Re La Rosa, F.C. & Anor. Ex Parte Gilpin Park P/L & Anor. Gilpin Park P/L v Norgard, R. as Official Liquidator of Hobourne P/L (In Liquidation)

[1993] FCA 313

Re: FRANCESCO CANDELORO LA ROSA and LINDA ROBYN LA ROSA
Ex parte: GILPIN PARK PTY LTD
And: ROSS STEWART NORGARD as Trustee in Bankruptcy of the Estate of Francesco
Candeloro La Rosa and Linda Robyn La Rosa and ROSS STEWART NORGARD as Official
Liquidator of Hobourne Pty Ltd (In Liquidation)
Nos. 616(i) of 1988 and WAG3017 of 1992
FED No. 313
Number of pages - 5
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA
GENERAL DIVISION
French J(1)

CATCHWORDS

Practice and Procedure - pleadings - claims for proof of debt in bankruptcy and company liquidation - claims contingent upon success of recovery back actions by Trustee and Liquidator - no basis for contingent liability pleaded - statements of claim defective - strike out orders made.

N.A. Kratzmann Pty Ltd (In Liquidation) v. Tucker (No. 2) (1968) 123 CLR 295

HEARING

PERTH, 12 February 1993

#DATE 30:3:1993

Counsel for Gilpin Park Pty Ltd: Mr M. McCusker QC and Mr C. McLeod

Solicitors for the Applicant: Parker and Parker

Counsel for Mr R.S. Norgard: Mr W. Martin with Mr S. Tudjman

Solicitors for Mr R.S. Norgard: Blake Dawson Waldron

ORDER

THE COURT ORDERS THAT:

In number 616(i) of 1988:

On the respondent's application filed 19 January 1993:

1. The statement of claim be struck out.

2. There be liberty to the parties to apply as to the future disposition of the action.

3. The applicant pay the respondent's costs of the application in any event.

In number 3017 of 1992:
On the respondent's motion filed 19 January 1993:

1. The statement of claim be struck out.

2. There be liberty to the parties to apply as to the future disposition of the action.

3. The applicant pay the respondent's costs of the motion in any event.

Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

Introduction

FRENCH J In actions numbered 616(i) of 1988 and 3017 of 1992, the respondent, Ross Stewart Norgard in his respective capacities as Trustee of the bankrupt estates of Frank and Linda La Rosa and Liquidator of Hobourne Pty Ltd, moves to strike out statements of claim filed by Gilpin Park Pty Ltd. In each of those actions Gilpin Park claims to be entitled to prove as a creditor of the respective estates in the event that there is recovery from it of sums claimed by Norgard in his capacities as Trustee and Liquidator in actions 616G of 1988 and 37 of 1992 respectively. Gilpin Park asserts in each case a contingent liability on the part of the bankrupts and the company which would arise if it were required to disgorge payments said to have been received from them. The principal ground for the attack on its claims in these proceedings is that there is no pleaded basis for the existence of the alleged contingent liabilities. It is not necessary for present purposes to set out the rather complicated pleadings in the proceedings brought against Gilpin Park. It is sufficient to consider the statements of claim in the proceedings which that company has undertaken.

Gilpin Park's Claim Against the Bankrupt Estate
2. In action number 616(i) of 1992, Gilpin Park sues Norgard in his capacity as Trustee of the bankrupt estate of the La Rosas. It says, inter alia, that at all material times it was a shareholder in Hobourne Pty Ltd and the unitholder in the CMA Unit Trust of which Hobourne was trustee. It pleads an agreement of 3 May 1988 between itself and a company called Feli Pty Ltd under which it agreed to sell and Feli agreed to buy 3,334 units for $1,263,333 ("the Trust Agreement"). Gilpin Park also alleges an agreement of the same date between itself and the bankrupts under which it agreed to sell and they agreed to buy 3,334 shares held by it in Hobourne for a consideration of $3,334 ("the Share Agreement"). Following settlement of the two agreements on 3 May 1988, Gilpin Park says it received a cheque drawn on the Parker and Parker trust account in the sum of $2,563,400. This was said to comprise the following:
(a) Consideration paid by Feli under the trust

agreement - $1,263,333

(b) Consideration paid by the bankrupts under the share

agreement - $3,334

(c) Balance of Gilpin Park's entitlement to a distribution of

the profits generated by Hobourne for the period 1 July 1987 to 30 April 1988 - $1,181,166.

(d) An amount due to Gilpin Park by Automotive Holdings Ltd

in respect of a management fee - $115,567.

1. The company then goes on to recite the substance of the claim brought against it by Norgard in action number 616G of 1988 and says that it is defending the proceedings and that except for the amount of $3,334 received in respect of the share agreement, denies that it received any payment from the bankrupts. In the alternative it says that any payment from the bankrupts was made before they became bankrupt, at a time when it had no notice of the presentation of their petition and was for valuable consideration, in good faith and in the ordinary course of business. If however, which is denied, it did receive the sum of $1,563,400 which is alleged in 616G of 1988, or any other sum from moneys paid to it by Messrs. Parker and Parker, and cannot rely upon s.123(1) of the Bankruptcy Act 1966, then it contends that the La Rosas are liable to it in respect of any amount that it is ordered to repay. Gilpin Park says it lodged a proof of debt or claim with Norgard on 30 July 1992 in respect of its contingent liability to repay the money claimed by him in 616G of 1988. But on or about 21 September 1992, Norgard gave notice that he had wholly disallowed that proof of debt or claim. By the present proceedings in 616(i) of 1988 Gilpin Park seeks orders pursuant to s.104 of the Bankruptcy Act 1966 that:
   

1. The decision of Norgard to wholly reject its proof of debt dated 30 July 1992 be reversed.

2. The proof of debt be admitted.

Whether the Gilpin Park Claim in Bankruptcy
Should be Struck Out
4. It is submitted for Norgard that there is no fact pleaded in Gilpin Park's statement of claim to support the assertion that the bankrupts would have any liability to it in the event that Gilpin Park were to be required to repay the sum of $1,563,400 claimed by Norgard. The only pleaded obligation of the bankrupts to Gilpin Park is to pay a sum of $3,334 pursuant to the share agreement. Norgard has admitted in his defence in these proceedings that if that sum is reimbursed to him by Gilpin Park then a debt due to Gilpin Park in that amount would be admitted in the bankruptcy.

1. Counsel for Gilpin Park was not in a position to make oral submissions upon the hearing of the motion beyond contending that the question should be left until after the hearing of the principal action where the relevant findings of fact would have been made and the relevant contingencies identified. Directions were made for the subsequent filing of written submissions by 23 February 1993. By a letter dated 3 March 1993 the solicitors for Gilpin Park wrote to the Court advising that no "additional" submissions would be filed.

2. The decision to strike out a pleading is not to be taken lightly, particularly when the order is sought on the basis that the statement of claim discloses no reasonable cause of action. The effect of the various authorities on the point, which I need not recite here, is that such a step is not to be taken unless the claim is manifestly untenable. In my opinion the present statement of claim is flawed to the extent that it discloses no reasonable cause of action. The claim relies upon the assumption that Mr Norgard's claim for recovery back of the sum of $1,563,400 paid by the bankrupts to Gilpin Park is successful. In many cases, a recovery back of a payment made by a bankrupt will revive a liability in discharge of which the payment was made. There is specific provision to that effect in sub-s.122(5) in relation to the setting aside and recovery of preferences. That sub-s. provides:
   

"Where:

(a) a conveyance, transfer or charge is set aside, or a payment is recovered, by the trustee in a bankruptcy in consequence of the operation of this section; or

(b) an obligation is void as against the trustee in a bankruptcy by force of this section; the creditor in whose favour the conveyance, transfer, charge, payment or obligation was executed, made or incurred may prove in the bankruptcy as if the conveyance, transfer, charge, payment or obligation had not been executed, made or incurred."

As the High Court said in N.A. Kratzmann Pty Ltd (In Liquidation) v. Tucker (No. 2) (1968) 123 CLR 295 at 303, the sub-section does no more than give statutory recognition to the principles that have prevailed in bankruptcy in relation to a proof of debt by a person to whom a preference has been given. That section of course is posited upon an antecedent liability in respect to which the preference is given. No such antecedent liability is pleaded in this case and no other basis for the claim is alleged. In my opinion the statement of claim should be struck out.

Gilpin Park's Claim Against Norgard as Liquidator of Hobourne Pty Ltd
No. 3017 of 1992
7. In action number 3017 of 1992, Gilpin Park sues Norgard in his capacity as Liquidator of Hobourne Pty Ltd. Gilpin Park asserts that it was at all material times a unitholder in the CMA Unit Trust of which Hobourne was trustee. On 2 May 1988 the trustees of that Trust are said to have resolved to distribute to unitholders the profits of the Trust for ten months ended 30 April 1988 being a sum of $3,972,762 of which Gilpin Park's share was $1,324,254. On 3 May 1988, Gilpin Park says it received a cheque drawn on the Parker and Parker trust account in the sum of $2,563,400 which included, inter alia, the sum of $1,181,166 being the distribution under the Trust less a sum of $143,088 which had already been received. A sum of $115,567 also paid apparently represented a proportion of a management fee charged to Hobourne by Automotive Holdings Ltd. The distribution and management fee were paid from profits derived by Hobourne in carrying on the businesses of Australian Auto Auctions and Town Auto Auctions. None of the profits were moneys generated by Hobourne, but trust property held on behalf of the unitholders including the applicant. Reference is then made to action number 37 of 1992 in which Norgard alleges that he is entitled to recover from Gilpin Park the sum of $1,296,733 comprising the profit distribution and the management fee. Gilpin Park denies that any of the money so received by it in its capacity as a unitholder in the CMA Unit Trust or otherwise constituted a settlement of property void as against Norgard pursuant to s.451 of the Companies Code or that Norgard is entitled to any order for repayment.

1. The statement of claim goes on to posit that Norgard succeeds in the proceedings. It asserts that Gilpin Park is entitled to claim as a debt due from Hobourne the amount ordered to be repaid to it. It complains that on 30 July 1992, Gilpin Park lodged a proof of debt in respect of its contingent liability to repay the profit distribution to Norgard and that on or about 21 September 1992 Norgard gave notice that the proof of debt had been wholly disallowed. In these proceedings, the company seeks an order under s.1301 of the Corporations Law that the decision to wholly disallow the proof of debt be reversed and that the proof of debt be admitted.

Whether the Gilpin Park Claim in the Liquidation of Hobourne Pty Ltd Should be Struck Out
9. It is submitted for Norgard that his claim against Gilpin Park in action number 37 of 1992 sets up two causes of action:

(a) A claim that Gilpin Park has received funds which constitute a settlement within the meaning of s.120 of the Bankruptcy Act.

(b) A claim that Gilpin Park received funds as constructive trustee for Hobourne Pty Ltd.

1. The s.120 claim, it is said, can only succeed if pleaded assertions are made out that the profit distribution and management fees, the subject of the proceedings, were not in fact made from the trust property of the CMA Unit Trust because they were not made from a true surplus of that Trust. If those assertions should be made out, it is said, Gilpin Park would have no claim against Hobourne in respect of the purported distribution because there would in fact have been no surplus.

2. In relation to the constructive trust claim it is submitted that in order for that claim to succeed the Court would have to hold that the funds were received by Gilpin Park as constructive trustee for Hobourne, that is that Gilpin Park had no beneficial interest in the funds. If ordered to reimburse the funds on that basis Gilpin Park, it is said, would have no claim against Hobourne. It would follow therefore, that the occurrence of the event upon which the proceedings depend, namely success of Norgard in action number 37 of 1992, necessarily would involve findings by the Court precluding any claim by Gilpin Park against Norgard. Again, in the absence of any substantive response to these submissions, I am of the view that they do indicate that the claim is fatally flawed and that no basis for the asserted liability is pleaded. In the circumstances I propose to strike out the statement of claim in number WAG 3017 of 1992.

3. In light of the conclusions which I have come to I propose to make orders that the statements of claim be struck out. I will hear from the parties as to the disposition of these proceedings otherwise.