Pitman v Pantzer

BEAUMONT ACJ: 1 Before the Court is a further amended application, filed on 7 February 2001, made under s. 104 of the Bankruptcy Act 1966 ("the Act") by which Alan Pitman, the applicant (claiming to be a creditor) seeks the reversal of a decision of Warren Pantzer as trustee of the estate in bankruptcy of Thomas Richard Wenkart. 2 The matter and other related litigation between these parties has a very long history which need not be fully recited here. For present purposes, the history of the present matter commenced on 18 August 2000 when the applicant filed an application under s. 104 seeking an order that the trustee admit the whole of the applicant's proof of debt. The matter was returned in the first instance before the then docket judge on 3 October 2000, and directions for the preparation for the final hearing of the application under s. 104 were then given. The proceedings were stood over to 7 December 2000 for directions. 3 On 18 January 2001, the bankrupt brought forward a proposal under s. 73 of the Act. On 19 January 2001, notice was given of a meeting of creditors to be held for this purpose on 31 January 2001. By letter dated 24 January 2001, the solicitors acting for the applicant gave notice of their objection to the meeting of creditors. Shortly thereafter, an urgent application was made to the Court to restrain the holding of that meeting. That application came before the duty judge at the time but was subsequently transferred to my list, as duty judge. 4 Several hearings of that interlocutory application were heard by me at about that time; ultimately, I granted conditional interlocutory relief restraining the holding of the meeting. The details of those conditions is not material for present purposes, but the Court then made it plain that, in its view, the whole matter should proceed to an early final hearing. The whole matter was, of course, the question of the admission or rejection of the proofs of debt. 5 At that early stage of the proceedings, the trustee was represented, but indicated to the Court (and subsequently gave effect to this indication), that he wished to withdraw from the proceedings, having no particular interest in the outcome. Application was then made on behalf of a group of intervening creditors for leave to be joined; and, without objection, that joinder was ordered. 6 On 7 February 2001, I gave the applicant leave to file a further amended application, seeking an order that the rejection by the Trustee of certain aspects of the applicant's proof of debt dated 31 January 2000 be reversed. A further order was then sought that the decision of the trustee to admit certain debts for voting purposes be varied, so as to admit other debts in the proof of debt for the purposes of voting on the s 73 proposal. 7 On 8 February 2001, at a further hearing of the matter, I gave leave to the applicant to file amended points of claim. I then further permitted the intervening creditors to file a statement of issues, which statement became MFI 4. The matter was then fixed for hearing before me on 22 and 23 February 2001. At about this time, Mr Chippindall of counsel was retained on behalf of the intervening creditors and appeared at the hearing on 22 and 23 February, along with Mr Ogborne for the applicant. 8 At the hearing on 22 and 23 February, it emerged that a potentially substantial issue was likely to arise, wholly or in part, in respect of the question of the quantum of legal costs and expenses said to have been incurred in respect of a range of litigious matters. I was shown several lever arch folders of bills of costs and memoranda of fees, and it was obvious that if those issues were to be pursued in all their detail, some mechanism would need to be devised by the Court to cope with this burden. 9 The approach taken by the parties jointly, as it turned out, was to place to one side for the time being the question of the reasonableness of those costs and expenses; and, rather, to tender to the Court a series of questions (essentially of law) for the Court to determine, separately and on a preliminary basis, prior to inviting the Court to proceed to address any question of the reasonableness of the costs and expenses, should that become necessary. 10 To that end, a number of the issues as described in MFI 4 were picked up and, with some modifications, made the subject of a consent order which I made on 23 February 2001, to the effect that those questions be decided separately on the evidence admitted on the hearing of the further amended application. It is not necessary for immediate purposes to describe the nature of those issues, they are several in number, but as I have said, they are essentially questions of law, some of which bear upon the particular effect of a number of transactions entered into between the parties, but others of which raise more general questions going to matters such as the rule against double proof. 11 It was evident at the time, given the ocean of litigation which had been embarked upon between these parties and related parties, that any attempt to analyse the legal effect, so far as relevant, of the multiple transactions that the parties had entered into would, itself, involve a major exercise for the Court; but, in addition, there was also (as I have mentioned) some more general questions, in particular questions arising as to the possible application in the present case of the rule against double proofs. 12 The matter proceeded before me on 22 February. Much of that hearing time was taken in hearing submissions on behalf of the intervening creditors. During the hearing on 22 February, I had the benefit also of lengthy written submissions prepared by Mr Chippindall dated 21 February. The hearing resumed on 23 February and during the hearing on that day I made the consent order for the determination of a separate question previously mentioned, and commenced hearing submissions from Mr Ogborne on behalf of the applicant. 13 Early in his oral submissions, Mr Ogborne indicated that he had himself prepared some lengthy written submissions. He informed me that they were being processed at that stage and requested that the matter stand down for a short time pending their arrival. I acceded to that. However, during the course of the day Mr Ogborne further informed me that more time was needed to process the submissions and that they would not be available until at least the following day. 14 In those circumstances I was left with no choice as to the future conduct of the matter. I had set aside two days for the hearing, I had other commitments to commence immediately thereafter. Accordingly, I gave a direction on 23 February that the applicant file and serve written submissions in reply to Mr Chippindall's submissions as soon as practicable. I directed the intervening creditors to file and serve any submissions on their part in reply to Mr Ogborne's submissions. 15 In fact, there was far more delay in the receipt of Mr Ogborne's submissions than I, for one, anticipated. I listed the matter of my own motion on 7 March inquiring as to the position. Mr Ogborne informed me that the document would be forthcoming shortly, and it was. Submissions, fifty-five pages in length, bearing the date 2 March 2001, were filed and served on or about 7 March. 16 In those submissions, which were not only helpful, but, extremely thorough, a contention was advanced on behalf of the applicant that a distinction may be drawn between the position of a creditor in terms of the assessment of a creditor's right to vote, as distinct from the position that may arise in terms of the ultimate admission or rejection of a proof of debt, for audit purposes: see paragraph 10.5 of the submissions. Reliance was placed by Mr Ogborne for this purpose on a decision of my own in Zantiotis v Andrew (2) (1988) 80 ALR 299 at 302. The submission goes on to contend that this construction of another provision, namely, s. 198 of the Act, was approved by the Full Court in Loeskow v Avokh Irrigation Pty Ltd (Receiver and Manager appointed) [1996] FCA 274, a case, as it happens, of alleged double proof. Given the size of the applicant's submission dated 2 March 2001, it was not surprising that Mr Chippindall sought an extension of time by which he could respond in writing. He was able to do this by written submission dated 20 March 2001. Again, this is a helpful submission and along with Mr Chippindall's earlier written submission dated 21 February 2001, thoroughly and carefully addresses the issues. 17 However, in Mr Chippindall's submission dated 20 March 2001, it is contended that the decision of the Full Court in Loeskow has no application to the facts in this case because it was concerned only with the right to vote. It is submitted that the Trustee must admit or reject the proof of debt. The submission goes on to state: "With respect the decision of Beaumont J in Zantiotis v Andrew (1998) (No. 2) 80 ALR 299 (even though given under section 198 of the Act which is now repealed) is not relevant to Section 73 arrangements. It follows that admission to vote under a Section 73 composition is of a different ilk to that of a Part X arrangement." 18 I have carefully considered all of the written submissions; but it does seem to me that a preliminary question arises which is not, at the moment at least, one of the preliminary questions before me. That preliminary question is, as will be apprehended, whether there is a distinction - that is material for present purposes - between the position of a creditor in terms of his or her or its right to vote on the one hand, and in terms of admission to proof for all purposes on the other. 19 The result, then is, that the Court is now left in the unsatisfactory position of having to decide a preliminary question upon a series of preliminary questions. It is said, and rightly said, that collateral issues are a curse of the law: they are expensive for the parties, they consume public resources, they (by definition) never address the merits, and as a consequence resolve nothing in any satisfactory way. 20 It is true that in the second order sought in the further amended application dated 7 February 2001, an application is made to, in effect, vary the Trustee's decision so as to admit certain debts for voting purposes. However, the first order sought in the further amended application is (as has been seen) a claim that the rejection of the proof of debt, in the respects there mentioned, be reversed. That claim could only be interpreted as one seeking an admission of proof of those debts for all purposes, and not merely for the purposes of voting at the meeting. 21 As I have already said, when this matter first came before me on an urgent application for interlocutory relief to restrain the holding of the meeting, the question of voting entitlements was of paramount consideration. Once, however, the holding of that meeting was restrained, albeit upon conditions, it became clear to me as a matter of the case management of an already complex set of proceedings, that it was in the interests of all parties that the matter should proceed to a final determination of all issues; that collateral proceedings (whether in the form of a claim for an interlocutory injunction or in any other form) were to be avoided, except where absolutely necessary. 22 In those circumstances, it seems to me that I have no choice but to rescind the order for separate question and to direct that points of defence be filed on behalf of the intervening creditors and that the matter proceed to a final hearing of claim 1 in the further amended application. I emphasise to the parties that I hope and expect that a date for the hearing of this matter can be fixed in the month of June. I would expect on the timetable I am about to pronounce that a date in the middle of June would be appropriate. That date can be arranged with my associate, but I will indicate to the parties now that once I commence that hearing I will proceed on oral submissions only, and I will sit day after day until the matter is concluded. The matter will not be permitted to be adjourned for any written submission.