Sheahan (Trustee) in the matter of Frost (Bankrupt) v Frost

REASONS FOR JUDGMENT 1 This matter has a lengthy history culminating in a judgment given in the first part of 2011: Sheahan (Trustee) in the matter of Frost (Bankrupt) v Frost [2011] FCA 356 and Sheahan (Trustee) in the matter of Frost (Bankrupt) v Frost (No 2) [2011] FCA 686. Formal orders were made to give effect to those decisions after the parties were given an opportunity to make submissions as to the orders which should be made. On 21 June 2011, the Court made declaratory orders giving effect to the reasons for judgment. An appeal from the making of those orders was dismissed: Frost v Sheahan as Trustee of the Bankrupt Estate of Allen Gordon Frost [2012] FCAFC 46. 2 The consequence of those declaratory orders is that the second respondent, Paul Richardson, did not have valid and effective mortgages against the applicant in his capacity as trustee of the bankrupt estate of Allen Frost in respect of what was called in the judgments the Mayflower Crescent property. That property was thus held by Mr Sheahan as trustee of the bankrupt estate of Mr Frost as to one half, and by Mr Frost's wife as to the other half. In late 2009 Mr Frost acquired from his wife her half interest in the Mayflower Crescent property, that being held as a several ownership rather than a joint ownership. The process in the normal case would have then been to seek an order for the sale of that property and the sharing of the net proceeds of sale. 3 The other issue in the principal proceeding concerned the status of one of the two issued shares in Ambrose Baker and Partners (Holdings) Pty Ltd (ABH) held in the name of Mr Frost at the time of his bankruptcy on 4 September 2000, and invested in Mr Sheahan at that time as trustee of his bankrupt estate. The issue was whether the property called the Angus Street property in the decisions was held by ABP on trust or in its own right. The declaratory order determined that it was held in its own right. 4 In addition to the declaratory orders, the parties presented proposals to the Court as to what consequential orders should be made. They were made after some adjustment by the Court on 21 June 2011. Part of those orders was directed to ensuring the sale of the Mayflower Crescent property at a proper price, and to ensuring that those involved in its sale had proper access to that property for the purpose of making sure it was improved to the point appropriate for its sale. It was implicit in those orders that Mr Frost had the capacity to impede that process and orders were made that he should not do so. In addition, at the request of the parties, Mr Frost was given the opportunity to buy at a nominated sum the half interest in the Mayflower Crescent property held by Mr Sheahan as his trustee upon the terms which are there set out. He was also given the opportunity to buy from Mr Sheahan the share in ABH which Mr Sheahan held, again on terms which are there specified. There were consequential orders. 5 By application of 30 May 2012 and heard on 5 June 2012, those orders were varied to extend the time for Mr Frost to take up those options or opportunities and to some degree to vary the terms upon which he might do so: Sheahan (Trustee) in the matter of Frost (Bankrupt) v Frost (No 3) [2012] FCA 588. The extended period of those options or opportunities has or is about to expire. By further application of 18 June 2012 Mr Frost now seeks further variation of the orders of 21 June 2011 as varied on 5 June 2012 in relation to the adjustment for rates, taxes and other expenditure which he says he has incurred on the Mayflower Crescent property and to propose an alternative method of fixing a value of his share in ABP from that which had previously been incorporated in the orders of 21 June 2011 as varied on 5 June 2012. The options or opportunities given to Mr Frost were, broadly speaking, with the consent of Mr Sheahan but there were matters of detail which the Court was requested to determine. 6 As to the Mayflower Crescent property, the order was that the price to be paid by Mr Frost if he took up that opportunity should be adjusted for all proper adjustments for payments made in respect of rates, taxes and other routine outgoings. In Order 10 of the orders made on 5 June 2012, there was provision for a memorandum to be submitted in the event of a dispute about matters of detail, in terms of the particulars specified in Order 10. That was to secure a clear identification of the disputed issue and the alternative submissions in relation to it. The present interlocutory application has not followed that direction. It is supported by extensive affidavit and exhibited material, including extensive documentation. The submissions have indicated to me that to resolve or to change the order of 5 June 2012 would involve the hearing of further evidence and the resolution of a number of subtle factual issues. I do not think it is appropriate to embark on that course, partly because of the costs involved and partly because it is done at Mr Frost's request when he now has had in excess of 12 months to take up the opportunity to acquire the Mayflower Crescent property in the terms of the previous orders. The opportunity for Mr Frost to acquire the full interest in that property directly from Mr Sheahan was not a consequence of the primary decisions, but a consensual addition to them. That consent should not routinely oblige the Court to act as a mediator to determine what should or could have been consented to. 7 It is now apparent that the parties cannot agree further upon what terms he should be given the opportunity to acquire the Mayflower Crescent property privately from Mr Sheahan. The property can be sold. There are orders in place for it to be sold. Mr Frost can participate in the sale process by endeavouring to buy that property. If he has an entitlement against Mr Sheahan in respect of moneys he has expended on that property he may pursue that entitlement in another venue. I do not think it is in the interests of justice, nor indeed that it is appropriate in this proceeding, simply to accede to his request for a further and somewhat different opportunity to acquire the Mayflower Crescent property from Mr Sheahan when in essence the orders originally made and subsequently made contemplate its sale and then put in place a structure for its sale to secure the best price reasonably obtainable in the interests of both Mr Sheahan and Mr Frost. 8 In relation to the shares in ABP, the principal asset of which is the Angus Street property, the question as to what, if any, adjustment should be made to the price at which Mr Frost might acquire the share in ABP from Mr Sheahan is a matter between them. Mr Sheahan, no doubt, wants the best price reasonably obtainable in the interests of the creditors of the bankrupt estate. There are commercial considerations relevant to Mr Frost's circumstances as to how he secures all the shares in ABP, if he wishes to. But if there is no agreement, and no option offered to him by Mr Sheahan privately which produces a result which economically Mr Frost considers acceptable, the orders protect the creditors of the bankrupt estate by appointing Mr Sheahan and Mr Lock as receivers of the Angas Street property for the purpose of its sale. The value realised can more readily then lead to the valuation and disposition of the shares or of the company itself. Mr Frost, again can participate in that process by bidding at the sale of the property. 9 There is a significant dispute as to whether, if Mr Frost were to have taken up the opportunity to purchase the share in ABP and thereby acquire control of the Angus Street property under the terms previously offered, there would or would not have been any capital gains tax or GST implications. They were raised originally when the orders were made and they have been raised again today. I do not propose to decide those questions. If Mr Frost were to have bought the share in ABP, the ownership of the Angus Street property would not in fact have changed. However that is merely an observation. 10 I propose to make no orders on the interlocutory application of 18 June 2012, but to allow the existing orders by which the Mayflower Crescent property is to be realised and the value of the share in ABP being realised through the realisation of its principal asset by the appointment of the receivers previously made. I repeat that Mr Frost is at liberty, as any person is, to participate in those sale processes by endeavouring to buy either or both of those properties in the normal manner. 11 The application of 18 June 2012 is refused. I order that Mr Frost pay the costs of and incidental to the interlocutory application of 18 June 2012. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.