Official Trustee in Bankruptcy v Delaney
[2008] FMCA 509
•7 March 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| OFFICIAL TRUSTEE IN BANKRUPTCY v DELANEY | [2008] FMCA 509 |
| BANKRUPTCY – Application for joinder. |
| Bankruptcy Act1966, ss.27, 30, 31(f), 58 Federal Magistrates Act 1999, ss.10, 18 |
| Barnes v Addy (1874) LR9ChApp 244 Re Wakim ex parte McNally (1999) 198 CLR 511 Fencott v Muller (1983) 152 CLR 570 |
| Applicant: | OFFICIAL TRUSTEE IN BANKRUPTCY |
| Respondent: | GRAEME JOHN DELANEY |
| File Number: | BRG 415 of 2006 |
| Judgment of: | Jarrett FM |
| Hearing date: | 5 March 2008 |
| Date of Last Submission: | 5 March 2008 |
| Delivered at: | Brisbane |
| Delivered on: | 7 March 2008 |
REPRESENTATION
| Solicitor for the Applicant: | Mr Bennett |
| Solicitors for the Applicant: | Bennett & Philp |
| No appearance by the First Respondent: |
| Counsel for the Joined Parties: | Mr Coulsen |
| Solicitors for the Joined Parties: | Flower & Hart |
ORDERS
Pursuant to Rule 11.02 of the Federal Magistrates Courts Rules 2001 Justin Anthony Moynihan and Robbins Watson (a firm) be included as parties to these proceedings as second and third respondents respectively.
Pursuant to Rule 7.01 of the Federal Magistrates CourtRules 2001 the Applicant be given leave to amend the application in the terms proposed in the amended Application annexed to the affidavit of Anthony James Bennett filed 8 February 2008.
Pursuant to Rule 2.06 of the Bankruptcy Rules the Respondents file and serve a Notice of Opposition stating the grounds of opposition to the amended Application on or before 12 March 2008.
Pursuant to section 45(1) of the Federal Magistrates Act 1999 it is appropriate in the interests of the administration of justice to allow discovery in this proceedings of documents in relation to the categories in Schedule A to these orders.
On or before 28 March 2008 the parties make and file verified lists of documents in relation to the categories appearing in Schedule A to these orders.
Inspection of documents be completed by 2 April 2008.
The Applicant file and serve a statement of claim against the Second and Third Respondents by 4.00pm on 28 March 2008.
The Second and Third Respondents file and serve a statement of defence by 4.00pm on 18 April 2008.
The Applicant file and serve a reply by 4.00pm on 25 April 2008.
The Applicant file and serve its evidence in chief by 15 May 2008.
The Second and Third Respondents file and serve their evidence in chief by 30 May 2008.
That the be set down for final hearing for not more than two (2) days commencing at 10.00am on 12 June 2008 in the Federal Magistrates Court of Australia at Brisbane.
The Applicant pay any hearing fee or seek a waiver of the fee no later than 4.00pm on 15 May 2008.
That no party shall be entitled to rely on any affidavit material not filed and served in accordance with these directions without leave of the Court first had and obtained.
Liberty to apply.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 415 of 2006
| OFFICIAL TRUSTEE IN BANKRUPTCY |
Applicant
And
| GRAEME JOHN DELANEY |
Respondent
REASONS FOR JUDGMENT
This is an application to join a solicitor and a firm of solicitors to these proceedings as second respondents.
The principal proceedings were commenced by the Official Trustee in Bankruptcy, who is the trustee of the estate of Graeme John Delaney
(a bankrupt).
The principal proceedings sought a declaration that the respondent's interest in certain real property vested in the applicant pursuant to s.58 of the Bankruptcy Act 1966 and an order that the respondent's half interest in that property be transferred to the applicant.
By consent on or about 14 September, 2006 I declared that the respondent's interest in the particular real property vested in the applicant pursuant to s.58 of the Bankruptcy Act 1966 and I ordered that the respondent transfer his half interest to his trustee.
In addition to those matters the principal proceedings contained two further claims against the bankrupt. The first is a claim for an account with respect to moneys advanced by a certain mortgagee on security of a mortgage over the real property the subject of the proceedings and an order for compensation against the bankrupt for loss the applicant suggests it has suffered because of the bankrupt’s dealings with the property. Those latter two issues remain live.
The Federal Magistrates Court, of course, has jurisdiction to decide bankruptcy matters and issues that arise under the Bankruptcy Act1966 – see ss.27, 30 and 31(f) of the Bankruptcy Act1966 and s.10 of the Federal Magistrates Act 1999.
The claim to be agitated against the solicitors in this case arises, it is said, under the second limb of the decision in Barnes v Addy (1874) LR9ChApp 244. That is to say the trustee wishes to agitate a claim that the solicitors have aided or assisted in the commission of a breach of trust in circumstances where they knew of the existence of the trust and knew that the applicant was likely to suffer loss as a result of that breach.
The solicitors resist the joinder application on the basis that the claim made against them is not a Federal claim and is not within the associated or accrued jurisdiction of this Court. The Court has associated jurisdiction in matters of a non-Federal matter – see s.18 of the Federal Magistrates Act1999.
The argument as it proceeded was that there was no common substratum of facts between the claim against the bankrupt and the claim against the solicitors. The relevant starting point for a consideration of whether the claim against the solicitors is within the associated jurisdiction of this Court is perhaps some words from the High Court in Re Wakim ex parte McNally (1999) 198 CLR 511 at 585 where the Court said:
There is but one matter where different claims are so related that the determination of one is essential to the determination of the other. As, for example, in the case of third party proceedings or where there are alternative claims for the same damage.
The nature and extent of the jurisdiction that arises under sections such as s.18 of the Federal Magistrates Act 1999 has been the subject of some decisions, but perhaps the seminal decision is Fencott v Muller (1983) 152 CLR 570. In that case Gibbs CJ said at page 591:
It is now established by Philip Morris v Brown that once a Federal Court is invested with jurisdiction with respect to a matter it may determine all the questions which form part of that matter, even though they are questions which it would have no jurisdiction to entertain if they arose in separate proceedings.
The respondent's solicitors argue that the claim made against them is not one within the associated jurisdiction of this Court because it does not rely on or arise out of the same substratum of facts as the claim against the bankrupt. In my view that misapprehends the nature of the claim to be made against the solicitors.
The chronology demonstrates that the relevant real property was transferred by the respondent to himself and his brother. In authorising that transfer they were acting as the trustees of the estate of their late mother who owned the property before she died.
Subsequently and after the transfer had been registered in the name of the bankrupt, the bankrupt and his brother raised money using the property as security and that transaction took place, arguably at any rate, in the bankrupt's own right as opposed to in his capacity as trustee for his late mother's estate. He was the beneficiary under the estate and the property had been transferred to him in execution of the trusts in his late mother’s will.
By dint of s.58 of the Bankruptcy Act1966 his entitlement to the estate assets vested in the trustee in bankruptcy, but that does not answer the point that after the deceased estate had been transferred to him and his brother he was acting not as trustee of the estate of his late mother that trust having been executed, but rather in his own right.
To the extent that the solicitors may have assisted him in completing that mortgage transaction they were, arguably, assisting him in his own right as opposed to in his capacity as trustee for his mother's estate.
Accordingly, it seems to me that there is really nothing in the point raised by the solicitors in opposition to the joinder application. The assistance that the solicitors are alleged to have given to the bankrupt seems to have been given to him after the property had been registered in his name in execution of the trust established by his mother's will. In those circumstances it seems appropriate to permit the joinder because the matter, it seems to me, is within the associated jurisdiction of the Court.
ORDERS DELIVERED
I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Jarrett FM
Associate: S. Haysom
Date: 18 April 2008
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