Ewert v Martin

Case [2018] FCA 1931

FEDERAL COURT OF AUSTRALIA

Ewert v Martin [2018] FCA 1931

File number(s): QUD 711 of 2018
Judge(s): DERRINGTON J
Date of judgment: 20 November 2018
Catchwords: BANKRUPTCY AND INSOLVENCY – application to appoint a trustee to take control of the respondents’ property pursuant to s 50 of the Bankruptcy Act 1966 (Cth) – where applicant also sought to restrain the respondents from disposing of their property without leave of the Court – where litigation history drawn out and the respondents regularly sought to delay and hinder the litigation – where it is in the interests of the respondents that a trustee be appointed – application granted
Legislation: Bankruptcy Act 1966 (Cth) s 50
Cases cited:

Curtis v NID Pty Ltd [2010] FCA 1072

Deputy Commissioner of Taxation v Klein (1983) 14 ATR 540
Date of hearing: 20 November 2018
Registry: Queensland
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 29
Counsel for the Applicant: Mr de Waard
Counsel for the First Respondent: The First Respondent did not appear
Counsel for the Second Respondent: The Second Respondent did not appear

ORDERS

QUD 711 of 2018
BETWEEN:

ANITA GERTRUD EWERT

Applicant
AND:

JONATHAN MARTIN

First Respondent

LEKEETA LEAH MARTIN

Second Respondent

JUDGE:

DERRINGTON J

DATE OF ORDER:

20 NOVEMBER 2018

THE COURT ORDERS THAT:

1.Subject to the interest of any secured creditor of the respondents, Nick Combis of Vincents be appointed as Trustee (Trustee) pursuant to s 50 of the Bankruptcy Act 1966 (Cth) to take control of all “property” as defined in s 5 of the Bankruptcy Act 1966 (Cth) of the first respondent and second respondent, including, but not limited to, the property located at 1 Hemes Close, Pacific Pines in the State of Queensland, more particularly described as Lot 418 on SP 129009, Title Reference 50335651 (Hemes Close Property) and all stock, shares, bank accounts and vehicles owned by the first respondent and the second respondent until further order.

2.That the Trustee shall open a bank account with a trading bank in the joint names of the first respondent and the second respondent and the Trustee (Trustee’s Nominated Account) and arrange that monies may be withdrawn from that account only upon the authority of the Trustee or a nominated officer of the Trustee.

3.The Trustee shall have the following powers:

(a)Powers to communicate on behalf of the first respondent and second respondent, provide instructions on behalf of the first respondent and second respondent, and direct funds due to the first respondent and second respondent from the sale of the Hemes Close Property to the Trustee’s Nominated Account; and

(b)Powers enabling the Trustee to engage any third party, including legal representation, as the Trustee requires to discharge his statutory duties under this Order.

4.That the first respondent and second respondent be restrained, without the prior approval of the Court, from paying, lending or depositing any money with, or transferring or delivering any property to, a person or a company…

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Ewert v Martin [2018] FCA 1931
Case
[2018] FCA 1931
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CaseChat Overview and Summary

The present case, Ewert v Martin, involves an application for the appointment of a trustee to take control of the respondents' property under section 50 of the Bankruptcy Act 1966 (Cth), and to restrain the respondents from disposing of their property without leave of the Court. The applicant, Ms Ewert, is the mother of the second respondent, Ms Martin, and the mother-in-law of the first respondent, Mr Martin. The proceedings originally commenced in the Supreme Court of Queensland, where Ms Ewert sought declarations as to her entitlement to a beneficial interest in property located at Pacific Pines in Queensland. The respondents were found to have acted vexatiously and failed to comply with court orders, leading to the present application.

The primary legal issue before the Court was whether it was in the interests of creditors for a trustee to be appointed to take control of the respondents' property, given their history of obfuscation and non-compliance with court orders. The Court had to consider whether the appointment of a trustee would protect the respondents' property from being disposed of before judgment could be enforced, and whether such an appointment was necessary to preserve the integrity of the Court's proceedings.

The Court granted the application, finding that it was in the interests of creditors for a trustee to be appointed. The Court emphasised the respondents' history of vexatious conduct, including multiple failures to comply with court orders and repeated attempts to delay and hinder the litigation. The Court noted that the respondents had accumulated a significant debt of $249,257.45 in costs, further demonstrating the need for the appointment of a trustee. The Court held that the appointment of a trustee was necessary to protect the respondents' property from being disposed of and to ensure that it would be available for distribution among creditors in the event of a sequestration order being made.

The Court made several orders, including the appointment of Nick Combis of Vincents as Trustee to take control of all property of the respondents, subject to the interests of any secured creditor. The Court also restrained the respondents from transferring or depositing money with, or transferring or delivering any property to, a person or a company so authorised by the Trustee, without the prior approval of the Court. The Court further restrained the respondents from remitting, transferring, sending or taking monies or other property out of Australia without the prior approval of the Court. The Court also ordered that the respondents' property cease to be subject to the control of the Trustee upon the determination of the creditor's petition filed in the Federal Circuit Court. The Court further ordered that the applicant's costs of and incidental to the application be paid by the respondents.

Orders

Orders of the court

1. Subject to the interest of any secured creditor of the respondents, Nick Combis of Vincents be appointed as Trustee (Trustee) pursuant to s 50 of the Bankruptcy Act 1966 (Cth) to take control of all “property” as defined in s 5 of the Bankruptcy Act 1966 (Cth) of the first respondent and second respondent, including, but not limited to, the property located at 1 Hemes Close, Pacific Pines in the State of Queensland, more particularly described as Lot 418 on SP 129009, Title Reference 50335651 (Hemes Close Property) and all stock, shares, bank accounts and vehicles owned by the first respondent and the second respondent until further order.

2. That the Trustee shall open a bank account with a trading bank in the joint names of the first respondent and the second respondent and the Trustee (Trustee’s Nominated Account) and arrange that monies may be withdrawn from that account only upon the authority of the Trustee or a nominated officer of the Trustee.

3. The Trustee shall have the following powers:

(a) Powers to communicate on behalf of the first respondent and second respondent, provide instructions on behalf of the first respondent and second respondent, and direct funds due to the first respondent and second respondent from the sale of the Hemes Close Property to the Trustee’s Nominated Account; and

(b) Powers enabling the Trustee to engage any third party, including legal representation, as the Trustee requires to discharge his statutory duties under this Order.

4. That the first respondent and second respondent be restrained, without the prior approval of the Court, from paying, lending or depositing any money with, or transferring or delivering any property to, a person or a company so authorised by the Trustee.

5. That the first respondent and second respondent be restrained, without the prior approval of the Court, from remitting, transferring, sending or taking monies or other property out of Australia.

6. That the first respondent and second respondent’s property ceases to be subject to the control of the Trustee upon the determination of the creditor’s petition filed 29 October 2018 in the Federal Circuit Court.

7. The applicant serve this order on the respondents by email at the email addresses previously used to contact the respondents by 12.00pm on 21 November 2018.

8. Any party adversely affected by the orders in paragraph 1 to 6 hereof may apply on two (2) clear days’ notice for any variation of same.

9. The applicant's costs of an incidental to the application are to be paid by the respondents.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

It should be noted that the application was brought on urgently with the Court sitting in Sydney and Counsel for the applicant appearing by videolink from Brisbane. Background The history of this matter is unsettling, particularly because the applicant, Ms Ewert, is the mother of the second respondent, Ms Martin, and the mother-in-law of the first respondent, Mr Martin. Between the protagonists, there has been litigation over many years. The proceedings originally commenced in the Supreme Court of Queensland, where Ms Ewert sought declarations as to her entitlement to a beneficial interest in property at Pacific Pines in the state of Queensland which had come to be registered in the respondents’ names. I will refer to that as the Hemes Close Property. The proceedings, although initiated in the Supreme Court of Queensland, were transferred to the District Court of that State. They were characterised by inordinate delays and obfuscation by the respondents during the interlocutory processes and, indeed, after the trial had been completed. The extensive material filed for the purpose of this application demonstrates quite clearly that, from the current perspective, the respondents’ conduct in that litigation was quite appalling. They failed to comply with the rules of Court on multiple occasions. They sought multiple adjournments for what now appears to be specious reasons. They failed to provide disclosure or documents as required by the rules of the District Court of Queensland. Indeed, they failed or refused to sign a request for trial date, which forced Ms Ewert to seek an order dispensing with such signature. There were also multiple orders of the District Court with which the respondents failed to comply. It is, perhaps, not necessary to further recite the litany of the respondents’ failures to comply with their obligations as litigants before the Court during the course of the interlocutory processes. However, the consequence of those failures was that a number of costs orders were made against them in favour of Ms Ewert. The total of those costs orders amounts to $249,257.45. I will refer to that as the “Bankruptcy Debt”. The trial in the District Court of Queensland commenced on 4 April 2018, and it too was characterised by delay caused by the conduct of the respondents. Indeed, the material shows that the second respondent, Ms Martin, admitted to intentional non-compliance with her obligations of disclosure. On 9 April 2018, after a four day hearing, his Honour Judge Koppenol delivered an ex tempore judgment in favour of the applicant, declaring that the Hemes Close Property was held on trust for her. His Honour ordered the transfer of that property to Ms Ewert. It is apparent, that his Honour also made a costs order against the respondents on an indemnity basis, to which one of the respondents audibly responded from the Bar Table, “Good luck getting that”. In a manner which is consistent with their obfuscation throughout the interlocutory and trial processes of the District Court proceedings, after judgment the respondents refused to comply with the order of the Court that they transfer the Hemes Close Property to the applicant. She was again forced to apply to the Court for orders compelling the compliance with the previous order, this time requiring the transfer of the property.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

As mentioned, this is an application under s 50 of the Bankruptcy Act, which reads as follows:50 Taking control of debtor’s property before sequestration(1)At any time after a bankruptcy notice is issued, or a creditor’s petition is presented, in relation to a debtor, but before the debtor becomes a bankrupt, the Court may:(a)direct the Official Trustee or a specified registered trustee to take control of the debtor’s property; and(b) make any other orders in relation to the property.(1A) The Court may give a direction or make an order only if:(a) a creditor has applied for the Court to make a direction; and(b)the Court is satisfied that it is in the interests of the creditors to do so; and(c) the debtor has not complied with the bankruptcy notice.(1B)If the Court directs a trustee to take control of the debtor’s property, the Court must specify when the control is to end.(2)Without limiting the generality of subsection (1), the Court may, at any time after giving a direction under subsection (1), summon the debtor, or an examinable person in relation to the debtor, for examination under this section in relation to the debtor.(3)A summons to a person under subsection (2) shall require the person to attend:(a)at a specified place and at a specified time on a specified day; and(b)before the Court, the Registrar or a magistrate, as specified in the summons;to be examined on oath under this section about the debtor and the debtor’s examinable affairs.(4)A summons to a person under subsection (2) may require the person to produce at the examination books (including books of an associated entity of the debtor) that:(a) are in the possession of the first mentioned person; and(b)relate to the debtor or to any of the debtor’s examinable affairs.(5)For the purpose of the examination under this section of a person summoned under subsection (2), subsections 81(2) to (17), inclusive, apply, with any modifications prescribed by the regulations, as if:(a)a sequestration order had been made against the debtor when the Court gave the direction under subsection (1) of this section;(b) the examination were being held under section 81; and(c)a reference in those subsections to a creditor were a reference to a person who has a debt that would be provable in the debtor’s bankruptcy if a sequestration order had been made as mentioned in paragraph (a) of this subsection. The section is, in some respects, an unusual provision. But in reality it is, in fact, a codified power of Court to protect the integrity of its own proceedings. In this respect it is not unlike many other powers exercised by Courts when the judgments or processes are sought to be undermined by litigants who seek to dispose of their assets before judgment can be enforced. In Deputy Commissioner of Taxation v Klein (1983) 14 ATR 540, Neaves J of this Court said of s 50, at page 545:The section is, clearly, a provision in aid of the creditors of a debtor who has already committed an act of bankruptcy and has a creditor’s petition pending against him. It is a necessary and ancillary provision designed to enable appropriate steps to be taken to preserve and protect the property of a debtor so that, in the event of a sequestration order being made, that property will be available for distribution equitably amongst them in accordance with the statutory provisions contained elsewhere in the Bankruptcy Act 1966. That this is its purpose is reinforced by a consideration of the provisions contained in subs 50(2) with their emphasis on obtaining information concerning the debtor or his trade dealings, property or affairs.