Mango Boulevard Pty Ltd v Whitton

Case [2015] FCA 1295

FEDERAL COURT OF AUSTRALIA

Mango Boulevard Pty Ltd v Whitton [2015] FCA 1295

Citation: Mango Boulevard Pty Ltd v Whitton [2015] FCA 1295
Parties: MANGO BOULEVARD PTY LTD (ACN 101 544 601) and BMD HOLDINGS PTY LIMITED (ACN 101 093 349) v ROBERT WILLIAM WHITTON, RICHARD WILLIAM SPENCER and SILVANA PEROVICH
File number: VID 1183 of 2010
Judge: RANGIAH  J
Date of judgment: 24 November 2015
Catchwords: BANKRUPTCY AND INSOLVENCY – application for abridgment of time – proposal for composition and trustee’s report – trustee unable to meet prescribed time limit under reg 4.18 of the Bankruptcy Regulations 1996 (Cth) – factors relevant to granting abridgement – whether adequate explanation for delay – where bankrupts delayed in paying surety to trustee and providing income details – whether trustee’s report adequate – where report included recommendation – whether prejudice to the parties – where defects can be remedied
Legislation: Bankruptcy Act 1966 (Cth) ss 33(1)(c), 73, 74, 76B and 222
Bankruptcy Regulations 1996 (Cth) regs 4.18 and 16.01
Cases cited: Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 cited
Labocus Precious Metals Pty Ltd v Thomas [2007] FCA 1154 applied
Mango Boulevard Pty Ltd v Whitton [2015] FCA 1169 cited
Re Bendel, Ex parte Bendel & Ors v Pattison (1997) 80 FCR 123 distinguished
Date of hearing: 10 November 2015
Dates of Orders: 10 and 24 November 2015
Place: Brisbane
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 82
Counsel for the Applicants: Mr AB Crowe QC with Mr DM Turner
Solicitor for the Applicants:  Minter Ellison
Counsel for the First Respondent:  Mr PP McQuade QC
Solicitor for the First Respondent: James Conomos Lawyers
Counsel for the Second and Third Respondents: Mr DD Keane
Solicitor for the Second and Third Respondents: Delta Law

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 1183 of 2010
BETWEEN:

MANGO BOULEVARD PTY LTD (ACN 101 544 601)
First Applicant

BMD HOLDINGS PTY LIMITED (ACN 101 093 349)
Second Applicant
AND:

ROBERT WILLIAM WHITTON
First Respondent

RICHARD WILLIAM SPENCER
Second Respondent

SILVANA PEROVICH
Third Respondent

JUDGE:

RANGIAH  J

DATE OF ORDER:

10 NOVEMBER 2015

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1.The time provided for by regulation 4.18 of the Bankruptcy Regulations 1996 (Cth) be abridged to two days in respect of each of the bankruptcy estates of the second and third respondents.

2.Any person or entity claiming to be a creditor of the bankruptcy estate of the second respondent or third respondent have liberty to apply within 28 days to set aside Order 1 of these orders.

3.The first respondent provide a copy of this order forthwith to the persons or entities identified as creditors in annexure JNC-2 to the affidavit of James Nicholas Conomos filed 9 November 2015.

4.The costs of the first respondent of and incidental to the application for directions and the abridgement of time be his costs in the bankruptcy estates of the second and third respondents.

Note:    Entry of orders is dealt with…

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Mango Boulevard Pty Ltd v Whitton [2015] FCA 1295
Case
[2015] FCA 1295
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CaseChat Overview and Summary

The case of Mango Boulevard Pty Ltd v Whitton involved the trustee's application for an abridgment of time concerning the bankrupts' proposals for composition, as stipulated under regulation 4.18 of the Bankruptcy Regulations 1996 (Cth). The applicants were contesting the trustee's application, and the primary focus was on whether the trustee should be allowed to proceed with the composition proposals under a shortened time frame. The court was tasked with determining the adequacy of the trustee's report, the reasons for the delay in providing necessary information, and whether the proposed abridgment would prejudice the creditors.

The legal issues central to this case revolved around the interpretation and application of regulation 4.18, specifically whether the court should exercise its discretion to abridge the prescribed time for holding a creditors' meeting. Key considerations included the explanation for the delay in providing funds and income details to the trustee, the sufficiency of the trustee's report, and the potential prejudice to creditors if the time was abridged. The court had to weigh these factors against the benefits of allowing the creditors to consider the composition proposals.

The court, after reviewing the submissions and the extensive history of litigation between the parties, concluded that it was in the best interest of justice to abridge the time as requested by the trustee. The court found that while there would likely be some prejudice to the creditors, this could be mitigated by allowing creditors the liberty to apply to set aside the order for abridgment. The court emphasized that the creditors would be deprived of the opportunity to consider the bankrupts' proposals if the time was not abridged, and that the primary delay was due to the unsuccessful principal application brought by the applicants. Therefore, the court exercised its discretion to grant the abridgment of time.

The final orders included abridging the time under regulation 4.18 to two days, granting creditors the right to apply to set aside the order for abridgment within 28 days, and requiring the trustee to provide copies of the reasons to the identified creditors. The costs of the application were also allocated to the trustee.

Orders

Orders of the court

1. The time provided for by regulation 4.18 of the Bankruptcy Regulations 1996 (Cth) be abridged to two days in respect of each of the bankruptcy estates of the second and third respondents.

2. Any person or entity claiming to be a creditor of the bankruptcy estate of the second respondent or third respondent have liberty to apply within 28 days to set aside Order 1 of these orders.

3. The first respondent provide a copy of this order forthwith to the persons or entities identified as creditors in annexure JNC-2 to the affidavit of James Nicholas Conomos filed 9 November 2015.

4. The costs of the first respondent of and incidental to the application for directions and the abridgement of time be his costs in the bankruptcy estates of the second and third respondents.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

1. The trustee provide a copy of these reasons forthwith to the persons or entities identified as creditors in Annexure “JNC-2” to the affidavit of James Nicholas Conomos filed 9 November 2015.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

I heard the trustee’s application on 10 November 2015. The parties submitted that it was desirable that I decide the application on that day. I decided to allow the application and I made orders that the time prescribed under reg 4.18 be abridged to two days and ancillary orders. I indicated that I would provide my reasons later. These are my reasons. BACKGROUND There has been a very substantial history of litigation between the applicants and the bankrupts over a long period of time. The litigation principally concerns shares in a company called Kinsella Heights Developments Pty Ltd (“Kinsella Heights”). What underlies the litigation is that Kinsella Heights owns a valuable piece of land at Mango Hill in Queensland. If Perovich’s proposal for a composition is approved by the creditors and her bankruptcy is annulled, she will have control of 25 shares in Kinsella Heights and the litigation concerning those shares. On the other hand, if she is discharged from bankruptcy, the shares will remain vested in the trustee and this would allow the applicants to negotiate with the trustee to resolve the litigation. In my previous judgment, I indicated that the principal proceeding was a piece in the strategic battle between the applicants and the bankrupts for the land owned by Kinsella Heights. The submissions of the applicants and the bankrupts upon the present application may be seen through the same lens. Sequestration orders were made against the estates of Perovich and Spencer on 20 August 2007 and 24 August 2007 respectively. The bankrupts were due to be automatically discharged from bankruptcy on 14 November 2010, but the trustee lodged notices of objection to their discharge with the Official Receiver. As a result of the objections, the periods of the bankruptcies were extended to 14 November 2015. On 11 February 2011, the bankrupts lodged proposals for compositions with the trustee. The trustee then sought directions from the Court concerning the proposals. On 29 April 2011, Logan J directed the trustee not to hold a meeting of creditors pending the determination of the principal proceeding. The trial of the principal proceeding was completed on 12 November 2014 and judgment reserved. On 9 October 2015, the bankrupts delivered new proposals for compositions to the trustee. On 19 October 2015, the bankrupts applied for a variation of the order made by Logan J. I made the following order on 22 October 2015:Upon the second and third respondents pursuant to s 73A of the Bankruptcy Act 1966 (Cth) paying to the first respondent, the sum of $55,000 by way of surety within seven (7) days of the date hereof and the first respondent being satisfied pursuant to s 73(2B) that the first and second respondents’ proposals for compositions under s 73 dated 9 October 2015 and exhibited to the affidavits of the second and third respondents filed on 16 October 2015 (the Proposals) make adequate provision for payment of accrued fees,It is directed that the first respondent, in his present capacity as trustee of the bankrupt estates of each of the second and third respondents, prepare for, call and hold a meeting of their respective creditors under s 73 of the Bankruptcy Act 1966 (Cth) to consider the Proposals, such meetings not to be called or held before the delivery of judgment in the principal proceeding.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

While there is likely to be prejudice to many of the creditors if the abridgment of time is granted, such prejudice can be limited by allowing creditors liberty to apply to set aside the order for abridgment; and is, in any event, limited by the provisions of the Bankruptcy Act that allow creditors to apply to set aside a composition.CONCLUSION A matter of particular significance is that if the time under reg 4.18 is not abridged, the creditors will be deprived of the opportunity to consider the bankrupts’ proposals and to make up their own minds. In addition, the bankrupts will be deprived of the opportunity to have their proposals considered by the creditors in circumstances where the main factor delaying the holding of a creditors’ meeting was the unsuccessful principal application brought by the applicants. There are substantial factors against an abridgment of time. Of particular importance is that reg 4.18 prescribes a minimum period of seven days before the meeting of creditors for the provision of the material. The bankrupts’ delay in providing funds and their income details to the trustee, and the absence of any explanation for their failure to provide the income details is significant. The limited information which the trustee has been able to provide to creditors and the piecemeal way in which further information is to be provided is relevant. However, the prejudice to creditors would be limited by giving the creditors liberty to apply to set aside the order abridging time. There are, in any event, mechanisms under the Bankruptcy Act, which would allow creditors to apply to set aside any compositions. On balance, the appropriate decision was for the Court to exercise its discretion to grant the abridgment of time sought by the trustee. On 10 November 2015, I made orders abridging the time prescribed under reg 4.18 and ancillary orders. I propose to make a further order requiring the trustee to provide a copy of these reasons to each of the creditors.

Ratio Decidendi

Legal Principle Established

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