John Lawrence Sherry and Anor v Philip Gregory Jefferson and Ors [1998] FCA 1719 (18 December 1998)

Last Updated: 5 January 1999

IN THE FEDERAL COURT OF AUSTRALIA	CATEGORY: NO QUESTION OF PRINCIPLE
QUEENSLAND DISTRICT REGISTRY	QG 7429 of 1998

BETWEEN:	JOHN LAWRENCE SHERRY AND CARMEL MARY DELORES SHERRY APPLICANTS
AND:	PHILIP GREGORY JEFFERSON AND JAY ARSCOTT STEVENSON FIRST RESPONDENTS JOHN ERNEST DUNWOODY SECOND RESPONDENT CHELMSCLIFF PTY LTD THIRD RESPONDENT WESTPAC BANKING CORPORATION FOURTH RESPONDENT
JUDGE(S):	DOWSETT J
DATE OF ORDER:	18 DECEMBER 1998
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The applicants are to pay the first respondents' costs of the proceedings, including reserved costs.

2. As between the applicants and the second and third respondents, the first respondents' said costs are reserved.

3. The costs of proceedings as between the applicants and the second and third respondents are reserved.

4. As between the applicants and the second and third respondents, the costs which the applicants have previously been ordered to pay to the fourth respondent are reserved.

5. The application is otherwise dismissed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 7429 of 1998

BETWEEN:	JOHN LAWRENCE SHERRY AND CARMEL MARY DELORES SHERRY APPLICANTS
AND:	PHILIP GREGORY JEFFERSON AND JAY ARSCOTT STEVENSON FIRST RESPONDENTS JOHN ERNEST DUNWOODY SECOND RESPONDENT CHELMSCLIFF PTY LTD THIRD RESPONDENT WESTPAC BANKING CORPORATION FOURTH RESPONDENT

JUDGE(S):	DOWSETT J
DATE:	18 DECEMBER 1998
PLACE:	BRISBANE

REASONS FOR JUDGMENT

These proceedings commenced as an application to annul a bankruptcy and to restrain the registration of a transfer of real property. It is, unfortunately, necessary to give a little of the background. It seems that the applicants and Mr Dunwoody, one of the respondents, have been involved in unpleasantness and litigation over a period of many years. They have the mutual misfortune of being neighbours in Mackay.

The applicants have obtained a substantial judgment against Mr Dunwoody in the District Court and seek to enforce it. Mr Dunwoody has presented a petition in bankruptcy and become bankrupt. Before doing so, he transferred a substantial asset to the third resondent, Chelmscliff Pty Ltd, which is the trustee of a trust of which Mr Dunwoody and other members of his family are beneficiaries.

The first respondents are Mr Dunwoody's trustees in bankruptcy, having been nominated by him at the time that he presented his own petition. I stress that I am not, in anything that I have said or propose to say, reflecting adversely upon the trustees. I see no reason in the material for concluding that they have done other than their duty, and that in an entirely competent and industrious way.

Nonetheless, one could imagine that the applicants, if not their legal advisers, would be most concerned at the situation in which Mr Dunwoody had disposed of a substantial asset and then gone voluntarily into bankruptcy. They therefore brought the present applications and sought interlocutory relief restraining the registration of the transfer of the property from Mr Dunwoody to Chelmscliff.

That purchase was financed by Westpac, which company was originally joined in the proceedings. In the end, it was conceded that there was no basis for holding Westpac to account for any of the misconduct alleged against Mr Dunwoody and/or Chelmscliff, and the transfer and mortgage have been registered. To the extent that the applicants sought any interlocutory relief in respect of that transfer, it can be said that they have failed.

It is at least arguable that their attempts to prevent registration on an interlocutory basis were misconceived, but they were certainly understandable. In the course of argument, I have suggested that most practitioners who practise in commercial areas have, at one time or another, experienced concern over the likely effect of registration of a Torrens title transfer on questions of priority based upon allegations of fraud and equitable misconduct. In those circumstances, it was understandable that the applicants should take steps designed to freeze the position even if, in fact, it turns out that registration would not have made the position any worse than it previously was. This is not to say that every such step will be held to be justified, but such steps are understandable.

Subsequently, Mr Dunwoody made an offer to compromise his debts, and a meeting of creditors was called. The applicants again intervened, alleging that the trustees had recommended acceptance of the proposal based upon a misguided appreciation of the circumstances. That matter has been resolved. It seems that for personal reasons, the applicants no longer propose to continue with the principal applications. They attribute this to certain events which have led them to be fearful for their safety. As I understand it, it is not suggested that their original applications were frivolous, although it is asserted strongly that they were always destined to fail.

However the trustees have now commenced proceedings against Chelmscliff to set aside the transfer of the property and it seems likely that, in the prosecution of those proceedings, the circumstances which led up to the transfer will be closely investigated. To put not too fine a point upon it, the applicants are, in effect, asserting that Mr Dunwoody has abused the provisions of the Bankruptcy Act 1966 (Cth) to defeat his creditors. Although they do not now wish to proceed with their application to establish that, the matter will be prosecuted indirectly in the trustee's proceedings against Chelmscliff. As the current applications are not to proceed, I am asked to dispose of the question of costs.

I should say that part of the original application was also for an order that the applicants be allowed to prosecute proceedings against Chelmscliff in the name of the trustees. This application was based upon an assertion that the trustees had indicated that they were not willing to prosecute those proceedings. In fact they had not gone so far. They had said that they were still investigating the matter. Notwithstanding this, the applicants sought to take over conduct of the proceedings. I consider that they were premature in seeking to do so at that stage. The trustees were both entitled and obliged to investigate the matter fully before making a decision, and it is fairly clear from the material that they had not done so at the time at which this application was brought.

It also seems to me that it was not open to any one creditor to simply assert an entitlement to take over the proceedings upon undertaking to pay the costs. A creditor who so underwrites an action may well derive some additional benefit from the outcome by virtue of obtaining an appropriate order under the Bankruptcy Act. All creditors ought be given the opportunity of participating in that way if there is a benefit to be gained. For this reason, it would have been necessary to give other creditors an opportunity to participate before an order of the kind contemplated would have been made.

For those reasons, as between the applicants and the trustees, I consider that the applicants should pay the trustees' costs of the proceedings, but I think that those costs should be reserved as between the applicants and the other parties to these proceedings. The costs of the applicants and the other parties, Mr Dunwoody and Chelmscliff should also be reserved.

That is an unusual order in the circumstances, given that the proceedings are to be otherwise discontinued. However, as the circumstances which led up to the transfer from Dunwoody to Chelmscliff are to be investigated in the trustees' action, I, for one, would be dissatisfied to make an order which may confer benefit upon Mr Dunwoody and Chelmscliff as against the applicants in circumstances in which the applicants may have been doing little more than defending themselves against quite aggressive action by Mr Dunwoody to which Chelmscliff may or may not have been a party.

Although I would not encourage the parties to litigate that question simply so that I can dispose of the question of costs in a way which I find comfortable, the issue is to be further ventilated in any event and properly so. I consider that any order for costs is more likely to reflect the interests of justice if it is deferred until after those proceedings have been completed.

I reserve all questions of costs as between the applicant and Mr Dunwoody and Chelmscliff, including the costs which I have ordered the applicants to pay to the trustees. Although the application will otherwise stand dismissed, it will stand over with respect to costs until further order.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett

Associate:

Dated: 24 December 1998

Counsel for the Applicant:	Mr S. Couper QC and Mr P. Land
Solicitor for the Applicant:	Beckley, Knight & Elliot
Counsel for the Respondent:	Mrs D. Mullins SC
Solicitor for the Respondent:	James Conomos Lawyers
The Second Respondent appeared by his solicitor
Solicitor for the Second Respondent:	Bennett & Philp Solicitors
Counsel for the Third Respondent:	Mr R. Derrington
Solicitor for the Third Respondent:	Hunt & Hunt Lawyers
No appearance for the Fourth Respondent
Date of Hearing:	18 December 1998
Date of Judgment:	18 December 1998