Bremner v French (No 5); Aesthete 101 Pty Ltd v Stone (No 2)

[2024] NSWSC 835

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Bremner v French (No 5); Aesthete 101 Pty Ltd v Stone (No 2) [2024] NSWSC 835

Hearing dates:

28 June 2024

Date of orders:

28 June 2024

Decision date:

28 June 2024

Jurisdiction:

Equity

Before:

Parker J

Decision:

See [42]-[43]

Catchwords:

CIVIL PROCEDURE — federal jurisdiction — special federal matters — Bankruptcy Act 1966 (Cth) — personal insolvency agreement — debtor a co-owner of five properties subject to orders appointing statutory trustee for sale — debtor assigns interest in three of the properties to PIA trustee — PIA trustee assigns debtor’s interest to purchasers — proceedings by purchasers against sale trustee and other co-owner to obtain registration — whether jurisdiction “in bankruptcy”

CIVIL PROCEDURE — application for injunction in nature of stay of previously made orders creating statutory trust for sale pending appeal — prima facie case — failure to join necessary party — application to vary substantive orders —Woods v Sheriff of Queensland (1895) 6 QLJ 163 — discretion — balance of convenience — order for sale of property by trustee — application refused

Legislation Cited:

Bankruptcy Act1966 (Cth)

Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth)

Property Law Act 1958 (Vic)

Transfer of Land Act 1958 (Vic)

Cases Cited:

Bremner v French (No 4); Aesthete 101 Pty Ltd v Stone [2024] NSWSC 793

House v The King (1936) 55 CLR 499

John Alexander’s Clubs Pty Ltd v White City Tennis Club (2010) 241 CLR 1

LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575

Re Galtari Pty Ltd [2018] NSWSC 917

Woods v Sherriff of Queensland (1895) 6 QLJ 163

Texts Cited:

Nil

Category:

Procedural rulings

Parties:

2014 Proceedings Notice of Motion filed 8 June 2024
Aesthete 101 Pty Limited (First Applicant)
Aesthete 102 Pty Limited (Second Applicant) Aesthete 103 Pty Limited (Third Applicant)
Jason Stone (First Respondent)
Christopher Piers Julian Bremner (Second Respondent)
Frank Lo Pilato (Third Respondent)

Notice of Motion filed 27 June 2024
Aesthete 101 Pty Limited (First Applicant)
Aesthete 102 Pty Limited (Second Applicant) Aesthete 103 Pty Limited (Third Applicant)
Jason Stone (First Respondent)
Christopher Piers Julian Bremner (Second Respondent)
Frank Lo Pilato (Third Respondent)

2024 Proceedings Summons filed 1 May 2024 Aesthete 101 Pty Limited
Aesthete 102 Pty Limited
Aesthete 103 Pty Limited
Jason Stone (First Defendant)
Christopher Piers Julian French (Second Defendant) Frank Lo Pilato (Third Defendant)

Notice of Motion filed 8 May 2024
Aesthete 101 Pty Limited (First Applicant)
Aesthete 102 Pty Limited (Second Applicant) Aesthete 103 Pty Limited (Third Applicant)

Notice of Motion filed 28 June 2024
Aesthete 101 Pty Limited (First Applicant)
Aesthete 102 Pty Limited (Second Applicant) Aesthete 103 Pty Limited (Third Applicant) Christopher Piers Julian French (First Respondent) Frank Lo Pilato (Second Respondent)
Jason Stone (Third Respondent)

Representation:

Counsel:
2014 Proceedings
Notice of Motion filed 8 June 2024
A Fernon SC/ B Nolan (First, Second and Third Applicants)
J Simpkins (First Respondent)
A Parish (Second Respondent)
A Spencer (Third Respondent)

Notice of Motion filed 27 June 2024
A Fernon SC/ B Nolan (First, Second and Third Applicants)
J Simpkins (First Respondent)
A Parish (Second Respondent)
A Spencer (Third Respondent)

2024 Proceedings
Summons filed 1 May 2024
A Fernon SC/ B Nolan (First, Second and Third Plaintiffs)
J Simpkins (First Defendant)
A Parish (Second Defendant)
A Spencer (Third Defendant)

Notice of Motion filed 8 May 2024
A Fernon SC/ B Nolan (First, Second and Third Applicants)
J Simpkins (First Respondent)
A Parish (Second Respondent)
A Spencer (Third Respondent)

Notice of Motion filed 28 June 2024
A Fernon SC/ B Nolan (First, Second and Third Applicants)
A Parish (First Respondent)
A Spencer (Second Respondent)
J Simpkins (Third Respondent)

Solicitors:
2014 Proceedings
Notice of Motion filed 8 June 2024
YPOL Lawyers (First, Second and Third Applicants)
Harris Carlson Lawyers (First Respondent)
Aitken Lawyers (Second Respondent)
Matthews Folbigg Lawyers (Third Respondent)

Notice of Motion filed 27 June 2024
YPOL Lawyers (First, Second and Third Applicants)
Harris Carlson Lawyers (First Respondent)
Aitken Lawyers (Second Respondent)
Matthews Folbigg Lawyers (Third Respondent)

2024 Proceedings
Notice of Motion filed 8 May 2024
YPOL Lawyers (First, Second and Third Applicants)
Harris Carlson Lawyers (First Respondent)
Aitken Lawyers (Second Respondent)
Matthews Folbigg Lawyers (Third Respondent)

Notice of Motion filed 28 June 2024
YPOL Lawyers (First, Second and Third Applicants)
Aitken Lawyers (First Respondent)
Matthews Folbigg Lawyers (Second Respondent)
Harris Carlson Lawyers (Third Respondent)

File Number(s):

2014/101136; 2024160893

Publication restriction:

Nil

JUDGMENT - ex tempore

Revised from transcript and annotated; issued 10 July 2024

Introductory note:

1. This judgment was the sequel to a decision made by the Court on 20 June, reasons for which were later published as Bremner v French (No 4); Aesthete 101 Pty Ltd v Stone [2024] NSWSC 793 (“J4”). The decision concerned two proceedings, referred to as the “2014 proceedings” and the “2024 proceedings”: see J4 [3]. Earlier judgments in the 2014 proceedings, identified at J4 [7]-[9], are referred to as “J1”, “J2 “and “J3”.

2. The background is set out at J4 [6]-[41]. The proceedings arise out of orders made by the Court in October 2019, and amended in December last year, for the sale of five properties in rural Victoria (“Sale Orders”). The Sale Orders were made pursuant to the Property Law Act 1958 (Vic) (“PLA”).

3. The properties in question were owned by two individuals, Dr Bremner and Mr French, as tenants in common in equal shares. Under the Sale Orders, a trustee (“Sale Trustee”) was appointed to undertake the sale, subject to various provisions in the Orders concerning the mode of sale and the distribution of the proceeds.

4. The properties have not yet been sold and remain registered in the names of Dr Bremner and Mr French. In February 2023, pursuant to a personal insolvency agreement (“PIA”) under Part X of the Bankruptcy Act1966 (Cth) (“BA”), Mr French assigned his “interests” in three of the properties (“PIA Properties”) to a trustee (“PIA Trustee”). By agreement made in late March this year (“Sale Agreement”), the PIA Trustee in turn assigned that interest to the plaintiffs in the 2024 proceedings (“the Purchasers”).

5. On 6 and 20 June, the Court conducted a hearing of a motion by the Purchasers in the 2014 proceedings (to which they had previously been joined as cross-defendants) and the Purchasers’ application for final relief by way of summons in the 2024 proceedings (a notice of motion had also been filed in the 2024 proceedings for the Purchasers, but this had been superseded by their motion in the 2014 proceedings: see J4 [50]-[52]). The relief sought by the Purchasers in the 2024 proceedings was an order requiring the Sale Trustee and Dr Bremner to assist them in being registered as the proprietors of Mr French’s half share of the PIA Properties (including, in the Sale Trustee’s case, delivery up of the certificates of title, and, in Dr Bremner’s case, withdrawal of caveats he had lodged on the titles to the Properties). In the 2014 proceedings the Purchasers sought to vary the Sale Orders to give them an opportunity to buy Dr Bremner’s share of the Properties at an independently determined valuation, rather than proceeding to auction.

6. The Court’s decision, as announced on 20 June, was that both the Purchasers’ motion in the 2014 proceedings and the Purchasers’ application for final relief in the 2024 proceedings (as well as the superseded motion in those proceedings) would be dismissed. But at the request of counsel for the Purchasers, the Court deferred making these orders to allow the Purchasers to make an application on 28 June for orders in the nature of a stay pending appeal.

7. Pursuant to directions made on 20 June, further notices of motion were filed for the Purchasers in the 2014 proceedings and the 2024 proceedings, seeking orders in the nature of a stay. The notices of motion also included applications for further relief which had not been foreshadowed on 20 June.

8. One of the points raised in the course of the argument which resulted in the 20 June decision was whether, because of the involvement of the PIA Trustee, the 2024 proceedings involved a special federal matter. The Court concluded that they did not. This was consistent with submissions made by counsel for the Purchasers. But following the delivery of the 20 June decision, the Purchasers reversed their position. They sought orders in the 2024 proceedings transferring them to the Federal Court on the ground that they indeed involved a special federal matter. Equivalent relief was sought in the 2014 proceedings.

28 June 2024:

Special federal matter

9. Jurisdiction: As I noted at J4 [55], the only relief now sought in the 2024 proceedings is order 5 in the summons. [1] Obviously the Court would have power to make orders against the Sale Trustee or against Dr Bremner under PLA Part IV concerning the sale of the PIA Properties but it seems plain enough that that is not the basis upon which the relief in the 2024 proceedings is sought. If it was, there would be no point in having separate proceedings in the first place.

   1. Summarised in the introductory note at [5] above.

10. That leaves the jurisdictional basis for the claim unclear. In argument, counsel contended that the Purchasers had some sort of right flowing from an ownership interest in the PIA Properties, which right they had acquired under the Sale Agreement and entitled them to require the Sale Trustee and Dr Bremner to assist them in registering themselves on the titles to the Properties in place of Mr French. If such a right exists at all (cf J4 [106]) it would be a right in relation to land under the Transfer of Land Act 1958 (Vic) (“TLA”) and would presumably arise under State law.

11. So far as the 2014 proceedings are concerned, the claim for relief appears to have arisen only from State jurisdiction. Counsel for the Purchasers referred to LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575 but I was unable to discern any rights owing their origin or existence to federal law. The rights with which I am concerned in the present case are rights in land under the TLA and, more immediately, rights deriving from an order for sale of that land under PLA Part IV.

12. Counsel’s argument, however, appears to be that, even if the Purchasers’ claims are only for State remedies with respect to property under State law, they nevertheless involve the exercise of federal bankruptcy jurisdiction. In their written submissions, counsel identified the special federal matter as being “as to whether the PIA conforms with the requirements of [BA] s 188A(2)”. [2]

    2. This enactment specifies “requirements for a personal insolvency agreement”. Relevantly sub-paragraph (a) provides that such an agreement must “identify the debtor’s property that is to be available to pay creditors’ claims”.

13. In my most recent judgment, I identified two reasons why I considered that the present matter is not a special federal matter.

14. The first was that there is simply no relevant dispute between the parties. [3] It is common ground that Mr French’s “interests” in the PIA Properties pass under the Sale Agreement to the Purchasers. The issue between the parties is about the nature of those interests.

    3. Notably the parties to the proceedings do not include Mr French: see J4 [47].

15. That conclusion has been reinforced for me today by reference to cl 3.3 of the Sale Agreement (the clause was redacted in the version of the Agreement tendered at the earlier hearing). It provides:

The [PIA Trustee] otherwise gives no warranties in relation to the Trustee’s interest in the PIA Properties, including whether or not the Transfer [definition quoted at J4 [35]] will be effective or possible. For the avoidance of doubt the assignment whether by Transfer or as a consequence of a Declaration [definition quoted at J4 [35]] is of the whole of the interest in [the PIA Properties] which the Debtor made available pursuant to the PIA, however the Trustee is unable to warrant or give any assurance that this will include any ability to effect the Transfer of legal title to any interest in any part of the Debtor’s Property.

16. I find it difficult to see how, if Mr French only had an interest in the proceeds of the PIA Properties rather than an interest in the Properties themselves, that would somehow result in the invalidity of the PIA. Of course, in the present case, I am dealing with the matter one step removed because the immediate question is the interest which the Purchasers have acquired under the Sale Agreement.

17. I acknowledge that at the time of the PIA Mr French retained the legal title to half shares in each of the PIA Properties. But clause 3.2 of the PIA (set out at J4 [31]) was not expressed as an assignment. It only obliged Mr French to do all things reasonably necessary to ensure that his interests in the PIA Properties were made available to the PIA Trustee for the benefit of his creditors. Even if expressed as an absolute legal assignment, it could only have taken effect, so far as land under the TLA was concerned, in equity (and see J4 [130]).

18. The second reason which I identified (at least tentatively) for the conclusion that the proceedings do not involve a special federal matter relied on the distinction which has been drawn between claims or defences which invoke the exercise of jurisdiction “in bankruptcy”, on the one hand, and claims or defences which merely recognise the effect of bankruptcy legislation for the purpose of State law or non‑exclusive federal law, on the other. In the course of today’s argument, counsel accepted the validity of this distinction and also the way in which Gleeson JA applied it in Re Galtari Pty Ltd [2018] NSWSC 917 at [51]-[56], [62]. As I remarked in my judgment, there is not even a defence based on BA ss 229 or 230, or indeed, any other provision of the BA, in the present case.

19. Accordingly, I remain of the view that the proceedings do not involve a special federal matter.

20. Transfer to Federal Court: Even if I had reached the opposite conclusion, I would not immediately have made an order transferring the proceedings to the Federal Court. This Court would have had a discretion to retain the proceedings for determination if satisfied that there were “special reasons” for doing so. Counsel for Dr Bremner, at least, invoked that exception.

21. Section 6(3) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) (“CVA”) requires exclusion of any consideration of the convenience of the parties but a transfer may have an effect on them which goes beyond mere inconvenience. In some cases, especially in expedited case such as the present, justice delayed may be justice denied.

22. Furthermore, s 6(3) of CVA does not exclude consideration of the effect of transfer on the courts concerned or on other litigants. In this Court, making an order for transfer in the present case would result in all of the time and effort that has so far been invested in the case being wasted. Whether or not that is a consideration to take into account, it would certainly be legitimate to take into account the effect on the Federal Court of adding another matter to its caseload, especially if that would have the result of displacing or slowing the progress of other matters in that Court towards hearing.

23. For these reasons, I would have wished to receive full argument on whether there might be special reasons for retaining the proceedings in this Court. But CVA s 6(4) would have required notice to be given to the Attorney General of the Commonwealth and of the State and allow them a reasonable opportunity to present submissions, which would have inevitably required an adjournment.

24. Had I reached this point, the question would have become whether I should grant interlocutory relief under CVA s 6(8) pending a hearing on transfer. Thus, on any view, the resolution of today’s application involves considering whether the Purchasers have made out a case for such interlocutory relief.

Injunction application

25. As a preliminary matter, it should be pointed out that what is sought is, in effect, a stay of operation of the Sale Orders. As matters stand at present, those Orders require the Sale Trustee to sell the subject properties as rapidly as possible, and with as little expense as possible, consistently with maximising the proceeds to those who will be entitled to receive them.

26. It seems to me that there is a conceptual difficulty with the Court ordering the Sale Trustee, who is effectively an officer of the Court, not to perform his duties while the Orders stand. Of course, if the application had been made before the Orders went into effect, that would be quite another matter. It is not, however, necessary to resolve this particular question on today’s application.

Prima facie case

27. 2024 proceedings: Nothing in today’s argument has caused me to question any of the conclusions that I reached in my previous judgment concerning the nature of the interest acquired by the Purchasers indirectly from Mr French. But I do not think it is necessary to reach any conclusion about the likelihood or otherwise of success on appeal on this question and I express no opinion on it.

28. There were other bases for my decision so far as the 2024 proceedings were concerned. I expressed the view that, even if I had been otherwise persuaded by the arguments by counsel for the Purchasers, I would have refused relief on the ground that Mr French had an interest in the proceedings and had not been joined.

29. In the course of today’s proceedings, counsel for the Purchasers eventually conceded that Mr French was a necessary party and ought to have been joined. When the application was made, belatedly, in the course of the afternoon to join him, I refused that application because it was coupled with an application for an adjournment until Monday, which I did not consider could be justified. [4]

    4. In particular, the application was opposed by counsel for the PIA Trustee on the ground that there was a sunset date in the Sale Agreement which would result in its automatic discharge on the intervening Sunday, 30 June. I was also by no means convinced that Mr French could be given proper notice and a full opportunity to respond.

30. I emphasise that, had the Purchasers’ position changed at an earlier stage of the proceedings, I would certainly have facilitated Mr French’s joinder so that he could be heard. Whether it would have been possible, even at this late stage, to overcome the difficulty by some other means, does not need to be considered, because no other application, apart from the adjournment application, was made.

31. In the course of today’s argument, counsel for the Purchasers repeated the point made previously (see J4 [133]) that Mr French had been told about the 2024 proceedings and could have intervened. But I addressed that point in my recent judgment. I think that High Court authority makes it abundantly clear that it is not enough to simply tell a party who is a necessary party about the proceedings, thereby shifting the obligation to that party to decide whether or not to apply to be joined: see John Alexander’s Clubs Pty Ltd v White City Tennis Club (2010) 241 CLR 1 at [140]. Counsel also suggested that I might have, myself, made orders requiring Mr French’s joinder, but even if that is so, I think the same principle applies. To be blunt, the Purchasers have only themselves to blame for the way in which the proceedings have been constituted.

27. In these circumstances, with due deference, I find it difficult to see how the failure to join Mr French is a matter which can be overcome on appeal.

28. I should add that the further question about what legal rights, beyond those that would arise under PLA Part IV, could possibly be relied upon to support order 5 (see [10] above) remains, so far as I can see, unanswered. I was not satisfied by the response which I received today to that point.

29. 2014 proceedings: The position here is, in my view, still more difficult for the Purchasers. First, there is the problem that Mr French was not joined to the motion which was before the Court. Second, as I pointed out at J4 [139]-[141], the application to vary substantive features of the Sale Orders seems to infringe the principle in Woods v Sherriff of Queensland (1895) 6 QLJ 163. No argument was presented to me today as to why my conclusion in that regard was incorrect.

30. And even if that point could be overcome, I expressed the view that, as a matter of discretion, I would not have made the orders sought (J4 [142]). A challenge to that decision on appeal would involve demonstrating some form of House v The King (1936) 55 CLR 499 error and the submissions before me today did not identify any such error.

31. Again, therefore, I am not, as at present advised, satisfied that there is any substantial likelihood of a successful appeal.

Balance of convenience

37. There was evidence from the Sale Trustee’s agent that any further delay in putting the properties subject to the Sale Orders to market could result in a loss of faith by buyers in the process. There are also economic risks associated with delay.

38. But the first question must be: what is the nature of detriment to the Purchasers? Effectively, counsel submitted they have ownership of half of the properties and their right to purchase the other half should be preserved. But it does not necessarily follow that the Purchasers will lose a valuable right if the sale proceeds. They will, of course, be entitled to bid at the auction like any other prospective purchaser. They may be required to put up the full amount of the purchase price and then wait for their distribution rather than putting up only half. But the critical problem here is that there is no evidence that they will, in fact, be worse off, or if so, by how much.

39. Counsel asserted that there were further interests associated with the Purchasers, such as YBL (Mr Amirbeaggi’s firm: see J4 [26]), or HHC or its receiver (YBL’s former client: see J4 [27]) whose interests could indirectly be affected if, as counsel put it, the PIA “fell over”. I am not sure the interests of such parties are relevant in an application such as this but again, it seems to me, that the fatal difficulty is that there is no evidence that they will, in fact, be worse off, or if so, by how much.

40. An undertaking as to damages, including a personal undertaking from Mr Amirbeaggi, was offered. But the difficulty remains that, if I am to balance the inconvenience to the other parties of delaying the sale against detriment to the Purchasers, I must have some credible evidence to allow that detriment to be assessed and valued, and there is none.

Orders

41. For these reasons, I consider that the Purchasers have failed to establish sufficient grounds for the making of the interlocutory orders which they seek. Their motions will be dismissed and the Court will make the orders foreshadowed in my previous judgment.

42. The orders of the Court in the 2014 proceedings are:

On the Notice of Motion filed 8 June 2024:

1. Order the Notice of Motion filed 8 June 2024 be dismissed.

2. Order the applicant pay the first and second respondent’s costs of the motion.

On the Notice of Motion filed 27 June 2024:

1. Order the motion be dismissed.

2. Order the applicants pay the respondents’ costs of the motion.

43. The orders of the Court in the 2024 proceedings are:

On the plaintiffs’ claims:

1. Dismiss the plaintiffs’ summons.

2. Order the plaintiffs pay the first and second defendant’s costs of the proceedings.

On the Notice of Motion filed 8 May 2024:

1. Order the motion be dismissed.

2. Order the applicants pay the first and second respondents’ costs of the motion.

On the Notice of Motion filed 28 June 2024:

1. Order the motion be dismissed.

2. Order the applicants pay the respondents’ costs of the motion.

**********

Endnotes

Amendments

10 July 2024 - Amendments to number ordering in [41]-[43]

Decision last updated: 10 July 2024