Feiglin v Ainsworth (No 3)
[2013] VSC 560
•21 October 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2010 03265
BETWEEN:
| ESTHER CELIA FEIGLIN and | Plaintiffs |
| MARK FEIGLIN | |
| – and – | |
| DAVID SARGON AINSWORTH and others as per attached schedule | Defendants |
JUDGE: | MUKHTAR ASJ | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 7 October 2013 | |
DATE OF JUDGMENT: | 21 October 2013 | |
CASE MAY BE CITED AS: | Feiglin v Ainsworth (No 3) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 560 | |
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BANKRUPTCY AND INSOLVENCY ― Statutory stay of action upon bankruptcy ― Action by co plaintiffs ― Second plaintiffs action summarily dismissed ― Prospect of appeal ― Whether appeal is “action” ― Statutory election by trustee in bankruptcy to prosecute or discontinue action ― What amounts to giving of notice by defendant to require the exercise of the election ― Assignment of bankrupt’s cause of action to other plaintiff ― Whether assignee competent to seek leave to appeal dismissal of case brought by bankrupt ― Bankruptcy Act 1966 (Cth) s 58(3), 60(2), s 60(3)
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Dr J Bleechmore | Chadwicks The Law Firm |
| For the Defendants | Mr S Stuckey | Dimos Lawyers |
HIS HONOUR:
The first and second plaintiffs, Esther and Mark Feiglin, are wife and husband respectively. The first defendant David Ainsworth is the wife’s father. This family dispute is over residential land and money.
In some peculiar circumstances, the wife has applied for an extension of time to file a notice of appeal from a judgment given and orders made by Randall AsJ on 5 March 2013. By those orders, his Honour summarily dismissed a discrete part of the proceeding in which the husband alone made a claim against his father in law to account for some moneys allegedly due to him as a commission. He was pursuing a commission of at least one-half of a $5 million fee allegedly earned by Ainsworth. That claim was held to be time barred, and therefore summarily dismissed. By the time those court orders were made the husband had been made a bankrupt. The wife now seeks leave to appeal out of time. She seeks to do so as an assignee from the trustee in bankruptcy of her husband’s (presently dismissed) cause of action. Her application was made by summons filed on 6 August 2013. That is almost six months after the expiry of the 14 day time limit for appeal ordinarily under rule 77.06.
There is a threshold question whether it is competent legally for the wife to make this application.
An “action” commenced by a person who subsequently becomes a bankrupt is stayed by operation of s 60(2) of the Bankruptcy Act 1966. And under that section, the action remains stayed until the trustee in bankruptcy elects in writing to prosecute or discontinue it. The defendants say the right of appeal is an aspect of the action and could only be exercised (by anyone) if the trustees had elected to prosecute an appeal in the stayed action. The defendants say they served the trustee with a notice of the action under s 60(3) of the Bankruptcy Act which required him to make an election whether to prosecute or discontinue the action. They say the trustee did not respond, and is therefore deemed to have abandoned the action under that section. There is a real question whether the defendants truly did give the requisite statutory notice. The defendants say, at worst, the trustee has assigned an abandoned action; or, at best, he has assigned a stayed action over which he has not made an election; but either way, it is not competent for the wife to make the election and seek to appeal out of time.
For the reasons that follow I do not sustain the defendants’ objection
The case is a little complicated. It will elucidate the issue to give a brief account of the elements of the case and the steps in the litigation that preceded the orders of Randall AsJ.
The writ was filed on 15 June 2010. On 13 May 2011, the plaintiffs filed a proposed amended statement of claim. That document made amendments to the composition of the plaintiffs’ joint case which alleges the defendants are estopped from denying that the residential property in which the Feiglins live at 32 Meadow Street in St Kilda East is held beneficially for them, upon repayment of certain moneys which they acknowledge they owe. Stripped to its essentials, the Feiglins’ case is that at a time when they were owners of that land, they experienced financial difficulties and were at risk of losing their home to a bank as mortgagee. They sought Ainsworth’s help. He gifted them some money and also lent them some money to discharge the mortgage. This was done, it was alleged, on terms that the Feiglins would transfer the property to a company that would hold the property on trust for them; they would pay rent, outgoings and other costs; they would indemnify Ainsworth for interest and charges under the loan; and upon repayment of the loan, and observance of all indemnities, the land would be transferred back to the Feiglins.
The defendants’ case in essence is that the Feiglins ceased to make any payments for rent; did not make any interest payments to Ainsworth; have not indemnified the trustee for costs and expenses of the acquisition and holding costs; and have repudiated the arrangement and never sought to repurchase the property. The defendants have counterclaimed for possession of the property and payment of money.
That part of the case sets the context for the newly added claim by the husband against his father in law Ainsworth. It is a claim for commission. In essence, Mark Feiglin alleges that Ainsworth was a taxation, finance and investment advisor and that he Feiglin had access to and influence over people who were in a position to benefit from such advice. He alleges that in about 1985 Ainsworth agreed to share equally any fees earned from clients that Feiglin introduced to him. None of this was in writing. He alleges that in about 1991 or 1992, Ainsworth earned a fee of about $5 million from a client thought to be one Joseph Gutnick to which he Feiglin was entitled to one half under the agreement. He alleges Ainsworth has failed to account and failed to remit the commission. He asks for an account of fees earned by Ainsworth, and in particular, an account of fees earned by him as a result of his introduction of Gutnick.
The legal positioning is easily discernible. The financial obligation acknowledged by the Feiglins as being owed to Ainsworth for the housing arrangement will be surpassed by the commission payment claimed by Feiglin against Ainsworth.
The defendants opposed the amendment on the basis that the new claim for commission was time barred under the Limitation of Actions Act1958, at the latest, six years after 1992. The writ in the proceeding was filed 18 years later in June 2010.
In a judgment published on 19 September 2011[1] I found that the remedy sought by the husband in the proposed commission claim was subject to a six year limitation period under s 6(2) of the Act. That claim was, I concluded, based on a simple duty to account which ― be it at law or equity ― was subject to that six year time limitation. I concluded that the duty to account was borne of a contractual duty and not a fiduciary duty; but that in any event, even if it was an equitable remedy arising under a fiduciary duty, the limitation period could not be side-stepped because equity would follow the law and apply the six year time limit by analogy anyway. I refused leave to amend, but for reasons stated in my judgment[2] I gave the husband an opportunity to file and serve another amended statement of claim. That was given to enable him at his counsel’s request to consider pleading additional facts to proactively make a case for a postponement of the limitation period under s 27 of the Act. That section says where relevant:
[1][2011] VSC 454.
[2]See paras [45] and [46].
Where, in the case of any action for which a period of limitation is prescribed by this Act —
(a)the action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent; or
(b)the right of action is concealed by the fraud of any such person as aforesaid; or
(c)the action is for relief from the consequences of a mistake —
the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it: …
On 17 October 2011, the plaintiffs filed another amended statement of claim. It adhered to the same form as the previous proposed pleading. It maintained the allegation of a fiduciary relationship. There were two additional allegations to make a case, proactively as I have said, that the limitation period had been postponed. The allegations were:
8W In or about May 2007, Mark discovered that –
(a)Ainsworth had provided further services of an extended and very valuable kind to the third party, and
(b)Ainsworth had earned further fees in the region of $5,000,000 in respect of the provision of these further services.
8XThe breaches of the Commission Agreement and fiduciary duties of Ainsworth, as pleaded respectively in paragraphs 8T and 8U hereof, constituted fraud by Ainsworth within the meaning of s 27 of the Limitation of Actions Act 1958.
8YFurther to paragraph 8W and 8X hereof, or in the alternative, the right of action of Mark arising out of the Commission Agreement was concealed by the fraud of Ainsworth in failing to apprise Mark that –
(a)he had provided further services of an extended and very valuable kind to the third party, and
(b)he had thereby earned fees in the region of $5,000,000.
To those allegations a defence was filed which said –
8WThey deny each and every allegation contained in paragraph 8W and say further that from 1995 at the latest the Second Plaintiff has been alleging that Mr Ainsworth owed him substantial money by way of commission earned by him in respect of substantial fees earned by Mr Ainsworth in providing services to Joseph Gutnik, which fees he alleged Mr Ainsworth had failed to account to him in respect of.
8XThey deny each and every allegation contained in paragraph 8X and say that as a matter of law the causes of action alleged by the Second Plaintiff do not involve any element of fraud and accordingly are not actions for fraud within the meaning of Section 27 of the Limitation of Actions Act 1958.
8YThey deny each and every allegation contained in paragraph 8Y and say further that if any of the facts were true, which is expressly denied, the Second Plaintiff was aware of those facts by 1995.
9Further, any claim which the Second Plaintiff asserts to an accounting in respect of transactions or relationships alleged between himself and Mr Ainsworth:
(a)arose, on the allegations made, at the latest in 1992; and
(b)are barred by virtue of Section 5(2) of the Limitation of Actions Act 1958.
By summons filed 25 November 2011, Ainsworth moved for summary judgment against Feiglin on the commission claim. In a judgment published on 5 March 2013, Randall AsJ granted that application.[3] His Honour gave judgment for Ainsworth on the commission claim as contained in paragraphs 8L to 8Y of the further amended statement of claim. There is no need for me to refer to the facts before his Honour and the legal analysis undertaken, or to remark. Ultimately it was concluded[4] -
… I determine that the plaintiffs have no real prospect of success in prosecuting the commission claim when the right of action was complete in or about 1991 or 1992, was formulated in 1998 and could have been distilled from the correspondence in 1995 and 1996. In those circumstances the contention that the cause of action only crystallised in May 2007 upon being informed of the amount of $5,000,000, is nothing more than fanciful.
[3]See [2013] VSC 83.
[4]See [86].
Now, I come to the beginning of the current controversy. Before his Honour had given his judgment and made orders, but after the application had been made and his Honour had reserved his decision, a sequestration order was made against the estate of Mark Feiglin. That was on 27 September 2012. Despite that, on 19 March 2013 (that is, within the 14 day appeal period), a notice of appeal was filed by Esther Feiglin ostensibly on behalf of her bankrupt husband. Questions about the validity of a notice of appeal lodged without the authority of the appellant or the trustee are academic because the defendants challenged the competence of the appeal given Feiglin’s bankruptcy.[5] That challenge was conceded. On 9 April 2013, an order was made by consent giving leave to discontinue that appeal.
[5]On the question of validity see Adams v London Improved Motor Coach Builders [1920] 1 KB 495 at 503.
The next moves are significant for present purposes. On 13 May 2013 Ainsworth’s lawyers sent to the Feiglin’s trustee in bankruptcy proofs of debt for David Ainsworth, Ainsworth Melbourne Properties Pty Ltd (the second defendant) and Midmonsec Pty Ltd (the third defendant). Each proof of debt was based on costs orders made against Mark Feiglin on 9 February 2013 and 5 March 2013. They were orders for costs to be taxed. The proof stated a figure of approximately $28 000 for the total amount of costs under both Court orders. With the proofs, the liquidator was given the Court’s costs order of 9 April 2013 and a copy of the judgment of Randall AsJ on 5 March 2013 the last paragraph of which stated a proposed order for costs in the defendants’ favour.
It is necessary to state the actual contents of the e-mail communication from Ainsworth’s solicitors. It said no more than this to Mr Robert Tornatore from Messrs Deloitte Touche Tohmatsu acting for the trustee: –
Dear Robert,
We refer to the above matter [scil. “Bankrupt Estate of Mark Aaron Feiglin (No: VIC 3432/12/4)”] and attach the following for your attention:
1. David Sargon Ainsworth;
2. Ainsworth Melbourne Properties Pty Ltd;
3. Midmonsec Pty Ltd;
4. Supreme Court Order dated 9 April 2013;
5. Supreme Court Order dated 5 March 2013.
Should you have any queries, please do not hesitate to contact me.
On 18 June 2013 a letter was sent to the trustees from Ainsworth’s solicitors referring to that email. It said:
We refer to our email to Mr Tornatore of 13 May 2013 to which we attached proofs of debt of Mr D S Ainsworth, Ainsworth Melbourne Properties Pty Ltd and Midmonsec Pty Ltd, as well as Supreme Court Orders made on 9 April 2013 and 5 March 2013 in proceeding number S CI 2010 03265.
This email constituted notice to the Trustee in Bankruptcy pursuant to section 60(2) of the Bankruptcy Act 1966. Neither we nor our clients have received advice of an election made by you pursuant to section 60(3) of the Act and you are now deemed to have abandoned the action.
Please note that we shall be writing to the Court seeking to have the matter listed as soon as practicable and we have written to the solicitors for the plaintiff to advise accordingly.
In the meantime we note that you have not provided us with any sent to creditors. Please provide this office by return with all circulars to creditors, minutes of meetings and any other documents sent to creditors in this matter.
I come now to the instant application. It is made by the first plaintiff Esther Feiglin. She now seeks an extension of time to file a notice of appeal from the judgment and orders of Randall AsJ. Her affidavit in support of the application says these things:
(a)after his Honour’s decision, she asked her lawyers to represent to the trustee in bankruptcy that he should make an election to continue to prosecute the proceeding and to proceed with an appeal;
(b)the notice of appeal (subsequently discontinued) was drawn on her instructions pending the decision of the trustee in bankruptcy;
(c)the trustee in bankruptcy elected not to prosecute the proceeding however, she entered into negotiations with him to obtain an assignment of the cause of action;
(d)the trustee agreed to assign the action to her and did so by Deed dated 1 August 2013;
(e)having obtained an assignment of her husband’s cause of action, she now wished to prosecute the claim, and to prosecute an appeal.
Clause 2 of the deed of assignment says –
In consideration of payment by the Assignee to the Assignors of the sum of $5,000.00, which sum is payable upon the execution of this Deed, the Assignors hereby assign their right title and interest in the Action to the Assignee, effective upon the execution of this Deed and subject to the terms of this Deed.
“Action” was defined under cl 1.1 to mean –
…any causes of action held by the Bankrupt in the Proceedings and those set out in the proposed Further Amended Statement of Claim dated 17 October 2011 and which vested in the Assignors pursuant to section 58 of the Bankruptcy Act 1966
“Proceedings was defined to mean –
…the proceedings issued by the Assignee and the Bankrupt against David Sargon Ainsworth and others out of the Supreme Court of Victoria and numbered S CI 2010 03265.
The statutory stay
There are two immediate consequences to a sequestration order.
First, s 58(3) vests the property of the bankrupt upon the trustee in bankruptcy forthwith upon the debtor becoming a bankrupt. That property includes such rights of action as Mark Feiglin had prior to his bankruptcy. He had two sets of rights or choses in action: (i) his property claim made jointly with his wife that the Meadow Street property was held beneficially for them; and (ii) his separate money claim for commission. His wife may still proceed with the property claim and what steps she or the trustee may take over that part of the proceeding is no part of this adjudication. The commission claim as vested in the trustee has been held by the Court to be time barred. That legal state of affairs prevails unless and until the judgment is set aside on appeal.
The second conclusion is that the “action” is stayed. There is said to be a controversy whether the word “action” in s 60(2) refers merely to the legal proceedings instituted or the underlying cause of action. In Temsign Pty Ltd v Biscen Pty Ltd [6] Wheeler J said that the better view was that it refers to the proceeding. I would take that view because I think a stay is a procedural phenomenon that suspends, as it were, a legal proceeding. It is not apposite I think to speak of a stay of a cause of action. Likewise the expressions to “prosecute or discontinue” are naturally or by common usage referable to a legal proceeding. The proceeding is the means by which a cause of action is propounded.
[6]157 ALR 83 at 92-3.
The first question is: does a stay of the proceeding on bankruptcy extend to the prosecution of an appeal?
An appeal has been said to be a proceeding distinct from that in which the judgment or order challenged on appeal was given or made: see Carpenter v Pioneer Park Pty Ltd.[7] Dr Bleechmore, counsel for Esther Feiglin, seizes on that proposition to make a submission that there is therefore no stay of the proceeding under s 60(2) as far as an appeal is concerned because that section refers to an action commenced by a person who subsequently becomes a bankrupt. He submits that the appeal here (or an application for leave to appeal out of time) is a proceeding that comes into existence after the bankruptcy and is therefore not caught by the statutory stay or the election provisions. Therefore, he submits, stay is irrelevant, and the liquidator is at liberty to assign the ability to appeal like any other chose in action of the bankrupt and has done so.
[7](2008) 71 NSWLR 577 at 582.
I do not accept that submission. The exercise of a right of appeal is, in one sense, a distinct step after a first instance determination. But it emanates, or is an aspect of the proceeding from whence it derives. I would say it is a distinct step in the proceeding which all the while concerns the rights sought to be asserted and the claims made in the initiating proceeding. If an action is stayed then in my view it includes any appeal in that action. The evident purpose of s 60(2) is to put a halt to that proceeding. The oddity here is that the action that was stayed was subsequently dismissed by Randall AsJ. But to seek leave to appeal out of time to set aside that judgment and reviving the action amounts to prosecuting a stayed action. As a first step, I would hold that any right of appeal emanating from Mark Feiglin’s commission claim against Ainsworth could not be exercised for as long as the proceeding was stayed.
But that does not disqualify this application.
The next question concerns abandonment under s 60(3). The relevant sections state:
(2)An action commended by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
(3)If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.
Mr Stuckey counsel for the Ainsworth submits the email correspondence on 13 May 2013 and 18 June 2013 from the defendant’s solicitors amounted to a “notice of the action” for the purposes of s 60(3), and the action was abandoned. I reject that submission. Those communications did not purport evidently, or constructively, to be giving a statutory notice. Those communications had as their manifest purport the lodging of a proof of debt. I think it is a forced characterisation of those communications to say that they also amounted to a notice to elect under s 60(3). At the very least, a notice under section 60(3) must contain sufficient information to draw the trustee’s attention to the fact that time will run against the trustee upon service of the notice. This was established by the Full Court of the Federal Court in Aware Industries v Robinson.[8] There the Court said –
It might be thought that there the requirements of s 60(3) would be satisfied by service of a document which said no more than that an action in an identified court had been commenced by the bankrupt to which the person serving the notice was a defendant. But we do not regard the notice contemplated by s 60(3) as a mere provision of the details of the action. The consequences of the effluxion of time without an election to prosecute are serious. An action which may have value would be lost. The purpose of the notice is to alert the Trustee to the need to consider whether to prosecute or discontinue the action. In those circumstances it is appropriate to read s 60(3) as requiring that the notice contain sufficient information to draw the Trustee’s attention to the fact that time will run against the Trustee upon service of the notice.
[8](1997) 75 FCR 600.
As the Court went on to say, ideally a notice would: carry the description of being a notice under s 60; recite the existence of the action; identify the notice–givers as being the defendants in that action; require the trustee to make a written election within 28 days of service; and state that in default of such advice the trustee would be deemed to have abandoned the action. None of these matters were present here. The lodging of a proof of debt is not a s 60(3) notice.
I can see that at the time those communications were sent the action stood dismissed and the notice of appeal instigated by Esther Feiglin had been discontinued. That means there was nothing really to put to the trustee apart from perhaps asking him whether he intended to take up the cudgels and seek to appeal out of time. In reality, defendants tend to keep quite or at least not agitate matters, especially where there are time limits for appeal anyway. Despite that, if the question is whether the trustees have been deemed to have abandoned the action for the purposes of any prospective appeal by reason of not responding to the two communications in May and June 2013, I would hold that there has not been a notice and there has not been an abandonment.
That leads me to the deed of assignment, which I think is the transaction where the real issue lies. The commencing principle is that the trustee can only assign what he has got. So what has been assigned? In my view, what has been assigned is a cause of action which had been summarily dismissed but was capable of revival upon appeal, if successful. As I have said earlier the cause of action or the action as assigned includes an appeal.
Now, the question as I see it on close analysis is whether the fact of assignment shows that the Trustee had elected to proceed with the action and then assigned it. Mr Stuckey relies on a construction of section 60 (2) as given by Wheeler J in Temsign Pty Ltd v Biscen Pty Ltd[9] that –
The first thing that should be noted about s 60(2) is that the Bankrupt’s action is stayed until the Trustee makes election to prosecute or discontinue. The responsibility for this decision apparently cannot be assigned. There is nothing to suggest, as the submissions of the Trustee’s solicitors appear to assume, that the statutory scheme provides for the Trustee’s assignment of the chose in action without any election being made by the Trustee.
[9]157 ALR 83 at 92.
Temsign dealt with a particular fact situation. The Court held that there is no power in a trustee in bankruptcy to assign a chose in action to a bankrupt. But in so doing, the Court accepted the submission that by making an assignment before an election, the Trustee had put it out of his power to make a valid election, and the action remained stayed. If that is correct, or applicable here, Esther Feiglin has taken for valuable consideration an assignment of the action including a right of appeal but can do nothing with it because it is stayed. And, if the defendants are right, the only way to “un-stay” is for the trustee to regain the subject matter of the assignment, and either apply himself for an extension of time to appeal or elect overtly to prosecute the appeal and assign again to her.
From my own researches, I have discovered that it is those sort of machinations that led Madgwick J in Brien v P&E Phontos Pty Ltd[10] to distinguish Temsign and give a different construction of the section, which aids in finding the legal solution here. The Brien case is significant. It was a case where a trustee in bankruptcy applied for an extension of the 28 day time limit within which to make an election to prosecute under s 60(3). The trustee had first, assigned his right, title and interest in the causes of action to the debtor’s father and subsequently applied to extend the 28 day limitation in which he may elect to prosecute the action. The opposing argument was that if the trustee had put himself in a position where by assignment he no longer had any right to conduct the action, then he cannot elect to prosecute it.
[10](1999) 91 FCR 209.
His Honour rejected that submission and in doing so settled on a construction of the Act which I think is capable of application in this case. The case supports the view, which I would take, that the expression “stayed until the trustee makes election, in writing, to prosecute … the action” in s 60(2) may include the meaning “to prosecute or to arrange the prosecution of the action by an assignee who is not a bankrupt”.[11] In other words, it is legally sound for an assignment to take effect which predates an election. His Honour went further to say, without deciding the question, that the written assignment can itself amount to an election contemplated by s 60(2).
[11]At [13].
The passage of his Honour’s reason is worthy of reproduction in full. It was adopted in its entirety by Mason P in Baker v Sheridan.[12] Madgwick J said (with my underlining for emphasis):
12However, there is nothing to stop a trustee, after an election to prosecute the action, from assigning the rights of the bankrupt estate in the action to a third party. The third party may then be substituted as the plaintiff. On such an assignment and substitution, the trustee would have no continuing power to influence the course of the proceedings, except by agreement with the assignee. Thus, the purpose of the Bankruptcy Act is not to assure the defendants in an action begun by a bankrupt that, if the trustee elects to prosecute the action, then he or she will necessarily remain personally available to meet costs or to direct the manner of further prosecution of the action.
13These considerations affect the meaning to be accorded to the expression “to prosecute” in s 60(2). The phrase cannot mean “to prosecute personally” or “to prosecute under the trustee's direction”. Once it is appreciated that the phrase, on the contrary, may include the meaning, “to prosecute or to arrange the prosecution of the action by any assignee who is not a bankrupt”, the nature of the election is illuminated. The ability so to elect is obviously not retroactively vitiated by the subsequent assignment of the right to conduct the action in question.
14Neither, in my opinion, is there any warrant to constrict the notion of an “election” in s 60(2) so as to make it impossible for an assignment which pre-dates the election to take effect. To interpret the notion of the trustee's “election” as the respondents contend is apt to have a number of unfortunate effects. One is to give an unwarranted benefit to the defendants in the action. Another is to disappoint the assignee. A third may be to prevent the bankrupt's estate from retaining either the consideration for the assignment or the rights in the action. Further, it is not the case that upon an assignment of the right to the benefit of a particular action, the trustee is irrevocably disconnected from the action: the trustee might buy back such a right. Had the trustee done so here, then, as I apprehend it, the objection taken could not be sustained. The applicant might, indeed, still do so. It would be odd if the ability to elect could be extinguished and then resurrected in that way.
15It is apparent, from the trustee's having assigned the right to conduct the action, that it was the trustee's intention that the action should continue. It would be the trustee's implied obligation to the assignee not to fail, except for reasonable cause, to take available steps to make the assignment effective. The Act expressly requires no formality of an election except that it be in writing and implicitly it only requires that such election be communicated to the defendant(s) in the action and to the forum court within a reasonable period or periods. The written assignment in this case may therefore have amounted to an election contemplated by the Act. However, it is unnecessary to decide that question.
16These considerations lead me to think that the expression “to prosecute” in s 60(2) should be interpreted as including the meaning “to arrange the prosecution of the action by an assignee, who is not a bankrupt, whether or not the assignment occurs before or after the trustee's election to prosecute”.
[12][2005] NSWCA 408 at [37] and [38].
His Honour distinguished Temsign on the facts, and declined to follow it, saying
17This view is at odds with remarks expressed by Wheeler J in Temsign v Biscen (1998) 157 ALR 83 at 93. However, that was a case of purported assignment by a trustee to the bankrupt himself. The assignment was held to be contrary to the policy and purposes of the Bankruptcy Act. It was not necessary to decide whether an assignment of the rights in the action might be made to a non-bankrupt assignee. The case should not be read as so deciding and it is, accordingly, distinguishable. In any event, there is no sign that the sorts of considerations that weigh with me were urged before Wheeler J. If that case should be read as supporting a conclusion contrary to my own, then, despite the special importance of seeking uniform interpretation of a much-litigated Commonwealth statute, I would respectfully decline to follow it, believing that aspect of the decision, to be wrong. It will be apparent from my general approach to the present case that I respectfully consider the principal basis for the decision in Temsign to be correct and that I have assumed its correctness in what I have said above.
I too think that the assignment here, in writing, manifestly reveals the trustee’s intention to prosecute the action not personally but by putting it in the hands of the assignee to do so. It might be questionable to say that an assignment per se means an election has been made, because election as an action involves making a choice between inconsistent positions, and that naturally connotes means communication to the defendants as parties affected. Defendants who want to be active can use s 60(3) to force the issue. But I have found on the facts that the defendants did not serve a s 60(3) notice, thus there is no time limit for which an election might be made by the trustee under s 60(2). If as Brien says, section 60(2) implicitly requires notification to the defendants then it can come at any reasonable time.
I think there is no injustice or disregard of the statute to say that the revelation of the assignment has occurred at the latest in this very application proceeding in the forum court. An election to prosecute has been shown to have been made. The assignment is effective. The statutory object has been fulfilled.
For those reasons, I would hold that that the first plaintiff has standing and is competent to make the application for an extension of time to appeal. I shall hear the parties on the form of order, but I have in mind an order that the defendants’ objection to competency of the application is disallowed.
SCHEDULE OF PARTIES
| S CI 2010 3265 | |
| BETWEEN: | |
| ESTHER CELIA FEIGLIN | First Plaintiff |
| MARK FEIGLIN | Second Plaintiff |
| – and – | |
| DAVID SARGON AINSWORTH | First Defendant |
| AINSWORTH MELBOURNE PROPERTIES PTY LTD | Second Defendant |
| MIDMONSEC PTY LTD | Third Defendant |
| AND BETWEEN: | |
| MIDMONSEC PTY LTD | Plaintiff by counterclaim |
| – and – | |
| ESTHER CELIA FEIGLIN | First defendant by counterclaim |
| MARK FEIGLIN | Second defendant by counterclaim |
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