Kovarfi v BMT & Associates Pty Ltd (No 2)
[2014] NSWSC 100
•14 February 2014
Supreme Court
New South Wales
Medium Neutral Citation: Kovarfi v BMT & Associates Pty Ltd (No. 2) [2014] NSWSC 100 Hearing dates: 14 February 2014 Decision date: 14 February 2014 Jurisdiction: Common Law Before: Campbell J Decision: (1) Prayers 5, 6 and 7 of the relief claimed in the statement of claim filed on 3 May 2013 are struck out without prejudice to any right of the third plaintiff to seek such relief by way of proceedings recommenced by summons.
(2) The proceedings are otherwise dismissed under rule 13.4 of the Uniform Civil Procedure Rules 2005
(3) The first and second plaintiffs are to pay the defendants' costs on the ordinary basis forthwith after they have been agreed or assessed.
Catchwords: PROCEDURE - civil - summary disposal - whether claim statute barred - whether right to bring the claim vested in the Official Bankruptcy Trustee Legislation Cited: Bankruptcy Act 1966 (Cth) ss 58, 116, 152
Corporations Act 2001 (Cth)
Limitation Act 1961 (NSW) ss 52, 55
Trade Practices Act 1974 (Cth) s 82Cases Cited: Agar v Hyde (2000) 201 CLR 552
Campbelltown City Council & Ors v McKay (1989) 15 NSWLR 501
Cox v Journeaux (No. 2) 52 CLR 713
Daemar v Industrial Commission of New South Wales (No 2) (1990) 22 NSWLR 178
Manningel v Hewlett Phelps [1991] NSWCA 186.
Moss v Eaglestone [2011] NSWCA 404
Murdaca v Pizzinga [2013] NSWSC 396
Pegler v Dale [1975] 1 NSWLR 265
Poulton v Commonwealth (1953) 89 CLR 540
Samootin v Shea [2010] NSWCA 371Category: Principal judgment Parties: Edith Kovarfi (First Plaintiff)
Attila Kovarfi (Second Plaintiff)
Sara Kovarfi (Third Plaintiff)Representation: Counsel:
E Kovarfi (Plaintiff in person)
J Williams (Defendants)
Solicitors:
Yeldham Price O'Brien Lusk (Defendants)
File Number(s): 2013/137597
EX TEMPORE Judgment
Introduction
By notice of motion filed on 22nd August 2013, the defendants move for an order dismissing the proceedings as disclosing no reasonable cause of action, that is to say, the defendants move for summary dismissal.
The statement of claim was filed on 3rd May 2013, and concerns the circumstances in which the first and second plaintiffs became bankrupt because of the failure of a property development they were undertaking in Queenscliff, New South Wales, by means of a company which they controlled.
The company had borrowed money for the development from the Commonwealth Bank of Australia which took a mortgage over the property on which the development was to be undertaken. In their personal capacity each of the first and second plaintiffs provided guarantees for the repayment of the loan advanced by the bank.
The case is brought by the first and second plaintiffs against the valuers appointed by the bank to advise the bank in relation to progress of construction for the purpose of the bank making progress payments. The first defendant is a company and the second, a director of the first.
There is no issue before me that, at least arguably, the first and second plaintiffs as guarantors of the indebtedness of the company may be owed a duty of care by the valuers appointed by the bank in the performance of their work.
Background facts
There is no real question that the loss suffered by the plaintiffs probably accrued as early as 27 October 2004 when the bank as mortgagee in possession sold the property at a loss. I interpolate that in narrating these facts I am assuming in favour of the plaintiffs that the facts averred in the statement of claim, and in a general way supported by the material put before me by the parties, can be established at a trial.
In summary, what happened was that the development, perhaps not uncommonly, took a little longer than was contemplated by the parties at the outset, so that the period during which the work was being undertaken exceeded the term of the original loan.
In about May of 2004, the bank obtained a report from the valuers as to the cost of completing the work. That report has been placed before me by the plaintiffs.
The upshot of the provision of the report was that the amount required to complete the project, in accordance with the plans and specifications upon which the loans were advanced, exceeded the amount available of the unused loan moneys, and accordingly, again to use neutral language, the bank called in the loan.
The development company was unable to pay. The bank went into possession, and the property, with the partially completed building on it, was sold, as I have said, at a significant loss.
The loss became payable by the first and second plaintiffs under the terms of their guarantee. They were unable to pay from their liquid assets immediately and had no option, it seems, but to go into bankruptcy, which occurred in January 2005.
As pleaded in the statement of claim, not only did the plaintiffs suffer economic loss in respect of the shortfall on sale of the security, but as a consequence of the bankruptcy, the first plaintiff, who was a real estate agent, lost her licence and could not continue to carry on in that occupation. The second plaintiff, a builder, lost his licence. They suffered consequential economic losses, including loss of directors' payments from the company, rental income, and future development income.
In short, as I think the plaintiffs put it, they lost everything. And as a consequence of that property damage and economic loss, the first plaintiff says and avers that she has been affected by mental sickness, including depression and anxiety.
The plaintiffs' claim
On the face of the pleadings, fairly read, the claim made by the first and second plaintiffs - I will return to the case of the third plaintiff later - can readily be understood as depending in the alternative upon a claim brought in the tort of negligence, and a claim brought pursuant to the statutory cause of action created by s 82 of the Trade Practices Act 1974 (Cth), in respect of losses caused by what is said to be the defendants' misleading and deceptive conduct in preparing their valuation reports.
The plaintiffs also say that there is a third category which, if not pleaded, ought to be taken by me to be pleadable, having regard to the material that has been put before me, and that third category is an action in fraud or deceit.
It seems to me that reading the statement of claim that, although the expression "misleading and deceptive" is used variously in the averments, one could not readily understand the emphasis to have been placed upon deceit as opposed to misleading.
To summarise the case factually, the plaintiffs say that at the time the bank received the report of May 2004 it had overpaid the builder to the tune of around $850,000 and that that overpayment occurred either because of the negligence of the defendants or due to the misleading and deceptive conduct engaged in by them in providing erroneous information in their reports.
So far as a claim is said to be available in fraud it is said, and this is not pleaded, that having discovered an earlier mistake in approving more than the builder was entitled to, the valuer sought to deliberately conceal their mistake from the bank by providing the report of May 2004 to justify the amounts advanced by the bank already thereby demonstrating that the available funds were insufficient to complete the development. As I have said there is no doubt that the latest date at which any cause of action might have accrued to the plaintiffs is 27 October 2004. Indeed paragraph 27 of the statement of claim avers that "the plaintiffs suffered damages on 27 October 2004 when the financier sold the development property with a shortfall as a result of the negligence of the defendants". Particulars of negligence follow.
Paragraph 17 of the statement of claim avers that the report of 13 May 2004 "was misleading and deceptive" and again particulars follow. Nothing in those particulars, it must be said, has the flavour of fraud.
Representation of the parties
I should record, having stated those background facts, that the defendants are represented by Mr J Williams of counsel and I have given leave to the first plaintiff, Mrs Kovarfi, to appear on her own behalf and on behalf of her husband, who is the second plaintiff, and her mother-in-law, who is the third plaintiff. Mrs Kovarfi, as well as a being a real estate agent, from correspondence tendered, seems to have a Bachelor of Architecture and a Bachelor of Laws. She informed me from the bar table, and I accept, that she obtained her Bachelor of Laws from the University of New England. She tells me that her husband and mother-in-law are unable to be here today because of ill health affecting each of them, but she assures me that she has their authority to represent them before me today. It seems obvious to me from the material that has been prepared, that given her academic qualification Mrs Kovarfi is the person who drafted the statement of claim, the written submissions and the affidavits relied upon. It is also apparent that she appeared in a previous matter of Kovarfi v BMT & Associates Pty Limited [2012] NSWSC 1101 decided by McCallum J on 14 September 2012. In these circumstances, I thought it appropriate to grant Mrs Kovarfi the leave she sought to represent the other members of her family and she has, if I may say so, advanced the arguments in writing and orally with a great deal of competence.
The arguments of the parties
There are a number of grounds advanced as justifying summary dismissal or, in the alternative, a stay. I think they can be summarised as falling into three significant categories. The first is that because of the bankruptcy of the first and second plaintiffs their right to sue the defendants, if any, vested in the trustee in bankruptcy by force of s 58 of the Bankruptcy Act 1966 (Cth). That being so, the discharge of the first and second plaintiffs from bankruptcy, which occurred in the early part of 2008, did not serve to divest that property from the trustee and re-vest it in the plaintiffs. The second ground upon which summary dismissal was sought is that whether one considers the matter from the stand point of the claim in negligence or the Trade Practices claim, the proceedings are out of time and statute barred. The third point, which supported the stay was that, the cost of the previous proceedings between the parties had not been paid by the plaintiffs. Other grounds are referred to in writing and I did not understand Mr Williams to abandon them, but essentially he focussed his argument on the three matters which I have identified.
In answer to those matters, Mrs Kovarfi argued that because the first and second plaintiffs' right to sue was a bare cause of action it was not capable of vesting in the trustee in bankruptcy, by analogy I think as I followed the argument, with the principles stated in Poulton v the Commonwealth (1953) 89 CLR 540.
By reference to the decision of the Court of Appeal in Moss v Eaglestone [2011] NSWCA 404, Mrs Kovarfi argued that because the cause of action upon which she relied was "mixed", having elements of claims for economic loss and claims for personal loss, it was therefore indivisible and for that reason did not vest in the trustee but rather remained in her hands. And thirdly I understood her to argue that, in the alternative, the cause of action if it had vested in the trustee divested upon her discharge from bankruptcy.
So far as the defendant's claim for release based upon the statute bar was concerned, a number were relied upon. First, she said that her bankruptcy and her medical condition each separately constituted a form of disability for the purpose of s 52 of the Limitation Act 1961(NSW) which had the effect of extending the limitation period which otherwise would have expired on 24 October 2010, for the period of her disability and the proceedings were in fact issued within time.
Secondly, to the extent to which a claim in fraud was pleadable she relied upon s 55 of the Limitation Act as extending the period during which proceedings could be brought to at least the date upon which the statement of claim was filed. In relation to the application for a stay, she relied upon her written submissions.
I will deal with each of the issues in order addressed above.
Did the cause of action remain vested in the bankruptcy trustee?
So far as the argument based upon the bankruptcy of the first and second plaintiffs is concerned, I have concluded that the defendants are correct in the arguments they advance. It seems clear that even a bare right to sue in respect of property and economic losses is property of the bankrupt which will vest in the trustee pursuant to s 58 of the Bankruptcy Act. According to s 116 of the act, all property belonging to a bankrupt at the commencement of the bankruptcy is property divisible amongst the creditors of the bankrupt and accordingly vests in the trustee. The provisions of s 116(2) (g) create an exception. That paragraph is in the following terms:
Subsection (1) does not extend to the following property:
...
(g) any right of the bankrupt to recover damages or compensation:
(i) for personal injury or wrong done to the bankrupt, the spouse or de facto member of the bankrupt or a member of a family of the bankrupt or
(ii) in respect of the death of the spouse, the de facto partner of the bankrupt or a member of the family of the bankrupt;
and any damages or compensation recovered by the bankrupt (whether before or after she became a bankrupt), in respect of such an injury or wrong or the death of such a person.
As the authorities Mr Williams referred me to make clear, and as does I think the reasoning of Allsop P (as the Chief Justice then was) in Moss v Eaglestone [2011] NSWCA 404 make clear, the present case falls into what might be called a single "mixed" cause of action having aspects of both a property claim about it and a personal claim. In Moss v Eaglestone Allsop P at [28] said:
there can be no doubt...that choses in action are prima facie included as property in the bankrupt's estate subject to the exemptions in s 116(2)(g).
His Honour then, with great respect, undertook an illuminating review of the old English authorities, and of the Australian authorities following the enactment of the 1966 Bankruptcy Act. So far as Australian law is concerned, although preceding the enactment of the 1966 Act, the principle seems to be that stated by Dixon J (as the Chief Justice then was) in Cox v Journeaux (No. 2) 52 CLR 713 at 721 in the following terms:
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 without reference to his rights of property.
At [68] in Moss Allsop P said:
The difficulty arises, as often is the case, where property and personal damage arise from the same wrong or cause of action. The dividing line in these cases has been drawn by reference to whether the personal action is severable from, or directly related to, or consequential upon the property claim.
In my judgment to the extent to which the first plaintiff claims for mental anguish or the like, that matter arises as an aspect of consequential loss in a cause of action whether arising at common law or under statute which is essentially a claim for economic loss. The cases referred to by Allsop P make clear that in the realm of bankruptcy law it has long been recognised that a single cause of action can give rise to such mixed consequences. Moreover, it has been recognised in New South Wales at least since the decision of the Court of Appeal in Campbelltown City Council & Ors v McKay (1988) 15 NSWLR 501 at 511 that in an action for damage to property the plaintiffs are entitled to recover for personal damage which is the reasonably foreseeable result of the defendant's negligent damage of that property. There seems to me to be no reason why the same principle does not extend to what might be characterised otherwise as a claim for damages for pure economic loss.
The question of whether in the case of such mixed loss the whole cause of action vests in the trustee was considered by the Court of Appeal in Manningel v Hewlett Phelps [1991] NSWCA 186 Handley JA said:
The plaintiffs claims for damages for loss of credit, for mental distress, inconvenience and for injury to their physical and mental health therefore were not claims "without reference to their rights of property" within the principle stated by Dixon J On the contrary those claims were consequential on damages to the plaintiff's financial and property interests as a result of alleged breaches of professional duty by the solicitors.
The plaintiffs in the present case sue on indivisible causes of action in tort and contract. Those causes of action formed part of the property of the plaintiffs which vested in the Official Receiver on their bankruptcy. No separate cause of action to recover damages for any personal injury or wrong has been pleaded or exists in the circumstances.
That statement of principle, it seems to me, is directly applicable to the present case. However, to these authorities I would add Samootin v Shea [2010] NSWCA 371. In that case Campbell JA recognised that the real question was whether the proceedings brought by the discharged bankrupt were competent. Like the present case, his Honour at [76] identified the relevant question being whether because of the claim for pain and suffering the totality of the rights that the claimant was asserting against the defendant had vested in the official trustee.
Campbell JA, naturally, referred to Cox v Journeaux and also observed at [81] that the pain and suffering claimed in Samootin was pain and suffering that allegedly arose from the claimant having lost her property through the wrongful act of the defendant. The same, I think, is true in the present case. On that basis his Honour, after going on to consider a second question, that is the question of any divestment, held that the whole cause of action had vested in the trustee, notwithstanding the claim in respect of pain and suffering. This followed by application of the approach of Dixon J in Cox v Journeaux. See also Murdaca v Prizzinga [2013] NSWSC 369 (Bellew J).
I have no doubt therefore that the whole cause of action pleaded in the statement of claim vested in the trustee upon the first and second plaintiffs becoming bankrupt. I should also add that to the extent to which there is a pleadable cause of action based on deceit or fraud, the same result would naturally follow for the reasons I have rehearsed.
The next question then is whether, upon discharge from bankruptcy, the cause of action divested from the trustee and re-vested in the first and second plaintiffs. The answer to this question is settled beyond argument in New South Wales by the decision of the Court of Appeal in Daemar v Industrial Commission of New South Wales (No 2) (1990) 22 NSWLR 178. The judgment of Kirby P, as his Honour then was, Clarke JA and Meagher JA agreeing, depends upon the language of s 152 of the Act in particular. That provision is in the following terms:
A discharged bankrupt must, even though discharged, give such assistance as the trustee reasonably requires in the realization and distribution of such of his or her property as is vested in the trustee.
Having noted some differences of opinion in early English and Australian cases, Kirby P referred with approval to the decision of Needham J in Pegler v Dale (1975) 1 NSWLR 265 and said:
[S.152], as Needham J pointed out, assumes that property vested in a trustee at the time of sequestration remains vested in that trustee, even after the discharge of the bankrupt. There is nothing in the section which specifically revests in the discharged bankrupt the property which was, by the sequestration order, vested in the trustee. That property includes shows as inaction, not only as Needham J construction is attentive to the language of section 152, it is appropriate to the scheme of the Bankruptcy Act. Under that act, it is the function of the trustee to gather in for the benefit of the creditors the property of the bankrupt at the time of sequestration. Save as exceptions provided by the act, such property is to be then available for distribution to the creditors. The property includes shows as an action. It thus includes the 'actions' which a bankrupt may have commenced at the time of the sequestration order. The act exempts certain personal actions. But for reasons which given at the original stay proceedings, the claimant's action against the Industrial Commission and Mr Sheath is not in that class.
For the reasons I have already given, none of the plaintiff's asserted causes of action fall into the exempted class of personal actions.
It is worth commenting that in Moss v Eaglestone Allsop P said at [75] that Daemar was founded on the idea that "the personal injury was inseverable from the financial wrong complained of that was the subject of the suit in the industrial tort."
His Honour also pointed out that Daemar, and other Australian cases which follow it "permit a conclusion that to the extent that the damages for personal injury are wrong, are inseverable from, or directly consequential upon, interference with property rights, a claim for them does not survive the stay brought about by s 60(2)."
A fortiori it does not fall within the exception identified in s 116(2)(g), and, as Daemar demonstrates, the cause of action does not divest upon discharge.
For these reasons, the proceedings brought by the first and second plaintiffs, whether depending upon a cause of action in negligence, under the Trade Practices Act, or one which may have been pleadable in fraud, are not competently commenced for the simple reason that if such an action arose on 27th October 2004, it vested in the trustee, by dint of s 58 of the Act, and remained vested in the trustee even after discharge by force of s 152 of the Act, according to the reasoning in Daemar.
Are the causes of action statute barred?
These reasons would be sufficient to justify the order summarily dismissing the proceedings sought by the defendants. But as the limitation point was fully argued before me, I think it appropriate that I should state my conclusions in respect of it.
Mrs Kovarfi argued that the bankruptcy of herself and her husband amounted to a disability for the purpose of s 52 of the Limitation Act. With respect I must reject this argument because the concept of disability for the purpose of s 52 is itself defined by s 11(3) of that act in terms which do not include bankruptcy. I acknowledge, of course, that bankruptcy is sometimes spoken of as a disability for legal purposes in other contexts.
The bankruptcy event may be put to one side. Mrs Kovarfi relied upon evidence from her treating general practitioners as to her mental condition. For the reasons given for overruling Mr Williams' objections, see my separate judgment in that regard. I admitted that evidence on the basis that it was evidence which satisfied me for the purposes of this present interlocutory application that there is a triable issue about whether between about November 2004 and 5th November 2008 Mrs Kovarfi was substantially impeded in the management of her affairs in relation to the cause of action in negligence pleaded in the statement of claim by reason of a disease or impairment of her mental condition.
The evidence which is attached to her affidavit of October last year at pages 146 to 150 shows that she was between September 2004 and September 2005, and again between 22nd November 2006 and 5th November 2008, receiving medical treatment for an anxiety and depressive disorder. I would for present purposes assume that notwithstanding the lacuna in the treatment that there was a continuity of her condition from September 2004 to 5 November 2008. That material persuades me that should the matter go to trial, Mrs Kovarfi would have evidence which, if accepted, is capable of making good the argument she advanced in relation to extending the limitation period by reference to s 52 of the Limitation Act. I observe that this evidence does not avail the second plaintiff or the third plaintiff.
In the event nor does the availability of an arguable case based upon s 52 avail Mrs Kovarfi herself as a matter of law. Although there may be evidence ultimately led that she suffered the disability for four years, that matter, if found in her favour, would not extend the limitation period for four years. Rather, the "extension" would be provided by s 52(1)(e). It is in the following terms:
(1) Subject to subsections (2) and (3) and subject to section 53, where:
(a) a person has a cause of action,
(b) the limitation period fixed by this Act for the cause of action has commenced to run, and
(c) the person is under a disability,
in that case:
(d) the running of the limitation period is suspended for the duration of the disability, and
(e) if, but for this paragraph, the limitation period would expire before the lapse of three years after:
(i) the date on which the person last (before the expiration of the limitation period) ceases to be under a disability, or
(ii) the date of the person's death,
(whichever date is the earlier), the limitation period is extended so as to expire three years after the earlier of those dates.
For present purposes the 'earlier of those dates' can only be the date when Mrs Kovarfi ceases to be under a disability. In that regard the section would only serve to extend the limitation period not for the period during which it was suspended by reason of the disability, but rather for the period of three years after the cessation of the disability. On the material before me, I infer that at a trial there would probably be evidence that the disability ceased on 5th November 2008. The limitation period therefore would not be extended beyond 5th November 2011. In the present case, as I've said, the statement of claim was issued in May 2013. Section 52 would not avail Mrs Kovarfi.
Although I am not persuaded that the material relied upon by Mrs Kovarfi demonstrates the availability of a pleadable case in fraud, I think it appropriate, because Mrs Kovarfi relies upon it, for me to refer to s 55 of the Limitation Act. As I understood the case Mrs Kovarfi outlined in argument, she and her husband were aware in 2004 that, according to the advice they had received from another valuer, the defendant may have overstated the value of the work performed up to 13th February 2004 and accordingly the amount necessary to complete the job had been wrongly stated in the report of May 2004.
The only matter that they were not aware of was information relayed to them in October 2010 on behalf of the bank that a person they believed to be a bank officer in fact worked for the defendant. I am not sure - I interpolate - how that information makes any difference. I cannot see that the case sought to be made in relation to the erroneous contents of the reports, as alleged, becomes one of fraud, even if it is assumed that the person involved in fact worked for the valuers and not for the bank. But in any event, s 55 of the Limitation Act is relevant. However, it applies where a cause of action is based on fraud or deceit, or, the person by whom it is owed fraudulently conceals the cause of action.
In either of those cases the cause of action does not commence to run, or rather time is not counted, before the date on which the person having the cause of action first discovers, or may with reasonable diligence have discovered the fraud, deceit or concealment, as the case may be.
As I have said, the availability of a cause of action against the valuers, if one was available, was discovered by the first and second plaintiffs, on their case, in 2004 when they realised that erroneous information had been passed on to the bank. The cause of action does not in any way improve because of any allegation of fraud. In any event, I am not satisfied that there is any evidence from which I could infer that any such fraud could not, with reasonable diligence, have been discovered in or about 2004. For these reasons I am not satisfied that there is likely to be an available extension of the limitation period by virtue of s 55.
I stress that this is not a case where it is open to me to exercise any general discretion to extend time for bringing the actions. I also stress that to the extent to which the action is based upon the Trade Practices Act, there are no statutory equivalents of either s 52 or s 55, and that cause of action is clearly out of time. I should not be understood as suggesting that I am persuaded that there are discretionary grounds which would justify an extension of time if I had that power.
Conclusion about summary dismissal
Accordingly, I am of the view that the proceedings brought on behalf of the first and second defendants ought properly be summarily dismissed. In coming to this conclusion I have borne in mind the stringency of the legal test which it is necessary for me to apply. In particular, I remind myself of what was said by the plurality in Agar v Hyde (2000) 2001 CLR 552 at 57 in the following terms:
It is of course well accepted that a Court whose jurisdiction is regularly invoked in respect of a local defendant...should not decide the issues raised in those proceedings in a summary way, except in the clearest of cases. Ordinarily a party is not to be denied the opportunity to place his or her case before the Court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the outcome of the proceedings if it were allowed to go to trial in the ordinary way.
I have a high degree of certainty that, if these proceedings brought by the first and second plaintiffs were to proceed to trial in the ordinary way, they would surely be unsuccessful because they are not competent for the reasons I have given, and nor are they brought within the time limited by the relevant limitations provisions in Federal and State law.
Before announcing final orders, I should say something about the remaining issues and something about the position of the third defendant. The remaining issues ventilated by the defendant relate to an argument that, even assuming duty and breach, whether at common law or under statute, the issue of causation cannot be made good at a trial.
A similar argument was raised before McCallum J, and her Honour rejected it on the basis that causation is a question of fact, and, par excellence, a question of contestable fact. In those circumstances it could not be said that no evidence could be brought at a trial capable of tipping the balance in favour of the plaintiffs. This is not a statement of principle, but a finding of fact in that case. However, I have come to the same conclusion in the context of the present case.
Should the proceedings be stayed on account of an unpaid costs order arising from earlier proceedings?
It is not necessary to decide whether the proceedings should be stayed because the costs order imposed by McCallum J on the same plaintiffs remains unsatisfied. To the extent to which that question depends upon the exercise of me by a judicial discretion, I would not have been satisfied that the proceedings should be stayed.
For obvious commercial reasons advanced in the evidence before me, the defendants have not taken any real step to enforce the costs order they obtained in the last proceedings. That may well be very understandable. There is no point throwing good money after bad, as it is said. However, given that no steps have been taken in that regard, I would not have thought the bare order a sufficient reason to stay the proceedings.
I should refer to one argument raised by Mrs Kovarfi, and that is to say, as McCallum J may have come to the conclusion that a mere cause of action of the type the subject of her right to sue the defendants cannot be assigned, itself a contestable proposition of law, it is impossible for the causes of action to have vested in the trustee. However, the vesting in the trustee does not depend upon assignment; rather, it depends upon the operation and force of federal law, as I have said, by reference to s 58 of the Bankruptcy Act, and I would reject that argument.
Should the company be restored?
I turn now to the position of the third defendant. The third defendant is Mrs Kovarfi's mother-in-law, and she was the last director and shareholder of the development company at the time it was deregistered. She is joined as a plaintiff to enable her to move for orders under the Corporations Act 2001 restoring the company to the register so that it could be joined as a party to these proceedings asserting any loss it may have suffered additional to the loss actually suffered by the plaintiffs who are natural persons.
Given that the substantive proceedings will be dismissed, there is no utility in reviving that company for the purpose of these proceedings. Moreover, given the decision of McCallum J, it is difficult to see how any cause of action the property of the deregistered company could be ventilated as it is statute barred.
Mr Williams put to me other discretionary reasons which might affect a decision as to whether the company should be reinstated to the register, and for these reasons it seems to me that I should strike out the statement of claim in so far as it relates to those claims for relief by the third plaintiff.
As Mr Williams argued, if there is any utility in reviving those claims for relief, they can be brought by summons in the corporations list of the equity division, where they are doubtless more properly determined.
For these reasons, I make the following orders:
(1) Prayers 5, 6 and 7 of the relief claimed in the statement of claim filed on 3 May 2013 are struck out without prejudice to any right of the third plaintiff to seek such relief by way of proceedings recommenced by summons.
(2) The proceedings are otherwise dismissed under rule 13.4 of the Uniform Civil Procedure Rules 2005.
(3) The first and second plaintiffs are to pay the defendants' costs on the ordinary basis forthwith after they have been agreed or assessed.
**********
Decision last updated: 20 February 2014
10
7
4