have accepted a payment under s 73 of the Bankruptcy Act (s 74 of the Bankruptcy Act).”

This means that even after discharge, the Appellant “remained a creditor for a number of purposes and provisions of the Bankruptcy Act. Importantly, any dividend that she might receive remained diminished by the consent orders which had the effect of removing property from the bankrupt estate which would otherwise have been available for the second respondent’s creditors, including the appellant.”

This court considered “we are satisfied that the appellant remained a person affected by the consent orders, notwithstanding the second respondent’s discharge from bankruptcy”.  The appeal was successful and the Order dismissing the proceedings was set aside and the proceedings were remitted for further hearing.