Re Faulkner, Sylvia Margaret Ex parte The Official Receiver [1981] FCA 3

Federal Court of Australia|1981-02-06|Before: Evatt J, Lockhart J

Bankruptcy - application by Official Receiver to elect to proceed with action in High Court commenced by bankrupt prior to her bankruptcy - whether time for making of such election can be extended - whether Official Receiver had abandoned the action ~

factors to be considered when exercising discretion to extend time

RE: SYLVIA MARGARET FAULKNER EX PARTE: THE OFFICIAL RECEIVER Trustee of the bankrupt estate of Sylvia Margaret Faulkner

ORDERS JUDGE MAKING ORDERS: WHERE MADE: DATE OF ORDERS:

THE OFFICIAL RECEIVER Trustee of the bankrupt estate of Sylvia Margaret Faulkner

The time for the Official Receiver as trustee of the

bankrupt estate of Sylvia Margaret Faulkner to make

an election in writing to prosecute or discontinue action

No. 52 of 1974 in the High Court of Australia be extended

EX PARTE: THE OFFICIAL RECEIVER Trustee of the bankrupt estate of Sylvia Margaret

Faulkner

The Official Receiver, as trustee of the estate of Sylvia Margaret Faulkner ("the bankrupt"), seeks an extension of time limited by s. 60 (3) of the Bankruptcy Act 1966 ("the Act") to make an election to prosecute or discontinue an action in the original jurisdiction of the High Court of Australia ("the High Court action").

The High Court action was commenced in 1974 by the bankrupt against the Commonwealth of Australia and Charles Francis Flint ("Brigadier Flint").

It was not until December 1975 that the »Yankrupt filed a statement of claim. It alleges that the Commonwealth of Australia, by its agent, Brigadier Flint, represented to the bankrupt as the beneficial owner of the 1ssued share capital in a company Trisal Engineering Pty. Limited and, as its governing director, that the Commonwealth would lodge orders in large quantities for the purchase of articles known as Trisal clips

produced by Trisal Engineering Pty. Limited for use by the

Australian Armed Forces, and that, relying upon those representations, the bankrupt advanced moneys to Trisal Engineering Pty. Limited for the purpose of developing and marketing the clips, refrained from disposing of her interest in the clips and the patent and other rights relating thereto and procured Trisal Engineering Pty. Limited to refrain from disposing of its interest in the clips and the patent and other rights relating thereto; and in the result, damage was sustained by the bankrupt. She claims damages of $1,246,852.00. The Commonwealth filed a defence to the statement

of claim which in essence either denies or does not admit the material allegations. If Brigadier Flint has filed a defence it is not in evidence in these proceedings. :

On 15 March 1978 a sequestration order was made against the estate of the bankrupt.

This is the second application for extension of time to make an election to prosecute or discontinue the High Court action by the Official Receiver. He first sought an extension of time in 1978. It is common ground that on 20 September 1978 notice of the High Court action was served upon the Official Receiver by the Commonwealth. On 17 October 1978, Evatt J. ordered that time to comply with the notice of 20 September 1978 be extended to 1 November 1978. Following the order of Evatt J., the Official Receiver convened a meeting of creditors

of the bankrupt for 31 October 1978 where they resolved that the

Official Receiver be authorised to continue the High Court action.

There was discussion as to whether the creditors would indemnify the Official Receiver in respect of costs relating to that action; but the creditors did not give any such indemnity.

By letter dated 1 November 1978 the Official Receiver informed the Crown Solicitor of the Commonwealth of the resolution passed at the meeting of creditors and said that, as the creditors were not able to provide him with funds and indemnities in respect of costs of the action, he was not able to proceed with it at that stage.

Correspondence ensued between the Official Receiver and the Commonwealth Crown Solicitor culminating in a letter dated 3 July 1979 from the Crown Solicitor to the Official Receiver in which the Crown Solicitor said that, as the Official Receiver had not prosecuted the action within the time specified in s. 60 (3) of the Act, he was deemed to have abandoned the action.

The Official Receiver applied to the Minister for Business and Consumer Affairs of the Commonwealth pursuant to s. 305 of the Act for his approval to the costs of the High Court action being paid by the Commonwealth. On 6 March 1980 this approval was given.

No application has been made by the Commonwealth or Brigadier Flint in the High Court to strike out the High Court action for want of prosecution.

The solicitors who had the carriage of the High Court action on behalf of the bankrupt informed her in June 1980 that the did not propose to represent her any further. The Official

Receiver requested them to reconsider the decision by letter

dated 12 August 1980. They informed the Official Receiver

that they would act for him in his capacity as trustee of the estate of the bankrupt.

By letter dated 20 August 1980, those solicitors informed the Crown Solicitor that the Official Receiver had requested them to act on his behalf in the High Court action and that he sought to be substituted as plaintiff. They asked the-Crown Solicitor to obtain the anstructions of the Commonwealth as to whether it would consent to the substitution. The Crown Solicitor replied by letter of 5 September 1980 declining to give that consent.

The solicitors acting for Brigadier Flint informed the bankrupt's solicitors that they had instructions to consent to the Official Receiver being substituted as plaintiff in liev of the bankrupt.

A summons was taken out by the bankrupt's solicitors on 18 November 1980 seeking an order that the High Court action be continued with the Official Receiver as plaintiff in substitution for the bankrupt. The application has not yet been heard by the High Court. The Commonwealth intends to oppose the application.

The Commonwealth opposes this application for further extension of time to make the necessary election.

makes election, in writing, to prosecute or discontinue the action.

(3) If the trustee does not make such an election within twenty-eight days after notice of the action is served upon him by a defendant or other party to the action, he shall be deemed to have abandoned the action. (4) Notwithstanding anything contained in this section, a bankrupt may continue, in his own name, an action commenced by him before he became a bankrupt in respect of - (a) -any personal injury or wrong done

(b) the death of his spouse or of a member of his family.

(5) In this section, "action" means any civil proceeding, whether at law or in equity."

The orders sought assume that the bankrupt's rights in respect of the High Court action vested in the Official Receiver as trustee of the bankrupt's estate on the making of the sequestration order. I decided in a separate application by the bankrupt, immediately before giving judgment in this matter, that the right of action did vest in the Official Receiver. It was not disputed by the Commonwealth on the hearing of the present application that the right of action vested in the Official Receiver.

Section 60 does not itself enable the court to extend the time prescribed for making an election, either before or after its expiration . The Official Receiver relies on s. 33 (1) (c) which, so far as relevant, provides:-

if this Act does not expressly provide to the contrary, after its expiration, any time limited by

this Act for doing an act or thing or abridge any such time."

Counsel for the Commonwealth conceded towards the end of his argument that s. 33 (1) (c)was a source of power to extend time to make an election under s. 60 (3). The concession was correctly made, especially in the light of the decisions of Re Brooks 1930 2 A.B.C. 49 and Re Greve 1967 10 F.L.R. 187.

In Re Brooks Long Innes J. held that the power conferred by s. 27 (2) (c) of the Bankruptcy Act 1924 (Cth.)

(the equivalent of s. 33 (1) (c) of the Act) permitted the extension of time for registration of a deed of arrangement under Part XII of the Bankruptcy Act 1924, notwithstanding that the application was not made until after the time prescribed had

expired. In Re Jeanne and Hilton's Deed of Arrangement 1960

20 A.B.C. 34 Burbury C.J. doubted the correctness of this decision, but his Honour did not find it necessary to decide the question and held that if he had power to grant an extension of time, he would,on the facts of the case, refuse to do so. Both cases were referred to by Gibbs J. in Re Greve. His Honour followed the decision of Long Innes J. in Re Brooks and held that he had power to grant an extension of time for registration of a deed of arrangement under Part XII of the Bankruptcy Act 1924 which had not been registered within twenty- eight days after its execution as required by s. 193 (1). In my opinion, the power conferred by s. 33 (1) (c) is available to permit an extension of time for making an election under s. 60 of the Act notwithstanding that the application is not made until after the expiration of the

Counsel for the Commonwealth submitted that the time for making the election could not, or alternatively, should not, be extended because the Official Receiver had in fact abandoned the High Court action on 1 November 1978. That was the date of the Official Receiver's letter to the Crown Solicitor informing him of the order of the Court extending time for making the election to 1 November 1978; and in the same letter the Official Receiver informed the Crown Solicitor that, although the creditors had resolved that the Official Receiver be authorised to continue the High Court action against the Commonwealth, they were not able to provide him with funds and indemnities in respect of costs of the action, and that therefore he was not

able to proceed with the action at that stage. e Counsel for the Commonwealth submitted that the lapse of time had been so long, by the bankrupt before the sequestration order and, thereafter by the Official Receiver, that the proper inference to be drawn is that the Official Receiver had abandoned the High Court action. In the relevant correspondence between the Official Receiver and the Crown Solicitor enquiries were made by the latter as to when the former intended to continue the High Court action and as to the steps he proposed to take. Although the High Court action has slumbered over the years since it was commenced in 1974, the creditors authorised the Official Receiver to continue it; but, as they were not prepared to

indemnify him for costs at that stage, he was not prepared to take

any further step for the time being. Once an indemnity for costs

was granted by the Minister for Business and Consumer Affairs

the barrier to the future conduct of the litigation was removed. The Commonwealth knew that the absence of an indemnity for costs, by the creditors, was the reason for no fresh step being taken by the Official Receiver. Indeed, the Commonwealth took no steps

to have the High Court action struck out or dismissed for want of prosecution. Each party was content to let the action lie dormant. There was no abandonment of the High Court action by the bankrupt or the Official Receiver.

That leaves the question of discretion. Counsel for the Commonwealth submitted that I should not exercise my discretion in favour of extending time to make the election as the Court granted this indulgence on an earlier occasion in 1978 and more than two years have passed since notice of the action was served upon the Official Receiver by the Commonwealth.

It is true that the delay has been considerable, both before and after the making of the sequestration order; but, since the making of the sequestration order, it has been due in the main to the absence of an indemnity for costs being given to the Official Receiver. That obstacle has now been overcome. The Commonwealth was not able to point to any prejudice that it has suffered or may suffer, other than the delay itself. I am satisfied that in all the circumstances this 1s a proper case to extend time for the making of an election under s. 60 of the Act.

I should add that it was not submitted on behalf of the Commonwealth that the Court's power to extend time for making an election under s. 60 could be exercised once only; and that, as

this was done in 1978, it could not be exercised again.

As to costs, it was necessary for the Official Receiver to apply for this Court's leave to extend time. Although the Commonwealth opposed the application and failed, its opposition was not unreasonable in all the circumitances. There should be no order as to costs.

I extend the time for the Official Receiver as trustee of the bankrupt estate of Sylvia Margaret Faulkner to make an election in writing to prosecute or discontinue action No. 52 of 1974 in the High Court of Australia up to and including

At a glance

Court

Decision date

Before

Source

Judgment (61 paragraphs)