Rusin, Re A.

[1986] FCA 132

LIMITED DISTRIBUTION

CATCHWORDS

BANKRUPTCY - Application by bankrupt for order to set aside

order giving leave to institute proceedings - Incorrect

information previously provided to the Court - Power of the

.Court to correct a defect in its record - Proceedings against

both bankrupt personally and company controlled by him -

Inability of Federal Court to deal with claim against company

- Considerations of convenience favouring resolution of all

matters in District Court - Whether costs to be paid out of

estate of bankrupt or by bankrupt personally.

Bankruptcy Act 1966 s.58(3)

(b)

No. W.273 of 1984

Re: ANDREW RUSIN

Wilcox J.

Sydney

17 March 1986

LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA	1 1
GENERAL DIVISION	) )

BANKRUPTCY DISTRICT OF THE STATE OF ) No. W.273 of 1984

)

NEW	SOUTH W E S AND	1
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THE AUSTRALIAN CAPITAL TERRITORY 1

E: ANDREW RUSIN

CORAM :	WILCOX J
m:	17 MARCH 1986
PLACE :	SYDNEY

MINUTE OF ORDERS

THE COURT ORDERS THAT:

1. The application be dismissed.

2.        The costs of this application be paid by Andrew Rusin ..

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THE COURT DIRECTS THAT:

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1.        Exhibit A be returned to Mr Bluett on behalf of the

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Officlal Trustee.	l>
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NOTE : Settlement and entry of orders is dealt with in Order 36

of the Federal Court Rules;

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LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA )

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GENERAL DIVISION ) )

BANKRUPTCY DISTRICT OF THE STATE OF ) No. W.273 of 1984

)

NEW SOUTH W E S AND )

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THE AUSTRALIAN CAPITAL TERRITORY - - 1

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I ANDREW RUSIN

i	CORAM :	WILCOX J
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DATE:	17 MARCH 1986
PLACE :	SYDNEY

EXTEMPORE REASONS FOR JUDGMENT

There is before the Court today an application made

on behalf of the bankrupt, Andrew Rusin, seeking an order

setting aside an order made by me on 10 December 1984,

pursuant to s.58(3)(b) of the Bankruptcy Act 1966, whereby I

granted to the then applicants, Huseyin Hasan and Osman and

Huyla Xasif, leave to proceed with'an action in the District

Court of New South Wales against Mr Rusin, a company known as

Rusin Pty Limlted and	a firm known as Centrepoint Smash
Repairs.

2.

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The action there referred to was an action arising ... ..

out of an alleged oral agreement made between the applicants

and Mr Rusin, and concerning the sale of a business. There

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was apparently some question in the minds of the applicants as to whether the party on behalf of whom Mr Rusin was speaking

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was himself personally or the company, Rusin Pty Limited,

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which he apparently controlled. I gather that the business,

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the subject of the sale, was carried on under the name

"Centrepoint Smash Repairs" and that it is accepted that this

business was conducted either by the company or	by Mr Rusin
personally.

When I dealt with the application on 10 December 1984

Mr Rusin was not represented. The solicitor who appeared for

the applicants indicated to me,that the District Court proceedings had actually been commenced before the sequestration order, which sequestration order had been made

on 2 April 1984. It transpires that this answer was

incorrect, and that the proceedings in the District Court had

been commenced by the filing of a Statement of Claim on 12

June 1984, the plaintiff's solicltors being apparently in

ignorance of the fact of the sequestration order. When this

fact was drawn to their attention, application was made to

this Court.

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Following the grant of leave by me on 10 December

1984, an application was made for summary judgment in the

District Court. This application was granted by Judge Foord

on 5 December 1985. I am informed by counsel for Mr Rusin

that, at that time, his client had dispensed with the services

of his instructing solicitors and himself, that he had now

come back into the matter and that he had instructions to take

action in the District Court to set aside the summary

judgment.

It is clear, and indeed conceded, that the

information given to me when I made my previous order was incorrect. It is submitted on behalf of Mr Rusin that it follows that the Court may set aside the previous order.

Counsel has not referred to any particular provision of any statute or of any rule, but refers to the inherent power of

the court to correct a defect in its record. Counsel for the

present respondents, that is to say the plaintiffs in the District Court proceedings, challenges this view and says that, if the position is that the order was improperly

obtained, the remedy is to appeal. He points out that a

formal order has been taken out.

In the view I take it is not necessary to choose

between the submissions of counsel as to the power of the

Court to interfere with the previous order. I am of the

opinion that the application should, in any event, fail.

4.

The position appears to be that a claim 1s made by

the, plaintiffs in the District Court for damages in relation

. to the sale of a business. As I understand Mr Rusin’s

position, he denies that there is any liability by any person.

He further says that, if there is any liability, it does not

affect him personally; and presumably he says that, in that

situation, the correct defendant is the company. If I were to

accede to the present application, the position would remain

that there was a judgment in the District Court. The

applicant apparently assumes that the effect of my revoking

the previous order would be to facilitate an application on behalf of Mr Rusin to set aside the District Court judgment.

- I do not express any view as to whether or not that assumption

is justified. If the assumption is justified, and the District Court judgment is set aside, it will leave outstanding the resolution of the dispute between the parties.

Only the District Court can deal with any claim insofar as it

affects the company. If I set aside the previous order under

s.58(3)(b), and unless there is some future order granting

leave to proceed against Mr Rusin personally, the only way in

which the dispute between the District Court plaintiffs and Mr

Rusin can be resolved would be pursuant to an appeal against a

decision by the Official Trustee upon acceptance or rejection

of a proof of debt. This would leave the situation that this

Court has to go into the merits of the dispute between the parties insofar as it affects Mr Rusin, whilst the District

5.

Court has to deal with the merits of the dispute insofar as it

affects Rusin Pty Limited. It seems to-me that this situation

is most undesirable, and that it is the precise situation

which was in contemplation when provlsion was made in the

Bankruptcy Act for thls Court to grant leave to a plaintlff to

proceed against a person notwithstanding the fact that he is a

bankrupt. To my mind the convenient course is that all issues

between the parties relating to the existence of any liability

and, if there be a liability, the person who is liable should

be dealt with in the one proceeding; and	that can only be in
the District Court.

At this stage I cannot recall the extent to which the

incorrect statement as to the chronology affected my mind on

10 December 1984. However the matter was dealt with much more

briefly on that occasion than it has been today and I have no.

doubt that, on any fuller discussion on that day, I would have

reached the same conclusion, even without that misinformation,

as I have just expressed. It seems to me appropriate that,

even if there is power to interfere with the previous order,

it not be exercised. I think that the parties should be left

to resolve the matter in the District Court.

I might indicate that counsel for the plaintiffs in

the District Court, has tendered proofs of debts which have

been lodged by his clients, each claiming the sum of

$22,816.24. These include not only the amounts sought in the

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District Court, but also costs which have been incurred since the proceedings commenced, that is since the 'date of the sequestration order, and indeed costs incurred in thls Court.

The proofs of debt were admitted into evidence

subject to relevance. They provide some background to the

matter, but I express no view as to whether or not the

claimants are entitled to prove for the amount claimed or any

part of it. In particular, there is a question which I have

not sought to resolve in relation to the costs which have been

incurred since the date of the sequestration order.	The order
that I make is that the application be refused.

The application has failed, and I am of the opinion

that there ought to be an order for costs. The question is

whether that should be an order for payment out of the estate

of the bankrupt or an order against the bankrupt personally.

In relation to the original applicafion I made an order for

payment of the costs out of the estate of the bankrupt. I

think that that course was appropriate, because it was

essential in the proper administration of the estate that

there be some resolution of the dilemna in which the

plaintiffs in the District Court were then placed.

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However, today's application is in a separate

category. I do not think that'it arises out of the normal

administration of the estate and I do not see why there should

be an order which-would have the effect of reducing any .-

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dividend which may be available to other creditors. I think

it is appropriate to regard the responsibility as being

similar to a liability incurred by a bankrupt after the date

of the sequestration order.

It is true that the catalyst for the application was

the error made by the solicitor for the present respondents on

10 December 1984; but notwithstanding that, the application

has failed and I do not think that that error should deprive

that solicitor's clients of their costs of resisting the

application today.

I therefore order that the costs of this application

be paid by Andrew Rusin. I direct that exhibit A be returned

to Mr Bluett on behalf of the Official Trustee.

I certify that this and the six (6)

preceding pages are a true copy of the

Reasons for Judgment herein of his Honour Mr Justice Wilcox.

Associate: A-/+&

Date : 17 April 1986

Counsel for the bankrupt: Mr T Elliott

Solicitors for the bankrupt: Messrs	B J Murphy & CO
Counsel for the respondents: Mr J Maston

Solicitors for the respondents: Messrs	S E Cook & Son
Appearance for Official

Receiver on behalf of

Official Trustee:	Mr N Bluett
Date of hearing:	17 March 1986