Secure Funding Pty Ltd v Hurst-Meyers [2025] ACTSC 177

The second defendant, in respect of whom the present application is brought, has filed a defence which the plaintiff contends is incompetent because he, the second defendant, is an undischarged bankrupt.

In those circumstances the plaintiff contends that the defence is liable to be struck out on two independent grounds. First, the plaintiff submits that the second defendant has no standing to be heard in defence of the plaintiff’s claim because of his status as an undischarged bankrupt. Secondly, the plaintiff contends that his defence discloses no reasonable defence appropriate to the plaintiff’s claim concerning its rights under the loan and mortgage. The second proposition is contestable, but it is not necessary to determine that issue because the first contention is determinative.

Rule 425 is the power the Court has to strike out a pleading at any stage of the proceedings. The principles governing such applications are, as submitted by the plaintiff, well established. The test as described in the decision of the High Court in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 is that the pleading sought to be struck out must be “so obviously untenable that it cannot possibly succeed” (at 129). There are other formulations of the same principle in that decision but that will suffice for present purposes.

Mr Mohammad, who appears for the plaintiff, submitted that it is well established that a bankrupt person has no interest in a proceeding brought for possession of real property or standing to be heard in defence of a secured creditor’s claim for possession of real property. He relied on a number of decisions in support of that contention. It is sufficient for present purposes to refer to the decision of Johnson J, who formerly presided over the possession list in the Supreme Court of New South Wales, in National Australia Bank Limited v Strik [2009] NSWSC 184 at [9]. In that decision, his Honour was faced with a similar application to that before me today, save perhaps to accept that Mr Hurst-Myers’ defence at least engages rationally with the plaintiff’s claim, whereas Mr Strik’s defence cited irrelevant historical features concerning the life and death of Jesus Christ.

In any event, in each case, the defendant was an undischarged bankrupt and the principles recited by Johnson J at [9] of the judgment apply. His Honour said: I am satisfied that the Defendant has no more than a bare legal interest in the Wollongong property which he holds for the benefit of the Official Trustee, and that he has no interest in the proceedings brought against him for possession of the property and has no standing to be heard in defence of the Plaintiff’s claim: Farrow Mortgage Services Pty Ltd v Winfield (1992) 2 QdR 282 at 285; Bendigo Bank Ltd v Demaria [2001] VSC 218 at [18]. Mr White has drawn the Court’s attention, appropriately, to the decision of Dodds-Streeton J of the Victorian Supreme Court in Re-Engine Pty Ltd v Fergusson (2007) 209 FLR 1 at 9– 12 ([50]–[68]), where reference was made to a number of decisions, including Farrow Mortgage Services Pty Ltd v Winfield and Bendigo Bank Ltd v Demaria. Dodds-Streeton J observed at 12 [67]–[68] that, although the authorities indicate that a bankrupt does not have locus standi or an entitlement to be heard, the Court has a discretion to permit a person to give evidence in answer to allegations of personal misconduct and that, in the unusual circumstances of that case, it would promote the due administration of justice to permit the person to be heard. Nothing said by her Honour undermines the principle concerning standing expressed in Farrow Mortgage Services Pty Ltd v Winfield and Bendigo Bank Ltd v Demaria.

As I have indicated, those principles plainly apply in the present case. The defendant, being an undischarged bankrupt, has no more than a bare legal interest in the security property.

Mr Hurst-Myers has submitted that his position is protected by section 60 of the Bankruptcy Act 1966 (Cth), which provides for the trustee in bankruptcy to make an election in writing to prosecute or discontinue an action. However, that section applies to a proceeding commenced by the bankrupt. It has no application in these proceedings, in which the secured creditor seeks to enforce its security.

The applicable section is section 58 of the Bankruptcy Act, which makes plain that the property of the second defendant has vested in the trustee and, furthermore, in accordance with (5), that the rights of Secure Funding as secured creditor are unaffected.

For those reasons, I am satisfied that it is appropriate to make the order sought.

Accordingly, I make the following order: (1) Pursuant to r 425 of the Court Procedures Rules the second defendant’s defence is struck out. I certify that the preceding eleven [11] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Chief Justice McCallum. Associate: Date: