Pursuant to costs assessments arising out of proceedings in the New South Wales Civil and Administrative Tribunal, judgments were entered in Fairfield Local Court on 16 October 2019 for $1,591.00, and on 17 October 2019 for $26,551.98. After a letter of demand 8 December 2019 was not complied with by the plaintiff, a bankruptcy notice was served on the plaintiff by the judgment creditors (the fifth, sixth and seventh defendants herein). The bankruptcy notice was challenged by the plaintiff, but it was upheld by Gleeson J on 25 June 2020 (Singh v Fobupu Pty Ltd [2020] FCA 886), with an appeal against her Honour's decision being dismissed by the Full Federal Court on 3 February 2021 (Singh v Fobupu Pty Ltd [2021] FCAFC 14), with the result that an act of bankruptcy on the part of the plaintiff occurred on 25 June 2020.
Subsequently a creditor's petition was filed by the judgment creditors, and on 6 May 2021 a sequestration order was made against the plaintiff. The trustees appointed were Innis Cull and Gess Rimbaldi from Pitcher Partners (the third and fourth defendants herein).
On 4 May 2021, two days before the sequestration order, the plaintiff applied for a review of the costs assessment.
In the course of considering whether the review application by the plaintiff was lodged within time, the Manager, Costs Assessment, Mr B Bellach ("the Manager"), said this in an email sent to the plaintiff, the solicitor for the judgment creditors and the trustees in bankruptcy on 13 May 2021:
However, the issue of whether Mr Singh has standing to seek the review application has arisen through the appointment of the Joint Bankruptcy Trustees. With their appointment pursuant to orders made by the Federal Court, Mr Singh cannot continue this cause of action, instead that decision rests with the Joint Bankruptcy Trustees.
Their response is now sought to clarify, if, this review application in (sic) being pursued, with that response being required by 7 June 2021. Upon receipt of their response this matter will be further considered. Please note thou (sic), if no response is received from the Bankruptcy Trustee's (sic) the MCA will presume the review application is not being pursued and will take steps to close this file.
On 8 June 2021 Mr Cull, for the Trustees, wrote to the Manager saying:
I wrote to notify the Court that have (sic) not made an election in writing to prosecute or discontinue the Application within the prescribed time frame. Pursuant to s 60(3) of the BA the proceeding is therefore deemed to have been abandoned by me.
On 10 June 2021, the Manager then wrote to the various parties including the plaintiff, informing them of the correspondence from the plaintiff's Trustees in Bankruptcy saying:
With that in mind it would appear that the [Manager, Costs Assessment] cannot proceed with [the plaintiff's] review application given [the plaintiff] does not seem to have standing to pursue it himself and, as it has been abandoned under the Bankruptcy Act.
Having said that, steps have been taken to close the file.
On 10 August 2021, the plaintiff filed a summons seeking judicial review of the decision of the Manager dated 13 May 2021. The summons does not make reference to the decision of the Manager of 10 June 2021. He seeks that the decision of 13 May 2021 be set aside and asks that the application for review be remitted to the Manager for determination according to law.
There are four grounds as follows:
Denial of procedural fairness
Acting under the dictation of a third party
Exercise of judicial power vested in Commonwealth Federal Court.
Failure to consider factors required by legislation to be considered.
The defendants named in the summons were as follows:
First Defendant: Secretary, Department of Communities and Justice;
Second Defendant: Anthony Dicembre (The judgment creditor's solicitor);
Third Defendant: Innis Cull (Trustee);
Fourth Defendant: Gess Michael Rambaldi (Trustee);
Fifth Defendant: Ghulam Akbar Khan;
Sixth Defendant: Samina Khan; and
Seventh Defendant: Fobupu Pty Limited (judgment creditors)
On 3 September 2021, the second, fifth, sixth and seventh defendants filed a notice of motion seeking the following orders:
1. A declaration that the Plaintiff does not have standing to bring or continue these proceedings.
2. A declaration that the proceedings are incompetent and/or a nullity.
3. An order pursuant to Rule 14.3 (sic) of the Uniform Civil Procedure Rules 2005 dismissing the whole of the proceedings.
The reference to r 14.3 appears to be an error with the intended Rule being r 13.4 Uniform Civil Procedure Rules 2005 (NSW).
In submissions filed on behalf of those defendants, they say that as result of the sequestration order the plaintiff does not have any standing to prosecute the proceedings, relying on ss 58 and 116 of the Bankruptcy Act 1966 (Cth) having regard to the definition of "property" in s 5. The defendants say that any right to make the application has vested in the trustees. Further, they say that the second defendant has been improperly joined to the proceedings, and that the summons does not disclose any cause of action against him.
Although no motion has been filed by the first defendant, the first defendant has filed written submissions, saying that the Secretary is not an appropriate party to the proceedings. The Secretary further agrees with the submissions filed by the second, fifth, sixth and seventh defendants, and says that the just, quick and cheap approach to the matter is to await the outcome of the present motion before seeing if there is a necessity for the Secretary to file a notice of motion to dismiss the proceedings against it.
A brief written submission has also been prepared on behalf of the trustees. That submission says that the bankrupt estate is without funds, and the trustees agree with the other defendants that the plaintiff does not have standing to bring or continue the proceedings.
Although the plaintiff has filed two documents entitled "Submissions", the first on 27 October 2021 and the second on 5 November 2021, those submissions do not appear to address the main point made by the defendants concerning the right of the plaintiff to bring or maintain the proceedings.
In his oral submissions, the plaintiff submitted that the process of costs assessment is an executive action, not a judicial process. He relied for that proposition on what was said by Master Malpass in Brierley v Anthony Charles Reeves T/as Kaplan Reeves & Co & Ors [2000] NSWSC 305 at [24]:
In my view, these rules [the Supreme Court Rules] (which have application to proceedings in this Court) do not apply to a non curial process (such as that governed by procedures prescribed by the Regulation [Legal Profession Regulation 1994].
He further submitted that if the process is not a judicial process, the trustees have no right to intervene. In that way, the Manager should not have made his decision as a result of what the trustees notified him, namely, that no decision had been made to take over the process. He submitted, in any event, that the Manager had no right to "execute federal legislation", which appeared to mean that it was wrong for the Manager to have made a decision by applying federal legislation.
He submitted that the second defendant was a proper party because he misled the Manager, and he is a person interested in maintaining the decision. He submitted that the first defendant was a proper party because the Manager was not a legal entity, and (somewhat inconsistently) that the employer of Mr B Bellach was the Department of Communities and Justice. The trustees were said to be proper parties because they, like the first defendant, were interested in maintaining the Manager's decision.
While a right to sue is property in the form of a chose in action, and would vest in the trustee on a sequestration order being made (Samootin v Shea [2010] NSWCA 371; Faulkner v Bluett (1981) 52 FLR 115 at 122; and see also s 116(1)(b) of the Bankruptcy Act), the right to bring an appeal appears not to constitute property: Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 133 and 134; Samootin at [90].
However, in Cummings, the majority judgment of Brennan CJ, Gaudron and McHugh JJ held that in such a case the bankrupt has no financial interest which would confer locus standi to appeal in his own name against a judgment.
The majority judgment made reference to the judgment of Hoffmann LJ (as his Lordship then was) in Heath v Tang [1993] 1 WLR 1421, and went on to say (at 137-138):
After canvassing the authorities, his Lordship concluded that they demonstrated "that in principle a bankrupt cannot in his own name appeal from a judgment against him which is enforceable only against the estate vested in his trustee". In a later unreported case, Hoffmann LJ said:
"The essence of [the] decision [in Heath v Tang] is that a bankruptcy order divests the bankrupt of any further interest in what debts he owes because it provides that he shall no longer be under any personal liability. An appeal from the judgment against him or an application to set aside the judgment against him is therefore a matter for his trustee, but does not concern the bankrupt."
So far as a judgment entered in an action against a bankrupt creates or evidences a provable debt, we respectfully agree that the bankrupt has no financial interest which would confer locus standi to appeal in his own name against the judgment. That is because it is fundamental to the law of bankruptcy that the bankrupt is divested of both his interest in his property and liability for his provable debts.
Of course, a money judgment entered against a bankrupt has the effect of increasing the amount of the debts provable in his estate. But it is immaterial that, if an appeal against the judgment were successful, there would or might be a surplus in the estate after the remaining creditors are paid. A bankrupt's contingent interest in a surplus does not give him an interest which would allow him to sue to enforce proprietary rights and, that being so, it cannot give him an interest to appeal to minimise liabilities. If the bankrupt cannot appeal against such a judgment, does his trustee have the power to do so? The powers of a trustee are defined by s 134. By sub-s (1)(j), the trustee is authorised to "bring, institute or defend any action or other legal proceeding relating to the administration of the estate". That is an ample power to permit the trustee to institute an appeal against a judgment entered against a bankrupt that affects the administration of the estate.
(emphasis added; citations omitted)
The present proceedings, being judicial review proceedings, are effectively proceedings in the form of an appeal against the decision of the Manager, and the reasoning of the majority in Cummings applies analogously to the present proceedings. That is because on sequestration the plaintiff became divested of both his interest in the property and liability for his provable debts. The provable debts are the judgments which resulted from the costs assessment.
In that way, the bankrupt has no interest in the judgments. An attempt to go behind the judgments by having the assessments reviewed, so that the judgments could be set aside or varied, is not, on the basis of what is said in Cummings, open to the plaintiff.
It is not to the point whether the costs assessment process is "executive" or "judicial". The plaintiff's reliance on Brierley is misconceived. The only point being made by Master Malpass was that provisions of the Act and Rules could not be called in aid to correct defects in the procedure laid down in the Regulation. That was because the process was not the same as legal proceedings which were governed by the Act and Rules. That is the sense in which "non curial" is used. The distinction the plaintiff seeks to make between "executive" and "judicial" in relation to the Bankruptcy Act has no foundation.
The judicial review proceedings brought by the plaintiff were for the purpose of requiring the Manager to continue with the review the plaintiff had instituted prior to his bankruptcy. That review was stayed by virtue of s 60(2) of the Bankruptcy Act. Of course, s 60(2) has no application to the present proceedings because those proceedings were not on foot at the time the plaintiff became bankrupt: Cummings at 130-131.
Since the plaintiff has no locus standi to bring the present proceedings, he does not have a reasonable cause of action in the sense that he has no right to have the decision of the Manager reviewed. His claim for judicial review must necessarily fail.
As far as the second defendant is concerned, he was not a party to any review of the costs order, being only the solicitor for the fifth, sixth and seventh defendants. He has been improperly joined to the proceedings, and the proceedings against him should be dismissed.
In a similar fashion, the first defendant was not properly joined to the proceedings. The fact that the Manager might have been the employee of the Department of which the first defendant is the Secretary, provides no basis for joining the Secretary to judicial review proceedings. Apart from the judgment creditors, the only other appropriate party was the Manager who ought to have been joined: r 59.3(4) UCPR.
Neither were the trustees proper parties to judicial review proceedings unless those proceedings had been brought by them. It was apparent that the trustees did not wish to pursue the costs assessment. It follows that they should not have been joined as parties to proceedings seeking judicial review of a decision made in the course of the costs assessment review which had been instituted by the plaintiff prior to his sequestration.
Accordingly, I make the following orders:
Declare that the plaintiff has no standing to commence or maintain the proceedings.
Dismiss the proceedings pursuant to r 13.4 Uniform Civil Procedure Rules 2005 (NSW).
The plaintiff is to pay the defendants' costs.
[2]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 10 February 2022