John Emmanuel Rose v Meriton Apartments Pty Ltd and anor

4 It is to be observed that by s 108(a) an application for relief may only be made by a party to the contract that is sought to be declared unfair. From the description contained within the summons in its current form, it is clear that the applicant is not personally a party to either of the contracts that are described. Accordingly, unless the applicant is granted leave to amend, it is arguable that the proceedings have not been validly commenced. The applicant's motion was resisted by the respondents. One of the many matters for consideration is whether, the proceedings having been invalidly commenced, there is, in effect, anything that can be validly amended in the manner sought by the applicant. There is a subsidiary question whether the power and jurisdiction of this Court under s 106 of the Act extends to the variation of a contract so as to add another party to it. 5 There is considerable overlap in the motions brought by the respondents. In order to deal with them I first need to recite some factual background that was established for the purpose of these interlocutory proceedings and that was substantially non-contentious as to the factual circumstances, but not, obviously, as to the effect at law of these matters. 6 On 21 June 2005, some two months after commencing these proceedings, the applicant became a bankrupt for the purposes of the Bankruptcy Act 1966. On 4 January 2006, the solicitors for Owners Corporation wrote to Mr Robert W. Whitton of the firm Lawler Partners who was the applicant's trustee in bankruptcy. The letter directed Mr Whitton's attention to s 60 of the Bankruptcy Act, and in particular subsections (2) and (3) which are in the following terms:

S 60 - Stay of legal proceedings (2) 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. (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. 7 The letter continued: "Please consider this correspondence formal notice of the action for the purposes of s 60 of the proceedings and our formal request as to your election to either prosecute or discontinue the proceedings. Should we not receive a written election from you within 28 days, we will take all necessary steps to dismiss the proceedings with costs against Mr Rose, without any further notice being given to you. Please also be advised that should you elect to prosecute the proceedings, our client reserves all of its rights in relation to alternate interlocutory relief arising from the clear jurisdictional deficiencies and patent lack of merit that the claim displays." 8 Mr Whitton responded to this letter, by letter dated 7 January 2006 in which he stated the following: "As you stated, I am fully aware of the relevant provisions of the Bankruptcy Act. I have sought advice in relation to these proceedings and as a result have assigned the chose in action constituted by the unfair contract proceedings no: 2131 of 2005 to Mr John Rose. I understand that Adrian Barwick of Employment Lawyers acts for Mr Rose in such proceedings." 9 A further letter by the solicitors to Mr Whitton dated 25 January 2006 queried whether the "purported assignment" of the action to Mr Rose took place before the trustee had elected to either prosecute or discontinue the action and suggested that the trustee no longer had the power to either prosecute or discontinue the action by way of any valid election. 10 The notices of motion filed by the respondents in the aggregate raised the following matters for consideration: (1) Whether the trustee in bankruptcy had made a valid election to either prosecute the action himself or discontinue the proceedings within 28 days as required by s 60(2) of the Bankruptcy Act . (2) Whether the proceedings are saved from the operation of s 60 by the provisions of s 60(4) of the Bankruptcy Act . (3) Whether by operation of s 60(3) of that Act the proceedings are deemed to have been abandoned by the trustee in bankruptcy. (4) Whether the purported assignment by the trustee of the proceedings brought under s 106 was valid and permissible within the provisions of the Bankruptcy Act . (5) Whether the applicant had standing under s 108 to commence the proceedings. (6) Whether leave to amend the proceedings could be validly granted by reason of the amendment sought. (7) Whether the proceedings should be dismissed or permanently stayed. (8) Whether the applicant should be required to provide security for costs in the event that the respondents' arguments failed and the proceedings were validly amended. (9) Whether, if the respondents succeeded overall or on any basis to have the proceedings dismissed or permanently stayed, costs should be awarded against either the applicant or his trustee in bankruptcy. 11 For completeness, I add that a copy of the contracts identified in the summons as being the contracts sought to be declared unfair and varied both in the summons and the proposed amended summons were admitted into evidence for the purpose of these interlocutory proceedings. The applicant is not a party to either of those contracts. 12 I now turn to deal with the various issues that I have identified as having been raised in these interlocutory proceedings.

Are the s 106 proceedings caught by the Bankruptcy Act ?

13 It is necessary to consider this matter for two reasons. The first is to ensure that the proceedings are in fact caught by the Bankruptcy Act, otherwise, as will be seen, the provisions of s 60 will not apply to them especially in considering whether the trustee of the applicant was required to elect as to whether they should be continued or abandoned. The other reason for considering this matter relates to the provisions of s 60(4). S 60(4) and (5) are as follows: S 60 - Stay of legal proceedings (4) Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of: (a) any personal injury or wrong done to the bankrupt, his or her spouse or a member of his or her family; or (b) the death of his or her spouse or of a member of his or her family. (4A) Notwithstanding paragraph (1)(b), this section does not empower the Court to stay any proceedings under a proceeds of crime law. (5) In this section, action means any civil proceeding, whether at law or in equity. 14 There has been a substantial consideration of almost all of these matters in the judgment of Schmidt J in this Court in Robyn Smith v Chevelle Development Pty Ltd t/as Snowden Parkes Real Estate Agents and anor [2005] NSWIRComm 109. As I agree with the reasoning of her Honour I shall take the liberty of extracting relevant parts of her Honour's judgment which dealt with proceedings under s 106 of the Industrial Relations Act commenced by an applicant who was an undischarged bankrupt. 15 At paragraph [7] her Honour sets out the relevant provisions of the Bankruptcy Act which I extract below: " [7] Sections 58, 116(1) and 116(2)(g)(i), and the definition of 'property' and 'the property of the bankrupt' in s5 of the Bankruptcy Act , are relevant to the matters which here arise for determination. They relevantly provide:

58 Vesting of property upon bankruptcy - general rule (1) Subject to this Act, where a debtor becomes a bankrupt: (a) the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and (b) after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.

Note: This subsection has a limited application if there are orders in force under the proceeds of crime law: see section 58A.

(2) Where a law of the Commonwealth or of a State or Territory of the Commonwealth requires the transmission of property to be registered and enables the trustee of the estate of a bankrupt to be registered as the owner of any such property that is part of the property of the bankrupt, that property, notwithstanding that it vests in equity in the trustee by virtue of this section, does not so vest at law until the requirements of that law have been complied with. (3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor: (a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or (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.

(4) After a debtor has become a bankrupt, distress for rent shall not be levied or proceeded with against the property of the bankrupt, whether or not the bankrupt is a tenant of the landlord by whom the distress is sought to be levied.

(5) Nothing in this section affects the right of a secured creditor to realize or otherwise deal with his or her security.

(5A) Nothing in this section shall be taken to prevent a creditor from enforcing any remedy against a bankrupt, or against any property of a bankrupt that is not vested in the trustee of the bankrupt, in respect of any liability of the bankrupt under: (a) a maintenance agreement; or (b) a maintenance order; whether entered into or made, as the case may be, before or after thecommencement of thissubsection. (6) In this section, after-acquired property , in relation to a bankrupt, means property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt. 116 Property divisible among creditors

(1) Subject to this Act: (a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; (b) the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge; (c) property that is vested in the trustee of the bankrupt's estate by or under an order under section 139D; and (d) money that is paid to the trustee of the bankrupt's estate under an order under section 139E; is property divisible amongst the creditors of the bankrupt. (2) Subsection (1) does not extend to the following property: ... (g) any right of the bankrupt to recover damages or compensation:

(i) for personal injury or wrong done to the bankrupt, the spouse of the bankrupt or a member of the family of the bankrupt; or " property " means real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident as to any such real or personal property.

"the property of the bankrupt" , in relation to a bankrupt, means: (a) except in subsections 58(3) and (4): (i) the property divisible among the bankrupt's creditors; and (ii) any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt; and

(b) in subsections 58(3) and (4): (i) the property, rights and powers referred to in paragraph (a) of this definition; and (ii) any other property of the bankrupt. " 16 Her Honour concluded that the right of the applicant to bring proceedings under s 106 constituted after acquired property which vested in her trustee under s 58(2) of the Bankruptcy Act which was property divisible among the creditors of the bankrupt and that that property did not fall within the exemption provided for in s 116(2)(g). 17 I set out hereunder [11] to [15] of her Honour's judgment that embody her Honour's reasoning and references to decided authority. "[11] The first crucial question which here requires consideration, is whether or not the right to initiate such proceedings, is property, as defined in the Bankruptcy Act . Given the width of the definition in s5, it seems to me unarguable, that it is. The nature of proceedings brought under s106 has been recently considered. Views as to whether or not the section conferred accrued rights, for the purpose of the provisions of the Interpretation Act 1987, were considered in Kennedy v Contract Solutions [2003] NSWIRComm 158; Bowker v Software Engineers Australia and Ors [2003] NSWIRComm 213; Mullins v Peoplebank Australia Pty Ltd [2003] NSWIRComm 457; Larsen v Ondeo Nalco Australia Pty Ltd [2004] NSWIR Comm 123 and in Aveling v UBS Capital Markets Australia Holdings Ltd [2004] NSWIRComm 261, where the judgment in Kennedy was overruled (see [39]).

[12] That is not, however, the issue which here arises. The definition of property in the Bankruptcy Act includes 'personal property of every description' as well as 'any estate, interest or profit, whether present or future, vested or contingent, arising out of or incidental to any such real or personal property'. Those words are sufficiently wide to capture proceedings such as this, even if the right to commence proceedings under s106 are not accrued rights, for the purpose of the Interpretation Act . As Marks J characterised s106 for example in Larsen , it provides for the conduct of an investigation by the Court as to whether the contract in question was unfair and whether new rights should be granted. Section 108 provides that such orders may be made upon application of various persons or entities, including the parties to the contract in question. The section plainly grants such persons the right to initiate the proceedings - once initiated, the Court must conduct the investigation Marks J described. The question here at issue is whether the provisions of the Bankruptcy Act have displaced Ms Smith's right to commence the proceedings, by vesting them in the trustee.

[13] So seen, it is clear that the characterisation of a claim brought in accordance with ss106 and 108 as involving the exercise of the right to commence proceedings in which the Court will investigate the fairness of the employment contract, shows that it is a right which falls within the definition of property as a 'future ... contingent' interest arising out of or incidental to real or personal property. Relevantly, here the claims in part allege that there were unpaid entitlements arising under various award provisions. Such a claim might be a present interest under the definition of property, were proceedings for recovery of such moneys initiated under other provisions of the Act. However, in these proceedings, the claim advanced is always dependent upon the Court forming the view that the contract is relevantly unfair.

[14] A similar conclusion was reached by Spender J in Clark v Mayne Nickless Ltd t/as Security Express (Unreported, Industrial Relations Court of Australia, 14 May 1996), in relation to proceedings brought under ss127A and 127B and of the Industrial Relations Act 1988 (Cth), (the unfair contract provisions of the legislation), and ss178, 179, 179A and 179B, the provisions dealing with contraventions of awards. At p8, Spender J concluded that the claims, which he had described at p6 as being 'essentially in the nature of claims for non payment of sums which Mayne Nickless is said to have been obliged to pay him', did not fall within the exemption provided by s116(2) of the Bankruptcy Act . In that case, the claims concerned events prior to the bankruptcy, but the proceedings were commenced afterwards. Spender J concluded that it was 'for the trustee in those circumstances to consider whether in the interests of creditors they should be pursued', after referring to observations of Drummond J in Cockerill v Westpac Banking Corporation (Unreported, Federal Court of Australia, 9 March 1992) at p3, that such a bankrupt had no standing to institute the proceedings in his own name, even with the trustees' consent; 'only the trustee had standing to bring such an action'.

[15] In this case, I am satisfied that given the provision made in s58 in respect of after acquired property, no different conclusion may properly flow." 18 Her Honour also dealt with the question whether or not the proceedings under s 106 fell within the exemption provided by s 116(2)(g). Again, I set out extracts from her Honour's judgment and respectfully agree with her Honour's reasoning and conclusion.

"[20] That right became part of the property divisible amongst the applicant's creditors, pursuant to s116(1). The exemption relating to the right to recover damages or compensation for personal injury or wrong done to a bankrupt, provided by s116(2)(g), does not apply to these proceedings. The summons does not assert any claim for compensation for injury to the body, mind or character of the applicant. It is concerned, as I noted, with the alleged unfairness of Ms Smith's employment contract.

[21] This conclusion is consistent with the observations of the Court of Appeal as to the nature of the scheme established by the Bankruptcy Act in Daemar v Industrial Commission of New South Wales and Ors (1988) 12 NSWLR 45, at 50-51: Indeed, it is so notwithstanding the fact that it deprives the bankrupt of important civil rights which he or she would otherwise normally enjoy. It is of the essence of bankruptcy, as provided for by the Act, that property which belongs to the bankrupt, including choses in action (other than those which are specifically exempted) are vested upon bankruptcy in the bankrupt's trustee. The trustee has the charge of the estate of the bankrupt. It is then for the trustee to distribute that property as the Act provides, principally for the benefit of the creditors. To secure the benefits and protections which the Act provides to a debtor, the debtor's status is changed, rights are diminished and property is controlled. It could scarcely be otherwise for if it were, valuable interests which a bankrupt might have, in the form of choses in action would not be caught in the net cast by the very wide language of s 116(1). This would be so despite the specific and limited terms of the exemption in the case of rights to recover damages or compensation provided by s 116(2) and the very purposes of gathering in the bankrupt's property.

[22] The Bankruptcy Act evinces the same intention in respect of after acquired property, subject to limitations which do not here apply. This conclusion is also consistent, I note, with the approach of the Queensland Court of Appeal in Geia v Palm Aboriginal Council [1999] QCA 389, where the claim pursued was for damages for breach of contract, arising, it was alleged, from a failure to give adequate notice of termination. The bankruptcy also occurred prior to the termination of the employment in question. It was held that the proceedings did not fall within the exemption in s116(2) and at [17], it was concluded that the action could not be brought by the bankrupt, it could only be brought by the trustee, because it did not concern a claim for personal services actually rendered before termination of the contract.

[23] The same conclusion follows here, where, in accordance with the statutory scheme, the claim concerns the fairness of the contract of employment, in the respects identified in Ms Smith's summons.

[24] Similar conclusions were reached by Madgwick J in the matter of Pelechowski v NSW Land & Housing Commission [2000] FCA 233, in the context of proceedings to which s60 of the Bankruptcy Act , were relevant. Section 60 gives a trustee a right of election as to the further prosecution of proceedings brought prior to a bankruptcy. The proceedings in question were brought under the illegal termination of employment provisions of the Workplace Relations Act 1966 (Cth). Madgwick J concluded at [5]: There is in reality no claim for anything in the nature of damages which would be "estimated by immediate reference to pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property": see Cox v Journeaux (1935) 52 CLR 713 at 721. The essential element of proceedings for illegal termination of employment under the Workplace Relations Act 1996 (Cth), is that one's economic relations with one's former employer have been disrupted. Those economic relations depend upon contract, or perhaps in the case of a public servant, a statutory relationship, but nevertheless of a contractual or quasi-contractual kind, that is to say, property rights are at the heart of the proceedings. 19 For completeness, I would, in this context, refer also to the discussion of the provisions of s 60(4) in the judgment of the Full Court of the Federal Court of Australia in Cole v Challenge Bank Limited [2002] FCAFC 200. At [11], Gray J said:

"[11] 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." 20 RD Nicholson and Emmett JJ agreed in his Honour's reasons in this regard. 21 On the basis of all of the authorities to which I have been referred, the approach taken is to confine the provisions of s 116(2)(g)(i) and s 60(4) to claims strictly involving personal injury or personal wrong such as defamation. Once the claim may be characterised as being referable to some entitlement associated with property whether personal or real, or whether tangible or intangible, such claims will fall outside both provisions and will therefore become a part of the bankrupt estate. 22 The summons is framed in terms of relief directed to the remuneration of the applicant under or pursuant to the two contracts referred to. On this basis, it is clear that the applicant's proceedings brought under s 106 do not give rise to an action for personal injury or wrong done to the bankrupt. The proceedings therefore fall outside each of the relevant provisions, and are subject to s 60 of the Bankruptcy Act.

Did the trustee in bankruptcy make an election within s 60(2) to prosecute the action? 23 This involves a construction of the terms of the letter from the trustee. That letter does not specifically state that the trustee has elected to prosecute the action. Nevertheless, it would seem to me to be inconsistent with a determination not to proceed with the action that there be a purported assignment of it to the bankrupt applicant. As a matter of construction, I would read the letter, therefore, as electing to prosecute the action. In taking this approach I am mindful that it is consistent with the approach adopted by all members of the Full Federal Court of Australia in Cole v Challenge Bank Limited [2002] FCAFC 200. It is consistent also with the approach adopted by Mason P in the New South Wales Court of Appeal in Baker v Sheridan and anor [2005] NSWCA 408. That is, the courts will endeavour to ascertain the intention of the trustee not only from the language used but from the course of action proposed in determining whether there has been an election to prosecute proceedings. 24 It was submitted on behalf of the respondents that s 60(2) should be construed as being confined to an election made by the trustee that the trustee continue the proceedings and that the subsection should be confined so that it does not apply to circumstances where the proceedings are assigned. 25 It is clear that a trustee in bankruptcy is entitled to assign a cause of action including one that is personal to the bankrupt and not necessarily associated with some entitlement to property or other tangible matter. Indeed, it has been held that an assignment of a bare right of action even though champertous at common law and therefore against public policy is permitted under the Bankruptcy legislation to be effected by a trustee in bankruptcy. This matter was considered in some detail by reference to an extensive array of authorities by Bainton J in the Supreme Court of New South Wales in Cotterill v Bank of Singapore (Australia) Ltd (1995) 37 NSWLR 238. Furthermore, an examination of the mechanism established by the Bankruptcy Act to deal with the property of a bankrupt in the context of the powers of trustees in bankruptcy would mitigate against confining the operation of s 60(2) in the manner contended for by the respondents. 26 Madgwick J in the Federal Court of Australia discussed this matter in Brien v P and E Phontos Pty Ltd (in the Estate of Metchler) [1999] FCA 1072 in the following terms: "[10] The election contemplated by s 60(2) is either "to prosecute or discontinue the action". Alternatively, there may be no election made, in which case there is a deemed abandonment. Thus, there are three possible outcomes for the action: (a) election within the primary or extended time to prosecute, in which case the action remains on foot, (b) election within such time to discontinue, in which case the action will be disposed of in a manner acceptable to the court in which the action is brought, but which, except by conscious decision of that court, will not finally extinguish the underlying cause of action, or (c) no such election, in which case there is a deemed abandonment of the action, which will not require any further steps in such court for its effectuation, although ancillary steps may be taken, for example, to provide for costs. [11] The Act appears at least to contemplate that, upon a bankruptcy occurring, persons who have been sued should not be further troubled by the suit unless the independent trustee has formed the opinion that the action is worth pursuing. The mere act of election will not necessarily and does not of its own force expose the trustee to personal liability for costs. It seems that the "preferable opinion" is that the trustee should be substituted as the plaintiff in the action: Ryan v Hopkinson (1993) 16 FAMLR 659 per Priestley JA. If the trustee cannot procure sufficient indemnities from creditors as to costs, he or she will presumably be unwilling to make the election. Actual further prosecution of the action will, generally, at least be made conditional upon the defendants having an undertaking from someone who is not a bankrupt to meet their costs if the plaintiff should prove unsuccessful, but that is a matter for the court which provides the forum for the action. At best, for the defendant(s) in the action, the Act might therefore be said to contemplate that, by the election, the trustee will present himself or herself to the defendant(s), as a presently non-bankrupt individual, to meet the costs if the action is ultimately unsuccessful. [12] However, there is nothing to stop a trustee, after an election to prosecute the action, from assigning the rights of the bankrupt estate in the action to a third party. The third party may then be substituted as the plaintiff. On such an assignment and substitution, the trustee would have no continuing power to influence the course of the proceedings, except by agreement with the assignee. Thus, the purpose of the Bankruptcy Act is not to assure the defendants in an action begun by a bankrupt that, if the trustee elects to prosecute the action, then he or she will necessarily remain personally available to meet costs or to direct the manner of further prosecution of the action. [13] These considerations affect the meaning to be accorded to the expression "to prosecute" in s 60(2). The phrase cannot mean "to prosecute personally" or "to prosecute under the trustee's direction". Once it is appreciated that the phrase, on the contrary, may include the meaning, "to prosecute or to arrange the prosecution of the action by any assignee who is not a bankrupt", the nature of the election is illuminated. The ability so to elect is obviously not retroactively vitiated by the subsequent assignment of the right to conduct the action in question. [14] Neither, in my opinion, is there any warrant to constrict the notion of an "election" in s 60(2) so as to make it impossible for an assignment which pre-dates the election to take effect. To interpret the notion of the trustee's "election" as the respondents contend is apt to have a number of unfortunate effects. One is to give an unwarranted benefit to the defendants in the action. Another is to disappoint the assignee. A third may be to prevent the bankrupt's estate from retaining either the consideration for the assignment or the rights in the action. Further, it is not the case that upon an assignment of the right to the benefit of a particular action, the trustee is irrevocably disconnected from the action: the trustee might buy back such a right. Had the trustee done so here, then, as I apprehend it, the objection taken could not be sustained. The applicant might, indeed, still do so. It would be odd if the ability to elect could be extinguished and then resurrected in that way. [15] It is apparent, from the trustee's having assigned the right to conduct the action, that it was the trustee's intention that the action should continue. It would be the trustee's implied obligation to the assignee not to fail, except for reasonable cause, to take available steps to make the assignment effective. The Act expressly requires no formality of an election except that it be in writing and implicitly it only requires that such election be communicated to the defendant(s) in the action and to the forum court within a reasonable period or periods. The written assignment in this case may therefore have amounted to an election contemplated by the Act. However, it is unnecessary to decide that question." 27 The observations of Madgwick J were adopted by Mason P in the New South Wales Court of Appeal in Baker v Sheridan, previously referred to. I also respectfully adopt this reasoning. 28 Accordingly, I find that there was, on a prima facie basis, an election constituted by the trustee's letter of 7 January 2006 within the provisions of s 60(2). 29 However, this prima facie election needs to be considered against the background that at the time that the purported election was made by letter of 7 January 2006 the trustee had already purported to assign the chose in action represented by the proceedings by deed of assignment made on 20 December 2005. If the assignment was effective then the trustee would have no power or right to make an election, he having previously assigned any right, title or interest in the proceedings. It is therefore necessary to consider the effectiveness of the purported assignment to the bankrupt. Was the assignment to the bankrupt applicant effective? 30 The respondents asserted that the assignment by the trustee in bankruptcy of the chose in action constituted by these proceedings to the applicant, an undischarged bankrupt, was ineffective at law. I should add that Mr Whitton, the applicant's trustee in bankruptcy, stated that the assignment of the chose in action had been undertaken "for valuable consideration" and had been effected by a deed of assignment made on 20 December 2005. It was further asserted by the trustee that that decision "was made in good faith and in the best interests of the creditors." 31 The principal authority cited by the respondents in aid of this submission was a judgment of Wheeler J in the Supreme Court of Western Australia in Temsign Pty Ltd v Biscen Pty Ltd (1998) 157 ALR 83. 32 In those proceedings, her Honour was also faced with circumstances where a trustee in bankruptcy had purported to assign choses in action constituted by court proceedings to undischarged bankrupts who were some of the plaintiffs in those proceedings. That purported assignment had also been effected prior to any purported election having been made by the trustee under s 60(2) of the Bankruptcy Act. 33 In order to consider her Honour's judgment it is also necessary, for completeness, that I refer to the provisions of s 134 of the Bankruptcy Act. S 134(1)(a) empowers a trustee in bankruptcy to "sell all or any part of the property of the bankrupt." It may be assumed that there is no specific provision in s 134 or elsewhere in the Bankruptcy Act which would have the effect of prohibiting a sale of the property of a bankrupt by the trustee to the bankrupt himself or herself during such period as that person remains a bankrupt. 34 Wheeler J approached the matter in a number of ways by reference to principle, the statutory scheme and its policy and by reference also to decided cases. It is not necessary for the purpose of these reasons for judgment that I review her Honour's judgment in any detail. I respectfully adopt her Honour's approach and reasoning and will attempt, accordingly, to summarise her Honour's conclusions without, hopefully, detracting in any meaningful way from her Honour's overall judgment. 35 Having considered the relevant statutory provisions including in particular ss 58, 116 and 60, her Honour noted the tension between the concept of assignment of a chose in action by a trustee to the bankrupt and the provisions of s 58 dealing with "after acquired property". That is, if a trustee assigns a chose in action to a bankrupt, that chose in action would immediately become after acquired property and vest accordingly in the trustee, creating a circuitous situation. Her Honour also noted that there was an apparent inconsistency in the concept of an assignment of a chose in action by a trustee to a bankrupt that would prime facie be inconsistent with the policy behind s 60. That section, particularly by reference to subsection (4) would appear to restrict the circumstances in which and the ability of a bankrupt to continue to maintain legal proceedings consequent upon bankruptcy. After discussing in some detail the nature of the statutory scheme and its policy by reference to historical matters and earlier authorities, her Honour concluded "If the purpose of s 60 is the protection of other parties from litigation commenced by a bankrupt, in part for the reason that a bankrupt will neither be personally at risk as to costs, nor able to meet an order for costs, a power in the trustee to assign the action to the bankrupt would appear to be contrary to this objective. Similarly, such a power would not appear to promote orderly administration of the estate, nor to assist in removing uncertainty." (At 90). 36 Wheeler J then considered a number of authorities. Principally, these were the proceedings in the Federal Court in what I shall summarise as the Cirillo litigation and an English authority, Kitson, to which I shall shortly refer. Neither of these authorities persuaded her Honour to adopt a different approach to the "in principle" conclusion which her Honour drew from a consideration of the statutory scheme and its policy, namely that the Bankruptcy Act should be construed so as to render a purported assignment of a chose in action by a trustee in bankruptcy to an undischarged bankrupt as ineffective. 37 I shall refer briefly to the Cirillo litigation. The proceedings at first instance came before Branson J in the Federal Court of Australia and are reported as Re Bankrupt Estate of Cirillo Exparte Official Trustee in Bankruptcy (1996) 136 ALR 607. The unsuccessful appeal from her Honour's judgment to the full Federal Court of Australia is reported as Citicorp Australia Ltd v Offical Trustee in Bankruptcy (1996) 141 ALR 667. The facts in those proceedings are, as Wheeler J pointed out in Temsign, relevantly distinguishable from the factual matrix being considered by her Honour and from the factual matrix that applies in these proceedings. In the Cirillo proceedings, a trustee in bankruptcy assigned a cause of action that had vested in the trustee back to the bankrupt, but at a time after the assignee had been discharged from his bankruptcy. There is reference in the judgment of Branson J and of the members of the full Court to the power of a trustee in bankruptcy to authorise a sale to "the bankrupt." There is, however, as I read these judgments, no consideration either expressly or by implication as to whether the undoubted right of assignment under s 134 of the Bankruptcy Act includes a power to sell or assign to a bankrupt who is and remains at the time of the assignment undischarged from his or her bankruptcy. In these circumstances, I would not consider it efficacious to have regard to these judgments for the purpose of resolving this particular issue in these proceedings. 38 There is, however, authority in England that reaches a view contrary to that expressed by Wheeler J. That authority has been followed in Australia by French J in the Federal Court of Australia in Nguyen Exparte Official Trustee in Bankruptcy (1992) 107 ALR 424 and by the English Court of Appeal in Ramsey v Hartley (1977) 1 WLR 686. The authority is Kitson v Hardwick (1872) LR 7 CP 473. Wheeler J referred to both Kitson and Nguyen, and it appears that Ramsey v Hartley was not cited to her Honour. 39 In Kitson, a trustee in bankruptcy had assigned to a bankrupt, whilst he remained a bankrupt, what appears to have been the totality of his property including, relevantly, all causes of action and interests of and thereto. The undischarged bankrupt then commenced proceedings as plaintiff. The defendants demurred, attacking the validity of the assignment. 40 The judgment of the Court was delivered by Willes J, Keating J concurring. Willes J approached the matter by reference to the statutory construction of the Bankruptcy legislation. His Lordship noted a power in the trustee "to sell all the property of the bankrupt…." either by way of auction or private contract. There was nothing in the language used in the legislation to preclude a bankrupt from seeking to acquire property vested in the trustee. Nor, could his Lordship see any policy reason that would preclude a bankrupt from "bidding" to acquire property. His Lordship said, in part at page 478- 9:

"I can conceive many cases in which it would be highly desirable that the bankrupt should have an opportunity of becoming the purchaser of the stock in trade and book debts. Having had much experience in bankruptcy, I have seen the advantage of giving the debtor a chance of getting back the business, especially where it is one which depends upon the personal influence or skill of the individual. In many cases a higher price might be obtained from him than a stranger would be willing to give. We are bound to put the ordinary construction upon the words of the Act, unless the doing so will be manifestly inconsistent and contrary to the general scope and policy of the legislation: and, when the Act says that the trustee may sell the estate to any person, and that any person buying may sue in his own name in respect of it, I see nothing inconsistent or contrary to the policy of the Act in holding that a sale to the bankrupt himself is not even voidable." Willes J dismissed as being overly stringent and unjust an argument that the consequences of the sale to the bankrupt would be one of immediately revesting the chose in action in the trustee, even though "at first sight (this) would seem to be a plausible argument." His Lordship noted that there was some property that was excluded from any claim by a trustee including "proceeds of his manual labour." 41 For myself, I would read the judgment of Willes J as focussing on one aspect only of the consequences of bankruptcy, namely the potential benefit in certain circumstances of allowing a bankrupt to prosecute proceedings or to reacquire a business in which he or she may have some operating expertise. However, in my respectful opinion, this approach ignores the substantive policy considerations underlying the Bankruptcy legislation as a whole. These matter were succinctly summarised by Kirby P, (as his Honour then was) in the New South Wales Court of Appeal in Daemar v Industrial Commission of New South Wales (1988) 79 ALR 591 at 596, as cited by Wheeler J in Temsign. Kirby P said: "(The Act operates) upon the debtor's becoming a bankrupt, to transfer property rights, including certainly the right to sue in respect of claims to property, from the bankrupt to his trustee. This is so, notwithstanding that it involves personal inconvenience to the bankrupt…Indeed, it is so notwithstanding the fact that it deprives the bankrupt of important civil rights which he or she would otherwise normally enjoy. It is of the essence of bankruptcy, as provided for the Act, that property which belongs to the bankrupt, including choses in action…are vested upon the bankruptcy in the bankrupt's trustee. The trustee has the charge of the estate of the bankrupt. It is then for the trustee to distribute that property as the Act provides, principally for the benefit of the creditors. To secure the benefits and protections which the Act provides to a debtor, the debtor's status is changed, rights are diminished and property is controlled. It could scarcely be otherwise for if it were, valuable interests which a bankrupt might have, in the form of choses in action would not be caught in the net cast by the very wide language of s 116(1)." (At 88 - 89) 42 The approach of Willes J ignores the important policy considerations associated with the disabilities attendant upon bankruptcy. Its adoption in the manner contended for in 1872 by Willes J would, in my opinion, undermine the substantive approach to bankruptcy and would ignore the much greater commercial complexities that are attendant upon the conduct of business in the 21st century. 43 The judgment of Willes J was adopted by Megaw, Lawton and Geoffrey Lane LJJ in Ramsey v Hartley, previously referred to. Their Lordships adopted the same approach to construction of the English Bankruptcy legislation and the same approach to policy considerations. Principally, also, their Lordships appear to have been motivated by the fact that the decision in Kitson had been applied in England for over 100 years and there was no reason not to follow it. 44 As I have already indicated, the judgment of Willes J in Kitson was also applied in Nguyen. 45 In her judgment in Temsign, Wheeler J considered Nguyen and in doing so noted that Mr Nguyen had apparently been discharged from bankruptcy at the time that the proceedings came before French J. There was another bankrupt involved in those proceedings but whether she had been discharged from bankruptcy was not clear from the report of the proceedings before French J. Her Honour also noted that French J did not deal with the "revesting question" other than by reference to the judgment of Willes J in Kitson. Her Honour determined not to follow the judgment of French J. 46 That part of the judgment of Wheeler J in Temsign which concluded that the purported assignment to an undischarged bankrupt was invalid was accepted as correct by Madgwick J in Brien and, therefore, by Mason P in Baker. Her Honour's judgment has also been accepted as correct by Bennett J in the Federal Court of Australia in Jambrecina v Official Trustee in Bankruptcy [2003] FCA 1352. (See [30] and [31]). Furthermore, her Honour's judgment and a number of other decisions were considered recently by Federal Magistrate Smith in Pascoe v Official Trustee in Bankruptcy [2006] FMCA 1099 (16 August 2006). His Honour reviewed a number of additional authorities in this area, all of which supported the opinion expressed by Wheeler J in Temsign. 47 Accordingly, there is a not inconsiderable body of authority at single judge level in Australia supportive of the opinion that a trustee in bankruptcy cannot validly assign property of a bankrupt to that bankrupt whilst he or she remains bankrupt. Such a purported assignment is ineffective. 48 There is, however, as I have indicated, a body of opinion in England which expresses a contrary view. That authority is at Court of Appeal level. I am accordingly faced with a dilemma as to whether to defer to authority at Court of Appeal level in England or whether, as a matter of comity, to follow the authorities in Australia. I should state that my own personal preference is to adopt and accept as correct the opinion of Wheeler J in Temsign for the reasons expressed by her Honour. I would add, however, that I would, with respect, not agree with the policy approach of the English decisions to which I have referred and in particular that of Willes J for the reasons that I have previously expressed. That is, the basis upon which Willes J proceeded as accepted by the Court of Appeal in Ramsey focussed attention on one particular aspect of the administration of a bankrupt estate only and failed to have regard to the totality of the circumstances in which the bankruptcy legislation operates including the creation of a legal disability and the protection of third parties from dealings with a bankrupt person. In the Australian context, the English approach fails to have regard to the clear policy referable to the conduct of proceedings contained within s 60 of the Bankruptcy Act, especially as read in conjunction with the provisions of s 58. The power of sale created by s 134 should be tempered accordingly. 49 The standing of decisions of the English Court of Appeal and their impact upon judges in Australia, whether at first instance or at appellant level, was considered in the joint judgment of Mason, Wilson, Deane and Dawson JJ in the High Court of Australia in Cook v Cook (1986) 162 CLR 376. At 390, their Honours said: "In the Full Court of the Supreme Court Matheson J, having expressed the view that the comments of Latham CJ and Dixon J in Joyce's Case in relation to the reduced content of the duty of care were 'only dicta', regarded himself as constrained to accept the reasoning of the majority of the English Court of Appeal in Nettleship v Weston . In support of that approach, his Honour referred to a number of statements in cases in this and other courts in which it has been said that in the absence of controlling authority a State Supreme Court, including a 'Supreme Court on appeal', should, as a general rule, follow decisions of the English Court of Appeal: see, e.g., Public Transport Commission (NSW) v J Murray-More (NSW) Pty Ltd; Viro v The Queen . Whatever may have been the justification for such statements in times when the Judicial Committee of the Privy Council was the ultimate court of appeal or one of the ultimate courts of appeal for this country, those statements should no longer be seen as binding upon Australian courts. The history of this country and of the common law makes it inevitable and desirable that the courts of this country will continue to obtain assistance and guidance from the learning and reasoning of United Kingdom courts just as Australian courts benefit from the learning and reasoning of other great common law courts. Subject, perhaps, to the special position of decisions of the House of Lords given in the period in which appeals lay from this country to the Privy Council, the precedents of other legal systems are not binding and are useful only to the degree of the persuasiveness of their reasoning." (References to footnotes omitted). 50 I conclude that the purported assignment by the trustee of these proceedings to the bankrupt was not permitted by the Bankruptcy Act and was therefore ineffective.

Consequences of ineffective assignment 51 Having concluded that the purported assignment was ineffective, the trustee was then in a position to purport to make an election as required by s 60(2) as contained within his letter of 7 January 2006. I have previously expressed the view that on a prima facie basis that letter constituted an election, albeit one which arguably was made contemporaneously with a reference to the purported assignment to the applicant. In expressing this opinion, I have taken into account the observations of Madgwick J in Brien, particularly those contained within [14] which I have previously extracted. I acknowledge that this is contrary to the approach adopted by Wheeler J in Temsign. In those proceedings the purported assignment, held by her Honour to be ineffective, had occurred prior to the purported election. However, the trustee's letter in Temsign was reflective of a desire on the part of the trustee not to pursue the proceedings because of a lack of funds. There is no such qualification contained in Mr Whitton's letter of 7 January 2006, the relevant contents of which I have previously set out. 52 Having determined that the purported assignment was ineffective, it is now necessary to return to a consideration of the trustee's letter of 7 January 2006. It may be considered, as I have done on a prima facie basis, as constituting an indication to elect to prosecute the action, having in mind the assignment to the bankrupt applicant. It may also be considered, as was contended for by the respondents, as representing solely an intention to assign the proceedings to the bankrupt applicant with no concurrent intention that they be continued to be prosecuted by the trustee. In my opinion, the letter is ambiguous and is capable of being read in either manner. It is unfortunate that this state of affairs has been brought about by the inability of the trustee to express himself with sufficient clarity so as to make his intentions clear. This is especially so as there is a statutory obligation created by s 60 of the Bankruptcy Act to elect to prosecute or discontinue the action. 53 Construing the trustee's letter as best I can in all the circumstances, I approach it on the basis that it does not contain a clear, unconditional election on the part of the trustee to continue the action in his own right absent any assignment to the bankrupt applicant. The preponderance of the tenor of that letter is one which contemplates that the proceedings will be continued by reference to and having regard to the purported assignment. That is, the assignment may be seen as an integral part of any election to proceed contained within that letter. 54 As the authorities make clear, a qualified election, such as making the assignment subject to some form of agreement as to the payment of costs, does not constitute an election for the purposes of s 60(2). In circumstances where any election must be regarded as containing, as an integral component, the assignment to the bankrupt applicant, such assignment being ineffective as I have held, I would not regard the letter of 7 January 2006 as constituting a valid election by the trustee to prosecute these proceedings as required by s 60(2). On this basis, the trustee is deemed to have abandoned these proceedings at the expiry of 28 days after 6 January 2006. 55 It is then necessary to consider the impact of the deemed abandonment of the proceedings by the trustee. As a matter of logic, and in the absence of any matter compelling any alternative consideration, it would seem to follow that the proceedings must be dismissed. Indeed, this is the course taken by Gzell J in the Supreme Court of New South Wales in Voskuilen v Morisset Mega Markets [2005] NSWSC 34, referring in part to Cole v Challenge Bank. I would propose to follow this course. On this ground therefore it would be appropriate for the proceedings to be dismissed. Status of the s 106 proceedings. 56 I have referred to the fact that the applicant is not a party to either of the contracts that collectively are referred to as "the contract" as described in the summons. I have previously set out the provisions of s 108 of the Industrial Relations Act at [3] above.

57 It is clear, as I have previously observed, that only a party to the contract sought to be impugned under s 106 has the standing to commence proceedings. There can be no doubt, based on the manner in which the summons for relief is framed that there is no claim that the applicant is a party to any contract sought to be impugned in the proceedings. Accordingly, the applicant was not entitled to commence the proceedings in his name because of the operation of s 108(a). Nor, does it seem to me, that the applicant is entitled to rely in any way on the provisions of s 108(b). That subsection operates on the basis that an order has been made removing a party to a contract. It only applies to a person who was a party to the contract prior to and "but for" the making of an order under s 106. It cannot be used to entitle a person to commence proceedings who is made a party to the contract pursuant to any order. 58 For these reasons, I conclude that the applicant had no standing to commence the proceedings in his name. 59 Proceedings commenced by a person with no standing to commence them are a nullity. If authority be needed for such a fundamental proposition, I refer to the judgment of the Full Court of the Federal Court of Australia in Byers v Overton Investment Pty Ltd [2001] FCA 760. Those appeal proceedings concerned proceedings commenced by a person who purported to be the legal personal representative of a deceased estate but who was not. Although the plaintiff subsequently became competent to maintain the proceedings consequent upon a later grant of probate, it was held that she was not so competent at the time that the proceedings were commenced, that there was no statutory relation back period which saved the proceedings and that they were a nullity and that it had been correct to dismiss them accordingly. I refer also to Michail Distribution Service Pty Ltd v Australia Post [2004] NSWIRComm 235 in which I discussed relevant authorities with respect to proceedings instituted by a corporation which was not registered at the time that the proceedings were commenced. Based on the authorities referred to, I held that they were a nullity and that being a nullity there was no power in the Court to adjourn them whether to enable the applicant to amend or otherwise. They were dismissed accordingly. 60 Here, the applicant has no standing as an undischarged bankrupt to continue the proceedings in his own name as an assignee of the chose in action constituted by the proceedings. Furthermore, he is not a party to the contract sought to be impugned. The proceedings are therefore a nullity and they should be dismissed accordingly.

The applicant's motion to amend the summons. 61 As I have previously indicated, the applicant has moved the Court to amend the summons. The amendment sought is that orders be made "making the applicant a party to the contract" with each of the first and second respondents. 62 There must be grave doubt about whether this Court is entitled under s 106 of the Industrial Relations Act to grant relief at the suit of a person who is not party to a contract for a contract found to be unfair to be varied so as to make that person a party. Any relief granted under s 106 by way of variation of a contract must be directed to relieving any unfairness found to exist. There is no assertion contained in the proposed amended summons for relief that would justify any consideration as to why the applicant should be made a party to the contracts other than an assertion that he personally lost the benefit of monies which he invested in a company and by reason of "the personal loss of financial benefit" which he suffered because of the alleged unfairness of the contract. 63 I agree in general terms with the observations of Boland J in this Court in Gough and Gilmore Holdings Pty Ltd v Caterpillar of Australia [2001] NSWIRComm 92 at [43] doubting the ability of this Court to vary a contract by adding a party. 64 In any event, I have already concluded that the proceedings are a nullity. On this basis, there is nothing to be amended and the proceedings should be dismissed.

The applicant's request to make oral submissions 65 During the course of the proceedings on 12 September 2006, counsel for each of the respondents handed up written submissions. Counsel for the applicant then indicated that he had only recently come into the proceedings and requested time in which to prepare written submissions. I acceded to this request. Those submissions were received on 21 September 2006. At the conclusion of the written submissions, counsel indicated that the applicant sought an opportunity to "speak to these submissions in argument before the Court." Each of the respondents has replied to the applicant's written submissions. 66 Having regard to the fact that the hearing of the notices of motion had been set down for some considerable time and bearing in mind also that the applicant's counsel was afforded an opportunity of making written submissions, which he has done, I am not prepared to allow the parties any further opportunity to speak orally to the written submissions. The factual material was relatively uncontroversial and all of the parties have had an opportunity of exploring and making submissions about the various matters of legal principle involved in the proceedings. For these reasons, I decline the applicant's request. Costs 67 The parties have asked that I defer dealing with costs and I shall accede to this request.

Orders 68 For the reasons that I have given, I make the following orders: (1) The applicant's motion to amend the proceedings is dismissed. (2) The summons is dismissed. (3) Costs are reserved. (4) Liberty to apply with respect to costs which should be exercised within one month of this date.

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