Managed Print Investments Pty Ltd v Warner (Trustee), in the matter of Vinden (Bankrupt)
[2025] FedCFamC2G 271
•27 February 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Managed Print Investments Pty Ltd v Warner (Trustee), in the matter of Vinden (Bankrupt) [2025] FedCFamC2G 271
File number(s): SYG 2026 of 2024 Judgment of: JUDGE LAING Date of judgment: 27 February 2025 Catchwords: BANKRUPTCY – application under s 58(3)(b) of the Bankruptcy Act 1966 (Cth) for leave to continue proceedings in the District Court of New South Wales – parties – considerations regarding grant of leave – Trustee consent to orders proposed – leave granted Legislation: Bankruptcy Act 1966 (Cth) ss 58 & 82 Cases cited: 7Steel Building Solutions Pty Ltd v Wright [2011] FCA 328
Armstrong Scalisi Holdings Pty Ltd v Gioiello [2018] FCA 1729
Kattirtzis v Zaravinos [2001] FCA 1158
Lawrence & Hanson Group Pty Ltd, in the matter of Pugliese v Pugliese [2016] FCA 1278
Commissioner of Taxation v Yeo (Trustee) (No 2) [2019] FCA 1188
Yan v Spyrakis as trustee in bankruptcy for Liu [2022] FCA 872
Division: General Number of paragraphs: 21 Date of hearing: 25 February 2025 Place: Sydney Counsel for the Applicant: Mr J Raftery Solicitor for the Applicant: Rydge Partners Counsel for the Respondent: Ms G Adams Solicitor for the Respondent: Legal One Services ORDERS
SYG 2026 of 2024 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF SHEENA NITIN VINDEN, BANKRUPT
BETWEEN: MANAGED PRINT INVESTMENTS PTY LTD ACN 639 385 023
Applicant
AND: ANTHONY WARNER AS TRUSTEE OF THE BANKRUPT ESTATE OF SHEENA NITIN VINDEN
Respondent
ORDER MADE BY:
JUDGE LAING
DATE OF ORDER:
27 FEBRUARY 2025
BY CONSENT, THE COURT ORDERS THAT:
1.Pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth) the applicant is granted leave to continue District Court Proceedings No. 2023/00423059.
2.The respondent pay the applicant’s costs of the application.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE LAING:
The applicant (MPI) seeks an order under s 58(3)(b) of the Bankruptcy Act 1966 (Cth) (Act) for leave to continue District Court proceedings No. 2023/00423059 (District Court Proceedings). This order is sought in circumstances where the defendant in those proceedings, Sheena Nitin Vinden, became bankrupt during the currency of those proceedings.
The respondent (Trustee) consents to the order sought by MPI, as well as a proposed order regarding costs. Although a further order granting leave to continue related Supreme Court proceedings was initially proposed by consent, this was not pressed at the hearing of the matter.
For the following reasons, the orders that have otherwise been proposed by consent will be granted.
BACKGROUND
The following is taken from an affidavit of Bradley Peter Keen made on 21 August 2024.
Atkinson Vinden Pty Ltd (Atkinson Vinden) went into liquidation on 12 December 2023. Atkinson Vinden had previously operated a law practice, of which Ms Vinden was the sole director. MPI contends that an amount is owing under an agreement between MPI and Atkinson Vinden that was guaranteed by Ms Vinden (Agreement). MPI is said to have a security interest in Ms Vinden’s real and personal property under the Agreement.
On 31 October 2023, a caveat (Caveat) was lodged regarding Ms Vinden’s interest in a property (Property). On 17 November 2023, a lapsing notice was served.
MPI commenced the District Court Proceedings on 22 November 2023, seeking recovery of the amount said to be owing under the Agreement.
On 29 November 2023, MPI commenced the related Supreme Court proceedings seeking to, inter alia, extend the operation of the Caveat. On 30 November 2023, the operation of the Caveat was extended until further order of the Court. The Supreme Court Proceedings were adjourned pending the District Court Proceedings. A Defence, amended pleadings and evidence have subsequently been filed and served in the District Court Proceedings.
On 27 May 2024, Ms Vinden became bankrupt following acceptance and endorsement of her debtor’s petition. The Trustee was appointed on the same date.
On 22 August 2024, MPI commenced the current proceedings.
RELEVANT PRINCIPLES
Section 58 of the Act relevantly provides:
(1) Subject to this Act, where a debtor becomes a bankrupt:
(a)the property of the bankrupt, not being after - acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and
(b)after - acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee…
(3)Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b)except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
Section 82 of the Act relevantly states:
(1)Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy…
(2)Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy.
The policy behind s 58(3) of the Act was considered in 7Steel Building Solutions Pty Ltd v Wright [2011] FCA 328 (7Steel Building Solutions) at [10] (Flick J):
10.The policy behind s 58(3) has been expressed as follows by Hill J in Re Rose; Ex parte Devaban Pty Ltd (Unreported, Federal Court of Australia, Hill J, 7 October 1994) (“Re Rose”) as follows:
The obvious policy behind s 58(3) of the Act was that any proceedings in force at the time of bankruptcy should be stayed and no further proceedings should be commenced so far as they relate to the period prior to bankruptcy unless the Court gives leave. In this way the bankrupt is freed from any claims that might be made in respect to the period prior to bankruptcy and the Trustee in bankruptcy can, if the Trustee accepts the proof of debt, treat a claim against the estate like the claim of all other creditors, so that the assets of the estate are, in due course, divided pro rata among the creditors.
Another reason for staying proceedings or preventing new proceedings from being commenced is to ensure that the Trustee of a bankrupt estate is not put to expense in defending proceedings which the Trustee has no money to defend. On the other hand, the Act does contemplate that the Court will, in an appropriate case, grant leave. In that respect a case would be an appropriate case where the proceedings proposed against the bankrupt are proceedings to which other parties are involved and for the proper conduct of which it may be necessary for the bankrupt to become a party.
Section 58(3) protects a bankrupt and the property of the bankrupt against the enforcement of remedies and enables the Court to control proceedings in respect of a provable debt in the light of the objectives of the Act: Gertig v Davies (2003) 85 SASR 226 at [15].
At [12]-[13], Flick J further reasoned:
12.Also relevant to the exercise of the discretion conferred by s 58(3) is whether the facts are complex and whether it may be preferable for those facts to be resolved at a hearing rather than by way of a proof of debt: Allanson v Midland Credit Ltd (1977) 30 FLR 108 (“Allanson”). Bowen CJ, Riley and Deane JJ there observed:
Before proceeding further with the question of the effect of the stay and the operation of s 58(3), it is convenient to consider the second question which arises. That is, whether the court, if it has jurisdiction, should grant leave in the present case. Franki J, while indicating that as then advised he would not have answered this question in the affirmative, never reached the stage where it was necessary to decide it. The facts are complex. The claim of Midland Credit is not only against Mr Allanson but against other defendants who, in some respects, may be jointly and severally liable with him. There is also the question of the defences, some of which form the basis of the cross-claim. It would seem that all of these issues would be better and more comprehensively dealt with by a contested trial of the action in the Supreme Court than could possibly be the case if Midland Credit were required to lodge a proof of debt in respect of its claim against Mr Allanson alone. Such a proof of debt would be in the form of an affidavit and determined by the official receiver at such time as the stay ceased to operate. If the official receiver disallowed the claim in whole or in part, an appeal on this isolated issue could be brought to the Bankruptcy Court. But in these circumstances, the issues would have been determined in a less satisfactory way and questions between Mr Allanson and the other parties to the action would not be resolved: (1977) 30 FLR at 114.
See also: Westpac Banking Corporation v Ollis [2007] FCA 1194 at [18] to [20] per Cowdroy J.
13.For present purposes it should finally be noted that in Allanson, Bowen CJ, Riley and Deane JJ went on to observe that leave may be granted without determining whether s 58(3) applies. In this context their Honours concluded:
In the circumstances, we have formed the view that, if s 58(3) applies, the court has jurisdiction to grant leave to proceed and such leave should be granted.
We consider that it is unnecessary in the circumstances for us to express a final view of the effect of the stay on the operation of s 58(3). Where a court is given power to grant leave to perform a particular act or pursue a particular course of action and the question whether the need for such leave has arisen involves difficult and complicated questions of law or fact, it is permissible, in an appropriate case, to proceed on the basis that such leave is necessary rather than involve the parties in the futile exercise of determining, possibly after a series of appeals, whether the need for such leave has arisen. In all the circumstances including the urgency of the matter, we consider that that is the appropriate course to adopt in this case and that we should, to the extent necessary, grant leave to Midland Credit to continue and take fresh steps in the proceedings in the Supreme Court of New South Wales. This approach would, it seems to us, be consistent with that adopted by the High Court in Talga Ltd v MBC International Ltd (1976) 133 CLR 622. It is an approach which was raised before us in the course of argument but not before the learned judge below: (1977) 30 FLR at 114-115.
The power of the Court to grant leave includes the power to make an order nunc pro tunc: Re Veghelyi; Smith v Official Trustee in Bankruptcy (1993) 45 FCR 413 at 417 per Sweeney J; Sturdy Components Pty Ltd v Trustee of the Bankrupt Estate of Sturt [2000] FCA 884 at [3] per Burchett J.
Considerations such as complexity, the nature and advanced stage of proceedings, the potential for duplication and further litigation through the proof of debt process and a lack of objection by the trustee have been relevant to the question of leave in other cases: see for example 7Steel Building Solutions at [20]-[22], Armstrong Scalisi Holdings Pty Ltd v Gioiello [2018] FCA 1729 (Armstrong Scalisi Holdings) at [32]-[39] (Markovic J), Yan v Spyrakis as trustee in bankruptcy for Liu [2022] FCA 872 (Yan v Spyrakis) at [11] (Katzmann J) and Lawrence & Hanson Group Pty Ltd, in the matter of Pugliese v Pugliese [2016] FCA 1278 at [28] (Gleeson J).
PARTIES
The application before the Court initially expressed Ms Vinden to be the respondent. However, MPI and the Trustee appear to have proceeded on the common understanding that the reference to Ms Vinden was intended to be a reference to the Trustee. Orders were accordingly made at the hearing of this matter to reflect this common understanding.
At the hearing, I queried whether Ms Vinden was on notice of the proceedings. I was informed by the Trustee that she was and that the proceedings had been discussed with her. In any event, MPI relied upon Federal Court authority to the effect that the bankrupt is not a necessary party to such an application: see Kattirtzis v Zaravinos [2001] FCA 1158 at [5] (Gyles J), Armstrong Scalisi Holdings at [24], Yan v Spyrakis and Commissioner of Taxation v Yeo (Trustee) (No 2) [2019] FCA 1188 at [43] (Anderson J).
Having regard to the authorities relied upon by MPI, I accept that Ms Vinden is not a necessary party to the application before the Court.
CONSIDERATION
MPI submitted that:
(a)the District Court Proceedings were commenced well before Ms Vinden became a bankrupt and are well advanced, with MPI having already served its evidence;
(b)the proceedings have the potential for some complexity, including by reference to potential defences that may be raised in those proceedings;
(c)the matters that will potentially be in dispute between the parties are more suitable for a contested trial than the proof of debt process;
(d)rejection of a proof of debt would likely result in MPI appealing the rejection, resulting in additional proceedings;
(e)the proof of debt process would result in MPI losing its security; and
(f)the Trustee was willing to consent to the grant of leave sought.
I find these submissions to be persuasive. The District Court Proceedings appear to involve, at least potentially, some level of legal and factual complexity. They also appear to be at a reasonably advanced stage, having commenced some time before the bankruptcy of Ms Vinden. Evidence has been filed. Refusal of leave in these circumstances appears likely to result in wasted costs and potential duplication between the processes in that Court and the proof of debt process. Should the proof of debt be refused, then the Trustee’s determination would be subject to review. There would therefore be a risk of further duplication through additional proceedings. No objection to the orders sought has been made by the Trustee (or anyone else). The Trustee has consented to the orders sought.
CONCLUSION
Having regard to the above, I will make orders by consent granting leave for continuation of the District Court Proceedings and in relation to costs.
I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Laing. Associate:
Dated: 27 February 2025
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