Australian Securities Commission v BMM Investments Pty Ltd & Ors [1998] FCA 1249 (21 August 1998)

Last Updated: 8 October 1998

CATEGORY: NO QUESTION OF PRINCIPLE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 3003 OF 1998

BETWEEN:	AUSTRALIAN SECURITIES COMMISSION APPLICANT
AND:	BMM INVESTMENTS PTY LTD FIRST RESPONDENT OFFICIAL TRUSTEE IN BANKRUPTCY SECOND RESPONDENT ROGER GREGORY MATSON THIRD RESPONDENT
JUDGE(S):	SPENDER J
DATE OF ORDER:	21/08/98
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

(1) Pursuant to s 471B of the Corporations Law I give the Official Trustee in Bankruptcy leave to proceed against BMM Investments Proprietary Limited;

(2) Bennett & Philp be authorised to apply the funds held by them pursuant to the order made by me on 19 February 1998 in the following manner:

(i) by payment of $110,000 to the second respondent;

(ii) by payment of the balance (including any interest derived through investment of the fund) to Graham Lindsay Starkey, the liquidator of BMM Investments Proprietary Limited.

(3) I further order that the application by the Australian Securities Commission (now the Australian Securities and Investments Commission) against the first respondent, BMM Investments Proprietary Limited, and the claim by the Official Trustee in Bankruptcy against the first respondent, BMM Investments Proprietary Limited, be dismissed.

(4) I make no order as to costs.

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 3003 OF 1998

BETWEEN:	AUSTRALIAN SECURITIES COMMISSION APPLICANT
AND:	BMM INVESTMENTS PTY LTD FIRST RESPONDENT OFFICIAL TRUSTEE IN BANKRUPTCY SECOND RESPONDENT ROGER GREGORY MATSON THIRD RESPONDENT

JUDGE(S):	SPENDER J
DATE:	21/08/98
PLACE:	BRISBANE

REASONS FOR JUDGMENT

In these proceedings, which have had a curious curial history, the essential claim by the Official Trustee in Bankruptcy appears from a statement of claim filed on 6 March 1998. The statement of claim alleges, amongst other things, that Mr Matson became bankrupt on 24 December 1996 when he presented a debtor's petition which was accepted by the Official Receiver. The Official Receiver upon acceptance of that debtor's petition became trustee of the property of Mr Matson, and remains the trustee of that property.

The claim by the Official Trustee is that pursuant to s 115(2) of the Bankruptcy Act 1966 Mr Matson's bankruptcy is taken to have relation back to and having commenced on 27 June 1996. The basis for that claim is that there was the commission of an act of bankruptcy within six months before the petition was accepted, which was constituted by the giving of notice to creditors that Mr Matson had suspended or was about to suspend payment of his debts. That claim in turn is based on four letters which are exhibited to the affidavit of Robert Tom, sworn on 22 December 1997. Each of those letters is dated 26 June 1996 and were sent by Barwicks Lawyers, and the letters in terms commence:

"We act on behalf of Roger Matson.

Our client has instructed us to write to you proposing a moratorium on repayment of your debt to enable them to overcome temporary cash flow problems which are now being addressed. "

The recipients of those letters were Hertz Rent A Car, American Express International Inc, Commonwealth Bank of Australia and Diners Club. As the second paragraph that I have just referred to tends to indicate, the reference to "to enable them to overcome temporary cash flow problems" suggested that the accounts may have been corporate accounts, but in respect of which Mr Matson had some obligation to see honoured.

The letters clearly are letters written on behalf of Roger Matson and the sentence that I have just read out indicates that there was a notice given on his behalf suspending his payment of his debts. The point of all this is that Mr Matson was the registered owner of property at Bracken Ridge, and by transfer of 19 October 1994, produced to the Registrar of Titles on 21 November 1994, there was a transfer by Mr Matson to BMM Investments Proprietary Limited (BMM Investments) as trustee upon trusts, contained in the BMM Investments Trust Deed of Settlement dated 6 June 1994.

The claim by the Official Trustee in the statement of claim is that that transfer is void as against the Official Trustee as trustee of the property of Mr Matson by virtue of s 120(1) of the Bankruptcy Act. There is a further alternative claim that the transfer is void by virtue of s 121 of the Act. The property was sold by BMM Investments to a Mr and Mrs Poznik by contract dated 3 September 1997.

There are net sale proceeds remaining after payment of the mortgage debt on the property, costs, and other adjustments, of $98,261.47. In the statement of claim, the Official Trustee claims a declaration that the transfer is void as against it; an order that the net sale proceeds together with any interest thereon be paid to it; and an order that the first respondent, that is to say, BMM Investments, pay to it the sum of $20,536.53 as well as costs.

After the proceedings had commenced, BMM Investments was placed in liquidation, and the present proceedings in the court come about because the Official Trustee in Bankruptcy and the liquidator of BMM Investments have agreed to compromise the claim of the Official Trustee concerning the net proceeds of the property. Mr Matson was joined as third respondent by my direction, that direction being based on my concern that he, as transferor of the property the transfer of which was sought to be impugned by the Official Trustee, ought to be given the opportunity of being heard in respect of that matter.

Mr Matson does not agree with the orders which the Official Trustee and the liquidator have sought the court to make. The difficulty in respect of the submissions by Mr Matson, is that legally he has no interest in the funds or any other financial interest in or concerning BMM Investments. Any such entitlement of Mr Matson vested in the Official Trustee by virtue of s 58 of the Bankruptcy Act. Mr Matson is not and has never been a shareholder or director of BMM Investments, and he has no authority legally to speak for them.

I acknowledge, however, the fact that BMM Investments was part of a family financial structure, and that one can understand his concern at the possible misallocation of resources which on one view should belong to BMM Investments. The position legally is that the liquidator is the person charged with administering the property of the company and conducting its winding up. Section 477(1)(c) of the Corporations Law provides as follows:

"Subject to the section, the liquidator of a company may make any compromise or arrangement with creditors or persons claiming to be creditors, or having or alleging that they have any claim, present or future, certain or contentioned, ascertained or sounding only in damages against the company, or whereby the company may be rendered liable."

It is clear that the claim by the Official Trustee in respect of the net proceedings of the Bracken Ridge property is a claim of the kind referred to in s 477(1)(c). I am also of the opinion that s 477(2)(a) has no application, the claim here not being a debt owed to the company. It therefore follows that what Mr Matson essentially is asserting is that the decision by the liquidator to compromise the claim by the Official Trustee is one which has been made wrongly, perhaps on incorrect or inadequate information, and that, if the matter could be adjourned, it might be possible to persuade the liquidator to change his mind as to the terms of the compromise, or, alternatively, that the Court ought not to sanction the compromise by making the orders which the Official Trustee and liquidator seek the Court to make.

The power of the liquidator to compromise under s 477(1)(c) of the Corporations Law does not require the approval of the Court or of a committee. In this particular case therefore there is no basis on which the Court can or ought second guess the decision made by the liquidator, which, on the material before me, seems to have been made in good faith and for sound commercial reasons. The fact that Mr Matson disagrees with it does not provide any basis for reaching a different conclusion.

In those circumstances it seems to me that I ought to give effect to the consent agreement between the Official Trustee and BMM Investments, and I do that by making the following orders, notwithstanding that Mr Matson does not consent to the making of them. In my opinion, he has no legal standing to dispute the compromise made between the Official Trustee and the liquidator.

(1) Pursuant to s 471B of the Corporations Law I give the Official Trustee in Bankruptcy leave to proceed against BMM Investments Proprietary Limited;

(2) Bennett & Philp be authorised to apply the funds held by them pursuant to the order made by me on 19 February 1998 in the following manner:

(i) by payment of $110,000 to the second respondent;

(ii) by payment of the balance (including any interest derived through investment of the fund) to Graham Lindsay Starkey, the liquidator of BMM Investments Proprietary Limited.

(3) I further order that the application by the Australian Securities Commission (now the Australian Securities and Investments Commission) against the first respondent, BMM Investments Proprietary Limited, and the claim by the Official Trustee in Bankruptcy against the first respondent, BMM Investments Proprietary Limited, be dismissed.

(4) I make no order as to costs.

I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender.

Associate:

Dated: 21/08/98

Counsel for the Applicant:	Ms C Conway of Australian Securities Commission
Counsel for the First Respondent:	Mr P Dunning
Solicitor for the First Respondent:	Damien Bourke & Associates
Solicitor for the Second Respondent:	Mr A J Bennett of Bennett & Philp
The Third Respondent appeared in person. Date of Hearing:	21 August 1998
Date of Judgment:	21 August 1998