Oxford Gold Pty Ltd v Francis
[2011] FMCA 315
•27 April 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| OXFORD GOLD PTY LTD & ORS v FRANCIS | [2011] FMCA 315 |
| BANKRUPTCY – Leave to continue proceedings in the District Court of Western Australia. |
| Bankruptcy Act 1966 (Cth), ss.27(1), 58(3)(b) |
| Cordes v Dr Peter Ironside Pty Ltd (2009) 235 FLR 94; [2009] QCA 302 Lovell v Penkin (a bankrupt) (2008) 101 ALD 335; [2008] FCA 637 Meriton Apartments Pty Ltd & Anor v Industrial Court of New South Wales & Anor (2008) 171 FCR 380; [2008] FCAFC 172 Secure Parking (WA) Pty Ltd v Francis [2010] FMCA 191 Singh v Official Trustee in Bankruptcy (2007) 214 FLR 84; [2007] FMCA 1367 |
| First Applicant: | OXFORD GOLD PTY LTD ACN: 009 465 650 |
| Second Applicant: | ANTONIA LOWRY |
| Third Applicant: | LORENZO ROSSI |
| Respondent: | IAN CHARLES FRANCIS AS TRUSTEE OF THE BANKRUPT ESTATE OF MICHAEL JOHN MCPHEE |
| File Number: | PEG 96 of 2011 |
| Judgment of: | Lucev FM |
| Hearing date: | 27 April 2011 |
| Date of Last Submission: | 27 April 2011 |
| Delivered at: | Perth |
| Delivered on: | 27 April 2011 |
REPRESENTATION
| Counsel for the Applicants: | Mr S. Blyth |
| Solicitors for the Applicants: | Lewis Blyth & Hooper |
| For the Respondent: | No appearance |
ORDERS
The applicants have leave under s.58(3)(b) of the Bankruptcy Act 1966 (Cth):
(a)nunc pro tunc, to take such steps as have already been taken, in proceeding CIV 272 of 2007 in the District Court of Western Australia (“the District Court Proceedings”); and
(b)to take any fresh steps in the District Court Proceedings.
The respondent have liberty to apply in relation to the imposition of conditions upon the grant of leave under Order 1.
There be liberty to apply with respect to the costs of this application.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 96 of 2011
| OXFORD GOLD PTY LTD ACN: 009 465 650 |
First Applicant
| ANTONIA LOWRY |
Second Applicant
| LORENZO ROSSI |
Third Applicant
And
| IAN CHARLES FRANCIS AS TRUSTEE OF THE BANKRUPT ESTATE OF MICHAEL JOHN MCPHEE |
Respondent
REASONS FOR JUDGMENT
(Ex tempore – edited from the transcript)
Introduction
Some time in 2007, the applicants commenced proceedings by way of writ of summons in the District Court of Western Australia in a proceeding numbered CIV 272 of 2007 against Michael John McPhee, a solicitor.[1] The District Court Proceedings allege negligence and breach of contract by Mr McPhee. Mr McPhee became a bankrupt on or about 30 April 2008.
[1] “District Court Proceedings”.
The proceedings presently before this Court seek leave under section 58(3)(b) of the Bankruptcy Act 1966 (Cth)[2] to regularise steps taken in the District Court Proceedings and to allow those proceedings to continue.
[2] “Bankruptcy Act”.
The applicants, it would appear, became aware of Mr McPhee’s bankruptcy some time in 2008 or 2009, but were seemingly unaware of the requirement to obtain leave of this Court, or the Federal Court, to continue to proceed against Mr McPhee or, more correctly, his Trustee in Bankruptcy, until informed of the necessity to do so by their present solicitors in April 2011. Section 58(3)(b) of the Bankruptcy Act 1966 (Cth), provides that, except as otherwise provided under the Bankruptcy Act 1966 (Cth), it is not competent for a creditor to commence, or take a fresh step in, any proceeding, against a bankrupt in respect of a provable debt, except with leave of a court having jurisdiction in bankruptcy under the Bankruptcy Act 1966 (Cth), and upon such terms as such a court thinks fit.
The applicants commenced the District Court Proceedings at a time when leave was not required but, following Mr McPhee’s bankruptcy, the necessary leave of a court having jurisdiction in bankruptcy, namely this Court, or the Federal Court of Australia, was not sought.[3] That leave is now sought.
[3] Bankruptcy Act, s.27(1). As to the nature of the exclusive jurisdiction in bankruptcy under s.27(1) of the Bankruptcy Act, see generally Meriton Apartments Pty Ltd & Anor v Industrial Court of New South Wales & Anor (2008) 171 FCR 380; [2008] FCAFC 172 and Cordes v Dr Peter Ironside Pty Ltd (2009) 235 FLR 94; [2009] QCA 302.
Issues
The issues which arise in the present proceedings are:
a)whether the Court can grant leave to proceed with the District Court Proceedings with retrospective effect;
b)whether leave should be granted to proceed with the District Court Proceedings; and
c)if leave is granted to proceed with the District Court Proceedings, whether that leave should be granted on conditions.
Consideration
For reasons set out in Singh v Official Trustee in Bankruptcy[4], the Court has the power to grant leave to commence and continue proceedings with retrospective effect. Singh was followed in Secure Parking (WA) Pty Ltd v Francis[5], and both cases are referred to in the applicant’s submissions. The grant of leave, under section 58(3)(b) of the Bankruptcy Act 1966 (Cth), does not require the Court to consider the merits of the various issues and contention. Rather, it requires the Court to determine:
a)whether the issues in the proceedings are complex;
b)whether the issues are able to be resolved more thoroughly and expeditiously in the proceedings sought to be continued, than would be the case under the proof of debt process in respect of the Bankrupt’s estate;
c)whether there are a multiplicity of claims, and whether they ought be resolved in one proceedings; and
d)whether conditions ought to attach to any grant of leave.[6]
[4] (2007) 214 FLR 84; [2007] FMCA 1367 (“Singh”).
[5] [2010] FMCA 191 (“Secure Parking”).
[6] Singh FLR at 89 per Lucev FM; FMCA at para.19 per Lucev FM; Secure Parking at para.10 per Lucev FM.
The Indorsement of Claim in the Writ of Summons provides as follows:
The plaintiff’s claim for damages from the defendant for breach of contract and negligence, in the defendant’s advice provided to and representation of the plaintiffs relating to their claims for damages for misrepresentations, damages and/or relief under the Trade Practices Act and Fair Trading Act (WA) for misleading and deceptive conduct, breach of contract, and/or collateral contract in the purchase of a business known as the Ballajura City Coffee Lounge.
And the plaintiffs claim:
1. Damages
2.Interest to the date of judgment at the appropriate rate, pursuant to section 32 of the Supreme Court Act 1935
3. Costs
It would appear that with knowledge of Mr McPhee’s bankruptcy, but without knowledge of the requirement for leave under section 58(3)(b) of the Bankruptcy Act 1966 (Cth), the District Court Proceedings went through various steps, including:
a)an informal settlement conference in early 2010 between the applicant’s then solicitors and solicitors Law Mutual WA, who were Mr McPhee’s insurers, and Mr McPhee; and
b)the making of an order by the Principal Registrar of the District Court in the following terms on 25 August 2010:
THIS ACTION having been listed for directions and UPON HEARING Mr Popperwell as Amicus Curiae THE COURT OF ITS OWN MOTION ORDERS that:
1. unless within 3 months of the date of service of this order on each plaintiff, a plaintiff makes an application for leave to proceed pursuant to Bankruptcy Act 1966 (Cth) section 58(3), the writ herein be struck out.
There is evidence before the Court that indicates that the order of the Principal Registrar of the District Court has not taken effect by way of strikeout of the District Court Proceedings, because at least one party has not yet been served or, if they have now been served, the three month post service period in the order has not expired. The Court observes that, at this stage, it appears there is no statement of claim in the District Court Proceedings.
Mr Blyth’s affidavit, sworn 21 April 2010 and filed in Court today with leave of the Court, states as follows:
12.I have conducted a preliminary review of the conduct of the District Court Action by the Applicant’s former solicitors Dwyer Durack and, with the benefit of specific instructions and evidence provided to me by Michael Lowry, I say that the Applicant’s claim against McPhee in the District Court Action is a complex claim and not a readily provable debt because, in my assessment:
(a)The allegations of negligence and breach of contract the subject of the District Court Action, require an assessment of the conduct by McPhee of the Supreme Court Action; the sufficiency of the pleadings filed by him on behalf of the Applicants in those proceedings; as to whether he properly obtained all necessary expert accounting evidence to support the causes of action in the said proceedings; whether he properly pleaded all the causes of action, taking into account expert evidence the Applicants had procured from Price Waterhouse Coopers; whether when McPhee became aware of the deficiencies in the pleadings pointed out to him by the Defendants in the Supreme Court proceedings, he failed to properly advise the Applicants as to what steps could be taken to apply to the Court to amend the pleadings and/or seek an adjournment of the Supreme Court trial scheduled to commence on 14 May 2001, so as to enable the pleadings to be amended to include all the evidence the Applicants had obtained from Price Waterhouse Coopers in support of such action;
(b) Depending on the findings as to the allegations in sub paragraph (a), the damages that might arise from the alleged negligence and/or breach of contract by McPhee, damages would need to be assessed.
13.I am informed by Michael Lowry and verily believe that, as a result of the alleged negligence and breach of contract on the part of McPhee in the Supreme Court Action, the Applicants were advised by McPhee to accept the payment of $75,000.00 in full and final satisfaction of such proceedings and on the basis that the Applicants otherwise consent to the discontinuance of the Supreme Court Action and the Applicants accepted and acted upon that advice.
14.I am informed by Michael Lowry and verily believe that an order discontinuing the action was made by the Court on 17 May 2001…
There is attached to Mr Blyth’s affidavit a copy of both the Memorandum of Consent Orders and a copy of the Supreme Court Order discontinuing the action. The nature of the issues involved in the District Court proceedings and the Supreme Court proceedings - the Supreme Court proceedings being CIV 1750 of 1996[7] and which related to the sale and purchase, it would appear, of a suburban coffee lounge - are such that they clearly involve:
a)allegations of negligence by McPhee;
b)allegations of breach of contract by McPhee;
c)an assessment of McPhee’s conduct as a solicitor, including the sufficiency of the pleadings in the Supreme Court Proceedings as to whether expert evidence of an accounting nature had been properly obtained, such as to support the pleadings;
d)whether McPhee gave the applicants proper advice concerning the deficiencies in the pleadings in the Supreme Court Proceedings observed, and communicated to him, by the defendants, and what steps ought to have been taken in relation to the Supreme Court Proceedings to either adjourn or allow for pleading amendments to be made;
e)the advice given to the applicant concerning settlement and discontinuance of the Supreme Court Proceedings; and
f)the assessment of damages.
[7] “Supreme Court Proceedings”.
The Court observes that in that regard it has also had regard to the Supreme Court Proceedings’ pleadings, which are in evidence attached to Mr Blyth’s 21 April 2011 affidavit. As this Court observed in Secure Parking, and as the Federal Court observed in Lovell v Penkin (a bankrupt),[8] it is reasonably apparent that an action alleging negligence or breach of contract by a solicitor in relation to litigation or proceedings of the type outlined immediately above, is likely to give rise to issues, especially as to determination of liability and quantum of damages, which are sufficiently complex so as to be more appropriately determined by a court, in this case, the District Court, rather than by way of what would be the less satisfactory, in this case, proof-of-debt process.[9]
[8] (2008) 101 ALD 335; [2008] FCA 637 (“Lovell v Penkin”).
[9] Secure Parking at para.16 per Lucev FM; Lovell v Penkin ALD at 338-339 per McKerracher J; FCA at paras.14-15 per McKerracher J.
On the basis of the foregoing, and noting that:
a)there is material before the Court indicating that the Trustee in Bankruptcy will abide by the Court’s judgment in the matter; and
b)the Court is sufficiently satisfied that the District Court proceedings are sufficiently complex to warrant a grant of a leave under section 58(3)(b) of the Bankruptcy Act 1966 (Cth),
the issues in the District Court Proceedings, it follows, are more appropriately determined by the District Court than under the proof-of-debt process. The Trustee in Bankruptcy did not appear, did not file a submission or draft order suggesting any relevant conditions upon the grant of leave.
In those circumstances, and no conditions of leave having been suggested by the applicant in these proceedings, the Court does not consider it necessary to impose any conditions upon the grant of leave, but will provide for the Trustee in Bankruptcy to have liberty to apply in relation to the imposition of conditions on the grant of leave, such liberty being consistent with the nature of the Trustee’s duties in bankruptcy and allowing for any change of circumstance, either generally or in relation to the District Court Proceedings. Therefore, the Court considers that the issues in the District Court Proceedings would be better and more appropriately dealt with by the District Court than under the proof-of-debt procedure and, therefore, leave ought to be granted retrospectively to:
a)take such steps as have already been taken; and
b)continue the District Court Proceedings.
The Trustee in Bankruptcy will have liberty to apply in relation to the imposition of conditions and the grant of leave for the reasons that the Court has just outlined.
The Court directs the parties to confer with a view to agreeing costs to which the applicant is entitled, and the Court makes an order that there be liberty to apply with respect to costs, so as to facilitate the matter being brought back before the Court in the event of a disagreement as to costs.
I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of Lucev FM
Date: 6 May 2011
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