Sunday 7 February 2016

A creditor, a bankrupt and a Binding Financial Agreement

The difficulties that arise in relation to enforcing a Binding Financial Agreement that provides for the division of assets and liabilities between a couple has increased following the recent decision of Grainger & Bloomfield.

In this case Ms Bloomfield obtained a judgement debt against Mrs Grainger for $2,100,000 in 2011. On 14 October 2012 a bankruptcy notice was served on Mrs Grainger. On 1 November 2012 Mr and Mrs Grainger entered into a Binding Financial Agreement that provided for Mrs Grainger to transfer her interest in a property to Mr Grainger. Mrs Grainger became a bankrupt on 7 January 2013.

Ms Bloomfield applied to the Court to set aside the Binding Financial Agreement. Ms Bloomfield was seeking that Mr Grainger transfer the property to Mrs Grainger's Trustee in Bankruptcy or alternatively pay the Trustee the equivalent value.

Mr Grainger responded arguing that as Mrs Grainger was a bankrupt Ms Bloomfield, as a creditor, did not have standing to bring her Application.

The first Judge decided that Ms Bloomfield did have standing. Mr Grainger appealed.
On appeal the Full Court of the Family Court agreed that Ms Bloomfield had standing to bring her application as, while the Family Law Act had been amended to restrict applications by creditors seeking involvement in property division proceedings nothing in the Act stopped a creditor bringing an application to set aside a Binding Financial Agreement.

Whether the Binding Financial Agreement should be set aside will now be determined by the Court. 

1 comment:

  1. Hi Rose - this is more the effect of the bankruptcy and family law harmonisation amendments, giving power to third parties to apply to set aside orders that defeat their interests. It was in fact crook barristers using Part VIIIA financial agreements to avoid loss of assets to the Trustee in Bankrupcty for their huge tax default that led to these reforms. Well done - great article!
    Lee Galloway

    ReplyDelete