Lefebvre v Shepard in His Capacity as the Trustee of the Property of Lefebvre

[2017] FCCA 2550

FEDERAL CIRCUIT COURT OF AUSTRALIA

LEFEBVRE v SHEPARD IN HIS CAPACITY AS THE TRUSTEE OF THE PROPERTY OF LEFEBVRE & ANOR [2017] FCCA 2550

Catchwords:
BANKRUPTCY – Review of a trustee’s decision – where evidence does not establish that a loan exists – application dismissed.

Legislation:

Bankruptcy Act 1966 (Cth), ss.27, 30, 178, cl.90-15 of sch.2.

Cases cited:

Ferella v Official Trustee in Bankruptcy [2013] FCAFC 43

Young, In the matter of Macryannis (2011) 124 ALD

Young v Thomson [2017] FCAFC 140

Applicant: JON MAX LEFEBVRE

First Respondent: ADAM SHEPARD IN HIS CAPACITY AS THE TRUSTEE OF THE PROPERTY OF LEFEBVRE

Second Respondent: NICHOLAS IAN BURNHAM

File Number: SYG 2432 of 2017

Judgment of: Judge Street

Hearing date: 20 October 2017

Date of Last Submission: 20 October 2017

Delivered at: Sydney

Delivered on: 20 October 2017

REPRESENTATION

Solicitors for the Applicant: Mr M Rosanblatt
Somerset Ryckmans

Solicitors for the First Respondent: Brown Wright Stein

Counsel for the Second Respondent: Mr S Golledge

Solicitors for the Second Respondent: Hennessey & Co Lawyers

ORDERS

1. Leave to the applicant to file in Court the amended application.

2. The amended application is dismissed.

3. The applicant pay the second respondent’s costs as taxed or agreed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 2432 of 2017

JON MAX LEFEBVRE

Applicant

And

ADAM SHEPARD IN HIS CAPACITY AS THE TRUSTEE OF THE PROPERTY OF LEFEBVRE

First Respondent

NICHOLAS IAN BURNHAM

Second Respondent

REASONS FOR JUDGMENT

Background

1. This is an application within the Court’s jurisdiction under s 27 of the Bankruptcy Act 1966 (Cth) (“the Act”) for relief under either s 178, s 30, or cl 90-15 of Schedule 2 to the Act in respect of a decision of the first respondent made at a meeting of creditors on 25 July 2017 to reject the statement of claim lodged by the father of the debtor for the sum of $1,300,000.00. The amount allowed by the trustee of that meeting was an amount of $126,210 and otherwise the proof of debt was rejected.

2. Evidence has been adduced in support of the proof of debt arising from three alleged loan agreements between the father and son entered into purportedly in September 2001, August 2005, and May 2010. The agreements, but for the amounts, are in identical terms. The first two agreements were for the sum of $500,000. The third agreement was for the sum of $300,000.

3. The term of the agreements are as follows:

   This letter serves as a legally binding agreement between Max Lefebvre and Jon Lefebvre with regards to a loan.

   Max Lefebvre agrees to pay $[x] to Jon Lefebvre on request by way of mutally agreed installments.

   Jon Lefebvre agrees to pay Max Lefebvre the principal loan of $[x] without Interest at his discretion.

   Jon Lefebvre agrees to Inform Max Lefebvre of repayment and business developments every six months.

4. The Court’s powers in relation to s 30, s 178 and cl 90-15 of Schedule 2 are in substance the same principles that have been identified in Young v Thomson [2017] FCAFC 140 at [109] to [117], and they are also identified in Ferella v Official Trustee in Bankruptcy [2013] FCAFC 43 at [39] to [40] and Young, In the matter of Macryannis (2011) 124 ALD 28 at [26] to [31].

5. The first consideration for the Court is one of discretion as to whether or not it is appropriate to entertain the application seeking to challenge the trustee’s decision. The Court possesses a high degree of supervisory control over the conduct of trustees. However, that control is ordinarily exercised with a level of restraint. The present case involved a matter where the trustee adjourned a meeting in order to consider further the alleged proof of debt and provided detailed reasons engaging with the substance of the material advanced in support of the alleged proof of debt explaining the rejection. The consequence of the proposed personal insolvency agreement in the present case if the proof of debt had been admitted is that the creditors would have then voted in favour of the personal insolvency agreement, which would have resulted in a distribution to substantial creditors of an amount of $9,000.00.

6. The trustee was not in favour of supporting the personal insolvency agreement. The trustee identified particular transactions by the debtor that were the subject of concern and required further investigation. The trustee correctly identified a potential issue if the purported loan agreements were treated as creating a loan obligation in terms of the statute of limitations. On the proper construction of the respective documents, they do not create any loan agreement. On the proper construction of the documents, they purport to be gifts in that repayment was at the discretion of the debtor.

7. Further, those are documents that identified particular amounts the subject of a proposed payment. None of the amounts the subject of the proposed proof of debt reflect the amounts identified on the loan agreement. There is a presumption of advancement that applies in respect of payments from a parent to a child. Each of the payments the subject of the proposed proof of debt, on their face, fall within that presumption. On its proper construction, if it were a loan agreement, I accept the first respondent’s submission that it would be repayable immediately following the first advance.

8. In those circumstances, each of the payments but for the amounts identified by the trustee are the subject of a six-year time bar. A consequence of the proposed application in the present case is to pursue a challenge in respect of a trustee’s decision where the trustee engaged in a real and meaningful consideration of the alleged proof of debt and provided cogent and logical reasons in support of the same. The consequences of the admission of the proof of debt have already been referred to.

9. As a matter of discretion, this is not an application, on its face, that advances the general interest of creditors of the debtor’s estate. The amount involved in terms of the consequence of the proposed challenge does not identify a substantial redistribution that would be made available for the benefit of creditors. For those grounds alone, as a matter of discretion, the application should be refused. For the reasons I have given, the challenge is also misconceived.

10. I find that there was no loan agreement to support any of the amount of the proof of debt. I find that the advances made are not identifiable with, or capable of being attributed to, the loan agreement, and on their face the payments are advances by a parent to a child the subject of the principle of a presumption of advancement. I find that presumption is not rebutted. Further, I find in relation to the amounts advanced, subject to the amount that was allowed by the trustee, that the statute of limitations applies.

11. For these reasons, the amended application is dismissed.

I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Judge Street

Date: 30 November 2017