Taylor (Trustee), in the matter of Jarvie (Bankrupt) v Jarvie

[2015] FCA 590

FEDERAL COURT OF AUSTRALIA

Taylor (Trustee), in the matter of Jarvie (Bankrupt) v Jarvie [2015] FCA 590

Citation:	Taylor (Trustee), in the matter of Jarvie (Bankrupt) v Jarvie [2015] FCA 590
Parties:	BARRY ANTHONY TAYLOR AS TRUSTEE OF THE BANKRUPT ESTATE OF PATRICIA ANNE JARVIE v PATRICIA ANNE JARVIE
File number:	NSD 491 of 2015
Judge:	KATZMANN J
Date of judgment:	16 June 2015
Catchwords:	BANKRUPTCY AND INSOLVENCY — whether estate trustee appointed by orders made under s 50 of the Bankruptcy Act 1966 (Cth) entitled to be indemnified from the bankrupt estate for remuneration and expenses for work done under the orders before bankruptcy — source of the power to make orders referring to the Registrar the determination of the amount the remuneration and expenses — whether s 50 order should be discharged — Bankruptcy Act ss 30(1), 50
Legislation:	Bankruptcy Act 1966 (Cth), ss 30, 50, 134
Cases cited:	In Re Universal Distributing Company Limited (in Liquidation) (1933) 48 CLR 171 Nationwide News Pty Ltd v Samalot Enterprises Pty Ltd (No 2) (1986) 5 NSWLR 227 Penning v Steel Tube Supplies Pty Ltd (1988) 18 FCR 568 Re Application of Central Commodities Services Pty Ltd [1984] 1 NSWLR 25 Re Bilen; Ex parte Sistrom (unreported, Neaves J , 11 April 1985) Re Penning Ex parte State Bank of South Australia (1989) 23 FCR 588 Shirlaw v Taylor (1991) 31 FCR 222 Talacko v Talacko (2010) 183 FCR 311 Victorian Securities Corporation Limited v Gadallah [2010] FMCA 113
Date of hearing:	9 June 2015
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	26
Counsel for the Applicant:	Mr R D Marshall
Solicitors for the Applicant:	Gillis Delaney Lawyers
Counsel for the Respondent:	The respondent did not appear

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 491 of 2015

IN THE MATTER OF PATRICIA ANNE JARVIE

BETWEEN:	BARRY ANTHONY TAYLOR AS TRUSTEE OF THE BANKRUPT ESTATE OF PATRICIA ANNE JARVIE Applicant
AND:	PATRICIA ANNE JARVIE Respondent

JUDGE:	KATZMANN J
DATE OF ORDER:	16 JUNE 2015
WHERE MADE:	SYDNEY

THE COURT DECLARES THAT:

1.The applicant is entitled to be indemnified for his remuneration and expenses when acting as the controller of land owned by the respondent pursuant to orders of the Court made under s 50 of the Bankruptcy Act1966 (Cth) on 3, 12 and 20 December 2013 and 7 February 2014 (“the appointment”), such indemnity secured by equitable lien against the land at 4 Jopling Street, North Ryde, New South Wales and 37 North Rothbury Street, North Rothbury, New South Wales.

THE COURT ORDERS THAT:

2.The amount of the applicant’s expenses and remuneration for acting under the appointment be referred to the Registrar for determination.

3.The appointment be discharged.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 491 of 2015

IN THE MATTER OF PATRICIA ANNE JARVIE

BETWEEN:	BARRY ANTHONY TAYLOR AS TRUSTEE OF THE BANKRUPT ESTATE OF PATRICIA ANNE JARVIE Applicant
AND:	PATRICIA ANNE JARVIE Respondent

JUDGE:	KATZMANN J
DATE:	16 JUNE 2015
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. On 14 May 2014 a sequestration order was made against the estate of Patricia Anne Jarvie. Barry Anthony Taylor, a chartered accountant and registered trustee, consented to act as her trustee in bankruptcy. Before then, Mr Taylor held an appointment as the controller of two properties, a residence in the Sydney suburb of North Ryde and a parcel of vacant land in the Hunter Valley (“the appointment”), both of which were owned by Ms Jarvie. The appointment was made by the Court on 3 December 2013 under s 50(1) of the Bankruptcy Act 1966 (Cth), which relevantly permits a court with jurisdiction to hear bankruptcy proceedings to direct a specified registered trustee to take control of a debtor’s property at any time after a bankruptcy notice is issued but before the debtor becomes bankrupt. The order was made for a limited period but extended on three occasions, most recently on 7 February 2014, when it was extended “until further order”. It has never been discharged.

2. Section 134(4) of the Act gives a trustee in bankruptcy the right to apply to the Court for directions in respect of a matter arising in connection with the administration of the estate. By application filed on 4 May 2015 Mr Taylor applied for a direction that he be justified in admitting to proof under s 82 of the Act as a debt provable in bankruptcy his expenses and remuneration in acting under the appointment. He also sought orders that the determination of the amount be referred to the Registrar and that, “to the extent necessary”, his appointment be discharged. And he applied for an order that the costs of the application be paid out of the assets of the bankrupt estate. In supplementary submissions filed after the hearing Mr Taylor proposed a different suite of orders (without alteration):

   1.Pursuant to section 30 of the Bankruptcy Act 1996 the Court declares that Barry Taylor entitled to be indemnified for his remuneration and expenses of acting as the controller of land owned by Patricia Anne Jarvie under orders made by the Court pursuant to Section 50 of the of the Bankruptcy Act 1966 on 3, 12 and 20 December 2013 and 7 February 2014, such indemnity secured by equitable lien against the land at 4 Jopling Street North Ryde New South Wales and 37 North Rothbury Street North Rothbury New South Wales.

   2. Pursuant to section 30 of the Bankruptcy Act 1966, the amount of Barry Taylor's expenses and remuneration for acting under his appointment made pursuant to section 50 of the Bankruptcy Act 1966 be referred to the Registrar for determination.

   3. To the extent necessary, the appointment of Barry Taylor under section 50 of the Bankruptcy Act 1966 is discharged.

   4.Reserve for further consideration any application by Barry Taylor in regard to the enforcement of his equitable lien.

3. The application is supported by Mr Taylor’s affidavit sworn on 23 April 2015.  Amongst other things, the affidavit describes the nature of the work that Mr Taylor in his capacity as controller undertook or caused to be undertaken.  It also includes Mr Taylor’s remuneration rates, a summary of his disbursements, and a report itemising the work in progress performed by him and his staff in connection with the appointment.  The claim for remuneration totals $6,088.50 including GST.  Disbursement and expenses are said to amount to $4,271.66 including GST. 

   The facts

4. The following summary is taken from Mr Taylor’s affidavit.  Ms Jarvie did not appear at the hearing, so the statements he made are uncontested.

5. The order appointing Mr Taylor as controller was made by Rares J on the application of the petitioning creditor, HWY Rentals Pty Ltd (In Liquidation), for the period from 3 December 2013 “up to and including 13 December 2013”.  His Honour also ordered that Ms Jarvie cause the certificates of title for the properties to be delivered to Mr Taylor within three days but he permitted her to continue to occupy the properties.

6. Upon his appointment as controller Mr Taylor instructed solicitors to lodge a caveat on his behalf over the titles to the two properties. 

7. On 12 December 2013 the duty judge, Perry J, made orders extending the appointment until 20 December 2013 and varying the previous order concerning the delivery up of the certificates of title so as to require Ms Jarvie to give the certificate of title to the North Ryde property “to a solicitor retained by her for her in [the] proceedings” before 9.30 am on 20 December 2013 and, if she did not retain such a solicitor, to bring the certificates to Court for a hearing scheduled on 20 December 2013; and to cause an application to the Land Titles Office for the original certificate of title for the Hunter Valley property to be brought to Court for the 20 December 2013 hearing. 

8. On 20 December 2013, the certificate of title to the North Ryde property was handed to the Court by Ms Jarvie’s son, Russell.  Perry J ordered that it be held by the Registrar for safe keeping until further order.  It does not appear that the certificate of title to the Hunter Valley property was produced as her Honour ordered that “any replacement certificate of title” for that property be delivered to the Registrar for safekeeping by 4.30 pm on the next working day after its issue.  Her Honour also extended Mr Taylor’s appointment until further order. 

9. On 7 February 2014 Perry J once again extended the appointment until further order and set down the hearing of the creditor’s petition before the Registrar on 14 May 2014.

10. Five days before the creditor’s petition was due to be heard, Mr Taylor learned from his solicitor that Ms Jarvie or someone on her behalf had removed the caveats placed on the titles to the properties, although neither he, nor anyone from his office, nor his solicitor had been served with a lapsing notice.  Mr Taylor instructed his solicitor to lodge a further caveat over the properties. 

11. Early in the afternoon of 14 May 2014 – the day the creditor’s petition was heard and the sequestration order was made – Ms Jarvie and her son attended at the office of Land & Property Information (formerly the Land Titles Office) and made an application for a new certificate of title to be issued for the North Ryde property on the ground that the original (then in the custody of the Court) had been lost.  The application was refused and the Jarvies were escorted from the premises by security.  This information was conveyed to Mr Taylor’s solicitor, Nicholas Dale, in a telephone call from the senior solicitor at Land & Property Information, who subsequently forwarded the documents comprising the application to Mr Dale.  They were annexed to Mr Taylor’s affidavit.

12. The work undertaken by Mr Taylor and his staff from the time of his appointment and described in para 16 of his affidavit was not insignificant.  In addition to lodging the caveats over the titles to the properties, it relevantly included “attend[ing] to insurance”.

    Is Mr Taylor entitled to an indemnity for his remuneration and expenses?

13. Oddly enough, in contrast to the position with a trustee in bankruptcy (see s 109(1)(a)) and a controlling trustee appointed under Pt X of the Act (see s 189AC and s 109(1)(b)), the Act does not expressly deal with payment of remuneration of, or expenses incurred by, a controller appointed under s 50.

14. In Re Penning Ex parte State Bank of South Australia (1989) 23 FCR 588 at 597 von Doussa J held at 597 that:

    as a necessary incident of the exercise of the jurisdiction under s 50, which existed between the presentation of the creditor's petition and its dismissal, after the dismissal the Court can give all necessary directions as to the distribution of property of the debtors in the control of the person who had been appointed under s 50, and can settle the proper remuneration of that person for work done prior to the dismissal of the creditor's petition.

    (Emphasis added.)

15. In Victorian Securities Corporation Limited v Gadallah [2010] FMCA 113 Smith FM relied on Re Penning to conclude that s 50 gave the Court the power to make such an order. I respectfully disagree. First, as Mr Taylor’s counsel readily conceded, Re Penning provides no support for that proposition. Secondly, once a debtor becomes bankrupt, s 50 has no more work to do. The section relevantly states:

    Taking control of debtor’s property before sequestration

    (1)At any time after a bankruptcy notice is issued, or a creditor’s petition is presented, in relation to a debtor, but before the debtor becomes bankrupt, the Court may:

    (a)direct the Official Trustee or a specified registered trustee to take control of the debtor’s property; and

    (b)make any other orders in relation to the property.

    …

    (1B)If the Court directs a trustee to take control of the debtor’s property, the Court must specify when the control is to end. 

16. It is clear from the chapeau to subs (1) that the Court’s powers may only be exercised during the period between the issuing of the bankruptcy notice or the presentation of the creditor’s petition, as the case may be, and the date of bankruptcy.

17. But the question here is not whether the Court has power to make an order for the payment of a trustee’s remuneration and expenses for work done pursuant to a s 50 order. Mr Taylor does not seek such an order. What he seeks is a declaration that he is entitled to an indemnity for his remuneration and expenses secured by an equitable lien against the properties. For the following reasons I am satisfied that he is.

18. Mr Taylor carried out work pursuant to a Court order.  In so doing, he acts as an officer of the Court:  Penning v Steel Tube Supplies Pty Ltd (1988) 18 FCR 568 at 580. That work included preserving the properties by insuring them and by placing caveats on their titles. He did so as a controller. There is no material distinction between the appointment by a court of a trustee under s 50 to take control of the debtor’s property and the appointment by a court of a receiver of a company to take control of the company’s assets: Penning at 575. It is well-recognised that a court-appointed receiver has an indemnity over the assets of the company in question and is a secured creditor with an equitable lien for his or her expenses, remuneration and costs: Re Application of Central Commodities Services Pty Ltd [1984] 1 NSWLR 25 at 27 (Needham J). Cf. Nationwide News Pty Ltd v Samalot Enterprises Pty Ltd (No 2) (1986) 5 NSWLR 227 at 230‑1 (McLelland J); Shirlaw v Taylor (1991) 31 FCR 222 at 231 (Sheppard, Burchett and Gummow JJ). The lien arises upon and survives the termination of the appointment: Nationwide News, Shirlaw, ibid.  See also In Re Universal Distributing Company Limited (in Liquidation) (1933) 48 CLR 171 at 174 (Dixon J) where the liquidator of a company, who had undertaken work and incurred expenses in “the care, preservation and reali[s]ation” of assets subject to security, was held to be entitled be paid from the fund in priority over the rights of a secured creditor (a debenture holder) in relation to those assets.

19. By analogy to the cases to which I have referred above and, absent any provision in the Bankruptcy Act to the contrary, I would hold that a trustee appointed under s 50 to take control of a debtor’s property also has an indemnity for his or her expenses and remuneration, secured by an equitable lien over the debtor’s property.

20. The declaration Mr Taylor seeks should therefore be made.

    Remaining issues

21. I am also satisfied that I should make orders referring to the Registrar the determination of the amount of Mr Taylor’s remuneration and expenses and for the discharge of his appointment.  

22. For the reasons I have already given, the power to make these orders does not derive from s 50. Rather, it derives from s 30(1), which states:

    The Court:

    (a)has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and

    (b)may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter. 

23. In Talacko v Talacko (2010) 183 FCR 311 at [18] the Full Court (Gray, Mansfield and McKerracher JJ) observed that the language used in the subsection supported the conclusion that “it should not be construed narrowly or in a confined or limited way”. The Court cited with apparent approval the following remarks in Re Bilen; Ex parte Sistrom (unreported, Neaves J , 11 April 1985):

    In my opinion s 30(1) of the Bankruptcy Act 1966 is not a provision limiting the Court’s jurisdiction. It is a facultative provision giving the Court full power, within the limits of its jurisdiction to be found elsewhere, to make such orders as it considers should be made in order to carry out and give effect to the Act.  The words used are not words of limitation but of extension. 

24. It is debatable whether it is necessary to make an order discharging Mr Taylor’s appointment under s 50, given that once the sequestration order was made there was nothing more he could do in that capacity. Nevertheless, for more abundant caution and, having regard to the form of the s 50 order last made, it is desirable to do so.

25. The final question concerns the proposed order that further consideration of any application regarding enforcement of the equitable lien be reserved.  The purpose of such an order, according to Mr Taylor’s counsel, was that (without alteration):

    Mr Taylor may seek to approach the Court by motion filed in these proceedings if he has difficulty in receiving payment under his right of indemnity. It is to be hoped that he will not need to exercise such liberty (common sense hopefully prevailing in circumstances where Mr Taylor may not need to resort to selling all of the land in the estate, and where - in the end – the bankrupt may agree to satisfy Mr Taylor’s right of  indemnity out of surplus funds due to her).

26. Thus, the premise for the proposed order is a hypothetical dispute.  It is no more appropriate to make such an order than it would be to reserve liberty to a successful applicant to apply to enforce an award of damages in the event that the respondent does not pay.  If the eventuality arises, Mr Taylor may make another application.  I therefore decline to make the final order Mr Taylor seeks.

I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.

Associate:

Dated:       16 June 2015