Wilson v Sellers

[2016] FCCA 1425

FEDERAL CIRCUIT COURT OF AUSTRALIA

WILSON & ORS v SELLERS & ORS [2016] FCCA 1425

Catchwords:
BANKRUPTCY – Application for leave to proceed under s.58(3) of the Bankruptcy Act 1966 (Cth) – leave granted – prevailing factors in favour.

Legislation:

Bankruptcy Act 1966 (Cth), s.58

Civil Procedure Act 2005 (NSW), s.140
Contracts Review Act 1980 (NSW)

Cases cited:

Allanson v Midland Credit Ltd (1997) 16 ALR 43

Glass v Tarea Management (North Shore) Pty Ltd (1990) 95 ALR 752

Re McMaster; Ex Parte McMaster (1991) 33 FCR 70

Stoker v Starr [2011] FCA 746

Applicant: CAROLYN MARIE WILSON

Second Applicant: BRETT WILSON

Third Applicant: WILSONS CERAMICS PTY LTD

Respondent: KENNETH STEWART SELLERS

Second Respondent: ALICE RUHE

Third Respondent: RODERIC WILLIAM POWER

File Number: SYG 1056 of 2016

Judgment of: Judge Dowdy

Hearing date: 10 June 2016

Date of Last Submission: 10 June 2016

Delivered at: Sydney

Delivered on: 16 June 2016

REPRESENTATION

Counsel for the Applicant: Mr Fantin.

No Appearance for the Respondents.

Counsel for Interested Party: Ms O’Keefe (solicitor).

Solicitors for Interested Party: Moray & Agnew.

ORDERS

1. To the extent that such leave is required, pursuant to s.58(3)(b) of the Bankruptcy Act 1966 (Cth) leave be granted to the Applicants to take fresh steps in and continue with:

   (a)   Proceeding number 323804 of 2012 in the District Court of New South Wales at Lismore against Roderic William Power; and

   (b)  Proceeding number 62171 of 2016 in the Equity Division of the Supreme Court of New South Wales against Roderic William Power.

2. It is a condition of the leave to proceed hereby given that the Applicants and each of them not take any step to enforce any money judgment or money order made in Lismore District Court proceeding 323804 of 2012 as either heard and determined in the District Court of New South Wales itself or the Supreme Court of New South Wales if transferred thereto, without the prior leave of this Court.

3. The parties have liberty to apply on three days’ notice.

4. Make no order as to costs to the intent that all parties pay their own costs of the proceeding.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 1056 of 2016

CAROLYN MARIE WILSON

Applicant

BRETT WILSON

Second Applicant

WILSONS CERAMICS PTY LTD

Third Applicant

And

KENNETH STEWART SELLERS

Respondent

ALICE RUHE

Second Respondent

RODERIC WILLIAM POWER

Third Respondent

REASONS FOR JUDGMENT

1. By Amended Application filed in Court on 7 June 2016 the Applicants, namely Mr and Mrs Wilson and Wilson Ceramics Pty Limited, seek pursuant to s.58(3) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) the leave of the Court to continue and take fresh steps in two proceedings in which one Roderic William Power, against whom a sequestration order was made in this Court at its Melbourne Registry on 22 March 2016, is a Defendant. At the time of the sequestration order Ms Alice Ruhe and Mr Kenneth Stewart Sellers became trustees of the bankrupt estate of Mr Power. The petitioning creditor against Mr Power was Javelin Asset Management Pty Ltd (Javelin).

2. As at the date of the sequestration order Mr Power was First Defendant, and a company associated with him, Finserv Pty Ltd the Second Defendant, in a case commenced against them by the Applicants in the District Court of New South Wales at Lismore, bearing case number 323804 of 2012 (the Lismore District Court proceeding).

3. In the Lismore District Court proceeding the Applicants seek a variety of relief against Mr Power and his company, including money judgment for $877,720.75, declaratory relief that certain instruments are void or voidable and  relief under the Contracts Review Act 1980 (NSW). These claims for relief are said to be based on a contract for accounting services, professional negligence, fraud, fraudulent misrepresentation and the tort of deceit.

4. Also pending at the date of the sequestration order was the Applicants’ Summons, filed on 26 February 2016 in the Equity Division of the Supreme Court of New South Wales and bearing case number 62171 of 2016, in which Mr Power was First Defendant and his said company Second Defendant (the Supreme Court proceeding).

5. The Summons in the Supreme Court proceeding sought a transfer of the Lismore District Court proceeding into the Supreme Court of New South Wales pursuant to s.140 of the Civil Procedure Act 2005 (NSW). That Summons has now been succeeded by an Amended Summons filed in the Supreme Court on 22 April 2016.

6. At the hearing of the Amended Application in this Court Mr Fantin of Counsel appeared for the Applicants and Ms O’Keefe solicitor appeared for QBE Insurance Australia Limited (QBE) as the insurer of Mr Power and Finserv Pty Ltd for limited purposes in the Lismore District Court proceeding. Ms O’Keefe for QBE does not oppose leave to proceed being granted by the Court and the trustees of the Bankrupt Estate of Mr Power have indicated that they neither oppose or consent to the Amended Application.

7. The Respondents to the Amended Application are Ms Alice Ruhe and Mr Kenneth Sellers as the bankruptcy trustees of the Estate of Mr Power and Mr Power himself.

8. I considered that Mr Power should be joined as a Respondent in this proceeding, and that was achieved through the Amended Application filed on 7 June 2016. Mr Power has been notified of the Amended Application and he has indicated that he does not oppose leave being granted. He has today filed in Court a Notice of Appearance.

9. I note that there is a case pending in the District Court of Western Australia in which Javelin is Plaintiff and Mr and Mrs Wilson are Defendants and Cross-Claimants, but to which Mr Power is not a party. The nature of that case was put into evidence before me and may be the subject of certain settlement negotiations which have been indicated to me as currently taking place, but as the case in Western Australia and the settlement negotiations have no direct involvement in the present application before me I say no more about them.

10. I now turn to consider whether or not leave should be granted as sought in the Amended Application. I have come to the view that leave should be granted for the reasons below.

11. Section 58(3) of the Bankruptcy Act has the purpose of protecting a bankrupt and the property of the bankrupt against the enforcement of actions against him or her and enables the Court to control proceedings in respect of provable debts. The purposes of the Bankruptcy Act were stated by Hill J in Re McMaster; Ex Parte McMaster (1991) 33 FCR 70 at 72-73 as follows:

    The modern bankruptcy law serves three purposes. The first is to ensure that the assets of the bankrupt are distributed rateably among creditors. The second, which is interrelated with the first, is to ensure that one creditor does not obtain an undue advantage over other creditors. The third is to bring about the discharge of the debtor from future liability for his existing debts, so that the debtor may start afresh …

12. In support of the Amended Application the Applicants assert and maintain that their claims in the Lismore District Court proceeding largely constitute claims in respect of provable debts. It is further submitted that the proof of debt process is not appropriate in this instance because of the complexity and nature of the matters to be considered in the Lismore District Court proceeding. I accept for the purposes of the present application the correctness of both of these submissions.

13. The transfer application the subject of the Supreme Court obviously does not seek any substantive relief against Mr Power. However, I consider that it is a legal proceeding, connected with and ancillary to the Lismore District Court proceeding, and is therefore “in respect of a provable debt or debts” as claimed for in the Lismore District Court proceeding. The phrase “in respect of” in the present context of s.58(3) of the Bankruptcy Act should be given a wide construction and as Beaumont J said in Glass v Tarea Management (North Shore) Pty Ltd (1990) 95 ALR 752 at 755 in a similar context with reference to the Bankruptcy Act:

    It will be recalled that s 60(1)(b)(i) empowers the court to “stay any legal process… in respect of the non-payment of a provable debt…” (emphasis added). In my opinion, the phrase “in respect of” should, in the present context, be given a wide construction. It has been said that the phrase has the “widest possible meaning of an expression intended to convey some connection or relation between the two subject matters to which the words refer” (per Mann CJ in Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110 at 111; and see State Government Insurance Office v Rees (1979) 144 CLR 549 at 561 ;26 ALR 341: see also Sutherland-Cropper (FCR at 161).

14. Reasons supporting the grant of leave include the following.

15. First, I consider that a substantial number of the claims made in the Lismore District Court proceeding most probably fall within s.58(3) of the Bankruptcy Act as “provable debts”. However, the facts and nature of the Lismore District Court proceeding are complex and I do not consider that I have to come to a final and concluded view on whether any part of the relief claimed therein is in respect of a “provable debt” in Mr Power’s bankrupt estate. This is because as Jacobson J explained in Stoker v Starr [2011] FCA 746 ([13]) with reference to the decision of the Full Court of the Federal Court in Allanson v Midland Credit Ltd (1997) 16 ALR 43 at 48:

    [13]Their Honours went on to observe that leave may be granted without determining whether s 58(3) is enlivened. This is because the question of whether leave is required may involve difficult and complex questions of law and fact. It is, as their Honours said, therefore, permissible in an appropriate case to proceed on the basis that leave is necessary rather than to involve the parties in the futile exercise of determining, possibly after a series of appeals whether the need for such leave has arisen: Allanson at 49.

16. Second, both the Lismore District Court proceeding and the Supreme Court proceeding were commenced before the bankruptcy of Mr Power.

17. Third, it is preferable that the complex facts of the Lismore District Court proceeding be heard and determined at a hearing in a  court of law rather than by the submission of proofs of debt and adjudication thereupon by the First and Second Respondents in their role as trustees of Mr Power’s bankrupt estate.

18. Fourth, the trustees of the bankrupt estate of Mr Power do not oppose leave being granted. Mr Power does not oppose leave being granted. Further, QBE does not oppose leave being granted and has advised the Court that it is possible that the grant of leave may in fact have a tendency to assist in the overall settlement of the Lismore District Court proceeding and the Supreme Court proceeding. Javelin has indicated to the Court that it neither consents nor opposes.

19. Accordingly, in all the circumstances I consider that leave should be granted on the usual condition and accordingly I make the following orders:

    a)To the extent that such leave is required, pursuant to s.58(3)(b) of the Bankruptcy Act 1966 (Cth) leave be granted to the Applicants to take fresh steps in and continue with:

    (i)Proceeding number 323804 of 2012 in the District Court of New South Wales at Lismore against Roderic William Power; and

    (ii)Proceeding number 62171 of 2016 in the Equity Division of the Supreme Court of New South Wales against Roderic William Power.

    b)It is a condition of the leave to proceed hereby given that the Applicants and each of them not take any step to enforce any money judgment or money order made in Lismore District Court proceeding 323804 of 2012 as either heard and determined in the District Court of New South Wales itself or the Supreme Court of New South Wales if transferred thereto, without the prior leave of this Court.

    c)The parties have liberty to apply on three days’ notice.

    d)Make no order as to costs to the intent that all parties pay their own costs of the proceeding.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Judge Dowdy

Associate: 

Date:  16 June 2016