FEDERAL COURT OF AUSTRALIA

Tyne v UBS AG (No 4) [2017] FCA 374

ORDERS

THE COURT NOTES THAT:

1.    The Second Applicant, Clare Elizabeth Marks, became bankrupt on 11 June 2014.

2.    The Trustee of the Second Applicant’s bankrupt estate was notified of these proceedings on 8 March 2017 by the Respondent pursuant to Section 60(3) of the Bankruptcy Act 1966 (Cth).

3.    The Trustee of the Second Applicant’s bankrupt estate did not make an election within the 28 day period referred to in Section 60(3) of the Bankruptcy Act 1966 (Cth) and has confirmed by letter dated 6 April 2017 addressed to the Federal Court of Australia, and confirmed to the parties, that the time for making the election under Section 60(3) has expired and that, in consequence, the proceedings in the name of Clare Elizabeth Marks are deemed to have been abandoned.

4.    Neither the Trustee nor the Second Applicant appeared before the Court.

THE COURT ORDERS THAT:

1.    The proceeding brought by the Second Applicant against the Respondent is dismissed.

2.    The Second Applicant pay the Respondent’s costs of and incidental to her proceeding.

3.    The First Applicant pay the Respondent’s costs of and incidental to the case management hearings on 17 March 2017 and 10 April 2017 on an indemnity basis.

4.    The Respondent is to notify the First Applicant by 8 May 2017 whether it opposes the grant of leave to file the further amended statement of claim.

5.    The proceedings be listed for further case management on 15 May 2017.

6.    The parties have liberty to apply on 48 hours’ notice.

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

REASONS FOR JUDGMENT

GREENWOOD J

1    These proceedings are concerned with the Orders to be made having regard to particular circumstances which have recently emerged in relation to the standing of Ms Clare Elizabeth Marks, the Second Applicant, to maintain and prosecute her principal proceeding.

2    The principal proceeding was commenced on 13 January 2014. In that proceeding Ms Marks claims the following relief on the grounds recited in the originating application:

(1)    Damages for the infringement of Section 12DA, Australian Securities and Investments Commission Act 2001 (Cth);

(2)    Damages for the infringement of Section 1041H, Corporations Acts 2001 (Cth);

(3)    Damages for the infringement of Section 42, Fair Trading Act 1987 (NSW);

(4)    Damages for the infringement of Section 38, Fair Trading Act 1989 (Qld).

3    Mr Tyne as Trustee for the Argot Trust is the First Applicant. Ms Marks is the Second Applicant. Ms Marks is, in life, Mr Tyne’s partner.

4    On 8 January 2016 the Court permanently stayed the proceeding: Tyne v UBS AG (No 3) [2016] FCA 5. The First Applicant was ordered to pay the costs of the stay application. On 20 January 2017, an appeal from the stay order by both applicant appellants was allowed. In lieu of the orders made on 8 January 2016, the Court, by Justices Jagot and Farrell; Dowsett J dissenting, ordered that the interlocutory application of UBS seeking the stay be dismissed: Tyne (Trustee) v UBS AG (No 2) [2017] FCAFC 5. The Court also ordered UBS to pay the appellants’ costs of the appeal; the costs of the application for leave to appeal; and the costs of the interlocutory application, as agreed or taxed. Thus, Ms Marks has the benefit of an order in her favour for three sets of costs (as does the First Applicant Appellant).

5    On the hearing on 8 May 2015 of the UBS interlocutory application for a stay, Mr Tyne appeared for the First Applicant and was given leave to appear on behalf of Ms Marks, T p 2, lns 1-25. On the hearing of the appeal on 26 May 2016, Mr Tyne appeared for the First Appellant (First Applicant). He was refused leave to appear for Ms Marks as the Second Appellant. Ms Marks was called but did not appear: T p 2, lns 1-22; T p 3, lns 6-8; 26 May 2016.

6    However, on 11 June 2014, Ms Marks had become a bankrupt upon the making of a Sequestration Order that day. The Petitioning Creditor was the ANZ Bank. Ms Marks filed a statement of affairs on 11 September 2014. The Trustee of her estate is Mr Nick Combis of Vincents Chartered Accountants. Upon Ms Marks becoming bankrupt, her action, commenced as co-applicant, became stayed until the making of an election by the Trustee, in writing, to either prosecute or discontinue the action: s 60(2) Bankruptcy Act 1966 (Cth), (the “Act”). Section 60(3) provides that if the Trustee does not make an election within 28 days after notice of the action is served upon the Trustee by a defendant or other party to the action, the Trustee shall be deemed to have abandoned the action.

7    It should also be noted that by s 116(1) of the Act the remedial entitlements claimed by Ms Marks constitute “property divisible amongst the creditors of the bankrupt”. Such property also constitutes “the property of the bankrupt” by operation of s 5(1). Such property vests in the Official Trustee: s 58(1).

8    In her statement of affairs, Ms Marks recited that she was involved in a legal proceeding described as “Marks v UBS, Federal Court, QUD10/2014”. In a letter dated 14 March 2017, Mr Combis makes the following observations. First, on 11 June 2014 the Official Trustee was declared Trustee of the Estate of Ms Marks. Mr Combis is unable to say why the Official Trustee did not notify the Court, on or following the receipt of the statement of affairs, of the circumstance that the estate of Ms Marks was being regulated and administered by the Official Trustee.

9    Second, Mr Combis says that he has seen a letter sent by the Official Receiver to Ms Marks on 22 September 2014 requesting further details of the two cases listed by her in her statement of affairs (which includes QUD10/2014).

10    Third, by email dated 8 October 2014 from Ms Marks to the Official Trustee, Ms Marks authorised Mr Tyne “to discuss the matter with the Official Receiver on her behalf”.

11    Fourth, email correspondence between Ms Marks and the Official Trustee of 17 October 2014 suggests that Mr Tyne had not, by then, discussed the matter of the Federal Court action.

12    On 16 April 2015, the Official Trustee ceased to be the Trustee of the Estate. Mr Combis and Mr Dinoris became the Trustees of the Estate of Ms Marks. They were already acting as the Trustees of Mr Tyne’s estate. Mr Dinoris ceased to be Trustee on 13 December 2016. Since his appointment, Mr Combis has received no correspondence from either Ms Marks or Mr Tyne.

13    On 8 May 2015, Mr Tyne, appearing for Ms Marks, failed to tell the Court that Ms Marks had become a bankrupt on 11 June 2014. Mr Tyne says that he assumed that the Trustee had advised the Court of the position in relation to Ms Marks and thus it was not a matter for him to advise the Court of her status as a bankrupt either on 8 May 2015 or before the Full Court on 26 May 2016.

14    On 8 March 2017, UBS notified the Trustee, Mr Combis, of the proceedings for the purposes of s 60(3) of the Act. In a letter dated 6 April 2017 addressed to the Federal Court, Mr Combis said this:

I received notice from King & Wood Mallesons (representing UBS) on 8 March 2017 requesting that the Trustee provide an election pursuant to Section 60(3) of the Act whether to prosecute or discontinue the action on behalf of the regulated debtor by 5 April 2017. I confirm that the election period has now expired. Pursuant to section 60(3) of the Bankruptcy Act the proceedings in the name of the regulated debtor are deemed to have been abandoned.

[original emphasis]

15    Since the “action” has been abandoned, the appropriate order is that the action, in the form of the proceeding brought by Ms Marks against UBS, be dismissed: Cole v Challenge Bank Limited [2012] FCAFC 200 per Gray J; R D Nicholson J agreeing at [20] and [21]; and Emmett J agreeing at [22]; Gore v Prentice (Trustee), in the matter of the Personal Insolvency Agreement of Gore [2012] FCA 660.

16    UBS is entitled to an order that Ms Marks pay its costs of and incidental to her proceeding. Mr Tyne contends, in effect, that any such order ought to preserve the benefit of any order for costs obtained to date by Ms Marks and that an order for costs of the proceeding made against Ms Marks ought not to have the effect of “re-opening” any existing order (entered or otherwise) or have the effect of “setting aside” any existing costs order. UBS says that it should not have been put to any expense by Ms Marks after 11 June 2014 and it ought to have its costs notwithstanding that other orders may have been made in her favour in the course of the matter.

17    It seems to me that the proper course is this.

18    UBS ought to have its costs of and incidental to the proceedings by Ms Marks. Such an order, in the context of the bankruptcy of Ms Marks, will take effect according to law and especially having regard to the provisions of the Bankruptcy Act. The existing order in favour of Ms Marks, in relation to costs, is the order made by the Full Court on 20 January 2017 at Order 3(b): that is, the costs of the appeal; the costs of the application for leave to appeal; and the costs of the interlocutory application of UBS. I am not satisfied that as an incident of dismissing the proceeding consequent upon its abandonment, the orders of the Full Court ought to be set aside or re-opened.

19    It may well be appropriate to re-open the exercise of the discretion in relation to costs exercised by the Court in its appellate jurisdiction. One imagines that the Full Court proceeded, in the exercise of the discretion as to costs, on the footing that the proceeding so far as it related to Ms Marks was not stayed as a matter of law from 11 June 2014. Plainly, the Court has power to re-open the Order: Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300, Mason CJ at 302 and 303; De L v Director-General, NSW Department of Community Services (No 2) (1997) 190 CLR 207 per Toohey, Gaudron, McHugh, Gummow and Kirby JJ at 215; State Rail Authority of NSW v Codelfa Construction Pty Ltd (1982) 150 CLR 29 at 38.

20    However, the question of whether Order 3(b) of 20 January 2017 ought to be re-opened is a matter that would need to be agitated by UBS before the Judges who constituted the Full Court that made the order. Even if I were to be persuaded that I had power to entertain such an application directly, I would decline to do so in favour of the Full Court itself addressing the question (in terms of the authorities mentioned above) of whether its order ought to be re-opened.

21    As to these matters, Orders will be made that the proceeding brought by the Second Applicant against the Respondent be dismissed and the Second Applicant pay the Respondent’s costs of and incidental to her proceeding.

22    As to the costs incurred by UBS in addressing the matter of the bankruptcy of Ms Marks and its implications for the proceeding, UBS seeks an order that the First Applicant pay the Respondent’s costs of the case management hearing on 17 March 2017 and the case management hearing on 10 April 2017. The costs of the hearing on 17 March 2017 were reserved for later determination. I am satisfied that had Mr Tyne advised the Court on the hearing of the interlocutory application on 8 May 2015, or at any other time, the costs of the two case management hearings would not have been incurred. Mr Tyne says that he assumed that the Trustee had advised the Court of the bankruptcy of Ms Marks. Nevertheless, Mr Tyne represented Ms Marks on the hearing of the application on 8 May 2015 and appeared before the Full Court for the First Appellant on 26 May 2016. There is no doubt in my view that Mr Tyne ought to have told the Court of the intervention of the Sequestration Order concerning the estate of Ms Marks made on 11 June 2014. It must have been obvious to Mr Tyne on 8 May 2015 on the hearing of the application and on 26 May 2016 on the hearing of the appeal that the Court was proceeding in the belief that no impediment, as a matter of law, subsisted in relation to the capacity or entitlement of Ms Marks to continue in her action. Accordingly, an order will be made that the First Applicant pay the Respondent’s costs of the case management hearings on 17 March 2017 and 10 April 2017. I am satisfied that the costs ought to be awarded on an indemnity basis.

23    The First Applicant has now served upon the Respondent a proposed further amended statement of claim. The First Applicant also seeks to preserve amendments foreshadowed earlier in time. The First Applicant proposes to write to UBS about aspects of that matter. For present purposes it is enough to order that the Respondent is to notify the First Applicant by 8 May 2017 whether it opposes the grant of leave to file the further amended statement of claim as foreshadowed and whether the earlier foreshadowed amendments are to be resisted. The Respondent has already indicated an intention to resist those amendments. I will further order that the proceedings be listed for case management again on 15 May 2017.

24    The parties have liberty to apply on 48 hours’ notice.

Associate:

Dated:    11 April 2017