Gao v Official Trustee in Bankruptcy of Yu Jing Zhu

[2002] VSC 285

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

PRACTICE COURT

No. 6332 of 2002

PENG YUAN GAO	Plaintiff
v
THE OFFICIAL TRUSTEE IN BANKRUPTCY OF YU JING ZHU	Defendant

---

JUDGE:	GILLARD J.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	10 July 2002
DATE OF JUDGMENT:	10 July 2002
CASE MAY BE CITED AS:	Peng Yuan Gao v The Official Trustee in Bankruptcy of Yu Jing Zhu
MEDIUM NEUTRAL CITATION:	[2002] VSC 285

---

APPLICATION TO ADD OFFICIAL TRUSTEE IN BANKRUPTCY TO PROCEEDING – Some of plaintiff’s claims arguably provable debts – Application refused – Course open to plaintiff to prove in the bankruptcy.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	In person
For the Defendant	Mr Lhuede (solicitor)

HIS HONOUR:

1. I have before me an appeal from an order made by Master Evans on 2 July this year.  The Master dismissed the plaintiff's application and ordered him to pay costs.  He now appeals.

1. In order to understand the nature of the plaintiff's application it is necessary to go back in history.  Back in 1999, Mr Gao brought this proceeding against Mrs Yu Jing Zhu.  It would appear that at some stage he gave her a large sum of money, and Mr Gao asserts that she breached various obligations and he sought recovery of the money.  Going back to some time last year, he obtained a judgment in the sum of approximately $160,000 against Mrs Zhu.  However, that amount did not cover his total claim and he was granted leave to file a further amended statement of claim, to claim further damages, which he did, pursuant to an order I made on 9 July last year.  So the position was, that he had at that point a judgment in his favour in the sum of about $160,000, and he sought damages from her in relation to other causes of action.

1. The matter has not been concluded in this court.  Mr Gao made an appointment to bring his proceeding on before a Master to assess the damages on 20 April this year, but prior to that application being brought on, the defendant filed her own petition and was made bankrupt on 10 April 2002. 

1. What is before the court is a summons filed by Mr Gao on 14 June 2002.  He seeks the following relief -

"1.       The plaintiff has leave (sic) the said trustee is in lieu of Y. Jing Zhu as a defendant in the proceeding.

2.      Contract note made by Zhu on 8 February 2002 for selling the property at 168 Hansworth Street, Mulgrave, 3170 [Volume 8938 Folio 042] be set aside.

3.      The property be sold as soon as possible but within reasonable time by the trustee or sheriff and the proceeds of the sale be paid to the court for pending further order of the court."

That summons came on before Master Evans and he dismissed it and ordered the plaintiff to pay the costs.  The summons was addressed to the Official Trustee in Bankruptcy, which appears in the heading on Mr Gao's summons.  What he sought was the joinder of the Trustee in Bankruptcy as a defendant.

1. As a result of the bankruptcy, certain consequences flow in relation to the property of the defendant, Mrs Zhu.  By reason of s.58(1), the property of the bankrupt vests forthwith in the Official Trustee.  Sub-s.(3) is relevant and reads -

"(3)Except as provided by this Act, after a debtor has become bankrupt it is not competent for a creditor:

(a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or

(b)except with the leave of the court and on such terms as the court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding."

(Emphasis added).

It is observed that the creditor is not entitled thereafter to enforce any remedy in respect of "a provable debt", unless, of course, leave of the court is obtained to continue the proceeding.  "Court" is defined in the Act as a court having jurisdiction in bankruptcy, and that does not include this Court.  If leave was to be granted to continue the proceeding in relation to a provable debt, it would be necessary for Mr Gao to go to the Federal Court to obtain that leave.

1. One then goes to s.82 to determine what debts are provable in bankruptcy.  Section 82(1) states "all debts and liabilities present or future, certain or contingent to which a bankrupt was subject at the date of the bankruptcy or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy".  Sub-s.(2) is important and it reads -

"(2)Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy."

It therefore follows that if Mr Gao's demand was in the nature of unliquidated damages which were not a provable debt in bankruptcy, i.e. that his claim does not arise out of a contract, promise or breach of trust, then the Bankruptcy Act would not apply to him and he would be permitted to continue his claim in this court.

1. Rule 9.09 of the Rules of this Court provide, for the substitution of a party on bankruptcy, and it would be open to the court in appropriate circumstances to in fact substitute the Official Trustee in Bankruptcy for the defendant, if it was thought appropriate.

1. In my view, it is necessary to consider the claim brought by Mr Gao.  It is necessary to consider his further amended statement of claim, filed 9 July 2001.  Mr Gao prepares his own pleadings and, like many pleadings prepared by litigants in person, there is some difficulty in understanding the precise nature of his claim.  In relation to paragraphs 6, 7 and 8 of the statement of claim, one may infer that Mr Gao is seeking compensation for causes of action in the nature of a breach of contract, also may be a breach of promise, deceit, and a claim in unconscionable and fraudulent dealing.  There may be a claim for breach of constructive trust.  All these causes of action appear to arise out of a transaction concerning the payment of money by Mr Gao to Mrs Zhu and the purchase of a property in Mulgrave.  It can be seen that some of his claims may be provable debts.  On the other hand, it may be that some of his claims fall outside what is a provable debt.

1. The question is:  what should the court do at this stage?  It would be most inappropriate to splinter the proceeding in this Court.  It seems to me - and, of course, it is a matter for the discretion of the court - that this application is premature.  He should proceed to lodge his proof of debt with the Official Trustee in Bankruptcy to seek compensation in relation to this matter, and, in so far as his claim is based upon the definition of provable debt in s.82(2), then no doubt the Trustee in Bankruptcy will consider his proof and decide the outcome.  That is not to say that, if he fails before the Official Trustee in Bankruptcy, he may not be able to return here, but that will depend upon what part of this claim falls outside what is a provable debt.  At this point, in my view, the most practical course to adopt is to dismiss his application in so far as it seeks to join the Official Trustee in Bankruptcy.  On the face of his amended statement of claim some of his causes of action appear to me to be arguably provable debts, and if that be so then this court cannot proceed with it without the leave of another Court.  Mr Gao will have to pursue his rights in the bankruptcy.  If he fails because his claim is not a provable debt he may return to this Court.

1. That brings me to his paragraphs 2 and 3.  Events have overtaken the paragraphs.  It appears that Mrs Zhu did enter into a contract on 8 February 2002.  The contract had not been settled by the time she became bankrupt.  The Official Trustee has in fact come to an agreement with the purchaser;  deposit moneys have been refunded and the contract has been set aside.  The property now forms part of the estate of the bankrupt.  Having said that, it would appear that the Commonwealth Bank is a mortgagee, it has a secured debt, and it is in the process of enforcing its security.  It is unnecessary to make any orders in the form of paragraphs 2 and 3, assuming the Court did have power to do anything about it anyway, which I doubt.

1. As a result, in my view, the summons should be dismissed.  It follows that the appeal should be dismissed.  The summons remains dismissed based upon the orders made by Master Evans, and the only other question is the question of costs.

1. I order -

1.That the appeal from the orders made by Master Evans on 2 July 2002 is dismissed and the orders are affirmed.

2.That the plaintiff pay the costs of the Official Trustee in Bankruptcy of the appeal.

---