Park v Barclay - [2010] FMCA 397

FEDERAL MAGISTRATES COURT OF AUSTRALIA

PARK v BARCLAY

[2010] FMCA 397

BANKRUPTCY – Application for sale of property against co-owner of real property – power to make orders.

Bankruptcy Act 1966, ss.30(1), 58, 77(g) and 78
Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth), s.4(2)
Federal Magistrates Act 1999, s.18
Property Law Act 1974 (Qld), s.38

Phillip Morris Incorporated v Adam P Brown Male Fashions Proprietary Limited; United States Surgical v Hospital Products (1981) 148 CLR 457
Re Bilen; Ex parte Sistrom [1985] FCA 120
Lynn v White (as Trustee of the Bankrupt Estate of Kathleen Fay Lynn ) [1997] FCA 1064
John Sheahan (Trustee of the Bankrupt Estate of Jillian Helen Marshall and the Bankrupt Estates of Richard John Cooper and Simon Vincent Cooper) v Noelene Michelle Cooper & Ors [1998] FCA 1531
Re Wakim; Ex parte McNally (1999) 198 CLR 511
White v Lynn [1999] FCA 841
White v Lynn (1998) FCA 875
White v Lynn (1999) FCA 1612
Lynn v White (1999) FCA 1649
Re Lynn; Lynn v White (as Trustee) (2000) 171 ALR 217
Cook v Tagamilitsky (2001) FMCA 117
Cook v Schwarcz (2005) FMCA 1598
Nguyen v Pascoe (2006) FCA 719
Official Receiver v Tregaskis (2006) FMCA 1915
Jefferson & Collins v Lynam (A Bankrupt) [2007] FMCA 732
Patterson v McKinnon (2008) FCA 1624
Pascoe v Hooper (2009) FMCA 520
Sutherland v Graham [2009] FMCA 795
Harrison v O’Brien [2010] FMCA 339
Harrison v Tsamasis [2010] FMCA 341

Applicant:

JOHN RICHARD PARK AND JOHN GERVASE SHANAHAN AS TRUSTEES OF THE ESTATE OF DEBOPRAH A BARCLAY ALSO KNOWN AS DEBORAH ANNETTE BARCLAY

Respondent:

PAUL LINDSAY BARCLAY

File Number:

BRG 274 of 2010

Judgment of:

Jarrett FM

Hearing date:

29 April, 2010

Date of Last Submission:

29 April, 2010

Delivered at:

Brisbane

Delivered on:

6 May 2010

REPRESENTATION

Solicitors for the Applicant:

Dibbs Barker

No appearance for the respondent

ORDERS

That the application filed 29 March 2010 is dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT BRISBANE

BRG 274 of 2010

JOHN RICHARD PARK AND JOHN GERVASE SHANAHAN AS TRUSTEES OF THE ESTATE OF DEBORAH A BARCLAY ALSO KNOWN AS DEBORAH ANNETTE BARCLAY

Applicant

And

PAUL LINDSAY BARCLAY

Respondent

REASONS FOR JUDGMENT

Revised from the transcript

This is an application described in the applicant’s written submissions as an application “for the appointment of the applicants as trustees for the sale” of certain property, and for orders for sale of that property. I am not so sure that the application seeks an order that the applicants be appointed trustee for sale. The form of relief sought in the application seeks an order that the land and buildings comprised in a certain survey plan, and certificate of title, be sold, “by the applicant as trustee for sale”, with all the obligations and privileges pertaining thereto and that the proceeds after payment of all expenses of and incidental to such sale be divided equally between the applicant and the respondent.
Thereafter follows a claim for some other orders. Paragraph 2 seeks an order that the respondent do all things necessary to list and sell the land, orders which I would have thought were not necessary, if the applicant was being appointed as trustee. There are some other consequential orders, again, which may not be necessary if the applicants were really asking to be appointed as trustees for sale. On balance, the application is probably an application for an order for sale of some property and nothing more.
The application arises against these background facts. On 10 June, 2009 a sequestration order was made against the estate of Deborah Annette Barclay and the applicants became the trustees of her estate in bankruptcy. The evidence satisfies me that the bankrupt and the respondent to these proceedings, Paul Lindsay Barclay, were registered proprietors as joint tenants of certain real property situated in Queensland. On 14 October, 2009 the applicants and the respondent became the registered proprietors of the property, as tenants in common in equal shares.
I am satisfied by the evidence that the applicant has made numerous attempts to communicate with the respondents so as to take the necessary steps to effect an orderly sale of the bankrupt’s interest in the property. The respondent has been wholly unresponsive. Consequently, the applicants apply to this court for an order that the whole property be sold and the proceeds divided between the trustees and the respondent, as I have already set out.
The applicants identify the jurisdiction and power to make this order as s.30(1) of the Bankruptcy Act 1966. Section 30(1) is in the following terms:
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.
The closing phrase of s.30(1)(b) “any such case or matter” must, in my view, necessarily refer to the cases and matters identified in subsection 30(1)(a), namely:
… in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court.
The applicants’ solicitors referred me to two authorities said to stand for the proposition that s.30(1) authorised the orders for sale sought in this case. The first authority is Re Bilen; Ex parte Sistrom [1985] FCA 120. In that case the issue before the court was whether there ought to be a stay of some proceedings pending before the Federal Court. In the proceedings sought to be stayed the applicant was the trustee in bankruptcy of one Bilen. The respondent was Bilen’s spouse. The trustee in bankruptcy sought declarations that he was beneficially entitled to one undivided half share of certain land owned by the bankrupt and his wife, and that he was entitled to dispose of, or otherwise deal with, the undivided half share, pursuant to his powers as trustee.
At the same time, there were pending proceedings in the Supreme Court of the Australian Capital Territory. The first in time were commenced by the trustee and were brought pursuant to the provisions of the Partition Act, 1900 of New South Wales in its application to the Australian Capital Territory. In those proceedings the trustee sought orders that the relevant parcel of land be sold out of court and other consequential orders. A second set of proceedings were commenced by the respondent (non-bankrupt spouse) seeking declarations that she was entitled to the whole of the relevant property and that the trustee held his interest on a constructive or resulting trust for her.
Neaves J refused the stay but, in doing so, sought undertakings from the trustee to discontinue the proceedings in the ACT Supreme Court. In the course of his reasons, his Honour said:
In my opinion sub-section 30(1) of the Bankruptcy Act 1966 is not a provision limiting the Court’s jurisdiction. It is a facultative provision giving the Court full power, within the limits of its jurisdiction to be found elsewhere, to make such orders as it considers should be made in the order to carry out and give effect to the Act. The words used are not words of limitation but of extension.
Subsequently, his Honour said:
… this Court is not restricted in considering what orders it would be appropriate to make in exercise of the power conferred on it by sub-section 30(1) of the Bankruptcy Act 1966 by the kinds of limitations which may be found in the Petition Act, 1900 New South Wales.
In stating that, his Honour was expressing the primary reason for reaching his conclusion that the stay ought not to be granted. His Honour was of the view, quite clearly, that he could make orders under s.30(1) of the Bankruptcy Act which were not subject to the same types of limitation that might be attendant upon proceedings under the Partition Act. Be that as it may, the application that was then pending in the Federal Court was for declaratory relief in respect of an interest in land and sought by a trustee in bankruptcy. That was something clearly within both the jurisdiction and power of the court pursuant to the Bankruptcy Act. His Honour was not being asked to make an order for sale. His Honour’s words clearly draw the distinction between the jurisdiction given to the court (to be found elsewhere other than s.30(1)) and the powers the court has within that jurisdiction.
The second authority to which I was taken was Nguyen v Pascoe (2006) FCA 719, a decision of a single judge of the Federal Court of Australia sitting as the Full Court on appeal from a federal magistrate. In that case the two passages to which I have just referred were cited. But beyond referring to those two passages in a general sense, there was no particular discussion about the nature or extent of the power vested in the courts exercising bankruptcy jurisdiction by s.30(1) of the Bankruptcy Act and in particular, whether the power extended to making orders for sale in cases like that presently before me. The appeal in that case turned on entirely different issues.
I referred the solicitors for the applicant to another decision, John Sheahan (Trustee of the Bankrupt Estate of Jillian Helen Marshall and the Bankrupt Estates of Richard John Cooper and Simon Vincent Cooper) v Noelene Michelle Cooper & Ors [1998] FCA 1531 in which Mansfield J had before him applications by a trustee in bankruptcy for partition and sale of certain property jointly owned by the bankrupt (and vested in the trustee) and others. It is clear from the report that the applications were made under the Law of Property Act 1936 (SA) and that those applications were cross-vested into the Federal Court.
There are some other authorities on the point. There is a line of decisions involving the same parties, Lynn v White, to which I shall refer shortly, but before I do, I will turn to a line of authority in the Federal Magistrates Court where it is said that orders such as those that are sought to be made in this case, have been made. The starting point is the decision in Cook v Tagamilitsky (2001) FMCA 117. In that case, the court had before it an application for delivery up to the trustee of vacant possession of certain real property. The orders made were for the respondent to vacate possession of the relevant property and for delivery up of vacant possession to the trustee in bankruptcy.
The court took the view that power to make that order came by a combination of s.30(1) of the Bankruptcy Act and ss.58, 77(g) and 78 of the Bankruptcy Act. In particular, when referring to questions about the form of the order that might be made, the court said this:
It is interesting that although recovery of the assets of a debtor frequently involves the sale of the debtor’s property, and therefore the necessity to require a debtor to vacate possession of that property, there is no specific section in the Bankruptcy Act dealing with this matter in a codified form. Reference has been made to a number of sections of the Act, however, it is obvious from cases such as Dixon v Lee Che Tran Cow & Anor, a decision of Beazley J, as she then was, unreported, 23 June 1995, in the Federal Court and White, as trustee of the bankrupt estate of Lyn v Lyn (1999) FCA 841, a decision of Finkelstein J, that the court has power to make such orders and indeed to stay those orders on terms. In this case the respondent is not present and has made no request for a stay of any order which I might make. It is my view that a combination of section 77(g) and section 30 of the Bankruptcy Act is sufficient to ground the jurisdiction for the orders that I propose to make.
Cook v Tagamilitsky was not a case where orders for sale against a co-owner of the relevant property were sought. The orders for delivery up of vacant possession were sought against the bankrupt.
In Cook v Schwarcz (2005) FMCA 1598 the court was dealing with an application for the delivery up of vacant possession of certain real property. The orders were sought only against the bankrupt. The court referred to the decision to which I have just referred, Tagamilitsky, and applying that decision came to the view that a combination of ss.77(1)(g) and 30 of the Bankruptcy Act was sufficient to ground the jurisdiction for the orders proposed to be made in that case, namely, for delivery up of possession.
In Official Receiver v Tregaskis (2006) FMCA 1915, the court took the reasoning in Tagamilitsky one step further. The court was dealing there with an application for orders for the sale of land against a bankrupt and his spouse who was a co-owner of the relevant real property. The court referred to the paragraphs to which I have just referred in Tagamilitsky and to Schwarcz. The court also referred to Sheahan v Cooper, the decision to which I have referred above and Re Bilen; Ex parte Sistrom, after which the court concluded:
19. It follows that this court is not limited by any restrictions found in section 126 of the Property Law Act (WA).
20. The applicant seeks vacant possession of the Calista and Warnbro land and wishes to have sole conduct of the sale of the Warnbro land, already having sold conduct of the Calista land pursuant to the provisions of the Bankruptcy Act, in order to realise the assets of the bankrupt estate.
21. The bankrupt has failed to do all such acts and things in relation to the realisation of the land and to aid the official trustee in the administration of the bankrupt estates was required by section 77(1)(g) and (e) of the Bankruptcy Act.
The court continued:
26. There is nothing before the court to prevent it from making the orders sought in the application.
27. The court has power to make the orders sought pursuant to section 30 and 77 of the Bankruptcy Act, and to make those orders in the absence of the respondents. In Tagamilitsky and Schwarcz, similar orders were made, notwithstanding the non-appearance of the respondents (the respondents in those proceedings being bankrupt).
The difference between Tregaskis on the one hand and Tagamilitsky and Schwarcz on the other is that the latter two cases concerned applications for the delivery up of vacant possession against the bankrupt only, whereas Tregaskis goes a step further and deals with an application not only for delivery up of vacant possession but also an order for the sale of it as against another who was a co-owner with the bankrupt of the property.
Tregaskis was applied in Pattison v Wates (2007) FMCA 1068. That case, again, involved only an order for vacation of certain property and the delivery up of vacant possession as against the bankrupt. Nonetheless, the court referred to Tregaskis and the line of authority, including Tagamilitsky and Schwarcz to determine that there was power to make the orders sought in that case.
There are other cases in this court where orders for delivery up of possession as against the bankrupt have been made relying upon Tagamilitsky, Schwarcz and Tregaskis (or some of them): Jefferson & Collins v Lynam (A Bankrupt) [2007] FMCA 732, Pascoe v Hooper (2009) FMCA 520, Sutherland v Graham [2009] FMCA 795, Harrison v Tsamasis [2010] FMCA 341 and Harrison v O’Brien [2010] FMCA 339.
Patterson v McKinnon (2008) FCA 1624 is a decision of the Federal Court. A single judge in that case ordered the delivery up of vacant possession of certain property and warrants for possession. His Honour referred to the line of authority to which I have just referred and said this:
I am satisfied that the court has both the jurisdiction and the power to make the orders sought by the applicant.
It is important to note that the court there was dealing with an application by a trustee in bankruptcy for the delivery up of vacant possession against the bankrupts.
I return now to the line of cases between Mr White and Mr & Mrs Lynn. One will recall that it is one of those decisions referred to in Tagamilitsky as identifying the power to make orders such as those made in Tagamilitsky pursuant to s.30 of the Bankruptcy Act. The White v Lynn litigation commenced in the Federal Court with an order by Marshall J. Mrs Lynn was bankrupt, having presented her own petition following some unsuccessful litigation in the County Court of Victoria. After she became bankrupt she transferred her interest in some real property that she owned jointly with her husband to him. Marshall J set that transaction aside. There was an unsuccessful appeal from that decision: Lynn v White (as Trustee of the Bankrupt Estate of Kathleen Fay Lynn) [1997] FCA 1064.
In White v Lynn (1998) FCA 875 Mrs Lynn’s trustee sought orders vesting in him her share of the property she owned jointly with her husband and orders for the sale of the property pursuant to s.223 of the Property Law Act 1958 (Vic.). Heerey J made orders for the sale of the real property, but stayed the operation of the orders for sale for six months. It is clear from his reasons for decision that his Honour was exercising jurisdiction under the Property Law Act 1958 (Vic.), although what is not quite so clear is how that application came to be in the Federal Court.
In White v Lynn [1999] FCA 841 Finkelstein J had cross-applications before him for delivery up of possession of the property (by the trustee) and orders for a further stay of the orders of Heerey J (by the bankrupt’s spouse). Certain orders were made upon the bankrupt and her spouse’s undertakings not to interfere with the trustee’s inspections and preparations for the sale of the property or damaging it in any way. The orders made were designed to ensure that the Official Receiver was able to inspect the relevant real property, prepare it for sale, organise the sale and conduct the sale. Liberty to apply was given. It is clear from his Honour’s reasons that the order for sale was made under the Property Law Act 1958 (Vic.). It is not entirely clear how that application came to be in the Federal Court. His Honour granted a stay of the order for sale for about 5 months.
It is this decision which is one of the decisions referred to in Tagamilitsky as authority for the proposition that the court has power to make orders for the delivery up of vacant possession of real property against a bankrupt and others pursuant to the Bankruptcy Act. It is clear, however, that his Honour’s orders, insofar as they concerned Mr Lynn (not the bankrupt) were made under the Property Law Act 1958 (Vic).
White v Lynn returned to court on 24 September, 1999 on the trustee’s application for an order that the stay of the order for sale be lifted. In White v Lynn (1999) FCA 1612 Finkelstein J ordered that the stay he had previously ordered be lifted.
On 19 November, 1999 the matter again came before the Federal Court of Australia, this time before Ryan J: Lynn v White (1999) FCA 1649. That was an application by Mr and Mrs Lynn for certain injunctions to prevent the Official Receiver from taking possession of their home. Apart from staying the operation of a warrant for the possession of the property for a short period, their application was otherwise dismissed.
Ryan J’s orders, which assisted the carrying out of the earlier orders for sale, were the subject of an appeal: Re Lynn; Lynn v White (as Trustee) (2000) 171 ALR 217.
In the appeal judgment the Full Court of the Federal Court of Australia set out the history of the litigation from which it is very clear that the orders for sale which were at the heart of this series of cases were made pursuant to the Property Law Act 1958 (Vic.). It is also clear that the applications for orders for sale, at least as against Mr Lynn were before the Federal Court pursuant to the cross-vesting legislation that was then operative between the Commonwealth and the states.

Between the decision of Ryan J in November 1999 and the hearing of the appeal, however, the High Court delivered judgment in Re Wakim; Ex parte McNally (1999) 198 CLR 511 wherein it was held that the cross-vesting legislation, insofar as state legislatures sought to invest federal courts with state jurisdiction was invalid.
At paragraph 11 of the Full Court judgment in Lynn v White, the Full Court says:
[11] The appeal came before us on an urgent basis on 13 December 1999. The appellants appeared in person. Each of them addressed the court. Their case was that they deserved sympathy for a number of reasons. These included their allegations that the legal system had failed them in many instances, and that they were old and in poor health. The court raised with the representatives of the respondents the question whether the orders made by Heerey J on 15 July 1998 might have been made without jurisdiction. Because the respondents were not ready to argue that question, it was necessary to adjourn the further hearing of the appeal. The court therefore ordered that the second respondent be added as a respondent to the appeal, adjourned the further hearing of the appeal until 18 February 2000, and gave directions as to the filing and service of written submissions by the first respondent. The court also ordered that the execution of the warrant for possession be stayed until the hearing and determination of the appeal. It reserved the costs of the respondents.
[12] When the hearing resumed, counsel for each of the respondents conceded that the orders made by Heerey J on 15 July 1998 were made without jurisdiction. Those orders were made in reliance upon provisions of the Property Law Act 1958 (Vic) and the Transfer of Land Act 1958 (Vic). Heerey J purported to exercise jurisdiction to make orders under those Victorian Acts pursuant to s 4(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth). That provision purported to confer on the court jurisdiction that would otherwise have been available only to courts of the State. The relevant provisions of the Property Law Act 1958 (Vic) and the Transfer of Land Act 1958 (Vic) confer jurisdiction on “the Court”. Section 3(1) of the former Act and s 4(1) of the latter define the word “Court” in terms restricted to courts of the State of Victoria.
Later, at paragraph 14 of their judgment, their Honours continued:
[14] The orders made by Heerey J, and the subsequent orders made by Finkelstein J, directed to their enforcement were orders made by the court, which is a superior court of record. It is axiomatic that a judgment or order of a superior court of record stands, and must be treated as valid and obeyed, unless and until it is set aside. The orders the appellants sought from Ryan J were not directed towards the enforcement of the orders of Heerey J. Rather, they were directed towards preventing the enforcement of Heerey J’s orders. It might have been possible for the appellants to have argued before Ryan J that the second respondent ought to be restrained by injunction from taking steps to sell the property pursuant to the orders of Heerey J, or that those orders ought to be stayed, on the ground that they were made without jurisdiction. The appellants, not being lawyers, did not put these arguments to Ryan J. The issues were not raised at all. The point having been raised by the court in this appeal, it is impossible for us to ignore the fact that the orders made by Heerey J were made without jurisdiction. Simply to accept that they were valid orders, because they were made by a superior court of record, would be an abdication of the court’s responsibility.
The Full Court came very clearly to the conclusion that the orders made by Heerey J were without jurisdiction. It was not suggested in the course of the argument in that case or in the reasons that there was any basis under the Bankruptcy Act to save the orders that his Honour had made. The only basis upon which they may have been made was the state legislation, which was not available to his Honour as a basis for the orders for sale.
The decisions in Lynn v White deal with, amongst other things, orders for sale against a party who is not the relevant bankrupt. The line of authority is to be distinguished from the earlier cases to which I have referred, save for Tregaskis in which orders for sale were made against a co-owner of real property who was not the bankrupt. It appears, however, that the court in Tregaskis was not referred to Re Lynn; Lynn. v White (as Trustee) (2000) 171 ALR 217.
In my view, this court does not have power to make an order for sale under s.30(1) of the Bankruptcy Act against a co-owner of real property and who is not the relevant bankrupt. As Neaves J pointed out in Re Bilen s.30(1) deals with the courts powers, not jurisdiction. The relevant jurisdiction must be “found elsewhere”.
As is demonstrated by Lynn v White on appeal, the power to make an order that real property the subject of co-ownership be sold where the co-owner is not otherwise a party to the bankruptcy must be found in the state law and in the case of Queensland, s.38 of the Property Law Act 1974 (Qld.).
I was taken to no other section in the Bankruptcy Act which was said to give rise to the relevant jurisdiction. It is possible that the court has jurisdiction to make the orders sought in this matter as an exercise of its associated jurisdiction: s.18 of the Federal Magistrates Act 1999. But before the court’s associated jurisdiction arises it is necessary to have before it a properly constituted federal matter: Phillip Morris Incorporated v Adam P Brown Male Fashions Proprietary Limited; United States Surgical v Hospital Products (1981) 148 CLR 457. There must be pending in this court an application which engages this court’s original federal jurisdiction before recourse can be had to its associated jurisdiction.
On the application as it presently stands, whether viewed as an application for the appointment of the applicants as trustees for sale, or an application for orders for sale, there is no federal matter before this court and accordingly, the application must be dismissed.

I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of Jarrett FM

Associate: Lynnette Chin

Date: 8 June 2010