Steiner v Strang

Supreme Court of NSW|2017-06-30|Before: Kunc J

Summary

This judgment resolves a notice of motion brought in family provision proceedings in which I reserved judgment on 29 May 2017 after a six day hearing. The proceedings concern the estate of the late Dorothy Margaret Steiner ("Mrs Steiner"). Unfortunately, a great deal of litigation has attended the estate both in Australia and the United States. Her estate was originally valued at in excess of $14,000,000. Approximately $5,600,000 remained available to satisfy pecuniary legacies at the time of the family provision hearing.
The applicant on the present motion is the plaintiff in the proceedings, Mr John Steiner. He is Mrs Steiner's son. Without intending any disrespect I shall refer to him as "John" and to his motion as "John's motion". John received a specific legacy of $2,000,000 (and a half share in residue which will have no value) under Mrs Steiner's will. He has already received interim distributions of approximately $788,000. However, he says that his parlous financial position and difficult circumstances in life warrant an order for additional provision.
The respondents to the motion are three other beneficiaries of Mrs Steiner's estate and a company connected to them. I shall refer to the respondents compendiously as the "Creditors". Although on notice of John's motion, the executor defendants in the substantive proceedings took no part in this most recent argument.

The facts

Mrs Steiner died on 12 October 2011.
John commenced these family provision proceedings by summons filed on 13 June 2012.
In 2014 John commenced proceedings against the Creditors (the "Other Proceedings"). On 12 April 2016, Slattery J determined those proceedings against John: Steiner v Strang [2016] NSWSC 395. John was ordered to pay the Creditors' costs of the Other Proceedings.
On 25 April 2017 a certificate of assessment of the costs of the Other Proceedings was issued in the amount of $460,003.72. Another certificate of the same date certified the costs of the assessment as $21,498.65.
On 18 May 2017 a District Court judgment was entered in favour of the Creditors against John for $460,003.72 based upon the certificate of the costs of the Other Proceedings.
I heard these proceedings, together with related proceedings, over six days commencing on 22 May 2017 and reserving judgment on 29 May 2017. The proceedings are not straightforward. As far as possible, the practice of this Division is to deliver judgments within three months of the completion of submissions. I am unable to express a view whether that will be able to done in this case. However, it is very unlikely that judgment will be delivered before 31 July 2017 (see paragraph [23] below).
The Notice was issued on 7 June 2017, relying upon the District Court judgment referred to in paragraph [16] above.
The Notice was served on 12 June 2017.
John's motion is dated 21 June 2017.
Assuming the Notice is not complied with, John will commit an act of bankruptcy this coming Thursday, 6 July 2017.
The evidence in the family provision proceedings was that - notwithstanding the interim distributions referred to in paragraph [2] above - John has liabilities of approximately $2,300,000 and assets of $556,000 with the pension providing his only income. Approximately half of John's liabilities are the product of costs orders in litigation he has instigated.
One of John's assets is the home in which he lives with his wife and adult son. That home is subject to a mortgage to Bank of Queensland ("BOQ"), securing approximately $507,000, and under which John is now in default. BOQ has agreed to forbear on taking repossession of the home until 31 July 2017. Inquiries made at my request at the end of the family provision hearing as to whether BOQ would take no steps past that date pending delivery of judgment yielded this response (which was forwarded to my chambers with the consent of the parties to the family provision proceedings): "…given the indulgences already granted, the delays BOQ has been subjected to in enforcement of its rights and the terms of the deed, BOQ anticipates that it will be unwilling to provide an extension past 31 July if the judgment remains reserved. Notwithstanding and without prejudice to BOQ's rights, any update provided and extension requested by Mr Steiner closer to 31 July will be considered at that more appropriate time."
Assuming an act of bankruptcy was committed and a creditor's petition was presented expeditiously, and if John made no applications to delay the process, it is unlikely that the Federal Circuit Court will make a sequestration order before late September or early October 2017.

John's submissions

John submitted that his motion did not invoke the BA. He contended that his application did not fall under the exclusive jurisdiction of the federal courts because, having regard to the definition of "bankruptcy" in s 5(1) of the BA, it did not invoke or constitute "jurisdiction or proceedings under or by virtue of" the BA. John's motion was, he said, similar to the circumstances considered by such as by Austin J in Sutherland v Brien (1999) 149 FLR 321; [1999] NSWSC 155 ("Sutherland"), in which his Honour had to determine whether certain transactions were void under s 120 of the BA. His Honour said: "[4] Given that the question of timing has been resolved, the only issue for me to determine is whether the deed of guarantee and mortgage executed by Mr and Mrs Roberts, amended by their subsequent consents which increased the amount of guaranteed monies, are void as against the defendants under s120 of the Bankruptcy Act. If they are, the defendants will substantially or wholly succeed on the cross-claim and the summons will be dismissed; if they are not, the plaintiffs are entitled to the relief sought in the summons and the cross-claim will fail. The parties have agreed that whatever be the outcome of the s120 issue, they will invite me to order that the costs of the plaintiffs and the defendants be paid out of the fund held in Mr Sutherland's trust account. The Court's Jurisdiction [5] Before proceeding further I must deal with a preliminary point concerning this Court's jurisdiction. S27(1) of the Bankruptcy Act, as amended in 1996, says: 27(1) The Federal Court has jurisdiction in bankruptcy, and that jurisdiction is exclusive of the jurisdiction of all courts other than the jurisdiction of the High Court under s75 of the Constitution. [6] According to s5 'bankruptcy', in relation to jurisdiction or proceedings, means any jurisdiction or proceedings under or by virtue of the Bankruptcy Act. 'Proceeding' means a proceeding under the Bankruptcy Act. [7] Neither party asserts that s27(1) deprives this Court of jurisdiction to deal with the present proceedings. On the contrary, they have been anxious for me to hear and determine the matter. However, prior to the hearing counsel properly drew my attention to s27(1) and invited me to satisfy myself on the question of jurisdiction before the commencement of the hearing. I did so. [8] In my opinion, s 27(1) does not have the effect of giving the Federal Court exclusive jurisdiction to hear and determine a matter such as the present case. Here, the proceedings arise out of claims to a fund held in a trust account. The proceedings have been brought for a determination of those claims and for orders as to the payment of the fund. Although the legal issue to be determined in the proceedings relates to the proper construction and application of a section of the Bankruptcy Act, the proceedings themselves are not 'proceedings under or by virtue of' the Bankruptcy Act. Rather, they are proceedings which invoke the Court's well-established jurisdiction to determine and declare rights to property and make orders as to its destination. Consequently, these proceedings do not fall within the definition of 'bankruptcy' in relation to jurisdiction or proceedings, and do not fall within the 'jurisdiction in bankruptcy' which s 27(1) vests exclusively in the Federal Court. Proceedings of the present kind may be contrasted, for example, with a petition by a creditor for a sequestration order against the estate of a debtor, where the Court exercises a statutory jurisdiction conferred by s 43 of the Bankruptcy Act."
Furthermore, the relevant distinction was explained in Meriton Apartments Pty Ltd v Industrial Court of New South Wales (2008) 171 FCR 380; [2008] FCAFC 172 ("Meriton") by Greenwood J (with whom, on this point, Branson and Perram JJ agreed): "88 The model adopted by the Bankruptcy Act 1966 upon its commencement provided for the investing of federal jurisdiction in bankruptcy (s 27(2) and s 5) in the eight courts identified in s 27(1) of that Act rather than an exclusive vesting of jurisdiction in a federal court. It would be an odd result if the subsequent conferral of exclusive jurisdiction in bankruptcy in the terms of the current s 27 of the Bankruptcy Act deprived the several courts of the States of a jurisdiction to determine whether a plaintiff has properly engaged that court's jurisdiction having regard to his or her standing by reason of the operation of one or more provisions of the Bankruptcy Act. There is a distinction between the exercise of a court's jurisdiction in a proceeding that calls into question a provision of the Bankruptcy Act on the one hand and the exercise by that court of a jurisdiction under or by virtue of the Bankruptcy Act, on the other."
Rather, it was submitted that John's motion sought in personam relief under the Court's inherent jurisdiction to protect the integrity of its own processes and to prevent unconscionable conduct.
An analogy was drawn with anti-suit injunctions, citing the decision of the plurality in CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR; [1997] HCA 33 (citations omitted) (at 391-392): "The counterpart of a court's power to prevent its processes being abused is its power to protect the integrity of those processes once set in motion. And in some cases, it is that counterpart power of protection that authorises the grant of anti-suit injunctions. Thus, for example, if "an estate is being administered … or a petition in bankruptcy has been presented … or winding-up proceedings have been commenced … an injunction [may be] granted to restrain a person from seeking, by foreign proceedings, to obtain the sole benefit of certain foreign assets". Similarly, as Gummow J pointed out in National Mutual Holdings Pty Ltd v Sentry Corp, a court may grant an injunction to restrain a person from commencing or continuing foreign proceedings if they, the foreign proceedings, interfere with or have a tendency to interfere with proceedings pending in that court. The inherent power to grant anti-suit injunctions is not confined to the examples just given. As with other aspects of that power, it is not to be restricted to defined and closed categories. Rather, it is to be exercised when the administration of justice so demands or, in the context of anti-suit injunctions, when necessary for the protection of the court's own proceedings or processes. Quite apart from the inherent power of a court to protect its own processes, a court may, in the exercise of the power deriving from the Chancery Court, make orders in restraint of unconscionable conduct or the unconscientious exercise of legal rights. If the bringing of legal proceedings involves unconscionable conduct or the unconscientious exercise of a legal right, an injunction may be granted by a court in the exercise of its equitable jurisdiction in restraint of those proceedings no matter where they are brought. In some cases, the equitable jurisdiction to restrain unconscionable conduct may be exercised in aid of legal rights. Thus, as the respondents correctly contend, if there is a contract not to sue, an injunction may be granted to restrain proceedings brought in breach of that contract, whether brought here or abroad. Similarly, an injunction may be granted in aid of a promise not to sue in a foreign jurisdiction constituted, for example, by an agreement to submit to the exclusive jurisdiction of the courts of the forum."
The Court was also referred to the recent decision of Elliott J concerning anti-suit injunctions in Cargill Australia Ltd v Viterra Malt Pty Ltd (No 2) [2017] VSC 283. In that case, when case management including discovery was well advanced, one of the parties commenced proceedings without notice in the United States to obtain discovery in aid of the Victorian proceedings pursuant to a provision of the United States civil code. His Honour said (citations omitted): "[42] Accordingly, there is no requirement for injunctive relief that the proceeding in the foreign jurisdiction be unlawful. The question is simply whether the use of that overseas process, in the particular circumstances of a case, "will have an impermissible tendency to interfere with the proceeding in this Court". … [52] As may be seen, this proceeding has been the subject of extensive case management from the outset. Again, although this fact, of itself, is not determinative of the outcome of the application, it is plainly relevant in determining whether or not there is a need for the court to protect its own processes. [53] Of particular significance in this case is the fact that the court had already demonstrated its concern about the amount of costs being incurred with respect to discovery. Further, by late April 2017, the court was actively involved in seeking to ensure all necessary steps were being taken for the matter to proceed to trial on 9 October 2017. [54] In summary, failing to notify the court of an intention to seek discovery by way of a foreign proceeding, and effectively shutting out the court to the management of that process, was an affront to the overall case management of the proceeding. … [70] As the matters set out above demonstrate, the processes of this court will be substantially interfered with if the Foreign Proceeding is not halted. The circumstances in which it was commenced were entirely inappropriate. [71] Whilst nothing stated in this ruling is to be taken to comment on the general appropriateness or otherwise of utilising discovery processes in a foreign jurisdiction as part of the preparation for trial in this jurisdiction, the relevant factors in this case are overwhelmingly in favour of the Cargill Parties. Without being exhaustive, those factors include the lack of notice, the timing, the extent of the discovery sought, the substantial overlap with the extensive discovery that has already been made in this proceeding and the failure to pursue avenues for further discovery in this proceeding. [72] Accordingly, in order to give effect to the overarching purpose, the Viterra Parties must be prevented from taking further steps in the Foreign Proceeding and must be compelled to take all reasonable steps to have the Foreign Proceeding discontinued."
If the inherent jurisdiction was unavailable, then John submitted that the relief he sought could be made as ancillary or consequential orders under s 66 of the Act, being "in addition to" any family provision order the Court might make. He submitted that there was no reason why such an order could not be made in anticipation of a family provision order being made, provided that the Court thought that John had a bona fide claim and the Creditors were embarking on conduct which might prejudice the efficacy of a future family provision order.
Jurisdiction or power being established, it was argued for John that if he was made bankrupt, the procedures of this Court would be interfered with or the Creditors will have engaged in unconscionable conduct.
The interference was said to arise in this way. The Court had already given significant time and resources to hearing these proceedings. If a trustee in bankruptcy was appointed, the trustee's fees and disbursements would consume much of any additional provision and John would be delayed in receiving his share. Crucially, at the heart of the proceedings was John's submission that he should receive additional provision to ensure he kept his home. If he was made bankrupt before judgment, BOQ would inevitably take possession of his home, thereby undermining a significant basis of John's claim for relief.
Insofar as unconscionable conduct is concerned, John submitted that three of the Creditors are also significant beneficiaries in Mrs Steiner's estate. Their shares of the estate would be diminished by any additional provision for John. Knowing John's financial affairs, it was submitted that there could be no proper commercial reason behind them seeking to enforce their costs judgment. While unconscionability in equity did not necessarily involve impugning the actual motives of the Creditors, the lack of commercial utility in bankrupting John should lead the Court to infer that at least the three natural Creditors were pressing the bankruptcy proceedings for the collateral benefit of the Court rejecting John's claim for additional provision if he were made bankrupt.

The Creditors' submissions

The Creditors submitted that, in substance, John's motion sought to interfere with the statutory scheme of the BA: the issuing of a bankruptcy notice (BA s 41), an act of bankruptcy for failing to comply with the bankruptcy notice (BA s 40(1)(g), the presentation of a creditor's petition (BA s 43) and the making of a sequestration order (BA s 43). Any attempt to interfere with that scheme was necessarily an appeal to jurisdiction or a proceeding "under or by virtue of the Act" for the purposes of s 5 and s 27 of the BA and therefore within the exclusive control of the federal courts.
Similarly, the inherent power of the Court was also constrained by the statutory regime laid out in the BA. The Creditors relied on this statement by the plurality in Reid v Howard (1995) 184 CLR 1; [1995] HCA 40 ("Reid") (emphasis added): "[19] The Court of Appeal proceeded on the basis either that it had inherent power to make the orders in question or that they could be made in the exercise of the jurisdiction conferred by s 23 of the Supreme Court Act 1970 (NSW). That section provides: "The Court shall have all jurisdiction which may be necessary for the administration of justice in New South Wales." [20] Although it has been said that the inherent power of a superior court cannot be restricted to defined and closed categories, the power is not at large. Nor is the jurisdiction conferred by s 23 of the Supreme Court Act. Neither the inherent power nor the completely general terms of s 23 can authorise the making of orders excusing compliance with obligations or preventing the exercise of authority deriving from statute. Thus, neither can be exercised to authorise non-compliance with a search warrant issued in the exercise of statutory power as, apparently, was intended in the present case. Nor, of course, can either be exercised to excuse compliance with a subpoena issued by the Federal Court which might occur if, for example, bankruptcy proceedings were brought against the appellant."
Turning to s 66 of the Act, the creditors submitted that the terms of s 66(1) made it clear that "in addition to" had to be in addition to an extant family provision order. The same applied for an order to be "for the purpose of giving effect to the family provision order". The construction contended for by John would have the strange result (and therefore one to be avoided) that the Court could make the ancillary order but then not make a family provision order. This would be a retrospective determination that it did not have jurisdiction to make the ancillary order.
Finally, even if the preceding submissions were wrong, the Creditors argued that none of the criteria set out in s 66(1)(a) to (k) could remotely be said to have been satisfied. Nor could an order be said to be "necessary" for the purpose of s 66(1)(l) until the Court knew it was going to make an order for additional provision and what the nature and form of the order would be.
The Creditors then turned to the question of what the Court should do if, contrary to their primary submissions, it was satisfied that it had jurisdiction or power to make the orders in John's motion. I shall briefly summarise the detailed submissions advanced on behalf of the Creditors on the discretionary issues.
The Creditors submitted that proposed order 2 (that the Notice be withdrawn) may be immediately dismissed. None of John's submissions demonstrated how the service of the Notice in and of itself has caused or will cause prejudice to John. Nor had any reason been demonstrated as to why withdrawal of the Notice is necessary to protect this Court's processes. The real focus of John's submissions was on the consequences of him being made bankrupt. I accept this submission.
To this I would add that, in any event, having been issued by the Official Receiver under s 41(1) of the BA and since served on John, there is no statutory provision allowing for the Notice to be "withdrawn" by anyone. I do not see how such an order could be made. This may be contrasted with s 47(2) of the BA, which expressly permits a creditor's petition to be withdrawn with leave.
A similar submission was made in relation to the mere filing of a creditor's petition. Nothing adverse would occur simply by the filing of the petition. Even at the hearing of the petition it would, for example, be open to John to submit that a sequestration order should not be made, or the hearing be adjourned, because of the pending family provision judgment.
So it was that the consequences of the making of a sequestration order were the focus of John's submissions.
The Creditors submitted that the making of a sequestration order would not prevent this Court adjudicating on John's claim. The proceedings would not be stayed under s 60 of the BA: Poesch v Grosvero [2013] VSC 596. Even if s 60 did apply, it was inconceivable that a trustee would not elect to prosecute the proceedings, given that no costs would be incurred in waiting for the judgment and there was a possibility that the judgment would increase the size of John's estate available to his creditors as after acquired property.
It was next submitted that there was no reason to think that John being made a bankrupt would have an effect on the outcome of the proceedings.
In terms of considering any prejudice to John, there would be none if the Court decided to award no additional provision or additional provision in an amount less than would enable him to discharge all his debts.
The only potential prejudice was theoretical and able to be cured by the Court. This would occur if John were made bankrupt before judgment was delivered and the Court was minded to give John sufficient additional provision to pay out his creditors. Then the only consequence would be that a small increase in the provision may be required to pay fees incurred by the trustee.
The next contention was that there was a public interest in bringing the affairs of insolvent persons under administration. Concentrating on John's position ignored the prejudice to the Creditors in being unable to pursue their rights under what was now a judgment debt when other creditors would not be so prevented. Furthermore, there was possible prejudice to third parties if the "relation back period" were not able to be fixed by reference to the early act of bankruptcy constituted by non-compliance with the Notice.
It was then submitted that there was no conduct on the part of the Creditors that equity would recognise as falling within an established category of unconscionability. In particular, where the Creditors had a judgment debt in their favour and a legitimate commercial interest, among other things, in establishing the "relation back period" for their own benefit and that of others, the Court could not draw the inference of the improper purpose referred to in paragraph [33] above.
Finally, if John was made bankrupt, the possibility of BOQ foreclosing in the meantime is not a prejudice of the kind that would enliven the Court's jurisdiction in and of itself. Interference with the Court's process or unconscionable conduct would have to be shown, and it had not been.

Resolution - Jurisdiction

The Court accepts the Creditors' submissions for the reasons given by them that John's motion seeks relief which falls within the exclusive jurisdiction of the federal courts. I express my reasons as follows.
Section 27 of the BA provides: "27. Bankruptcy courts (1) The Federal Court and the Federal Circuit Court have concurrent jurisdiction in bankruptcy, and that jurisdiction is exclusive of the jurisdiction of all courts other than: (a) the jurisdiction of the High Court under section 75 of the Constitution; or (b) the jurisdiction of the Family Court under section 35 or 35A of this Act. (2) To avoid doubt, subsection (1) does not: (a) confer jurisdiction in a criminal matter; or (b) exclude the jurisdiction of a court of a State or Territory under the Judiciary Act 1903 in a criminal matter relating to this Act."
Section 5(1) of the BA provides that "bankruptcy, in relation to jurisdiction or proceedings, means any jurisdiction or proceedings under or by virtue of this Act".
Therefore the question is whether John's motion meets the description of "jurisdiction or proceedings under or by virtue of" the BA.
The BA is a code. What can or cannot be done in relation to, or what follows from, a bankruptcy notice, creditor's provision or a sequestration order is determined solely by reference to the provisions of the BA. It follows that, for example, any power to order the withdrawal of a bankruptcy notice (as is sought in proposed order 2 of John's motion) must be found in the BA.
The Court accepts the Creditors' submission that the substance and effect of proposed order 1 of John's motion is to prevent the Creditors presenting a creditor's petition to the competent federal court. Putting it another way, it seeks to restrain them from exercising the right which is implicitly, but nevertheless clearly, conferred on them by s 43(1) of the BA, which provides: "43(1) Subject to this Act, where: (a) a debtor has committed an act of bankruptcy; and (b) at the time when the act of bankruptcy was committed, the debtor: (i) was personally present or ordinarily resident in Australia; (ii) had a dwelling-house or place of business in Australia; (iii) was carrying on business in Australia, either personally or by means of an agent or manager; or (iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager; the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor."
Again, because the BA is a code, if order 1 of John's motion is to be made, the power to do so must be found in the BA. That means that John's motion necessarily invokes jurisdiction or is a proceeding "under or by virtue of" the BA.
In my view, even this Court's inherent jurisdiction does not extend to making such an order. This conclusion can be explained in two ways.
First, I do not accept that John's analogy with the anti-suit injunction is apposite. In those cases the Australian court is not subject to the laws of the foreign country whose laws and procedures may have been regularly invoked by the party sought to be restrained. The injunction does not impeach or impugn those laws but acts in personam on the respondent who is subject to the jurisdiction of the Australian court. In the present case, the BA is a law of Australia which this Court is bound to uphold. This explains why the Court in Reid could conclude that neither the inherent power of a superior court or s 23 of the Supreme Court Act 1970 (NSW) could authorise this Court to excuse compliance with a subpoena issued by the Federal Court if bankruptcy proceedings had been commenced. That was something that could only be done by the court which was empowered by statute to issue the subpoena.
Second, the same result follows by giving the words "by virtue of" their proper effect. The Compact Oxford English Dictionary defines "by virtue of" to mean "by the authority of, … in consequence of, because of". The Macquarie Dictionary defines it as "by reason of". Presumably "by virtue of" is not mere surplusage so, while it may be coextensive with "under" (e.g. "by the authority of"), it must be given some additional content. In my opinion, John's motion is a proceeding brought or an appeal to jurisdiction "in consequence of" or "by reason of" the BA because it seeks to intercept the Creditors exercising their right under s 43(1) to present a creditor's petition once John has committed an act of bankruptcy. Putting it another way, but for that right under the BA, John's motion would be unnecessary. The same conclusion pertains because the source of power to make the proposed orders must be found in the BA (see paragraphs [54] to [56] above).
I do not think the conclusion I have reached is inconsistent with the decision of Austin J in Sutherland. In my view these proceedings fall within the type of case which his Honour contrasted to the one before him, the contrast being with "a petition by a creditor for a sequestration order against the estate of a debtor, where the Court exercises a statutory jurisdiction conferred by s 43" of the BA. Similarly, to adopt the language of Greenwood J in Meriton, I do not think John's motion merely "calls into question a provision of" the BA, but rather it does require "the exercise by [this] Court of a jurisdiction under or by virtue of" the BA.

Resolution - s 66 of the Act

The relevant statutory context is: "3 Definitions (1) In this Act: … "family provision order" means an order made by the Court under Chapter 3 in relation to the estate or notional estate of a deceased person to provide from that estate for the maintenance, education or advancement in life of an eligible person. … 59 When family provision order may be made (1) The Court may, on application under Division 1, make a family provision order in relation to the estate of a deceased person, if the Court is satisfied that: (a) the person in whose favour the order is to be made is an eligible person, and (b) in the case of a person who is an eligible person by reason only of paragraph (d), (e) or (f) of the definition of "eligible person" in section 57-having regard to all the circumstances of the case (whether past or present) there are factors which warrant the making of the application, and (c) at the time when the Court is considering the application, adequate provision for the proper maintenance, education or advancement in life of the person in whose favour the order is to be made has not been made by the will of the deceased person, or by the operation of the intestacy rules in relation to the estate of the deceased person, or both. … 62 Interim family provision orders and orders restraining distribution of the estate: (1) The Court may make an interim family provision order before it has fully considered an application for a family provision order if it is of the opinion that no less provision than that proposed in the interim order would be made in favour of the eligible person concerned in the final order. (2) After making an interim family provision order, the Court must proceed to finally determine the application for a family provision order by confirming, revoking or varying the interim order. (3) The Court may make an order restraining the final or partial distribution of an estate (other than a distribution under section 94 (1) of this Act or section 92A of the Probate and Administration Act 1898) pending its determination of an application for a family provision order. … 65 Nature of orders (1) A family provision order must specify: (a) the person or persons for whom provision is to be made, and (b) the amount and nature of the provision, and (c) the manner in which the provision is to be provided and the part or parts of the estate out of which it is to be provided, and (d) any conditions, restrictions or limitations imposed by the Court. (2) A family provision order may require the provision to be made in one or more of the following ways: (a) by payment of a lump sum of money, (b) by periodic payments of money, (c) by application of specified existing or future property, (d) by way of an absolute interest, or a limited interest only, in property, (e) by way of property set aside as a class fund for the benefit of 2 or more persons, (f) in any other manner the Court thinks fit. (3) If provision is to be made by payment of an amount of money, the family provision order may specify whether interest is payable on the whole or any part of the amount payable for the period, and, if so, the period during which interest is payable and the rate of the interest. 66 Consequential and ancillary orders (1) The Court may, in addition to, or as part of, a family provision order, make orders for or with respect to all or any of the following matters for the purpose of giving effect to the family provision order: (a) the transfer of property of the estate directly to the eligible person in whose favour the order is made, or to any other person as trustee for that person, (b) where property is to be held on trust, the purpose of the trust and the way in which it is to be constituted, (c) the appointment of a trustee of property of the estate, (d) the powers and duties of a trustee of property of the estate, including any trustee constituted or appointed under this section, (e) the vesting in any person of property of the estate, (f) the exercise of a right or power to obtain property for the estate, (g) the sale of or dealing with property of the estate, (h) the disposal of the proceeds of any sale or other realising of property of the estate, (i) the securing, either wholly or partially, of the due performance of an order under this Part, (j) the management of the property of the estate, (k) the execution of any necessary conveyance, document or instrument, the production of documents of title or the doing of such other things as the Court thinks necessary in relation to the performance of the family provision order, (l) any other matter the Court thinks necessary. (2) The Court may make such additional orders as it considers necessary to adjust the interests of any person affected by a family provision order and to be just and equitable to all persons affected by the order. (3) The execution of an instrument relating to property in the notional estate of a deceased person pursuant to an order under this section is not liable to duty under the Duties Act 1997."
The provisions which I have just set out demonstrate that the making of a family provision order (final or interim) is the sine qua non of Chapter 3 of the Act. Adopting that as a fundamental matter of context for the interpretation of s 66(1) (or even if it is not taken into account), the Court accepts the Creditors' submission for the reasons they advanced that s 66(1) requires a family provision order to be made before the power in s 66 is enlivened.
John accepted that result was required by the words "as part of" in s 66(1) but said that "in addition to" meant the power was at large. I respectfully disagree based on the ordinary English meaning of the words used. Something cannot be "in addition to" nothing. In other words, the orders contemplated by s 66 will only be "in addition to" if there is a family provision order.
Similarly, orders under s 66 will not be "for the purpose of giving effect to the family provision order" (emphasis added) unless one has been made.

Resolution - Discretion

Even if the Court had the jurisdiction or power in this case to make the orders sought in John's motion, the Court would decline to do so in the exercise of its discretion for two reasons.
First, I accept the Creditors' submissions that nothing in their conduct, or possible future conduct in seeking a sequestration order, represents a colourable interference with the processes of this Court or unconscionable conduct. They have an undoubted judgment debt which, prima facie, they are entitled to seek to enforce through the mechanism of bankruptcy proceedings. That is sufficient in and of itself to answer John's submission that the Court should find unconscionable conduct of the kind referred to in paragraph [33] above. In any event, I do not see how John becoming bankrupt can have any material influence on the outcome of these proceedings in circumstances where John's insolvency - in the sense of his liabilities far exceeding his assets - was a key element of his case from the start.
Nor do I see how the making of a sequestration order would interfere with the Court's delivery of judgment. I should acknowledge that, with the utmost respect, I have some difficulty accepting the correctness of Poesch (see paragraph [43] above) because Derham AsJ does not appear to have had his attention directed to s 60(5) of the BA, which defines any action that would be stayed as "any civil proceeding, whether at law or equity". However, I do not have to decide the point, because even if s 60 did operate to stay these proceedings, I readily accept the Creditors' submission that a trustee would elect to prosecute the proceedings where all that had to occur was the delivery of a judgment which could yield funds to John's bankrupt estate.
Finally, in the absence of interference with the Court's process or unconscionable conduct, I do not accept the possibility of BOQ enforcing its security against John's home if he is made bankrupt before judgment is delivered (two "ifs", neither of which is certain) to be a type of prejudice in and of itself sufficient to interfere with the Creditors' entitlement to pursue their rights under the BA. In any event, the Creditors' action will be irrelevant if BOQ does not agree to stay its hand past 31 July 2017 (as to which see paragraph [23] above). On no view of the evidence will a sequestration order be made before then.
While keeping his home may have been a hope and purpose of bringing these proceedings, the fact that it may not be a possible outcome does not detract from the working through of the Court's processes. In any event, while John and his family may be attached to his present home, an order for provision sufficient to pay his debts as they were at the date of the hearing (see s 59(1)(c) of the Act) would necessarily leave him with funds to purchase a home if, John having been made bankrupt, BOQ enforced its security rights.
The second discretionary reason why I would refuse relief is that, as a matter of comity, I would be reluctant to make orders in relation to the Notice, or impeding the Creditors' entitlement to present a creditor's petition, unless it was demonstrated that an approach to the relevant federal court was not possible or practicable. There is a well-developed body of principle in relation to setting aside both bankruptcy notices and creditor's petitions, or granting extensions of time for compliance with bankruptcy notices and adjourning or dismissing creditor's petitions. This includes where the debtor's capacity to pay may be materially improved by a judgment or appeal pending in other proceedings. An application by John for any such relief based on the possible outcome of these proceedings would hardly be novel or difficult for a court whose daily business involved the administration of the BA.

Conclusion

In reaching these conclusions I have not overlooked that proposed order 1 of John's motion is also intended to apply, for example, to rights created by the certificate for the costs of the assessment (see paragraph [15] above). However, for the same reasons I have set out above, the Court cannot or, alternatively, declines to make the order sought in relation to the other matters referred to in the proposed order.
The orders of the Court are: 1. The plaintiff's motion dated 21 June 2017 is dismissed. 2. The plaintiff is to pay the costs of the respondents to that motion. 3. The respondents' costs of that motion are to be assessed and payable forthwith.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 July 2017

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