Pearce v Carman
[2014] FCA 81
•11 February 2014
FEDERAL COURT OF AUSTRALIA
Pearce v Carman [2014] FCA 81
Citation: Pearce v Carman [2014] FCA 81 Parties: MARK WILLIAM PEARCE AND ANDREW JOHN HEERS AS TRUSTEES OF THE PROPERTY OF PHILLIP CARMAN v PHILLIP CARMAN, AUSTRALIAN AND NEW ZEALAND BANKING CORPORATION LIMITED (A.B.N. 11 005 357 522), AMERICAN EXPRESS AUSTRALIA LIMITED (A.B.N. 92 108 952 085), DEPUTY COMMISSIONER OF TAXATION, RACHEL CARMAN, COLLAS MORO ROSS (A FIRM), DEBRA OLDFIELD and ALAN EDMONSON, CHMCB PTY LTD (A.C.N. 061 451 545) AS TRUSTEE OF THE COSTELLO HOLMES McBAIN SERVICE TRUST, MOONEE GARDENS PTY LTD (A.C.N. 003 763 568), NATIONAL AUSTRALIA BANK LIMITED (A.B.N. 12 004 004 937), SENKA CO LTD INC & MARIKO MIYANO File number(s): QUD 842 of 2013 Judge(s): GREENWOOD J Date of judgment: 11 February 2014 Catchwords: BANKRUPTCY – consideration of an application under s 306 of the Bankruptcy Act 1966 (Cth) Date of hearing: 11 February 2014 Date of last submissions: 11 February 2014 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 10 Solicitor for the Applicants: Mr P G Lynch, Lynch Andrews Lawyers Counsel for the Respondents: No appearance Solicitor for the Respondents: No appearance
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 842 of 2013
IN THE MATTER OF PHILLIP CARMAN
BETWEEN: MARK WILLIAM PEARCE AND ANDREW JOHN HEERS AS TRUSTEES OF THE PROPERTY OF PHILLIP CARMAN
ApplicantsAND: PHILLIP CARMAN
First RespondentAUSTRALIAN AND NEW ZEALAND BANKING CORPORATION LIMITED (A.B.N. 11 005 357 522)
Second RespondentAMERICAN EXPRESS AUSTRALIA LIMITED
(A.B.N. 92 108 952 085)
Third RespondentDEPUTY COMMISSIONER OF TAXATION
Fourth RespondentRACHEL CARMAN
Fifth RespondentCOLLAS MORO ROSS (A FIRM)
Sixth RespondentDEBRA OLDFIELD
Seventh RespondentALAN EDMONSON
Eighth RespondentCHMCB PTY LTD (A.C.N. 061 451 545) AS TRUSTEE OF THE COSTELLO HOLMES McBAIN SERVICE TRUST
Ninth RespondentMOONEE GARDENS PTY LTD (A.C.N. 003 763 568)
Tenth RespondentNATIONAL AUSTRALIA BANK LIMITED (A.B.N. 12 004 004 937)
Eleventh RespondentSENKA CO LTD INC & MARIKO MIYANO
Twelfth Respondent
JUDGE:
GREENWOOD J
DATE OF ORDER:
11 FEBRUARY 2014
WHERE MADE:
BRISBANE
THE COURT DECLARES THAT:
1.The failure of the applicants to determine whether a quorum was present at a meeting of the first respondent’s creditors held at 11.00am on 1 November 2013 (the “meeting”), contrary to the requirements of s 64N of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”), in circumstances where the failure to constitute a quorum arose by reason of a failure of a creditor, or a proxy or attorney of a creditor, to participate in the meeting in person or by telephone, due to all creditors directing their individual proxy to the Controlling Trustee, Mr Mark William Pearce, present in person at the meeting for the purposes of s 64N(2) of the Bankruptcy Act, was a defect or irregularity in the convening of the meeting which did not have the effect of invalidating the resolution passed at the meeting (as a special resolution for the purposes of s 204 of the Bankruptcy Act had a quorum been present) for the acceptance of a proposal of Mr Phillip Carman that he enter into a Personal Insolvency Agreement as that term is understood under the provisions of the Bankruptcy Act.
THE COURT ORDERS THAT:
2.The applicants are disentitled from claiming any remuneration, costs, charges or expenses in their administration of the property of the first respondent for any work undertaken by them concerning this application and for any disbursement incurred by them in connection with this application and there otherwise be no order as to costs.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 842 of 2013
IN THE MATTER OF PHILLIP CARMAN
BETWEEN: MARK WILLIAM PEARCE AND ANDREW JOHN HEERS AS TRUSTEES OF THE PROPERTY OF PHILLIP CARMAN
ApplicantsAND: PHILLIP CARMAN
First RespondentAUSTRALIAN AND NEW ZEALAND BANKING CORPORATION LIMITED (A.B.N. 11 005 357 522)
Second RespondentAMERICAN EXPRESS AUSTRALIA LIMITED
(A.B.N. 92 108 952 085)
Third RespondentDEPUTY COMMISSIONER OF TAXATION
Fourth RespondentRACHEL CARMAN
Fifth RespondentCOLLAS MORO ROSS (A FIRM)
Sixth RespondentDEBRA OLDFIELD
Seventh RespondentALAN EDMONSON
Eighth RespondentCHMCB PTY LTD (A.C.N. 061 451 545) AS TRUSTEE OF THE COSTELLO HOLMES McBAIN SERVICE TRUST
Ninth RespondentMOONEE GARDENS PTY LTD (A.C.N. 003 763 568)
Tenth RespondentNATIONAL AUSTRALIA BANK LIMITED (A.B.N. 12 004 004 937)
Eleventh RespondentSENKA CO LTD INC & MARIKO MIYANO
Twelfth Respondent
JUDGE:
GREENWOOD J
DATE:
11 FEBRUARY 2014
PLACE:
BRISBANE
EX TEMPORE REASONS FOR JUDGMENT
This is an application made under s 306 and s 30 of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”). By the application, the applicants, who are Mark William Pearce and Andrew John Heers as trustees of the estate of Phillip Carman, seek a declaration that the failure of the applicants to ensure that a quorum was present at the meeting of the first respondent’s creditors held on 1 November 2013, contrary to the requirements of s 64N of the Bankruptcy Act, in the circumstances deposed to in the affidavit of Mark William Pearce filed on 20 December 2013, was a formal defect or irregularity in the conduct of the meeting.
The relevant first respondent is Mr Phillip Carman.
Further orders are sought by the application. However, fundamentally, what is sought is a declaration as to the question of the contended defect or irregularity for the purposes of s 306 of the Bankruptcy Act. The particular circumstances need not be quoted at great length. A meeting was convened on 1 November 2013. There were five persons present, namely, Mr Mark Pearce as one of the Controlling Trustees; Mr McCullagh, who is a staff member of the firm Pearce & Heers Insolvency Accountants of which the Controlling Trustees are members; Mr Phillip Carman, the debtor; Mr Terence Lee, an observer from the Bankruptcy Regulation section of the Australian Financial Security Authority; and Ms Gemma Denton, an observer from the Enforcement Section of the Australian Financial Security Authority.
Five creditors with admitted claims for voting purposes were represented at the meeting, namely, CHMCB Pty Ltd trading as Costello Holmes McBain Accountants, American Express Australia Limited, Collas Moro Ross, Ms Rachael Carman, and Moonee Gardens Pty Ltd. Proxies were directed in a particular way for the purposes of the meeting. No creditor was present at the meeting and there was, thus, a failure to comply with s 64N of the Bankruptcy Act in properly convening a quorum for the meeting.
In relation to this application, all creditors who have lodged proofs, who were represented at the meeting, support the application, other than American Express Australia Limited which opposed the proposed resolution at the meeting, which was, in fact, passed as a special resolution. Nevertheless, that particular creditor has received notification of this application and has expressly acknowledged receipt of it. That creditor does not oppose the present application. Accordingly, all persons with a relevant interest in the resolution passed at the meeting have expressed views in relation to the proposed application either by affidavit or by reason of Mr Pearce having given oral evidence about his discussions with American Express Australia Limited.
The question for consideration is whether the failure to convene a meeting properly constituted by a quorum for the purposes of the Bankruptcy Act can properly be characterised as a “defect or irregularity” for the purposes of s 306 of the Bankruptcy Act which is capable of being remedied in the exercise of the discretion conferred under the section.
The authors of McDonald, Henry and Meek, Australian Bankruptcy Law and Practice, consider the scope and operation of s 306 of the Bankruptcy Act in some detail in relation to a range of particular applications. The general overarching principle which governs the operation of the section and the exercise of the discretion is said to be this:
The principal question for determination by the court when it is asked to exercise the power conferred upon it by this section is whether, by the failure to comply with the Act or rules, substantial injustice has been caused. [306.1.10]
[emphasis added]
The authority for that proposition is Re Debtor (No 49 of 1932); Ex parte Debtor v Petitioning Creditor (1933) B & CR 53. There are other authorities which adopt that formulation of the underlying principle.
Having regard to the circumstances of this case and recognising that each case turns upon its own facts in substantial degree, I am satisfied that the interests of justice are served by making the declarations sought. I am satisfied that no substantial injustice has been caused by the failure to convene a meeting by having a creditor present, either personally or by reason of a proxy directed to a person other than the Controlling Trustee present at the meeting. I am satisfied on the material and all of the affidavits read in support of the application that the outcome would have been no different had the failure to comply with the quorum requirements of s 64N(1) and in particular the elements of s 64N(2) not occurred.
Accordingly, I will make the orders sought by the application subject to the solicitors for the applicants submitting proposed orders for consideration.
I certify that the preceding ten (10) numbered paragraph are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. Associate:
Dated: 11 February 2014
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