Bankruptcy significantly alters a person's legal rights. Parties in family property settlement proceedings should be cautious of the impact of bankruptcy on their ability to litigate the proceedings, as a recent Federal Court decision by the Full Court held that bankrupts are not entitled to prosecute appeals of property settlement orders.

In Glover & Webster [2021] FedCFamC1A 69 (19 November 2021), the Full Court comprising of Sttrickland, Ainslie-Wallace and Aldridge JJ heard an appeal from a decision of Baumann J relating to a binding financial agreement. During the appeal, the Full Court was required to decide on the issue of a bankrupt’s ability to appeal property orders, during which the Full Court held that a bankrupt did not have sufficient interest in the property order to give her standing to prosecute the appeal.

In this case, the appealing party was the wife who became a bankrupt amidst the proceedings.

The Full Court, from [33], held that the interest in a property settlement order is one of property, which vested in the trustee in bankruptcy. This was because, pursuant to [38] of the decision, any property the bankrupt would have became entitled to after a successful appeal would be vested in her trustee in bankruptcy as after-acquired property pursuant to Section 58(1)(b) of the Bankruptcy Act. Hence, and in such cases, the bankrupt person, in her personal capacity, had no standing in the appeal, and could therefore not go prosecute the appeal unless the trustee in bankruptcy was willing to do so.

In this case, however, the trustee in bankruptcy had declined to follow through with the appeal. The appeal was therefore dismissed.

Implications

Under Australian family laws, a bankrupt is entitled to commence property settlement proceedings (Guirguis & Guirguis [1997] FamCA 6). This has created confusions and misconceptions as to his/her right to lodge and prosecute appeals. 

The Full Court’s decision has provided clarity on this point, and for better or for worse, it is something a litigating party should be mindful of when pursuing his/her property settlement litigations.

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