FEDERAL COURT OF AUSTRALIA Blanshard v Tolcher as Trustee of the Bankrupt Estate of Blanshard [2011] FCA 732 Citation: Blanshard v Tolcher as Trustee of the Bankrupt Estate of Blanshard [2011] FCA 732 Parties: HEATH BLANSHARD v RAYMOND GEORGE TOLCHER AS TRUSTEE OF THE BANKRUPT ESTATE OF ROBERT MCMILLAN BLANSHARD File number(s): NSD 750 of 2011 Judge: EMMETT J Date of judgment: 15 June 2011 Legislation: Bankruptcy Act 1966 (Cth) s 58(3)(b) Date of hearing: 15 June 2011 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 7 Solicitor for the applicant: D Anderson of ERA Legal Counsel for the respondent: The respondent did not appear IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 750 of 2011 BETWEEN: HEATH BLANSHARD Applicant AND: RAYMOND GEORGE TOLCHER AS TRUSTEE OF THE BANKRUPT ESTATE OF ROBERT MCMILLAN BLANSHARD Respondent JUDGE: EMMETT J DATE OF ORDER: 15 JUNE 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The applicant be granted leave pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth) to continue as advised in proceeding 5656 of 2008 in the Supreme Court of New South Wales. 2. The proceeding be otherwise dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 750 of 2011 BETWEEN: HEATH BLANSHARD Applicant AND: RAYMOND GEORGE TOLCHER AS TRUSTEE OF THE BANKRUPT ESTATE OF ROBERT MCMILLAN BLANSHARD Respondent JUDGE: EMMETT J DATE: 15 JUNE 2011 PLACE: SYDNEY REASONS FOR JUDGMENT 1 I have before me an application under s 58(3)(b) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act). Section 58(3)(b) relevantly provides that, after a debtor has become a bankrupt, it is not competent for a creditor, except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding. 2 The present applicant, Heath Blanshard, is the wife of Robert Blanshard, who is a bankrupt (the Bankrupt). In August 2008, Alasdair Iain Gidley-Baird, Alasdair Angus Gidley-Baird, Deirdre Sheahan and Kathleen Sheahan (the Creditors) commenced a proceeding against the Bankrupt in the Supreme Court of New South Wales. In that proceeding the Creditors asserted that the Bankrupt was in breach of his obligations as the trustee of trusts in which the Creditors had an interest. The Creditors alleged that the result of those breaches was that the assets of the trusts had been completely dissipated. On 6 August 2008, the Creditors obtained a freezing order in respect of the assets of the Bankrupt. At that time, the assets of the Bankrupt included an interest in a property in Pacific Road, Palm Beach, which he held as joint tenant with Mrs Blanshard. 3 In August 2008, the Bankrupt and Mrs Blanshard sold the Palm Beach property for the sum of $1.7 million. The proceeds of sale were applied on completion, as to approximately $1.185 million, to St George Bank Limited, a registered mortgagee. The balance of the proceeds, approximately $332,000, was paid into the trust account of a firm of solicitors who acted for the Bankrupt and Mrs Blanshard on the sale. One half of the proceeds held by the solicitors was released to Mrs Blanshard. The other half was retained in the solicitors' trust account on the basis that the monies were subject to the freezing order. 4 There is now a dispute between Mrs Blanshard, on the one hand, and the Creditors and the Bankrupt's trustee in bankruptcy, on the other, concerning entitlement to the fund that was retained in the solicitors' trust account. In November 2008, Mrs Blanshard commenced a second proceeding in the Supreme Court of New South Wales seeking a declaration that she was entitled to the balance of the proceeds of sale of the Palm Beach property and that the fund representing that balance be paid to her. The matter was slightly further complicated because Mrs Blanshard sought to acquire a further property with the proceeds of sale. An arrangement was made whereby the fund in the solicitors' trust account was released to Mrs Blanshard to enable her to complete the purchase of the other property, on the basis that a charge over the property was created in favour of the Creditors to protect their position as claimants in the estate of the Bankrupt. 5 Mrs Blanshard's claim to the second half of the balance of proceeds of sale is based upon an asserted equity of exoneration arising out of an advance made by her from the proceeds of the sale of a house in Darling Street, Chatswood to reduce the borrowings of the Bankrupt from St George Bank Limited. It is unnecessary, for the purposes of this application, to enter into the entitlement of Mrs Blanshard to the rights asserted in the second Supreme Court proceeding. However, there is at least an arguable case disclosed on the material before me to indicate that she may well be entitled to an equity of exoneration arising from the application by her of the proceeds of the Chatswood property in reduction of the amount, secured in favour of St George Bank Limited, representing a liability of the Bankrupt. 6 The trustee of the Bankrupt's estate appears to be taking no interest in the proceeding. That appears to be because of a lack of funds. The real dispute is between the Creditors, on the one hand, who would otherwise prove in the bankruptcy, and Mrs Blanshard, on the other. That is the question that will be resolved in the second Supreme Court proceeding. However, because of the operation of s 58(3)(b) of the Bankruptcy Act, Mrs Blanshard cannot at present prosecute or take a further step in that proceeding. 7 In the absence of any opposition from the Bankrupt's trustee, who was served with this application but did not appear, I consider that it is appropriate to accede to the application, and I propose to make orders accordingly. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 28 June 2011