Westpac Banking Corporation v Makhoul

[2017] FCCA 460

FEDERAL CIRCUIT COURT OF AUSTRALIA

WESTPAC BANKING CORPORATION v MAKHOUL & ANOR [2017] FCCA 460

Catchwords:
BANKRUPTCY – Bankruptcy Act 1966 (Cth) – Application for leave to proceed with Supreme Court proceeding against discharged bankrupt under s.58(3) of the Act – leave appropriate and granted.

Legislation:

Bankruptcy Act 1966, s.58

Cases cited:

Stoker v Starr [2011] FCA 746

Re McMaster; Ex Parte McMaster (1991) 33 FCR 70

Applicant: WESTPAC BANKING CORPORATION

First Respondent: JOHN JOE MAKHOUL

Second Respondent: NICHOLAS CRAIG MALANOS AS TRUSTEE IN BANKRUPTCY FOR JOHN JOE MAKHOUL

File Number: SYG 3478 of 2016

Judgment of: Judge Dowdy

Hearing date: 10 March 2017

Date of Last Submission: 10 March 2017

Delivered at: Sydney

Delivered on: 10 March 2017

REPRESENTATION

Counsel for the Applicant: Mr S. B. Docker.

Solicitors for the Applicant: Kemp Strang.

The First Respondent appeared in person.

No appearance for the Second Respondent.

THE ORDERS OF THE COURT ARE AS FOLLOWS:

1. Pursuant to s.58(3)(b) of the Bankruptcy Act 1966, grant leave to the applicant, Westpac Banking Corporation, if and insofar as it is necessary, to commence and take fresh steps against the first respondent, Mr John Joe Makhoul in Common Law Division proceeding number 7103 of 2015 in the Possession List of the Supreme Court of New South Wales (proceeding) for debt under a loan agreement and damages for the tort of deceit as contained in prayers 6 and 6(a), and in paragraphs 33 to 39(c) in the draft second further amended statement of claim, a copy of which is annexed to the affidavit of Mr Matthew James Pike, sworn 6 December 2016, or as further subsequently amended by the applicant.

2. For the purposes of order (1), leave to commence the proceeding against Mr Makhoul is to be deemed to have been granted on 18 August 2016.

3. It is a condition of the leave to proceed hereby given that the applicant not take any step to enforce any money judgment or any money order against the first respondent, Mr Makhoul, in the proceeding without the prior leave of this court.

4. The parties have liberty to apply on three days’ notice.

5. Order that the applicant’s costs of this application for leave are to be dealt with and fall under the applicant’s costs in the proceeding as between the applicant and the respondent.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 3478 of 2016

WESTPAC BANKING CORPORATION

Applicant

And

JOHN JOE MAKHOUL

First Respondent

NICHOLAS CRAIG MALANOS AS TRUSTEE IN BANKRUPTCY FOR JOHN JOE MAKHOUL

Second Respondent

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

EX TEMPORE

1. Westpac Banking Corporation presently has on foot as plaintiff proceeding number 7103 of 2015 in the Possession List of the Common Law Division of the Supreme Court of New South Wales which was commenced on 8 January 2015. By application filed in this Court on 8 December 2016, Westpac, as applicant, seeks leave pursuant to section 58(3) of the Bankruptcy Act 1966 to commence and proceed with certain claims against Mr John Joe Makhoul in that Supreme Court proceeding.

2. The details and factual matters of the circumstances concerning that proceeding are sufficiently set forth in the affidavit of Mr Matthew James Pike sworn on 7 December 2016.  Mr Makhoul, who is first respondent to the application, was made bankrupt on 9 May 2008 but discharged by operation of law on 10 May 2011.  I note that the second respondent to the application is Mr Makhoul’s former trustee in bankruptcy.

3. The proceeding in the Supreme Court is of considerable complexity and other defendants include Mr Makhoul’s mother, a Mr Germanos and two other companies.  Westpac’s claim against Mr Makhoul in the Supreme Court proceeding is for a debt incurred by means of alleged fraud and deceit on or about 9 August 2006 pursuant to a loan agreement entered into on or about 5 July 2006.

4. Westpac submits that by reason of the fact that there is a claim in fraud and section 153(2)(b) of the Bankruptcy Act, Mr Makhoul’s discharge from bankruptcy did not release him from the alleged debt. When the proceeding commenced on 8 January 2015, Mr Makhoul was not named as a defendant. He was ultimately named as a defendant in a further amended statement of claim filed in the Supreme Court on 19 August 2016.

5. I consider that in all the circumstances set out in the affidavits that have been read before me that it is appropriate to grant leave under section 58(3). Section 58(3) of the Bankruptcy Act has the purpose of protecting a bankrupt and the property of the bankrupt against the enforcement of actions against him or her, and enables the Court to control proceedings in respect of provable debts.

6. The purposes of the Bankruptcy Act were stated by Hill J in Re McMaster; Ex Parte McMaster (1991) 33 FCR 70 at 72-73 as follows:

   The modern bankruptcy law serves three purposes. The first is to ensure that the assets of the bankrupt are distributed rateably among creditors. The second, which is interrelated with the first, is to ensure that one creditor does not obtain an undue advantage over other creditors. The third is to bring about the discharge of the debtor from future liability for his existing debts, so that the debtor may start afresh …

7. The proceeding in the Supreme Court is reasonably complex, as I have said, and in those circumstances I do not consider that I have to come to a final and concluded view on whether any part of the relief claimed against Mr Makhoul in that Supreme Court proceeding is in respect of a provable debt.  This is because, as Jacobson J explained in Stoker v Starr [2011] FCA 746, a court hearing a section 58(3) application can make an order granting leave insofar as necessary.

8. Further, I consider that it is preferable that the complex facts in the proceeding in the Supreme Court be heard and determined in a court of law with all the added avenues for the exploration of contested facts, rather than by any proof of debt procedure.  Further, Mr Milanos, the former trustee in bankruptcy of Mr Makhoul, neither opposes nor supports Westpac’s application for leave to proceed.  Further, there does not appear to be any prejudice to any creditor of Mr Makhoul’s estate if leave is granted or, indeed, prejudice to any other party.

9. Finally, I do not consider that the fact that leave was not sought prior to filing the original statement of claim to which Mr Makhoul was not joined should militate now against leave being granted.  Accordingly, I consider that overall it is entirely in the interests of justice that leave should be granted and I propose to make the following orders.

   i)Pursuant to s.58(3)(b) of the Bankruptcy Act 1966, grant leave to the applicant, Westpac Banking Corporation, if and insofar as it is necessary, to commence and take fresh steps against the first respondent, Mr John Joe Makhoul in Common Law Division proceeding number 7103 of 2015 in the Possession List of the Supreme Court of New South Wales (proceeding) for debt under a loan agreement and damages for the tort of deceit as contained in prayers 6 and 6(a), and in paragraphs 33 to 39(c) in the draft second further amended statement of claim, a copy of which is annexed to the affidavit of Mr Matthew James Pike, sworn 6 December 2016, or as further subsequently amended by the applicant.

   ii)For the purposes of order (1), leave to commence the proceeding against Mr Makhoul is to be deemed to have been granted on 18 August 2016.

   iii)It is a condition of the leave to proceed hereby given that the applicant not take any step to enforce any money judgment or any money order against the first respondent, Mr Makhoul, in the proceeding without the prior leave of this court.

   iv)The parties have liberty to apply on three days’ notice.

   v)Order that the applicant’s costs of this application for leave are to be dealt with and fall under the applicant’s costs in the proceeding as between the applicant and the respondent.

I certify that the preceding nine (9) paragraphs are a true copy of the reasons for judgment of Judge Dowdy

Date: 10 March 2017