Pascoe v Smith
[2011] FMCA 528
•7 June 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PASCOE v SMITH & ANOR | [2011] FMCA 528 |
| BANKRUPTCY – Application by former trustee of bankrupt’s estate for a declaration and orders in relation to property in the name of the trustee and the second respondent. |
| Conveyancing Act 1919 (NSW), s.66G Bankruptcy Act 1966 (Cth), ss.19, 27, 30, 50, 58, 77, 129AA, 130, 149 Federal Magistrates Act1999 (Cth), ss.15, 16, 18 |
| Anderson v Pongas & Ors [2011] FMCA 54 Cook v Schwarz [2005] FMCA 1598 Cook v Tagamilitsky [2001] FMCA 117 Holmes v Dillon & Ors (No.2) [2010] FMCA 399 Horne (as trustee of the Bankrupt Estate of Sekulovski) v Sekulovski [2009] FCA 1164 Meriton Apartments Pty Ltd and Another v Industrial Court of New South Wales and Another (2008) 171 FCR 380; [2008] FCAFC 172 Official Receiver v Fall (2008) 5 ABC(NS) 772; [2008] FMCA 489 Official Receiver v Maher [2010] FMCA 857 Official Receiver v Tregaskis & Anor [2006] FMCA 1915 Park and Another v Barclay (2010) 239 FLR 396; [2010] FMCA 397 Pascoe v Smirneos & Ors [2010] FMCA 404 Pattison v McKinnon [2008] FCA 1624 Pattison v Wales [2007] FMCA 1068 Re Bayliss; Ex parte Hadotone Pty Ltd and Others v Official Trustee in Bankruptcy (1987) 15 FCR 91; [1987] FCA 209 Re Gareth John Ellis Ex Parte: Philip Gregory Jefferson and Jay Arscott Stevenson [1995] FCA 1072 Re Lynn; Lynn and Another v White(as trustee) and Another (2000) 171 ALR 217; [2000] FCA 429 Re Vinko Bilen Ex Parte: David William Sistrom v Grace Bilen [1985] FCA 120 Re Wakim; Ex parte McNally and Another (1999) 198 CLR 511; [1999] HCA 27 Talacko and Others v Talacko (2010) 183 FCR 311; [2010] FCAFC 54 Warner v Liddell [2006] FMCA 893 Williams v Minister for the Environment and Heritage and Another (2003) 199 ALR 352; [2003] FCA 627 Zantiotis v Andrewand Another (1987) 80 ALR 23; [1987] FCA 473 |
| Applicant: | SCOTT DARREN PASCOE AS FORMER TRUSTEE IN BANKRUPTCY OF THE PROPERTY OF THE BANKRUPT ESTATE OF SMITH |
| First Respondent: | KEVIN JOHN SMITH |
| Second Respondent: | SALLY ANNE GURR |
| File Number: | SYG 722 of 2011 |
| Judgment of: | Barnes FM |
| Hearing dates: | 31 May 2011 & 7 June 2011 |
| Delivered at: | Sydney |
| Delivered on: | 7 June 2011 |
REPRESENTATION
| Solicitors for the Applicant: | Farrar Lawyers |
| Respondents: | No appearance |
DECLARATIONS
The applicant and the second respondent are the beneficial owners of the property known as 26 Tobruk Ave, Muswellbrook in the State of New South Wales being folio identifier 15/237872 (the Property).
ORDERS
The first respondent deliver up vacant possession of the Property to the applicant within 28 days of the date of these orders.
The first respondent deliver up all keys for all buildings and improvements on the Property to the applicant within 28 days of the date of these orders.
The second respondent deliver up vacant possession of the Property to the applicant within 28 days from the date of these orders.
The second respondent deliver up all keys of all buildings and improvements on the Property to the applicant within 28 days of the date of these orders.
In the event that the respondents fail to deliver up vacant possession of the Property in accordance with the orders above a writ possession will issue forthwith in favour of the applicant.
The respondents must remove from the Property all personal property being vehicles, rubbish and chattels (personal property) which are not vested in the applicant within 28 days of the date of these orders.
In the event that the respondents fail to comply with order 6 above the applicant is empowered to remove and dispose of the personal property on the Property as he sees fit.
The Property is to be sold free from encumbrances.
The Property is to be sold subject to the Law Society of New South Wales standard form contract and any special conditions reasonably required by the applicant.
The applicant has the sole conduct of the sale of the Property and is authorised to instruct an agent or an auctioneer for that purpose.
The applicant is solely to decide whether the Property is to be sold by public auction or private treaty.
The applicant is solely to decide whether or not to set a reserve for any auction of the Property and, if so, at what price.
The applicant is empowered to sign any contract of sale, discharge of mortgage authority, transfer and any other documents on behalf of the second respondent necessary to give effect to the sale in the event that the second respondent does not sign such documents within such time as required by the applicant’s solicitors.
The first and second respondents do all things as may be reasonably required by the applicant, his selling agent or his solicitors for the purpose of achieving a sale of the Property including providing access to buildings on the Property and for the purpose of valuation and viewing by potential purchasers.
The second respondent has liberty to bid at the sale of the Property; subject to satisfying the applicant of the second respondent’s ability to complete any such purchase.
The net proceeds of the sale of the Property after payment of any monies due to any encumbrancer or encumbrancers according to their priorities, the cost of these proceedings, and all other costs, charges and expenses of the sale of the Property, be paid to the applicant and the second respondent in equal shares.
Liberty to any party to apply on three days notice.
The applicant notify the respondents of the orders made today by email, facsimile and mail despatched by close of business today.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 722 of 2011
| SCOTT DARREN PASCOE AS FORMER TRUSTEE IN BANKRUPTCY OF THE PROPERTY OF THE BANKRUPT ESTATE OF SMITH |
Applicant
And
| JOHN KEVIN SMITH |
First Respondent
| SALLY ANNE GURR |
Second Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
This matter is before the court by way of an amended application filed with leave of the court, replacing an earlier application filed on 14 April 2011. The applicant, Scott Darren Pascoe (the Trustee) was appointed trustee of the bankrupt estate of the first respondent Kevin John Smith on 18 December 2002. He seeks a declaration as to beneficial ownership and orders in relation to vacant possession and sale of a property at 26 Tobruk Avenue Muswellbrook (the Muswellbrook Property) that was owned by Mr Smith and the second respondent, Sally Anne Gurr. That property is now registered in the names of Mr Pascoe and Ms Gurr as tenants in common in equal shares.
Mr Smith did not complete his statement of affairs (which disclosed his joint ownership of the Muswellbrook property) until 18 February 2003.
It was filed on 5 March 2003. Mr Smith’s bankruptcy automatically discharged on 5 March 2006 under s.149 of the Bankruptcy Act 1966 (Cth).There is evidence from Mr Pascoe before the court that the property of the former bankrupt was insufficient to discharge all liabilities. Hence, in accordance with s.129AA of the Bankruptcy Act, the property vested in the trustee would not revest in the former bankrupt until the sixth anniversary of the date of discharge, which would be 5 March 2012. Under s.129AA(4) that period can be extended in relation to a particular property by the trustee giving written notice to the bankrupt. In this case Mr Pascoe gave the bankrupt a written notice on 14 February 2011 stating that a latter revesting time of 5 March 2015 would apply for the Muswellbrook property.
Relief is sought pursuant to the court’s jurisdiction under the Bankruptcy Act. Reliance is also placed, insofar as necessary, on ss.15, 16, and indeed 18 of the Federal Magistrates Act1999 (Cth). The applicant relied on an affidavit of Mr Pascoe sworn 11 April 2011 and filed 14 April 2011, affidavits of Mirjana Pavlovic sworn and filed 18 May 2011, 31 May 2011 and 7 June 2011 and of Robert Salt sworn on 30 May 2011 and filed on 31 May 2011.
The respondents, who filed notices of appearance, did not appear when this matter first came before the court on 31 May 2011. The matter was adjourned until today. The applicant was ordered to notify the respondents of the adjournment, notwithstanding their failure to appear or to contact the court to explain their non-appearance. I am satisfied on the affidavit evidence before the court that the respondents are on notice of the proceedings but have chosen not to participate.
Mr Farrer, the solicitor for the applicant, told the court at the start of the proceedings today that he had intended to rely on an unsworn affidavit that he had prepared in relation to a conversation with the first respondent. He had not been able to swear the affidavit prior to court. He was given leave to give oral evidence and he adopted the contents of that affidavit which is now before the court as an exhibit. Relevantly, that evidence, which I accept, provides some support for one of the orders that is sought today, as discussed further below.
There is a considerable amount of evidence before the court dated between 2003 and 2011 consisting of copies of correspondence from the solicitors for the trustee to the former bankrupt and (separately) to the second respondent in relation to the existence of creditors’ claims, unsuccessful attempts by the trustee to obtain possession of the Muswellbrook property and realisation of the trustee’s interest in the property. The trustee proposed arrangements for the sale of the property and advised the former bankrupt of the amount required to meet liabilities to creditors. Ms Gurr was given the opportunity to purchase the trustee’s interest in the property or to consensually participate in a joint sale of the property.
It appears that none of this correspondence resulted in a response. I note that on several occasions the solicitors for the trustee brought to the attention of the respondents that if the matter was not able to be resolved, the trustee would find it necessary to institute court proceedings in relation to a sale of the property.
The evidence before the court as to the value of the Muswellbrook property suggests that it had a value in the order $100,000 as at 28 February 2010. There is evidence of one encumbrance, being a mortgage to Maritime, Mining & Power Credit Union, the payout figure for which was $28,031.75 as at 10 March 2011. There is said to be $52,852.04 owing to unsecured creditors of Mr Smith.
Mr Farrer’s evidence is that in a conversation with Mr Smith on 10 May 2011 he discussed the application presently before the court. Mr Smith confirmed that he had received the application, affidavit and exhibits, but responded by asking what it was all about, as he had “paid off this bankruptcy years ago and don’t know why you [Mr Farrar] are sending me things now, so many years later”. Mr Farrar explained that there were unpaid creditors when his bankruptcy was automatically discharged (in particular the Australian Taxation Office). Mr Smith reiterated that he did not know why he was being sent these documents as he was out of bankruptcy. Mr Farrar explained that the trustee’s interest in the Muswellbrook property had not revested in him and that the trustee was entitled to sell it in order to pay creditors as both of the respondents had been advised in writing.
According to Mr Farrar, Mr Smith confirmed his contact details. While Mr Smith told Mr Farrar that he would send a written proposal in relation to the creditor’s claims to avoid a sale, Mr Farrar has not received any such written proposal. As indicated, neither respondent appeared in these proceedings.
In these circumstances the applicant seeks a range of orders. Initially declarations were sought as to beneficial ownership of the Muswellbrook property and also as to when the property would revest in the first respondent. The solicitor for the applicant advised that the declaration as to time of revesting was not pursued and that the primary relief sought was a declaration that the applicant and Ms Gurr were beneficial owners of the Muswellbrook property. Orders are also sought that the respondents deliver up vacant possession of the property and that in the event that the respondents fail to do so, a writ of possession issue forthwith in favour of the applicant. Mr Smith recently confirmed to Mr Farrar that his current address was the Muswellbrook address.
In addition, orders are sought to enable the applicant to have sole conduct of the sale of the Muswellbrook property, to decide the method of sale, to sign any contract for sale or other necessary documents to give effect to the sale should Ms Gurr fail to do so and to require that the net proceeds of sale after payment of moneys due to any encumbrances, the cost of these proceedings and other costs, charges and expenses of sale, be paid to the applicant and Ms Gurr in equal shares. Ms Gurr was also to be given liberty to bid at the sale of the property.
When this matter first came before the court, reference was made in the applicant’s written submissions to two decisions of this court that were said to be of relevance; Official Receiver v Tregaskis & Anor [2006] FMCA 1915 and Park and Another v Barclay (2010) 239 FLR 396; [2010] FMCA 397.
Tregaskis
provides support for the proposition that this court has power to make the orders sought in relation to sale of the property and that it is not subject to restrictions to be found in state legislation akin to s.66G of the Conveyancing Act 1919 (NSW). That case was determined by this court in Western Australia and hence the relevant state legislation was s.126 of the Property Law Act 1969 (WA).
In Tregaskis, Lucev FM found that this court had jurisdiction to make orders of the nature sought in these proceedings by virtue of s.77(1)(g) and s.30 of the Bankruptcy Act. His Honour expressed the view, consistent with what was said to have been decided by Neaves J in Re Vinko Bilen Ex Parte: David William Sistrom v Grace Bilen [1985] FCA 120, that the court was not restricted in considering what orders would be appropriate to make in exercising the power conferred by s.30 of the Bankruptcy Act by the kinds of limitations which may be contained in state legislation.
As in this case, the respondents in Tregaskis were the bankrupt and the co-owner of property in respect of which the bankrupt’s interest had vested in the trustee. The bankrupt had failed to do all such acts and things in relation to realisation of the land and to aid the trustee in administration of the bankrupt estate as required by s.77(1)(g) and (e) of the Act. The respondents had failed to respond to the Trustee’s correspondence in relation to the sale of the property or to indicate any willingness to cooperate in the sale. Similar circumstances exist in this case (except that the trustee is the former trustee in whom the property in question remains vested under s.129AA of the Act).
Lucev FM found that the court had power to make the orders sought, including in relation to the non-bankrupt co-owner notwithstanding the absence of the respondents and that there was nothing to prevent the court from making the orders sought. His Honour has followed this approach in subsequent decisions. (See for example Official Receiver v Fall 5 (2008) ABC(NS) 772; [2008] FMCA 489, Official Receiver v Maher [2010] FMCA 857, (where the only respondent was the co-owner of property held as tenant in common with the trustee) and Anderson v Pongas & Ors [2011] FMCA 54).
In Park v Barclay, trustees in bankruptcy sought orders in relation to the sale of property against a co-owner of real property, previously owned jointly with a bankrupt. In contrast to these proceedings, the bankrupt was not a party to the proceedings. The trustees sought an order for their appointment as trustees for the sale of certain property, for the sale of that property and for the proceeds to be divided equally between the applicants and the respondent. As in this case and Tregaskis, there was no appearance by the respondent.
Jarrett FM saw that application as “probably” an application for an order for sale of some property and nothing more (at [1] – [2]). His Honour referred to the fact that a sequestration order had been made against the estate of a person who had owned the property together with the respondent, that having become registered as co-owner as tenants in common in equal shares with the respondent the applicants had unsuccessfully attempted to communicate with the respondent to undertake the necessary steps to effect a sale of the bankrupt’s former interest in the property and that the respondent co-owner had been unresponsive.
His Honour found, however, there was no basis under the Bankruptcy Act to make the orders sought in the proceedings before him against a co-owner of real property who was not the relevant bankrupt and that in particular, the court did not have the power to make such an order for sale under s.30(1) of the Bankruptcy Act. Jarrett FM referred to the fact that he had not been taken to any other section in the Bankruptcy Act giving rise to relevant jurisdiction in a case such as that before him. His Honour acknowledged that this court may have jurisdiction to make orders of the nature sought in the exercise of its associated jurisdiction, but pointed out that before the court’s associated jurisdiction would arise it was necessary for the court to have before it a properly constituted federal matter which engaged the court’s original federal jurisdiction. There was no such federal matter before the court in Park v Barclay ([38] – [41]).
In reaching these conclusions, his Honour referred to several cases in which the view had been taken that the court had power to make orders against a bankrupt for delivery up of vacant possession (Cook v Tagamilitsky [2001] FMCA 117; Cook v Schwarz [2005] FMCA 1598 and Pattison v Wales [2007] FMCA 1068 and also see the Federal Court decision of Pattison v McKinnon [2008] FCA 1624) but observed that this was not the nature of the proceedings before him. There was no application for possession in Park v Barclay and the bankrupt was not a party to the proceedings.
His Honour declined to follow the approach taken in Tregaskis in light of a line of authority described as the “White v Lynn” litigation, to which it appeared the court had not been referred in Tregaskis.
In particular, Jarrett FM referred to the decision of the Full Court of the Federal Court in Re Lynn; Lynn and Another v White(as trustee) and Another (2000) 171 ALR 217; [2000] FCA 429 in relation to earlier decisions of Heerey J and Finklestein J in which their Honours had each purported to exercise jurisdiction under state legislation akin to the New South Wales Conveyancing Act (such as the Property Law Act 1958 (Vic)) in making orders for sale against a party who was not the relevant bankrupt in reliance on the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth), rather than in reliance on any jurisdiction under the Bankruptcy Act. Following the decision of the High Court in Re Wakim; Ex parte McNally and Another (1999) 198 CLR 511; [1999] HCA 27 which held that the cross-vesting legislation was invalid insofar as state legislation sought to invest federal courts with state jurisdiction, the Full Court in Lynn v White reached the view that the orders made at first instance in reliance on provisions of the Property Law Act and Transfer of Land Act 1958 (Vic) in the exercise of jurisdiction under the Jurisdiction of Courts (Cross-vesting) Act were made without jurisdiction.
As Jarrett FM pointed out in Park v Barclay at [36] there was no suggestion in Lynn v White that there was any basis under the Bankruptcy Act to save the orders that had been made at first instance. The only basis on which they had been made was under the state legislation. His Honour suggested (at [39]) that the Lynn v White litigation demonstrated that the power to make an order against a party, other than the relevant bankrupt, for sale of real property the subject of co-ownership must be found in state law.
The applicant submitted however that Park v Barclay could be distinguished and that, consistent with the approach taken in a number of other cases, this court had the jurisdiction to make all of the orders that were sought in these proceedings in circumstances where orders were sought against both the bankrupt and the co-owner.
The applicant referred to s.27 of the Bankruptcy Act which confers concurrent original jurisdiction “in bankruptcy” on this court and on the Federal Court of Australia. It was said to be the primary source of jurisdiction in this case. I note in that respect the detailed and helpful discussion of the width of the jurisdiction of the Federal Court in bankruptcy by Perram J in Meriton Apartments Pty Ltd and Another v Industrial Court of New South Wales and Another (2008) 171 FCR 380; [2008] FCAFC 172.
Reliance was also placed on a number of other provisions in the Bankruptcy Act. Section 77 of the Bankruptcy Act (the section referred to in cases such as Tregaskis and a number of other decisions in this jurisdiction) which imposes duties on a bankrupt, in particular to aid to the utmost of his power in the administration of his estate (see in particular s.77(1)(c) and (g) which were said not to have been met in this case). Under s.58 of the Bankruptcy Act all property of the bankrupt (including his interest in the Muswellbrook property) was said to have vested in the trustee. In addition, s.129AA provides for property to remain vested in the trustee after an automatic discharge from bankruptcy. It was submitted, and I accept, that when read in context this provision was intended to enable the trustee to exercise the powers in relation to property of the bankrupt that are granted to the trustee generally under the Bankruptcy Act. Pursuant to s.19(1) (see paragraphs (b), (e), (j) and (k)) the trustee has duties to determine property that is available for the payment of creditors, to bring it in and to realise it.
In light of these provisions, reference was made to s.30 of the Bankruptcy Act, which sets out the general powers of courts in bankruptcy, including full power to decide all questions, whether of law or fact in any case of bankruptcy, and to 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 the Bankruptcy Act in any such case or matter.
Declarations have been made in a number of cases before the court to the same effect as the declaration sought in this case that the applicant and the second respondent are the beneficial owners of the Muswellbrook property (see the cases referred to at [17] above and also see Meriton v Industrial Court at [196]).
Insofar as necessary, reliance was also placed on ss.15, 16 and 18 of the Federal Magistrates Act, in particular, on the basis that once jurisdiction under the Bankruptcy Act arose the court had associated jurisdiction in related matters (including matters arising under State laws).
It was submitted that the orders sought in this case, including a declaration as to beneficial ownership of the Muswellbrook property (see s.5 of the Bankruptcy Act, s.15 of the Federal Magistrates Act and Zantiotis v Andrew and Another (1987) 80 ALR 23; [1987] FCA 473) and the orders against both the former bankrupt and the co-owner, were necessary for the purposes of carrying out or giving effect to the Bankruptcy Act (s.30(1)(a)) and that the court had jurisdiction to make the orders sought under the Bankruptcy Act or in the exercise of its accrued or associated jurisdiction (there being a properly constituted federal matter before the court consisting of the application for orders against the former bankrupt under the Bankruptcy Act). Reference was made to the wide approach taken to s.30(1) of the Act in Talacko & Others v Talacko (2010) 183 FCR 311; [2010] FCAFC 54.
As submitted for the applicant, there is no doubt that the court has jurisdiction and power under the Bankruptcy Act to grant declaratory relief under or by virtue of the Act, in particular in relation to the title of the trustee.
Such a declaration is sought on the basis that in this case the former bankrupt has claimed to the solicitor for the trustee that his bankruptcy is at an end and does not accept that the Muswellbrook property has not re-vested in him upon his discharge from bankruptcy. The applicant and the second respondent are recorded as legal co-owners of the property.
In these circumstances the applicant seeks a declaration that the applicant and the second respondent are beneficial owners of the property.I am satisfied in the particular circumstances of this case, and in light of the other orders sought, that the applicant has a real interest and the declaration sought is not purely hypothetical. It is appropriate that such a declaration be made. (See Zantiotis and Re Gareth John Ellis Ex Parte: Philip Gregory Jefferson and Jay Arscott Stevenson [1995] FCA 1072).
As indicated, the applicant no longer seeks declaration that the property will not re-vest in the first respondent until after 5 March 2015. However I note the operation of s.129AA of the Act and the provision in s.58 that all property of a bankrupt vested in the trustee upon the trustee’s appointment. This included the Muswellbrook property. The trustee has duties under s.19 of the Act to determine property available for the payment of creditors, to bring it in and realise it. The other orders are sought in an endeavour to exercise such powers. The former bankrupt has not met his duties under s.77(1)(e) and (g) of the Act.
Thus, the trustee seeks an order that the first respondent (that is the former bankrupt) deliver up vacant possession of the property and all keys to the property. There is nothing in the authorities before the court to suggest that the court does not have power to make such orders. I note that there was no application for such order before Jarrett FM in Park v Barclay. Indeed I also note that subsequently, in Holmes v Dillon & Ors (No.2) [2010] FMCA 399, Jarrett FM accepted that the court had jurisdiction to make such orders in relation to a bankrupt. There are a number of other authorities that also support that proposition (see in particular, Pattison v McKinnon [2008] FCA 1624, Official Receiver v Fall and Warner v Liddell [2006] FMCA 893, Tregaskis and Pascoe v Smirneos & Ors [2010] FMCA 404, (although I do note that Smith FM did indicate as a note to his ex tempore judgment in Pascoe v Smirneos that Park v Barclay had not been brought to his attention at the time that he made these and other orders).
In Holmes v Dillon an order was made that the applicant deliver up vacant possession of the property to her trustee in bankruptcy and the co-owner of the property and that in the event that she failed to do so an enforcement warrant for possession of the property be issued in favour of the trustees and the co-owner. The orders were for delivery up of the property to the trustee and the co-owner. The co-owner was cooperating in the sale. As Jarrett FM explained (at [31]), once seized of the property the trustee could deal with it in accordance with the Bankruptcy Act and in such circumstances an order for sale was unnecessary, and hence Jarrett FM found it unnecessary. It was thus unnecessary to consider the application of Park v Barclay.
There is no cited authority to suggest that orders for possession and, indeed, for a writ of possession to issue in the absence of compliance, cannot be made in relation to a bankrupt. It is appropriate to make such orders in this case having regard to the evidence that is before the court as to the lack of co-operation of the former bankrupt.
In addition, orders are sought granting relief against the non-bankrupt party who is the co-owner of the Muswellbrook property with the applicant. First it is sought that Ms Gurr also deliver up vacant possession of and keys to the property. In addition orders are sought in relation to the sale of the Muswellbrook property, either in reliance on the court’s original jurisdiction pursuant to ss.27, 30(1) and 77(1) of the Act or within the associated jurisdiction pursuant to s.66G of the Conveyancing Act 1919 (NSW).
There is some relevant Federal Court authority, albeit in connection with an application by a non-bankrupt for a stay of proceedings bought by a trustee in bankruptcy. In Re Bilen a trustee in bankruptcy had commenced proceedings in the Supreme Court of the Australian Capital Territory seeking orders under the Partition Act 1900 (NSW) for sale and also commenced proceedings in both the Supreme Court and the Federal Court seeking orders that the trustee was beneficially entitled to, and entitled to dispose of, his undivided half share of the property.
The non-bankrupt sought a stay of the Federal Court proceedings on the basis that there were proceedings on foot in the Supreme Court and that the Federal Court did not have jurisdiction to entertain the trustee’s application, as the jurisdiction of that court was said to be available only where it was necessary for the Federal Court to exercise the jurisdiction that it had, in particular under the Bankruptcy Act. It was also submitted that the issue could be resolved in the Supreme Court.
However, Neaves J did not accept the argument that the Federal Court had no jurisdiction to entertain the trustee’s application that he was beneficially entitled to a half share and entitled to dispose of the property pursuant to his powers as trustee. Neaves J found at [8] that s.30(1) of the Bankruptcy Act was not a provision limiting the court’s jurisdiction, but was 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 order to carry out and give effect to the Act”. The words in s.30 were said not to be words of limitation, but of extension. As Jarrett FM stated in Park v Barclay at [11]:
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.
I note however that in this case there is an application for a declaration as the primary relief sought, a matter “clearly” within the jurisdiction and power of the court. It is in that context that the court is also asked to make orders in relation to sale of the property (as in Tregaskis).
Neaves J did not discuss the basis for the jurisdiction of the court in
Re Bilen but proceeded on the basis that the Federal Court had the jurisdiction to make the orders sought and in those circumstances was not persuaded that it was appropriate to stay the proceedings. In the course of reaching that conclusion Neaves J expressed the primary reason for concluding that the stay should not be granted at [17] as follows:…this court is not restricted in considering what orders it would be appropriate to make in exercise of the power conferred on it by subsection 30(1) of the Bankruptcy Act 1966 by the kinds of limitation which may be found in the Partition Act, 1900 (N.S.W).
Some of the difficulties that would arise under that legislation as it stood had been referred to earlier in the judgment.
The applicant relies on Re Bilen in support of the proposition that the court has jurisdiction in proceedings which involve the trustee’s exercise of powers in relation to property vested in him as part of the former bankrupt’s estate to make orders against a non-bankrupt co-owner of the property. As stated in Re Bilen, the powers under s.30 are very broad in aid of, and facultative in relation to, such jurisdiction. Reference was also made to the recent decision of the Full Court of the Federal Court in Talacko v Talacko. That case concerned the issue of whether s.30 of the Bankruptcy Act could be used to restrain a person from leaving the jurisdiction of the court in circumstances where a bankruptcy notice had been issued in relation to that person. The applicants in that case sought a final order directing that the official trustee or a specified registered trustee take control of the respondent’s property under s.50 of the Bankruptcy Act and that all passports of the respondent be delivered up and held and also that he not leave the State until further order.
The Full Court considered this issue as a special case. It found that s.30 of the Bankruptcy Act did empower the Court to order that a person in respect of whom a bankruptcy notice had been issued be restrained from leaving the jurisdiction and be required to deliver up his or her passport or passports to the Court or to any other person. In the course of reaching that conclusion their Honours addressed submissions about possible limitations on the Court’s powers, in particular the absence of any express reference to such a power in s.30. The court reached the conclusion that “The breadth of the language appearing in s 30(1) supports a conclusion that it should not be construed narrowly or in a confined or limited way.” (at [18]), referring in support of that proposition to the remarks of Neaves J in
Re Bilen. Their Honours continued relevantly:
The judicial power conferred is intended to assist in the exercise of jurisdiction in bankruptcy. It is an ingredient of the exercise of discretion under such power that it be ‘necessary for the purposes of carrying out or giving effect to’ the Bankruptcy Act. In express terms, it is contemplated that the Court may make orders granting injunctions or other equitable remedies. The legislature is to be taken to have intended that the Court would adopt the same approach to making such orders as it adopts in the exercise of other broad discretionary powers in support of its jurisdiction.
The Full Court did observe that the circumstances may have been different had an order been sought in relation to delivery of a passport in relation to a party other than the person in relation to whom a bankruptcy notice had issued and referred in that respect to the decision of Spender J in the Federal Court in Re Bayliss; Ex parte Hadotone Pty Ltd and Others v Official Trustee in Bankruptcy (1987) 15 FCR 91; [1987] FCA 209. However Bayliss related to the issue of whether s.30 of the Bankruptcy Act contained a general power sufficient to justify an order for the issue of certain warrants of search and seizure of the property of third parties going beyond the express provisions in s.130 of the Act and in circumstances where this was a drastic power.
The orders sought in this case are not of that nature. The construction the Full Court adopted in Talacko was said to be supported by decisions in relation to the construction of s.23 of the Federal Court of Australia Act 1976 (Cth) which is in almost identical terms to s.15 of the Federal Magistrates Act. It was said (at [26]) that:
There is no discernable difference in principle between s 30(1)(b) of the Bankruptcy Act and s 23 of the Federal Court Act which empowers the Court to make such orders as it considers appropriate.
The power given by s.15 is (like s.23) expressly limited to matters in which the court has jurisdiction, although in Talacko their Honours (at [26]) summarised what Lindgren J stated (at [18]) in Williams v Minister for the Environment and Heritage and Another (2003) 199 ALR 352; [2003] FCA 627 as follows:
…the inherent or implied power to make an order directed to preserving the subject matter of litigation or to preventing its processes from being frustrated is a power which ‘exists (sic) independently of the familiar form of provision such as that found in s 23 of the Federal Court Act.
In any event, reliance was also placed by the applicant on the associated jurisdiction of the court under s.18 of the Federal Magistrates Act. The possibility of such jurisdiction was referred to in Park v Barclay as well as in Tregaskis in circumstances where, in contrast to the situation in Park v Barclay, the application before the court was an application for a declaration in relation to beneficial ownership of property and for orders in relation to the bankrupt and the co-owner for possession and following on from that, in relation to sale of the property.
Park v Barclay did not involve an application for declaratory relief or for orders for possession and the sale of real property against both a bankrupt and a co-owner. Orders were sought solely against a co-owner. It was in those circumstances that it could not be said there was pending in the court an application which engaged the court’s original federal jurisdiction.
The decision in Park v Barclay can be distinguished by virtue of the difference in the factual situations confronting the court. There is authority (including the later cases of Fall and Anderson) that the court has the jurisdiction to make the orders that are sought under the Bankruptcy Act. In Pattison v McKinnon orders for possession were made by Jessup J against both a bankrupt and a co-owner in circumstances where a trustee had entered into a contract to sell the property. His Honour was satisfied the court had both jurisdiction and power under ss.77(1)(e) and (g) and s.30 of the Bankruptcy Act. Jessup J (at [2]) acknowledged Tregaskis in reaching this conclusion.
I am of the view that on this basis orders for possession can be made against both the bankrupt and the co-owner.
Moreover, in Horne (as trustee of the Bankrupt Estate of Sekulovski) v Sekulovski [2009] FCA 1164 orders were made by the Federal Court of the nature of the orders that are sought today, including in relation to sale of property. Both the bankrupt and a co-owner were respondents in Horne v Sekulovski. Tracey J ordered that pursuant to s.30 of the Bankruptcy Act, the first and second respondents vacate the property; that if they failed to do so a Writ of Possession issue; that they remove all vehicles, rubbish and chattels; that if they failed to do so the applicant trustee be empowered to do so; and, importantly, that the applicant, who was the trustee of the bankrupt estate of one of the respondents, be at liberty to sell the property and receive the net proceeds of sale with liberty to apply as to the proper allocation of those funds.
This is authority directly in point. It was not referred to in Park v Barclay. Tracey J found that s.30 and s.77(1)(g) of the Bankruptcy Act provided a basis for the orders that were sought, referring to the fact that it was plainly necessary that the trustee be in a position to provide any purchaser of the property with vacant possession in order to facilitate the sale, that the property be placed in a condition that it be attractive and that it was appropriate that the orders sought should be made. Such an approach is consistent with the view of Lucev FM (see Tregaskis, Fall, Maher and Anderson) that the court has the power and jurisdiction under the Bankruptcy Act to make orders in relation to a co-owner and orders for sale, not limited by any restrictions in the relevant state legislation.
As presently informed and on the material before the court, in the different factual circumstances of this case I am of the view that I should follow the approach taken by Lucev FM in Tregaskis and Tracey J in Horne v Sekulovski and that, on this basis, consistent with what was said in Re Bilen by Neaves J (who clearly proceeded on the basis that the court had wider powers and was not bound by the restrictions in the Partition Act 1900). The court jurisdiction and power to make the orders sought under the Bankruptcy Act. As Lucev FM stated in Tregaskis, Fall, Maher and Anderson) the court is not restricted in considering what orders it would be appropriate to make in exercise of powers conferred by s.30 of the Bankruptcy Act by the kinds of limitations to be found in state legislation such as the Conveyancing Act.
In the alternative, the court would have associated jurisdiction to make orders under the State legislation (see s.66G of the Conveyancing Act) as there is a federal matter before the court given the orders sought in relation to the bankrupt.
I am satisfied that the applicant is entitled to seek a declaration in relation to beneficial ownership of the property. The court has jurisdiction to make such orders as the court considers necessary for the purposes of carrying out or giving effect to the Bankruptcy Act and there is sufficient evidence to satisfy me as a matter of discretion that the orders sought should be made in the absence of any agreement having been reached with either respondent. The applicant has for a long period been unable to realise his interest as trustee in the Muswellbrook property, notwithstanding attempts since at least 2003 to reach an agreement with either or both of the first and second respondents without any substantive response being provided by those parties. Moreover, some of the orders that are sought would have to be sought in this court. It is clearly in the interests of efficiency that all necessary orders be obtained in the one proceedings where the court has the power to make the orders that are sought. The applicant does not seek a greater proportion of the net proceeds of sale of the property over and above a division 50/50 so that the second respondent would not be disadvantaged in a financial sense or prejudiced such as to warrant the orders not being made. The respondents have not appeared or raised any matters that would go against the exercise of the discretion in relation to any of the orders sought.
There is a clear line of authority, apart from the decision in Park v Barclay which has not been affected by that decision, in relation to circumstances in which the orders that are sought include orders in relation to both a bankrupt and non-bankrupt for possession and, in some cases, sale of property. The powers of the court under the Act are to be interpreted in a facultative way. It is however in the discretion of the court whether the orders sought should be made affecting a non-bankrupt party. This does not mean that such orders would be made in all circumstances. In the present circumstances I consider that it is appropriate that orders involving the property that was previously co-owned by the bankrupt and Ms Gurr be made in the particular circumstances of this case. In all of the circumstances, I consider it appropriate to make orders in the nature of those sought by the applicant.
As indicated, the respondents have chosen not to appear in these proceedings. It may emerge that, either from the applicant’s perspective or indeed that of the respondents, there are issues with the wording of some of the orders sought in their application for example the second respondent (at the heel of the hunt as it were) suddenly finds a way to put forward an acceptable proposal to acquire the trustee’s interest in the property, notwithstanding the existence of a not insubstantial mortgage and given the overall value of the property. In order to address the possibility of such issues arising in relation to the wording of the orders, I propose to give liberty to any party to apply on three days’ notice. That provides an opportunity to address any technical issues that might arise in relation to the wording of particular orders.
I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of Barnes FM
Date: 8 July 2011
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