Hall v Whittingham

[2020] VCC 1525

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

 Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-19-03331

AMANDA JEAN HALL	Plaintiff
V
MARK WILLIAM WHITTINGHAM	Defendant

---

JUDGE:	HER HONOUR JUDGE A RYAN
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF RULING:	30 September 2020
CASE MAY BE CITED AS:	Hall v Whittingham
MEDIUM NEUTRAL CITATION:	[2020] VCC 1525

REASONS FOR RULING
---

Subject:  PRACTICE AND PROCEDURE

Catchwords:             Application by undischarged bankrupt to file a counterclaim in his own name without leave of his trustee – proceeding not commenced prior to sequestration order – application refused

Legislation Cited:     Bankruptcy Act 1966 (Cth), s60

Cases Cited:Elberg v Fraval (No.2) [2012] VSC 371; Cox v Journeaux (No 2) 1935 52 CLR 713; Watson v National Australia Bank [2017] FCA 128

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Not applicable	SLF Lawyers
For the Defendant	The defendant filed submissions on his own behalf

HER HONOUR:

1       This proceeding was commenced by writ dated 19 July 2019. The plaintiff (Hall) brought proceedings against the defendant (Whittingham) arising out of an alleged breach of contracts of sale of land dated 24 June and 19 August 2013. The contracts related to the purchase of a property at 21 Shasta Avenue, Brighton East (the property). Hall was seeking to recover a shortfall of a deposit in the sum of $100,000, together with interest claimed of $70,363.01. 

2       Whittingham filed a notice of appearance, which although dated 25 June 2019 (predating the writ) was not filed with the Court until 30 August 2019.

3       On 21 October 2019, Whittingham filed a summons in person. He sought an order, “For an application to discontinue proceedings”. Whittingham swore an affidavit dated 14 October 2019 in support of his application. He deposed he had filed a notice of appearance on 30 August 2019. He referred to the relevant Court Rules noting that Hall had not filed a statement of claim as she was required to do so in circumstances where the writ bore an indorsement of claim. Accordingly, he sought orders that the matter be discontinued and his costs of $3,250 for the payment of fees for advice from his lawyers and any other order that the Court may direct. 

4       At the time the appearance was filed and, when the summons was later filed in October 2019, Whittingham was a bankrupt. There is no evidence before the Court that either of these steps taken by him were authorised by his trustee in bankruptcy.

5       On 7 November 2019, the solicitor acting on behalf of Hall filed an affidavit. The deponent, Mr Fabris, referred to the fact that the writ had been filed on 19 July 2019. He then went on to depose that on 26 July 2019, Registrar Ryan made orders in the Federal Circuit Court of Australia ordering, inter alia, a sequestration order be made against the estate of Mark William Whittingham, the defendant in this proceeding. He exhibited to his affidavit a true copy of the orders made by the Registrar. On 26 July 2019, Stephen John Michell of PCI Partners became trustee of the bankrupt estate of Whittingham. Mr Fabris deposed that his office had not received any correspondence from the trustee that he intended to defend the claim or provide his authority to the bankrupt to file a notice of appearance in the proceeding.

6       Mr Fabris deposed that on 24 September 2019, his office had received the trustee’s report to creditors. After considering the contents of that report and, the financial position of Whittingham, his client had instructed his firm not to seek leave of the Court to continue to prosecute this claim against the bankrupt defendant.

7 Before any fresh step could have been taken in the proceeding, it would have been necessary for Hall to have sought leave of the Court to do so under s58(3) of the Bankruptcy Act.

8       In correspondence from Whittingham to the Court dated 18 November 2019, Whittingham asked the Court to vacate the hearing date of his application which had been set down for 6 December 2019 until some time in late April 2020. The basis for the adjournment application was that the defendant’s application to annul the sequestration order was due to be heard in the Federal Circuit Court on 3 April 2020. This was consented to by the plaintiff’s solicitors. A consent order was made by his Honour Judge Cosgrave on 27 November 2019 adjourning the matter to 24 April 2020.

9       As a result of the COVID‑19 pandemic, the interlocutory matters listed for hearing during April 2020 were subject to a direction that they be determined on the papers. 

10      On 23 April 2020, my associate wrote to Hall’s lawyers and to the defendant asking the parties to confirm whether Whittingham remained an undischarged bankrupt. Assuming the defendant remained an undischarged bankrupt, the parties were requested to provide written submissions as to why the proceeding was not automatically stayed in such circumstances. Any submissions were to be filed and served by 4:00pm on 29 April 2020. 

11      No response was received from the plaintiff’s solicitors in answer to the communication from the Court. This was not unsurprising given the solicitors had previously informed the Court that their client was not persisting with her claim and may no longer have had instructions to act on her behalf.

12      Whittingham did file a submission which is dated 29 April 2020. He recited the history of the matter and referred to his application that the plaintiff’s writ be discontinued because she had not provided a statement of claim. He noted, however, in paragraph 6 of his submission that the plaintiff’s writ was stayed as a result of a sequestration order made against his estate dated 27 July 2019 but the stay did not deal with his counterclaim that is the damage (sic) claim.

13      Whittingham did not address the topic at all of whether his application to annul his bankruptcy had been heard and if so, what was the outcome. In the absence of any evidence that his bankruptcy was annulled, the Court proceeds on the basis that he is still an undischarged bankrupt.

14      In Whittingham’s submission he referred at paragraph 7 to the following:

“A Claim/Counter Claim was attempted to be filed in the County Court of Victoria against the Plaintiff at the same time these proceedings commenced for damages. This was prior to the sequestration order being made against my estate.”

15      Whittingham noted that a counterclaim he sent through in October 2019 was rejected by the Registry. In paragraph 12 of his submission, Whittingham said the return advice was lost in the post or no advice was given until 26 April 2020 by the Registry of the County Court of Victoria that it had been rejected and required additional work on the counterclaim. At the time, Whittingham was an inmate of HM Prison Barwon and he said it was not unusual for mail to be misplaced.

16      Enquires from Registry disclose that Whittingham has attempted to file several writs against Hall, none of which have been accepted for filing. He attempted to file in September 2019 a writ against Hall dated 25 June 2019. The latter date precedes the date of Hall’s writ and Whittingham’s bankruptcy, but the writ was not sought to be filed until September 2019. In any event, the writ was not accepted for filing by Registry. This writ contained a general indorsement of claim. Whittingham alleged that Hall had breached contracts of sale and a licence agreement relating to the property. He claimed that Hall was indebted to him for $265,000, being the deposit paid together with the sum of $124,583 representing losses caused by Hall’s alleged breach of the licence agreement.

17      In support of Whittingham’s desire to have the counterclaim dealt with, he says in paragraph 14:

“The claim against my estate is stayed, the Counter Claim is not stayed and in accordance with section 60 (4) of the Bankruptcy Act 1966, a person may continue with a with a claim for damages against his or her estate.”

18      Whittingham sought orders in paragraph 15 of his submission that he be given leave to file and serve by 5 June 2020 an amended counterclaim for damages against the plaintiff. 

19 Under s60(2) of the Bankruptcy Act, an action commenced by a person who subsequently becomes a bankrupt is stayed until the trustee makes election, in writing, to prosecute or defend the action. The purpose of s60(2) is to bar independent actions by bankrupts unless the trustee elects to prosecute the action. Section 60 also applies to a counterclaim by a bankrupt.[1] The section has no application to a proceeding filed after a sequestration order is made.[2]

[1]Elberg v Fraval (No.2) [2012] VSC 371 at [13] and [14].

[2]Watson v National Australia Bank [2017] FCA 128 at [41].

20 Whittingham seeks to rely upon the exception contained in s60(4) which provides as follows:

“(4)   Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of:

(a)      any personal injury or wrong done to the bankrupt, his or her     spouse or de facto partner or a member of his or her family; or

(b)      the death of his or her spouse or de facto partner or of a   member of his or her family.”

21 On 26 July 2019, Mr Whittingham had been declared a bankrupt. The counterclaim/writ which he attempted to file against Hall was well after the date of his bankruptcy. As can be seen, the Registry did not permit the counterclaim to be filed. There was no proceeding commenced by Whittingham at the time he became a bankrupt, being the initial requirement under s60(4) before he may continue an action in his own name.

22 Furthermore, the counterclaim sought to be brought is not in respect of “personal injury or wrong” done to Whittingham. Dixon J set out the test for a personal injury or wrong within the meaning of s60(4) in Cox v Journeaux (No 2)[3] as:

“The test appears to be whether the damages or part of them are to be estimated by immediate reference to pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property.” 

[3](1935) 52 CLR 713, 721.

23 The subject matter of the proposed counterclaim is a claim for damages against Hall for alleged breaches of contracts of sale of land and a licence agreement. Such a claim does not fall within the purview of s60(4)(a) of the Bankruptcy Act.

Conclusion

24      As can be seen from the foregoing, Whittingham lacks standing to bring a counterclaim in his own name. He has not persuaded the Court he had commenced an action against Hall prior to him being declared bankrupt. The counterclaim he sought to file was well after the date of his bankruptcy. Any attempts to file a writ/counterclaim against Hall have been rejected by Registry staff. There was no extant proceeding on foot against Hall when Whittingham became a bankrupt.

25 The other insurmountable difficulty is that the counterclaim which Whittingham seeks to bring does not fall within the exception allowed under s60(4)(a) of the Bankruptcy Act. Accordingly, leave to file a counterclaim as sought by Whittingham is refused. I will make the following orders:

(a)      The defendant’s summons dated 14 October 2019 is dismissed;

(b)      The defendant’s application on the papers for leave to file an amended counterclaim against the plaintiff for damages is refused;

(c)       No order as to costs.

- - -

Certificate

I certify that these 6 pages are a true copy of the Reasons for Ruling of Her Honour Judge A Ryan delivered on 30 September 2020.

Dated: 30 September 2020

Associate to Her Honour Judge A Ryan