Boothe v Commonwealth of Australia - [2002] FCA 1101

FEDERAL COURT OF AUSTRALIA
Boothe v Commonwealth of Australia [2002] FCA 1101
BANKRUPTCY – realisations charge – the whole of the amount of a judgment recovered by the trustee of a deed of assignment is, when paid to his solicitors pursuant to an authority to receive, “received” by that trustee.
Bankruptcy (Estate Charges) Act 1997, s 8
IN THE MATTER OF ROBERT GALLUZZO & ANOR
STEPHEN ALAN BOOTHE v COMMONWEALTH OF AUSTRALIA
N 7442 of 2001
WHITLAM J
6 SEPTEMBER 2002
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 7442 of 2001

IN THE MATTER OF ROBERT GALLUZZO AND
LORRAINE KAREN GALLUZZO

BETWEEN:

STEPHEN ALAN BOOTHE
APPLICANT

AND:

COMMONWEALTH OF AUSTRALIA
RESPONDENT

JUDGE:

WHITLAM J

DATE OF ORDER:

6 SEPTEMBER 2002

WHERE MADE:

SYDNEY

THE COURT DECLARES THAT:
1.The whole of the amount of $325,000 paid in satisfaction of the judgment in action no. 5723 of 2000 in the District Court of New South Wales was received by the applicant as trustee of the deed of assignment executed in relation to Robert Galluzzo and Lorraine Karen Galluzzo.

2.The amounts paid out of the said sum by authority of the applicant to his solicitors and to Insolvency Management Fund Pty Ltd are not permitted deductions within the meaning of s 8(3) of the Bankruptcy (Estate Charges) Act 1997.

AND ORDERS THAT:
3.        The applicant pay the respondent’s costs of the proceeding.
Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 7442 of 2001

IN THE MATTER OF        ROBERT GALLUZZO AND
LORRAINE KAREN GALLUZZO

BETWEEN:

STEPHEN ALAN BOOTHE
APPLICANT

AND:

COMMONWEALTH OF AUSTRALIA
RESPONDENT

JUDGE:

WHITLAM J

DATE:

6 SEPTEMBER 2002

PLACE:

SYDNEY

REASONS FOR JUDGMENT

The applicant is the trustee of a deed of assignment executed on 8 September 1998 by Robert Galluzzo and Lorraine Karen Galluzzo under Pt X of the Bankruptcy Act 1966 (“the Act”). This case concerns the amount on which the realisations charge payable by the applicant as such trustee under Pt 3 (ss 6, 7, 8) of the Bankruptcy (Estate Charges) Act 1997 (“the Estate Charges Act”) is calculated for the period ended 31 October 2001.
Section 6 of the Estate Charges Act imposed a charge, calculated in accordance with ss 7 and 8, in respect of “amounts received by a trustee … during a charge period”. (Section 4 of that Act defined a charge period as a period of 6 months commencing on 1 November or 1 May.) By virtue of s 7 the amount of charge payable for a charge period is an amount equal to 8% of the “amount on which charge is payable” for the period. Section 8 provided:
“(1)The amount on which charge is payable for a charge period is the amount realised less the permitted deductions.
(2)The amount realised is the total amount received by the trustee in the capacity referred…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2002] FCA 1101
Decision Date: 6 SEPTEMBER 2002

CaseChat Overview and Summary

In Boothe v Commonwealth of Australia, the Federal Court of Australia considered the interpretation of the Bankruptcy (Estate Charges) Act 1997 in the context of a dispute over the calculation of a realisations charge for a trustee of a deed of assignment. The applicant, Stephen Alan Boothe, as the trustee of a deed of assignment executed by Robert Galluzzo and Lorraine Karen Galluzzo, challenged the liability to pay the realisations charge in respect of the full amount of a judgment debt of $325,000 recovered by him in a District Court action against Allianz Australia Insurance Limited. The Court was required to determine whether certain payments made by the applicant to his solicitors and Insolvency Management Fund Pty Ltd constituted deductions from the amount received by the trustee for the purposes of calculating the realisations charge.

The Court found that the entire amount of the judgment debt, despite being paid to the applicant's solicitors, was "received" by the applicant as trustee, and thus subject to the realisations charge. The Court rejected the applicant's argument that physical possession was required for an amount to be considered "received," noting that the statutory language was broad and unambiguous. The Court also dismissed the applicant's alternative arguments that the costs and disbursements of the action were permitted deductions or that the solicitors and the fund were secured creditors. The Court held that these payments were not incurred in the course of carrying on the business of the debtors or in relation to secured creditors, and thus did not qualify as deductions under the Act.

The Court's reasoning was based on the clear language of the Bankruptcy (Estate Charges) Act 1997 and the interpretation of similar provisions in prior legislation. The Court emphasised that the payment of the judgment debt in its entirety to the applicant's solicitors did not alter the nature of the receipt, and that the obligation to pay was discharged upon the payment. The Court also noted that the applicant's agreements with his solicitors and Insolvency Management Fund Pty Ltd did not have the effect of altering the character of the receipt. As a result, the Court declared that the entire amount of $325,000 was received by the applicant as trustee and that the payments in question were not permitted deductions. The applicant was ordered to pay the respondent's costs of the proceeding.

Orders