FEDERAL COURT OF AUSTRALIA

Rushton v Kaney (Executor), in the matter of Rushton (Deceased) [2017] FCA 637

ORDERS

THE COURT ORDERS THAT:

1.    The petition filed by the applicant be dismissed.

2.    The applicant pay the respondent’s costs of the proceeding.

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

REASONS FOR JUDGMENT

TRACEY J:

1    The present proceeding was commenced by the filing of a petition by the applicant, Mr Rushton, in which he sought orders under section 244 of the Bankruptcy Act 1966 (Cth) (“the Act”) for an order for the administration of the estate of his deceased wife. In that petition, he contended that he was an unsecured creditor of his wife’s estate in the amount of $10,000,000 based on what he described as a “commercial lien”. He asserted that the debt was a liquidated sum payable immediately or at a certain future time which he did not identify.

2    On 28 February 2017, he filed a revised petition which contained substantially the same assertions relating to the $10,000,000 debt for a commercial lien but expanded upon the basis of that assertion by referring to a number of documents, including a certificate of marriage, a death certificate and other documents, which he described as each having a “certificated security” number. In contrast to the initial petition, Mr Rushton’s revised petition claimed that he held “security over the property of the deceased respondent debtor to the value of $10,000,000” because of “perfected super-priority security interest financing statements” filed with the relevant public records office. The petition indicated that he was willing to surrender his security for the benefit of creditors generally in the event an order for the administration of the estate was made.

3    As I have said, Mr Rushton’s petition was filed pursuant to s 244 of the Act. Relevantly, that section provides:

244 Administration of estates under this Part upon petition by creditor

(1)    Subject to this section, where:

(a)    a debt of not less than $5,000 was owing by a deceased person at the time of his or her death to a creditor, or debts amounting in the aggregate to not less than that amount were so owing to any 2 or more creditors;

(b)    a debt incurred by the legal personal representative of a deceased person of not less than $5,000 is owing to a creditor, or debts so incurred amounting in the aggregate to not less than that amount are owing to any 2 or more creditors; or

(c)    a debt of not less than $5,000, or debts amounting in the aggregate to not less than that amount, which a deceased person would have been liable to pay to a creditor or any 2 or more creditors if he or she had not died becomes or become owing after his or her death;

the creditor or creditors to whom the debt or debts is or are owing may present a petition to the Court for an order for the administration of the estate of the deceased person (in this section referred to as the deceased debtor) under this Part.

(2)    Subject to subsection (3), a secured creditor shall, for the purposes of subsection (1), be deemed to be a creditor only to the extent, if any, by which the amount of the debt owning to him or her exceeds the value of his or her security.

(3)    A secured creditor may present, or join in presenting, a petition under this section as if he or she were an unsecured creditor if he or she includes in the petition a statement that he or she is willing to surrender his or her security for the benefit of creditors generally in the event of an order for the administration of the estate under this Part being made.

(4)    Where a petitioning creditor is a secured creditor, he or she shall set out in the petition particulars of his or her security.

(5)    A petition under this section shall be verified by the affidavit of a person who has knowledge of the facts.

(6)    A petition under this section shall not be presented unless:

(a)    the debt, or each of the debts, in respect of which it is presented:

(i)    is a liquidated sum due at law or in equity or partly at law and partly in equity; and

(ii)    is payable immediately or at a certain future time; and

(b)    at the time of his or her death, the deceased debtor:

(i)    was personally present or ordinarily resident in Australia;

(ii)    had a dwelling-house or place of business in Australia;

(iii)    was carrying on business in Australia, either personally or by means of an agent or manager; or

(iv)    was a member of a firm or partnership carrying on business in Australia by means of a partner or partners, or of an agent or manager.

…

(11)    At the hearing of the petition, the Court shall require proof of:

(a)    the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);

(b)    service of the petition, unless service of the petition has been dispensed with; and

(c)    the fact that the debt or debts to which the petition relates is or are still owing;

and if it is satisfied with the proof of those matters, may make an order that the estate be administered under this Part.

(12)    If the Court is not satisfied with the proof of any of those matters or is of the opinion that for other sufficient cause the order sought ought not be made, it may dismiss the petition.

(13)    Where proceedings have been commenced in a court for the administration of a deceased person’s estate under a law of a State or Territory, a petition for an order under this section in relation to the estate shall not be presented by a creditor except by leave of the Court and on such terms and conditions (if any) as the Court thinks fit.

…

(Original emphasis.)

4    As will be seen from s 244(1), a petitioner must be a creditor of the deceased or of the legal personal representative of the deceased, and this must be established by evidence. And subsection (5) requires that the petition must be verified by an affidavit of a person who has knowledge of the relevant facts. Pursuant to subsection (11), the Court may only make an order for administration of the estate if satisfied with the proof of the matters stated in the petition. Subsection (12) provides that the Court may dismiss a petition in the absence of such satisfaction.

5    On 28 February 2017, Mr Rushton filed an affidavit which purported to be a verifying affidavit for the purposes of subsection (5). I have examined that affidavit closely and it does not establish any of the factual preconditions, prescribed by s 244(1), for such a petition to be presented to the Court. In particular, it does not establish that Mr Rushton is or was a creditor, secured or otherwise, of his wife’s estate, and nor does it establish the existence of any debt of the kind identified in the petition. His claim for the $10,000,000 was founded on what he described as a commercial lien. There was no evidence that would support the existence of any common law or equitable lien.

6    It follows that none of the preconditions prescribed by s 244(6)(a) has been established.

7    The respondent also submitted that, as probate had been granted to the respondent by the Supreme Court of the Australian Capital Territory on 6 November 2015, the applicant was required to seek leave to file his petition pursuant to s 244(13). The respondent noted that no such application had been made and that, in any event, leave should not be granted as there was no utility in doing so where other preconditions in s 244 had not been satisfied.

8    The purpose of s 244(13) of the Act is to ensure that two courts are not administering the same estate at the same time. However, there is authority for the proposition that s 244(13) does not extend to circumstances where an application for probate is pending or has been granted: see Gonzales v Marmentini, Executrix of the Estate of the Late Raber [1998] FCA 911 at pp 4–6 (Emmett J); Meinhardt (Hong Kong) Limited v Meinhardt (Deceased) [2006] FCA 1106 [16]–[19] (Jessup J). Accordingly, I do not consider that s 244(13) is engaged in the present proceeding.

9    The respondent has filed an interlocutory application pursuant to r 26.01(1) of the Federal Court Rules 2011 (Cth) seeking summary dismissal of Mr Rushton’s petition. The grounds relied on include, relevantly, that the applicant has no reasonable prospect of successfully prosecuting the proceeding (r 26.01(1)(a)) and that no reasonable cause of action is disclosed (r 26.01(1)(c)).

10    The power summarily to dismiss a proceeding is found in s 31A of the Federal Court of Australia Act 1976 (Cth). The power is to be exercised with caution: see Spencer v Commonwealth (2010) 241 CLR 118 at 131; [2010] HCA 28 at [24] (French CJ and Gummow J). The exercise of the power is guided by principles expounded in that case by Hayne, Crennan, Kiefel and Bell JJ. Their Honours considered that expressions like “frivolous”, “untenable”, “groundless” or “faulty”, when used in relation to a proceeding, do not sufficiently describe the scope of s 31A (at 141 [59]). They continued at 141 [60]:

Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is “no reasonable prospect” of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to “no reasonable prospect” can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase “just and equitable” when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes.

11    Despite repeated opportunities to do so, Mr Rushton has failed to establish that he is or was a creditor of his wife or her estate. He therefore lacked standing to present the petition to this court. Moreover, the preconditions for presenting a petition prescribed by subsection (6) of s 244 have not been complied with.

12    The application is, in my view, hopeless and bound to fail. Summary dismissal is warranted and should be ordered.

13    The orders of the Court are:

(1)    The petition filed by the applicant be dismissed.

(2)    The applicant pay the respondent’s costs of the proceeding.

Associate:

Dated:    6 June 2017