Neville v Schon Gregory Condon as trustee of the Bankrupt Estate of Kenneth Lloyd Neville
[2012] FMCA 947
•16 October 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| NEVILLE & ANOR v SCHON GREGORY CONDON AS TRUSTEE OF THE BANKRUPT ESTATE OF KENNETH LLOYD NEVILLE | [2012] FMCA 947 |
| BANKRUPTCY – Application pursuant to s.58(3)(b) of the Bankruptcy Act 1966 (Cth) seeking leave to take fresh steps in proceedings in the Supreme Court of New South Wales against a bankrupt – application not opposed by the Trustee – leave granted. |
| Bankruptcy Act 1966, ss.5, 58(3)(b), 82 |
| Allanson v Midland Credit Ltd (1977) 16 ALR 43 Aztech Science Pty Ltd v Daevys [2005] FCA 1828 Melnik v Melnik (2005) 144 FCR 141 Norilya Minerals Pty Ltd, Re Ireland v Ireland (as named executor of the estate of Dean Edward Ireland) [2006] FCA 1235 Stoker (in her capacity as a trustee of the estate of the late Starr) v Starr [2011] FCA 746 |
| First Applicant: | RAYMOND ROBERT NEVILLE |
Second Applicant: | THOMAS BRUCE NEVILLE |
| Respondent: | SCHON GREGORY CONDON AS TRUSTEE OF THE BANKRUPT ESTATE OF KENNETH LLOYD NEVILLE |
| File Number: | SYG 1831 of 2012 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 26 September 2012 |
| Date of Last Submission: | 26 September 2012 |
| Delivered at: | Sydney |
| Delivered on: | 16 October 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr J. Potts |
| Solicitors for the Applicant: | Mr J. Brown of J.A. Brown & Co |
| Solicitors for the Respondent: | Ms C. Pyliotis of Mason Black Lawyers |
ORDERS
The Applicants be granted leave pursuant to s.58(3)(b) of the Bankruptcy Act 1966 (Cth) to proceed in Supreme Court of New South Wales Equity Division proceedings numbered 2007/00258110, between the Applicant and the bankrupt Kenneth Lloyd Neville, to take any steps necessary to seek:
(a)Specific performance of a settlement agreement reached in those proceedings on 28 April 2011 between the Applicants and Kenneth Lloyd Neville;
(b)To have orders made in terms of the document headed “Consent Orders B” to the settlement agreement; and
(c)Any consequential orders necessary to give effect to the order for specific performance of the settlement agreement, or the “Consent Orders B” to the settlement agreement.
The leave granted by Order 1 shall be limited in that it does not permit the Applicants to enforce Orders 3(A), 4(B) and 5 as set out in the document “Consent Orders B”, or any other monetary judgment against the bankrupt Kenneth Lloyd Neville, or order that the bankrupt Kenneth Lloyd Neville pay money to them, otherwise than by proving in the bankruptcy of Kenneth Lloyd Neville.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1831 of 2012
| RAYMOND ROBERT NEVILLE |
First Applicant
| THOMAS BRUCE NEVILLE |
Second Applicant
And
| SCHON GREGORY CONDON AS TRUSTEE OF THE BANKRUPT ESTATE OF KENNETH LLOYD NEVILLE |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application brought by Raymond Robert Neville and Thomas Bruce Neville (the “Applicants”) against Schon Gregory Condon as Trustee of the Bankrupt Estate of Kenneth Lloyd Neville (the “Respondent”) seeking the following orders:
1. The [A]pplicants be granted to leave pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth) to proceed in Supreme Court of New South Wales Equity Division proceedings numbered 2007/00258110, between the Applicants and the bankrupt Kenneth Lloyd Neville, to take any step necessary to seek:
(a) specific performance of a settlement agreement reached in those proceedings on 28 April 2011 between the applicants the bankrupt Kenneth Lloyd Neville;
(b) to have orders made in terms of the document headed “Consent Orders B” to the settlement agreement; and
(c) any consequential orders necessary to give effect to the order for performance of the settlement agreement, of the “Consent Orders B” to the settlement agreement.
2. Costs
3. Such further or other order as the Court deems fit.
The proceedings were first made returnable before a registrar of the Court where they were referred to this Court. The matter was listed on 26 September 2012 for hearing of the Applicants’ application. On 26 September 2012, after hearing of the application, the Applicants were granted leave to file draft minutes of order with the consent of the respondent. Those minutes were subsequently received by the Court and made in the terms proposed by the parties. These reasons give effect to those orders.
Hearing 26 September 2012
Background
Mr Potts, appearing for the Applicants, indicated to the Court that Proceedings, numbered 2007/00258110, were brought in the Supreme Court of NSW (the “Supreme Court Proceedings”) by the Applicants against Kenneth Lloyd Neville (the “Bankrupt”) and, subsequently in those Proceedings, the Bankrupt filed a cross-claim against the Applicants. The parties in the dispute are brothers and the dispute in the Supreme Court proceedings related to a farming partnership and property in Cowra (the “Property”) they were partners in. There were initially four brothers involved in the partnership, but John Neville passed away in 2001. On John’s death, the partnership continued between the remaining three brothers, and John’s interest in the common property passed to his wife. The three remaining brothers continued to manage the property before falling into dispute, which ultimately led to the Supreme Court Proceedings.
Mr Potts informed the Court that the family property comprised a whole raft of separate lots, which are held by the various family members as tenants in common. Marlene, the widowed wife of John Neville, is not relevant to this application, as the Applicants would deal with her interest in the property separately. The Supreme Court Proceedings were mediated and a settlement in the form of the document titled “Heads of Agreement” was reached on 28 April 2011 and executed between the parties. Pursuant to the settlement, the Bankrupt was to be permitted to purchase the Applicants’ share of the family property for $1,424,000.00 on the assumption that Marlene, the widow of John Neville would have her share of the property acquired by the Applicants. If the Bankrupt did not sign a contract for the sale of the property to him, certain default provisions would take effect, including the entitlement for the Applicants to file pre-signed consent orders in the form of “Consent Orders B” which was annexed to the “Heads of Agreement”.
The parties to the Supreme Court Proceedings entered a period of lengthy negotiations during which a draft contract was prepared by the legal representatives of the Applicants, but, ultimately, the Bankrupt decided that he did not want to buy the property. This position was formally confirmed on 27 July 2011 and, subsequently, on 4 August 2011 the Applicants’ legal representatives indicated that they were preparing to file a notice of motion seeking to enforce the “Heads of Agreement”.
The Bankrupt then filed a debtor’s petition, which was accepted by the Official Receiver, on 17 August 2011. Thereafter, negotiations between the Applicants and the Trustee of the bankrupt estate of Kenneth Raymond Neville, the Respondent to this application, commenced. The negotiations were similarly protracted, leading to numerous adjournments in the Supreme Court proceedings and, ultimately, the Respondent formed the view that the Bankrupt’s interest in the property had vested in the trustee pursuant to s.58 of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”).
It is the desire of the Applicants to specifically enforce the “Heads of Agreement” in the Supreme Court Proceedings and ultimately facilitate the transfer of Kenneth Neville’s holding of the property to the Applicants in the terms of “Consent Orders B”. This can only occur if the Applicants are successful in their application before this Court.
Statutory Framework
This Application is brought under s.58(3) of the Bankruptcy Act, which states:
(3) Except as provided by this Act, after a debtor has become bankrupt, it is not competent for a creditor:
(a) to enforce any remedy against the person of the property of the bankrupt in respect of a provable debt; or
(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceedings in respect of a provable debt or take any fresh step in such a proceeding.
Relevantly, s.5 of the Bankruptcy Act defines a “provable debt” as a “debt or liability that is, under this Act, provable in bankruptcy”.
Section 82(1) of the Bankruptcy Act states:
(1) Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
Applicants’ Authorities and Submissions
Mr Potts submitted that the prohibition referred to in s.53(3)(b) of the Bankruptcy Act applies to legal proceedings “in respect of” a provable debt is of very wide import and referred the Court to the decision of his Honour, Wilcox J, in Aztech Science Pty Ltd v Daevys [2005] FCA 1828. Mr Potts contended that, in that instance, even though the proceedings in the Supreme Court no longer sought damages against the bankrupt that were sought in the original statement of claim, Wilcox J still concluded it was correct to grant leave to the applicant to take fresh steps to continue with the Supreme Court proceedings as they were a “legal proceeding in respect of a provable debt”.
Mr Potts also referred the Court to the decision of the Full Court of the Federal Court in Melnik v Melnik (2005) 144 FCR 141. In that case their Honours Spender, Hill and Finn JJ also discussed whether related proceedings between former spouses was “in respect of” a provable debt and found that the related proceedings had been instituted because the applicant had failed to pay the $79,000 ordered by Jerrard J of the Family Court, before subsequently filing a debtor’s petition.
Mr Potts argued that in these proceedings the Court should take a similar view to that of Wilcox J in Aztech (supra) and although the specific application the Applicants seek leave to bring in the Supreme Court relates to the disposition of the bankrupt’s property (now vested in the Trustee) to the Applicants, the Supreme Court Proceedings as a whole seek the taking of accounts and other related orders, which appear to be “in respect of” a provable debt.
It was submitted by Mr Potts that, in any event, leave may be granted without determining whether s.58(3) was enlivened and referred the Court to his Honour Jacobson J’s decision in Stoker (in her capacity as a trustee of the estate of the late Starr) v Starr [2011] FCA 746 where his Honour referred to a judgment of the Full Court in Allanson v Midland Credit Ltd (1977) 16 ALR 43 at 48 and 49 where their Honours Bowen CJ, Riley and Deane JJ found accordingly. Jacobson J identified a number of reasons why he was prepared to grant leave and Mr Potts contended that there are similar circumstances in the proceedings before this Court.
Mr Potts indicated that to the extent that there may be doubt about the necessity of leave being granted, particularly in the absence of any concession by the trustee that leave is not necessary, the court may grant leave as the related applications often contain “difficult and complex questions of law and fact” per Jacobson J in Stoker (supra). The court may adopt the course undertaken by French J (as his Honour then was) in Norilya Minerals Pty Ltd, Re Ireland v Ireland (as named executor of the estate of Dean Edward Ireland) [2006] FCA 1235 where his Honour made orders pursuant to s.58(3)(b) of the Bankruptcy Act in the following terms:
1. If and to the extent that the proceeding issued by the applicant … constitutes or includes a claim provable in the bankruptcy … the applicant have leave to take further steps in the Civil Action up to and including the entry of final judgment.
…
Mr Potts referred the Court to the judgment in Allanson v Midland Credit Ltd and Anor (supra) which was, similarly, an application under s.58(3) of the Bankruptcy Act. At 48 their Honours stated:
… The facts are complex. … It would seem that all of these issues would be better and more comprehensively dealt with by a contested trail of the action in the Supreme Court than could possibly be the case if Midland Credit were required to lodge a proof of debt in respect of its claim against Mr Allanson alone. …
Mr Potts submitted that this is the leading authority on application of this nature. Their Honours noted that cases where complex questions may arise may be appropriately dealt with by leave being granted for them to be properly determined in a court, reducing costs and complexity in the future conduct of those cases, and this is the case in the Application before this Court.
Mr Potts indicated that the claim that the Applicants seek to press in the Supreme Court Proceedings is a claim to obtain the balance of the property in specie. The complexity of the claim is partly dependent on the position taken by the Trustee in respect of any specific performance application, but Mr Potts informed the Court that the Trustee does not intend to continue the litigation in respect of the “Heads of Agreement”. Mr Potts also notes that the Trustee neither opposes nor consents to the Application before this Court and that the Supreme Court Proceedings were commenced and settled before Kenneth Neville successfully presented his debtor’s petition. It is acknowledged that the Applicants seek to obtain an advantage over other creditors of the bankrupt’s estate by reason of the Supreme Court Proceedings, but the conditions to which they are prepared to submits would protect the interests of other creditors, by not seeking to enforce Orders 3(A), 4(B) of the Orders in “Consent Orders B”. Mr Potts submitted that the Court should grant the relief sought as the performance application would be better and more comprehensively dealt with by an application in the Supreme Court Proceedings.
Respondent’s Submissions
Ms Pyliotis, appearing for the Respondent, indicated to the Court that the Trustee does not consent or oppose the proposed orders and that the Trustee has run out of funds and has desisted with the pursuance of this Application.
Consideration
I am assisted by the submissions of the Mr Potts in respect of this Application. I am satisfied that leave should be granted pursuant to s.58(3)(b) of the Bankruptcy Act for the Applicants to proceed in the Supreme Court of NSW in proceedings 2007/00258110 to seek to enforce the settlement agreement with Kenneth Neville. Accordingly, I make in terms of the draft orders provided to me by the parties.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM
Associate:
Date: 16 October 2012
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