Macks as Trustee of the Bankrupt Estate of Lee v Lee (No 2)

This matter concerned an application by the Trustees of the Bankrupt Estate of Lee (the Trustees) to be substituted as applicants in proceedings previously commenced by Mr Macks. The Trustees sought to challenge a finding that they had failed to prosecute the proceedings with due diligence, arguing that their attempts to be substituted as applicants constituted reasonable efforts. The court was required to determine whether the Trustees' actions, or lack thereof, warranted the dismissal of the proceedings.

The central legal issue was whether the discretion to dismiss the proceedings for failure to prosecute should be exercised against the Trustees, notwithstanding their eventual application for substitution. This involved assessing the adequacy of their attempts to be substituted and considering various findings made by the court regarding the conduct of the parties and their legal representatives. These findings included a lack of cooperation in identifying issues, inconsistent explanations for procedural steps, failures to disclose relevant information to opposing parties and the court, and a failure by counsel to disclose communications recommending non-appearance at a scheduled hearing.

Manousaridis J found that the Trustees had not at any time applied to be substituted as applicants, but rather had a conditional intention to do so only if a separate application was rejected. The court noted that the Trustees had failed to address inconsistencies in explanations for their conduct and had failed to disclose material information to the respondents and the court. Furthermore, counsel for the Trustees had failed to disclose communications recommending non-appearance at a hearing and the actual agreement reached between Mr Macks and the Trustees regarding the proceedings. These failures, particularly the lack of engagement with legitimate matters raised in correspondence and the lack of transparency, were considered relevant to the exercise of the discretion to dismiss.

The court concluded that the Trustees' conduct, including their failure to prosecute the proceedings with due diligence and their lack of transparency, meant that the discretion to dismiss the proceedings should be exercised in favour of dismissal.