RYAN v GISI - [2024] SADC 99

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Appeal Against a Master)
RYAN v GISI
[2024] SADC 99
Judgment of his Honour Judge Dart
21 August 2024
APPEAL AND NEW TRIAL - PROCEDURE - SOUTH AUSTRALIA
Appeal from a Master - the Master allowed the respondent's application for summary judgment - appellant a bankrupt - no standing to bring an action to recover property - his property vested in his trustee when the sequestration order was made.
Held:
1. Appeal dismissed.
2. The appellant is to pay the respondent's costs on a standard costs basis, to be taxed or agreed.
Bankruptcy Act 1966 (Cth) s 58, s 60, s 116, s 149; Administration and Probate Act 1919 (SA) s 45, referred to.
Cummings v Claremont Petroleum NL (1996) 185 CLR 124, considered.

RYAN v GISI
[2024] SADC 99

This is an appeal from a decision of a Master. The Master allowed the respondent’s application for summary judgment. He was right to do so. The appeal is dismissed.
Background
The appellant’s case is difficult to follow in some respects. In broad terms, the allegation is that the respondent stored chattels belonging to the appellant at a property in Burra. It is alleged that the storage was pursuant to a contract between the parties. The gist of the complaint is that the respondent has failed to return to the appellant his property.
A number of difficulties arise. The first is that a large portion of the property the subject of the proceedings was not property of the appellant but property of his mother. She has now passed away. The appellant asserts a right to bring an action in relation to his mother’s property. His standing to do so is in dispute.
The reason that the Master dismissed the action was that the appellant is an undischarged bankrupt. A bankrupt has very limited rights to property.
The scheme of the Bankruptcy Act
It is necessary to consider the scheme of the Bankruptcy Act 1966 (Cth) and the effect that has on a person’s ability to prosecute proceedings. Upon the making of a sequestration order a person becomes bankrupt and is divested of his or her property. The relevant provision is as follows:
BANKRUPTCY ACT 1966 - SECTION 58
Vesting of property upon bankruptcy--general rule
(1)  Subject to this Act, where a debtor becomes a bankrupt:
(a)     the property of the bankrupt, not being after - acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section   156A, in that registered trustee; and
(b)     after - acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.
The effect of the sequestration order is that the property formerly owned by the bankrupt is vested in the trustee. The bankrupt no longer has an interest in the property and no right to commence proceedings in relation to it. Simply, he has no standing to prosecute a claim about his former property.[1] The section also deals with after acquired property. It follows that even if the appellant could recover his property or his mother’s, immediately upon its recovery, the property would vest in the trustee.
[1] Cummings v Claremont Petroleum NL (1996) 185 CLR 124.
The Bankruptcy Act deals with claims commenced by a bankrupt before bankruptcy. That is not the case here, but it illustrates the point:
BANKRUPTCY ACT 1966 - SECTION 60
Stay of legal proceedings
…
(2) An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
…
The provision demonstrates the point that the bankrupt has no standing in proceedings in relation to his property as that property has vested in the trustee. It is only the trustee who may commence or continue proceedings to recover property.
There is an exception to the rule that property vests in the trustee. The Act provides:
BANKRUPTCY ACT 1966 - SECTION 116
Property divisible among creditors
(1)  Subject to this Act:
(a)     all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; and
(b)     the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge; and
(c)     property that is vested in the trustee of the bankrupt's estate by or under an order under section   139D or 139DA; and
(d)     money that is paid to the trustee of the bankrupt's estate under an order under section   139E or 139EA; and
(e)     money that is paid to the trustee of the bankrupt's estate under an order under paragraph   128K(1)(b); and
(f)      money that is paid to the trustee of the bankrupt's estate under a section   139ZQ notice that relates to a transaction that is void against the trustee under section   128C; and
(g)     money that is paid to the trustee of the bankrupt's estate under an order under section   139ZU;
is property divisible amongst the creditors of the bankrupt.
(2)  Subsection (1) does not extend to the following property:
(a)     property held by the bankrupt in trust for another person;
(b)     the bankrupt's household property that is:
(i)  of a kind prescribed by the regulations; or
(ii)  identified by a resolution passed by the creditors before the trustee realises the property;
…
The ordinary household chattels of a bankrupt do not vest in the trustee. The Bankruptcy Regulations 2021 define the nature of the property that is household property.[2]
[2] Bankruptcy Regulations 2021, regulation 27.
It should be noted that a person who is made bankrupt is ordinarily automatically discharged after a period. The relevant provision is s 149(1)(a):
149 Automatic discharge
(1)A bankrupt is discharged from bankruptcy, by force of this subsection, at the end of the period of 3 years from whichever of the following dates is applicable:
(a) for a bankruptcy because of a sequestration order—the date the statement of the bankrupt’s affairs accepted under subsection 57B(1) was filed;
A difficulty here is that the appellant has never lodged a statement of affairs. That means that the period of three years has not started running. The appellant will remain a bankrupt until he attends to the filing of a statement of affairs.
Another statutory issue arises in relation to the appellant’s alleged entitlement to pursue a claim for the property of his mother. She died intestate. There has been no application for a grant of letters of administration. Where a person dies intestate and there has been no grant, her property vests in the Public Trustee. The following provision of the Administration and Probate Act 1919 is relevant:
45—Vesting of intestate estates until administration
From the decease of any person dying wholly or partially intestate, and until administration is granted in respect of his estate, or until an order has been obtained to administer the same, the estate of such deceased person within this State, in so far as not affected by his will, shall be vested in the Public Trustee, in like manner and to the like effect as, immediately after the coming into operation of the Court of Probate Act 1858, the personal estate and effects of persons dying intestate in England vested in the Judge of the said Court of Probate.
It would appear that the present position is that only the Public Trustee could pursue an action to recover the property of the appellant’s mother. The appellant has no standing.
Consideration
All property of the appellant, unless subject to an exception under the Bankruptcy Act, has vested in the trustee. The appellant has no standing to pursue a claim in relation to that property. Insofar as the claim relates to his mother’s property, the appellant is without standing in that matter also. The property is vested in the Public Trustee unless and until someone obtains letters of administration. If that occurs, that person would be entitled to pursue a claim for the property.
The appeal was adjourned on several occasions to allow the appellant the opportunity to file an amended statement of claim relating to property of the type excluded from vesting by s 116(2)(b). The appellant has been unable to articulate, in a way that complies with the rules, such a claim. He bears the onus of establishing that the property he seeks to recover in the litigation falls outside of the scheme established by the Bankruptcy Act. He has been unable to do so.
In the circumstances the court cannot be satisfied that the appellant has any claim at all. The Master was correct to grant summary judgment in favour of the respondent. The orders of the court are:
1.The appeal is dismissed.
2.The appellant is to pay the respondent’s costs on a standard costs basis, to be taxed or agreed.