Federal Court of Australia

Barranbali Pty Ltd v Pioneer Australia Pty Ltd [2021] FCAFC 100

ORDERS

THE COURT ORDERS THAT:

1.    The appeal is dismissed.

2.    The Appellants pay the Respondents’ costs of and incidental to this appeal, to be taxed failing agreement.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GREENWOOD J:

1    I have had the benefit of reading the reasons for judgment of Justices Perry and Anastassiou. I gratefully adopt the description of the background matters in relation to the appeal and definitional terms referred to by their Honours.

2    I agree that the appeal is to be dismissed.

3    I do so on the footing that the proper construction to be attributed to the text of ss 5-5, 5-30, 90-15 and 90-20 of Schedule 2 to the Bankruptcy Act 1966 (Cth) (the “Act”) in the context of the objects and purposes of Schedule 2 to that Act, and the scheme of the Act for the administration of a “regulated debtor’s estate” (ss 5-15 and 5-16, Schedule 2), is such that one of two joint creditors of a debtor (in these proceedings a judgment debtor as a result of a judgment of the Supreme Court of Queensland in favour of two creditors jointly), has standing under s 90-20(1) to apply to this Court (s 27) for orders under s 90-15(1), including a form of order contemplated by s 90-15(3)(b) that a person cease to be a trustee of a regulated debtor’s estate and an order under s 90-15(3)(c) that another person be appointed as trustee of that estate, without applying jointly with the other joint creditor; or having the authority of the other joint creditor to apply; or joining the other joint creditor as a respondent to the application.

4    The standing to apply for such orders (relevantly for present purposes), is conferred by s 90-20(1)(a) of Schedule 2 (the Insolvency Practice Schedule (Bankruptcy)) on “a person with a financial interest in the administration of a regulated debtor’s estate”. Section 5-5 of Schedule 2 provides that a person has a financial interest in the administration of a regulated debtor’s estate in the circumstances set out in s 5-30 of Schedule 2. That section provides that a person has a financial interest in the administration of a regulated debtor’s estate if the person is, relevantly, a “creditor”. The term “creditor” when used in relation to a regulated debtor’s estate, means “a creditor of the estate”: s 5-5, Schedule 2.

5    A person is a regulated debtor if the person is, relevantly, a bankrupt: s 5-15, Schedule 2.

6    An estate is a regulated debtor’s estate if it is the estate of the bankrupt: s 5-16, Schedule 2.

7    The term “bankrupt” includes a person who has become a bankrupt by virtue of the presentation of a debtor’s petition under the Act: s 5. That is what occurred in the case of Mrs Rory Ann Quinn and it is common ground that Mrs Quinn’s estate is a regulated debtor’s estate.

8    Thus, by virtue of ss 5-5 (as to the definitions of “creditor” and “financial interest”), 5-30 and 90-20(1)(a), of Schedule 2, a creditor of the estate of Mrs Quinn has standing to apply for the orders earlier mentioned under ss 90-15(3)(b) and (c) of Schedule 2.

9    The object of Schedule 2, finding expression in part in the power to apply under s 90-20 for the orders contemplated by s 90-15 in the context of the provisions of Schedule 2 earlier mentioned is, at one level, to ensure that any person registered as a trustee has an appropriate level of expertise; behaves ethically; and maintains sufficient insurance to cover his or her liabilities in practising as a registered trustee: s 1-1(1), Schedule 2. At another level, the object of the schedule is to regulate the administration of regulated debtors’ estates consistently (unless there is a clear reason to do otherwise); and to regulate the administration of regulated debtors’ estates to give greater control to the creditors: s 1-1(2), Schedule 2.

10    The short point upon which the appeal falls to be determined is whether the approach adopted in the authorities to the textual construction of the term “creditor” (in the context of a joint judgment creditor) in ss 40(1)(g), 40(3)(d), 41(1) and 41(3) (as those provisions relate to applications by a creditor for the issue of a bankruptcy notice, having obtained a final judgment or order) and the term “creditor” in ss 43(1),  44 and Div 2 of Pt IV of the Act (as those sections and that Division relate to petitions to the Court by creditors for the making of sequestration orders), informs the construction and meaning to be attributed to the term “creditor” and the phrase “creditor of the estate” for the purposes of ss 5-5, 5-30, 90-15 and 90-20 of Schedule 2.

11    The appellants contend that the term “creditor” and “creditor of the estate” ought to be given a consistent meaning throughout the Act unless there is a clear intention expressed in the text in the relevant Parts or Divisions of the Act or the Schedule to depart from the meaning of the term used in other Parts of the Act.

12    As to bankruptcy notices, s 41(1) of the Act provides that the Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor a final judgment or final order of the kind described in s 40(1)(g) (apart from other qualifying circumstances).

13    Section 40(1)(g) contemplates a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed. For the purposes of s 40(1)(g), a person who is for the time being entitled to enforce a final judgment or final order for the payment of money shall be deemed to be a creditor who has obtained a final judgment or final order: s 40(3)(d).

14    The orthodox position so far as “joint creditors” is concerned is put this way in McDonald, Henry & Meek: Australian Bankruptcy Law and Practice, McQuade PP and Gronow MGR, (6th ed, Thomson Reuters) at [40.1.205] (update 240):

Where a judgment has been obtained against a debtor by joint creditors, a bankruptcy notice based on it must be issued in the names of all the joint creditors: Australian Workers Union v Bowen (1946) 72 CLR 575 at 590 (Dixon J) [other citations omitted]. Thus, where the right of creditors to enforce a judgment was a joint right, a bankruptcy notice being authorised by some only of the judgment creditors was invalid [authorities cited]. That was because “[t]he right to enforce the judgment was vested in those persons jointly, and not severally, and so therefore, it was necessary that it [ie the bankruptcy notice] should be obtained in the names of all of them by a person authorised either in fact or law so to obtain it” [authorities cited].

15    In Australian Workers’ Union and Others v Bowen (1946) 72 CLR 575 (“Bowen”), Latham CJ said this at 583:

The Bankruptcy Act 1924-1933, s 52(j) provides that a bankruptcy notice may be issued upon the application of a creditor who has obtained a final judgment. A judgment creditor can issue a bankruptcy notice only if he [or she] is in a position to issue execution [authorities cited]. Only one writ of execution can be issued for the one judgment debt to which joint judgment creditors are entitled, and a bankruptcy notice in the case of such creditors can be effective only when issued by or on behalf of all the judgment creditors. So also a bankruptcy petition must be presented by all the joint judgment creditors [authorities cited].

16    In Bowen, Dixon J having recognised that the right to enforce the decree or order for costs was vested in the judgment creditors jointly (although as trustees for a particular entity in the context of the particular facts) observed that if the beneficiary sought to take steps to recover the judgment sum in circumstances where some of the joint creditors refused to lend their names to the proceedings, the beneficiary would be entitled to require those joint creditors, so refusing to act, to lend their names to proceedings including proceedings in bankruptcy. His Honour then said this at 589:

But, except where he [the beneficiary] has the express or implied authority of the party in whose name he desires to proceed, the person beneficially entitled in the subject of a proceeding must, as a general rule, seek the consent of the nominal party and offer him a sufficient indemnity against any liability for costs to which the use of his name might expose him. Unless the real actor does this, or unless special circumstances exist excusing him from doing so, the courts will not permit him to join, or proceed in the names of, nominal parties without their actual authority, express or implied [authorities cited]. If one of two creditors or claimants desired to put a joint right in suit, he might, upon giving a proper indemnity, be permitted by the common law courts to sue in the name of the other creditor or claimant as well as his own. But preparedness to afford a proper indemnity was a condition of his being allowed to proceed in their joint names.

It is true that when the person beneficially entitled sued in the name of the nominal party, or one co-obligee sued in the name of all the co-obligees, the proceedings would not be struck out or stayed once a satisfactory indemnity was provided. … It is enough that, speaking generally, it was indispensable. It could not be said that the bankruptcy notice was applied for as required by s 52(j) of the Bankruptcy Act 1924-1933 by the persons entitled to enforce the decree for costs, if one or some only of them applied without an authority in law or in fact from all the others which was complete and absolute.

17    In Scook v Sims Construction Pty Ltd [2004] FCAFC 306 at [22], RD Nicholson, Jacobson and Bennett JJ held that a bankruptcy notice given by some only of joint judgment creditors is invalid, citing Bowen.

18    As to creditors’ petitions, the observations of Latham CJ in Bowen mentioned earlier also makes the position clear. The orthodox position adopted in McDonald, Henry & Meek: Australian Bankruptcy Law and Practice at [44.1.02] (update 242) expresses the position concerning joint creditors in this way:

Where a debt is due to two or more creditors jointly, all the creditors must join in the petition (Buckland v Newsame 127 ER 919; (1809) 1 Taunt 477; Australian Workers Union v Bowen (1946) 72 CLR 575 [other citations omitted]) but if one has died the survivor or survivors may present a petition: Re Tucker; Ex parte Tucker (1895) 2 Mans 358.

19    No doubt having regard to these authorities, the appellants contend, and the respondents agree, that a single joint creditor does not have standing to issue a bankruptcy notice and nor does a single joint judgment creditor have standing to issue a creditor’s petition. The point of departure between the parties to the appeal is that the respondents say that a single joint judgment creditor has standing to lodge a proof of debt and also has standing to apply under s 90-20 of Schedule 2 for orders under s 90-15 of the Schedule.

20    The common law conception of the limitations upon a joint judgment creditor issuing execution processes without doing so on behalf of all of the joint judgment creditors relevantly parties to the judgment or order, or seeking to issue a bankruptcy notice or present a creditor’s petition without the consent or authority of all of the joint judgment creditors, are all concerned with an entitlement (or otherwise) to take a step or make an application anterior to the debtor becoming bankrupt (either because a sequestration order has been made or the debtor has presented a debtor’s petition, with the bankruptcy commencing in each case as determined by s 115 of the Act).

21    However, where a debtor becomes bankrupt, the particular statutory scheme of the Act is engaged for the administration of the estate of the bankrupt for the benefit of the creditors. The proper meaning to be attributed to the text of ss 90-15 and 90-20 of Schedule 2 to the Act begins and ends with the text in the context of the scheme of the Act having regard to the principles identified in the following authorities: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at [47]; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503 at [39]; Thiess v Collector of Customs (2014) 250 CLR 664 at [22]; SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362 at [14] and [37] to [40]; and s 15AA of the Acts Interpretation Act 1901 (Cth).

22    The statutory scheme of the Act is well understood.

23    However, for the purposes of statutory construction the essential elements of that scheme have a relationship with Schedule 2 to the Act and the approach to construction of s 90-20 and the related parts of Schedule 2 with which s 90-20 engages.

24    As to the scheme of the Act, these things should be noted as essential elements of the scheme once a person enters bankruptcy.

25    The property of the bankrupt vests in the Official Trustee or a registered trustee: s 58. Except as provided by the Act, once a debtor becomes bankrupt, it is not competent for a creditor to enforce any remedy against the person or property of the bankrupt concerning a provable debt or, except with leave, to commence any legal proceedings in respect of a provable debt or take a fresh step in any proceeding: s 58(3). The Court may stay any legal proceedings: s 60. The bankrupt is required to provide documents, books of account and extensive information to the trustee: ss 77(1)(a) to (g).

26    Subject to Div 1 of Pt VI, all debts and liabilities (present or future, certain or contingent) to which a bankrupt was subject at the date of the bankruptcy or to which he or she may become subject prior to discharge, are provable in the person’s bankruptcy: s 82(1).

27    Having regard to the text of s 82(1), a debt owed to judgment creditors jointly (but not severally) nevertheless remains a “liability” to each joint creditor. The characterisation of the obligation as one owed to the judgment creditors jointly does not have the effect that there is no liability to each of them. There is a liability to both albeit as joint creditors.

28    The proof of debt procedure set out in Div 1 of Part VI (ss 82 to 107) is fundamental to the process of properly identifying the value and number of creditor claims to be administered in the course of the bankruptcy.

29    The property divisible among the creditors is addressed at s 116 (particularly ss 116(1) and (2)), and before applying the proceeds of the property of the bankrupt in making any payments, the trustee must apply the proceeds in the order set out in s 109. A transfer of property by a person who later becomes a bankrupt is void against the trustee in the circumstances of s 121 and a transfer that confers a preference on a creditor in the circumstances of s 122 is void as against the trustee.

30    The scheme of the Act, within the limits of the statutory text, is to establish a regime for the orderly administration of the estate of a bankrupt that vests the property of the bankrupt in the trustee; engages a proof of debt process that renders all debts and liabilities provable and capable of being the subject of a proof of debt, subject to Div 1 of Pt VI; provides a mechanism for identifying the property divisible among the creditors and a mechanism for recovering a transfer of property within the integers of ss 121 and 122. All of these provisions are designed to strike a balance between the interests of the creditors in the administration of the estate of the bankrupt ultimately leading, where possible, to a distribution of a dividend, and the interests of the bankrupt particularly with regard to s 116(2) of the Act.

31    It would be inconsistent within the essential beneficial features of the scheme engaging these various provisions to conclude, for example, that one of two joint judgment creditors could not lodge a proof of debt in respect of an obligation owed to joint judgment creditors, simply because of the reluctance or unwillingness of a joint judgment creditor to assist or participate in such a process. Of course, the trustee would be required to make a decision on the proof lodged as to the parties entitled to be admitted to proof, namely all of the joint judgment creditors. However, the proof of debt could be lodged by a single joint judgment creditor so as to ensure that a debt owed to joint judgment creditors is brought within the administrative scheme of the Act.

32    Schedule 2 is entirely consistent with a broad conception of the term “creditor” in the scheme for the administration of a bankrupt estate. The object of the schedule is to ensure consistency in the administration of regulated debtors’ estates and to give creditors greater control in the regulation of the administration of regulated debtors’ estates. Division 90 addresses the topic of “Review of the Administration of a Regulated Debtor’s Estate” and confers standing to apply on “a person with a financial interest in the administration of the regulated debtor’s estate”, and although a person has such an interest if the person is a “creditor”, the relationship between the taxonomic term “creditor” and the phrase giving that term context in Div 90 (having regard to ss 5-5 and 5-30), “financial interest in the administration of a regulated debtor’s estate”, suggests that the term “creditor” is to be broadly understood consistent with the scheme of the Act; and, the entitlement of such a person to apply to seek an order that a person cease to be a trustee of the estate and that another person be appointed as the trustee of the estate, is beneficial and enabling in the regulation of trustees of regulated debtors’ estates.

33    Division 90 thus contemplates by s 90-20(1) applications made under s 90-15 by a person who is one of a number of persons who are joint judgment creditors, notwithstanding that the joint co-obligees refuse to apply or fail to respond or cooperate in making an application with their co-obligee who seeks to obtain an order under s 90-15(1) within the scope of orders contemplated by s 90-15(3).

34    The particular conception of the notion of “creditor” in the context of joint judgment creditors, so far as the standing of a single joint judgment creditor is concerned in engaging in enforcement proceedings, or making application for the issue of a bankrupt notice, or applying to the Court by way of a creditor’s petition in seeking a sequestration order, does not condition or determine the standing of a single joint judgment creditor to take steps contemplated by the scheme of the Act for the purpose of the administration of the estate of a bankrupt and the standing of a single joint judgment creditor to apply under s 90-20 of Schedule 2 for orders contemplated by s 90-15 of that Schedule, once that person enters bankruptcy and the estate of the regulated debtor falls within the scope of the regulatory procedures contained in Schedule 2.

35    Accordingly, Spa Investments Pty Ltd as a single joint judgment creditor of the bankrupt, Mrs Quinn, had standing to apply for the orders made by the primary judge.

36    Accordingly, the appeal must be dismissed with an order that the appellants pay the respondents’ costs of and incidental to the appeal.

Associate:

Dated:    11 June 2021

REASONS FOR JUDGMENT

PERRY AND ANASTASSIOU JJ:

Introduction

37    Spa Investments Pty Ltd, the Second Respondent, is a joint judgment creditor of the Bankrupt, Mrs Rory Ann Quinn, along with Pioneer Australia Pty Ltd ACN 073 498 905 (the Deregistered Pioneer Company). The First Respondent, Pioneer Australia Pty Ltd ACN 128 784 725 (the New Pioneer Company) is, for the purpose of the present proceeding, a stranger to the judgment debt. However, for reasons we explain below, that fact is contested in other proceedings between the parties.

38    This appeal raises an issue of narrow compass; namely, whether Spa has standing to apply for an order to remove and replace a trustee in bankruptcy pursuant to s 90-15 of the Insolvency Practice Schedule (Bankruptcy), Schedule 2 of the Bankruptcy Act 1966 (Cth). That issue arises because Spa is only one of the two joint creditors, but nevertheless brought the application the subject of this appeal alone.

39    For the reasons that follow, we agree with the reasoning of the learned primary judge that Spa had the necessary standing, as one of two joint creditors, to bring an application to remove and replace the trustee in bankruptcy. Accordingly, the appeal must be dismissed.

Background

40    Before considering the substantive matters raised on appeal, it is necessary to say something about the background to the matter generally and the status of related proceedings.

41    The judgment debt arises out of a $3,000,000 loan made by Spa Investments and one of either the Deregistered Pioneer Company or the New Pioneer Company to YIC Industrial Pty Ltd, the Eighth Appellant, on 21 October 2009. That loan was provided to develop rural land in Yeppoon for industrial use. It was secured by the subject property and guaranteed by the Bankrupt (the sole director and secretary of YIC) and her husband. YIC defaulted in repayment of the loan and, although subsequent deeds were entered into varying the terms of the loan, the amount was ultimately not repaid.

42    As a result, SPA and Pioneer Australia (to use a neutral expression) realised the real property security given to support the loan and sought to recover the remaining debt. On 26 March 2019, Bond J of the Supreme Court of Queensland gave judgment in the sum of $7,146,275 in favour of Spa and the Deregistered Pioneer Company, which was the amount of the debt found to be owing (including interest): see Pioneer Australia Pty Ltd & Anor v Quinn [2019] QSC 72 (the Original Judgment). On 22 November 2019, the Queensland Court of Appeal dismissed an appeal in respect of the Original Judgment: see Quinn & Anor v Pioneer Australia Pty Ltd & Anor [2019] QCA 266.

43    The difficulty that arises from both a practical and legal perspective is that the Deregistered Pioneer Company was deregistered on 24 June 2008, more than a year before the loan agreement with YIC was entered into. The New Pioneer Company was registered on or around 5 December 2007 and was the only company called “Pioneer Australia Pty Ltd” which existed in October 2009. Accordingly, it seems that the New Pioneer Company ought to have been the joint creditor, together with Spa, seeking recovery from YIC, and the bankrupt and her husband as sureties, of the balance of the loan. In any event, that is not an issue we are required to decide on this appeal nor one in relation to which we express any view.

44    On 27 May 2020, YIC commenced proceedings in the Supreme Court of Queensland against the Respondents and their legal representatives, seeking to set aside the Original Judgment on the basis of fraud (the Fraud Proceeding). On 18 December 2020, Davis J gave summary judgment in the Fraud Proceeding in favour of the Respondents and their legal representatives (the Summary Judgment). His Honour also noted, at [65], in relation to the prospect of the Original Judgment being unenforceable because it was in favour of the Deregistered Pioneer Company, that this “would surely be avoided by the slip rule”: YIC Industrial Pty Ltd & Anor v Spa Investments Pty Ltd & Ors [2020] QSC 378.

45    On 4 February 2021, YIC made an application to the Queensland Court of Appeal for leave to appeal the Summary Judgment. The application for leave to appeal is presently listed for hearing on 1 June 2021.

46    The Respondents also filed an application to amend the ACN in respect of “Pioneer Australia Pty Ltd” in the Original Judgment. That application was heard by Burns J on 25 March 2021 and has been adjourned, to a date to be fixed, with costs reserved.

47    Given the pending applications in the Supreme Court and, in particular, the contention (albeit contested) that the ACN of the deregistered company should be corrected under the slip rule, this Court raised concerns as to whether the present appeal should have been stayed pending the hearing of those matters as their resolution may render this appeal moot. However, because we have decided that the appeal must be dismissed in any event, many of the issues that may have arisen do not, in fact, arise. This is because even assuming that the judgment debt is held jointly by Spa and the Deregistered Pioneer Company, Spa had standing to bring an application under s 90-20 of the Insolvency Practice Schedule for an order pursuant to s 90-15 to remove and replace the trustee of the Bankrupt’s estate.

Decision of Primary Judge

48    On 19 December 2019, the Bankrupt was served with a Bankruptcy Notice by the Respondents pursuant to the Original Judgment. The Bankrupt was subsequently declared bankrupt on the filing of her own petition and Mr Bettles was appointed her trustee in bankruptcy on 20 January 2020.

49    On 6 August 2020, the Respondents brought an application in this Court seeking to remove and replace Mr Bettles as trustee of the Bankrupt’s estate. On 14 December 2020, the learned primary judge made orders that Mr Pearce and Mr Heers be appointed to replace Mr Bettles as trustees of the Bankrupt’s estate.

50    At first instance, the Appellants submitted that there is authority for the proposition that “joint creditors can only act together, and anything done without the authority and agreement of all of them is invalid”, citing Australian Workers’ Union v Bowen (1946) 72 CLR 575 at 583 (Latham CJ) and 590 (Dixon J); Re Kevin McNamara and Son Pty Ltd [2014] VSC 337; 287 FLR 96 at [99]. Accordingly, the Appellants submitted that Spa was not entitled to bring an application pursuant to s 90-20 of the Insolvency Practice Schedule in the absence of the other joint creditor.

51    The primary judge summarised the authorities relevant to the proposition that a single joint creditor cannot, by itself, present a bankruptcy petition or enforce judgment. His Honour then held at [41]-[42]:

With respect to the careful and thoughtful submissions of [counsel], the principle identified above has little to do with the existing circumstances. The above authorities are concerned only with the statutory right of joint creditors to act to enforce their claim. Whether in respect of the issuing of a bankruptcy notice or a statutory demand, the entitlement to take either step is vested in a person or entity which is entitled to enforce the claimed debt. This must be so, as the nature of the debtor’s liability is that of a single obligation owed to each of the joint creditors such that one of them has no ability to enforce it on their own.

However, that says nothing of the right of a person described as a “creditor” in s 5-30 of Sch 2 of the Bankruptcy Act to make a relevant application under s 90-20. It is clear enough, at least for the purposes of the present case, that the application by Spa Investments is not one by which the claimed judgment debt is sought to be enforced in any way. Whilst it is possible that if it were to take such a step it would need the support of the joint creditor, there is nothing in the Act which suggests that the making of an application to ensure the proper administration of the bankrupt estate is one which cannot be made by it alone.

[Emphasis added]

52    The primary judge also accepted that the concept of “creditor” in s 5-30 of the Insolvency Practice Schedule has a “very wide” meaning and there “is nothing in the scope or purpose of s 5-30, or of ss 90-15 and 90-20, which suggests that the word “creditor” should be given any narrow construction.” In this regard, his Honour said at [44]-[46]:

… [Section 90-1], which provides a simplified outline of the division states, inter alia:

Review by the Court

The Court may inquire into the administration of a regulated debtor’s estate either on its own initiative or on the application of the Inspector-General or a person with a financial interest in the administration of the regulated debtor’s estate.

The Court has wide powers to make orders, including orders replacing the trustee or dealing with losses resulting from a breach of duty by the trustee.

The above indicates that the purpose of the Division includes protecting the integrity of the administration of debtors’ estates and that can be secured by the making of applications by creditors: see in particular s 90-10 where the Court is empowered to undertake an inquiry of an administration on the application of a “person with a financial interest” in it. There is no apparent reason for the scope of persons who might make that application to be narrowed to only those who are entitled, by themselves, to enforce their claimed debt. It is not to be supposed that a creditor or creditors should not be entitled to pursue a legitimate complaint merely because one of a number of joint creditors is unwilling to authorise the making of the application. The same reasoning applies to s 90-15.

In the circumstances, where Division 90 is concerned with the proper administration of estates, and applications to the Court for that purpose are not concerned with the enforcement of debts or judgments, there is no reason for reading it down such that the expression “a person with a financial interest in the administration of the regulated debtor’s estate” does not include a creditor whose claim is joint with another entity. On that basis, Spa Investments is a judgment creditor, albeit jointly with another party, and has the necessary standing to bring the present application.

[Emphasis added]

53    Accordingly, the primary judge accepted that Spa was entitled to make an application in relation to the administration of the Bankrupt’s estate pursuant to s 90-15 of the Insolvency Practice Schedule, notwithstanding that it is a joint judgment creditor acting alone.

Grounds of Appeal

54    By their Notice of Appeal dated 17 December 2020, the Appellants raised six grounds of appeal:

1.    The primary Judge erred in law in finding that the Respondent, Spa Investments Pty Ltd ("Spa"), "has the necessary standing to bring the present application" (Reasons at [46]), in circumstances where:

(a)    it was expressly conceded by the Respondents, and the primary Judge correctly found, that Spa was a "joint judgment creditor" (Reasons at [36] and [46]);

(b)    the primary Judge correctly found that Spa's "proof of debt was lodged on the basis that the debt was owed jointly'' (Reasons at [36]);

(c)    the primary Judge correctly found that Spa, as one of two joint creditors, would not have been entitled to enforce the joint debt on its own (Reasons at [41]);

(d)    in the premises, Spa's only interest in the estate of the bankrupt is that of a joint judgment creditor;

(e)    the application in the Court below:

(i)    was pressed only on behalf of Spa "on its own" (Reasons [34]); and

(ii)    was not pressed on behalf of, together with, or with the proper authority or agreement of the joint judgment creditor; and

(f)    in the premises, Spa therefore did not have standing to bring the application in the Court below on its own without the proper authority and agreement of the joint judgment creditor.

2.    The primary Judge erred in law in finding that Spa, "has the necessary standing to bring the present application" (Reasons at [46]), in circumstances where Spa, as one of two joint creditors, was not, upon the proper construction and true effect of the Insolvency Practice Schedule (Bankruptcy), being Schedule 2 to the Bankruptcy Act 1966 (Cth) ("the Schedule"):

(a)    "a creditor" within the meaning of section 5-30 of the Schedule; or

(b)     a person with a "financial interest" in the administration of the estate of the bankrupt within the meaning of section 90-20 of the Schedule.

3.    The primary Judge erred in law in construing the word "creditor'' for the purposes of sections 5-30 and 90-20 of the Schedule (Reasons at [44]) as having a different meaning, operation, outcome and effect depending upon:

(a)    whether one joint creditor had purported to enforce a joint debt through issuing a bankruptcy notice without the authority or agreement of the other joint creditors – in which case the bankruptcy notice would be invalid because, as the primary Judge correctly found, "one of them has no ability to enforce [the joint debt] on their own" (Reasons at [41]), and one joint creditor would not have standing as a creditor; or

(b)     (as in the present case) whether a person declares bankruptcy on their own petition – in which case, according to the reasoning of the primary Judge, one joint creditor has the right to make an application concerning the administration of the bankrupt estate because the joint creditor, alone, does have standing as a creditor.

4.    The primary judge erred in law, alternatively fact, in finding that Spa's application to interfere with the administration of the estate of the bankrupt was "not one by which the claimed judgment debt is sought to be enforced in any way" (Reasons at [42]) and was "not concerned with the enforcement of debts or judgements" (Reasons at [46]), in circumstances where:

(a)    Spa was a 'Joint judgment creditor' (Reasons at [36]);

(b)    Spa's "proof of debt was lodged on the basis that the debt was owed jointly" (Reasons at [36]);

(c)    Spa's only interest in the estate of the bankrupt is that of a joint judgment creditor; and

(d)    in the premises, Spa's application to interfere with the administration of the estate of the bankrupt was, in truth and in fact, only brought to seek a return on its claimed judgment debt, whether directly or indirectly and whether wholly or in part.

5.    The primary Judge erred in law in finding, implicitly, that the proof of debt lodged by Spa was valid (Reasons at [36]), in circumstances where:

(a)    the proof of debt was lodged:

(i)    jointly in the joint names of Spa and "Pioneer Australia Pty Ltd";

(ii)    on the basis of a joint judgment (as conceded by the Respondents and correctly found by the primary Judge (Reasons at [36]));

(b)    the reference to “Pioneer Australia Pty Ltd” in the proof of debt is a reference to either:

(i)    Pioneer Australia Pty Ltd ACN 073 498 905, a company which was at all material times deregistered, but which was made a party to antecedent proceedings and the joint judgment; or

(ii)    the Respondent, Pioneer Australia Pty Ltd ACN 128 784 725, a company which was not a party to the antecedent proceedings or the joint judgment – and to the extent that it becomes relevant, the primary Judge erred in fact in finding that the proof did not identify "whether the entity claiming to be the creditor was the old or new Pioneer Australia" (Reasons at [36]) because the proof of debt, being exhibit DRS-13 to the Affidavit of Dennis Roland Standfield expressly stated "ABN: 38 128 784 725 (PIONEER)" and thereby identified the Respondent, Pioneer Australia Pty Ltd ACN 128 784 725; and

(c)     in the premises, the proof of debt lodged by Spa, as a joint creditor, was, and it remains, invalid and liable to being rejected or set aside.

6.    In the circumstances, the primary Judge erred in ordering that:

(a)    Jason Walter Bettles be removed as trustee of the bankrupt estate; and

(b)    Mark William Pearce and Andrew John Heers be appointed as joint trustees of the bankrupt estate.

55    In substance, each of the grounds of appeal raised for consideration the proper construction and meaning of “creditor” in the Insolvency Practice Schedule, at least in the context of an application to remove and replace a trustee.

Consideration

56    At first instance, the Respondents conceded for the purposes of the application that Spa and the Deregistered Pioneer Company were the named joint judgment creditors in the Original Judgment and the application to remove and replace the existing trustee in bankruptcy was pressed by Spa “on its own”. On appeal, the Court proceeded on the same basis. Accordingly, there was in essence one issue to be decided; namely, whether one only of joint judgment creditors has standing to apply for an order to remove and replace a trustee pursuant to s 90-15 of the Insolvency Practice Schedule.

57    Under the Act, a person has standing if he or she has an interest in the administration of the bankrupt’s estate: ss 5-15(a) and 90-20(1)(a) of the Insolvency Practice Schedule. A person has that interest if he or she is, amongst other things, a “creditor” within the meaning of s 5-30(a)(ii) of the Insolvency Practice Schedule. There is no relevant definition of “creditor” in the Act. However, it is broadly settled that a “creditor” in the bankruptcy context means any person who, at the date of the payment to him or her, would have had the right to come in and prove and rank with the other creditors in the bankruptcy: see, eg, Federal Commissioner of Taxation v Jaques (1956) 95 CLR 223 at 230 (Dixon CJ, Fullagar, Kitto and Taylor JJ); Commissioner of Taxation v Lane [2020] FCAFC 184; 385 ALR 92 at [133] (Allsop CJ, Perram and Farrell JJ agreeing).

58    The Appellants submitted that the concept of a “creditor”, as it appears in s 5-30 and applies to s 90-20, must be capable of precise definition. That definition must be clear, specific and consistent when used in different contexts. The Appellants submitted that “creditor” should be given its ordinary, natural meaning and, further, that it should not be given a meaning in some contexts which is different to its meaning in other contexts. On this predicate, the Appellants submitted that “creditor” in the context of joint creditors cannot mean one of multiple joint creditors acting alone or independently of the other joint creditor or creditors. The Appellants submitted that if the phrase “creditor” as it appears in the Insolvency Practice Schedule were to include a joint creditor acting alone, that would be, in effect, to re-define that concept to mean something different to its established meaning at common law.

59    Advancing this submission further, the Appellants posited that it would transgress “fundamental precepts of statutory construction” if the meaning of creditor in the Act were supposed to have different applications in different contexts. The Appellants relied on the well-established principle that where parties hold a joint interest, neither party holds an individual interest: Deputy Commissioner of Taxation v Westpac Savings Bank Pty Ltd (1987) 87 FLR 130 at 134 (Bryson J).

60    By extension, the Appellants submitted that Spa is not a “creditor” with standing to bring an application to remove and replace the trustee unless it is joined in making that application by the other joint creditor. While this submission is attractive at a relatively superficial level, it does not grapple with the fact that the concept of a “creditor” is capable of being used in different contexts, for which the objective purpose of the statutory provision might also differ.

61    In our opinion, the distinction between the enforcement of the rights of a single creditor and those of joint creditors lies not in any distinction between the rights attributed by the law to a single creditor compared with the rights that may be attributed to joint creditors, but rather in the proper characterisation of the obligation upon which the debt itself is founded. Indeed, the primary judge correctly concluded that the distinction of relevance between a single creditor and a joint creditor flows from the nature of the obligation itself, not from any difference in the characterisation of the obligee’s rights: see primary judge’s reasons at [41]-[42], extracted above.

62    The Appellants’ contention is that the common law constraint against joint creditors acting independently in relation to the recovery of a single obligation, in effect, defines the rights of a joint creditor for all purposes. However, in our view, that submission extends the constraint against only one of joint creditors taking action to recover a joint debt for a purpose that is unnecessary in the present context.

63    To allow a joint creditor to act independently in seeking an order under s 90-15 of the Insolvency Practice Schedule is not antithetical to the common law recognition that the underlying chose of action is a single obligation owed jointly and not severally. Allowing an independent application for the removal of a trustee would not lead to the mischief complained of by the Appellant; namely, of “creditor” having a different operation or meaning depending on where it appears in the Act. Indeed, the meaning of the word “creditor” remains uniform and consistent throughout the Act, it is merely that the rights of a single joint creditor in relation to the administration of the bankrupt’s estate vary depending on the nature of the obligation.

64    Further, we do not accept the Appellants’ submission that allowing a single joint creditor to apply to remove and replace a trustee creates a conflict between the rights of a joint creditor and a single creditor recognised by the common law, and the meaning of “creditor” in the Act. A single joint creditor is aptly described as, and falls within, the meaning of “creditor” in s 5-30 of the Insolvency Practice Schedule, notwithstanding that for the purpose of recovering a debt such creditors must act jointly.

65    Finally, we have had the advantage of reading the reasons of Justice Greenwood in draft. We agree with his Honour’s conclusion concerning the outcome of this appeal and with his reasons in relation to the standing of a single joint judgment creditor to apply under s 90-20 of the Insolvency Practice Schedule for the orders contemplated in s 90-15. However, there is one point of departure between his Honour’s reasons and those we have expressed; namely, we do not agree that a proof of debt is capable of being lodged by a single joint creditor acting alone.

66    For the purpose of this appeal, it is not strictly necessary to decide whether a single joint creditor is able to lodge a proof of debt. However, in light of the reasons expressed by Greenwood J, we consider it appropriate to address that question. Section 82(1) appears in Division 1 of Part VI of the Act and relevantly provides that:

Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.

67    A creditor shall be taken not to have proved a debt until a proof of debt lodged by him or her in respect of that debt has been admitted: s 83 of the Act. The manner of proving debts is dealt with in s 84 of the Act, which states as follows:

(1)    Subject to this Division, a creditor who desires to prove a debt in a bankruptcy shall lodge, or cause to be lodged, with the trustee a proof of debt in accordance with this section.

(2)    A proof of debt:

   (a)    shall set out particulars of the debt;

   (b)     shall be in accordance with the approved form;

(c)    shall specify the vouchers, if any, by which the debt can be substantiated; and

   (d)    shall state whether or not the creditor is a secured creditor.

(3)    Where the trustee is of the opinion that it is desirable that all the matters, or some of the matters, contained in a proof of debt lodged with him or her by a creditor should be verified by statutory declaration, the trustee may serve on the creditor a written notice informing the creditor that he or she is of that opinion and that, unless the creditor lodges with the trustee a statutory declaration verifying the matters contained in the proof of the debt or such of those matters as the trustee specifies in the notice, the trustee will administer the estate as if the proof of debt had not been lodged.

(4)    A statutory declaration verifying matters in a proof of debt lodged by a creditor may be made by:

   (a)     the creditor; or

(b)    a person whose own knowledge includes the facts set out in the statutory declaration and the proof of debt, and who is authorised by the creditor to make the declaration.

(5)    Where the trustee serves a notice on a creditor under subsection (3) in respect of a proof of debt, the proof of debt shall, for the purposes of this Act (other than section 263), be deemed not to have been lodged with the trustee unless and until the creditor has lodged with the trustee a statutory declaration verifying the matters in the proof of debt or such of those matters as are specified in the notice, as the case requires.

(6)    A proof of debt under this section, or a statutory declaration referred to in subsection (3), sent to the trustee by post as certified mail (postage being prepaid) shall be deemed to have been lodged with the trustee and shall be deemed to have been so lodged at the time at which it would have been delivered in the ordinary course of post unless it is shown that the trustee did not receive it at that time.

68    Also relevant is s 102 of the Act, which outlines the function of the trustee to examine a proof of debt, including relevantly:

(1)    The trustee shall examine each proof of debt and the grounds of the debt sought to be proved and, subject to the power of the Court to extend the time, shall, not later than 14 days after the expiration of the period specified in the notice of intention to declare a dividend as the period within which creditors may lodge their proofs of debt, either:

(a)    admit the proof of debt in whole;

(b)    admit it in part and reject it in part;

(c)    reject it in whole; or

(d)    require further evidence in support of it.

(2)    Where the trustee rejects a proof of debt in whole or in part, he or she shall inform the creditor by whom it was lodged, in writing, of the grounds of the rejection.

…

69    As Greenwood J correctly observes, Part VI of the Act is designed to strike a balance between the interests of the creditors in the administration of the bankrupt’s estate and the interests of the bankrupt. However, in our view, it does not follow that it would be inconsistent with the essential beneficial features of the statutory scheme – including the orderly administration of the estate of a bankrupt – to preclude one only of joint creditors from lodging a proof of debt in respect of an obligation owed to joint creditors.

70    Indeed, we regard the requirement that a proof of debt must be lodged jointly by joint creditors, and cannot be lodged individually, as entirely consistent with the statutory scheme. In our view, it is not satisfactory to leave such a question of principle to be determined by the hypothetical trustee in performing their function under s 102 of the Act. If the trustee were in doubt about such a matter, he or she would be justified in seeking judicial advice on the subject, and arguably should do so: see, eg, s 63 of the Trustee Act 1925 (NSW); Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; 237 CLR 66 at [36], [54]-[75] (Gummow ACJ, Kirby, Hayne and Heydon JJ) and [196] (Kiefel J). It is conceivable that the trustee may permit a proof of debt lodged by one only of joint creditors and, in our view, if that were to occur it would be inconsistent with the principle articulated by the High Court in Bowen.

disposition

71    For the reasons expressed above, the appeal should be dismissed with costs.

Associate:

Dated:    11 June 2021

SCHEDULE OF PARTIES