Cockerill, G.D. v Westpac Banking Corporation

[1992] FCA 96

JN THE FEDERAL COURT OF AUSTRmA

NEW SOUTH WALES DISTRICT REGISTRY	1	L
GENEfUh DIVISION	1

BETWEEN!	FRlUlAM DOUGLAS COCKERILL, A BANKRUPT, WITH
THE CONSENT OF MR. ROBERT BURNS, HIS TRUSTEE IN BANKRUPTCY l ARTHUR DAVID TIiOMAS
DINGLE, A BANKRUPT, WITH THE CONSENT OF -
BR 4 ROBERT BURNS. HIS TRUSTEE IN BANKRUPTCY AND VALERIE DINGLE, A BANKRUPT, BITH THE CONSENT OF MR, ROBERT BURNS, IlER TRUSTEE IN BANKRUPTCY

First applicant^

AND f JVOR WORRELL

Second Applicant

AND ! WESTPAC BANKING CORPORATION

-

NINUTES OF ORDERS

10 MAR 1992

AUSTRALIA PRINCIPAL

JUDGE MAKING ORDEqt	Drummond J
bATE OF ORDERi	9 March, 1992
WHERE MADE2	Brj sbane
THE COURT ORDERS THAT!
m1	Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.

i .         The claim by the kirst Applicants is dismissed.

THE FEDERAL COURT OF AUSTR~IB ) No. NG 29 of 1991

PEW SOUTH WALES DISTRICT REGISTRY	1	\
GENERAL DIVISION	1

RETWEEN ! GRJUfAM DOUGLAS COCKERILL, A BANKRUPT WITH

THE CONSENT OF MR. ROBERT BURNS, 111s

* S U R ! J ! TEE IN

PINGLE, A BANKRUPT, WITH THE CONSENT OF

BR: ROBERT BURNS. HIS TRUSTEE IN

BANKRUPTCY AND VALERIE DINGLEI A BANKRUPT, PITH THE CONSENT OF MR. ROBjT BURNS, HER TRUSTEE IN BANKRUPT=

First Applicants

AND! IVOR WORRELD

second ~pplicant

AND ! WESTPAC BANKING CORPORATION

Respondent

W!	brummond J
&l&!	9 March, 1 9 9 2
Place	t Brisbane

REASONS FOR JUDGMENT

The ~espondent applies for an order dismissjng the Pik~Jt Applicantet claime, under Order 6, rule 9 of the Federal

court Rules on the ground that the Applicantsp right of action vested in the trustee upon their respective bankruptcies and they have no standing to aue on it.

Each applicdnt became bankrupt on 26 ~ctober, 1 9 9 0 ,

i.e. prior to the commencement of the action on 25 January,

The purpose of the application j s n& doubt to ensure that the only causes of action that the Respondent will tiltiinately have to face will be those which the Second Applicant, Mr. Worrell, who is the First Applicants1 new tru8tee, is not time barred from running, having regard to the fact that he only became d party to the proceedings, by hddition, in October iast and in view of the provisions of Order 6, rule l i ( 3 ) .

The compldint by the First Applicants is that the
Rekpohdent engaged in misleading condoct in connection with a
Swiss franc loan dgrekment they entered into at the end of

1984. It ie not clear from the pleading just what are the preciee compldihtn the Applicante make or when the various iobseb sought to be recovered occurred. But it appears to be dlieged that the lossee suffered commenced on about the date oh khich interest first had to be paid, that is g May, 1985.

No defence hds yet been filed.

The original dpplication asserts that it was brought by edch of the First Applicants with the consent of his ot her truetee in bankruptcy. The Respondent promptly made dpplication to etrike out the proceedings on the same ground hob advanced. he Applicants, in response to this application by the Respondent' did not seek to join Mr. Burns, their then- ttusteer an a party ih the actiont corlnsel for the First hpplicdnts informed me that they trled to do that, but Mr.

Burns declined to take over the conduct of the action in the dbsence of satisfactory indemnities to cover the costs he might be exposed to in the action.

On 23 May, 1991, Pincus J declined to strike out the proceedings. In the course of his judgment, Pincua J said that there was no reason to think that the right of action involved in these proceedings would not have passed to the trustee. There is no chdllenge now to this.

Before Pincue J, however, the ~pplicante indicated that they had an application for annulment of their bankruptcies pendinG: they further submitted that, if the action were dismiasbd but their annulment application hubeequently granted, then they may lose the whole or part of their righte of actioh because a time limitation might pos~ibly operate aghnst them between the date of commencement of the suit and the date of Annulment so as to prevent kecovery of some of their losses. Pincus J granted the

hdjorfrnment eought by the Applicants saying!

suit alleging mieleading statements, but may acquire	"The ~pplicdhtf4 have at present no standing in the
etanding soon. I f annulments are granted, that
acquisition would argu~bly date back to the date of
bankruptcy, prior to the institution of the suit.'
In coming to this conclusion, Pincus J referred to

Thb Metro~olitan Bank Ltdt ti Anor. v Poolev (1885) 10 hpp.

Ces. 210. This CB clear authority for the proposltfon that a

bankrupt who sues after bankruptcy on a cause of action that vested in hie trustee upon bankruptcy has no standlng to mtlihtain the action. See page 219, 223 and 224. See also W I R l Henry & Son v Hodae 119631 V.R. 111 and Bailey v Thurston

5 CO, ti902) 2 K.B. 397 at 400.

Proceedings instituted by an applicant who at the time has no standing to institute theni are incurably a nullity. See Jnaall v &loran [l9441 K.B. 160 at 164-165 and fiinister of State for the Interior v RAT. Comvanv Ptv. Ltd. C Ore). (1961) 107 C.L.R. l at 7.

The First Applicants thus had no standing to ihstitute the proceedings in their own name, even though they may have had the consent of the trdstee to do that? only their trustee had standing to brlng such an action.

A case such 66 this ie quite different from the case

iri which a bankrupt suee in hi6 own name in respect of after-

dcqtiired ptoperty.

So fat as concerns all after-acquired property other thafi ihcome from the pereonal efforts of the bankrupt, the bdnktupt has title, subject to intervention of the trustee, to bking proceedihgs in his own name with respect to such ptoperty. Thie is so even though the legal and equitable titie to after-acquired property vests in the trustee immediately the property is acquired by the bankrupt and

kithotit the need for any intervention by the trustee, Palmer I

v The Public Trustee (1916) 21 C.L.R. 645 at 661-2; ~histlethwavte v Gender Estates Ptv, Ltd, (1976) 8 A.L.R. 700 at 704.

Even if the trustee subflequently intervenes, an action commenced by a banktupt in his own name in respect of after-acquired property is properly constituted from the btart. Cf. Bailey v Thurston & CO, [l9021 2 K.B. 397 at 401- 402.

So far as concerns after-acquired income, by force of e.131 of the Bankru~tcv Act 1966, all income earned by the personal effott of the bankrupt after hid bankruptcy is his property and he alone hag the right to sue in respect of it, although the trustee can seek an order directing that all or part of such income be paid to him. See Knisht & Anor. v pe~utv Commissioner of Taxation (NSW) C Anor. (1987) 79 A.L.R. 347 at 354.

Emden v Carte (1881) 17 Ch.D. 169 and 768 (on dppedl), in which a trustee kas added as d plaintiff with the bankrupt, is of no ds8ietance to the applicants. That was a caBe in which the trustee intervened in an action brought by

the bankrupt after his bankruptcy in respect of after-acquired

ptoperty, not being income earned by the bankrupt's personal efforts. The order made was that the trustee be added as plaintiff and given the cohduct of the action. This was done

because inadequacies in the available proceddre prevented the making of an order substituting the ttustee for the bankrupt:

see page 173. But given that such an action is properly

constituted from the outset even where it is the bankrupt alone who sues initially, the proper order when the trustee intervenes is an order that he be substituted for the original pldintiff r rather than added as a pjaintiff. The difference betweeh subatitution and addition is defined in order 6, rule i i ( 2 ) dhd (3) of the ~ederal Court Rules. The difference can

bd ~ignificaht. ~t i# significant here and is the reason for

the Respondent's present application.

The applicflntb also relied bpon Foster & Anor. v Gamaee h Anor* (11176) 1 Q . B . D . 666. That case concerns the pre-Judicature Act practice governing the plea of bankruptcy of the plaintiff after an action has commenced. It has no relevance to this case in which the plaintiffs were

ddj~dicated	bankrupt before they commenced the action.
The annulment application by the First Applicants by Mr. Worrell, who is apparently prepared to pursue the suit.	failed and steps were then taken to replace the then-trustee
Mr. Worreli, who replaced Mr. Burns as trustee of each of the
Pitet Applicants, was added as a party by the order of Pincus f of 18 Octoberr 1991: he has standing as trustee to maintain
the action. There has beefi no appeal against Pincus J r s order joinihg Mr. Worrell. hor did the Respondent seek to set aslde the whole proceedingbt notwithstanding Mr. Worrell's joinder, on the ground that they were a nullity, with $ vjew to leaving it to Mr. Worrell to decide whether to commence fresh proceedings in his sole name.
Dismissal of the First Applfcants' claims is therefore the appropriate order to make, even though it will have the consequence, in view of State of Western Australia v waxdlev Australia Ltd, & Ore, (1991) 102 A.b.R. 213, that Mr. Worrellr who became a party as a result of Pincus J r s order of
i 0 October, 1991, may be faced with time bar defences to at
least part of the claims which would not have been available to the Respondent if the First Applicants had remained on the record.
The Respondent's application for an order that the claim by the First Applicants be dismissed is therefore grdnted.
1 certify that this and the six
preceding pages are ttue copy
of the reasons for judgment herein of the ffonourable
Mr, J U S ~ ~ C ~ Drummond.
~ d k e ! 9 March, 1992