WILLIAMS v Turco - [2020] WASC 417

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
CITATION:   WILLIAMS -v- TURCO [2020] WASC 417
CORAM:   MASTER SANDERSON
HEARD:   ON THE PAPERS
DELIVERED          :   19 NOVEMBER 2020
PUBLISHED           :   19 NOVEMBER 2020
FILE NO/S:   CIV 1195 of 2020
BETWEEN:   SUELLEN WILLIAMS
Plaintiff

AND

VICTORIO VINCENZO TURCO
First Defendant

TURCO & CO PTY LTD
Second Defendant

Catchwords:

Bankruptcy - Whether trustee elected to pursue action then on foot - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA)
Bankruptcy Act 1966 (Cth)

Result:

Action stayed

Category: B

Representation:

Counsel:

Plaintiff	:	No appearance
First Defendant	:	No appearance
Second Defendant	:	No appearance

Solicitors:

Plaintiff	:	Alan Rumsley
First Defendant	:	GG Legal
Second Defendant	:	GG Legal

Case(s) referred to in decision(s):

Cole v Challenge Bank Limited [2002] FCAFC 200
O'Connor v SP Bray Ltd [1936] 36 SR (NSW) 248
Sargent v ASL Developments Limited (1974) 131 CLR 364

MASTER SANDERSON:

On 11 February 2020 the plaintiff issued a writ on which was indorsed a statement of claim. The plaintiff pleaded that by a deed between the plaintiff, Mario Turco and the defendants dated 14 June 2013, Mario Turco and the defendants agreed to satisfy any and all debt which might be alleged to be owed by the plaintiff to Mortgage Ezy Pty Ltd. On 8 November 2017 a judgment was entered in favour of Mortgage Ezy against Mario Turco and the plaintiff. The plaintiff alleges the defendants failed to satisfy the debt of the plaintiff to Mortgage Ezy as a consequence of which she suffered loss and damage. The plaintiff claims against the defendants for the amount of the debt owed by the plaintiff to Mortgage Ezy.
On 5 March 2020 the defendants applied to strike out the plaintiff's action. The application was effectively an application for summary judgment under O 16 of the Rules of the Supreme Court 1971 (WA). In support of the application the defendants relied upon an affidavit of the first defendant sworn 4 March 2020. In response the plaintiff filed an affidavit sworn 3 April 2020. Matters were then overtaken by events. On 16 June 2020 a sequestration order was made against the plaintiff. The defendants then sought to have the plaintiff's action dismissed.
The plaintiff responded by issuing a summons seeking to have Malcolm Field, the trustee of the bankrupt estate of the plaintiff, joined as a party to these proceedings. A consent of Mr Field was filed. This did not satisfy the defendants. They maintain the action should be dismissed. These reasons deal with that question.
The defendants say that on bankruptcy 'the property of the bankrupt' vests in the trustee in bankruptcy: s 58(1) of the Bankruptcy Act 1966 (Cth) (the Act). By s 5 of the Act this means the property of the bankrupt is divisible among the bankrupt's creditors as provided for in s 116. Any rights and powers in relation to that property that would have been exercisable by the bankrupt but for the bankruptcy vest in the trustee. Section 116(1)(b) of the Act extends this property to include the capacity to exercise rights and to take proceedings for exercising all such powers over and in respect of property. The subject matter of the plaintiff's claims in these proceedings are property which is vested in the trustee in bankruptcy. A bankrupt has no right to prosecute proceedings to protect property of which they have been divested on bankruptcy. None of these matters are contentious and the principles were accepted by counsel for the plaintiff.
Section 60(2) of the Act provides:
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.
Section 60(3) of the Act provides:
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.
It is clear s 60(2) of the Act has a number of elements. First, it requires service by a defendant on the trustee giving notice of the action. Second, if the trustee does not make an election within 28 days after service of the notice then the action is deemed to have been abandoned. This deeming provision is automatic - it is not necessary for the trustee to advise the party who has given notice of the abandonment. It is automatic. Third, the section confers no discretion on the court. There is no scope to extend the time within which the notice must be given. Finally, if there is a deemed abandonment of the proceedings, the stay effected by s 60(2) of the Act continues.
By letter dated 7 August 2020 the defendants wrote to Mr Field giving him notice of the action. There is no dispute between the parties that this notice complied with the requirements of s 60(3) of the Act. On 17 July 2020, Mr Field wrote back to the defendants' solicitors. A copy of this letter appears as attachment VVT7 to the first defendant's affidavit of 7 September 2020. Relevantly, the letter reads as follows:
I refer to your various email correspondence with this office and your letter dated 7 August 2020.
As trustee, I am not personally prosecuting the Action, however, I do support the interest of the Bankrupt to do so, particularly in circumstances where the Bankrupt has an appeal before the court in relation to her sequestration.
Further, I appreciate if I am kept appraised of any material developments that arise in relation to the Action.
The defendants say two things about the second paragraph of the letter. First they say that it is an election as required by s 60(2). Second they say that it is an election not to prosecute the action. The defendants say further if the letter cannot be characterised as an election either to prosecute or discontinue the action then the action is deemed discontinued under s 60(3). Nothing can now be done in the defendants' submission to rescue the position.
In support of their application the defendants relied upon the decision of Cole v Challenge Bank Limited.[1] The decision of the court was given by Gray J and appears to have been delivered ex tempore. On behalf of the court his Honour said:
[1] Cole v Challenge Bank Limited [2002] FCAFC 200 [8] – [15].
On 11 April 2002, the solicitors for the first respondent wrote to the appellants' trustee in bankruptcy, to give notice pursuant to s 60(3) of the Bankruptcy Act. The letter, in referring to the appeal, said:
'We are instructed to request you pursuant to section 60(2) of the Bankruptcy Act to make an election in writing within 28 days whether to prosecute or discontinue the action.'
The letter enclosed consent orders dismissing the appeal with no order as to costs. The trustee in bankruptcy was invited to sign those consent orders. On 29 April 2002, the solicitors for the trustee in bankruptcy responded to that letter. In their letter of that date they said:
"Our client does not intend to pursue the current appeal W507 of 2001 in the Federal Court. He is not a party to the action and cannot sign proposed consent orders. He will simply allow that proceeding to become abandoned by operation of s 60(3) of the Bankruptcy Act."
By notice of motion, filed on 3 May 2001, the first respondent seeks an order that the appeal be dismissed and an order that the appellants pay the respondents' costs of the motion and of the appeal. That motion was made returnable today on the listing of the appeal for hearing. Counsel for the first respondent appeared to move the Court. Counsel for the second respondent has also appeared and moved the Court orally for similar orders.
Section 60 of the Bankruptcy Act plainly applies to a proceeding of this nature. The definition of "action" in subs (5) is broad enough to cover an appeal in a civil proceeding. The appeal, in my view, clearly does not fall within the exception in s 60(4) of the Bankruptcy Act. Although there is reference in the particulars of loss and damage appended to pars 37 and 58 of the substituted statement of claim to loss of business reputation, in my view, that does not give rise to an action for personal injury or wrong done to the bankrupt. There is clearly no allegation in the substituted statement of claim of personal injury or of defamation. Against the second respondent, the claim is in negligence, but that claim was with respect to the alleged failure to conduct properly the administration of a company in which the appellants claimed to have some interest. In my view, it could not be said, even if the appeal were to have proceeded, that it involved any allegation of personal injury or wrong done to the bankrupt. The mere inclusion of loss of business reputation in particulars of loss and damage relating to entirely different causes of action does not make a proceeding one relating to personal injury or wrong done to the bankrupt.
A question arises whether, by the letter of 29 April, the trustee in bankruptcy has elected in writing to discontinue the appeal in terms of s 60(3). The letter itself in the passage I have read seems to be equivocal on that point. In one sentence, the trustee says clearly that he does not intend to pursue the appeal. On the other hand, he seems to regard that statement as not a clear election to discontinue, stating that he will simply allow the proceedings to become abandoned by operation of subs (3).
The trustee has not filed a notice of discontinuance of the appeal in accordance with O 52 r 19 of the Federal Court Rules. In a subsequent letter to the solicitors for the first respondent the solicitors for the trustee in bankruptcy said on 1 May 2002:
"As previously stated, the trustee in bankruptcy does not intend to pursue the current appeal in the Federal Court. If you apply to a judge to have the appeal dismissed then the trustee does not intend to oppose your application or to appear at the hearing. As you are aware, the trustee is not a party to the proceedings."
In my view, the preferable construction of the correspondence is that the trustee in bankruptcy has made an election in writing to discontinue the appeal. The problem is that that has not been followed by any formal discontinuance by notice, which would have put an end to the appeal without the necessity for the appearances today. In my view, in the statement made in the letter of 29 April, the trustee in bankruptcy must be taken to have indicated clearly that he did not intend to continue the appeal against either of the respondents. His election therefore, in my view, is in relation to the entirety of the appeal.
If I am wrong and there has been no election, then the effect of s 60(3) of the Bankruptcy Act is that the trustee has been deemed to have abandoned the appeal. It is clear that notice of the appeal was served upon the trustee in bankruptcy by another party to the appeal. It is sufficient that one other party should serve such notice. I note also that the effect of O 52 r 19 is that if a notice of discontinuance is filed and served an appeal is abandoned.
The position then is clear. If the letter from Mr Field to the defendants' solicitors cannot be construed as an election to pursue the action then the action must be taken to have been abandoned.
Section 60(2) embodies what might be called 'statutory election'. For present purposes it is the same as election at common law. This doctrine was discussed at some length by Jordan CJ in O'Connor v SP Bray Ltd at (257) ‑ (263).[2] It was also considered by Mason J in Sargent v ASL Developments Limited.[3] His Honour said at (655):
A person is said to have a right of election when events occur which enable him to exercise alternative and inconsistent rights, i.e. when he has a right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to insist on the continuation of the estate or the performance of a contract. It matters not whether the right to terminate the contract is conferred by the contract or arises at common law for fundamental breach – in each instance the alternative right to insist on performance creates a right of election.
[2] O'Connor v SP Bray Ltd [1936] 36 SR (NSW) 248.
[3] Sargent v ASL Developments Limited (1974) 131 CLR 364.
Not without some hesitation I have concluded the trustee's letter does not satisfy the requirements of s 60(3). In the letter the trustee does not say that he personally has made a decision to prosecute the action. Remembering that as the property of the bankrupt has vested in the trustee it is only he who can make the decision. So far as it goes the letter does not by its terms indicate the trustee has decided to prosecute the action. The letter cannot be read as an election to discontinue. But no matter how the phrase is tortured the wording simply cannot support a conclusion the trustee has personally decided to prosecute the action.
The action by the plaintiff must be dismissed. If costs are an issue between the parties each party should file short submissions within 7 days of the date of publication of these reasons.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TM
Associate to Master Sanderson
19 NOVEMBER 2020