Thomson, G.D. v Silvia, B.R

[1990] FCA 596

Re: GEOFFREY DAVID THOMSON and FLORENCE MARY THOMSON
And: BRIAN RAYMOND SILVIA
No. G304 of 1990
FED No. 596
Practice and Procedure - Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Davies J.(1)

CATCHWORDS

Practice and Procedure - special leave to appeal out of time

Bankruptcy - beneficiary under will - grant of probate made after discharge from bankruptcy - whether chose in action accruing during bankruptcy amounts to after acquired property of bankrupt

Bankruptcy Act 1966 (Cth) - ss.5, 116, 149

HEARING

SYDNEY

#DATE 31:10:1990

Counsel for the applicants: Mr S.J. Motbey

Solicitors for the applicants: Taperell Rutledge

Counsel for the respondent: Mr B.J. Skinner

Solicitors for the respondent: Kemp Strang and Chippindall

ORDER

Special leave to appeal out of time be refused.

The applicants pay the respondent's cost of the application.

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

JUDGE1

This is an application for special leave to file and serve a notice of appeal in respect of a judgment delivered by Lockhart J. on 30 June 1989. The principles to be applied on such an application were enunciated by Lockhart, Sheppard and Burchett JJ. in Jess v. Scott and Ors (1986) 12 FCR 187 and I adopt their Honours' exposition.

1. The matter which came before Lockhart J., whose decision is reported in (1989) 87 ALR 695, arose in the bankruptcy jurisdiction of the Court. The sequestration order against the estate of Mrs F.M. Thomson was made on 31 July 1984. On 7 August 1985, a testatrix, Eva Elizabeth Kirkness, made a last will and testament appointing Mr G.D. Thomson executor and trustee of her estate and leaving the whole of the estate to his wife, the bankrupt.

2. Mrs Thomson was discharged from her bankruptcy by the operation of s.149 of the Bankruptcy Act 1966 (Cth)("the Act") on 1 August 1987. Probate was granted to Mr Thomson on 7 September 1988. One of the principal assets of the estate was a house at 18 Bent Street, Gosford, in which Mr and Mrs Thomson had lived with the testatrix prior to her death and in which they continued to reside thereafter and in which they still reside.

3. After hearing counsel for Mr Thomson and counsel for the trustee in bankruptcy, Lockhart J. declared that all the right, title and interest of Mrs Thomson to the estate of the testatrix was and was deemed to be included in the property divisible amongst Mrs Thomson's creditors in her bankrupt estate.

4. Mr and Mrs Thomson chose not to appeal from that order, though they were advised of their right to do so. Mrs Thomson, who was suffering from ill health at the time, preferred to attempt to reach agreement with creditors of her estate, the principal creditors being her two sisters. Furthermore, Mr and Mrs Thomson did not have funds available for litigation. Since his Honour's judgment, Mrs Thomson has negotiated with her sisters but has failed to reach agreement. The trustee has sought a transfer of assets in the Kirkness estate. Early in 1990, the trustee instituted proceedings in the probate division of the Supreme Court of New South Wales for an order that the property at 18 Bent Street, Gosford be transmitted to the trustee. Subsequently, on 18 May 1990, the Supreme Court of New South Wales in its equity division ordered that "the Defendant transfer to the Plaintiff all the rights title and interest of Florence Mary Thomson to the estate of Eva Elizabeth Kirkness." Leave was granted to either party to apply on 7 days notice, presumably with respect to any matters arising out of the principal order. That decree of the Supreme Court was obtained in implementation of the declaration made in this Court.

5. Mr and Mrs Thomson, who now have some additional though limited funds, desire special leave to appeal out of time from the declaration made by Lockhart J..

6. Mr S.J. Motbey of counsel, who appeared for Mr and Mrs Thomson, submitted that the interest which Mrs Thomson had in the Kirkness' estate was not comprehended by the terms of s.116(1) of the Act which provides inter alia:-
   "116. (1) Subject to this Act -
   

(a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him, or has devolved or devolves on him, after the commencement of the bankruptcy and before his discharge;

(b) the capacity to exercise, and to take proceedings for exercising, all such powers in, over or in respect of property as might have been exercised by the bankrupt for his own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his discharge; ...

is property divisible amongst the creditors of the bankrupt."

1. Mr Motbey submitted that his Honour's declaration was inconsistent with the decision of the Judicial Committee in Commissioner of Stamp Duties (Qld) v. Livingston (1965) AC 694 and that an interest which a beneficiary had in an unadministered estate was a mere expectancy which was not property acquired or devolving on the beneficiary prior to the completion of the administration of the administration of the testatrix's estate and was not a power over and in respect of property. Mr Motbey submitted that the judgment of Lockhart J. and the earlier judgment of Sheppard J. in Re Pevsner; Ex parte Trustee in Bankruptcy (1983) 68 FLR 254 were incorrect having regard to Commissioner of Stamp Duties (Qld) v. Livingston and Lord Sudeley v. Attorney-General (1897) AC 11. It was submitted that, if the judgment of Lockhart J. stood, the trustee in bankruptcy would obtain property to which he was not entitled and that Mrs Thomson would suffer prejudice thereby.

2. However, I am of the view that the judgment of Lockhart J. was clearly correct for the reasons which his Honour stated. Lord Sudeley's case and Livingston's case both were concerned with the application of a taxing statute under which both the location of an asset and its valuation were significant. See the opinion of their Lordships in Livingston's case, delivered by Lord Radcliffe at pp 706, 709 and 717. The crux of their Lordships opinion is stated at p 717 where Lord Radcliffe states:-
   

"... their Lordships regard it as clearly established that Mrs Coulson was not entitled to any beneficial interest in any property in Queensland at the date of her death. What she was entitled to in respect of her rights under her husband's will was a chose in action, capable of being invoked for any purpose connected with the proper administration of his estate; and the local situation of this asset, as much under Queensland law as any other law, was in New South Wales, where the testator had been domiciled and his executors resided and which constituted the proper forum of administration of his estate."

Likewise in the High Court Fullagar J. said at (1960) 107 CLR 411 at pp 435-6:-

"Proceeding on this basis, the courts have consistently held in a large number of cases that the right of a residuary legatee or next of kin, before the administration of the estate is complete, is a right against the executors or administrators to have the estate duly administered, and the residue ascertained and disposed of according to the will or according to law. From the nature of the right it follows that it must be treated as situate in the place of administration, or the principal place of administration, of that estate - the place where the executors are, and where they must, or most naturally would, be sued. The locality, natural or artificially ascribed, of the assets comprising the estate is immaterial."

1. This principle does not support Mr Motbey's proposition that a beneficiary who has an entitlement to the whole of an administered estate has, during administration, only a mere expectancy which is not in the nature of property. The contrary is well established. In Lord Sudeley's case, the interest was held to be personal property situated in the United Kingdom where the executors resided and was subject to probate duty there. In Livingston's case Fullagar J. referred at p 440 to Watt's case (1926) 38 CLR 12 in which Knox C.J. and Gavan Duffy J. said at p 30:-
   

"`The interest of the deceased under the settlement was not an interest in the specific property in which the trust funds were for the time being invested, but a right to call on the trustees of the settlement to account to him as a beneficiary under the settlement. The trustees were resident in New South Wales and not elsewhere, and the interest of the testator was a chose in action enforceable by action against the trustees. The Courts of New South Wales were the proper forum for the enforcement by the deceased or by his representatives of his claim as a beneficiary, and his interest under the settlement was, therefore, a New South Wales asset'"

Livingston's case itself proceeded on the footing that there had been a transmission of such an interest. See the discussion in Equity Doctrines and Remedies by Meagher, Gummow and Lehane, 2nd Ed. at paras 404-7. The definition of "property" in s.5(1) of the Bankruptcy Act is wide enough to cover such an interest. As was stated in Williams' Bankruptcy Practice, 7th Ed. at p 193:-

"Generally, it has been held that, according to the general scope and spirit of the bankruptcy laws, every beneficial interest which the bankrupt has should be disposed of for the benefit of his creditors."

Thus, the submissions put by Mr Motbey do not give any cause to doubt the correctness of Lockhart J.'s judgment.

1. Moreover, the facts do not favour the case put for Mr and Mrs Thomson. The affidavits do not show that there was any matter to administer other than the action to be taken to obtain probate and formally transfer the property at 18 Bent Street, Gosford, to Mrs Thomson. From the time of the death of the testatrix in 1986, Mr and Mrs Thomson had possession and control of the property and they resided there. It was their home. It is not shown that there are any creditors to pay out or that any person other than Mrs Thomson and the trustee in bankruptcy had any interest in or respecting the property. There appears to have been an unadministered estate only in the sense that, during Mrs Thomson's bankruptcy, no step was taken to prove the will, or for that matter to advise the trustee in bankruptcy of the provisions for the will. This was not a case where an executor had to get in assets and sell assets to meet the debts and expenses of the estate. So far as the affidavits disclose, from the death of the testatrix, Mrs Thomson had the use and enjoyment of the property as she was entitled to under the will.

2. In these circumstances, and having regard to the decision taken by Mr and Mrs Thomson in 1989 not to appeal, to the desirability of obtaining a finalisation of the bankrupt's estate in the interests of the creditors and to the decree of the Supreme Court of New South Wales, I am of the view that special leave to appeal out of time should be refused. The applicants should pay the respondent's costs of the application.