Kok v Commonwealth Development Bank

CATCHWORDS : standing - locus standi - Bankruptcy Act LEGISLATION CITED : Bankruptcy Act 1966 (Cth), s60 Commonwealth Development Bank of Australia Ltd v Kok; In the matter of Kok [2003] FCA 90; Cummings v Claremont Petroleum NL (1996) 185 CLR 124; Faulkner v Bluett (1981) 52 FLR 115; CASES CITED : Fuller v Beach Petroleum NL; Cummings v Beach Petroleum NL (1993) 43 FCR 60; Heath v Tang [1993] 1 WLR 1421; [1993] 4 All ER 694; Kok v Commonwealth Development Bank (Australia) Ltd [2003] FCA 1107; Want v Moss (1889) 10 NSWR (L) 274 PARTIES : Bernard Cornelis Kok - plaintiff/respondent Commonwealth Development Bank of Australia Limited - defendant/applicant FILE NUMBER(S) : SC 13257/2002 COUNSEL : In Person - plaintiff/respondent J. Lanser (sol) - defendant/applicant SOLICITORS : J.K O'Sullivan - defendant/applicant

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

Commonwealth Development Bank of Australia Limited (Defendant)

JUDGMENT 1 Shaw J: In this matter, there is a challenge to the locus standi of the plaintiff to bring an action in the Common Law Division of this Court. 2 The gist of the action is described in an unreported judgment of Kirby J of 13 October 2003. To adopt the language in his Honour's judgment, Mr Kok has commenced an action against the Commonwealth Development Bank (Australia) Limited in the Local Court seeking to set aside the judgment. There was an application heard by the Registrar, and then an appeal to a magistrate who refused to set aside the default judgment which the defendant bank had obtained. There was no dispute that the action commenced in this Court was filed on or about 3 December 2002, and the Order of Sequestration rendering the plaintiff bankrupt was made by the Federal Court on 14 February 2003: Commonwealth Development Bank of Australia Ltd v Kok, in the matter of Kok [2003] FCA 90 per Beaumont J.

3 The defendant, who is the applicant in this motion, has raised the preliminary point that the plaintiff has no standing to bring the proceedings before this Court because he has been made a bankrupt. It has been determined that this question of standing should be determined as a point. As Kirby J said in his judgment: "It seems to me appropriate that the issue should be dealt as a discrete preliminary issue when the matter proceeds." The Bankruptcy Act 1966 (Cth) provides certain constraints upon a person who has become a bankrupt. In particular, s 60(2) provides: an action commenced by a person who subsequently becomes a bankrupt is, on his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action. 4 Some might think that this is an unfair provision, truncating access to the law. Nevertheless, it is the declaration of the Commonwealth Parliament and must be complied with by this Court. Sub-section (3) of the same section goes on to provide that: if the trustee does not make 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. 5 As I apprehend the argument put before me, it was common ground that the trustee indicated an election to discontinue the proceedings before this Court. It is also common ground that in the judgment of Beaumont J, his Honour made a sequestration order against the estate of the present plaintiff: Commonwealth Development Bank of Australia Ltd v Kok, in the matter of Kok [2003] FCA 90. Subsequently, an application for an extension of time to file and serve a notice of appeal against that judgment came before Madgwick J of the same Court and his Honour dismissed that application with costs: Kok v Commonwealth Development Bank (Australia) Ltd [2003] FCA 1107. 6 The High Court of Australia considered these statutory provisions in Cummings v Claremont Petroleum NL (1996) 185 CLR 124. In the judgment of Brennan CJ, Gaudron and McHugh JJ their Honours cited Want v Moss (1899) 10 NSW (L) 274 at 279, the judgment of Manning J in the Full Court of the Supreme Court of NSW staying a proceeding commenced by a bankrupt which was a motion for a rule nisi, in which case his Honour said: In my opinion it would be monstrous if it were not so. It could never have been contemplated that a bankrupt, who can have no means to pay costs if he fails, should be allowed to go and put the plaintiff to trouble and expense …. it is a proceeding at law and is commenced by a bankrupt and as it has now been abandoned by the official assignee, the only person who has any interest in the matter, I am clearly of the opinion that it cannot be allowed to continue.

The Full Court of the Federal Court in the Cummings case: Fuller v Beach Petroleum NL; Cummings v Beach Petroleum NL (1993) 43 FCR 60 which judgment was upheld by the High Court reflected the same policy considerations by saying at 68: It is consistent with the policy of the Act that after sequestration of the estates of unsuccessful litigants the successful party not be put at the risk of sustaining further costs of appellate litigation": 7 In an obvious reflection of the statutory language, the judgment of the High Court, to which I have referred, said at 132: The right of a bankrupt to prosecute proceedings that he has commenced is restricted by s 60(2).

The joint judgment also draws attention to a number of observations of Hoffmann LJ in Heath v Tang [1993] 1 WLR 1421; 4 All ER 694, to the effect that the authorities demonstrated that:

in principle a bankrupt cannot in his own name appeal from a judgment against him which is enforceable only against the estate vested in his trustee.

Their Honours in Cummings went on to say at (137 - 138): So far as a judgment entered in an action against the bankrupt creates or evidences a provable debt, we respectfully agree that the bankrupt has no financial interest which would confer locus standi to appeal in his own name against the judgment. That is because it is fundamental to the law of bankruptcy that the bankrupt is the vested of both his interest in his property and liability for his provable debts. 8 These are the legal principles which I am bound to apply. 9 Against the weight of those principles, Mr Kok, as a litigant in person, has submitted a number of points. Essentially, he has relied upon the provisions of s 60(4). That sub-sections provides: 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 of a member of his or her family.

This sub-section requires the Court to focus on the substantive nature of the proceedings which have been brought. These involve an attack upon the decision of the Magistrate to decline to set aside a default judgment against Mr Kok and alleges that there were legal errors, including a breach of procedural fairness, in that the Magistrate declined to enforce the attendance of the receiver of the partnership for cross-examination. In my view, it is not possible to characterise proceedings of this character as a personal injury or wrong done to the bankrupt or his family and, a fortiori, it cannot be said that the proceedings have anything to do with the death of a member of the family. 10 In these circumstances I am of the view that the reliance by Mr Kok on s 60(4) of the Act is misconceived. In the High Court case, to which I have referred, Cummings, the relevant judgment consisted of an award of damages made by a judge of the Federal Court of Australia based upon breach of fiduciary duty. In that respect, Dawson and Toohey JJ, although dissenting in relation to some aspects of the judgment, said at 148: The judgment does not constitute a 'personal injury or wrong done to the bankrupt'. It may be said that the findings of the conspiracy to the fraud, deceit and contravention to the statutory obligations not to engage in misleading and deceptive conduct affect the appellants. But these are findings in the course of arriving of the orders to be made. Although they affect reputation, they are not themselves a 'personal injury or wrong done to the bankrupt' which could form the basis for a separate cause of action. The judgment is a judgment for a sum of money which cannot be pursued against the appellants save through the machinery of the Act.

11 The next point made by Mr Kok relied upon a passage in Cummings at 142, which referred to s 60(4) as permitting a bankrupt to continue in his own name any action, commenced before he became bankrupt. In that passage reference was made to a judgment of Lockhart J in Faulkner v Bluett (1981) 52 FLR 115 at 119, where his Honour concluded in relation to that particular sub-section: The common thread running through these cases is that where the primary and substantial right of action is direct pecuniary loss to the property or estate of the bankrupt, the right to sue passes to the trustee notwithstanding that it may have produced personal inconvenience to the bankrupt.

In my view, the passage relied upon by the plaintiff is against him. 12 Mr Kok also relied upon the fact that the Order of Sequestration was subsequent to the initiation of proceedings in this Court. However, it seems to me that the language of s 60(2) provides a clear answer to that submission in that it expressly refers to an action commenced by a person who "subsequently" becomes bankrupt. Accordingly, I am of the view that the submission has no substance.

13 Mr Kok apparently has health difficulties. However I believe that various judges of this Court have gone out of their way to accommodate those difficulties and to deal with an unrepresented litigant, including the granting of appropriately a number of adjournments. 14 In short, I believe that the defendant is correct in its submission that Mr Kok has no standing to prosecute his appeal. I am also of the view that there is substance in the submission for the defendant that, in any event, the Magistrate was not in error in declining to require the attendance of the receiver of the partnership for cross-examination on the basis that it is difficult to see that such material could have assisted the establishment of an arguable defence to the Bank's claim. 15 I order that the defendant's application succeeds, the plaintiff has no standing to bring the proceedings. It follows that the appeal must be dismissed with costs.

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