FEDERAL COURT OF AUSTRALIA Meinhardt (Hong Kong) Ltd v William Edward Meinhardt (Deceased) & Ors [2006] FCA 1106 BANKRUPTCY – creditor's petition for administration of estate of deceased person – pending applications in State court for probate and letters of administration – whether bar to creditor's petition - whether leave of the court is required – "proceedings for the administration of a deceased person's estate". PRACTICE AND PROCEDURE – precedent – whether previous decision of single Judge should be followed – whether previous decision 'plainly wrong'. Bankruptcy Act 1966 (Cth): s 244(13) Rules of the Supreme Court of Victoria:Pt 54 Cooper v Commissioner of Taxation (2004)139 FCR 205 followed Gonzalez v Maria de Luz Marmentini (unreported, Federal Court of Australia, Emmett J, 7 July 1998) followed McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 applied Minister for Immigration and Multicultural and Indigenous Affairs v SZANS (2005) 141 FCR 586 followed SZEEU v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 150 FCR 214 followed MEINHARDT (HONG KONG) LTD v WILLIAM EDWARD MEINHARDT (DECEASED) & ORS VID838 OF 2006 JESSUP J 22 AUGUST 2006 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID838 OF 2006 BETWEEN: MEINHARDT (HONG KONG) LTD Applicant AND: WILLIAM LINDSAY MEINHARDT (DECEASED) First Respondent WILLIAM EDWARD MEINHARDT Second Respondent VICTORIA BARBARA TREYVAUD Third Respondent JUDGE: JESSUP J DATE: 22 AUGUST 2006 PLACE: MELBOURNE RULING 1 William Lindsay Meinhardt died on 23 November 2003 leaving a will which named Timonthy Jonathan Browne and Roderick Charles McKenzie as executors. The residuary beneficiaries were William Meinhardt's three children, Victoria Treyvaud, Sally Veall, and William Edward Meinhardt. No application for probate had been made when, on 23 November 2005, William Meinhardt Jr commenced proceedings in the Supreme Court of Victoria against the executors under s 15 of the Administration and Probate Act 1958 (Vic) in which they sought orders that the executors show cause why they should not renounce probate of the will and why administration of the will should not be granted to State Trustees Ltd. On 22 December 2005 the executors commenced their own proceeding in the Supreme Court in which they applied for probate of the will. On 16 March 2006 the Supreme Court ordered that the two proceedings be heard together. 2 On 4 July 2006, the executors issued a summons in the proceeding which they had commenced in the Supreme Court under which they sought orders that they have leave to renounce their application for probate in favour of State Trustees Ltd or another nominated corporate trustee. This proceeding and the proceeding commenced by William Meinhardt Jr remain pending in the list of the Supreme Court. The parties to those proceedings have agreed to seek an adjournment of them until after 21 September 2006. 3 On 1 May 2006 the present proceeding was commenced in the Federal Magistrates Court. The applicant petitions for an order for the administration in bankruptcy of the estate of William Meinhardt Sr pursuant to s 244 of the Bankruptcy Act 1966 (Cth). The executors, and the children of the deceased, were served with the petition. On 21 June 2006 the Federal Magistrates Court ordered that Victoria Treyvaud and William Meinhardt Jr be joined as respondents, and that the executors be excused from further appearance in the proceeding. 4 In the course of interlocutory proceedings in the Federal Magistrates Court, it became apparent that it would be contended that the commencement of this proceeding was not regular in the absence of leave having been granted for the presentation of the petition pursuant to subs (13) of s 244, which provides as follows: "Where proceedings have been commenced in a court for the administration of a deceased person's estate under a law of a State or Territory, a petition for an order under this section in relation to the estate shall not be presented by a creditor except by leave of the Court and on such terms and conditions (if any) as the Court thinks fit." It also became apparent that reliance would be placed upon the judgment of this Court in Gonzalez v Maria de Luz Marmentini, Executrix of the Estate of the late Ida Garcia Raber, an unreported judgment of Emmet J given on 7 July 1998. I shall refer to that judgment further below, it being sufficient here to relate that the Federal Magistrates Court considered it more appropriate that the argument whether that judgment was 'plainly wrong', if there were to be such an argument, should be had in this Court, rather than in that Court. For this and other reasons to which that Court referred, on 19 July 2006 the proceeding was transferred to this Court. 5 The parties argued the question of the applicability of s 244(13) of the Bankruptcy Act as a preliminary point. It was submitted by Mr Bigmore QC, who appeared with Mr Lyons for William Meinhardt Jr, that the applicant required the leave of the Court before presenting the petition which it had purported to present on 1 May 2006, although he accepted that, if that leave were now to be sought and granted, the grant could validly operate nunc pro tunc. Mr Sifris QC, who appeared with Mr Fary for the applicant, submitted that leave was not required in the circumstances of this case. Mr Foster, the solicitor for Victoria Treyvaud, made submissions on some legal issues arising, without indicating any particular position with respect to the application of subs (13) in the circumstances. 6 The burden of Mr Bigmore's submission was that the Supreme Court proceedings to which I have referred are, either separately or taken together, 'proceedings … in a court for the administration of a deceased person's estate under a law of a State or Territory' within the meaning of subs (13). Mr Sifris took issue with that proposition, contending that the Supreme Court proceedings were concerned only with identifying, and empowering according to law, the person or persons who would thereafter be responsible for the administration of the estate of William Meinhardt Sr. He relied upon the judgment in Gonzalez in support of the proposition that the 'administration' to which subs (13) refers is a general administration of the whole estate of the kind that was once done in Chancery, or a more limited analogue of that description of administration for which, for example, Pt 54 of the Rules of the Supreme Court of Victoria now provides. 7 In the period leading to about the middle of the nineteenth century in England, the Court of Chancery exercised a jurisdiction whereby it undertook the general administration of a trust, or a deceased estate. A decree for general administration was made as of course upon application by a beneficiary. The history of the proceeding is set out in the judgment of Young Jin McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623. His Honour said (at 633): "[By] 1850 the law was that if any beneficiary came to the court at all and asked for general administration, general administration would be decreed as of course. The court would order that the trust was to be specifically performed under its supervision, that nothing was to be done without its imprimatur, that accounts should be taken to see what the trust assets were and the court would give directions as to how the trust would be carried out." I have also been referred to Williams, Mortimer and Sunnucks, Executors, Administrators and Probate, 18th ed, 2000. In that edition, the authors say (at p38): "In the nineteenth century the main business of the Chancery Masters was the administration of the estates of deceased persons. It was common for estates to be administered in Chancery and testators sometimes even directed in their wills that the estate should be so administered. If the assistance of the court was required, the only relief available was the making of a full administration order. This terminated the authority of the representative to administer and put the whole of the administration in the hands of the court, a necessarily expensive and slow matter. A full administration order required (and still requires, if one were to be made) accounts to be taken of the testator's debts, and of his property come to the hands of the representatives and an inquiry as to what part of his property was outstanding or undisposed of, and whether it was subject to incumbrances. There was (and theoretically still is) machinery for advertising for creditors, requiring creditors to come in and prove their claims, and for examining the representatives' accounts." 8 For reasons explained both by Young J and by Williams et al, proceedings for the general administration of trusts became increasingly less frequent in the second half of the nineteenth century, and are today all but unknown. There is a simpler and more flexible procedure under which a beneficiary may obtain particular relief in relation to a deceased estate or a trust, without the need to place the whole estate or trust under the general administration of the court. In Victoria, that procedure is established by Pt 54 of the Rules of the Supreme Court of Victoria. However, courts of equity retain their jurisdiction to make general administration decrees, even if the existence of that jurisdiction may be regarded, in contemporary times, as theoretical. Indeed, in McLean itself, although Young J ultimately did not make the (interlocutory) general administration order which had been sought in the proceedings before him, his refusal to do so depended in no sense upon a view that jurisdiction was lacking, or that an order for general administration could no longer be made by a court of equity. 9 In the proceedings before me, Mr Sifris argued that a proceeding for administration by the court, of either the traditional, general, kind or the more flexible and specific kind for which Pt 54 of the Rules of the Supreme Court of Victoria provides, is the kind of proceeding to which s 244(13) of the Bankruptcy Act refers. He said that a proceeding of this kind was conformable with the natural meaning of the phrase 'proceedings … in a court for the administration of a deceased person's estate'. 10 Mr Bigmore submitted that so to construe subs (13) was to narrow down the natural meaning of the words found therein without any apparent grammatical or contextual justification. While accepting, as I understood him, that the subsection did extend to proceedings for general administration or under Pt 54, he submitted that the natural meaning of the words extended also to a situation in which someone had applied for a grant of probate, or for letters of administration, in relation to a deceased estate. In these situations, the estate would be administered by or under the direction of the person to whom the grant had been made, and proceedings in a court were necessary to obtain the grant. 11 As I have indicated above, I was referred to materials which illuminated the history, utility and drawbacks of the proceeding by way of general administration. Historically, that s 244(13) might contain an intended reference to such a proceeding (or to the more limited form under rules of court) could not be regarded as an absurdity, or even an oddity. It is true that the procedure for general administration had fallen into considerable disfavour by the time of the enactment of the Bankruptcy Act 1924 (Cth), but its replacement by the more efficient procedure under rules of court makes inevitable the conclusion that proceedings for the administration of deceased estates or trusts by a court would have been within the reasonable contemplation of the legislature at the time. In the Act of 1924, the corresponding provision was s 155(3), which provided as follows: "A petition for administration under this section shall not be presented to the Court after proceedings have been commenced in any Court for the administration of the deceased debtor's estate, but the latter Court may, on proof that there is no reasonable probability that the estate will be sufficient to pay its debts, transfer the proceedings to the Court exercising bankruptcy jurisdiction, and thereupon the Court may, in the prescribed manner, make an order for the administration of the deceased debtor's estate, and the like consequences shall ensue as under an administration order made on the petition of a creditor." Neither counsel made anything of the change in wording as between that set out above and the current form which appears in s 244(13), which change was effected, without apparent comment at the policy level, upon the enactment of the Act of 1966. 12 Both Mr Bigmore and Mr Sifris strove to discern, and to rely upon, what they said were the consequences – good or bad – of a construction of the provision one way or the other. Neither these considerations, nor the arguments in support of them, ultimately points with conviction to a particular outcome on the matter of construction. Each counsel relied upon terms of subs (9) of s 244, which provides as follows: "Subject to subsection (10), a sealed copy of the petition shall be served upon the legal personal representative of the deceased debtor or, if there is no legal personal representative, upon such person as the Court directs." For his part, Mr Sifris submitted that, in contemplating the existence of a legal personal representative, subs (9) was inconsistent with the notion that proceedings for appointment of such a representative could not be taken in a court of a State or a Territory, without leave, because of the prohibition in subs (13). As I shall indicate presently, however, it was no part of Mr Bigmore's argument that there might not already be a validly appointed legal personal representative at the stage when s 244(13) was called upon to play its part. 13 The one Ace which Mr Sifris had in his hand was the judgment of Emmet J in Gonzales to which I have referred. In the facts which led to that judgment, the executrix was granted probate of the will of the deceased on 6 August 1997. On 6 April 1998, a creditor filed a petition under s 244 of the Bankruptcy Act for the administration of the deceased estate in bankruptcy. It was contended that subs (13) operated as a bar to the presentation of the petition. The response to this was that s 244(13) referred only to proceedings in the nature of a general administration, and was inapplicable where the only proceedings were those which had lead to the grant of probate. Emmet J accepted that response. He said that the purpose of s 244(13) was 'to ensure that there are not two courts administering an insolvent estate or administering the estate generally'. His Honour referred to Pt 68 of the NSW Supreme Court Rules (corresponding to Pt 54 of the Victorian Supreme Court Rules) and continued: "It is an order such as is contemplated by Pt68 of the Supreme Court Rules which I consider was in contemplation when s 244(13) was enacted. Administration suits in Australia are in fact rare for the reasons which I have briefly indicated. The purpose of s 244(13) is to ensure that where an order for the administration of an estate has been made by the Supreme Court of a State or Territory, the effect of which is to prevent any dealings with the estate otherwise than under the direction of the Court, the Bankruptcy Court will not, in conflict with such an order, seek to administer the estate." His honour also referred to s 244(9) which, he noted, suggested that the statutory draftsman had in mind that subs (13) 'would not apply to every application for the grant of probate'. 14 Mr Bigmore dealt with Gonzalez at two levels. First, he submitted that Gonzalez was concerned with a situation in which the probate proceedings in the Supreme Court had been completed by the time the s 244 petition was presented. On his construction of subs (13), the opening words – 'where proceedings have been commenced' – carry the sense of proceedings which have been commenced, but remain pending, as at the date of the presentation of the bankruptcy petition. Mr Bigmore said that Emmet J's judgment was correct on the facts before him, since the probate proceedings in the Supreme Court were well concluded before the bankruptcy proceedings commenced in this Court. He submitted, accordingly, that Gonzalez should be distinguished. 15 I do not think that Gonzalez may be distinguished in this way. It is not a situation in which an earlier case has been decided a particular way because of a fact or circumstance which does not exist in the instant case. It is, rather, a situation in which an earlier case has been decided by reference to a particular rule or proposition, whereas it might equally have been decided the same way by reference to a different rule or proposition having application to facts or circumstances which differ from those existing in the instant case. In the latter situation, the rule or proposition by reference to which the earlier case was in fact decided constitutes its ratio decidendi. It is true, of course, that the ratio decidendi of a decided case extends no further than the rules and propositions which were essential for the course of reasoning which led the case to be decided in the way that it was. However, this does not justify a later court in effectively deconstructing the earlier court's process of reasoning by postulating a more limited basis upon which the earlier case might have been, but was not, decided. 16 Mr Bigmore's second submission was that Gonzalez was plainly wrong. He accepted that I should follow the judgment of another single judge of this Court unless I was persuaded that it was plainly wrong: see Cooper v Commissioner of Taxation (2004)139 FCR 205, [46]; Minister for Immigration and Multicultural and Indigenous Affairs v SZANS (2005) 141 FCR 586, [38]. When speaking of a like test in the context of a later Full Court being asked to depart from the judgment of an earlier Full Court, in SZEEU v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 150 FCR 214, [148], Weinberg J said (with the assent of Allsop J): "The word "plainly" does more than simply add emphasis. It suggests that the error must be manifest or, if it does not rise to that level, at least capable of being easily demonstrated. In a sense, the error must be so clear as to enable a later court to say that the point is not reasonably arguable." 17 Mr Bigmore submitted first that Emmett J's proposition that subs (13) referred to proceedings by way of general administration was no more than an assertion which, without proper foundation, went directly to the end conclusion of the point being argued before him. I do not so read his Honour's reasons. He stated that the purpose of the subsection was 'to ensure that there are not two courts administering an insolvent estate or administering the estate generally.' Mr Bigmore submitted that his Honour's identification of the purpose of the provision was unsupportable. He said there was no reason to suppose that the legislature was concerned with dual administrations – otherwise, why would subs (13) contemplate that leave might be granted to present a petition under s 244 in some cases? He submitted that, whatever was the purpose of the provision, it could not be the avoidance of dual administrations. I must say that I am unpersuaded by Mr Bigmore's submissions on this point. It is not uncommon, when a statute seeks to deal with some vice or problem, for a general injunction to be accompanied by a facility for the making of exceptions in the discretion of a court or, depending on the context, a public official. If – as I have no reason to doubt – it may be assumed that dual administrations by different courts would generally be regarded as inconvenient, I cannot see how the reservation of a discretionary power to permit such a circumstance to arise in the exceptional case throws into doubt the validity of the original assumption. 18 Mr Bigmore also submitted that, if subs (13) were limited as proposed by Emmett J, it would have no work to do, since equitable decrees for general administration are now all but unknown. This submission, however, fails to appreciate that his Honour treated the modern procedure under various rules of court as analogous to the older procedure for general administration. Clearly, if construed as proposed by his Honour, subs (13) would still have a deal of work to do in the modern environment. 19 I am a considerable distance from forming the view that the judgment in Gonzalez was wrong, much less plainly wrong. In the circumstances, I am bound to follow, and I do follow, the judgment in Gonzalez. It follows that I rule that there is nothing in s 244(13) of the Bankruptcy Act which would constitute a bar to the commencement to this proceeding. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup . Associate: Dated: 22 August 2006 Counsel for the Applicant: M.Sifris QC and P.Fary Solicitor for the Applicant: Maddocks Counsel for the Second Respondent: G.T.Bigmore QC and K.J.A Lyons Solicitor for the Second Respondent: Chambers & Co Counsel for the Third Respondent: A.Foster Solicitor for the Third Respondent: Foster Harris Lawyers Date of Hearing: 10 August 2006 Date of Judgment: 22 August 2006