Low v Barnet (Trustee)

Case [2014] FCA 728

FEDERAL COURT OF AUSTRALIA

Low v Barnet (Trustee); In the Matter of Mathai [2014] FCA 728

Citation: Low v Barnet (Trustee); In the Matter of Mathai [2014] FCA 728
Parties: LOW MOOI KWEE (ALSO KNOWN AS MONICA LOW) v KATHERINE BARNET AS TRUSTEE OF THE BANKRUPT ESTATE OF MATHEW KERALAVAKAYIL MATHAI; IN THE MATTER OF THE BANKRUPT ESTATE OF MATHEW KERALAVAKAYIL MATHAI 
File number: NSD 310 of 2014
Judge: FOSTER J
Date of judgment: 4 July 2014
Catchwords: BANKRUPTCY – whether the Court should grant leave to be heard to a former bankrupt and his son who received property from the bankrupt which has been the subject of orders under s 121 of the Bankruptcy Act 1966 (Cth) in a proceeding brought by the only creditor of the bankrupt estate for relief under s 109 of that Act
Legislation: Bankruptcy Act 1966 (Cth), ss 109, 121, 153A, 153B, 154(1)(c)
Foreign Judgments Act 1991 (Cth), s 6
Federal Court (Bankruptcy) Rules 2005, r 2.04
Cases cited: Grandsky Pty Ltd v Horne [2014] FCA 119
Green v Official Trustee in Bankruptcy [2003] FCA 214
Mathai v Kwee [2005] FCA 932
Mathai v Nelson (2012) 208 FCR 165
Roadshow Films Pty Ltd v iiNet Ltd (2011) 248 CLR 37
Date of hearing: 27 June 2014
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 48
Counsel for the Applicant: Mr BA Coles QC and Ms J Muir
Solicitor for the Applicant: Matthews Folbigg Pty Ltd
Counsel for the Respondent: Mr S Golledge
Solicitor for the Respondent: TressCox Lawyers
Counsel for the Applicants on the Interim Application (Mr Mathew Mathai and Mr Michael Mathai): Mr MGR Gronow
Solicitor for the Applicants on the Interim Application (Mr Mathew Mathai and Mr Michael Mathai): Maddocks Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 310 of 2014

IN THE MATTER OF THE BANKRUPT ESTATE OF MATHEW KERALAVAKAYIL MATHAI

BETWEEN:

LOW MOOI KWEE (ALSO KNOWN AS MONICA LOW)
Applicant
AND:

KATHERINE BARNET AS TRUSTEE OF THE BANKRUPT ESTATE OF MATHEW KERALAVAKAYIL MATHAI
Respondent

JUDGE:

FOSTER J

DATE OF ORDER:

4 JULY 2014

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Pursuant to r 2.04 of the Federal Court (Bankruptcy) Rules 2005 and subject to any order revoking such leave, Mathew Keralavakayil Mathai have leave to be heard in this proceeding upon condition that:

(a)He be represented by a suitably qualified lawyer;

(b)By 28 July 2014, he provide security for any adverse costs orders that may be made against him, such security to be in the total amount of $100,000 being $50,000 on account of the costs of the applicant and $50,000 on account of the costs of the respondent and to be paid in cash to the NSW District Registrar;

(c)The said Mathew Keralavakayil Mathai be responsible for his own costs of and incidental to his intervention herein to the intent that it shall not be open to him to seek an order for costs against either the applicant or…

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Low v Barnet (Trustee) [2014] FCA 728
Case
[2014] FCA 728
Decision Date

CaseChat Overview and Summary

This case involves a dispute between Ms Low and the Trustee of Mr Mathai's bankrupt estate over the registration of a foreign judgment and the potential recovery of assets. The dispute originated from a 1993 case in the High Court of Justice of England and Wales, Chancery Division, where Ms Low successfully sued Mr Mathai for fraudulently obtaining control of certain UK Treasury stocks. The English court ordered Mr Mathai to pay Ms Low GBP179,575.24 plus interest and costs, a judgment that was later registered in the Supreme Court of Victoria. Despite the judgment, Mr Mathai did not comply with a Bankruptcy Notice served on him, leading to a Creditor's Petition by Ms Low, which resulted in Mr Mathai's sequestration. The Trustee of Mr Mathai's estate now seeks to annul the registration of the foreign judgment and recover assets transferred to avoid creditors.

The central legal issues before the court were whether the Trustee could be compelled to contradict Ms Low's application and whether Mr Michael Mathai, Mr Mathai's son, could intervene in the proceeding. The court had to consider the implications of compelling the Trustee to contradict Ms Low, given the potential for her to influence the outcome and the financial implications for the estate. The court also had to assess Mr Michael Mathai's interest in the property at 69 Wellington Street, considering his obligation to transfer it to the Trustee.

The court ruled that the Trustee need not contradict Ms Low's application, considering the financial burden and potential conflict of interest. The court noted that if the Trustee felt unfairly remunerated, she might seek court direction, further increasing costs and diminishing the estate. Regarding Mr Michael Mathai's potential intervention, the court found he had no real interest in the proceeding as he had already executed the required transfer of 69 Wellington Street to the Trustee, albeit not yet registered. The court dismissed Mr Michael Mathai's potential intervention and did not compel the Trustee to contradict the application.

The court's decision aimed to protect the estate's interests and avoid unnecessary financial strain. The Trustee was not required to contradict Ms Low's application, and Mr Michael Mathai's potential intervention was dismissed. This ruling ensures that the Trustee can focus on managing the estate without undue influence from the creditor and that the estate's assets can be recovered as appropriate.

Orders

Orders of the court

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Background

Background to the litigation

By these Reasons for Judgment, I determine that Amended Interim Application. THE RELEVANT FACTS In 1993, Ms Low commenced proceedings against the bankrupt in the High Court of Justice of England and Wales, Chancery Division (Ch 1997 K 3097) in which she claimed from the bankrupt three holdings of United Kingdom Treasury stocks that she claimed belonged to her. In those proceedings, Ms Low claimed that the bankrupt had fraudulently obtained control of those stocks by forging a document which purported to transfer the stocks to him. On 12 October 1998, the Court gave judgment in favour of Ms Low against the bankrupt. The trial judge found that the bankrupt had forged the signatures of Ms Low and another person on the document purporting to transfer the stocks. The Court made an appropriate declaration and ordered the bankrupt to pay to Ms Low GBP179,575.24 plus interest and costs. On 12 February 2003, the Supreme Court of Victoria registered the judgment of the English High Court and the Default Costs Order made by that Court under s 6 of the Foreign Judgments Act 1991 (Cth). The net amount in respect of which judgment was entered was GBP118,317.11. The Supreme Court also ordered that the bankrupt pay Ms Low’s costs of the registration of the English judgment. On 14 June 2003, the bankrupt was validly served with notice of the foreign judgment registration and a demand for payment at his home at 69 Wellington Street, Kew, VIC (69 Wellington Street). On 3 July 2003, on the application of Ms Low, the Official Receiver issued a Bankruptcy Notice against the bankrupt. The amount specified in the Bankruptcy Notice was $288,086.46. That amount was the Australian dollar equivalent of GBP118,317.11 as at 3 July 2003. The bankrupt spent most of the second half of 2003 overseas. On 6 December 2003, the Bankruptcy Notice was validly served on the bankrupt in Australia. The bankrupt did not comply with the Bankruptcy Notice. On 2 January 2004, Ms Low filed a Creditor’s Petition in this Court seeking a sequestration order against the estate of the bankrupt. On 18 May 2004, a Registrar made a sequestration order against the estate of the bankrupt. On 19 April 2005, the bankrupt applied for an annulment of his bankruptcy pursuant to s 153B of the Bankruptcy Act 1966 (Cth) (the Act). The bankrupt subsequently also sought review of the Registrar’s decision to make a sequestration order. On 19 July 2005, Graham J dismissed the bankrupt’s annulment application and his application for review (Mathai v Kwee [2005] FCA 932). On 21 June 2007, the then Trustee of the bankrupt’s estate applied in the Federal Magistrates Court of Australia (as it was then known) for relief under s 121 of the Act against the bankrupt and against the registered proprietors of 68A Wellington Street, Kew, VIC (68A Wellington Street) which was then in the name of the bankrupt’s wife, Mrs Margaret Mathai, his brother-in-law Mr Wee Eng Poh and Mr Brian Selby Gill, and 69 Wellington Street, which was in the name of his son, Mr Michael Mathai. The Trustee claimed that the bankrupt had transferred both of these properties at times when he was, or was about to become, insolvent, in order either to prevent the properties from being recovered by his creditors, or to obstruct, or to delay his creditors.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

However, at the hearing before me, Counsel for the Trustee submitted that his client was justifiably concerned about her ability to play an active and effective role as contradictor where the costs of doing so might ultimately be under the control of Ms Low. In addition, Counsel drew my attention to the fact that the Trustee’s indications as to the likely quantum of the debts of the estate do not take into account the costs that will be incurred in defending the present proceeding.CONSIDERATION I am not persuaded that Michael Mathai, the son of the bankrupt, has any real interest in the outcome of Ms Low’s application. As the sole registered proprietor of 69 Wellington Street, Michael Mathai was obliged to transfer that property to his father’s Trustee in bankruptcy. As I understand the present state of affairs in relation to that matter, Michael Mathai has executed such a transfer and delivered it to his father’s Trustee. However, the transfer has not yet been registered. Nonetheless, Michael Mathai has done all that he was required to do in order to effect that transfer. It was submitted on behalf of the Mathais that Michael Mathai may have a beneficial interest of some kind in 69 Wellington Street. There is no evidence before me as to how such an interest might have arisen nor would the present proceeding be an appropriate forum for determining whether such an interest exists. As between Michael Mathai and the Trustee of his father’s bankrupt estate, Michael Mathai is required to disgorge 69 Wellington Street in favour of the Trustee. If, in due course, he wishes to agitate some claim against his father in respect of that property or the proceeds of sale of that property, he may do so. For these reasons, I do not consider that Michael Mathai has any interest that would warrant an order in his favour allowing him to intervene in the present proceeding. According to the figures presented to me in evidence in the present Application, remuneration and expenses currently due to the respondent and to former trustees of the bankrupt’s estate total $457,124. As submitted by Counsel for the Trustee, further remuneration and expenses will be due to her in respect of the current proceeding. According to some evidence before me, the current value of Ms Low’s claim in the present proceeding is approximately $1,227,958, although the true figure may be up to $100,000 or so more than this. It seems highly likely that, in due course, there will be a surplus in the bankrupt’s estate. In the past, there has obviously been disputation between Ms Low and one or more of the Trustees of the bankrupt’s estate and between the bankrupt and one or more of the Trustees of his estate. I would be justified in thinking that, in defending the present proceeding, the Trustee will be in the difficult position of being required to defend a proceeding against the only creditor of the bankrupt’s estate in circumstances where both that creditor and the bankrupt himself ultimately may have real control over whether the Trustee is fairly remunerated for her efforts in defending this proceeding. Counsel who appeared for the respondent emphasised the difficulties confronting the respondent. He even foreshadowed that she may feel compelled to seek directions from the Court as to whether she would be justified in defending Ms Low’s application. This would only add to the costs of this proceeding and further diminish the bankrupt’s estate.