Wenkart v Pantzer

BACKGROUND FACTS 8 On 28 October 1999, in proceeding NG 8467 of 1998, a sequestration order was made against Dr Wenkart's estate and the Court appointed Mr Pantzer as trustee of the estate. 9 Between the making of the sequestration order and early March 2003, several proceedings, which I need not identify or discuss, were brought arising out of the bankruptcy. 10 The present proceeding arose directly out of one of those proceedings, N 7752 of 2000, in which Alan Pitman, as applicant, sought an order that Mr Pantzer admit the whole of Mr Pitman's proof of debt dated 31 January 2000 for $3,743,900.27 ('the Pitman proceeding'). Mr Pitman's application eventually became an application for an order under s 104 of the Act reversing a decision by Mr Pantzer on 28 July 2000 to reject Mr Pitman's proof of debt. Throvena Pty Ltd ('Throvena'), Hapday Holdings Pty Ltd ('Hapday') and Macquarie Health Corporation Ltd ('Macquarie') (together 'the Intervenors'), companies associated in various ways with Dr Wenkart, were added as intervenors in the Pitman proceeding. 11 On or about 18 January 2001, Dr Wenkart lodged with Mr Pantzer a proposal under s 73(1) of the Act. One matter which this provided for was the delivery by Dr Wenkart to Mr Pantzer of several bank cheques drawn in favour of creditors for specified amounts to be held by Mr Pantzer subject to acceptance of the proposal by creditors. In addition, there were to be bank cheques for $105,000 in favour of Mr Pantzer for his fees as trustee 'up to the conclusion of the Section 73 meeting and its implementation', and for $105,000, less an amount already held by Mr Pantzer, in favour of Cutler, Hughes and Harris, Mr Pantzer's solicitors, for their fees 'up to the date and conclusion of the Section 73 meeting and its implementation'. 12 Mr Pantzer called a meeting of creditors for 31 January 2001 to consider Dr Wenkart's proposal, but Mr Pitman obtained an injunction restraining the creditors from accepting the proposal until further order. 13 It does not seem necessary to recount the history of the Pitman proceeding, except to note certain developments towards the end of 2001. 14 The Intervenors moved for an order that Mr Pantzer call a meeting of creditors to consider Dr Wenkart's proposal of 18 January 2001. 15 On 29 November 2001 Mr Pitman and the Intervenors asked the Court to note their agreement that, for the purposes of valuation, certain specified items of Mr Pitman's proof of debt were valued at $1,300,000 (certain items of the proof of debt were omitted, consistently with a judgment which had been given by Beaumont J in the Pitman proceeding on 13 July 2001). The agreement was expressed to be without prejudice to the Intervenors' right to argue that Mr Pitman was not entitled to claim the items valued at $1,300,000. 16 On 3 December 2001 the directors of Hapday, namely, David Wenkart and Henry Holden, resolved that on condition of a meeting of creditors being held within ten days of delivery of the final judgment in the Pitman proceeding, Hapday should discharge its mortgage over the Property. 17 On 21 February 2002 Beaumont J made orders, inter alia, noting the agreement of 29 November 2001, and reserving liberty to Dr Wenkart to apply to the Court for an order that Mr Pantzer call a meeting of his creditors pursuant to s 73(2) of the Act. 18 On 15 February 2002 Dr Wenkart exercised that liberty to apply. He (personally) wrote to Beaumont J asking that Mr Pantzer be ordered to convene a meeting of creditors to consider his proposal of 18 January 2001. I will discuss Dr Wenkart's 'application' in more detail at [47] - [49] below. 19 Pursuant to directions of his Honour, a new file was opened, namely the file relating to this proceeding (N 7051 of 2002), and Dr Wenkart's 'application' was listed for directions before his Honour on 1 March 2002 under the new file number. 20 On 1 March 2002, by consent his Honour granted Mr Pantzer leave to file in court his appearance as first respondent, ordered that the Intervenors be joined as second respondents, and made the following further orders: '1. Subject to order 2, the First Respondent convene a meeting of Creditors of the Bankrupt Estate of Wenkart within 14 days of the date of these orders for the purposes of considering the Proposal made by Wenkart to his creditors pursuant to s 73 of the Bankruptcy Act dated 18 January 2001, as amended at the directions hearing on 1 March 2002, and any other information to creditors provided by the First Respondent. 2. The Bankrupt deliver to the first respondent immediately before the meeting referred to in order 1, the following bank cheques: (a) Warren Pantzer as Trustee of the Estate of T R Wenkart $105,000.00 (b) Cutler Hughes & Harris $105,000.00 (c) Brian Rayment [of counsel] $14,000.00 (d) Solomon Garland, Solicitors $10,941.00 (e) Gadens, Solicitors $9,215.00 (f) Hapday Holdings Pty Ltd $8,378.64 (g) Macquarie Health Corporation Ltd $1,013.35 (h) Throvena Pty Ltd $608.01 provided that in the event that the creditors do not accept the Proposal, the First Respondent shall deliver back to the Bankrupt the bank cheques referred to in paragraphs (a) and (b). 3. Orders 1 and 2 above are made without prejudice to the first Respondent's rights to claim and recover in accordance with the provisions of the Bankruptcy Act all remuneration, costs, charges and expenses to which the First Respondent is lawfully entitled under the provisions of the Bankruptcy Act in respect of the administration of the Bankrupt Estate; and without prejudice to the rights of the Applicant and Second Respondent to have the First Respondent's remuneration, costs, charges and expenses determined in accordance with the Bankruptcy Act and regulations. 4. That the proceedings be stood over to 3 April 2002 at 9.45 am.' Clearly, the intention of the parties and of the Court was that the meeting of creditors be held without delay; that Mr Pantzer's full entitlement to remuneration be preserved; and that there be a payment on account of that entitlement to the extent of $105,000, subject to the creditors' accepting the proposal by special resolution. 21 Pursuant to Mr Pantzer's request, the proceeding was again listed on 11 March 2002. On that date he filed a lengthy affidavit sworn by him on 8 March 2002 as to the amount said to be due to him and to his solicitors, Cutler Hughes and Harris. 22 On 11 March 2002, by consent, his Honour made the 11 March 2002 orders. Short minutes of the 11 March 2002 orders were signed by Dr Wenkart, counsel for Mr Pantzer, and the solicitor for Hapday, which, no doubt, joined in for the purposes of agreeing to the postponement of the mortgage it held over the Property in favour of the charge given by Dr Wenkart to Mr Pantzer. 23 As noted earlier (at [5]), on 15 March 2002 Dr Wenkart's creditors held a meeting and passed a special resolution accepting his proposal. 24 There was dispute between Dr Wenkart and Mr Pantzer over the fees of Cutler Hughes and Harris and over Mr Pantzer's own remuneration. A bill of costs of Cutler Hughes and Harris was taxed (Ms Ann Sexton was later to give a certificate of taxation on 17 February 2003). 25 On 31 October 2002, Mr Pantzer filed his notice of motion for 'orders in aid' described in [2] above, to which the present notice of objection to jurisdiction relates, supported by a lengthy affidavit sworn by Mr Pantzer on 30 October 2002. 26 On 19 November 2002, Dr Wenkart filed a notice of grounds of opposition to Mr Pantzer's motion. In substance, Dr Wenkart relied on the provisions of s 74 of the Act, and, in particular, the annulment of the bankruptcy on 15 March 2002, as depriving Mr Pantzer of his entitlement to fees. 27 On 12 December 2002, Dr Wenkart filed a notice of motion seeking an order restraining Mr Pantzer from selling the Property and declarations that Mr Pantzer was not lawfully entitled to recover remuneration, costs, charges and expenses from Dr Wenkart (cf para 1 of the 11 March 2002 orders). 28 On 9 April 2003, Beaumont J answered a separate question relating to Dr Wenkart's notice of his intention to oppose the making of the 'orders in aid' sought by Mr Pantzer (Wenkart v Pantzer (No 1) [2003] FCA 315). The question and his Honour's answer to it were as follows: 'Q: Do the matters relied upon by the applicant in pars 1 - 20 of his notice of intention to oppose the respondent's application made by his notice of motion filed on 31 October 2002, constitute an answer to the respondent's application? A: The matters stated in pars 1 - 17 of the applicant's notice of intention to oppose do not constitute any such answer; and the matters stated in pars 18 - 20 do not purport to make such answer.' His Honour ordered Dr Wenkart to pay Mr Pantzer's costs of the separate question. 29 In the reasons supporting his answer to the question, his Honour stated: '[20] The effect of the consent orders (doubtless made with a view to achieving acceptance of the applicant's s 73 proposal) was to defer the resolution of any dispute as to the amount of the respondent's remuneration, but upon terms that the respondent would receive security for that amount. The Court sanctioned that arrangement in the form of an order made under the reservation reserved by the concluding words of s 74(6) - "reverts ... on such terms and subject to such conditions ... as the Court orders". [21] Given that conclusion, it must follow, in my opinion, that the consent orders were within power and operated to vest in the respondent the charge created by par 2 thereof. [22] Accordingly, I will respond to the separate question by the answer that pars 1 - 17 of the applicant's objection do not constitute any answer to the respondent's present claims. I will add that, pars 18 - 20 do not purport to answer the respondent's present claims, merely stating, as par 1 of the consent orders provides, that the respondent can recover only the remuneration (etc) to which he is "lawfully entitled". The costs of the separate question must follow the event.' 30 On 14 April 2003, Beaumont J ordered that a further question be determined as a separate question. His Honour set out that further question and his answer to it as follows (Wenkart v Pantzer (No 2) [2003] FCA 364): 'Q. Having regard to the provisions of the consent order made herein on 11 March 2002 and to the annulment of the applicant's bankruptcy on 15 March 2002, do the provisions of s 167 of the Bankruptcy Act continue to apply in accordance with their terms? A. Yes.' Section 167 provided for the trustee of a bankrupt's estate (such as Mr Pantzer) to require taxation by a taxing officer of a bill of costs for services provided by a person (such as Cutler Hughes and Harris) in relation to the administration of the estate. His Honour's reasons included the following paragraphs: '[6] In my opinion, the provisions of the consent order should be interpreted as "holding" or preserving the status quo regime. That is to say, in order to expedite the processing of the annulment procedure that was then contemplated, the applicant and the respondent, not at that stage being in agreement on the amount of the respondent's entitlement, deferred the implementation of any process in that area, in the absence of any agreement by way of ultimate determination. It would, in my opinion, be quite perverse to attribute to either the applicant or the respondent, in the framing of the terms of the consent order, any objective of eliminating any of the machinery provisions that would have been available for the determination of the respondent's entitlement. Such machinery was, of course, plainly available during the course of administration of the bankrupt estate. [7] Essentially, for the reasons I gave in the judgment published on 9 April 2003, and in particular, having regard to the provisions of s 74(6), I am of the view that, so far only as the matters mentioned in par 1 of the consent order made on 11 March 2002, the machinery provisions of the Act, in all their relevant application, remained in force so as to protect all parties concerned; that is to say, relevantly, both the applicant and the respondent. Those machinery provisions must, in my view, clearly include s 167 and for those reasons I answer the separate question. 31 On 28 April 2003 Dr Wenkart filed an amended notice of intention to oppose Mr Pantzer's motion for orders in aid (this was further amended on 1 May 2003). Paragraph 28(a) of the amended notice of intention to oppose was as follows: '28. ... [T]he respondent is not entitled to... (a) remuneration, costs, charges and expenses incurred by the Respondent after the First Proposal on 9 March 2000 [an earlier proposal by the then bankrupt Dr Wenkart to his creditors] which the Respondent neglected and refused thereafter to put to creditors in accordance with section 73(2) of the Act which he was obliged so to do either by operation of the Act and/or because of his duty to act reasonably;...' On 1 May 2003 his Honour answered a further question as follows (Wenkart v Pantzer (No 3) [2003] FCA 432): 'Q: Do the facts and matters pleaded in par 28(a) of the applicant's amended notice of intention to oppose, dated 28 April 2003, constitute an answer in whole or in part to the respondent's notice of motion, dated 31 October 2002, and if in part, to what extent? A: No.' 32 His Honour gave further decisions with reasons on 5 and 6 May 2003 on issues relating to Mr Pantzer's entitlement to remuneration, costs, charges and expenses (Wenkart v Pantzer (No 4) [2003] FCA 456 and Wenkart v Pantzer (No 5) [2003] FCA 471, respectively). 33 On 29 August 2003 a Full Court dismissed certain appeals brought by Dr Wenkart from orders of Beaumont J (Wenkart v Pantzer [2003] FCAFC 210). The Full Court allowed an appeal by Mr Pantzer from his Honour's ruling of 5 May 2003 that on 15 March 2003, Dr Wenkart was made aware only of a formulaic claim, rather than a claim for an 'amount', in respect of Mr Pantzer's claim for remuneration. The Full Court set aside that ruling and substituted the following ruling: 'On 15 March 2002, the applicant was, within the meaning of Regulation 8.09(1) of the Bankruptcy Regulations 1996, made aware of the amount of the trustee's claim for remuneration.' 34 The significance of this ruling is found in reg 8.09 of the Bankruptcy Regulations 1966 (Cth) ('the Regulations'). Regulation 8.09 provided at that time that where a trustee of the estate of a bankrupt claimed remuneration under s 162 of the Act, the bankrupt or a creditor who was dissatisfied with the amount of the claim might, 'by notice in writing lodged within 14 days of being notified in writing or becoming aware of the amount of the claim', request a taxing officer to tax the claim. In view of the Full Court's substituted ruling, the 14-day period for a request for taxation had expired on 29 March 2002. 35 On 12 August 2003 I ordered that certain questions be separately decided, and on 6 September 2003 I ordered that the Commonwealth of Australia be added as second respondent until further order. On 21 October 2003, by consent, I noted that: '2. The parties are agreed that Lindgren J should continue with the hearing of the respondent's motion brought by notice of motion filed on 31 October 2002 and the applicant's motion brought by notice of motion filed on 12 December 2002 as if Lindgren J stood in the shoes of Beaumont J in all respects including the respect that all evidence given before his Honour should be taken to have been given before Lindgren J and that Lindgren J should be part-heard on the motion.' 36 On 30 October 2003 I dismissed Dr Wenkart's motion brought by notice of motion filed on 12 December 2002, in so far as it was found in para 8 of that notice of motion (Wenkart v Pantzer (No 6) [2003] FCA 1210). By para 8, Dr Wenkart had sought an order that the time allowed by reg 8.09(1) of the Regulations for requesting a taxing officer to tax Mr Pantzer's claim for remuneration, be extended. 37 On 30 October 2003, I also decided certain questions arising under the Bankruptcy (Estate Charges) Act 1997 (Cth) (Wenkart v Pantzer (No 7) [2003] FCA 1211). Subsequently, pursuant to my order, the Commonwealth of Australia ceased to be a party to the proceeding.

REASONING 38 Certain procedural matters should be noted. There was no order in the 11 March 2002 orders to the effect that this proceeding was 'otherwise dismissed'. As recorded above, the proceeding has provided the framework within which motions have been brought and determined, and decisions have been given by Beaumont J and me on several separate questions. There has not been, and could not be, any issue raised as to the Court's jurisdiction to decide the matters it has decided to date, notwithstanding the two procedural irregularities referred to in the next paragraph. Resolution of the disputes which have given rise to the motions and decisions was clearly within s 27(1) of the Act set out at [45] below. 39 One of the irregularities referred to is that Dr Wenkart did not file an application in accordance with the Federal Court Rules (see O 77 rr 5 and 6 of those Rules and Form 5 in Sch 1 to those Rules). Instead, his letter to Beaumont J and the accompanying 'Application' were treated as the originating process. Another irregularity is that, while the proceeding was not 'otherwise dismissed' in the 11 March 2002 orders, there has not been pending since that date, at least in form, any application for final relief in the proceeding. 40 These procedural irregularities do not go to jurisdiction, but when the proceeding is next before the Court, appropriate orders should be made regularising the position. 41 The amount of the remuneration to which Mr Pantzer is entitled as trustee until the annulment on 15 March 2002 has now long since been quantified at 85 per cent of $115,406.07, ie, $98,095.16 (see s 162(4) of the Act and reg 8.08 of the Regulations). It appears that the only issue now remaining to be decided (apart from the present jurisdictional question) is whether the Court should make the 'orders in aid' sought in Mr Pantzer's notice of motion filed on 31 October 2002. 42 Two issues arise on Dr Wenkart's objection to jurisdiction:

1. Does the Court have jurisdiction to enforce the charge given by Dr Wenkart to Mr Pantzer in the 11 March 2002 orders?
2. If so, does the Court have power to do so by appointing a trustee for sale of the Property? 43 In my opinion, the answer to each question is "Yes" for the reasons given below.

1. Does the Court have jurisdiction to enforce the charge given by Dr Wenkart to Mr Pantzer in the 11 March 2002 Orders? 44 Subsection 19(1) of the Federal Court of Australia Act 1976 (Cth) ('the FCA Act') provided that the 'Court has such original jurisdiction as is vested in it by laws made by the Parliament'. 45 Section 27 of the Act invested the Court with jurisdiction, by providing, relevantly: '(1) The Federal Court has jurisdiction in bankruptcy …'. 46 Subsection 30(1) of the Act gave the Court powers, by providing, relevantly: '(1) The Court: (a) …; and (b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.' 47 As noted earlier, the event which prompted Beaumont J to direct that a new file be created was Dr Wenkart's letter to his Honour dated 15 February 2002 asking him to order that Mr Pantzer call a meeting of creditors pursuant to s 73(2) of the Act. In his accompanying 'Application' Dr Wenkart stated: '… unless the Court orders, I will remain in Bankruptcy indefinitely even though all eligible voting creditors and myself wish to have it determined urgently.' 48 The order sought was formulated by Dr Wenkart as: 'An order that [Mr Pantzer] reconvene the meeting of creditors of the bankrupt estate of Wenkart of the 31 January 2001 within seven (7) days of the date of these orders for the purposes of considering the proposal made by Wenkart to his creditors pursuant to section 73 of the Bankruptcy Act dated 18 January 2001 or any amendment to that proposal that may be made at that meeting and any other information to creditors provided by [Mr Pantzer].' 49 In support, Dr Wenkart stated as follows: 'Since my submission dated 21 January 2002, Mr Pantzer contacted me and made it very clear that he expected his fees to be agreed prior to appropriate accountability to creditors, and only then he would voluntarily call a Section 73 meeting. Pantzer is claiming, without legals, almost another $100,000 since 31 January 2001, in spite of not having any significant reasons for a huge bill. Pantzer then made it clear that a failure to agree to an acceptable fee would negate him calling the Section 73 meeting unless ordered by the Court. For the record Pantzer has never had his fee structure agreed by my creditors nor has he ever presented any accounts for his or other costs (mainly legal) to any creditors' meeting. As a financial bankrupt is rare, it seems the process taken has been deliberately extended to maximise the costs which have now totalled more than $850,000 over two years!' 50 The controversy in respect of which this proceeding was commenced concerned the amount of remuneration to which Mr Pantzer was entitled; whether he was obliged to call a meeting of creditors to consider Dr Wenkart's proposal under s 73 of the Act; and, if so, how, if at all, his entitlement to remuneration could or should be protected. 51 In Re Wong; Ex parte Robinson [1995] FCA 805, Sackville J, in the exercise of his discretion, declined to make an order under s 153B annulling a bankruptcy in the absence of satisfactory arrangements for payment of the fees, expenses and charges in relation to the bankruptcy (as well as of the balance of the debt due to the petitioning creditor). But an annulment brought about by the operation of s 74(5) is different. That subsection provides, and provided at the relevant time: 'Upon the passing of a special resolution at a meeting of creditors of a bankrupt under subsection 73(4), the bankruptcy is annulled by force of this subsection, on the date on which the resolution was passed.' (my emphasis)

52 When Dr Wenkart wrote to Beaumont J on 15 February 2002 requesting an order directing Mr Pantzer to call a meeting of creditors pursuant to s 73(2), the Bankruptcy Legislation Amendment Act 2002 (No 131, 2002) had not been passed. That Act inserted subs (2B),amended subs (3) of s 73, and inserted a new s 73A. The amendments were intended to protect a trustee's entitlement to remuneration (and to provide for the costs involved in holding the creditors' meeting).

'The trustee may refuse to call the meeting if the proposal does not make adequate provision for payment to the trustee of accrued fees that: (a) are owing to the trustee (at the time the proposal is lodged) in respect of the administration of the bankrupt's estate, but are not able to be taken out of the bankrupt's estate; and (b) have been approved by the creditors before the proposal is considered.' 54 Subsection 73(3) provided that the bankrupt might, at the meeting of creditors, amend the terms of his or her proposal, and the amending Act added the words 'but not in a way that reduces any provision for payment to the trustee of fees referred to in subsection (2B)'. 55 The new s 73A provided: '(1) Before calling a meeting under section 73, the trustee may require the bankrupt to lodge with the trustee an amount that is sufficient to cover: (a) the estimated costs that will be incurred by the trustee in arranging and holding the meeting; and (b) the estimated fee that will (if approved by the creditors) be payable to the trustee in respect of the meeting. (2) If the amount lodged by the bankrupt is more than the actual costs and fee, then the trustee must refund the excess to the bankrupt.' 56 These amendments were applicable only to proposals lodged by a bankrupt with a trustee after 18 December 2002, and therefore had no application to Dr Wenkart's proposal of 18 January 2001. 57 A trustee in bankruptcy, like any other trustee, is entitled under general law principles to an indemnity out of the trust estate in respect of all costs, charges and expenses properly incurred by the trustee: Re Love; Hill v Spurgeon (1885) 29 Ch D 348 at 350; Re Beddoe; Downes v Cottam [1893] 1 Ch 547 at 558; Adsett v Berlouis (1992) 37 FCR 201 ('Adsett') at 210. 58 A right to remuneration, however, is not given to trustees by the general law, and the general law right to indemnity just mentioned does not extend to any entitlement to remuneration that may exist in the circumstances of a particular case; for example, as a result of an express or implied contract. 59 It was never the intention that Mr Pantzer perform his duties as trustee in bankruptcy gratuitously. His remuneration was not fixed by the creditors or any committee of inspection, and it follows that he was 'to be remunerated as prescribed by the regulations': s 162(4) of the Act. The Act offered a trustee in bankruptcy certain safeguards in regard to remuneration: · Pursuant to s 162(4) of the Act, regs 8.08 - 8.11 of the Regulations prescribed a régime for the quantification of a trustee's claim for remuneration (see Mayne v Jaques (1960) 101 CLR 169 at 172-173, 175, 180-181); · Section 161B of the Act provided that if the total remuneration payable to a trustee was less than a specified amount, the trustee was entitled to be paid additional remuneration equal to the shortfall; and · Subsection 109(1) of the Act, which provided for priority payments, provided that the payment to be made first in priority was that of the taxed costs of the petitioning creditor and 'the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee …'. 60 A trustee in bankruptcy is subject to the supervision of the Court (see, for example, Div 4 of Pt VIII of the Act) and has been conceived of as an officer of the court: see Ex parte James; Re Condon (1874) LR 9 Ch App 609 at 614; Scranton's Trustee v Pearse [1922] 2 Ch 87; Downs Distributing Co Pty Ltd v Associated Blue Star Stores Pty Ltd (in liq) (1948) 76 CLR 463 at 481-483; Re Henderson; Ex parte Tonkin (1934) 7 ABC 273 at 277-278 and Adsett at 208. Even prior to the amendments of 2002 (noted above at [52] - [56]), the Court would have attempted, if it could do so consistently with the Act, to protect its officer's lawful entitlement to remuneration. 61 How might the Court have protected Mr Pantzer's entitlement in the face of Dr Wenkart's application for an order that a meeting of creditors be called, and the unavoidable statutory annulment of the bankruptcy if Dr Wenkart's proposal was to be accepted by special resolution of the creditors? Adapting the words of the Full Court in Adsett above, 'it was important to ensure, by one means or another, that this matter was covered' (at 213). 62 Provided Dr Wenkart's proposal fell within the description in s 73(1), was made bona fide, and Mr Pantzer knew who the creditors were, Mr Pantzer would not have been entitled to refuse to call a meeting of creditors until his remuneration or costs of calling the meeting were paid or secured: Re Bendel; Ex parte Bendel v Pattison (1997) 80 FCR 123 at 131. The obligation to call a meeting of creditors was not activated if the proposal lodged was not a bona fide one: in Arcuri v Jones; in the matter of Arcuri [2003] FCA 68 at [17]-[23], I declined to order a trustee to call a meeting of creditors where the proposal would have compelled the trustee to accept $2,000, and to forego a claim for $160,000, for past work. And see Re Groom; Ex parte Official Receiver (1976) 13 ALR 529 (applications for approval of a composition accepted by creditors failing where, in effect, one creditor, the Deputy Commissioner of Taxation, was excluded). 63 The Court might have imposed terms and conditions on the reverter of 'the property of the bankrupt' to Dr Wenkart. Subsection 74(6) of the Act provided: 'Where a bankruptcy is annulled under this section, all sales and dispositions of property and payments duly made, and all acts done, by the trustee or any person acting under the authority of the trustee or the Court before the annulment shall be deemed to have been validly made or done but, subject to subsection (7), the property of the bankrupt still vested in the trustee vests in such person as the Court appoints or, in default of such an appointment, reverts to the bankrupt for all his or her estate or interest in it, on such terms and subject to such conditions (if any) as the Court orders.' (my emphasis) I need not explore the full scope of the terms and conditions which s 74(6) authorised the Court to impose. In my opinion, s 74(6) would have authorised the Court to make it a term and condition of the reverter of the Property of the bankrupt to Dr Wenkart that the Property be security for the amount of Mr Pantzer's entitlement. But it suffices for present purposes that it was reasonably arguable that it would have done so. 64 Another possibility facing Dr Wenkart was that if Mr Pantzer's claimed entitlement was not properly provided for in Dr Wenkart's proposal, and the proposal was to be accepted by a special resolution of creditors and Dr Wenkart's bankruptcy annulled by the operation of s 74(5), Mr Pantzer might apply under s 75(4)(b)(iii) for annulment of the composition or scheme of arrangement (which the Court was empowered to order if it was made to appear to the Court that it was 'desirable that the affairs of the former bankrupt be investigated and administered under the provisions of [the Act] relating to bankruptcy'). 65 It was against the background of the possibilities described above that Dr Wenkart and Mr Pantzer compromised their dispute in the 11 March 2002 orders. The compromise was simple, in that it did not involve non-parties or property extraneous to the proceeding ('the property of the bankrupt still vested in the trustee' to which s 74(6) referred, included the Property). 66 Mr Pantzer's claim to enforce the charge was a claim to enforce proprietary rights springing out of a contract - a non-federal claim. Subsection 27(1) of the Act (set out at [45] above) has been described as 'the seminal source of the Court's jurisdiction in bankruptcy': Scott v Bagshaw (2000) 99 FCR 573 at 577; and see Morris v Maroudas (1986) 12 FCR 346 and Forshaw v Thompson (1992) 35 FCR 329 at 339. Once jurisdiction under s 27(1) exists, the Court can have 'accrued jurisdiction' in accordance with the principles established in Re Wakim; Ex parte McNally (1999) 198 CLR 511 ('Wakim') at 585-587; Scott v Bagshaw, above, at 577-578. But in my opinion the question of the Court's jurisdiction to enforce the charge can be resolved without reference to its accrued jurisdiction, broad as Wakim shows it to be. (See the discussion of the Court's accrued jurisdiction by Justice Ronald Sackville in 'The re-emergence of federal jurisdiction in Australia' (2001) 21 Aust Bar Rev 133 at 139 et seq.) 67 Sections 76 and 77 of the Constitution empower the Parliament to make laws defining the jurisdiction of this Court with respect to any 'matter' arising under a law made by the Parliament. The Parliament exercised that power in s 27(1) of the Act set out at [45] above. Importantly, the Parliament also exercised that power in s 39B(1A)(c) of the Judiciary Act 1903 (Cth) ('the Judiciary Act') in the following terms: 'The original jurisdiction of the Federal Court of Australia also includes jurisdiction in any matter: (a) …; or (b) …; or (c) arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter.' (See the discussion of the conferral of jurisdiction on the Court by s 39B(1A) by Justice JLB Allsop in 'Federal jurisdiction and the jurisdiction of the Federal Court of Australia in 2002' (2002) 23 Aust Bar Rev 29 at 33 et seq.) 68 In my opinion, Mr Pantzer's claim to enforce the charge is a matter arising under a law made by the Parliament, namely the Act and the Regulations made under the Act, with the result that s 39B(1A)(c) gives the Court jurisdiction in the matter of the enforcement of that charge. 69 The charge was in respect of the remuneration, costs, charges and expenses to which Mr Pantzer was or might become lawfully entitled. The reference was to the amount of Mr Pantzer's lawful entitlement recognised in, and quantified under, the Act and the Regulations. Subsection 162(4) of the Act was referred to at [59] above. While the Act does not exclude the possibility of a trustee in bankruptcy acting gratuitously, it assumes to the contrary. The Act requires that a trustee's entitlement to remuneration be quantified so that the entitlement will be effectual: Mayne v Jaques (1960) 101 CLR 169. Quantification is essential to entitlement. Unless a trustee in bankruptcy has agreed to act gratuitously, the Act gives or recognises a right to remuneration upon which '[g]eneral doctrines of equity concerning the remuneration of express trustees have little bearing': Mayne v Jaques (above at 181 per Windeyer J). Mr Pantzer's entitlement to remuneration was akin to the debts, the existence of which was owed to Commonwealth legislation, referred to in Federal Airports Corporation v Aerolineas Argentinas (1997) 147 ALR 649 and Coffey v Secretary, Department of Social Security (1999) 86 FCR 434. 70 In addition, the consideration for the giving of the charge was Mr Pantzer's proceeding to call a meeting of creditors pursuant to s 73(2) of the Act without seeking an order imposing terms and conditions on the reverter of title to the 'property of the bankrupt' to Dr Wenkart. Mr Pantzer was agreeing not to make an application to the Court which s 74(6) allowed him to make. 71 The position was analogous to that in LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575 ('LNC'). LNC concerned a contract for the transfer of quota under a licence to import motor vehicles issued under the Customs (Import Licensing) Regulations made under the Customs Act 1901 (Cth). The transferor claimed a declaration that the transferee held the quota units on trust, an order that they be transferred, and damages. If the claim arose under a law made by the Commonwealth Parliament within s 76(ii) of the Constitution, the then s 39(2)(a) of the Judiciary Act prevented an appeal to the Privy Council from a decision of the Supreme Court of New South Wales in favour of the transferee. 72 The High Court held that the claim did arise under a law of the Commonwealth, because the property the subject of the contract and of the alleged trust was the creature of such a law. This was so even though the contract and the alleged trust, considered independently of their subject matter, were creatures of State law, and no question of construction of a Commonwealth law was involved. Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ (with whom Murphy J agreed) stated (at 581): 'When it is said that a matter will arise under a law of the Parliament only if the right or duty in question in the matter owes its existence to a law of the Parliament that does not mean that the question depends on the form of the relief sought and on whether that relief depends on federal law. A claim for damages for breach or for specific performance of a contract, or a claim for relief for breach of trust, is a claim for relief of a kind which is available under State law, but if the contract or trust is in respect of a right or property which is the creation of federal law, the claim arises under federal law. The subject matter of the contract or trust in such a case exists as a result of the federal law.' Their Honours also said (at 582): 'The contracts in the present matter were concerned solely with entitlements under the Regulations. The object of the plaintiff's claim was identified in the statement of claim as "any benefit accruing" after a certain time as a result of the utilization of a quota under the Regulations. It is common ground that the "benefit" mentioned is any "benefit" which might accrue under the Regulations. The subject matter of the contracts and of the action arose under and existed only by reason of the provisions of the Regulations and the Act in pursuance of which the Regulations were made. The Act was of course a law of the Parliament and the Regulations were made under it.' 73 In the present case, the Property was not the creature of federal law, but both the entitlement which the charge over it secured and the consideration for the giving of that charge owed their existence directly to the Act and the Regulations. 74 It is not to the point, as Dr Wenkart submits, that the 11 March 2002 orders, including the charge, were only to have effect if the bankruptcy was annulled (that is, if and when Dr Wenkart became a 'former bankrupt' and Mr Pantzer became a 'former trustee of his estate in bankruptcy'). Mr Pantzer's entitlement and the consideration for the giving of the charge still owed their existence directly to the Act and the Regulations. 75 Against the above background, I turn now to consider cases in this Court referred to in the parties' submissions, which were concerned specifically with attempts to enforce contracts in compromise of federal claims made in proceedings in the Court. 76 In Pallas v Finlay (1985) 61 ALR 220, the foundation federal claim was for contravention of ss 52 and 53 of the Trade Practices Act 1974 (Cth) ('the TP Act') by Lincoln Hunt Australia Pty Ltd. By terms of settlement it was agreed, relevantly, that the respondent company should be relieved of any liability to the applicant (Dr Finlay); that Messrs Pallas and Dubinski-Hunt ('the appellants', who were not parties to the proceeding) should pay $150,000 to Dr Finlay; that upon default in payment, Dr Finlay should be entitled to enter judgment against the appellants for $150,000; and that the appellants agreed to be joined as parties to the proceeding for that purpose. Although the terms of settlement were signed by the parties to the proceeding, their counsel and the appellants, they were not filed in Court. The only order of the Court was that the proceeding be stood over generally with liberty for either party to restore it on two days' notice. 77 Upon the appellants' default, the applicant successfully moved for judgment for $150,000 against the appellants.

78 On the appeal, Beaumont J, with whom Northrop J and Lockhart J agreed, emphasised that:

· the appellants had not been parties to the primary proceeding and no relief had been sought against them in that proceeding; and · there was otherwise no common substratum of facts as between the original federal cause of action and the non-federal cause of action which arose from the terms of settlement (his Honour referred to Fencott v Muller (1983) 152 CLR 570 at 607). His Honour thought that there was no basis for invoking the accrued jurisdiction of the Court (or its associated jurisdiction under s 32 of the FCA Act). 79 The present case is distinguishable. First, s 39B(1A) of the Judiciary Act, which was introduced by the Law and Justice Legislation Amendment Act 1997 (No 34, 1997) s 3, Sch 11, Item 1, was not available to sustain the contractual cause of action in Pallas v Finlay. Second, the three parties to the agreements in the 11 March 2002 orders in the present case, and to the charge in particular, were all parties to the proceeding itself. (When Pallas v Finlay was decided, Wakim had not been, but I need not express an opinion as to whether the broad notion of accrued jurisdiction recognised in Wakim would have embraced jurisdiction in respect of the agreement of compromise in Pallas v Finlay.) 80 In Darling Downs Investments Pty Ltd v Ellwood (1988) 18 FCR 510 ('Darling Downs'), the parties to a claim for damages under the TP Act agreed to compromise the proceeding on the basis that the respondent promised to pay $77,500 'all up' to the applicant. It was conceded that the original proceeding had never been discontinued or otherwise terminated. The respondent reneged on the settlement. The applicant successfully moved for judgment for an amount of $57,500 representing the sum of $77,500 promised less $20,000 which the respondent had in fact paid under the settlement. The respondent's appeal was dismissed by majority (Pincus and Einfeld JJ, Fisher J dissenting). 81 Pincus and Einfeld JJ, 'not without doubt,' distinguished Pallas v Finlay as having turned on the fact that relief had not been sought against the appellants in the proceeding at first instance. Their Honours considered that s 22 of the FCA Act empowered the Court to enforce the settlement. Section 22 is as follows: 'The Court shall, in every matter before the Court, grant, either absolutely or on such terms and conditions as the Court thinks just, all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him or her in the matter, so that, as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of proceedings concerning any of those matters avoided.' (my emphasis) 82 Their Honours gave the following summary of their views (at 526): '1. Section 22 of the Federal Court of Australia Act must be construed as having an effect analogous to s 24(7) of the English Judicature Act. 2. Section 24(7) and its Australian counterparts have been held to include, amongst other remedies, orders enforcing compromises of suits. 3. Section 22 should also be read as including such orders within its ambit. The objection as to power therefore fails.' 83 Their Honours did not accept an assumption on which they thought Pallas v Finlay had been argued, namely, that the order sought 'was only justifiable, if at all, under the accrued jurisdiction' (at 522). Rather, their Honours founded on s 22 of the FCA Act, treating the claim to enforce the compromise as a claim 'properly brought forward … in the matter'. That is not the same thing as relying on s 22 as a source of jurisdiction. Section 22 does not confer jurisdiction: Phillip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457. In the present case, as in Darling Downs, the proceeding has never been dismissed or discontinued. It may be that Mr Pantzer's claim to enforce the compromise expressed in the 11 March 2002 orders is a 'claim properly brought forward [by Mr Pantzer] in the matter', on the basis that "the matter" embraced the protection of Mr Pantzer's entitlement, not only by order of the Court, but also by agreement of the parties in compromise of suit. 84 I need not discuss this possibility further, however, as I prefer to rely on s 39B(1A)(c) of the Judiciary Act - a provision not in force when Darling Downs was decided (see [79] above). 85 In Reid v Interarch Australia Pty Ltd [2000] FCA 1328, Hely J enforced a compromise of a claim to damages for misleading and deceptive conduct under ss 52 and 82 of the TP Act, expressed in a Deed of Settlement, on the motion of the second applicant in the original proceeding. The Deed provided that in return for releases, the respondents jointly and severally agreed to pay a specified sum of money to the second applicant. The respondents conceded that Darling Downs established that the Court had power to entertain the motion in the existing proceeding, but submitted that it should not do so in the exercise of its discretion, because it raised issues foreign to those raised in the proceeding. 86 His Honour disagreed. He noted, at [24], that in Phillips v Walsh (1990) 20 NSWLR 206, McLelland J had said that a court should not enforce a compromise on motion in the original proceeding if 'substantial matters in controversy are involved beyond the ambit of the proceeding as originally constituted, or where, in the interests of justice, disposition of the matter on a summary application is inappropriate'. Hely J entered judgment for the second applicant against the respondents in accordance with the Deed of Settlement for $500,000. 87 The recent Full Court decision in Macteldir Pty Ltd v Dimovski (2003) 202 ALR 83 ('Macteldir') has been criticised: see case note by Mark Leeming, 'Breach of Contract in the Federal Court' (2004) 78 ALJ 96-98. The applicant ('Macteldir') brought a proceeding to the Court against Mile Dimovski and Rockdale Ilinden Soccer Club Inc for an injunction and damages for infringement of Macteldir's copyright in the Macedonian Telephone Directory. Macteldir alleged that its copyright was infringed by the Rockdale Ilinden Soccer Club Inc Sponsors Directory-Calendar of 2001. The proceeding was settled and the parties' agreement was set out in 'Terms of Settlement' signed by the parties' solicitors. The document comprised seven paragraphs. Paragraph 2 was as follows: '2 The first and second defendants [sic - respondents] will not publish, produce, distribute, promote or in anyway be related with the publication, production, distribution or promotion of any book, magazine or document which contains advertisements, pictorials or drawings with similar contents which have been copied or reproduced from the form and layout of the Macedonian Telephone Directory.' Relevantly, the Court noted this paragraph and others as 'undertakings to the Court' and by consent ordered that the matter be dismissed. 88 Subsequently Macteldir filed a notice of motion in the proceeding seeking relief in respect of a subsequent publication by the respondents, this time of the 2002 edition of the directory-calendar. Macteldir sought injunctions and damages for infringement of its copyright in this further publication. 89 The course of the proceeding was confused. Affidavits supporting the application referred to breaches of the earlier undertaking to the Court. At one stage counsel for Macteldir said his client was seeking 'enforcement of the terms of settlement and damages', but later resiled from this position. 90 The following issue presented to a Full Court in the original jurisdiction of the Court by way of a special case stated by a judge of the Court under s 25(6) of the FCA Act: 'whether the Court has jurisdiction to grant injunctive relief or damages in respect of the respondents' alleged breach of the terms of settlement filed in court on 7 August 2001.' (my emphasis) 91 The Full Court reviewed Pallas v Finlay and Darling Downs and the following decisions of State Supreme Courts on the question of the enforcement of agreements of compromise of legal proceedings within those proceedings: Roberts v Gippsland Agricultural and Earth Moving Contracting Pty Ltd [1956] VLR 555; General Credits (Finance) Pty Ltd v Fenton Lake Pty Ltd [1985] 2 Qd R 6; and McLaren v Schuit (1983) 33 SASR 139. 92 Because Supreme Courts have a general jurisdiction in respect of contractual disputes, no question can arise as to their jurisdiction to entertain a proceeding to enforce an agreement of compromise. The cases in the Supreme Courts have been concerned with whether the agreement of compromise may be enforced within the original proceeding or only by the commencement of a fresh proceeding, in either case, of course, in the same Court. 93 I set out the question before the Full Court in Macteldir at [90] above. It was not whether the Court had jurisdiction to 'enforce' the undertaking by way of a proceeding for contempt of court in the original proceeding. The Full Court expressly noted (at [48]) that Macteldir had not taken the course of initiating a proceeding for contempt. Moreover, although the Court had jurisdiction to entertain a claim by Macteldir for an injunction and damages in respect of alleged infringement of copyright based on the later publication, Macteldir did not make such a claim either. (In fact, at one stage it did so by commencing a separate proceeding in the Court in respect of the second respondent's 2002 directory-calendar, but it discontinued that proceeding.) Notwithstanding initial confusion, Macteldir's claim was simply one to enforce the agreement of compromise. The Full Court answered the referred question 'No'. 94 Macteldir was a decision given in the original, not the appellate, jurisdiction of the Court. Therefore, it is not binding on me. But I would decide inconsistently with it only if I thought it plainly wrong. 95 It is clear that in Macteldir, no submission was made to the Court based on s 39B(1A)(c) of the Judiciary Act. Macteldir sought to support the Court's jurisdiction to enforce the parties' agreement on a different basis. The Full Court was not asked to determine, and did not in fact determine, whether the Court was given jurisdiction to enforce the terms of settlement by s 39B(1A)(c) of the Judiciary Act. 96 There are distinctions between Macteldir and the present case. The contractual promise in Macteldir was that the respondents would not do certain acts. It happens that those acts would, on Macteldir's case, have constituted an infringement of its copyright under the Copyright Act 1968 (Cth), in respect of which the Court would have had jurisdiction. It is arguable, however, that these circumstances did not suffice to make the claim to enforce the contractual promise a matter arising under a law of the Parliament, namely, that Act. 97 The present case is not concerned with a promise by Dr Wenkart not to do acts, the doing of which would in fact infringe property rights of Mr Pantzer created by a law of the Parliament. Rather it is concerned with the outworking of a charge given in the 11 March 2002 orders themselves. Macteldir, even if it had been decided in the appellate jurisdiction of the Court, would not require me to uphold Dr Wenkart's objection to jurisdiction in the present case. I am not required to reach a view as to whether the decision in Macteldir was plainly wrong. 98 In my opinion, the fact that the charge secured the amount of Mr Pantzer's entitlement to remuneration under the Act and Regulations, and the fact that the consideration for the giving of the charge was Mr Pantzer's agreeing to perform a task assigned to him by the Act (calling a meeting of creditors) without asking the Court to impose terms and conditions safeguarding his entitlement under the Act and Regulations, suffice to characterise his claim to enforce the charge as a matter arising under the Act for the purposes of s 39B(1A)(c) of the Judiciary Act.

2. Does the Court have power to enforce the charge by appointing a trustee for sale of the Property? 99 I set out s 22 of the FCA Act at [80] above. 100 Section 79 of the Judiciary Act provides as follows: 'The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.' 101 Under the law of the State of New South Wales, a charge of the kind given by Dr Wenkart to Mr Pantzer is an equitable charge enforceable in the equitable jurisdiction of the Supreme Court of New South Wales by the appointment of a trustee for sale on the application of the chargee: Tennant v Trenchard (1869) LR 4 Ch App 537; and cf Fine Real Estate Network Pty Ltd v Howell (unreported, Supreme Court of NSW, Young CJ, 4 December 1997). In my opinion, the law providing for the enforcement of an equitable charge by the appointment of a trustee for sale is a law relating to procedure within s 79 of the Judiciary Act. This Court was created as a 'court of law and equity': FCA Act, s 5(2). It has power to appoint a trustee for sale of the Property. 102 The claim to enforce the charge was 'properly brought forward' by Mr Pantzer for the purposes of s 22 of the FCA Act, in a matter in respect of which the Court had jurisdiction under s 39B(1A)(c) of the Judiciary Act. 103 Enforcing the charge by the appointment of a trustee for sale falls within s 22 of the FCA Act and s 79 of the Judiciary Act.

CONCLUSION 104 Dr Wenkart's objection to jurisdiction should be dismissed with costs. I certify that the preceding one-hundred and four (104) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Counsel for the Applicant Mr M Green (Dr Wenkart):

Solicitor for the Applicant: The Bruce & Stewart Commercial Practice Pty Ltd

Counsel for the First Respondent Mr M R Aldridge SC and Mr J T Johnson (Mr Pantzer):

Solicitor for the First Respondent: Sally Nash & Co

Date of Hearing: 17 February 2004