Pucar v Grubb - [2004] FMCA 42

FEDERAL MAGISTRATES COURT OF AUSTRALIA

PUCAR & ORS v GRUBB

[2004] FMCA 42

BANKRUPTCY – Leave to issue proceedings pursuant to s.58(3) of the Bankruptcy Act – provable debt – whether leave necessary.

Bankruptcy Act 1966, ss.58(3), 82, 82(2), 117

Aliferis v Kyriacou (2000) 1 VR 447
Chittick v Maxwell (1993) 118 ALR 728
Re Sharp Ex parte Tietyens Investments Pty Ltd (in liq) (1998) FCA 1367
Reid v Interarch Australia Pty Ltd (2000) FCA 1328
ACCC v Kritharas (2000) 105 FCR 440 at 449-451
Charter Pacific Corp Ltd v Belrida Enterprises Pty Ltd (2003) QCA 375 Badgery v Nash (2002) FMCA 149).
Allanson v Midland Credit Ltd & Anor (1977) 16 ALR 43
Barewa Oil and Mining NK (in liq) v Isim Mineral Development Pty Ltd (1981) 59 FLR 451, 455, 456
Loftus v Clark [2002] FMCA 66
Midland Credit Ltd v Official Trustee in Bankruptcy (1982) 68 FLR 53

Applicants:

MARINKO PUCAR, LENA PUCAR and RICHMARK ASSET PTY LTD
(ACN 102 785 731)

Respondent:

BRUCE GRAEME GRUBB

File No:

WZ 166 of 2003

Delivered on:

4 February 2004

Delivered at:

Perth

Hearing Date:

19 January 2004

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicants:

Mr Price

Solicitors for the Applicants:

Eley Palmer

Counsel for the Respondent:

Mr S.F. Popperwell

Solicitors for the Respondent:

Pynt & Partners

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

WZ 166 of 2003

MARINKO PUCAR, LENA PUCAR and RICHMARK ASSET PTY LTD (ACN 102 785 731)

Applicants

and

BRUCE GRAEME GRUBB

Respondent

REASONS FOR JUDGMENT

In this matter Marinko Pucar, Lena Pucar and Richmark Asset Pty Ltd (the applicants) have made an application pursuant to s.58(3) of the Bankruptcy Act 1966 (the Bankruptcy Act) seeking an order that the applicants have leave to issue proceedings against Bruce Graeme Grubb (the respondent). The amended application for leave to commence proceedings, which was filed in court on the day of the hearing, also seeks leave to issue proceedings against the respondent for breach of “fiduciary type duties" in the Supreme Court of Western Australia.
It is perhaps convenient to note that in submissions made in writing for and on behalf of the applicants specific leave is sought by the applicants to commence and maintain proceedings in the Supreme Court of Western Australia “in respect of the subject matter of the applicants' proposed writ of summons and to seek relief claimed therein.”
In the written submissions the applicants refer to the leave encompassing both a claim against the bankrupt, that is, the respondent, in negligence, and a claim for a breach of “fiduciary type duties”, whether the latter were part of or separate from the usual duty of care.
The application for leave to commence the proceedings arises, as indicated, from s.58(3) of the Bankruptcy Act which provides as follows:
“58(3)Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.”
It is also relevant to note that in considering the discretion the court has in relation to its power to make an order granting leave of the kind sought in this application, consideration must be given to s.82 of the Bankruptcy Act which provides as follows:
“82(1)Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
(1A)Without limiting subsection (1), debts referred to in that subsection include a debt consisting of all or part of a sum that became payable by the bankrupt under a maintenance agreement or maintenance order before the date of the bankruptcy.
(2)Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy.
(3)Penalties or fines imposed by a court in respect of an offence against a law, whether a law of the Commonwealth or not, are not provable in bankruptcy.
(3AA)An amount payable under an order made under section 1317G of the Corporations Act 2001 is not provable in bankruptcy.
(3AB)A debt incurred under Part 4-1 of the Higher Education Support Act 2003 is not provable in bankruptcy.
(3A)An amount payable under an order made under a proceeds of crime law is not provable in bankruptcy.
(3B)A debt is not provable in a bankruptcy in so far as the debt consists of interest accruing, in respect of a period commencing on or after the date of the bankruptcy, on a debt that is provable in the bankruptcy.
(4)The trustee shall make an estimate of the value of a debt or liability provable in the bankruptcy which, by reason of its being subject to a contingency, or for any other reason, does not bear a certain value.
(5)A person aggrieved by an estimate so made may appeal to the Court not later than 28 days after the day on which the person is notified of the estimate.
(6)If the Court finds that the value of the debt or liability cannot be fairly estimated, the debt or liability shall be deemed not to be provable in the bankruptcy.
(7)If the Court finds that the value of the debt or liability can be fairly estimated, the Court shall assess the value in such manner as it thinks proper.
(8)In this section, liability includes:
(a)compensation for work or labour done;
(b)an obligation or possible obligation to pay money or money's worth on the breach of an express or implied covenant, contract, agreement or undertaking, whether or not the breach occurs, is likely to occur or is capable of occurring, before the discharge of the bankrupt; and
(c)an express or implied engagement, agreement or undertaking, to pay, or capable of resulting in the payment of, money or money's worth, whether the payment is:
(i) in respect of amount—fixed or unliquidated;
(ii) in respect of time—present or future, or certain or dependent on a contingency; or
(iii) in respect of the manner of valuation—capable of being ascertained by fixed rules or only as matter of opinion.”
The applicants have relied upon affidavits sworn by Lena Pucar on

28 October 2003, together with a further affidavit by the same deponent sworn on 12 December 2003. More recently in further support of the application, and in particular the amended application filed in court, the applicants seek to rely upon an affidavit of Mitchell Orman sworn 17 December 2003 and a further affidavit of the same deponent sworn 15 January 2004.
The respondent has sought to rely upon a notice of intention to oppose the application which has been filed with the court on 16 January 2004, and in addition seeks to rely upon an affidavit sworn by the respondent on the day of the hearing, that is, 19 January 2004.
By way of background, it appears from the affidavits of the second‑named applicant, that is, Lena Pucar, that the applicants had been borrowers involved in what is alleged to involve the borrowing of funds from a business known as Graeme Grubb Finance Broking Business (GGFB) and in the course of borrowing money from GGFB dealt with the respondent as their legal adviser.
In the first affidavit of Ms Pucar she deposes that the applicants had been borrowers borrowing funds from GGFB and that as a result “of the papers that we signed when the respondent was acting as the legal practitioner for the applicants we suffered loss and damage.”
In her affidavit Ms Pucar goes on to state the following:
“5.That loss and damage arose because the papers that we signed were not the correct papers to be signed and as a result of signing them, we gave securities to third parties for funds that had not been advanced by them and for funds that we never received. Those securities were in the form of mortgages that were registered against real property and as a result of the Torrens system of land registration in Western Australia, those mortgages became indefeasible upon registration.
6.As a consequence of the securities that we gave, the third parties were able to enforce those mortgages and sell our assets, which included the third named Applicant's hotel business and the personal home of myself and the first named Applicant (who is my husband).”
In the affidavit material it is clear that the applicants seek to rely upon a claim against the respondent in his capacity as a certified legal practitioner and also assert that at all material times he was insured for professional indemnity insurance for negligence.
The affidavit of the second applicant asserts that she, along with the other applicants, are seeking leave to issue proceedings against the respondent for the purpose of proving his negligence and recovering against either his policy of insurance or the general fidelity fund for legal practitioners.
Annexed to the first affidavit is a draft statement of claim proposed to be relied upon in relation to a writ of summons wherein the first-named plaintiff and second plaintiff are the applicants in this present proceeding. In the draft statement of claim, although specific reference has not been made to a retainer, nor is it alleged specifically that at all material times the defendant in that statement of claim had acted as a solicitor for the parties, there are general pleadings that the defendant received instructions from GGFB in relation to the issue of preparation of mortgages, transfers, discharge of mortgages and attending to settlements arising from the claimed dealings which the applicants became involved in with GGFB.
It is perhaps not necessary to deal in further detail with the background set out in the affidavit material, save and except that it is alleged in the draft statement of claim that as a consequence of the financial dealings by the applicants with GGFB certain moneys which were to be advanced were not advanced and significant losses occurred by virtue of security and mortgage documents being executed and then duly enforced by those seeking to claim against the applicants.
Otherwise, the statement of claim raises allegations concerning the alleged negligence of the respondent and/or breach of fiduciary duty. Although it does not seek specific damages, it is asserted by counsel for and on behalf of the applicants the damages at least exceed the minimum claim permissible in the Supreme Court of Western Australia, namely $250,000, and given that there is affidavit evidence relating to the sale of assets, including a home and a hotel business, that the damages in the circumstances can be regarded as significant.
It is noteworthy that the respondent has been declared bankrupt and the bankruptcy would appear to have occurred, according to the further affidavit material, on 2 December 2002. It is not in dispute that the respondent is an undischarged bankrupt. It also appeared to be the case that the trustee in bankruptcy does not oppose the current application. A letter dated 3 November 2003 from Mr Ken Yoong for the Official Receiver states in part the following:
“The matters appears to relate to some negligence on the part of the bankrupt and is for unliquidated damages and appears to be not provable in the estate. There does not appear to be a need for the Applicants to apply to court for leave to commence proceedings. They can pursue the matter without applying to court.”
It is significant to note the contents of that letter from the official receiver as a key issue in the present case is whether or not it is even necessary for the applicants to seek the order of the kind now sought in the amended application.
As an alternative in the present case, the applicants through their counsel have indicated that they would be content with a declaration from this court that leave pursuant to s.58(3) of the Bankruptcy Act is not necessary.
It is useful to briefly set out the submissions made on behalf of the applicants in support of the application. The proposed claim, according to the submissions, as indicated, relate to the respondent's role as a solicitor. It is submitted that the respondent, who of course is the proposed defendant to the Supreme Court proceedings, was the legal adviser to the first and second-named applicants, as well as being a legal adviser to the trust of which the third-named applicant is now a trustee.
The statement of claim was relied upon in relation to the relationship amongst the parties, and in particular in paragraph 17 the statement of claim alleges that at all material times the defendant was the legal practitioner acting for the first and second-named applicants in this application and for Bolivia Nominees Pty Ltd (Bolivia). Richmark Asset Pty Ltd (the third applicant in these proceedings) is alleged to be the trustee of the Bolivia Trust having replaced the previous trustee Bolivia.
It is further submitted that in the present case the leave sought importantly is for the applicants to commence and maintain proceedings in the Supreme Court of Western Australia in respect of the subject matter in the proposed writ of summons on the basis that leave being granted in that form would enable the applicants, if necessary, to deal with any objections in relation to pleadings and/or amend pleadings or otherwise conduct the proceedings uninterrupted so that the matter may proceed to finality, presumably either by way of settlement or judgment.
The applicants' submissions further rely upon the statutory provisions which I have set out earlier in this decision. It is claimed that the issues in the present case may be summarised as follows:
·Whether the proposed Supreme Court proceedings are in respect of a provable debt; and
·If so, whether, in the circumstances, leave to commence and maintain the proceedings should be given to the applicants.

Provable debt – whether the leave of the court is necessary

In support of the submissions on behalf of the applicants reference was made to conflicting authorities which have arisen in recent times. The Victorian Supreme Court of Appeal in the matter of Aliferis v Kyriacou (2000) 1 VR 447 had decided that a claim against a solicitor in negligence was not a provable claim. Reference was made to the decision in that court where it was held that the plaintiff's claim in tort against the defendant solicitor was within s.82(2) of the Bankruptcy Act as a claim arising otherwise than by reason of contract and therefore was not provable, even though essentially the same claim against the solicitor lay in contract.
It is useful to set out the following extract from Charles JA at p.493 of the Aliferis decision as follows:
“It seems to me rather that the correct test to apply for the purpose of deciding whether a demand is within the exclusion provided by s 82(2), leaving breach of trust to one side, is whether a contract or promise constitutes an essential element of the cause of action. In a claim for unliquidated damages for professional negligence against a solicitor, the pleading of the retainer will often, if not usually, be necessary, but only for the purposes of delineating and defining the scope of the professional's duty of care. For reasons such as those given by Lord Wright in Grant's case the pleading of the contract or retainer, however, is not an essential element in the cause of action.”
Counsel for the applicants quite properly referred the court to a different view, albeit one disapproved of by the Victorian Court of Appeal in the Aliferis case, namely, a decision in the matter of Chittick v Maxwell (1993) 118 ALR 728. In Chittick's case claims of negligence and breach of fiduciary duty were sought to be pursued against a bankrupt solicitor. The decision of the court in that case was approved by Weinberg J in Re Sharp Ex parte Tietyens Investments Pty Ltd (in liq) (1998) FCA 1367 where his Honour held that certain claims (inter alia in negligence) against three solicitors then undischarged bankrupts, were provable debts within s.82 since the claims were “based in part at least upon the contractual relationship which existed between those individuals and those who ultimately lost their investments. They therefore arise 'by reason of a contract'.”
It was submitted that the reasoning of the Victorian Court of Appeal in Aliferis has been adopted in a number of other decisions (see Reid v Interarch Australia Pty Ltd (2000) FCA 1328, ACCC v Kritharas (2000) 105 FCR 440 at 449-451, Charter Pacific Corp Ltd v Belrida Enterprises Pty Ltd (2003) QCA 375, Badgery v Nash (2002) FMCA 149).
It was submitted that if Aliferis is good law, the applicants' claim in negligence is not provable in bankruptcy and leave to proceed against the bankrupt is not required. This of course is consistent with the view expressed by the official receiver in the correspondence to which I referred to earlier.
Counsel for the applicants, however, submitted that there is conflicting authority on the issue of whether unliquidated damages that can arise in contract and tort is a provable debt and whether it comes under the exception in s.82(2) (see McDonald Henry and Meek, Australian Bankruptcy Law and Practice (5th edition) at paragraph 82.2.55).
It was submitted, in any event, it is not necessary for the court to resolve the apparent conflict in relation to the authorities. Reliance instead was placed upon the decision of the Full Court of the Federal Court of Australia in the matter of Allanson v Midland Credit Ltd & anor (1977) 16 ALR 43 at p.49 where in that case the court stated the following:
“… Where a court is given power to grant leave to perform a particular act, or pursue a particular course of action, and the question whether the need for such leave has arisen involves difficult and complicated questions of law or fact, it is permissible, in an appropriate case, to proceed on the basis that such leave is necessary rather than involve the parties in the futile exercise of determining, possibly after a series of appeals, whether the need for such leave has arisen. …”
It is noteworthy that the Full Court in the Allanson decision had made an order in the following terms:
“Order that to the extent that such leave is necessary by reason of the provisions of s 58(3) of the Bankruptcy Act 1966 ...”
The Full Court went on to make the order granting leave for the parties in that case to continue and take fresh steps in proceedings and also made the order conditional upon a term that the leave did not extend to the taking of any step to enforce any judgment obtained in such proceedings.
It was argued, and I accept, on behalf of the applicants that the term which was imposed by the Full Court in Allanson's case is probably not necessary and indeed may be superfluous having regard to the fact that in the current application as amended the applicants do not seek to avoid the operation of s.58(3)(a) which of course has the effect of making it not competent for a creditor to enforce any remedy against the person or the property of the bankrupt in respect of the provable debt.
It was submitted on behalf of the applicants that a claim for breach of fiduciary duty is a provable claim, either as a claim "arising out of a contract" or as a claim by reason of a "breach of trust" and that that finds support in a number of cases (see Barewa Oil and Mining NL (in liq) v Isim Mineral Development Pty Ltd (1981) 59 FLR 451, 455, 456, Re Sharp and Chittick).
In the present case the fiduciary duties, which were referred to in paragraph 18 of the proposed statement of claim, can be viewed, according to the applicants' submissions, as either a separate fiduciary duty or simply as particulars of the usual tortious duty of care applying in the context of the case.

Whether leave should be given

It was submitted that in the present case the court has a discretion as to whether or not to grant leave under s.58(3). The factors that may be relevant in the discretion are recently referred to by this court in the matter of Loftus v Clark [2002] FMCA 66 at paragraphs 25-42.
It was submitted that where the facts and issues are complex, as in the present case with the proposed Supreme Court claim, it is more effective that the issues be contested at trial in the normal course rather than the creditor lodging a proof of debt (see Midland Credit Ltd v Official Trustee in Bankruptcy (1982) 68 FLR 53 at 54, 57).
It was further submitted in the present case that there is insurance relating to the bankrupt's alleged liability and it is likely that there would be no ultimate burden imposed on the bankrupt estate. In the submissions on behalf of the applicants it is noted that reference is made to the fact that in Western Australia legal practitioners are required to hold professional indemnity insurance (see Legal Practitioners (Professional Indemnity Insurance) Regulations 1995 (WA)).
Reference was made to s.117 of the Bankruptcy Act whereby the trustee in bankruptcy must hold the benefit of third party insurances for the benefit of the third parties. Therefore, it is submitted that the assets of the bankrupt would still be distributed rateably among his creditors. It was submitted the applicants, therefore, are not seeking to obtain an advantage over other creditors.
It was further submitted that it is of some significance that the trustee in bankruptcy does not oppose the applicants pursuing legal proceedings against the respondent.
The application has been opposed and the issues to which I have referred have been subject to submissions made for and on behalf of the respondent and reliance is placed upon those matters raised specifically in the notice of intention to oppose application dated

16 January 2004. In that notice the respondent states the following grounds:
“1.The proposed claims for unliquidated damages are provable debts. If the applicants' proposed action against the respondent proceeds while there is uncertainty over the availability of insurance, should the respondent's insurer subsequently refuse an indemnity, there is a risk of burdening the bankruptcy trustee with the defence of the claim;
2.The proposed pleaded claim cannot succeed because there is no plea that the respondent was instructed to act for the applicants;
3.Part of the proposed pleaded claim of the corporate applicant is bound to fail for want of compliance with the Limitation Act;
4.The proposed pleaded claim of the corporate applicant is bound to fail because there is no causative link between the alleged acts and omissions of the respondent and the loss, if any, of the corporate applicant; the corporate applicant appears to have received funding prior to the respondent's involvement.”
During the course of submissions counsel for the respondent referred to and relied upon the affidavit to which I have already referred of Bruce Graeme Grubb sworn 19 January 2004. In that affidavit Mr Grubb deposes as follows:
“2.At paragraph 24 of the applicants' outline of submissions, the applicants rely on the existence of insurance, covering any liability I may have to the applicants, as a relevant factor for the court to consider in determining the application.
3.I may have access to an indemnity under the Law Mutual Scheme for my civil liability to the applicants for a claim up to $1.5 million. I have not been granted an indemnity under the Scheme and I do not know when or if an indemnity will be granted.
4.Pynt & Partners have been retained by the Scheme to represent me in these proceedings without prejudice to the Scheme's right to terminate Pynt & Partners instructions if the Scheme decides I am not entitled to an indemnity under the scheme.”
It is clear from the affidavit material, and I accept, that the claim by the current applicants against the respondent in the Supreme Court has been foreshadowed by the applicants as early as August 2003. The basis of that finding is that in the further affidavit of the second applicant sworn 12 December 2003 she refers to the fact that there had earlier been an application filed in this court on 28 August 2003 essentially seeking the same relief sought in the current application, even though, as a result of there being no appearance, that first application was dismissed without the matters being decided on their merit. Although that first application was determined ex parte, it was submitted that in the circumstances notice at least had been given as early as August 2003 of the potential claim by the applicants against the respondent in the Supreme Court.
There was some discussion during the course of submissions concerning the extent to which the court can embark upon any meaningful understanding or analysis of the insurance issue. In my view, the most appropriate conclusion the court can reach in an application of this kind is that there is an insurance policy in existence which may or may not respond to a claim made against the respondent. The fact that the respondent is currently represented by solicitors retained by the Law Mutual Scheme does not automatically entitle a court to conclude that the scheme has decided to indemnify the respondent or that it will continue, if it has decided to indemnify him, to indemnify him in the future.
At best I can only conclude that the scheme is aware of the claim and, as indicated in the affidavit material, is prepared on a without prejudice basis to arrange representation for the respondent. It is appropriate to conclude, however, that at least potentially there is insurance which may respond to the claim. In my view, that is a relevant matter for reasons which will become evident further in this judgment.
It was further submitted on behalf of the respondent that in the present case the application may well be unnecessary and otherwise submissions were made essentially supporting those matters raised in the notice of intention to oppose the application. In particular, it was submitted that effectively granting leave may well give a preference to potential creditors at the expense of other creditors who may wish to benefit from the estate. It was further submitted that by requiring the respondent to defend proceedings in the Supreme Court, that may then involve the trustee and draw upon the funds of the estate to the detriment of other creditors. The trustee, it was submitted, would be left in a position of having to determine, or at least seek to resolve, a dispute with the potential insurer.
Further criticism was made of the state of the pleadings and it was submitted that the pleadings are deficient to the extent that there is no real indication of the extent of loss and damage, and further, no specific pleading of retainer which one would normally expect to find in an application of this kind, particularly given the second respondent has in her affidavit deposed to the fact that the respondent has at all material times acted as a legal practitioner for the applicants.
It was submitted in the circumstances that the court in the exercise of its discretion should have regard to the uncertainty of the insurance issue, the vagueness of the quantum said to be the subject of a claim in the Supreme Court action and the omission from the proposed statement of claim of a specific pleading of retainer of the respondent as legal practitioner for each of the applicants.

Reasoning

In my view, there is considerable conflict in relation to the issue of whether it could properly be said that a claim of this kind potentially against the respondent in his capacity as a legal practitioner based on what is described as negligence and/or breach of fiduciary duty could be said to be a provable claim against the respondent. My own view is that there is a strong probability that the decision of the Victorian Court of Appeal in Aliferis is correct. However, I am mindful of the fact that there are differing views and indeed note specifically, and have regard to, the view of Young J in Chittick followed by Weinberg J in Re Shar
The practical and appropriate approach for a court at this level is to adopt the approach by the Full Court in Allanson. In my view, it is not possible for this court to reconcile, if it needs to be reconciled, the law which appears to be at least in conflict between the Victorian Court of Appeal, the New South Wales Supreme Court and the Federal Court. In the circumstances, it is more appropriate to look carefully at the basis of the potential claim and in circumstances where there is some doubt as to whether or not leave should be granted, it is otherwise appropriate for this court to consider in the exercise of its discretion whether leave should be granted of the kind sought albeit that it may not be absolutely necessary to grant leave.
On a proper reading of the affidavit material it is at least arguable that the current claim, which I take to be expressed both in the affidavit material and the proposed pleading for the purpose of this application, may well involve a claim where there is some doubt as to whether it could be properly regarded as a claim for a provable debt. In the circumstances I am satisfied that it would be prudent as a court of bankruptcy to at least consider making an order granting leave in the form similar to the form adopted by the Full Court in Allanson's case.
In exercising my discretion as to whether I should indeed make the order in the present case, I am prepared to accept that in the present case there is at least sufficient evidence that insurance does exist. I am only prepared to accept that the insurance policy may respond to the claim, when ultimately formulated, in the Supreme Court. I further accept that there is sufficient in the affidavit material and draft statement of claim to suggest that there is a significant potential claim having regard to the fact that there is evidence that the applicants have had assets disposed of which include a home and hotel business.
It is important generally to have regard to the matters which this court should consider in relation to the exercise of its discretion under s.58(3) of the Bankruptcy Act. In my view, the proper course for the court to adopt is to consider the practical circumstances in which the claim arises. In doing that on the material before me it is clear that there is at least the presence of a legal practitioner involved either formally by way of retainer and/or involved to such an extent which may give rise to a claim in either negligence and/or breach of fiduciary duty of a type which might constitute a claim for unliquidated damages.
It is sufficient for the court, having drawn that conclusion, to have regard to the significant disadvantage to the applicants if the court does not grant leave in the present circumstances. To refuse to grant leave would leave open the prospect of there being arguments at a later stage which, if successful, might then combine with the limitation periods imposed in the state of Western Australia on the proposed action and ultimately defeat the action when, in the alternative if leave is granted, that potential consequence would be avoided.
Given the nature and extent of the claim, I am also satisfied that there is a reasonable probability that the insurance will respond to this claim. On that basis, together with the fact that even without that possibility there are discrete arguments which could be advanced on behalf of the applicants. These should properly be pursued in the Supreme Court. It is in the interests of both the estate and other creditors that those issues be argued discretely before the Supreme Court rather than by way of proof of debt and arguments arising out of a trustee's dealing with the claimed proof of debt.
Whether the proceedings are commenced in the Supreme Court or agitated by way of a proof of debt claim in a court of bankruptcy would nevertheless almost inevitably still involve extensive costs of litigation which may well be visited upon the creditors of the bankrupt estate. In any event, it seems almost inevitable that the issue of insurance will be agitated, if indeed indemnity is refused. Of course from a practical point of view it may well be that once the proceedings are commenced in the Supreme Court in Western Australia than the issue of indemnity is resolved at an earlier stage and does not need to be litigated. That would leave then the complex issues of liability which will be more appropriately dealt with in the interests of all parties by the Supreme Court in Western Australia.
It is appropriate for the reasons given that the court does exercise its discretion to grant leave pursuant to s.58(3) of the Bankruptcy Act. The respondent expressed a desire to be heard in relation to the form of the order. I will hear the parties further in relation to the nature of the order that the court should make in this matter.

I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 4 February 2004