Mango Boulevard Pty Ltd v Whitton

Case [2011] FCA 1383

FEDERAL COURT OF AUSTRALIA

Mango Boulevard Pty Ltd v Whitton [2011] FCA 1383

Citation: Mango Boulevard Pty Ltd v Whitton [2011] FCA 1383
Parties: MANGO BOULEVARD PTY LTD ACN 101 544 601 and BMD HOLDINGS PTY LIMITED (ACN 010 093 349) v ROBERT WILLIAM WHITTON, RICHARD WILLIAM SPENCER (BANKRUPT) and SILVANA PEROVICH (BANKRUPT)
File number(s): VID 1183 of 2010
Judge: GREENWOOD J
Date of judgment: 6 December 2011
Catchwords:

PRACTICE AND PROCEDURE – consideration of an application under s 31A(2)(b) of the Federal Court of Australia Act – consideration of whether the claims of the applicants in the principal proceeding have no reasonable prospects of success in the context of claims made under s 178 and s 30 of the Bankruptcy Act 1966 (Cth) – consideration of an application to strike out paragraphs of the Amended Statement of Claim and a cross‑application to strike out paragraphs of the Amended Defence, under the Federal Court Rules 2011

BANKRUPTCY AND INSOLVENCY – consideration of an application for summary judgment in respect of claims under s 178 of the Bankruptcy Act to set aside a decision of the trustee of the estates of two bankrupt persons to object under s 149B of the Bankruptcy Act to the automatic discharge of each bankrupt from bankruptcy – consideration of an application to set aside resolutions of a meeting of creditors to remove the trustees of each estate and replace those trustees with a new trustee – consideration of the meaning to be attributed to the term “person affected” in s 178 of the Bankruptcy Act – consideration of that phrase in the context of no authority on the question
Legislation: Federal Court of Australia Act 1976, s 31A(2)(b)
Bankruptcy Act 1966 (Cth), ss 27, 30, 73, 149B, 149C, 149D(1)(d) and (e), 178 and 181
Federal Court Rules, Rule 16.21
Cases cited:

Spencer v The Commonwealth (2010) 241 CLR 118 – cited and quoted
Edwards v Santos Ltd (2011) 242 CLR 421 – cited and quoted
Inspector‑General in Bankruptcy v Nelson (1998) 86 FCR 67 – cited and quoted
Frost v Sheahan (2008) 249 ALR 538 - cited
Macks as Trustee of the Property of Balnaves v Ardalich [1999] FCA 679 - cited
Re Crawford (Deceased); Ex parte The Trustee; The Official Receiver and Autoterms Limited (1943) 13 ABC 201 – cited and quoted
Macchia v Nilant (2001) 110 FCR 101 – cited and quoted
Wharton v Official Receiver in Bankruptcy (2001) 107 FCR 28 – cited and quoted
Prentice v Wood (2002) 119 FCR 296 – cited and quoted
Minister for Aboriginal Affairs v Peko‑Wallsend Limited (1986) 162 CLR 24 – cited
Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 - cited
R v Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd (1979) 144 CLR 45 - cited
Re Tyndall, Ex parte Official Receiver (1977) 17 ALR 182 –cited and quoted
Frost v Sheahan [2009] [FCAFC 20]; (2009) 6 ABC (NS) 786 - cited

Cummings v Clarmont Petroleum NL (1996)…

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AGLC
Mango Boulevard Pty Ltd v Whitton [2011] FCA 1383
Case
[2011] FCA 1383
Decision Date

CaseChat Overview and Summary

Mango Boulevard Pty Ltd and others brought an action against Whitton and others seeking relief under the Bankruptcy Act 1966 (Cth), including setting aside decisions made by the trustees of the estates of two bankrupts. Whitton and others filed applications to strike out parts of the Amended Statement of Claim and sought to strike out parts of the Amended Defence. Whitton and others also applied for summary judgment on the claims under s 178 of the Bankruptcy Act. The court was required to decide whether the applicants' claims had no reasonable prospects of success, the meaning of the term "person affected" in s 178 of the Bankruptcy Act, and the admissibility of evidence.

The court dismissed the application for summary judgment on the claims under s 178 of the Bankruptcy Act. It held that the applicants' claims had reasonable prospects of success because they raised genuine issues that needed to be resolved at trial. The court also held that the term "person affected" in s 178 of the Bankruptcy Act should be interpreted broadly to include those who have a legitimate interest in the outcome of the trustee's decision. The court struck out certain paragraphs of the Amended Statement of Claim and the Amended Defence and directed the parties to confer and submit proposed directions orders to the Court within seven days. The costs of the application were reserved for determination upon the trial of the action.

The court's decision dismissed the application for summary judgment on the claims under s 178 of the Bankruptcy Act and held that the applicants' claims had reasonable prospects of success. The court also interpreted the term "person affected" in s 178 of the Bankruptcy Act broadly to include those who have a legitimate interest in the outcome of the trustee's decision. The court struck out certain paragraphs of the Amended Statement of Claim and the Amended Defence and directed the parties to confer and submit proposed directions orders to the Court within seven days. The costs of the application were reserved for determination upon the trial of the action.

Orders

Orders of the court

1. The amended interlocutory application of the second and third respondents filed on 30 August 2011 so far as that application concerns an application for orders under s 31A of the Federal Court of Australia Act 1976 (Cth), is dismissed.

2. So far as the application referred to in Order 1 concerns an application for orders for the striking out of particular paragraphs of the Amended Statement of Claim of the applicants, para 2.3 of the Amended Statement of Claim is struck out and the application is otherwise dismissed.

3. Paragraphs 28(a) to (v) and 33(a) and (b) of the Amended Defence of the second and third respondents filed 4 April 2011 are struck out.

4. The second and third respondents are granted leave to further amend their Amended Defence so as to address the matters referred to at [148] to [176] of the reasons for judgment explanatory of these orders.

5. The costs of and incidental to the application of the second and third respondents filed on 30 August 2011 and the application of the applicants filed on 5 August 2011 are reserved for determination upon the trial of the action.

6. The parties are directed to confer with a view to submitting proposed directions orders to the Court within seven days which address a timetable for further amending the Amended Defence, further amending the reply and completing all interlocutory steps with a view to the early allocation of trial dates.

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

Background

Background to the litigation

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Evidence

Evidence Before The Court

The costs of the application by Spencer and Perovich will be reserved. The costs in relation to the strike‑out application by Mango Boulevard and BMD will be reserved. The applicants’ challenges to admissibility of evidence During the course of the applications I made a preliminary ruling which was to be further considered in these reasons, that the reference to a “without prejudice” communication (a letter dated 21 December 2010 annexed to the affidavit of Mr Rozario sworn 18 August 2011 described as QGR‑28), representing the sole basis supporting a challenge by Spencer and Perovich to the applicants’ action as an abuse of process, was inadmissible. I confirm the preliminary ruling. No abuse of process contention is pressed as part of the s 31A application. It remains as part of the Defence to the proceeding. The applicants expressed strong protest about the incorporation of the “without prejudice” material in the affidavit followed by the abandonment of the contention so far as relevant to the s 31A application on the morning of the hearing upon challenge to the use of the “without prejudice” material. That matter is simply noted. As to other challenges to admissibility, I accept that those paragraphs of Mr Whitton’s affidavit that are directed to questions of the “appropriate venue” are irrelevant to the present applications. As to those paragraphs of the affidavits relied upon by Spencer and Perovich that are based upon information and belief derived from sources of information other than the knowledge of the deponent (whether expressed as information or belief or simply properly characterised in that way), none of those paragraphs are admissible on the s 31A application for final relief. Each of those paragraphs is admitted on the strike‑out applications made under the Federal Court Rules. Apart from the orders dispositive of the applications, orders will be made addressing the future conduct of the proceeding.

Decision

Reasons for decision

The relevant elements of s 31A of the Federal Court of Australia Act are in these terms:31A Summary judgment…(2)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:(a)the first party is defending the proceeding or that part of the proceeding; and(b)the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.(3)For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:(a) hopeless; or(b) bound to fail;for it to have no reasonable prospect of success.(4)This section does not limit any powers that the Court has apart from this section.…The Bankruptcy Act provisions The relevant provisions of the Bankruptcy Act are these: 27 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.30 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(b)may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.…73 Composition or arrangement [see Table B](1) Where a bankrupt desires to make a proposal to his or her creditors for:(a) a composition in satisfaction of his or her debts; or(b) a scheme of arrangement of his or her affairs;he or she may lodge with the trustee a proposal in writing signed by him or her setting out the terms of the proposed composition or scheme of arrangement and particulars of any sureties or securities forming part of the proposal.…(2)The trustee shall call a meeting of creditors and shall send to each creditor before the meeting a copy of the proposal accompanied by a report on it.(2A)The report must indicate whether the proposal would benefit the bankrupt’s creditors generally.(2AA)The report must name each creditor who was identified as a related entity of the bankrupt in the bankrupt’s statement of affairs.(2B)The trustee may refuse to call the meeting if the proposal does not make adequate provision for payment to the trustee of accrued fees that:(a)are owing to the trustee (at the time the proposal is lodged) in respect of the administration of the bankrupt’s estate, but are not able to be taken out of the bankrupt’s estate; and(b)have been approved by the creditors before the proposal is considered.(3)The bankrupt may, at the meeting, amend the terms of his or her proposal, but not in a way that reduces any provision for payment to the trustee of fees referred to in subsection (2B).(4) The creditors may, by special resolution, accept the proposal.(5)A creditor who has proved his or her debt may assent to or dissent from the proposal by written notice to that effect delivered to the trustee before the meeting or sent by post to the trustee and received by him or her before the meeting, and in that case the creditor shall, for the purposes of this Division, be deemed to have been present at the meeting and to have voted according to his or her assent or dissent.149B Objection to discharge(1)Subject to the following provisions of this Subdivision, at any time before a bankrupt is discharged from bankruptcy under section 149, the trustee may file with the Official Receiver a written notice of objection to the discharge.(2)The trustee of a bankrupt’s estate must file a notice of objection to the discharge if the trustee believes:(a)that doing so will help make the bankrupt discharge a duty that the bankrupt has not discharged; and(b)that there is no other way for the trustee to induce the bankrupt to discharge any duties that the bankrupt has not discharged.149C Form of notice of objection(1) A notice of objection must:(a)set out the ground or each of the grounds of objection, being a ground or grounds set out in subsection 149D(1) but not being a ground or grounds of a previous objection to the discharge that was cancelled; and(b)refer to the evidence or other material that, in the opinion of the trustee, establishes that ground or each of those grounds; and(c)state the reasons of the trustee for objecting to the discharge on that ground or those grounds.(1A)Paragraph (1)(c) does not apply to a ground specified in paragraph 149D(1)(ab), (d), (da), (e), (f), (g), (h), (ha), (k) or (ma).(2)A notice of objection is not invalid merely because it does not state the ground or grounds of objection precisely as set out in subsection 149D(1) provided that the ground or grounds can reasonably be identified from the terms of the notice.149D Grounds of objection(1)The grounds of objection that may be set out in a notice of objection are as follows:…(d)the bankrupt, when requested in writing by the trustee to provide written information about the bankrupt’s property, income or expected income, failed to comply with the request;(da) …(e)the bankrupt failed to disclose any particulars of income or expected income as required by a provision of this Act referred to in subsection 6A(1) or by section 139U;…178 Appeal to Court against trustee’s decision etc.(1)If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.(2)The application must be made not later than 60 days after the day on which the person became aware of the trustee’s act, omission or decision.181 Removal of trusteeThe creditors may, by resolution, at a meeting of which not less than 7 day’s notice has been given, remove a registered trustee appointed by them, or a registered trustee who is, by virtue of subsection 156A(3), the trustee of the estate of the bankrupt concerned, and may at the same or a subsequent meeting appoint another registered trustee to be trustee in his or her place.

Ratio Decidendi

Legal Principle Established

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