Singh v Khan
[2021] NSWSC 1093
•30 August 2021
Supreme Court
New South Wales
Medium Neutral Citation: Singh v Khan [2021] NSWSC 1093 Hearing dates: 26 August 2021 Decision date: 30 August 2021 Jurisdiction: Common Law Before: Adamson J Decision: (1) Declare that the proceedings are stayed by reason of the operation of s 60(2) of the Bankruptcy Act 1966 (Cth).
(2) Declare that the plaintiff had no standing to file, and has no standing to move on, the notices of motion filed by him on 13 July 2021 and 12 August 2021 respectively and dismiss the notices of motion accordingly.
(3) Subject to any party making an application for a different order, order the plaintiff to pay the defendants’ costs of the notices of motion filed by the plaintiff on 13 July 2021 and 12 August 2021 and of the defendants’ notice of motion filed on 23 July 2021.
Catchwords: CIVIL PROCEDURE – Defendants seeking stay of proceedings by reason of s 60(2) of the Bankruptcy Act 1966 (Cth) and dismissal of plaintiff’s notice of motion as he lacks standing — Plaintiff seeking review of Registrar’s directions to list defendants’ notice of motion prior to determination of his earlier notice of motion — Plaintiff’s notices of motion dismissed as per the Bankruptcy Act 1966 (Cth) as he does not have standing to prosecute them in his own name – declaration of stay
BANKRUPTCY — Exclusive jurisdiction of federal courts “in bankruptcy” — Jurisdiction of State courts conferred under s 39(2) of the Bankruptcy Act 1966 (Cth) to determine matters arising under the Act other than those falling within the Federal Court’s exclusive jurisdiction — effect of s 60 of the Bankruptcy Act 1966 (Cth) on proceedings in this Court does not require the exercise of jurisdiction “in bankruptcy” — this Court has no jurisdiction to determine the validity of a bankruptcy notice as it is a matter “in bankruptcy” — by operation of ss 60(2) and (3) of the Bankruptcy Act 1966 (Cth) the plaintiff does not have standing to prosecute these proceedings or notices of motion in his own name
Legislation Cited: Bankruptcy Act 1966 (Cth), ss 5, 27, 35, 35A, 40, 58, 60, 116
Civil and Administrative Tribunal Act 2013 (NSW), s 60
Constitution, ss 75, 76
Judiciary Act 1903 (Cth), ss 39, 39B
Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth), s 3
Legal Profession Uniform Law Application Act 2014 (NSW), ss 70, 71
Uniform Civil Procedure Rules 2005 (NSW), rr 13.6, 36.10
Cases Cited: Faulkner v Bluett [1981] FCA 3; (1981) 52 FLR 115
Meriton Apartments Pty Ltd v Industrial Court of New South Wales (2008) 171 FCR 380; [2008] FCAFC 172
Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597; [2002] HCA 1
Morris Finance Ltd v Brown (2016) 93 NSWLR 551; [2016] NSWCA 343
Singh v Fobupu Pty Ltd, in the matter of Singh [2020] FCA 886
Singh v Fobupu Pty Ltd, in the matter of Singh [2021] FCAFC 14
Truthful Endeavour Pty Ltd v Condon (2015) 233 FCR 174; [2015] FCAFC 70
Category: Procedural rulings Parties: Gurjit Singh (Plaintiff)
Ghulam Akbar Khan (First Defendant)
Samina Khan (Second Defendant)
Fobupu Pty Ltd (Third Defendant)
Secretary, Department of Communities and Justice (Third Respondent to the Notice of Motion dated 12 August 2021)Representation: Counsel:
Solicitors:
In person (Plaintiff)
R Brown (First, Second and Third Defendants)
C Frommer (Third Respondent to the Notice of Motion dated 12 August 2021)
McGrath Dicembre & Co (First, Second and Third Defendants)
Crown Solicitor’s Office (NSW) (Third Respondent to the Notice of Motion dated 12 August 2021)
File Number(s): 2018/278850
Judgment
Introduction
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Two notices of motion were listed for hearing together in this matter. The first was filed on 23 July 2021 on behalf of Ghulam Khan, Samina Khan and Fobupu Pty Ltd (the defendants). It seeks, first, a stay of the proceedings by reason of the statutory prohibition in s 60(2) of the Bankruptcy Act 1966 (Cth) and, second, an order that the plaintiff’s notice of motion filed on 13 July 2021 be dismissed on the grounds the plaintiff does not have standing to bring the motion or continue the proceedings. Gurjit Singh (the plaintiff), by notice of motion filed on 12 August 2021, seeks review of the Registrar’s directions to list the defendants’ notice of motion for hearing prior to determination of his notice of motion filed on 13 July 2021.
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Although the issues in dispute do not, ultimately, require detailed consideration of what led to the notices of motion, it is necessary to give some context to the disputes between the parties, if only to appreciate the parties’ respective submissions. Accordingly, before turning to the motions, I propose to summarise the background to the present applications.
Background facts
The proceedings in the New South Wales Civil and Administrative Tribunal
Proceedings in the Consumer and Commercial Division
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On 18 December 2017, the plaintiff commenced proceedings in the Consumer and Commercial Division of the New South Wales Civil and Administrative Tribunal (NCAT). He sought orders concerning retail lease premises which were the subject of a lease entered into between Fobupu Pty Ltd, as lessor, and Amnol Holdings Pty Ltd, as lessee. The plaintiff was the guarantor of the lessee’s obligations. On 6 March 2018, Senior Member Simon made directions for the matter which was listed for hearing on 14 May 2018. The directions required the parties to provide to each other, and to NCAT, copies of all documents on which they proposed to rely for the hearing. A direction was also made that a failure by a party to provide documents in accordance with the directions may result in the party not being permitted to rely on the documents without leave. On 21 March 2018, the plaintiff sought leave to appeal to the Appeal Panel against these orders. Subsequently, on 6 April 2018, the plaintiff applied to vacate the hearing date. Further directions were made by the Deputy President of the Consumer and Commercial Division of NCAT on 17 April 2018 which required the parties to file and serve by 26 April 2018 a statement of the orders they sought in the proceedings, together with evidence relied upon. The Deputy President stood the matter over to 27 April 2018.
Proceedings in the Appeal Panel
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On 18 April 2018, Principal Member Harrowell, sitting as the Appeal Panel, heard and determined the plaintiff’s application for leave. His reasons for decision amounted to 15 pages. His conclusions and orders were as follows:
“It seems to me in those circumstances there is no basis which has been established that would warrant leave in the present case. I might add to those comments that that is particularly so having regard to the fact that the orders which have been appealed were made on 6 March 2018, and it is clear from the information that has been provided to the Appeal Panel that those orders were in fact varied to extend time on 29 March 2018 and were subject to the further review on 17 April 2018. There is no material before the Appeal Panel that would suggest that those extensions of time were inappropriate or not sufficient. More particularly, however, no appeal has been lodged in relation to those orders, and even if an appeal had been lodged, those orders seem somewhat to have been taken over by the orders on 17 April 2018 made by the Deputy President.
In those circumstances the Appeal Panel is not satisfied that leave to appeal should be granted. Accordingly the Appeal Panel makes the following orders:
1. Leave to appeal the decision made on 6 March 2018 is refused.
2. The notice of appeal is otherwise dismissed.”
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On 25 May 2018, the Appeal Panel ordered the plaintiff to pay the defendants’ costs of the proceedings on the ordinary basis. The defendants applied for the costs to be assessed. On 24 September 2019, NCAT made a further costs order against the plaintiff, which it ordered to be paid in the gross sum of $1,400.
The proceedings in this Court
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By summons, which was filed in this Court on 11 September 2018, the plaintiff seeks leave to appeal against the decision of the Appeal Panel of NCAT to refuse leave to appeal. As referred to above, an amended summons was filed on 23 November 2018. The plaintiff explained at the hearing before me on 26 August 2021 that he also challenged the costs order made against him by NCAT and did so on the basis that s 60(2) of the Civil and Administrative Tribunal Act 2013 (NSW) limited NCAT’s power to award costs in proceedings before it to cases where it was satisfied that there were “special circumstances” warranting an award of costs.
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The plaintiff foreshadowed that he would rely (at a substantive hearing of his amended summons) on Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597; [2002] HCA 1, and, in particular the following passage at [51] (Gaudron and Gummow JJ):
“There is, in our view, no reason in principle why the general law should treat administrative decisions involving jurisdictional error as binding or having legal effect unless and until set aside. A decision that involves jurisdictional error is a decision that lacks legal foundation and is properly regarded, in law, as no decision at all. Further, there is a certain illogicality in the notion that, although a decision involves jurisdictional error, the law requires that, until the decision is set aside, the rights of the individual to whom the decision relates are or, perhaps, are deemed to be other than as recognised by the law that will be applied if and when the decision is challenged.”
[Footnotes omitted.]
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On 26 April 2019, various notices of motion were listed before Harrison AsJ. Her Honour dismissed the plaintiff’s notices of motion dated 15 October 2018 and 20 December 2018 respectively, with costs. At the conclusion of the hearing, the plaintiff raised a further issue before her Honour. He submitted that there be a stay of the costs order made by NCAT, pending determination of the summons in this Court. At this point, Mr Brown, who appeared for the defendants, informed the Court that the defendants were seeking to have the costs in NCAT assessed. He said:
“I’m instructed to provide an undertaking that we will not seek to enforce any costs order without first providing [the plaintiff] 21 days’ notice.”
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Associate Justice Harrison informed the plaintiff that she would not grant a stay of the costs order on 26 April 2019 and that he would have to file an affidavit to show why a stay ought be granted. The plaintiff asked Harrison AsJ to record the defendants’ undertaking. Her Honour confirmed that it had been recorded.
The plaintiff’s notice of motion filed 3 June 2019
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On 3 June 2019, the plaintiff filed a notice of motion, which was made returnable on 13 June 2019. In his motion, the plaintiff sought to challenge orders and directions made by Harrison AsJ on 26 April 2019.
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The defendants did not appear on 13 June 2019 (it is not clear whether they had been served with the notice of motion). The matter was stood over for directions on 25 July 2019. On that date, the defendants appeared but the plaintiff did not. The matter was stood over to 8 August 2019. Registrar Brown noted that a letter pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 13.6, would be sent to the plaintiff informing him that his notice of motion filed on 3 June 2019 would be dismissed if there was no appearance on that occasion.
The order dismissing the proceedings
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On 8 August 2019, the matter came before the Registrar who noted that a medical certificate had been sent by the plaintiff who did not appear. An order was made dismissing the proceedings (not merely the plaintiff’s notice of motion filed on 3 June 2019) pursuant to UCPR, r 13.6. The Registrar ordered the plaintiff to pay the defendants’ costs. The order dismissing the proceedings would appear to have been an error since the plaintiff had been notified only that his notice of motion would be dismissed if he did not appear on 8 August 2019. However, for the reasons which follow, this error does not affect the effect of the plaintiff’s bankruptcy on these proceedings.
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The matter was re-listed on 31 October 2019 and came before the Registrar (not the same Registrar who had made orders on 8 August 2019). The plaintiff appeared for himself and Mr Brown appeared on behalf of the defendants. They intended to hand up signed short minutes of order to be made by consent that the matter be adjourned to 20 February 2020 (which would suggest that the defendants appreciated that only the notice of motion ought to have been dismissed, not the proceedings). Notwithstanding these consent orders, the Registrar made no orders as he noted that the proceedings had been dismissed on 8 August 2019.
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Nonetheless, the matter came before Registrar Jones on 20 February 2020, who noted that the matter was to be closed and that there were to be no further listings. She also noted that the plaintiff disputed that the matter had been dismissed.
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Before returning to the balance of what occurred in the proceedings in this Court, it is necessary to address the enforcement of the costs orders made against the plaintiff in NCAT, since they led to the plaintiff’s bankruptcy.
The assessment of costs
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The defendants applied for the costs of the proceedings in NCAT to be assessed. On 30 September 2019, the Manager, Costs Assessment, issued two certificates: a Certificate of Determination of Costs specifying the sum of $24,453.85, which was payable by the plaintiff to the defendants; and a Certificate of Determination of Manager’s Assessment Costs, which certified an amount of $1,907.13, which was to be paid by the plaintiff in respect of the costs assessor’s costs.
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Pursuant to UCPR, r 36.10, a costs assessment certificate may be filed in a court of competent jurisdiction. The effect of filing such a certificate is that it is taken to be a judgment of the court (ss 70(5) and 71(3) of the Legal Profession Uniform Law Application Act 2014 (NSW)) for the amount of costs which have not yet been paid. In the present case, the defendants filed the costs certificates in the Local Court, as a result of which two judgments in the Local Court were entered, first, on 16 October 2019 for $1,591 (which related to the lump sum costs order made on 24 September 2019) and, second, on 17 October 2019 for $26,551.98 (being the sum of the two costs certificates issued by the Manager, Costs Assessment).
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By notice of motion filed on 16 March 2020 in the Local Court, the plaintiff sought to have the judgments entered in the Local Court set aside. On 9 April 2020, his notice of motion was dismissed by Tsavdaridis LCM
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The plaintiff subsequently challenged the costs assessments, by application filed on 4 May 2021, to the Manager, Costs Assessment for review of the costs certificates. However, before the matter proceeded further, on 6 May 2021, a sequestration order was made against the plaintiff’s estate in the Federal Circuit Court on the basis of the Local Court judgments referred to above.
The bankruptcy proceedings in the Federal Court
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On 9 December 2019, the defendants served on the plaintiff a bankruptcy notice which required him to pay the creditors the sum of $28,142.98 (being the total of the two judgments entered in the Local Court), or otherwise to make arrangements to their satisfaction for settlement of the judgment debts, in accordance with the provisions of the Bankruptcy Act. The plaintiff sought to challenge the bankruptcy notice in the Federal Court. His application was dismissed by Gleeson J on 25 June 2020: Singh v Fobupu Pty Ltd, in the matter of Singh [2020] FCA 886.
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On 6 July 2020, the defendants filed a creditors’ petition in the Federal Court, seeking a sequestration order against the plaintiff’s estate based on his non-compliance with the bankruptcy notice.
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The plaintiff appealed against Gleeson J’s decision to the Full Federal Court (Rares, Farrell and Stewart JJ), which, on 3 February 2021, dismissed the appeal: Singh v Fobupu Pty Ltd, in the matter of Singh [2021] FCAFC 14.
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The defendants’ application for a sequestration order was heard by the Federal Circuit Court (Judge Street) on 6 May 2021. The Court found that the act of bankruptcy occurred on 25 June 2020. His Honour made the following orders:
“1. Leave to file the application in a case dated 6 May 2021 is refused.
2. Leave is granted to the applicants to amend the Creditor’s Petition in respect of the date of the act of bankruptcy, being 25 June 2020, and the Court dispenses with the need for the filing of an amended Creditor’s Petition.
3. A sequestration order is made against the estate of [the plaintiff].
4. The Petitioning Creditors’ costs be paid out of the bankrupt estate in accordance with the priority to which they are entitled, in such amount as is agreed with the trustees and/or as assessed.”
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The Court noted the following:
“1. A consent to act as joint trustees has been filed by Innis Anthony Cull and Gess Michael Rambaldi.
2. The act of bankruptcy occurred on 25 June 2020.”
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On 23 May 2021, the plaintiff filed a notice of appeal in the Federal Court from the orders made by the Federal Circuit Court on 6 May 2021. The evidence does not disclose when that matter is to be determined.
Post-bankruptcy events
The application for review of the costs assessment
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On 7 May 2021, the Manager, Costs Assessment, made directions for the progress of the plaintiff’s application for review (which had been filed on 4 May 2021). On 11 May 2021, the defendants’ solicitor wrote to the Manager, Costs Assessment, informing him of the plaintiff’s bankruptcy and seeking that the matter be adjourned for 28 days to permit the plaintiff’s trustees in bankruptcy to decide whether to prosecute the application for review. On 13 May 2021, Innis Cull, one of the plaintiff’s trustees in bankruptcy, wrote to the Manager, Costs Assessment to inform him that he was considering whether to press the application for review and informed him that he would let him know of his decision by 4 June 2021. On 8 June 2021, Mr Cull wrote to the Manager, Costs Assessment, informing him that he had not made an election to continue the application, which was therefore taken to have been abandoned by him, by reason of s 60(3) of the Bankruptcy Act.
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On 9 June 2021, the plaintiff wrote to the Manager, Costs Assessment, and to the parties disputing the effect of s 60(3), as asserted by Mr Cull. He opposed the closing of the file relating to his application filed on 4 May 2021.
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On 10 June 2021, the Manager, Costs Assessment, wrote to the plaintiff and the other parties to the review application (as listed above) and informed them of the correspondence from the plaintiff’s trustees in bankruptcy. He said, in part:
“With that in mind, it would appear that the [Manager, Costs Assessment] cannot proceed with [the plaintiff’s] review application, given [the plaintiff] does not seem to have standing to pursue it himself and, as it has been abandoned under the Bankruptcy Act.
Having said that, steps have been taken to close the file.”
Proceedings 2021/227850 in this Court
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By summons filed on 10 August 2021, the plaintiff commenced proceedings in this Court for judicial review, 2021/227850, seeking an order that the decision of the Manager, Costs Assessment be set aside (the 2021 proceedings). The defendants to the 2021 proceedings are the Secretary, Department of Communities and Justice (the Secretary), Anthony Dicembre (the solicitor for the defendant in these proceedings), Mr Cull and Gess Rambaldi (the plaintiff’s trustees in bankruptcy); and the defendants (in these proceedings).
The plaintiff’s application for review of decisions of Registrars on 8 August 2019 and 20 February 2020
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On 13 July 2021, the plaintiff filed a notice of motion (in the present proceedings) seeking an order that the following orders be set aside and that the summons be listed for further directions:
The order made on 8 August 2019 dismissing the proceedings; and
The orders made on 20 February 2020 that there be no further listings and that the matter be closed.
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This notice of motion was made returnable on 20 July 2021. On that day, there was no appearance by the plaintiff. Mr Brown appeared for the defendants. Mr Frommer appeared for the Secretary, as a person affected. Although the plaintiff did not appear on that day, he filed written submissions at 7.39am that morning. In his submissions, he informed the Court that when he woke up, he was sneezing and had a sore throat and a cough. He said that he was available by telephone. He sought directions for the further conduct of the matter, which included that the defendants would have a week to put on further evidence and he would have a further two weeks after that to put on evidence in reply.
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On 20 July 2021, the Registrar made directions (presumably on Mr Brown’s application) that the defendants file and serve any notice of motion by 23 July 2021 to be made returnable on 28 July 2021. I apprehend that Mr Brown informed the Court of the plaintiff’s bankruptcy and the effect that this would have on the whole of the proceedings. The matter was stood over to 28 July 2021. As referred to above, on 23 July 2021, the defendants filed a notice of motion for a stay of proceedings and dismissal of the plaintiff’s notice of motion filed 13 June 2021 on the grounds of the plaintiff’s bankruptcy.
The directions hearing on 28 July 2021
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On 28 July 2021, the matter came before the Registrar for directions. The plaintiff appeared on his own behalf; Mr Brown appeared for the defendants; and Mr Frommer appeared for the Secretary. At the commencement of the directions hearing, Mr Brown informed the Registrar that the proceedings were required to be stayed because a sequestration order had been made against the plaintiff’s estate pursuant to the Bankruptcy Act. Mr Brown submitted that it would be “prudent” for the Court to determine the defendants’ motion of 23 July 2021 before determining the plaintiff’s motion of 13 July 2021 because of the defendants’ contention that the plaintiff (by reason of his bankruptcy) did not have standing to contest the Registrars’ decisions which he sought, by his motion of 13 July 2021, to challenge. Mr Frommer supported this course and submitted that the proceedings had been automatically stayed by reason of the Bankruptcy Act and that the Court “should so declare if necessary.”
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In response, the plaintiff relied on the express terms of s 60 of the Bankruptcy Act (see further below). The Registrar told him, in substance, that it was not necessary to talk about the “legalities” since she wanted to make directions about the further conduct of the matter and the hearing of the notices of motion. The plaintiff continued to read out s 60 of the Bankruptcy Act and make submissions about the effect of ss 60(2) and (3). Once again, the Registrar informed the plaintiff that she was not going to be “getting into the technicalities of what’s going on” and “really wanted to move the matter forward with some directions timetabling orders.”
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The plaintiff took great exception to the circumstance that his notice of motion, which had been filed on 13 July 2021, was not to be listed for hearing, although the defendants’ notice of motion, which had been filed on 23 July 2021 was to be listed for hearing. The Registrar consulted the plaintiff about a timetable for the defendants’ notice of motion and made directions accordingly. The Registrar also directed the defendants to file an outline of submissions to be served on the plaintiff as to the basis of their notice of motion. Before the conclusion of the directions hearing, the plaintiff’s connection to the Court was lost. The matter was stood down in the list. The plaintiff was not able to be contacted before the matter concluded.
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At the conclusion of the directions hearing on 28 July 2021, the Registrar made the following directions (as recorded in JusticeLink):
“This matter is listed for Directions (Common Law Registrar) on 3 August 2021 9:00 AM before the Supreme Court - Civil at Supreme Court Sydney.
Estimated duration: 5 Minutes
This matter is listed for Duty (Common Law) on 26 August 2021 10:00 AM before the Supreme Court - Civil at Supreme Court Sydney.
Estimated duration: 90 Minutes
ORDERS OR DIRECTIONS
1. The Plaintiff is to file and serve all evidence in answer to the NOM [notice of motion] filed 23 July 2021, by 18 August 2021.
2. The Defendant is to file and serve an outline of written submissions by 6 August 2021.
3. The Plaintiff is to file and serve any written submissions by 20 August 2021.
4. Stood over for Directions Hearing on 3 August 2021 (in relation to the NOM filed 13 July 2021).
5. The Court is to send a Notice of Orders Made to the Plaintiff.”
Notification to the plaintiff’s trustees in bankruptcy
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On 14 July 2017, the plaintiff’s trustees in bankruptcy were notified of his application to reinstate these proceedings. On 28 July 2021 the plaintiff wrote to his trustees and, on 29 July 2021, received the following reply:
“I refer to your below email received at 11.02 am yesterday and your email of this morning at 12.45pm.
● The proceeding that you have referred to (2018/278850) appears to have been dismissed prior to the date of your bankruptcy.
● You subsequently made an application to reinstate the proceeding after the date of your bankruptcy. It is my view that you did not have standing to do so.
● It is therefore my view that s 60 of the Bankruptcy Act 1966 does not apply to the proceeding.
● Notwithstanding the above, I was notified of your application to reinstate the proceeding on 14 July 2021.”
Consideration
The relevant provisions of the Bankruptcy Act
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The determination of the present applications is governed by the Bankruptcy Act. Upon the making of the sequestration order in respect of the plaintiff’s estate, all of the plaintiff’s property vested in his trustees as from the date of bankruptcy: s 58(1). Thus, the effect of the making of the sequestration order on 6 May 2021, was to vest all of the plaintiff’s property from 25 June 2020 in his trustees.
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Section 5 of the Bankruptcy Act defines “property” as follows:
“‘property’ means real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property.”
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Section 60 of the Bankruptcy Act relevantly provides:
“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.
(3) 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.
(4) Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of:
(a) any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or
(b) the death of his or her spouse or de facto partner or of a member of his or her family.
…
(5) In this section, action means any civil proceeding, whether at law or in equity.”
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The term “property”, as defined by s 5, has been held to include the right to sue: Faulkner v Bluett [1981] FCA 3; (1981) 52 FLR 115. In Faulkner v Bluett, the applicant claimed damages for negligence and negligent misrepresentation. After commencing the proceedings, a sequestration order was made against her estate. The Federal Court (Lockhart J) held that any damages to which the applicant might be entitled would be estimated by reference to her rights of property and not to any pain felt by her in respect of her body, mind or character. Thus, it was held that the action would not fall within the exception in s 60(4) of the Bankruptcy Act. The action was stayed as the applicant had no right to continue it in her own name. I understood the plaintiff to concede that the present proceedings would not fall within the exception in s 60(4). In case I misunderstood the plaintiff, I ought note that I am satisfied that the present proceedings do not fall within that exception.
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Section 116 of the Bankruptcy Act relevantly provides:
“Property divisible among creditors
(1) Subject to this Act:
…
(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;
…
is property divisible amongst the creditors of the bankrupt.”
The matters raised by the plaintiff in opposition to the defendants’ notice of motion
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The plaintiff argued, on the following grounds, each of which will be addressed in turn, that the proceedings in this Court were not stayed:
this Court has no jurisdiction to grant, or declare, a stay since bankruptcy is within the exclusive jurisdiction of the Federal Court;
the bankruptcy notice was invalid as the judgments in the Local Court were not final judgments and the enforcement proceedings had been brought in breach of the undertaking which the defendants gave to this Court on 26 April 2019 (referred to above); and
as the defendants had not proved that the trustee had been notified of the proceedings pursuant to s 60(3) of the Bankruptcy Act, no stay under s 60(2) came into operation because s 60(3) qualified s 60(2).
This Court’s jurisdiction
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The plaintiff submitted that this Court had no jurisdiction to grant a stay of the proceedings because the effect of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) was to confer exclusive jurisdiction with respect to bankruptcy on the Federal Court.
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Section 3(1)(e) of the Jurisdiction of Courts (Cross-Vesting) Act defines “special federal matter” as, relevantly, “a matter that is within the original jurisdiction of the Federal Court under s 39B of the Judiciary Act 1903 (Cth); being a matter in respect of which the Supreme Court of a State ... would not, apart from this Act, have jurisdiction.” Section 39B(1A)(c) of the Judiciary Act provides that the Federal Court has original jurisdiction in any non-criminal matter arising under Commonwealth legislation. The Bankruptcy Act is Commonwealth legislation.
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Section 39(2) of the Judiciary Act relevantly confers federal jurisdiction on State courts, including this Court, in the following terms:
“(2) The several Courts of the States shall within the limits of their several jurisdictions, whether such limits are as to locality, subject-matter, or otherwise, be invested with federal jurisdiction, in all matters in which the High Court has original jurisdiction or in which original jurisdiction can be conferred upon it ...”
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The effect of s 39(2) of the Judiciary Act is that jurisdiction with respect to matters arising under the Bankruptcy Act is conferred on State courts, subject to the limitation referred in s 39(2). The relevant limitation on this Court’s jurisdiction is to be found in s 27(1) of the Bankruptcy Act which provides that “the Federal Court and the Federal Circuit Court have concurrent jurisdiction in bankruptcy”, which is exclusive of the jurisdiction of all courts other than the jurisdiction of the High Court under s 75 of the Constitution or the jurisdiction of the Family Court under ss 35 or 35A of the Bankruptcy Act. Section 27(1) is to be read with the definition of bankruptcy in s 5 which provides:
“bankruptcy, in relation to jurisdiction or proceedings, means any jurisdiction or proceedings under or by virtue of this Act.”
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The effect of s 27(1) of the Bankruptcy Act is that this Court (and other State courts) would not have jurisdiction “in bankruptcy” but for the Jurisdiction of Courts (Cross-Vesting) Act: Truthful Endeavour Pty Ltd v Condon (2015) 233 FCR 174; [2015] FCAFC 70 (Truthful Endeavour) at [48] (Allsop CJ, Katzmann and Gleeson JJ); and the authorities referred to by Perram J in Meriton Apartments Pty Ltd v Industrial Court of New South Wales (2008) 171 FCR 380; [2008] FCAFC 172 (Meriton) at [172]-[173].
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The distinction between the words “in bankruptcy” in s 27(1) of the Bankruptcy Act and the words “matter … arising under any laws made by the Parliament” in s 76(ii) of the Constitution is significant. It differentiates those matters in respect of which the Federal Court has exclusive jurisdiction from those matters where the federal jurisdiction under the Bankruptcy Act can be exercised either by State courts (pursuant to s 39(2) of the Judiciary Act) or by the Federal Court (pursuant to s 39B(1A)(c) of the Judiciary Act). The Federal Court has exclusive jurisdiction “in bankruptcy”, meaning “in jurisdiction or proceedings under or by virtue of” the Bankruptcy Act (s 5 of the Bankruptcy Act). However, the State courts have jurisdiction to determine matters arising under the Bankruptcy Act other than those falling within the Federal Court’s exclusive jurisdiction: Meriton at [172] (Perram J), cited with approval in Morris Finance Ltd v Brown (2016) 93 NSWLR 551; [2016] NSWCA 343 by Payne JA at [32] (Basten JA agreeing).
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Practical as well as legal reasons underlie this distinction. Matters such as the validity of a bankruptcy notice and presentation of creditor’s petitions fall within the exclusive jurisdiction of the Federal Court. However, the legislature did not intend to deprive the State courts of jurisdiction to deal with matters arising when, for example, a party to a proceeding is declared bankrupt unless it would involve jurisdiction “in bankruptcy”. The question whether proceedings in this Court brought by a plaintiff against whom a sequestration order is subsequently made does not require the exercise of jurisdiction “in bankruptcy”. Accordingly, this Court has jurisdiction to determine the effect of s 60 of the Bankruptcy Act on these proceedings.
The validity of the bankruptcy notice
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The second basis on which the plaintiff challenged the defendants’ notice of motion was his challenge to the validity of the bankruptcy notice on the basis that the judgments in the Local Court registered as a consequence of the filing of the costs certificate were not final judgments and therefore did not qualify as a basis for a bankruptcy notice under s 40(1)(g) of the Bankruptcy Act (which provides that a debtor commits an act of bankruptcy if the debtor does not comply with a bankruptcy notice served on the basis of a final judgment or order). He also relied on the alleged breach by the defendants of the undertaking given to Harrison AsJ on 26 April 2019 (which breach is denied by the defendants).
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As set out above, the plaintiff has unsuccessfully challenged the bankruptcy notice in the Federal Court (Gleeson J) and the Full Federal Court. He also challenged it in the Federal Circuit Court, when resisting the making of a sequestration order on the basis of the creditors’ petition (which is subject to appeal to the Federal Court). A challenge to a bankruptcy notice plainly falls within the jurisdiction of the Federal Court as it is a matter “in bankruptcy”. Accordingly, this Court has no jurisdiction to determine it.
The effect of the Bankruptcy Act on the proceedings in this Court
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The third basis on which the plaintiff opposed the orders sought by the defendants in their notice of motion of 23 July 2021 arises from the construction of s 60 of the Bankruptcy Act. The plaintiff accepted that the word “action” in s 60(2) of the Bankruptcy Act incorporated the whole of these proceedings. However, he submitted that there was only a stay under s 60(2) if notice had been given to the trustees in bankruptcy and 28 days had passed since the giving of such notice. He contended that, as there was no evidence of notice having been given, no stay had come into operation. Accordingly, he submitted that s 60 was irrelevant to the current proceedings. He argued that the effect of ss 60(2) and (3) was that the only stay which would arise would be a stay of 28 days which would begin from the date the notice of the proceedings was served on the trustee. In other words, the plaintiff contended that the effect of s 60(3) was to qualify the general words of s 60(2).
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I reject the plaintiff’s interpretation of s 60. The automatic stay effected by s 60(2) is not qualified by s 60(3). Thus, it applies irrespective of whether the trustee has been notified of the proceedings. In any event, the evidence established that the trustee (who had understood that the proceedings had been dismissed) was notified on 14 July 2021 of the plaintiff’s attempt to reinstate them. Mr Cull’s view was that the plaintiff did not have standing to do so (presumably because of the operation of s 116(1)(b) of the Bankruptcy Act). Mr Cull’s statement in his email of 29 July 2021 that “s 60 does not apply to the proceedings” must be read in the context of his understanding that the proceedings had already been dismissed (before the sequestration order was made); that the plaintiff had no standing to reinstate them (thereby making the proceedings a nullity in any event); and that, accordingly, there were no proceedings upon which a stay under s 60 could operate. In any event, as the trustees have not elected to prosecute or discontinue the action within 28 days of notice having been given, they are taken to have abandoned them: s 60(3).
Conclusion
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The proceedings in this Court were commenced before the plaintiff became bankrupt. Thus, s 60(2) of the Act applies. By operation of s 60(2), the proceedings were stayed automatically on and from the date of the sequestration order, being 6 May 2021, unless and until the trustees elected in writing to prosecute or discontinue them. The trustees were notified of the proceedings, at the latest, on 14 July 2021. By operation of s 60(3), the trustees are deemed to have abandoned them. Accordingly, the plaintiff does not have standing to prosecute the proceedings in his own name. Thus, he has no standing to prosecute his notices of motion filed on 13 July 2021 and 12 August 2021 respectively, which ought, accordingly, be dismissed. The defendants are entitled to the relief claimed in their notice of motion filed on 23 July 2021.
Costs
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The plaintiff sought that I reserve the question of costs pending delivery of reasons. I indicated that I would make a provisional costs order but provide the parties with the opportunity to make submissions on costs. I note that in Faulkner v Bluett, Lockhart J made an order that the applicant pay the costs of applications which she had made after she had become bankrupt and which his Honour found that she had no standing to make.
Orders
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For the reasons given above, I make the following orders:
Declare that the proceedings are stayed by reason of the operation of s 60(2) of the Bankruptcy Act 1966 (Cth).
Declare that the plaintiff had no standing to file, and has no standing to move on, the notices of motion filed by him on 13 July 2021 and 12 August 2021 respectively and dismiss the notices of motion accordingly.
Subject to any party making an application for a different order, order the plaintiff to pay the defendants’ costs of the notices of motion filed by the plaintiff on 13 July 2021 and 12 August 2021 and of the defendants’ notice of motion filed on 23 July 2021.
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Decision last updated: 31 August 2021
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