Bloomfield and Grainger is yet another attempt to set aside a financial agreement

The recent case of Bloomfield and Grainger is yet another attempt to set aside a financial agreement. This case is different in that on this occasion it was a creditor of the wife who attempted to set the agreement aside.

The creditor, Ms Bloomfield, relied on the sections of the Family Law Act dealing with the rights of third parties to recover debts owed by a party to the marriage. Ms Bloomfield’s case was that the agreement should be set aside because it did not comply with the formal requirements necessary to make the agreement binding. Ms Bloomfield was unsuccessful and her claim was struck out.

Background

In November, 2012 Ms and Mr Grainger entered into a financial agreement under s90C of the Family Law Act (during the marriage). The effect of this agreement was that Ms Grainger transferred her interest in a property to Mr Grainger. Two months later, Ms Grainger became a bankrupt (on 7 January, 2013). Ms Bloomfield was a judgment creditor of Ms Grainger at that time.

The trustee in bankruptcy was a respondent to the proceedings but did not enter an appearance for this application.

The Central Issue

The central issue was whether a creditor of a bankrupt has the standing to apply to have the agreement set aside.

What Ms Bloomfield (as a creditor of a bankrupt) overlooked was the relationship between the Bankruptcy Act and the Family Law Act. In particular S58 (1) of the Bankruptcy Act, which provides that the property of a bankrupt vests forthwith with the Official Trustee. As a result of this section, Ms Grainger was automatically replaced by the Trustee in Bankruptcy.

Under the definition of “matrimonial cause” in S4 of the Family Law Act, the only parties who could rely on the failure to comply with the formal requirements as a ground to set the agreement aside are the husband and wife (if she was not a bankrupt) as parties to the agreement. Seeing as the wife was a bankrupt, her trustee in bankruptcy ‘stood in her shoes’ and became the party in her place.

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