BOOK REVIEW: The Interaction of insolvency and family law
Michael Murray, General Editor
Published in 2/4 Australia Insolvency Law Bulletin 79 (December 2001)
Klotz, Robert
Bankruptcy, Insolvency and Family Law (2nd ed)
Carswell Press Canada 2001
Bankruptcy, Insolvency and Family Law by Robert Klotz of Canada is an extremely well researched, useful and readable book, for practitioners, judges and academics in both the insolvency and family law fields. There is no text like it in Australia. Books here on family law touch upon insolvency in an incidental way; likewise family law issues are treated incidentally in bankruptcy texts. (One exception, Butterworths Bankruptcy Law and Practice, which has useful chapters on bankruptcy and family law and child support). Klotz's book brings it all together for the bankruptcy and family law practitioner.
The interaction between bankruptcy and family law typically involves either a divesting of assets through bankruptcy to the detriment of the spouse and family, or the passing of assets to the family in anticipation of pending bankruptcy to the detriment of the creditors. It is an increasingly common area of law in Australia in the last decade, but its complexities have remained largely unresolved. This is probably due to the legislature's political unwillingness to resolve the complex priorities, extending beyond legal issues, between the rights of the spouse and the family, and the rights of creditors. With unsympathetic legislation, judicial efforts have been necessarily confined to interpreting bankruptcy concepts of voidable dispositions in the context of family law, and interpreting family law concepts within the context of a bankruptcy claim.
This text comprehensively explains these interactions, from a Canadian perspective as well as internationally, on the admirable premise that 'in order to extrapolate Canadian law where there are few cases precisely on point, one should consider foreign precedents occurring within the confluence of these two subject areas'. The book, with its extensive international focus, can only serve to promote that worthy aim in Australia and other similar jurisdictions.
But the book's perspectives are not only jurisdictional. It examines the issues from every angle, including from that of the non-bankrupt spouse, the creditors, the bankrupt, even the lawyers. And as the title suggests, the text extends its analysis beyond bankruptcy, looking also at the insolvent spouse, and family law aspects of corporate and business insolvency. It thus examines debtor-creditor issues arising in family law cases in respect of trust claims, fraudulent conveyances (Australia's Statute of Elizabeth provisions), partition and sale of property, and child support. As for the matrimonial or insolvency lawyers, the book includes a section on methods to counter attempts by clients to avoid payment of their fees by way of settling a matrimonial claim - 'sweetheart deals', which attempts, Mr Klotz notes, 'are, fortunately, infrequent'
The broad range of other topics in the book can only be summarised in an overview: the priority of a family law order in a subsequent bankruptcy; implied, resulting and constructive trusts; the doctrine of exoneration; the question of collusive division of property between non-separating spouses; protection of the family home; pre-bankruptcy dispositions of property; and 'artificial' business failure. All these are topical issues in Australia, from the sometimes proposed (usually by family lawyers) 'homestead' protection adopted in some US States and in Canada, to new Part VIIIA of the Family Law Act 1975 (Cth) by which pre-nuptial and nuptial division of property is permitted.
A section on 'malicious spouses' raises many of the areas of abuse of process in this area with which we are familiar. A defendant spouse's petition for bankruptcy the day before a family law claim is to be heard - in one Canadian case, one and half hours before - is one that has been seen not only in Australia but, as the book reports, from all countries. Spouse emotions know no legal boundaries. In one extreme instance, a Canadian case, involved an annulment ordered of a bankruptcy arising from collusion by the petitioning creditor, who happened to be the bankrupt's new spouse, who had presented a petition against him for a debt of only $1000. In that respect, the position in Canada appears to be the same as in Australia: that an annulment order can be made, but this may not succeed if the spouse is, in fact, insolvent.
An interesting approach to this situation in Canada is to allow the bankruptcy court to impose conditions on the bankrupt's discharge if the principal creditor is the spouse and the bankruptcy of the other spouse was intended to frustrate the other's family law claim; in such a case, the bankruptcy court can impose payment requirements on the bankrupt as a condition of discharge, up to 50% of the claim or more, payable to the trustee. The 'attitude and actions' of the bankrupt before and after bankruptcy are subject to the court's assessment.
Canadian bankruptcy and family law is similar to that in Australia. The book would be a useful addition to the library of any Australian lawyer who practices in either or both of family law and insolvency, or in matters of domestic relations. Indeed, from a local perspective, the major Australian cases - Balnaves, Baumgartner, Calverley v Green, DCT v Swain, McMaster, Official Trustee v Mitchell, Page, Twigg - are referred to in the text, and accurately reported.
But even accepting that there are differences in the two jurisdictions, it is healthy to examine the law with a globalised perspective, bringing in concepts, ideas and approaches that might supplement our own endeavours to resolve this complex area. Solutions may be found in legislative processes, or, in individual cases, by judicial or negotiated means - more so in an area where even though there may be international differences in legal approach, human responses are universal.
Finally, the book is well indexed, each of the 16 substantive chapters contains an introductory summary of its contents, with clear headings throughout each chapter, and there are extensive cases footnoted from all common law jurisdictions. The book concludes with chapters containing case studies, (Canadian) forms and precedents, legislative excerpts from Canada, Australia, New Zealand, the US, the UK and South Africa, and a bibliography based on each jurisdiction.
Bankruptcy, Insolvency and Family Law is available from LBC Information
Services, priced at $115. It is a looseleaf service, supplemented with updates
supplied to subscribers periodically and invoiced separately.