FEDERAL COURT OF AUSTRALIA Jones Lang Lasalle (NSW) Pty Ltd v Simpson; In the Matter of Simpson (Bankrupt) [2011] FCA 1006 Citation: Jones Lang Lasalle (NSW) Pty Ltd v Simpson; In the Matter of Simpson (Bankrupt) [2011] FCA 1006 Parties: JONES LANG LASALLE (NSW) PTY LTD v PAUL SIMPSON, ROBERT FISZMAN, ANTONY DE VRIES and DAVID SOLOMONS; IN THE MATTER OF SIMPSON (BANKRUPT) AND FISZMAN (BANKRUPT) File number: NSD 1373 of 2011 Judge: FOSTER J Date of judgment: 26 August 2011 Catchwords: BANKRUPTCY – whether the applicant should have leave to proceed pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth) against the first and second respondents in a proceeding in the Supreme Court of New South Wales in which the applicant (as plaintiff) alleges that the first and second respondents were knowing participants in a breach of trust by a corporation of which they were directors and executives Legislation: Bankruptcy Act 1966 (Cth), s 5, 58(3), 82 and 153(2)(b) Cases cited: Allanson v Midland Credit Ltd (1977) 30 FLR 108 cited Westpac Banking Corporation v Ollis [2007] FCA 1194 cited Date of hearing: 26 August 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 11 Counsel for the Applicant: Mr JA Halley SC Solicitor for the Applicant: Marque Lawyers Counsel for the First and Second Respondents: Mr AE Maroya Solicitor for the First and Second Respondents: Holman Webb Solicitor for the Third and Fourth Respondents: Ms Dora A Jabbour IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1373 of 2011 IN THE MATTER OF SIMPSON (BANKRUPT) AND FISZMAN (BANKRUPT) BETWEEN: JONES LANG LASALLE (NSW) PTY LTD Applicant AND: PAUL SIMPSON First Respondent ROBERT FISZMAN Second Respondent ANTONY DE VRIES Third Respondent DAVID SOLOMONS Fourth Respondent JUDGE: FOSTER J DATE OF ORDER: 26 AUGUST 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. To the extent such leave is required, pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth), leave be granted to the applicant to take fresh steps in, and to continue with, proceedings in the Supreme Court of New South Wales Equity Division between the applicant, as plaintiff, and Univers Carpet Wholesalers Pty Limited (ACN 000 913 619) (In Administration) and others, as defendants, (Case No. 2011/37290) to the extent necessary to enable the Supreme Court of New South Wales to determine the applicant's entitlement to the relief specified in prayers for relief 1 to 8 of the proposed Second Further Amended Statement of Claim, including seeking leave from the Supreme Court to file the proposed Second Further Amended Statement of Claim, a true copy of which is exhibited at pages 42–60 of Exhibit "NTM-1" to the affidavit of Nathan Thomas Mattock sworn on 16 August 2011 and filed herein, upon terms that: (a) The applicant keep the third and fourth respondents informed of the progress of the Supreme Court proceeding; (b) The applicant notify the third and fourth respondents of any settlement proposal in respect of the Supreme Court proceeding as soon as practicable after such settlement proposal is raised amongst the parties to the Supreme Court proceeding; and (c) No judgment or order for payment directed by the Supreme Court in favour of the applicant be entered without the further leave of this Court. 2. There be no orders as to the costs of the Application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1373 of 2011 IN THE MATTER OF SIMPSON (BANKRUPT) AND FISZMAN (BANKRUPT) BETWEEN: JONES LANG LASALLE (NSW) PTY LTD Applicant AND: PAUL SIMPSON First Respondent ROBERT FISZMAN Second Respondent ANTONY DE VRIES Third Respondent DAVID SOLOMONS Fourth Respondent JUDGE: FOSTER J DATE: 26 AUGUST 2011 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The applicant seeks leave to proceed against the first and second respondents pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth), to the extent that it may be necessary, in order to take fresh steps in, and to continue with, a proceeding instituted by it against Univers Carpet Wholesalers Pty Limited (ACN 000 913 619) (In Administration) (Univers) and the first and second respondents in the Supreme Court of New South Wales Equity Division (Case Number 2011/37290) (the Supreme Court proceeding). At all times relevant to the Supreme Court proceeding, the first and second respondents were directors of Univers. The first respondent was and is the Chief Operating Officer, the Chief Financial Officer and the Company Secretary of Univers. The second respondent was and is the Managing Director of Univers. 2 The relevant facts may be shortly stated. 3 On 12 November 2010, by way of electronic transfer, the applicant paid to the bank account of Univers an amount of $895,863.10. That sum was properly due to an unrelated third party and was paid to Univers by mistake. There was a debt due to Univers from the applicant as at 12 November 2010 but that debt was only for an amount of $31,890.10. The amount overpaid by the applicant to Univers was, therefore, $863,973.00. 4 Between the date when the amount of $895,863.10 arrived in the bank account of Univers (12 November 2010) and 16 December 2010, the entire amount of the overpayment of $863,973.00 was dissipated. 5 In the Supreme Court proceeding, the applicant contends that the overpayment made to Univers was impressed with a trust in its favour and for its benefit. It also claims from Univers repayment of the overpayment as money had and received. The applicant also contends in the Supreme Court proceeding that the first and second respondents were knowing participants in the breach of trust committed by Univers and, to the extent that each of them received any part of the overpayment, were knowing recipients of trust property and liable to repay same. The applicant says that each of the first and second respondents is personally liable to make good the loss suffered by the applicant by reason of the breach of trust committed by Univers. 6 Originally, the only defendant in the Supreme Court proceeding was Univers. However, on 28 February 2011, the applicant joined the first and second respondents to that proceeding as second and third defendants respectively. 7 On 4 August 2011, each of the first and second respondents was made bankrupt on his own petition. This was shortly before the Supreme Court proceeding was due to be heard. In light of the bankruptcy of the first and second respondents, the hearing of the Supreme Court proceeding was adjourned to 12 September 2011. 8 The trustee in bankruptcy of each of the first and second respondents neither opposes nor consents to the present application. 9 Mr Halley SC, who appears for the applicant, submitted that: (1) Leave should be granted to the applicant because it was necessary in the interests of justice for this Court to know the result of the relatively complex factual and legal issues raised in the Supreme Court proceeding before determining the status of the applicant in the bankruptcy of the first and second respondents. He submitted that, on the pleadings in the Supreme Court, knowledge of the alleged breach of trust was a critical issue. He said that the alleged knowledge was denied by both the first and second respondents. He submitted that, when regard was had to the nature of the disputes with which the Supreme Court is dealing, it was not appropriate to leave the determination of the role and liability of the first and second respondents in what occurred in November and December 2010 to the proof of debt process in their bankruptcies. It was preferable that their liability be tested at a trial and determined by the Supreme Court after a trial (see Allanson v Midland Credit Ltd (1977) 30 FLR 108 at 114–115 per Bowen CJ, Riley and Deane JJ; and Westpac Banking Corporation v Ollis [2007] FCA 1194 at [18]–[20] per Cowdroy J). Mr Halley submitted that it was unnecessary, for present purposes, for me to reach any concluded view as to whether the applicant's claims in the Supreme Court proceeding, if made out, are provable debts within the meaning of s 58(3)(b) and s 82 of the Bankruptcy Act 1966 (Cth) and thus whether leave to proceed is truly required. (2) There is an allegation made in the Supreme Court proceeding that the dissipation of the funds belonging to the applicant was procured by the fraud, at least in the equitable sense, of the first and second respondents. For that reason, Mr Halley submitted that a discharge of the bankruptcy of the first and second respondents would not release either of them from their liability in respect of the claims made in the Supreme Court proceeding, if those claims were made out in that proceeding. In this regard he referred me to ss 5, 82 and 153(2)(b) of the Bankruptcy Act 1966 (Cth). 10 As I have already mentioned, the trustee of each of the first and second respondents neither opposes nor consents to the orders sought in the application. The first and second respondents have appeared before me in order to argue that leave to proceed as sought by the applicant in the circumstances of the present case is unnecessary. This latter proposition is based upon a contention that there is no utility in the grant of leave because the trustees of the first and second respondents are likely to admit as a provable debt in the bankruptcies of the first and second respondents the amount claimed by the applicant in the Supreme Court proceeding. However, the trustees have not yet done so and, even if they had, the submission made on behalf of the first and second respondents does not answer the second submission advanced by Mr Halley SC in support of the orders sought in the present application. 11 It seems to me that the appropriate course is to make the order sought, essentially for the reasons advanced by Mr Halley SC. The submissions made by the first and second respondents do not raise any matter which outweighs the force of Mr Halley's submissions. I propose to grant the leave sought but to do so on terms. There will be orders accordingly. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate: Dated: 30 August 2011