Pearson v Pearson Australia Group Pty Ltd

[2007] FMCA 1881

FEDERAL MAGISTRATES COURT OF AUSTRALIA

PEARSON v PEARSON AUSTRALIA GROUP PTY LTD & ANOR [2007] FMCA 1881

BANKRUPTCY – Costs – judgment of Weinberg J in Kyriackou considered – exercise of judicial discretion.

Kyriackou v Shield Mercantile Pty Ltd(No 2) [2004] FCA 1338

Applicant: ELIZABETH JANE PEARSON TRADING AS SCHOOL OF METAPHYSICS AUST. (S.O.M.A.)

Respondent: PEARSON AUSTRALIA GROUP PTY LTD

Intervenors: PHILIP NEWMAN AND CLYDE PETER WHITE (TRUSTEES IN BANKRUPTCY)

File number: MLG 885 of 2007

Judgment of: Burchardt FM

Hearing date: 5 November 2007

Date of last submission: 5 November 2007

Delivered at: Melbourne

Delivered on: 5 November 2007

REPRESENTATION

Counsel for the Applicant: Ms S. Bohan

Solicitor for the Applicant: Patane Lawyers

Counsel for the Respondent: Mr D. Taylor

Solicitor for the Respondent: Messrs. Ward Taylor Solicitors

Counsel for the Intervenors: Mr P. Newman

Solicitor for the Intervenors: Piper Alderman

ORDERS

1. The Applicant pay the Respondent's costs of the application, fixed at $3,541.65.

2. The Applicant pay the Respondent's costs of today to be assessed according to the Federal Court Rules if not otherwise agreed.

3. The Sequestration Order made by the Registrar on 11 September 2007 be set aside.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG 885 of 2007

ELIZABETH JANE PEARSON TRADING AS SCHOOL OF METAPHYSICS AUST. (S.O.M.A.)

Applicant

And

PEARSON AUSTRALIA GROUP PTY LTD

Respondent

And

PHILIP NEWMAN AND CLYDE PETER WHITE
(TRUSTEES IN BANKRUPTCY)

Intervenors

REASONS FOR JUDGMENT

(Revised from transcript)

1. On 11 September 2007, Elizabeth Jane Pearson was the subject of a Sequestration Order made by Registrar Hetyey. That Order stemmed in the ultimate from a default judgment in the Melbourne Magistrates Court for a sum of $3,541.65.

2. From Mr Newman's affidavit, it is apparent that very shortly thereafter, two employees of his went to Queensland from Victoria on

   
   

   13 September 2007 to meet Ms Pearson and gain a clearer insight into her affairs.

3. On 14 September 2007, the very next day, Ms Pearson instructed

   
   

   Mr Patane, a solicitor in Queensland, to apply to review the Sequestration Order made against her and on that same day, Mr Patane caused notice of that application to be given to the Trustees of

   
   

   Ms Pearson's estate. I note from an annexure to Mr Patane's affidavit sworn on 1 November 2007 that that was faxed off on that day and that initially, Ms Pearson undertook to provide $30,000.00 under protest to enable her business to continue.

4. It is not necessary to recapitulate all the correspondence that Mr Patane has annexed but it is apparent that within a short while and within the 21-day time limit provided, his client’s application was filed and indeed it was apparent by as early as 16 October 2007 that the debt which had given rise to the original judgment had been satisfied.

5. Before me this morning, the Creditor and Ms Pearson are not in argument. Orders will be made, disposing of their participation in the proceeding by costs in favour of the Creditor. The issue that remains outstanding is what happens to the costs incurred by the Trustee which amount, from exhibit PN9, to in excess of $20,000.00.

6. In circumstances such as these, I would respectfully adopt what was put by Weinberg J in Kyriackou v Shield Mercantile Pty Ltd(No 2) [2004] FCA 1338 at [42] - [43], set out in part in paragraph 41 of

   
   

   Ms Pearson's outline of submissions, where his Honour observed:

   “A trustee who administers a bankrupt estate in the knowledge that the bankrupt is challenging the validity of the sequestration order must exercise caution when incurring expenses while the status of the bankrupt remains uncertain.  In this case, a balance must be struck between the rights of an appellant, who should never have been made bankrupt in the first place, and the official trustee, who has simply done what the Act required him to do.”

7. Those principles have been applied in other cases. In this case, the matter is relatively finely balanced but in the ultimate, I think a proper exercise of my discretion is that I should accede to the position contended for by Ms Pearson that the bankruptcy be set aside. The Trustee was on very early notice by Ms Pearson that she was going to challenge the Order for Sequestration and although I of course accept what Mr Newman says before the Court that this is something that happens routinely, the matter was agitated in an active way by the solicitors acting on behalf of Ms Pearson. In my view, the decision to expend $1,600.00, it would appear, on travel expenses within a matter of a day or two of the Order coming into effect, when the total debt was only $3,000.00-odd, was somewhat precipitate to say the least.

I certify that the preceding seven (7) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Associate:  Brooke Evans

Date:  5 November 2007