George v Fletcher

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 192 of 2011

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

AND: WILLIAM JOHN FLETCHER AS TRUSTEE FOR THE BANKRUPT ESTATE OF LAUREN KAY GEORGE

JUDGE: LOGAN J DATE: 10 AUGUST 2011 PLACE: BRISBANE

REASONS FOR JUDGMENT 1 On 27 July 2011, the Federal Magistrates Court made orders in respect of the controversy which fell for adjudication as a sequel to an earlier judgment of the Full Court in George v Fletcher (Trustee) [2010] FCAFC 53. For reasons which were published that day, the orders initially made were by the Federal Magistrates Court were: 1. that the parties submit of minute of order giving effect the terms of this judgment within seven (7) days of this order; and 2. that in the absence of submission to the contrary, which submission be made in writing within seven (7) days of these orders, the first respondent (Ms George) pay the cost of and incidental to the application including reserved costs to be assessed: see Fletcher v George & Ors [2011] FMCA 553. 2 Later that day, other orders were made by the Federal Magistrates Court. Those orders were as follows. 1. The Heads of Agreement dated 19 February 2008 and exhibited at WJF-8 to the Affidavit of William John Fletcher sworn 29 October 2008 is valid and enforceable as between the parties to that Heads of Agreement; 2. The legal beneficial ownership of Lot 13 on SP145714, County of Stanley (The Land), Parish of Moggill, Title Reference 50440445 (the "Land") vests in the Applicant and is subject only to the registered interest of the Fourth Respondent, National Australia Bank Limited; 3. No trust exists in favour of Alexander George, the First Respondent or any other person over the Land, or any chattels stored at, located at, or seized from the Land; 4. All chattels seized from the First Respondent including a registered horse float, registration number 938QMZ VIN 6T9T27V97603EZ050 vest with the Applicant subject to the orders below; THE COURT ORDERS: 5. The Registrar return to the First Respondent the watch currently being held by the court as an exhibit, which the First Respondent claims to be her late mother's; 6. The Registrar return to the Applicant all items of jewellery, other than the watch referred to in order 5, which are currently being held by the court and which exhibits vest with the Applicant; 7. The First Respondent forthwith deliver to the Applicant the horse float referred to in paragraph 4 herein and execute any such instruments as may be required to effect a transfer or registration within 7 days of their submission; 8. In default of the First Respondent failing to comply with the order contained in paragraph 7, the Registrar is directed to sign all documents and do all things necessary in the place of the First Respondent to give effect to order 7; 9. The First Respondent pay all other parties' costs of and incidental to the application including reserved costs to be assessed. 10. Liberty to apply. 3 Two days later, on 29 July 2011, Ms George filed a notice of appeal in respect of the whole of the judgment and orders of the Federal Magistrates Court given on 27 July 2011. A fair reading of that notice of appeal is that it is directed not to the orders initially pronounced that day but rather, to the orders which were also, and apparently later that day, pronounced, ie, those set out above. In other words, the appeal related to the substantive rather than the procedural and cost order initially pronounced on 27 July. 4 The grounds of appeal are diffuse, to say the least. They do, though, include grounds directed to an alleged denial of procedural fairness and natural justice. Further, in the orders sought, one order that is sought is, "urgent interim interlocutory orders, to stay the orders dated 27 July 2011 and 2 June 2011". The reference in the interim orders sought in orders of 2 June 2011 is at least, for present purposes, something of a distraction. That is not to say that there is not some relevance in the events of June 2011, only that the substantive orders which were made were those latterly made on 27 July. 5 Those orders of 27 July dealt with various issues concerning the property of the bankrupt. In June 2011, the Federal Magistrates Court made orders relating to what might conveniently be termed the Moggill property on the application of the trustee as a sequel to the affecting of that property by the Brisbane floods. 6 The application by Ms George for a stay of the orders of, materially, 27 July was initially listed for hearing by me on 19 August 2011. However, as a result of a communication to the registrar, of which the other parties to the appeal had notice, made by Ms George, it came to my attention that the trustee proposed to sell by auction before then certain chattels in his possession. It transpired that sale by auction was to occur on 11 August 2011. That being the case, I brought the application for a stay on, before me this morning, initially for mention. 7 At that time, there was no appearance by or on behalf of the fifth respondent, Ms Susan Wilson. That was not altogether surprising to any of the parties given the position which Ms Wilson had adopted in the proceedings below. Appearances were, though, made by Ms George and by each of the other respondents. The interest of the second, third and fourth respondents respectively concerned the Moggill property rather than the chattels. That being the case, and there being no apparent urgency in relation to so much of the stay application as related to the Moggill property, I adjourned so much of the application as related to that to its originally - the originally fixed hearing date, 19 August 2011. 8 It was then convenient although not, it just be said, ideal for the trustee and Ms George to have determined the question of what orders by way of stay, if any, ought to be made in respect of chattels. 9 The trustee, Mr Fletcher, understandably enough, wishes to have the benefit of the substantive orders which were made on 27 July. That is particularly understandable when one has regard to affidavit evidence read before me today which gives something of the flavour of the assets which, in the trustee's present view at least, are to be found in the estate. Suffice to say, there is reason, and good reason, for the trustee to form a view that there will no longer be, as was once anticipated, a return to creditors of 100 cents in the dollar. That is very much the product, according to the evidence before me today, of the unfortunate impact which the Brisbane flood has had in relation to the worth of the Moggill property. Quite apart from that, the trustee is incurring costs in the administration of Ms George's bankrupt estate which include the housing of the chattels which are proposed to be sent to auction. I can well see, having regard to the frank disclosure by the trustee of his views concerning the realisations in prospect in the estate, that it is a source of concern to him to have a continuing expense in relation to the housing of the chattels which are covered by the orders of 27 July 2011. 10 Prima facie, the trustee is entitled to the fruits of the judgment given in the Federal Magistrates Court, and further, as was correctly pointed out in the submissions, the trustee has a duty under the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) to administer the bankrupt estate of Ms George as expeditiously as possible. As against that, Ms George is entitled as of right to appeal against the judgment given in the Federal Magistrates Court. 11 There are well settled principles which are applicable to the stay of a judgment when it is the subject of an appeal to this Court. The present Federal Court Rules 2011 do not alter the position which prevailed under previous rules of court. At present, r 36.08 provides: (1) An appeal does not: (a) operate as a stay of execution or a stay of any proceedings under the judgment subject to the appeal; or (b) invalidate any proceedings already taken. (2) However, an appellant or interested person may apply to the Court for an order to stay the execution of the proceedings until the appeal is heard and determined. (3) An application may be made under subrule (2) even though the court from which the appeal is brought has previously refused an application of a similar kind. 12 In terms of principle, the position is that an applicant for a stay of judgment pending appeal need not show special circumstances in order to obtain a stay. The discretion is a broad one. It is sufficient if the applicant for the stay demonstrates a reason in an appropriate case to warrant a favourable exercise of that broad discretion Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65. 13 The chattels which are proposed to be auctioned tomorrow are set out in the auction catalogue which is exhibit 2 in today's proceedings. In respect of those chattels, two paragraphs of the reasons for judgment of the learned federal magistrate are particularly pertinent. At para 219 and para 221 his Honour stated: [219] The bankrupt also contends for the return of property taken by the trustee in the nature of antique furnishings, china and silverware removed from the Moggill property. In the course of trial, complaint was made by the bankrupt concerning the trustee's removal of all furnishings, including basic furnishings and household effects. Following that complaint, certain basic items were released to her with the trustee retaining only the more valuable furnishings, including the antiques. No formal inventory of that material has been prepared and so I am unable to rule on specific items beyond noting that generally, those kinds of chattels do not fall within the ambit of that which is protected by the operation of regulation 6.03 (3). I make no ruling beyond indicating that in respect of any antiques, silverware and other like chattels, it is unlikely that they would fall within the prescription provided by regulation for protected property. I will adjourn this part of the application to hear parties on specific orders. … [221] In summary, I find that the bankrupt's jewellery, except for a watch which was her late mother's, her furnishings and other household chattels which should not already been delivered into her possession and the unregistered horse float, property which are vested in the trustee and are not exempt pursuant to section 116 (2) of the Bankruptcy Act. 14 The difficulty which emerged in a way that was, perhaps with respect, opaque in the notice of appeal, but not so as the hearing progressed, is that final orders came to be pronounced on 27 July 2011 apparently in respect of chattels including those to which the learned federal magistrate referred in para 219. Again, it is those same chattels which appear (along with others) in the auction catalogue. 15 As to others, the horse float is also mentioned there. That is the subject of separate attention by the learned federal magistrate in his reasons for judgment. Also mentioned in the auction catalogue is a 1996 Mitsubishi Triton 4X4 Dual-Cab Ute. That is not any longer the subject of forensic controversy. 16 As for the horse float, the conclusions reached by the learned federal magistrate were reached after very deliberate findings of credit. It does not seem to be that the question for agitation on the appeal is such that having regard to such findings, warrants the granting of a stay. There could be no expectation of any further opportunity to be heard in respect of the horse float arising from what appears in para 219 of the reasons for judgment below. 17 Another item listed in the auction catalogue is a rocking horse. The particular assertion there which Ms George submits she was not able to make is that this chattel is one which has sentimental value such that it would fall within the exclusion for which s 116(2)(ba) of the Bankruptcy Act provides. In the course of the hearing of the application today, the trustee indicated that he did not propose to press for the sale at auction tomorrow of the rocking horse, but rather he was, without admission as to the merits, if any, of the appeal, agreeable to an order which would stay the sale of that particular chattel pending the hearing and determination of the appeal. 18 There could be no question in my view that the Triton Dual-Cab Ute - mentioned in the auction catalogue - may be auctioned by the trustee. I am not persuaded that there is a case for a stay in respect of the double horse float. That a stay ought to go in respect of the rocking horse is commendably the subject of a concession on the part of the trustee. 19 That leaves the question of all of the other chattels. Ms George has marked in red ink as a copy of the catalogue those chattels in respect of which she would wish to have made submissions to the federal magistrate pursuant to the invitation apparently extended in para 219 of the reasons for judgment. It is patent that such an invitation was not able to be taken up before the orders were entered on 27 July 2011. It may well be, having regard to the evidence before the court and, for that matter, the conclusion voiced by his Honour in para 221, that there was a view reached or open as to this property not being within the exempt classes for which s 116(2) of the Bankruptcy Act provides. However, it does seem to me that Ms George has raised an arguable case in respect of a denial of procedural fairness. 20 It is in my view relevant to take into account the prospective strength of an appeal ground. Also relevant is to take into account questions of whether some irreparable harm might be done in the event that a stay were not granted. I have already referred to the difficulties which attend the administration of this estate by Mr Fletcher. They are very real. As against that, the value that is received at auction, if it transpires that Ms George succeeds, may not necessarily give her the replacement value of the chattels concerned, only a "auction value". Thus, even were the trustee to be the subject of an order to repay auction proceeds to Ms George, that might not compensate her in the event that it were to transpire that the chattels did not comprise the property of the bankrupt. 21 Another factor which I take into account, and this is a factor which is yet another burden faced by the trustee, is that the appeal is not one which, in the ordinary course events, will be heard in the final appeal sittings of the Court for this year. Those sittings will be heard in November. This appeal will not be in the list then; rather it will be heard in the ordinary course in the first appeal sittings in the new year, in February 2012. I do expressly take into account the consequence that a stay would have, in terms of the trustee having to house the chattels pending the determination of the appeal. That to me, though, while a significant consideration, is not determinative having regard to the impact, which may be visited on Ms George if she is in any way successful in respect of the chattels, of not receiving a replacement value, but rather only the auction value plus interest. 22 To make the observation that there is an arguable case is, in no way determinative of that proposition. It is just that, given the prospect of a very real loss in the event of success, in terms of ever receiving a replacement value, it seems to me that there is a case for the exercise of the discretion in respect of a stay of so much of the orders of 27 July as relate to the chattels in the auction catalogue, (exhibit 2), save for lot 1 the vehicle, and lot 3 the horse float. 23 Therefore the orders which I make are: 1. Save in respect of the registered horse float, registration number 938 QMZ VIN 6T9 T27 V97 603 EZ050, the declaration made by paragraph 4 of the orders of the Federal Magistrates Court of 27 July 2011 is stayed until the hearing and determination of the appeal, or further earlier order. 2. In amplification of that stay, the trustee is not pending the hearing and determination of the appeal or further earlier order, to dispose of any of the chattels listed in the auction catalogue, which is exhibit 2, save for the dual-cab Mitsubishi Triton being lot 1 in that catalogue and the horse float being lot 3 in that catalogue. 3. I reserve the costs of today and adjourn the further hearing of the application for a stay to 10.15am on 19 August 2011. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.