Condon v Watson

Case [2009] FCA 11

FEDERAL COURT OF AUSTRALIA

Condon v Watson [2009] FCA 11

CORPORATIONS – C and W both registered liquidators and official liquidators – W becomes employed by C – at that time W is already sole court appointed liquidator of two companies and sole liquidator of five companies the subject of creditors’ voluntary windings up – C and W are appointed as liquidators of nine companies the subject of court-ordered windings up, as liquidators of eight companies the subject of creditors’ windings up, as voluntary administrators of one company, and as administrators of deeds of company arrangement in respect of 11 companies – W ceases to be employed by C – C and W agree that W will resign all offices and that C will fill all offices – W signs notices of resignation of all offices – W’s entitlement unilaterally to resign office – whether, in the case of the sole appointments, Court can and should appoint C as W’s successor in office – whether, in the case of the co-appointments, C continued in office alone – exercise of discretion to enable C to continue in office alone.

BANKRUPTCY – C and W both registered trustees in bankruptcy – W becomes employed by C – during W’s employment by C, C and W are appointed as trustees in bankruptcy in respect of each of 33 bankrupt estates – the bankruptcies are pursuant to sequestration orders or the filing of debtors’ petitions – W ceases to be employed by C – C and W agree that W will resign as co-trustee, leaving C as sole trustee – W tenders written resignations as co-trustee in bankruptcy – whether Court should accept W’s resignations – direction that W entitled to continue as sole trustee of each bankrupt estate.

Corporations Act 2001 (Cth) ss 447D, 449C, 449D, 451A, 451B, 473, 479, 499, 502, 503, 511, 530, 532(9)
Bankruptcy Act 1966 (Cth) ss 134, 156A, 160, 179, 180
Bankruptcy Regulations 1966 reg 13.07, Form 12
Federal Court (Bankruptcy) Rules 2005 r 8.02
Federal Court (Corporations) Rules 2000 r 5.5(2), 7.1
Supreme Court (Corporations) Rules 1999 r 7.1

Re Aplin, Brown & Co Ltd [1902] St R Qd 67 discussed
Re McGrath (2005) 54 ACSR 55 discussed
Re Application of Vouris (2004) 49 ACSR 543 discussed
Re Wallace Smith; National Express Group Australia (Bayside Trains) Pty Ltd
(recs & mgrs apptd) (admins appted)s (2003) 46 ACSR 674 discussed
Ex parte Griffin; Re Dixon (1826) 2 GL&J 114 cited
Re Gudgeon; Ex parte Pegler (1969) 13 FLR 350 cited

Keay A, McPherson’s Law of Company Liquidation (4th ed, LBC Information Services, 1999)

SCHON GREGORY CONDON v DAVID PATRICK WATSON

NSD 1848 of 2008

LINDGREN J
14 JANUARY 2009
SYDNEY


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1848 of 2008
BETWEEN:

SCHON GREGORY CONDON
Applicant
AND:

DAVID PATRICK WATSON
Respondent

JUDGE:

LINDGREN J

DATE OF ORDER:

18 DECEMBER 2008

PLACE:

SYDNEY

BY CONSENT THE COURT:

In relation to each of the 33…

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Condon v Watson [2009] FCA 11
Case
[2009] FCA 11
Decision Date

CaseChat Overview and Summary

In the matter of Condon v Watson, the court was required to address an issue concerning the validity of orders made under the Corporations Act, specifically orders 13 and 15, which contained clerical errors. The orders were initially made on 18 December 2008, but it was later identified that Order 13 should have referenced s 447D(1) instead of s 477D(1), and Order 15 should have referenced s 447D(1) instead of s 477D. The court subsequently corrected these errors on 12 January 2009, in accordance with O 35 r 7(3) of the Federal Court Rules, after notifying the parties and receiving no objections. The court's decision to correct the orders was based on the clear identification of the clerical errors and the absence of any objections from the parties involved.

The primary legal issue before the court was whether the orders, despite containing clerical errors, could be corrected under the Federal Court Rules without affecting the validity of the court's decisions. The court found that the errors were clerical and did not affect the substance or intent of the orders, thus allowing for the corrections to be made under O 35 r 7(3). The court also considered the statutory framework provided by the Corporations Act and the Bankruptcy Act, particularly in relation to the resignation of trustees and the appointment process for trustees of bankrupt estates.

In its reasoning, the court emphasised the importance of ensuring that court orders accurately reflect the intended legal provisions. The court noted that the errors were identified promptly and that there was no prejudice to the parties involved in the proceedings. The court concluded that the corrections were appropriate and in line with the Federal Court Rules, which permit such amendments to rectify clerical errors. The court also highlighted the need for precise legal references to avoid any potential ambiguities or legal challenges. The outcome of the court's decision was that the corrected orders would stand, ensuring that the intended legal framework was accurately reflected.

The court's final orders confirmed the correction of orders 13 and 15 to accurately reference s 447D(1) of the Corporations Act. This correction ensured that the orders were consistent with the intended legal provisions and that there was no doubt regarding the validity or intent of the court's decisions. The court's decision provided clarity and certainty to the parties involved, ensuring that the legal process continued without any procedural impediments.

Orders

Orders of the court

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

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

LINDGREN J
Orders 13 and 15 made on 18 December 2008 contained a clerical slip or error. Order 13 referred to s 477D(1) of the Corporations Act rather than to s 447D(1) of that Act, and order 15 referred to s 477D of the Corporations Act rather than to s 447D(1) of that Act. On 12 January 2009, pursuant to O 35 r 7(3) of the Federal Court Rules, after notification to the parties and without objection by them, I corrected those orders.CONCLUSION It was for the reasons set out above that I made orders and gave directions on 18 December 2008.

Ratio Decidendi

Legal Principle Established

Established by: LINDGREN J

In view of all the circumstances referred to above, I was of the opinion that it was in the interests of creditors that the Court should, if possible, facilitate Mr Condon’s continuing to occupy each of the offices in question alone.CONSIDERATION1. In relation to each of the 33 bankrupt estates listed in Schedule 1 to the Orders (of which the parties are trustees) Mr Watson signed a written resignation as trustee in relation to each bankruptcy. Section 180 of the Bankruptcy Act provides:The Court may, subject to such terms and conditions as it thinks just, accept the resignation of a registered trustee from the office of trustee of an estate.I will return to this section below, but first it is necessary to refer to the circumstances and nature of the appointments of Messrs Condon and Watson as trustees of the estates. Mr Condon and Mr Watson became trustees of each of the 33 estates when the debtor became a bankrupt, either upon the making of a sequestration order or upon the Official Receiver’s acceptance of a debtor’s petition: see ss 43(2), 55(4A) and 156A(3)(a) of the Bankruptcy Act. In each case, Messrs Condon and Watson had filed with the Official Receiver a consent to act as trustee of the estate of the debtor under s 156A(1) of the Bankruptcy Act. Section 156A(1)(a), (2) and (3)(a) of the Bankruptcy Act provides, relevantly:(1)A registered trustee may, by instrument signed by him or her and filed with the Official Receiver, consent to act:(a)as the trustee of the estate of the debtor specified in the instrument in the event that the debtor becomes a bankrupt; or(b) ...(2)An instrument under subsection (1) shall be in accordance with the approved form.(3) Where:(a)at the time when a debtor becomes a bankrupt, a registered trustee has, under subsection (1), consented to act as the trustee of the estate of the debtor and the consent has not been revoked, the registered trustee becomes, at that time, by force of this subsection, the trustee of the estate of the bankrupt; and(b) ...…The approved form is Form 12 to the Bankruptcy Regulations 1966 (Cth) (Bankruptcy Regulations) (Form 12). It will be noted that a registered trustee who has consented becomes trustee of a bankrupt estate by the operation of the Bankruptcy Act. There is a question whether it is open to two or more registered trustees to sign a form of consent to act, and so to be trustees of an estate. In the present case, there was no contradictor to argue that Mr Condon and Mr Watson were not both validly in office in respect of each estate. Section 156A contains no provision comparable to s 158 of the Bankruptcy Act which expressly empowers the creditors, if they think fit, to appoint two or more registered trustees jointly, or jointly and severally, to the office of trustee. The omission of any comparable provision in s 156A may suggest an intention that only a single registered trustee may sign a consent and become trustee pursuant to that section, notwithstanding the presumption that the singular includes the plural: see Acts Interpretation Act 1901 (Cth) s 23.