Fletcher v George (No.5)
[2008] FMCA 1628
•18 November 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FLETCHER v GEORGE (No.5) | [2008] FMCA 1628 |
| BANKRUPTCY – Amended application for final orders – application for stay of proceedings – seeking a declaration that Heads of Agreement remain valid and enforceable – the bankrupt made application to the Supreme Court seeking declarations in her favour as trustee in respect of the subject property – relevant parties to that proceeding are in part or principally parties to this application save for the trustee – trustee contends that he did not need to be a party to those proceedings – common substratum of facts and issues arising in relation to title of property – rights of the parties in contest for too long – whether this court is vested with exclusive jurisdiction under the Bankruptcy Act and whether the Supreme Court has any jurisdiction in respect of those matters – matter should proceed to trial. |
| Bankruptcy Act 1966 |
| Fencott v Muller (1983) 152 CLR 570 Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2008] FCAFC 172 Philip Morris Inc & Anor v Adam P Brown Fashions Pty Ltd (1981) 148 CLR 457 Re Wakim Ex Parte McNally (1999) 163 ALR 270 |
| Applicant: | WILLIAM JOHN FLETCHER AS TRUSTEE OF THE BANKRUPT ESTATE OF LAUREN KAY GEORGE |
| Respondent: | LAUREN KAY GEORGE |
| File Number: | BRG 709 of 2008 |
| Judgment of: | Burnett FM |
| Hearing date: | 18 November 2008 |
| Date of Last Submission: | 18 November 2008 |
| Delivered at: | Brisbane |
| Delivered on: | 18 November 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Coulsen |
| Solicitors for the Applicant: | Coleman Webb Lawyers |
| Counsel for the Respondent: | Ms George appears on her own behalf |
ORDERS
That the application for a stay of proceedings is refused.
That Richard Siebert be joined as a party to these proceedings.
That the first respondent file an affidavit informing the parties to these proceedings of the additional matters she wishes to raise in addition to or in variation of the matters alleged in her amended statement of claim exhibited in the affidavit of Nick Humzy-Hancock filed by leave on 18 November 2008 and that such affidavit be filed on or by 4:00pm on 21 November 2008, in default of which the first respondent will not be permitted to advance such claim at trial.
That the first respondent serve upon the parties to the proceeding copies of any documents to be relied upon by the first respondent in respect of any amendments notified pursuant to order 3 above on or before 4:00pm on 21 November 2008.
That any documents filed in the Supreme Court of Queensland proceedings 3747 of 2008 be taken as if filed in this proceeding.
That any party wishing to respond to the first respondent’s affidavit filed in accordance with order 3 herein file and serve any affidavit and any supporting material to be relied upon at the trial by 4:00pm on 28 November 2008.
That this matter be adjourned for further mention to 26 November 2008.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 709 of 2008
| WILLIAM JOHN FLETCHER AS TRUSTEE OF THE BANKRUPT ESTATE OF LAUREN KAY GEORGE |
Applicant
And
| LAUREN KAY GEORGE |
Respondent
REASONS FOR JUDGMENT
In this application the applicant is the trustee in bankruptcy for the estate of the first respondent, Lauren Kay George. By an amended application filed on 7 November 2008 the applicant seeks final orders which include declarations identified in paras.1, 2, 3 and 8, particularly he seeks a declaration that Heads of Agreement dated 19 February 2008 remain valid and enforceable.
Secondly, a declaration that as at 24 February 2006, the legal and beneficial ownership of lot 30 on SP145714 County of Stanley, Parish of Moggill, title reference 50440445 vests in the applicant as trustee of the bankrupt estate, and I will refer to that land from hereinafter as the Landing Place property.
Thirdly, a declaration that there is no trust in favour of Alexandra George, the bankrupt, or any other person in respect of the Landing Place property and then in para.8 a declaration that as at 24 February 2006 the legal and beneficial ownership of items listed in schedule A vests the trustee of the bankrupt estate. The items listed in schedule A are chattels including furnishings and jewellery. There are other declarations sought in respect of other chattels including a motor vehicle and livestock and they are not the subject of a dispute between the parties today and are not the subject of the stay application.
The Heads of Agreement referred to para.1 of the declaration is an agreement entered into between each of the parties to the proceeding today, that is, between the trustee, between the first respondent, the bankrupt Dr Ironside and Dr Ironside's company, Ironside Pty Ltd and a Ms Wilson who is the bankrupt's sister. That agreement dealt with the ownership and claims in respect of ownership of the Landing Place property and purportedly binds the bankrupt herself individually and as trustee.
Essentially the assets which are being debated are former matrimonial assets including the former matrimonial home, furnishings and jewellery which the bankrupt now says are held by her as trustee for her son, Alexander George, a minor. The trustee says that the trusts are a sham and are held beneficially for the bankrupt or by her personally and, in turn, is property that vests in the trustee pursuant to s.58 of the Act. The legal issues in this case are not difficult, however, there are significant factual disputes.
The bankrupt in this instance appears to have got off first by making an application to the Supreme Court of Queensland early in 2008 seeking declarations in her favour as trustee for her son in respect of the subject property. The relevant parties to that proceeding are in part or principally are parties to this application save for the trustee. The trustee's contention was that he did not need to be a party to those proceedings because his claim was one under the Bankruptcy Act and as this Court has exclusive jurisdiction there was no point in him being joined in that proceeding. Having said that, the trustee has appeared at various mentions in the proceedings before the Supreme Court and has, on all occasions, reserved his position including in so far as making application to be joined in the event that that was necessary. He has, however, at least from transcript presented to me in material filed today appeared at all of the various interlocutory skirmishes that have occurred in that Court which principally were an application for summary judgment which was brought by one of the defendants to that proceeding and also, as I say, in relation to matters pertaining to the ongoing case management of that proceeding.
The significance of the trustee's position in those proceedings was highlighted by Martin J at page 45 of the transcript of proceedings on 5 December 2008 when dealing with the issue of real property. I do not think it can be seriously contested that the trustee has otherwise done anything but contend his interest as the trustee in bankruptcy in anticipation of an order that the property is properly property of the bankrupt and not held in trust for the benefit of others.
In October the chattels were added to the claim and the observations I make in respect of the real property apply with equal force in relation to the chattels. What follows, in my view, is that what are presently on foot are proceedings in this Court and in the Supreme Court which press common matters. In this Court what is pressed by the trustee are claims in respect of real property, personal effects and chattels, together with vehicles and livestock, which I have earlier noted are not the subject of the stay application today. In effect the same proceedings for the same relief are pressed in the Supreme Court.
There is agreement, at least, between all the respondents and the trustee that there is a common substratum of facts and issues arising in relation to title of property. I do not think the bankrupt necessarily disagrees. At least she has not pointed to anything and I take her position, at worst, to be a mere matter of non admission.
It follows then, at its heart, the question of title by either by this Court or by the Supreme Court will determine the ultimate issues,. Clearly if the title of the various assets is properly attributable to the bankrupt, well then the assets vest in the trustee otherwise then, of course, if the property is indeed held by the bankrupt on trust other rights follow.
It is accepted, at least by all parties save for the bankrupt, that this Court and the Federal Court are invested with exclusive jurisdiction under the Bankruptcy Act and that the Supreme Court has no jurisdiction in respect of those matters. Recently in Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2008] FCAFC 172 the Full Court of the Federal Court gave express consideration to the question of this matter of jurisdiction, particularly in so far as it concerned State Courts. The Full Court, in that case, determined that it is only the Federal Magistrates Court or the Federal Court which has jurisdiction to settle such contests. His Honour, Greenwood J in that case at para.114 noted that:
“A proceeding engaging any of section 31 subject matter is expressly an exercise of section 27 jurisdiction (with the statutory direction that the matter be dealt with in open Court). Although the section 27 conferral goes beyond on the section 31 subject matter, section 31 nevertheless, gives a clear statutory indication of the classes of subject matter which the bankruptcy treats as jurisdictional subject matter arising under or by virtue of the Bankruptcy Act. Each proceeding owes its authority to the Bankruptcy Act.”
His Honour, Perram J reached a similar conclusion where he noted at para.195:
“Once it is accepted, as I think it must be, it follows that jurisdiction to determine the trustee's title to Mr Rose's right of action was exclusively vesting in this Court and the Federal Magistrates Court. The existence of that jurisdiction is demonstrated by section 31(1)(f) which required this Court to exercise jurisdiction to declare the title of the trustee to the right of action in open Court. It is important to emphasise that section 31 is not a grant of power but a requirement that certain powers be exercised in open Court. It seems to me that the question of title of the trustee might come up in a number of different ways “in bankruptcy” and not just by way of declaration referred to in section 31(1)(f). This underscore was that section 31(1)(f) is not a grant of jurisdiction itself and therefore the real question is not whether a Court is being asked for such a declaration, but rather whether it is purporting to determine the title of the trustee. Once that receives an affirmative answer, it follows that the matter lies in this Court's exclusive jurisdiction.”
The matter of real property and chattels as particularised in paras.1, 2, 3 and 8 of the amended claim, in my view, involve questions of determining title of the trustee and, accordingly, must be settled in this Court. In any event, even if I were wrong in my interpretation of the Full Court's pronouncement in Meriton Apartments v Industrial Court of New South Wales, the matter arguably falls within the accrued jurisdiction of this Court.
In so far as that matter is concerned, it is now well settled and has been since the High Court's decision in Fencott v Muller. So far as the concept of matter is concerned, it is settled and I note their adoption of the observations of the High Court's decision in Philip Morris Inc & Anor v Adam P Brown Fashions Pty Ltd at 475 where they stated:
“It is settled doctrine in Australia that when a Court which can exercise Federal jurisdiction has its jurisdiction attracted in relation to a matter that jurisdiction extends to the resolution of the whole matter. This accrued federal jurisdiction is not limited to matters incidental to that aspect of the matter which has, in the first place, attracted federal jurisdiction. It extends in my opinion to the resolution of the whole matter between the parties. This accrued jurisdiction carries with it the authority to make such remedial orders as are necessary or convenient for, or in consequence of that resolution. For this purpose the Court exercising federal jurisdiction may enforce rights which derive from a non federal source. This exercise of this jurisdiction which for want of a better term I shall call “accrued” jurisdiction is discretionary and not mandatory, although it will be obligatory to exercise federal jurisdiction which has been attracted in relation to the matter.”
The Court noted further, at page 608:
“…in the end it is a matter of impression and of practical judgment whether a non federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of the matter.”
And further, again:
“…there is but a single matter if different claims arise out of common transactions and facts “or” a common substratum of facts, notwithstanding that the facts upon which the claim is dependent do not wholly coincide.”
Perhaps the matter was best articulated for present purposes by the observations of the High Court in Wakim where at para.141 their Honours noted:
“…often the conclusion that if proceedings were tried in different Courts that there would be conflicting findings made on one or more issues common to the two proceedings to indicate that there is a single matter.”
I make that observation particularly in the present context. Although the stay is only sought in respect of a part of the amended claim there is, of course, a close connection between that part of the claim and the claim which concerns the livestock and the vehicle given the nature of the trusts that are asserted in respect of some of those items.
For her part, the bankrupt principally asserts that those principles, particularly the principles in relation to the accrued jurisdiction do not apply because there is no commonality of parties, and strictly what the bankrupt submits is correct. However, as I have earlier noted, notwithstanding the absence of the trustee in bankruptcy in the Supreme Court proceedings, his interest in those proceedings has been well flagged and identified by the trustee. He has sought to reserve his position and, indeed, it is apparent from a reading of the transcript the most recent appearance before the Court on an occasion earlier this month, his position is reserved pending the resolution of proceedings in this Court. Despite the absence of his formal presence as the face of the record in those proceedings, I should not overlook the serious issue to be determined concerning his title, whether it be in this Court or that Court. To that end, notwithstanding that point of distinction identified by the bankrupt, in this case that point of distinction is not one with any merit.
The other matter contended for by the bankrupt in her submissions on this particular point dealt with the matter of pleadings not having been closed in order to suggest, for instance, that there were further issues to be raised. I will deal with the issue of pleadings in some greater detail shortly but, in any event, it was apparent from the matters raised that there was nothing that would be raised in any further contentions on behalf of the bankrupt that would suggest that there was any absence of a common substratum of fact which would warrant the matter not being resolved in this Court. It follows, in my view, that this Court should proceed to hear the matter and, on that basis, the application for the stay is refused.
The trial has been listed for two days commencing on 8 December this year. The trial raises substantially the same issues that have been the subject of pleadings and other interlocutory steps in the Supreme Court proceedings. The bankrupt now wants to amend her statement of claim again. As the plaintiff in the proceeding before the Supreme Court she has had significant opportunity since the commencement of that action to articulate her claim. Indeed, strictly speaking, her cause of action notionally arose at the time of her bankruptcy almost three years ago. The history before the Court, or before the Supreme Court has an extensive history. Delays appear largely to have been occasioned by her desire to amend pleadings and raise new issues.
While I acknowledge the bankrupt has appeared in those proceedings self represented, the transcript of proceedings before the Supreme Court do appear to demonstrate some filibustering on her part. It is clear to me that the bankrupt is a capable and articulate person. She is not in employment and she does have ample time on her hands to prepare this case between now and mid December. Evidence in the Supreme Court proceedings can all be used in this proceeding and, really, the question for determination here really revolves around the hearing of the case and the conduct of the trial rather than advancing interlocutory steps.
There are, in my view, only two matters that require further attention, and by reason of matters the bankrupt informed me of this morning, I think they can be addressed in short compass. Indeed, if there was to be a claim for an adjournment or any claim for prejudice then, in my view, they are matters that would more properly be brought by the other parties to the proceeding. There are two matters that I have in mind: first is the proposed further amendment to a statement of claim which was foreshadowed on the last occasion before me just over a week ago and which proposal has been articulated again this morning.
The foreshadowed amendments to the statement of claim involve essentially a claim of unconscionability which is alleged against the bank. A matter I note was the subject of debate in proceedings before Martin J on the return of the application for summary judgment in early September, and so a matter in respect of which I expect the bankrupt is well versed and ready and able to articulate.
The second matter concerns the assertions made concerning a resulting trust arising from the disposition of property and the conversion in turn of that resulting trust into a trust which appears to have been settled some time in 1997. Whilst I do not completely understand the nature of the transactions which were being articulated by the bankrupt, no doubt she will be able to perhaps more clearly express them in writing so that all parties will be appraised of that matter. In any event, that is not an unduly complicated matter having regard to the bankrupt's information to the Court that most of the documents relate to conveyances which are referred to in documents already filed in this proceeding and leaves only a relatively minor amount of disclosure to follow up.
That then leads into the second matter which, of course, is the question of disclosure. Obviously there may be some further disclosure following up on the two allegations which are to be incorporated into any amended claim, but one would expect having regard to the confined nature of the proposed amendments, that that disclosure also can be readily attended to.
The rights of the parties have otherwise now been in contest for too long. The costs to creditors, in my view, escalate and escalate daily, particularly because of the manner in which the bankrupt is dealing with the application. Indeed, it seems to me, having regard to the information that first came before this Court at the time of the issuing of the warrant, that there will not be a full dividend to creditors and the prospective dividend will continue to diminish as these proceedings are elongated.
Finally, of course, I take into account the fact that we are now almost not quite two months short of the bankrupt's third anniversary of bankruptcy and it seems, in all the circumstances, that that factor too militates very much in favour of the matter proceeding to trial. It follows that the matter should proceed to trial on the due date and I propose to make directions in order to ensure that the parties are able to advance these matters.
Broadly what I have in mind are directions in these terms, if you could listen carefully to what I have to say I will hear your submissions in relation to these matters in a moment, but first I will direct that the first respondent file an affidavit informing the parties of the additional matters she wishes to raise in addition to or in variation of the matters alleged in her amended statement of claim exhibited to the affidavit of Nicholas Hancock filed by leave on 18 November 2008, and that such affidavit be filed by 4 pm on 21 November 2008, in default of which the first respondent will not be permitted to advance such claims at trial.
Secondly, the first respondent serve upon the parties to the proceeding copies of any documents to be relied upon by the first respondent in respect of any amendments notified pursuant to direction 1 above on or before 4 pm 21 November 2008. Now, what I have in mind here in effect is a guillotine order.
I am minded also to make a direction that any documents filed in Supreme Court proceedings 3747 of 2008 be taken as if filed in these proceedings.
I will direct that any party wishing to respond to the first respondent's affidavit filed in accordance with direction one herein, file and serve such affidavit and any supporting material to be relied upon at the trial by 4 pm on 28 November.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Burnett FM
Associate: Beverley Schmidt
Date: 4 December 2008
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