Federal Court of Australia

Shanahan as trustee of the Estate of Wilcox v Sanderson Estates Pty Ltd in the matter of Wilcox (a bankrupt) (No 2) [2025] FCA 528

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 19 of the Federal Court of Australia Act 1976 (Cth) and r 14.23 of the Federal Court Rules 2011 (Cth) (Rules), John Shanahan and Kathleen Vouris as receivers and managers of the respondent (Receivers) are justified in:

(a)    seeking leave to file a submitting appearance in Supreme Court of New South Wales, Court of Appeal proceeding numbered 2024/444822 (Appeal Proceeding) pursuant to r 51.5 and r 6.11 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR); and

(b)    not taking any active role in the Appeal Proceeding, including by not appearing at the final hearing of the Appeal Proceeding.

2.    Pursuant to s 30(1) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) and s 90-15 of the Insolvency Practice Schedule (Bankruptcy), being Schedule 2 to the Bankruptcy Act, that John Shanahan and Matthew Vines as joint and several trustees of the estate of Benjamin Ian Alexander Wilcox (Trustees) are justified in:

(a)    not seeking leave to be joined as a respondent in the Appeal Proceeding pursuant to r 6.27 of the UCPR; and

(b)    not taking any active role in the Appeal Proceeding, including by not appearing at the final hearing of the Appeal Proceeding.

3.    The Trustees’ costs of this interlocutory application be a cost in the administration of the bankrupt estate.

4.    The Receivers’ costs of this interlocutory application be a cost in the receivership of the respondent.

5.    Order 7 of the orders made on 9 April 2024 be amended such that the Receivers are to prepare and file with the Court pursuant to r 14.25 of the Rules their next account conforming with s 422A of the Corporations Act 2001 (Cth) by Tuesday, 8 July 2025, and then every 12 months thereafter.

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

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

HALLEY J:

A.     Introduction

1    John Shanahan and Matthew Vines (Trustees) are the trustees of the bankrupt estate of Benjamin Wilcox and Mr Shanahan and Kathleen Vouris (Receivers) are the court appointed receivers of the respondent, Sanderson Estates Pty Ltd ACN 000 399 379.

2    By an interlocutory application filed on 15 May 2025, the Trustees and the Receivers (together, the applicants) seek judicial advice in respect of a Supreme Court of New South Wales, Court of Appeal proceeding numbered 2024/444822 (Appeal Proceeding). The Appeal Proceeding arises from orders made on 5 November 2024 by Ward P in a Supreme Court of New South Wales proceeding numbered 2021/00059314 (Supreme Court Proceeding).

3    On 30 July 2024, Wigney J gave judicial advice to the applicants in respect of the Supreme Court Proceeding and the hearing listed before Ward P commencing on 12 August 2024 in substantially similar form to that now sought in the interlocutory application: Shanahan as trustee of the Estate of Wilcox v Sanderson Estates Pty Ltd in the matter of Wilcox (a bankrupt) [2024] FCA 893.

4    The applicants rely upon an affidavit of Mr Shanahan affirmed on 4 April 2024 and two affidavits of Carrie Nicole Peterson, the solicitor for the applicants sworn on 25 July 2024 and 15 May 2025. In addition, the applicants tendered a letter dated 16 May 2025 from Wilsons Solicitors, the solicitors for Robert Wilcox, to Ms Peterson (16 May 2025 letter), the relevance of which will be explained later in these reasons. Robert Wilcox is the brother of Mr Wilcox and is the plaintiff in the Supreme Court Proceeding and the appellant in the Appeal Proceeding.

5    The interlocutory application has been provided to the solicitors acting for Mr Wilcox, the bankrupt. Mr Wilcox does not formally appear today but his solicitor Ms Alison Drayton advised the Court that Mr Wilcox does not seek to be heard and does not otherwise oppose nor consent to the application made by the applicants today.

B.     Background

6    On 14 September 2023, this Court made an order that the estate of Mr Wilcox be sequestrated and the Trustees were appointed as joint and several trustees in bankruptcy. Prior to the making of the sequestration order, Mr Wilcox was the registered proprietor of four of the 11 folios comprising a grazing property known as “Barwon Vale” located at Walgett, New South Wales. Sanderson Estates is the registered proprietor of the remaining seven folios of Barwon Vale.

7    Mr Wilcox has been the sole director and secretary of Sanderson Estates since 11 April 2019, and the sole holder of all the shares in Sanderson Estates since 30 August 2016. By reason of the sequestration order, those shares have now vested in the Trustees.

8    The investigations undertaken by the Trustees to date have revealed that the total of the debts owed to creditors of Mr Wilcox amount to approximately $528,068.37. In addition, the Trustees have received advice from Elders Real Estate, Dubbo, that they had received an expression of interest of between $600-$700 per acre for Barwon Vale, suggesting a value for Barwon Vale, as a whole, in the range of $6 million-$7 million. It is therefore apparent that the assets that are vested in the Trustees (being the folios in Barwon Vale held by Mr Wilcox and the shares that he holds in Sanderson Estates) have a value which substantially exceeds the amount owed to the creditors in the bankrupt estate.

9    Given the likely significant surplus in the assets in the bankrupt estate, the Trustees explored the possibility of obtaining finance to achieve an annulment of the bankruptcy. Those efforts, however, were unsuccessful and on 9 April 2024, upon the application of the Trustees, the Court made orders in this proceeding appointing the Receivers as the receivers and managers of Sanderson Estates.

B.1.     Supreme Court Proceeding

10    The background to the Supreme Court Proceeding was conveniently set out by Wigney J in Shanahan at [2]-[14]. For present purposes, it is sufficient to provide the following summary.

11    The Supreme Court Proceeding was commenced by Robert Wilcox in 2021. In that proceeding, Robert Wilcox seeks, among other things, a declaration that Sanderson Estates holds the land at Barwon Vale which is registered in its name on trust for him and Mr Wilcox in equal shares and a declaration that Mr Wilcox holds 50 per cent of the shares in Sanderson Estates on trust for him. Robert Wilcox also seeks various orders consequential upon the Court making those declarations, including an order that Sanderson Estates transfers the relevant land to him and Mr Wilcox as tenants in common.

12    The defendants to the Supreme Court Proceeding include (a) the executor of Ms Wilcox’s estate, as the first defendant, (b) the executor of the deceased estate of Ms Wilcox’s late husband, as the second defendant, (c) Sanderson Estates and (d) Mr Wilcox. Ms Wilcox is the late mother of Mr Wilcox and Robert Wilcox. Each of the defendants filed a defence to the claim brought by Robert Wilcox. In their defences, the executors of the estates of Ms Wilcox and her late husband deny the factual allegations of Robert Wilcox’s claim that the relevant land and shares in Sanderson Estates were held on trust for him. The executors also plead positive defences, including claims of res judicata, issue estoppel arising from an earlier unsuccessful proceeding brought by Robert Wilcox and a defence based on the terms of a deed of settlement and release executed by Robert Wilcox in 2015.

B.2.     Earlier application for judicial advice

13    His Honour, Wigney J was satisfied that having regard to the known circumstances, the applicants were justified in not appearing, and not taking any active role in the final hearing of the Supreme Court Proceeding: Shanahan at [19].

14    His Honour considered that on the one hand at [20], the relief sought by Robert Wilcox in the Supreme Court Proceeding was opposed by the executors of the estates of Ms Wilcox and her late husband, and those parties were active contradictors and he considered undoubtedly better placed to defend the proceeding. His Honour was satisfied that the involvement or participation of the Trustees and the Receivers at the final hearing would not add anything to the conduct of the defence of the proceeding by the active contradictors.

15    On the other hand, his Honour considered at [21] that active participation in the proceeding by the applicants would undoubtedly require them to incur not insubstantial legal costs that might ultimately not be recoverable from Robert Wilcox. His Honour concluded that this would lead to an unnecessary depletion of the assets of the bankrupt estate of Mr Wilcox which would otherwise be available for distribution to creditors or as it appeared likely, ultimately distributed to Mr Wilcox in the event that there was a surplus.

16    In addition, his Honour noted at [23] that Mr Wilcox had belatedly appeared at the hearing of the application and had indicated that he would appear at the hearing of the Supreme Court Proceeding, although not legally represented, and he would continue to oppose the relief sought by Robert Wilcox. His Honour noted, however, that Mr Wilcox did not contend that the applicants should appear in the Supreme Court Proceeding and did not oppose the Court giving the directions or advice sought by the applicants.

B.3.     Hearing of Supreme Court Proceeding

17    The hearing of the Supreme Court Proceeding took place before Ward P over five days from 12-15 August 2024 and 29 August 2024. Consistent with the advice that Wigney J had provided to the applicants, they did not play a substantive role in the hearing.

18    On 5 November 2024, Ward P delivered a judgment dismissing the claims made by Robert Wilcox: Wilcox v Chapple [2024] NSWSC 1394. Of particular relevance to the current application is the following finding made by her Honour at [13]:

As to [Mr Wilcox], who was declared bankrupt on 14 September 2023, no application was made by [Robert Wilcox] for leave to proceed against [Mr Wilcox] following his bankruptcy. As noted above, in the equity proceeding Robert Wilcox claims an equitable interest in 50% of the shares in Sanderson Estates. In the absence of leave to proceed against [Mr Wilcox], who remains an undischarged bankrupt, the relief claimed in relation to the shares in Sanderson Estates owned by [Mr Wilcox] cannot be pursued and this claim must be dismissed.

B.4.     Appeal Proceeding

19    On 19 February 2025, Robert Wilcox served a notice of appeal and on 18 March 2025 he served a first amended notice of appeal. No challenge has been made in the Appeal Proceeding to the finding made by Ward P set out at [18] above.

20    The Appeal Proceeding is listed for hearing on 28 May 2025. The respondents to the Appeal Proceeding other than Mr Wilcox and Sanderson Estates (being the executors of Ms Wilcox’s estate and the estate of her late husband) actively opposed the orders sought by Robert Wilcox in the appeal and continue to be represented by the same counsel and solicitors as in the Supreme Court Proceeding.

C.     Relevant Principles

21    The applicable principles governing the provision of judicial advice by the court to trustees in bankruptcy and court appointed receivers are well settled. As Wigney J observed in Shanahan at [18], the leading authorities include Re One.Tel Limited (2014) 99 ACSR 247; [2014] NSWSC 457 (Brereton J); Re Ansett Australia Limited (No 3) (2002) 115 FCR 409; [2002] FCA 90 at [44] and [65] (Goldberg J); Re Mirabela Nickel Ltd (Recs and Mgrs Apptd) (in liq); Ex Parte Madden [2018] WASC 335 at [89] (Vaughan J); Heenan, Ruby Apartments Pty Ltd (in liq) v Ralan Paradise No 1 Pty Ltd (in liq) (No 2) [2021] FCA 1314 at [57] (Downes J).

22    Justice Wigney then distilled the following principles that emerge from those authorities at [18], which distillation I respectfully adopt:

First, the Court has a discretion to provide a trustee or receiver with directions or advice. Second, it is generally inappropriate to exercise that discretion where the trustee or receiver in effect simply want reassurance about a business or commercial decision. Third, it may be appropriate to exercise the discretion where the trustee or receiver requires guidance on an issue of legal judgment or legal procedure. Fourth, the effect of the direction or advice given by the Court is to sanction the proposed course of action of the trustee or receiver so that they may take that course free from the risk of personal liability for breach of duty.

D.     Consideration

23    I am satisfied that orders should be made pursuant to s 19 of the Federal Court of Australia Act 1976 (Cth) and r 14.23 of the Federal Court Rules 2011 (Cth) that the Receivers are justified in seeking leave to file a submitting appearance in the Appeal Proceeding and not taking any active role in the Appeal Proceeding, including by not appearing at the final hearing of the Appeal Proceeding.

24    I am also satisfied that an order should be made pursuant to s 30(1) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) and s 90-15 of the Insolvency Practice Schedule (Bankruptcy), being Sch 2 to the Bankruptcy Act that the Trustees are justified in not seeking leave to be joined as a respondent in the Appeal Proceeding pursuant to r 6.27 of the Uniform Civil Procedure Rules 2005 (NSW) and not taking an active role in the Appeal Proceeding including by not appearing at the final hearing of the Appeal Proceeding.

25    I have concluded that those orders should be made for the following reasons.

26    First, the advice sought by the applicants falls well within the relevant principles in that the approach that the applicants should take to the Appeal Proceeding is an issue calling for the exercise of legal judgment and a question of legal procedure. It is not a business or commercial decision.

27    Second, I am satisfied that the appearance of the applicants at the hearing of the Appeal Proceeding will not materially add anything to the conduct of that proceeding by the active contradictors, particularly given the applicants had no substantive involvement in the Supreme Court Proceeding. The trustees of the estates of Ms Wilcox and her late husband have at all times undertaken the substantive defence of the Supreme Court Proceeding and have retained the same counsel and solicitors for the hearing of the Appeal Proceeding.

28    Third, as submitted by counsel for the applicants, the likely costs that would be incurred by the applicants if they were required to prepare for and attend the hearing of the appeal are likely to exceed $25,000 in circumstances where it is substantially more likely than not that those costs would not be recoverable from Robert Wilcox.

29    Fourth, it is important to have regard to the obligation imposed by s 19 of the Bankruptcy Act and a trustee’s public duty to “perform conformably with the requirements of that duty but also conformably with the trustees obligation to administer the estate in such a manner to maximise ... any possible surplus for the bankrupt”: see Adsett v Berlouis (1992) 37 FCR 201 at 208 (Northrop, Wilcox, Cooper JJ).

30    Fifth, although the application has been made urgently by the applicants and in the shadow of the hearing of the Appeal Proceeding, I am satisfied that there is a satisfactory explanation for the delay in the application for judicial advice. Ms Peterson addresses in her second affidavit recent communications from the solicitors for Robert Wilcox in which Robert Wilcox had foreshadowed making an application in this Court for leave to proceed against Mr Wilcox. It was for that reason given the uncertainty of any foreshadowed application that the applicants understandably formed the view that an earlier application may prove to be otiose in the event that Robert Wilcox proceeded with his foreshadowed application.

31    Ultimately, that uncertainty was resolved by the 16 May 2025 letter in which Robert Wilcox confirmed that he would only proceed with the application in this Court for leave to proceed against Mr Wilcox if the applicants would not oppose him proceeding against Mr Wilcox as the fourth defendant in any retrial of the Supreme Court Proceeding. If and when such an application is made by Robert Wilcox, the applicants, as I understand the position, will consider any such application and determine at that time whether it would be opposed. In any event, for present purposes the position remains that no such application has been made.

E.    Variation to order for filing accounts

32    The applicants also seek a variation to an order made by Perry J in this Court on 9 April 2024. At the time, orders were made for the appointment of the Receivers, a requirement was imposed on the Receivers to prepare and file with the Court an account conforming with s 422A of the Corporations Act 2001 (Cth) (Corporations Act) within 6 months of the orders being made and every 12 months thereafter. The applicants seek for the order to be varied to provide that the account be provided next by 8 July 2025 and then every 12 months thereafter to bring it into line with the schedule for the filing of accounts pursuant to s 422A of the Corporations Act. I am satisfied that in order to avoid the unnecessary expense of filing accounts pursuant to two different timeframes, that the order should be varied as sought by the Receivers.

F.     Disposition

33    For these reasons, orders substantially in the form sought by the applicants are to be made.

Associate:

Dated:    21 May 2025