FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CUSKELLY v KEMBREY | [2010] FMCA 899 |
| BANKRUPTCY – Creditor under costs order against deceased estate – Pt.IV bankruptcy proceedings against executor personally – sequestration order made by Registrar – delay in applying for review – sequestration order ought not have been made – order set aside – no orders as to costs including trustee costs. |
| Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41(1), 44(1), 52, 82, 153B, 154, 244(1), 244(1)(b), 244(13), Pts.IV, XI Bankruptcy Regulations 1996 (Cth), reg.16.01(1)(c) Family Provision Act 1982 (NSW), ss.7, 9, 22, 24, 26, 27, 28 Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), r.2.03 Federal Magistrates Act 1999 (Cth), ss.104, 104(2), 104(3) Legal Profession Act 2004 (NSW), s.368(5) Probate and Administration Act 1898 (NSW), s.46C, Sch.3 Pt.1 Supreme Court Rules 1970 (NSW), Sch.J cl.6(1) Uniform Civil Procedure Rules 2005 (NSW), Pt.54 |
| Applicant: | ELIZA CUSKELLY |
| Respondent: | MICHAEL KEMBREY |
| File Numbers: | SYG 2738 of 2009 SYG 1241 of 2010 |
| Judgment of: | Smith FM |
| Hearing date: | 30 July 2010 |
| Date of Last Submission: | 20 September 2010 |
| Delivered at: | Sydney |
| Delivered on: | 15 December 2010 |
REPRESENTATION
| Counsel for the Applicant: | Applicant in person |
| Counsel for the Respondent: | Ms C Ross |
| Solicitors for the Respondent: | Turnbull Hill Lawyers |
ORDERS
Time is extended to allow the bringing of an application under s.104(2) of the Federal Magistrates Act 1999 (Cth) for review of the orders made by Registrar Segal on 11 March 2010 in proceeding (P)SYG2738/2009.
The application for review is allowed.
The orders are set aside, and the petition is dismissed.
No orders as to costs in relation to that proceeding or the present proceeding.
A copy of this order will be forwarded by the Court to the Official Receiver within 2 working…
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- AGLC
- Cuskelly v Kembrey [2010] FMCA 899
- Case
- [2010] FMCA 899
- Decision Date
CaseChat Overview and Summary
The legal issue before the court was whether the costs order, which became payable out of the estates, could be considered a debt incurred by the legal personal representative, thus allowing the petitioner to petition for the administration of the estates. The court considered whether the costs order constituted a debt under section 244(1)(b), which refers to debts incurred by the legal personal representative. The court explored the interpretation of "incurred by the legal personal representative" and whether it included debts the representative became liable to pay in their official capacity.
The court held that the costs order, once made, became a debt of the estates, and Mr. Ah Toy, as the legal personal representative, became responsible for paying it. The court interpreted "incurred by the legal personal representative" to include debts that the representative became liable to pay in their official capacity. This interpretation aligns with the legislative intent to enable creditors to petition for administration when debts are incurred by the legal personal representative. The court rejected the argument that there was a hiatus in the scope of section 244(1)(b) and found that the costs order was a valid debt under the Act.
ORDERS:
1. Time is extended to allow the bringing of an application under s.104(2) of the Act.
Orders
Orders of the court
1.
Time is extended to allow the bringing of an application under s.104(2) of the
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Section 244(1) provides: 244Administration of estates under this Part upon petition by creditor (1)Subject to this section, where: (a) a debt of not less than $5,000 was owing by a deceased person at the time of his or her death to a creditor, or debts amounting in the aggregate to not less than that amount were so owing to any 2 or more creditors; (b) a debt incurred by the legal personal representative of a deceased person of not less than $5,000 is owing to a creditor, or debts so incurred amounting in the aggregate to not less than that amount are owing to any 2 or more creditors; or (c) a debt of not less than $5,000, or debts amounting in the aggregate to not less than that amount, which a deceased person would have been liable to pay to a creditor or any 2 or more creditors if he or she had not died becomes or become owing after his or her death; the creditor or creditors to whom the debt or debts is or are owing may present a petition to the Court for an order for the administration of the estate of the deceased person (in this section referred to as the deceased debtor) under this Part. It has been held that s.244(1)(b) encompasses an order made in probate proceedings that costs be paid out of the deceased’s estate. In Austrust Ltd & Anor v Estate of the late Evan Schomburgk Herbert & Anor [1998] FCA 1621, Mansfield J said: Section 244(1)(b) did not have a legislative ancestor in the Bankruptcy Act 1924 (Cth): see, s 155, Bankruptcy Act 1924. Section 244(1) contemplates that a petition may be presented in respect of debts of the estate incurred by the deceased person, or after that person’s death by the legal personal representative of the deceased person. It reflects the earlier provision in so far as it enables a petition to be presented without there having been an earlier act of bankruptcy, simply on the basis of the existence of the debt: Re Paravicini (Deceased) (1930) 3 ABC 15. No particular provision of s 244 appears specifically to be focussed upon what may constitute debts incurred by the legal personal representative. Section 244(13) clearly refers to administration suits, in the following terms: “Where proceedings have been commenced in a court for the administration of a deceased person’s estate under a law of a State or Territory, a petition for an order under this section in relation to the estate shall not be presented by a creditor except by leave of the Court and on such terms and conditions (if any) as the Court thinks fit.” It does not specifically address the present problem, namely whether an order for costs to be payable out of the estate in issue, made in such proceedings, is capable of constituting a debt under s 244 so as to entitle one person in whose favour an order for costs is made to petition for an order for an administration of the estate. There is no dispute that the costs order, quantified by the Deed, and now reflected in the judgment, is a debt as defined in s 5(1) of the Act: Re Coward, ex parte Heiser [1956] SR (Qld) 412. There is either a hiatus in the scope of the operation of s 244, which Mr Ah Toy contends, or the costs order made in the administration proceedings is, or by virtue of the Deed or the judgment has become, a debt incurred by Mr Ah Toy as the legal personal representative of the Estates of Evan and Oscar. Mr Ah Toy is the legal personal representative of Evan and Oscar. Upon the grant of probate of their wills he became able, in a practical sense, to exercise his rights in that capacity. As there was an issue as to whether probate of the wills of Evan and Oscar would be granted to him, an administrator pendente lite of their personal estates and a receiver of their real estates were earlier appointed under s 32 of the AP Act until the resolution of the two probate actions. The administrator pendente lite so appointed was Public Trustee, but the appointment was only with respect to the inter vivos action as there was a perceived conflict of interest in the roles of Mr Ah Toy in his capacity as the named executor in their wills on the one hand, and as a recipient of certain inter vivos transactions on the other. In addition, under s 51 of the AP Act, an estate vests in Public Trustee upon death until it vests in some other person. Section 52 of the AP Act provides: “52. Upon the grant of representation of the estate of any deceased person, all the property whether real or personal which the person has left within the Territory, and which is unadministered at the date of the grant, shall, as from the death of that person, pass to and become vested in the executor to whom probate has been granted or the administrator (as the case may be) for all his estate and interest therein in the manner following, that is to say:- (a) on testacy, in the executor or administrator with the will annexed;” Thus, upon the acceptance of proof of the wills in solemn form by Nader J (and upon the affirmation of that order by the Full Court of the Supreme Court of the Northern Territory on 28 August 1990: cp. Taylor v Taylor (1881) 6 P&D 29), the property in the Estates of Evan and Oscar so far as it had not been administered by Public Trustee vested in Mr Ah Toy, and did so from the respective dates of death. In Williams, Mortimer and Sunnucks On Executors, Administrators and Probate (Stevens & Sons, 1993) at 83 there is a convenient summary of that position at common law: “Where an executor is appointed by a will, he derives title from the will, and the property of the deceased vests in him from the moment of the testator’s death, so that probate is said to have relation to the time of the testator’s death.” That seems to have been reflected in s 52 of the AP Act. However, Mr Ah Toy contends that the proper construction of s 52 of the AP Act means that the point of time at which the formal sealed order of the Court occurs, rather than the time of pronouncing judgment, is the critical time. He refers to the definition of “representation” in s 6 of that Act. He says there is no grant of representation until that point, and not per se by the announcing of judgment: Bone v Commissioner of Stamp Duties (NSW) (1974) 132 CLR 38 at 46 and 54. The Howard Estate responds that s 6 of the AP Act should not limit the proper scope of operation of s 244(1)(b) of the Act. It points to the terms of the costs order. On this particular aspect, it also submits that the advice of the Privy Council overruled the decision of the High Court: Commissioner of Stamp Duties (NSW) v Bone (1976) 135 CLR 223 at 227‑228 in relevant respects. For reasons which appear below, I do not think that that contention by Mr Ah Toy is really to the point. I do not need to address the High Court decision and the advice of the Privy Council in Bone. In my judgment, the effect of the costs order is to create a debt “incurred by the legal representative” of Evan and Oscar, so as to entitle the Howard Estate to present the petition under s 244(1)(b) of the Act. In cases involving proof of a will in solemn form, it has long been recognised that the normal rules as to costs apply: Twist v Tye [1902] P92, namely that costs follow the event. In that case an unsuccessful proponent of a disputed will was ordered to pay the costs of the proceeding. In Public Trustee v Hall [1937] SASR 252, an unsuccessful proponent to the proof of a will in solemn form was ordered to pay costs. An illustration is provided by Re Green, deceased; Lloyd v Green [1969] WAR 67. There have been cases where the costs of the unsuccessful opponent have been ordered to be paid out of the estate, where it has been concluded that the conduct of the testator has in some way warranted that opposition: see the discussion of that principle by Sir J Hannen in Davies v Gregory (1873) LR 3 P&D 28 at 32‑33, and by Gorell Barnes J in Twist at 93‑94. In that latter case, his Lordship appears to have extended the scope of the principle by reference to the reasonableness of the opponent’s attitude in the circumstances. What is apparent is that the order for costs is not the product of some peculiar rule of principle or practice. It is the result of the application of a judicial discretion generally exercised in inter partes litigation, but exercised in the particular circumstances of the case. It does not attract a characterisation which warrants it being regarded as special, for the purposes of the general law, including the Act. There is no reason why, as a liability of the estates of Evan and Oscar, it ought not be treated as recoverable in the normal way. Upon the making of the costs order, Mr Ah Toy became responsible to give effect to it. His conduct in agreeing the quantum of that entitlement by the Deed reflects that responsibility. In those circumstances, rather than accept a hiatus in the scope of operation of s 244(1)(b) of the Act, in my judgment it is more appropriate to interpret the expression “incurred by the legal personal representative” as including a debt which the legal personal representative of the deceased person becomes liable to pay in the capacity as legal personal representative. It is not necessary to interpret “incur” to require some deliberate act on the part of the legal personal representative on behalf of the estate. Of course, that will commonly be the circumstance giving rise to a debt to which s 244(1)(b) applies. But “incur” is also capable of describing the circumstance of finding oneself subject to a liability or consequence (SOED, Vol 1, 1993, page 1344). That is the effect of the costs order. The use of the word “by” in conjunction with the word “incurred” in the context serves only to indicate that the debt is, in reality, the debt of the estate so that it is the legal personal representative in that capacity, rather than in a personal capacity, who is responsible to pay that debt. In my view, that approach reflects the legislative mandate in s 15AA of the Acts Interpretation Act 1901 (Cth): Supetina Pty Ltd v Lombok Pty Ltd (1984) 5 FCR 439 at 442. The purpose of s 244(1)(b) is, in my view, to enable a person who is owed money recoverable from an estate, as a result of events which took place after the death of the deceased, and which the legal personal representative of the estate should pay from the estate (as distinct from having a personal liability to pay), to take steps in respect of that debt under the Act. It is complementary to the rights which s 244(1)(a) and (c) provide, in respect of debts which existed as at the date of death or which come into existence after the date of death by reason of events which occurred before that date.