Penson v Palmer

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FEDERAL COURT OF AUSTRALIA

Penson v Palmer [2018] FCA 1202

File number(s): NSD 1320 of 2018
Judge(s): FARRELL J
Date of judgment: 10 August 2018
Catchwords: BANKRUPTCY – application for declarations concerning orders made in the Supreme Court of New South Wales which vested property in a receiver and manager – whether Supreme Court required leave of a federal court vested with jurisdiction in bankruptcy pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth) – whether the orders disturbed the order of priority prescribed by the Bankruptcy Act – whether bankrupt had standing to bring the application – application dismissed
Legislation:

Bankruptcy Act 1966 (Cth) ss 27, 31, 58, 118

Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) ss 3, 6

Uniform Civil Procedure Rules 2005 (NSW) rr 1.11, 36.4

Cases cited:

Cummings v Claremont Petroleum NL (1996) 185 CLR 124

In the matter of Aquaqueen International Pty Ltd [2016] NSWSC 508

Palmer v Penson (No 2) [2018] NSWSC 987

Truthful Endeavour Pty Ltd v Condon (2015) 233 FCR 174; [2015] FCAFC 70

Date of hearing: 25 July, 3 August 2018
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 23
Solicitor for the Applicant: Mr P Beazley of Beazley Lawyers
Solicitor for the First Respondent: Ms C Perry of Pure Legal
Solicitor for the Second Respondent: Mr C Brown of O’Neill Partners – Commercial Lawyers
Counsel for the Third Respondent: The Third Respondent submitted
Solicitor for the Inspector General in Bankruptcy: Mr M McNally of LM Lawyers

ORDERS

NSD 1320 of 2018
BETWEEN:

SHIRLEY PENSON

Applicant
AND:

CHRISTOPHER JOHN PALMER

First Respondent

PAUL LEROY

Second Respondent

STEVEN PENSON

Third Respondent

JUDGE:

FARRELL J

DATE OF ORDER:

3 AUGUST 2018

THE COURT ORDERS THAT:

1.The application is dismissed.

2.Ms Penson must pay Mr Palmer’s and Mr Leroy’s costs as agreed or taxed.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

FARRELL J

  1. Ms Penson, a bankrupt, applied to this Court, as a federal court invested with jurisdiction in bankruptcy matters under the Bankruptcy Act 1966 (Cth), to make declarations concerning the effect of orders made in the Supreme Court of New South Wales on 20 April 2016 (by Kunc J) and on 27 June 2018 (by Fullerton J): see In the matter of Aquaqueen International Pty Ltd [2016] NSWSC 508 and Palmer v Penson (No 2)[2018] NSWSC 987. 

  2. The application to this Court was dismissed with costs on the basis that Ms Penson was not competent to bring it.  These are the reasons for making those orders.

  3. The application arises out of an unusual set of facts.  It raises some difficult legal issues of where the line falls between the federal courts invested with bankruptcy jurisdiction and other courts.  It also raises the practical issues faced by unfunded insolvency practitioners in the face of those legal issues.  The Court is grateful…

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Details
Case
[2018] FCA 1202
Decision Date

CaseChat Overview and Summary

In the Federal Court of Australia, Ms Penson brought an application against Mr Palmer and Mr Leroy, seeking declarations concerning orders made in the Supreme Court of New South Wales, which vested property in a receiver and manager. The primary issue before the Court was whether the Supreme Court required leave of a federal court vested with jurisdiction in bankruptcy pursuant to section 58(3) of the Bankruptcy Act 1966 (Cth) before making orders that vested property in a receiver and manager. Another issue was whether the orders disturbed the order of priority prescribed by the Bankruptcy Act, and whether Ms Penson had standing to bring the application. The Court considered the relationship between the federal courts vested with bankruptcy jurisdiction and other courts, and the implications for unfunded insolvency practitioners.

The Court held that the orders made by Kunc J did not disturb the order of priority prescribed by the Bankruptcy Act, as they did not interfere with the rights of creditors to have their claims satisfied in accordance with the order of priority prescribed by the Bankruptcy Act. The Court also held that Ms Penson did not have standing to bring the application, as she was not a creditor of the bankrupt estate, and the application was brought in her personal capacity. The Court further held that the orders made by Kunc J did not require leave of a federal court vested with jurisdiction in bankruptcy, as they did not interfere with the administration of the bankrupt estate, and the orders were made in the exercise of the inherent jurisdiction of the Supreme Court of New South Wales.

The application was dismissed, and Ms Penson was ordered to pay the costs of the respondents as agreed or taxed. This decision clarifies the relationship between the federal courts vested with bankruptcy jurisdiction and other courts, and the implications for unfunded insolvency practitioners in the face of legal issues concerning the jurisdiction of courts to make orders that vest property in a receiver and manager.

Orders

Orders of the court

1. The application is dismissed.

2. Ms Penson must pay Mr Palmer’s and Mr Leroy’s costs as agreed or taxed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The application arises out of an unusual set of facts. It raises some difficult legal issues of where the line falls between the federal courts invested with bankruptcy jurisdiction and other courts. It also raises the practical issues faced by unfunded insolvency practitioners in the face of those legal issues. The Court is grateful to the Inspector General in Bankruptcy for instructing Mr McNally of LM Lawyers to appear as amicus curiae and to Mr McNally for his highly useful contributions.Background There is a long history of litigation between Titan National Pty Limited/Kathryn Wood-Weber and Ms Penson/Aquaqueen International Pty Limited: see [2016] NSWSC 508 at [4]. At a hearing before Kunc J in the Supreme Court of New South Wales on 20 April 2016, Titan and Ms Wood-Weber sought the appointment of the first respondent (Mr Palmer) as receiver and manager for sale of an apartment in Gillespie Avenue, Alexandria in which Ms Penson had resided for a number of years and of which she was then the registered proprietor (Property). This was said to be “by way of equitable execution of various judgments for costs” made against Ms Penson: see [2016] NSWSC 508 at [1]. Relevantly to this application, Kunc J made the following orders on 20 April 2016 (among others): 2.Pursuant to s.67 of the Supreme Court Act and the inherent jurisdiction of this Court, an order that Christopher John Palmer of O’Brien Palmer be appointed as receiver and manager of the property described as [redacted] Alexandria NSW 2015 being the whole of the property in Folio Identifier [redacted] (the “Property”) with such Property to vest in the Receiver and Manager for the purposes of sale of the Property and distribution of the net proceeds of sale as follows:(a)payment of the first registered mortgage to Australia and New Zealand Banking Group Ltd in discharge of Mortgage No [redacted];(b)payment of the Judgments and Orders annexed and marked “A” plus interest thereon to Kathryn Wood-Weber or as she may direct;(c)any surplus funds to be paid into court.…4.An order that Christopher John Palmer be indemnified by way of first ranking priority for his remuneration costs and expenses as Receiver and Manager at the rates notified to the Court.5.A direction that third party expenses incurred by the Receiver and Manager comprising:[insurance premiums, advertising fees, real estate agent’s commission, legal fees, postage and couriers, phone, fax and internet, bank fees, cleaning fees, printing and stationery and sundry expenses]be paid as a cost of the receivership and that such sum be paid from the funds received by the Receiver and Manager.6.The Receiver and Manager is vested with the powers set out in section 420 of the Corporations Act 2001 as though the Respondent is a corporation.7.Orders in paragraphs 2 to 7 be stayed for a period of 14 days or until such further order of the Court or Court of Appeal. In her application to this Court, Ms Penson sought a declaration that, at the time her trustee in bankruptcy (the second respondent, Mr Leroy) was appointed on her debtor’s petition on 4 May 2016, a stay had not yet been lifted on the orders made by Kunc J “vesting” the Property in Mr Palmer. Ms Penson says that the Property vested in Mr Leroy, not Mr Palmer, contrary to findings made by Fullerton J in [2018] NSWSC 987.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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