TRAN v PU

[2014] FCCA 1980

FEDERAL CIRCUIT COURT OF AUSTRALIA

TRAN v PU [2014] FCCA 1980

Catchwords:
BANKRUPTCY – Application for review of a Sequestration Order made by a Registrar of the Federal Court – consideration of terms of Deed of Settlement signed by parties – terms of Deed of Settlement a bar to proceedings – application for review dismissed – costs.

Legislation:

Bankruptcy Act 1966 (Cth)

Applicant: PHILLIP TRAN

Respondent: FENG PU

File Number: MLG 1013 of 2014

Judgment of: Judge Whelan

Hearing date: 26 August 2014

Date of Last Submission: 26 August 2014

Delivered at: Melbourne

Delivered on: 26 August 2014

REPRESENTATION

Counsel for the Applicant: Mr Selimi

Solicitors for the Applicant: MLC Lawyers

Counsel for the Respondent: Mr Moonan

Solicitors for the Respondent: O’Neill Behan & Associates

Counsel for the Trustee in Bankruptcy Mr Lilley

Solicitors for the Trustee in Bankruptcy Saxbys Lawyers

ORDERS

1. The Application for Review filed by the Applicant on 15 July 2014 be dismissed.

2. The Applicant pay the costs of the Respondent as agreed or, in default, as taxed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1013 of 2014

PHILLIP TRAN

Applicant

And

FENG PU

Respondent

REASONS FOR JUDGMENT

(As revised from transcript)

Introduction

1. This is an application for review by the Applicant Bankrupt,

   
   

   MR PHILLIP TRAN (“the Applicant Bankrupt”)[1] of a sequestration order made by Registrar Burns on 8 July 2014. The petitioning creditor,

   
   

   MR FENG PU (“the Petitioning Creditor”) opposed the granting of the application and submits that under the terms of a Deed of Settlement entered into by the parties of on 16 April 2014 (“the Deed”),[2] the Applicant Bankrupt is barred from bringing these proceedings.

   [1] Application for review filed 15 July 2014.

   [2] Affidavit of Colin Edward O’Neill filed 14 August 2014 at Annexure “CON-3”.

Background

1. The Applicant Bankrupt made wide-ranging submissions dealing with the role of the Court in hearing an application for review of a Registrar’s decision and the powers of the Court to go behind a judgment order in such proceedings.

2. With respect to the Deed, it was argued that it was not binding and conclusive insofar as the jurisdiction of a court in bankruptcy is concerned and that, under its terms, a party was precluded from ‘commencing’ a proceeding but not from ‘opposing’ or ‘defending’ a proceeding. The application for review of a sequestration order was not, in the Applicant’s submission, ‘an action, suit or proceeding commenced, continued or taken by’ the Applicant.

Conclusions

1. There is an aspect of public policy with respect to these proceedings and that is the issue of the public interest in the encouraging of settlement of legal proceedings as between parties to litigation.

2. The Court should not lightly ignore a deed of settlement entered into by parties to litigation with the benefit of legal advice, whatever the Applicant Bankrupt now says about the quality of the advice he received.

3. It is inherent in a deed of settlement, that parties agree to compromise what legal rights they believe they may have, in order to avoid further litigation.

4. In this case, the Petitioning Creditor agreed to compromise on the amount claimed and for which a default judgment had been obtained.

5. The Applicant Bankrupt in these proceedings agreed to abandon a counterclaim. I note that that counterclaim is said to arise from “loss and damage as a result of Feng and Eureka’s breach of the Agreement”.[3]

   [3] Affidavit of Colin Edward O’Neill filed 14 August 2014, Annexure “CON-3”, p.3 at para.H.

6. The Deed was a commercial settlement. While I agree that the drafting is not the best, the key provisions, for the purpose of these proceedings, lie in clause 3 and 4 of the Deed.[4]

   [4] Ibid.

7. Clause 3.0 of the Deed is headed “Bar to Proceedings”. It states:

   3.1This Deed may be pleaded as a full and complete defence by the parties to any action, suit or proceeding commenced, continued or taken by or on behalf of any party in connection with any of the matters referred to in this Deed.[5]

   [5] Affidavit of Colin Edward O’Neill filed 14 August 2014, Annexure “CON-3” at p.4.

8. Clause 4.0 of the Deed is headed “Default”. It states:

   4.1In the event that Phillip defaults in relation to any payment that is due under this Deed, and the default is not remedied within a period of seven days after the date on which Feng serves written notice of default on Phillip, then Feng shall be entitled to apply to the Court on the basis of Phillip’s non-compliance with the Bankruptcy Notice.[6]

   [6] Ibid.

9. While those clauses may be open to some differing views on how they might be construed, the interpretation which, in my view, is consistent with the commercial nature of the agreement, is that both parties agreed to consider the Deed to be a complete defence to any action, suit or proceeding, commenced, continued or taken save that should the Applicant Bankrupt default on payment, the Petitioning Creditor would be entitled to proceed with the Bankruptcy Notice by bringing a creditor’s petition.

10. It would make no sense for the Petitioning Creditor to agree to the terms of the Deed unless the Applicant Bankrupt was barred from bringing proceedings such as these as, otherwise, if the

    
    

    Applicant Bankrupt defaulted, the Petitioning Creditor would have gained nothing.

11. I am satisfied that the Deed is a bar to the application instituted in this application for review and the application is therefore dismissed.

12. There will be an order that the Applicant Bankrupt in these proceedings pay the Petitioning Creditor’s costs as agreed or as taxed.

I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of Judge Whelan

Associate: 

Date:  29 August 2014