Pergoleto v Chandler

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
PERGOLETO v CHANDLER & ORS
[2021] SASC 30
Judgment of Judge Dart a Master of the Supreme Court

SUCCESSION - FAMILY PROVISION - CIRCUMSTANCES PRECLUDING RELIEF
BANKRUPTCY - ADMINISTRATION OF PROPERTY - CONTRIBUTION OF BANKRUPT AND RECOVERY OF PROPERTY
Application pursuant to Inheritance (Family Provision) Act 1972 - estate fully distributed - extension of time required - applicant a bankrupt - other causes of action vest in the trustee.
Held:
1. Court has no jurisdiction to grant an extension of time in respect of the statutory claim.
2. Applicant has no standing in respect of other causes of action, as they have vested in the trustee.
Inheritance (Family Provision) Act 1972 (SA) s 8; Bankruptcy Act 1966 (Cth) s 5, s 58(1), s 58 (3), s 58 (6), s 91 and s 116, referred to.
Brooks & Anor v Young & Ors [2018] SASCFC 81; Collicoat & Ors v McMillan & Anor [1999] 3 VR 803; Coffey v Bennett [1961] VR 264, considered.

PERGOLETO v CHANDLER & ORS
[2021] SASC 30
Judge Dart
Civil

The applicant commenced these proceedings seeking remedies pursuant to the Inheritance (Family Provision) Act 1972 (“the IFP Act”). He also seeks other common law remedies in the event that the statutory claim is unsuccessful. The respondents ask the Court to deal with the application summarily and dismiss it. The respondents are entitled to a dismissal of the action.
Background
The applicant is one of the children of Antonia Pergoleto (“the deceased”) who died on 12 August 2018 leaving a will. A grant of probate was made on 12 March 2019 and the entire estate was distributed shortly thereafter in accordance with the terms of the will.
These proceedings were commenced on 20 November 2019. They were commenced out of time. The applicant seeks an extension of time within which to commence the proceedings. The IFP Act provides as follows:
8—Time within which application to be made
(1) Subject to this section, an application shall not be heard by the Court at the instance of a person claiming the benefit of this Act unless the application is made within six months from the date of the grant in this State of probate of the will, or letters of administration of the estate, of the deceased person.
(2) The Court may, after hearing such of the persons affected as the Court thinks necessary, extend the time for making an application for the benefit of this Act.
(3)An extension of time granted pursuant to this section may be granted—
(a) upon such conditions as the Court thinks fit; and
(b) whether or not the time for making an application pursuant to subsection (1) of this section has expired.
(4) An application for extension of time pursuant to this section shall be made before the final distribution of the estate.
(5) Any distribution of any part of the estate made before the application for extension of time shall not be disturbed by reason of that application or any order made thereon.
(6) An application for the benefit of this Act shall be deemed to be made on the day when the summons by which it is instituted is served on the administrator of the estate.
(7) Where an application has been made for the benefit of this Act, the Court may, if satisfied that it is just and expedient to do so, permit at any time prior to the final determination of the proceedings, the joinder of further claimants as parties to the application.
As mentioned, the applicant seeks an extension of time. The proceedings were commenced more than six months after the grant of probate. The solicitors acting for the applicant recognised that there may be difficulties in obtaining an extension of time. A Statement of Claim was filed. It purports to bring a claim in deceit and a conspiracy to defraud the applicant, in addition to the statutory claim. The gist of the additional claims is that the applicant was misled by the respondents, his siblings, about progress of the grant of probate and the status of the distribution of the estate. Those claims are denied by the respondents, who say the opposite was true and that the applicant knew full-well the position in relation to the application for a grant of probate. Initially the applicant was legally represented, but now is self-represented.
The interlocutory application seeking summary dismissal was set for argument on 2 March 2021. In early February the applicant requested that the argument be adjourned. He cited health reasons. The application for an adjournment, made only by email, was opposed by the respondents. In the circumstances, the parties were notified on 9 February 2021 that the argument would proceed on 2 March and that the application for an adjournment was refused. There was no attendance on the argument by the applicant.
It is apparent that the family members have been estranged for many years. After the proceedings commenced, the respondents became aware of the fact that the applicant was an undischarged bankrupt. The evidence before the Court shows that he became a bankrupt on 1 June 2015.
An extension of time
The difficulty for the applicant in respect of an extension of time is that the entirety of the estate was fully distributed prior to the commencement of the action. The IFP Act makes clear the difficulties for an applicant in such circumstances.
The position in relation to an extension of time was considered by the Full Court in Brooks & Anor v Young & Ors where, in the principal judgment, Doyle J said: [1]
If the claim is made outside of six months from the grant of probate, then the implications of this will depend, inter alia, upon whether there has been no distribution of the estate, partial distribution of the estate or final distribution of the estate.
1.   If there has been no distribution of the estate, then the Court has a discretion to grant an extension of time. If the extension of time is granted the claim will be determined in the ordinary course and may result in an order being made in respect of any part of the estate.
2.   If there has been a partial distribution of the estate, then the Court retains a discretion to grant an extension of time. However, if the extension of time is granted, the claim will be confined to the part of the estate which has not been distributed.[2] This is a consequence of the specification in s 8(5) of the IFP Act that the part of the estate that has been distributed shall not be “disturbed”.[3] Certainly this means that the distributions cannot be set aside.[4] But in my view it means more than this. It means that the distributions cannot be disturbed in any way, including by any order for provision in respect of the distributed asset. A beneficiary who has received a distribution will not be vulnerable to an order requiring that he or she hold the distributed asset subject to an order for provision, or any other form of liability by reason of having received that asset. Allowing any form of proprietary claim against the beneficiary would plainly operate to “disturb” the distribution. Further, given that a personal claim against the beneficiary would be parasitic upon such a proprietary claim, it seems to me that such a claim was also intended to be precluded by the operation of s 8(5).
3.   If there has been final distribution of the estate, then no order for provision may be made. The claim will be out of time, and the court has no power to grant an extension of time. It follows that no beneficiary who has received a distribution would be vulnerable to either a proprietary or personal claim.
[1] [2018] SASCFC 81 at [66].
[2]    Blunden v Blunden [2008] SASC 286 at [33]; Yancic v Yancic [2010] SASC 335 at [11]; Dawson v Fitch (2002) 84 SASR 20 at [30]; Young v IOOF Australia Trustees Ltd (1995) 180 LSJS 302 at 314.
[3]    The position was the same under the legislation considered in Easterbrook v Young (1977) 136 CLR 308 at 318, although their Honours did not elaborate upon the meaning or effect of this limitation upon provision claims.
[4]    Blunden v Blunden [2008] SASC 286 at [28], [30].
There can be no extension of time on the facts of this matter. The IFP Act claim must therefore be dismissed.
The effect of bankruptcy
The fact that the applicant is an undischarged bankrupt is relevant to the application. Due to the fact that he has not cooperated with his trustee, the period of his bankruptcy has been extended to eight years. Accordingly, he remains an undischarged bankrupt. Even if an extension of time within which to commence proceedings was available to the applicant, his prospects in relation to the IFP Act claim might best be regarded as bleak.
When a person becomes bankrupt his or her property forthwith vests in the trustee in bankruptcy.[5] Property of a bankrupt includes a chose in action. It might be thought, therefore, that the claim of the bankrupt under the IFP Act would vest in the trustee. However, it appears that may not be the case. In Collicoat & Ors v McMillan & Anor Ormiston J said:[6]
A particular problem, arguably one of principle, arises in relation to the adult son’s claim because he was at his mother’s death a bankrupt and still remains an undischarged bankrupt. The problem in the present case is not as acute as it is in other cases in that there seems little doubt that about half of the existing provision out of the personal estate in favour of Kenneth must pass to the official trustee in bankruptcy in order to satisfy the claims of his unsecured creditors but, even then, he will retain some benefits. Thus his claim does not pose the same problems as that of an undischarged bankrupt who has received no provision but nevertheless seeks what in other circumstances would be considered necessary further provision for his proper maintenance and support for the first time. It is probably sufficient to say that it has been accepted that the right to make a claim for further provision itself does not pass to the official trustee but is a personal right and thus the official trustee is not in this case nor in others a relevant party to the application, although from time to time the official trustee may have a right to intervene to protect an interest already given: see Re Estate of Robert Frangos (unreported, Court of Appeal, 7 July 1995). Because of the personal nature of the claim the better view appears to be that an order should not be made if it will not in fact benefit the applicant. If an order for further provision, intended as it is to provide for a person’s maintenance and benefit, would invariably go to his creditors and provide no other benefit to the applicant, then it would not seem appropriate to exercise the discretion at the second stage of the enquiry even if a decision were made that the testator had otherwise failed in the distribution of his or her estate to make adequate provision for proper maintenance and support: see McLeod v. Johns [1981] 1 N.S.W.L.R. 347 at 348. In the present case the difficulty is not so acute because, as I have said, the share already to be received by Kenneth will be sufficient and more than sufficient to pay those creditors.
[5] Bankruptcy Act 1966 (Cth) s 58(3).
[6] [1999] 3 VR 803 at [51].
It seems to be accepted in a number of cases that the approach adopted in Collicoat is the correct approach. It might be noted, however, that the authorities all trace the position back to the case of Coffey v Bennett,[7] which is a 1961 decision. It was made at a time when the Bankruptcy Act 1924 (Cth) was applicable. It turned on the proposition that the common law of bankruptcy excluded certain property from vesting in the trustee. One such type of property was an IFP Act‑type claim.
[7] [1961] VR 264.
The provisions of the current Bankruptcy Act are perhaps more prescriptive than the 1924 Act. As mentioned above, a chose in action ordinarily vests in the trustee. There are exceptions. Relevant is the following section of the Act:
116Property divisible among creditors
…
(2) Subsection (1) does not extend to the following property:
…
(g)any right of the bankrupt to recover damages or compensation:
(i)for personal injury or wrong done to the bankrupt, the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt; or
(ii)in respect of the death of the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt;
and any damages or compensation recovered by the bankrupt (whether before or after he or she became a bankrupt) in respect of such an injury or wrong or the death of such a person;
It would appear that there is a cogent argument that a cause of action under the IFP Act does not fall within the definition provided within the property excluded by s 116(2)(g). It is not a claim for damages or compensation for personal injury or wrong done to the applicant.
The 1924 Act defined “property” to include things in action.[8] It also provided that a right of a bankrupt to take proceedings in respect of property vested in the trustee.[9] That Act did not have an equivalent of s 116(2)(g).
[8] Bankruptcy Act s 5.
[9] Bankruptcy Act s 91.
The question becomes whether it is appropriate to exclude causes of action, other than those specified in s 116(2)(g), from vesting in the trustee upon the making of the sequestration order. Arguably not. Nonetheless, it has to be accepted that there are a number of authorities which suggest that an IFP Act action does not vest. It is not a matter that needs to be resolved for the purposes of this matter, the action being out of time in any event. It is a matter that would most appropriately be resolved by an intermediate appeal court.
It may be that, even where a bankrupt has a claim under the IFP Act, no benefit will accrue to the bankrupt. In the excerpt Collicoat, quoted above, Ormiston J noted that, if an order for provision would go to the bankrupt’s creditors, it may not be appropriate to order provision from the deceased estate.
Further, in a bankruptcy, “after acquired property” vests in the trustee as soon as it is acquired by the bankrupt.[10] Thus, even if a bankrupt could prosecute a claim and obtain a provision, the fruit of the litigation would immediately vest in the trustee on the Court making such an order. That being the case, the question of whether a bankrupt retains the right to bring a claim under the IFP Act may largely be academic.
[10] Bankruptcy Act s 58(1) and (6).
The effect of bankruptcy on the balance of the action, however, is relevant. The cause of action in deceit and conspiracy to defraud are actions of a type that vest in the trustee. The trustee does not wish to prosecute the action. In Bendigo & Adelaide Bank Ltd v Capotondi & Anor[11] an issue on standing was raised. I noted:[12]
Once the property of a bankrupt vests in a trustee, the bankrupt no longer has standing in legal proceedings in respect of that property.[13] In Rogers v Asset Loan Co Pty Ltd & Ors[14] the Court was dealing with an application by a bankrupt for an interlocutory injunction to prevent a secured creditor exercising a power of sale in respect of real property. Greenwood J said:[15]
Mr Rogers attacks the exercise of the power of sale by the secured creditor[s] on the basis of a failure to comply with the requirements of s84 of the Property Law Act 1974 (Qld). The interest of Mr Rogers in agitating that question is his interest as owner of the property the subject of the security. That interest has become vested in the trustee. It includes the rights, powers and capacities of the bankrupt in relation to that interest which, in turn, includes the right to agitate the question of whether the secured creditor has complied with the Property Law Act 1974 (Qld). I accept the submission that only the trustee can agitate that question and the trustee chooses not to do so.
[11] [2016] SASC 11.
[12] Bendigo & Adelaide Bank Ltd v Capotondi & Anor [2016] SASC 11 at [8].
[13] Cirillo & Anor v City Corp Australia Limited & Ors (2004) 2 ABC(NS) 525 at 545.
[14] (2006) 4 ABC(NS) 293.
[15] Rogers v Asset Loan Co Pty Ltd & Ors (2006) 4 ABC(NS) 293 at 305.
In the present action, the applicant has no standing to proceed with the causes of action in deceit or conspiracy to defraud. The trustee does not propose to do so. The respondent is entitled to summary dismissal in relation to the non-IFP Act aspects of the proceeding as well.
The action will be dismissed. I will hear the parties as to the form of order and consequential matters.

[2021] SASC 30

24 March 2021