Moran v Minco Holdings Pty Ltd (in Liquidation)
[2022] WASCA 93
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: MORAN -v- MINCO HOLDINGS PTY LTD (IN LIQUIDATION) [2022] WASCA 93
CORAM: BUSS P
MITCHELL JA
HEARD: 21 JULY 2022
DELIVERED : 29 JULY 2022
FILE NO/S: CACV 10 of 2021
BETWEEN: RUSSELL HOWARD MORAN
Appellant
AND
MINCO HOLDINGS PTY LTD (IN LIQUIDATION)
Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram: FLYNN DCJ
File Number : CIV 2432 of 2019
Catchwords:
Appeal - Practice and procedure - Bankruptcy of appellant after appeal instituted - No election by trustee in bankruptcy to prosecute or discontinue appeal - Deemed abandonment - Whether appeal should be dismissed - Whether appellant should be required to pay the respondent's costs of the appeal
Legislation:
Bankruptcy Act 1966 (Cth), s 60
Result:
Appeal dismissed
Appellant to pay the respondent's costs of the appeal
Category: B
Representation:
Counsel:
| Appellant | : | R C Cowden |
| Respondent | : | J R Shepherd |
Solicitors:
| Appellant | : | Tudori Hager Grubb |
| Respondent | : | Blackwall Legal LLP |
Case(s) referred to in decision(s):
Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194
Cleary Bros (Parramatta) Pty Ltd v Commonwealth Bank of Australia [No 2] [2011] ACTSC 130
Cole v Challenge Bank Ltd [2002] FCAFC 200
Cristovao v Tan and Tan Lawyers Pty Ltd [No 2] [2017] WASCA 171
Culleton v Dakin Farms Pty Ltd [2015] WASCA 183
Duckworth v Water Corporation [No 2] [2012] WASC 163
Dymocks Franchise Systems (NSW) Pty Ltd v Chapter Three Pty Ltd [2022] NSWSC 35
Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52
Freeman v Joiner [2005] FCAFC 149
Frigger v Rowe Bristol Lawyers Pty Ltd [2020] WASC 5
Lafferty v Waterton [2016] WASCA 183
National Australia Bank Ltd v Nyasa Nominees Pty Ltd [2019] WASC 107
Nugawela v Commissioner of Taxation [2018] FCA 1458
Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622
Savage v Australian Unity Funds Management Ltd [2011] NSWCA 270
The State of Queensland v Beames [2003] QSC 399; [2004] 2 Qd R 99
JUDGMENT OF THE COURT:
We are dealing with the question of what orders this court should make in this appeal following the appellant's bankruptcy and the deemed abandonment of the appeal under s 60(3) of the Bankruptcy Act 1966 (Cth).
Background
On 29 January 2021, the primary judge granted summary judgment to the respondent against the appellant in the sum of $290,132.30. That amount was owing under a loan by the respondent to the appellant (First Loan Agreement). The appellant was given leave to defend the primary proceedings so far as the respondent claimed an amount owing under a subsequent loan agreement between the appellant and the respondent. The appellant was the sole director, secretary and shareholder of the respondent, which is a company in liquidation.
The appellant resisted the summary judgement application, arguing that the respondent was indebted to him for an amount in excess of his indebtedness to the respondent under the First Loan Agreement. The respondent's liability to the appellant was alleged to arise from unpaid consultancy fees and loans (including a loan for $250,000) made by the appellant to the respondent. The appellant claimed a right to set-off the amount he owed to the respondent under the First Loan Agreement against the claimed amounts owing by the respondent to the appellant.[1]
[1] Primary ts 177 - 178.
The primary judge found that a cause of action existed in relation to the appellant's claim as to the unpaid consultancy fees and in relation to the $250,000 loan by the appellant to the respondent. However, the primary judge also found that the appellant was not entitled to set‑off the amount he owed to the respondent under the First Loan Agreement against any of his claims against the respondent.[2] This was on the basis that any claim the appellant had in contract or unjust enrichment, based on either the alleged consultancy agreement or the $250,000 loan, were for unliquidated debts for which set-off was not available either at law or in equity.[3]
[2] Primary ts 178.
[3] Primary ts 184, 188 - 189.
On 11 February 2021, the appellant instituted an appeal in this court against the primary judge's orders. The ground of appeal is that the primary judge erred in finding that the claim based on the $250,000 loan was not a liquidated claim, with the result that the appellant was not entitled to statutory set-off in respect of that claim.
The appellant's bankruptcy
On 31 January 2022, the Federal Court of Australia ordered that the appellant's estate be sequestrated under the Bankruptcy Act 1966 (Cth). The date of the act of bankruptcy noted on the sequestration order was 13 September 2021.[4]
[4] Order of Registrar Benter dated 31 January 2022, in matter number WAD212/2021.
The sequestration order engaged s 60(2) and s 60(3) of the Bankruptcy Act, which provide:
(2)An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
(3)If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.
These provisions are subject to certain exceptions created by s 60(4) of the Bankruptcy Act, none of which are arguably applicable in the present case. Section 60(5) defines 'action' to mean any civil proceeding, whether at law or in equity. This appeal is clearly an 'action' for the purposes of s 60 of the Bankruptcy Act.
On 4 May 2022, the respondent's solicitors gave the appellant's trustee in bankruptcy notice under s 60(3) of the Bankruptcy Act.[5] The trustee in bankruptcy has not made any election to prosecute or abandon the appeal under that section. As more than 28 days have passed since the notice was given to the trustee in bankruptcy, the appellant's trustee in bankruptcy is now deemed by s 60(3) to have abandoned the appeal.
[5] Affidavit of Jonathan Rex Shepherd sworn 18 May 2022, annexure JRS1.
Appropriate order following abandonment
While the appeal is deemed to have been abandoned by operation of the Bankruptcy Act, the deemed abandonment does not operate to dismiss the appeal.[6] On 14 June 2022, the acting Court of Appeal registrar issued a notice to the parties to attend for the court to consider whether to give effect to s 60(3) of the Bankruptcy Act by formally dismissing the appeal. Correspondence of 14 June 2022, providing the parties with that notice to attend, was also sent by the registrar's associate to the office of the appellant's trustee in bankruptcy, who did not seek to appear at the hearing.
[6] Cristovao v Tan and Tan Lawyers Pty Ltd [No 2] [2017] WASCA 171 [11]; National Australia Bank Ltd v Nyasa Nominees Pty Ltd [2019] WASC 107 [12]; Frigger v Rowe Bristol Lawyers Pty Ltd [2020] WASC 5 [4].
The appellant accepts that the appeal should be dismissed in these circumstances. The appellant does not seek any order that would have the effect of preserving any substantive rights which the appeal seeks to establish. Nor does the appellant ask this court to make any order dealing with the contingency of the sequestration order being set aside.[7]
[7] The potential significance of such a request is noted in Culleton v Dakin Farms Pty Ltd [2015] WASCA 183 [46].
The deemed abandonment of a proceeding by a trustee in bankruptcy does not itself extinguish the cause of action asserted in the proceedings.[8] The deemed abandonment of proceedings effected by s 60(3) does not mean, of itself, that proceedings should be dismissed. It is a separate question in any particular case whether there ought to be a dismissal and what order as to costs may be made consequent upon the abandonment effected by the statute.[9]
[8] Freeman v Joiner [2005] FCAFC 149 [14].
[9] TheState of Queensland v Beames [2003] QSC 399; [2004] 2 Qd R 99, applied in Nugawela v Commissioner of Taxation [2018] FCA 1458 [11].
Given the appellant's attitude, it is appropriate that this court give effect to the deemed abandonment of the appeal pursuant to s 60(3) of the Bankruptcy Act by an order that the appeal be dismissed. There are no circumstances to warrant keeping this appeal on foot.
Costs of the appeal
The respondent seeks an order that the appellant pay its costs of the appeal to be assessed if not agreed. It is open to this court to make such an order, notwithstanding s 58(3) of the Bankruptcy Act, which provides that it is not competent for a creditor, without the leave of a bankruptcy court, to take any step in a proceeding in respect of a provable debt. This is because any liability to pay costs pursuant to an order made by this court after the sequestration order would not be a 'provable debt' in the appellant's bankruptcy under s 82 of the Bankruptcy Act.[10]
[10] Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 [67].
The appellant contends that there should be no order as to costs on the basis that the appeal proceedings have been brought to an end by operation of the Bankruptcy Act without any determination on the merits. We do not accept that submission. The cases relied on by the appellant concern a different situation, where there has been a settlement of a dispute or some other circumstance that has made it unnecessary to resolve the dispute.[11] Those cases are distinguishable from the present case, where the appeal is deemed, by s 60 of the Bankruptcy Act, to have been abandoned and is dismissed following that deemed abandonment.
[11] Lafferty v Waterton [2016] WASCA 183 [17] - [18]; Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 [201]; Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin(1997) 186 CLR 622, 625; Dymocks Franchise Systems (NSW) Pty Ltd v Chapter Three Pty Ltd[2022] NSWSC 35 [2].
The appropriate general approach when a proceeding by a bankrupt is deemed to have been abandoned under s 60(3) of the Bankruptcy Act was described by Gray J (RD Nicholson and Emmett JJ relevantly concurring) in Cole v Challenge Bank Ltd:[12]
Ordinarily, if an appeal is discontinued, costs follow the event. If an appeal were to be abandoned in normal circumstances by express statement of the appellant, it would be open to a respondent to put an end to it by moving the Court to have the appeal dismissed for want of prosecution. In those circumstances, costs would still follow the event and an order would be made against the appellant in respect of those costs. Such costs would, of course, include the costs of moving the Court to dismiss the appeal for want of prosecution.
I am not aware of any authority on the effect of s 60 of the Bankruptcy Act on the matter of costs when either there is an election to discontinue a proceeding or there is a deemed abandonment of it. In my view, the Court should follow the normal practice and costs should follow the event.
[12] Cole v Challenge Bank Ltd [2002] FCAFC 200 [16] - [17], [20] ‑ [21], [22].
The reasoning in Cole is applicable in the current statutory context. Abandonment of the appeal by the appellant (or the trustee in bankruptcy standing in his stead) would ordinarily be achieved by the filing of a discontinuance notice under r 59 of the Supreme Court (Court of Appeal) Rules 2005 (WA). Subject to a presently immaterial exception, r 59(4) provides that an appellant who discontinues an appeal must pay the respondent's costs of the appeal unless a single judge orders otherwise.
This aspect of the decision in Cole has been applied in a number of single judge decisions.[13] It is apparent from Cole and the decisions following it that the mere fact that the proceedings are deemed to be abandoned by an appellant's trustee in bankruptcy, and that the appellant personally will remain liable to pay the costs after discharge of the bankruptcy, does not ordinarily, of itself, provide a basis for declining to make a costs order against the appellant where the proceedings are dismissed.
[13] Frigger [70] - [71]; Duckworth v Water Corporation [No 2] [2012] WASC 163 [37] - [38], [44]; Cleary Bros (Parramatta) Pty Ltd v Commonwealth Bank of Australia [No 2] [2011] ACTSC 130 [19], [21]; Savage v Australian Unity Funds Management Ltd [2011] NSWCA 270 [21] - [22], [27].
In our view, there is no sufficient reason in the present case to depart from the ordinary rule that costs should follow the event on dismissal of the appeal. The appropriate order is that the appellant pay the respondent's costs of the appeal, to be assessed if not agreed.
Orders
For the above reasons, the following orders should be made in this appeal:
1.The appeal is dismissed.
2.The appellant pay the respondent's costs of the appeal, to be assessed if not agreed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
EM
Associate to the Honourable Justice Mitchell
29 JULY 2022
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