Labocus Precious Metals Pty Limited v Thomas (No 3) [2007] FCA 1346

FEDERAL COURT OF AUSTRALIA

Labocus Precious Metals Pty Limited v Thomas (No 3) [2007] FCA 1346

BANKRUPTCY – composition – setting aside PRACTICE AND PROCEDURE – COSTS – proper approach of parties to conduct of litigation Bankruptcy Act 1966 (Cth),ss 30, 110, 222 and 222C Real Property Act 1900 (NSW), s 74MA Ashmore v Corporation of Lloyds [1992] 1 WLR 446 Nowlan v Marson Transport Pty Limited (2001) 53 NSWLR 116 LABOCUS PRECIOUS METALS PTY LIMITED AND MICHAEL LOCH MCGURK v HUGH CHARLES THOMAS, MILTON ALEXANDER NAYLOR, GLEN ELLWYN NAYLOR AND 26 ORLANDO AVENUE PTY LIMITED NSD 1125 OF 2007

ALLSOP J

29 AUGUST 2007

SYDNEY IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 1125 OF 2007

BETWEEN: LABOCUS PRECIOUS METALS PTY LIMITED

First Applicant

MICHAEL LOCH MCGURK

Second Applicant

AND: HUGH CHARLES THOMAS

First Respondent

MILTON ALEXANDER NAYLOR

Second Respondent

GLEN ELLWYN NAYLOR

Third Respondent

26 ORLANDO AVENUE PTY LIMITED

Fourth Respondent

JUDGE: ALLSOP J

DATE OF ORDER: 29 AUGUST 2007

WHERE MADE: SYDNEY

THE COURT: 1. Declares that the first respondent has validly rescinded the contract for the sale entered into in April 2007 between the first applicant and the first respondent of Certificate of Title Folio Identifiers 1/137459, 1/137460, 1/111408, 3/111408, 164/750357, 165/750357, 166/750357, 171/750357, 173/750357, 179/50357, 183/750357, 184/750357, Auto Consol 11846-232, Auto Consol 8100-243, Auto Consol 5574-195 and Auto Consol 1222-122. 2. Orders pursuant to section 74MA of the Real Property Act 1900 (NSW), the First Applicant to withdraw Caveat No. AD114421M lodged in respect of the said land. 3. The applicants having given to the Court the undertaking dated 15 August 2007 (a copy of which is annexed to these reasons and marked 'A') and in the circumstances: (a) Orders pursuant to s 222 of the Bankruptcy Act that the arrangement pursuant to s 73 of the Bankruptcy Act entered into by the creditors of the bankrupt estates of (a) Milton Alexander Naylor and Glen Ellwyn Naylor, (b) Milton Alexander Naylor and (c) Glen Ellwyn Naylor (hereafter "the Naylor Estates") on 11 May 2007 be set aside. (b) Declares pursuant to ss 30 and 222(8) of the Bankruptcy Act that the property described in the First Schedule hereto is held on trust by the first respondent for those persons who were creditors of the Naylor Estates as at 11 May 2007. (c) Directs the first respondent to deal with the said property by: (i) Holding three meetings of all the persons mentioned in (b) above by reference to the identity of the creditors of the three former bankrupt estates, within five weeks of 29 August 2007 so that such persons may decide on the sale of the said property or any or all of it. (ii) Providing to the said creditors within four weeks of 29 August 2007, the terms of any offer from Mr Milton Naylor and Mr Glen Naylor or any other person to purchase the said property, including the offer to purchase pursuant to the terms of the said undertaking of the applicants. The terms of the said undertaking may be communicated to the said creditors at any time within those four weeks. (iii) Providing to the said creditors within four weeks of 29 August 2007, a précis of any competing offers to the creditors and his views about the competing benefits of the respective proposals. (iv) As soon as reasonably possible after said meeting, entering into a contract to sell the said property to the purchaser decided upon at the meeting. (d) Orders that should the second and third respondents wish to put a proposal to the persons mentioned in (b) above at the meetings mentioned in (c) above, such proposal in final form and wholly in writing signed by the Naylors capable of consideration and acceptance by the meetings be delivered by hand to the first respondent by 4.00 pm Wednesday, 19 September 2007. (e) Orders that the costs of the proceedings (application and cross-claim) in the Federal Court be payable as follows: (i) the applicants pay 70% of the costs of the first respondent up to and including 15 August 2007 on a party/party basis; (ii) the applicants pay 70% of the Naylors' costs up to the same time on the same basis; (iii) the first respondent pay 30% of the Naylors' costs up to the same time on the same basis; and (iv) each party pay his or its own costs of the proceedings from 15 August 2007 up to today. (f) Notes the agreement between the applicants and the first respondent that the proceedings commenced in the Supreme Court of NSW in relation to the caveat being proceedings number 3182 of 2007, will be discontinued by consent with the only other orders being an order that the defendants pay both the plaintiff's costs and the cross-defendant's costs of the cross-claim on an indemnity basis. (g) Orders that the first respondent will not, without the leave of the Court, seek to recover, either as part of his costs, charges and expenses of the administration of the estates of the second and third respondents or as part of his costs, charges and expenses of the composition entered on 11 May 2007 or of the trust created hereunder any costs, charges and expenses occasioned by these proceedings and the Supreme Court proceedings up to and including 29 August 2007. (h) Orders that the costs of the steps required to be undertaken by the first respondent henceforth, including the costs of the meeting referred to at (b) above, be determined by the Court after the sale of the property, such determination being as to amount and who is to pay. 4. If the first respondent does not receive any proposal from the Naylors or any other party (other than the applicants) by 4.00 pm Wednesday, 19 September 2007 the first respondent is directed to deal with the said property as follows: (a) As soon as reasonably possible, entering into a contract to sell the said property referred to in the First Schedule to the first applicant or the nominee of the second applicant (on the terms set out in the undertaking annexed to the reasons published today and marked 'A'). In the event that there is any dispute as to the terms of the contract, the parties are to seek directions from the Court, and the Court shall settle the terms of the contract. (b) Upon completion of the said sale, to distribute the net proceeds of sale to the persons who are creditors of the Naylor Estates as at 11 May 2007, as if it were a distribution pursuant to s 110 of the Bankruptcy Act. (c) Subject to 3(h) above, the first respondent only deduct from the sale proceeds the amounts set out in the schedule attached to the undertaking, being Annexure 'A', plus or minus appropriate and reasonable adjustments. (d) In the event that there is any dispute between the applicants or either of them and the first respondent as to adjustments, that dispute is to be referred to this Court for determination. (e) The first respondent take steps at the cost of the applicants for the obtaining of vacant possession of the land described in the Second Schedule, such application to be brought in the first instance before Allsop J for directions at the earliest opportunity. 5. If the first respondent does receive a proposal from the Naylors or any other party (other than the applicants) by 4.00 pm on Wednesday, 19 September 2007, but he is of the view that it is not a proposal of the kind described in 3(d) above, the first respondent is to have the proceedings listed before Allsop J at the earliest opportunity, having notified all parties. 6. Liberty to apply on 2 days' notice or such earlier notice as is considered necessary by the listing party. 7. Subject to further order, these orders not be entered before 3.30 pm on Friday, 31 August 2007. 8. Any argument about the form of these orders be listed for hearing at 10.15 am on Friday, 31 August 2007.