Boase v Jneid

[2010] WASC 275

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   BOASE -v- JNEID [2010] WASC 275

CORAM:   LE MIERE J

HEARD:   12 AUGUST 2010

DELIVERED          :   28 OCTOBER 2010

FILE NO/S:   CIV 2388 of 2008

BETWEEN:   TIMOTHY BOASE

Plaintiff

AND

RATEB JNEID
First Defendant

ASICA DEVELOPMENTS PTY LTD
Second Defendant

WESTWIDE DEVELOPMENTS PTY LTD (IN LIQ)
Third Defendant

Catchwords:

Bankruptcy - Leave to continue proceedings against bankrupt defendant - Whether Supreme Court has jurisdiction to grant leave to continue - Bankruptcy Act 1966 (Cth) s 5, s 27(1), s 58(3)

Legislation:

Bankruptcy Act 1966 (Cth), s 5, s 27(1), s 58(3)
Judiciary Act 1903 (Cth), s 39(2)
Rules of the Supreme Court (WA), O 18 r 7(1)

Result:

Application dismissed

Category:    B

Representation:

Counsel:

Plaintiff:     In person

First Defendant            :     In person

Second Defendant        :     No appearance

Third Defendant           :     No appearance

Solicitors:

Plaintiff:     In person

First Defendant            :     In person

Second Defendant        :     No appearance

Third Defendant           :     No appearance

Case(s) referred to in judgment(s):

Green v Schneller [2001] NSWSC 897; (2001) 189 ALR 464

Macchia v The Public Trustee [2008] WASCA 241; (2008) 251 ALR 385

Mrowka v Format Finishing Pty Ltd [2009] WASCA 184

Re Killington; Ex parte Chisholm [1998] FCA 1474

1. LE MIERE J: On 6 May 2010 the first defendant became bankrupt after presenting a debtor's petition. The plaintiff seeks leave of the court to continue the action pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth) (the Act).

The action

1. The action arises out of a property development in Thornlie.  The plaintiff says that he invested $65,000 in relation to the development and it was agreed that he would have an interest in the development.  The plaintiff brought this action against the first defendant, Mr Jneid, and two companies associated with him.  The plaintiff claims orders that the defendants repay the $65,000 invested plus interest and damages.

This application

1. On the hearing of this application on 12 August 2010 the plaintiff and Mr Jneid both appeared in person.  Mr Jneid's trustee in bankruptcy was present in the court but did not take any part in the proceedings.  The plaintiff's submissions were directed principally to allegations to the effect that Mr Jneid had money or assets available to pay any judgment obtained against him notwithstanding that he had become bankrupt after presenting a debtor's petition and that his trustee's statement of affairs disclosed no substantial assets and an estimated deficiency of $1,011,619.  I reserved my decision.

2. On 16 August 2010 the plaintiff delivered written submissions in which he submitted that leave should be granted because the action is far too complex for the proof of debt method applied by Mr Jneid's trustee in bankruptcy to be adequate or sophisticated enough for the task and because the trustee does not have the resources, the funds, or legal experience to complete the task.

3. I subsequently considered that there is an issue whether the court has jurisdiction to grant leave under s 58(3) of the Act.  Accordingly, I invited the parties to make any submissions in relation to that issue in writing.  The plaintiff filed further written submissions dated 17 September 2010.

Jurisdiction

1. Section 58(3) of the Act provides:

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

   (a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or

   (b)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. It is necessary to consider at the outset whether this court has jurisdiction to grant such leave. The relevant jurisdiction is, by s 58(3)(b) of the Act, conferred on 'the court'. By s 5, 'the court' is defined as 'a court having jurisdiction in bankruptcy under this Act'.

3. Section 27 deals with 'bankruptcy courts':

   (1)the Federal Court and the Federal Magistrates Court have concurrent jurisdiction in bankruptcy and that jurisdiction is exclusive of the jurisdiction of all courts other than:

   (a)the jurisdiction of the High Court under section 75 of the Constitution; or

   (b)the jurisdiction of the Family Court under section 35 or 35A of this Act.

4. The question of the jurisdiction of a State Supreme Court to grant leave under s 58(3) of the Act was considered by Barrett J in Green v Schneller [2001] NSWSC 897; (2001) 189 ALR 464. Barrett J said:

   The present application for leave to proceed does not involve the inherent jurisdiction of this court. The jurisdiction is wholly statutory. It is created by the Bankruptcy Act. Nothing could more clearly involve 'jurisdiction or proceedings under or by virtue of this Act' as referred to in the s 5 definition of 'bankruptcy'. The relevant jurisdiction is therefore 'jurisdiction in bankruptcy' for the purposes of s 27(1), with the result that, subject to one possibility about to be mentioned, it is confined by that section to the Federal Court, the Federal Magistrates Court and having regard to s 75 of the Constitution, the High Court [23].

5. His Honour went on to say that the only possible basis on which the court might exercise the s 58(3)(b) jurisdiction in the face of these clear specifications in the Act is that some other Commonwealth law nevertheless operates to confer that jurisdiction. That was considered in Re Killington; Ex parte Chisholm [1998] FCA 1474 where Mansfield J, dealing with the question of the jurisdiction of the Supreme Court of South Australia to grant leave to proceed under s 58(3)(b) of the Act concluded that the Supreme Court may have jurisdiction to entertain that question as jurisdiction had already been granted to it under s 39(2) of the Judiciary Act 1903 (Cth). Mansfield J said it was unnecessary to further consider the matter in that case. In Green v Schneller Barrett J considered the matter in the light of relevant authorities and concluded that s 39(2) of the Judiciary Act does not enable the Supreme Court of New South Wales to hear and determine matters within the jurisdiction referred to in s 27(1) of the Act. His Honour said that when s 27(1) says that the jurisdiction it confers 'is exclusive of the jurisdiction of all courts other than the jurisdiction of the High Court under s 75 of the Constitution', it plainly evinces a specific intention to exclude the jurisdiction conferred on state courts by the general prescription in s 39(2) of the Judiciary Act. Barrett J concluded that the Supreme Court of New South Wales did not have jurisdiction to grant leave to proceed under s 58(3)(b) of the Act.

6. Green v Schneller was approved, or cited with apparent approval by Steytler P, with whom I agreed, in Macchia v The Public Trustee [2008] WASCA 241; (2008) 251 ALR 385 and by Owen JA, with whom Pullin and Buss JJA agreed, in Mrowka v Format Finishing Pty Ltd [2009] WASCA 184 [59].

Order 18 rule 7

1. In his written submissions of 17 September 2010 the plaintiff referred to O 18 r 7(1) of the Rules of the Supreme Court 1971 (WA) which provides that where a party to an action dies or becomes bankrupt but the cause of action survives, the action shall not abate by reason of the debt or bankruptcy. That rule does not assist the plaintiff. The issue before the court is not whether the plaintiff's action against Mr Jneid has survived his bankruptcy. The issue is whether or not this court has jurisdiction to grant leave under s 58(3) of the Act. For the reasons stated I find that the court does not.

Leave to proceed against Westwide Developments

1. In his written submissions of 17 September 2010 the plaintiff stated that he 'will also ask the court for leave to proceed against the third defendant, Westwide Developments Pty Ltd (in liquidation)'.  The plaintiff further states that he has been in contact with the liquidator for Westwide Developments and the liquidator has indicated that he will not oppose any application from the plaintiff 'in this regard'.

2. The application which I am presently dealing with is the plaintiff's application for leave under s 58(3) of the Act to continue the action against Mr Jneid. If the plaintiff wishes to seek leave under s 500(2) of the Corporations Act 2001 (Cth) to continue the action against Westwide Developments then he must make an application in accordance with the rules of the court for leave pursuant to s 500(2) of the Corporations Act to proceed against Westwide Developments. The application should be supported by any affidavit material the plaintiff relies upon and should be served on the liquidator.

Conclusion

1. In my view it is clear that this court does not have jurisdiction to grant leave to proceed under s 58(3)(b) of the Act. In those circumstances it is not necessary to consider whether the court should grant leave, if it had jurisdiction to do so, or the other issues raised by this application. The application must be dismissed.