FEDERAL COURT OF AUSTRALIA

Chamberlain (Trustee) v Tilbrook [2017] FCA 1586

ORDERS

THE COURT ORDERS THAT:

1.    Judgment be entered in favour of the Applicant as against the Respondent in the sum of $339,725.09 pursuant to s 139ZQ(8) of the Bankruptcy Act 1966 (Cth).

2.    The Respondent is to pay interest on the sum of $339,725.09 from 28 October 2015 up to and including 19 December 2017 pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth).

3.    The Respondent is to pay interest on the judgment sum pursuant to s 52 of the Federal Court of Australia Act 1976 (Cth).

4.    The Respondent is to pay the Applicant’s costs of the proceedings.

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

REASONS FOR JUDGMENT

1    The progression of this case to hearing has not proved easy.

2    The proceeding commenced with the filing of an Originating Application on 28 June 2017. It was accompanied by a Statement of Claim. The Applicant in the proceeding was Mr Christopher Mel Chamberlain as Trustee (the “Trustee”) of the Bankrupt Estate of Mr Malcolm John Tilbrook. The Respondent to the proceeding was Ms Patricia Susan Tilbrook. She is the wife of Mr Malcolm Tilbrook.

3    The Trustee sought judgment in the sum of $339,725.09 pursuant to s 139ZQ(8) of the Bankruptcy Act 1966 (Cth). The Trustee also sought interest as from 28 October 2015 up to the date of judgment and interest on the judgment sum pursuant to s 52 of the Federal Court of Australia Act 1976 (Cth). An order for costs was also sought.

4    The final hearing took place today. On that occasion, as was the case in respect to each of the earlier occasions upon which the proceeding came before the Court, there was no appearance for Ms Tilbrook. Leave was granted to amend the Statement of Claim.

5    It is concluded that the relief sought by the Trustee should be granted.

The attempts to effect service

6    The reason why the progression of this case to hearing has not proved easy arises out of the attempts made to effect service on Ms Tilbrook.

7    An affidavit of Ms Alice Gant, a solicitor employed by the Trustee’s solicitors, establishes that Ms Tilbrook lives at 4/16 Shellcove Road, Neutral Bay in Sydney.

8    A licensed process server, Mr Frank Hoare, was retained to effect service upon Ms Tilbrook. Mr Hoare was able to recognise Ms Tilbrook as a result (inter alia) of having previously served her with documents. On an unspecified date in July 2017, Mr Hoare attended at the Shellcove Road premises to effect service of the Originating Application and Statement of Claim. But when he knocked on the door of the unit he was told by Mr Tilbrook that Ms Tilbrook was “not here”. Mr Hoare attended on two later occasions later in the month but met with no greater success.

9    The proceeding was first scheduled to come before the Court on 25 July 2017. The Applicant, however, had been unable to affect service by 21 July 2017 and a request was made to vacate the first case management hearing to allow the Applicant to make an application for substituted service. The proceeding was stood over to 24 August 2017.

10    On 24 August 2017 there was no appearance for Ms Tilbrook. Orders were then made dispensing with personal service of the Originating Application and Statement of Claim. Orders were also made pursuant to r 10.24 of the Federal Court Rules 2011 (Cth) for service to be effected by delivering those documents to any person over the age of 16 years at the Shellcove Road address or by affixing the documents to the front door of the property. An order was also made allowing for service to be effected by serving the documents upon Mr Tilbrook. Service in accordance with those orders was effected on 30 August 2017.

11    The proceeding came back before the Court on 22 September 2017. Again there was no appearance for Ms Tilbrook. Orders were then made for service of those orders and the orders previously made on 24 August 2017 and a letter advising Ms Tilbrook that the proceeding was listed for directions on 11 October 2017.

12    On 11 October 2017 there was again no appearance for Ms Tilbrook. The proceeding was listed for hearing on 28 November 2017. A copy of those orders was also required to be served on Ms Tilbrook. Service in accordance with those orders was also effected.

13    On 28 November 2017 there was again no appearance on the part of Ms Tilbrook. But the proceeding on that day was further adjourned until today in order for evidence to be adduced that no payment had been made by Ms Tilbrook and that the debt as claimed remained outstanding. Ms Tilbrook was again informed as to the hearing being adjourned until today.

14    On 19 December 2017, again there was no appearance by Ms Tilbrook. Evidence as to the outstanding debt as of the date of the hearing was then adduced.

15    It is concluded that service has been effected in accordance with the orders made. It is further concluded that every effort has been made to bring to the attention of Ms Tilbrook the existence of the present proceeding and that Ms Tilbrook is in fact aware of the existence of the present proceeding.

16    Her absence, it is concluded, is a deliberate choice on her part not to participate in the present hearing.

Section 139ZQ

17    Section 139ZQ is found within Pt VI of the Bankruptcy Act, namely that Part which is directed to “[a]dministration of property”. Within that Part, Div 3 is directed to “[p]roperty available for payment of debts”; Div 4 is directed to “[r]ealization of property”; and Div 4B is directed to “[c]ontribution by bankrupt and recovery of property”. Within Div 4B, Subdiv J is directed to “[c]ollection of money or property by Official Receiver from party to transaction that is void against the trustee”.

18    Section 139ZQ is a provision found within Subdiv J. It provides as follows:

Official Receiver may require payment

(1)    If a person has received any money or property as a result of a transaction that is void against the trustee of a bankrupt under Division 3, the Official Receiver:

(a)    if the Official Trustee is the trustee—on the initiative of the Official Receiver; or

(b)    if a registered trustee is the trustee—on application by the trustee;

may require the person, by written notice given to the person, to pay to the trustee an amount equal to whichever of the following is applicable:

(c)    if:

(i)    the transaction is void against the trustee under section 128B or 128C; and

(ii)    the transaction is by way of a contribution to an eligible superannuation plan for the benefit of a person (the beneficiary) who may or may not be the bankrupt; and

(iii)    the beneficiary is a member of the eligible superannuation plan;

whichever is the lesser of the following:

(iv)    the money or the value of the property received;

(v)    the beneficiary’s withdrawal benefit in relation to the eligible superannuation plan;

(d)    in any other case—the money or the value of the property received.

(2)    The notice must set out the facts and circumstances because of which the Official Receiver considers that the transaction is void against the trustee.

(3)    The notice may:

(a)    require the amount to be paid at a time or within a period set out in the notice; or

(b)    require the amount to be paid at such times, and in such instalments, as are set out in the notice.

(4)    After the Official Receiver has given a notice to a person under subsection (1), the Official Receiver may at any time, by a further notice given to the person, revoke or amend the first-mentioned notice.

(5)    If the Official Receiver gives a notice under this section, the Official Receiver must send a copy of the notice to the bankrupt and, if a registered trustee is the trustee, to the trustee.

(6)    A notice to be given under this section to the Commonwealth, a State or a Territory, or to an authority of the Commonwealth, of a State or of a Territory, is taken to be duly given if it is given to a person who, by any law, regulation, appointment or authority, has the function of paying, or in fact pays, money on behalf of a Department of the Commonwealth, of that State or of that Territory, or on behalf of the authority, as the case may be.

(7)    If a person is required by a notice under this section to pay to the trustee the value of any property, the requirement is taken to be complied with if the property is transferred to the trustee.

(8)    An amount payable by a person to the trustee under this section is recoverable by the trustee as a debt by action against the person in a court of competent jurisdiction.

(9)    For the purposes of subparagraph (1)(c)(ii), disregard a benefit that is payable in the event of the death of a person.

(10)    In this section:

contribution has the same meaning as in Subdivision B of Division 3.

eligible superannuation plan has the same meaning as in Subdivision B of Division 3.

member of an eligible superannuation plan has the same meaning as in Subdivision B of Division 3.

withdrawal benefit has the same meaning as in Subdivision B of Division 3.

The term “value” is defined in s 139K as follows:

value, in relation to property referred to in a notice, means the market value of the property when the notice is given.

19    Also within Subdiv J of Div 4B is s 139ZS. That section confers power upon the Court to set aside a notice and provides as follows:

Power of Court to set aside notice

(1)    If the Court, on application by a person to whom a notice has been given under section 139ZQ or by any other interested person, is satisfied that this Subdivision does not apply to the person on the basis of the alleged facts and circumstances set out in the notice, the Court may make an order setting aside the notice.

(1A)    The application must be made:

(a)    not later than 60 days after the day the notice under section 139ZQ was given to the applicant; or

(b)    if the applicant is another interested person—not later than 60 days after the day the applicant became aware that the notice has been given.

(2)    A notice that has been set aside is taken not to have been given.

Section 139ZS(1A) is expressed in mandatory terms such that no application may be made later than the 60 days there specified: Sampson (Trustee) v Taboada [2017] FCA 79 at [42] per Burley J.

20    The provisions within Subdiv J were summarised as follows by Gummow, Hayne, Heydon, Crennan and Kiefel JJ in Vale v Sutherland [2009] HCA 26, (2009) 237 CLR 638 at 643 to 644:

[11]    The notice must “set out the facts and circumstances because of which the Official Receiver considers that the transaction is void” (s 139ZQ(2)). Once a notice has been issued the property is “charged with the liability of the person to make payments to the trustee as required by the notice” (s 139ZR(1)). Failure or refusal to comply with the notice is an offence (s 139ZT(1)). The amount payable to the trustee under the section is recoverable as a debt by action in a court of competent jurisdiction (s 139ZQ(8)). However, on application by the person subject to the notice, or any other interested person, a court having jurisdiction in bankruptcy under the Act may set aside the notice where it is satisfied that Subdiv J does not apply to the person “on the basis of the alleged facts and circumstances set out in the notice” (s 139ZS(1)). These words are important in construing the section.

(Footnote omitted.)

21    Without being exhaustive, a few of the features of s 139ZQ should presently be noted.

22    First, the legislative objective of s 139ZQ is to provide an administrative mechanism for the recovery of dispositions of property that are void as against the Official Trustee or the registered trustee. The section provides “an administrative shortcut whereby the necessity for protracted proceedings under ss 120, 121 and 122 of the Act could be circumvented”: Re Rose; Godfrey v Whitton [2006] FCA 823 at [24] per Graham J. “The scheme of Subdiv J encourages the saving of costs by, on the one hand, compliance with the notice by the transfer to the trustee of property in respect of the value of which the notice requires payment (s 139ZQ(7)) and on the other, by the revocation or amendment of notices to accommodate a settlement (s 139ZQ(4))”: Vale v Sutherland [2009] HCA 26 at [22], (2009) 237 CLR 638 at 647 per Gummow, Hayne, Heydon, Crennan and Kiefel JJ.

23    Second, the reference in s 139ZQ(1) to “a transaction that is void against the trustee” is but one of a number of provisions in the Bankruptcy Act directed at identifying transactions that are void and at identifying the circumstances in which property transferred by a bankrupt as a result of such transactions is available to the trustee for distribution to creditors. Sections 120 and 121, for example, are directed respectively at “[u]ndervalued transactions” and transfers of property that defeat creditors. Section 139ZQ is not drafted in terms of the Official Trustee being of the “opinion” or being “satisfied” that a person has received money or property as a result of a transaction that is void as against the trustee; the section is drafted in terms of there in fact being a transaction which is void. The power conferred is, accordingly, “dependent upon the existence of a jurisdictional fact”: Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble (1995) 58 FCR 391 at 401 per Carr J.

24    Third, s 139ZQ(1) also refers to the giving of a notice to pay “an amount equal to … the money or the value of the property received”. “The term ‘value’ in this provision has the meaning given by the definition of ‘value’ in s 139K, namely ‘the market value of the property when the notice is given’” : Vale v Sutherland [2009] HCA 26 at [8], (2009) 237 CLR 638 at 643 per Gummow, Hayne, Heydon, Crennan and Kiefel JJ. See also: Combis (Trustee) v Spottiswood (No 2) [2013] FCA 240 at [73], (2013) 11 ABC(NS) 407 at 425 per Logan J

25    Fourth, the amount stated in the notice, however, is not conclusive as to the value of the property that has been transferred: Re Aley; Ex parte Sweeney v Aley (1996) 63 FCR 294 at 300 to 301. Drummond J there observed:

I am reluctant to read s 139ZR of the Act as making a notice under s 139ZQ of the Act effective to charge property owned by the recipient of the notice with liability to pay the figure asserted in the notice as the value of the transferred property in contrast to the true value of the property at the date of receipt. Section 139ZR(1) of the Act charges the property “with the liability of the person to make payments to the trustee as required by the notice”. Under s 139ZQ(1) of the Act, all that the notice can require by way of payment to the trustee is payment of “an amount equal to ... the value of the property received”. It is that, not for example the amount stated in the notice, that is to be paid. Section 139ZQ(2) of the Act does not require any information as to how the figure demanded by the notice was arrived at to be set out in the notice. The figure stated in the notice as the value of the property received from the bankrupt is not given by the Act any evidentiary force. A notice issued in reliance on s 139ZQ is, in my opinion, only effective to give rise to a debt enforceable under s 139ZQ(8) of the Act and a charge within s 139ZR of the Act if the amount demanded by the notice is, in fact, equal to the value of the property at the relevant time. Such an interpretation should not create any significant difficulty since the concept of the value of property at a particular time will generally involve an imprecise rather than an exact assessment of worth.

Nor is a statement in the notice as to the facts upon which the notice was given conclusive: Vale v Sutherland [2009] HCA 26, (2009) 237 CLR 638 at 647. Gummow, Hayne, Heydon, Crennan and Kiefel JJ there observed:

[24]    In an action by the Trustee to recover that amount as a debt, the appellant would be at liberty to establish such matters of fact, from which the liability was alleged to arise, as were disputed. The same would be so in any action to restrain the exercise of the power of sale conferred by s 139ZR(6).

(Footnote omitted.)

In an action to recover the amount claimed in the notice as a debt, the person receiving the notice would thus be able to dispute that amount: Vale v Sutherland [2009] HCA 26 at [24], (2009) 237 CLR 638 at 647 per Gummow, Hayne, Heydon, Crennan and Kiefel JJ. Similarly, in Halse v Norton (1997) 76 FCR 389 at 399, Lee and RD Nicholson JJ observed:

If a notice served on a person under s 139ZQ remains uncontested, service of the notice provides the trustee with a right that may be enforced against that person, namely, the right to recover as a debt the sum claimed in the notice. If the claim for the payment of money made in the notice is disputed, s 139ZS provides a means by which the controversy as to the application of Div 3 of the Act to the transaction is to be resolved and determined by the Court. In most cases it will be necessary for the trustee to be joined as a party to a proceeding commenced under s 139ZS, but if the applicant, or the Official Receiver, fails to have the trustee so joined the Official Receiver will stand in the trustee’s place and be under the same onus of proof as the trustee.

26    Fifth, inaccuracies in the statement of facts in a notice may not be sufficient, without more, to result in an order under s 139ZS setting aside the notice: Official Trustee in Bankruptcy v Lopatinsky [2003] FCAFC 109 at [151], (2003) 129 FCR 234 at 256 per Whitlam and Jacobson JJ.

27    Sixth, in circumstances where the amount claimed as a debt is put in issue by the recipient of a s 139ZQ notice, the trustee bears the onus of establishing the facts alleged in the notice: Halse v Norton (1997) 76 FCR 389 at 392. In the context of resolving a question as to onus of proof and s 139ZS, Black CJ there observed:

a trustee has always carried the onus of proving the facts that make a transaction void and in instances in which the onus of proof is to lie elsewhere the Parliament has clearly so provided.

A little later, the Chief Justice further addressed as follows the question of onus in respect to proof of the “jurisdictional fact” upon which a notice proceeds, namely the basis upon which it is claimed that a transaction is “void” (at 392):

Clearly, too, s 139ZS is not the exclusive means of challenging a notice under s 139ZQ … and there may well be cases in which there is good reason for the trustee to bring what would be in effect a cross-application for a declaration that a transaction is void … It would be strange if the position of the trustee varied according to the procedure adopted in the particular case.

In these circumstances, but especially because of the nature of the “jurisdictional fact” upon which the power to issue a notice is dependent, I consider that the primary judge was correct in concluding that subdiv J has not changed the position with regard to the burden of proof other than requiring an applicant to put before the Court sufficient evidence to call the validity of the notice into question. Such a situation is not novel in the law; it is not unlike the situation where reliance is placed upon the presumption of regularity but sufficient evidence is put before the Court to challenge the application of the presumption in the particular case, or class of case …

Thus, for example, in Official Trustee in Bankruptcy v Lopatinsky [2003] FCAFC 109 at [152], (2003) 129 FCR 234 at 256, Whitlam and Jacobson JJ there observed with reference to the facts of that case that the Official Receiver “bears the onus of satisfying the Court that s 120 does apply”.

28    Finally, non-compliance with a notice under s 139ZQ constitutes a criminal offence: s 139ZT. See: Official Trustee in Bankruptcy v Lopatinsky [2003] FCAFC 109 at [150], (2003) 129 FCR 234 at 256 per Whitlam and Jacobson JJ

The material facts pleaded & the notice given

29    Turning to the material facts pleaded and the notice given. Other than the evidence in respect to the primary basis upon which the Court was invited to proceed to enter judgment was the statement of material facts set forth in the Amended Statement of Claim and the absence of any Defence having been filed.

30    The Statement of Claim as amended, in its entirety, was expressed as follows:

1.    On 8 February 2011, Malcolm John Tilbrook became bankrupt when his debtors’ petition was accepted by the Official Receiver.

2.    On 8 February 2011, the Applicant, Christopher Mel Chamberlain, was appointed Trustee of the bankrupt estate of Malcolm John Tilbrook.

3.    The Respondent, Patricia Susan Tilbrook, is the spouse of Malcolm John Tilbrook.

4.    On 10 July 2015, the Official Receiver issued a Notice pursuant to section 139ZQ of the Bankruptcy Act 1966 (Cth) (Notice) to the Respondent demanding payment of the sum of $339,725.09 within 28 days of receipt of the Notice.

Particulars

The Notice is in writing dated 10 July 2015

5.    On 28 October 2015, the Respondent was personally served with the Notice.

6.    The Respondent has failed to comply with the Notice.

7.    By reason of the facts, matters and circumstances set out in paragraphs 4, 5 and 6, and pursuant to section 139ZQ(8) of the Bankruptcy Act 1966 (Cth) the Respondent is indebted to the Applicant in the amount of $338,725.09.

31    In the absence of a Defence being filed, each of the allegations of fact set forth in the Statement of Claim “are taken to be admitted”: Federal Court Rules r 16.07(2).

32    Further to the statement of material facts set forth in the Amended Statement of Claim, it should be noted that the notice issued pursuant to s 139ZQ and as identified in the Particulars to para [4] set forth the basis upon which it was contended that the transaction relied upon was “void” as follows:

4.2 Transfer of Monies

i.    On 1 December 2005 the Debtor inherited his late mother’s property situated 9 King Edward Street, Roseville (‘the Property’) pursuant to probate number 112562/05 granted on 17th August 2005.

ii.    On 14 November 2008 the Debtor sold the Property for $1,850,000.00.

iii.    The bank account statement for the St George Freedom Cheque Account (Account Number: 112-879 061199463) (‘the Bank Account’) held jointly by you and the Debtor show that

•    On 14 November 2008 a cheque for amount $314,625.26 representing the total net equity from the sale of the Property was deposited into the Bank Account; and

•    On 25 November 2008 a further deposit of two cheques of amount $106,397.18 and $2,370 respectively (totalling $108,767.18- representing the balancing deposit monies from the sale of the Property) was made into the Bank Account.

iv.    On 23 September 2008 a Company styled Mosman Health Foods Pty Ltd (ACN 133 390 664) (‘the Company’) was incorporated. The historical search of the Company records:

•    You as the former director;

•    Mr Peter John Morris as a former Member of the Company.

v.    The copy of an email dated 28 June 2012, from Mr Peter John Morris records that his shareholding in the Company was held beneficially for you due to his firm, Peter Morris & Co incurring costs for the incorporation of the Company.

vi.    The contract for the sale of business filed in the Office of State Revenue disclose that on or about 27 November 2008 the Company purchased the Mosman Good Health Food Store (‘the Business’) for consideration of $310,000.00.

vii.    On 9 December 2008 a cheque for $339,725.09 was drawn from the Bank Account in favour of Relate Holdings Pty Ltd which was used to purchase the Business.

33    As at today’s date, Ms Tilbrook has not only not filed a Defence and is accordingly in default under r 5.22 of the Federal Court Rules, she has also failed to attend any directions hearing or hearing in this case and has failed to defend the proceeding with any due diligence.

34    It is concluded that judgment should be entered as sought not merely by reason of a failure on her part to comply with requirements imposed by the Rules of this Court but also by reason of the fact that there is no reason to question the fact that the debt as claimed is recoverable pursuant to s 139ZQ(8).

35    The notice has been served and Ms Tilbrook has not complied with it. In such circumstances, s 139ZQ(8) provides that the amount of $339,725.09 “is recoverable by the trustee as a debt”. Even though the statements made in the notice given pursuant to s 139ZQ are not conclusive (Re Aley; Ex parte Sweeney v Aley (1996) 63 FCR 294 at 300 to 301 per Drummond J; Vale v Sutherland [2009] HCA 26 at [24], (2009) 237 CLR 638 at 647 per Gummow, Hayne, Heydon, Crennan and Kiefel JJ) and that the trustee bears the onus of proving such facts as are stated in the notice that may be put in issue (Halse v Norton (1997) 76 FCR 389 at 392 per Black CJ; Official Trustee in Bankruptcy v Lopatinsky [2003] FCAFC 109 at [152], (2003) 129 FCR 234 at 256 per Whitlam and Jacobson JJ), of present relevance is that the current proceeding is a proceeding to recover “as a debt” the amount stated in the notice (s 139ZQ(8)) where no fact has been placed in issue. Of present relevance is the statement of the material facts in the Amended Statement of Claim that the notice was served and that there has been non-compliance with the notice. No application has been made by Ms Tilbrook pursuant to s 139ZS seeking to have the notice set aside and no application was made in the present proceeding to dispute any of the facts stated in the notice which the trustee relies upon to give rise to the debt. That is sufficient, it is considered, to establish the debt on the facts and circumstances of the present case. “If a notice served on a person under s 139ZQ remains uncontested, service of the notice provides the trustee with a right that may be enforced against the person, namely, the right to recover as a debt the sum claimed in the notice”: Halse v Norton (1997) 76 FCR 389 at 399 per Lee and RD Nicholson JJ. To conclude otherwise, and to require the Trustee to also prove each of the facts upon which the notice was founded, would defeat the object and purpose of s 139ZQ: Re Rose; Godfrey v Whitton [2006] FCA 823 at [24] per Graham J; Vale v Sutherland [2009] HCA 26 at [22], (2009) 237 CLR 638 at 647 per Gummow, Hayne, Heydon, Crennan and Kiefel JJ.

36    Even if it were necessary for the trustee to go beyond the statement of material facts as set forth in the Amended Statement of Claim, and if it were necessary to set forth the basis upon which it is contended that the transaction was “void”, para 4.2 of the Schedule to the s 139ZQ notice would satisfy any such necessity.

37    It is further concluded that interest should be ordered to be paid upon that sum as between 28 October 2015 and today’s date: cf. Combis (Trustee) v Spottiswood (No 2) [2013] FCA 240 at [76], (2013) 11 ABC(NS) 407 at 425 per Logan J. Interest on the judgment should also be ordered pursuant to s 52 of the Federal Court of Australia Act.

38    The Applicant is also entitled to an order for costs.

THE ORDERS OF THE COURT ARE:

1.    Judgment be entered in favour of the Applicant as against the Respondent in the sum of $339,725.09 pursuant to s 139ZQ(8) of the Bankruptcy Act 1966 (Cth).

2.    The Respondent is to pay interest on the sum of $339,725.09 from 28 October 2015 up to and including 19 December 2017 pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth).

3.    The Respondent is to pay interest on the judgment sum pursuant to s 52 of the Federal Court of Australia Act 1976 (Cth).

4.    The Respondent is to pay the Applicant’s costs of the proceedings.

Associate:    

Dated:    21 December 2017