FEDERAL COURT OF AUSTRALIA Khoury v Official Receiver as Trustee of Estate of Joe Khoury [2001] FCA 1849 JOE KHOURY v OFFICIAL RECEIVER AS TRUSTEE OF ESTATE OF JOE KHOURY N 7375 OF 2001 EMMETT J 18 SEPTEMBER 2001 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 7375 OF 2001 IN THE MATTER OF JOE KHOURY BETWEEN: JOE KHOURY APPLICANT AND: OFFICIAL RECEIVER AS TRUSTEE OF ESTATE OF JOE KHOURY RESPONDENT JUDGE: EMMETT J DATE OF ORDER: 18 SEPTEMBER 2001 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The net amount after costs, remuneration and other expenses recovered from Alice Khoury, Ralph Khoury and Zena Khoury in proceeding 1827 of 2000 in the Supreme Court of New South Wales be distributed pro rata according to their admitted debts between Peter Braine and MMI General Insurance Limited. 2. Any further distributions made out of the bankrupt estate be made to Peter Braine and MMI General Insurance Limited for the balance of their claims pro rata with other creditors of the estate. 3. The applicant's costs of and incidental to this application be costs of the administration and paid out of the bankrupt estate. 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 N 7375 OF 2001 IN THE MATTER OF JOE KHOURY BETWEEN: JOE KHOURY APPLICANT AND: OFFICIAL RECEIVER AS TRUSTEE OF ESTATE OF JOE KHOURY RESPONDENT JUDGE: EMMETT J DATE: 18 SEPTEMBER 2001 PLACE: SYDNEY REASONS FOR JUDGMENT 1 I have before me an application brought by the Trustee in Bankruptcy of the estate of Joe Khoury. A sequestration order was made in respect to the estate of Joe Khoury on 12 March 1998. At the time of the sequestration order the bankrupt was the part owner of a property situated at 25 Ernest Avenue, Chipping Norton, NSW. 2 Following the appointment of the Official Trustee as Trustee of the estate, attempts were made to negotiate an agreement with the co-owner of the property to sell the property. Those attempts were unsuccessful. The Official Receiver therefore decided to apply to the Supreme Court of New South Wales for an order pursuant to s 66G of the Conveyancing Act 1919 (NSW). Section 66G provides for the appointment of trustees for sale or trustees for partition of jointly held land. 3 On 8 November 1999 the Official Receiver wrote to the creditors of the bankrupt informing them of the intention to initiate proceedings pursuant to s 66G of the Conveyancing Act. Since there were no funds in the estate to fund such an action the Official Trustee requested confirmation as to whether or not any of the creditors were prepared either to provide a cash advance or to indemnify the Official Trustee in respect of costs incurred in making such an application. 4 Two of the creditors responded, being Mr Peter Braine, barrister and MMI General Insurance Limited. Those creditors have been admitted by the Official Trustee to proof in the bankrupt estate in the sums of $16,480 and $25,756 respectively. The Official Trustee subsequently commenced a proceeding in the Supreme Court and the filing fees in the Supreme Court were funded equally by those two creditors. The proceeding thus commenced was ultimately compromised, when orders were made involving the payment to the Official Trustee of sums totalling $44,650. 5 The Official Trustee now applies to the Court for orders pursuant to s 109(10) of the Bankruptcy Act 1966. That provision is in the following terms: "(10) Where in any bankruptcy: (a) property has been recovered, realized or preserved under an indemnity for costs of litigation given by a creditor or creditors; or (b) expenses in relation to which a creditor has, or creditors have, indemnified a trustee have been recovered; the Court may, upon the application of the trustee or a creditor, make such orders as it thinks just and equitable with respect to the distribution of that property and the amount of those expenses so recovered with a view to giving the indemnifying creditor or creditors, as the case may be, an advantage over others in consideration of the risk assumed by creditor or creditors." 6 Money recovered as a result of an action pursuant to s 66G is within s 109. It is clear also that the discretion conferred on the Court by s 109 extends to giving priority in respect of the whole of the amount recovered in an appropriate case. 7 All of the creditors of the estate of the bankrupt were invited to assist the Official Trustee but only two were prepared to give any assistance. They were the largest creditors. However, the other creditors who have been admitted to proof in the estate range between $4,610 and $7,914 in terms of their debts. At the time of the commencement of the proceeding in the Supreme Court, there were no funds in the estate and the Official Trustee would not have been in a position to commence a proceeding for recovery of the bankrupt's interest in the jointly owned land. 8 All of the creditors who have been admitted to proof and other persons disclosed in the bankrupt's statement of affairs as creditors have been informed of the proposed application today. No creditor has appeared. In the circumstances it seems to me that the appropriate order is that the property recovered pursuant to the proceeding in the Supreme Court be distributed to the two creditors who indemnified the Trustee pro rata according to their admitted debts. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 20 December 2001 Counsel for the Applicant: S Mullette Solicitor for the Applicant: The Argyle Partnership Date of Hearing: 18 September 2001 Date of Judgment: 18 September 2001