Singh v Khan

Singh v Khan - [2021] NSWSC 1093 - NSWSC 2021 case summary — Zoe

[7]

The proceedings in this Court

By summons, which was filed in this Court on 11 September 2018, the plaintiff seeks leave to appeal against the decision of the Appeal Panel of NCAT to refuse leave to appeal. As referred to above, an amended summons was filed on 23 November 2018. The plaintiff explained at the hearing before me on 26 August 2021 that he also challenged the costs order made against him by NCAT and did so on the basis that s 60(2) of the Civil and Administrative Tribunal Act 2013 (NSW) limited NCAT's power to award costs in proceedings before it to cases where it was satisfied that there were "special circumstances" warranting an award of costs.
The plaintiff foreshadowed that he would rely (at a substantive hearing of his amended summons) on Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597; [2002] HCA 1, and, in particular the following passage at [51] (Gaudron and Gummow JJ): "There is, in our view, no reason in principle why the general law should treat administrative decisions involving jurisdictional error as binding or having legal effect unless and until set aside. A decision that involves jurisdictional error is a decision that lacks legal foundation and is properly regarded, in law, as no decision at all. Further, there is a certain illogicality in the notion that, although a decision involves jurisdictional error, the law requires that, until the decision is set aside, the rights of the individual to whom the decision relates are or, perhaps, are deemed to be other than as recognised by the law that will be applied if and when the decision is challenged." [Footnotes omitted.]
On 26 April 2019, various notices of motion were listed before Harrison AsJ. Her Honour dismissed the plaintiff's notices of motion dated 15 October 2018 and 20 December 2018 respectively, with costs. At the conclusion of the hearing, the plaintiff raised a further issue before her Honour. He submitted that there be a stay of the costs order made by NCAT, pending determination of the summons in this Court. At this point, Mr Brown, who appeared for the defendants, informed the Court that the defendants were seeking to have the costs in NCAT assessed. He said: "I'm instructed to provide an undertaking that we will not seek to enforce any costs order without first providing [the plaintiff] 21 days' notice."
Associate Justice Harrison informed the plaintiff that she would not grant a stay of the costs order on 26 April 2019 and that he would have to file an affidavit to show why a stay ought be granted. The plaintiff asked Harrison AsJ to record the defendants' undertaking. Her Honour confirmed that it had been recorded.

[11]

The bankruptcy proceedings in the Federal Court

On 9 December 2019, the defendants served on the plaintiff a bankruptcy notice which required him to pay the creditors the sum of $28,142.98 (being the total of the two judgments entered in the Local Court), or otherwise to make arrangements to their satisfaction for settlement of the judgment debts, in accordance with the provisions of the Bankruptcy Act. The plaintiff sought to challenge the bankruptcy notice in the Federal Court. His application was dismissed by Gleeson J on 25 June 2020: Singh v Fobupu Pty Ltd, in the matter of Singh [2020] FCA 886.
On 6 July 2020, the defendants filed a creditors' petition in the Federal Court, seeking a sequestration order against the plaintiff's estate based on his non-compliance with the bankruptcy notice.
The plaintiff appealed against Gleeson J's decision to the Full Federal Court (Rares, Farrell and Stewart JJ), which, on 3 February 2021, dismissed the appeal: Singh v Fobupu Pty Ltd, in the matter of Singh [2021] FCAFC 14.
The defendants' application for a sequestration order was heard by the Federal Circuit Court (Judge Street) on 6 May 2021. The Court found that the act of bankruptcy occurred on 25 June 2020. His Honour made the following orders: "1. Leave to file the application in a case dated 6 May 2021 is refused. 2. Leave is granted to the applicants to amend the Creditor's Petition in respect of the date of the act of bankruptcy, being 25 June 2020, and the Court dispenses with the need for the filing of an amended Creditor's Petition. 3. A sequestration order is made against the estate of [the plaintiff]. 4. The Petitioning Creditors' costs be paid out of the bankrupt estate in accordance with the priority to which they are entitled, in such amount as is agreed with the trustees and/or as assessed."
The Court noted the following: "1. A consent to act as joint trustees has been filed by Innis Anthony Cull and Gess Michael Rambaldi. 2. The act of bankruptcy occurred on 25 June 2020."
On 23 May 2021, the plaintiff filed a notice of appeal in the Federal Court from the orders made by the Federal Circuit Court on 6 May 2021. The evidence does not disclose when that matter is to be determined.

[15]

The directions hearing on 28 July 2021

On 28 July 2021, the matter came before the Registrar for directions. The plaintiff appeared on his own behalf; Mr Brown appeared for the defendants; and Mr Frommer appeared for the Secretary. At the commencement of the directions hearing, Mr Brown informed the Registrar that the proceedings were required to be stayed because a sequestration order had been made against the plaintiff's estate pursuant to the Bankruptcy Act. Mr Brown submitted that it would be "prudent" for the Court to determine the defendants' motion of 23 July 2021 before determining the plaintiff's motion of 13 July 2021 because of the defendants' contention that the plaintiff (by reason of his bankruptcy) did not have standing to contest the Registrars' decisions which he sought, by his motion of 13 July 2021, to challenge. Mr Frommer supported this course and submitted that the proceedings had been automatically stayed by reason of the Bankruptcy Act and that the Court "should so declare if necessary."
In response, the plaintiff relied on the express terms of s 60 of the Bankruptcy Act (see further below). The Registrar told him, in substance, that it was not necessary to talk about the "legalities" since she wanted to make directions about the further conduct of the matter and the hearing of the notices of motion. The plaintiff continued to read out s 60 of the Bankruptcy Act and make submissions about the effect of ss 60(2) and (3). Once again, the Registrar informed the plaintiff that she was not going to be "getting into the technicalities of what's going on" and "really wanted to move the matter forward with some directions timetabling orders."
The plaintiff took great exception to the circumstance that his notice of motion, which had been filed on 13 July 2021, was not to be listed for hearing, although the defendants' notice of motion, which had been filed on 23 July 2021 was to be listed for hearing. The Registrar consulted the plaintiff about a timetable for the defendants' notice of motion and made directions accordingly. The Registrar also directed the defendants to file an outline of submissions to be served on the plaintiff as to the basis of their notice of motion. Before the conclusion of the directions hearing, the plaintiff's connection to the Court was lost. The matter was stood down in the list. The plaintiff was not able to be contacted before the matter concluded.
At the conclusion of the directions hearing on 28 July 2021, the Registrar made the following directions (as recorded in JusticeLink): "This matter is listed for Directions (Common Law Registrar) on 3 August 2021 9:00 AM before the Supreme Court - Civil at Supreme Court Sydney. Estimated duration: 5 Minutes This matter is listed for Duty (Common Law) on 26 August 2021 10:00 AM before the Supreme Court - Civil at Supreme Court Sydney. Estimated duration: 90 Minutes ORDERS OR DIRECTIONS 1. The Plaintiff is to file and serve all evidence in answer to the NOM [notice of motion] filed 23 July 2021, by 18 August 2021. 2. The Defendant is to file and serve an outline of written submissions by 6 August 2021. 3. The Plaintiff is to file and serve any written submissions by 20 August 2021. 4. Stood over for Directions Hearing on 3 August 2021 (in relation to the NOM filed 13 July 2021). 5. The Court is to send a Notice of Orders Made to the Plaintiff."

[17]

The relevant provisions of the Bankruptcy Act

The determination of the present applications is governed by the Bankruptcy Act. Upon the making of the sequestration order in respect of the plaintiff's estate, all of the plaintiff's property vested in his trustees as from the date of bankruptcy: s 58(1). Thus, the effect of the making of the sequestration order on 6 May 2021, was to vest all of the plaintiff's property from 25 June 2020 in his trustees.
Section 5 of the Bankruptcy Act defines "property" as follows: "'property' means real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property."
Section 60 of the Bankruptcy Act relevantly provides: "Stay of legal proceedings … (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. (4) Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of: (a) any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or (b) the death of his or her spouse or de facto partner or of a member of his or her family. … (5) In this section, action means any civil proceeding, whether at law or in equity."
The term "property", as defined by s 5, has been held to include the right to sue: Faulkner v Bluett [1981] FCA 3; (1981) 52 FLR 115. In Faulkner v Bluett, the applicant claimed damages for negligence and negligent misrepresentation. After commencing the proceedings, a sequestration order was made against her estate. The Federal Court (Lockhart J) held that any damages to which the applicant might be entitled would be estimated by reference to her rights of property and not to any pain felt by her in respect of her body, mind or character. Thus, it was held that the action would not fall within the exception in s 60(4) of the Bankruptcy Act. The action was stayed as the applicant had no right to continue it in her own name. I understood the plaintiff to concede that the present proceedings would not fall within the exception in s 60(4). In case I misunderstood the plaintiff, I ought note that I am satisfied that the present proceedings do not fall within that exception.
Section 116 of the Bankruptcy Act relevantly provides: "Property divisible among creditors (1) Subject to this Act: … (b) the capacity to exercise, and to 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; … is property divisible amongst the creditors of the bankrupt."

[19]

This Court's jurisdiction

The plaintiff submitted that this Court had no jurisdiction to grant a stay of the proceedings because the effect of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) was to confer exclusive jurisdiction with respect to bankruptcy on the Federal Court.
Section 3(1)(e) of the Jurisdiction of Courts (Cross-Vesting) Act defines "special federal matter" as, relevantly, "a matter that is within the original jurisdiction of the Federal Court under s 39B of the Judiciary Act 1903 (Cth); being a matter in respect of which the Supreme Court of a State ... would not, apart from this Act, have jurisdiction." Section 39B(1A)(c) of the Judiciary Act provides that the Federal Court has original jurisdiction in any non-criminal matter arising under Commonwealth legislation. The Bankruptcy Act is Commonwealth legislation.
Section 39(2) of the Judiciary Act relevantly confers federal jurisdiction on State courts, including this Court, in the following terms: "(2) The several Courts of the States shall within the limits of their several jurisdictions, whether such limits are as to locality, subject-matter, or otherwise, be invested with federal jurisdiction, in all matters in which the High Court has original jurisdiction or in which original jurisdiction can be conferred upon it ..."
The effect of s 39(2) of the Judiciary Act is that jurisdiction with respect to matters arising under the Bankruptcy Act is conferred on State courts, subject to the limitation referred in s 39(2). The relevant limitation on this Court's jurisdiction is to be found in s 27(1) of the Bankruptcy Act which provides that "the Federal Court and the Federal Circuit Court have concurrent jurisdiction in bankruptcy", which is exclusive of the jurisdiction of all courts other than the jurisdiction of the High Court under s 75 of the Constitution or the jurisdiction of the Family Court under ss 35 or 35A of the Bankruptcy Act. Section 27(1) is to be read with the definition of bankruptcy in s 5 which provides: "bankruptcy, in relation to jurisdiction or proceedings, means any jurisdiction or proceedings under or by virtue of this Act."
The effect of s 27(1) of the Bankruptcy Act is that this Court (and other State courts) would not have jurisdiction "in bankruptcy" but for the Jurisdiction of Courts (Cross-Vesting) Act: Truthful Endeavour Pty Ltd v Condon (2015) 233 FCR 174; [2015] FCAFC 70 (Truthful Endeavour) at [48] (Allsop CJ, Katzmann and Gleeson JJ); and the authorities referred to by Perram J in Meriton Apartments Pty Ltd v Industrial Court of New South Wales (2008) 171 FCR 380; [2008] FCAFC 172 (Meriton) at [172]-[173].
The distinction between the words "in bankruptcy" in s 27(1) of the Bankruptcy Act and the words "matter … arising under any laws made by the Parliament" in s 76(ii) of the Constitution is significant. It differentiates those matters in respect of which the Federal Court has exclusive jurisdiction from those matters where the federal jurisdiction under the Bankruptcy Act can be exercised either by State courts (pursuant to s 39(2) of the Judiciary Act) or by the Federal Court (pursuant to s 39B(1A)(c) of the Judiciary Act). The Federal Court has exclusive jurisdiction "in bankruptcy", meaning "in jurisdiction or proceedings under or by virtue of" the Bankruptcy Act (s 5 of the Bankruptcy Act). However, the State courts have jurisdiction to determine matters arising under the Bankruptcy Act other than those falling within the Federal Court's exclusive jurisdiction: Meriton at [172] (Perram J), cited with approval in Morris Finance Ltd v Brown (2016) 93 NSWLR 551; [2016] NSWCA 343 by Payne JA at [32] (Basten JA agreeing).
Practical as well as legal reasons underlie this distinction. Matters such as the validity of a bankruptcy notice and presentation of creditor's petitions fall within the exclusive jurisdiction of the Federal Court. However, the legislature did not intend to deprive the State courts of jurisdiction to deal with matters arising when, for example, a party to a proceeding is declared bankrupt unless it would involve jurisdiction "in bankruptcy". The question whether proceedings in this Court brought by a plaintiff against whom a sequestration order is subsequently made does not require the exercise of jurisdiction "in bankruptcy". Accordingly, this Court has jurisdiction to determine the effect of s 60 of the Bankruptcy Act on these proceedings.

[21]

The effect of the Bankruptcy Act on the proceedings in this Court

The third basis on which the plaintiff opposed the orders sought by the defendants in their notice of motion of 23 July 2021 arises from the construction of s 60 of the Bankruptcy Act. The plaintiff accepted that the word "action" in s 60(2) of the Bankruptcy Act incorporated the whole of these proceedings. However, he submitted that there was only a stay under s 60(2) if notice had been given to the trustees in bankruptcy and 28 days had passed since the giving of such notice. He contended that, as there was no evidence of notice having been given, no stay had come into operation. Accordingly, he submitted that s 60 was irrelevant to the current proceedings. He argued that the effect of ss 60(2) and (3) was that the only stay which would arise would be a stay of 28 days which would begin from the date the notice of the proceedings was served on the trustee. In other words, the plaintiff contended that the effect of s 60(3) was to qualify the general words of s 60(2).
I reject the plaintiff's interpretation of s 60. The automatic stay effected by s 60(2) is not qualified by s 60(3). Thus, it applies irrespective of whether the trustee has been notified of the proceedings. In any event, the evidence established that the trustee (who had understood that the proceedings had been dismissed) was notified on 14 July 2021 of the plaintiff's attempt to reinstate them. Mr Cull's view was that the plaintiff did not have standing to do so (presumably because of the operation of s 116(1)(b) of the Bankruptcy Act). Mr Cull's statement in his email of 29 July 2021 that "s 60 does not apply to the proceedings" must be read in the context of his understanding that the proceedings had already been dismissed (before the sequestration order was made); that the plaintiff had no standing to reinstate them (thereby making the proceedings a nullity in any event); and that, accordingly, there were no proceedings upon which a stay under s 60 could operate. In any event, as the trustees have not elected to prosecute or discontinue the action within 28 days of notice having been given, they are taken to have abandoned them: s 60(3).

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (25 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (12)

Cited By (7)