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The Liquidator and the Family Court – friends or foe?

The Liquidator and the Family Court – friends or foe?

In this column I have previously opined on how independent financial experts, such as insolvency practitioners, add value in Family Law property disputes. During the past decade, amendments to the Family Law Act 1975 (FLA) and Bankruptcy Act 1966, have largely aligned procedures between the two jurisdictions, where one party is a bankrupt.

However, no such accommodation exists for the Corporations Act 2001 (CA), resulting in liquidators and administrators of insolvent companies tending to give the Family Court of Australia (Family Court) a wide berth.Reasons for this are cited as including perceived a lack of confidence and certainty as to available remedies, a general unavailability of costs orders, and (no doubt with suitable respect) an apparent unacquaintedness with commercial realities, as compared to the more familiar surroundings of the State Supreme Courts and the Federal Court of Australia.

Recently, however, there has been a rise in reported cases from the Family Court in which liquidators of insolvent companies have sought to actively participate in proceedings between separating couples.

Such circumstances generally, but not always, arise where the separating parties are co-directors/shareholders of a subject insolvent company, and one of those parties seeks to involve the company’s liquidator in Family Court proceedings in respect of disputed asset ownership.

However, section 75(2) of the FLA provides, amongst other things, that in taking account of matters regarding maintenance (and therefore the distribution of property as between the parties), the Court shall take into consideration “the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt…” Furthermore, section 79 of the FLA enables the Family Court to make orders affecting the property of parties to the marriage in some circumstances in favour of creditors of one or another or both. This contrasts with the traditional approach taken by liquidators of seeking the exercise of the Family Court jurisdiction in the CA – often a far more difficult prosecution.

These FLA provisions prove useful where the impugned conduct of one or both parties may fall outside of the ordinary limitation periods attached to the claim under the CA. The range of remedies available to liquidators in proceedings before the Family Court also generally avoid issues of attachment to and execution against personal property usually associated with Liquidators proceeding against individual respondents. Experience suggests the Family Court is particularly attracted to remedies addressing shortfalls in employee entitlements not otherwise addressed in the winding up.

Tony Lane is a Registered and Official Liquidator at Vincents Chartered Accountants.
For more information, contact Vincents on (02) 6274 3402
www.vincents.com.au

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