Re Carter; Sweeney v Millyard

issues on the application 11 Mr Millyard, by his counsel, submits that : (a) the letter of 4 November 1999 was a sufficient notice of the action for the purposes of s 60(3) of the Act; or (b) the entire correspondence from Mr Millyard's solicitors constituted a sufficient notice for the purposes of s 60(3) of the Act; and (c) there is no jurisdiction or power under s 33 of the Act to extend time to make the election once the twenty-eight day period specified in s 60(3) expires. 12 The trustee, by his counsel, submitted to the contrary in respect of each issue.

conclusion on application 13 Section 60 of the Act relevantly provides : "60(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." 14 The question is not whether the trustee was made aware of the proceedings. The issue is whether notice of the action has been served on him. The twenty-eight day period provided for in s 60(3) does not commence to run until the trustee has been served with the requisite notice. The service of a notice of the action is a condition precedent to the running of time under s 60(3): Aware Industries Ltd v Robinson (1997) 75 FCR 600 (FC) at 602. 15 There is no prescribed form for the notice of the action for the purposes of s 60(3) of the Act. The requirements of the section were considered by a Full Court of this Court (Northrop, Davies and Sundberg JJ) in Aware Industries. In a joint judgment, their Honours said (at 602 - 603) : "It might be thought that the requirements of s 60(3) would be satisfied by service of a document which said no more than that an action in an identified court had been commenced by the bankrupt to which the person serving the notice was a defendant. But we do not regard the notice contemplated by s 60(3) as a mere provision of the details of the action. The consequences of the effluxion of time without an election to prosecute are serious. An action which may have value will be lost. The purpose of the notice is to alert the trustee to the need to consider whether to prosecute or discontinue the action. In those circumstances it is appropriate to read s 60(3) as requiring that the notice contain sufficient information to draw the trustee's attention to the fact that time will run against the trustee upon service of the notice. Ideally a notice will be in the form of that served in Welinski v Temple (unreported, Federal Court, 8 April 1997). The document served in that case was described as a notice pursuant to s 60. It recited the existence of the action and that the persons on whose behalf it was given were the defendants in the action, required the trustee within 28 days of service to provide in writing an election advising the defendants of the trustee's intention to prosecute or discontinue the action, and stated that in default of such advice the trustee would be deemed to have abandoned the action. That notice expressly drew attention to the fact that time ran from the date of service, and that the action would be deemed to have been abandoned at the expiration of the 28-day period in default of an election to prosecute it. But given that a notice will be directed to a registered trustee, it need not have all the attributes of that served in Welinski so long as, on a fair reading, it draws the trustee's attention to the fact that time runs against him from the date of service." 16 In my view the letter of 4 November 1999 does not satisfy these requirements. The subject matter of the letter is an inquiry whether the "creditors have yet had the opportunity of considering whether this litigation should be pursued." It seeks a response within fourteen days to that question. There is nothing in the letter which indicates to the trustee that he is being put on notice to make an election within twenty-eight days of service of the letter to prosecute the District Court proceedings and that time runs from service of the notice. Nor does any other letter from Mr Millyard's solicitors, or the correspondence taken as a whole, give the trustee the requisite notice. 17 In my view the twenty-eight day period never commenced to run against the trustee. The letter of the trustee dated 24 February 2000 is a sufficient election for the purposes of s 60(2) of the Act. 18 It is unnecessary to determine whether or not there is a power to extend the time to make the election once the twenty-eight day period has expired. However, in my opinion it is now settled that there is such a power: Re Faulkner; Ex parte Official Receiver (1981) 52 FLR 109 at 113; Re Collins; Ex parte Official Trustee in Bankruptcy v Bracher (1986) 10 FCR 209 at 213; Abeyratne v Trkulja (1998) 90 FCR 253; Brien v P & E Phontos Pty Ltd [1999] FCA 1072; Re Paterson; Ex parte Official Trustee [2000] FCA 116. The obiter observations of the Queensland Court of Appeal in Theissbacher v MacGregor Garrick & Co (a firm) [1993] 2 QdR 223 at 230, do not, in my view, lead to a different conclusion. 19 If it were necessary to do so, I would have extended the time for the trustee to make the election until and including 24 February 2000. 20 The appropriate relief in the circumstances is declaratory. Costs should follow the event. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper.

Counsel for the Applicant: Mr K Howe Solicitor for the Applicant: Robinson & Robinson

Counsel for the Respondent: Mr R Traves Solicitor for the Respondent: Miller Harris Lawyers

Date of Hearing: 20 July 2000 Date of Judgment: 1 November 2000