Re Kennedy, Susan Maree Ex Parte Porter, Inez Helen v Worrell, Ivor
[1996] FCA 300
•30 APRIL 1996
CATCHWORDS
BANKRUPTCY - Application pursuant to s 118 Bankruptcy Act 1966 (Cth) - whether certain monies owNed by bankrupt absolutely or jointly by bankrupt and former partner - no question of principle.
Bankruptcy Act 1966 (Cth) s 118
Susan Maree Kennedy; Ex parte Inez Helen Porter v Ivor Worrell
No. QB418 of 1996
Cooper J
Brisbane
30 April 1996
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION BANKRUPTCY DISTRICT
OF THE STATE OF QUEENSLAND
No QB418 of 1996
RE: SUSAN MAREE KENNEDY
(A Bankrupt)
EX PARTE: INEZ HELEN PORTER
(Applicant)
AND: IVOR WORRELL
(Respondent)
JUDGE MAKING ORDER: Cooper J
WHERE MADE: Brisbane
DATE OF ORDER: 30 April 1996
MINUTES OF ORDER
THE COURT ORDERS THAT:
The applicant do all such things as may be necessary to procure the release of the funds in the Magistrates Court at Brisbane to the respondent.
Out of the funds received from the Magistrates Court at Brisbane the sum of $277.50 be paid to the applicant's solicitors.
The application filed 8 March 1996 be dismissed.
The applicant pay the respondent's costs of and incidental to the application to be taxed if not agreed.
Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION BANKRUPTCY DISTRICT
OF THE STATE OF QUEENSLAND
No QB418 of 1996
RE: SUSAN MAREE KENNEDY
(A Bankrupt)
EX PARTE: INEZ HELEN PORTER
(Applicant)
AND: IVOR WORRELL
(Respondent)
CORAM: Cooper J
PLACE: Brisbane
DATE: 30 April 1996
REASONS FOR JUDGMENT
By application filed 8 March 1996 in the bankrupt estate of Susan Maree Kennedy, the applicant seeks the following orders :-
"1.A declaration that the sum of $6,030.72 paid by Baker Johnson to the Magistrates Court at Brisbane in proceedings number 26765/95 were monies jointly belonging to the bankrupt and Scott Porter.
2.That pursuant to section 118 of the Act the monies ought to be paid as follows :-
Inez Helen Porter $3,015.36
Walters & Co$ 277.50
Ivor Worrell$2,737.86
$6,030.72
3.That the trustee pay the applicant's costs of and incidental to this application."
The application arises out of a dispute between Ms Kennedy and Scott
Stanley Porter as to the distribution of the proceeds of sale of a house property jointly owned by them.
Ms Kennedy and Mr Porter had been involved in a relationship and had purchased a house property together. In order to do so, they borrowed money from the Bank of New Zealand ("the Bank"), where Ms Kennedy was employed, from Mr Porter's mother, Doris Porter and from Mr Porter's grandmother, Inez Helen Porter (the applicant). The loan from the Bank was secured by a registered mortgage over the house property. The loans from Doris Porter (who had herself borrowed money to enable her to assist her son and Ms Kennedy) and the applicant were not secured.
When the relationship broke down in May 1995, Ms Kennedy and Mr Porter decided to sell the house property. On 13 June 1995 they entered into a contract for the sale of the house for $205,000. The date for the completion of the contract was 11 August 1995.
Prior to settlement Ms Kennedy and Mr Porter discussed what was to happen to the proceeds of the sale and in particular, how and when the loan from the applicant was to be repaid. On 7 August 1995 Ms Kennedy met with Mr Porter and told him that she would only allow the sale of the house to proceed if the sale proceeds were distributed in a certain way. She gave him a letter setting out her proposed distribution as follows :-
"I am prepared to allow settlement to proceed on the basis that cheques will be drawn as follows:
1.Bank of New Zealand $50,802.55
2.Bank of New Zealand $89,207.52
3.LJ Hooker Capalaba $ 587.50
4.Doris E Porter $47,754.00
5.Scott Porter (or nominee) $ 6,030.72
6.Baker Johnson Lawyer Trust Account $ 6,030.72"
Mr Porter agreed to the proceeds being distributed as indicated in the letter. At the bottom of the letter he wrote "I nominate the payee for the cheque due to me to be in favour of Doris E Porter" and signed below. The $6,030.72 paid to Doris Porter at Mr Porter's nomination was applied in reduction of the debt of approximately $45,000 owing by Ms Kennedy and Mr Porter to the applicant.
On 24 November 1995 the applicant commenced proceedings in the Magistrates Court at Brisbane against Ms Kennedy for recovery of the outstanding debt. Those proceedings were not defended. Judgment by default in the sum of $38,925.78 (plus costs) was entered against Ms Kennedy on 19 December 1995. On that day the applicant issued a garnishee summons in respect of the $6,030.72 paid into the Baker Johnson Trust Account. Also on that day Mr Porter caused his solicitors to deliver to Baker Johnson an authority which authorised payment of the monies held in the trust account to the applicant or to the Magistrates Court. On 23 January 1996 a garnishee order absolute was made against Baker Johnson and on 7 February 1996 Baker Johnson paid the monies held in their trust account to the Magistrates Court at Brisbane.
On 9 February 1996 Ms Kennedy's petition for bankruptcy was accepted.
The applicant submits that the $6,030.72 paid into the Baker Johnson Trust Account are joint monies and pursuant to s 118 of the Bankruptcy Act 1966 (Cth) ("the Act") should be dealt with in the manner sought in the application. The respondent submits that the monies are the property of the bankrupt absolutely and vest in him by operation of the Act.
Ms Kennedy and Mr Porter were cross-examined on the hearing of the application. According to Mr Porter, the $6,030.72 was paid into the trust account pending resolution of the dispute between he and Ms Kennedy as to how the debt to the applicant was to be repaid. Mr Porter says that at no time did he relinquish any interest he had in the monies.
Ms Kennedy's version of events appears in an affidavit filed by her on 26 March 1996 :-
"6.Prior to 11 August 1995 I had consulted Baker Johnson Lawyers concerning the breakdown of my relationship with Scott Porter and the indebtedness that we would have [sic] jointly have to Scott's mother Doris Porter and Scott's grandmother Inez Helen Porter as we had overspent and over capitalised on the joint residence.
7.Neither Scott's mother nor Scott's grandmother were secured creditors as neither had mortgages.
8.I am employed by the Bank of New Zealand and as a consequence the mortgages over the property were in favour of the Bank of New Zealand.
9.I agreed with Scott that from the proceeds of sale of the house the debt to his mother should be discharged. That unsecured debt stood at $47,754.00 as at the date of settlement.
10.I refused to make any agreement whatsoever over the debt due to Scott's grandmother the Applicant herein. There were insufficient monies available to pay out the debt to the Applicant and we were unable to agree on how to treat those monies.
11.After completion and the disbursement of monies to the Bank of New Zealand, the selling agent and Scott's mother the sum of $12,061.44 remained to be distributed.
12.I was prior to this time seeking advice from Baker Johnson Lawyers as to a Part X arrangement in an effort to avoid bankruptcy. I was informed by my Solicitor Mr Bax and verily believe that I should take all of the balance monies which were available to me after the settlement and bank them into his trust account pending the holding of a meeting pursuant to Section 188 of the Bankruptcy Act.
13.At completion Scott wanted me to agree that all the monies would be paid to the Applicant thereby reducing her debt to something in the order of $32,000.00 whereupon I was to be responsible for at least half of that debt.
14.I sought advices from my Solicitors in relation to this matter and as a result of those advices determine to proceed with the Part X.
15.As a consequence of the advices I received from my Solicitors and my inability to settle the debt with the Applicant who had appointed Scott Porter as her agent, I informed Scott that I was not prepared to pay my share of the proceeds to the applicant.
16.We then agreed that we would split the balance monies between us. This meant that I would receive $6,032.72 and he would receive $6,032.72.
17.Scott informed me and I verily believe that he was travelling overseas shortly after settlement and for that reason the money should be paid to his mother Doris Porter.
18.I agreed that the money would be paid to Doris Porter only after Scott endorsed the bottom of exhibit A to the Affidavit of Russell Galt Walters sworn 8 March 1996.
19.Upon settlement I paid the sum of $6,030.72 into trust at Baker Johnson in a ledger in my name solely.
20.Mr Bax proceeded with the Part X meeting. A representative of the Applicant attended the meeting and voted against the Part X."
Ms Kennedy, in cross-examination, said :-
"MR WALTERS: I see. Anyway, prior to settlement; a few days prior to settlement on the 7th, you had a meeting with him?---Yes, I did.
And you told him you would only allow the settlement to go ahead if the moneys were to be paid in a certain way?---Yes.
All right.And that included a payment to Baker Johnson trust account?---On my behalf, yes.
That included the payment to Baker Johnson trust account, did it not?---Yes.
Yes.And there was going to be ongoing discussions, were there, regarding the payment of the grandmother?---Yes.
And that money was going to be held by Baker Johnson, pending those discussions, was it not?---Yes."
In my view the $6,030.72 paid into the Baker Johnson Trust Account was owned absolutely by Ms Kennedy. It was clear to her and Mr Porter that the proceeds of the sale of the house property would not be sufficient to discharge all of their joint indebtedness. The Bank was a secured creditor and had to be paid. Ms Kennedy and Mr Porter agreed that Doris Porter should also be paid, apparently because she herself had borrowed the funds loaned to them. Mr Porter wanted to use the remaining money to reduce their joint indebtedness to the applicant. Apparently on the basis that he had, after the break-up, received more of the chattels jointly purchased, Mr Porter was "responsible" for more of that indebtedness than Ms Kennedy ($26,000 as opposed to $19,000). Ms Kennedy did not want to apply the "surplus" funds to the reduction of the debt owed to the applicant. She wanted to enter into a Deed of Arrangement under Part X of the Act so as to avoid bankruptcy. The $6,032.72 was paid into the Baker Johnson Trust Account, on the advice of her solicitor, under a ledger "Susan Maree Kennedy - Part X" for that purpose.
There is no doubt that Ms Kennedy and Mr Porter agreed that there would be "further discussion" as to the payment of the debt owed to the applicant. However, I am not satisfied that there was any agreement that the monies in question would be used for that purpose.
The parties were able to agree as to the distribution of all of the proceeds of sale. As to the $12,031.44 remaining after the distribution of other agreed payments, Mr Porter took one-half, which he applied in reduction of the debt to his grandmother. Ms Kennedy took the other half which she paid into her solicitor's trust account to support a proposed Deed of Arrangement under Part X of the Act. Ms Kennedy did not thereafter either agree to hold that sum or any part of it for the applicant or Mr Porter; nor did she by operation of law or equity so hold the money.
If the sum of $6,032.72 had been paid by Barker Johnson to the applicant pursuant to the garnishee, that sum less the costs of $277.50 would have been repayable by the applicant to the respondent (s 118 of the Act). That has not occurred. However to avoid the necessity for interpleader proceedings in the Magistrates Court on the part of the respondent to recover the monies in that court, I will order the applicant to do all such things as may be necessary to procure the release of the funds in the Magistrates Court at Brisbane to the respondent. Although the circumstances of the case do not fall directly within the terms of s 118, the justice of the case requires that the sum of $277.50 be paid out of the funds to the applicant's solicitors.
Otherwise, the application filed 8 March 1996 will be dismissed. I have considered submissions and material on the question of costs and am not persuaded that there is any reason why costs ought not follow the event. The applicant will pay the respondent's costs of and incidental to the application.
THE COURT ORDERS THAT:
The applicant do all such things as may be necessary to procure the release of the funds in the Magistrates Court at Brisbane to the respondent.
Out of the funds received from the Magistrates Court at Brisbane the sum of $277.50 be paid to the applicant's solicitors.
The application filed 8 March 1996 be dismissed.
The applicant pay the respondent's costs of and incidental to the application to be taxed if not agreed.
I certify that this and the preceding seven (7) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper.
Date:30 April 1996
Associate
Solicitor for the Applicant: Walters & Co
Counsel for the Respondent: Mr M Martin
Solicitors for the Respondent: Baker Johnson
Date of Hearing: 1 April 1996
Place of Hearing: Brisbane
Date of Judgment: 30 April 1996
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