Jones (Trustee in Bankruptcy of the estate of Tony Daniel) v Daniel

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3338/04 - MICHAEL GREGORY JONES (TRUSTEE IN BANKRUPTCY OF THE ESTATE OF TONY DANIEL) v TINA DANIEL JUDGMENT 1 The plaintiff is the trustee of the bankrupt estate of Tony Daniel. On or about 10 May 2004, he lodged caveats AA625921Q and AA625922N in respect of two parcels of land under the Real Property Act of which the registered proprietors are (and were) the plaintiff and Tina Daniel as tenants in common in equal shares. The estate or interest claimed in the property is described in each caveat as follows: "A one half interest in the freehold by virtue that the said property vests as an asset in the bankrupt estate." 2 The facts by virtue of which the estate or interest is claimed are stated to be: "The caveator was appointed trustee in the bankrupt estate of Tony Daniel on 16 December 2003. The trustee and the bankrupt were previously registered proprietors of the property. The caveator has initiated Federal Court proceedings in defence of his interest in the property." 3 By a summons filed on 9 June 2004, the plaintiff claims an order extending the operation of each such caveat until further order of the court. He does so following service of a lapsing notice. 4 The facts are uncontroversial. Before the bankruptcy of Tony Daniel, the properties were held by him and the defendant, Tania Daniel, as joint tenants. They were husband and wife. On 15 December 2003, the Family Court of Australia ordered that by 1 February 2004 Tony Daniel execute all such documents as were necessary to transfer his interest in the properties to the defendant. On 16 December 2003, Tony Daniel presented his own petition in bankruptcy by virtue of which he became a bankrupt. On 27 January 2004, the plaintiff, as trustee in bankruptcy, filed a transmission application by means of which he became the registered proprietor of an undivided one-half share in each property, the other undivided one-half share being held by the defendant. 5 With the title to each property in that state, the defendant, on 17 February 2004, filed an application in the Family Court seeking a declaration that the plaintiff's interest in each property was held beneficially for her. That application was dismissed. On 2 March 2004, the defendant filed an application in the Federal Court of Australia seeking a like declaration. On 16 April 2004, the Federal Court (Emmett J) made the following declaration (the "Trustee in Bankruptcy" being the present plaintiff and the "applicant" being the present defendant): " DECLARES that as at 18 March 2004 the Trustee in Bankruptcy holds in trust for the applicant an undivided one-half share in each of the following properties ('the Properties'): (a) the property known as and situated at 3 Hunterford Crescent, Hunterford Estate, Oatlands in the State of New South Wales being the land in folio identifier 41/270218; and (b) the property known as and situated at 24 Tennyson Street, Wetherill Park in the State of New South Wales being the land in folio identifier 72/258502."

The Federal Court also noted that the plaintiff had executed and delivered to the defendant transfers of his interest in the properties. 6 Had matters rested there, no conceivable basis for the assertion of the estate or interest claimed by the plaintiff in the caveats could have existed. The order of the Federal Court had the effect of recognising the defendant as the full beneficial owner of the undivided one-half share recorded as vested in the plaintiff. Any interest he claimed was denied by that final adjudication. 7 In the plaintiff's submission, however, matters do not rest there. By notice of appeal filed on 6 May 2004, the present plaintiff appealed to the Full Federal Court from the whole of the judgment in respect of which declarations were made on 16 April 2004. The notice of appeal states two grounds of appeal: first, that the primary judge erred in law in considering himself bound by the decision of the Full Federal Court in Official Trustee in Bankruptcy v Mateo [2003] FCAFC 26; and second, that the primary judge erred in law in declaring that the properties were, as at 18 March 2004, held in trust for the present defendant as to an undivided one-half share. There is sought in the appeal a declaration that, as at 18 March 2004, the interest of the present plaintiff (as trustee of the estate of Tony Daniel) in the properties "was held absolutely by him". 8 The plaintiff's claim to have the declaratory order made by Emmett J set aside and to be recognised, by an appropriate order of the Full Federal Court, as the full owner (albeit in his trustee capacity) of an undivided one-half share in each property was said by Mr Hall of counsel, who appeared for the plaintiff, to bring the plaintiff within the part of s.74K that refers to: "Any person who … claims to be entitled to a legal or equitable estate in land …'

Mr Hall emphasised that the task of the court under s.74K is to come to a view on the question whether the particular claim "has or may have substance". That, in his submission, means that this court must inquire into the merits of the plaintiff's appeal to the Full Federal Court and decide whether the "claim" represented by the appeal "has or may have substance", in that the appeal is likely to succeed. 9 I do not consider this to be the correct approach. A superior court of record has made what s.16(1) of the Federal Court of Australia Act 1976 describes as a "binding declaration of right" the effect of which is to define conclusively the rights of the respective parties in respect of the particular parcels of land. This court must afford full faith and credit to the declaratory order made by the Federal Court. 10 In Emanuel Management Ltd v Fosters Brewing Group Ltd (1999) 149 FLR 310, the Supreme Court of South Australia declined to entertain and transferred to the Supreme Court of Queensland a proceeding in which it was necessary to go behind a judgment of the Queensland court and to decide whether it had been properly entered. In Eagle Homes Pty Ltd v LED Builders Pty Ltd [1999] NSWSC 1049, Hodgson CJ in Eq, upon an application to set aside a statutory demand based on a Federal Court judgment debt, ultimately declined to consider the possibility of calling into question the decision of the Federal Court on the question whether execution of the judgment should be stayed pending an appeal. 11 Dawson J observed in Chamberlain v Deputy Commissioner of Taxation (1998) 164 CLR 502 that "contradictory judgments … ought not be permitted save in special circumstances". This court should therefore not inquire into the correctness of Emmett J's decision or embark upon an examination of the merits of the appeal. It must take the rights defined by the Federal Court order as it finds them and conclude that there is no substance to the claim to an interest in the relevant properties recited in the caveats, that claim being inconsistent with the rights determined by the existing Federal Court declaratory order. 12 The case before me is, in any event, summed up in the words of Windeyer J in Public Trustee v Theissl [1999] NSWSC 708: "[O]n the evidence presently available, the interest which is claimed has not been shown to exist, but merely 'might', if subsequent proceedings succeed, be shown to exist."

His Honour considered a case such as that to be one in which the element of discretion existing within s.74K should be exercised against the applicant. I take the same view of this case. The plaintiff has no more than a right of action (in the form of a right to appeal) which, if successfully pursued, may result in a court order conferring an interest in the properties. But unless and until that position is reached, there is no interest: see, for example, Elmant Pty Ltd v Dickson (2001) V ConvR 54-647. 13 The plaintiff's application for an order extending the operation of the two caveats until further order will be dismissed with costs. 14 I observe, in conclusion, that I was not informed of any steps that the plaintiff had taken in the Federal Court in an attempt to restrain dealings with the properties in order to preserve the subject matter of the appeal. Any order of that kind, being an order to protect the appellate process of the Federal Court, would appropriately be made by that court. I note without comment that, despite the reference to the Supreme Court in s.74K, both the Family Court and the Federal Court have in the past purported to make orders under that section in proceedings otherwise regularly before them: see In the marriage of Stevens (1991) 15 Fam LR 51 and Ipandco (Australia) Pty Ltd v Australian Technology Park Precinct Management Ltd [2003] FCA 1322 (noted at (2004) 78 ALJ 24). **********

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