Salubre v Jones as trustee for the Bankrupt Estate of Pascual - [2014] FCCA 441

FEDERAL CIRCUIT COURT OF AUSTRALIA

SALUBRE v JONES AS TRUSTEE FOR THE BANKRUPT ESTATE OF PASCUAL & ANOR

[2014] FCCA 441

Catchwords:
BANKRUPTCY – Application to file and serve further amended application and statement of claim – where applicant claims to be beneficiary of bankrupt by way of constructive trust over property – where property sold by bankrupt’s trustee in bankruptcy – where amended application by seeks annulment of sequestration order made against bankrupt – where application made by third party – whether to join bankrupt to proceedings – whether owners of strata plan relating to property should be respondents to proceedings – whether amendments should be allowed – whether to restore trustee as party to the proceedings.

Legislation:

Bankruptcy Act 1966 (Cth), s.153B

Salubre v Jones as Trustee for the Bankrupt Estate of Pascual & Ors [2013] FCCA 1706

Applicant:

MARY ROSE SALUBRE

First Respondent:

Second Respondent:

MICHAEL GREGORY JONES AS TRSUTEE FOR THE BANKRUPT ESTATE OF MYLA LONTOK PASCUAL

THE OWNERS STRATA PLAN NO 10564 (“OC/SP10564”)

File Number:

SYG 2244 of 2013

Judgment of:

Judge Raphael

Hearing date:

5 March 2014

Date of Last Submission:

5 March 2014

Delivered at:

Sydney

Delivered on:

5 March 2014

REPRESENTATION

Counsel for the Applicant:

Mr G O’Shea

Solicitors for the Applicant:

Leigh Johnson Solicitors

Solicitors for the Respondent:

Bannermans Lawyers

ORDERS

Michael Gregory Jones, as Trustee of the bankrupt estate of Myla Lontok Pascual, be restored as Respondent to the proceedings.
The proceedings against the Second respondent be dismissed with costs.
The applicant have leave to file a further amended application and statement of claim, limited to her claim against the trustee arising out of her allegations of the existence of a constructive trust over property comprised of Folio Identifier 8/SP10564, such Amended Application and Statement of Claim to be filed and served by 19 March 2014 together with a copy of these Reasons.
The applicant to approach the Registry for the matter to be listed before the Bankruptcy Duty Judge on 7 April 2014.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT SYDNEY

SYG 2244 of 2013

MARY ROSE SALUBRE

Applicant

And

MICHAEL GREGORY JONES AS TRUSTEE FOR THE BANKRUPT ESTATE OF MYLA LONTOK PASCUAL

First Respondent

THE OWNERS STRATA PLAN NO 10564 (“OC/SP10564)

Second Respondent

REASONS FOR JUDGMENT

There comes before me today an application to file and serve a further amended application and statement of claim in these bankruptcy proceedings. The applicant, Mary Rose Salubre, is a person who claims that the bankrupt, Myla Lontok Pascual, was the trustee by way of constructive trust over the property comprised in Folio Identifier 8/SP10564. She brought proceedings against the trustee in bankruptcy of Ms Pascual and the owners of the Strata Plan 105634 which commenced by way of application in this Court on 23 September 2013.
There was an interim application in respect of which I gave judgment on 14 October 2013; Salubre v Jones as Trustee for the Bankrupt Estate of Pascual & Ors [2013] FCCA 1706. At [5] and [6] of that judgment I said:
“[5]It was only after Ms Pascual had been made bankrupt, as a result of allegedly not paying strata levies - which Ms Salubre says were her duty to pay and were paid, and the trustee sought to have himself registered as proprietor of the property - that Ms Salubre came out of her shell and asserted her ownership of the property. There were then no less than three cases in the Supreme Court of New South Wales, ostensibly involving a caveat being placed on the title of the property by Ms Salubre. None of those cases ever came to final determination, and each time there was a judgment given against Ms Salubre, not only dismissing the proceedings but ordering her to pay costs. As the defendant in each case was the trustee, it will be clear that he has a substantial set-off against Ms Salubre under any circumstances.
[6]While I accept the provisions of the Civil Procedure Act (2005) NSW, and Civil Procedure Regulation (2012) (NSW), that a consent dismissal does not constitute an admission, it hardly behoves someone who has had three opportunities to put their case for ownership of the property in one Court to come to this one and seek an order freezing the balance of the proceedings of sale, which, in all the circumstances, would rightly belong to the trustee for the benefit of the creditors. Once such creditor will be the trustee himself as a creditor for his costs and disbursements, including those he would have laid out in defending the proceedings by Ms Salubre that she lost and he succeeded in.”
I then make some comment as to the existence of indications that Ms Salubre may have a claim to part of the property before determining not to make the orders that were requested in that interim application. The matter then proceeded and on 2 December consent orders were made discontinuing the proceedings against the first respondent with no order as to costs.
On 10 December the matter was further considered by me and other orders were made, the first of which was:
“(1)The applicant to file and serve any application seeking leave to amend the application and statement of claim, together with the affidavits in support, by 18 December 2013.
(2)The respondent to file and serve any affidavits in respect of any application for leave by the applicant to amend by 1 February 2014.
(3)Any motion seeking leave to amend the application and statement of claim to be heard on 5 March 2014.”
There were also orders relating to the filing of submissions which did not appear to have been complied with.
The applicant comes before me today seeking leave to file and serve the amended application and statement of claim and Mr Fini appears on behalf of the strata plan owner. The draft further amended statement of claim contains the following relevant proposed amendments, the first of which can only be considered together with paragraph 1 of the existing statement of claim. These two paragraphs are in the following form:
“1.On 10 February 2012 Myla Lontok Pascual (“Myla”) was made bankrupt pursuant to a Sequestration Order of the Federal Magistrates Court of Australia.
1AThe order ought never to have been made as:
a.Myla was not served with the statement of claim upon which the debt was founded, the bankruptcy notice and the creditors petition;
b.If there was a debt owed to the second respondent at the time the order was made it was $48.00 and Myla had no other debts.
c.The Court in its discretion would not have made the sequestration order even if the debt was the amount claimed had Myla appeared at the hearing and the Court been informed that the second respondent was the sole creditor and the debt related to unpaid strata levies and costs claimed by the second respondent.
d.The Court would not have proceeded to make a sequestration order as Myla was solvent.”
It will immediately be seen that what is being sought here is for the Court to go behind the judgment which founded the bankruptcy notice and later the sequestration order made against the bankrupt. An action of this sort is rightly identified in paragraph 9 of the proposed amended application as being an application under s.153B of the Bankruptcy Act 1966 (Cth) being an application for the annulment of the bankruptcy on the basis that the sequestration order should not have been made. But that is an action which is brought by the bankrupt. It is not brought by some third party who claims an interest in property of which the bankrupt was the legal owner.
The two actions are so disparate that I would not be prepared to grant the application which was made orally to join the bankrupt in these proceedings. If the bankrupt wishes for the Court to go behind a 2011 Judgment of the Supreme Court of New South Wales and to rehearse the affidavits of service of the bankruptcy notice and petition, then he must bring that proceeding in his own name separate to this one. For that reason I do not believe that the proposed amendment in paragraph 1A is appropriate for this statement of claim nor do I believe that it is appropriate for this applicant to seek orders 9 and 10 relating to the dismissal of the creditors petition in the proposed amended application.
The second proposed amendment is found in paragraph 13 of the proposed amended statement of claim. The amended statement of claim is rehearsing the actions of the trustee who, at this stage, is not in the proceedings, having by consent been removed there from. However, the amendment is to delete some allegations against the trustee and I would permit it.
The third amendment is in paragraph 17A and it is in the following form:
“17A The loss was caused by the second respondent:
a.Obtaining a sequestration order of Myla’s estate when it had no right, entitlement or standing to obtain such an order by reason of the matters pleaded in paragraph 1A;
b.Obtaining an order when it ought not to have obtained an order by reason of the matters pleaded in paragraph 1A; and
c.Obtaining an order with the knowledge and expectation that the appointed trustee in bankruptcy would sell the Property.”
This takes up the problem of the inclusion of the owners of the strata plan as second respondent to the proceedings. It is true that if the owners of the strata plan had not sued the bankrupt for its strata levies none of the events which later occurred namely, the sale of the property and the “outing” of Ms Salubre as the beneficial owner of the property, would have occurred. But it was not the strata plan who sold the property, it was the trustee. The proper respondent to these proceedings so far as the court is concerned, would be the trustee. This is the argument put by Mr Fini on behalf of the strata plan. It cannot be said that the loss that Ms Pascual alleges was caused by the second respondent. The debt was not hers. It was the debt of the legal owner of the property, the bankrupt. Paragraph 17A will not be permitted.
Paragraph 18 is in the following form with the proposed amendments shown as having a line through the words which are proposed to be deleted:
“18.The second respondent ~~Mr Jones~~ is liable to make good that loss by paying damages, equitable compensation, ~~under the rule in Ex Parte James~~ and pursuant to section 30 of the Bankruptcy Act 1966.”
It follows hard upon paragraph 17A. Mr Jones is not the second respondent. He is not a respondent at all at the moment although he is probably the only proper respondent to the proceeding. The second respondent is the strata plan and, as I have said, in my view, it is not a proper party to these proceedings. I will not allow the proposed amendment to paragraph 18 and believe that paragraph 18 should be redrafted.
There are proposed amendments by deletion to paragraphs 21 and 22, and to 23. The court has no problem with these amendments if it is believed that they are proper to promote the case against the trustee. The court would make similar remarks in relation to the proposed amendments by deletion in paragraphs 26 to 31 noting, however, that if Mr Jones is to be made a party to the proceedings then some thought may have to be given to whether or not they are appropriately deleted.
Although the court has said that the proper respondent to the claim by Ms Salubre is the trustee, it is sensible of the fact that a consent order was made releasing the trustee from the proceedings. To the extent that the court believes that an order should be made restoring the respondent to the proceedings it is made on the basis only of allowing Mr Jones, as respondent, to make such application as he may deem necessary or fit to argue that he is not an appropriate party given what has previously occurred. The trustee was not represented today and he, therefore, did not have an opportunity to make those points to me. I believe that this is the fairest way of dealing with the issues that have been raised as a result of the applicant’s wish to continue to proceed with her claim that she is the beneficial owner of the property. This is a rather confused scenario but then the whole proceedings have been confused by what I believe is an attempt to bring in one proceeding two really unrelated matters on behalf of two different applicants.

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Judge Raphael

Associate:

Date: 7 March 2014