Lawindi v Elkateb

[2001] NSWSC 865

CITATION:	Lawindi v Elkateb [2001] NSWSC 865
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 4479/99
HEARING DATE(S):	07/09/01
JUDGMENT DATE:	3 October 2001
PARTIES :	Wasfy Lawindi (P) Mohamed Safwat Elkateb (D)
JUDGMENT OF:	Young CJ in Eq

COUNSEL :	I J Cheney (S) (P) Defendant in person
SOLICITORS:	Turner Freeman (P) Defendant in person
CATCHWORDS:	BANKRUPTCY [120]- Personal rights- Whether bankrupt has standing to apply to discharge injunction or mareva order. EQUITY [340]- Mareva order- Defendant bankrupt- Whether mareva should be dissolved.
LEGISLATION CITED:	Bankruptcy Act 1966, ss 30, 58, 60
CASES CITED:	Capital Cameras Ltd v Harold Lines Ltd [1991] 1 WLR 54 Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 Cummings v Claremont Petroleum NL (1996) 185 CLR 124 Hedwan v Hannouf (1997) 140 FLR 229 In Marriage of O'Neill (1998) 145 FLR 237 Macchia v Nilant [2001] FCA 7 McCallum v Federal Commissioner of Taxation (1997) 145 ALR 446 Re Claybridge Shipping SA - The Times 14.3.1981 noted [1981] Current Law Year Book 261 Re Clunies-Ross; Ex parte Totterdell (1987) 72 ALR 241 The Mercantile Group (Europe) AG v Aiyela (1993) 20 FSR 745
DECISION:	Notice of motion dismissed with costs.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

4479 of 1999
YOUNG CJ IN EQ
Wednesday 3 October 2001

LAWINDI v ELKATEB

Judgment

: This is a motion filed by the defendant, M S Elkateb, for an order discharging a mareva injunction which was made against him at the suit of the plaintiff Wasfy Lawindi. The order was made, after a contested hearing before Bergin J, on 29 October 1999 as a result of an arbitration between the parties having been determined against Mr Elkateb.

2 At the time when Bergin J gave her decision, the preliminary steps to found bankruptcy proceedings against Mr Elkateb had already been taken in that a bankruptcy notice had been served on him.

3 Mr Elkateb became bankrupt on 13 June 2001. His trustee is Mr David J Kerr.

4 On 20 August 2001, Mr Elkateb filed the present notice of motion.

5 This motion came on for hearing before me on 7 September 2001 in the duty list. Mr Elkateb appeared for himself and called no evidence, it being clear that his submission was that, because he was now bankrupt, the mareva order was of no utility and should not remain. Mr I J Cheney, solicitor, appeared for the plaintiff and resisted the application on two grounds: (a) that Mr Kerr alone had standing to bring the motion; and (b) that it was not necessarily the case that bankruptcy by itself was sufficient ground to discharge a mareva injunction.

6 As neither side were able to assist me on the resolution of these questions, and as I had a busy duty list to consider, I reserved my decision.

7 The first point is whether Mr Elkateb had standing to bring the application.

8 Upon sequestration, the property of the bankrupt vests in his or her trustee. Any application with respect to the property, accordingly, also vests in the trustee. Under s 58 of the Bankruptcy Act 1966, a plaintiff cannot take any fresh step in proceedings which he or she may have instituted against the bankrupt. Under section 60, the bankrupt cannot proceed with an action (except actions which fall within sub-section 4 being actions for personal injury or the death of a family member) but the trustee must elect whether to proceed.

9 Neither s 58 nor s 60 deal with the situation where the bankrupt is a defendant in proceedings, an injunction has been granted against him and he wishes to discharge that injunction.

10 An injunction is a personal remedy. It does not concern the property of the bankrupt. Accordingly, the cause of action is not vested in the trustee to discharge it. There being no prohibition in either s 58 nor s 60, on the bankrupt instituting proceedings, I cannot see any reason why he should not do so.

11 I should note that whilst I have used the word “injunction”, strictly speaking a mareva order is not an injunction; see Cardile v LED Builders Pty Ltd (1999) 198 CLR 380. However, it is abundantly clear that a mareva order is as much an in personam matter as the ordinary injunction.

12 There are, of course, decisions which appear to go the other way. In Cummings v Claremont Petroleum NL (1996) 185 CLR 124, the High Court held that a bankrupt had no locus standi to institute an appeal against the judgment which brought about his bankruptcy. The majority said at 138:

“That is because it is fundamental to the law of bankruptcy that the bankrupt is divested of both his interest in his property and liability for his provable debts.”

The minority thought that the right of appeal was properly of the bankrupt. See also the decision of Santow J in Hedwan v Hannouf (1997) 140 FLR 229. Cases such as In Marriage of O’Neill (1998) 145 FLR 237 that a bankrupt cannot seek to appeal in the Family Court against a property settlement order, and McCallum v Federal Commissioner of Taxation (1997) 145 ALR 446, that a bankrupt probably has no right to seek review of an objection to a taxation assessment, both deal with property rights and are distinguishable when one is dealing with a purely in personam right. The problems are also considered by French J in Macchia v Nilant [2001] FCA 7 at [41] et seq.

13 Accordingly, in my view, Mr Elkateb has standing to make this application.

14 I pass to the second point.

15 Although there is no decision directly on point, all the indications in what authority there is, go in the direction of saying that this point should be found against Mr Elkateb.

16 Under s 30 of the Bankruptcy Act 1966, a court with jurisdiction in bankruptcy can make an injunction in aid of the proper administration of the bankrupt’s property. In a proper case, the court can make a mareva order to preserve the assets for the trustee. A good example is Re Clunies-Ross; Ex parte Totterdell (1987) 72 ALR 241. If such an injunction can be made, there is firm ground for saying that a mareva injunction is not necessarily rendered otiose because of a bankruptcy.

17 Gee, Mareva Injunctions and Anton Piller Relief, 4th ed (Sweet & Maxwell, London, 1998) says at p 16:

“Mareva relief can … be maintained in force even after a winding up order or a bankruptcy order has been made, provided that its purpose is to preserve the assets held by or for the defendant, for the creditors as a whole.”

18 The authorities for that proposition are given as Re Claybridge Shipping SA, English Court of Appeal, 9 March 1981, The Times 14 March 1981, noted [1981] Current Law Year Book 261, as applied by Hobhouse J in The Mercantile Group (Europe) AG v Aiyela (1993) 20 FSR 745, 758. (Affirmed without this point being discussed [1994] QB 366).

19 It would seem that if a mareva order interferes with the due administration in bankruptcy that the trustee may apply to have it discharged on analogy with what was said in cases such as Capital Cameras Ltd v Harold Lines Ltd [1991] 1 WLR 54.

20 Hoyle, The Mareva Injunction and Related Orders, 3rd ed (LLP, London, 1997) at p 90 notes, without authority, that whilst a mareva may become unnecessary because the orders made in bankruptcy are sufficient protection, in many cases a mareva order may have use so as to provide double protection for the creditors. This again points in the direction that the mere fact of bankruptcy of the debtor does not provide a reason for discharge of the mareva order.

21 In the present case, the trustee, by swearing an affidavit that he does not consider the bankrupt has standing, can be said not to support the bankrupt’s application. There is no evidence that the existence of the mareva order impedes the bankruptcy. Accordingly, there is no reason to discharge the order.

22 I should make two final comments. First, although I initially had doubts about the matter, I do not consider that the discharge of a mareva order is in the same plight as the discharge of other orders associated with a debt which the bankrupt is entitled to have discharged under s 60(1) of the Bankruptcy Act 1966. In any event, that would be a matter for the Federal Court in its bankruptcy jurisdiction. Secondly, I am conscious that my ruling that the bankrupt has standing, is inconvenient in the sense that most bankrupts do not have sufficient property left to defray orders for costs, so that this sort of application may be made with the practical result that no costs penalty will be suffered. However, it seems to me that the law as to security for costs is sufficient remedy here without denying a bankrupt in the proper case to make the application.

23 However, for the reasons I have given, the bankrupt’s notice of motion must be dismissed with costs.

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Last Modified: 10/08/2001