Re Rose; Ex parte Devaban Pty Ltd

[1994] FCA 1082

JUDGMENT No. ... 1.2 .?.k l ..?L.

IN THE FEDERAL COURT OF AUSTRALIA )	Limited Distribution
GENERAL DIVISION	)
BANKRUPTCY DISTRICT OF THE	) No. QB 568 of 1992
STATE OF OUEENSLAND	)

ALAN EDWARD ROSE

Debtor

EX PARTE : DEVABAN PTY LTD

Flrst Applicant

EOUITY MANAGEMENT CORPORATION

Second Applicant

MICHAEL STANISLAUS SMITH

Third Applicant

AND :  ALAN EDWARD ROSE

Respondent

RECEIVED

CORAM	:	HILL J
PLACE	:	SYDNEY 19 APR 1995
DATED :	7 OCTOBER 1994	FEDERAL COURT OF

AUSTRALIA PRINCIPAL REGISTRY

REASONS FOR JUDGMENT

The present application is an application by Equity Management Corporation Limited and Devaban Pty Limited, for leave to commence proceedings against Mr Alan Edward Rose ("Mr Rose"), a bankrupt, the application being brought under s.58(3)(b) of the Bankru~tcv Act 1966 (Cth) ("the Act"). The proceedings sought to be commenced are proceedings which began at the latest in June of this year, when an amended statement of claim and amended application were filed to which, inter alia, Mr Rose was joined as a party.	In those proceedings ( "the Devaban proceedings"), misconceived, it is alleged that Mr Rose owed a fiduciary duty	which to the extent of Mr Rose being made a party are clearly
to Equity Management Corporation Limited, and that that fiduciary duty was breached by the making of loans, or the payment of other benefits, to Grandstand Holdings Pty Limited, which company was trustee for the A Rose Family Trust, and which benefit is said to be a benefit which accrued to Mr Rose personally. The statement of claim also alleges breach of the Trade Practices Act (Cth) 1974, and a breach by Mr Rose of his
duties under the Cor~orations Law.
On behalf of the applicants it is said that the Devaban proceedings cannot be prosecuted without the active participation of Mr Rose in person:

". . . by reason of the respondents

[presumably Mr Rose] past and or present retention of the abovementioned benefits, and it is just and equitable that the respondent be sued as to same."

In opposition, Mr Rose filed an affidavit in which he deposed that he had become a bankrupt on 10 March 1992 and	remains to thls date an undischarged bankrupt. Annexed to his	affidavit is a statement of affairs, filed in the bankruptcy
which discloses a deficiency of assets over liabilities; the unsecured creditors disclosed being approximately $143,800, the secured creditors showing a deficiency over and above the security of $165,000 with assets of $10,000 comprising basically household furniture and effects.
I have been told from the bar table that the applicants ln the Devaban proceedings, or at least some of them, have lodged a proof of debt in the bankruptcy estate but that proof of debt has not yet been dealt with. Notification of the present application was glven to the Trustee of Mr Rose's estate and the Trustee has not appeared nor indicated to the Court his support or otherwise of the present application. I must therefore assume that the Trustee neither opposes nor supports the present application.
The obvious policy behind s.58(3) of the Act was that any proceedings in force at the time of bankruptcy should be stayed and no further proceedings should be commenced so far as they relate to the period prior to bankruptcy unless the Court gives leave. In this way the bankrupt is freed from any claims that might be made in respect to the period prior to bankruptcy and the Trustee in bankruptcy can, if the Trustee accepts the proof of debt, treat a claim against the
estate like the claim of all other creditors, so that the assets of the estate are, in due course, divided pro r a t a
among the creditors.
Another reason for staying proceedings or preventing new proceedings from being commenced is to ensure that the Trustee of a bankrupt estate is not put to expense in defending proceedings which the Trustee has no money to defend. On the other hand, the Act does contemplate that the Court will, in an appropriate case, grant leave. In that respect a case would be an appropriate case where the proceedings proposed against the bankrupt are proceedings to which other parties are involved and for the proper conduct of which it may be necessary for the bankrupt to become a party. One must be careful in statlng the matter that way, as counsel for the applicant did, not to come to the point where all proceedings in which a bankrupt is a respondent are automatically allowed because such proceedings could never continue without the bankrupt being a party in one sense.
It has been submitted that it is, of course, open to the applicants in the Devaban proceedings to subpoena Mr Rose to give evldence, if his evldence is critical to the disposition of those proceedings. The applicants in the Devaban proceedings, however, point to the fact that they will be unable to obtain discovery or have pleadings filed or perhaps interrogate Mr Rose unless he became a party.
It seems to me that, in the present case the question I should ask is how integral the claim against Mr Rose is to the claims made to the other parties in the Devaban proceedings? Ultimately, what is alleged in the Devaban proceedings is that benefits were obtained in breach of fiduciary or statutory duties by Grandstand Holdings Pty Limited, a company in whose interests Mr Rose is alleged to have acted, that being a Trustee company for his family.
The claims made against Mr Rose are inseparable from the claims made against Grandstand Holdings Pty Limited, so that if Mr Rose is added as a respondent, this will add little to the probable burden that Mr Rose will, in any event, have in assisting Grandstand Holdings Pty Limited defend the claim and likewise will be related to that claim.
In these circumstances I propose to accede to the application presently before me and give leave to the applicants in the Devaban proceedings to join Mr Rose as a respondent in those proceedings.
I direct that the cost of this application be costs in the proceedings numbered NG 809 of 1992.
I waive the requirement that the application and statement of clalm be served upon Mr Rose.

In respect of the proceedings numbered NG 809 of

1992 I direct that:

1. Mr Rose flle and serve a defence on or before 19 October and that he request particulars, if required, of the applicant's claim on or before 26 October;

2.   Any particulars requested of him be replied to by

9 November;

3.   An affidavit of discovery be filed and served on or before 9 November;

4 .    The matter be relisted on 1 4 November for directions.

I certify that this and the
preceding five (5) pages
are a true copy of the Reasons
for Judgment herein of his Honour

Justice Hill.

T

Associate: S	, JJcK/~\--	.
Date:	31 March 1 9 9 5	C)

Counsel and Solicitors	Andrew Hewlett (solicitor)
for Applicant:	instructed by Andrew Hewlett & CO
Counsel and Solicitors	N McCaffery instructed by
for Respondent:	Michael Smith
Dates of Hearing:	7 October 1 9 9 4
Date Judgment Delivered:	7 October 1 9 9 4