Liristis v Gadelrabb

Automatic abandonment on bankruptcy 2Relevantly for present purposes, s 6 of the Bankruptcy Act provides: "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. 3The section thus provides that an action commenced by a person who subsequently becomes bankrupt is stayed until the trustee makes an election in writing to discontinue the action. The section also envisages that the trustee may not make such an election within 28 days after the notice of action is served, in which case the proceedings are deemed to have been abandoned. 4The trigger for that event is the service of notice of the action. In relation to the proceedings in this Court that would involve service of, at the very least, the application for leave to appeal and the draft notice of appeal, if not the contents of the white book as a whole. It appears that when the sequestration order was originally made the Official Trustee was the trustee of the estate of the bankrupt and the documents which would constitute notice of the action were indeed served on the Official Trustee at the time of his appointment. However, before the 28 days had elapsed the Official Trustee appointed Mr Turner of G S Turner & Co, Chartered Accountants, as the trustee of the estate of the bankrupt. 5Whether or not the 28 day period already triggered continued to run is a matter as to which there appears to be no authority; certainly counsel for the respondent was not aware of any. 6The decision to make an election is a decision vested in the trustee personally. If the trustee changes there are two possibilities. One is that the period continues to run pending a decision by either the initial trustee or the replacement trustee. Alternatively, a further period of 28 days commences to run once the replacement trustee has accepted appointment and has been provided with a copy of the notice of the action or, if the trustee is not immediately provided with a copy of the notice of the action, a new period of 28 days commences to run from the time that the substitute trustee is served with that material. 7The effect of sub-s (3) of s 60 is automatic and determinative of proceedings which are then on foot. It has a significant effect on the interests and rights of the bankrupt person and his or her estate. Indirectly it will have effects on the creditors for whom the trustee must take relevant steps. The importance of the election, which may involve prosecution of the proceedings if the trustee deems fit, is hard to underestimate. Where one trustee has been replaced by another it must be assumed that the power to elect is no longer extant in the first trustee. That a trustee who replaces the first trustee should have an opportunity to make such an election within an appropriate time frame is to be assumed from the structure of the provision. Accordingly, in my view the better interpretation of the section is that the second trustee must then have a period of 28 days within which to make such an election before the automatic effect of sub-s (3) is triggered. However, that trustee must also have notice of the action served upon him or her in order properly to consider what is a personal determination. 8In the present case it appears that the second trustee did not receive the notice of action materials at the time when his appointment took effect. It appears from a letter provided by the solicitor for the new trustee, Ms Sally Nash, that at the time of the appointment Mr Turner was aware of the existence of certain materials because there was, as she put it in her letter of 15 August 2012 (exhibit 4) "mention of a notice under s 60 of the Bankruptcy Act for the Official Trustee to make an election." The fact that it is so referred to leads to the implication that the actual notice had not been provided to Mr Turner. That implication or inference is confirmed by the fact that Ms Nash then sought a copy of the notice together with a copy of the pleadings at first instance and the notice of appeal and the grounds, presumably in relation to the appeal. She then sought an amount to be paid on account to the trustee for the purpose of meeting his costs of considering the request for an election to be made. I am told that that amount was not paid but nothing seems to turn on that for present purposes. 9What then eventuated is to be derived from evidence given by Ms Abood, who is the solicitor having carriage of the matter for the respondent. Ms Abood responded to Ms Nash's request by sending electronically a scanned copy of the material which would have included the material required to be served by way of notice of the action. That material was sent to Ms Nash on 15 August 2012 and the electronic responses indicate that it was received and read no later than 16 August 2012. 10The question which then arises is whether that material was served on the trustee when it was served on Ms Nash. I accept that Ms Nash acted for the trustee at all relevant times and probably still does. Her letter of 15 August confirms that fact and there is no reason to doubt it. 11In the ordinary course it would also be inferred that when she obtained the material she provided it to her client, Mr Turner. However, there is in exhibit 6 correspondence between Mr Liristis and Mr Turner which indicates that as at 18 September 2012 Mr Turner, acting as trustee of the bankrupt's estate, did not have the written material advising of any legal proceedings. That language is inconsistent with him having the documents which would constitute notice of the action. Because it is Mr Turner who must make the election for the purposes of s 60(2) it is to be inferred that he would consider whether or not to make an election if and when he obtained that material. Given his letter to Mr Liristis of 18 September the inference is available that he had not received the material by that date. If he had received the material from Ms Nash when she received it on 16 August then the 28 day period would have expired on or about 14 September. If the period had not commenced by 18 September then clearly the 28 day period would not have elapsed by today. 12I am in real doubt as to whether or not Mr Turner does have the documentation which would constitute the notice of action. If he has it then I would be satisfied that it was served upon him by being provided to the solicitor who was acting for him. However, his statement that he does not have relevant written material in relation to the legal proceedings involving the bankrupt raises doubt in my mind and I am not satisfied on the balance of probabilities that he has that material. I appreciate, and it has been forcefully put by counsel for the respondent, that if the respondent cannot be certain that service is effected by providing the material at her request to the solicitor who is acting for the trustee there may be serious difficulties in the efficient and timely operation of s 60(3) of the Bankruptcy Act. 13As I have indicated, I am prepared to accept that service on the solicitor would prima facie be service on the trustee. However, it is not provided in the Bankruptcy Act that service on an agent for the trustee is sufficient, nor is any reliance placed on any other statutory provision in relation to service. In the circumstances where the trustee has to make a personal decision I am satisfied that the service must bring the documents to the notice of the trustee by allowing copies of them to be obtained by him. That has not happened. I am therefore not satisfied on the balance of probabilities that notice of the action has been served upon the trustee within the 28 day period preceding today. Accordingly, I dismiss the application to dismiss the proceedings on the basis that they are deemed to have been abandoned by the trustee pursuant to s 60(3) of the Bankruptcy Act.

Want of prosecution 14In addition to the application reliant upon s 60(3) of the Bankruptcy Act the respondent also seeks to have the proceedings in this Court dismissed for want of prosecution. For that purpose reliance is placed upon the chronology which in particular involves five applications by the applicant to vacate hearing dates. Those applications were all granted and no review has been instituted of any of those determinations. There is, I am advised, no hearing date presently fixed, nor indeed does counsel seek a hearing date within the next twenty-eight days and possibly for a slightly longer period on the basis that he has foreshadowed that he intends to seek material from Mr Turner in order to establish when notice of action was served upon him. It may be that that date is in the past and it may be that the material will be forthcoming voluntarily; alternatively it may be necessary to issue a subpoena. 15At this stage I do not propose to set a date for the hearing of the leave application as it may well need to be vacated. Nor should the proceedings be dismissed for want of prosecution.

Breach of condition of stay 16In addition counsel seeks to have the stay which I ordered on 20 July 2011 by order 3(c) lifted on the basis that Mr Liristis is in breach of his obligation to pay an occupation fee of $350 per fortnight with respect to the continued occupation of the premises during the stay of the issue of the writ of possession. 17For that purpose the respondent relies upon a document prepared by Ms Abood indicating that two defaults were made in payment of the occupation fee, one in respect of the fee due on 22 June 2012 and the other the fee due and payable on 14 September 2012. The document indicates that payments had been missed on earlier occasions but had been corrected. The document records six missed payments, one of which was duplicated before it was due and the other five of which were repaid approximately one month after the last became due. 18The evidence as to the circumstances of the payments given by Mr Liristis is that the payments are made by automatic deduction from a Commonwealth Bank account operated by him into which are paid Centrelink benefits. After deduction of a number of amounts, the payment from the Commonwealth Bank to the trust account for the respondent is made automatically. On a previous occasion when payments were missed they were repaid according to Mr Liristis because they had been paid by mistake to a different account. 19The explanation for the fees not paid on 22 June and 14 September may or may not be explained by what had happened in the past. Mr Liristis was given notice that the fee paid on 22 June had not been paid, although he denied receiving the email by which that notice was given. The reason that it was missed is therefore presently unexplained. However, Mr Liristis gave an undertaking on oath in the witness box that those two payments would be made good and I accept that undertaking. I am not satisfied that there has been any deliberate failure to pay and it is more likely that the payments were missed without fault of Mr Liristis, although the reasons for the missing payments are presently unexplained. Given the otherwise regular payment of the occupation fees and the intention to maintain payments I do not propose to vary the order made on 20 July 2011 on that basis. 20Mr Liristis must of course understand that the payments must be maintained and if they are not then the matter will no doubt be brought back before me on an urgent basis by the respondent. I should also indicate, as counsel has mentioned, that it is not the responsibility of the solicitor for the respondent to explain when and why or where missed payments have occurred. It is the responsibility of Mr Liristis to maintain a system whereby he is advised by Centrelink when payments are made into the account so that he is able to check that the money is there and is also able to obtain from the Commonwealth Bank information as to payments out of the account, to which information he is entitled as the account holder.

Orders 21Accordingly I make the following orders: (1) Dismiss the application to dismiss the proceedings as abandoned pursuant to s 60(3) of the Bankruptcy Act. (2) Dismiss the application to have the proceedings struck out for want of prosecution. (3) Direct that the application for leave to appeal be heard separately and apart from the proposed appeal. (4) Grant leave to the respondent to apply to the Registrar as a matter of urgency for leave to issue a subpoena or subpoenas as necessary. (5) Grant leave to the respondent to have the application for leave to appeal listed before the Registrar to set a date for hearing. (6) Liberty to apply to bring the matter back before Basten JA for further hearing of the notice of motion filed 24 August 2012. (7) Dismiss the application to lift the stay made on 20 July 2011. (8) Costs in respect of the motion be costs in the leave application.

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: 09 October 2012