Kattirtzis v Zaravinos

REASONS FOR JUDGMENT (EX TEMPORE) 1 This is an application that leave be granted to the applicants who are the plaintiffs in Supreme Court proceeding 4177 of 1999 ("the Supreme Court Proceeding") pursuant to s 58(3) of the Bankruptcy Act 1996 (Cth) ("the Act") for leave now to regularise the steps which have been taken in those proceedings as from 21 February 2000 and leave to take all necessary fresh steps in the proceedings hereafter. 2 A short chronology of events is as follows. The District Court handed down judgment on 7 October 1998. The impugned transactions were in 1997 and 1998. An application under s 37A of the Conveyancing Act 1919 (NSW) in the Supreme Court was before that court first on 1 October 1999 and an order was made on that date. It is said that there was an act of bankruptcy on 5 October 1999. The petition was presented on 11 October 1999. The sequestration order was made on 21 February 2000. The report to creditors shows the present applicants as the only creditors apart from a nominal $1 for the Deputy Commissioner of Taxation. There is no evidence of any other creditors being in existence although the solicitor for the Official Trustee points out that there has been no advertising in that respect. 3 The essence of the Supreme Court Proceeding is to set aside certain transactions in relation to properties identified in those proceedings between the bankrupt and his wife. I have permitted an appearance on behalf of the wife by counsel to oppose the leave being granted in these proceedings. Without endeavouring to summarise all of the arguments, the essence of the case put by counsel for the applicant was that the applicant, having elected to pursue bankruptcy proceedings at the same time that he was pursuing the Supreme Court Proceeding, has no real basis for now coming to this court to regularise his position. 4 It is further submitted that once resort is made to the bankruptcy administration that overtakes any relief which can be granted in this proceeding. Counsel referred me to Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589 and the decision of Hill J in Re McMaster; Ex parte McMaster (1991) 33 FCR 70. Indeed, it is said that s 37A of the Conveyancing Act cannot continue to have any operation once the bankruptcy administration comes into play and he draws attention to s 121 of the Act in that respect. 5 Counsel also referred to the fact that there was no evidence of service of the current application upon the bankrupt. It is accepted by counsel for the applicant that that is so. He submits that the Official Trustee was served and that this is sufficient. It seems to me that the bankrupt is not a necessary party to proceedings under s 58(3) of the Act and I see no particular reason why the bankrupt should be heard on this application at this stage, particularly as there is a contradictor. 6 The Official Trustee has made it clear that no proceedings under s 121 of the Act will be commenced to set aside the transactions which are here in issue. There is a threshold question, that is whether leave is necessary, it being arguable that it is not, or the Supreme Court Proceeding is not a legal proceeding in respect of a provable debt. 7 I have been referred to the decision of the Full Court of this Court in Fraser v Deputy Commissioner of Taxation (1996) 69 FCR 99 which would provide support for the view that leave is presently required. Whether that be right or not the applicants do come to this court to seek leave and are therefore subject to the discretion of the court as to the grant of that leave. 8 The hearing of the proceeding in the Supreme Court has been fixed to commence tomorrow and I gather that five days have been allocated for the hearing. There has been no explanation by the applicant for the delay in applying to this court for leave but no prejudice is put forward by or to any party because of that delay. This is an unusual case: the creditors are pursuing both bankruptcy proceedings and Supreme Court proceedings at the same time and there may be circumstances where it is inappropriate to do that. It is also clear enough that there are many types of proceeding which it would be quite inappropriate to regularise by the grant of leave. Generally speaking, if there is any disadvantage to the bankrupt estate arising out of the proceedings then leave should not be granted. 9 In the present case the principal relief sought in the Supreme Court Proceeding is, as I have said, to set aside transactions entered into between the bankrupt husband and his wife prior to both the bankruptcy and the Supreme Court Proceeding. Insofar as that is concerned, it seems to be that that is wholly for the benefit of the bankrupt estate provided that appropriate conditions are laid down. Indeed, if the Supreme Court Proceeding is not to continue, then the possibility of advantage to the bankrupt estate is lost. 10 The same would not apply to any collateral claims in that proceeding for monetary relief or indeed costs against the bankrupt because that would be to the disadvantage of the bankrupt estate. I do not see any disadvantage to the bankrupt estate in relation to any proceedings against the wife. 11 Taking into account all of the circumstances, it seems to me that leave should be granted but on a basis which is clearly limited to that which is appropriate. I make the following orders: 1. Leave be granted to George Kaitirtzis and Nick Houvardas to take all necessary steps in proceeding 4177 of 1999 in the Supreme Court of New South Wales ("the Proceeding"), the proceedings nunc pro tunc as from 21 February 2000. 2. Leave to take all necessary fresh steps in the Proceeding hereafter pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth) on the following conditions: (a) leave is restricted to the proceeding for recovery of property as identified in the Proceeding and is not to include any claims for damages or other monetary relief against the bankrupt, George Zaravinos; (b) that the applicants, by their counsel, undertake to the court that: (i) in the Proceeding they will restrict relief sought to recovery of the properties identified as aforesaid; (ii) will not seek final relief without having given seven days notice to the office of the Official Trustee; (iii) will not oppose any application by the Official Trustee to be joined in the said Proceeding at any time; (iv) will ensure, by appropriate means, that the benefit of an order obtained in relation to recovery of the said properties of any of them will be received by the Official Trustee, to be held on behalf of the bankrupt estate. (3) Leave be granted without prejudice to the determination of the issues of substance which arise in the Proceeding. (4) The applicants pay the costs of the Official Trustee. 12 I will have to deal with costs in this proceeding in due course. I will then need to look at whether there is scope for monetary relief against the wife which should be covered by the leave, if that be necessary. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.