FEDERAL COURT OF AUSTRALIA
McNamara v San (No. 3) [2010] FCA 227
Citation: McNamara v San (No. 3) [2010] FCA 227 Parties: PAUL ANTHONY McNAMARA v BAO SAN, JULIE SAN, IVAN SAN, OFFICIAL TRUSTEE IN BANKRUPTCY and SCHON GREGORY CONDON File number: NSD 615 of 2009 Judge: GRAHAM J Date of judgment: 15 March 2010 Catchwords: BANKRUPTCY – standing of a creditor to seek relief under s 120 and/or s 121 of the Bankruptcy Act or declaratory relief in respect of the rights of a trustee to obtain relief under those sections – control over trustees under ss 177-179 of the Act.
PRACTICE AND PROCEDURE – summary dismissal under s 31A of the Federal Court of Australia Act – resolution of questions of law on a summary dismissal application
PRACTICE AND PROCEDURE – leave to continue proceedings under s 37A of the Conveyancing Act 1919 (NSW) following the bankruptcy of the transferors of property said to have been transferred with intent to defraud creditors
Legislation: Federal Court of Australia Act 1976 (Cth) s 31A(2)
Bankruptcy Act 1966 (Cth) ss 58(3), 109(10), 120, 121, 127(3), 127(4), 134(1), 156A, 160, 177, 178 and 179
Conveyancing Act 1919 (NSW) s 37A
Bankruptcy Act 1924 (Cth) s 94
Corporations Law ss 468(1) and 565(1)
Federal Court Rules O11 r16Cases cited: Upton v Tasmanian Perpetual Trustees Ltd (2007) 158 FCR 118
Spencer v The Commonwealth of Australia (1907) 5 CLR 418
Tyler v Thomas (2006) 150 FCR 357
Kowalski v MMAL Staff Superannuation Fund Pty Ltd (2009) 178 FCR 401
Storey v Lane (1981) 147 CLR 549
Re McMaster; ex parte McMaster (1991) 33 FCR 70
Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589
Taylor v Secretary to the Department of Social Security (1988) 18 FCR 322
Re Rose; ex parte Devaban Pty Ltd [1994] FCA 1082
Williams v Lloyd; in re Henry Morgan Williams (1934) 50 CLR 341
In Re Carter and Kenderdine’s Contract [1897] 1 Ch 776
Anscor Pty Limited v Clout (2004) 135 FCR 469
Re Francesco Candeloro La Rosa and Linda Robyn La Rosa (Bankrupts); Ex parte Norgard [1989] FCA 231
D M Cannane v J Cannane Pty Limited (in liquidation) (1998) 192 CLR 557
Heath v Chadwick (1848) 2 Phillips 649 [41 ER 1094]
Davis v Snell (1860) 28 Beavan 321 [54 E.R. 389];
(1860) 2 de G.F. & J. 463 [45 E.R. 700]
Douglas v M’Intyre (1884) X VLR (Equity) 249
Re Fresjac Pty Ltd (In liquidation); Campbell v Michael Mount PPB (1995) 65 SASR 334
Re Tyndall (1977) 30 FLR 6
Wilson v Commonwealth of Australia [1999] FCA 219
Moore v Macks [2007] FCA 10
Kattirtzis v Zaravinos [2001] FCA 1158
Green v Official Trustee in Bankruptcy, in the matter of Schneller a bankrupt [2001] FCA 1644
Australian Conservation Foundation Inc v Commonwealth (1980) 146 CLR 493
Bateman’s Bay Local Aboriginal Land Council v Aboriginal Community Benefit Fund Pty Ltd (1998) 194 CLR 247
Australian Gaslight Company (ACN 052 167 405) v Australian…
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- McNamara v San (No 3) [2010] FCA 227
- Case
- [2010] FCA 227
- Decision Date
CaseChat Overview and Summary
The primary legal issues that the Court had to address included whether the creditor had standing to seek orders under sections 120 and 121 of the Bankruptcy Act 1966 (Cth), and whether the creditor could enforce the provisions of section 109(10) of the Act. Additionally, the Court had to consider the policy and legislative scheme underpinning the Act and the role of the trustee in managing the bankrupt estate.
Justice Edelman held that the creditor's proceedings were misconceived. The Court noted that the creditor's approach to section 109(10) of the Act was flawed, as it did not account for the fact that the sub-section only applies when property has been recovered, which had not occurred in this case. Furthermore, the Court clarified that only a trustee may seek to avoid transfers under sections 120 and 121 of the Act. The Court emphasised that allowing a creditor to usurp the trustee's role would frustrate the policy and scheme of the Act, which aims to ensure that trustees act in the interests of all creditors. The Court also highlighted the provisions in sections 177-179 of the Act, which provide for appropriate control over trustees in the discharge of their responsibilities.
Ultimately, the Court dismissed the creditor's proceedings, finding that they were not permissible under the Act. The Court's decision underscored the importance of respecting the legislative framework and the role of the trustee in managing a bankrupt estate.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
In Green v Official Trustee in Bankruptcy, in the matter of Schneller (A bankrupt) [2001] FCA 1644 (‘Green’) Hill J granted leave to continue proceedings brought by a creditor of a bankrupt under s 37A subject to the giving of an undertaking by the creditor to the Court to hold the benefit of any order made in the s 37A proceedings for the Official Trustee on behalf of the bankrupt estate of Mrs Schneller.Consideration This is not a case where the applicant is seeking to enforce public law such that consideration needs to be given to whether he has a sufficient material interest in the subject matter, beyond the satisfaction of righting a wrong, upholding a principle or winning a contest (cf Australian Conservation Foundation Inc v Commonwealth (1980) 146 CLR 493 and Bateman’s Bay Local Aboriginal Land Council v Aboriginal Community Benefit Fund Pty Ltd (1998) 194 CLR 247). With respect, it seems to me that the applicant’s proceedings are misconceived. Firstly, the applicant’s approach to s 109(10) of the Act fails to take account of the fact that the sub-section only operates where property has been, not might be, recovered and that has not occurred in this case as yet. Secondly, it is only a trustee who may seek to avoid a transfer in reliance upon s 120 and/or s 121 of the Act and the cases cited above. The quoted parts of the relevant section as recorded above, when taken in conjunction with s 127 of the Act and the cases cited above make this demonstrably clear. How absurd it would be to contemplate creditors having a right to seek orders that transfers of property by a bankrupt be declared void with the consequence that, if such orders were to be made, obligations would thereby be cast upon the relevant trustees to make payments of money to the relevant transferees.Thirdly, the policy and scheme of the Act would be totally frustrated if an individual creditor was able to usurp the role of the trustee whose duty it is to act in the interests of all creditors of the relevant bankrupt estate. Fourthly, provision is made in ss 177-179 of the Act, along with other sections such as s 104 in relation to applications to the Court for the review of decisions of a trustee in relation to the admission or rejection of proofs of debt etc, to ensure that appropriate control over trustees is exercised in the discharge of their responsibilities. Even if the evidence had established, which it has not, that the applicant had put the fourth and fifth respondents in funds sufficient to enable them to address and seek orders under s 120 and/or s 121 of the Act in respect of the transfer of the property by the first and second respondents to the third respondent, and that the applicant had provided a secure and appropriate indemnity for any liability which the fourth and fifth respondents may incur by virtue of their commencement of proceedings as proposed by the applicant, there remains a discretion in the trustee to decline to bring proceedings, where they have not been reasonably persuaded that the transfer in question was at an undervalue or made to defeat the creditors of the relevant bankrupt.