Re Brazel, Allan Joseph Ex Parte

[1995] FCA 1092

IN THE FEDERAL COURT OF AUSTRALIA      )
GENERAL DIVISION  )
   No. QB 1471 of 1995   
BANKRUPTCY DISTRICT OF THE            )
STATE OF QUEENSLAND                   )

RE:ALLAN JOSEPH BRAZEL

Bankrupt

EX PARTE:PHILIP GREGORY JEFFERSON and JAY ARSCOTT STEVENSON

Applicant trustees

AND:METWAY BANK LTD

Respondent

MINUTES OF ORDER

JUDGE MAKING ORDER:     Spender J

DATE OF ORDER:          15 December 1995

WHERE MADE:            Brisbane

THE COURT ORDERS THAT:

(1)the time within which the trustees are to make the election required by s. 60(3) of the Bankruptcy Act 1966 be extended to 4pm, 30 days from today;

(2)the trustees pay to Metway Bank Ltd its costs of and incidental to the trustees' application filed 12 December 1995;

(3)the trustees' obligation in respect of the costs order that I have made may be met by their having recourse to the funds in the estate.

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

IN THE FEDERAL COURT OF AUSTRALIA      )
GENERAL DIVISION  )
   No. QB 1471 of 1995   
BANKRUPTCY DISTRICT OF THE            )
STATE OF QUEENSLAND                   )

RE:ALLAN JOSEPH BRAZEL

Bankrupt

EX PARTE:PHILIP GREGORY JEFFERSON and JAY ARSCOTT STEVENSON

Applicant trustees

AND:METWAY BANK LTD

Respondent

CORAM:    Spender J
DATE:     15 December 1995
PLACE:    Brisbane

REASONS FOR JUDGMENT

This is the third application pursuant to s. 33(1)(c) of the Bankruptcy Act 1966 ('the Act') seeking an extension of the time within which the trustee in bankruptcy of the estate of Allan Joseph Brazel may elect, pursuant to ss 60(2) and (3) of the Act, to prosecute an action in the Supreme Court against the respondent bank. The trustee was notified of the action some time before 19 July 1995. On 20 September 1995 the trustee sought an extension of time within which to make the election. An extension of 30 days was granted on that day by Cooper J.

An election was not made within that time but, on 16 October 1995, Kiefel J entertained a further application for an extension of time within which the trustee might make the election and extended the time for 60 days.  That period expires today, 15 December 1995.
By an application filed on 12 December 1995, the trustees, Philip Gregory Jefferson and Jay Arscott Stevenson, seek a further extension of the time allowed for the making of the election to which s. 60(3) is directed. That subsection simply provides:

"If the trustee does not make such an election within 28 days after notice of the action is served upon him by a defendant or other party to the action, he shall be deemed to have abandoned the action. "

In Re Collins; Ex parte Official Trustee in Bankruptcy v Bracher (1986) 10 FCR 209, Burchett J held that in the circumstances of that case an extension of time was not necessary. However, he noted in that case the authorities which establish that if, by reason of the operation of the statute, an action is deemed to be abandoned, the trustee is not barred from bringing a subsequent action founded on the same cause.

What that would mean, however, is that, in the circumstances of this case, should the trustees seek the indemnity which, in a practical sense, is a necessary pre-condition for their electing to continue with the action, there would be some duplication in costs.  If, on the other hand, the indemnity is not obtained, I think it would be plain that the trustee will formally abandon the action. 

In Re Faulkner; Ex parte Official Receiver (1981) 52 FLR 109 the considerations which should guide the exercise of the discretion to extend time were considered by Lockhart J.

In that particular case, the litigation in the High Court was extremely leisurely.  The action had been commenced in 1974.  It was not until 1975 that the bankrupt filed a statement of claim.  The sequestration order was made on 15 March 1978 and the application did not come before Lockhart J until the end of 1980.  That application was the second application for an extension of time to make the election to prosecute or discontinue the High Court action.  An earlier extension of time had been granted on 17 October 1978 when Evatt J ordered that the time to comply with the notice which the defendant had issued on 20 September 1978 was extended until 1 November 1978.

It was only on 6 March 1980 that approval for the funding of the litigation was obtained and there was then an application made for a further extension of time. Lockhart J concluded that the power conferred by s 33(1)(c) is available to permit an extension of time for the making of an election under s 60 of the Act, notwithstanding that the time therein had expired. And he further noted at p 114:

"...that it was not submitted on behalf of the Commonwealth that the court's power to extend time for making an election under s 60 could be exercised once only; and that, as this was done in 1978, it could not be exercised again. "

His honour had regard to the absence of prejudice that had been suffered by the Commonwealth and, notwithstanding that the delay had been considerable both before and after making the sequestration order, he granted an extension of time.  The reason, it seems to me, that he did that was that the delay had been explained.  In his Honour's words at p 114:

"...[the delay] has been due in the main to the absence of an indemnity for costs being given to the official receiver.  That obstacle has now been overcome. "

His Honour, in a practical and realistic way, realised that litigation requires funding and that difficulties associated with whether funding is to be obtained or not is a highly relevant consideration.

I have indicated in the course of submissions that there seems to have been a misappreciation on the part of the trustees as to the urgency  with which their election should be made, particularly having regards to the sequential applications that have occurred in this case and I have difficulty in accepting that the matter has been prosecuted with the urgency that it should have been.

The fact is that the Act, by setting a time limit of 28 days, indicates that a timely election is necessary and it would be a mistake to think that the fact that Cooper J extended the time by 30 days invites a further application after that time had expired. Even more so it should not be thought that just because an application had been granted by Cooper J and then by Kiefel J, there would be no difficulty in granting a further extension; rather, the reverse is the case.

The real reason for the absence of an election thus far is the difficulty the trustees have had in determining whether the proposed litigation will be funded.  The arguments by Mr S. Couper QC, counsel for Metway Bank Ltd., concerning the difficulties with the litigation and with the absence of a pleaded case, in my view, go directly to whether there will be a provision of indemnity by the insurance company and if Mr Couper QC is correct in his criticisms there will be very telling factors against the possibility of finding somebody willing to put up the money.

I have to confess that I was strongly minded to decline to grant any further extension of time given the history of the matter and the events that have occurred, notwithstanding the indulgences previously granted by judges of this court.  In the end, however, it seems to me that justice can be done if I do grant an extension but on terms that the cost to Metway Bank Ltd of this present application is borne by the trustees.  I know that, in a sense, the trustees have been successful over the opposition of the bank in that I have granted a further extension of time of 30 days within which the election should be made.

Notwithstanding that, in the exercise of the discretion as to costs where the primary motive or object has to be to achieve what is just in all the circumstances, I think it right to grant the indulgence which the trustees have come along to court to seek but on terms that they pay the costs of Metway Bank Ltd in seeking to persuade the court not to grant that extension.

The orders that I make therefore are that:

(1)the time within which the trustees are to make the election required by s. 60(3) of the Bankruptcy Act be extended to 4pm, 30 days from today;

(2)the trustees pay to Metway Bank Ltd its costs of and incidental to the trustees' application filed 12 December 1995;

(3)the trustees' obligation in respect of the costs order that I have made may be met by their having recourse to the funds in the estate.

I certify that this and the preceding five (5) pages are a true copy of the reasons for judgment herein of the Honourable Justice Spender.

Associate

Date: 15 December 1995

Solicitors for the applicant trustees:         M J Murray & Associates

Counsel for the Respondent:                 Mr S Couper QC
Instructed by:  Gadens Ridgeway

Date of Hearing:  15 December 1995