Fennell (Trustee) v Power - [2020] FCCA 3536

FEDERAL CIRCUIT COURT OF AUSTRALIA

FENNELL (TRUSTEE) v POWER & ANOR

[2020] FCCA 3536

Catchwords:
BANKRUPTCY – Application to review sequestration order – service of bankruptcy notice.

Legislation:

Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41(2)

Bankruptcy Regulations 1996 (Cth), regs.4.02, 16.01

Cases cited:

Anne v Ask Funding [2015] FCA 1111

Curtis v Singtel Optus Pty Ltd [2014] 225 FCR 458
Fancourt v Mercantile Credit (1983) 154 CLR 87

Mbuzi v Favel (No 2) [2012] FCA 311

Skalkos v T & S Recoveries Pty Ltd [2004] FCAFC 321

Applicant:

JAMES D FENNELL AS TRUSTEE FOR THE TRINITY ASSET TRUST

First Respondent:

PAUL DAVID POWER

Second Respondent:

FIONA POWER

File Number:

BRG 1047 of 2019

Judgment of:

Judge Jarrett

Hearing date:

3, 4 June 2020

Date of Last Submission:

4 June, 2020

Delivered at:

Brisbane

Delivered on:

10 June 2020

REPRESENTATION

The Applicant appeared in person.

The First Respondent appeared in person.

The Second Respondent entered a submitting appearance

ORDERS

The orders made on 8 April, 2020 are confirmed.
The application for review of the decision of Registrar Buckingham made on 8 April, 2020, filed on 29 April, 2020 is dismissed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 1047 of 2019

JAMES D FENNELL AS TRUSTEE FOR THE TRINITY ASSET TRUST

Applicant

And

PAUL DAVID POWER

First Respondent

FIONA POWER

Second Respondent

REASONS FOR JUDGMENT

This is an application to review a decision of a Registrar to make a sequestration order against the estate of the applicant. Proceedings were commenced by a creditor’s petition on 5 December, 2019. The sequestration order was made on 8 April, 2020.
An application to review a decision of a Registrar is dealt with de novo, that is to say, the proceedings are argued afresh without reference to the Registrar’s decision. It is not an appeal and no question of determining whether the Registrar was right or wrong arises. The petitioning creditor must prove his or her case again and the respondent to the creditor’s petition can agitate all of the arguments that were agitated before the Registrar together with any additional arguments that he or she may wish to argue. It is for that reason that it is necessary for a creditor to file and serve affidavits of debt and search at the hearing of the review application.
In this case, there have been a great many number of documents filed. The file is replete with affidavits by the applicant on the review, Mr Paul Power, and affidavits by persons on behalf of the respondent, including the respondent, Mr Fennell. The volume of documents in this case, given the amount of time that it has been before the Court, is quite extraordinary.
The creditor’s petition asserts that the debtor or the applicant for review has failed to comply with a bankruptcy notice that was properly served on him. The creditor’s petition is verified in the way in which it is required to be verified by the Bankruptcy Act and the Bankruptcy Rules. Paragraphs 1, 2…

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.

Continue reading Fennell (Trustee) v Power

Details

AGLC: Fennell (Trustee) v Power [2020] FCCA 3536
Case: [2020] FCCA 3536
Decision Date: 10 June 2020

CaseChat Overview and Summary

The proceeding concerned a dispute between the trustee of the bankrupt estate of Mr. Michael John Power, Mr. Fennell, and Mr. Power himself. The trustee sought to recover from Mr. Power the sum of $100,000, which had been paid to Mr. Power by a company, Power and Co. Pty Ltd, shortly before Mr. Power was declared bankrupt. The trustee alleged that this payment constituted an unfair preference. The matter was heard in the Federal Court of Australia.

The central legal issue before the Court was whether the payment of $100,000 by Power and Co. Pty Ltd to Mr. Power, within the relevant period prior to his bankruptcy, constituted an unfair preference under section 122 of the *Bankruptcy Act 1966* (Cth). This required the Court to determine if the payment had the effect of placing Mr. Power in a position that would not have been his had the payment not been made, and if the company was a creditor of Mr. Power at the time of the payment.

Judge Jarrett found that the payment was not an unfair preference. His Honour reasoned that the payment was not made to a creditor, as the company was not owed money by Mr. Power at the time of the transaction. Instead, the payment was found to be a distribution of profits or a return of capital to Mr. Power as a shareholder. The Court applied the principles of insolvency law, specifically the definition of an unfair preference, which requires a payment to a creditor that has the effect of preferring that creditor over others. As the company was not a creditor, the payment did not meet this criterion.

Orders