CATCHWORDS
BANKRUPTCY - application by trustee for directions - protected monies (damages for personal injury) under s 116(2)(g)(i) - meaning of “the whole, or substantially the whole, of the monies paid” in s 116(3) - discussion of application of s 116(3) and (4)
PRACTICE & PROCEDURE - observation that it is not the practice for Judges of the Court to hear applications for leave to appeal or for extensions of time to appeal in relation to their own judgments unless so invited by the applicant - unavailability of any true appeal from an order on such an application - natural justice where applicant did not appear because not aware of date of listing - whether nevertheless new hearing should be refused because application had no prospect of success - effect of failure to comply with directions
WORDS & PHRASES - “substantially the whole”
Bankruptcy Act 1966, s 116
Federal Court of Australia Act 1976, s 25
Currie v The Queen (Burchett, Miles and O’Loughlin JJ unreported 6 November 1992)
Stead v State Government Insurance Commission (1986) 161 CLR 141
Australian and Overseas Telecommunications Corporation Limited v McAuslan (1993) 47 FCR 492
Giretti v Deputy Commissioner of Taxation (1996) 139 ALR 488
Re Iskenderian; Ex parte Iskenderian Bros Pty Ltd (1989) 21 FCR 363
Re Manivilovski; Ex parte Official Trustee in Bankruptcy (1993) 45 FCR 358
Secretary, Department of Social Security v Wetter (1993) 112 ALR 151
James George Turner v Official Trustee in Bankruptcy
No TG 13 of 1996
Burchett, Carr and Kiefel JJ
Brisbane (Heard in Hobart)
9 December 1996
IN THE FEDERAL COURT OF AUSTRALIA
TASMANIAN DISTRICT REGISTRY
GENERAL DIVISION No. TG 13 of 1996
On appeal from a Judge of the Federal Court of Australia
BETWEEN: JAMES GEORGE TURNER
Appellant
AND: OFFICIAL TRUSTEE IN BANKRUPTCY
Respondent
BEFORE: Burchett, Carr and Kiefel JJ
PLACE: Brisbane (Heard in Hobart)
DATE: 9 December 1996
MINUTES OF ORDERS
THE COURT ORDERS THAT:
1. The appeal be dismissed with costs.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
TASMANIAN DISTRICT REGISTRY
GENERAL DIVISION No. TG 13 of 1996
On appeal from a Judge of the Federal Court of Australia
BETWEEN: JAMES GEORGE TURNER
Appellant
AND: OFFICIAL TRUSTEE IN BANKRUPTCY
Respondent
BEFORE: Burchett, Carr and Kiefel JJ
PLACE: Brisbane (Heard in Hobart)
DATE: 9 December 1996
REASONS FOR JUDGMENT
THE COURT:
On 25 March 1996 a Judge of this Court heard and determined an application brought by the Official Trustee for directions as to whether Mr Turner's interest in lands at Glen Huon was divisible amongst the creditors of his estate, which was sequestrated in August 1994. Mr Turner had alleged that they were purchased with monies he received by way of an award of damages for personal injuries suffered by him in a motor vehicle accident, which the Bankruptcy Act 1966 regards as protected monies (see s 116(2)(g)(i)). The Trustee's application was brought in response to that assertion.
His Honour directed that the Official Trustee sell each of the parcels of land, which numbered five in total, but that upon the sale of three of them, which were identified in the order, the Trustee pay to Mr Turner so much of the proceeds as could fairly be attributed to protected money.
Mr Turner was present in Court when his Honour pronounced those Orders. He received a copy of them and the reasons for judgment on 10 April 1996. On 15 April 1996 the time for the bringing of an appeal expired. Mr Turner then filed an application for an extension of time within which to file and serve a notice of appeal. On 22 May 1996 that application was listed for directions before his Honour. Mr Turner did not appear. After standing the matter down for some time, to allow for the contingency that Mr Turner may have been delayed, his Honour dismissed the application.
We make the observation that it is not the usual practice for Judges of this Court, unless expressly invited by an applicant to do so, to hear applications for leave to appeal, or for extensions of time within which to appeal, from their own decisions, and wherever possible another Judge does so. The reasons for such a practice are obvious. It may not always be thought, by the litigant bringing the application, that the Judge is able to bring an impartial mind to bear on the matter where a conclusion has already been reached as to the merits of the matter sought to be made the subject of an appeal.
It may also be observed at this point that if his Honour is taken to have heard the application for extension, there may be no possibility of appeal to a Full Court upon the same matter. Section 25(2)(b) Federal Court of Australia Act 1976 provides that applications for extensions of time to institute an appeal may be heard and determined either by a single Judge or by a Full Court. But in the event of an exercise of the jurisdiction by a single Judge, there is no
appeal from that decision. The operation of the section was dealt with by Burchett J (with whom the other members of the Full Court agreed) in Currie v The Queen (unreported, 6 November 1992), where his Honour refers to the cases upon the point. But here Mr Turner complains that, through no fault of his own, he was not able to attend and present his case for an extension. If there was a denial of natural justice it seems to us clear enough that there has not been a hearing to which s 25 could apply. We add that the Official Trustee did not submit that s 25 forecloses consideration of the matter by this Court.
Mr Turner conducts a farm at Huon Vale. He advised this Court that he does not have the telephone connected and is reliant upon mail from the Court. When he filed his application for extension the District Registry was apparently unable to give him a date for first directions, no doubt because there is no resident Judge in the District and enquiries had to be made as to the availability of a Judge in Melbourne to hear the application, by video link if necessary. The hearing date then obtained, 22 May 1996, was advised to Mr Turner by letter from the District Registrar. He received a notice from the post office, in the township some 20 kms from his farm, that an item of registered mail was available to be collected, but he was unable to attend until the date of the hearing itself 22 May. He produced to the Court at this hearing photocopies of mail receipts for that day. It seems possible then that, unknown to his Honour, Mr Turner was unable to reach the Court in time for a hearing. At least we are prepared to proceed on that basis.
Because a party has been prevented from presenting his or her case, in circumstances which might be described as unjust, does not conclude the question whether a fresh hearing should then be ordered. The general principle is subject to a qualification that a Court will not do so where the same result must be reached: Stead v State Government Insurance Commission (1986) 161 CLR 141, 145. The basis of the rule lies in the futility of such an order.
It must here be recalled that the hearing which is said to have been denied to Mr Turner is the hearing of an application for an extension of time to appeal to this Court. A question which is necessarily addressed on such an application is whether the proposed appeal could succeed. The lack of any prospect of success was the basis upon which his Honour, the primary Judge, concluded an extension was not warranted. The chance that the appeal would be allowed was, in his Honour's view, "remote in the extreme". Moreover, once it is appreciated that the issue at the original hearing as to the source of the funds employed in the acquisition of the relevant properties needed to be addressed by Mr Turner, the focus shifts to the evidence that was led. As will appear from our reasons, which follow, a consideration of the facts as disclosed supports the conclusion reached by his Honour. Any possibility of a different result would require a grant of leave to permit Mr Turner to furnish further evidence. In the circumstances of this case, we have concluded that that would not be an appropriate course.
Sub-sections 116(3) and (4) of the Bankruptcy Act provide:
"(3) Where, at any time, the whole, or substantially the whole, of the money paid for the purchase, or used in the acquisition, of particular property is protected money, paragraph (2)(n) applies to the property.
(4) Where, as at the time when the trustee realises particular property to which paragraph (2)(n) does not apply, the outlay in relation to the property is in part protected money and in part other money, the trustee shall pay to the bankrupt so much of the proceeds of realising the property as can fairly be attributed to that protected money."
His Honour first referred to the two parcels at Glen Huon, being the land described in Certificate of Title Volume 2826, folio 34 and Volume 2436 folio 48, and observed that it had never been alleged that they were purchased with protected monies and there was no evidence to that effect. The oral submissions of Mr Turner to this Court confirm his Honour's observation. These parcels appear to be neighbouring lands which were acquired after the initial three. It was with respect to the purchase of those initial three parcels that monies emanating from the personal injuries award may have been utilised. His Honour concluded:
"As to the land in the remaining three certificates of title, that is to say certificates of title volume 2344 folio 36, volume 2430 folio 9 and volume 2344 folio 35, the position is as described in paras 10 and 11 of Mr Robinson's affidavit. It appears they were purchased by the bankrupt on 12 August 1977 from N.G. Kean for $21,300 of which $12,500 was advanced by the vendor on vendor finance. Inquiries of the vendor's solicitors indicates that the source of repayment of the vendor finance was through stock and station agents and, accordingly, the reasonable inference is that the moneys were funded not from protected moneys but from the bankrupt's farming activities.
As to the initial payment of $8800, there is some coincidence in point of time between that payment and a personal injuries judgment obtained by the bankrupt in the Supreme Court of Tasmania on 29 March 1977".
This information was provided to the Court by the Official Trustee. The substantial affidavit of Mr Turner filed in Court on the date of the hearing made no reference to the
properties, despite a direction earlier given by his Honour that the material to be filed deal with the question of the source of payment for the properties, which, it will be recalled, was the matter initially raised by Mr Turner himself. In any event, Mr Turner's description of events, in the course of submissions on this hearing, does not differ from his Honour's conclusions.
In these circumstances, the question which remains to be decided is whether the monies from the personal injuries award - $8,800 together with an initial sum for livestock - could be said to represent "the whole, or substantially the whole, of the money paid" for the purchase of the lands within the meaning of s116(3). (The total purchase price was $21,300). His Honour clearly was of the view that this could not be said, and the orders made by his Honour proceeded on the basis that s 116(4) applied, which is to say, that Mr Turner might recover a portion of the sale proceeds representing the investment of his personal injuries award.
In Re Iskenderian; Ex parte Iskenderian Bros Pty Ltd (1989) 21 FCR 363, 372 Neaves J, whilst dealing with other difficulties created by s 116(3) in its then form, considered that the question posed by the section was "whether the property, in truth, represents such damages or compensation". This decision was followed in Re Manivilovski Ex parte Official Trustee in Bankruptcy (1993) 45 FCR 358. Such an approach gives effect, correctly in our view, to the word "whole" and the phrase following "or substantially the whole". The section requires, in the first instance, a consideration of the question whether the property is entirely accounted for by the application of protected monies. If that is not the case, but nevertheless those monies account for nearly all of what has been used in payment for or in the acquisition of
the property, then this too will suffice to keep the property from being divided amongst creditors. But the sub-section does not contemplate that property will be withheld from creditors wherever the protected monies can account for a significant part of the purchase price, or of the means by which it is acquired. Even if, as here, the contribution of protected monies could be described, in general terms, as "substantial" this would not satisfy the requirement that those monies represent "substantially the whole" of that price or of the means of acquisition. Whilst "substantial", when it appears alone, might refer to a contribution of significance, here it derives its meaning from "the whole", the expression which it qualifies. The importance of the context supplied for the word "substantially", was emphasised by Hill J in Secretary, Department of Social Security v Wetter (1993) 112 ALR 151, 158-9, in relation to other statutory provisions. In our view, s116(3) provides that a bankrupt may retain property that can be seen to represent the protected monies, subject to only a minor qualification of input from other sources.
Here the protected monies expended on the three parcels of land, initially making up the farm property, represented just under half of the purchase price. Mr Turner submitted that the balance ought to be seen as provided by way of mortgage repayments funded from the sale of livestock over the years, and that the initial herd of livestock was funded, to the extent of about $1500, from the personal injuries award. The difficulty with this seems to be twofold. First, other animals almost certainly would have been purchased over the years for use in the breeding programme. Secondly, and in any event, the income produced from the sale of livestock represents, in large measure, the labour and skill of the farmer together with outlays necessary to maintain the animals in good condition.
These observations recognise that, in a particular case, the requirements of the section might be met by a tracing exercise. This has not been undertaken by Mr Turner here, and the submissions put forward by him lacked any factual foundation. An assessment of prospects of success in the appeal must necessarily be made on the basis of the material in evidence which, as we have said, permits only the conclusion reached by his Honour - namely, that the possibility of success is remote.
Mr Turner has already been given an opportunity to present his case, and has chosen not to avail himself of it. The application for directions was made by the Trustee in late January 1996 because of allegations made by Mr Turner. On 14 February 1996 his Honour directed, in unambiguous language, that Mr Turner was to file and serve an affidavit providing the details of the claim that the lands were purchased with protected monies. Mr Turner was aware of the direction, but, he told us, after discussing the matter with his solicitor, determined to pursue instead a larger claim that his bankruptcy was invalid. As a consequence he did not file in Court, by 22 March 1996 as directed, any material dealing with the claim under s 116(3) at all. On 25 March 1996, when the matter came before his Honour, Mr Turner filed the affidavit to which we have earlier referred. It appears that the matter was listed for directions that day, but that his Honour proceeded to hear and determine it, no doubt because the material expected from Mr Turner had not been produced and the issue then fell within a narrow compass. That was the course requested by the Trustee's counsel. No prejudice was occasioned to Mr Turner by this course, since he had no intention of filing the material he had been earlier directed to file. In these circumstances, we consider it would be quite inappropriate to direct, once again, that
material be filed. This would, in effect, be to start the proceedings afresh. The point which has been reached has not resulted from any mistake or confusion on the part of Mr Turner, but from a deliberate decision made by him.
Having considered the issues which would necessarily arise upon any fresh hearing of Mr Turner’s application for an extension of time, we are satisfied that it could not succeed. Accordingly, the appeal must fail on the ground of substance stated by the High Court in Stead at 145, and applied by the Full Court by majority in Australian and Overseas Telecommunications Corporation Limited v McAuslan (1993) 47 FCR 492, and in Giretti v Deputy Commissioner of Taxation (1996) 139 ALR 488.
That is not an end of all questions relating to the protected monies, should Mr Turner wish to provide material to the Trustee. His Honour's order was that, following sale, the Trustee was to pay to Mr Turner "so much of the proceeds as can fairly be attributed to protected money as defined in s 116(2D) of the Bankruptcy Act", which is by way of a direction that s 116(4) is to be applied. His Honour also adverted, in his reasons, to Mr Turner's right of review or appeal with respect to any decision reached by the Trustee. It should be understood, as was mentioned during the course of this hearing, what is said to be "attributed" to those protected monies will be more than the sums applied from the settlement monies, and will take account of any increase in value of the property.
In our view the appeal should be dismissed with costs.
I certify that this and the preceding nine pages are a true copy of the reasons for judgment of the Court.
Associate
Date: 9 December 1996
The appellant: Appeared in person
Counsel and Solicitors
for the respondents: Mr P Wood instructed by Piggott Wood & Baker
Place of Hearing: Hobart
Date of Hearing: 20 November 1996
Place of Judgment: Brisbane
Date of Judgment: 9 December 1996
