Burkitt, R.J. v Harts Pty Ltd - [1995] FCA 496

IN THE FEDERAL COURT OF AUSTRALIA )
  )
GENERAL DIVISION                  )
  )   Estate No 1184 of 1993
BANKRUPTCY DISTRICT               )
  )
OF THE STATE OF QUEENSLAND        )

RE:RAYMOND JOHN BURKITT
Debtor

EX PARTE:HARTS PTY LIMITED

Applicant

AND:PAUL DESMOND SWEENEY

Trustee/Respondent

AND:RE: RAYMOND JOHN BURKITT

Debtor

EX PARTE:PAUL DESMOND SWEENEY

Trustee/Cross-applicant

AND:HARTS PTY LTD

Cross-respondent

CORAM:    RYAN J
PLACE:    BRISBANE
DATE:     14 JULY 1995

MINUTE OF ORDERS
THE COURT ORDERS:

That the application by Harts Pty Ltd dated 10 March 1995 be dismissed with costs.

That the cross-application by the Trustee, Paul Desmond Sweeney, dated 10 April 1995 be dismissed with costs.

That liberty be reserved to any party to apply on not less than 72 hours' notice in writing to each other party.

NOTE: Settlement and entry of orders is dealt with in O 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA )
  )
GENERAL DIVISION                  )
  )   Estate No 1184 of 1993
BANKRUPTCY DISTRICT               )
  )
OF THE STATE OF QUEENSLAND        )

RE:RAYMOND JOHN BURKITT
Debtor

EX PARTE:HARTS PTY LIMITED

Applicant

AND:PAUL DESMOND SWEENEY

Trustee/Respondent

AND:RE: RAYMOND JOHN BURKITT

Debtor

EX PARTE:PAUL DESMOND SWEENEY

Trustee/Cross-applicant

AND:HARTS PTY LTD

Cross-respondent

CORAM:    RYAN J
PLACE:    BRISBANE
DATE:     14 JULY 1995
REASONS FOR JUDGMENT

RYAN J: By application dated 10 March 1995, the applicant Harts Pty Ltd ("Harts"), which carries on business as accountants, has applied to have set aside a notice under s 139ZQ of the Bankruptcy Act ("the Act") by which the Deputy Official Receiver required payment of the sum of $10,500 to Paul Desmond Sweeney ("the Trustee") as trustee of the bankrupt estate of Raymond John Burkitt. By a cross-
application dated 10 April 1995 the Trustee has sought the following relief:

A declaration that the payments of $10,500.00 to the respondent and $12,669.00 to the bankrupt from the trust account from the respondent were not payments in good faith and in the ordinary course of business;

That the said payments referred to in the last preceding paragraph are void against the applicant as trustee of the property of the bankrupt under the doctrine of the relation back;

An order that the respondent pay to the applicant the sum of $23,169.00 together with interest."

The evidence discloses that in or about August 1992 Mr Burkitt, as the principal shareholder of Dondale Pty Ltd ("Dondale") sought advice from Harts in respect of Dondale's heavy indebtedness to Circle Petroleum Pty Ltd ("Circle") and the need to resolve Dondale's liability for unpaid group income tax and prescribed payments tax and to prepare Dondale's current accounts. It was intimated to Mr Burkitt by Mr Steven Hart, a principal of Harts, that Harts could not provide further accounting services unless given some assurance that its fees would be met. Accordingly, on Mr Hart's advice, Mr Burkitt obtained a valuation of his own residential property at 9 Rocket Court Benowa ("the property"). The…

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: [1995] FCA 496
Decision Date: 14 Jul 1995

CaseChat Overview and Summary

The matter before the Federal Court of Australia, General Division, involves Harts Pty Ltd, a firm of accountants, and Paul Desmond Sweeney, the trustee of the bankrupt estate of Raymond John Burkitt. Harts had applied to set aside a notice issued by the Deputy Official Receiver, which required the payment of $10,500 to the trustee. Conversely, the trustee sought to declare payments of $10,500 to Harts and $12,669 to the bankrupt as void against Harts and to order the trustee to repay the total amount of $23,169 plus interest. The primary legal issues before the court were whether the payments made to Harts constituted a preference under the Bankruptcy Act, and if so, whether Harts had a legitimate claim to retain any portion of these payments as a reward for their services.

Justice Ryan found that the payments to Harts were indeed preferential, as they were made out of the bankrupt's property and gave Harts an advantage over other creditors. However, the court was not persuaded that the property was realized for its full assessed value due to Harts' advice, as Harts had not provided sufficient evidence to support this claim. Furthermore, the court held that the work done by Harts did not justify the full amount of $10,500, as much of it was related to services for Dondale, a company controlled by Burkitt, rather than personal advice to him. The court also rejected Harts' claim that it was entitled to a particular lien over the funds in its trust account, as the discretion to allow any amount to Harts for their exertions rested with the trustee of the bankrupt estate.

Regarding the payment of $12,669 to the bankrupt, Justice Ryan found that Harts had failed to prove that the payment was made in good faith and in the ordinary course of business. The money was intended to be used to offer a settlement to Circle Petroleum Pty Ltd, a creditor of Burkitt, in an effort to prevent bankruptcy proceedings. When this offer was rejected, the court held that Harts was required to return the money to Burkitt or otherwise deal with it at his direction. Therefore, the court dismissed both Harts' application and the trustee's cross-application and ordered each party to pay the other's costs.

The court also reserved liberty to any party to apply on not less than 72 hours' notice in writing to each other party, concerning the question of interest or otherwise as they may be advised.

Orders