Foyster v INSOLVENCY and Trustee Service Australia - [2005] FMCA 457

FEDERAL MAGISTRATES COURT OF AUSTRALIA

FOYSTER v INSOLVENCY & TRUSTEE SERVICE AUSTRALIA

[2005] FMCA 457

BANKRUPTCY – Practice and procedure – leave to be heard.

Bankruptcy Act1966, s.30(1)(b)
Federal Magistrates Courts Rules 2001, r 29.05

Re Barton (1980) 43 FLR 245
Clyne v Andrew (1984) 1 FCR 169

Applicant:

DAVID LLOYD FOYSTER

Respondent:

INSOLVENCY & TRUSTEE SERVICE AUSTRALIA

File No:

BRG 377 of 2004

Delivered on:

11 April 2005

Delivered at:

Brisbane

Hearing date:

14 March 2005

Judgment of:

Jarrett FM

REPRESENTATION

The Applicant appeared in person.

Solicitor for the Respondent

Mr Belcher

Solicitors for the Respondent

Australian Government Solicitor

Counsel for Tasmanian Titanium Pty Ltd

Mr Erskine

Solicitors for Tasmanian Titanium Pty Ltd

James Conomos Lawyers

ORDERS

That the application of Tasmanian Titanium Pty Ltd for leave to be heard in the application filed by the applicant on 18 August 2004 be dismissed.
That the applicant file and serve any written argument in support of any application for costs no later than 4.00pm on 18 April 2005.
That the respondent to any costs application file and serve any written argument in opposition to the costs order by no later than 4.00pm on 2 May 2005.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRG 377 of 2004

DAVID LLOYD FOYSTER

Applicant

And

INSOLVENCY & TRUSTEE SERVICES AUSTRALIA

Respondent

REASONS FOR JUDGMENT

This is an application by Tasmanian Titanium Pty Ltd pursuant to r.29.05 Federal Magistrates Courts Rules 2001 for leave to be heard in a certain application filed by David Lloyd Foyster (“the principal application”). David Lloyd Foyster is a bankrupt. Tasmanian Titanium is a creditor of Mr Foyster.
In the principal application, Mr Foyster seeks relief against certain decisions of his trustee in bankruptcy taken at a meeting of creditors on 20 May 2004. The meeting was convened to consider a composition pursuant to s.73 of the Bankruptcy Act1966 (“the Act”). After objection from Tasmania Titanium, a proxy on behalf of another creditor was rejected by the Chairman of the meeting. Had the proxy been allowed and the creditor’s vote taken, the proposal would have passed and the bankruptcy consequently annulled (s.74 of the Act). The proposal, however, failed.
Tasmanian Titanium’s application for leave to be heard is opposed.
Rule 29.05 appears in Chapter 4 – Bankruptcy Proceedings of the Federal Magistrates Court Rules 2001. It is in the following terms:
29.05 Leave to be heard
(1) The Court may grant leave to be heard in a proceeding to a person who is not a party to the proceeding.
(2) The Court may grant the leave on conditions and may revoke the leave at any time.
(3) The Court may order the person to pay costs if:
(a) the granting of leave to the person causes additional costs for a party to the proceeding; and
(b) the Court considers that the costs should be paid by the person.
(4) The Court may also order that the person is not to be further heard in the proceeding until the costs are paid or secured to the Court’s satisfaction.
(5) The Court may grant leave or make an order under this rule on the Court’s own motion or on the application of a party or another person having an interest in the proceeding.
(6) An application for leave or for an order must be made by filing an application in accordance with the form of application set out in Part 1 of Schedule 2.
The basis upon which Mr Foyster pursues the principal application is far from clear. It seems, however, that it is an application to review a decision of his trustee pursuant to s.178 of the Act.
Rule 29.05 FMCR provides sufficient power for this court to make the orders sought by Tasmanian Titanium. The issue is the basis upon which such an order might be made and the factors that might be relevant to the exercise of the discretion conferred by the FMCR.
In Re Barton (1980) 43 FLR 245, Lockhart J determined that s.30(1)(b) of the Act provided sufficient power to support an application by ten applicants for leave to intervene in an application for discharge by the bankrupt in that case. That was so whether or not the creditors’ debts were provable in the bankruptcy. Although his Honour was not dealing with an application under any equivalent of the FMCR, he was dealing with the broad discretion conferred by s.30(1)(b) of the Act. In my view, the discretion conferred by FMCR 29.05 is no narrower than that relevantly conferred by s. 30(1)(b) of the Act.
The principal application in Re Barton was an application for discharge from bankruptcy. The applicants for leave to intervene applied on the basis that:
a)Ordinarily, the interests of justice would be served if the right of appearance on such an application was confined to the official receiver, the petitioning creditor and creditors whose debts have been admitted to proof;
b)The circumstances of the present case demand the intervention of the applicants because only they could give the Court full and complete information about the commercial morality of the bankrupt and other matters relevant to the public interest;
c)Their interests would be affected because if the bankrupt was discharged their debts provable in the bankruptcy would be released.
His Honour granted leave to intervene on the basis that “it is unreal to expect that the official receiver and the petitioning creditor would be able adequately to deal with all matters that may be relevant” given the complex nature of the questions of fact and law involved in the many complicated transactions involving the bankrupt over the years preceding his bankruptcy and that may have a bearing on his application for discharge (at p.253).
Re Barton was followed in Clyne v Andrew (1984) 1 FCR 169. In that case, Beaumont J was dealing with an application by a creditor for leave to intervene in an application by the bankrupt for consent to leave Australia. His Honour granted the application and in doing so said, at p. 170 :
In my view, s.30(1)(b) gives the Court the power, in an appropriate case, to grant leave to a creditor to intervene in any proceedings involving the bankrupt or his estate.
As to the discretion to be exercised in applications for leave to intervene Beaumont J said, at p.170:
In my opinion, where a trustee (or, in the peculiar circumstances of this case, two trustees) can represent the interests of creditors in the application, special circumstances must be shown to exist before intervention of a creditor should be permitted. In the present case, the Deputy Commissioner says that he has a special knowledge of the affairs of the bankrupt, having regard to the extensive litigation which has taken place between them. He says that, accepting fully the integrity and competence of the trustees and their advisers, he is seized of a deal of information about the bankrupt which is impossible to communicate properly to the trustees, at least in the short term.
The discretion conferred by FMCR 29.05 is broad and unfettered. Relief pursuant to its terms can be granted on conditions, including conditions as to costs, and leave may be revoked at any time. Section 30(1)(b) of the Act has, of course, a much wider application than FMCR 29.05 but as Re Barton and Clyne v Andrew demonstrate, the broad discretion within its terms has to be exercised in a principled way. Ordinarily, it will not be appropriate to give leave to intervene in applications where the trustee can represent the interests of the creditors in the relevant application.
Rule 29.05 FMCR speaks of leave to be heard in proceedings. Re Barton and Clyne v Andrew concerned applications for leave to intervene. In my view in the present context there is little difference in the nature of the two applications and considerable guidance is derived from Re Barton and Clyne v Andrew.
In the course of argument, I was taken to authorities dealing with applications to join in proceedings as a party (eg: Pegang Mining Co. Ltd. v Choong Sam [1969] 2 MLR 52 and News Limited v Australian Rugby Football League Ltd [1996] 870 FCA 1). Given the very different nature of the consequences of a successful application to be joined as a party to proceedings, I think those authorities are of limited assistance.
In my view, an order for leave to be heard in proceedings pursuant to FMCR 29.05 will not be made as a matter of course. An applicant should establish that:
a)the bankrupt’s trustee cannot represent the interests of all creditors in the application; and
b)special circumstances exist that justify the making of the order for leave to be heard.
In support of its application, Tasmanian Titanium says that the following matters lead to a favourable exercise of the discretion to give it leave to be heard in the principal application:
a)Tasmanian Titanium will be directly or indirectly affected by the outcome of the principal application. If the principal application succeeds and the matter proceeds to another vote, the bankrupt’s proposed composition is likely to be carried and the bankruptcy annulled. That will affect Tasmanian Titanium because it is presently in litigation with the bankrupt in the Supreme Court of New South Wales. That litigation is not being pursued by the bankrupt’s trustee, but is likely to be revived if the bankruptcy is annulled. The bankrupt says that in the event that the bankrupt is successful part, if not all, of the proceeds of that action will be made available to creditors to satisfy their debts.
b)Tasmanian Titanium is a creditor able to provide the Court with assistance for the determination of the proceedings and should be given leave to be heard on the application.
c)The bankrupt’s opposition to this application carries with it serious allegations of apparent conflict, or improper conduct, on the part of Hopkins as an office holder of Tasmanian Titanium. It is argued that Tasmanian Titanium (by Hopkins) ought to be permitted to lead evidence in answer to those allegations.
d)The c1aims of the bankrupt have been protracted over a long period and the bankrupt effectively wishes to continue those proceedings by paying creditors (through the composition) a relatively small sum of money in circumstances where there is no evidence from the bankrupt as to his financial capacity to pay creditors in accordance with the composition.
None of the above matters appear to me to meet the requirement of “special circumstances” espoused by Beaumont J in Clyne v Andrews. I accept that all creditors will be affected by the outcome of the bankrupt’s principal application. That, of itself, is insufficient to amount to special circumstances. For it to be otherwise would mean that there really is no requirement for special circumstances to be shown. And just as Tasmanian Titanium might be adversely affected by the outcome of the bankrupt’s principal application, so too the creditors who voted in favour of the relevant proposal might benefit.
The nature and extent of the assistance that might be provided by Tasmanian Titanium in the principal application is not identified in argument, and it is not suggested that the respondent Trustee could not provide that assistance on behalf of all creditors in any event. The principal application challenges a decision of the trustee taken at a creditors’ meeting on 20 May, 2004 to reject a certain voting proxy. The basis upon which the trustee did so is apparent enough from the transcript of the meeting (see annexure “J” to the affidavit of David Lloyd Foyster filed on 28 October, 2004). It is a matter that will probably be decided without reference to any other evidence than what occurred at the meeting.
Much of the material filed in this application by both protagonists appears to be relevant to a dispute between the bankrupt, his father Lloyd Foyster and Peter William Hopkins, an office holder of Tasmanian Titanium. It is difficult to see its relevance to any of the issues before me.
I am concerned that the bankrupt, Lloyd Foyster and perhaps less so Tasmanian Titanium and Hopkins are seeking to use this application and the principal application as a fishing expedition for the New South Wales proceedings. The view I take of the matter is that much of the material filed in support of this application, by both the applicant and the bankrupt, is entirely misdirected and irrelevant to the matter that I have to decide.
Finally, it is said that the ultimate outcome of these proceedings might be that the bankruptcy is annulled. I doubt that would be a likely consequence of the principal proceedings. Annulment might be an outcome that follows a successful proposal properly put to a meeting of creditors and the consequent effect of the Act. In that respect, it is said that Tasmanian Titanium as a creditor would be entitled to apply to the Court for an annulment of the composition. Even if that is so, it seems to me to be a matter irrelevant to the present application. The considerations relevant to that matter would be entirely different to the considerations in the principal application.
In my view, the applicant for leave to be heard in the principal proceedings has not established that:
a)the bankrupt’s trustee cannot represent the interests of all creditors in the application; and
b)special circumstances exist that justify the making of the order for leave to be heard.
The present application is dismissed.

I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of Jarrett FM

Deputy Associate: Emma Crutchfield

Date: 12 April 2005