Dynamic Excavation and Demolition Pty Ltd v Official Trustee in Bankruptcy
[2011] FMCA 546
•28 June 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DYNAMIC EXCAVATION AND DEMOLITION PTY LTD v OFFICIAL TRUSTEE IN BANKRUPTCY | [2011] FMCA 546 |
| BANKRUPTCY – Application for order under s.58 of the Bankruptcy Act 1966 nunc pro tunc. |
| Bankruptcy Act 1966 (Cth), ss.58, 60 Real Property Act 1900 (NSW), s.74J |
| Mango Media Proprietary Limited v Valingos (2008) 26 FLR 176; [2008] NSWSC 202 Re McMaster; Ex Parte McMaster (1991) 33 FCR 70 Singh v Official Trustee in Bankruptcy (2007) 214 FLR 84; [2007] FMCA 1367 Singh v Official Trustee in Bankruptcy [2008] FMCA 521 |
| Applicant: | DYNAMIC EXCAVATION AND DEMOLITION PTY LTD (ABN 52 099 202 703) |
| Respondent: | OFFICIAL TRUSTEE IN BANKRUPTCY |
| File Number: | SYG 1297 of 2011 |
| Judgment of: | Barnes FM |
| Hearing date: | 28 June 2011 |
| Delivered at: | Sydney |
| Delivered on: | 28 June 2011 |
REPRESENTATION
| Counsel for the Applicant: | M B Obradovic |
| Solicitors for the Applicant: | M Jokovic & Associates |
| Solicitors for the Respondent: | Shaw Reynolds Bowen & Gerathy |
ORDERS
Pursuant to s.58(3) of the Bankruptcy Act 1966 (Cth) leave be granted to the applicant nunc pro tunc to commence and continue proceedings in the Supreme Court of New South Wales in suit number 2011/173419 in respect of caveat AE371885D.
The application for a declaration pursuant to s.60(2) of the Bankruptcy Act is refused.
There be no order as to costs.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1297 of 2011
| DYNAMIC EXCAVATION AND DEMOLITION PTY LTD (ABN 52 099 202 703) |
Applicant
And
| OFFICIAL TRUSTEE IN BANKRUPTCY |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
By application filed on 22 June 2011 the applicant, Dynamic Excavation and Demolition Pty Ltd, sought an order pursuant to s.58(3)(b) of the Bankruptcy Act 1966 (Cth), that leave be granted to continue proceedings in the Supreme Court of New South Wales in suit number 2011/173419 in respect of caveat AE371885D. The order that is now sought is leave nunc pro tunc to commence and continue the Supreme Court proceedings that were commenced on or about 26 May 2011, after Mr Bechara, the first defendant, became bankrupt. I am told that Mr Bechara became bankrupt on 12 May 2011 on a debtor’s petition at a time at which there was a creditor’s petition on foot presented by Dynamic. The Official Trustee in Bankruptcy is the respondent in these proceedings and is the second defendant in the Supreme Court proceedings.
The second order that is sought is a declaration pursuant to s.60(2) of the Bankruptcy Act that “the action of the bankrupt in seeking to elapse caveat AE371885D be stayed until the trustee makes an election in writing to prosecute or discontinue the action”.
In an affidavit sworn on 21 June 2011, Michael Jokovic, the solicitor for Dynamic, attested that a caveat had been lodged by the applicant against an interest in land held by Mr Albert Bechara on or about 9 December 2008 “consequent upon” the execution by Mr Bechara of a Deed of Loan in December 2004 (a copy of which was annexed to the affidavit). The land in question was owned by Mr Bechara as joint tenant with his wife. In the Deed of Loan Mr Bechara agreed to charge all his interest in real estate with his obligations to Dynamic under the Deed.
The applicant also instituted proceedings against Mr Bechara in the District Court of New South Wales in respect of the debt referred to in the Deed. In 2009 orders were made in favour of the applicant for the sum of $323,000 plus costs. The judgment in that matter (a copy of which is annexed to Mr Jokovic’s affidavit) refers to a dispute between the parties about the validity and enforcement of the caveat in reliance on the Deed of Loan.
On or about 17 May 2011 (shortly after Mr Bechara became bankrupt by way of a debtor’s petition) the applicant received a Notice to Caveator of Proposed Lapsing of Caveat from the NSW Registrar General of the Land and Property Management Authority. The notice advised that the caveat would lapse 21 days after the date of service on the notice, unless an order extending its operation was obtained from the Supreme Court of New South Wales. A copy of that document is annexed to Mr Jokovic’s affidavit. It is undated. It is not clear when Mr Bechara applied to the Registrar General under s.74J of the Real Property Act 1900 (NSW) for the caveat to lapse.
Dynamic commenced proceedings in the Supreme Court seeking an extension of the caveat by way of a summons issued on or about 26 May 2011, some two weeks after Mr Bechara had become bankrupt. I cannot be satisfied that the proceedings were commenced without knowledge of the bankruptcy.
The matter came before the Supreme Court on 6 June 2011. I am told that by that time Dynamic was certainly aware of Mr Bechara’s bankruptcy. The Trustee appeared and orders were made by consent. In any event, the summons names the first defendant as Albert Bechara and the second defendant as the Official Trustee in Bankruptcy. Given that such originating summons refers to the Official Trustee in Bankruptcy it would appear that Dynamic must have been aware of Mr Bechara’s bankruptcy at the time of the summons, as it would otherwise be unlikely that the Official Trustee would be named as a party.
In any event, on 6 June 2011, the Official Trustee consented to orders being made by the Supreme Court extending the caveat until 4 July 2011. The matter was stood over until 9.00 am on 4 July 2011.
In these circumstances Dynamic now seeks an order under s.58(3) of the Bankruptcy Act, in effect to regularise the Supreme Court proceedings it commenced to protect its interests. That order is sought on the basis that the court has the power to make an order nunc pro tunc, that it is appropriate to do so, that it is in respect of a provable debt (see Mango Media Proprietary Limited v Valingos (2008) 26 FLR 176; [2008] NSWSC 202), and that leave ought to be granted having regard to considerations such as whether the issues would be better and more comprehensively dealt with in the Supreme Court, rather than in any other way. It was also suggested that if the Supreme Court proceedings could not go ahead as proposed the applicant would incur further costs.
The Official Trustee, who was represented today, does not oppose an order being made under s.58(3)(b) of the Act. The Trustee’s consent to the caveat being extended by order of the Supreme Court is consistent with that view and I bear that in mind in relation to the discretion to make an order under s.58 of the Bankruptcy Act.
It was submitted for the applicant that the court has the power to make the order nunc pro tunc based on Re McMaster; Ex Parte McMaster (1991) 33 FCR 70, a decision of Hill J in the Federal Court (also see the discussion by Lucev FM in Singh v Official Trustee in Bankruptcy [2008] FMCA 521). I agree. It is well-established that the court has the power to grant an order nunc pro tunc giving leave to commence and continue an action where proceedings have been commenced against a bankrupt without knowledge of the bankruptcy. This is not such case as the Official Trustee was named as a party to the Supreme Court proceedings. However in Singh, Lucev FM granted an order nunc pro tunc under s.58(3)(b) in circumstances where the proceedings had been commenced with knowledge of the bankruptcy, having regard to the usual discretionary considerations, including the complexity and state of progress of the proceedings.
In this case, having regard to the matters discussed in Singh (and also see Singh v Official Trustee in Bankruptcy (2007) 214 FLR 84; [2007] FMCA 1367) I am of the view that there is no impediment to the court exercising its discretion to grant leave nunc pro tunc, and that I should follow the approach taken by Lucev FM there being nothing to indicate that his Honour was clearly wrong.
It is however necessary to have regard to whether the court should exercise its discretion and otherwise considers it appropriate to grant leave. I am satisfied that the proceedings are in respect of a provable debt (see Mango Media Pty Ltd v Valingos). I bear in mind that the Official Trustee consented to the orders that were made in the Supreme Court on 6 June 2011.
There is nothing in the circumstances of this case that is such as to render it inappropriate to grant leave in the exercise of its discretion. I have had regard to the fact that Mr Bechara became bankrupt of his own volition. The lapsing notice was served on Dynamic fairly soon after. It is apparent that the bankrupt, either very soon before or contemporaneously with his debtor’s petition, gave notice to the Registrar General under s.74J of the Real Property Act. In these circumstances there is nothing to suggest that the applicant’s Supreme Court action is an inappropriate way to proceed to seek to maintain its interest pursuant to the caveat that it lodged some considerable time ago in the circumstances referred to above.
I am also satisfied that any issues in relation to that caveat would be better and more comprehensively dealt with in the Supreme Court than in proceedings in bankruptcy. I have borne in mind that the court is not required to consider the merits of the issues raised in the Supreme Court proceedings, but rather to determine more generally whether the issues are complex. There may be some complexity in the Supreme Court proceedings given a possible issue about the validity of the caveat. Moreover the proceedings are of the nature more generally resolved in the Supreme Court. In that sense it is appropriate to be dealt with by that court, which is in a position to resolve the matter more expeditiously. In particular, it is appropriate that proceedings of this nature be dealt with in the Supreme Court proceedings which are already on foot. The matter will next be before that court very shortly. The proceedings are in that sense advanced.
However, I do not consider that it has been established that it is necessary, appropriate, or in the interests of the administration of justice for a declaration to be made under s.60 of the Bankruptcy Act. I accept the submissions for the Trustee in that respect that the order sought is misconceived, insofar as it seeks a declaration that the “action” of the bankrupt in seeking to elapse the caveat be stayed until the Trustee makes an election in writing to prosecute or discontinue the action.
Under s.60(5), “action” means any civil proceeding, whether at law or in equity. There are no such civil proceedings on foot by the bankrupt which could be stayed, or which the Trustee could elect to continue. The lodgement of an application with the Registrar General is not an “action” within s.60(2) of the Act.
As the applicant will be able to continue the proceedings before the Supreme Court, the Trustee’s response to such proceedings will no doubt be made known to that court. However it is not appropriate to make the second order that is sought.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Barnes FM
Date: 18 July 2011
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