Pattison v Official Receiver
[2006] FMCA 1571
•28 November 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PATTISON v OFFICIAL RECEIVER | [2006] FMCA 1571 |
| BANKRUPTCY – Competing claims to funds by Trustee of first bankrupt estate and Trustee of second bankrupt estate. |
| Bankruptcy Act 1966 (Cth), ss.30 (1)(b), 59 |
| Applicant: | PAUL ANTHONY PATTISON |
| Respondent: | OFFICIAL RECEIVER |
| File number: | MLG 1126 of 2006 |
| Judgment of: | Turner FM |
| Hearing date: | 23 October 2006 |
| Date of last submission: | 23 October 2006 |
| Delivered at: | Sydney |
| Delivered on: | 28 November 2006 |
REPRESENTATION
| Counsel for the Applicant: | Mr Baker |
| Solicitors for the Applicant: | Mr Ball of Coadys |
| Solicitors for the Respondent: | Mr Watson-Jones of Lewis Holdway |
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1126 of 2006
| PAUL ANTHONY PATTISON |
Applicant
And
| OFFICIAL RECEIVER |
Respondent
REASONS FOR JUDGMENT
Introduction
Maureen Jean O’Connor was made bankrupt first on 3 March 2000.
At that time she was the registered proprietor of a property at
113 Harding St Deniliquin (“the Property”). She was automatically discharged from bankruptcy on 2 August 2003. The Official Trustee was the Trustee of the (first) bankrupt estate.
Ms O’Connor was made bankrupt again on 2 August 2005. Mr Pattison is the Trustee of the second bankrupt estate. He has made application to the Court for a Declaration pursuant to s30 (1) (b) of the Bankruptcy Act 1966 (“the Act”) as to the respective entitlements of the Official Trustee and himself (as Trustee) to the proceeds of the sale of the Property.
The Property was sold on 5 November 2005 for $91,000.00.
The respondent holds $33,700.00 of those proceeds in trust, pending the outcome of this case.
The respondent contended to the applicant during discussions that, pursuant to s.59 of the Act, the property vested and continues to vest in the respondent, as s.59 applies only to concurrent bankruptcies.
A representative of the Applicant responded that the correct construction of s.59 is that, where a person is made bankrupt for a second or subsequent time, the property of the bankrupt that had not been distributed in the earlier bankruptcy vests in the trustee of the latter bankruptcy.
The relevant parts of s59 are:
(1)where a person who is a bankrupt again becomes a bankrupt :
(a)the property of the bankrupt:
(i) that was acquired by, or devolved on, the bankrupt on or after the date of the earlier bankruptcy; and
(ii) that has not been distributed amongst the creditors in the earlier bankruptcy before the date on which the person became bankrupt on the latter occasion;
shall (subject to any disposition of that property made by the trustee in the earlier bankruptcy without knowledge of the presentation of the petition on , or by virtue of the presentation of which, the person became bankrupt on the later occasion and subject also to section 126) vest forthwith in the trustee in the later bankruptcy;
The parties disagreed as to the correct construction of s.59, and the applicant sought clarification from the Court.
An order was made by Registrar Mussett on 9 October 2006, granting leave to amend the name of the Respondent from the “Official Receiver” to the “Official Trustee”.
The case for the applicant
The applicant stated at the hearing that he “brings this application for the purposes of clarifying what was initially thought to be some confusion as to the interpretation …of the Bankruptcy Act 1966, in particular s.59, and also to seek declarations”. (Court Transcript (“CT”) page 2 at line 18).
The applicant submitted further that, “As things have transpired it certainly is clear that the law in respect of what was thought to be confusion in interpretation…is quite clear”. (CT page 2 at line 26).
The respondent lodged a caveat over the property.
The applicant told the respondent that he intended to sell the Property, and an agreement was entered into whereby the respondent removed its’ caveat. The applicant and the respondent agreed that:
·The respondent would withdraw its’ caveat;
·$33,700.00 would be held in trust by the respondent until the Court decides the entitlements pursuant to s59.
·Directions be sought from the Court as to entitlements to the proceeds of sale of the Property.
The applicant submitted further that it is clear that, even although there was initial confusion as to whether s59 applies, the actual situation is that, once property vests in the trustee, s59 doesn’t apply to that property, as it only applies to “after acquired property” (CT 4 at line 18), which does not apply to the Property.
A number of other submissions were made by the applicant in support of his application, as follows;
·It would certainly seem clear that the property clearly vested in the Official Trustee under s.58, and further, as it is not “after acquired property”, s.59 cannot have any application to it (CT 6 at line 15);
·The appropriate declaration is that the Property and the proceeds vested as at the date of the first bankruptcy, and are still vested in the Official Trustee (CT 6 line 20);
·The consequence of these things is that the Official Trustee is entitled to the proceeds of the sale of the Property to the extent necessary to satisfy all the debts, costs and fees incured in the first bankruptcy, and the balance would then vest in the applicant as the trustee of the second bankruptcy (CT 6 line 24);
Declarations are sought by the applicant to the effect (CT page 6 at line 33);
·“that the Property vested in the Official Trustee as at the date that Maureen Jean O’Connor was made a bankrupt, that the proceeds of sale of that Property also vested in the Official Trustee, and that those proceeds can be used by the Official Trustee to satisfy the debts, costs and expenses of the first bankruptcy…
·Further, the balance of proceeds left over after the Official Trustee has satisfied the debts, costs and expenses of the first bankruptcy vest in the trustee of the second bankrupt estate”.
As to Costs, the Applicant argues that a trustee in bankruptcy is always entitled to come to court to seek directions or seek some assistance, and sought an order, “that the costs of this application incurred by the applicant be paid out of the Bankrupt estate in the second bankruptcy, and the costs of this application incurred by the Official Trustee…be paid out of the first bankrupt estate.”
The case for the Respondent
The applicant concedes the application in terms of the orders we have been seeking.
Upon the commencement of the second bankruptcy, the assets of the first bankrupt estate, in excess of the amount required to satisfy the debts, costs, expenses, charges and fees, vested in the applicant.
The respondent sought the following declaration and orders;
1. That the Court declares that the respondent is entitled to so much of the proceeds of the sale of land particularised in New South Wales certificate of title folio 6/22012 that is sufficient to satisfy the debts, costs, charges, fees and expenses of the bankrupt estate of Maureen Jean O’Connor of which it is the trustee.
2. That the Respondent forthwith apply any such proceeds held by it to the payment of the debts, costs, charges, fees and expenses of the bankrupt estate of M J O’Connor of which it is trustee.
3. That from the proceeds of the sale of land in the declaration above, the applicant pay the respondent so much of the amount that remains due to the bankrupt estate of which the respondent is trustee after application of the proceeds according to 2 above.
4. That the payment in 3 above be made within 7 days of the date of this order.
5. That out of the bankrupt estate of M J O’Connor of which the applicant is trustee, the applicant pay the respondent’s costs of , and incidental to , this application, fixed in the sum of $3000.00.
6. That this order be entered forthwith.
It appears that the order proposed in 3 above should read:
3. That from the proceeds of the sale of the land in the declaration above , the Respondent forthwith pay to the Applicant so much of the amount that remains after application of the proceeds according to 2 above.
Once 3 is redrafted, the declaration and orders sought by each party are similar, other than as to costs.
Costs
The applicant proposed to the respondent that, “Declarations be sought from the Court, and that any costs incurred by me are to be borne by the second bankruptcy". [1]
[1] Email from Sophie Zapantis to Peter Olsen dated 13 February 2006, in exhibit SZ1 to her affidavit dated 20 October 2006.
The Respondent stated in reply that it “has no objection to your approaching the Court for their directions. The Official Trustee does not intend being represented and we will simply submit the legal advice we have received…”[2]
[2] Email reply from Peter Olsen to Sophie Zapantis dated 13 February 2006, exhibit SZ1 of the same affidavit.
Agreement was reached between the parties on those terms.
At the hearing, the respondent sought an order that the applicant pay the respondent’s costs of, and incidental to, the application out of the second bankrupt estate, fixed at $3000.00. The respondent submitted that the applicant was conceding the application, and that the application was unnecessary as it was always clear that s59 had no application.
I disagree; at one stage the applicant held the view that the section is ambiguous; consequently I reject the respondent’s submission.
The applicant sought an order that the costs of this application incurred by him be paid out of the second bankrupt estate, and that the costs incurred by the respondent be paid out of the first bankrupt estate. The order sought by the applicant as to his costs reflects the agreement reached. As to the respondent’s costs, the applicant is entitled to seek assistance from the Court, but has sought orders as to entitlement to the proceeds of the sale of the property consistent with those sought by the respondent. In those circumstances, the respondent has succeeded in having its view upheld by the Court. The applicant must pay the costs of the respondent out of the second bankrupt estate, to be taxed by the Registrar.
Declarations and orders
In light of the above findings, I make the following declarations and orders:
1)The respondent is entitled to so much of the proceeds from the sale of the land particularised in New South Wales certificate of title folio 6/22012 that is sufficient to satisfy the debts, costs, charges, fees and expenses of the bankrupt estate of Maureen Jean O’Connor of which it is trustee.
2)That the respondent forthwith apply any such proceeds held by it to the payment of the debts, costs, charges, fees and expenses of the bankrupt estate of M J O’Connor of which it is trustee.
3)That after the application of the proceeds according to 2 above, the respondent forthwith pay to the applicant so much of the proceeds that remain.
4)That the Costs of the Applicant and of the Respondent be paid out of the Second bankrupt estate, with the costs of the Respondent to be taxed the Registrar.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Turner FM
Associate: Dian Neligan
Date: 28 November 2006
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