Wong v Lui

[2008] FMCA 1114

FEDERAL MAGISTRATES COURT OF AUSTRALIA

WONG v LUI & ANOR [2008] FMCA 1114

BANKRUPTCY – Application for leave to proceed in action against a bankrupt – lack of candour in affidavit in support – applicant himself a bankrupt – cause of action vested in his trustee – deemed abandonment of action by trustee – further adjournment refused – application dismissed.

Bankruptcy Act 1966 (Cth), ss.58(3), 58(3)(b), 60(2), 60(3), 116

Britt v Wong [2007] FMCA 791
Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45
Wong v Britt [2007] FCA 1580

Applicant: ANDREW WONG

First Respondent: ANDREW LUI

Second Respondent: JOHN MELLUISH

File Number: SYG 922 of 2008

Judgment of: Smith FM

Hearing date: 29 July 2008

Delivered at: Sydney

Delivered on: 29 July 2008

REPRESENTATION

Counsel for the Applicant: Mr A Crossland

Solicitors for the Applicant: City Law Pty Limited

Counsel for the Respondents: No appearance by or on behalf of the respondents

ORDERS

1. The application is dismissed. 

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 922 of 2008

ANDREW WONG

Applicant

And

ANDREW LUI

First Respondent

JOHN MELLUISH

Second Respondent

REASONS FOR JUDGMENT

(revised from transcript)

1. This is an application filed on 16 April 2008, in which Mr Wong seeks an order under s.58(3)(b) of the Bankruptcy Act 1966 (Cth) giving him leave to commence or take further steps in proceedings filed by him in the Supreme Court of New South Wales against Mr Andrew Lui, being matter 11926 of 2006. A statement of claim in that matter claims damages arising from Mr Lui’s negligence as a solicitor when instructed by Mr Wong to defend proceedings brought against Mr Wong in the District Court in 2001. It is alleged that he failed to do this, that Mr Wong suffered a default judgment for $197,159.01, and that Mr Lui is liable to pay this amount and other losses as damages. Mr Wong appears to hope that this amount can be recovered under Mr Lui’s LawCover insurance policy.

2. The application under s.58(3) named Mr Lui as first respondent and Mr John Melluish as second respondent, Mr Melluish being the trustee of Mr Lui’s bankrupt estate. It is Mr Lui’s bankruptcy on 1 March 2006 which prevents continuance of the Supreme Court proceedings without the leave of a bankruptcy court. No appearance has been filed by either Mr Lui nor Mr Melluish. Correspondence from Mr Melluish states that there are no funds in Mr Lui’s Estate. It is unclear to me whether LawCover have been informed of the present application.

3. The affidavit in support of the application to this Court, sworn by Mr Wong’s solicitor, made no mention that Mr Wong himself is also a bankrupt person. It was fortuitous that I was aware of this fact, because I had made Mr Wong bankrupt on 17 May 2007 on a petition which relied upon his failure to pay the District Court judgment which he now seeks to recover from Mr Lui (see Britt v Wong [2007] FMCA 791). Mr Wong appealed from the sequestration order, but the appeal was unsuccessful (see Wong v Britt [2007] FCA 1580). In the appeal, he was represented by his present solicitor.

4. My judgment and Graham J’s judgment discussed Mr Wong’s opposition to bankruptcy based on his claim that he had a good defence to the debt relied upon in the petition, being the defence that is now alleged not to have been properly put forward by Mr Lui. As my judgment reveals, I was not persuaded that there was evidence supporting an arguable defence with sufficient merit justifying going behind the default judgment relied upon in the petition, and similar opinions had previously been arrived at in the District Court. 

5. The lack of candour in the affidavit in support of the present application is in my opinion sufficient in itself to cause the Court to decline to make the orders sought, since, as I shall explain, Mr Wong’s bankruptcy is very material to the exercise of power under s.58(3)(b). I raised this problem with the legal representative of Mr Wong on the first occasion that this matter came before me. There was no doubt that the legal representatives of Mr Wong in the present application were aware that he was himself a bankrupt person. However, I acceded to requests for a series of adjournments which have continued for several listings of this matter, to allow Mr Wong and his representatives to consider the implications of his being a bankrupt person, and to notify and to attempt to obtain the involvement of his own trustee, who is Mr Aggs.

6. Evidence was presented to me today in support of a further adjournment, showing that there has been correspondence with Mr Aggs seeking to obtain Mr Aggs’ support for the claims against Mr Lui’s bankrupt estate or his insurers.  The affidavit is incomplete as to the correspondence, and it is unclear to me what is the proposition that has been put to Mr Aggs, and the extent to which Mr Aggs has been properly informed of the background to the matter. 

7. What is clear from the correspondence, is that Mr Aggs has been on notice of the litigation in the Supreme Court at least since 21 May 2008, and has not made any election to prosecute the action in accordance with s.60(2) and (3) of the Bankruptcy Act. Under s.60(2) the Supreme Court action was stayed until Mr Aggs made an election in writing whether to prosecute or discontinue the action. Section 60(3) provides:

   (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. 

8. The correspondence before me suggests that Mr Aggs has received such notice from Mr Wong, if not from other parties to the Supreme Court action, and that 28 days has elapsed. Section 60(3) therefore appears to present an insuperable difficulty to the Court giving leave now for the continuance of the proceeding against Mr Lui. In my opinion, such leave would be futile, and therefore should be refused, because the action is deemed to have been abandoned.

9. A further difficulty facing the present application arises from the vesting in his trustee of Mr Wong’s cause of action against Mr Lui, pursuant to s.116 of the Bankruptcy Act (see Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45 at 50). Mr Wong himself therefore has no interest in, nor standing to continue, the Supreme Court proceeding. It would not be a proper exercise of power under s.58(3)(b) to give him leave to continue an action in which he has no interest. The present application has not been brought by his trustee, and there has been no application to join the trustee as the person currently vested with the relevant cause of action. For that reason also I consider the present application to this Court is doomed to fail in the manner that it is presently presented.

10. There have now been four adjournments of this application, to allow Mr Wong to consider and to attempt to rectify all these difficulties.  In my opinion, the current evidence still leaves little prospect that he will ever be able to do so.  I am not satisfied that its continuance is in the interests of the administration of the bankrupt estates of either Mr Liu or Mr Wong.  I therefore do not propose to accede to the application for a further adjournment. 

11. For the reasons which I have indicated above, I am not persuaded to exercise the Court’s power under s.58(3)(b) in the terms sought by Mr Wong. I therefore dismiss his application.

12. I shall make no order as to costs. 

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

Associate:  Lilian Khaw

Date:  8 August 2008