Re Banks; Ex parte Ceneas Pty Ltd, Delroi Caterers Pty Ltd, Weingarde Pty Ltd v Banks

[1995] FCA 655

CATCHWORDS

BANKRUPTCY - security for costs in respect of application by debtor under s 99 of the Bankruptcy Act 1966 - whether Court has jurisdiction to order security for costs in relation to an application of this kind - whether debtor a "nominal plaintiff" in respect of s 99 application - application for security for costs refused.

Bankruptcy Act 1966 - s 99

Re Taylor and Anor; Ex parte Century 21 Real Estate Corporation (1994) 49 FCR 324
Cowell v Taylor [1885] 31 Ch D 34
Rhodes v Dawson 16 QB 548
Semler v Murphy 1967 2 WLR 1171

RE BEVERLEY BANKS; EX PARTE CENEAS PTY LIMITED, DELROI CATERERS PTY LIMITED, WEINGARDE PTY LIMITED v BEVERLEY JOY BANKS

No. NB 1186 of 1994

FOSTER J
28 JULY 1995
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA )
  )
NEW SOUTH WALES DISTRICT REGISTRY )    No. NB 1186 of 1994
  )
BANKRUPTCY DIVISION              )

RE:BEVERLEY BANKS

Debtor

EX PARTE:CENEAS PTY LIMITED

(ACN 002 195 557)

First Applicant/Creditor

DELROI CATERERS PTY LIMITED

Second Applicant/Creditor

WEINGARDE PTY LIMITED

Third Applicant/Creditor

AND:BEVERLEY JOY BANKS

Respondent/Debtor

JUDGE MAKING ORDERS:    FOSTER J

DATE:     28 JULY 1995

PLACE:    SYDNEY

MINUTE OF ORDERS

THE COURT ORDERS THAT:

1.Both applications for security for costs are refused.

2.The costs of the applications for security for costs be the applicants' costs in the cause.

Note:  Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA )
  )
NEW SOUTH WALES DISTRICT REGISTRY )    No. NB 1186 of 1994
  )
BANKRUPTCY DIVISION              )

RE:BEVERLEY BANKS

Debtor

EX PARTE:CENEAS PTY LIMITED

(ACN 002 195 557)

First Applicant/Creditor

DELROI CATERERS PTY LIMITED

Second Applicant/Creditor

WEINGARDE PTY LIMITED

Third Applicant/Creditor

AND:BEVERLEY JOY BANKS

Respondent/Debtor

CORAM:    FOSTER J

DATE:     28 JULY 1995

PLACE:    SYDNEY

REASONS FOR JUDGMENT
  (Extempore)

HIS HONOUR:   These are two applications for security for costs in these proceedings.  The respondent to the application is Beverley Joy Banks who was made bankrupt on 27 May 1994.  The first applicant, Ceneas Pty Limited ("Ceneas"), has lodged proof of debt with the trustee in the amount of $31,062.  The
second applicant, Delroi Caterers Pty Limited "(Delroi"), has proved for a debt of $6,212.  These two applicants are represented by the one solicitor and have jointly sought security in the sum of $5,000.  The third applicant, Weingarde Pty Limited "(Weingarde"), is separately represented.  It also seeks security for costs in the same sum.  It has proved for a debt of $21,000.

The proceedings in respect of which security is sought is an application by Mrs Banks under s 99 of the Bankruptcy Act 1966 in respect of the admission of the proofs of debt of each of the applicants by the trustee. Mrs Banks asserts that the proofs of debt have been wrongly admitted and seeks an order that they be expunged or that the amount of the debts admitted by the trustee be reduced. The creditors oppose her application and have provided evidence of the legal costs they anticipate will be incurred in that opposition.

I accept that I have jurisdiction to make the orders for security the creditors seek if I am satisfied that it is appropriate to do so: see discussion by Burchett J in Re Taylor and Anor; Ex parte Century 21 Real Estate Corporation (1994) 49 FCR 324 at 324-5. It is currently accepted by all the creditors that the facts of Mrs Banks bankruptcy and impecuniosity do not in themselves afford grounds for the ordering of the security sought: Cowell v Taylor [1885] 31 Ch D 34; Rhodes v Dawson 16 QB 548. However, all creditors submitted that her prospects of success in the s 99
application are so low that the orders should be made, notwithstanding that they might have the effect of stifling the litigation. 

This submission has involved me in reading and considering the fairly extensive material which has already been filed in respect of Mrs Banks' application.  Filing of relevant material is obviously not yet complete and some of the material already filed is not in admissible form.  However, the proceedings are still subject to directions hearings and are not yet ready for trial.  It is reasonable to assume that merely evidentiary matters will be attended to in the future.  I have concerned myself only with the apparent substance of Mrs Banks' claims.

So far as Weingarde is concerned, it is apparent that its claim is a longstanding one and has always been disputed by Mrs Banks on the basis that the relevant contract was not made with her personally but with the company.  In any event, it has always been the subject of a threatened substantial cross-claim.  No action was brought against Mrs Banks for this alleged debt prior to her bankruptcy, although there was ample time to do so.  I am not prepared to find that her claim for the expunging or reduction of this debt lacks merit or has little prospect of success.

In respect of the claims by Ceneas and Delroi, there are obviously greater difficulties in the way of Mrs Banks'
application, these debts being founded on court orders.  It must be remembered, however, that this court has the power to go behind judgments in appropriate cases.  In relation to the debt allegedly owing to Ceneas, it appears that Mrs Banks has always contended that the settlement on which it was based was subject to a condition that she be entitled to recover possession of a large number of chattels from Ceneas, and that this condition was not complied with.  Alternatively, she claims entitlement to the value of those goods in reduction of the debt.  I am not prepared at this stage to find that these claims are significantly lacking in substance.  As the same solicitor appears for Delroi, I do not find it necessary to give that debt separate consideration.

All three creditors make a final submission that Mrs Banks should be treated as a "nominal plaintiff" in respect of the application under s 99. In Semler v Murphy 1967 2 WLR 1171 at 1176 Lord Denning MR said:

"A nominal plaintiff is a man who is a plaintiff in name but who in truth sues for the benefit of another."

It is submitted that even if Mrs Banks succeeds in having these three proofs of debt expunged, there will still be no surplus of assets from which she can obtain benefit.  This does not, in my view, suffice to constitute her a nominal plaintiff. 

It was further put that, in reality, Mrs Banks has instituted the s 99 application for the benefit of her husband who claims to be a substantial creditor. In fact, Mr Banks has made a claim which is currently being considered by the trustee and has, as yet, not been admitted. In these circumstances I am not persuaded that Mrs Banks is merely making the application on behalf of her husband.

In all these circumstances I have come to the conclusion that I should refuse both applications for security for costs.  I consider that the costs of the security for costs applications should be the applicants' costs in the cause.  I order accordingly.

I certify that this and the preceding four (4) pages are a true copy of the reasons for judgment herein of the Honourable Justice M. L. Foster.

Associate:

Date:   28 JULY 1995

A P P E A R A N C E S

THE DEBTOR APPEARED IN PERSON.

COUNSEL FOR THE FIRST AND SECOND APPLICANT:
  P.J. SNOWDEN

INSTRUCTED BY:                   BUTLERS SOLICITORS

COUNSEL FOR THE THIRD APPLICANT:  M. JOSEPH

INSTRUCTED BY:                   KEMP, STRANG & CHIPPINDALL

DATE OF HEARING:   28 JULY 1995

DATE OF JUDGMENT:  28 JULY 1995