Kobylinski & Anor v Walker
[2008] FMCA 89
•25 January 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KOBYLINSKI & ANOR v WALKER | [2008] FMCA 89 |
| BANKRUPTCY – Leave to take fresh steps in proceedings – whether leave to be granted – sufficient complicity and multiplicity of claims – whether leave ought to be granted conditionally. |
| Bankruptcy Act 1966 (Cth), ss.58(3)(b), 109 |
| Fraser v Commonwealth of Taxation & Anor (1996) 69 FCR 99 Singh v Official Trustee in Bankruptcy & Anor [2007] FMCA 1367 |
| First Applicant: | ADRIAN JOHN KOBYLINSKI |
| Second Applicant: | ANNE MARIA KOBYLINSKI |
| Respondent: | GEOFFREY WALKER |
| File number: | PEG 221 of 2007 |
| Judgment of: | Lucev FM |
| Hearing date: | 25 January 2008 |
| Date of last submission: | 25 January 2008 |
| Delivered at: | Perth |
| Delivered on: | 25 January 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Duncan |
| Solicitors for the Applicant: | Gibson Lyons Lawyers |
| Counsel for the Respondent: | Mrs McKenzie |
| Solicitors for the Respondent: | McKenzie and McKenzie |
ORDERS
Under section 58(3)(b) of the Bankruptcy Act the applicants have leave to take any further steps it considers necessary in proceeding 1893 of 2006 in the District Court of Western Australia, on the following conditions:
(A)that the applicants will not take further steps in the District Court proceedings without giving 7 days notice to the Official Trustee in Bankruptcy, provided that on each occasion it is necessary to take a further step this period may be varied by agreement with the Official Trustee in Bankruptcy;
(B)that the applicants will not oppose the Official Trustee in Bankruptcy being joined in the District Court proceedings at any time;
(C)that the applicants will hold the property of the respondent the subject of the District Court proceedings, or any monies of the Respondent received in the District Court proceedings, for the Official Trustee in Bankruptcy on behalf of the bankrupt estate of the respondent;
(D)that the applicants will notify the Official Trustee in Bankruptcy of any settlement proposed to be entered into in respect of the District Court proceedings concerning the property of the respondent and not enter into any such settlement unless consented to by the Official Trustee in Bankruptcy; and
The respondent pay the applicants’ costs of this application, if not agreed, to be taxed under 0.62 of the Federal Court Rules by a Registrar of this Court, and paid out of the respondent’s bankrupt estate in the priority fixed by s.109(1) of the Bankruptcy Act 1966.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 221 of 2007
| ADRIAN JOHN KOBYLINSKI |
First Applicant
| ANNE MARIA KOBYLINSKI |
Second Applicant
And
| GEOFFREY WALKER |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
(As corrected)
This is an application under s.58(3)(b) of the Bankruptcy Act 1966 (Cth) by which the applicants seek leave to continue proceedings in District Court action 1893 of 2006 against the respondent, Geoffrey Walker, and, if necessary, to join other parties an seek discovery. Copies of the application have been served on the respondent and on the Official Trustee in Bankruptcy.
The respondent became bankrupt on 14 May 2007, with total creditors, he says, of $303,700, of which $300,000 was attributed to the applicant. The Official Trustee in Bankruptcy has not entered an appearance in these proceedings and does not appear to oppose the application presently before the Court. The respondent appears but neither consents to nor opposes the application before the Court.
The grant of leave under s.58(3)(b) of the Bankruptcy Act does not require the Court to consider the merits of the various issues in contention. Rather, it requires the Court to determine:
a)whether the issues in the proceedings are complex;
b)whether the issues are able to be resolved more thoroughly and expeditiously in the proceedings sought to be commenced or continued than would be the case under the proof of debt process in respect of the bankrupt’s estate;
c)whether there are a multiplicity of claims and whether they ought all be resolved in one proceeding; and
d)whether conditions ought to attach to any grant of leave.[1]
[1] Singh v Official Trustee in Bankruptcy & Anor [2007] FMCA 1367 at paras 18 and 19 per Lucev FM (“Singh”), and cases there cited.
In terms of the complexity of the issues, it appears to be the case that on or about 26 September 2006 the applicants commenced the District Court proceedings by way of writ of summons and statement of claim. The statement of claim essentially asserts that the applicants contracted with the respondent to act as a licensed pest controller to prepare a report concerning termite activity and damage in premises in Hannan Street, Kalgoorlie, being purchased by the applicants, and that in carrying out a termite inspection at the Hannan Street property, and in making a report, the respondent breached terms of his contract and his duty of care, causing the applicants loss and damage.[2]
[2] Affidavit of Mr Duncan sworn 9 November 2007 at paragraph 2 and the annexure being the statement of claim in the District Court proceedings.
The defence filed in the District Court proceedings on or about 7 November 2006 denied liability and asserted that the respondent was engaged by a third party to perform the termite inspection work. That third party is asserted to be the real estate agent for the vendor in respect of the sale of the Hannan Street property.
The District Court has made various case management directions.
The applicants’ current solicitors have made certain inquiries of the Official Trustee in Bankruptcy concerning the applicants’ assertion that he is a creditor in the sum of $300,000, but it does not appear that any useful information from the applicants’ point of view has been forthcoming from that process. The case management directions do not appear to have all been complied with or completed.
As presently pleaded, in order to determine liability and quantum of damages, it will be necessary for a court to hear from the applicants, the respondent, and various third parties, which appear on the papers and the argument presented today, to include the vendor’s real estate agent and perhaps the vendor him or herself. It would also appear to be the case that there is a necessity, or would be a necessity, for a court to hear expert evidence about the termite inspection and damage.
As presently pleaded, it also appears that it will be necessary for discovery to be sought by the applicants from the respondent, and possibly various third parties, including the vendor, the vendor’s real estate agent, and the respondent’s insurers, and that there would therefore be likely to be a need for there to be third party discovery orders in the District Court proceedings.
As presently pleaded, the case involves a number of issues and, as explained today in argument by counsel for the applicants, appears to give rise to a number of legal issues, including issues of contract, and probably agency. It may be the case that the matter ultimately turns on issues associated with negligence, and that it will be necessary to join an additional party or parties, in particular the vendor’s real estate agent has been identified in the affidavit material. Today in submissions the vendor has also been identified as a possible third party.
In circumstances where:
a)there are a matrix of seemingly disputed legal issues related to contract, agency and negligence,
b)discovery is required possibly from a number of third parties,
c)a number of third parties may need to be joined in order to ultimately determine issues of liability and quantum – and that of course of itself may lead to cross-claims and cross-defences; and
d)the quantification of damages and the determination of liabilities may affect the distribution of any of the bankrupt’s property in the bankrupt’s estate to creditors,
it appears to the Court that it is appropriate and that the matter is of sufficient complexity, with a sufficient multiplicity of potential claims and procedural and interlocutory issues, that it is unsuitable to be dealt with under the normal proof of debt process, and therefore it is appropriate that the proceedings commenced be continued in the District Court.
The question arises as to whether any grant of leave ought to be conditional.[3]
[3] For cases where the question of leave on conditions has been considered, see, for example, Singh at paras 22-24 per Lucev FM, and cases there cited.
In the Court’s view, leave ought to be conditional, and those conditions ought to be those that the Court outlined in the course of the submission from the applicants’ counsel, and they will appear in the final orders. Those conditions ensure that the Official Trustee in Bankruptcy is apprised of progress in the District Court proceedings and will be able to take steps to intervene if the Official Trustee in Bankruptcy considers that to be appropriate. Additionally, if successful, any proceeds of the litigation will be held for the benefit of the Official Trustee in Bankruptcy on behalf of the bankrupt estate. That scheme of things is consistent with the intention of the Bankruptcy Act.[4]
[4] Singh at para 24 per Lucev FM, Fraser v Commonwealth of Taxation & Anor (1996) 69 FCR 99 at 114 per Beaumont J.
In relation to costs, the applicants seeks an order that the respondent pay the applicants’ costs and costs be recoverable in the bankruptcy and, if not agreed, costs be taxed in accordance with order 62 of the Federal Court Rules. That order is not opposed, and the Court will make an order accordingly, with the proviso that the costs are to be paid out of the bankrupt’s estate in the priority fixed by section 109(1) of the Bankruptcy Act.
I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate: S.Polley
Date: 1 February 2008
Corrections – Amendments to Orders
Orders page 2:
The words by consent have been amended to read the Court orders that.
Applicant has been amended to read applicants.
3
2
1