Charter Finance Pty Ltd v Finn - [2012] FMCA 681

FEDERAL MAGISTRATES COURT OF AUSTRALIA

CHARTER FINANCE PTY LTD v FINN

[2012] FMCA 681

BANKRUPTCY – Interim application filed by second mortgagee against Trustee contesting the terms of a Deed of Settlement & Release entered into to settle ligation – construction of key terms of the agreement.

BANKRUPTCY – Trustee’s obligations in respect to the acceptance and rejection of Proof of Debt – effect of Deed of Settlement & Release.

Bankruptcy Act 1966 (Cth), ss.43, 52, 82, 90, 104, 105, 120, 176
Conveyancing Act 1919 (NSW), s.66
Real Property Act 1900 (NSW), ss.57, 58
Trade Practices Act 1974 (Cth)

Barwick v Goodridge (No.2) [2011] NSWSC 1523
Adsett v Berlouis & Ors (1992) 37 FCR 201
Brady v Official Trustee in Bankruptcy (No.1) [2001] FMCA 63
Brady v Official Trustee in Bankruptcy [2002] FCA 363
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Esber v Kimberly Securities Ltd [2009] NSWSC 1422
Hunt Brothers (a firm) v Colwell (1939) CA Vol 4, 406
Jackson v Salisbury (No.3) [2000] FCA 1840
McKenzie v Rees (1941) 65 CLR 1
Pridmore v Magenta Nominees Pty Ltd (1999) 161 ALR 458
Re Stanton [1902] 2 IR 57
Sanwick v Wily as Trustee of the Bankrupt Estate of Peter Robert Finn & Anor [2009] NSWSC 86
Schuler A.G. v Wickman Machine Tool Sales Ltd [1974] AC 235
Scott Fell v Lloyd (1911) 13 CLR 230

Applicant:

CHARTER FINANCE PTY LTD

Respondent:

PETER ROBERT FINN

Applicant for Interim Orders:

MANGO MEDIA PTY LTD

Respondent for Interim Orders:

ANDREW HUGH JENNER WILY AS TRUSTEE FOR THE BAKRUPT ESTATE OF PETER ROBERT FINN

File Number:

SYG 3906 of 2007

Judgment of:

Lloyd-Jones FM

Hearing date:

11 October 2011

Date of Last Submission:

11 October 2011

Delivered at:

Sydney

Delivered on:

13 August 2012

REPRESENTATION

Counsel for the Applicant for Interim Orders:

Mr M. W. Young

Solicitors for the Applicant for Interim Orders:

Heidtman & Co

Counsel for the Respondent for the Interim Orders:

Mr Baird

Solicitors for the Respondent for the Interim Orders:

Sally Nash & Co

ORDERS

The interim application filed on 27 June 2011 is dismissed.
The Applicant to pay the Respondent’s costs to be agreed on or, in the absence of agreement, to be assessed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 3906 of 2007

CHARTER FINANCE PTY LTD

Applicant

And

PETER ROBERT FINN

Respondent

REASONS FOR JUDGMENT

Introduction

On 20 December 2007 a creditor’s petition was filed by Charter Finance Pty Ltd, applying to the Court for the making of a sequestration order under s.43 of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”) against the estate of Peter Robert Finn. The respondent debtor failed to comply on or before 15 November 2007 with the requirements of a bankruptcy notice issued on 17 October 2007 and served on the respondent debtor on 25 October 2007, or to satisfy the Court that he had a counter-claim, set-off or cross-demand equal to or more than the sum claimed in…

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: [2012] FMCA 681
Decision Date

CaseChat Overview and Summary

Charter Finance Pty Ltd was the first mortgagee of property owned by Peter Robert Finn, who subsequently became bankrupt. Mango Media Pty Ltd was the second mortgagee. Mango Media commenced proceedings against Finn in the Supreme Court of New South Wales, seeking to enforce its mortgage over Finn's property. Mango Media and the Trustee of Finn's bankrupt estate entered into a Deed of Settlement and Release to settle their disputes. Mango Media sought an interim order against the Trustee, claiming that the Trustee was in breach of the Deed of Settlement and Release by rejecting a proof of debt Mango Media had lodged in Finn's bankruptcy. Mango Media claimed that it was entitled to have the Trustee acknowledge it as a creditor and pay it an amount of $164,953.88. The Trustee opposed the interim application. The Federal Magistrates Court was required to construe the Deed of Settlement and Release to determine if the Trustee had breached it by rejecting Mango Media's proof of debt. The Court considered the entire Deed of Settlement and Release and the context in which it was entered into. The Court found that Mango Media was entitled to be paid $203,500, being its principal amount due plus interest, under its mortgage at the date of Finn's bankruptcy. Mango Media received that amount from Westpac Banking Corporation, the first mortgagee, after it sold the Croydon property. Mango Media was not entitled to claim interest from the date of bankruptcy as it was unsecured. The Court found that Mango Media's proof of debt was properly rejected as there was no provable debt. The Trustee was required to administer the estate in accordance with the Bankruptcy Act and was not permitted to contract out of that obligation. The Court found that the Trustee had not breached the Deed of Settlement and Release and dismissed the interim application.

Orders