Newman v Bain

Case [2013] FCA 558

FEDERAL COURT OF AUSTRALIA

Newman as trustee for the Bankrupt Estate of Keet v Bain [2013] FCA 558

Citation: Newman as trustee for the Bankrupt Estate of Keet v Bain [2013] FCA 558
Appeal from: Newman as trustee for the Bankrupt Estate of Keet v Bain [2012] FMCA 629
Parties: PHILIP NEWMAN AS TRUSTEE FOR THE BANKRUPT ESTATE OF JOHN FRANCIS DESMOND KEET v CLIVE STEWART BAIN
File number: WAD 169 of 2012
Judge: GILMOUR J
Date of judgment: 10 June 2013
Catchwords:

PRACTICE AND PROCEDURE –whether leave to appeal is required – test for determining whether an order is final or interlocutory – whether the failure to respond to a notice under s 60(3) of the Bankruptcy Act 1966 (Cth) has the legal effect of a final adjudication of a substantive right – appeal from a discretionary judgment

PRACTICE AND PROCEDURE – application for an extension of time to bring an application for leave  

Legislation: Bankruptcy Act 1966 (Cth) ss 33(1)(c), 60(2), (3)
Federal Court of Australia Act 1976 (Cth) s 24(1)(d), 24(1A), 25(2)(a)
Cases cited:

Abeyratne v Trkulja (1998) 90 FCR 253
Bienstein v Bienstein (2003) 195 ALR 225
Bright v Femcare Ltd (2002) 195 ALR 574
Carr v Finance Corporation of Australia Limited (1981) 147 CLR 246

Cummings v Lewis (1993) 41 FCR 559

Ex parteBucknell (1936) 56 CLR 221
Campbell v Metway Leasing Ltd (2001) 188 ALR 100
Computer Edge Pty Ltd v Apple Computer Inc (1984) 54 ALR 767
Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397
Dousiv Colgate Palmolive Pty Ltd (1987) 9 NSWLR 374
Duncan v Secretary, Department of Family and Community Services (2007) 99 ALD 241
Ferdinands v Chief of Army [2009] FCA 22
House v R (1936) 55 CLR 499
Johnston v Cameron (2002) 124 FCR 160
Norbis v Norbis (1986) 161 CLR 513
Paramasivam v Flynn (1998) 90 FCR 489
Rogers v Asset Loan Co Pty Ltd [2008] FCA 1304
State Energy Commission of Western AustraliavAlcoa of Australia Ltd (1996) 17 WAR 131
State of Queensland v Beames [2004] 2 Qd R 99
Stobbart v Mocnaj (1996) 16 WAR 318
Vince v Sellers [2004] FMCA 564
Worrell v Foodlink Ltd [1998] FCA 1814

Date of hearing: 25 February 2013
Place: Perth
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 70
Counsel for the Applicant: Mr R Cywicki
Solicitor for the Applicant: Corser & Corser Lawyers
Counsel for the Respondent: Mr T Palmer
Solicitor for the Respondent: DLA Piper Australia

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION

WAD 169 of 2012
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN:

PHILIP NEWMAN AS TRUSTEE FOR THE BANKRUPT ESTATE OF JOHN FRANCIS DESMOND KEET
Applicant

AND:

CLIVE STEWART BAIN
Respondent

JUDGE:

GILMOUR J

DATE OF ORDER:

10 JUNE 2013

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

1.The heading in the proceeding be amended to substitute “appellant” with “applicant”.

2.The time for the applicant to bring an application for…

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AGLC
Newman as trustee for the Bankrupt Estate of Keet v Bain [2013] FCA 558
Case
[2013] FCA 558
Decision Date

CaseChat Overview and Summary

The case of Newman v Bain involves an application by the appellant for leave to appeal a decision of the Federal Circuit Court of Australia regarding the Bankruptcy Act 1966. The dispute concerns whether the failure of the Official Trustee in Bankruptcy, Insolvency and Trustee Service Australia, to respond to a notice under section 60(3) of the Bankruptcy Act 1966 had the effect of a final adjudication of a substantive right. The court had to determine whether leave to appeal was required and whether the order in question was final or interlocutory.

The key legal issues were whether the failure of the Official Trustee in Bankruptcy to respond to a notice under section 60(3) of the Bankruptcy Act 1966 resulted in a final adjudication of a substantive right and whether leave to appeal was necessary. The court considered whether the order in question was final or interlocutory, and whether the failure to respond to the notice had the legal effect of a final adjudication of a substantive right. The court also had to determine whether the application for leave to appeal was within time.

The court found that the failure of the Official Trustee in Bankruptcy to respond to the notice did not result in a final adjudication of a substantive right. Instead, it was an administrative decision that did not affect the substantive rights of the parties. The court held that the order in question was interlocutory and that leave to appeal was required. The court also found that the application for leave to appeal was not within time, as the notice was received on 26 September 2011, and the application was made on 22 November 2011, well beyond the 28-day period specified in the Act. The court dismissed the application for leave to appeal and ordered the applicant to pay the respondent's costs.

The court amended the heading in the proceeding to substitute "appellant" with "applicant" and extended the time for the applicant to bring an application for leave to appeal to 9 November 2012. The application for leave to appeal was dismissed, and the applicant was ordered to pay the respondent's costs.

Orders

Orders of the court

1. The heading in the proceeding be amended to substitute “appellant” with “applicant”.

2. The time for the applicant to bring an application for leave to appeal is extended to 9 November 2012.

3. The application for leave to appeal is dismissed.

4. The applicant for leave to appeal pay the costs of the respondent, to be taxed if not agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The decision below, which is discretionary in nature, requires the Trustee to establish that an error of the kind referred to in House v R (1936) 55 CLR 499 at 504-5 was made by the Federal Magistrate before the Court will conduct a rehearing. Background A sequestration order was made on 19 September 2011 against Keet’s estate. The Official Trustee in Bankruptcy, the Insolvency and Trustee Service Australia (ITSA), became trustee for the bankrupt estate. When the sequestration order was made the third party action was still pending. The third party action arose as a result of proceedings brought in the Supreme Court of Western Australia against Keet on behalf of former clients of his accounting practice. The plaintiffs sought damages as a result of alleged misappropriation of funds by one of Keet’s employees from a trust account operated by the practice. The proceedings in the main action were resolved by default. Keet failed to comply with certain Supreme Court springing orders. Default judgment dated 20 April 2010 was, for that reason, entered for the plaintiffs against Keet for an amount of approximately $836,000 including interest. Keet’s other contribution proceedings against the National Australia Bank were likewise dismissed because of his non-compliance with Court orders. Keet’s application to set aside each of those judgments was dismissed by a judge of the Supreme Court on 6 October 2010. The third party action against Bain was for an indemnity or contribution in relation to his liability to the plaintiffs in the main action together with interest and costs. Keet alleged that Bain had conducted an audit of the relevant trust account and provided him with an unqualified report in relation to the trust account for a period during which a number of the relevant misappropriations had occurred. Keet claimed that, had the audit been conducted by Bain to the required standard, Bain would have discovered the unauthorised withdrawals from the trust account, thereby allowing Keet the opportunity to pursue the monies already misappropriated and further allowing him the opportunity to prevent the additional misappropriation of funds that occurred after the audit had been performed. Section 60 of the Act The third party action was, by virtue of s 60(2) of the Act, stayed until such time as the Trustee might make an election, in writing, relevantly, to prosecute the action. Relevantly, s 60(3) of the Act provides that if the bankrupt’s trustee does not make such an election within 28 days after notice of the action is served upon him by a defendant or other party to the action then he shall be deemed to have abandoned the action. The third party action is an action for the purposes of s 60(3). On about 26 September 2011, ITSA was served with such a notice by letter from Bain’s solicitors, DLA Piper (the notice). Although not obliged to do so, the letter also pointed out to ITSA the effect of s 60(2) and s 60(3) of the Act. ITSA did not make any election within the prescribed period of 28 days, which expired on 24 October 2011.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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