Bagheri and Goudarzi and Anor
[2017] FamCAFC 96
•23 May 2017
FAMILY COURT OF AUSTRALIA
| BAGHERI & GOUDARZI AND ANOR | [2017] FamCAFC 96 |
| FAMILY LAW – APPEAL – APPLICATION IN AN APPEAL – Application by the husband to dismiss wife’s appeal – Appeal commenced by wife who subsequently became bankrupt – Appeal stayed upon bankruptcy – Election of trustee to prosecute or discontinue action – Action deemed abandoned if the trustee fails to make an election after 28 days – Section 60 of Bankruptcy Act 1966 (Cth) – Mere knowledge of the action is not notice – Minimum requirements of notice – Application in an Appeal dismissed. |
| Family Law Act 1975 (Cth) ss 79, 94(2B)(b) |
Aware Industries Ltd, Christopher Avery, Peter McCloskey, James Johnson, William Sterling and Allan Bounader v David Charles Robinson (1997) 75 FCR 600
| Freeman v Joiner [2005] FCAFC 149 |
Guirguis & Guirguis (1997) FLC 92-726
O’Neill & O’Neill (1998) FLC 92-811
Re Collins; Ex parte Official Trustee in Bankruptcy v Bracher (1986) 10 FCR 209
| APPLICANT: | Mr Bagheri |
| FIRST RESPONDENT: | Ms Goudarzi |
| SECOND RESPONDENTS: | Trustees for the Bankrupt Estate of Ms Goudarzi |
| FILE NUMBER: | SYC | 7646 | of | 2008 |
| APPEAL NUMBER: | EA | 66 | of | 2016 |
| DATE DELIVERED: | 23 May 2017 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Thackray ACJ, Strickland & Ryan JJ |
| HEARING DATE: | 23 May 2017 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 4 April 2016 |
| LOWER COURT MNC: | [2016] FamCA 205 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Richardson SC |
| SOLICITOR FOR THE APPLICANT: | Barkus Doolan |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Othen |
| SOLICITOR FOR THE FIRST RESPONDENT: | Slater & Gordon Lawyers |
| COUNSEL FOR THE SECOND RESPONDENTS: | Mr Crossland |
| SOLICITOR FOR THE SECOND RESPONDENTS: | Rose Litigation Lawyers |
Orders
The Application in an Appeal filed 23 March 2017 be dismissed.
There be no order as to costs.
And The Court Notes:
The Amended Response to an Application in an Appeal filed by the First Respondent on 16 May 2017 is withdrawn.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Bagheri & Goudarzi and Trustees for the Bankrupt Estate of Goudarzi has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 66 of 2016
File Number: SYC 7646 of 2008
| Mr Bagheri |
Applicant
And
| Ms Goudarzi |
First Respondent
And
Trustees for the Bankrupt Estate of Ms Goudarzi
Second Respondents
EX TEMPORE REASONS FOR JUDGMENT
Ryan J
By an Application in an Appeal filed on 23 March 2017, Mr Bagheri (“the husband”) seeks an order for the dismissal of an appeal instituted by Ms Goudarzi (“the wife”). She is bankrupt. However, her appeal was filed before she became a bankrupt and as a consequence, the action was stayed by force of s 60(2) of the Bankruptcy Act 1966 (Cth) (“BA”).
The husband’s application was presented on the basis that as a consequence of the trustees’ failure to make an election in accordance with s 60(3) of the BA, the appeal was abandoned and it should now be dismissed.
There is no doubt that the trustees knew of the appeal, however the question which needs to be considered, is whether notice as required by s 60(3) was served on the trustees so as to trigger the 28 day period to make an election, failing which, the trustees would be deemed to have abandoned the appeal.
Before proceeding any further, because s 60 of the BA is important, the relevant portions are now set out:
(1)The Court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit:
…
(b) stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this subsection, against the person or property of the debtor:
(i) in respect of the non-payment of a provable debt or of a pecuniary penalty payable in consequence of the non‑payment of a provable debt; or
(ii) in consequence of his or her refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt;
…
(2)An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
(3)If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.
…
(5)In this section, action means any civil proceeding, whether at law or in equity.
Effect Of The Wife’s Bankruptcy On Her Appeal
By way of background, after a defended hearing on 4 April 2016 Cleary J made final orders pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) in proceedings between the husband and the wife.
On 29 April 2016, the wife filed a Notice of Appeal (EA66 of 2016) against a number of those orders. She filed an Amended Notice of Appeal on 20 September 2016.
On 9 February 2017, a Registrar of the Federal Circuit Court of Australia made a sequestration order against the wife. By reason of s 58 of the BA, the property of the bankrupt wife was vested in her trustee. This included the wife’s appeal (see Guirguis & Guirguis (1997) FLC 92-726; O’Neill & O’Neill (1998) FLC 92-811).
The effect of s 60(2) of the BA is that the wife’s appeal was stayed effective from 9 February 2017.
The husband’s Application in an Appeal to dismiss the wife’s appeal was, as indicated, filed on 23 March 2017.
The effect of s 60(3) of the BA is that if the trustee does not make an election within 28 days after notice of the action is served on him or her, he or she shall be deemed to have abandoned the action. In other words, the effect of s 60(3) is to bring an end to the s 60(2) stay and in the instant case, would be to deem the wife’s appeal abandoned.
It is well accepted that s 60(3) only operates on the trustee, relevantly so as to deny the trustee the right to prosecute an appeal that has been abandoned. The weight of authority is that the underlying cause of action remains. See Freeman v Joiner [2005] FCAFC 149 at [14]:
The position is that, whilst the proceedings brought by the bankrupt are deemed to have been abandoned by the trustee, the cause of action remains. The provision, properly construed, operates only upon the trustee. There is no bar to the trustee commencing a fresh proceeding on the same cause of action or a bankrupt, on discharge, doing so whether [sic] there has been no determination of the issues. There is a line of authority to this effect. They include Re Gargan;Ex parte Gargan v Official Trustee in Bankruptcy a decision of Drummond J of 18 August 1995 in QB697 of 1993; Ivor Worrell as trustee of the Bankrupt Estate of Jeffrey Ross Fletcher and Janice Berryl Fletcher v Foodlink Ltd & Ors, a decision of Cooper J of 23 December 1998 in QG 27 of 1998; Temsign Pty Ltd v Biscen Pty Ltd (1998) 157 ALR 83, a decision of Wheeler J; State of Queensland v Beames [2003] QSC 399, a decision of McMurdo J. See also Re Kwok; Ex parte Rummel (1981) 61 FLR 336 at 342, a decision to which reference is made in the above mentioned cases.
Before further consideration is given to the question of notice, it needs to be understood that the husband’s application for dismissal came before me for directions on 26 April 2017. On this occasion, senior counsel for the husband asked that pursuant to s 94(2B)(b) of the Act, the application be dismissed, in effect, by “constructive consent”. The point being, that a judge sitting alone may dismiss an appeal by consent. It was submitted that as the wife lacked standing in the appeal, the trustees had not made an election to prosecute the appeal, and time had lapsed pursuant to s 60(3) of the BA, the husband had become the only party to the appeal. Hence he could “constructively consent” to his own application that it be dismissed. The argument was not persuasive and I directed that the application for dismissal be listed before a Full Court.
On 27 April 2017 the wife filed an application in the Sydney Registry of the Federal Circuit Court of Australia, pursuant to s 104 of the Federal Circuit Court of Australia Act 1999 (Cth) seeking a review of the sequestration order. Directions have been made in that court for the filing of evidence and the wife’s application for review is listed for hearing on 21 June 2017.
Knowledge Is Not Notice
It is the husband’s contention that “not later than 22 February 2017” the wife’s trustees “had knowledge of the appeal” and, as the trustees had not, within 28 days of that date, made an election to prosecute or discontinue the appeal:
12. The 28 day period expired. The trustees are deemed to have abandoned the appeal and the order sought presently by the applicant [husband] can in that sense be regarded as a formality to have the court record recognise the abandonment.
(Summary Of Argument filed 12 May 2017)
Early in the hearing this afternoon, counsel who appeared for the trustees conceded notice had been given in accordance with the subsection. As became apparent this concession was made without regard to relevant authority. In any event, counsel for the trustees said that there were three instances when relevant notice had been given to the trustees, namely; correspondence from the solicitor for the husband dated 28 February 2017, service on 30 March 2017 of the application to dismiss and the provision of documents from the first respondent’s solicitor’s on 27 March 2017 as set out in paragraph 17 of the affidavit of one of the trustees filed 22 May 2017. Paragraph 17 refers to documents having been provided by the solicitors instructed by the bankrupt wife.
Offered an adjournment to read the relevant case law, the concession as to notice was properly withdrawn.
Returning however to the remarks quoted from senior counsel for the husband’s summary of argument, the latter point, of course, ignores the fact that s 60(3) of the BA only operates against the trustees.
In any event, it is appropriate to now consider what it is that the husband contends constitutes notice.
The first occasion of notice is said to be correspondence dated 22 February 2017. On that day, the trustees wrote to the solicitors for the husband informing them that the wife had been made bankrupt and of their appointment. They wrote that they understood the solicitors acted on behalf of the husband in family law proceedings and sought information that might assist in their administration of the bankruptcy.
The question of whether knowledge could constitute notice pursuant to s 60(3) was considered by the Full Court of the Federal Court of Australia in Aware Industries Ltd, Christopher Avery, Peter McCloskey, James Johnson, William Sterling and Allan Bounader v David Charles Robinson (1997) 75 FCR 600 (“Aware Industries”). The Full Court described the operation of the subsection thus (at page 602):
Section 60(3) cannot be read as if the 28 day period runs from the day on which the trustee becomes aware of the existence of an action. That is not what the subsection says, and the two concepts – becoming aware of the existence of an action and becoming served with notice of it – are quite different. The second is a formal concept involving the notions familiar to lawyers of “notice” and “service”. The word “notice” is used in its strict sense. There must be a document which is a notification, and it must be served upon the trustee.
These remarks are apt. It is also critical that the notice triggering s 60(3) is given by “a defendant or other party to the action”. In Aware Industries the purported knowledge/notice had come to the trustee from the bankrupt party. The Full Court agreed with the trial judge that s 60(3) does not contemplate the provision of notice by anyone other than a party to the action excluding the bankrupt party (see Re Collins; Ex parte Official Trustee in Bankruptcy v Bracher (1986) 10 FCR 209). This is sufficient to dispose of the claim that the provision of documents to the trustees by the solicitors for the bankrupt wife on 27 March 2017 could constitute notice.
As the Full Court in Aware Industries explained (at page 602):
The question is not whether the trustee already knew of the action. It is whether notice of the action has been served on him. The 28 day period is not set running by the trustee’s acquisition of information about the action, but by a notice which satisfies the description in s60(3). If in order to start time running a defendant must notify the trustee of something of which the trustee is already aware, so be it.
The point being that s 60(3) is a facility for parties to an action to achieve a state of certainty as to the continuation of the subject proceedings. It follows, that the correspondence from the trustees to the solicitors for the husband on 22 February 2017 could not constitute notice.
Given these matters, consideration must be given to later correspondence issued to the trustees by the solicitors for the husband. At this juncture it is helpful to record that the effect of Aware Industries is that it is essential that notice, when it is given, “draws the trustee’s attention to the fact that time runs against him [or her] from the date of service” of the notice. On this point, the Full Court said (at pages 602-603):
It might be thought that the requirements of s60(3) would be satisfied by service of a document which said no more than that an action in an identified court had been commenced by the bankrupt to which the person serving the notice was a defendant. But we do not regard the notice contemplated by s60(3) as a mere provision of the details of the action. The consequences of the effluxion of time without an election to prosecute are serious. An action which may have value will be lost. The purpose of the notice is to alert the trustee to the need to consider whether to prosecute or discontinue the action. In those circumstances it is appropriate to read s 60(3) as requiring that the notice contain sufficient information to draw the trustee’s attention to the fact that time will run against the trustee upon service of the notice. Ideally a notice will be in the form of that served in Welinski v Temple (Federal Court of Australia, unreported, 8 April 1997). The document served in that case was described as a notice pursuant to s60. It recited the existence of the action and that the persons on whose behalf it was given were the defendants in the action, required the trustee within 28 days of service to provide in writing an election advising the defendants of the trustee’s intention to prosecute or discontinue the action, and stated that in default of such advice the trustee would be deemed to have abandoned the action. That notice expressly drew attention to the fact that time ran from the date of service, and that the action would be deemed to have been abandoned at the expiration of the 28 day period in default of an election to prosecute it. But given that a notice will be directed to a registered trustee, it need not have all the attributes of that served in Welinski so long as, on a fair reading, it draws the trustee’s attention to the fact that time runs against him from the date of service.
Turning then to the correspondence addressed to the trustees from the solicitors for the husband (he being the only other party to the appeal). The solicitors wrote to the trustees on 28 February 2017 (see Annexure B to the Affidavit of Ms M filed 22 May 2017). The letter is in response to that of the trustees’ dated 22 February 2017 and provided the trustees with the information sought therein. In addition, the solicitors informed the trustees of various cost assessment orders and orders for costs made against the wife in favour of their client. No reference was made to s 60 of the BA, to time limits, or indeed, to the appeal. The letter does no more than provide information and could not constitute notice.
As I mentioned earlier, the husband’s application was listed before me on 26 April 2017. Of this appearance, senior counsel for the husband said “the trustees have had knowledge of the appeal since not later than 22 February 2017. Mr Fitzgerald, who appeared on behalf of the trustees on 26 April 2017 acknowledged that this was so”. (Summary of Argument filed 12 May 2017 at [9]).
As one of the trustees, Mr L, deposed in his affidavit filed on 22 May 2017, there is no issue that the trustees knew of the appeal as and from 13 February 2017, when documents were given to him by solicitors acting on behalf of the bankrupt wife. This concession as to knowledge does not satisfy the requirements of s 60(3). Nor does the concession made by Mr Fitzgerald.
Nor in my view, does the fact of service of the application for dismissal on the trustees. That application is predicated upon notice having been given much earlier and does not in and of itself purport to trigger the application of the subsection. The effect of this is that notwithstanding the submission of the solicitor for the trustees in his outline of argument filed 19 May 2017 that “the trustees did not make an election to prosecute or discontinue the Appeal within the time prescribed under section 60(3) of the Bankruptcy Act 1966 (Cth)”, I am satisfied, not only because the concession was withdrawn, but also because on the face of the facts placed before this court it was a concession that should never have been made and it should not be accepted.
By the time the trustees filed their outline of argument, two affidavits from the solicitor for the husband had been filed in support of the application. The first was filed on 23 March 2017 and the second on 18 May 2017. In circumstances where neither of these affidavits appeared to disclose effective notice in accordance with s 60(3), and having received the trustees’ apparent concession, directions were made for the solicitor for the husband to file a further affidavit which contained the notice apparently conceded on behalf of the trustees. An affidavit was filed on 22 May 2017 but it did not add to the body of evidence as to what might constitute notice.
The solicitor’s affidavit concluded with the following evidence:
5.At no time following service of the application and affidavit upon the joint trustees was I ever informed that the copy of the documents sent to the joint trustees (by email and by post) were incomplete. At no time did I receive any correspondence informing me that the copy of the documents sent to the joint trustees were incomplete.
6. On 6 April 2017, I was contacted by Billy Fitzgerald, partner of Rose Litigation Lawyers. The first communication was by telephone and this was followed by an email providing his details to me. I was informed by Mr Fitzgerald that Rose Litigation Lawyers had received instructions to act for the joint trustees.
7. Following that first communication, I had discussions with Mr Fitzgerald about the application on 13 April 2017 and 24 April 2017. We also discussed the appeal which had been filed by [the wife].
8. On 24 April 2017, I forwarded to Mr Fitzgerald by email the Amended Notice of Appeal filed by [the wife] on 21 September 2016.
I make the following observations in relation to this evidence. First, the paragraphs do no more than indicate knowledge in the trustees of the appeal and the evidence relied on in that affidavit is silent about the provision of notice. As to paragraph 5, a trustee is under no obligation to prompt a defendant or other party to trigger s 60(3). There are many reasons why a defendant or other party to an action may be content that the proceedings are stayed. A trustee should not and is not to be placed in a position of needing to guess whether such a person has triggered the period for election.
On a fair reading of the evidence relied upon by the husband, none of the matters therein constitute notice in accordance with s 60(3). That being the case, in my view, the application should be dismissed.
Thackray ACJ
I agree with the reasons of Ryan J and therefore agree that the application should be dismissed.
Strickland J
I too agree with the reasons given by Ryan J and as a result, agree that the application should be dismissed.
Ryan J
The orders of the court will therefore be:
1.The Application in an Appeal filed 23 March 2017 be dismissed.
2.There be no order as to costs.
I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Thackray ACJ, Strickland, and Ryan JJ) delivered on 23 May 2017.
Associate:
Date: 25 May 2017
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