DOYLE CJ: The outcome of this appeal turns on the meaning to be given to s 58(3) of the Bankruptcy Act 1966 (Cth) (“the Act”). It provides as follows:
“(3)Except as provided by this Act, after a debtor has become a 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.”
The expression “the property of the bankrupt” is defined by s 5 as follows:
“the property of the bankrupt, in relation to a bankrupt, means:
(a)except in subsections 58(3) and (4):
(i)the property divisible among the bankrupt’s creditors; and
(ii)any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt; and
(b)in subsections 58(3) and (4):
(i)the property, rights and powers referred to in paragraph (a) of this definition; and
(ii)any other property of the bankrupt.”
Background
Mr Davies sued Mr Gertig for damages for personal injuries sustained in a motor vehicle accident. On 23 August 2001, after a trial, a Judge of this Court directed that judgment be entered for Mr Davies against Mr Gertig for damages and interest amounting to $314,124.30. That judgment has not been drawn up and entered.
On 28 August 2001 the Judge ordered that Mr Davies recover costs against Mr Gertig up to fourteen days after 14 December 2000 (the date of filing of a Rules of Court offer by Mr Gertig), and that Mr Gertig recover costs against Mr Davies thereafter. He ordered that the lesser amount of costs be set-off against the greater amount. He ordered a stay of execution of the judgment for damages. It was anticipated by all parties that there would be a substantial balance owing to Mr Gertig on account of costs, after the set-off ordered by the Judge.
On that day counsel for Mr Gertig also sought an order under r 101.01(1)(c) of the Supreme Court Rules that the balance of costs payable to Mr Gertig be set-off against the damages payable by Mr Gertig to Mr Davies. It was likely that if that order was made nothing would be payable to Mr Davies on account of damages.
The Judge deferred a decision on that application. The Judge was told that Mr Davies owed money to a number of creditors. Mr Davies became bankrupt on his own petition, the bankruptcy commencing from 23 January 2002.
The Official Receiver stated that he had no interest in the damages payable to Mr Davies.
Later the Judge heard submissions on the application for an order that costs be set-off as against…
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.
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AGLC
Gertig v Davies [2003] SASC 86
Case
[2003] SASC 86
Decision Date
CaseChat Overview and Summary
The appeal in Gertig v Davies involved Mr Gertig seeking an order for a set-off of costs against damages awarded to Mr Davies. The primary dispute centred on the interpretation and application of section 58(3) of the Bankruptcy Act 1966 (Cth) and whether the sought set-off order constituted a fresh step in legal proceedings against Mr Davies, who had been declared bankrupt. The case was initially heard in the Supreme Court of Victoria, with the appeal subsequently being heard by the Court of Appeal.
The legal issues before the Court of Appeal included whether section 58(3)(a) of the Act prohibited Mr Gertig from enforcing remedies against Mr Davies' property and whether the application for set-off constituted a fresh step in the legal proceedings as per section 58(3)(b). The Court also needed to determine if the application for set-off was made within the appropriate procedural framework and whether the trial Judge had correctly exercised his discretion in declining to grant the set-off order.
In resolving these issues, the Court of Appeal held that section 58(3)(a) did not prevent Mr Gertig from seeking the set-off order, as it did not directly prohibit enforcement of remedies against the bankrupt's property in this context. Regarding section 58(3)(b), the Court found that the application for set-off did not constitute a fresh step in the legal proceedings. The Court further determined that the application was procedurally valid and that the trial Judge had not erred in declining to grant the set-off order, although the Court set aside the order dismissing the application for further consideration.
The Court of Appeal allowed the appeal, set aside the order dismissing the application for set-off, and ordered that the matter be remitted to the trial Judge for further consideration in light of the Court’s reasons. The decision emphasised that Mr Gertig would need to obtain leave from the Federal Court to proceed with his application, while noting that no submissions were made regarding the need for leave for Mr Davies’ solicitors to pursue their claim for a lien.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
It was not disputed before us that leave can be granted only by the Federal Court: see Green v Schneller at [29]. Accordingly, an application will have to be made to that Court for leave.Conclusions I would allow the appeal, set aside the order dismissing the application for a set-off, and order that the matter be remitted to the Judge for further consideration in light of these reasons. On my approach Mr Gertig will have to obtain leave to proceed from the Federal Court. It may be that Mr Davies’ solicitors will also need leave to pursue their claim for a lien, but I emphasise that we heard no submissions on that point and I express no view on it. MULLIGHAN J: I agree that the appeal should be allowed for the reasons given by the Chief Justice. I also agree with the orders proposed by him. BESANKO J: This appeal raises questions as to the proper interpretation of s 58(3) of the Bankruptcy Act 1966 (Cth) (“the Act”). That subsection provides as follows:“(3)Except as provided by this Act, after a debtor has become a 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.” The expression “the property of the bankrupt” is defined in s 5 of the Act. It is unnecessary to set out the definition. The Chief Justice has set out the facts in this matter and I gratefully adopted his statement of the facts. For the reasons he gives, I agree with the Chief Justice that s 58(3)(a) of the Act does not prevent the Court from making the order that Mr Gertig seeks. I also agree with the Chief Justice that Mr Gertig’s application is not caught by the prohibition in s 58(3)(b) against the commencement of “any legal proceeding”. However, I respectfully disagree with the conclusion of the Chief Justice that the hearing of the application or the making of a decision on the application constitutes a “fresh step” in the relevant proceeding. The application by Mr Gertig for an order that his entitlement to costs be set-off against Mr Davies’ entitlement to damages (“the relevant order”) was made orally by counsel for Mr Gertig on 28 August 2001. It is not suggested that it was inappropriate to make the application at that particular time or that the application fell foul of the Rules of Court in some way. Counsel for Mr Davies opposed the making of the relevant order and said that Mr Davies had other creditors and that the order sought would put Mr Gertig in a position of priority in terms of Mr Davies’ other creditors. The trial Judge raised a question as to how long it would take the respective parties to tax their costs. The trial Judge ordered a stay of execution of the judgment in favour of Mr Davies. The trial Judge also made an order that in relation to the respective orders for costs “the lesser amount of costs be offset against the greater amount of costs payable”. The trial Judge indicated that he was not prepared to make the relevant order at that time.