Re Brazel A.J Ex parte Royal Nominees Pty Ltd

[1995] FCA 774

CATCHWORDS

BANKRUPTCY - Application to extend time for the making of an election under s.60 of the Bankruptcy Act 1966 (Cth) - delay reasonable to obtain independent information and advice - no identifiable prejudice by failure to make election.

Bankruptcy Act 1966 (Cth) s.60

Re Faulkner Ex parte The Official Receiver (1981) 52 FLR 109 - Appl.
Re Collins Ex parte Official Trustee in Bankruptcy and Bracher (1986) 65 ALR 338 - Appl.

Re Allan Joseph BRAZEL;  Ex parte Royal Nominees Pty Ltd
No. QB1471 of 1995
Cooper J., Brisbane, 20 September 1995

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND

No. QB1471 of 1995

RE:

ALLAN JOSEPH BRAZEL

Judgment Debtor

EX PARTE:

ROYAL NOMINEES PTY LTD

ACN 010 901 407

Judgment Creditor

JUDGE MAKING ORDER:           Cooper J.

WHERE MADE:  Brisbane

DATE OF ORDER:             20 September 1995

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The time for the trustees making an election under s.60 of the Bankruptcy Act 1966 (Cth) be extended to 4.00 p.m. 20 October 1995.

1. There be no order as to costs.

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

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND

No. QB1471 of 1995

RE:

ALLAN JOSEPH BRAZEL

Judgment Debtor

EX PARTE:

ROYAL NOMINEES PTY LTD

ACN 010 901 407

Judgment Creditor

CORAM:  Cooper J.

PLACE:  Brisbane

DATE:  20 September 1995

REASONS FOR JUDGMENT

This is an application by the trustees of the bankrupt estate of Allan Joseph Brazel for an extension of time during which to consider making, and if appropriate, make an election under s.60 of the Bankruptcy Act 1966 (Cth) ("the Act") to adopt proceedings in the Supreme Court of Queensland instituted by Mr Brazel on 25 November 1994 against Metway Bank Limited ("Metway").

A sequestration order was made in relation to the estate of Mr Brazel on 23 June 1995.  The solicitors presently acting for the trustees, Messrs M.J. Murray and Associates, were, it is submitted by Metway, at all material times acting for Mr Brazel, as appears from an affidavit of Mr Duke Myrteza (exhibit "JHD6" to the affidavit of John Hastie Davies filed in opposition to the application by Metway).

It is submitted on behalf of Metway that it is apparent from that affidavit that the solicitors for Mr Brazel sought and obtained counsel's advice as to the prospects of the proceedings instituted by Mr Brazel being successful, and that in the circumstances the trustees have available and should accept and rely upon that advice for the purpose of making an election or otherwise in relation to the litigation.  It is further submitted that the trustees have had such advice for some time, or at least access to it, and the delay in making the election is inordinate and unjustifiable.  Ms Bognuda for Metway submitted that the trustees, as controlling trustees under a proposed deed of arrangement in early 1995, had knowledge of the proceedings at that time, and that in any event formal notice was given to them at the latest on 19 July 1995. 

The application for extension of time is sought in order to obtain, on the instructions of the trustees and on the material supplied by the trustees, as opposed to the instructions of and material supplied by Mr Brazel, fresh advice from counsel as to the prospects of success in the Supreme Court proceedings, and if necessary or appropriate, in order to call a meeting of creditors to seek funding for the continuation of the action. That is, the trustees seek a further period of one month in order to consider making the election order s.60.

The basis of the opposition to any extension of time is two-fold;  inexcusable delay and alleged prejudice.

Insofar as the question of delay is concerned, I am not satisfied that there has been inexcusable delay.  It seems to me reasonable that before making an election in relation to substantial Supreme Court litigation the trustees would wish to obtain independent advice, and for that purpose to assemble all relevant and independent information before proceeding further.  It may well be that Mr Brazel did not litigate and press his proceedings with due diligence.  Indeed, the bank appears in March 1995 to have moved to have the Supreme Court proceedings struck out for non-delivery of a statement of claim.  However, it would also appear that a statement of claim was delivered in response to the application and the matter proceeded.  The delay in the prosecution of the litigation prior to the appointment of the present trustees on 19 July 1995 is not, in my view, wholly relevant, although it is a matter that I take into account in the context of alleged prejudice against the bank. 

The bank claims, in effect, that it is prejudiced by having the proceedings on foot by the conduct of Mr Brazel in circulating material to persons who were to be guests at the Honeymooners Resort at Hervey Bay suggesting, or claiming, that his bankruptcy was forced upon him by Metway Bank.  The material being circulated by Mr Brazel, it is alleged, is defamatory.  Be that as it may that conduct on the part of Mr Brazel does not, in my view, prejudice the bank in relation to the conduct of the proceedings, which is for the purpose of this application the only relevant prejudice.  There has been no material filed showing there is any identifiable prejudice which the bank has suffered by the trustees having failed to make an election within 60 days, other than that prejudice which normally flows from delay in the prosecution of proceedings.

On that basis a proper exercise of the discretion seems to me to require a balancing of the possible benefit to the creditors generally if there is a valuable cause of action which ought properly to be prosecuted against the bank against the embarrassment to the bank of having the Supreme Court proceedings unresolved. 

I have had regard to the observations of Lockhart J in Re Faulkner;  Ex parte The Official Receiver (1981) 52 FLR 109, and of Burchett J in Re Collins;  Ex parte Official Trustee in Bankruptcy and Bracher (1986) 65 ALR 338. In each of those cases their Honours took an approach similar to that which I have indicated I intend to take in this case. I think it is reasonable in the circumstances to extend the period for a further 30 days in order to enable the trustee to obtain the further advice and if appropriate to call the requisite meeting of creditors.

THE COURT ORDERS THAT:

1. The time for the making of an election under s.60 of the Bankruptcy Act 1966 (Cth) be extended to 4.00 p.m. 20 October 1995.

2. There be no order as to costs.

I certify that this and the preceding three (3) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper.

Date:20 September 1995

Associate

Counsel for the Applicant:  Mr P. Davis

Solicitors for the Applicant:             MJ Murray & Associates

Solicitor for the Respondent  Gadens Ridgeway

Date of Hearing:  20 September 1995

Place of Hearing:  Brisbane

Date of Judgment:  20 September 1995