Cushway v Cushway
[2005] FMCA 512
•26 April 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CUSHWAY v CUSHWAY | [2005] FMCA 512 |
| BANKRUPTCY – Application to set aside Bankruptcy Notice – where applicant sought orders pursuant to s.122 and s.106 of the Powers of Attorney Act (Qld) – where the balance of proceedings under the Powers Act had not yet been heard – whether or not the a costs order on dismissal of s.122 proceedings was a final judgment or order – whether the order of the Supreme Court of Queensland was a complying order – whether the applicant had a counter claim, set-off or cross-demand that could not have been set up in the original application which is equal too or exceeds the amount claimed in the Bankruptcy Notice – where action is brought against the executor in his representative capacity. |
| Bankruptcy Act 1966, ss.30, 40(1)(g), 40(3)(b), 41(6A), 41(7), 106 Powers of Attorney Act 1998 (Qld), ss.110, 122, 122(1)(a), 122(2) Succession Act 1981 (Qld), s.41 |
| Freeman v National Bank of Australia Ltd [2004] FCAFC 318 Re Gibbs; Ex Parte Triscott (1995) 65 FCR 80 Re Ryan; Ex parte Ryan v Jupiter’s Management Limited (1992) 38 FCR 127 Re: Errol Hugh Pollnow and: Queensboro Pty Limited And Garden Mews-St. Leonards Pty Limited No. B2391 And B378 Of 1988 Bankruptcy Notice (unreported, Burchett J, 19 October 1988) Kayo Contractors v Jose Fernandez (1984) 71 FLR Ebert v The Union Trustee Company of Australia Limited (1996) 104 CLR 346 Citicorp Australia Ltd v Official Trustee in Bankruptcy (1965) 71 FCR 550 |
| Applicant: | ASHLEY MONTGOMERY CUSHWAY |
| Respondent: | RONALD DAVID CUSHWAY |
| File Number: | SYG 672 of 2005 |
| Judgment of: | Raphael FM |
| Hearing date: | 18 April 2005 |
| Date of Last Submission: | 18 April 2005 |
| Delivered at: | Sydney |
| Delivered on: | 26 April 2005 |
REPRESENTATION
| Solicitors for the Applicant: | Diana Karageorge |
| Counsel for the Respondent: | David Ash |
ORDERS
Application dismissed.
Applicant to pay the respondent’s costs to be taxed if not agreed pursuant to the Federal Court Act and Rules.
Time for compliance with the Bankruptcy Notice No: QN177 be extended until 2 May 2005.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 672 of 2005
| ASHLEY MONTGOMERY CUSHWAY |
Applicant
And
| RONALD DAVID CUSHWAY |
Respondent
REASONS FOR JUDGMENT
Ashley and Ronald Cushway are brothers. On 25 August 2004 Ashley commenced proceedings in the Supreme Court of Queensland seeking orders pursuant to section 122(1)(a) of the Powers of Attorney Act 1998 (Qld) (“the Powers Act”) requiring his brother to file in court and serve upon himself a summary of receipts and expenditure received and made by him as attorney for their mother Rosalind Hilary Cushway who had died on 4 March 2004. Ashley also sought orders pursuant to section 106(1) of the Powers Act that Ronald compensate his mother’s deceased estate with certain monies allegedly withdrawn from accounts in her name, which were specified in the originating application.
Ronald Cushway is the executor of his mother’s estate. She, by will, left a substantial part of the estate to Ronald and some part of the estate to his and Ashley’s sister. Ashley received nothing but believed he had a claim under section 41 of the Succession Act 1981 (Qld) (“the Succession Act”) for maintenance and support. He claimed that he was unable to determine whether or not he should bring such a claim until he knew the size of his mother’s estate, which he had been told amounted to only a few hundred dollars. If the estate was reimbursed in respect to the monies he claimed had been misdirected by Ronald then it would be one that was significant enough to attract his claim under the Succession Act.
On 24 September 2004 the proceedings came before McMurdo J in the Supreme Court of Queensland. Shortly before the hearing certain information concerning their mother’s funds was supplied by Ronald and his Honour says at page 2 of the copy of the judgment exhibited to the affidavit of Ashley dated 15 March 2005:
“The respondent has set out in his affidavit some details of his application of his mother’s funds. They do not provide to the applicant all of the information which would probably be required by an order under 122 and hence this application. But that affidavit of the respondent certainly demonstrates that the respondent and his family received what appears to have been the bulk of the assets of Mrs Cushway within this relatively short period prior to her death.
The affidavit from the respondent would I think provide a sufficient basis in itself for the pleading of a case, if pleadings are required within the proposed section 41 proceedings, to the effect that the respondents should account to the estate for all or much of the payments which he caused to be made from his mother’s funds.
In other words, the applicant does not seem to need the benefit of an order under Section 122 in order to obtain sufficient information by which to plead his case under the section 41 proceedings;”
His Honour decided once the information had been provided, that put paid to the utility of the application. He dismissed the claim under s.122 and stated that the balance of the amended originating application should be adjourned to a date to be fixed. He ordered that Ashley pay Ronald’s costs.
The balance of the proceedings for compensation have not been heard. On or about 1 December 2004 Ronald Cushway commenced proceedings under ss.41(1) and (2) of the Succession Act seeking provision for his proper maintenance and support in the District Court of Queensland. Those proceedings have also not been heard. I am informed by Ms Karageorge, Ashley’s solicitor, that it is intended that the balance of the Supreme Court proceedings under the Powers Act be heard in the District Court with the Succession Act proceedings.
In the meantime the costs of the hearing before McMurdo J were assessed and on 17 January 2005 an order issued out of the Supreme Court of Queensland in the following form:
“THE ORDER OF THE COURT IS THAT;
(1) Respondent’s cost against the applicant to be paid pursuant to the order of Justice P D McMurdo made 24 December 2004 and pursuant to rule 719(1) of the Uniform Civil Procedure Rules are assessed at $3,325.”
A copy of that order was attached to Bankruptcy Notice No: QN177 of 2005 issued by the Official Receiver of the Bankruptcy District of Queensland on 24 February 2005 and served upon Ashley Cushway on 10 March 2005. On 15 March 2005 Ashley made an application to set aside the Bankruptcy Notice pursuant to sections ss.30, 41(6A) and 41(7) of the Bankruptcy Act 1966 (Cth) (“the Act”).
The questions raised by these proceedings are:
i)Is the order of the Supreme Court of Queensland a final judgment or order within the meaning of section 40(1)(g) of the Act as enlarged by provisions of section 40(3)(b) of the Act?
ii)If it was a complying order did the applicant have a counter claim, set off or cross demand that could not be set up in the original action and which is equal to or exceeds the amount claimed in the Bankruptcy Notice?
I am satisfied that an interlocutory order for costs is a final judgment within the meaning of section 40(1)(g): Kayo Contractors v Jose Fernandez (1984) 71 FLR 34 at 38; Re Gibbs; Ex Parte Triscott (1995) 65 FCR 80 at 92; Re: Errol Hugh Pollnow and: Queensboro Limited And Garden Mews-St. Leonards Pty Limited No. B2391 And B378 Of 1988 Bankruptcy Notice (unreported, Burchett J, 19 October 1988). The decision in these cases can be distinguished from that in Re Ryan; Ex parte Ryan v Jupiter’s Management Limited (1992) 38 FCR 127 where Spender J said at [134]:
“My view of section 40(3)(b) is that whiles it does extend the category of judgments or orders on which a Bankruptcy Notice can be founded, it does not apply to judgments or orders that are interlocutory in character or which lack a quality of determining some question between the litigants in an ultimate sense.”
because it seems to me that that statement did not constitute dicta. His Honour decided the case on the basis of whether or not the applicant had a cross demand of the type referred to in section 40(1)(g) not on the basis that the order of the Court of Appeal requiring the debtor to repay certain sums that had been paid to her was not a final order. In any event the judgment in respect of the section 122 claim did determine such a question between the parties and the cost order reflected that.
The second question which I have to answer is more difficult. I am satisfied that Ashley Cushway could not have set up his cross claim in the relevant proceedings which I take, following the decision of Burchett J in Pollnow and Queensboro Pty Limited to be:
“either the application for interlocutory orders in the suit or the application for a costs order in that interlocutory application.”
The more important questions is whether or not Ashley (the debtor) has a cross claim, cross demand or set off against Ronald (the creditor) other than in a representative capacity. The proceedings which Ashley brought under the Powers Act are proceedings in which he claimed to be an ‘interested person’. Justice McMurdo did not resolve the dispute as to whether he was such a person but stated at page 4 of his judgment:
“For the applicant Mr Crowley submits that the persons entitled to apply under Section 122 are those persons described in section 110, subsection 3. On the face of section 110, that submission appears to be correct but there is some tension between that provision and section 122(2). Plainly, the applicant is a person within those described within section 110(3) so that if a person is entitled to apply for an order under section 122 by reason of being a person within section 110(3), this applicant has standing.”
Assuming that Ashley Cushway also has standing to bring the proceedings under section 106 it would appear that the relief that that section will bring is a benefit only to the estate of the donor of the power. No benefit will accrue to Ashley Cushway from the disgorgement of funds by his brother back into the estate unless he also obtains an order for maintenance from the estate pursuant to section 41 of the Succession Act.
The proceedings which Ashley brings under section 41 of the Succession Act are brought against Ronald Cushway but they are brought against Ronald qua executor of his mother’s estate and not against him in his non-representative capacity. It is ironic that if the proceedings had been reversed, i.e. if Ashley had obtained a judgment for maintenance for the estate he may then have had a personal interest in proceedings to recover of the money allegedly misappropriated. But by proceeding in a more cautious way it is arguable that he may not. It seems to me that the answer to both questions can be found by close reading of the final and lengthy paragraph of Ebert v The Union Trustee Company of Australia Limited (1996) 104 CLR 346 . Their Honours Dixon CJ, McTiernan and Windeyer JJ said at [351]:
“Now let it be supposed that the appellant were afforded the opportunity of pursuing the course of proceedings she desires. Could it possibly be said that they constitute or comprise a cross demand upon the respondent which equals or exceeds the amount of the judgment debt? So far as the appellant is concerned it is a demand that a grant of administration c.t.a. should be brought in for proof in solemn form. Obviously that in itself cannot fall within the words. The judgment for costs is against the appellant and creates a debt to the respondent which so far as the appellant is concerned is owing to the respondent in its own personal right. The assets of the estate have been realized and there remained in the hands of the respondent trustee company at the time of the application a sum of £2980. Even if on recovery from the appellant of the costs adjudged the respondent trustee company would be bound to recoup the estate in respect of sums disbursed therefrom for the costs of the suit, it still remains true that it is a judgment debt in favour of the trustee company in its own right. Suppose the grant of letters of administration were to be revoked or that the will is to be proved in solemn form. Is the trustee company necessarily the party to undertake the duty? If so, in what right? If a prior will is, as the appellant now alleges, found to be the true last will, why is it supposed that the trustee company is to administer it? If there were ground for such a supposition it would be in a new and different right and, at the, a new representative right. Then again if any liability could be imposed upon the respondent trustee company to make good the amount of the deceased’s estate which ex hypothesi has been erroneously distributed by it as an administrator under the now existing grant, it would not be an immediate liability to the appellant but a liability to make good the amount to the estate, a liability she could only enforce directly of circuitously. These considerations are enough to show in detail why it is that the appellant debtor does not possess a cross demand against the respondent trustee company of a description within s.52(j). But that it is not a cross demand within s.52(j) might be seen from the mere statement of the thesis upon which the appeal was based without going into such considerations in detail. On the part of the respondent other reasons also were advanced for the conclusion that the appeal must be dismissed but it is unnecessary to go beyond what has already been said.”
As with the applicant in Ebert Mr Ashley Cushway could only enforce against the trustee the liability to make good an amount to the estate “indirectly or circuitously”. That right was not considered by the High Court to be a cross demand within the then section 52(j) Bankruptcy Act. It would not appear even to support the suggestion that Ashley Cushway might have such a cross claim once he had established his right to support from the estate. Even when the Succession Act and the Powers Act proceedings are amalgamated the likely orders (if the applicant is successful) are the respondent make reimbursement to the estate pursuant to section 106 of the Powers Act and that the estate makes provision for applicant. Although Ronald Cushway will be doing both of those things he will be doing them in different capacities. As was suggested by the court in Ebert it is even possible that another executor or administrator of the estate of the late Rosalind Hilary Cushway may have been appointed before any orders are made. In those circumstances there will not be any payment being made by Ronald Cushway, in whatever capacity he may have had, to his brother.
For these reasons I am unable to accede to the application to set aside the Bankruptcy Notice. I dismiss the application and order that the applicant pay the respondent’s costs to be taxed if not agreed according to the Federal Court Act and Rules. I note, however, that the amount claimed under this Bankruptcy Notice is small. I note the remarks of McMurdo J in relation to the substantive proceedings and I note the general principle that Bankruptcy proceedings should not be used to muzzle the prosecution of a legitimate cause of action: Citicorp Australia Ltd v Official Trustee in Bankruptcy (1965) 71 FCR 550 at 56, Freeman v National Bank of Australia Ltd [2004] FCAFC 318 at 34-37. I propose to order that the time for compliance of the Bankruptcy Notice be extended until 2 May 2005 so that the applicant may have an opportunity to satisfy the debt upon which the notice is founded.
I certify that the preceding ten (10) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date:
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