FEDERAL COURT OF AUSTRALIA Stojanovich v Vincent [2006] FCA 572 DIANNA STOJANOVICH v LOURAIN ANN VINCENT NSD 545 of 2006 ALLSOP J 11 MAY 2006 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 545 of 2006 BETWEEN: DIANNA STOJANOVICH APPLICANT AND: LOURAIN ANN VINCENT RESPONDENT JUDGE: ALLSOP J DATE OF ORDER: 11 MAY 2006 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application for the adjournment be dismissed. 2. The application to cross-vest the petition to the Supreme Court of New South Wales be dismissed. 3. The estate of the late Jason Kenneth Case be administered in bankruptcy pursuant to Part 11 of the Bankruptcy Act 1966. 4. The costs of the applicant (Ms Stojanovich) of the petition be paid out of the estate. 5. In the event of the estate not being sufficient to meet those costs the respondent (Ms Vincent) pay the costs of the applicant (Ms Stojanovich) of Tuesday 9 May 2006 and of the hearing on 11 May 2006. 6. The respondent (Ms Vincent) pay the applicant's (Ms Stojanovich's) costs of the adjournment application. 7. The respondent (Ms Vincent) pay the applicant's (Ms Stojanovich's) costs of the cross-vesting application. 8. It is a matter for the taxing officer as to whether the applicant (Ms Stojanovich) should have the costs of senior counsel. 9. The applicant (Ms Stojanovich) inform the Official Receiver of these orders within 24 hours. 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 NSD 545 of 2006 BETWEEN: DIANNA STOJANOVICH APPLICANT AND: LOURAIN ANN VINCENT RESPONDENT JUDGE: ALLSOP J DATE: 11 MAY 2006 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is a petition brought for the administration of the estate of the late Jason Kenneth Case under Part 11 of the Bankruptcy Act 1966. Mr Case died on 26 September 2005, leaving a will appointing the applicant, Ms Stojanovich, as his executor. 2 Ms Lourain Vincent is the sole beneficiary under the will and the former partner of the deceased. 3 On the evidence before me, which was not fundamentally in contest, the estate is clearly insolvent. The liabilities of the estate exceed $10 million and the assets available to the estate to meet those creditors on the best case would be in the order of a little over $7 million. 4 The position is complicated by the fact that the deceased and Ms Vincent were joint tenants in various properties in Double Bay adjacent to properties which were in the name of the deceased. The latter, of course, fell into the estate; the former by right of survivorship passed to Ms Vincent. 5 If one takes the value of the properties that have passed to Ms Vincent and adds that to the value of the properties in the estate, somewhat over the $10.17 million of liabilities is achieved. 6 The liabilities in the estate are both secured and unsecured. Some of the secured liabilities are running at punitive interest rates. Other liabilities are running at more modest default interest rates. In one sense, that is not particularly germane in that they are the secured creditors. 7 Ms Vincent applies to have the petition adjourned and also cross-vested to the Supreme Court of New South Wales. She wishes to apply to the Supreme Court of New South Wales to have Ms Stojanovich's probate revoked and herself put in Ms Stojanovich's place as executrix of the estate. This is sought in aid of, in effect, a refinancing of the debts of the estate and Ms Vincent based upon a total borrowing against all the assets of Ms Vincent and the estate in a sum which would pay out the secured and the unsecured creditors of the estate, leaving Ms Vincent as the sole debtor under the refinanced arrangement with the new lender. 8 Whether or not that is a feasible alternative course of action does not, however, depend upon the adjournment of the petition and the success of the application to the Probate Division in the Supreme Court. At the moment, Ms Stojanovich is the executrix. She is the executrix of an insolvent estate. Her entitlement and responsibility as such is to bring the matter before the Bankruptcy Court. 9 I am satisfied on the material before me of the matters in s 244(11) of the Bankruptcy Act. The question arises whether I should, having been satisfied of those matters, come to the view that there is other sufficient cause why the order should not be made, and either pursuant to s 244(12) dismiss the petition, or alternatively adjourn the petition to a time when the Supreme Court proceedings may have been dealt with. 10 I think in all the circumstances it would not be appropriate to keep this clearly insolvent estate in a state of limbo. The steps which may be practical and realistic that Ms Vincent contemplates depend on a number of things, whatever the structure of the estate. They depend upon the lender being prepared to advance over $10.17 million on the security of the land in question. The lender is apprised of the nature of the land and has made one indication as to lending, and the question is whether it will lend more funds on a different loan structure. That may depend upon mortgage insurance; it may depend on considerations that are not before me. 11 If the lender is prepared to do that and it is a sum which will pay out all the secured and unsecured creditors, it would be difficult to consider a circumstance where the Official Receiver or Trustee, behaving in the interest of the unsecured creditors, would not take all appropriate steps to see such an eventuality brought forward if it were to place the unsecured creditors in a position of being paid the whole or a substantial part of their debt. 12 On the current balance sheet of the estate, simply looking at the estate's assets, it would appear that the unsecured creditors will obtain nothing or, at the most, very little after the secured creditors have been paid. 13 In those circumstances, I would not impute in any exercise of discretion either laziness or impropriety on the part of the Official Receiver. I do not suggest from my reasons that any particular course of action to which I am not privy now should or should not be followed. However, I am only identifying what I see to be the necessary parameters of proper conduct on a certain hypothesis as a factor relevant to the exercise of my discretion as to whether I take a step under s 244(12). 14 Not being persuaded that the dismissal of the petition or its adjournment would be in the public interest and the interest of creditors within the exercise of discretion under subsection (12) and being satisfied of the matters set out in s 244(11), I think it appropriate to make an order that the estate of the late Jason Kenneth Case be administered in bankruptcy pursuant to Part 11 of the Act. 15 The question arose as to whether I should also make a finding about whether the estate of Mr Case was solvent or insolvent at the time of his death for the purposes of section 247A of the Act. I do not think that is appropriate or my function under this application. If a matter arises between the Trustee or Official Receiver and a third party as to the existence of the relation back period, that is the time and circumstance to debate that matter. If it were necessary, however, to make a decision about that on the material before me, it is hard to resist the conclusion that Mr Case was as insolvent then as the estate appears to be now. 16 In those circumstances, I dismiss the oral application for an adjournment. I dismiss the application for the cross-vesting of the application under Part 11 to the Supreme Court, and order that the estate of the late Jason Kenneth Case be administered in bankruptcy pursuant to Part 11 of the Bankruptcy Act (1966). 17 An order for costs of the applicant is sought against Ms Vincent. I am informed that there is a life insurance policy as part of the estate which will not fall into the bankrupt estate, being protected property. Ms Vincent has opposed the application. It may make no difference in the end as to whether an order is made. The orders I make are as follows: 1. The application for the adjournment be dismissed. 2. The application to cross-vest the petition to the Supreme Court of New South Wales be dismissed. 3. The estate of the late Jason Kenneth Case be administered in bankruptcy pursuant to Part 11 of the Bankruptcy Act 1966. 4. The costs of the applicant (Ms Stojanovich) of the petition be paid out of the estate. 5. In the event of the estate not being sufficient to meet those costs the respondent (Ms Vincent) pay the costs of the applicant (Ms Stojanovich) of Tuesday 9 May 2006 and of the hearing on 11 May 2006. 6. The respondent (Ms Vincent) pay the applicant's (Ms Stojanovich's) costs of the adjournment application. 7. The respondent (Ms Vincent) pay the applicant's (Ms Stojanovich's) costs of the cross-vesting application. 8. It is a matter for the taxing officer as to whether the applicant (Ms Stojanovich) should have the costs of senior counsel. 9. The applicant (Ms Stojanovich) inform the Official Receiver of these orders within 24 hours. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Allsop . Associate: Dated: 23 May 2006 Counsel for the Applicant: Mr D Fagan SC with Mr D Durston Solicitor for the Applicant: Etheringtons Solicitors Counsel for the Respondent: Mr C Stomo Solicitor for the Respondent: David H Cohen & Co Date of Hearing: 11 May 2006 Date of Judgment: 11 May 2006