Mateljan v HTT Huntley Heritage Pty Ltd

Judgment

1. THE COURT: By notice of motion filed on 3 June 2015 (the Substitution Motion), as amended on 20 November 2015, Mr John Mateljan seeks an order that he be substituted for Land Enviro Corp Pty Ltd (LEC) as the appellant in proceedings 2012/156726 in this Court (the Appeal Proceedings). The Appeal Proceedings relate to orders made on 27 April 2012, for reasons published on 20 April 2012, [1] by a judge of the Equity Division (the Primary Judge) in proceedings (the Equity Proceedings) brought by LEC, Mr Sam Zdrilic, Mrs Amy Zdrilic and Amy Holdings Pty Ltd (Amy Holdings) against HTT Huntley Heritage Pty Ltd (HTT) and other defendants.
2. The principal questions in the Equity Proceedings were whether LEC, Mr Zdrilic, Mrs Zdrilic and Amy Holdings (the Equity Plaintiffs) had rescinded, or were entitled to have set aside, an agreement entitled "Heads of Agreement" dated 13 May 2004 (the Heads of Agreement) and a deed entitled "Deed of Non-Dilution and Merger" dated 27 August 2004 (the Non-Dilution Deed) and to have orders, made by consent on 6 September 2004 dismissing proceedings 2001/5396 in the Equity Division (the 2001 Proceedings), set aside. LEC brought the 2001 Proceedings against HTT and other defendants in the Equity Proceedings. The orders made on 6 September 2004 were an embodiment of the Heads of Agreement and the Non-Dilution Deed.
3. All of the surviving parties to the Heads of Agreement, the Non-Dilution Deed and the 2001 Proceedings were parties to the Equity Proceedings. One of the questions was whether, assuming the Equity Plaintiffs were entitled to some or all of the other relief claimed, they were entitled to damages. That question of damages directed attention to the likely outcome of the 2001 Proceedings, should they have not been dismissed.
4. The Equity Plaintiffs claimed in the Proceedings that, in reliance on a number of representations that were alleged to have been fraudulent, misleading or deceptive, they entered into the Heads of Agreement and the Non-Dilution Deed and consented to the orders of 6 September 2004. In his reasons, the Primary Judge concluded that the claims by the Equity Plaintiffs should fail. His Honour was not satisfied that the representations pleaded induced the Plaintiffs to enter into the Heads of Agreement or the Non-Dilution Deed or to consent to the orders of 6 September 2004. Therefore, his Honour was not satisfied that they had rescinded or were entitled to rescind either the Heads of Agreement or the Non-Dilution Deed, or to have the orders of 6 September 2004 set aside. [2] Cross-claims had been filed but since the statement of claim was dismissed, the issues raised by the cross-claims did not arise for consideration. Accordingly, the cross-claims were dismissed. [3]
5. The time for filing a notice of appeal from the orders made by the Primary Judge on 27 April 2012 expired on 27 July 2012. [4] No notice of appeal was filed by that time. However, on 8 November 2012, LEC and Mr and Mrs Zdrilic filed a notice of motion seeking leave to extend the time to appeal. That application was dismissed by Allsop P on 21 February 2013 [5] but, on 4 March 2014, the orders made by Allsop P were set aside in so far as they related to (relevantly) HTT and Mr Robert Renshall, the Second Defendant in the Equity Proceedings. [6] The time within which to file a notice of appeal was extended to, and a notice of appeal was filed on, 6 March 2014.
6. Mr and Mrs Zdrilic are now both bankrupts, Amy Holdings is now in liquidation and LEC is also in liquidation. However, Mr Mateljan claims to have become entitled, by way of assignment from LEC, to the benefit of the causes of action that are the subject of the Appeal Proceedings. Hence, he seeks to be substituted for LEC as appellant. The respondents in the Appeal Proceedings oppose the application for substitution. They say that the purported assignment was ineffective for several reasons. Before dealing with those reasons and other impediments to the orders sought in the Substitution Motion, it is desirable to explain the mechanism of the purported assignment and to say something about the insolvencies and the Substitution Motion.

Mechanism of the Assignment

1. By deed dated 19 June 1998, LEC granted a fixed and floating charge in favour of Sam Zdrilic and Amy Zdrilic to secure "a maximum prospective liability" of $2,000,000 plus any unpaid interest and costs of default (the Charge). Clause 19 of the Charge provided that, if an event of default (as defined) happened, Mr and Mrs Zdrilic could enforce the Charge by entering into, seizing, taking possession of, managing or using LEC's property and exercising any one or more of the powers that a receiver may exercise under s 420 of the Corporations Law (now replaced by s 420 of the Corporations Act 2001 (Cth)). In addition, cl 21 of the Charge provided that, if an event of default happened, Mr and Mrs Zdrilic could appoint one or more persons to be receiver and/or manager of any of LEC's property. Clause 21 also provided that, except for any express limitation in the appointment, a receiver could exercise the powers listed in cl 19, as well as any powers that were given to receivers under statute or general law. It appears to have been common ground that an event of default under the Charge occurred.
2. On 25 May 2015, Mr and Mrs Zdrilic executed an instrument entitled "Deed of Appointment of Receiver and Manager" (the Deed of Appointment). The Deed of Appointment recited that LEC had executed the Charge in favour of Mr and Mrs Zdrilic, that the Charge was immediately enforceable and that Mr and Mrs Zdrilic were entitled to appoint a receiver and manager of LEC. By the Deed of Appointment, Mr and Mrs Zdrilic appointed Mr David Iannuzzi (the Receiver) as the receiver and manager of LEC pursuant to the Charge and, by cl 4, Mr Iannuzzi accepted the appointment. Clause 5 provided that the Receiver had all the powers conferred upon receivers and managers appointed under the Charge, including any right, power, authority, discretion, duty or remedy conferred by the Deed of Appointment, any legislation or statutory instrument or any other document or applicable law or in equity.
3. Somewhat curiously, the Deed of Appointment defined the term "Scope" as meaning "the extent and objectives of the Appointment" of the Receiver as receiver and manager, comprising of the following: 1. the purpose and objective of the appointment was to recover the amount owing to Mr and Mrs Zdrilic from LEC; 2. the Receiver was to pursue, in the best way possible, the Appeal Proceedings against HTT and other respondents if possible; 3. the Receiver would work closely with Mr and Mrs Zdrilic in achieving the objective of recovering the amount owing by LEC to Mr and Mrs Zdrilic; 4. the Receiver was not to enter into any contractual agreements or arrangements without the written consent of Mr and Mrs Zdrilic. The term "Scope" does not appear elsewhere in the Deed of Appointment. It is therefore difficult to see how, as HTT contends, the definition would have any bearing on the powers of the Receiver, as receiver and manager of LEC, assuming he was validly appointed. That question is addressed below.
4. On 25 May 2015, a second instrument, entitled "Deed of Assignment", was executed by LEC, as assignor, the Receiver, as receiver and manager of LEC, and Mr Mateljan, as assignee (the Assignment Deed). The Assignment Deed recited that the Receiver had been appointed as receiver of all of LEC's assets (including "the COA's"), that he had determined that LEC did not have sufficient funds to prosecute "the COA's", that he was not willing to take or to cause LEC to take any steps in (relevantly) the Appeal Proceedings and that LEC had offered to assign and Mr Mateljan had agreed to accept all of LEC's right, title and interest in "the COA's". The term "COA's" was defined as: Any and all powers, legal or equitable rights or remedies, benefits, actions, suits, choses in action or causes of action that [LEC] has, or may have, in respect of the facts, matters or circumstances the subject of the Amended Notice of Appeal [filed in the Appeal Proceedings], and/or the [Equity Proceedings and the Appeal Proceedings].
5. By cl 3 of the Assignment Deed, LEC assigned all of its rights, titles and interest in the COAs to Mr Mateljan and Mr Mateljan agreed to accept the assignment of the COAs from LEC in consideration of the payment of the "Assignment Fee" (as defined). The Assignment Deed provided that title to, interest in and risk of the COAs would pass to Mr Mateljan upon entry into of the Assignment Deed and that the Assignment Fee was not refundable under any circumstances. By an amending deed dated 30 October 2015 (the Amending Deed), the definition of 'Assignment Fee' in the Assignment Deed was amended as follows: 'Assignment Fee' means the sum calculated to be the total or part thereof of any Judgement Debt or Settlement Sum, whichever is applicable, up to the maximum amount of $2,000,000 from which the total of the Manager's fees to be the sum calculated as 1% of any Judgement Debt or Settlement Sum, whichever is applicable, but is a minimum of $10,000 and a maximum of $100,000.

The Insolvencies

1. On 18 March 2014, Mr and Mrs Zdrilic had committed an act of bankruptcy by failing to comply with a bankruptcy notice requiring payment of a judgment in the Supreme Court in the sum of $358,588.89. A creditor's petition seeking sequestration of the estates of Mr and Mrs Zdrilic was presented to the Federal Circuit Court of Australia on 20 August 2014. On 27 May 2015, sequestration orders were made on that petition in respect of the estates of both Mr and Mrs Zdrilic by a Registrar of the Federal Circuit Court. Mr Paul Leroy (the Trustee), who is a registered trustee, was appointed trustee of the estates and thereby became their trustee in bankruptcy.
2. On 17 June 2015, Mr and Mrs Zdrilic sought review of the orders made by the Registrar. On 26 November 2015, a judge of the Federal Circuit Court ordered that the application for review be dismissed and that the sequestration orders made in respect of the estates of Mr and Mrs Zdrilic on 27 May 2015 be confirmed. [7] Mr and Mrs Zdrilic have commenced proceedings by way of appeal to the Federal Court of Australia from the orders of the Federal Circuit Court of 26 November 2015.
3. On 17 December 2014, the Federal Court of Australia ordered that LEC be wound up in insolvency. Mr Robert Whitton (the Liquidator) was appointed liquidator of LEC.

The Substitution Motion

1. Mr Mateljan filed the original Substitution Motion on 3 June 2015, and amended it on 20 November 2015. The amendment was to include references to the Amending Deed. By way of the Substitution Motion, Mr Mateljan sought orders that Amy Holdings and Mr and Mrs Zdrilic be deleted as appellants. Subsequently, the Trustee discontinued the Appeal Proceedings in so far as Mr and Mrs Zdrilic were appellants. Further, on 15 June 2015, the appeal by Amy Holdings was dismissed by the Registrar of this Court for failure to comply with a notice under r 13.6 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). The Registrar also ordered on 15 June 2015 that the appeal by LEC be dismissed for non-compliance with a notice under r 13.6.
2. The effect of r 13.6 [8] is that, if there is no attendance by or on behalf of an appellant at a hearing of which the appellant has had due notice, the Court may adjourn the hearing to another date and direct that a notice of the adjournment be served on the appellant advising that the proceedings may be dismissed if there is no attendance at the adjourned hearing. If the appellant is given notice in accordance with that requirement and there is no attendance, the Court may dismiss the proceedings. The Substitution Motion had not been disposed of when the orders were made under r 13.6, and it appears that it was fixed for hearing on 7 December 2015, notwithstanding the dismissal of the Appeal Proceedings under r 13.6.
3. The question presently before the Court is whether Mr Mateljan should be substituted for LEC as the appellant in the Appeal Proceedings. At the hearing of the Substitution Motion, Mr Mateljan appeared without legal representation. However, by leave of the Court, Mr Zdrilic appeared for him, notwithstanding that Mr Zdrilic has no legal qualifications. Mr Zdrilic provided written submissions in support of the Substitution Motion and addressed the Court orally. He relied on affidavits of Mr Mateljan sworn on 28 June 2015, 19 October 2015 and 20 November 2015 and affidavits sworn by himself on 3 June 2015, 24 June 2015 and 28 June 2015.
4. The thrust of the submissions made by Mr Zdrilic on behalf of Mr Mateljan was that the assignment of the COAs was necessitated by the wrongful conduct of HTT and the other parties who were originally respondents to the Appeal Proceedings. That conduct was said to include the misrepresentations relied on in the Equity Proceedings and the taking of steps for the winding up of LEC and the sequestration of the estates of Mr and Mrs Zdrilic. It was said that the winding up and bankruptcies were pursued in order to frustrate the prosecution of the Appeal Proceedings. It is fair to say that, in his submissions on behalf of Mr Mateljan, Mr Zdrilic failed to come to grips with the thrust of the contentions advanced on behalf of the respondents as to why the purported assignment by LEC to Mr Mateljan of the benefit of the Appeal Proceedings was ineffective.
5. In response to the Substitution Motion, HTT contended as follows: 1. Mr and Mrs Zdrilic had no power to appoint the Receiver as receiver of LEC because, at the time that they purported to do so, all of their assets, including any power under the Charge to appoint a receiver, were vested in the Trustee; 2. Alternatively, even if the Receiver was validly appointed as receiver of LEC, he lacked power to cause LEC to give the assignment under the terms of his appointment; 3. In any event, the relevant causes of action in question in the Equity Proceedings and the Appeal Proceedings are incapable of being assigned.
6. It will be convenient to deal separately with each of those contentions. However, there are two issues that are anterior to the first contention. The first is whether these proceedings are properly constituted. The second is whether this Court cannot or should not determine that contention, because it gives rise to a "special federal matter".

Constitution of the Proceedings

1. The Substitution Motion directly raises the impact of Mr and Mrs Zdrilic's bankruptcy. HTT contends that the Trustee had rights under the Charge. If that is so, the Trustee is directly affected by the issue raised between the parties in the Substitution Motion. That makes it plain that the Trustee must be joined, or at least given an opportunity to be joined, before the issue is resolved. The Trustee has not been joined. That is no mere technicality. It is essential to avoid the possibility that the Trustee might subsequently commence proceedings claiming that he is entitled to exercise powers under the Charge. If Mr Mateljan's contentions are correct, and the rights purportedly assigned to him turn out to be valuable, then the possibility that the Trustee would seek to do so cannot be discounted as purely hypothetical.
2. Proceedings are no longer defeated merely because of a want of parties [9] . The usual course taken when a question of parties arises on the hearing of an appeal is to adjourn the hearing of the motion with a view to steps being taken to join the relevant party, in this case the Trustee, and for the receipt of further submissions. However, what is before the Court is merely a motion for Mr Mateljan's substitution pursuant to the purported assignment. There is no question presently before this Court of the appeal itself being dismissed. The dismissal of the Substitution Motion would not prevent Mr Mateljan from making a further application, if so advised, in properly constituted proceedings before a court with jurisdiction to determine the questions.
3. Despite the point being squarely raised by the respondents in a timely fashion, and the clear connection between Mr Mateljan's claim to title and the sequestration orders made in respect of the estates of Mr and Mrs Zdrilic, Mr Mateljan chose to have the Substitution Motion determined without joining the Trustee. Having taken that course, and noting that the dismissal of the Substitution Motion, which is clearly an interlocutory proceeding, will not prevent a further application, the appropriate course in the particular circumstances of these proceedings is that the Substitution Motion be dismissed. Those circumstances include the difficulties concerning jurisdiction referred to below, and the fact that, for the reasons given below, the Assignment Deed may have been ineffective to assign rights as it purported to do.

Special Federal Matter

1. Further, it is far from clear that this Court should determine the question of whether or not the power to appoint a receiver was properly vested in the Trustee, or, alternatively, was able to be exercised by Mr and Mrs Zdrilic. That question, which is addressed below, may well be within the "jurisdiction in bankruptcy" exclusively vested in the Federal Court and the Federal Circuit Court under s 27 of the Bankruptcy Act 1966 (Cth). The exclusivity of the concurrent jurisdiction in bankruptcy vested in the Federal Court and the Federal Circuit Court by s 27, subject to the operation of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth), raises difficult issues.
2. There are also practical difficulties because of the apparent breadth of the concept of "jurisdiction in bankruptcy" under the Bankruptcy Act, and the frequency with which disputes arise in State courts concerning claims, including equitable claims, in respect of the property of a bankrupt. As in the present case, the character of the proceedings which may bring it within federal jurisdiction is not always immediately apparent from the nature of the application or the relief sought.
3. While it is not altogether easy to discern in some cases [10] , there appears to be a distinction between, on the one hand, exercising jurisdiction under or by virtue of the Bankruptcy Act by simply recognising the effect of the Bankruptcy Act and, on the other, exercising "jurisdiction in bankruptcy". Central to the jurisdiction in bankruptcy is the authority to decide what property is, and what property is not, vested in the trustee in bankruptcy. An application for orders that "would have a necessary adverse effect on the title of" the Trustee is a matter in bankruptcy [11] .
4. Although s 27 uses the language of "exclusive" jurisdiction and is an exercise of power under s 77(ii) of the Constitution, that is not the end of the inquiry. Until 1996, jurisdiction had been invested in the Supreme Court, and the problem now confronted by Mr Mateljan would not have arisen. The Supreme Court is invested with federal jurisdiction under s 4(1) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) in cases where it would not otherwise have jurisdiction. This is significant because under s 6, a special federal matter must be transferred to the Federal Court unless the court is satisfied that there are "special reasons". The foregoing was not the subject of argument (although the question of jurisdiction was raised, briefly, during the course of the hearing). How these provisions work is far from straightforward, and it is neither necessary nor appropriate in these proceedings to determine the question conclusively. However, there is clear authority for the proposition that a matter in bankruptcy is a "special federal matter" within the meaning of s 3(1) of that Act. [12]

Was There Power to Appoint a Receiver?

1. Under s 58 of the Bankruptcy Act, where a debtor becomes a bankrupt, if a registered trustee becomes the trustee of the estate of the bankrupt, the property of the bankrupt vests forthwith in that registered trustee. After-acquired property of the bankrupt vests as soon as it is acquired by, or devolves on the bankrupt, in that registered trustee. Under s 5 of the Bankruptcy Act, the property of the bankrupt includes, relevantly, the property divisible amongst the bankrupt's creditors and 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. Section 116 relevantly provides that the property divisible amongst the creditors of a bankrupt includes all property that belonged to, or was vested in, the bankrupt at the commencement of the bankruptcy, together with the capacity to exercise and 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.
2. Section 115 of the Bankruptcy Act relevantly provides that, if a person becomes a bankrupt on a creditor's petition, the bankruptcy is taken to have relation back to, and to have commenced at, the time of the commission of the earliest act of bankruptcy committed by the person within the period of six months immediately before the date on which the creditor's petition was presented. The result of the relation back is that the debtor must be considered as having become a bankrupt at the moment when the relevant act of bankruptcy occurred, and all subsequent dealings with the debtor's property must be treated as if the bankruptcy had taken place at that moment. Thus, all property of the bankrupt at that time passes to the trustee in bankruptcy for the purpose of being distributed by the trustee amongst the creditors of the bankrupt. [13] Once an act of bankruptcy has been committed by a debtor, the debtor is no longer entitled to deal with his or her property and has no right to deal with the assets so as to give a title to any transferee with notice of the bankruptcy. [14]
3. As indicated above, the Trustee is a registered trustee. Accordingly, when he was appointed trustee of the estates of Mr and Mrs Zdrilic, all of their property vested in him. The creditor's petition on which the sequestration orders were made was presented on 20 August 2014. The act of bankruptcy on which the sequestration orders were made was committed on 18 March 2014. There is no evidence of any earlier act of bankruptcy. That act of bankruptcy occurred within the period of six months prior to the presentation of the petition. It follows that any purported dealing with property of Mr and Mrs Zdrilic after 18 March 2014 was of no effect. Specifically, the indebtedness of LEC to Mr and Mrs Zdrilic and the benefit of the security for that indebtedness created by the Charge was property of Mr and Mrs Zdrilic that vested in the Trustee with effect from 18 March 2014.
4. Accordingly, it would appear that the purported appointment of the Receiver as receiver and manager of LEC under the Deed of Appointment was of no effect, because the property of Mr and Mrs Zdrilic consisting of the Charge, and all of the powers conferred by it, vested in the Trustee with effect from 18 March 2014. If the Receiver was not validly appointed as receiver and manager of LEC, then the purported assignment of LEC's rights, title and interest in the COAs, being the choses in action that LEC has in respect of the facts, matters and circumstances that are the subject of the Equity Proceedings and the Appeal Proceedings, was of no effect. It would then follow that Mr Mateljan acquired no right, title or interest in or to the Appeal Proceedings and the choses in action sought to be enforced by the Equity Proceedings and the Appeal Proceedings. In those circumstances, there would be no utility in ordering that Mr Mateljan be substituted as the appellant in the Appeal Proceedings, since he would have no standing to prosecute the appeal.

Was the Purported Assignment Beyond Power?

1. HTT contends that, even if the Receiver was validly appointed, he did not have power to assign the COAs. In view of the conclusion reached above, it is not necessary to consider that contention. However, we shall make some observations about the contention.
2. Reliance for the contention was placed on the definition of the term "Scope" in the Deed of Appointment. The respondents point out that the powers conferred on receivers by s 420 of the Corporations Act are expressly made subject to the instrument under which the receiver is appointed, being a provision that limits the receiver's powers in any way. They say that the effect of the definition of the term "Scope" is to limit the Receiver's powers and that the mandatory terms in which the power is expressed mean that the Receiver is required to pursue the Appeal Proceedings, in the name of LEC, in the best way possible. That being so, they say, the Receiver is necessarily precluded from taking some other, inconsistent course, such as assigning, to a third party such as Mr Mateljan, the benefit of the choses in action that are the subject of the Appeal Proceedings.
3. As indicated above, while the term "Scope" is defined in the Deed of Appointment, it is not actually used in the Deed of Appointment. It therefore does not appear to have any operative effect. Since the premise upon which the contention is based, namely, that the definition of "Scope" has some bearing on the power of the Receiver, it is difficult to see how the contention could succeed.

Were the Causes of Action Assignable?

1. The respondents say that, even if the Receiver was validly appointed and had power to assign LEC's rights, none of the causes of action that are the subject of the Appeal Proceedings and the Equity Proceedings were capable of assignment. Having regard to the conclusion reached above, it is unnecessary, and probably undesirable, in the circumstances, to express a view as to the assignability of the choses in action that are the subject matter of the Appeal Proceedings and the Equity Proceedings. However, it is desirable to say something about the contention.
2. Three causes of action were relied on in the Equity Proceedings as follows:

• misleading and deceptive conduct giving rise to loss;
• claims for rescission of the Heads of Agreement and the Non-Dilution Deed and the setting aside of court orders;
• fraudulent or negligent misstatement giving rise to loss.

1. LEC and the other plaintiffs in the Equity Proceedings sought damages in respect of loss allegedly suffered by conduct on the part of the defendants in the Equity Proceedings that contravened Pt V of the Trade Practices Act 1974 (Cth) (the Trade Practices Act) and its equivalent in the Fair Trading Acts of the States. The respondents contend that such a cause of action is not assignable because an assignee of a cause of action is not, for the purposes of those statutes, a person who suffers damage "by" the contravention. [15] Such a person, they say, [16] would not satisfy the statutory requirement of the Trade Practices Act (in s 87) of being "a person who is a party to the proceeding" who "has suffered, or is likely to suffer, loss or damage".
2. In the Equity Proceedings, LEC and the other plaintiffs claimed that they had rescinded, or were entitled to set aside, the Heads of Agreement and the Non-Dilution Deed and claimed the setting aside of the orders made in the 2001 Proceedings on 6 September 2004. The Primary Judge rejected the claims on various grounds. While all of the surviving parties to the Heads of Agreement, the Non-Dilution Deed and the 2001 Proceedings were parties to the Equity Proceedings, only HTT and Mr Renshall are respondents in the Appeal Proceedings.
3. The respondents assert that no appeal is now possible against the other parties to the Heads of Agreement and the Non-Dilution Deed, since this Court has refused leave to appeal from the orders of the Primary Judge dismissing the claims against those parties. Further, Mr and Mrs Zdrilic and Amy Holdings are also necessary parties for the claim in rescission and they are no longer parties to the Appeal Proceedings. It follows, the respondents say, that any cause of action that might once have been available to seek rescission of the Heads of Agreement and the Non-Dilution Deed and to have the orders of 6 September 2004 set aside would no longer be available, since not all of the necessary parties can be before this Court.
4. The respondents also contend that the purported assignment was, in any event, an assignment of a mere equity to have the Heads of Agreement and Non-Dilution Deed and the orders of 6 September 2004 set aside. They say that a bare equity to rescind or to elect to rescind a contract upon grounds of fraud or misrepresentation is not capable of assignment.
5. Next, they say, it is a fundamental principle that one cannot assign a bare right to litigate, as distinct from a right to damages that might be an incident of a transfer of property, such as a cause of action that is ancillary or incidental to a right of property. [17]
6. One exception to that general rule, at least in the case of a claim in contract, is where the assignee has a genuine and substantial interest in the success of the litigation or a genuine commercial interest in the enforcement of the claim of another. [18] However, the interest must exist independently of the impugned assignment and must be more than an insubstantial and tenuous interest. It must be "rights-based" and not a "mere hope". [19] That is to say, there must be something beyond a mere personal interest in profiting from the outcome of the proceedings. Rather, there must be an interest by the assignee in the assignor or its business affairs or activities that the assignment may in some way protect. [20]
7. In the present case, Mr Mateljan claims to have an arrangement whereby he would share in the success of a proposed development by LEC. Therefore, it may be that he had a sufficient commercial interest in the success of LEC in the Appeal Proceedings. In the circumstances outlined above it is not necessary to decide that question.

Conclusion

1. Mr Zdrilic expressed his very great frustration with the events that have occurred. In his submissions to this Court on behalf of Mr Mateljan, he was adamant that the steps that were taken in relation to the purported assignment were taken in the interests of the creditors of LEC.
2. It may be that, in essence, Mr Zdrilic's complaint is that the Trustee will not take steps to protect the assets of the bankrupt estates consisting of the debt owed by LEC to Mr and Mrs Zdrilic and the shares in LEC held by Mr Zdrilic. Those assets are now vested in the Trustee, who is the only person with standing to act in relation to the assets.
3. Mr Zdrilic is a shareholder of LEC and is, therefore, a contributory. He would have standing to make a complaint about the refusal of the Liquidator to prosecute the Appeal Proceedings if the consequence is that a significant asset will be lost. There was no evidence that Mr Zdrilic had asked the Trustee to take proceedings to require the Liquidator to prosecute the Appeal Proceedings. However, that requires funding of some sort, and it may be assumed that the reason that the Liquidator will not do so is that he does not have funds.
4. The rights of Mr and Mrs Zdrilic under the Charge to appoint a receiver to the property of LEC appear to be vested in the Trustee. That property includes the choses in action that are the subject of the Equity Proceedings and the Appeal Proceedings. There is no evidence that Mr and Mrs Zdrilic have asked the Trustee to exercise those rights. Again, an impediment to the exercise of the right to appoint a receiver and manager of that property may be the costs involved.
5. Failure by the Trustee to take the steps outlined above could, if no expense or liability on the part of the Trustee were involved, be a matter for complaint by the bankrupts under ss 178 and 179 of the Bankruptcy Act. Section 178 relevantly provides that, if a bankrupt is affected by an act, omission or decision of the bankrupt's trustee, the bankrupt may apply to the court of bankruptcy, which may make such order in the matter as it thinks just and equitable. Such an application must be made not later than 60 days after the date on which the bankrupt became aware of the trustee's act, omission or decision. Section 179 relevantly provides that the court of bankruptcy may, on the application of a bankrupt, enquire into the conduct of the trustee in relation to a bankruptcy and may make such order as it thinks proper.
6. It may be open to Mr and Mrs Zdrilic to take proceedings under those provisions in relation to the conduct of the Trustee, if he has not acted appropriately to protect the assets consisting of the indebtedness of LEC and the Charge, which secures that asset. That may be the only avenue available to Mr Zdrilic to have the Appeal Proceedings prosecuted, assuming they were to be reinstated following the dismissal by the Registrar. However, it is not appropriate to express a view as to whether there is in fact any ground for valid complaint.
7. If the substitution of Mr Mateljan were to be permitted, Mr Zdrilic foreshadowed an application for leave to appear for Mr Mateljan on the hearing of the appeal. It may be that an arrangement could be put in place whereby the Receiver and the Liquidator could, at the behest of the Trustee, retain Mr Zdrilic to conduct the Appeal Proceedings on behalf of LEC, assuming that the Court were disposed to give leave to LEC to appear otherwise than through a solicitor. Those matters, of course, are not before this Court. They are matters for the court of bankruptcy in the first instance and could then be matters arising in the winding up of LEC.
8. Mr Mateljan should not take undue encouragement from what has been said above. HTT has squarely flagged an application for security for costs in the event that substitution be permitted and there is the real prospect of such an order being made. Mr Zdrilic's application to appear on behalf of Mr Mateljan (who is his brother in law) was sought "on behalf of the impecuniosity of Mr Mateljan, who cannot afford a lawyer". Although there are decisions to the effect that security for costs of an appeal will not be ordered where the impecuniosity is attributable to the conduct complained of in the appeal, there would appear to be at least a reasonably arguable case that security should be ordered in the present case, given that Mr Mateljan is an impecunious assignee.
9. The Substitution Motion should be dismissed. Mr Mateljan should be ordered to pay the costs of the respondents to the Substitution Motion.

Endnotes

1. Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2012] NSWSC 382.
2. [2012] NSWSC 382 at [1001]-[1002].
3. [2012] NSWSC 382 at [1005].
4. Uniform Civil Procedure Rules 2005 (NSW), r 51.9.
5. Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2013] NSWCA 35.
6. Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2014] NSWCA 34.
7. Zdrilic v Hickie [2015] FCCA 2882.
8. Read together with r 51.1.
9. See UCPR r 6.23.
10. See Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2008] FCAFC 172 at [18] and [194] ff; 252 ALR 19.
11. See Scott v Bagshaw [2000] FCA 816; 99 FCR 573 at [20].
12. Truthful Endeavour Pty Ltd v Condon (Trustee), in the matter of Rayhill (Bankrupt) [2015] FCAFC 70; 321 ALR 483.
13. Re Pollitt; Ex Parte Minor [1893] 1 QB 455 at 457.
14. Radio Corporation Pty Ltd v Bear (1961) 108 CLR 414 at 422.
15. Relying on Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2004] NSWSC 1041; 188 FLR 278 at 294 and 298.
16. Relying on Pritchard v Racecage Pty Ltd (1997) 72 FCR 203 at 218.
17. Relying on Trendex Trading Corporation v Credit Suisse [1982] AC 679 at 702-3; South Australian Management Corporation v Sheahan (1995) 16 ACSR 45 at 58.
18. Trendex Trading Corporation at 694 and 703.
19. Project 28 Pty Ltd (formerly Narui Gold Coast Pty Ltd) v Tim Barr Pty Ltd [2005] NSWCA 240 at [41]-[42].
20. Rickard Constructions at [59].

Amendments 26 February 2016 - [30] 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: 26 February 2016