Shannon v Commonwealth Bank of Australia

[2013] NSWSC 596

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Shannon v Commonwealth Bank of Australia [2013] NSWSC 596

Hearing dates:

11 April 2013

Decision date:

11 April 2013

Jurisdiction:

Common Law

Before:

Campbell J

Decision:

(1) Declare that the proceedings are stayed by force of section 60(2) of the Bankruptcy Act 1966 (Cth);

(2) Stand the matter over to Thursday 16 May 2013 at 10.00am for further mention.

Catchwords:

PRACTICE AND PROCEDURE - plaintiff became bankrupt after decision reserved in primary proceedings - trustee in bankruptcy appointed to plaintiffs estate - proceedings stayed until trustee makes election to prosecute or discontinue the action pursuant to s60(2) Bankruptcy Act 1966 (Cth)

Legislation Cited:

Bankruptcy Act 1966 (Cth)

Cases Cited:

Beneficial Insurance Company Limited v
Hamilton & Others (1985) 73 FLR 347
C2C Investments Pty Limited v Commonwealth Bank of Australia [2013] NSWSC 256
John & Anor v Nieman Holdings Pty Limited (1986) 84 FLR 84

Category:

Procedural and other rulings

Parties:

Linda Shannon (plaintiff)
Commonwealth Bank of Australia (defendant)

Representation:

Counsel:
No Appearance (Plaintiff)
A. Kaufmann (Defendant)
Solicitors:
Platinum Lawyers (Plaintiff)
Gadens Lawyers (Defendant)

File Number(s):

2012/00283241

Judgment

1. On 13 February 2013 I heard two interlocutory applications in these proceedings.

1. In logical order the first application was the defendant's application for summary dismissal. The second application was an application by the plaintiff for leave to re-plead on the basis of a proposed amended statement of claim.

1. In very brief terms the plaintiff was a defendant in prior proceedings in which she was sued on a guarantee of some corporate debts due to the bank. In accordance with the compromise of those proceedings the bank obtained judgment against the plaintiff in a large monetary sum in October 2010.

1. The current proceedings were an attempt by the plaintiff to have that judgment set aside. I will not go into the merits of that application by reference to the asserted grounds nor will I go into the basis on which the bank sought summary dismissal. It is not relevant to do so.

1. After judgment was reserved but before it was delivered, the plaintiff filed a debtor's petition on 5 March 2013 and on the same day a trustee was appointed to administer her estate under the Bankruptcy Act1966 (Cth).

1. I became aware of this when in the course of preparing my judgment in the present proceedings I came across the decision of Slattery J in the matter of C2C Investments Pty Limited v Commonwealth Bank of Australia [2013] NSWSC 256, delivered on 27 March 2013.

1. I caused the motion to be re-listed today, notice of which was given to both parties. When the matter was called this morning Mr Kaufman of counsel announced his appearance for the defendant. The matter was called in the customary way outside the Court three times and there was no appearance either for the plaintiff or for her trustee.

1. Mr Kaufman has tendered a letter from his instructing solicitor to the trustee dated 9 April 2013 (exhibit 1), informing the trustee of the proceedings, that the motions were heard on 13 February 2013 and that judgment stands reserved. The solicitor for the defendant also informed the trustee that the matter had been re-listed today and called upon him to respond in the following terms: "Please confirm your position in relation to the proceedings and if you intend to appear on 11 April 2013."

1. The trustee replied on 10 April 2013 (exhibit 2), confirming that he was the trustee of the bankrupt estate and stating that he did not intend to appear. He also said, "I have not at this time been provided with any materials or specific details regarding the bankrupt's claims made against [the bank] in the proceedings."

1. Section 60(2) Bankruptcy Act 1966 (Cth) is in the following terms:

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.

Subsection (3) is in the following terms,

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

1. It is quite clear from the contents of exhibit 1 and exhibit 2 that so far the trustee has made no election and that the period of 28 days during which an election may be made has not yet expired.

1. I did comment to Mr Kaufman in the course of our discussion that I was not persuaded that the letter of 9 April, exhibit 1, sufficiently called upon the trustee to make the statutory election.

1. As I understand the law, there are no mandatory requirements of the notice referred to in section 60(3), but it seems to me as a minimum it should refer to the provisions of subsections (2) and (3) of section 60. I will leave it to the bank's legal advisors to decide whether they should give any further notice in the present circumstances.

1. Rather than allowing the matter to abide indefinitely, I think the proper course for me to adopt is to make some further order. Before I do so I will observe that I am aware there are exceptions recognised by decisions of this Court to the operation of section 60(2).

1. One such exception, identified in Beneficial Insurance Company Limited v Hamilton & Others (1985) 73 FLR 347 and explained in John & Anor v Nieman Holdings Pty Limited (1986) 84 FLR 84 at 86 by Young J (as he then was), is when:

The litigation has progressed beyond the stage where the trustee's decision as to whether or not he will do anything about it is still material.

1. His Honour formulated that exception in those terms by reference to the Beneficial Insurance decision where Holland J had identified an exception in circumstances where a cross-claim had been fully litigated and just prior to the delivery of final judgment the cross-defendant was made bankrupt. His Honour in those circumstances considered that the litigation in respect of the cross-claim was spent, having become spent at the time the hearing concluded and the Court reserved its judgment. His Honour proceeded to deliver the reserved judgment.

1. The present case in my judgment is not in that category, as what are currently reserved are decisions concerning two competing interlocutory applications. Even If I accede to the defendant's application, the result would be the summary dismissal of the proceedings. It is well established that summary dismissal is not a final judgment but rather is an interlocutory judgment. Acceding to the plaintiff's application would have allowed the case to proceed to full hearing. This is an important point of distinction, in my view.

1. In these circumstances, like Young J in John & Anor v Nieman Holdings Pty Limited, I consider I should make appropriate orders. Before pronouncing them I interpolate that Young J by force of the federal legislation thought he was in no position to make any order other than one adjourning the case. However, I think it appropriate to make a declaration that the proceedings are stayed and then stand them over to enable subsection (3) of section 60 to be engaged if the defendant chooses to take further action. My orders are:

(1) I declare that the proceedings are stayed by force of section 60(2) of the Bankruptcy Act 1966 (Cth);

(2)   I stand the matter over to Thursday 16 May 2013 at 10.00am for further mention.

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Amendments

27 May 2013 - "11 April 2014" changed to "11 April 2013"

Amended paragraphs: Decision Date