Eight Star Finance Pty Ltd v Harricks
[2008] FMCA 953
•8 July 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| EIGHT STAR FINANCE PTY LTD & ANOR v HARRICKS & ORS | [2008] FMCA 953 |
| BANKRUPTCY – Application for leave to proceed, nunc pro tunc, where applicant was aware of bankruptcy, where proceedings required to protect caveat securing debt. |
| Bankruptcy Act 1966, s.58(3)(b) Queensland Land Title Act 1994, s.126 |
| Singh v Official Trustee in Bankruptcy & Anor [2007] FMCA 1367 |
| Applicants: | EIGHT STAR FINANCE PTY LTD (ACN 118 450 785) AND PACIFIC PERPETUAL INVESTMENTS PTY LTD (ACN 127 421 505) |
| Respondents: | WAYNE GEOFFREY HARRICKS ARMSTRONG WILY (AS TRUSTEE IN BANKRUPTCY OF THE ESTATE OF WAYNE GEOFFREY HARRICKS) AND ARMSTRONG WILY (AS TRUSTEE IN BANKRUPTCY OF THE ESTATE OF ATHIL SINGH |
| File Number: | SYG 1732 of 2008 |
| Judgment of: | Raphael FM |
| Hearing date: | 8 July 2008 |
| Date of Last Submission: | 8 July 2008 |
| Delivered at: | Sydney |
| Delivered on: | 8 July 2008 |
REPRESENTATION
| Solicitors for the Applicant: | WKA Legal |
| Solicitors for the Respondent: | No appearance |
ORDERS
That the Applicant’s Application be returnable instanter.
That under s.58(3)(b) of the Bankruptcy Act the applicant have leave:
(a)Nunc pro tunc, to commence, and take steps as have already been taken in proceeding D1751 of 2008 in the District Court of Queensland (‘District Court Proceedings’);
(b)To take fresh steps in the District Court proceedings, on the following conditions:
(i)That the Applicant will seek an amendment of the Statement of Claim filed in the District Court Proceedings so as to add the following Defendant’s names:
-Armstrong Wily (as Trustee in Bankruptcy of the Estate of Wayne Geoffrey Harricks); and
-Armstrong Wily (as trustee in Bankruptcy of the Estate of Athil Singh);
(ii)That the Applicant will not take steps in the District Court Proceedings without giving 7 days notice to the Trustee in Bankruptcy;
(iii)That the Applicant will notify the Trustee in Bankruptcy of any settlement proposed to be entered into in respect of the District Court proceedings.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1732 of 2008
| EIGHT STAR FINANCE PTY LTD (ACN 118 450 785) AND PACIFIC PERPETUAL INVESTMENTS PTY LTD (ACN 127 421 505) |
Applicants
And
| WAYNE GEOFFREY HARRICKS ATHIL SINGH |
Respondents
REASONS FOR JUDGMENT
In this matter the applicants seek an order under s.58(3)(b) of the Bankruptcy Act 1966 (the “Act”) for leave nunc pro tunc to commence and take steps as have already been taken in proceedings D1751/2008 in the District Court of Queensland and to take certain further steps outlined in paragraph 2(b) of the application.
The matter first came before me yesterday as an urgent application but because I was not satisfied with certain matters relating to the application I ordered that it be adjourned until 2.15 pm today and that the Trustee in Bankruptcy of the two bankrupt respondents be joined as parties.
There has now been produced to me two affidavits of Warwick Lang Keay from one of which I am satisfied that the Bankruptcy Trustee has consented to the orders requested being made. The other affidavit explains the necessity for the orders.
It appears that the bankrupt respondents, Harricks and Singh, borrowed money from the applicants on the security of certain properties and on the basis that certain other properties would also stand as securities but that no evidence of the securities being taken, such as a caveat, would be provided unless there was a breach of the loan agreement under which the money was lent and the properties were secured.
Needless to say, one of the terms of the loan agreement was that it would be breached if either of the borrowers became bankrupt or if they failed to make payments under the agreement. The borrowers did fail to make payments under the agreement and the applicant creditors sought to enforce its terms. They registered caveats in the Land Titles Office in Queensland where the properties were situated.
The caveats were lodged on or around 10 April 2008. In early May the applicants discovered that the two debtors were bankrupt and that Armstrong Wily was their Trustee. The solicitor for the creditor indicates in his affidavit that caveats lodged on title under the Queensland Land Title Act 1994 (“Land Title Act”) will, pursuant to s.126 of that Act, lapse unless the caveator commences proceedings in a court of competent jurisdiction to establish the interest claimed under the caveat. Those proceedings could have been commenced before the caveat was lodged but in this case they were not. Proceedings were commenced in the District Court of Queensland on 30 June 2008. By this time the plaintiffs in those proceedings, the applicants today, were aware of the bankruptcy of the respondents, who are the defendants. Notwithstanding this, no application under s.58(3)(b) was then made.
The three months referred to in s.126 of the Land Title Act expires on 10 July 2008 and the applicants have taken the view, probably rightly, that unless I grant the application the proceedings in the District Court are invalid and therefore will not fall within the definition of proceedings referred to in s.126(4)(a)(2) of the Land Title Act.
If the applicants are successful in their proceedings the proceeds of the sale of any property will be first used in order to repay the applicants in respect of their loan. The loan is secured upon the property therefore the funds would not be funds to which the Bankruptcy Trustee would be entitled. Any excess arising out of the sale of the property would be vested in the Trustee. It is therefore understandable that the Trustee currently has little interest in the continuation or otherwise of these proceedings; but if he later came to the view that the loan agreement is not valid the orders that the applicants have requested will allow the Trustee to take part in the proceedings and to defend them in the interests of the unsecured creditors.
Whilst it is always a concern that a solicitor who has knowledge of a bankruptcy should have commenced proceedings without obtaining the leave of the court this is not fatal to an application; Singh v Official Trustee in Bankruptcy & Anor [2007] FMCA 1367. Having considered the affidavit of Mr Keay and noted the views of the Trustee, I believe it is appropriate to make the orders requested. But those orders must be served not only on the Trustee but also on the individual bankrupts so that they can be made aware of what has occurred. I do not propose to make any order for costs in this matter.
I certify that the preceding nine (9) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date:
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