Barry v Coshott (No.3)
[2011] FMCA 541
•5 July 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BARRY v COSHOTT (No.3) | [2011] FMCA 541 |
| BANKRUPTCY – Creditor’s petition – further adjournment to allow settlement efforts in related Federal Court proceedings. |
| Bankruptcy Act 1966 (Cth), s.52(5) |
| Barry v Coshott (No.2) [2011] FMCA 228 Barry v Coshott [2010] FMCA 930 |
| Applicant: | STEPHEN MICHAEL BARRY |
| Respondent: | LJILJANA COSHOTT |
| File Number: | SYG 1738 of 2010 |
| Judgment of: | Smith FM |
| Hearing date: | 5 July 2011 |
| Delivered at: | Sydney |
| Delivered on: | 5 July 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Johnson |
| Solicitors for the Applicant: | Sally Nash & Co. |
| Counsel for the Respondent: | Mr S Bliim |
ORDERS
Pursuant to s.52(5) of the Bankruptcy Act 1966 (Cth), the period at the expiration of which the petition will lapse shall be the period of 24 months commencing on the date of the presentation of the petition.
Any application to amend the petition and any affidavits in support must be filed and served no later than 4pm on 19 July 2011.
Any affidavits in response, or in support of a further adjournment application must be filed and served no later than 4pm on 27 July 2011.
The petition is adjourned for further hearing on 1 August 2011 at 10.15am.
Costs reserved.
The applicant must give a copy of this order to the Official Receiver within 2 working days.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1738 of 2010
| STEPHEN MICHAEL BARRY |
Applicant
And
| LJILJANA COSHOTT |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
This is the fourth contested adjournment application which I have conducted in this creditor’s petition since it was referred to me by the Registrar. The background is found in two judgments I have published (see Barry v Coshott [2010] FMCA 930, and Barry v Coshott (No.2) [2011] FMCA 228).
As I indicated on the last occasion, I was satisfied that efforts to procure an annulment of Mr Coshott’s bankruptcy in the course of Federal Court proceedings should be allowed to come to fruition according to the terms of a settlement which were recorded in orders made by Rares J on 30 March 2011. Those orders have been subsequently amended, but the gist of them remained the same up until 28 June 2011.
In short, the settlement projected the full payment out of all of Mr Coshott’s creditors who had been admitted to participate in his bankruptcy, with interest. This includes the present petitioner against Mrs Coshott in relation to essentially the same joint indebtedness which is relied in the present petition. Mr Barry has not sought to amend the petition to rely on any separate indebtedness of Mrs Coshott. The present supporting creditors appear to be in a similar position.
The settlement noted by Rares J on 30 March 2011 involved the raising of money by Mr and Mrs Coshott’s sons from the Commonwealth Bank, by way of security provided on the family home at Bellevue Hill, on the basis that either they had beneficial title to that house as trustees of family trusts, or would procure it from the registered owners upon settlement with the Commonwealth Bank. It also involved further steps in relation to determining the entitlements of Mr Coshott’s trustee and his tax affairs. There is no evidence that these matters have, or will, cause the settlement to fail.
The additional evidence before me today indicates that there has been correspondence which sought to quantify some additional and separate liabilities of Mrs Coshott to Mr Barry. A letter has been written on behalf of Mr Barry, which estimates that an additional amount of about $100,000 would be owing by Mrs Coshott, and that she would also face liabilities in relation to legal costs for her separate litigation, including this petition, in the region of $141,000. The calculations in that letter have not been conceded, and some of the liabilities appear to be currently disputed in the Supreme Court or awaiting costs assessment or taxation.
Mrs Coshott has filed evidence from Mr Coshott today in support of a further adjournment of the petition. She seeks an adjournment until after a revised settlement date in relation to Mr Coshott’s joint and separate creditors, which was noted as being moved to 22 July 2011 in orders made by Rares J on 28 June 2011.
Mr Coshott’s affidavit and oral evidence sought to explain the failure to achieve the previous settlement date of 30 June 2011, as being the result of Mr Barry maintaining a claim to a lien over the certificate of title to the Bellevue Hill property as security for some of the outstanding costs. I am unclear whether the claimed lien includes amounts separately owing by Mrs Coshott, but assume that it does.
The evidence does not point to any other impediment to the settlement occurring, although it also suggests that the $2,500,000 to be raised from the Commonwealth Bank might be insufficient to pay off all of Mrs Coshott’s creditors as well as Mr Coshott’s joint and separate creditors who would be covered by the settlement in the proceedings in Rares J’s list. The evidence as to how the deficiency would be covered was left obscure before me today. Mr Coshott made vague suggestions that he understood that there would be some additional funds remaining from the borrowings from the Commonwealth Bank, and that his sons had additional resources available, which they would use to meet the claims of their mother’s separate indebtedness, including that to Mr Barry.
A number of well‑based criticisms of Mr Coshott’s evidence in this respect, and the absence of any evidence from Mrs Coshott or her sons, were made on behalf of Mr Barry today. They pointed to concerns which I have touched upon in both of my previous published judgments, and have previously drawn to the attention of Mrs Coshott’s representatives on other occasions. It is regrettable that the evidence tendered on behalf of Mrs Coshott continues to be poorly and belatedly presented.
However, I have been sufficiently persuaded that the reasons which I have previously given for adjourning the petition, in recognition of the settlement negotiations which have been conducted in the proceedings before Rares J, continue to have validity. I continue to believe that a full settlement with all of Mr and Mrs Coshott’s creditors is highly desirable, and I am not persuaded that there is no prospect of that happening under the proposed settlement, even now with its amended settlement date of 22 July 2011.
Mr Barry’s argument against any further adjournment of the proceedings today of the petition essentially invited this Court to wreck the settlement which had been arrived at in Rare J’s proceedings, that being in my opinion the inevitable effect of my ordering a sequestration order again Mrs Coshott today. As I indicated in my previous judgment, a sequestration order would almost inevitably require her new trustee to make claims and investigate the title of the Bellevue Hill property, if not by joining the proceedings before Rares J, then in fresh proceedings. It would become impossible to raise money on the Bellevue Hill property without the agreement of the new trustee, and most unlikely that this could be procured speedily and without added complications to all the existing litigation.
I remain of the view that it is in the general interests of all of Mrs Coshott’s creditors, whether separate or jointly with her husband, that the proposed settlement should be given reasonable opportunities to work itself through to satisfactory completion, notwithstanding my continuing uncertainty whether this will be achieved on or before 22 July 2011.
My concern as to the absence of evidence from the persons proposing to raise and make the funds available to meet all the creditors of Mr and Mrs Coshott, and of evidence showing their capacity to do that, has been somewhat allayed by an undertaking offered to the Court at the end of the hearing today by counsel for Mrs Coshott. He informed the Court that he had obtained instructions to make the offer on behalf of Mrs Coshott, and also Mr Coshott and their sons, James and Michael.
The terms of the offered undertaking are in writing and recorded on transcript. In short, as I understand it, it confirmed statements of intention which I would assume were also made to Rares J on 28 June 2011, that funds of $222,139.63 would be paid into the Federal Court to procure the release by Mr Barry of the certificate of title before 22 July 2011 and to allow the settlement to be executed, those funds to await the outcome of outstanding disputes currently before the Supreme Court and elsewhere.
Counsel for Mr Barry and other supporting creditors pointed to uncertainties in the formulation of the undertaking, and also uncertainties as to the basis of those making them to meet them. His criticisms are valid, but do not persuade me that the intention shown in the offered undertaking is not genuine or achievable. The suggested payment into court, could, indeed, provide a reasonable response to any reasonable justification Mr Barry might have for frustrating the settlement of the proceedings before Rares J.
In the circumstances in which the undertaking was offered, being exchanges between me and counsel for Mrs Coshott at the end of his submissions, and given the uncertainties in its terms, I have concluded that it would be inappropriate for me to accept the undertaking so as to give it consequences equivalent or greater than that of an injunction. However, I give weight to the offering of the undertaking, when deciding to adjourn the petition again. The offering of the undertaking has confirmed my opinion that a further adjournment of the petition is again an appropriate exercise of judicial discretion.
I shall discuss with the parties the further adjournment date, but note that it is likely to be either just before the expiry of the petition, or depending on my availability soon after the projected expiry of the petition. In all the circumstances, it appears to me to be appropriate now to extend the life of the petition under s.52(5) of the Bankruptcy Act, so as to remove uncertainties whether the petition is about to lapse. I note that Mrs Coshott did not oppose that course.
I note that I feel a considerable degree of frustration in my case management of the present petition, by reason of my being poorly informed of what has been happening before Rares J, while facing repeated contested adjournment applications. Neither party has yet tendered any transcripts, including of the most recent listing, which might better explain to me the nature and case management of the two Federal Court proceedings. I am acutely aware that I am far less informed than the Federal Court in relation to the potential issues concerning the title to the Bellevue Hill property, and I am also poorly informed about the disputes between Mr and Mrs Coshott and Mr Barry concerning their other costs assessment disputes, including those currently listed in the Supreme Court.
In this situation, I canvassed with both counsel whether the Court on its own motion, or on the application of one of the parties, should revisit the question of transferring the petition to the Federal Court. My first judgment, given in November last year, refused an application for this when made by Mrs Coshott. A transfer now has the added attraction that Mr Barry has become embroiled in the proceedings before Rares J, by reason of an effort by Mr Coshott in those proceedings to compel Mr Barry to co‑operate by freeing the title of the Bellevue Hill property, and by the now apparent necessity that any settlement in those proceedings must also address the claims of Mrs Coshott’s separate creditors.
It appears to me that there is a considerable waste of judicial resources occurring in the current litigation concerning the affairs of Mr and Mrs Coshott, due to a multiplicity of forums as well as proceedings. However, revisiting the reasons I previously gave for refusing to transfer the matter, on balance I think they remain valid today. There is no assurance that if I transfer the petition it would be placed in Rares J’s docket, and it would be entirely inappropriate for me to say anything as to whether this would or should happen.
I have concluded that the petition should remain in my list, and that the present situation remains one where the bankruptcy court should adjourn the petition to await developments in other courts which hold prospects of resolving the underlying indebtedness claimed in the petition and all other related issues.
I shall therefore, once again, adjourn the petition, making similar orders to those I have made on the last occasion. It is impossible for me at this stage to foreclose the possibility of further adjournment applications being successful or unsuccessful.
I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of Smith FM
Date: 19 July 2011
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