FEDERAL COURT OF AUSTRALIA

Sturdy Components Pty Ltd v Trustee of the Bankrupt Estate of Sturt

[2000] FCA 884

BANKRUPTCY – leave to continue cross-claim in Supreme Court proceedings under ss 58(3) and 249 (3) – power to make orders nunc pro tunc – relevant considerations and imposition of conditions.

Bankruptcy Act 1966, ss 58(3), 249(3)

Re Veghelyi Smith v Official Trustee in Bankruptcy (1993) 45 FCR 413 at 417 followed

In the matter of the Bankrupt Estate of Sharp; Ex parte Tietyens Investments Pty Ltd (in liq) (Weinberg J,unreported, 26 October 1998) followed

Re Rose; Ex parte Devaban Pty Ltd (Hill J, unreported, 7 October 1994) followed

Fraser v Commissioner of Taxation (1996) 69 FCR 99 referred to

Allanson v Midland Credit Ltd (1977) 30 FLR 108 applied

STURDY COMPONENTS PTY LIMITED v TRUSTEE OF THE BANKRUPT ESTATE OFRONALD STURT

N 7546 of 2000

BURCHETT J

22 JUNE 2000

SYDNEY

THE COURT ORDERS THAT:

(1)        Leave, nunc pro tunc, to pursue the cross-claims the subject of the application in each case, be granted, subject to conditions:

(a)        That no step be taken to enforce any judgment obtained either against the bankrupt personally (in the case of the individual bankruptcy) or against the estate of the deceased (in the other case) without the prior leave of the Federal Court of Australia in its bankruptcy jurisdiction.

(b)        The same condition applies with respect to any order in respect of costs which may be obtained in relation to the cross‑claims in question – and further, without such prior leave, the applicant shall not prove in either bankruptcy in respect of the whole or any part of any order for costs hereafter obtained in the proceedings in the Supreme Court.

(2)        The applicant pay the costs of these applications of the Official Trustee.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

EX TEMPORE REASONS FOR JUDGMENT

1                     These are applications for leave under s 58 (3) of the Bankruptcy Act 1966 (Cth), in the case of one matter which is a bankruptcy, and under s 249 (3), in the case of the other which is an administration of an estate in bankruptcy.  Those two provisions are identical for practical purposes, and the matters are so closely associated that I have heard the applications together and shall not differentiate between them in these reasons.

2                     The bankrupt estates are involved in a third cross-claim, brought by a cross‑defendant to the first cross‑claim, in a proceeding in the Common Law Division of the Supreme Court of New South Wales involving personal injuries sustained by the use of equipment, for which it is alleged in those proceedings by the defendant that the cross-defendants, at least in the first cross-claim, are to some degree responsible.  The applicant before me, as a cross-defendant, seeks to continue a cross‑claim already instituted, under which, if the applicant is held to be liable, it is claimed that the trustees in bankruptcy will be responsible to meet all or some of the claim.  It is, unusually, not a case in which leave is sought on the footing that there is insurance so that no ultimate burden is going to be imposed on the bankrupt estate.  Here, on the contrary, if the claim is ultimately successful, there will undoubtedly be proofs of debt lodged in each of the estates.

3                     It has been held that the Court has power to make an order nunc pro tunc in a case where a proceeding has already been launched or continued before the application comes before this Court.  I refer to Re Veghelyi Smith v Official Trustee in Bankruptcy (1993) 45 FCR 413 at 417, a decision of Sweeney J and In the matter of the Bankrupt Estate of Sharp; Ex parte Tietyens Investments Pty Ltd (in liq),an unreported decision of Weinberg J delivered on 26 October 1998, where the earlier decision was accepted as correct.

4                     It has also been held that, when exercising its discretion under s 58(3), in complex proceedings of the nature of those here involved, the Court should ask how integral the claim sought to be pursued is to the claims made by the other parties.  Such a case was Re Rose; Ex parte Devaban Pty Ltd, an unreported decision of Hill J delivered on 7 October 1994.  His Honour said that the claims made against the bankrupt were inseparable from the claims made against another party to the action, and he regarded that as a relevant consideration.  Weinberg J, in the decision of his to which I have already referred, cited the decision of Hill J, considering he ought to apply it.  He was of the view that the proceedings in question could not be effectively prosecuted without the active participation of the bankrupt.

5                     Another case, where interests other than those of the creditors in the estate had to be taken into account, was the Full Court decision of Fraser v Commissioner of Taxation (1996) 69 FCR 99.  There the special circumstances were considered to justify a grant of leave.  The actual facts are further removed from the present case than the other matters I have just cited.  The Full Court thought it was appropriate to require the applicant to undertake to keep the Official Trustee advised in connection with the proceedings.  During the argument, I made reference to an earlier Full Court decision in Allanson v Midland Credit Ltd (1977) 30 FLR 108.  That was a decision of Bowen CJ, Riley and Deane JJ.  It was also a case involving a cross-claim.  Their Honours said (at 114):

“It would seem that all of these issues would be better and more comprehensively dealt with by a contested trial of the action in the Supreme Court than could possibly be the case if Midland Credit were required to lodge a proof of debt in respect of its claim against Mr Allanson alone.”

Their Honours went on to say:

“Such a proof of debt would be in the form of an affidavit and determined by the official receiver at such time as the stay ceased to operate. -

there was a stay in question -

“If the official receiver disallowed the claim in whole or in part, an appeal on this isolated issue could be brought to the Bankruptcy Court.  But in these circumstances, the issues would have been determined in a less satisfactory way and questions between Mr Allanson and the other parties to the action would not be resolved.”

6                     Their Honours considered it appropriate to make an order granting leave, and they did so subject to conditions.  It seems to me it is appropriate, in the present case, that I do likewise.  Accordingly, I grant, in each case, leave nunc pro tunc to pursue the cross-claims the subject of the application, which have already been launched.  I grant that leave, in each case, subject to conditions:

1.         That no step be taken to enforce any judgment obtained either against the bankrupt personally (in the case of the individual bankruptcy) or against the estate of the deceased (in the other case) without the prior leave of the Federal Court of Australia in its bankruptcy jurisdiction.

2.         The same condition applies with respect to any order in respect of costs which may be obtained in relation to the cross‑claims in question – and further, without such prior leave, the applicant shall not prove in either bankruptcy in respect of the whole or any part of any order for costs hereafter obtained in the proceedings in the Supreme Court.

7                     The applicant must pay the costs of these applications of the Official Trustee.

Associate:

Dated:              30 June 1999