Sampson (Trustee) v Zaki, in the matter of Van Vlijmen

Federal Court of Australia|2024-10-11|Before: Mr J, Goodman J

Solicitor for the Applicant: Teneo Corporate Lawyers

Counsel for the First Respondent: No appearance by the first respondent

Counsel for the Second Respondent: Ms K E Holcombe

ORDERS NSD 947 of 2023 IN THE MATTER OF THE JOINT BANKRUPT ESTATES OF MARGRIET HERMINE VAN VLIJMEN AND WILLEM JOHAN VAN VLYMEN DAVID HENRY SAMPSON IN HIS CAPACITY AS TRUSTEE OF THE JOINT BANKRUPT ESTATES OF MARGRIET HERMINE VAN VLIJMEN AND WILLEM JOHAN VAN VLYMEN First Applicant BETWEEN: DAVID HENRY SAMPSON IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF MARGRIET HERMINE VAN VLIJMEN Second Applicant DAVID HENRY SAMPSON IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF WILLEM JOHAN VAN VLYMEN Third Applicant NADER YOUSSEF ZAKI AND: First Respondent MALCOLM DOUGLAS CARR Second Respondent

order made by: GOODMAN J DATE OF ORDER: 11 october 2024

THE COURT ORDERS THAT: The applicants' interlocutory application filed on 6 March 2024

The applicants have leave to re-open their case to adduce into evidence the email from Ms Fleur Evans to Mr Darren Vardy dated 7 August 2023 and which is Annexure A to the affidavit of Craig Higginbotham sworn 6 March 2024.
That email be marked as Exhibit A-1.
The applicants' interlocutory application filed on 6 March 2024 otherwise be dismissed.
The applicants pay the second respondent's costs of that application, as agreed or taxed. The originating application
Pursuant to s 100-5 of the Insolvency Practice Schedule (Bankruptcy), being Schedule 2 to the Bankruptcy Act 1966 (Cth), the assignment by the applicant to TJ & P Pty Ltd (as trustee for the Post Family Trust) of the "Chose in Action" as defined in the Deed of Assignment dated 17 August 2023 between the applicants, TJ & P Pty Ltd and Mr Tjeerd Post be approved.
There be no order as to the costs of the originating application, with the intention that the applicants and the second respondent bear their own costs of that application.
Any party seeking a variation of orders 4 or 6 may apply within seven (7) days of these orders. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT GOODMAN J

A. INTRODUCTION 1 Mr David Sampson is the trustee of: (1) the bankrupt estate of Mrs Margriet Van Vlijmen and Mr Willem Van Vlyman; (2) the bankrupt estate of Mrs Van Vlijmen; and (3) the bankrupt estate of Mr Van Vlyman. 2 On 3 November 2022 Mr Sampson, in the second and third of those capacities, commenced a proceeding in the Supreme Court of New South Wales against Mr Nader Zaki and Mr Malcolm Carr. The statement of claim (SOC) filed in the proceeding, in broad terms, involves allegations that Mr Zaki and Mr Carr, who were both legal practitioners, acted negligently toward Mr and Mrs Van Vlyman. 3 On 21 August 2023, Mr Sampson entered into a Deed of Assignment with TJ & P Pty Ltd (as trustee of the Post Family Trust) and Mr Tjeerd Post, pursuant to which he agreed to assign to TJ & P all of the applicant's interest (both at law and in equity) in the "Choses in Action" identified in that deed, being the legal chose in action in the proceeding which had vested in Mr Sampson pursuant to s 58 of the Bankruptcy Act 1966 (Cth). This assignment is conditional upon and will not take effect until the Court has given its approval. On 25 August 2023, Mr Sampson gave notice of the assignment to Mr Zaki and Mr Carr. 4 In this proceeding, Mr Sampson moves on an originating application pursuant to which he seeks an order, pursuant to s 100-5 of the Insolvency Practice Schedule (Bankruptcy) (IPS (B)), being schedule 2 to the Act, for approval of the assignment. Mr Zaki, who is the first respondent to the originating application, is bankrupt. His trustee in bankruptcy informed the Court that he does not intend to participate in the application. Mr Carr, who is the second respondent to the originating application, opposes the making of the orders sought in the originating application. For convenience, I will refer in these reasons to Mr Sampson as the applicant (without distinguishing between his various capacities unless otherwise indicated) and to Mr Carr as the respondent.

B. DOES SECTION 100-5 OF THE IPS(B) APPLY? 5 Somewhat curiously, the applicant's primary argument is that the approval sought in the originating application is not required, because s 100-5 is not engaged, thus rendering the relief sought unnecessary. This raises a question as to why the originating application has been brought at all; and whether it ought be dealt with in circumstances where the applicant's primary position is contrary to the relief sought. However, as the respondent has taken the position that the applicant requires leave under s 100-5 and there is a controversy between the parties requiring resolution, I will proceed to deal with the question whether s 100-5 is engaged; and, to the extent that the applicant requires the leave of the Court with respect to the assignment, whether such leave ought be granted. 6 Section 100-5 provides: 100‑5 Trustee may assign right to sue under this Act (1) Subject to subsections (2) and (3), the trustee of a regulated debtor's estate may assign any right to sue that is conferred on the trustee by this Act. (2) If the trustee's action has already begun, the trustee cannot assign the right to sue unless the trustee has the approval of the Court. (3) Before assigning any right under subsection (1), the trustee must give written notice to the creditors of the proposed assignment. (4) If a right is assigned under this section, a reference in this Act to the trustee in relation to the action is taken to be a reference to the person to whom the right has been assigned. 7 It is common ground that the applicant is a "trustee of a regulated debtor's estate" within the meaning of that term in s 5-16 of the IPS(B). At issue is whether the assignment in respect of which the applicant seeks approval is an assignment of a "right to sue that is conferred on the trustee by this Act". 8 The applicant's position is that the expression "right to sue that is conferred on the trustee by this Act" is limited to rights to sue that a trustee has and that are created by the Act, such as actions under ss 120 and 121 of the Act; and does not extend to a right to sue (such as the present) which was originally the bankrupt's right to sue and which vested in the trustee by dint of the bankruptcy under s 58 of the Act. The respondent contends that this expression "right to sue that is conferred on the trustee by this Act" is sufficiently broad to include rights of the latter kind. Thus, the constructional choice is whether that expression is limited in the manner for which the applicant contends or whether it operates more broadly in the manner for which the respondent contends. 9 The starting point for the construction of s 100-5 is its text, construed having regard to its history, context and purpose: Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503 at 519 [39] (French CJ, Hayne, Crennan, Bell and Gageler JJ). As Kiefel CJ, Nettle and Gordon JJ explained in SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 262 CLR 362 at 368 [14]: The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected. 10 The text of s 100-5(1) suggests that - subject to s 100-5(2) and (3) - a trustee of a regulated debtor's estate may assign "any right to sue that is conferred on the trustee by this Act". The use of the word "any" suggests that a narrow view is not to be taken, provided that the right to sue is one conferred on the trustee by the Act. The text of s 100-5(2) suggests that the Court is to fulfil a supervisory role where the assignment occurs while a proceeding is on foot, but not otherwise. 11 The broader context of the Act includes that the Act does not identify what is a "right to sue" or which such rights are "conferred on the trustee" by the Act. However, the broader context of the Act includes ss 58, 134 and 161. 12 Pursuant to s 58 of the Act, the property of the bankrupt vests in the trustee at the time of bankruptcy. The expression "property" is defined broadly in s 5 of the Act, and it is well‑established that such property includes choses in action: see, e.g., Citicorp Australia Ltd v Official Trustee in Bankruptcy [1996] FCA 1115; (1996) 71 FCR 550 at 558 (Foster, von Doussa and Sundberg JJ). 13 Section 161 of the Act expressly confers upon the trustee of the estate of a bankrupt a right to sue and to do so qua trustee of the property of the bankrupt. That section provides in so far as is presently relevant that: 161 Trustee may act in official name (1) The trustee of the estate of a bankrupt may sue and be sued by the prescribed official name and may, by that name, hold, dispose of or acquire property of every description, make contracts, enter into engagements binding on the trustee and his or her successors in office and do all other acts and things necessary or expedient to be done in the execution of his or her office. (2) For the purposes of subsection (1), the prescribed official name is "The Trustee (or Trustees) of the Property of (name of bankrupt), a Bankrupt". … 14 In my view, the text of s 161 of the Act confers upon the trustee of the estate of a bankrupt a right to sue, which is expressed in broad terms. When read with s 58, it includes a right to sue with respect to choses in action that have vested in the trustee. 15 I also taken into account s 134 of the Act, which empowers a trustee to sell the property of a bankrupt, including choses in action. On one view, s 100-5(1) might be considered unnecessary if it applied to choses in action of the bankrupt that have vested in the trustee because the trustee is empowered by s 134 of the Act to sell such causes of action. However, this is not a reason to read down s 100-5, which operates more broadly than permission to assign. As noted above, it also extends to require Court approval where the action has already commenced (and indeed it is in this scenario that the section has the most work to do), and there is no reason to exclude from that requirement actions based upon choses in action of the bankrupt that have vested in the trustee. Similar considerations apply to the requirement of notice in s 100-5(3). 16 As to purpose, the objects of the IPS(B) are expressed in s 1-1 thereof as: 1‑1 Object of this Schedule (1) The object of this Schedule is to ensure that any person registered as a trustee: (a) has an appropriate level of expertise; and (b) behaves ethically; and (c) maintains sufficient insurance to cover his or her liabilities in practising as a registered trustee. (2) The object of this Schedule is also: (a) to regulate the administration of regulated debtors' estates consistently, unless there is a clear reason to treat a matter that arises in relation to a particular kind of estate differently; and (b) to regulate the administration of regulated debtors' estates to give greater control to creditors. 17 These objects do not favour one construction over the other. 18 As to history, s 100-5 was included in the Act as a result of the enactment of the Insolvency Law Reform Act 2016 (Cth). The Explanatory Memorandum to the Insolvency Law Reform Bill 2015 (Cth) does not assist in the construction of that section. 19 Finally, I note that in Sampson in his capacity as trustee of the bankrupt estates of Van Vlymen v Agrinova Pty Ltd [2022] FCA 529 - a case coincidentally involving the same trustee as assignor, bankrupts and assignee - Rares J made orders giving effect to his decision to approve an assignment of a chose in action which had vested in the trustee upon bankruptcy, and in circumstances where the action had been commenced by the bankrupts prior to their entry into bankruptcy, albeit the present controversy does not appear to have been raised. I also note that the operation of s 100-5 does not appear to have otherwise been considered in this Court, perhaps because the involvement of the Court is only necessary when the assignment is to occur after a proceeding has commenced. 20 I have also had regard to various authorities dealing with s 100-5 of the Insolvency Practice Schedule (Corporation) (IPS (C)), being schedule 2 to the Corporations Act 2001 (Cth), which was introduced at the same time as s 100-5 of the IPS(B) and is couched in similar language. I have found those authorities to be of little assistance to the present issue. Although it may be accepted that there is a legislative intention that the provisions of the IPS(B) and the IPS(C) operate in a consistent manner, it must be borne in mind that they are schedules to different statutes containing different provisions. Foremost for present purposes, s 58 of the Act operates to vest in the trustee in bankruptcy the choses in action held by the trustee, and there is no analogue in the Corporations Act. 21 For the reasons set out above, in my view the preferable construction of s 100-5 of the IPS(B) is that the expression "right to sue that is conferred on the trustee by this Act" includes a trustee's right to sue where that right was originally a right of the bankrupt but which vested in the trustee in bankruptcy. As such, the trustee's right to sue the respondent is one conferred upon the trustee by the Act. Indeed, as was common ground during argument, such a right in the trustee to sue has no other source but the Act. 22 In support of its preferred construction, the applicant referred to obiter dicta comments made by Judge Manousaridis in Macks as Trustee of the Bankrupt Estate of Lee v Lee [2021] FedCFamC2G 249; (2021) 365 FLR 137 at [46]ff to the effect that a distinction is to be drawn between: (1) rights to sue held by a person before they become bankrupt and which vest in the trustee upon bankruptcy; and (2) rights to sue "conferred" on the trustee by the Act. His Honour's reasoning does not disclose why the former are not rights to sue conferred on the trustee by the Act, save perhaps his Honour's reference to s 134 of the Act. For the reasons set out above, in my view the preferable construction is that rights to sue held by a bankrupt and which subsequently vest in their trustee in bankruptcy are rights to sue conferred on the trustee by the Act, within the meaning of s 100-5. 23 For the reasons set out above, the assignment involves an assignment of a right to sue conferred on the trustee within the meaning of s 100-5, with the consequence that approval under s 100‑5(2) is needed because the proceeding has already begun.

C. SHOULD APPROVAL BE GIVEN? 24 I turn now to whether such approval should be given.

C.1 Introduction 25 The applicant submitted that the Court would be satisfied that approval of the assignment is appropriate. The respondent resisted that proposition. However, before considering this issue, it is necessary to address an application by the applicant to re-open its case so as to tender further evidence.

C.2 The application to re-open 26 The applicant's application to re-open its case arises in the context set out below. 27 The application was initially heard on 27 February 2024. In anticipation of that hearing, the applicant made two affidavits on 30 August 2023 and 22 November 2023. The applicant also filed an outline of written submissions dated 25 October 2023. The respondent did not file any affidavit evidence, but filed written submissions dated 15 November 2023. 28 At the hearing, counsel for the applicant read the applicant's affidavits. Counsel for the respondent did not read any affidavit evidence, but tendered a settlement deed between the "Van Vlymen Entities" and the "Wong Entities" dated 4 November 2016; a certificate of independent legal advice; and the SOC. 29 During the course of the hearing, counsel for the applicant - in reply to a submission from counsel for the respondent that the applicant had not proven that notice in accordance with s 100-5(3) had been given with respect to a particular creditor - requested that the applicant have leave to adduce further evidence "on that singular point". Counsel for the respondent opposed the grant of such leave on the basis that the issue had been raised in the written submissions filed on behalf of the respondent on 15 November 2023 and again in oral address during the hearing and that the applicant had been given an ample opportunity to address the deficiency in its case. I then made orders requiring the respondent to serve the proposed further evidence; for the applicant to indicate its position with the benefit of having seen the evidence; and in the event that an agreed position was not reached for the respondent to file an application to re-open, supported by evidence, and for the exchange of submissions. 30 The applicant subsequently filed and served an interlocutory application for leave to re-open his case for the purpose of tendering: (1) an email (relevant to the provision of notice under 100-5(3) to the particular creditor); and (2) a further affidavit sworn by the applicant on 29 February 2024. That interlocutory application was supported by an affidavit sworn by the applicant's solicitor, Mr Craig Higginbotham on 6 March 2024. 31 Prior to the filing of the interlocutory application, the respondent had indicated in correspondence that he did not object to the tender of the email. The respondent did however maintain his objection to the filing of the further affidavit. Each of the applicant and the respondent filed submissions concerning the application to re-open and a hearing of that application occurred on 12 April 2024. 32 Against that background, I turn to consider the application to re-open the applicant's case. 33 The power to allow a re-opening of a party's case is well-established: see Frigger v Trenfield (No 7) [2020] FCA 1740 at [20] (Jackson J). Rule 1.32 Federal Court Rules 2011 (Cth) provides that the Court may make any order that the Court considers appropriate in the interests of justice. The power in that rule is to be exercised in a manner that best promotes the overarching purpose of facilitating the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible: s 37M of the Federal Court of Australia Act 1976 (Cth). 34 The Court has a broad discretion to allow a party to re-open its case. The discretion is of course to be exercised judicially and by reference to the dictates of the interests of justice. In Matson v Attorney-General (Cth) [2021] FCA 161, White J explained at [178]: The principles on which the Court acts when considering an application to re-open a matter before the delivery of judgment are settled. The overriding principle is the interests of the administration of justice having regard to the circumstances of the case: Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22 at [24], [26]; Brown v Petranker (1991) 22 NSWLR 717 at 729; Urban Transport Authority of NSW v Nweiser (1992) 28 NSWLR 471 at 478; Harrington Smith (on behalf of the Wongatha People) v Western Australia (No 8) [2004] FCA 338, (2004) 207 ALR 483 [121]; and Walsh v Greater Metropolitan Cemeteries Trust (No 2) [2014] FCA 456, (2014) 243 IR 468 at [48]. 35 See also Frigger at [22] and the authorities there cited. 36 I am not persuaded, for the following reasons, that the applicant should be allowed to re-open its case so as to adduce the evidence in the further affidavit. 37 First, the applicant had ample opportunity to file the evidence now sought to be adduced prior to the initial hearing. As noted above, the applicant swore two affidavits in support of the originating application on 30 August 2023 and 22 November 2023. The second of those affidavits was made after the respondent's submissions were filed on 15 November 2023, which submissions suggested that there were deficiencies in the applicant's case. 38 Secondly, as counsel for the applicant fairly and candidly acknowledged, the applicant has not explained why the evidence in the further affidavit was not adduced at the initial hearing. The absence of any explanation is a matter of considerable weight in the exercise of the discretion. 39 Thirdly, I do not accept the submission made by counsel for the applicant that the Court would nevertheless infer that the failure to adduce the evidence earlier was inadvertent. I am not prepared to draw such an inference, particularly in circumstances where the applicant's solicitor made an affidavit in support of the application to re-open but did not address why the evidence was not adduced earlier: see Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418F-G (Handley JA). 40 Fourthly, it is difficult to avoid the conclusion that the applicant - upon reflection, and after initially indicating that it wished to re-open solely to tender the email - now seeks to adduce further evidence so as to address perceived deficiencies in his case at the initial hearing. As Perry J explained in Fisk v Chief of Defence Force [2017] FCA 1489 at [28(4)], leave to re‑open is not to be granted for the purpose of re-agitating arguments already considered by the Court; nor is it to be exercised simply to allow a party to better present its argument. 41 Fifthly, in the context of the matters described above, it would be contrary to the overarching purpose to allow the applicant to have a further opportunity to fully present his case and to subject the respondent to the time and cost involved in assessing and dealing with that further evidence (whether by way of contrary evidence, cross-examination, or otherwise) and in making further submissions to the Court dealing with that evidence. 42 Sixthly, and relatedly, allowing the applicant to re-open its case would be contrary to the public interest in the timely conclusion of litigation: see Frigger at [24]. 43 Seventhly, although the evidence sought to be adduced through the further affidavit is germane and would likely assist the applicant's case, I do not regard this as sufficient to outweigh the other considerations discussed above. 44 Finally, although there is some force in the applicant's submission that applications for approval under s 100-5 share some features of applications for judicial advice, this does not provide a sufficient reason in the present case to allow the applicant to re-open, particularly when the present application has been contested and in view of the matters set out above.

C.3 Should approval be given? 45 The next question is whether the Court should approve the assignment. I note in this regard that the respondent's challenge on the basis that notice had not been effected as required by s 100-5(3) fell away with the tender of the email. I am satisfied that such notice was given. 46 Section 100-5 does not prescribe the factors to be considered when exercising the discretion to grant approval. 47 It appears that s 100-5(2) has previously been considered in this Court only in Agrinova. In that case, the application was unopposed. Rares J made the orders sought, upon being satisfied that the assignment appeared to be valid and because the trustee had given notice of the assignment to the creditors of the bankrupt estate. 48 In considering the factors which may inform the exercise of the discretion to grant approval for an assignment, the approach taken by the Full Court of this Court in Citicorp is instructive. In that case the Court considered an appeal from a decision to grant leave under the then extant s 135 of the Act, to the Official Trustee in Bankruptcy to assign choses in action representing rights of action that the bankrupts might have had against a company in respect of which they had given guarantees. The Full Court rejected arguments that such approval should only be given after the Court has satisfied itself that the cause of action has reasonable prospects of success; and decided that it was sufficient that the Court be satisfied that the cause of action to be assigned is not one which was demonstrably unviable because it had no reasonable prospects of success. In the case of an unviable cause of action the Court (and the trustee as an officer of the Court) should not allow the assignment to occur. The Full Court noted that few cases would be expected to fit this description; and that the onus of establishing that a cause of action has no prospects of success falls upon the party making that assertion. See also Unal v Cetinkaya [2015] FCA 270 at [82] to [85] (Beach J). 49 The Full Court in Citicorp also emphasised the practicalities that attend such an application, including the time and costs that may be involved in establishing affirmatively that a cause of action has reasonable prospects of success; and the tension between maximising returns for creditors on the one hand and incurring costs (and a potential liability for the costs of other parties) in proving the viability of particular claims on the other. 50 In support of his application for approval of the assignment, the applicant provided evidence that in accordance with his obligations as trustee of the bankrupt estates referred to at [1] above, he had prosecuted the proceeding, and at the same time, had been considering the best course available to realise the assets of the bankrupt estates for the benefit of creditors of those estates. In considering the best course available to realise the assets of the bankrupt estates, he had, for some time, been considering an assignment of the choses in action in the proceeding. Having done so, the applicant formed the view that it was in the best interests of creditors of the bankrupt estates for him to exercise his powers as trustee of the bankrupt estates to assign those choses in action. 51 The applicant formed the view that it was in the best interests of the creditors of the bankrupt estates to assign those choses in action by taking into account the following matters. 52 First, the financial state of the bankrupt estates. In this regard: (1) as at 30 June 2023, the bankrupt estates had assets of $295,148.47 being the cash balance deposited in a Macquarie Bank account; (2) the applicant understood that the costs of prosecuting the proceeding could be in the vicinity of $350,000.00 to $400,000.00; and (3) accordingly, he formed the view that the funds available in the bankrupt estates may not be sufficient to fund the proceeding; and in any event, he would be likely to incur significant legal costs, and the funds of the bankrupt estates would be at risk of being depleted; and there would only be a return to creditors if the proceeding was successfully prosecuted. If the proceeding was not successfully prosecuted, there would be no, or no substantial, funds in the bankrupt estates. In other words, the applicant considered that he would be risking the funds available for creditors if he continued to prosecute the proceeding. He also considered that, although the claims had a reasonable prospect of success, litigation is inherently risky. If he were able to assign the proceeding for a payment, he would recover additional funds which would increase the funds in the bankrupt estates and would not expose those estates to a depletion of their funds. The applicant also formed the view that it was most unlikely that a litigation funder would agree to provide funds to litigate the proceeding. 53 Secondly, the expenses that would be incurred in undertaking a preliminary view of the prospects of success. Based on his experience as a trustee in bankruptcy and as a liquidator, and having had involvement in court proceedings throughout his career and his experience as a client of legal services providers, he considered that the legal costs likely to be incurred by him in obtaining such a preliminary view would be a reasonably modest amount and would not significantly impact on the funds available in the bankrupt estates, and the likely amount he could receive for an assignment would be greater than any legal costs likely to be incurred in obtaining a preliminary view. 54 Thirdly, whether there was any decisive point that suggests the right to sue had no reasonable prospect of success or that it would constitute an abuse of process. The applicant considered that there was a reasonable prospect of success for the claims made in the proceeding and that it would not be an abuse of process to prosecute, or to assign the proceeding. 55 Fourthly, the benefit the bankrupt estates would receive from the assignment, namely $50,000. 56 Finally, the efforts he made to obtain the best consideration for the assignment. The applicant considered the amount which he might request for the assignment, and negotiated this amount with the representative for TJ & P. At the conclusion of the negotiations, the applicant considered that he had obtained the best consideration available to him. He also considered that it was most unlikely that another party, for example, a litigation funder, would take any greater amount than the $50,000 he had negotiated. He also considered that as he had not received any response from any creditors to a notice that he had sent to them concerning the proposed assignment, he formed the view that no creditors objected to the assignment and that no creditor was willing to fund the litigation or otherwise purchase by way of an assignment the choses in action. 57 The applicant's evidence described at [50] to [56] above was not challenged. Instead, the applicant contended that the proposed assignment should not be approved because the case propounded by the applicant qua trustee of the bankrupt estate of Mrs Van Vlijmen has no prospects of success. That case may be summarised as follows: (1) there was a retainer between Mr Zaki and Mr Carr on the one hand and Mr Van Vlyman on the other for the provision of legal services whereby Mr Zaki and Mr Carr would advise Mr Van Vlyman and companies associated with him, referred to as the "Van Vlyman Entities", in relation to various matters concerning dealings between Mr Van Vlyman or the Van Vlyman Entities and a Mr Patrick Wong (SOC [22]); (2) Mr Zaki and Mr Carr owed to Mrs Van Vlijmen (and Mr Van Vlyman) a duty of care to exercise due care and skill in relation to all aspects of the retainer and to take all reasonable precautions to alleviate the risk of harm arising from or in relation to the retainer (SOC [60]); (3) Mr Zaki and Mr Carr acted in breach of that duty of care, principally by failing to provide particular advice to Mr Van Vlyman (SOC [67]); and (4) those breaches of the duty of care caused Mrs Van Vlijmen (and Mr Van Vlyman) to suffer loss and damage (SOC [68] and [69]). 58 The respondent submitted that this case was hopeless in circumstances where Mrs Van Vlijmen was not a client of Mr Zaki or Mr Carr and the only retainer was one in respect of which Mr Van Vlyman was the client. I do not accept this submission. I accept that, as a general proposition, solicitors do not owe a duty of care to persons who are not their clients. However, this is not a universal rule as Kenny J explained in some detail in Carey v Freehills [2013] FCA 954; (2013) 303 ALR 445 at 525 to 527 ([310] to [318]). Thus, it is open to the applicant to persuade the Supreme Court of New South Wales that Mr Zaki and Mr Carr owed a duty of care to Mrs Van Vlijmen despite the absence of a solicitor-client relationship. This may or may not involve an amendment to the SOC. However, the case is not so devoid of any prospect of success that this Court should withhold its approval to the assignment of the right to sue which underpins it. 59 The respondent also relied upon a certificate of independent legal advice concerning advice given to Mrs Van Vlijmen, which he contended was fatal to the claim made on behalf of her bankrupt estate. However, on the facts presently available, I am not in a position to reach such a conclusion.

D. CONCLUSION 60 For the reasons set out above: (1) the applicant's application to re-open should be allowed with respect to the email only and otherwise dismissed. In circumstances where the respondent consented to the tender of the email prior to the filing of the application to re-open and the applicant was otherwise unsuccessful, the applicant should pay the respondent's costs of that application; and (2) the approval sought in the originating application should be given. However, in circumstances where a considerable amount of the argument on that application concerned the applicant's unsuccessful contention that the relief he sought was unnecessary, there should be no costs order, with the intention that each of the applicant and the respondent bear their own costs of the originating application. 61 I will make orders accordingly. I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Goodman.

At a glance

Court

Decision date

Before

Source

Judgment (14 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (22)