Garrett v Cahill - [2015] VSC 572

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
PROFESSIONAL LIABILITY LIST

S CI 2015 01232

ANDREW MORTON GARRETT	Plaintiff
v
FRANCIS CAHILL	First Defendant
and
ALTIUS PARTNERS PTY LTD	Second Defendant

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JUDGE:	RIORDAN J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	5 OCTOBER 2015
DATE OF JUDGMENT:	20 OCTOBER 2015
CASE MAY BE CITED AS:	GARRETT v CAHILL
MEDIUM NEUTRAL CITATION:	[2015] VSC 572

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BANKRUPTCY – Stay of pending proceeding commenced by bankrupt – Election by trustee in bankruptcy pursuant to s 60(2) of Bankruptcy Act 1966 (Cth) to discontinue proceeding – Whether action is stayed when party to proceeding, acting as trustee, subsequently becomes bankrupt – Whether an action as defined in s 60(5) of the Bankruptcy Act 1966 (Cth) includes claims alleging conduct which contravenes criminal statutes – Severability of claim against solicitor for failure to prosecute a defamation claim – Claims stayed against defendants except for defamation related claim – Statement of claim struck out with limited leave to re-plead.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	In person	In person
For the First and Second Defendants	Mr C Juebner	K&L Gates

HIS HONOUR:

By a generally indorsed writ filed on 19 March 2015, the plaintiff claims the sums of $310,000 and $4.5 million from the first and second defendants (‘the defendants’) essentially on the basis of alleged breaches of trust.

On 15 May 2015, a sequestration order was made against the estate of the plaintiff in the Federal Circuit Court. Mr Timothy Holden was appointed the sole trustee of the bankrupt estate of the plaintiff.

By letter dated 17 June 2015, Mr Holden elected under s 60(2) of the Bankruptcy Act 1966 (Cth) (‘the Act’) not to continue with this proceeding.

The defendants now seek in substance the following orders, which they contend are consequential upon Mr Holden’s election under s 60(2) of the Act:

(a) the claim against the second defendant be dismissed with costs; and

(b) the plaintiff file and serve a fresh statement of claim pleading the defamation related claim[1] against the first defendant, but no other claims.

[1]See paragraph [31] below.

Background

In summary, the general indorsement contained the following allegations:

(a)Between 11 December 2011 and 14 February 2014, the plaintiff either personally or alternatively as trustee of the Andrew Garrett Family Trust No 4 (‘AGFT 4’) paid to HC Legal Pty Ltd, of which the first defendant was a director and a principal within the meaning of the Legal Profession Act 2004 (Vic), the sum of $310,000 on account of fees.
(b)On 23 February 2014, the first defendant received $4.5 million by way of a GST credit that was intended to be paid to the trustee of the AGFT 4 to satisfy the corresponding GST liability on the running balance account of the AGFT 4.
(c)In breach of trust the first defendant failed to account to the plaintiff for these amounts and the plaintiff claims the sum of $4.81 million as money had and received…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Garrett v Cahill

Details

AGLC: Garrett v Cahill [2015] VSC 572
Case: [2015] VSC 572
Decision Date: 20 OCTOBER 2015

CaseChat Overview and Summary

The dispute in Garrett v Cahill involved a plaintiff who had commenced legal proceedings against various defendants before being declared bankrupt. The trustee in bankruptcy subsequently elected to discontinue the proceedings, but the plaintiff, now acting as the trustee, sought to continue the litigation. The central issue for the court was whether the legal action was stayed upon the plaintiff's bankruptcy and whether the action included claims that involved conduct contravening criminal statutes. Additionally, the court had to determine if a specific claim for the solicitor's failure to prosecute a defamation claim could be severed from the other claims.

The court examined the statutory provisions and held that the legal action was indeed stayed upon the plaintiff's bankruptcy, as per the relevant sections of the Bankruptcy Act 1966. The court clarified that an "action" under the act includes claims that involve conduct which contravenes criminal statutes, thus these claims were subject to the stay. However, the court found that the claim against the solicitor for failure to prosecute a defamation claim could be considered separately, or severed, from the other claims. Consequently, the claims against the defendants were stayed except for the defamation-related claim, which was not subject to the automatic stay.

The reasoning of the court was grounded in the statutory language and legislative intent behind the Bankruptcy Act. The court held that the stay of proceedings applied to all claims brought by the bankrupt, unless they were severable and could proceed independently. The court granted leave for the defamation-related claim to be re-pleaded, subject to certain conditions. The final orders of the court included a stay on the claims against the defendants, with the exception of the defamation-related claim, and the striking out of the statement of claim with limited leave to re-plead that specific claim.

Orders