FEDERAL COURT OF AUSTRALIA Pitman v Pantzer (Trustee of the Bankrupt Estate of Thomas Richard Wenkart) [2001] FCA 1764 PRACTICE & PROCEDURE – where cross-claim filed – where refined issue arising on applicant's claim not finally determined – question of priorities in relation to resolution. Bankruptcy Act 1966 (Cth) ALAN PITMAN V WARREN PANTZER (TRUSTEE OF THE BANKRUPT ESTATE OF THOMAS RICHARD WENKART) N7752 OF 2000 JUDGE: BEAUMONT J DATE: 27 NOVEMBER 2001 PLACE: SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N7752 OF 2000 BETWEEN: ALAN PITMAN APPLICANT AND: WARREN PANTZER (TRUSTEE OF THE ESTATE OF THOMAS RICHARD WENKART) FIRST RESPONDENT THROVENA PTY LIMITED, HAPDAY HOLDINGS PTY LIMITED AND MACQUARIE HEALTH CORPORATION LIMITED SECOND RESPONDENTS AND BETWEEN: THROVENA PTY LIMITED, HAPDAY HOLDINGS PTY LIMITED AND MACQUARIE HEALTH CORPORATION LIMITED CROSS-APPLICANTS AND ALAN PITMAN FIRST CROSS RESPONDENT WARREN PANTZER (TRUSTEE OF THE ESTATE OF THOMAS RICHARD WENKART) SECOND CROSS RESPONDENT JUDGE: BEAUMONT J DATE OF ORDER: 27 NOVEMBER 2001 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The cross-claim be stood over generally, with liberty to restore on seven days' notice. 2. All costs be reserved. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N7752 OF 2000 BETWEEN: ALAN PITMAN APPLICANT AND: WARREN PANTZER (TRUSTEE OF THE ESTATE OF THOMAS RICHARD WENKART) FIRST RESPONDENT THROVENA PTY LIMITED, HAPDAY HOLDINGS PTY LIMITED AND MACQUARIE HEALTH CORPORATION LIMITED SECOND RESPONDENTS AND BETWEEN: THROVENA PTY LIMITED, HAPDAY HOLDINGS PTY LIMITED AND MACQUARIE HEALTH CORPORATION LIMITED CROSS-APPLICANTS AND ALAN PITMAN FIRST CROSS RESPONDENT WARREN PANTZER (TRUSTEE OF THE ESTATE OF THOMAS RICHARD WENKART) SECOND CROSS RESPONDENT JUDGE: BEAUMONT J DATE: 27 NOVEMBER 2001 PLACE: SYDNEY REASONS FOR JUDGMENT (ON HEARING A CROSS-APPLICATION) BEAUMONT J: 1 The earlier history of this litigation is explained in my reasons in the matter given on 4 May 2001 and 13 July 2001. In those reasons, I followed and applied the principle of judicial administration that it is, generally speaking, and for obvious reasons, in the interest of all parties (including in this case the intervening creditors, the second respondents and the bankrupt) and in the public interest, that litigation proceed to a final determination on the merits as soon as practicable; and as a corollary, that collateral or hypothetical or abstract questions not be entertained by the Court. In the application of these principles, on 4 May 2001, I directed that the matter proceed to a final hearing of claim 1 in the further amended application. That is, a claim by the applicant (Mr Pitman) for an order under s 104 of the Bankruptcy Act 1966 ("the Act") reversing a decision of the trustee made under s 102 of the Act to reject certain proofs of debt lodged by Mr Pitman. 2 That final hearing took place on 3 and 4 July 2001. As mentioned, on 13 July 2001, I published reasons on claim 1 and stood the matter over to a date to be fixed, in accordance with those reasons. On 22 August 2001, after hearing argument on the orders that should then be made, I decided that the interests of justice dictated that this litigious process be further refined. Accordingly, I made the following orders: "1. Pursuant to O 34 R 2, appoint Deputy Registrar Geoffrey Harold Segal as a court expert to inquire into and report upon the following question: QUESTION: 'On a provisional basis only, in the opinion of the Deputy Registrar, are the amounts claimed for costs, fees and disbursements in the several memoranda of costs, fees and disbursements contained in Exhibit AE reasonable either in whole or in part (and if so, in which part) for the purposes of a claim for those costs, fees and disbursements made pursuant to a contract for indemnity?' 2. Direct that, as soon as practicable, the second respondents file and serve a memorandum addressing each of the items in Exhibit AE in the form of a Scott schedule. 3. Direct that the applicants file and serve any response within 21 days of service of the second respondents' memorandum. 4. Reserve liberty to the second respondents to file and serve any reply as soon as practicable thereafter. 5. Note that the times stipulated in the foregoing orders may be varied by consent or as Deputy Registrar Segal may direct. 6. Note that the Deputy Registrar is to have access to the following: (a) all reasons for judgment handed down in these proceedings; (b) all exhibits in evidence in the matter; (c) all affidavits read in the matter and, in particular, evidence in the form of judgments of the NSW Supreme Court at first instance and in the NSW Court of Appeal which are the subject of the memoranda in Exhibit AE. (Affidavits read in the proceedings are as follows: · Affidavit of Robert Gorczyca sworn 18/08/00 · AAffidavit of Robert Gorczyca sworn 25/01/01 · Affidavit of Robert Gorczyca sworn 29/01/01 · Affidavit of Robert Gorczyca sworn 30/01/01 · Affidavit of Gennaro Abignano sworn 05/02/01 · Affidavit of Geoffrey Holden sworn 16/02/01) 7. The hearing in this matter otherwise to be stood over until 5 September 2001 at 10.15 am. 8. Any cross-claim to be filed and served by the second respondents as soon as practicable. 9. Any further evidence to be relied upon in the form of affidavit evidence to be filed and served as soon as practicable. 10. The notice of motion filed by the second respondents on 16 August 2001 to be returnable instanter and stood over for hearing on 5 September 2001 at 10.15 am." 3 Regrettably, the direction given to the intervening creditors in par 2 of these orders has not been complied with at all. Despite an invitation by Mr Pitman's solicitors, and despite the acknowledgment of both sides at the time, that resolution of the issue identified in par 1 of the orders would, in all probability, determine the ultimate outcome of the whole of this litigation (given the amount of that particular claim), the intervening creditors have made no attempt to progress the matter in accordance with the procedure contemplated by par 1 of the orders made on 22 August 2001. No excuse or justification has been suggested. Instead, as will appear, the intervening creditors have sought to proceed up an entirely different path by cross-claiming in the principal proceedings for different relief. Be that as it may (and I will come to that cross-claim shortly) it is obviously unsatisfactory that a procedure laid down (after careful consideration) to progress Mr Pitman's claim should be stalled by the deliberate inaction of the intervening creditors. 4 I propose, therefore, with the assistance of the Court expert, to restore to the list, immediately, the hearing of that claim. I order that the applicant's claim on the issue identified in par 1 of the orders made on 22 August 2001 be restored for hearing before me as soon as practicable, at a date to be arranged with my Associate. That date, so far as I am concerned, can be as early as Thursday of this week at 2.15 pm and I will sit every day until Christmas Eve, except for 3 December 2001. It may be noted, in this connection, that the Court expert will be invited to attend at that hearing before me, and thereafter as required. 5 It should next be explained that the notice of motion filed by the intervening creditors mentioned in par 10 of the orders made on 22 August 2001 sought, inter alia, a direction that the trustee call a meeting of creditors "…for the purpose of considering the proposal of the bankrupt … dated 18 January 2001 or any amendment that may be made to that proposal at that meeting"; together with a direction that the trustee "determine the proofs of debt of [Mr Pitman] in accordance with the judgment of [the] Court of 13 July 2001". 6 On 30 October 2001, I directed that the intervening creditors proceed on their notice of motion by filing a cross-claim and a statement of claim in the principal proceedings, so as to identify the scope of the intervening creditors' own claims. The cross-claim filed sought, again, an order for the calling of a s 73 meeting. In addition, an order was sought that the trustee "determine the proof of debt of [Mr Pitman] as nil". 7 The statement of cross-claim, filed on 9 November 2001, is annexed to these reasons. Without attempting to summarise the claims there made, it will be seen that the pleading appears to raise a number of complex legal issues for determination. 8 For his part, Mr Pitman, by his defence to the statement of cross-claim (also annexed) has not only joined issue on every substantial allegation, but has also pleaded a number of special defences. Having now had the benefit of full argument from both sides on the issues raised by these fresh proceedings, it is apparent to me that the issues tendered on the cross-claim are extremely complex and their resolution, in every respect, cannot be beyond reasonable argument. 9 The overall position, then, is that although the intervening creditors have declined to participate in the orderly disposition of Mr Pitman's claim, they now press for the immediate disposition of their cross-claim. It may be accepted that there would be scope for dealing expeditiously with the cross-claim if the issues there raised were straight forward or at least substantially without real contention. But a perusal of the annexed pleadings, alone, shows that this is plainly not the case. In my opinion, the defence of the cross-claim raises a number of contentions which are at least arguable. That being so, the question which now arises is really one of priorities: whose claim (Mr Pitman's or the intervening creditors') should proceed first? 10 In addressing this issue, I must, I think, assume, on the information and experience available at this stage, that each of the claims in the cross-claim will be contested substantially on every issue. In other words, it should be assumed that all of those issues are truly in contention. 11 On the other hand, so far as presently appears, the issues (that is, of quantification of costs and disbursements) identified in par 1 of the orders made on 22 August 2001 may well not turn out to be truly contentious. In the absence of any attempt by the intervening creditors to provide any detail of any challenge to the amounts claimed for costs and disbursements, it is impossible to say what is, or is not, seriously in dispute. As has been said, if one had to make an assessment at this point, present indications are that little would be challenged. In any event, the only way to find this out, is to embark upon the process of hearing that aspect of the litigation now. As mentioned, I propose to do this forthwith. ORDERS PROPOSED 12 In these circumstances, I propose to order that the cross-claim be stood over generally, with liberty to restore it on seven days' notice. As indicated, I would not regard the cross-claim as ripe for restoration, until I have finally determined the refined issue arising on the applicant's claim identified in par 1 of the orders made of 22 August 2001. 13 All costs are reserved. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont. Associate: Dated: December 2001 Counsel for the Applicant: Mr A Ogborne Solicitor for the Applicant: The Bruce & Stewart Commercial Practice Counsel for the Intervening Creditors: Mr J K Chippindall Solicitor for the Intervening Creditors: Hunt & Hunt Date of Hearing: 21 and 23 November 2001 Date of Judgment: 27 November 2001