Federal Court of Australia Shanahan as trustee of the Estate of Wilcox v Sanderson Estates Pty Ltd in the matter of Wilcox (a bankrupt) [2024] FCA 893 File number(s): NSD 372 of 2024 Judgment of: WIGNEY J Date of judgment: 30 July 2024 Date of publication of reasons: 9 August 2024 Catchwords: CORPORATIONS – application by trustees and receivers for judicial advice – whether appropriate for Court to give advice sought – whether trustees and receivers justified in not appearing, and not taking any active role in, proceeding to be heard in Supreme Court of NSW – orders made giving advice sought Legislation: Federal Court of Australia Act 1976 (Cth) s 19 Federal Court Rules 2011 (Cth) Bankruptcy Act 1966 (Cth) s 30, s 90-15(1) of Sch 2 Uniform Civil Procedure Rules 2005 (NSW) rr 6.11, 6.27 Succession Act 2006 (NSW) Cases cited: Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392 Connelly as Receivers and Managers of "Digital Currency Assets" v NGS Crypto Proprietary Limited [2024] FCA 618 Coshott v Prentice (2014) 221 FCR 450; [2014] FCAFC 88 Heenan, Ruby Apartments Proprietary Limited (In liquidation) v Ralan Paradise No. 1 Proprietary Limited (In Liquidation) (No 2) [2021] FCA 1314 Mansfield v Thousand Angeles Island Proprietary Limited (In Liquidation) [2021] FCA 283 Re Ansett Australia Limited (No 3) 115 FCR 409; [2002] FCA 90 Re Mirabela Nickel Limited (Receivers and Managers Appointed) (In Liquidation); ex parte Madden [2018] WASC 335 Re One.Tel Limited (2014) 99 ACSR 247; [2014] NSWSC 457 Wilcox v Wilcox [2012] NSWSC 1138 Wilcox v Wilcox (No. 2) [2014] NSWSC 88 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 24 Date of hearing: 29 July 2024 Counsel for the Applicant: B Koch Solicitor for the Applicant: Peterson Haines Mr Wilcox: Mr Wilcox appeared in person ORDERS NSD 372 of 2024 IN THE MATTER OF BENJAMIN IAN ALEXANDER WILCOX (A BANKRUPT) BETWEEN: JOHN SHANAHAN AND MATTHEW VINES AS JOINT AND SEVERAL TRUSTEES OF THE ESTATE OF BENJAMIN IAN ALEXANDER WILCOX Applicants AND: SANDERSON ESTATES PTY LTD ACN 000 399 379 Respondent order made by: WIGNEY J DATE OF ORDER: 30 JULY 2024 THE COURT ORDERS THAT: 1. Pursuant to s 19 of the Federal Court of Australia Act 1976 (Cth) and r 14.23 of the Federal Court Rules 2011 (Cth) that John Shanahan and Kathleen Vouris as Receivers and Managers of the Respondent (Receivers) are justified in: (a) seeking leave to file a submitting appearance in Supreme Court of New South Wales proceeding numbered 2021/00059314 (NSWSC Proceedings) pursuant to r 6.11 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR); and (b) not appearing at the final hearing of the NSWSC Proceedings. 2. Pursuant to s 30(1) of the Bankruptcy Act 1966 (Cth) and s 90-15 of the Insolvency Practice Schedule (Bankruptcy), being Schedule 2 to the Bankruptcy Act, that the Applicants are justified in: (a) not seeking leave to be joined as a defendant in the NSWSC Proceedings pursuant to r 6.27 of the UCPR; and (b) not taking any active role in the NSWSC Proceedings, including by not appearing at the final hearing of the NSWSC Proceedings. 3. The Applicants' costs of this Interlocutory Application be a cost in the administration of the bankrupt estate. 4. The Receivers' costs of this Interlocutory Application be a cost in the receivership of the Respondent. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (Revised from transcript) WIGNEY J 1 The applicants in this matter are the Trustees of the bankrupt estate of Mr Benjamin Wilcox and the court appointed Receivers of a company, Sanderson Estates Pty Limited, the shares in which were owned by Mr Wilcox, but which are now vested in the Trustees. The Trustees and the Receivers have sought directions or advice from the Court as to whether they would be justified in not appearing, and not taking any active role, in a proceeding about to be heard in the Supreme Court of New South Wales in which Mr Wilcox and Sanderson Estates have been named as the third and fourth defendants. The question for the Court is whether it is appropriate in all the circumstances to direct or advise the Trustees and the Receivers that they would be justified in taking that approach. 2 For the reasons that follow, it is appropriate for the Court to give the Trustees and the Receivers the directions or advice that they have sought. In essence, that is because, were they to take any, or any active, role in the Supreme Court proceeding, they would incur not insubstantial legal fees in circumstances where their appearance would not have any material impact on the conduct of the proceeding or its outcome. To understand why that is so, it is necessary to briefly explain the factual background to, and nature of, the Supreme Court proceeding. 3 Prior to his bankruptcy, Mr Wilcox was the registered proprietor of four parcels of land near Walgett in New South Wales. Sanderson Estates is the registered proprietor of another seven nearby parcels of land. Mr Wilcox has been the sole director and secretary of Sanderson Estates since April 2019. Prior to his bankruptcy, he also held all the issued shares in Sanderson Estates. The land formerly owned by Mr Wilcox and the land owned by Sanderson Estates together comprised or constituted a grazing property known as Barwon Vale. 4 Mr Wilcox inherited both the four parcels of land near Walgett and the shares in Sanderson Estates from his late mother, Ms Patricia Wilcox. Ms Wilcox had also effectively inherited that land and the shares in Sanderson Estates from her late father, Mr Ian Sanderson. 5 The administration of Mr Sanderson's deceased estate was not without controversy or disputation. Mr Wilcox and his brother, Mr Robert Wilcox, commenced proceedings against Ms Wilcox in her capacity as executor of Mr Sanderson's estate, claiming that they were entitled to the entirety of Mr Sanderson's estate on the basis that statements made by Mr Sanderson during his lifetime gave rise to either a promissory estoppel or, it would appear, some form of trust. They also made claims for family provision orders under the Succession Act 2006 (NSW). 6 The claims made by Mr Wilcox and Mr Robert Wilcox were largely unsuccessful. The claims based on promissory estoppel, or the existence of some form of trust, were rejected in 2012: Wilcox v Wilcox [2012] NSWSC 1138. Mr Wilcox subsequently withdrew his application for a family provision order. Mr Robert Wilcox, however, pressed for the making of such an order and ultimately achieved a measure of success: Wilcox v Wilcox (No. 2) [2014] NSWSC 88. That success, however, was short-lived. The family provision order that was made at first instance was overturned on appeal: Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392. 7 The disputation, unfortunately, did not end there. Disputes also arose in relation to the administration of the deceased estate of Ms Wilcox following her death. It is unnecessary to detail those disputes. It suffices to note that in 2015 Mr Robert Wilcox entered into a deed of settlement and release with the executor of Ms Wilcox's estate, and that, some years later, a claim made by Mr Wilcox for a family provision order was ultimately dismissed. It was Mr Wilcox's liability for legal fees arising from that ill-fated family provision proceeding that ultimately led to his bankruptcy. 8 Of more immediate importance to the present application is the recent proceeding commenced by Mr Robert Wilcox in the Supreme Court of New South Wales. In that proceeding, which was commenced in 2021, Mr Robert Wilcox seeks, among other things, a declaration that Sanderson Estates holds the land at Barwon Vale which is registered in its name on trust for him and Mr Wilcox in equal shares, and a declaration that Mr Wilcox holds 50 per cent of the shares in Sanderson Estates on trust for him. He also seeks various orders consequent upon the court making those declarations, including an order that Sanderson Estates transfer the relevant land to him and Mr Wilcox as tenants in common. 9 Mr Robert Wilcox's claim that Sanderson Estates holds the land on trust for him and Mr Wilcox appears to be primarily based on the contents of a letter sent by a solicitor, Mr Paul Duffy, to Ms Wilcox in September 1980. Mr Duffy had previously acted for Ms Wilcox in respect of various conveyancing transactions. In the letter, Mr Duffy indicated that Ms Wilcox's "interests" in Sanderson Estates were "covered through trusts", and referred, albeit in very general terms, to the terms of what was said to be a "trust deed". 10 The defendants to the Supreme Court proceeding include the executor of Ms Wilcox's estate, as the first defendant, the executor of the deceased estate of Ms Wilcox's late husband, as the second defendant, and, as has already been noted, Sanderson Estates and Mr Wilcox. Each of the defendants has filed a defence to Mr Robert Wilcox's claim. Importantly, in their defences, the executors of the estates of Ms Wilcox and her late husband deny the factual allegations that support Mr Robert Wilcox's claim that the relevant land and shares in Sanderson Estates were held on trust. The executors also plead positive defences, which include a claim of res judicata and issue estoppel arising from the earlier unsuccessful proceedings brought by Mr Robert Wilcox, and a defence based on the terms of the deed of settlement and release executed by Mr Robert Wilcox in 2015. 11 As for Mr Wilcox and Sanderson Estates, prior to Mr Wilcox's bankruptcy, he and Sanderson Estates filed a defence to Mr Robert Wilcox's claim. In that defence, they pleaded, among other things, that they did not know of the existence or terms of any deed of trust and did not know and could not admit the factual claims which were said to underpin Mr Robert Wilcox's claim as to the existence of the alleged trust. 12 The Supreme Court proceeding is listed for a six-day hearing to commence on 12 August 2024. The executors of the estates of Ms Wilcox and her late husband are legally represented in the proceeding, including by experienced junior counsel. The information available to the Trustees and the Receivers is that the executors of Ms Wilcox and her late husband are and will continue to be "active contradictors" and will continue to oppose the relief sought by Mr Robert Wilcox. The Trustees and the Receivers are also of the view that the first and second defendants to the proceeding are obviously better placed than them to actively defend the claims brought by Mr Robert Wilcox. The first and second defendants have served, and intend to adduce, evidence in the proceeding, and, as has already been noted, have positively denied the key allegations made by Mr Robert Wilcox. 13 In contrast, Mr Wilcox and Sanderson Estates have not to date served any evidence in the Supreme Court proceeding. Moreover, even if they had some relevant evidence available to them, it is highly unlikely that they would be permitted to adduce it at this late stage. The Trustees and the Receivers will also be unable to do much more other than rely on the non-admissions by Mr Wilcox and Sanderson Estates in their filed defence. The Trustees and the Receivers are in no position to deny the factual claims made by Mr Robert Wilcox that underpin the relief he seeks. 14 It is in that context that the Trustees seek the Court's direction or advice that they would be justified in not seeking leave to be joined, and not taking any active role in, the Supreme Court proceeding. It is also in that context that the Receivers seek the Court's direction or advice that they would be justified in seeking leave to file a submitting appearance in, and not appearing at the final hearing of, the Supreme Court proceeding. The Trustees and Receivers submit, on the one hand, that their appearance at the hearing of the proceeding will not add anything to the conduct of the proceeding by the active contradictors, being the first and second defendants, the executors of the estates of Ms Wilcox and her late husband. On the other hand, they submit that if they appear and take an active role at the hearing, they estimate that they will incur legal fees of approximately $100,000. They submit that if they incur those costs, the assets of Mr Wilcox's bankrupt estate will be unnecessarily depleted. 15 I should also add in this context that the Trustees and Receivers did not become aware of the precise nature of the Supreme Court proceeding and the manner in which it had been defended until fairly recent times. It was for that reason that the present application was made and heard on an urgent basis. I am satisfied that the Trustees and Receivers acted in a timely manner and had a reasonable basis for approaching me, sitting as duty judge, on an urgent basis. 16 The Court has jurisdiction to provide directions or advice to a trustee in bankruptcy pursuant to the broad powers in s 30 of the Bankruptcy Act 1966 (Cth) and s90-15(1) of the Insolvency Practice Schedule (Bankruptcy) (being Schedule 2 of the Bankruptcy Act): Coshott v Prentice (2014) 221 FCR 450; [2014] FCAFC 88 at [93]; Mansfield v Thousand Angeles Island Proprietary Limited (In Liquidation) [2021] FCA 283 at [31] – [35]. 17 The Court also has jurisdiction to provide directions or advice to a court appointed receiver pursuant to s 19 of the Federal Court of Australia Act 1976 (Cth): Connelly as Receivers and Managers of "Digital Currency Assets" v NGS Crypto Proprietary Limited [2024] FCA 618 at [20]. 18 The applicable principles in respect of judicial advice to trustees in bankruptcy and court appointed receivers are well-settled. The lead authorities include: Re One.Tel Limited (2014) 99 ACSR 247; [2014] NSWSC 457; Re Ansett Australia Limited (No 3) 115 FCR 409; [2002] FCA 90 at [44], [65]; Re Mirabela Nickel Limited (Receivers and Managers Appointed) (In Liquidation); ex parte Madden [2018] WASC 335 at [89]; Heenan, Ruby Apartments Proprietary Limited (In liquidation) v Ralan Paradise No. 1 Pty Limited (In Liquidation) (No 2) [2021] FCA 1314 at [57]. The key principles that can be distilled from those authorities may be summarised as follows. First, the Court has a discretion to provide a trustee or receiver with directions or advice. Second, it is generally inappropriate to exercise that discretion where the trustee or receiver in effect simply want reassurance about a business or commercial decision. Third, it may be appropriate to exercise the discretion where the trustee or receiver requires guidance on an issue of legal judgment or legal procedure. Fourth, the effect of the direction or advice given by the Court is to sanction the proposed course of action of the trustee or receiver so that they may take that course free from the risk of personal liability for breach of duty. 19 I am persuaded and satisfied, on the basis of the evidence and information as currently known, that it is appropriate to give the Trustees and the Receivers the directions or advice which they have sought concerning their proposed course of action. They would, having regard to the known circumstances, be justified in not appearing, and not taking any active role in, the final hearing of the Supreme Court proceeding commenced by Mr Robert Wilcox. 20 On the one hand, the relief sought by Mr Robert Wilcox in the Supreme Court proceeding is opposed by the first and second defendants in the proceeding, being the executors of the estates of Ms Wilcox and her late husband. Those parties are active contradictors and are undoubtedly better placed to defend the proceeding. On the information currently available, those parties also intend to continue to actively defend the proceeding. The involvement or participation of the Trustees and the Receivers at the final hearing will not add anything to the conduct or defence of the proceeding by the active contradictors. 21 On the other hand, active participation in the proceeding by the Trustees and Receivers will undoubtedly require them to incur not insubstantial legal costs. The Trustees and Receivers may ultimately be unable to recover those costs. That would lead to the unnecessary depletion of the assets of Mr Wilcox's bankrupt estate which would otherwise be available to be distributed to creditors, or as appears more likely, ultimately distributed to Mr Wilcox in the event that there is a surplus. 22 Of course, if the Trustees and Receivers become aware of any material change of circumstances, it would be incumbent on them to approach the Court for further directions or advice. If, for example, they become aware that the first and second defendants in the Supreme Court proceeding no longer intended to defend the proceeding, or that their defences materially change, they should then approach the Court for further advice or directions. 23 I should finally add that Mr Wilcox belatedly appeared at the hearing of this application by the Trustees and Receivers. He indicated that he would appear at the hearing of the Supreme Court proceeding, albeit not legally represented, and that he would continue to oppose the relief sought by Mr Robert Wilcox. He did not assert that the Trustees and Receiver should appear in the Supreme Court proceeding, and did not oppose the Court giving the directions or advice sought by the Trustees and Receivers. 24 I will accordingly make the orders sought by the Trustees and Receivers in their interlocutory application. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wigney. Associate: Dated: 9 August 2024