MacMahon v Block

Is there a serious question to be tried? 9 Section 60 of the Bankruptcy Act relevantly provides: (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 a selection 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) In this section action means any civil proceeding, whether at law or in equity. 10 The Commissioner did not dispute for the purpose of this proceeding that proceedings in the AAT are civil proceedings. The question here is whether the proceedings of the bankrupt, Peter, are the same proceedings as the proceedings of his brother. The applicant's contention rejected by the AAT is that by the March directions the various proceedings brought by the two brothers - six in all - were consolidated and became the one proceeding. Thus, he submitted the "action" in this case is the consolidated proceeding, and the AAT's decision to reverse the March directions amounted to a step in the action prohibited by the terms of s 60 subs (2). He relied on the judgment of Young J in John v Neiman Holdings Pty Ltd (1986) 84 FLR 84 (Neiman Holdings) which he argued was "on all fours" with this case, and which was followed by Weinberg J in this Court in McKellar v Container Terminal Management Services Ltd (No 4) [2002] FCA 185, and was cited with approval by Gray J in Re Lofthouse [2001] FCA 25, 107 FCR 151. 11 The AAT distinguished Neiman Holdings. That decision concerned an application for adjournment made by one of two plaintiffs in proceedings instituted in the Equity Division of the New South Wales Supreme Court for rectification of the members' register of the defendant company, restoration of the first plaintiff to his position as a director, and relief under s 320 of the Companies (NSW) Code. The first plaintiff had entered into a deed of assignment within the meaning of s 187 of the Bankruptcy Act, and the trustee under the deed had not yet decided what attitude he would take to the continuation of the proceedings. 12 The second plaintiff sought the adjournment because he wanted to know what the attitude of the first plaintiff's trustee was, and argued that it was only proper that all the claims in the proceeding be heard at the same time. Young J considered the terms of s 60(2) of the Bankruptcy Act noting that no guidance was given in the language of the subsection to the situation where proceedings are commenced by two or more people, one of whom later becomes bankrupt. 13 In that case, the defendant argued that the words "action commenced by a person" means that part of the proceedings which have been commenced by that person so that where, as in that case, there were three claims in the one set of proceedings because they involved common questions of fact and law, only those claims are stayed which are claims made by the bankrupt. His Honour considered that the definition of the word "action" in subs (5) told against that construction. Counsel for the applicant submitted that the Commissioner's argument in this case was "redolent" of the submission of the defendant in Neiman Holdings. In that case Young J concluded at 86: [I]t seems to me inescapable, in view of the presence of subs (5), to read down the words "civil proceedings" as meaning a claim in a civil proceeding or part of a civil proceeding, and thus confining it to the claims which the bankrupt makes, as opposed to the claims that other people may make in the litigation. Indeed, subs 1(b) where it speaks of orders being made in civil proceedings, seems to me to reinforce this view and, of course, there is a contrast in subs (1) with legal process and civil or criminal proceedings. Insofar as the authorities touch on the point they again seem to support this view. Under the old New South Wales legislation cases such as Cohen v Moss (1887) 8 LR(NSW) 156 and Kerle v Smith (1897) 18 LR(NSW) 211 were both cases where the statutory stay was held to apply even though only one of two plaintiffs had become bankrupt. True it is that those cases may have involved actions where there was a joint cause of action, but my view is that in view of subs (5) this is not a material distinction. 14 Senior counsel for the applicant conceded that this case differed from Neiman Holdings in that here each brother had independently commenced his own proceedings, whereas in Neiman Holdings the proceeding was commenced jointly by the two plaintiffs. But he maintained that the difference was not material. If the applicant's point is correct, then the AAT would undoubtedly have made an error of law - Gregory's action would have become stayed by operation of s 60(2). But subs (2) concerns an action (or a civil proceeding) commenced by a person who later becomes bankrupt. Peter did not commence Gregory's proceedings. 15 The mere fact that the various proceedings retained their original matter numbers tells against the submission that they were consolidated and became the one proceeding. Gregory was not added as a party to Peter's applications or Peter to Gregory's and it is difficult to think of any circumstances in which that would be appropriate in this kind of case. The actions commenced by Peter are not Gregory's actions. The evident purpose of s 60(2) is to give the trustee in bankruptcy time to consider whether she or he wishes to prosecute or discontinue the action. Beneficial Insurance Company Ltd v Hamilton (1985) 73 FLR 347 at 348. Nothing the applicant put in argument suggests that the construction for which the applicant contends would promote the purpose or object of the provision. 16 In Neiman Holdings the trustee had an interest in the action because there was only one proceeding albeit that it involved two plaintiffs. Here there have always been six proceedings, three brought by Gregory and three by Peter. The administrative directions that they be heard together, and that evidence in one be evidence in the other, did not transform the multiple actions into one. The AAT in its reasons emphasises that, although the factual matrix of Gregory's applications is "much the same" as the factual matrix of Peter's, "[t]he Gregory applications and the Peter applications constitute two separate sets of applications". 17 No order was made consolidating them. When the submission was made to it, the AAT said that it did not accept that the two sets of applications had been consolidated either "in substance or otherwise". I do not see why or how I should decide otherwise. No argument was raised at the hearing before me to support the first ground unless it is merely another way of putting the second. Ground 4 aside, as the only argument directed to error of law related to the construction of s 60(2), I assume that this is the subject of ground 3. I now move to ground 4. 18 This ground is difficult to understand. Nothing was put to show how continuing with Gregory's applications could have any effect on the "independent processes" of Peter's trustees. The trustees are not parties to this application, did not appear and, I was informed, are as yet unaware of it. Peter's bankruptcy did not result in his trustees taking over Gregory's proceedings. The legal representatives for Gregory do not act for Peter's trustees. I cannot see how any finding made in Gregory's case would affect Peter's. The applicant produced no evidence to indicate, even at a prima facie level, that Peter's trustees have any interest in what happens with Gregory's proceedings. 19 Furthermore, for all we know, the trustees may decide not to pursue Peter's applications. If there was a need in Peter's case to protect the status quo in Gregory's one would expect to hear from the trustees, not from Gregory. The applicant's case that there is a possibility that the decision of the AAT in Gregory's case "might operate as an estoppel to [Peter's trustees] and to the detriment of creditors of the bankrupt estate" is opaque. In argument I was referred to Commonwealth of Australia v Sciacca (1988) 17 FCR 476 which provides no support for it. On the contrary in Sciacca the Full Court in obiter stated at 480: A finding by an administrative tribunal will not give rise to an issue estoppel. 20 If in Gregory's case the tribunal appears to prejudge issues of fact or credit arising in Peter's, then a differently constituted tribunal may hear Peter's case. In any event, as Deane J observed in Nevistic v Minister for Immigration and Ethnic Affairs (1981) 34 ALR 639 at 647, the AAT is not bound to follow its own decisions and "the desire for consistency should not be permitted to submerge the ideal of justice in the individual case". In short, I cannot fathom why the decision to stay Peter's case is a relevant consideration in Gregory's. As the AAT observed in its reasons, had it not directed that the applications be heard together, they would have been heard separately and the only reason they are now not being heard together is that it is no longer convenient to the tribunal. 21 For all these reasons I do not think that there is sufficient likelihood that the points raised by the application will succeed so as to enable me to conclude that there is a serious question to be tried. I should add that there is also doubt about whether the application under s 5 of the ADJR Act is competent. As Mason CJ, with whom Brennan J agreed, held in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 337-8 and I quote: Another essential quality of a reviewable decisionis that it be a substantive determination…If "decision" were to embrace procedural determinations then there would be little scope for review of "conduct", a concept which appears to be essentially procedural in character. To take an example, the refusal by a decision maker of an application for an adjournment in the course of an administrative hearing would not constitute a reviewable decision, being a procedural matter not resolving a substantive issue and lacking the quality of finality. Then it is the "conduct" of the hearing in refusing an adjournment that is the subject of the review. To treat the refusal of the adjournment in this way is more consistent with the concept of "conduct" than with the notion of "decision under an enactment".

Balance of convenience 22 Even if I am wrong in the view I have formed on the first issue, the balance of convenience is against the applicant. The applicant does not suggest that the issue has previously arisen. The point, if it has merit, can be agitated later. The mere fact that there are common issues of fact and law in the brothers' cases does not tip the scales. The applicant argued that he was prejudiced by the AAT's decision but I cannot see it. His junior counsel (who is conducting the proceedings in the AAT) submitted that Peter, who is apparently giving evidence in Gregory's case, would now be a reluctant witness, but there was no evidentiary basis for the submission. Anyway counsel for the Commissioner informed the Court that he did not require either Peter or Gregory for cross-examination (notwithstanding that he had previously done so) and would not object to the tender of any of their sworn statements. 23 There does not appear to be any right Gregory might have that is put in jeopardy by the stay granted in Peter's proceeding or that would be imperilled if the injunction that is sought were not granted. What is more, in relation to the application under s 39B of the Judiciary Act, as a general rule, the Court is most reluctant to interfere with interlocutory decisions of the tribunal that do not finally dispose of the matter before it: cf. WAKN v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1245, 138 FCR 579 per French J at [38]. There is no sufficient reason for doing so in this case.

Conclusion 24 I therefore refuse the application for an interlocutory injunction and I order the applicant to pay the Commissioner's costs. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.