Pedersen v Delaveris

REASONS FOR JUDGMENT (Revised from Transcript) 1 This is an urgent application for an order giving the applicant leave pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth) (the Act) permitting her to continue with proceedings brought under the Property (Relationships) Act 1984 (NSW) (the PR Act) in the Supreme Court of New South Wales against the first respondent. There was no appearance by the first respondent at the hearing of the application though his trustee, the second respondent, did appear and made submissions in opposition to the proposed order. 2 The first respondent was made bankrupt on 25 March 2010 on his own petition. The second respondent, Andrew Wily, was appointed trustee of the first respondent's estate on that day. According to a summary prepared by the trustee of the bankrupt's statement of affairs, the bankrupt had only two significant assets namely, a motor vehicle of modest value and a property at Connells Point in New South Wales (the Connells Point property) which he acquired in around June or July 2007. According to the summary, the value of the Connells Point property is estimated to be $800,000 although there is evidence that the trustee has obtained an informal valuation suggesting that it might be worth a little more than this. 3 The summary of the statement of affairs also indicates that there is a secured creditor owed an amount of $765,000 and various unsecured creditors owed a total of $745,000. The secured creditor is Westpac Banking Corporation (Westpac), which is the registered mortgagee of the Connells Point property. There is a list of unsecured creditors included in the trustee's summary which include various relatives of the bankrupt who he claims to owe a total of $395,000, and a further amount of $200,000 which he claims to owe to Kekatos & Partners. I am informed by the trustee that Kekatos & Partners is a firm of accountants. The applicant issued a notice to produce for copies of any proofs of debt and supporting documentation provided by creditors. The trustee did not produce any documents even though it appears that he wrote to the creditors of the first respondent on or about 21 April 2010 calling for proofs of debt. 4 The applicant took me through a chronology which, for the purpose of this hearing, the trustee accepted as correct. Relevantly, the applicant and the first respondent commenced living together in rented premises in around June 2000. The applicant claims that in July 2007 she and the first respondent purchased the Connells Point property for $865,000, which was acquired in the first respondent's name using moneys advanced by Westpac. They took up residence at the Connells Point property in July 2007. The applicant claims that she contributed $43,500 towards the deposit and that she commenced making mortgage payments in respect of the Connells Point property in August 2007. 5 The applicant also claims that in July 2003 a company associated with the first respondent purchased a half share in a kindergarten for $90,000 which was sold in May 2008 for approximately $600,000. The applicant says that the first respondent received $300,000 from its sale. 6 The relationship between the applicant and the first respondent ended in September 2008, at which time she moved out of the Connells Point property. 7 In July 2009 the applicant commenced proceedings in the Supreme Court against the first respondent. The relief claimed is as follows: 1. An order pursuant to section 8 and section 20 of the Property (Relationships) Act 1984, varying or adjusting the interests of the parties in the property of the domestic relationship. 2. A declaration that the Defendant holds the Property on trust for the Plaintiff in a portion to be determined by this honourable Court. 3. An order that, pursuant to section 66G of the Conveyancing Act 1919, the Property vest in trustees for the sale of the Property. 4. An order that upon the sale of the Property the proceeds of the sale be distributed as follows and in the following priority: (a) the costs of the sale, being agents costs and commission and legal costs of sale; (b) the trustees' costs associated with the sale; (c) the residue to be divided between the Plaintiff and the Defendant in a proportion to be determined by this honourable Court. 5. An order that the Defendant pay to the Plaintiff a sum determined by this Court to be an appropriate proportion of the property of the domestic relationship. 6. An order that the Defendant pay to the Plaintiff interest on any sum adjudged to be paid by the Defendant to the Plaintiff at the rate specified in section 100 of the Civil Procedure Act. 7. An order that the Defendant pay the Plaintiff's costs of this application. 8 The affidavit evidence in the Supreme Court proceedings was filed in November and December 2009. These affidavits include affidavits from the applicant and the first respondent. The proceedings have been ready for hearing since at least March 2010. A mediation was held on 4 March 2010 which was unsuccessful. On 18 March 2010 the proceedings were then set down for hearing in May 2010. I was told there was an application made on 24 March 2010 by the second respondent to vacate the hearing date on the basis that the May dates were inconvenient to his legal representatives. That problem was quickly resolved by the allocation of new hearing dates of 3 and 4 June 2010. However, soon after the proceedings were set down for hearing, the first respondent was made bankrupt on his own petition. The Supreme Court proceedings are scheduled to be heard over two days in the latter part of next week. 9 The trustee accepts that s 58(3)(b) does not prevent the applicant from pursuing her claim for a declaration that the bankrupt holds some portion of the Connells Point property on trust for her. As to that claim, I was informed by the solicitor for the trustee that the trustee proposes to appear and resist it. However, so far as the other claims are concerned, the trustee says he opposes leave being given because it would increase the legal costs that will be incurred by him in defending the proceedings. I will return to that point later in these reasons. 10 Section 58(3) of the Act provides: Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor: (a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or (b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding. 11 There is a question as to whether s 58(3)(b) applies to the proceedings commenced by the applicant in the Supreme Court however there was very little argument before me directed to that point. I have real doubts as to whether the Supreme Court proceedings are "in respect of a provable debt" within the meaning of s 58(3)(b), at least not until such time as an order for the payment of money is made. 12 In any event, it is open to me to proceed on the assumption that leave is required without determining whether the section applies: Allanson v Midlands Credit Ltd & Anor (1977) 16 ALR 43. In that case the Full Court (Bowen CJ, Riley and Deane JJ) said (at 49): Where a court is given power to grant leave to perform a particular act, or pursue a particular course of action, and the question whether the need for such leave has arisen involves difficult and complicated questions of law or fact, it is permissible, in an appropriate case, to proceed on the basis that such leave is necessary rather than involve the parties in the futile exercise of determining, possibly after a series of appeals, whether the need for such leave has arisen.