| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : NITZKEVICH -v- AUSTIN as trustee for KAYALAMI TRUST [2011] WADC 130 CORAM : SWEENEY DCJ HEARD : 15 NOVEMBER 2010 DELIVERED : 26 AUGUST 2011 FILE NO/S : APP 60 of 2010 BETWEEN : LARRY NITZKEVICH Appellant
AND
LYNETTE AUSTIN as trustee for KAYALAMI TRUST
First respondent
COLIN JAMES RITCHIE
Second respondent
FILE NO/S : APP 61 of 2010 BETWEEN : LARRY NITZKEVICH Appellant
AND
LYNETTE AUSTIN
First defendant
COLIN JAMES RITCHIE
Second defendant
MARGARET ELIZABETH RITCHIE
Third defendant
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ON APPEAL FROM:
For File No : APP 60 of 2010 Jurisdiction : MAGISTRATES COURT OF WESTERN AUSTRALIA Coram : MAGISTRATE COCKRAM File No : PE 2071 of 2009 For File No : APP 61 of 2010 Jurisdiction : MAGISTRATES COURT OF WESTERN AUSTRALIA Coram : MAGISTRATE COCKRAM Citation : PE 4016 of 2006 Catchwords: Appeal - Summary judgment - No standing to sue - Bankruptcy - Trust assets - Chose in action vesting in Official Trustee in bankruptcy - Res judicata - No cause of action disclosed Legislation: Bankruptcy Act 1966 (Cth) s 5, s 55, s 60, s 116, s 153, s 154
Magistrates Court (Civil Proceedings) Act 2004 s 17, s 18 Result: Both appeals dismissed
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Representation: APP 60 of 2010 Counsel:
Appellant : Mr S Millman
First respondent : Mr A Metaxas
Second respondent : Mr S Tompkinson
Solicitors:
Appellant : Slater & Gordon
First respondent : Metaxas & Hager
Second respondent : Kott Gunning
APP 61 of 2010 Counsel:
Appellant : Mr S Millman
First defendant : Mr A Metaxas
Second defendant : Mr S Tompkinson
Third defendant : Mr S Tompkinson
Solicitors:
Appellant : Slater & Gordon
First defendant : Metaxas & Hager
Second defendant : Kott Gunning
Third defendant : Kott Gunning
Case(s) referred to in judgment(s):
Blair & Perpetual Trustee Co Ltd v Curran (1939) 62 CLR 464
Bride & Bride v Peat Marwick Mitchell [1989] WAR 383
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Jackson v Goldsmith (1950) 81 CLR 446
Pinnock Brothers v Lewis & Peat Ltd [1923] KB 690
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Pridmore v Magenta Nominees Pty Ltd (1999) 161 ALR 458
Royal Brunei Airlines SDN BHD v Tan Kok Ming [1995] 2 AC 378
Temsign Pty Ltd v Biscen Pty Ltd (1998) 20 WAR 47
Willoughby v Clayton Utz [No 2] [2009] WASCA 29
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1 SWEENEY DCJ: This is an appeal by Mr Nitzkevich against the summary dismissal of his two related claims in the Magistrates Court. There is quite some history to the matter.
2 On 3 September 2001 Mr Nitzkevich commenced proceedings 'representing LVN Property Trust' in the District Court (action 2286/2001) suing Mr and Mrs Ritchie and Ms Austin in connection with money said to be owed to him out of the profits of the business 'Alteri Deli'. He also claimed he was owed pay for bookkeeping. That claim was summarily dismissed by Registrar Kingsley on 21 March 2002 and Mr Nitzkevich's subsequent appeal was likewise dismissed by French DCJ on 5 July 2002. 3 Four and a half years later, on 14 March 2006, Mr Nitzkevich instituted proceedings in the Magistrates Court (action 4016/2006) against the same parties, also in connection with money owing to him out of the profits of the business, Alteri Deli, and outstanding pay for bookkeeping. 4 Then a further three years later, on 12 February 2009, he commenced proceedings in the Magistrates Court (action 2071/2009) against Mr Ritchie and Ms Austin, but not Mrs Ritchie, still in connection with money said to be owing to him out of the Alteri Deli, but this time said to arise out of the sale of that business sometime in February 2003. 5 On 26 July 2010 his Honour Magistrate Cockram dismissed action 4016/2006 against all three defendants. He also dismissed action 2071/2009 against Mr Ritchie. Ms Austin had not applied to have that action dismissed against her, although my impression from the transcript of that hearing is that this was an oversight and that such an application may yet be made. 6 In essence, then, both of Mr Nitzkevich's claims have been summarily dismissed by the Magistrates Court. From those decisions, he now appeals to this court pursuant to s 41 Magistrates Court (Civil Proceedings) Act 2004. To succeed, he must demonstrate error in the court below. 7 In order to understand the learned magistrate's reasons for dismissing the two claims, which I set out below, it is necessary firstly to set out the background of the various actions in more detail.
District Court action 2286/2001 8 On 3 September 2001 Mr Nitzkevich, 'representing LVN Property Trust', sued both Mr and Mrs Ritchie 'in their own right and as directors of (Page 6)
Springridge Holdings Pty Ltd' and Ms Austin 'in her own right and as trustee for Kayalami Trust trading as Alteri Delicatessen'. I refer to this action below as Mr Niztkevich's 'original' claim or action. 9 The action alleged that Mr Nitzkevich, on behalf of his trust, invested funds with Springridge Holdings. He pleaded that, by a trust declaration/agreement form executed between the Ritchies and him as trustee for the LVN Property Trust, he agreed to pay $65,000 in return for receiving 25% 'of all profits earned by the Alteri Delicatessen (Registered partners being Springridge Holdings P/L & Lyn Austin ATF Kayalami Trust on a 50/50 ratio)'. 10 He claimed a breach of contract between him and the Ritchies only (not Ms Austin) in failing to pay him money due as profit, and he sought damages, an account of money owed and a declaration that the defendants held any assets purchased with 'the sum' on trust for him. He also claimed outstanding pay for performing bookkeeping services performed by him between 5 February 1999 and 7 March 2000. He did not specify the basis upon which he had undertaken such work and was entitled to be paid for it. 11 Mr Nitzkevich clearly drafted the statement of claim himself and it is fairly unclear in some regards, but it does contain allegations, without any adequate particulars, of misrepresentation and fraud against all three defendants and breach of trust. 12 To make some sense of this claim, I refer to the affidavit of Mr Ritchie sworn 25 February 2002 in support of the Ritchies' applications for Mr Nitzkevich's original claim to be struck out. Mr Ritchie deposed that Springridge Holdings Pty Ltd (of which he was director and his wife secretary) had originally held a 50% share in the business trading as Alteri Deli and that Ms Austin held the other 50% share. He deposed that, in February 1999, Springridge sold half of its 50% share to Mr Nitzkevich for the sum of $65,000 but, because Mr Nitzkevich did not wish to disclose this transaction to his wife, his intended 25% share in the business was kept in Springridge's name, the result being that Springridge held his 25% share on trust and also retained 25% in its own right. He deposed that Ms Austin was aware of this arrangement. The effect of that at law, of course, was that Springridge remained the legal owner of a 50% share in the business. 13 A copy of the agreement between Springridge and Mr Nitzkevich made 5 February 1999 is before the court annexed to an affidavit of (Page 7)
Ms Wood, a member of the law firm which represents the Ritchies. Mr and Mrs Ritchie each signed that declaration of trust deed on behalf of Springridge. There was no personal undertaking given by either of them. 14 This original claim was dismissed by Registrar Kingsley on 21 March 2002. His reasons are unavailable, but the sealed order dismissing the action states that it was dismissed 'on the basis of being a nullity'. The submissions filed before Registrar Kingsley on behalf of the Ritchies at that time argued that the action was commenced without standing by Mr Nitzkevich, he being an undischarged bankrupt. He became bankrupt on 5 September 2000. Mr Nitzkevich's subsequent grounds of appeal also refer to his action as having been dismissed on that basis. 15 Mr Nitzkevich appealed against the dismissal of his suit but, on 5 July 2002, French DCJ dismissed that appeal. The learned registrar's reasons were likewise unavailable to her Honour. Her Honour referred to the registrar as having dismissed the action on the basis that, at the time Mr Nitzkevich instituted those proceedings, he was disqualified, under the terms of the LVN Property Trust deed, from being a trustee and, it follows, from suing on behalf of the trust or appointing another trustee. Without the learned registrar's reasons, one can only speculate that her Honour was so informed from the bar table and it appears therefore that Registrar Kingsley may have dismissed the action on two connected grounds. 16 French DCJ commented: It is a situation that although the trustee in bankruptcy has no interest in it, in the sense that it cannot derive any benefit for creditors through the trust, and in that sense you have received correspondence to that effect – that they are not interested in taking any role in the litigation, which obviously they would not be, because they cannot derive any benefit because of the trust; but the fact of the matter is that you are disqualified from being a trustee. I an also satisfied that the registrar was correct in deciding, which he apparently did even though I do not have a copy of any reasons, that that incapacity also precludes you from being able to make any appointment of another trustee. In effect you are simply disqualified. That would mean that not only is the commencement of proceedings invalid, just to use a very broad term, but so would be any appointment of another trustee. 17 The correspondence to which her Honour referred was a letter dated 28 June 2002 from the Official Trustee in bankruptcy which stated that 'the Official Trustee has no interest in the LVN Property Trust or the (Page 8)
assets of the LVN Property Trust'. That letter was generated between the dismissal of the action by Registrar Kingsley and the hearing before her Honour. Her Honour commented to Mr Nitzkevich that 'you have certainly a right to some accounting' but also pointed out that 'nothing can be done until a trustee has been appointed'. 18 On 9 November 2003, Mr Nitzkevich was discharged from bankruptcy.
Magistrates Court matter 4016/2006 19 On 14 March 2006 Mr Nitzkevich commenced an action against all three defendants. He claimed that, in February 1999, he (on behalf of the LVN Property Trust) purchased a 25% share in Alteri Deli which was held on trust for him by Springridge Holdings, which also held 25% of the business while Ms Austin held the other 50%. He claimed this was documented by a declaration of trust executed by Springridge on 5 February 1999 (referred to above) and that he contributed $65,000 for the purchase of his share, together with $8,000 stock, $2,500 working capital and a float of $500, in total $76,000. 20 That declaration of trust states that Mr Nitzkevich was to get one-half of all income from the business received by Springridge. The document did not, on its face, require Mr Nitzkevich to do anything in order to earn that income, apart from his initial investment of $65,000. Whether that agreement truly did give Mr Niztkevich a beneficial equity in the business (rendering him liable to its losses as well) or not, he and the Ritchies appear to have understood that it did. 21 Mr Nitzkevich also claimed in this action that he was the bookkeeper for the business for 13 months and issued invoices for his work, but was never paid. He did not specify any basis upon which he had undertaken such work and was entitled to be paid for it. 22 He also pleaded that, in March 2000, Ms Austin purchased Springridge's interest of 25%. He claimed that, in April 2000, it was verbally agreed by Mr and Mrs Ritchie and Ms Austin that he would be paid $500 per week, without specifying what that payment represented. He claimed that, up to August 2001, he only received $10,500, leaving a shortfall of $25,000 over 17 months. He said he had been paid nothing ever since and also sought to be paid for his bookkeeping. His claim was for a total of $45,000. (Page 9)
23 It is readily apparent that, however one characterises Mr Nitzkevich's causes of action, the subject matter and the parties are the same as in the original claim. He claims to have not been paid all of the profit owing to him from the business and also claims to have not been paid for performing bookkeeping services. 24 It is also readily apparent that his written agreement to invest $65,000 in the business and receive 25% of the profits was with Springridge and not with Mr and Mrs Ritchie personally and certainly not with Ms Austin. No basis is asserted in the description of claim justifying any claim against the defendants personally. Mr Nitzkevich has never sued Springridge. Springridge, I understand, was deregistered some years ago.
Magistrates Court matter 2071/2009 25 Mr Nitzkevich commenced this action on 12 February 2009 against Mr Ritchie and Ms Austin, but not against Mrs Ritchie. 26 In this action Mr Nitzkevich claimed that, up to July 2001, Springridge held his 25% share of the business which he purchased (on behalf of the LVN Property Trust) on trust for him and that, after 20 July 2001 when Springridge resigned as trustee, it then had no further ability to deal with his property. He asserted that, notwithstanding the above claim, in February 2003, Springridge and Ms Austin sold the Alteri Deli business to a Mr Parry for $120,000, 'without reference' to Mr Nitzkevich and 'in breach of the obligation of good faith owed by the defendants to the claimant'. 27 The 'obligation of good faith' owed by Ms Austin to Mr Niztkevich is said to arise from her 'consent' having been given to the agreement reached between him and Springridge whereby he acquired his 25% beneficial share in the business. There are no particulars as to when, or how, or in what terms that consent was given, or whether it extended beyond mere knowledge. 28 As against Mr Ritchie personally, Mr Niztkevich claimed that he, 'in purporting to sell the interest of Springridge Holdings did so deliberately without reference to the claimant and with the intent of depriving the claimant of his interest in the delicatessen business'. Without using the words, Mr Nitzkevich is clearly asserting a fraudulent intent against Mr Ritchie. (Page 10)
29 I perceive this claim to be based upon an assertion that Mr Ritchie, as agent to Springridge, dishonestly assisted Springridge to commit a breach of its trust. 30 He may also be asserting – it is not pleaded but is perhaps implied - that both Mr Ritchie and Ms Austin partook in sharing the proceeds of the sale of the business, 25% of which proceeds – after deduction of any losses and expenses of the business – were held in trust for Mr Nitzkevich, but were instead retained by Mr Ritchie and Ms Austin. Mr Nitzkevich claims that as a result of their conduct, he has suffered 'loss and damage'. 31 Although clearly connected by broad subject matter to action 4016/2006, this action is exclusively concerned with the sale of the Alteri Deli and the proceeds of that sale. 32 One has to read a great deal between the lines to understand the nature of the claim. In reality, however it is described in the description of claim, Mr Nitzkevich is seeking an accounting of the trust fund to him and seeks to recover from third parties any money owed him by Springridge, now defunct. While the claim is described as one for damages, it is primarily a claim for restitution. It is not clear to me whether Mr Nitzkevich complains that the business was sold without his consent, or complains that it was sold without accounting to him for his share of the proceeds. 33 A third party can be sued to recover trust funds received by him in breach of trust, or for damages where he has dishonestly assisted or procured the trustee to breach its trust: see Royal Brunei Airlines SDN BHD v Tan Kok Ming [1995] 2 AC 378. Against Mr Ritchie such a claim must be based either upon his receipt of trust funds, if he did receive trust funds, or upon a dishonest procuring or assistance on his part as an agent to Springridge to breach the terms of its trust. A claim against Ms Austin, who was not an agent of Springridge, but a third party who, it is asserted, knew of the trust and consented to the arrangement, would also have to be based upon receipt of trust funds, or a deliberate and dishonest procuring or assisting of Springridge to breach its trust. 34 And the claim rests upon the premise that there were trust funds to be distributed out of the proceeds. It is not apparent from the pleadings whether these are said to be the outstanding debts alleged in action 4016/2006, or a simple 25% share in the eventual sale figure, or both. The outstanding figure, if there was an outstanding figure, could only be (Page 11)
determined by taking an account of the partnership between Ms Austin and Springridge, because Mr Nitzkevich's beneficial entitlement was to be paid 25% of the profits of the business, by Springridge, not by the business generally. 35 The only evidence before the learned magistrate was that contained in the affidavits sworn by Mr Ritchie. 36 In Mr Ritchie's affidavit of 25 February 2002 (and placed before the court in the latest actions) he deposed that, in March 2000, Ms Austin purchased Springridge's remaining 25% share and that, since then, he and his wife considered themselves out of the business, purporting to resign in July 2001 as trustee for the plaintiff and transferring his 25% interest in the business to him in his own right. 37 The original agreement between Mr Nitzkevich and the Ritchies contemplated such a situation, providing that 'in the event that we dispose of our remaining equity in the business … your equity in the business will remain at 25%' and 'your income distribution/entitlement will remain at 25% of all income received from the business'. What, in practical terms, the parties imagined would occur in such a situation is hard to guess at, with the Ritchies no longer having an interest in the business but still holding his interest in trust. No provision was made to deal with the practicalities of that situation and the trustee's obligation to take care of the property vested in it. It is the uncertainty inherent in that clause, together with the entire trust arrangement, which led to the dispute arising. 38 The inadequacy of that agreement was soon revealed. By letter dated 20 July 2001 (annexed to Mr Ritchie's affidavit) he purported to give notice to Mr Nitzkevich that Springridge resigned as trustee for the LVN Property Trust. The letter also announced: I have notified (the Austins) that they are to deal direct with you in relation to all matters relating to the deli. LVN is effectively is a partner to the extent of 25% of the deli business in the present partnership that was entered into between Springridge and the Austins … You will need to meet with your partners to vote on what course of action to take from now on. 39 Clearly Mr Ritchie was under the impression one can foist a partner upon someone. Ms Austin's attitude to this development at the time is entirely unknown and there is no material before the court shedding any light on how the business was run after this letter was sent. Mr Ritchie did not depose as to what occurred during the period March 2000 to July 2001. He deposed that he never lodged any paperwork correcting the (Page 12)
record as to who the owners of the business were from July 2001 on and was not aware of Mr Nitzkevich doing so either. 40 He also conceded that the plaintiff had carried out bookkeeping in the business for months. He said he and his wife were unaware what arrangement had been reached between Mr Nitzkevich and Ms Austin as to that. 41 It appears the Ritchies simply purported to divest Springridge of responsibility in the matter and left Mr Nitzkevich with no legal interest in the business and also no trustee to hold his beneficial interest, or to ensure that his interests were looked after. 42 There is no evidence before this court from the Ritchies or from Ms Austin as to what occurred in the sale of the business or to whom the proceeds of sale went. The only evidence before the court tends to suggest that it was not the Ritchies' intention that Mr Nitzkevich ever be deprived of any interest in the business, but it also seems they did not regard themselves as obliged to ensure that he was not. 43 Ms Austin's three brief 'affidavits' were, in reality, nothing more than legal submissions. I have not seen any affidavit in which she deposed to what her understanding was, if any, of the trust arrangement between Mr Nitzkevich and the Ritchies, what arrangement if any was reached about bookkeeping services, or what became of the proceeds of the sale of the business. She has never put up any substantive defence, but has rather argued the matter on the basis of challenging Mr Nitzkevich's standing to sue and the inadequacy of his descriptions of claim. In her affidavit sworn on 15 March 2010 she did state that there is a letter in existence, which she did not annex, in which Mr Nitzkevich acknowledged that he took on the role of bookkeeper voluntarily for Springridge. That seems contrary to Mr Ritchie's affidavit. 44 For his part, the onus being upon him to show his claims have a reasonable chance of success, Mr Nitzkevich has never filed an affidavit deposing to any of the matters upon which his claim is based.
The learned magistrate's reasons for decision 45 Ms Austin only applied to have action number 4016 of 2006 dismissed. His Honour dismissed that action against her on two separate grounds. (Page 13)
46 Firstly, he found that, while the Magistrates Court was not a court of pleadings, the defendant was entitled to have the description of claim 'set out in recognisable detail the cause of action'. His Honour found that: I accept that on the information before me, if the claimant has any claim, and I am not saying that he does, but then if he does it would seem that that would be against Springridge Holdings and not against Ms Austin because I accept, as I have said, that there is nothing to indicate that he had a legal interest in the 25% holding in the partnership. (ts 35) 47 In addition, his Honour dismissed the claim on the basis of res judicata. Firstly, he found that: On the information which is on the file as to the District Court action and this action, I accept that in effect case number 4016 of 2006 is the same claim as made by the claimant in District Court action 2286 of 2001. (ts 36) 48 His Honour then referred to comments made by French DCJ in her reasons for decision (upholding the dismissal of the original claim) to the effect that Mr Nitzkevich was disqualified from acting as a trustee and disqualified from appointing a new trustee and that he was therefore disqualified from instituting the proceedings in his capacity as trustee. His Honour stated: The claimant's affidavit at paragraph 9 states that he was discharged from bankruptcy on 9 November 2003, so I know the reason why the matter was dismissed before the District Court. I know that the claimant's bankruptcy came to an end on 9 November 2003. What I do not know, and the claimant has not put any evidence before me on this point, is the position with regard to the LVN Property Trust as at the date of commencement of case number 4016 of 2006, being the matter which I am dealing with. That date was 14 March 2006. I do not know, for example, whether – putting to one side the construction which should be placed on the trust deed raised during the course of submissions with reference to clause 56.2 – the claimant was subsequently reappointed as a trustee. I do not know if at some point a new trustee had been appointed as at or before 14 March 2006. If that is the case, I do not know who that is or what authority the claimant would have in relation to this matter if a different trustee has been appointed. There is simply, in my view, a vacuum in relation to the information in relation to the position of the trust and the trustee. I therefore accept the submission made on behalf of Ms Austin that the claimant has not demonstrated that the reason for dismissing the District Court action is not now relevant. I accept that there is no evidence to show that the claimant (Page 14)
now has standing to bring this claim. For those reasons I accept that the claim against Ms Austin should be dismissed. (ts 37) 49 In relation to the applications made by Mr and Mrs Ritchie on case number 4016 of 2006, his Honour repeated and incorporated by reference his reasoning in relation to the ground of res judicata 'and for the same reasons I accept that Mr and Mrs Ritchie should be successful in relation to that submission' (ts 37). 50 His Honour also found that no cause of action was disclosed against Mr and Mrs Ritchie personally, in that the partners in the business were Springridge Holdings and Ms Austin, and it was not asserted in Mr Nitzkevich's claim that Mr and Mrs Ritchie held any interest in the matter personally. His Honour found that the only relationship asserted in the description of claim was to the effect that Mr Ritchie was a director of Springridge Holdings Pty Ltd which, by itself, did not give rise to a cause of action against him in his personal capacity. 51 His Honour also found that, although the description of claim asserted that Mr Nitzkevich was entitled to receive $500 per week drawings 'on the grounds of a verbal agreement with the first, second and third defendants reached in or about April 2000', there was nothing in the description of claim which set out the basis upon which Mr and Mrs Ritchie were able to enter into such an agreement and why it would be enforceable against them. 52 Turning to case number 2071 of 2009, for similar reasons his Honour found that the claim did not disclose any cause of action against Mr Ritchie personally and on that basis his Honour dismissed that claim as well. 53 While his Honour did not expressly say so, it also logically follows that his Honour found a similar dearth of evidence in relation to Mr Nitzkevich's standing to institute those proceedings.
The grounds of appeal 54 The amended grounds in both appeals raise similar issues which may be summarised without the need to set them out here verbatim or distinguish between the two subsequent actions. 55 Mr Nitzkevich argues that the learned magistrate erred in finding there was no cause of action disclosed against Ms Austin, or Mr and Mrs Ritchie, because 'the possibility of the claimant having a claim based (Page 15)
on a beneficial interest in the partnership cannot be discounted and remains to be tried'. 56 He asserts that his descriptions of claim disclosed that Mr and Mrs Ritchie, in their capacity as directors of Springridge Holdings (in fact Mrs Ritchie was not a director) 'assisted the business partnership to deny the appellant the proceeds of the trust to which the appellant was entitled under the trust'. 57 Mr Nitzkevich argues that his claims disclose the elements of a potential claim against Ms Austin 'as constructive trustee of the appellant's share in the business'. This ground asserts that Mr Nitzkevich had purchased an interest in the business 'and the business thereafter held the claimant's interest in the business on trust' and that Ms Austin 'assisted the trustee business partnership to commit a breach of trust or fiduciary duty owed to' Mr Nitzkevich and this assistance 'was provided with knowledge that the business partnership was committing a breach of trust'. 58 Wrapped up in the above arguments is an assertion that the learned magistrate failed to apply the proper test in deciding whether grounds for summary dismissal had been made out, namely (it is said) that, where it is exercised for lack of disclosure of a cause of action, the court must be satisfied the action cannot succeed. 59 Mr Nitzkevich complains next that the learned magistrate ruled on the issue of res judicata purely on the issue of Mr Nitzkevich's standing to bring the claims. It is argued that French DCJ, in upholding the dismissal of the original action, did not deal with the causes of action on the merits and the only issue litigated in 2002 was Mr Nitzkevich's standing to sue. Mr Nitzkevich argues that that alone will not support a plea of res judicata. 60 The last substantive ground of appeal is that the learned magistrate failed to provide adequate reasons for decision, but no meaningful particulars have been provided of this ground. During the course of legal argument a further ground was added, namely that the learned magistrate failed to accord natural justice and procedural fairness before determining that the descriptions of claim disclosed no cause of action.
Submission that his Honour failed to apply the proper test for summary dismissal of claims 61 Mr Nitzkevich submits that, where summary dismissal is exercised for lack of disclosure of a cause of action, the court must be satisfied that (Page 16)
the action cannot succeed, citing authorities for this proposition such as General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. 62 Section 17 Magistrates Court (Civil Proceedings) Act empowers the court to strike out all or part of a case statement if 'it does not disclose any reasonable grounds for any claim'. One can immediately see that s 17 does not require the court to be satisfied that the action cannot succeed. 63 Further, the defendants' applications were for summary dismissal of Mr Niztkevich's claims. Section 18(1) Magistrates Court (Civil Proceedings) Act provides that the court may grant summary judgment to a defendant 'if the party making the claim does not satisfy the Court that the claim has a reasonable prospect of succeeding'. 64 Those time-honoured authorities dealing with the principles of summary judgment generally, casting the onus upon the defendant to prove that there is no serious question to be tried (see Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, 99), must bow to the unambiguous terms of s 18(1), casting the onus upon the claimant to prove a reasonable prospect of success in his claim. 65 Part of Mr Nitzkevich's complaint rests upon the learned magistrate commenting that 'there is a vacuum (of) information in relation to the position of the trust and the trustee'. Some of the submissions made on behalf of Mr Nitzkevich appear to have failed to grasp that the onus of proof was upon him and not the defendants. 66 That is not to suggest, of course, that the court need not be mindful that the result of granting summary judgment is to deny the claimant the opportunity to present his case at trial and that a summary judgment application will not generally be granted where there is a dispute on the facts upon which the court must rule. This was not a case of disputed facts, however. The action was dismissed for lack of standing to sue and failure to disclose a cause of action. 67 There is no basis for suggesting that his Honour misapplied the test set down by statute. Indeed, his Honour's comments concerning the lack of material before him from Mr Niztkevich make it apparent that his Honour was mindful of the terms of s 18(1). I would not uphold this ground. (Page 17)
Whether his Honour erred in upholding a submission of res judicata 68 When the original claim was dismissed and the appeal from that dismissal upheld by French DCJ, it was on the basis that Mr Nitzkevich lacked standing to commence any action on behalf of the LVN Property Trust by reasons that his bankruptcy had the effect of disqualifying him as trustee. 69 I think it likely it was also on the basis that he was an undischarged bankrupt – an argument I find even more compelling – but I will come to that aspect in time. 70 Clause 56.2 of the LVN Property Trust Deed provides: 71 Clearly, then, Mr Nitzkevich became disqualified from acting as trustee at least from the point at which he attained the status of bankrupt on 5 September 2000, if not before (in that insolvency will usually precede bankruptcy). He has placed no evidence before the court as to the position with the trust since that date. 72 In his grounds of appeal in the original claim (which are not evidence) he asserted that he was still the registered trustee as at 3 September 2001, when he commenced the original claim, and did not resign until 22 September 2001. The fact is he was not the trustee from the moment he was disqualified. He could not resign. He had already ceased to be trustee. Being the sole trustee, the trust from that point on had no trustee. 73 Nor as sole unit holder could he reappoint himself trustee, because he was disqualified from acting as trustee. Nor as sole unit holder could he unanimously appoint someone else (as contemplated by cl 56.4), because to do so required a quorum of two unit holders (cl 33.10) and there was only one unit holder. And nor could he transfer a unit to appoint a second unit holder, being disqualified as trustee. 74 There was only one option available to the LVN Property Trust, and that was to apply to the court pursuant to s 77 Trustee Act 1962 for an order appointing a new trustee. Given that the Trustee Act precisely (Page 18)
contemplates a situation where there is no trustee, it would appear such an application could be made even though there is no trustee who can represent the trust as such in the application. 75 And that had to be done prior to the commencement of the original action, or the action would be, as it was adjudged to be, a nullity, commenced by someone with no standing, purporting to be claiming on behalf of the LVN Property Trust. Clearly it was not done. 76 In both of his more recent claims, Mr Nitzkevich has identified the claimant as simply 'Larry Nitzkevich', perhaps in the hope of avoiding this issue, but each description of claim makes it immediately clear that his claim is based upon the purchase of a 25% interest in the business in his capacity as the trustee of the LVN Property Trust. The substance of his claim then is still brought as trustee of that trust. 77 That being so, the issue is whether the 'very right or cause of action' raised in the original claim, have passed into judgment and are res judicata. 78 The defence of res judicata was explained in Blair & Perpetual Trustee Co Ltd v Curran (1939) 62 CLR 464, 531 (Dixon J): 79 In Jackson v Goldsmith (1950) 81 CLR 446, Fullagar J explained: The rule as to res judicata can be stated sufficiently for present purposes by saying that, where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action. (466) (Page 19)
80 He later said: In the first place, if A sues B to judgment and in subsequent proceedings between them a plea of res judicata is raised, the primary question will be whether the cause of action in the later proceedings is the same as that which was litigated in the former proceedings. (467) 81 And finally: It follows from the very nature of the difference between the plea of res judicata and the plea of issue estoppel that different materials are relevant in each case. Where the plea is of res judicata, only the actual record is relevant. Where the plea is of issue estoppel, any material may be looked at which will show what issues were raised and decided. Reasons given for judgment pronounced are likely to be particularly important for this purpose. (467) 82 What is required to be established by a party setting up a defence of res judicata has been fairly recently considered by our Court of Appeal in Willoughby v Clayton Utz [No 2] [2009] WASCA 29. Having cited these passages above, and further authorities, Pullin JA (Wheeler & Miller JA), concluded that, for the purpose of deciding whether a cause of action has been determined by previous litigation, the reasons for decision are not part of the record, but for the purposes of deciding whether the causes of action in the first action were decided on the merits, then the reasons for decision are relevant and may be considered. 83 Having considered the reasons for decision in that case, Pullin JA concluded [30]: What Master Newnes' reasons reveal is that the Causes of Action were never examined or dealt with at all. They were not 'litigated'. What was 'litigated' in the hearing before Master Newnes in the First Action was whether or not the appellants had standing to sue. The 'merits' of that point only were considered. Only that point became res judicata. This is arguably analogous to a case which is dismissed because the plaintiff has sued in a tribunal which does not have jurisdiction. That will not support a plea of res judicata when the proceedings are commenced in the correct court or tribunal. See Pinnock Brothers v Lewis & Peat Ltd [1923] KB 690. 84 In this case, whatever the precise reasons for decision of Registrar Kingsley were, it is apparent, and it is confirmed by French DCJ's reasons upholding his decision, that the original claim was dismissed purely on the basis that Mr Nitzkevich lacked standing to sue. The causes of action in the original claim were not litigated and there was no decision on the merits as to those causes of action. (Page 20)
85 What was litigated, however, on the merits, was Mr Niztkevich's standing to sue on behalf of the LVN Property Trust. He was found to have no standing. That point is res judicata. 86 His counsel argues that an adverse ruling on the single issue of standing will not support a plea of res judicata and this, I take it, is derived from the paragraph I have cited above from Pullin JA's judgment. 87 The case of Pinnock Brothers v Lewis & Peat Ltd [1923] KB 690 to which his Honour referred raised a quite different scenario, however, that being the question of whether a party's failure to submit a dispute within the time frame specified to confer jurisdiction upon an arbitrator barred the action from later being commenced in a court of appropriate jurisdiction. There being no such provision in the contract barring proceedings before a court, the court found that it did not. I did not understand Pullin JA to be saying anything other than that. I do not understand him to be saying that res judicata cannot be raised if the only issue previously decided was the question of standing. 88 And in Willoughby v Clayton Utz [No 2], the appellants had, between the first action (dismissed for lack of standing) and that second action, acquired standing to sue on a different basis, namely that the original cause of action had been assigned to them. Consequently the issue that was res judicata, namely their lack of standing because of their bankruptcy, would not bar new proceedings brought after they had been assigned the right to sue. They had a new basis for standing which had not existed or been litigated in the first action. 89 No such development has occurred here, as far as the court is aware. Mr Nitzkevich lacked standing to sue on behalf of the trust in 2001 because he was not the trustee, having been disqualified by insolvency. There was no material before the learned magistrate – and there has been no application to this court to admit further evidence on appeal – to suggest that Mr Nitzkevich gained standing to sue on behalf of the trust prior to instituting either action in 2006 or 2009. There is no pleading in either description of claim which suggests he has gained standing. I need not decide whether the terms of the LVN Trust Deed disqualify him for evermore by reason of insolvency, or only while insolvent. There is no material before the court to address either possibility. 90 The description of claim in action 4016/2006 does not assert that Mr Nitzkevich has standing. And in action 2071/2009 Mr Nitzkevich simply asserts that at all material times he was the trustee of LVN (Page 21)
Property Trust, which flies in the face of his disqualification from acting as trustee on account of his insolvency, and which is the precise point upon which he was unsuccessful in 2002. 91 The causes of action in action 4071/2006 are the same as those in the original claim. Action 2071/2009, by contrast, raises a different cause of action. But the single issue to which res judicata applies as between Mr Nitzkevich and these same defendants is the issue of his standing to sue on behalf of the LVN Property Trust. 92 In the absence of some material being put before the court to suggest that Mr Nitzkevich has acquired some new standing to sue on behalf of the LVN Trust, I find he is simply re-litigating the precise point upon which he was unsuccessful in 2002 and that issue – that issue alone – is res judicata and cannot now be re-litigated. It follows that I find his Honour did not err in dismissing the claims on the basis of res judicata. 93 But if I am wrong in concluding that a plea of res judicata can be made good in relation to a single issue of standing to sue only, it makes no difference to the outcome of this case. 94 Mr Nitzkevich has put no material before the court to suggest that he has standing to sue on behalf of the LVN Property Trust. His description of claim in action 4016/2006 does not assert that he does have standing. His description of claim in action 2071/2009 does, on its face, set up a basis upon which it can be said he has standing, but that assertion flies in the face of material before the court as to his bankruptcy and disqualification as trustee. 95 Therefore if the issue of standing to sue is not res judicata, and his Honour did err in that regard, Mr Nitzkevich still has no standing to sue. That alone is a reason to not interfere with his Honour's decision.
Whether Mr Nitzkevich has standing to sue given his bankruptcy 96 There is another reason to not interfere with the learned magistrate's dismissal of these latest two actions on the basis of a lack of standing to sue. 97 His Honour was persuaded by the argument that Mr Niztkevich lacked standing to sue, or could not demonstrate that he had standing to sue, by virtue of having been disqualified from acting as trustee for the LVN Property Trust due to his insolvency. While I agree with (Page 22)
his Honour's assessment as to the lack of evidence before the court on that point, I have reached a different view of the significance of the bankruptcy, which makes the whole issue of Mr Nitzkevich's standing as a trustee somewhat irrelevant. 98 I have concluded, for reasons I am about to set out, that the so-called 'LVN Property Trust' was not a trust at all, and its assets were those of Mr Nitzkevich absolutely, and hence his right to sue the defendants vested in the Official Trustee in bankruptcy and has never been restored to Mr Nitzkevich. 99 This point was squarely raised before the learned magistrate by counsel for Ms Austin, although it did not find its way into his Honour's reasons for decision. It may indeed have been one of the reasons why Registrar Kingsley dismissed the original claim. It was certainly the Ritchies' position in their written submissions before Registrar Kingsley back in 2002 and submissions filed by Mr Nitzkevich in the District Court back in 2002 also refer to the original claim as having been dismissed by Registrar Kingsley on the basis that Mr Nitzkevich was an undischarged bankrupt and therefore had no standing to commence or originate his action. 100 In any event, I am persuaded by the submission now and will explain why that is. 101 Between 5 September 2000 and 9 November 2003, Mr Nitzkevich was an undischarged bankrupt. 102 During the period of his bankruptcy (I have taken this to be the relevant time-frame although these sections of the Bankruptcy Act1966 (Cth) either remain the same or substantively the same today), s 58 Bankruptcy Act provided: (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 …; 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 … … (6) In this section, "after-acquired property", in relation to a bankrupt, means property that is acquired by, or devolves on, the bankrupt on (Page 23)
or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt. 103 'Property' was a defined term (s 5 Bankruptcy Act) meaning 'real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property'. 104 'The property of the bankrupt' was a defined term (s 5 Bankruptcy Act) and relevantly meant 'the property divisible among the bankrupt's creditors' and 'any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt'. 105 The definition of property is broad 'enough to encompass choses in action and thus a right or entitlement to pursue an action or recover damages by suit': Pridmore v Magenta Nominees Pty Ltd (1999) 161 ALR 458, 464. 106 Section 116 of the Act relevantly provided: (1) Subject to this Act: (a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; (b) the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge; (c) …; (d) …, is property divisible amongst the creditors of the bankrupt. (2) Subsection (1) does not extend to the following property: (a) property held by the bankrupt in trust for another person; … (Page 24)
(g) any right of the bankrupt to recover damages or compensation: (i) for personal injury or wrong done to the bankrupt, the spouse of the bankrupt or a member of the family of the bankrupt … 107 The letter from the Official Trustee in bankruptcy dated 28 June 2002 stating that 'the Official Trustee has no interest in the LVN Property trust or the assets of the LVN Property Trust' is ambiguous. It might be interpreted as indicating that the Official Trustee had formed the view that the assets of the LVN Property Trust fell within the exception of 'property held by the bankrupt in trust for another person'. Her Honour French DCJ appears to have placed that interpretation upon it and also accepted that view as correct. The letter might equally be interpreted to mean that the official trustee was not interested in depleting further the assets of the bankrupt in pursuing legal action against the defendants on behalf of the LVN Property Trust. 108 The trust deed dated 1 March 1996 is, however, a very curious document. It purports to establish a unit trust, where the trustee is identified as 'Larry Victor Nitzkevich' and the sole subscribing unit holder is identified as 'Larry Victor Nitzkevich as trustee for the Nitzkevich Superannuation Fund'. 109 By cl 6.3, the trustee 'shall stand possessed of the trust fund and the income thereof upon the trusts and with and subject to the powers and provisions herein after expressed concerning the same' and, by cl 7.1, 'the beneficial interest in the trust fund as originally constituted and as existing from time to time shall be vested in the unit holders for the time being'. Ostensibly then, the trustee holds the fund on trust for himself. 110 The notation that the sole unit holder Mr Nitzkevich holds his unit on trust for a superannuation fund does not alter the position. Clause 9.3 of the trust deed provides: (Page 25)
contingent future or partial interest in any Unit or any interest therein or (except only as the provisions of this Deed otherwise provide) any other rights in respect of any Unit except an absolute right to the entirety thereof in the Unit Holder. (c) Units held by a Unit Holder as trustee of a particular trust may be marked in the Register in such a way as to identify them as being held in respect of that trust but no liability shall be created by any such marking and the Trustee shall not be affected with notice of any trust recorded as aforesaid. 111 Mr Nitzkevich, being both trustee and the sole unit holder, held the assets of the trust fund on trust for himself absolutely, notwithstanding the reference to his own superannuation fund in the schedule identifying the unit holder. In his capacity as trustee he took no notice of any trust affecting the unit holder. 112 The LVN Property Trust Deed did not achieve the creation of a trust. As is stated in The Law of Trusts, HAJ Ford and WA Lee (Thomson Reuters (Professional) Australia Limited 2011) at [5.510]: Whatever the position might be where a trustee attempts to contract with himself … there is no doubting that a person, whether natural or corporate, cannot be sole trustee and sole beneficiary under the one trust. A person who holds a legal estate in fee simple cannot be regarded as holding both a legal estate in fee simple and an equitable estate in fee simple. Nor can a person holding a legal estate in fee simple hold on trust for himself or herself for some lesser estate in equity … If X declares that he holds certain property on trust for himself alone, the declaration is of no effect. 113 In those circumstances, the assets of the LVN Property Trust fund were not 'property held by the bankrupt in trust for another person', but property held by the bankrupt in trust for himself. The assets of the fund were not excluded from the operation of s 116(2)(a) of the Bankruptcy Act. While Mr Nitzkevich in his capacity as unit holder held the unit on trust for his superannuation fund, the Official Trustee in bankruptcy gained all such powers over or in respect of property as might have been exercised by the bankrupt for his or her own benefit, including his power as trustee under the deed to treat the unit holder as being the absolute owner of the unit. 114 There is no evidence before me of any subsequent distribution of units. However I feel I can leave to one side the question of whether any subsequent transfer of units of which the court is unaware might, in some way, have created a trust, or constructive trust to the benefit of a third party. (Page 26)
115 Firstly, Mr Nitzkevich was on notice that this argument was being relied upon by one of the parties and has not put any such evidence before the court, the onus being upon him to do so. 116 Secondly, in his 'Outline of submission pursuant to notice of appeal filed 24 April 2002 for hearing before a judge on 5 July 2002 at 2.15 pm', a document filed on behalf of Mr Nitzkevich in his appeal against the dismissal of his original action 2286 of 2001 (and annexed to Mr Ritchie's affidavit of 4 May 2010) he submitted the following: 1. The learned registrar erred in dismissing the plaintiff's action on the basis that the plaintiff as an undischarged bankrupt had no standing to commence/originate the action, whereas the action was not commenced by the bankrupt in his own right but as the trustee of the LVN Property Trust (as at 3 September 2001 was still the registered trustee). 2. The action was commenced with the full concurrence and approval of the only unit holder of the LVN Property Trust being the Nitzkevich Superannuation Fund (self-managed retirement fund). 3. LVN Property Trust is the working vehicle of the Nitzkevich Superannuation Fund. 4. The action was commenced with the full concurrence and approval of the sole beneficiary of the Nitzkevich Superannuation Fund, being Larry Victor Nitzkevich. 117 Given the contents of that document, I am satisfied that there is no evidence which might have been produced before this court which might alter my interpretation of the LVN Trust Deed. 118 While ever Mr Nitzkevich was the sole unit holder and also the sole trustee, the property of the LVN Property Trust was simply his property, and any assets of the LVN Property Trust, including any chose in action held by that trust, was 'property divisible amongst the creditors of the bankrupt' (s 116(1)) and vested in the Official Trustee in bankruptcy at the time when Mr Nitzkevich became a bankrupt (s 58(1)(a)). 119 This precise submission was raised before the learned magistrate, with counsel for Ms Austin submitting that any beneficial interest held by the LVN Property Trust in relation to the Alteri Deli 'passed to his trustee in bankruptcy and has never been reconveyed' (ts 13). Counsel submitted that, because Mr Nitzkevich was the sole beneficiary of the LVN Property Trust, any assets vested in the Official Trustee in bankruptcy. (Page 27)
120 In response to this submission, counsel for Mr Nitzkevich made, with respect, the rather simplistic submission 'We believe that the second and third respondent is operating under the assumption that Mr Nitzkevich continued to be a bankrupt' (ts 14) concluding: He was previously bankrupt. He had no standing because he was bankrupt. He is now no longer bankruptcy [sic], ergo he has standing. That's the submission. (ts 28) 121 Neither counsel referred his Honour to the provisions of the Bankruptcy Act, nor to any specific authority, on this precise point. Nor was the proper characterisation of the LVN Property Trust explored in detail before his Honour, which may well be why the whole submission was not mentioned by his Honour at all, particularly given that his Honour gave an ex tempore judgment. 122 The law is clear, however, that if, by virtue of bankruptcy, Mr Nitzkevich's chose in action relating to the Alteri Deli vested in the Official Trustee in bankruptcy, then Mr Nitzkevich's subsequent discharge from bankruptcy did not restore that chose in action to him. 123 The effect of a discharge from bankruptcy is governed by s 153 of the Act. A discharge from bankruptcy does not restore the bankrupt's property to him. 124 This is to be contrasted with s 154, which does restore the remainder of any property to the bankrupt in the event his bankruptcy is annulled by the court pursuant to s 153 of the Act. There is no suggestion in this case of the bankruptcy having being annulled. 125 In Bride & Bride v Peat Marwick Mitchell [1989] WAR 383 Malcolm CJ (Wallace & Brinsden JJ) said (390 - 391): Under s 58(1) of the Act "the property of the bankrupt, not being after-acquired property, vests forthwith" in the trustee and "after-acquired property of the bankrupt vests, as soon as it is acquired". By s 5 "property" is defined to mean (inter alia) "personal property of every description" which would include any chose in action or damages for a tort to which the bankrupt was entitled. The expression "the property of the bankrupt" is relevantly defined by s 5 to mean: (Page 28)
The property which is divisible among the bankrupt's creditors is that referred to in s 116(1) to which reference is already been made. Clearly, such property would include the benefit of any chose in action, including an action for damages for tort. The effect of the statutory provisions is that there is a notional assignment of the chose in action which vests it in the trustee in bankruptcy: Starke JG, Assignment of Choses in Action in Australia (1972) par 105. 126 His Honour also said (393): In my opinion, it is clear beyond doubt that any chose in action for damages reflecting any diminution of the appellant's bankrupt estate in respect of the cause of action the subject of the appellant's allegations against the respondents vested in the trustee in bankruptcy pursuant to s 58. In my view, such chose in action remained vested in the trustee, notwithstanding the appellant's subsequent discharge from bankruptcy by an order made on 24 February 1986 pursuant to s 150 of the Act. Thus, s 152(1) of the Act provides that: 'A discharged bankrupt shall, notwithstanding his discharge, give such assistance as the trustee reasonably requires in the realisation and distribution of such of his property as is vested in the trustee'. Under s 150 it is possible, for example, for a bankrupt to obtain an order of discharge at any time after his public examination has been concluded or after the expiration of a period of 12 months from the commencement of the bankruptcy. Clearly the administration of the bankrupt's estate may well continue for some time after discharge. Hence, property vested in the trustee continues to be so vested even after discharge: Pegler v Dale and Piwinski v Corporate Trustees of the Diocese of Armidale. It follows that any chose in action which the appellants had against the respondents before they became bankrupt or to which they became entitled after they became bankrupt vested in and remained with the trustee notwithstanding their discharge. For this reason they would have no standing to sue the respondents. In Bride v Australian Bank Ltd & Stewart (unreported; Federal Court, French J, 26 July 1988) it was held that a claim by the appellants against the bank and Stewart for damages for conspiracy and false, misleading and deceptive conduct and a claim to set aside the sale of the business of Oatmilling of Katanning was a chose in action which had vested in the trustee and remained so vested, notwithstanding discharge. The claim for damages in that case was based upon similar allegations to those made by the appellants in the present case. The decision of French J was affirmed by the Full Court of the Federal Court in Bride v Australian Bank and Stewart (unreported, Federal Court, Beaumont, Burchett and Lee JJ, 5 December 1988). Thus, both at first instance and on appeal the Federal Court reached the same conclusion on the standing point. 127 Mr Nitzkevich's causes of action also do not fall within the exception contained in s 116(2)(g) of a 'personal injury or wrong done to the (Page 29)
bankrupt', designed to retain the right in the bankrupt to sue for personal injury, including to his character or repute (see commentary at [116.1.65] by the learned authors of McDonald, Henry and Meek Australian Bankruptcy Law & Practice [6th ed loose-leaf]). 128 The combined effect of s 58 and s 116 of the Act is that a bankrupt may not institute legal proceedings, in that any chose in action that he is possessed of before bankruptcy, or acquires after he becomes bankrupt, vests in the Official Trustee in bankruptcy and thereafter the bankrupt has no standing to institute or continue proceedings. 129 And indeed, by virtue of s 60(2) of the Act (both then and now): An action commenced by a person who subsequently becomes a bankrupt is, upon his becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action. 130 The Act therefore captures proceedings commenced both before and after bankruptcy commences. 131 Mr Nitzkevich's first action was commenced on 3 September 2001, during the period of his bankruptcy. He therefore had no standing from the outset, his right to sue having vested in the Official Trustee. 132 The letter from the Official Trustee, dated 28 June 2002, to the effect that 'the Official Trustee has no interest in the LVN Property Trust or the assets of the LVN Property Trust' had no effect upon the vesting of the chose in action in the Official trustee which occurred by operation of law. 133 The letter was ambiguous, but on no interpretation could it amount to a transfer back to Mr Nitzkevich of any right he had to sue the defendants, even if the Official Trustee had power to do so: see Temsign Pty Ltd v Biscen Pty Ltd (1998) 20 WAR 47, but see also Willougby v Clayton Utz[No 2] [4(h)]. Nor did it amount to any sort of election pursuant to s 60(2) of the Act, which in any event only applies to actions commenced prior to bankruptcy, and not after. 134 Any right to institute proceedings lay with the Official Trustee and not Mr Nitzkevich, a position which did not alter upon his discharge from bankruptcy. Mr Nitzkevich did not have standing to institute proceedings in 2001 and has never regained standing to institute those proceedings. 135 Action 4061/2006 is a claim based upon the same causes of action as were described in the original claim. The right to pursue those causes of (Page 30)
action was lost on bankruptcy. He did not, therefore, have standing to institute those proceedings in 2006. 136 Action 2071/2009 relates to the sale of the Alteri Deli in February 2003 which was obviously not the subject of the proceedings instituted in 2001. But Mr Nitzkevich was not discharged from bankruptcy until 9 November 2003. Any chose in action he acquired to sue over the sale of the business was acquired before he was discharged from bankruptcy. It was therefore 'after-acquired property' which, upon its acquisition, vested in the Official Trustee pursuant to s 58 Bankruptcy Act and was never restored to Mr Niztkevich. He did not, therefore, have standing to institute those proceedings in 2009. 137 If, as I have found, the LVN Property Trust deed was ineffective and there was no trust, then any property (including a chose in action) the LVN Property Trust acquired was acquired by Mr Nitzkevich in his own right absolutely. It might then be argued on his behalf that he did not, and does not, need standing to sue on behalf on the trust and is entitled to sue in his own name. 138 If the trust deed was ineffective in creating a trust, however, then it follows that any assets of the so-called LVN Property Trust were not 'property held in trust for another' and therefore did vest in the Official Trustee in bankruptcy, in which case (unless his bankruptcy was annulled) Mr Nitzkevich lost forever the ability to institute those proceedings. 139 So while the submission which found favour with his Honour and the finding that I have made are quite contrary to each other, they are logically in the alternative, and each results in Mr Nitzkevich lacking standing to sue. I am persuaded, on different grounds to his Honour, that Mr Nitzkevich lacked and lacks standing to sue and see no reason to interfere with his Honour's decision, though my reasoning process may differ. 140 That is sufficient to dispose of these two appeals. I will however, for the sake of completeness, deal briefly with the last argument advanced on behalf of Mr Nitzkevich.
Whether his Honour erred in finding the descriptions of claim disclose no cause of action 141 As I have commented above, s 18(1) Magistrates Court (Civil Proceedings) Act empowers the court to give summary judgment against a (Page 31)
claim if the claimant does not satisfy the court that it has a reasonable prospect of succeeding. 142 In action 4061/2006 Mr Nitzkevich's claim is based upon his written agreement with Springridge. That agreement was not, on its face, an agreement with Mr and Mrs Ritchie personally. Ms Austin was not a party to the agreement. No basis is asserted in the description of claim justifying any claim against the defendants personally. Insofar as the claim relates to the declaration of trust, I am satisfied that no cause of action is disclosed against the defendants. 143 The Magistrates Court is not a court of pleadings but there is power in the court to order a party to lodge and serve a statement of claim: r 41A Magistrates Court (Civil Proceedings) Rules 2005. By r 41A(4): The statement of claim must contain — (a) a summary of the facts relevant to the claim; and (b) the legal basis of the claim; and (c) the basic contentions of the party; and (d) the remedy or relief claimed; and (e) if the amount of the claim has been reduced in order to bring the claim within the jurisdictional limit, a statement to that effect. 144 Mr Niztkevich had only, at the stage his action was dismissed, filed a General Procedure Claim Form 3 with an accompanying description of claim. 145 No order for Mr Nitzkevich to lodge a subsequent statement of claim could cure the fact, however, that action 4016/2006 was truly an action against Springridge, brought against third parties with no basis for so doing. 146 Mr Nitzkevich also claimed that, in April 2000, it was verbally agreed by Mr and Mrs Ritchie and Ms Austin that he would be paid $500 per week, without specifying what that payment represented. He claimed that, up to August 2001, he only received $10,500, leaving a shortfall of $25,000 over 17 months. 147 It is not apparent that this claim is a different claim from his claim against Springridge. He asserts this occurred by verbal agreement with all three defendants, but that does not suggest that he acquired any right to (Page 32)
income from the business generally, over and above his agreement with Springridge. There is no assertion in the description of claim that he ever acquired a legal interest in the partnership running the business, that is to say the partnership comprising Springridge and Ms Austin, and no basis is asserted on which it could be said that he had a right to draw a regular income from the business. I concur with his Honour that no cause of action is disclosed by that aspect of the claim. 148 Mr Nitzkevich also claimed in this action that he was the bookkeeper for the business for 13 months between February 1999 and March 2000 and issued invoices for his work, but was never paid. He became bankrupt on 5 September 2000, so that six months of this bookkeeping work occurred during the term of his bankruptcy and might have rendered him liable to make a contribution of his income to the Official Trustee pursuant to s 139P Bankruptcy Act. 149 He did not specify any basis upon which he had undertaken such work and was entitled to be paid for it. This aspect of the claim is different in nature, referring to personal services performed and not, on its face, contemplated by the written agreement he reached with Springridge. Mr Ritchie, in his affidavit that I have quoted from above, accepted that Mr Nitzkevich did perform bookkeeping services. 150 Mr Nitzkevich might perhaps have been ordered to lodge a statement of claim to clarify the basis of this cause of action, but he was on notice that the defendants sought to have his claim summarily dismissed and put no material before the court to show that his claim had reasonable prospects of success. In those circumstances I see no reason to interfere with his Honour's ruling. 151 I turn now to action 2071/09. As I discussed above, one has to read a great deal between the lines to understand the nature of the claim, but it appears that Mr Nitzkevich is seeking an accounting of the trust fund to him and seeks to recover from third parties any money owed him by Springridge, now defunct. The claim is based upon an assertion that Mr Ritchie, as agent of Springridge, and Ms Austin, as a person who knew of the existence of the trust, both knowingly assisted or procured the trustee, Springridge, to breach its trust. There is also an implied assertion that either or both received trust money and failed to account for it. 152 The claim is poorly described and lacking in particulars. I have also implied certain assertions into the claim to make sense of it. Given, however, that the claim was only contained in a description of claim at the (Page 33)
time of its dismissal, I might not have been disposed, as his Honour was, to find that it disclosed no cause of action. In particular, his Honour was persuaded that the claim discloses no cause of action against Mr Ritchie personally. I consider that it does, albeit an inadequately described cause of action. This action might have been the subject of an order to file a statement of claim. 153 I see no reason to interfere with his Honour's ultimate disposition, however, because Mr Nitzkevich put no evidence before the court to prove that this claim had any reasonable prospect of succeeding. Mr Ritchie's affidavit, which I have quoted from, went some of the way towards establishing that there was a trust deed between Mr Nitzkevich and Springridge and that Mr Nitzkevich did acquire a beneficial interest in the business, or at least a contractual right to 25% of the profits. But there is no evidence before the court as to what discussions Mr Nitzkevich had with Ms Austin at any stage about any thing, what discussions he had with Mr Ritchie and Ms Austin when Springridge refused to act as trustee and told Mr Nitzkevich to deal with Ms Austin directly from then on and what he knew or was told about the sale and the fate of the proceeds. A description of claim is not evidence. The onus was upon Mr Nitzkevich and he has not discharged that onus.
Some final matters 154 During the course of argument before me, counsel for Mr Nitzkevich raised an additional ground of appeal that he had been denied procedural fairness. I gave leave to add the ground because its addition did not prejudice the defendants. The ground complains that his Honour erred in failing to accord natural justice and procedural fairness before determining that there was no cause of action disclosed in the descriptions of the claim. After some discussion it was conceded by counsel for Mr Nitzkevich that he was in fact on notice that each defendant intended to argue that there was no cause of action disclosed. The complaint in the end is that his Honour failed to alert counsel for Mr Nitzkevich that he intended to find or was likely to find that there was no cause of action and to invite counsel to make submissions on that issue. 155 In addition to raising the matter squarely in his written submissions, Mr Metaxas, counsel for Ms Austin, submitted very specifically in his oral submissions before his Honour that there was no cause of action disclosed and that the action should have been commenced against Springridge and that, in any event, Mr Nitzkevich could not be said to have acquired a legal interest in the business of the Alteri Delicatessen. (Page 34)
156 Mr Metaxas addressed the court first. If counsel chose not to reply to those submissions, he can hardly complain of a lack of procedural fairness. Given that he had come to meet an application to summary judgment against him, he ought to have anticipated that he would have to articulate the legal basis for the claim. It was squarely being put to his Honour that there was no cause of action disclosed by the descriptions of claim and counsel cannot reasonably claim to have been taken by surprise by his Honour considering and finding favour with that submission. That is sufficient to dispose of that ground of appeal. 157 Counsel for Mr Nitzkevich also complained that, during Mr Metaxas's submissions concerning Mr Nitzkevich's bankruptcy 'it was left up in the air, and in fact you'll see on that particular issue I requested an opportunity from the learned magistrate to obtain further instructions, which opportunity was denied' (ts 17). In fact counsel did not seek any adjournment in relation to the issue of bankruptcy at all. 158 He did complain to his Honour that this was the first time counsel for Ms Austin had raised the bankruptcy argument, but conceded it had been the Ritchies' submission in 2002. Counsel pointed out to his Honour that no authorities had been cited to him for his consideration as to whether his client's bankruptcy in some way continued to effect his standing to sue (ts 27). 159 Counsel was on notice and agreed he was on notice that bankruptcy was being relied upon by the defendants. Ms Wood, who is employed at the law firm representing the Ritchies, swore a affidavit in support dated 2 July 2009, more than three weeks prior to the hearing, to which she annexed the Ritchies' submissions before Registrar Kingsley in 2002 submitting that Mr Niztkevich had no standing to sue on account of being a bankrupt. Mr Nitzkevich's affidavit also annexed an extract from the National Personal Insolvency Index showing his discharge from bankruptcy on 9 November 2003. 160 If counsel chooses to work on an assumption, as counsel clearly did, that a bankrupt regains standing to sue once he is discharged, without, it would seem, so much as a glance at the Bankruptcy Act 1966 (Cth) or any authorities, he can hardly complain of unfairness. 161 As to asking to take further instructions, he did state 'if there is some live issue in respect of the trust deed which is now canvassed by the defendants, it would be our submission that the matter should be stood down while we obtain further instructions on that point' (ts 32). That then (Page 35)
was in relation to the interpretation of the trust deed and whether Mr Nitzkevich had in some way regained standing to sue on behalf of the trust. 162 From his Honour's comments 'This is his trust deed, isn't it?' and 'This issue about his standing has been alive at least since this morning', I gather his Honour expected Mr Nitzkevich's counsel to have already taken any instructions required, a view in which I concur. 163 In fact to describe the issue of the trust deed as alive 'at least since this morning' was generous, to say the least. It was the basis upon Mr Nitzkevich's action had been dismissed in 2002. Assuming counsel was unaware of that until rather more recently, nevertheless Mr Nitzkevich filed an affidavit in support dated 9 July 2010 annexing French DCJ's reasons for decision. One would have thought it basic preparation on the part of counsel in the circumstances to address in one's own mind, whatever the other side chose to rely upon, whether Mr Nitzkevich now had standing to sue on behalf of the trust, rather than to assume that somehow effluxion of time had cured the problem. I see no merit in the suggestion that he was denied procedural unfairness. 164 It follows that, for the above reasons, I dismiss both appeals.
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