Vince v Sellers - [2004] FMCA 564

FEDERAL MAGISTRATES COURT OF AUSTRALIA

VINCE v SELLERS & ORS

[2004] FMCA 564

BANKRUPTCY – Application by trustee to extend time to continue proceedings – ss.60(3) and 33(1) Bankruptcy Act 1966 – interests of creditors paramount.

Bankruptcy Act 1966, ss.33(1), 60(3)

Abeyratne v State of Victoria [1998] 1676 FCA (18 December 1998)

Applicant:

PETER ROBERT VINCE (AS TRUSTEE OF BANKRUPT ESTATE OF DAVID NEIL LOCKWOOD, A BANKRUPT)

Respondents:

KENNETH STEWART SELLERS, MICHAEL JAMES HUMPHRIS and LAURENCE ANDREW FITZGERALD

File No:

MLG 957 of 2003

Delivered on:

9 August 2004

Delivered at:

Melbourne

Hearing Date:

9 August 2004

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicant:

Mr J.M. Selimi

Solicitors for the Applicant:

Serry White & Co

Counsel for the First Respondent:

Mr R Smith

Solicitors for the First Respondent:

Abbott Stillman & Wilson

Solicitor for the Second and Third Respondents:

Mr D Andrews

Solicitors for the Second and Third Respondents:

Holding Redlich

ORDERS

The time for the Applicant as Trustee of the Bankrupt Estate of David Neil Lockwood to make an election in writing to prosecute or discontinue proceedings by the Bankrupt against the Respondents in Action Number 2016/2004 (F5668) in the Commercial List of the Supreme Court of Victoria be extended to 9 September 2004.
The Respondents' costs be paid out of the Bankrupt Estate of David Neil Lockwood.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG 957 of 2003

PETER ROBERT VINCE (AS TRUSTEE OF BANKRUPT ESTATE OF DAVID NEIL LOCKWOOD)

Applicant

and

KENNETH STEWART SELLERS and OTHERS

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

This is an application by Peter Robert Vince (the Trustee) by application filed 22 July 2004 seeking to extend the time in which to continue proceedings under ss.60(3) and 33(1) of the Bankruptcy Act 1966 (the Act). The application is supported by an affidavit of the applicant sworn 22 July 2004 and the order sought is that the time for the applicant as trustee of the bankrupt estate of David Neil Lockwood (the Bankrupt) to make an election in writing to prosecute or discontinue proceedings by the bankrupt against the respondent in action number 2016 of 2004 in the commercial list in the Supreme Court of Victoria be extended for such further time as the court deems appropriate.
In the affidavit in support of the application the Trustee deposes to the background information in relation to this application and it is noted that he is the trustee of the bankrupt estate of the bankrupt. The bankrupt was made bankrupt upon presentation of a debtor's petition on 4 June 2004. At that stage two others were appointed as trustees in the bankruptcy. Prior to the bankrupt becoming bankrupt, the Trustee had signed a consent to act as trustee in relation to a creditors petition brought against the bankrupt. It is not necessary for me to refer to the details of that save to say that the Trustee has indicated that in a proper consideration of proceedings which are pending in the Supreme Court, it is claimed that the material available to the trustee constitutes material which is described as complex and involves what is described as a multitude of documents which need to be properly considered by the Trustee when deciding whether or not to prosecute or discontinue the proceedings to which I have referred. The relevant chronology in this matter is set out again in the affidavit material but the crucial dates would appear to be that the applicant became trustee on 28 June 2004. He requested files relating to the pending proceedings on 15 July 2004 and those files were provided on 22 July 2004.
The matter in the Supreme Court has been listed before His Honour Byrne J on a number of occasions. I am told from the bar table that the matter is next listed before that court on 13 August 2004, when further directions will be made. It is difficult for this court to consider further what might occur on that day, having regard to the lack of evidence before this court as to the precise nature of the further hearing, save and accept that it is obviously a directions hearing when the matter would be further considered by His Honour. The proceedings which are pending in the Supreme Court were commenced by writ which appears to have been filed on 29 April 2004. I accept from the material that is currently before the court that the applicant was aware of that proceeding and certainly made aware of the nature of those proceedings prior to his appointment as trustee of the bankrupt estate.
The respondents to this application oppose the application and reliance is placed by the first respondent, upon an affidavit sworn by Kenneth Stewart Sellers on 6 August 2004. It is submitted on behalf of the respondents that the court should refuse the application. In the event that the application was to be granted, then only a short period of time should be allowed by way of extension of time. The applicant has sought to extend the time for a period of two months. It is submitted on behalf of the respondents that this court in the exercise of its discretion should have regard to the chronology of events and in particular should note that in fact the applicant at least since on or about 18 June 2004 has become aware of the pending proceedings in the Supreme Court and it is sufficient to note those proceedings arise from a claim arising from a partnership between the bankrupt and the three respondents. It is claimed that the material that is currently available to the applicant and which has been in the possession of the applicant at least since 22 July 2004 has enabled the applicant to now make an informed decision as to whether or not the proceedings in the Supreme Court should continue.
I have been referred to and rely and accept the decision of His Honour North J in the matter of Abeyratne v State of Victoria [1998] 1676 FCA (18 December 1998) at paragraph 35 as follows:-
“35.Mr Hardy, who appeared as counsel for Mr Trkulja, submitted that the ability of Mr Trkulja to meet a costs order should be considered by the Supreme Court in an application for security for costs brought by the State of Victoria if it was so advised. In my view, the capacity of the proposed assignee to pay the costs of the litigation is a relevant factor in determining whether to extend time. The power to extend time is a broad discretionary power. It is unfettered and must be exercised with a view to doing justice between the parties. On the material before me, an application for security for costs would be highly likely to succeed and Mr Trkulja would not be able to provide such security. The State of Victoria would suffer the prejudice of incurring costs of the application, which costs would be unlikely to be met by Mr Trkulja if the application succeeded. Mr Hardy suggested that the Court should not refuse orders to Mr Abeyratne on the basis of the financial position of Mr Trkulja. But, in my view, it would be unreal to limit consideration to the position of Mr Abeyratne and not take into account the capacity of Mr Trkulja to pay the costs of the proceeding when the only purpose for seeking the orders is to allow Mr Abeyratne to assign the causes of action to Mr Trkulja.”
It is sufficient to note that in an application of this kind the court does have, as his Honour states, an unfettered discretion in relation to the exercise of its discretion but of course must exercise the discretion with a view to doing justice between the parties.
In my view, a matter of paramount importance in a matter of this kind where there may be complex issues either in relation to the nature of the claim or the extent of damages sought in a claim by a person who is now bankrupt is the issue of the responsibility a trustee has to the creditors. It is appropriate, in my view, that a considered and careful approach be adopted by a trustee when deciding to either prosecute or discontinue pending proceedings. There is no doubt that the pending proceedings have commercial significance to both the applicant and the respondents. I take into account that any period of extended uncertainty would not be in the interests of any party in these proceedings and not be in the interests of the creditors.
However, in my view, in the exercise of my discretion a matter of paramount importance, having regard to the chronology which I have recited, is to give the opportunity to the trustee to make a proper and considered assessment of the proceedings now pending in the interests of creditors. That assessment also happens to be in the interests, in my view, of the respondents who of course are defendants to those pending proceedings. Having regard to the chronology of events and the nature of the claim pending in the Supreme Court and the material to be considered by the Trustee, much of which has been in his possession at least since 22 July 2004, and the issues no doubt which have been conveyed to him and about which he has been aware since approximately the middle of June need some further time for consideration in the proper discharge of the Trustee’s duties and in particular in the proper discharge of his responsibilities to creditors.
I take into account, however, the claimed prejudice by the respondent and in particular the first respondent in his affidavit. I particularly note that there is some prejudice in that the respondents to this application, who are defendants to the proceedings pending in the Supreme Court, reasonably expect some degree of finality in the decision‑making by the applicant in relation to those pending proceedings. Despite the fact that any further delay will cause a degree of uncertainty, I am satisfied that that factor, that prejudicial factor alone is insufficient to persuade me not to exercise my discretion to allow an extension of time.
The next issue is the question of whether or not the two‑month extension of time is reasonable in all the circumstances. Having considered the material before the court and in particular the affidavit material to which reference has already been made, it is clear to me that that material, particularly against the backdrop of the chronology to which I have referred, would not justify an extension of time of the kind requested by the applicant; that is, it would not justify an extension of time for a period of two months.
I note that the proceedings will be returning to the Supreme Court on 13 August 2004. It will be a matter of that court to decide what further action will be taken and/or directions made in those proceedings.
It is of course a matter for this court sitting as a court in bankruptcy to determine the duration of time within which the applicant should make a decision as to whether or not the proceedings shall be discontinued or prosecuted. I take into account the period of delay that has already occurred in this matter but also take into account the material which has to be properly and carefully considered by the trustee. Doing the best I can on the material before me, I am satisfied that the period of time within which the trustee should he allowed to consider the matter should not exceed one month.

I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 9 August 2004