Neighbourhood Association NA 285249 v Watson

[2007] NSWLEC 729

Land and Environment Court

of New South Wales

CITATION:

Neighbourhood Association NA 285249 v Watson [2007] NSWLEC 729

PARTIES:

FIRST APPLICANT:
Neighbourhood Association NA 285249

SECOND APPLICANT:
Neighbourhood Association NA 285433

THIRD APPLICANT:
Neighbourhood Association NA 285486

FOURTH APPLICANT:
David Timothy O'Brien

FIFTH APPLICANT:
Angela Christina O'Brien

FIRST RESPONDENT:
Anthony Rupert Watson

SECOND RESPONDENT:
Sammy One Pty Limited

FILE NUMBER(S):

41094 of 2006

CORAM:

Biscoe J

KEY ISSUES:

Practice and Procedure :- sequestration order against one of several applicants - whether proceedings by all applicants are thereby stayed

LEGISLATION CITED:

Bankruptcy Act 1966, s 60

CASES CITED:

John v Neiman Holdings Pty Ltd (1986) 84 FLR 84;
McKellar v Container Terminal Management Services Ltd (No 4) [2002] FCA 185

DATES OF HEARING:

17 October 2007

EX TEMPORE JUDGMENT DATE:

17 October 2007

LEGAL REPRESENTATIVES:

FIRST, SECOND, THIRD AND FIFTH APPLICANT:
Mr P Tomasetti SC and Mr N Eastman, barrister
SOLICITORS:
Cosgriff Orchard Legal

FOURTH APPLICANT:
N/A

FIRST AND SECOND RESPONDENT:
Mr C J Leggat SC and Mr J Young, barrister
SOLICITORS:
Andreones

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

BISCOE J

17 October 2007

41094 of 2006

NEIGHBOURHOOD ASSOCIATION NA 285249 & ORS v WATSON & ANOR

EX TEMPORE JUDGMENT

1 HIS HONOUR: When this matter was called on for hearing this morning, I was informed by counsel formerly appearing for all applicants that a sequestration order was made against the fourth applicant yesterday and that, consequently, the fourth applicant’s proceedings were stayed and counsel now appeared only for the other four applicants.

2 The respondents, however, submit that by reason of s 60(2) of the Bankruptcy Act 1966 (Cth) the entire proceedings brought by all applicants are stayed. On further consideration, the applicants do not submit to the contrary. Section 60 relevantly provides as follows:

60 Stay of legal proceedings
…
(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.
…
(5) In this section, action means any civil proceeding, whether at law or in equity.

3 In McKellar v Container Terminal Management Services Ltd(No 4) [2002] FCA 185 two applicants sued on the basis that each had been induced to enter into a contract of service by reason of misleading or deceptive conduct which contravened the provisions of the Trade Practices Act 1974 (Cth). They brought claims for breach of contract, conspiracy, malfeasance in public office and negligence. One of the applicants was made bankrupt. Weinberg J decided that the entire action by both applicants was stayed under s 60 of the Bankruptcy Act 1966. His Honour held:

21 That leaves Mr McKellar's position to be resolved. He is impecunious. He is not, however, a bankrupt.

22 ReLofthouse (2001) 107 FCR 151 is authority for the proposition that where one of several applicants is made bankrupt, the effect of s 60(2) of the Bankruptcy Act is to stay the entire action, and not just the claims brought by the bankrupt. In that case Gray J noted that s 60(5) of that Act defined the term action to mean any civil proceeding, whether at law or in equity. That was plainly a definition of great width. His Honour referred to John v Neiman Holdings Pty Limited (1986) 84 FLR at 84 where Young J of the Supreme Court of New South Wales had similarly held that s 60(2) operated to stay the whole of a proceeding even though the bankrupt concerned was one of several plaintiffs, and his claim was separate from those of the others. Both John v Neiman and ReLofthouse were cited with approval by Katz J in Campbell v Metway Leasing Ltd [2001] FCA 1311.
…

24 By reason of the operation of s 60(2) of the Bankruptcy Act the proceeding in its entirety is stayed. There is therefore no need for the Court to make any orders upon the respondents' notices of motion and it is appropriate that they be dismissed. There remains to be determined an issue as to costs.

4 One of the authorities to which his Honour referred was John v Neiman Holdings Pty Ltd (1986) 84 FLR 84. There Young J said at 84-85:

However, there must be some reading down of subs (2) in the light of the decision of Holland J in Beneficial Insurance Co Ltd v Hamilton (1985) 73 FLR 347. In that case bankruptcy occurred after the hearing, but before orders were pronounced. His Honour held that the subsection did not prevent the pronouncing of formal orders because its purpose was to give the trustee in bankruptcy time to consider whether he would prosecute or discontinue the action and that presupposed that the litigation was in such a state that such an election was still a relevant and practical matter.

However, in my view, apart from these two exceptions, viz: (1) where the bankrupt's property is not affected because he is merely added to the litigation as a party for more abundant caution; or (2) where the litigation has progressed beyond the stage where the trustee's decision as to what he will do about it is still material, the effect of s 60(2) is to prevent any activity in litigation in which the bankrupt is a plaintiff or one of the plaintiffs until the election has been made. This will doubtless cause hardship in many cases: the instant is one of them, but the Commonwealth Government must be taken to have formed the policy that it is better for some hardship to be caused to some litigants in the public interest of the trustee in bankruptcy making an informed decision as to whether in the interest of creditors he will pursue the action in which the bankrupt is involved or not.

5 In the course of submissions, the represented applicants raised the question whether either of the exceptions identified by Young J in John applied. The respondents contested that proposition, which thereafter was not pressed by those applicants. In my view, the exceptions are inapplicable.

6 In my opinion, the terms of s 60(2) of the Bankruptcy Act 1966, as interpreted in these cases, lead to the conclusion that these entire proceedings are stayed. This will cause inconvenience, to say the least, for parties and others who have travelled here to Moama, on the border of Victoria and New South Wales, for the first three days of the hearing, which has been set down for ten days with provision for possible further days later in the year. However, the statutory command is inescapable.

7 I am informed that, as presently advised, the remaining applicants have decided to wait and see whether the trustee in bankruptcy of the fourth applicant makes an election in writing to prosecute the action. Under s 60(3) of the Bankruptcy Act 1966, if the trustee does not make such an election within twenty eight 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.

8 The proceedings will be listed for mention before me after the expiry of that twenty-eight day period, on Friday, 23 November 2007 at 9.15am.