FEDERAL COURT OF AUSTRALIA

Ramsay Health Care Australia Pty Ltd v Compton (No 5) [2018] FCA 667

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 30(1) of the Bankruptcy Act 1966 (Cth) (“Act”), the Court declares nunc pro tunc that the authority signed by the first respondent and consented to in writing by the second respondent on 1 June 2017 is and was effective for the purposes of s 189AD of the Act on and from 26 February 2018.

2.    Pursuant to s 30(1) of the Act, the meeting of the creditors of the first respondent called for 9 April 2018 is a meeting validly convened under Part X of the Act.

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

REASONS FOR JUDGMENT

GLEESON J:

1    By interlocutory application filed 6 April 2018, the applicant (“Ramsay”) sought orders pursuant to s 30(1) of the Bankruptcy Act 1966 (Cth) (“Act”) in connection with a meeting of the creditors of the respondent (“Mr Compton”). This meeting was called by Mr Compton’s controlling trustee, Mr Weston, and scheduled for 3.00 pm on 9 April 2018. At the hearing on 9 April 2018 at 10.15 am, Ramsay sought declaratory orders to the effect that the controlling trustee authority signed by Mr Compton on 1 June 2017 “is and at all material times was” effective for the purposes of s 189(1A)(d) of the Act on and from 26 February 2018, and that the scheduled meeting of Mr Compton’s creditors was validly convened under Part X of the Act.

2    The application was supported by an affidavit of Ramsay’s solicitor, Caitlin Murray of MinterEllison, sworn 6 April 2018. In that affidavit, Ms Murray expressed concern that the controlling trustee may not be in control of Mr Compton’s property for the purpose of s 189 of the Act. She also expressed concern that, if the orders sought were not made in advance of the scheduled creditors’ meeting, there was a risk that the meeting may not have been validly called and that any resolutions passed at the meeting would be subject to challenge.

3    The proposed orders were not opposed by the controlling trustee.

4    However, counsel for Mr Compton, Mr Svehla, argued that the Court should do nothing. Ultimately, Mr Svehla submitted that the second proposed declaration would confirm implicitly that Mr Weston had been properly appointed as a controlling trustee and had called the meeting within the statutory period upon his appointment taking effect. He maintained that the first proposed declaration was unnecessary.

5    After hearing submissions, I made two declarations in terms similar but not identical to those proposed by Ramsay. These are my reasons for making those declarations.

Relevant statutory provisions

6    Section 30(1) of the Act provides:

(1)    The Court:

(a)    as full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and

(b)    may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.

7    Section 33 of the Act provides relevantly:

(1)    The Court may:

…

(c)    extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time.

8    Section 189 provides relevantly:

(1)    When an authority given by a debtor under section 188 becomes effective, the property of the debtor becomes subject to control under this Division.

(1A)    The control continues until one of the following events happens:

(a)    the creditors resolve at a meeting called under this Part that the property cease to be subject to control;

(b)    the debtor and a trustee execute a personal insolvency agreement following a special resolution of creditors;

…

(d)    4 months pass since the authority under section 188 became effective; …

Background facts

9    On 31 May or 1 June 2017, Mr Compton signed a controlling trustee authority appointing Mr Weston as the controlling trustee of his assets pursuant to s 188 of the Act. On 1 June 2017, Mr Weston consented to exercise the powers conferred by the authority.

10    On 2 June 2017, Flick J made an order sequestrating Mr Compton’s estate on Ramsay’s creditor’s petition: Ramsay Health Care Australia Pty Ltd v Compton (No 2) [2017] FCA 629.

11    On 27 July 2017, the Full Court heard Mr Compton’s appeal from the 2 June 2017 decision.

12    On 31 October 2017, four months passed since Mr Compton’s authority under s 188 became effective.

13    On 21 December 2017, the Full Court allowed Mr Compton’s appeal: Compton v Ramsay Health Care Australia Pty Ltd [2017] FCAFC 221.

14    On 19 February 2018, the Full Court (Siopis, Gleeson and Moshinsky JJ) made orders following Mr Compton’s successful appeal: Compton v Ramsay Health Care Australia Pty Ltd (No 2) [2018] FCAFC 21. In particular, the Full Court declared pursuant to s 188(6) of the Act that Mr Weston became the controlling trustee of the property of Mr Compton by about 5.00 pm on 1 June 2017 (Australian Eastern Standard Time).

15    Order 2 provided:

Pursuant to s 189AAA(1) of the Bankruptcy Act, Federal Court of Australia proceeding No. NSD 660 of 2015, Ramsay Health Care Australia Pty Ltd v Adrian John Compton (the Creditor’s Petition Proceeding), relating to the creditor’s petition presented by the first respondent (Ramsay Health Care) against Mr Compton, was stayed by about 5.00 pm on 1 June 2017 (Australian Eastern Standard Time) and remains stayed until the earlier of:

(a)    the conclusion of the first or only meeting of Mr Compton’s creditors called under the authority signed by Mr Compton under s 188(1) of the Bankruptcy Act; or

(b)    the adjournment of that meeting.

16    Order 5, made by consent, was in the following terms:

Pursuant to ss 30(1) and 33(1)(c) of the Bankruptcy Act and s 23 of the Federal Court of Australia Act 1976 (Cth), the time be extended nunc pro tunc for doing any act or thing under Pt X of the Bankruptcy Act, the Bankruptcy Regulations 1996 (Cth) or the Insolvency Practice Rules (Bankruptcy) 2016 (Cth) in relation to the authority signed at 9.15 pm on 31 May 2017 in Altavista, Virginia, United States of America, by Mr Compton under s 188(1) of the Bankruptcy Act naming and authorising Mr Weston to call a meeting of Mr Compton’s creditors and to take control of Mr Compton’s property, which Mr Weston consented to in writing on 1 June 2017 (Australian Eastern Standard Time), as if that authority had become effective on the seventh day after the date of this order.

17    On 27 February 2018, Ramsay received a notice of assignment of debt dated 22 February 2018 signed by Mr Compton, which purported to assign to IDS Consulting Pty Ltd his right, title and interest in amounts owing pursuant to certain costs orders described in the notice.

18    On about 22 March 2018, Mr Weston issued a controlling trustee’s report pursuant to s 189A of the Act. In the report, Mr Weston states that he was authorised to take control of Mr Compton’s property from 26 February 2018 and to convene a meeting of creditors. Mr Weston expressed the view that the notice of assignment of debt was likely to be effective because it took place prior to his controlling trustee authority becoming effective from 26 February 2018.

19    There is a dispute between the parties as to the effectiveness of the notice of assignment of debt which was not sought to be resolved on the application before the Court. Ultimately, senior counsel for Ramsay, Mr Stoljar SC, did not press the inclusion of the words “and at all material times” in the proposed first declaration.

Issue identified on behalf of Ramsay

20    Mr Stoljar SC submitted that order 5 in [2018] FCAFC 21 was intended to cure the consequences of the lapse of time between the Full Court’s hearing on 27 July 2017 and the orders made on 19 February 2018. However on another view, order 5 did not and could not provide for an extension of the four month time limit established by s 189(1A)(d) of the Act: s 189(1A)(d) on its face arguably operates automatically, and therefore could not be extended by s 33(1)(c), which concerns the “doing of an act of thing”: cf. Nilant v Macchia (1997) 78 FCR 419.

21    Mr Stoljar SC noted that Mr Weston had assumed that he became authorised to take control of Mr Compton’s property from 26 February 2018 and that he is authorised to hold a creditors’ meeting, as appears from his report. Mr Stoljar SC sought orders to confirm the position assumed by Mr Weston.

22    Mr Svehla submitted that the Full Court’s order 5, by effectively deeming Mr Compton’s authority to have become effective on 26 February 2018, then invokes the statutory regime from that period of time for Mr Weston to take control of the property and to do all things that he has done and, hence, the creditors’ meeting is valid and effective. Mr Svehla contended that it is not necessary to make the declaration sought for the purpose of having a valid appointment of Mr Weston on 26 February 2018 pursuant to the authority signed on 31 May 2017 but taken to have become effective on 26 February 2018.

Consideration and conclusion

23    The parties agreed that any declaration that I made would be in exercise of the Court’s original jurisdiction.

24    The Full Court’s order 2 plainly contemplates that a meeting of Mr Compton’s creditors will be called under the authority signed by Mr Compton under s 188(1), following the making of the orders. That is the controlling trustee authority. By order 5 the Full Court exercised the powers available to it to extend the time for doing any act or thing under the specified legislation to facilitate the conduct of the creditors’ meeting contemplated by order 2. In my view, those powers included the power conferred by s 33(1)(c) to extend the time for Mr Weston to exercise control over Mr Compton’s property: see Williamson and Hurt (in their capacity as controlling trustees of the affairs of Craig David Bond) v Bond [2013] FCA 828; (2013) 214 FCR 541.

25    However, I also accepted that the correct interpretation of the order was not free from doubt, for the reason advanced by Mr Stoljar SC.

26    I accepted that there was utility in making declarations as to the effectiveness of the authority on and from 26 February 2018 and, consequently, confirming the validity of the meeting of Mr Compton’s creditors called for 9 April 2018 where Ms Murray had raised a legitimate concern concerning the legitimacy of the impending meeting.

27    For those reasons, I was satisfied that it was proper to make the declarations that I made.

Associate:

Dated:    11 May 2018