Maclean Corporation Pty Ltd v Pantzer
[2006] FMCA 332
•9 March 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MACLEAN CORPORATION PTY LTD v PANTZER | [2006] FMCA 332 |
| PRACTICE & PROCEDURE – Jurisdiction of FMC to hear a matter relating to the settlement of proceedings commenced under the Bankruptcy Act – whether the matter is one within the accrued jurisdiction of the court. ORDERS & DECLARATIONS – Form of orders where agreement found to exist. CONTRACT – Whether there was a concluded agreement to settle certain proceedings brought under ss.120/121 of the Bankruptcy Act evidenced by correspondence between the parties solicitors. |
| Bankruptcy Act 1966, ss.30, 120, 121, 134(1)(e),(j), 139ZQ Federal Magistrates Act 1999, ss.10(1), 14, 18, Judiciary Act 1903, s.39B(1) Federal Court of Australia Act 1976, s.22 Trade Practices Act 1974, s.86(1) |
| Ellwood v Darling Downs Investments Pty Limited (1987) 75 ALR 47 H1976 Nominees Pty Limited v Joel Auctions Pty Limited (1988) FCA 3439 Needlework Warehouse Pty Ltd v Chansonette Pty Ltd [2005] FCA 1525 Macteldir Pty Limited v Dimovski [2005] FCA 1528 Masters v Cameron (1954) 91 CLR 353 We Two Pty Ltd v Shorrock and Others (No 2) (2005) 220 ALR 749 Rich v CGU Insurance (No S232/2004) (2005) 214 ALR 370 Re French Caledonia Travel Service Pty Ltd (in liq) (2003) 204 ALR 353 |
| Applicant: | MACLEAN CORPORATION PTY LTD |
| First Respondent: | WARREN PANTZER |
| File Number: | SYG1322 of 2005 |
| Judgment of: | Raphael FM |
| Hearing date: | 28 February 2006 |
| Date of Last Submission: | 28 February 2006 |
| Delivered at: | Sydney |
| Delivered on: | 9 March 2006 |
REPRESENTATION
| Counsel for the Applicant: | Mr G Underwood |
| Solicitors for the Applicant: | Thomas Mitchell Solicitors |
| Counsel for the Respondent: | Ms J Richards |
| Solicitors for the Respondent: | Phillips Fox |
ORDERS
THE COURT DECLARES THAT:
On or about 22 December 2005 the applicant Maclean Corporation Pty Limited entered into a contract with the respondent Warren Pantzer as trustee of the bankrupt estate of John Thomas Joseph Jobson whereby it was agreed that:
The trustee will pay to Maclean Corporation Pty Limited and Willowgreen Pastoral Pty Limited the sum of $40,000.00.
Upon settlement Maclean Corporation Pty Limited and Willowgreen Pastoral Pty Limited will severally release the trustee and the estate of Mr John Thomas Joseph Jobson from all claims they may have in relation to the proceeds of sale of the properties known as Willowgreen and Mt Ira whose folio identifiers are described in the affidavit of Raymond Michael Hastie sworn on 11 May 2005 and filed herein.
Willowgreen Pastoral Pty Limited will release the trustee and the estate of Mr John Thomas Joseph Jobson from any claim in relation to the proceeds of the sale of assets of Willowgreen Pastoral Pty Limited.
The parties will enter into a deed of mutual release relating to all existing and contingent claims and liabilities.
Upon settlement proceedings No SYG1322 of 2005 and SYG1396 of 2005 will be dismissed with no order as to costs.
Settlement will take place within a reasonable time of this declaration, such reasonable time to be 28 days from the date hereof.
THE COURT ORDERS THAT:
The parties shall do all such acts and execute all such documents as may be necessary to fulfil the agreement hereby declared within 28 days.
Interest be payable on the sum of $40,000.00 from 15 January 2006 at 9% per annum until settlement.
The first respondent pay the applicant's costs of the notice of motion on a party and party basis up to and including 22 February 2006 and thereafter on an indemnity basis, such costs to be taxed if not agreed in accordance with the Federal Court Act and rules.
There be liberty to apply on 2 days notice.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG1322 of 2005
| MACLEAN CORPORATION PTY LTD |
Applicant
And
| WARREN PANTZER |
First Respondent
REASONS FOR JUDGMENT
The matter before me is a notice of motion in certain proceedings between Warren Pantzer as trustee of the bankrupt estate of John Jobson and Maclean Corporation Pty Limited, a company against which Mr Pantzer had issued a notice under s.139ZQ of the Bankruptcy Act 1966 (the “Act”). That notice was disputed by the company and in the proceedings to set it aside Mr Pantzer had cross claimed under ss.120/121 of the Act. There were similar proceedings in Matter No SYG1396 of 2005 between Mr Pantzer and another company known as Willowgreen Pastoral Pty Limited which was also associated with the bankrupt. It is accepted that the decision in this Maclean Corporation Pty Limited case will also operate as a decision in the Willowgreen case.
The bankrupt was a farmer. He owned two parcels of grazing land near Orange in the central west of New South Wales. He fell into financial difficulties in about 2001 and transferred a one half share of his interest in the grazing properties to Maclean. In January 2004 he transferred his entire interest in certain plant equipment and livestock to Willowgreen. Mr Jobson became a shareholder in Willowgreen. A current shareholder and former director of Maclean is the owner of the other share in Willowgreen. The association between the bankrupt and Willowgreen and Maclean came about as part of an effort to assist the bankrupt to refinance certain debts he had in relation to his properties with another mortgagee in 1998. On 9 June 2005 the trustee sold the two properties for $400,000 and $475,000 respectively. The trustee’s solicitor currently holds $123,179.39 in his trust account pending the outcome of the proceedings.
Sensibly, the parties began in August 2005 to negotiate a settlement of the claims by the trustee against Maclean and Willowgreen. Correspondence passed between them which commenced with a letter of 19 August 2005. There was then a hiatus until 16 December 2005 when certain discussions took place. Those discussions were evidenced by correspondence dated 18 December 2005 from Messrs Phillips Fox, Mr Pantzer’s solicitors, to Messrs Thomas Mitchell Solicitors, a letter of 22 December 2005 from Thomas Mitchell to Phillips Fox, a letter of 5 January 2006 from Phillips Fox to Thomas Mitchell, a letter of 9 January 2006 from Thomas Mitchell to Phillips Fox and a letter of 11 January 2006 from Phillips Fox to Thomas Mitchell, which was responded to on the same day by Thomas Mitchell. The notice of motion indicates clearly the dispute between the parties. In it the applicant, Maclean:
“Seeks relief and orders as follows:
i)The declaration that there is a binding settlement agreement between the parties.
ii)…”
When the matter came before me I learnt that I was not only to decide this issue but also to consider an application made by Mr Pantzer to the effect that the Federal Magistrates Court of Australia does not have jurisdiction to deal with the notice of motion. I accept, of course, that any party to a proceeding had the right to suggest to a court that it does not have jurisdiction to hear the matter and that sometimes such an application can save a considerable amount of money by preventing fruitless proceedings. But I have to confess that I find it strange that a trustee in bankruptcy, an officer of the court and a creature of a federal statute should be alleging lack of jurisdiction against a respondent party whose is quite satisfied that the court has jurisdiction and is anxious to have the dispute adjudicated as soon as possible. The effect of a finding in favour of the trustee would be the requirement to refer the matter to an appropriate state court as a newly commenced proceeding in respect of which a considerable unavoidable delay would occur. Such delay and the extra costs involved could only redound to the detriment of creditors. The point to be adjudicated is short and I will be determining it in these reasons. If I am wrong a speedy appeal to the Full Bench of the Federal Court can be instigated. Such an appeal would be decided before the initial proceedings in the state court were even heard. But the trustee challenges my jurisdiction and I must therefore decide upon it.
The essence of the trustee’s argument is that:
“There is no common sub-stratum of facts in the present case which would give the Federal Magistrates’ Court jurisdiction to deal with the claim in contract as a matter which would fall within its accrued jurisdiction…. The subject matter of the contract presently alleged is as to the payment of a sum of money. This does not involve any federal matter. The alleged terms of settlement do not reflect the original controversy between the parties and so cannot be considered to be part of the same matter. It is a different controversy for the purposes of federal jurisdiction.
The alleged terms of settlement do not form orders of the court.
It cannot be said that the Federal Magistrates Court’s original jurisdiction in bankruptcy extends beyond that which it has by reason of ss.27(1) and 31 of the Bankruptcy Act.
The extent of the accrued jurisdiction of the court as described in Wenkart v Pantzer(No 3) (2004) 135 FCR 422 by Lindgren J does not extend to enforcing terms of settlement which are not in aid either of orders of the court (no application in the present case) or relates to the performance of obligations and acts carried out pursuant to the Bankruptcy Act.” [Respondent’s submissions]
The jurisdiction of the Federal Magistrates Court in bankruptcy arises in the following way. Section 10(1) of the Federal Magistrates Act 1999 (Cth):
“Jurisdiction
(1) The Federal Magistrates Court has such original jurisdiction as is vested in it by laws made by the Parliament:
(a) by express provision; or
(b) by the application of section 15C of the Acts Interpretation Act to a provision that, whether expressly or by implication, authorises a civil proceeding to be instituted in the Federal Magistrates Court in relation to a matter.”
Section 27 of the Act is in the following form:
“Bankruptcy courts
(1) The Federal Court and the Federal Magistrates Court have concurrent jurisdiction in bankruptcy and that jurisdiction is exclusive of the jurisdiction of all courts other than:
(a) the jurisdiction of the High Court under section 75 of the Constitution; or
(b) the jurisdiction of the Family Court under section 35 or 35A of this Act.”
Jurisdiction of the Federal Magistrates Court in associated matters is granted by s.18 of the Federal Magistrates Act. The court also has accrued jurisdiction which is merely an annex to “the matter”. As Allsop J said in his paper “Federal Jurisdiction and the Jurisdiction of the Federal Court of Australia in 2002” :
“Accrued jurisdiction” is that part of the matter which is not specifically federal. It is probably a term best avoided. The whole matter is federal if it arises under a federal law. It is apt to mislead if one thinks a state or common law jurisdiction clamping onto federal jurisdiction. It is all federal jurisdiction, if it is one controversy. The old notion of there being some “discretion” as to whether the court will accept this “accrued” jurisdiction may well be wrong (or at the very least, unreliable) in the light of recent statements of the High Court in re Wakim, Edensor and Austral Pacific.”
Allsop’s J paper was specific to the Federal Court and his views are expressed in the light of s.39B(1) of the Judiciary Act 1903 which does not apply to the Federal Magistrates Court. The notion of accrued jurisdiction can still exist within the scope of the jurisdiction granted to this court under individual Acts including the Act. That is because under s.30 of the Act:
“General powers of Courts in bankruptcy
(1) The Court:
(a)has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and …”
What is accrued is the expansion of the matter into an area which, if it was entirely separate, would not be within the jurisdiction conferred by the Act.
The power of the court to determine the existence of a compromise and to enforce any compromise arises out of s.14 of the Federal Magistrates Act which mirrors s.22 of the Federal Court of Australia Act 1976 and see also Ellwood v Darling Downs Investments Pty Limited (1987) 75 ALR 47; H1976 Nominees Pty Limited v Joel Auctions Pty Limited (1988) FCA 3439; Needlework Warehouse Pty Ltd v Chansonette Pty Ltd [2005] FCA 1525. In Macteldir Pty Limited v Dimovski [2005] FCA 1528 Allsop J considered the jurisdictional question of enforcement of compromises. At [43] he discusses certain submissions made to the Federal Court in an earlier hearing of the same case. His Honour said:
“43 The parties filed written submissions on the special case. The respondents’ submissions were filed first. The respondents asserted that the only relief propounded was contractual enforcement of the terms of settlement. It emphasised paragraph 20 of the special case. The following was put:
“In substance the present issue is whether the Court has jurisdiction to entertain proceedings on a simple contract (ie for alleged breach of the terms of settlement). The respondents submit that, clearly the Court does not have that jurisdiction: Pallas v Finlay (1985) 61 ALR 220 at 223.”
44 With the utmost respect to senior counsel who put those submissions, and not wishing to be critical of him, this overstated Pallas and, as a general proposition, was untenable and in the teeth of the unanimous view of the High Court in LNC Industries v BMW (Aust) Pty Ltd (1983) 151 CLR 557 to which I will come. Confidently and clearly expressed as it was, as a general proposition, this can be seen as a heresy which dominated the structure of the debate in the submissions to the Full Court.”
And at [59] his Honour said:
“[It] is clear that the majority in Darling Downs saw the enforcement in contract of the settlement as part of the same matter. The controversy was resolved by the settlement. The settlement was breached. Thus, the contractual end of the controversy, once breached, gave rise to a revival of the last aspect of the original matter. (In this respect see the reasoning of Lindgren J in Needlework Warehouse at [42] and [43] about the settlement in that case, with which I respectfully agree.) The majority in Darling Downs came to this view by reference to how Smith J in Roberts v Gippsland Agricultural and Earth Moving Contracting Co Pty Ltd [1956] VLR 555 had analysed the position (not examining any question of federal jurisdiction) in relation to the proper method of enforcement – whether by motion or new action.”
Finally, at [63] his Honour said:
“Here, the parties debated the merits of Pallas and Darling Downs. Even if it be the case, contrary to my view, that the contractual enforcement was not part of, or an outgrowth or extension of, the original justiciable controversy, and was a new matter, the subject matter of the contract being enforced in this new matter was a bundle of rights which owed their existence, and the entitlement to enforce them in court, to Commonwealth legislation. So it was a matter arising under a law of the Parliament: LNC Industries v BMW.”
As far as the jurisdiction of the Federal Magistrates Court is concerned I would substitute for the words “so it was a matter arising under a law of the Parliament” the words “so it was a matter arising under the Bankruptcy Act.”
I cannot see how it can be argued that a dispute as to whether or not the parties have settled this matter is not part of the original matter. One has only to pose the question what would occur if I found there was no settlement? to realise that the original matter would have to come on to be determined. In this case there were no orders made. The case has not been determined unless a court holds that the alleged agreement to determine it was effective. That a trustee has the power to compromise proceedings is clear from s.134(1)(e) of the Act and the power under s.134(j) to bring, institute or defend any action or other legal proceeding relating to the administration of the estate. That power must include the power to compromise those proceedings.
In Needlework Warehouse Lindgren J deals with the matter at [44]:
“When s 86(1) of the TPA confers jurisdiction on this Court ‘in any matter arising under’ that Act, it confers jurisdiction to quell justiciable controversies – in the present case, initially the justiciable controversy over Mr Edge’s federal statutory liability to the applicants arising out of his involvement in Chansonette’s misleading and deceptive conduct which caused loss to the applicants. The justiciable controversy arising out of the compromise agreement, the parties’ own attempt to quell that initial justiciable controversy, takes that initial federal justiciable controversy as its very subject matter: cf LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 557 (‘LNC’) discussed in a different context below. The substratum of facts underlying the justiciable controversy arising out of the compromise agreement includes at its core, the substratum of facts underlying the initial controversy.”
The trustee argued that this case was distinguishable from Needlework Warehouse because there was no provision such as s.86(1) of the Trade Practices Act 1974 in the Act. I am unable to see the difference between having “full power to decide all questions, whether of law or of fact in any case of bankruptcy” and having “jurisdiction in any matters arising under the Trade Practices Act.” I think the wording would do no more than to indicate the difference in age between the two pieces of legislation. I am satisfied that it is within the accrued jurisdiction of this court to enforce the compromise agreement if such exists.
As in Needlework Warehouse the applicant Maclean seeks a declaration as to the existence of a contract. It also suggests that the matter falls within the first limb of Masters v Cameron (1954) 91 CLR 353 at [360]:
“When parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reach finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect.”
In order to decide the matter it is necessary to look in detail at the letters. The first letter of 19 August 2005 is in the following form:
“1.The Trustee has instructed me to make the following offer of settlement to your clients. The Trustee wishes to complete the administration of Mr Jobson’s estate as promptly as possible and cannot do this until the matters at issue in the proceedings are determined.
1.1Maclean Corporation Pty Limited surrenders all claims that it asserts to 50% of the net proceeds of sale of the properties known as Willowgreen and Mt Ira.
1.2Willowgreen Pastoral Pty Limited surrenders all claims that it makes to the proceeds of sale of the assets of Willowgreen Pastoral Pty Limited.
1.3Maclean Corporation Pty Limited and Willowgreen Pastoral Pty Limited unconditionally release and discharge the Trustee and the Estate of Mr Jobson from all present and future claims.
1.4Each of Maclean Corporation Pty Limited and Willowgreen Pastoral Pty Limited will promptly sign all documents necessary to give effect to the matters set out in paragraph 1.1. and 1.2 above.
1.5The parties will enter into a suitable Deed of Release.
2.This offer is open for acceptance for 14 days from the date of this letter.
Please let me know your clients’ response.
Yours sincerely
Susanna Khouri”
I had no evidence as to what transpired between the date of that letter and 16 December 2005 but I can assume from the terms of the letter of 16 December 2005 set out below that certain negotiations took place:
“I refer to our discussion earlier today.
Your client’s offer to accept $80,000 (inclusive of costs, interest and GST) is rejected.
Without admission of liability and for commercial reasons only, I am instructed that the Trustee offers to pay to your clients the sum of $40,000 (inclusive of costs, interest and GST).
This offer is open for acceptance until 5.00p.m. on Monday 19 December 2005. I am instructed that this offer will not be extended or made again. If your client does not accept this offer, I am instructed that the Trustee will pursue both matters to a fully defended hearing.
This offer is otherwise made on the terms set out in my letter to you dated 19 August 2005.
Please let me know your client’s response.”
The letter of 16 December produced a telephone conversation, evidence of which I do not have, and a letter on 22 December:
“We refer to our previous telephone conversation and confirm that our client has accepted your client’s offer in the sum of $40,000.00, which will be released from the proceeds of sale of Mt Ira and Willowgreen to our office on the following basis:
1. Consent Orders will be filed for the proceedings and Cross Claims in the Federal Magistrates Court to be dismissed with each party to pay their own costs. Such Consent Orders to be filed within fourteen (14) days of the execution of the Deed as contemplated in paragraph two (2) hereof;
2. A Deed of Release to be entered into between the parties on the following basis:
(b) Subject to the payement of the sum of $40,000.00, Maclean Corporation Pty Limited will release the Trustee and the Estate of Mr John Jobson from all claims it may have in relation to the proceeds of sale of the properties of Willowgreen and Mt Ira;
(c) Willowgreen Pastoral Pty Ltd will release the Trustee and the Estate of Mr John Jobson from any claim in relation to the proceds of the sale of assets of Willowgreen Pastoral Pty Ltd as detailed in the Section 139ZQ Notice.
(d) There will be a mutual release between the parties in relation to all existing and contingent claims and liabilities.
Please now forward yoru client’s draft Deed of Release for our client’s consideration noting that provided the Deed is appropriate, the settlement monies will be provided to our office on or before 13 January 2006.
Yours faithfully
Thomas Mitchell Solicitors”
The first question to decide is whether or not the letter of 22 December 2005 constitutes an acceptance of the offer contained in the letter of 16 December which incorporates terms 1.1 to 1.5 of the letter of 19 August 2005 or whether it is a counter offer. There was no argument put that the “acceptance” was out of time. The letter of 22 December 2005 accepts the $40,000.00 payment. The letter of 22 December releases the trustee and the bankrupt from all claims in relation to the proceeds of the sale of the properties per 1.1 of the letter of 19 August 2005. Willowgreen releases the trustee from claims in relation to the sale of the assets of Willowgreen Pastoral as per 1.2. A mutual release suggested in 2(c) of the letter of 22 December is the suitable deed of release referred to in item 1.5 of the letter of 19 August. The only matter that could be considered to be a counter offer is the statement in the letter of 22 December 2005 that “provided the deed is appropriate the settlement moneys will be provided to our office on or before 13 January 2006.” There is no reference in the letter of 19 August to the time at which the settlement would take place. Accordingly, a court would hold that the letter implied that settlement would take place within a reasonable time: We Two Pty Ltd v Shorrock and Others (No 2) (2005) 220 ALR 749; Rich v CGU Insurance (No S232/2004) (2005) 214 ALR 370; Re French Caledonia Travel Service Pty Ltd (in liq) (2003) 204 ALR 353. The letter of
22 December 2005 merely makes a suggestion as to what that reasonable time might be and I do not believe it constitutes a counter offer. I am satisfied that a concluded contract was entered into at that stage. I think it is a contract within the first limb of Masters v Cameron because it was anticipated by both parties that the terms that were agreed in the form of 1.1 to 1.4 of the letter of 19 August or paragraph 2(a) to (c) of the letter of 22 December 2004 and those terms would be contained within the deed of release. In the circumstances I do not believe I am required to make any reference to the subsequent letters in the first of which, on 5 January, the solicitors for the trustee sought to introduce a new term concerning a payment of some $7,000.00. That term was never accepted by the applicant.
The notice of motion requests a declaration that there is a binding settlement agreement between the parties and an order that the first respondent do all such acts and execute all such documents as may be necessary to facilitate the settlement agreement within fourteen days. It also asks for orders relating to interest and costs. Adopting the course taken by Lindgren J in Needlework Warehouse I think it is appropriate that I should set out the agreement that I have found to exist in terms rather than make the general declaration sought. I will make the following declarations and orders which incorporate my view that a reasonable time in which the contract should be completed is
28 days.THE COURT DECLARES THAT:
On or about 22 December 2005 the applicant Maclean Corporation Pty Limited entered into a contract with the respondent Warren Pantzer as trustee of the bankrupt estate of John Thomas Joseph Jobson whereby it was agreed that:
(1)The trustee will pay to Maclean Corporation Pty Limited and Willowgreen Pastoral Pty Limited the sum of $40,000.00.
(2)Upon settlement Maclean Corporation Pty Limited and Willowgreen Pastoral Pty Limited will severally release the trustee and the estate of Mr John Thomas Joseph Jobson from all claims they may have in relation to the proceeds of sale of the properties known as Willowgreen and Mt Ira whose folio identifiers are described in the affidavit of Raymond Michael Hastie sworn on 11 May 2005 and filed herein.
(3)Willowgreen Pastoral Pty Limited will release the trustee and the estate of Mr John Thomas Joseph Jobson from any claim in relation to the proceeds of the sale of assets of Willowgreen Pastoral Pty Limited.
(4)The parties will enter into a deed of mutual release relating to all existing and contingent claims and liabilities.
(5)Upon settlement proceedings No SYG1322 of 2005 and SYG1396 of 2005 will be dismissed with no order as to costs.
(6)Settlement will take place within a reasonable time of this declaration, such reasonable time to be 28 days from the date hereof.
THE COURT ORDERS:
(1)The parties shall do all such acts and execute all such documents as may be necessary to fulfil the agreement hereby declared within 28 days.
(2)Interest be payable on the sum of $40,000.00 from 15 January 2006 at 9% per annum until settlement.
(3)The first respondent pay the applicant’s costs of the notice of motion, such costs to be taxed, if not agreed, in accordance with the Federal Court Act and Rules.
(4)There be liberty to apply on 2 days notice.
I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date:
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