Barton, Thomas Ex Parte Corporate Affairs Commission

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION

BANKRUPTCY DISTRICT

OF THE STATE

No. NSW 310 of 1974

NEW SOUTH WALES AND	THE AUSTRALIAN
CAPITAL TERRITORY

IN THE MATTER OF

AN APPLICATION UNDER SECTION 58 (3) FOR LEAVE TO INTERVENE IN APPLICATION BY BANKRUPT

FOR DISCHARGE

THOMAS BARTON

AND IN THE MATTER

THOMAS BARTON

EX PARTE CORPORATE AFFAIRS

COMMISSION, CORPORATE MINING INVESTMENTS OF AUSTRALIA (IN LIQUIDATION)

AND IN THE MATTER

THOMAS BARTON

EX PARTE CORPORATE AFFAIRS

COMMISSION, MULKANA CORPORATIl

N.L. (IN LIQUIDATION)

AND IN THE MATTER

THOMAS BARTON

EX PARTE CORPORATE AFFAIRS

COMMISSION, MURUMBA OIL N.L.

(IN LIQUIDATION)

AND IN THE MATTER

THOMAS BARTON

EX PARTE CORPORATE AFFAIRS

COMMISSION, BOUNTY OIL LIMITE:

(IN LIQUIDATION)

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AND IN THE MATTER OF

THOMAS BARTON

AND IN THE MATTER OF

THOMAS BARTON

-.	EX PARTE BANK OF NEW SOUTH WALES

REASONS FOR

JUDGMENT

6 June I980

LOCKHART J.

The applicants, Murumba Oil

N.L. (In Liquidation) -

( llMurwnball), Mulkana Corporation

N.L. (In Liquidation) - ( IfMulkana'

Corporate Mining Investments

of Australia (In Liquidation) -

(f1C.M.

l ! ) ,

Intercontinental Properties

Pty. Limited (In

Liquidation) - (llIntercontinentalll), Bounty Oil Limited

(In

Liquidation) - ("Bounty Oilt1)

and Corporate Affairs Commission

- ("the Commissiont1) are seeking the leave

of this Court nunc pro

tunc, to the extent that such leave may

be necessary, to commence

certain proceedings

in the Supreme Court

of New South Wales

Equity Division, and

to take all such steps as have been taken

to date and as

it may hereinafter be reasonable

for them to take

in the future conduct of those

proceedings.

The applications are made under sub-section

58 (3) of

the Bankruptcy Act

1966 - ("the Act").

They ,are

opposed by the

bankrupt. Counsel for the bankrupt

has informed me that on his

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instructions he is

unable to make submissions

on the substantive

matters involved in the application.

The Official Receiver

neither supports nor opposes the applications. He submits to

whatever order the Court sees

fit to make.

Each of the applicants Murumba, Mulkana,

C.M.I. and

Intercontinental instituted separate proceedings

in the Supreme

Court of New South Wales

on 29 July 1977.

Defences have been filed and counter-claims brought

by some of the defendants. Bounty instituted its proceedings

on 28 December 1979. The statement

of claim has been filed

but

not yet served on the defendants. The Commission

is a co-plaintif

in each proceeding pursuant to section	367B of the Companies Act
1961 (N.S.W.).

All proceedings are against the bankrupt and others

defendants. The Attorney-General for the State

of New South Wales

has caused each of the proceedings to be instituted

in th name

of the particular company as plaintiff, pursuant to sub-section

178 (9) of the Companies Act

1961.

It is not necessary to describe the proceedings

in any

detail. It is

sufficient to say that the causes

of action in

the proceedings in which the plaintiffs are Murumba, Mulkana,

Intercontinental and

C.M.I.

are based on allegations of breaches

of S. 124 of the Companies Act

l961 by failure

o f the directors to

act honestly and with due diligence; breaches of fiduciary duty

as directors; failure to exercise care as directors, and

conspiracy. Those are the allegations. They are denied. The

relief claimed against the bankrupt includes damages and orders

for repayment or restoration of moneys.

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liquidation without first obtaining the leave of the Court

required by the Companies Act,

1874, the Court

will, if good

cause be shewn on the merits, make	an order granting leave nunc
pro tunc.

Section 140 of the Companies Act

1874 provided:

When an order has

been made for winding-up

a company under this Act,

no suit, action,

or other proceeding shall

be proceeded with

o r commenced against the company except

with

the leave of the

Court and subject to such terms

,as the Court may impose.

In Re'=

parte Clarke

(1896) 17 NSW LRBC 85 A . H.

Simpson,J. considered sub-S. 10 (2) of the Bankruptcy Act	1887
(N.S.W.) which provided:

"After a sequestration order

has been made

except as directed by this Act no creditor

to whom the debtor

is indebted in respect

of any debt provable

in bankruptcy shall have

any remedy against the property

or person of

the debtor

in respect of the debt or shall

commence any action

or other legal proceedings

unless with the leave of

the Judge and

on such

terms as the Judge may

impose.

His Honour referred, apparently with approval,

to the decision of Manning

J. in Thornson's Case (supra)

and his Honour said

at p. 89:-

llImav

also observe that under a section

in the Companies Act analogous to this,

S. 140,

which Provides that where

an order has been

made fir -winding-up a company under the Act,

no suit, action, or other proceeding shall

proceeded with

o r commenced against the

company except with the leave of the Court, and subject to such terms as the Court may impose. Manning J. has held in Thomson v.

Mulgoa Irrigation Company that leave might be

given after proceedings had actually

been

commenced nunc pro tunc. This

is equivalent

to saying that the leave

of the Court

is not

absolutely necessary

as a condition precedent.

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The causes

of action in the proceeding

in which Bounty

Oil is a plaintiff are based

on allegations of fraud, rnisfeasance

misconduct, negligence, breach of duty and breach

of trust of

certain of the defendants, including the bankrupt,

in connection

with the affairs of Bounty Oil.

The allegations are denied.

None of the applicants assert that their claims, the

subject of the applications under sub-section

58 ( 3 ) of the

Act, are necessarily provable against the bankrupt's estate;

nor

do they say that

. they are

not provable. They contend that the

question whether any and,

if so, which of their claims may be

provable involves complex questions

of fact and law which ought

not to be determined by this Court in these applications. Rather

the appropriate course

in all the circumstances

is to proceed

on the basis that leave

is necessary.

Counsel for the applicants

has submitted that this

Court has power to give the leave sought nunc pro tunc; but

the course of

his argument the substantial question

has arisen

as to whether leave

to commence proceedings against

a bankrupt

under sub-section

58 ( 3 ) can be given

when the sequestration

order precedes the commencement

of the proceedings the subject

of the application

for leave.

It is well-established by decisions

of Courts in the

United Kingdom and Australia, including the State,

of New South'

Wales, that leave nunc

pro tunc may be given by the Courts having

jurisdiction over the winding-up of companies pursuant to the

relevant sections in companies legislation. In Thomson v. The

Mulgoa Irrigation Company Limited

(1894) 4 N.S.W. B.C.

33 Manning

J. held that where

a suit is commenced against a company in

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In Re Sydney Formworks

Pty. Limited (In Liquidation)

(1965) 82 W.N. Pt. I N.S.W. 558, McLelland C. J. In Equity

held that the Supreme Court had power under

S. 218 of the

Companies Act,

1936 (N.S.W.)

to make an order giving leave

to continue the action

r giving leave nunc pro tunc to commence

the action. Section 218 was in substantially the same terms

S. 14 of the	1874 Act considered by Manning	J. in Thomson Is Case
(supra).

In Re.A. J. Benjamin (In Liquidation) and the Companies

Act, 1969, 90 W. N. Pt. I N.S.W.

107, Street J. followed the

decision of McLelland C. J. in Eq. and granted leave nunc pro

tur

to proceed with

an action for damages against the company

liquidation.

The application was made under sub-S. 230 (3) of

the Companies Act,

1961, (N.S.W.), which is in substantially

the same terms as its predecessors	in the 1936 Act and the	1874
Act.

In Re Wanzer Limited

(1891 ) l Ch. 305, North J. dealt

with two sections of the

English Companies Act,

1962, namely,

ss . 8'7 and 163.

Section 87 was in substantially the same terms

as the other sections

in the Companies Acts

to which I have

referred. Section 163 provided:-

Where any company

is being wound

by the Court

or subject to the

supervision of the Court,

any attachment,

sequestration, distress,

or execution put

in force against the estate

or effects of

the company after the commencement of the

winding up shall be void to all intents."

In that case the liquidator sought to restrain

a Scotch landlord

of urban property from proceeding with

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further proceedings

on a petition for sequestration of the

stock, furniture and effects

on the premises of the company

in liquidation.

His Lordship held that notwithstanding that

the Companies Act

(S. 163)

rendered the relevant proceedings

commenced without leave void, the Court could grant leave to

proceed nunc pro tunc pursuant to

S. 87.

Sub-section 58 ( 3 ) of the Act provides:-

IIExcept as provided by this Act after a debtor has become a bankrupt it is.,not competent for a creditor...

(b)

except with the leave of the Court fit to commence any legal proceeding

in respect of a provable debt

or take

any fresh step

in such a proceeding.I1

The question arises whether the words

Itit is

not competentt1 are materially different from the language

the sections

in the Companies Acts and earlier Bankruptcy Acts

to which I have referred; and whether, according

to their

ordinary and natural meaning, the words appearing

in sub-S.

58 ( 3 ) mean that

a creditor is not legally competent to commence

proceedings without first obtaining the leave

of the Court. In

my opinion, sub-S. 58 ( 3 ) is to be construed in the same way

the analagous sections

in the companies legislation and earlier

bankruptcy legislation. I see no warrant for concluding that

the different choice of language

in sub-S. 58 ( 3 ) leads to

drastic a consequence as would be involved if the words

Itit is

not competent forf1

were to be given

a substantially different

meaning from their counterparts

in earlier legislation. More

particularly is this so when it is remembered that the obvious

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intention of the sub-section is the same as that of the sections

of earlier Bankruptcy Acts and Companies Acts, namely, to ensure

that the property of the insolvent

will be administered

accordance with the provisions of the

Act; to ensure that no-one

derives a benefit or advantage under those proceedings to which

he is not entitled; and to enable the Court to supervise all

claims propounded against the bankrupt.

The question also arises whether the applications

ought to

be granted where,

as here, they may relate to provable

claims or they may not. One must take

a practical view of the

power conferred by

sub-S. 58 ( 3 ) .

It is clear from the evidence

that there are many complicated transactions involving the

bankrupt over the

years preceding the bankruptcy.

Proceedings have been on foot for some time involving

the bankrupt and the applicants including those the subject of

these applications. In cases with such far-reaching ramifications

as those and involving such complex questions

of fact and law

it is

unreal to expect that these applications

for leave are the

appropriate vehicle

to determine issues of such complexity. The

Supreme Court proceedings may

o r may not succeed.

They may result

in provable claims; then again they may

not.

In Allanson v. Midland Credit Limited

(1977) 30 F.L.R. 10;

the Full Court of this Court comprising Bowen C. J.

Riley and

Deane JJ. said at p. 115 with reference to

sub-S. 58 ( 3 ) :

Where a Court is given power to grant

leave to perform

a particular act

o r

pursue a particular course of action and

the question whether the need

for such

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leave has arisen involves difficult and

complicated questions of law or fact, it

is permissible, in an appropriate case, to

proceed on the basis that such leave

necessary rather than involve the parties

in the futile exercise

of determining,

possibly after a series of appeals, whether

the need

for such leave

has arisen.11

Those words are apposite to the present

case.

I have

not been referred to any adverse consequences to the bankrupt

to his estate that would be occasioned by the granting

of leave.

Counsel for the applicants

has referred to certain matters which

he says may constitute prejudice

to his clients if leave is

refused.

I need not to traverse these

in depth as I do not think

it necessary to do so when dealing with the application. In any

event, the matters to which reference

was made did

not impress me

as having any

real bearing on the outcome

of these applications

under sub-S. 58 ( 3 ) ; save one, namely that

in 1977,

Intercontinental commenced proceedings

in the Supreme Court

Equity Division against the Bank of New South Wales. The bank filed a cross claim in those proceedings against the Official Receiver as trustee of the estate of the bankrupt and others.

In 1977 C.M.I. commenced proceedings in the Supreme Court against

the bank and the bank filed a cross claim

in those proceedings,

also against the Official Receiver as trustee of the bankrupt's

estate and others.

In 1977 C.M.I.

and the Commission commenced proceedings

in the Supreme Court

of New South Wales and

by cross claim, also

filed in 1977, the bank

was joined as a party to those

proceedings.

On the same day as the cross claim

w s filed the

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bank filed a second cross claim

in those proceedings, also

against the Official Receiver as trustee of the bankrupt's

estate and others.

The proceedings against the bank are

in respect

of cheques drawn on the accounts of C.M.I.

and Mulkana. They

arose out

of various transactions which took place

in 1971

involving the sale and purchase

of shares and other property

and the making and repayment of various alleged loans.

The

bank denies liqbility to the plaintiffs by those

cross claims

against the bankrupt. It seeks indemnity

or contribution from

him as trustee of the funds

of the various companies

on the basis

that, if there was any breach

of trust by the bank, the bankrupt

knowingly participated

in those breaches and as

director of all

the relevant companies

he was himself a trustee of the funds

those companies. The bank has cross claims in those proceedings

to which it was a party that were filed pursuant to leave granted

by this Court

in 1977.

The actions commenced by Murumba, Mulkana,

Intercontinental and

C.M.I. which are the subject of the

applications for leave to this Court, relate to the same

o r

substantially the same events and circumstances as those involved

in the actions of those same companies against the bank.

I have

briefly mentioned some

of those actions.

The bankrupt

has been joined as

a cross defendant

by the bank and,

as I say, leave has already been obtained by

the bank to pursue those cross claims.

The losses claimed by the companies, Murumba, Mulkana,

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Intercontinental and

C.M.I. against the bankrupt

in the Supreme

Court proceedings are the same,

or substantially the same, as

the losses claimed by those companies against the bank and the

subject of the indemnity over against the bankrupt.

A s leave has

been given

in respect of those cross claims propounded by the

bank against the bankrupt

i is in my opinion a relevant matter

to consider in favour of the granting

of the applications

for

leave; but my primary reasons are those to which

I have already

referred.

Accordingly, the applications

for leave under

S. 58 (3)

should be granted.

[1980] FCA 213

6 Jun 1980