Talacko, in the matter of Talacko (Bankrupt) v Bankrupt Estate of Talacko [2025] FCA 574

MARTIN THORNBURN JAN TALACKO (and others named in the Schedule)

1. Leave be granted to the First Applicant nunc pro tunc from 20 April 2012 pursuant to section 58(3)(b) of the Bankruptcy Act 1966 (Cth) to:

(a) take any further steps necessary to progress the claim against Paul Talacko and David Talacko commenced in the Czech Republic on 20 April 2012 and made pursuant to article 42a of the Czech Civil Code (Donation Proceeding) in relation to the properties set out in Annexure A to these orders (Properties);

(b) enforce the orders of:

(i) Justice Kyrou dated 11 December 2009 in the sum of €4,740,830 and €296,079 by way of interest (Kyrou J Orders); and

(ii) the costs order of Associate Justice Wood dated 28 October 2009 in the sum of $81,914.40 (Woods J Costs Orders)

in accordance with any judgment that may be obtained in the Donation Proceeding against Paul Talacko and David Talacko and the Properties.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANNEXURE A - LIST OF PROPERTIES IN THE CZECH REPUBLIC

Real estate in the cadastral area of Staré Město:

(a) house No. 465, which is part of plot No. 425 and plot No. 425 with an area of 711 m2, built-up area and courtyard, registered on the ownership sheet No. 457 at the Cadastral Office for the Capital City of Prague, cadastral area Staré Město;

(b) house No. 751, which is part of plot No. 823 and plot No. 823 with an area of 574 m2, built-up area and courtyard, registered on the ownership sheet No. 972 at the Cadastral Office for the Capital City of Prague, cadastral area Staré Město;

(c) house No. 753, which is part of plot No. 832 and plot No. 832 with an area of 541 m2, built-up area and courtyard, registered on the ownership sheet No. 527 at the Cadastral Office for the Capital City of Prague, cadastral area Staré Město;

(d) house No. 755, which is part of plot No. 860 and plot No. 860 with an area of 221 m2, built-up area and courtyard, registered on the ownership sheet No. 449 at the Cadastral Office for the Capital City of Prague, cadastral area Staré Město;

(e) house no. 939, which is part of plot no. 821 and plot no. 821 with an area of 115 m2, built-up area and courtyard, registered on the ownership sheet no. 539 at the Cadastral Office for the Capital City of Prague, cadastral area Staré Město.

(a) plot No. 544/8 with an area of 40 m2, other area;

(b) plot No. 544/9 with an area of 55 m2, other area;

(c) plot No 544/10 with an area of 3985 m2, other area;

(d) plot No 591 with an area of 22 m2, built-up area and courtyard;

(e) plot no. 592 with an area of 531 m2, garden;

(f) plot no. 593/3 with an area of 2271 m2, other area;

(g) plot No 593/6 with an area of 297 m2, other area;

(h) plot no. 1029/25 with an area of 3261 m2, arable land;

(i) plot No 1029/27 with an area of 2752 m2, other area;

(j) plot No 1029/28 with an area of 142 m2, other area;

(k) plot No 1029/29 with an area of 27089 m2, garden;

(l) plot No 1031/10 with an area of 90 m2, other area;

(m) plot No 1031/11 with an area of 32 m2, other area;

(n) plot no. 1031/12 with an area of 293 m2, other area;

(o) plot No 1031/13 with an area of 3666 m2, other area;

(p) plot No 1032/1 with an area of 706 m2, garden;

(q) plot no. 1032/4 with an area of 62 m2, built-up area and courtyard;

(r) plot no. 1033/1 with an area of 356 m2, garden;

(s) plot No. 1234/70 with an area of 1986 m2, other area;

(t) plot No. 1234/102 with an area of 124 m2, other area;

(u) plot No. 1234/103 with an area of 354 m2, other area;

(v) plot No. 1234/104 with an area of 20 m2, other area;

(w) plot No 1241/27 with an area of 2698 m2, arable land;

(x) plot No. 1241/29 with an area of 14 m2, other area;

all registered on the ownership sheet No. 1072 at the Cadastral Office for the Capital City of Prague, cadastral area Řepy.

1. The first applicant seeks leave pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth) (Act), to take a fresh step in legal proceedings in the Czech Republic in respect of two orders of the Supreme Court of Victoria respectively made on 28 October 2009 and 11 December 2009.
2. This proceeding has a complicated history (see Talacko & Talacko v Talacko [2008] VSC 128; Talacko v Talacko [2009] VSC 533; and Talacko v Talacko & Ors [2011] VSCA 71). For the purposes of the application before me, it is sufficient to record the following aspects of that history.

(a) The orders the subject of the application arise out of proceedings commenced in the Supreme Court of Victoria in 1998 (Victorian Proceedings). The plaintiffs in the Victorian Proceedings comprised the mother of the first applicant (Helena Talacko) and the second to fifth applicants. The defendant was Jan Emil Talacko.

(b) On 28 October 2009, Woods AJ made a cost order in the Victorian Proceedings in favour of the plaintiffs in the amount of $81,914.40. On 11 December 2009, Kyrou J made an order in the Victorian Proceedings that the defendant (Jan Emil Talacko) pay to the plaintiff (Helena Talacko) the sum of €4,740,830 and €296,079 by way of interest. I will refer to these orders made by Woods AJ and Kyrou J as the "Victorian Orders".

(c) On 7 November 2011, Jan Emil Talacko was declared bankrupt. The first respondent was appointed the trustee of his bankrupt estate. Jan Emil Talacko died on 3 November 2014. The first respondent remains the trustee of his bankrupt estate.

(d) On 20 April 2012, Helena Talacko commenced proceedings in the Czech Republic against Jan Emil Talacko's sons (David and Paul Talacko). In those proceedings, orders were sought pursuant to article 42a, Act No. 40 of 1964 of the Czech Republic (Czech Civil Code) setting aside two donation agreements by which Jan Emil Talacko transferred to his sons, by way of gift, his interests in certain properties in the Czech Republic (respectively, the "Donation Proceedings" and the "Czech properties"). I am told that the effect of the Donation Proceedings, if successful, is that the Czech properties will not pass back to the bankrupt estate of Jan Emil Talacko. Rather, the Victorian Orders may be enforceable against Paul and David Talacko and the Czech properties.

(e) Shortly after the commencement of the Donation Proceedings, Helena Talacko died. Her son Jan Talacko is the executor of her estate. Jan Talacko continued to prosecute the Donation Proceedings in his capacity as executor of his mother's estate.

(f) On 21 September 2021, orders were made in favour of the first applicant in the Donation Proceedings (Municipal Court Orders).

(g) On 16 February 2024, McElwaine J granted the first applicant leave under s 58(3)(b) of the Act to enforce the Victorian Orders against both Paul and David Talacko and the Czech properties in accordance with the Municipal Court Orders.

(h) Three days later, on 19 February 2024, the first applicant was informed by his Czech lawyers that Paul and David Talacko had successfully appealed the Municipal Court Orders in the Czech Supreme Court. The Municipal Court Orders were set aside and the Czech Supreme Court remitted certain questions in the Donation Proceedings to the Municipal Court of Prague (Remitted Questions). The Remitted Questions include whether the Victorian Orders are capable of "enforcement" under article 42a of the Czech Civil Code. The hearing of the Remitted Questions will take place before the Municipal Court of Prague on 29 April 2025.

1. It is against that background that the first applicant seeks leave pursuant to s 58(3)(b) of the Act.
2. The object of the leave sought is twofold:

(a) Firstly, to take a fresh step or fresh steps in the Donation Proceedings by:

(i) participating in the hearing of the Remitted Questions before the Municipal Court of Prague, and

(ii) instituting or defending any further appeals in the Donation Proceedings; and

(b) Secondly, to enforce any judgment that may be obtained in his favour in the Donation Proceedings against Paul and David Talacko and the Czech properties.

1. The matter has come before the Court as an urgent duty matter given the date of the hearing of the Remitted Questions, the date by which material must be filed in respect of the Remitted Questions, and the time needed to have a copy of any order made in respect of the present application translated by a certified translator.

1. Subsection 58(3) of the Act provides as follows:

(3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:

(a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or

(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.

1. Subsection 58(3)(a) of the Act does not apply here because of the curiosity of the Donation Proceedings that I have described above. Namely, the effect of those proceedings, if successful, is that the Czech properties will not pass back to the bankrupt estate of Jan Emil Talacko. It follows that the question before me is whether s 58(3)(b) of the Act is engaged. Leave is required under that section in relation to legal proceedings that are in respect of a "provable debt".
2. Section 5 of the Act defines a "provable debt" as:

... a debt or liability that is, under this Act, provable in bankruptcy.

1. The debts or liabilities provable in bankruptcy are set out in s 82 of the Act which relevantly provides as follows:

(1) Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.

(1A) Without limiting subsection (1), debts referred to in that subsection include a debt consisting of all or part of a sum that became payable by the bankrupt under a maintenance agreement or maintenance order before the date of the bankruptcy.

...

(8) In this section, liability includes:

(a) compensation for work or labour done;

(b) an obligation or possible obligation to pay money or money's worth on the breach of an express or implied covenant, contract, agreement or undertaking, whether or not the breach occurs, is likely to occur or is capable of occurring, before the discharge of the bankrupt; and

(c) an express or implied engagement, agreement or undertaking, to pay, or capable of resulting in the payment of, money or money's worth, whether the payment is:

(i) in respect of amount - fixed or unliquidated;

(ii) in respect of time - present or future, or certain or dependent on a contingency; or

(iii) in respect of the manner of valuation - capable of being ascertained by fixed rules or only as matter of opinion.

1. The phrase, "in respect of a provable debt", is construed widely: see Re McMaster [1991] FCA 598; (1991) 33 FCR 70, 72-73; Green v Schneller [2001] NSWSC 897; (2001) 164 FLR 82, 85-87. Moreover, the nexus between the proceeding and the provable debt may be indirect: Fraser v Deputy Commissioner of Taxation [1996] FCA 1701; (1996) 69 FCR 99, 112-114.

1. I am satisfied that each of the Victorian Orders are a "provable debt" within the meaning of the Act. That is because each of the Victorian Orders comprises a "debt or liability" to which Jan Emil Talacko was subject at the date of his bankruptcy (7 November 2011): Act, ss 5 and 82(1).
2. I am also satisfied that the Donation Proceedings are "legal proceedings" in respect of a provable debt. The object of the Donation Proceedings is to set aside agreements by which Jan Emil Talacko transferred to his sons, by way of gift, his interest in the Czech properties. If the first applicant is successful in the Donation Proceedings, then the Victorian Orders will be able to be enforced against Paul Talacko and David Talacko and the Czech properties. I consider that those matters establish the necessary nexus between the Donation Proceedings and the provable debt: c.f., Fraser.
3. The matters relevant to the grant of leave under s 58(3)(b) of the Act were summarised by Katzmann J in Yan v Spyrakis [2022] FCA 872 at [11] as follows:
   1. The Bankruptcy Act does not specify any factors that should be taken into account in considering whether leave should be granted. The discretion is at large. But the authorities indicate that the following matters weigh in favour of an applicant:

(1) the proceeding the subject of the application involves parties other than the bankrupt and it might be necessary for the bankrupt to become a party: Re Rose; Ex parte Devaban Pty Ltd [1994] FCA 1082 (Hill J);

(2) it is in the interests of justice that the claims made against the bankrupt are determined at the same time as the court determines the claims against the other parties: National Australia Bank Limited v Moore [2012] FCA 865 at [20] (Robertson J);

(3) the facts are complex and the issues would be better and more comprehensively dealt with in a contested trial than if the creditor were required to lodge a proof of debt against the debtor alone: Allanson, 30 FLR at 114; 16 ALR at 48;

(4) there is no opposition from the trustee in bankruptcy: SBA Music Pty Ltd v Hall (No 2) [2014] FCA 1116 at [28] (Wigney J); Health Services Union v Jackson (No 3) [2015] FCA 694 at [19] (Tracey J);

(5) the proceeding was commenced well before the date of the bankruptcy and there is no evidence to suggest that the application was made to gain an advantage over other creditors: Stoker (Trustee), in the matter of Starr (Bankrupt) v Starr [2011] FCA 746 at [22] (Jacobson J); Jackson at [20]; and

(6) the proceeding is otherwise ready for hearing such that the interests of unsecured creditors were unlikely to be prejudiced: Jackson at [20].

1. For the following reasons, the discretion conferred by s 58(3)(b) of the Act should be exercised in favour of granting the relief sought:

(a) At the time the Donation Proceedings were commenced, Czech bankruptcy laws did not recognise Australian trustees in bankruptcy. As such, the first respondent could not seek to recover the funds the subject of the Victorian Orders in the Czech Republic. The only option available to the first applicant to enforce the Victorian Orders was to recover the Czech properties through the Donation Proceedings.

(b) The Donation Proceedings have been on foot since 2012. It may be inferred that there has been a significant investment of time and money by the first applicant in the Donation Proceedings, and it is evident that they are well advanced: see Lovell v Penkin [2008] FCA 637 at [15].

(c) The orders sought are not opposed by the respondent or the other applicants to the proceedings who are also creditors in respect of the bankrupt estate of Jan Emil Talacko.

1. During the hearing, I engaged with counsel for the first applicant about the precise description of the legal proceedings for which leave is sought and the date from which such leave ought to be granted. The first applicant proposes amendments to the terms of orders initially sought to provide that leave be granted nunc pro tunc from 20 April 2012 and that the legal proceedings in respect of which leave be granted be more particularly described as "the claim against Paul Talacko and David Talacko commenced in the Czech Republic on 20 April 2012 and made pursuant to article 42a of the Czech Civil Code".
2. With those amendments, I grant leave in terms of the orders sought by the first applicant.

I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Longbottom.

THE DECEASED ESTATE OF MARGARET HELEN BEATRICE TALACKO