Gidley, Alice Isobell v Commonwealth Bank of Australia & Shears, Richard John v Commonwealth Bank of Australia

[1997] FCA 1463

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - creditor’s petition - whether creditor held any security over the property of the debtor for payment of the debt - debtor beneficiary under will of deceased, where probate not taken out - creditor holds mortgage over property that constitutes the estate of the deceased - nature of right to have will duly administered - whether right to have will duly administered is property of the debtor.

Bankruptcy Act 1966 (Cth), ss 5(1), 44(4)

Commissioner of Stamp duties (Queensland) v Livingston (1964) 112 CLR 12, applied

RE: ALICE ISOBELLE GIDLEY
EX PARTE: COMMONWEALTH BANK OF AUSTRALIA
NP 1403 OF 1996

RE: RICHARD JOHN SHEARS
EX PARTE: COMMONWEALTH BANK OF AUSTRALIA
NP 1404 OF 1996

TAMBERLIN J
SYDNEY
25 NOVEMBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NP 1403 OF 1996

RE:	ALICE ISOBELLE GIDLEY JUDGMENT DEBTOR
EX PARTE	COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 JUDGMENT CREDITOR
NP 1404 OF 1996
RE:	RICHARD JOHN SHEARS JUDGMENT DEBTOR
EX PARTE:	COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 JUDGMENT CREDITOR
JUDGE:	TAMBERLIN J
DATE OF ORDER:	25 NOVEMBER 1997
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The estate of each of the debtors be sequestrated.

1. Gavin Frederick Crichton Thomas be appointed Trustee.

1. The petitioning creditor’s costs (including reserved, if any) be taxed and paid in accordance with the Act.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NP 1403 OF 1996

RE:	ALICE ISOBELLE GIDLEY JUDGMENT DEBTOR
EX PARTE:	COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 JUDGMENT CREDITOR
NP 1404 OF 1996
RE:	RICHARD JOHN SHEARS JUDGMENT DEBTOR
EX PARTE:	COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 JUDGMENT CREDITOR

JUDGE:	TAMBERLIN J
DATE:	25 NOVEMBER 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT

There are before me two bankruptcy petitions.  One relating to Alice Gidley and the other relating to her husband Richard Shears.  The matters have had a lengthy and tortuous history which I will not reiterate.

I propose to deal directly with the submissions made in opposition to the making of a sequestration order.

The petition in both cases was filed on 28 November 1996.  It alleges a debt against Richard Shears in the sum of $3,190,650.94 and against Alice Gidley in the sum of $3,157,232.65 under a final judgment recovered in the Supreme Court of New South Wales on 15 August 1995.

The first submission is that the petition is defective because it refers to the debtor, in each case as being “ordinarily present in Australia” as opposed to “ordinarily resident in Australia”.  There is no evidence or suggestion that the debtors were not “ordinarily resident” in Australia or “ordinarily present” in Australia at all material times and nothing was said to flow from the discrepancy.  Accordingly, this submission has no substance and is rejected.

The second matter raised was the statement in the last sentence in par 2 of the petition which states that the consideration for the judgment was money due and owing under “a guarantee”.  There is no dispute that the money is owing and in my view in the present circumstances it is not material whether the “consideration” for the Supreme Court judgment was owing under a guarantee or otherwise.  Accordingly, I reject this submission.

A third submission made was that par 3 of the petition was erroneous in alleging that the creditor bank did not hold any security over the property of the debtor or any part of the property of the debtor for the payment of moneys owing under the Supreme Court judgment. This submission is based on s 44(4) of the Bankruptcy Act 1966 (Cth) (“the Act”) which provides:

“(4)  Where a petitioning creditor is a secured creditor, he or she shall set out in the petition particulars of his or her security.”

More precisely the submission is that at 28 November 1996 when the petition was filed the judgment creditor (“the Bank”) in fact held a mortgage over property of the mother of Alice Gidley at 17 Whiting Beach Road, Mosman, in respect of the debt referred to in the petition.  A title search dated 14 April 1997 shows the registered proprietor as Madeline Christian Gidley, with a mortgage to the Bank.  Madeline Gidley is the mother of the debtor, Alice Gidley.  She died on 29 August 1996, leaving a will, dated 18 April 1978, appointing her two daughters, the judgment debtor and Cynthia Berkemeier, as executrices and leaving all her estate to her daughters.  As of today, I am informed, Probate has not been taken out in the estate of Madeline Gidley.

The argument for the debtor, Alice Gidley, is that because she is entitled under the will of her mother to a share in the premises, 17 Whiting Beach Road, Mosman, over which the Bank has a mortgage the Bank is a “secured creditor” and the statement in par 3 of the petition was deficient and, in addition, the petition did not set out particulars of the Bank’s security. The debtors refer to the definition of “secured creditor” in s 5(1) of the Act which reads:

“‘secured creditor’ in relation to a debtor, means a person holding a mortgage, charge or lien on property of the debtor as a security for a debt due to him or her from the debtor” (Emphasis added).

The mortgage given by Madeline Gidley was given over her property for her debt.

“Property” is given a wide interpretation in s 5(1) of the Act which defines it to mean real or personal property of every description and includes any estate, interest or profit, present or future, vested or contingent, arising out of, or incident to, such real or personal property.

The Bank submits that at relevant times the mortgage to the mother was not a security on property of the debtor but was security on the property of the mother.  The fact that there may be an entitlement to obtain a share in real property under a will, which has not been administered or even admitted to Probate, does not mean that the right of the debtor to have the estate properly administered can be described as “property” of the debtor. The Bank refers to the Privy Council advice given in Commissioner of Stamp Duties (Queensland) v Livingston (1964) 112 CLR 12 at 17-18 where their Lordships held, in a stamp duty context, that the interest of a beneficiary to have an estate administered did not give rise to a beneficial interest in the property of the estate. Speaking of this right they said (at 18):

“What equity did not do was to recognize or create for residuary legatees a beneficial interest in the assets in the executor’s hands during the course of administration.... An unadministered estate was incapable of satisfying this requirement [this is a reference to creating equitable interests in property such that there were specific subjects identifiable as a trust fund].  The assets as a whole were in the hands of the executor, his property; and until administration was complete no-one was in a position to say what items of property would need to be realized for the purposes of that administration or of what the residue, when ascertained, would consist or what its value would be.”

In my view, the definition of “property” in s 5(1) is sufficiently wide to include the contingent future right to have the estate administered. It is appropriate to give a broad meaning to the term. However, this conclusion does not determine the case in favour of the judgment debtor. The important matter is that even if the right is “property” of the debtor, there is no security or mortgage over this “right” to the Bank as security for a debt due to the Bank by the debtor. The security given is over the Mosman real estate and not over the right to due administration.

For the above reasons I am satisfied that the right of the debtor Alice Gidley to have the estate of her late mother duly administered does not lead to the conclusion that the Bank is a secured creditor or mortgagee in respect of property of the debtor.

In relation to Mr Shears, the husband of Ms Gidley, it is further claimed that on 16 April 1997 Alice Gidley as assignor and Mr Shears as assignee executed a Deed of Assignment of one half of her right, title and interest in and to the estate of the late Madeline Gidley, including real estate, in consideration of the payment by Mr Shears to Ms Gidley of $1,000.  Assuming, that this purported Deed of Assignment is effective the husband as assignee can be in no better position as regards the assertion that the Bank at relevant times held security over property of the debtor for the debt than Alice Gidley herself.   If there is no mortgage or security over the “right” of Alice Gidley to due administration of her mother’s estate, then her husband can have no greater right by reason of the purported and belated assignment.

Accordingly, I am not persuaded that there is any substance in the submission that there has been non-compliance with the requirements of s 44(4) of the Act on the ground that the petition does not give particulars of the Bank’s security over the debtor’s property.

A further matter raised by the debtors was that the affidavit of search of Helen Annison of 28 November 1996, in verification of part of the petition, was in error because it referred to Westpac Banking Corporation and not the creditor Bank in relation to whether proceedings had been filed with the Registrar.

This clearly was “a slip” and nothing of material significance turns on it.  In any event, I am satisfied that having regard to the affidavits filed in Court this morning that there is no record of any proceedings against either of the debtors, nor is there any record that either of the debtors had previously become bankrupt.  I have also taken into account the extract from the National Personal and Insolvency Index tendered during the hearing.

There has been filed in Court a Consent to Act as Trustee of each of the bankrupts by Gavin Frederick Crichton Thomas.  No opposition is raised to his appointment if thought appropriate.

I am satisfied that the requirements for making a sequestration order have been made out and that it is appropriate to do so having regard to the evidence before me and having considered the submissions made by each party.  I am satisfied that the debtor, Alice Gidley, is indebted to the petitioning creditor in the sum of $3,501,500.73 and that the debtor, Richard Shears, is indebted to the petitioning creditor in the sum of $3,538,562.98, plus interest under the Supreme Court of New South Wales judgment of 15 August 1995 and that such debts are due and unsatisfied.

Accordingly, the orders I make are that the estate of each of the debtors be sequestrated; that Gavin Frederick Crichton Thomas be appointed Trustee and that the petitioning creditor’s costs (including reserved costs, if any) in each case, be taxed and paid in accordance with the Act.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin

Associate:

Dated:             25 November 1997

Solicitor for Judgment Debtor:	Tzovaras & Co
Counsel for Judgment Creditor	Mr G K Burton
Solicitor for Judgment Creditor:	Henry Davis York
Date of Hearing:	25 November 1997
Date of Judgment:	25 November 1997