Free v Ma

The applicants, represented by Mark Addison, sought leave from the Federal Court to commence proceedings against Hana Ma, who is in bankruptcy, alleging insolvent trading under the Corporations Act 2001 (Cth). The applicants claim that Hana Ma, as a director of the company, engaged in insolvent trading, and they seek to recover losses through the Court. The application was made under section 58(3) of the Bankruptcy Act 1966 (Cth), which requires leave from the Court to commence legal proceedings against a bankrupt in respect of a provable debt.

The court had to determine whether to exercise its discretion to grant leave for the applicants to commence proceedings against Hana Ma. The legal issue was whether the applicants' proposed proceedings were necessary, involved complex factual and legal issues better dealt with in court, had the consent of the trustee, and did not seek to gain an advantage over other creditors. The court considered that leave could be granted even if only some of the claims fell under section 58(3)(b) and that a bankrupt is not a necessary party to such proceedings. The court also noted that the Trustee had consented to the grant of leave and that the applicants did not seek to gain any advantage over other creditors.

The court decided to grant leave, finding that the proceedings were necessary to recover against AIG under the insurance policy and that the issues involved were better dealt with in court. The court granted leave in the terms sought by the applicants. The court also ordered that the applicants' costs of the application were to be costs in the bankrupt estate of Hana Ma.

This decision highlights the importance of the discretion conferred on the Court by section 58(3) of the Bankruptcy Act, which is unfettered. The court considered the necessity of the proceedings, the complexity of the issues, the consent of the Trustee, and the lack of any attempt to gain an advantage over other creditors in deciding to grant leave. The decision also emphasises that a bankrupt is not a necessary party to such proceedings and that the Court may grant leave without finally determining whether the need for leave has arisen.