Pitman v Pantzer

Case [2001] FCA 1743

FEDERAL COURT OF AUSTRALIA

Pitman v Pantzer (Trustee of the Bankrupt Estate of Thomas Richard Wenkart) [2001] FCA 1743

BANKRUPTCY – assignment of debt – leave to substitute proof – whether applicant’s right to indemnity from bankrupt merged into a right to proof – whether purported assignment of debt effective – whether purported release of applicant was effective.

Bankruptcy Act 1966 (Cth)
Conveyancing Act 1919 (NSW)

Clyne v Deputy Commissioner of Taxation (1988) 154 CLR 589 followed
Howden v Cock (1915) 20 CLR 201 applied
In re Frost;  Ex parte Official Receiver [1899] 2 QB 50 applied
In re Iliff [1902] 51 WR 80 followed
Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 followed
O’Donel v Commissioner for Road Transport & Tramways (NSW) (1938) 59 CLR 744 followed
Re Barry (1930) 2 ABC 85 followed
Re Blake (1933) 6 ABC 85 followed
Re Gill;  Ex parte Official Receiver (1964) 6 FLR 273 applied
Re Hills;  Ex parte Lang (1912) 107 LT 95 followed
Trident General Insurance Co Ltd v McNiece Bros. Pty Ltd (1988) 165 CLR 107 applied

The Laws of Australia – Contract:  General Principles, LBC

Spencer Bower Turner & Handley, The Doctrine of Res Judicata, 3rd ed. 1996

ALAN PITMAN V WARREN PANTZER (TRUSTEE OF THE BANKRUPT ESTATE

OF THOMAS RICHARD WENKART)

N7752 OF 2000

JUDGE:         BEAUMONT J
DATE:           21 DECEMBER 2001
PLACE:         SYDNEY


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N7752 OF 2000

BETWEEN:

ALAN PITMAN
APPLICANT

AND:

WARREN PANTZER (TRUSTEE OF THE ESTATE OF THOMAS RICHARD WENKART)
FIRST RESPONDENT

THROVENA PTY LIMITED, HAPDAY HOLDINGS PTY LIMITED AND MACQUARIE HEALTH CORPORATION LIMITED
SECOND RESPONDENTS
AND BETWEEN:

THROVENA PTY LIMITED, HAPDAY HOLDINGS PTY LIMITED AND MACQUARIE HEALTH CORPORATION LIMITED
CROSS-APPLICANTS
AND

ALAN PITMAN
FIRST CROSS RESPONDENT

WARREN PANTZER (TRUSTEE OF THE ESTATE OF THOMAS RICHARD WENKART)
SECOND CROSS RESPONDENT

JUDGE:

BEAUMONT J

DATE OF ORDER:

21 DECEMBER 2001

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The parties file and serve draft proposed minutes of final orders to be made, in accordance with these reasons, on the application and the cross-application.

2.The matter be stood over to 17 January 2002 for submissions on the final orders to be made, including costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N7752 OF 2000

BETWEEN:

ALAN PITMAN
APPLICANT

AND:

WARREN PANTZER (TRUSTEE OF THE ESTATE OF THOMAS RICHARD WENKART)
FIRST RESPONDENT

THROVENA PTY LIMITED, HAPDAY HOLDINGS PTY LIMITED AND MACQUARIE HEALTH CORPORATION LIMITED
SECOND RESPONDENTS
AND BETWEEN:

THROVENA PTY LIMITED, HAPDAY HOLDINGS PTY LIMITED AND MACQUARIE HEALTH CORPORATION LIMITED
CROSS-APPLICANTS
AND

ALAN PITMAN
FIRST CROSS RESPONDENT

WARREN PANTZER (TRUSTEE OF THE ESTATE OF THOMAS RICHARD WENKART)
SECOND CROSS RESPONDENT

JUDGE:

BEAUMONT J

DATE:

21 DECEMBER 2001

PLACE:

SYDNEY

REASONS FOR JUDGMENT
(ON APPLICATION AND CROSS-CLAIM)

BEAUMONT J:

  1. These reasons should be read in conjunction with my reasons in this matter dated…

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Pitman v Pantzer [2001] FCA 1743
Case
[2001] FCA 1743
Decision Date

CaseChat Overview and Summary

The case of Pitman v Pantzer involves a dispute between Mr Pitman and the Trustees of Dr Wenkart's estate regarding a claim for indemnity. Mr Pitman asserts that Dr Wenkart, who has since been declared bankrupt, was obligated under the Wenkart Indemnity to compensate Mr Pitman for certain debts. The Trustees, on the other hand, argue that the claim has no merit as the right to indemnity merged into a right to prove against Dr Wenkart's estate upon his bankruptcy. The matter was heard in the Supreme Court of Australia.

The primary legal issue before the court was whether Mr Pitman's right to indemnity from Dr Wenkart, which existed prior to Dr Wenkart's bankruptcy, survived the bankruptcy and could be enforced against Dr Wenkart's estate. This question required the court to consider the effect of bankruptcy on contractual obligations and the principles governing the merging of rights upon the sequestration of a debtor's estate. The court had to determine if the indemnity agreement was extinguished by the bankruptcy or if it transformed into a provable claim against the estate.

The court found that Mr Pitman's claim was valid in principle, acknowledging that upon the bankruptcy of a debtor, the creditor's rights transform from personal actions against the debtor to claims against the estate. However, the court noted that this transformation does not necessarily negate the creditor's rights but rather changes their form. The court examined the specific terms of the indemnity agreements and the effect of subsequent transactions, such as the sale of debts to Throvena, on Mr Pitman's claims. Ultimately, the court concluded that the indemnity agreement survived the bankruptcy and could be enforced as a provable claim against the estate, provided it complied with the relevant statutory and equitable principles.

The court ordered the parties to draft and exchange proposed minutes of final orders to be made in accordance with the court's reasons. The matter was stood over to a later date to allow for submissions on the final orders, including costs.

Orders

Orders of the court

1. The parties file and serve draft proposed minutes of final orders to be made, in accordance with these reasons, on the application and the cross-application.

2. The matter be stood over to 17 January 2002 for submissions on the final orders to be made, including costs.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

Mr Pitman denies this claim, and pleads that his contention here is that as at the date of bankruptcy of Dr Wenkart (28 October 1999), Dr Wenkart was, pursuant to the Wenkart Indemnity, liable to indemnify Mr Pitman in respect of the debts claimed in the proof of debt but that, on the making of the sequestration order, this right which Mr Pitman had to an indemnity from Dr Wenkart, merged, in an equitable execution, into a right to prove against Dr Wenkart’s estate.Conclusions on contention (1): In my opinion, so far as it goes (see below), Mr Pitman’s plea is valid. The position on the making of a sequestration order was considered by Gibbs CJ, Murphy, Brennan and Dawson JJ in Clyne v Deputy Commissioner of Taxation (1988) 154 CLR 589 at 594 – 595. Upon a debtor becoming bankrupt, the remedies against the debtor’s person and property formerly available to a creditor are taken away and there is substituted a right to prove against the estate. From that time, a creditor is not a mere creditor, but a creditor whose claim is in proof. The claim is no longer a mere right of action for a debt. An action as for a debt could no longer be maintained. The debt had been, at any rate provisionally, merged in an equitable execution. Amounts which were owed by a debtor at the date of the bankruptcy may, notwithstanding the bankruptcy, still be described as debts, and, in a number of provisions, the Act refers to them as such. They are “debts” from which the bankrupt is not released until he is discharged from bankruptcy. However, they are not “still owing”, since the effect of bankruptcy is that the debtor is no longer obliged to pay creditors, but is disabled from doing so. If the bankrupt offered payment, creditors could not safely accept it, since their right is a right of proof against the estate. However, whilst this process of transmogrification is an essential element in the context in which the cross-claim is considered, the process itself is not decisive of the substantive outcome of the cross-claim, one way or the other. As will be seen, the fact of this merger does not mean that a creditor’s new rights cannot be dealt with appropriately.Contention (2): The intervening creditors next plead several contentions as follows:“6.By deed dated 22 December 2000 (Throvena Deed) Abignano and Genallco agreed to sell to the Cross Applicant Throvena Pty Ltd (Throvena) and Throvena agreed to purchase from Abignano certain property referred to in the Throvena Deed as ‘the Assigned Debts’ for the sum of $2,047,500.00 (Price).7.It was a term and condition of the Throvena Deed that Abignano and Genallco must on the completion of the sale and purchase of the Assigned Debts being the date when payment of the Price is made in full (Completion Date) release [Mr Pitman] from all claims and liabilities that Abignano and/or Genallco has or may have against [Mr Pitman] which give rise to or would give rise to a liability of Wenkart to [Mr Pitman] or would cause Wenkart to become liable to [Mr Pitman] and without limiting the generality thereof any liability arising out of or with respect to any of the matters referred to in the matters and proceedings referred to in the recitals to the Throvena Deed and the Schedule to the Throvena Deed.8.The Price was paid in full by Throvena to Abignano and Genallco and the Completion Date was on 8 October 2001.9.Pursuant to a deed dated 8 October 2001 (Settlement Deed) Abignano and Genallco conveyed to Throvena absolutely the legal and beneficial title to the Assigned Debts free of any and all mortgages, charges, liens and any other encumbrances.10.…11.Pursuant to their obligations under the Throvena Deed, by letter dated 5 October 2001, Abignano and Genallco released [Mr Pitman] from all claims and liabilities that Abignano and/or Genallco has or may have against [Mr Pitman] which give rise to or would give rise to a liability of Wenkart to [Mr Pitman] or would cause Wenkart to become liable to [Mr Pitman] and without limiting the generality thereof any liability arising out of or with respect to any of the matters referred to in the matters and proceedings referred to in the recitals to the Throvena Deed and the Schedule to the Throvena Deed.12.By virtue of the release referred to in clause 11 above, [Mr Pitman] has no liability to Abignano and Genallco under the Pitman Indemnity and the Pitman Indemnity is not operative or enforceable against the [Trustees].13.By virtue of the aforesaid, [Mr Pitman] has no claim against Wenkart or his bankrupt estate under the Wenkart Indemnity.14.By virtue of the aforesaid Wenkart is not justly or truly indebted to [Mr Pitman] and therefore [Mr Pitman] is not entitled to recover any monies in or be paid any monies out of or prove for payment of any debt or liability in the bankrupt estate of Wenkart.15.By virtue of the aforesaid there is no debt or liability in existence which may be proved in the bankrupt estate of Wenkart by [Mr Pitman].”

Ratio Decidendi

Legal Principle Established

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