Abi-Rizk v BB Dundas Pty Ltd atf the BB Dundas Trust (No 2)

Legislation Cited: Bankruptcy Act 1966 (Cth) ss 5, 27, 58, 82

Cases Cited: Auto Group Ltd v England [2008] NSWSC 402
Carantinos v Magafas [2008] NSWCA 304
Coventry v Charter Pacific Corporation Ltd (2005) 227 CLR 234; [2005] HCA 67
Fraser v Commissioner of Taxation (1996) 69 FCR 99
Gertig v Davies (2003) 85 SASR 226; [2003] SASC 86
Green v Schneller [2001] NSWSC 897
Hancock v Rinehart [2015] NSWSC 646; (2015) 13 ASTLR 1
Iron Mountain Mining Ltd v K & L Gates [2016] WASCA 166
Juul v Northey [2010] NSWCA 211
Kitay v Frigger (No 3) [2020] WASCA 55; (2020) 17 ABC(NS) 400
Morris Finance Ltd v Brown (2017) 252 FCR 557; [2017] FCAFC 97
Re Amazon Pest Control Pty Ltd (No 2) [2016] NSWSC 1590
Technical Products Pty Ltd v State Government Insurance Office (Qld) (1989) 167 CLR 45

Texts Cited: Perry Herzfeld and Thomas Prince, Interpretation (3rd ed, 2024, Lawbook Co)

Category: Procedural rulings

Parties: Antonios Abi-Rizk (First Plaintiff)
Koukab Rizk (Second Plaintiff)
Sonia Rizk (Third Plaintiff)
BB Dundas Pty Ltd (in liq) in its capacity as trustee of the BB Dundas Trust (First Defendant)
Habib Boustany (Second Defendant)
Danny Basseal (Third Defendant)
BB & B Penrith Pty Ltd (Fourth Defendant)

Representation: Counsel:
N Li (Plaintiffs)
Submitting Appearance (First Defendant)
No appearance (Second to Fourth Defendants)
Solicitors:
Solve Legal (Plaintiffs)
Magna Carta Lawyers (First Defendant)
No appearance (Second to Fourth Defendants)

File Number(s): 2020/00063010

Publication restriction: Nil

JUDGMENT

Procedural background

1. The current proceedings, Antonios Abi-Rizk v BB Dundas Pty Ltd in its capacity as Trustee of the BB Dundas Trust, bearing file number 2020/00063010, were listed for hearing before me for four days commencing on Monday, 18 August 2025.

2. On Friday, 15 August 2025, my Associate received emails from the second and third defendants, copying the solicitors for the plaintiffs, in the following terms:

3. from the second defendant:

Dear Associate

I refer to the above matter, and confirm that I am the Second Defendant.

By way of court order, I was declared bankrupt and Bankrupt Trustee appointed. The Trustee appointed is Joshua Philip Taylor of Taylor Insolvency, xxxxx@xxxxx.com.au or xxxxxxxxxx.

I am advised that pursuant to section 58(3) of the Bankruptcy Act 1966, the legal proceedings are stayed, and that I am to refer all future conduct of these Proceedings to the Trustee. I confirm that I have informed the Trustee of these proceedings.

Given the above, I will no longer be participating in these Proceedings, and write this email as a courtesy to the Court.

I have copied in the Plaintiff representatives to this correspondence.

Regards,

Habib Boustany.

2. from the third defendant:

Dear Associate

I refer to the above matter, and confirm that I am the Third Defendant, and was the director of the Fourth Defendant.

I have been declared bankrupt and Bankrupt Trustee appointed. I understand the Trustee appointed is Liam Bailey of O’Brien Palmer, xxxxx@xxxxx.com.au.

I am advised that pursuant to section 58(3) of the Bankruptcy Act 1966, the legal proceedings are stayed, and that I am to refer all future conduct of these Proceedings to the Trustee. I confirm that I have informed the Trustee of these proceedings.

I also confirm that the Fourth Defendant was placed into external administration, and the Court Appointed Liquidators were Richard Albarran and Brent Trevor-Alex Kijurina of Hall Chadwick, xxxxx@xxxxx.com.au; xxxxx@xxxxx.com.au or xxxxxxxx.

I am advised that pursuant to section 100 of the Corporations Act 2001, the legal proceedings are stayed, and that I am to refer all future conduct of these Proceedings to the Liquidators.

Given the above, I will no longer be participating in these Proceedings, and write this email as a courtesy to the Court.

I have copied in the Plaintiff representatives to this correspondence.

Regards,

Danny.

3. At the commencement of the hearing on Monday, 18 August 2025, amongst other things, counsel for the plaintiffs made the following submissions in relation to the emails that had been received and the progression of the proceedings:

LI: … So, it does seem now that the second defendant and the third defendant are both bankrupt and the effect of that is, of course, the moratorium in s 58 of the Bankruptcy Act will apply in relation to proceeding to enforce against them. So, that’s 58 subs (3). Now, I think the difficulty for me is that the proviso in subs (3) subs (b), which provides that leave of the court can be granted, the reference to court - there is a court with jurisdiction in bankruptcy and that doesn’t include this court. So, I can’t seek leave from your Honour or the dispensation in subpar (b).There is still a first defendant, BB Dundas Pty Ltd, which has entered a submitting appearance, and my submission is I’m still competent to proceed against that defendant. There is a further step that I need to convince your Honour about, and that is I acknowledge that if I were to proceed against BB Dundas Pty Ltd, there is probably very little utility, unless I can get something else, because that company has no money and there’s something else that I’d want to convince your Honour to be able to give me, is to require the second and third defendants to render an account. And my submission is one, that order is not an order that is prohibited by the moratorium because it is not an enforcement of any remedy in respect of approvable debt. It’s just an equitable obligation that the fiduciaries to the trust company, so the second and third defendant, I would call them the fiduciaries to the trust company, are obliged to do if your Honour were to order them to do it. And the purpose of that is to enable the one, a finding to be made about the amounts taken out of the trust company in breach of trust and then to enable the trust company to lodge a proof of debt in the estate or the administration of this bankrupt estates of the second and third defendant.

And one reason why I’m troubling your Honour with that step is because we are in a court of equity, and it is appropriate and sensible for this court to be making findings about breaches of equitable obligations and applying maxims of equity, rather than leaving it to the trustee in bankruptcy to determine a proof of debt without the assistance of your Honour’s findings. And in particular, a lot of those maxims relate to not giving the person who has breached their equitable obligations sort of favourable inferences from the absence of evidence. And so that’s another reason why I’m particularly keen for your Honour to proceed with this hearing to make those findings and make an order for an account to be taken so that a net amount can be ascertained and that will prove a useful exercise for the administration of the BB Dundas Trust and also the administration of the bankrupt estates of the second and third defendants. The way that I was intending to proceed was to, one, convince your Honour that we should proceed.

4. Following those oral submissions and further discussion on related issues, I proposed that the plaintiff have 24 hours to prepare written submissions on the issues that had been raised orally, and for the matter to be relisted on Wednesday, 20 August 2025 at 10.00am. Following a brief adjournment, counsel for the plaintiffs indicated that the proposal was agreed to, and I made the orders as proposed.

5. The plaintiffs provided my Associate with a copy of their submissions on 19 August 2025 in accordance with the orders made on 18 August 2025, together with an Affidavit of Kyle Kutasi affirmed 19 August 2025. The submissions addressed the issue of whether the plaintiffs are competent to proceed against the defendants (the Bankruptcy submissions).

6. The subject of this judgment is the issue just mentioned.

7. I have sought to deliver these reasons as expeditiously as possible to give the plaintiffs (and potentially the trustees in bankruptcy of the second and third defendants) as much time as possible to consider what course they will take in light of the conclusions I have reached.

A short background

8. It is necessary to say something brief about what these proceedings are about. The summary below is drawn from the plaintiffs’ written submissions provided on 19 August 2025, along with the written outline of opening submissions provided for the substantive proceedings. What is set out below should not be taken as indicating my acceptance of the factual contentions made by the plaintiffs, nor as any findings of the Court. The summary containing contentions provided by the plaintiffs simply suffices for present purposes. I omit any description of the claim in debt made by the third plaintiff as it has been conceded those claims can no longer run.

9. The first and second plaintiffs (the former of whom the Court had been informed is now deceased) are unit holders and, for that reason, deemed beneficiaries of the “BB Dundas Trust” (the Trust). The first defendant (BB Dundas) is the trustee. The third defendant (Mr Basseal) was a director of the first defendant. The second defendant (Mr Boustany) is alleged to have been the controller of BB Dundas, but that is denied.

10. The proceedings arise out of some agreement between the first and second plaintiff (the precise contents of which are disputed on the pleadings) where the first and second plaintiffs would transfer their residential property in Dundas (the Dundas Property) to a nominee of the second defendant: that nominee was BB Dundas.

11. The material terms of the alleged agreement are these. The first and second plaintiffs agreed to transfer the Dundas Property to BB Dundas. BB Dundas was to pay out the existing mortgagee and ultimately develop the Dundas Property, which was to be subdivided so that two duplexes could be constructed. Ultimately, the first and second plaintiffs were supposed to receive one of the two duplexes constructed, and the defendants were to receive any net profit made on the sale of the other duplex.

12. It is contended that the parties agreed that rather than enter into a joint venture agreement, they would instead pursue this development venture via a unit trust – that is, the Trust. The first and second plaintiffs were to hold 50% of the issued units, and the other 50% were held by another nominee company of Mr Boustany.

13. The Dundas Property was subdivided and developed as contemplated. But the first and second plaintiffs did not receive one of the duplexes they say they were promised. Rather, both duplexes were sold for approximately $1.2 million each. The plaintiffs say they never received any money. I note here that the defendants claimed that the conveyance of one of the duplexes back to the first and second plaintiffs was conditional on the latter persons contributing to the costs of development.

14. The Second Further Amended Statement of Claim seeks a range of relief, on a range of bases, in relation to the alleged failure of BB Dundas, and the second and third defendants to convey one of the duplexes developed back to the first and second plaintiffs.

15. However, the now central complaint made by the plaintiffs against BB Dundas, and the second and third defendants is as to the administration of the Trust. The plaintiffs point to various evidence which they claim demonstrates that there has been a misappropriation of trust property. They say clause 6.3(a) and (b) of the trust deed for the Trust required BB Dundas to, in summary terms:

16. keep complete and accurate records of all receipts and expenditures relating to the money held pursuant to the Trust; and

17. prepare at regular intervals written accounting reports consisting of a statement of income and expenditure, and a list of assets and liabilities.

18. The plaintiffs say those obligations have not been complied with, such that the plaintiffs “do not, even to this day, know what the proper expenses of the [Trust] were and, to the extent that those expenses were less than the proceeds of sale of [the duplexes], where that surplus has gone.”

Can the plaintiffs competently proceed against the defendants?

17. Having regard to the Bankruptcy submissions, the matter now before me concerns whether the plaintiffs are competent to maintain or otherwise take steps in the proceedings against the defendants by reason of the winding up of BB Dundas, and the bankruptcy of the second and third defendants, Mr Boustany and Mr Basseal. The plaintiffs properly do not seek to proceed against the fourth defendant, BB & B Penrith Pty Ltd, which I was told had been deregistered.

18. Though the plaintiffs provided detailed submissions on this, the issue of whether the plaintiffs can maintain proceedings against BB Dundas does not arise. This is because on 29 April 2024, Black J had already granted leave for the plaintiffs to continue these proceedings against BB Dundas. Among other things, his Honour reinstated the registration of BB Dundas pursuant to s 601AH(2) of the Corporations Act 2001 (Cth) for the very purpose of proceeding against it. I raised this with counsel for the plaintiffs and he said he was not aware of any matter which would call into question the continuing force of Black J’s grant of leave.

19. As to the proceedings against the second and third defendants, the plaintiffs argue no leave is required to proceed against these two defendants “where the plaintiffs seek orders only that they render an account of trust property dealt with by them”. This order has not previously been sought in the plaintiffs’ Statement of Claim, and so to the extent that such relief is sought in these proceedings, the plaintiffs ought to have properly sought to amend their pleadings to include this new claim, and to include in any application to the Court the precise terms of any orders sought. I will nonetheless proceed on the basis that this will now be the only relief sought against the second and third defendants.

20. The third plaintiff, on the other hand, accepts that s 58(3) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) prevents her from continuing her debt claim against the second defendant. I was informed that she does not propose to seek leave under s 58(3)(b).

21. For the reasons which follow, the plaintiffs require leave under s 58(3)(b) of the Bankruptcy Act to seek an order of an account of trust property.

Legal principles relating to s 58(3)(b) of the Bankruptcy Act

22. Section 58(3)(b) provides (emphasis added):

58 Vesting of property upon bankruptcy—general rule

…

(3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:

…

(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.

23. The relevant definitions in s 5 are as follows:

creditor, in relation to a liability under a maintenance order, includes the Child Support Registrar referred to in the Child Support (Registration and Collection) Act 1988.

…

debt includes liability.

…

provable debt means a debt or liability that is, under this Act, provable in bankruptcy.

24. Section 82(1) defines what debts are provable in bankruptcy. That subsection provides:

(1) Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.

25. Other subsections of s 82 provide for various debts and liabilities to not be a debt provable in bankruptcy. The potentially relevant carve-out here is that contained in s 82(2), which provides:

(2) Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy.

26. For the purposes of s 82, subsection (8) provides the following inclusive definition of “liability”:

(8) In this section, liability includes:

(a) compensation for work or labour done;

(b) an obligation or possible obligation to pay money or money’s worth on the breach of an express or implied covenant, contract, agreement or undertaking, whether or not the breach occurs, is likely to occur or is capable of occurring, before the discharge of the bankrupt; and

(c) an express or implied engagement, agreement or undertaking, to pay, or capable of resulting in the payment of, money or money’s worth, whether the payment is:

(i) in respect of amount—fixed or unliquidated;

(ii) in respect of time—present or future, or certain or dependent on a contingency; or

(iii) in respect of the manner of valuation—capable of being ascertained by fixed rules or only as matter of opinion.

27. The plaintiffs submit s 58(3)(b) does not apply to prevent the plaintiffs from proceeding, without leave, against the second and third defendants because the only orders now sought against those defendants is an order that they render an account of trust property dealt with by them. The plaintiffs submit that the obligation to render an account, as distinct from an obligation to make restitution of any amounts owing after the taking of an account, should not be taken to meet the description of “debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy” because the obligation to render an account does not itself result in the payment of money. The plaintiffs’ submissions did not otherwise expressly address in detail why these proceedings are not a “legal proceeding in respect of a provable debt”.

28. I note the plaintiffs appear to have conflated s 58(3) and s 60(1)(b) of the Bankruptcy Act. For example, while the plaintiffs referred to both sections in the Bankruptcy submissions, they repeatedly asked the Court not to “stay” these proceedings under s 60(1)(b).

29. Section 60(1)(b) refers to the power of “the Court” to stay legal proceedings against the person or property of the debtor, relevantly, in respect of the non-payment of a provable debt. It appears, however, that “the Court” referred to in s 60(1)(b) is a reference to either the Federal Court of Australia or the Federal Circuit and Family Court of Australia (Division 2). That is because s 5(1) of the Bankruptcy Act defines “the Court” to mean “a Court having jurisdiction in bankruptcy under this Act”, and s 27 gives those courts just mentioned “concurrent jurisdiction in bankruptcy” which is exclusive of all other courts (save for some presently irrelevant exceptions). For those reasons, this Court has no power to make an order to stay the proceedings under s 60(1)(b).

30. In what follows I will proceed with my consideration of the plaintiffs’ Bankruptcy submissions as if they refer to the application of s 58(3) (to the extent they are referable).

31. It is accepted for present purposes the plaintiffs are “creditors” within the meaning of s 58(3)(b) as they claim they are persons to whom a debt or liability is owing from the defendants.

32. The focus of the assessment of whether s 58(3)(b) applies in relation to the plaintiffs’ competency is, thus, whether the plaintiffs are intending to “commence any legal proceeding in respect of a provable debt” or “[taking] any fresh step in such a proceeding”. The latter prohibition is the most immediately relevant.

33. The first question is this: is the claim for an account a “legal proceeding in respect of a provable debt”?

34. My view is that the plaintiffs’ claims are legal proceedings in respect of a provable debt.

35. The breadth of the expression “in respect of” has a “chameleon-like” quality that reflects the context in which it is used: Technical Products Pty Ltd v State Government Insurance Office (Qld) (1989) 167 CLR 45 at 47 (Brennan, Deane and Gaudron JJ). In the context of the Bankruptcy Act, there is authority from the Full Court of the Federal Court that there need only be a “discernible and rational link” between the proceeding and the provable debt to be caught by s 58(3)(b): Morris Finance Ltd v Brown (2017) 252 FCR 557; [2017] FCAFC 97 at [41] (Beach, Markovic and Moshinsky JJ). See also Perry Herzfeld and Thomas Prince, Interpretation (3rd ed, 2024, Lawbook Co) at 101-2 [4.420]. The width of these words in the context of s 58(3)(b) has been a basis for courts to conclude that the nexus between the proceedings in question and the relevant provable debt may indeed be indirect: see, for example, Green v Schneller [2001] NSWSC 897 (Green v Schneller) at [12]-[19] (Barrett J); Fraser v Commissioner of Taxation (1996) 69 FCR 99 at 113F (Beaumont J, Black CJ and Tamberlin J agreeing).

36. As explained above, the plaintiffs are now only seeking orders the second and third defendants render an account.

37. One immediate difficulty I have is that it was not made clear to me where any obligations to account the second and third defendant have comes from.

38. The plaintiffs’ submissions seem to suggest the accounts are to be rendered to BB Dundas. For example, the second and third defendants are described as the “accounting party to BB Dundas” at [48(b)] of the Bankruptcy submissions. Similarly, at the end of its submissions, the plaintiffs urge this Court to “exercise its equitable jurisdiction in relation to … Mr Boustany and Mr Basseal’s obligation to account to BB Dundas”. If the obligation to account is owed to BB Dundas rather than the plaintiffs, what standing the plaintiffs have to seek an account is not evident.

39. Given the allegations that the second and third defendants have misappropriated trust property, the obligation to provide an account to the plaintiffs must come about by reason of the alleged misappropriation. The pleadings do allege that the second and third defendants were knowing assistants to the alleged breaches of trust and fiduciary duties by BB Dundas.

40. For present purposes only, I will assume that the second and third defendants have some obligation to account to the plaintiffs.

41. In my view, the current proceedings are clearly in respect of a provable debt.

42. These proceedings are about the propriety of the defendants’ conduct of affairs in relation to properties in which the plaintiffs might have a beneficial interest. The plaintiffs’ claims against the defendants are in respect of such alleged liability incurred by the defendants before their bankruptcy. This is so regardless of whether the plaintiffs now only seek an “account of administration”, as the plaintiffs call it.

43. Certainly, the plaintiffs’ pleaded case in these proceedings is closely connected with a provable debt. The pleadings claim, amongst other relief, the payment of damages in contract and under the Australian Consumer Law, and several forms of equitable relief. The relief claimed against the second and third defendants specifically is closely connected to the plaintiffs’ assertions that, summarily described, the second and third defendants, as directors of the first defendant, failed to comply with obligations associated with their role in their sale of the duplexes held for the Trust. The fact the plaintiffs have largely abandoned the relief originally sought is, to me, a tacit concession any further proceedings claiming the relief originally sought would be barred by s 58(3)(b) of the Bankruptcy Act (subject to any leave that was sought).

44. However, I need to consider the more specific question of whether the plaintiffs’ claim for an account, on whatever basis, is a proceeding in respect of a provable debt.

45. The plaintiffs submit this is not so because the taking of an account is distinct from the obligation to make restitution of any amounts owing after the taking of an account. They submitted in writing that the obligation to render an account does not result in the payment of money. For example, the Court could order the taking of accounts on the common basis and reserve for further consideration without any order for the payment of any amount (for this, the plaintiffs cited Carantinos v Magafas [2008] NSWCA 304 at [145] (Campbell JA)).

46. The fundamental problem with the plaintiffs’ submissions is that the remedy of an account requires one to prove both that the second and third defendants are accounting parties (which may be assumed for now) and that the plaintiffs are entitled to some (uncertain) sum from the relevant defendants: see Juul v Northey [2010] NSWCA 211 at [185] (McColl JA); Hancock v Rinehart [2015] NSWSC 646; (2015) 13 ASTLR 1 at [338] (Brereton J).

47. Accepting the plaintiffs’ hypothesis that the order for an account itself does not affect the property of the second and third defendants is not enough to show the proceedings are not “in respect of” any provable debts owed to the plaintiffs which would be revealed by the accounts.

48. In Iron Mountain Mining Ltd v K & L Gates [2016] WASCA 166, Martin CJ and Murphy and Mitchell JJA considered that proceedings seeking an order for the assessment of legal costs were clearly connected to a provable debt (here, the liability of the bankrupt, a Mr Zohar, to pay back legal costs that the appellant had paid on his behalf). The key passage of their Honour’s reasons is [45], in which their Honours said (emphasis added):

The phrase “in respect of” in s 58(3)(b) has been given a wide meaning which promotes the purposes of the Act. In the present case the connection between the provable debt and the legal proceedings is clear. The objective purpose of the legislative provision for the assessment of costs is to quantify the legal costs payable by a non-associated third party payer to a client. The practical effect of the certificate of assessment in the present case would be to quantify the amount refundable by Mr Zohar to IMM (at least in relation to costs relating to charges of which he was not convicted, for which IMM says there is no contractual right to a refund) in a manner binding on Mr Zohar and IMM, but not the law practice. That connection is not lost because IMM asserts a subjective purpose of pursuing recovery against the law practice, which is not a purpose provided for in the Legal Profession Act nor a purpose which the assessment is capable of achieving. Recognising such a connection as sufficient promotes the purposes of the Bankruptcy Act, particularly the purpose of ensuring that the assets of Mr Zohar’s estate are not spent on defending legal proceedings. In our view, the proceedings in respect of the assessment application, and this appeal which takes its character from those primary proceedings, are in respect of a provable debt.

49. Reference might also be made to Barrett J’s decision in Green v Schneller, cited earlier in these reasons. There, the creditor sought a declaration under s 37A of the Conveyancing Act 1919 (NSW) to void a transfer of property from the first defendant (the bankrupt) to the second defendant. His Honour reasoned that while a declaration itself is not a “provable debt” (at [13]), because the relief sought was only available where the creditor was owed a debt by the bankrupt, there was a “direct and substantial” relation between the proceedings and the bankrupt’s provable debts.

50. The plaintiffs submitted the following as to what the purpose was of the order for an account they sought:

And the purpose of that is to enable the one, a finding to be made about the amounts taken out of the trust company in breach of trust and then to enable the trust company to lodge a proof of debt in the estate or the administration of this bankrupt estates of the second and third defendant.

And one reason why I’m troubling your Honour with that step is because we are in a court of equity, and it is appropriate and sensible for this court to be making findings about breaches of equitable obligations and applying maxims of equity, rather than leaving it to the trustee in bankruptcy to determine a proof of debt without the assistance of your Honour’s findings.

51. Similar logic to the two cases cited above can be applied here. Whatever the plaintiffs’ purpose may be of wanting to obtain an account from the second and third defendants, the ability to obtain an account from those defendants is intrinsically linked with the debt owed to the plaintiffs that the account would reveal, given the preconditions to an account noted in [46] above.

52. I note for completeness, though it was not squarely dealt with in the submissions, that I do not think s 82(2) of the Bankruptcy Act saves the plaintiffs. While that section provides that demands in the nature of unliquidated damages are not provable debts, there is an exception to that carve out. Namely, demands for unliquidated damages arising “by reason of a contract, promise or breach of trust” are still provable debts.

53. In Coventry v Charter Pacific Corporation Ltd (2005) 227 CLR 234; [2005] HCA 67 (Coventry), Gleeson CJ, Gummow, Hayne and Callinan JJ said at [6] that a statutory claim for unliquidated damages for misleading or deceptive conduct by a bankrupt “which induced the claimant to make a contract with the bankrupt would be a debt provable in bankruptcy.” Their Honours added at [71] that this conclusion was reached because the claims are “claims arising by reason of a contract”.

54. To similar effect and following the High Court’s observations in Coventry, in Auto Group Ltd v England [2008] NSWSC 402, Bryson AJ observed at [6] that it is “well-established” that to consider whether a claim arises “by reason of” a contract, promise or breach of trust requires one to look at the underlying transaction rather than the form of action. His Honour went on to say, at [23], that for that reason, a claim for compensation stemming from breaches of fiduciary duty “which occurred in a contractual context” is a claim which arises by reason of a contract.

55. Applying the same principled reasoning, all of the plaintiffs’ claims in this case, including any order for an account on the basis of misappropriated trust property, ultimately stem from the contractual relationship between the parties concerning the development of the Dundas Property. For that reason, it seems to me that any money to which the plaintiffs might be entitled by reason of an order for an account arises “by reason of a contract”, such that s 82(2) does not apply.

56. It may also be that because any money owed by the second and third defendants to the plaintiffs is closely connected with the first defendant’s alleged breaches of trust, the demand for money here also arises “by reason of” a breach of trust, supplying another reason s 82(2) does not apply.

57. This then takes me to the question of whether the plaintiffs are taking a “fresh step” in this legal proceeding.

58. What is a “fresh step” in proceedings is not defined in the Bankruptcy Act. However, the weight of authority suggests that a fresh step means any step which advances the proceeding towards judgment.

59. In Re Amazon Pest Control Pty Ltd (No 2) [2016] NSWSC 1590, Young AJ said the following (emphasis added):

[6] … [T]here are [two] cases dealing with fresh steps in proceedings decided outside the area of bankruptcy, though both are referred to in the principal bankruptcy practice. These are Deighton v Cockle [1912] 1KB 206 and ANZ Banking Group v Computer Plus [1992] 1 VR 607.

[7] There is no doubt that signing judgment is a fresh step: see Doran v Isaacs (1912) 12 SR (NSW) 699. However, the cases show that the significant date is the date on which the order for judgment is made and a judgment that is entered pursuant to an order that has already been made is not a fresh step: see Deighton’s case at 209 referred to by Wilson J in Australian Broadcasting Commission v Industrial Court (SA) (1985) 159 CLR 536 at 539. In the instant case, the order authorising judgment was made on 1 September and the bankruptcy did not occur until 8 September. There was accordingly no bar to signing judgment.

…

[12] There is some authority for the proposition that fresh step means any step which advances the proceeding towards judgment and Deighton’s case and the ANZ Banking case support that proposition. However, to my mind there may be situations where taking a step in the proceedings after judgment has been entered could be a fresh step. I thought it might be prudent to ask the solicitors for Mr Lakis to give me some assistance on this matter. However, I declined to do that because it seemed to me that the costs in these proceedings were already very high. The chances of there being a recovery did not appear, on the surface, to be that great and I did not wish further expensive research to be done at the client’s expense. It seems to me that the maxim “the greater includes the less” should come into play. On 1 September I authorised judgment for a larger sum than is now sought and I think modifying the judgment to reduce the sum is not taking a fresh step in the proceeding and, accordingly, is not barred by the Bankruptcy Act.

60. In Kitay v Frigger (No 3) [2020] WASCA 55; (2020) 17 ABC(NS) 400 at [39], Buss P and Mitchell JA observed that the concept of a “fresh step” in proceedings under the Bankruptcy Act has been taken to refer to the interlocutory steps in a proceeding, including any step that advances the proceeding toward judgment.

61. In Gertig v Davies (2003) 85 SASR 226; [2003] SASC 86 at [63], Doyle CJ (Mullighan J agreeing) considered that both the oral making of an application, the hearing of the said application, and the making of a decision on the application in that case constituted the taking of a “fresh step”. At [64], his Honour also said that, in the alternative, if the oral making of an application is the only true “fresh step” in the proceeding, then an order pronounced on application by a party should itself be regarded as a “fresh step” in the proceedings by the party (even if the Court is making the order itself). Besanko J agreed in the orders but dissented as to these particular conclusions by Doyle CJ. However, his Honour did make the following comment at [79], in obiter dicta which bears some relevance to this context (emphasis added):

It is not suggested that Mr Gertig [the creditor in this case] must obtain other orders before he can obtain the relevant order. If he did need to do that then an application for such orders may well constitute a fresh step in the proceedings. If, on the other hand, Mr Gertig obtains the relevant order but it transpires that he must secure further orders to obtain the result that he ultimately seeks then any application for such further orders may well constitute a fresh step in the proceeding.

62. I find that the plaintiffs are taking a “fresh step” in a “legal proceeding in respect of a provable debt”.

63. As regards a “fresh step”, and whether a fresh step has sought to be taken by the application “in a legal proceeding in respect of a provable debt”, the applicant argues that the obligation to render an account is distinct from an obligation to make restitution of any amounts owing after the taking of an account. For reasons earlier stated, I do not accept this.

64. What the plaintiffs here seek is essentially to amend their Statement of Claim to include a new form of relief, namely, an order for an account of trust property dealt with by the defendants. This newly sought relief is premised upon the same context and the same set of facts in which the other relief was earlier sought. This context includes the plaintiffs’ assertion that the second and third defendants as the (alleged) controller and di of BB Dundas failed to comply with obligations associated with their role in their sale of properties held by the Trust. This evidently is a “fresh step” in the current proceeding. Alternatively, the “fresh step” would be constituted by me making the order for an account, applying Doyle CJ’s reasoning in Gertig recounted above.

65. Either way, I am satisfied that the plaintiffs are taking a “fresh step” in a proceeding “in respect of a provable debt”.

66. For those reasons, I am of the opinion that leave under s 58(3)(b) of the Bankruptcy Act is required to continue the present proceedings against the second and third defendants. This Court, however, is not a court empowered by Parliament to exercise jurisdiction in bankruptcy and is thus not a court that can grant leave under s 58(3)(b): s 27 of the Bankruptcy Act.

67. I should add, in conclusion, the observation that the bankruptcy in a real sense protects the position of the plaintiffs by putting the power to deal with their finances to the plaintiffs’ detriment beyond the ability of the defendants. What more an accounting could do in a practical sense is not clear.

What should happen next?

68. The plaintiffs’ counsel orally accepted that the utility of proceeding against BB Dundas is extremely limited given it, to use counsel’s words, “has no money”. The plaintiffs contended at [31] of the Bankruptcy submissions (in advancing a case where it was believed leave to proceed against the first defendant was still necessary) that there was still utility in proceeding against the first defendant because it would quantify, for the liquidator, the amount of money that is ultimately payable to the plaintiffs. There seems to be an inherent tension in these submissions.

69. In any event, it does not appear sensible to me to try the case simply against the first defendant at this time. The plaintiffs may wish to seek leave from another court to proceed against the second and third defendants. Against the possibility they successfully take that course, hearing the matter against the first defendant in isolation greatly risks the fragmentation of this matter. Given the centrality of the second and third defendants to the narrative alleged by the plaintiffs, I am not prepared to split up the matter.

70. Additionally, time needs to be given to the plaintiffs to consider whether they do in fact want to seek leave from another court under s 58(3).

71. Finally, I am cognisant of the fact that the trustees in bankruptcy for the second or third defendants have not participated in the issues litigated before me. It is, I think, appropriate to give them the opportunity to consider whether they would like to be heard on any application for leave to proceed.

72. In those circumstances, the only order I will make is to stand the matter over before the Registrar in Equity for further directions.

73. I note the plaintiffs in the Bankruptcy submissions (at [32]) state:

There would be significant costs thrown away (approximately $400,000) if the plaintiffs’ proceedings were to now be permanently stayed on the hypothesis that a liquidator ought to bring proceedings to litigate precisely the same factual and legal issues.

74. Of this submission I note the following matters. First, the Court is not making any determination as to any stay, permanent or otherwise, and has no power to do so under the Bankruptcy Act, as stated above. Second, the decision of the Court, which will have the effect of adjourning the proceedings, has eventuated because of the operation of the Bankruptcy Act*,* where the fact of the bankruptcy of the second and third defendants only became known one working day before the commencement of the hearing. Third, in seeking to progress the matter in the face of these seeming obstacles, the plaintiffs have done so in the context of multiple procedural irregularities, which include the absence of a formal application to amend their pleadings in relation to the relief claimed, but also in relation to the identification of the parties. At the very least, I note Mr Abi-Rizk is still named as the first plaintiff notwithstanding counsel for the plaintiffs has advised the Court he is now deceased.

75. Any adjournment would thus allow the plaintiffs to take any procedural and other steps that are appropriate, which will ensure that, going forward, valuable court time is not spent dealing with irregularities and deficiencies in the plaintiffs’ pleadings, as well as ensuring that any appropriate issues of notice, in particular in relation to the trustees in bankruptcy, are addressed.

Order

76. I make the following order:

77. Stand the matter over to 20 November 2025 before the Registrar in Equity for further directions in relation to the progression of the matter.

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Amendments

21 August 2025

Coversheet and [46] - corrected typographical error.