Australian Meat Processor Corporation Limited v O'Connor
[2009] FCA 355
•1 April 2009
FEDERAL COURT OF AUSTRALIA
Australian Meat Processor Corporation Limited v O’Connor [2009] FCA 355
AUSTRALIAN MEAT PROCESSOR CORPORATION LIMITED ACN 082 373 448 v GREGORY JAMES O'CONNOR and SCOTT DARREN PASCOE
NSD 225 of 2009
GRAHAM J
1 APRIL 2009
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 225 of 2009
BETWEEN: AUSTRALIAN MEAT PROCESSOR CORPORATION LIMITED ACN 082 373 448
Applicant
AND: GREGORY JAMES O'CONNOR
First RespondentSCOTT DARREN PASCOE
Second Respondent
JUDGE:
GRAHAM J
DATE OF ORDER:
1 APRIL 2009
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.To the extent that such leave is necessary by reason of the provisions of Section 58(3) of the Bankruptcy Act 1966 (Cth) and the making of the sequestration order on 12 March 2009 in respect of the Estate of Gregory James O’Connor, Australian Meat Processor Corporation Limited have leave to continue and take fresh steps in proceedings instituted by it in the Equity Division of the Supreme Court of New South Wales against the said Gregory James O’Connor being proceedings no. 4015 of 2008 in that Court (the Supreme Court Proceedings) upon the following terms
(a) such leave does not extend to the taking of any step to enforce any judgment obtained in such proceedings against the person or property of the said Gregory James O’Connor without the prior leave of the Federal Court of Australia in its bankruptcy jurisdiction;
(b) Australian Meat Processor Corporation Limited shall not, without such prior leave, prove in respect of the whole or any part of such judgment in the bankruptcy of the said Gregory James O’Connor if the sequestration order is not set aside; and
(c) Australian Meat Processor Corporation Limited will not oppose, Scott Darren Pascoe, in his capacity as Trustee of the bankrupt Estate of Gregory James O’Connor from being joined in the Supreme Court Proceedings at any time.
2.The Applicant, Australian Meat Processor Corporation Limited, pay the costs of the Second Respondent, Scott Darren Pascoe, of these proceedings.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 225 of 2009
BETWEEN: AUSTRALIAN MEAT PROCESSOR CORPORATION LIMITED ACN 082 373 448
Applicant
AND: GREGORY JAMES O'CONNOR
First RespondentSCOTT DARREN PASCOE
Second Respondent
JUDGE:
GRAHAM J
DATE:
1 APRIL 2009
PLACE:
SYDNEY
REASONS FOR JUDGMENT
The matter presently before the Court is an Application filed 19 March 2009 in which an order is sought pursuant to s 58(3)(b) of the Bankruptcy Act 1996 (Cth) (‘the Bankruptcy Act’) granting leave to the applicant to continue proceedings number 4015 of 2008 in the Equity Division of the Supreme Court of New South Wales against Gregory James O’Connor, the first respondent, and take all necessary steps in those proceedings together with all necessary fresh steps. Section 58(3) of the Bankruptcy Act provides as follows:
‘58(3)Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b)except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.’
Proceeding number 4015 of 2008 in the Equity Division of the Supreme Court of New South Wales was commenced by the filing of a Summons on 1 August 2008.
On 1 August 2008 freezing orders were made in those proceedings in which the sole defendant is the first respondent, Gregory James O’Connor, such orders being continued on 5 August 2008. On or about 27 November 2008 a Statement of Claim was filed in the Supreme Court proceedings. I am informed by counsel for the applicant, which is the plaintiff in the Supreme Court proceedings, that an application is presently before the Supreme Court for leave to file and serve an Amended Statement of Claim and to add as defendants four other parties being Gregory John McCallum, GM Consultancy (International) Pty Limited, ACN 101 962 538, Sandra Julia O’Connor and Robert James Campany. At this stage no orders have been made adding those parties as defendants, nor has an order been made granting leave to file and serve the Amended Statement of Claim.
In the Statement of Claim presently before the Court it is alleged that Mr O’Connor served as Chief Financial Officer of the plaintiff during the period 24 August 1998 – 16 June 2008. Allegations are made of various duties said to be owed by Mr O’Connor to the applicant by reason of his contract of employment, by operation of certain provisions of the Corporations Act 2001 (Cth) and by virtue of his obligations said to arise as a result of a fiduciary relationship between the applicant and himself. Without canvassing in detail all of the allegations in the Statement of Claim it is alleged that he breached his duties as an employee, as an officer of the applicant, and as a fiduciary in a number of respects by, amongst other things, creating false invoices said to be payable by the applicant and causing such invoices to be paid. Other allegations relate to motor vehicles where it is said that Mr O’Connor obtained and received a beneficial interest in certain motor cars as a result of breaches of duty alleged against him. There are also claims for damages in respect of breaches of the duties said to be owed by Mr O’Connor to the applicant company.
In paragraph 28(a) of the Statement of Claim under the heading Particulars of Loss a claim has been quantified at $4,261,488. In the proposed Amended Statement of Claim further allegations are made alleging an indebtedness on the part of the proposed second defendant to the applicant, an alleged indebtedness from the proposed third defendant to the applicant, an alleged indebtedness by the fourth defendant to the applicant, and an allegation that a property referred to as ‘the Liverpool property’ is held on trust for the applicant.
Leave is presently sought under s 58(3) of the Bankruptcy Act so as to enable claims against the proposed second, third, fourth and fifth defendants to be made and ventilated in the Supreme Court proceedings, it being urged that Mr O’Connor is a necessary party to those proceedings.
The trustee of the bankrupt estate of Mr O’Connor, the second respondent, appeared when the matter was before the Court on 25 March 2009. Ms Nash, solicitor, who appeared for the second respondent, informed the Court that the second respondent did not oppose the form of orders handed up by counsel for the applicant being made. However, she observed that the second respondent reserved the right to claim that the property, said to be held in trust for the applicant, is in fact property of the bankrupt.
Mr Bilinsky, solicitor, who appears for the first respondent, sought an opportunity on the last occasion to consider the material relied upon to determine what the position of Mr O’Connor would be. He has today informed the Court that the first respondent does not oppose the orders sought in the short minutes which were handed up on the last occasion being made.
Under s 58(1)(a) of the Bankruptcy Act the property of a bankrupt vests forthwith in the Official Trustee where a debtor becomes a bankrupt. Under s 116 of the Bankruptcy Act all property that belonged to or was vested in a bankrupt at the commencement of a bankruptcy or has been acquired or is acquired by him or has devolved or devolves on him after the commencement of the bankruptcy and before his discharge, is property divisible amongst the creditors of the bankrupt.
However, under s 116(2) divisible property does not extend to include:
‘(a) property held by the bankrupt in trust for another person’
In relation to provable debts s 82 of the Bankruptcy Act relevantly provides:
‘82(1)Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he … may become subject before his … discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his … bankruptcy.
…
(2)Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy.
…’
In Re Sharp; Ex parte Tietyens Investments Pty Ltd (in liquidation) (‘Tietyens Investments’) an unreported decision of Weinberg J of 26 October 1998, his Honour referred to a judgment of Young J in Chittick v Maxwell (1993) 118 ALR 728 in which his Honour explained the operation of s 82 of the Bankruptcy Act at pages 738-9. Weinberg J said:
‘… His Honour emphasized the width to be accorded to the concept of a debt or a liability provable in bankruptcy in that section. His Honour’s analysis of Ex parte Llynvi [Coal] and Iron Co; re Hide (1871) LR 7 Ch App 28 at 31-32 per James LJ; Britter v Sprigg (1900) 26 VLR 65 at 82; Cutten and Harvey v Mount (1988) 14 ACLR 662 at 667, and Re Vassis; ex parte Leung (1986) 9 FCR 518 at 527 provides a cogent rationale for the modern tendency to give a narrow interpretation to the exclusionary aspect of s82(2). …’
The rationale behind s 58(3) of the Bankruptcy Act was considered by Hill J in Re Rose; ex parte Devaban Pty Ltd (unreported 7 October 1994). That rationale has been cited with approval in more recent cases including Tietyens Investments. Whilst there are some aspects of the Statement of Claim in the Supreme Court proceedings as presently formulated which would suggest that it is inappropriate to allow the Supreme Court proceedings to continue, there are other aspects in respect of which the mechanism for lodging proofs of debt would, in my opinion, be inappropriate.
In my opinion, this is a case where leave should be granted especially in circumstances where what one might call derivative claims are to be made against the second, third, fourth and fifth defendants who are shortly, one would assume, to be made additional parties in the Supreme Court proceedings. In my opinion the orders sought in the short
minutes handed up on the last occasion and to which the parties have consented should be made.
I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham. Associate:
Dated: 15 April 2009
Counsel for the Applicant: M J Dawson Solicitor for the Applicant: Tress Cox Lawyers Solicitor for the First Respondent: C Bilinsky of Horowitz & Bilinsky Solicitor for the Second Respondent: S S Nash of Sally Nash & Co (on 25 March 2009 only)
Date of Hearing: 25 March and 1 April 2009 Date of Judgment: 1 April 2009
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