Woodgate (Trustee) v Northop Hall Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Woodgate (Trustee) v Northop Hall Pty Ltd

[2016] FCA 370

File number: NSD 55 of 2015
Judge: RARES J
Date of judgment: 17 February 2016
Catchwords:

COURTS AND ORDERS – application to vary consent order – consent order for money paid into court from sale of disputed property to abide decision as to which party entitled – where one party sought partial payment out of fund because of impecuniosity – whether party held beneficial interest in fund – whether discretion could be exercised to set aside or vary consent orders – whether party’s alleged impecuniosity warranted order for payment out of fund

Held:  no order for payment out of funds held in Court

Legislation:

Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth)

Admiralty Act 1988 (Cth) s 29

Federal Court Rules 2011 (Cth) rr 2.42, 2.43, 39.05

Cases cited:

Adam P. Brown Male Fashion Pty Ltd v Philip Morris Inc (1981) 148 CLR 170

Baumgartner v Baumgartner (1987) 164 CLR 137

Berowra Holdings Pty Ltd v Gordon (2006) 225 CLR 364

Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226

Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661

Harvey v Phillips (1956) 95 CLR 235

Perpetual Trustee Company Limited;  Application of Chen [2010] NSWSC 808

Yuan v Xie [2015] NSWSC 492

Date of hearing: 17 February 2016
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 39
Counsel for the Applicant: CM Lawrence
Solicitor for the Applicant: Kemp Strang
Counsel for the Respondent: J Gatland
Solicitor for the Respondent: Gibson Howlin Layers
Table of Corrections
8 May 2017 Paragraph 35 has been amended.

ORDERS

NSD 55 of 2015
BETWEEN:

GILES GEOFFREY WOODGATE THE TRUSTEE OF THE PROPERTY OF GRAEME MARTIN JENNINGS A BANKRUPT

Applicant
AND:

NORTHOP HALL PTY LTD ACN 119 559 438 IN ITS OWN RIGHT AND IN ITS CAPACITY AS TRUSTEE FOR THE BROAD OAK TRUST

First Respondent

MALEYRACK NOI SNITH

Second Respondent
AND BETWEEN:

MALEYRACK NOI SNITH

Cross-Claimant on the First Cross-Claim
AND:

GILES GEOFFREY WOODGATE THE TRUSTEE OF THE PROPERTY OF GRAEME MARTIN JENNINGS A BANKRUPT

Cross-Respondent on the First Cross-Claim
AND BETWEEN:

NORTHOP HALL PTY LTD ACN 119 559 438 IN ITS OWN RIGHT AND IN ITS CAPACITY AS TRUSTEE OF THE BROARDOAK TRUST

Cross-Claimant on the Second Cross-Claim
AND:

GILES GEOFFREY WOODGATE THE TRUSTEE OF THE PROPERTY OF GRAEME MARTIN JENNINGS A BANKRUPT

Cross-Respondent on the Second Cross-Claim

JUDGE:

RARES J

DATE OF ORDER:

17 FEBRUARY 2016

THE COURT ORDERS THAT:

1.The claims in the interlocutory application for security for costs by the applicant/cross-respondent filed 11 February 2016 be dismissed.

2.The applicant/cross-respondent be granted leave to serve any outlines of evidence in reply on or before 9 March 2016.

3.The respondents/cross-claimants be granted leave to serve any outlines of evidence replying to the outlines under order 2 above, on or before 23 March 2016.

4.The claims in the…

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Details
Case
[2016] FCA 370
Decision Date

CaseChat Overview and Summary

Woodgate (Trustee) v Northop Hall Pty Ltd involved an application by Ms Snith to receive a partial payment from funds held by the court as a result of the sale of the Mosman property. Ms Snith sought payment on the basis of her alleged impecuniosity. The court was required to determine whether Ms Snith held a beneficial interest in the fund and whether the discretion to set aside or vary the consent orders could be exercised. The court also needed to consider whether Ms Snith’s alleged impecuniosity warranted an order for payment out of the fund.

The court concluded that the agreement to pay the money into court on the basis recorded in order 5e) made on 10 November 2014 should not be disturbed. The court found that the purpose of the payment into court was to put the funds into the control of the Court to abide the outcome of the proceedings. The court noted that when a person pays money into court, the circumstances in which that is done can affect the character of the person’s rights and interests in the money. The court held that Ms Snith had no beneficial interest in the fund and that the discretion to set aside or vary the consent orders could not be exercised. The court also found that Ms Snith’s alleged impecuniosity did not warrant an order for payment out of the fund.

Accordingly, the court dismissed the claims in the interlocutory application for security for costs and the claims in the interlocutory application seeking an order that Ms Snith be paid money from the funds paid into Court. The court also granted leave to the respondents to adduce evidence at the final hearing from Graeme Martin Jennings and Stuart Albert Spencer.

Orders

Orders of the court

1. The claims in the interlocutory application for security for costs by the applicant/cross-respondent filed 11 February 2016 be dismissed.

2. The applicant/cross-respondent be granted leave to serve any outlines of evidence in reply on or before 9 March 2016.

3. The respondents/cross-claimants be granted leave to serve any outlines of evidence replying to the outlines under order 2 above, on or before 23 March 2016.

4. The claims in the interlocutory application filed by the respondents/cross-claimants on 11 February 2016 seeking an order that the second respondent be paid money from the funds paid into Court be dismissed.

5. There be no order as to costs of the interlocutory applications filed on 11 February 2016.

6. Leave be granted to the respondents to adduce evidence at the final hearing from:

(a) Graeme Martin Jennings (the bankrupt); and

(b) Stuart Albert Spencer.

THE COURT NOTES THAT:

7. The respondents/cross-claimants are to continue to make efforts for Mrs Audrey Jennings to give evidence by audio-visual link from the United Kingdom at a time of day which is suitable to accommodate the differing time zones between Australia and the United Kingdom and her advanced age and circumstances.

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

Background

Background to the litigation

The bankrupt had purchased the Mosman property in May 2001 as sole registered proprietor. In June 2006, in a dealing that Mr Woodgate challenges, the bankrupt executed a registrable transfer of a one half share in that property to Ms Snith for a consideration of $1.00. That transfer was not registered until 2011, at which time the bankrupt and Ms Snith became registered proprietors as tenants in common in equal shares.Litigation background There are three separate proceedings involving the parties, all of which relate to Mr Jennings or his bankruptcy. On 10 November 2014, after Mr Jennings had become bankrupt, the Supreme Court of New South Wales made consent orders providing for the sale of the Mosman property. The consent orders empowered Mr Woodgate to sell the Mosman property on behalf of the registered proprietors and required that Ms Snith execute any contract for sale, transfer in registrable form or other document required to facilitate and complete such a sale. The orders required Mr Woodgate deduct from the proceeds of sale amounts necessary to obtain discharges of the registered mortgages and to pay the costs and expenses necessarily incurred in the conduct of the sale. Mr Woodgate then had to distribute the net balance of the proceeds of sale under order 5e) of the consent orders as follows: e)pay the net balance of the proceeds of sale of the Mosman Property (Sale Proceeds) as follows:(i)$40% to Mr Woodgate In his capacity as trustee of the bankrupt estate of Graeme Martin Jennings;(ii)60% paid into Court with such amount to be subsequently paid to Mr Woodgate or Ms Snith, or partly to Mr Woodgate and partly to Ms Snith:1)In accordance with the Court's determination in these proceedings [being proceedings brought by two of Mr Jennings’ creditors that I stayed on 8 May 2015] as to whether the transfer of part of the interest in the Mosman Property of [Mr Jennings] to Ms Snith pursuant to the [contentious] Transfer is voidable under s37A of the Conveyancing Act 1919 (NSW); and2)in accordance with the Court's determination in proceedings [that I ordered be consolidated with these proceedings] as to the extent of the interests of Mr Jennings and Ms Snith (if any) in the Mosman Property: and 3)In accordance with any orders of any Court in any cross claim or proceedings brought by Mr Woodgate in his capacity as trustee of the bankrupt estate of Mr Jennings, contending that the [contentious]Transfer was and/or is:A. voidable under section 37A of the Conveyancing Act 1919 (NSW): and/orB.voidable, void or otherwise liable, in any way, to be set aside, discharged or varied under the provisions of the Bankruptcy Act 1966 (Cth). (emphasis added) In addition, under order 7 of the consent orders made on 10 November 2014, the Supreme Court granted the parties liberty to apply on three days’ notice in relation to any matter arising. Mr Woodgate sold the Mosman property at auction and settlement occurred in February 2015. The proceedings contemplated in order 5e)(ii)3) eventuated as the proceedings in this Court. The net proceeds of the sale that Mr Woodgate paid into the Supreme Court, are now about $560,000 and are held by this Court under order 5e)(ii).

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In my opinion, on the present evidence, the agreement to pay the money into Court on the basis recorded in order 5e) made on 10 November 2014 should not be disturbed.Conclusion For those reasons, I refuse to vary that order or to make an order for payment out to Ms Snith of money from the funds in court.

Ratio Decidendi

Legal Principle Established

Ms Snith contended that in the interests of justice, orders should be made giving her some reasonable access to the legal asset that she formally held as a 50% registered proprietor, now represented by the moneys paid into Court, in a similar way to that in which the trustee was entitled to be paid 40% of the net proceeds of sale of the Mosman property so as to enable him to conduct his administration and the various proceedings in which they are engaged. Ms Snith relied on Perpetual Trustee Company Limited; Application of Chen [2010] NSWSC 808 at [22] to suggest that once a party pays money into court he or she no longer retains any legal or equitable interest in the money. She argued that the proceedings had taken considerably longer than she had appreciated at the time that the consent orders were made, and that this was another reason why it would be just and equitable to vary them. Nonetheless, Ms Snith accepted that part of the delay was due to the circumstances in which she and the bankrupt found themselves in caring for their elderly parents overseas at times when they were then unable to comply timeously with orders for the provision of their outlines of evidence to bring the case on for hearing earlier. Those difficulties have now been overcome and the matter is being readied for trial in a diligent way. Consideration The purpose of the payment into court, as reflected in the terms of order 5 made by the Supreme Court, was to put the funds into the control of the Court to abide the outcome of the proceedings. When a person pays money into court, the circumstances in which that is done can affect the character of the person’s rights and interests in the money. Ordinarily, where a person pays money into court by way of security for the outcome of proceedings, the payer retains his or her beneficial interest in the fund up to the time of judgment. In Dwight v Commissioner of Taxation (1992) 37 FCR 178 at 192, Hill J explained that the other party or parties for whom the moneys are held in court as security for any future order in his, her, its or their favour, has or have a defeasible equitable charge or lien over the moneys in respect of that potential order, but no present entitlement to them. Only at the time of judgment might an order for payment from that fund, giving effect to the decision of the Court or arbitrator, change the underlying rights in the fund. Payment of money into court can be made as security for the outcome of proceedings in that or another court or in an arbitration. For example, s 29 of the Admiralty Act1988 (Cth) which gives courts exercising jurisdiction under the Act power to order that a ship or other property (including a bail bond or P&I club letter of indemnity or guarantee) be held as security for the satisfaction of a judgment of a foreign court or arbitral award that may be made in proceedings that are either extant or prospective and the court may impose conditions for that purpose. In other cases, such as in Chen [2010] NSWSC 808, a trustee appointed simply for sale who had no other connection to the subject matter of the controversy between the parties, will pay the net proceeds of sale into court and, the trustee having recouped the expenses and entitlements of the performance of the trust, will lose all beneficial interest in the trust fund paid into court. Ordinarily, the trustee’s beneficial interest in the trust fund to secure its right to reimbursement or exoneration for liabilities properly incurred in the administration of the trust will be satisfied at the time of payment into court: cf Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at 246-247 [50] per Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ.