Dubow v Fitness First Australia Pty Ltd Fitness First Australia Pty Ltd v Dubow

Supreme Court of NSW|2011-10-20|Before: Garling J

ex tempore Judgment 1In each of these four matters which are listed to be heard together Ms Dubow, who is the plaintiff in two of them, and the defendant in two of them, makes application for a stay of the proceedings pending a determination by a trustee in bankruptcy of what the trustee's attitude would be to these proceedings.

The application to adjourn the proceedings 2The evidence in support of the application demonstrates that, against what is undoubtedly a complex and intertwined litigation history between Ms Dubow and Fitness First Australia Pty Ltd (FFA), which has taken place in the Local Court of New South Wales, this Court and the Federal Magistrate's Court, on 18 October 2011, Ms Dubow completed, pursuant to s 55(2) Bankruptcy Act 1966 (Cth) an application to become bankrupt. This is commonly known as a debtor's petition. 3The evidence satisfies me that debtor's petition was completed in a standard form and lodged with the Insolvency and Trustee Service of Australia (ITSA). 4The petition was lodged on 18 October 2011. A search conducted on 20 October 2011 of the National Personal Insolvency Index does not record any matter number against the surname of Ms Dubow. However, having regard to the fact that the petition was apparently lodged according to material provided to the Court by Ms Dubow by Express Post, it is entirely logical that insufficient time has elapsed for the petition to be received, examined, endorsed and then recorded on the National Personal Insolvency Index. 5The evidence does not allow me to conclude, as at this morning, that the estate of Ms Dubow has been sequestrated. However, the evidence does allow me to conclude that Ms Dubow has sent the debtor's petition for lodgement and on the probabilities it is likely that her estate will be sequestrated in the very near future.

The submissions of the parties 6Ms Dubow's application for a stay of proceedings was based upon s 60 Bankruptcy Act . As Mr Green's submissions on behalf of FFA have clearly demonstrated, that basis is not available to this Court as a ground for staying the proceedings. 7When confronted with that submission, Ms Dubow reformulated her application to call in aid this Court's inherent jurisdiction not to proceed with a hearing and determination of matters, in circumstances where that hearing and determination would serve no useful purpose in light of what is likely to occur. 8Mr Green, on behalf of FFA, resisted the application that the proceedings not continue today to a full hearing and judgment of the Court. He submitted that the application to engage the bankruptcy jurisdiction was a last minute one, there was no evidence as to why there was any particular need to lodge the debtor's petition at the time it was lodged, and that it was, and should be seen as, an attempt to derail these proceedings. 9He next submitted that the application made by way of a debtor's petition was on the evidence a non-compliant one, and therefore was not likely to be accepted. 10Furthermore, he submitted that the nature of the proceedings before the Court today did not affect any provable debt, and even if, by analogy, s 58 and s 60 of the Bankruptcy Act were available, the courts with jurisdiction under those sections, would not in accordance with those sections, stay these proceedings. 11Finally, counsel for FFA submitted that his clients had incurred cost and expense in preparation for today's hearings and that those costs and expenses would be wasted if the matter did not proceed. 12The evidence indicates that, in addition to the proceedings in this Court, there are also proceedings in the Federal Magistrate's Court. On 10 October 2011 proceedings which were there listed were adjourned, according to the evidence of Ms Dubow, until some time after this Court could hear these proceedings. 13On 13 October 2011, Ms Dubow sent what she says was an offer to FFA which would enable further negotiations to occur to resolve these proceedings. It is apparent from the terms of that offer that on Monday 10 October 2011, Justice Sackville, who was sitting in the Court of Appeal, made some observations to the parties. I do not know what those observations were, but it seems that some observations were made. 14In any event, the email which was said to constitute an offer of 13 October 2011, was met with what seems to be a refusal to engage by the solicitors for FFA. I infer that it was a refusal because the response which acknowledged the receipt of the email does not accept it, nor does it engage in any debate about it or suggest that what was there written was capable of resolving the proceedings. In fact, the response seems to refer to matters entirely outside of the content of that email. 15However one interprets that response, the fact is that on 13 October 2011 there seems to have been some exchange of emails, which might suggest that the parties resolve the proceedings. 16The evidence of Ms Dubow was that, having read that response on 14 October 2011 (which was Friday of last week), she determined on 18 October 2011 (which was Tuesday of this week), that she would lodge her petition. I am not prepared to conclude on the evidence before me that this lodging of the petition was solely with the intention of derailing the current proceedings and was not bona fide. 17For a debtor to file a petition in circumstances where it appears the debtor is a qualified and practising solicitor is a step that is never taken lightly, particularly having regard to potential professional consequences. And, I would not be persuaded that the lodging of the debtor's petition was other than a genuine step taken by Ms Dubow to address her financial situation. 18Whether the application is compliant or not is a matter of whether the application was accompanied by a statement of affairs. I do not think that the absence of a statement of affairs being tendered in this Court without more enables a conclusion to be drawn that the debtor's petition was not compliant. Rather, the position seems to me to be that if there is such a statement that has been lodged, the content of it will be considered by ITSA, and if there is not Ms Dubow will be required by ITSA to provide one.

A central issue in each of the proceedings 19The nature of the four matters in these proceedings carries with it a central consideration, the determination of which will, so it seems to me, dispose, by the making of a variety of different orders depending upon the proceedings, of all of the issues in the proceedings. 20That central issue is whether a deed of release entered into between the parties in November 2010, operates in a way which precludes Ms Dubow claiming an entitlement to a sum of a little over $30,000. This sum is derived from a Certificate Determination of Costs issued on 9 November 2010 in a sum of a little over $28,000, and a Certificate of Determination of Costs, in a sum a little over $3,000 also issued on 9 November 2010. 21As I presently understand it, the principle to be applied in such a determination is that decided by the High Court of Australia in Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112, where the High Court decided that as a matter of legal principle in cases where a defendant, in answer to a plaintiff's claim, seeks to rely upon a general release, the plaintiff's right to relief will depend upon the principle that a releasee must not use the general words of release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction. 22The true purpose of a transaction is ascertained from the nature of the instrument, here the deed, and the surrounding circumstances including the stated knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor. 23A determination of that principal question will result, as I have said, in a determination of what is the state of monetary affairs between Ms Dubow and FFA, that is to say, does FFA owe any money to Ms Dubow in accordance with any certificate of costs to which I have referred, or not. 24As well, each of the parties to the litigation seek orders for the costs of this litigation against each other. To the extent that FFA succeeds in its argument on the interpretation of the deed, in ordinary event by application of the Uniform Civil Procedure Rules with costs following the event, it might be expected that they would obtain a judgment in their favour for costs.

Impact of the proceedings on Ms Dubow's financial position 25It is clear to me that a determination of the central issue and a determination of this litigation will impact either favourably or unfavourably as the case may be, upon the extent, size and content of the estate of Ms Dubow in the event of sequestration. 26That is because of these reasons: First, if Ms Dubow is entitled to uphold the certificates of costs, then FFA will owe her estate a sum of money of a little over $30,000 which would enure to the benefit of all creditors of her estate. That is a matter in which any putative trustee would have a keen interest. 27Secondly, if it be the fact that FFA, succeeds in this litigation, then it would be entitled in due course on the probabilities to prove a debt in respect of the legal costs accumulated, either to date or as a consequence of this hearing. That may impact negatively on the interests of the creditors of Ms Dubow's estate.

Discernment 28It is clear in making a determination as to what should happen in these proceedings on the application now made, that I am exercising a discretion which is to be exercised having regard to the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules 2005. 29Rule 2.1 of the UCPR provides that the Court may, at any time, make such orders for the conduct of any proceedings as appear convenient for the just, quick and cheap disposal of the proceedings. 30The provisions of s 56 Civil Procedure Act require a court, when making any order in proceedings, and when applying the rules of court, to give effect to the overriding purpose of the legislation which is " to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings . 31As the High Court of Australia made plain in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175: "When considering questions of adjournment of proceedings it is appropriate to keep in mind not just the interests of the two parties to the proceedings but as well the interests generally of litigants of proceedings before the court." 32It may be accepted, as Mr Green submits, that FFA have incurred costs for the preparation of today. However, that is not the only issue which it is appropriate to include in a determination, it is but one of them. 33The other issues to which I have regard are these: (1)whether there is any real purpose to be served by the Court determining the dispute at this stage in circumstances where, on the probabilities, a trustee in bankruptcy will take control of Ms Dubow's estate in the very near future; (2)whether a continuation of this litigation and the incurring of substantial further costs by hearing and proceeding with this case may affect the interests of other creditors of Ms Dubow's bankrupt estate; and (3)whether any useful purpose would be served by determining the construction of a deed in circumstances where, as is not uncommon, although not inevitable, if a person is made a bankrupt, a trustee in bankruptcy will engage in negotiations with the parties in order to avoid the incurring of unnecessary and significant legal costs by a continuation of litigation. 34Ultimately, the exercise of the discretion is one in which I must seek to do justice to all parties and to act in the interests of justice in the proceedings and in respect of the Court generally. It seems to me that the interests of justice require that these proceedings be adjourned to a date to be fixed. There is simply no point in this Court engaging over the next two days in a hearing and determination of an issue which is likely to become moot in the very near future. 35There is no point in this Court participating in a proceeding which may affect the interests of all of the creditors of Ms Dubow's estate, where their interests are not addressed in the proceedings by the presence of a putative trustee. 36As well, there is every prospect that a trustee will not proceed with a good part of this litigation and may take the view that it is not in the interests of the creditors of the estate of Ms Dubow, upon a sequestration order being made, that any litigation is thereafter engaged in. 37These are all matters which to a degree are matters of speculation, but nevertheless it seems to me that the orderly conduct of the affairs of the estate and the orderly conduct of the affairs of FFA in this litigation require this Court to be in a position of knowing whether or not there is any purpose to be served by hearing and determining these proceedings.

Orders 38Accordingly, I propose to adjourn the hearing of these proceedings to a date for directions only, which I will fix before me on Wednesday 14 December 2011 at 9.30am. I will reserve all questions of costs arising out of today's application and decision. 39I order that within 48 hours of any of the following events occurring, Ms Dubow is to notify the solicitors for Fitness First Australia Pty Ltd by email of the fact of what has occurred. Those events are either (a)the acceptance of the debtor's petition by the official receiver; or (b)the rejection of the debtor's petition by the official receiver; or (c)the endorsing of the debtor's petition by the official receiver and the allocation of a matter number to Ms Dubow's estate.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 November 2011

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