FEDERAL COURT OF AUSTRALIA

Armstrong Scalisi Holdings Pty Ltd v Gioiello [2018] FCA 1729

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth) (Act) grant leave to the applicant to proceed with its claim for relief in para 1 of the second further amended statement of claim filed on 4 April 2018 insofar as leave is required.

2.    The applicant not enforce any judgment obtained by it in respect of para 1 of the second further amended statement of claim filed on 4 April 2018 insofar as it relates to a provable debt against Mr and Mrs Gioiello’s property that is divisible amongst the creditors of their bankrupt estates pursuant to s 116(1) of the Act other than by way of lodgement of a proof of debt with the third respondent without the leave of this Court pursuant to s 58(3) of the Act or otherwise.

3.    Costs of the applicant’s interlocutory application filed on 16 April 2018 be costs in the cause.

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

REASONS FOR JUDGMENT

MARKOVIC J:

1    This is an application made by Armstrong Scalisi Holdings Pty Ltd (ASH) for an order pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth) (Act) granting leave to continue with this proceeding in the form of the second further amended statement of claim (SFASC) filed on 4 April 2018.

2    The proceeding has a lengthy history, having first been commenced on 17 August 2015 in the Local Court of New South Wales (Local Court). It was transferred from the Local Court to the Supreme Court of New South Wales (Supreme Court) and most recently, by orders made in the Supreme Court on 9 February 2018, to this Court.

3    The respondents to the proceeding are Raffaelo and Maria Gioiello, who are husband and wife, and Joshua Taylor. Mr and Mrs Gioiello were declared bankrupt on 2 August 2010 and were discharged from bankruptcy pursuant to s 149(3) and (4) of the Act on 2 September 2013. Mr Taylor is the current trustee for the bankrupt estates of Mr and Mrs Gioiello (Trustee), having been appointed in February 2018 by the Official Trustee.

BACKGROUND

4    From July 2010 to July 2014 ASH traded as CAP Accounting (which I will also refer to as ASH) providing taxation and accountancy services.

5    Commencing in July 2010, ASH agreed to provide accounting services to Mr and Mrs Gioiello. On or about 26 July 2010 each of Mr and Mrs Gioiello signed a letter setting out the basis upon which the plaintiff would act as their “accountants, tax agents and financial advisors” (Costs Agreement). Mr Gioiello says that he signed the Costs Agreement but disputes that parts of it were present when he signed. Mrs Gioiello does not recall signing the Costs Agreement.

6    Each Costs Agreement provided, among other things, that:

Our fees, which will be billed as work progresses, are based on the time required by the individuals assigned to the engagement plus direct out-of-pocket expenses and disbursements. Fees are charged for court appearances, conferences, consultation (by telephone or otherwise), reading, research, traveling, advice, the storage of your records, the use of our office as your registered office, preparation or any other work done. If you have any concerns with any invoice issued by us, you must notify our office within 7 days of the date of the invoice and articulate the basis of those concerns otherwise you will be deemed to have accepted the correctness of the amount shown in the invoice. Our credit terms are fourteen (14) days. Interest is payable on any overdue fees at the rate determined from time to time by the Supreme Court of New South Wales on unpaid judgments.

…

You hereby grant us a charge over any real and/or personal property which you own (or come to own, whether in law or equity) either in your sole name or jointly or in co-ownership with any other person, persons or entities from time to time to secure and to the extent of any monies which you owe us or may come to owe us (for any reason under this agreement, including but not limited to professional costs/fees, disbursements and advances or funds). You charge, in our favour, all your estate and interest in any land which you now own or may later acquire and in any other asset or trust asset with payment of all monies owed by you or any of the guarantor(s) and/or indemnifiers.

…

7    As I have already observed, on 2 August 2010 Mr and Mrs Gioiello each became bankrupt and Andrew Wily was appointed as their trustee.

8    On 16 August 2010 ASH lodged a caveat (Caveat) over the property registered in the names of Mr and Mrs Gioiello situated at Oakville, New South Wales (Property).

9    On 16 June 2014, after Mr and Mrs Gioiello’s discharge from bankruptcy, ASH issued an invoice to Mr Gioiello for $81,993 for accounting fees they had incurred undertaking work for Mr and Mrs Gioiello, Vince Gioiello and Sandra Gioiello (Invoice).

10    On 25 May 2015 Kemp Strang Lawyers, at the time the solicitors for ASH, wrote to Mr Gioiello and in their letter demanded payment of fees the subject of the Invoice by 5 June 2015. They also informed Mr Gioiello that, if payment was not made, they were instructed to commence proceedings to recover those fees and that pursuant to the charge over the land he owned to secure payment of amounts owing to it included in the Costs Agreement, ASH had lodged the Caveat.

11    On 17 August 2015 ASH commenced proceedings in the Local Court against Mr Gioiello claiming payment of $88,752.37, comprising the amount claimed in the Invoice, interest of $6,759.37 claimed pursuant to the Costs Agreement up to 19 June 2015 and other fees as well as interest from 19 June 2015 until payment or judgment. Because of steps taken by Mr Gioiello to lapse the Caveat, ASH amended its statement of Claim in the Local Court to seek, among other things, a declaration that pursuant to the Costs Agreement, Mr Gioiello charged all his interest in the Property in its favour.

12    In or about March 2016 the Local Court proceeding was transferred to the Supreme Court where it remained until it was transferred to this Court. The parties continued the preparation of the matter for hearing including by the filing of their lay and expert evidence.

13    On 9 November 2016, pursuant to leave granted on 14 October 2016 by Darke J in the Supreme Court, ASH filed a further amended statement of claim joining Mrs Gioiello and Mr Wily, the former trustee of the bankrupt estates of Mr and Mrs Gioiello, to the proceeding.

14    On 28 July 2017 Darke J listed the matter for hearing for three days commencing on 19 February 2018.

15    On 9 February 2018, on the application of ASH, Darke J made orders vacating the hearing and transferring the proceeding to this Court. In their letter dated 25 January 2018, the solicitors for ASH explained to the solicitor for Mr and Mrs Gioiello that it was necessary to transfer the proceeding because it involved the exercise of bankruptcy jurisdiction as a result of matters pleaded by Mr and Mrs Gioiello in their defence, the nature of the claim made by ASH against the Property and because it was likely that leave to continue the proceeding pursuant to s 58(3) of the Act would be required.

the proceeding

16    In the SFASC, ASH relevantly seeks the following relief:

1    Judgment for the Applicant against the First and Second Respondents for $88,752.37.

2    A declaration that pursuant to the costs agreements between the Applicant and the First and Second Respondents made on 26 July 2010, the First and Second Respondents charged all of their interest in the land comprised in Folio identifier 4/253872 (Property) in favour of the Applicant for money owed by them to the Applicant.

3    A declaration that the said charge secures payment to the Applicant of:

a.    the sum of $88,752.37;

b.    the Applicant's legal costs on a full indemnity basis (or, in the alternative, the Applicant's costs on the ordinary basis) of the Proceedings and the sale of the Property;

c.    the Applicant's internal costs of enforcing payment of the sum of $88,752.37 and the sale of the Property: and

d.    interest

4    An order for judicial sale of the Property upon such terms and conditions as the Court considers appropriate.

5    An order that the Applicant shall, with respect to the sale of the Property, pay the proceeds of sale of the Property in the following order:

a.    First, for all the Applicant's proper costs and expenses relating to the sale of the Property (including any taxes in connection with the sale and insurance and other reasonable expenses for the protection and maintenance of the Property);

b.    Secondly, the whole of the amount due to the Australia and New Zealand Banking Group Limited (ANZ), pursuant to registered mortgage AD975764;

c.    Thirdly, the whole of the amount due to unregistered interest holders, including the Applicant, in the order of their priority;

d.    Fourthly, any surplus to be paid to the First and Second Respondents.

6    The Applicant shall, with respect to the sale of the Property, act in the following fashion:

a.    Prior to offering the Property for sale, the Applicant shall consult with ANZ, with respect to the sale of the Property and ascertain from ANZ a minimum sale price necessary to pay out ANZ ("the Minimum Price"), which shall include a reasonable allowance for further interest and costs under that mortgage up to the anticipated date of completion of the sale;

b.    Unless the court otherwise orders, the Applicant shall not offer the Property for sale at less than the Minimum Price;

c.    In the event that ANZ does not provide the Applicant with the Minimum Price within fourteen days of request, or the Minimum Price is a figure that the Applicant reasonably believes is unlikely to be realised or exceeded on the sale of the Property, the Applicant shall not proceed to sell the Property, but shall instead cause the matter to be relisted before the Court and shall notify the Respondents of the listing, for the purpose of the Court making directions as to the minimum reserve price for any auction and minimum sale price for any sale by private treaty.

7    An order that the Applicant have the powers in relation to the selling of the Property of a mortgage in exercising a mortgagee's power of sale.

…

(strikeout and underlining omitted)

17    Mr and Mrs Gioiello have filed a defence to the amended statement of claim but are yet to file a defence to the SFASC. In their defence to the amended statement of claim, in summary, they raise the following matters:

(1)    Mr Gioiello says that at the time he signed the Costs Agreement it was incomplete while Mrs Gioiello does not recall signing the Costs Agreement. Mr Gioiello denies that he agreed that ASH would provide accounting services on his behalf to Mrs Gioiello, Salvatore Gioiello or Sandra Gioiello;

(2)    Mr and Mrs Gioiello say that:

(a)    there was material inequality in bargaining power between each of them and ASH and that they had no opportunity to negotiate the terms of the Costs Agreement which imposed terms which were not reasonably necessary for the protection of ASH’s legitimate interests and that, by reason of those and other matters set out in the defence, ASH exerted undue influence, unfair pressure and unfair tactics on Mr and Mrs Gioiello and the Court should refuse to enforce the Costs Agreement and/or the charge in it;

(b)    while ASH provided them with accounting services in respect of their application for voluntary bankruptcy, they otherwise deny that any further services were provided;

(c)    any amount claimed in the Invoice is a provable debt in their bankruptcies within the meaning of s 82 of the Act and that their discharge from bankruptcy operated to release them from any debt owed pursuant to s 153 of the Act; and

(d)    the amount claimed in the Invoice does not reflect the accounting services that were in fact performed and represents gross overcharging for the services that they requested.

legal framework and principles

18    Section 58 of the Act relevantly provides:

(1)    Subject to this Act, where a debtor becomes a bankrupt:

(a)    the property of the bankrupt, not being after‑acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and

(b)    after‑acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.

…

(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.

…

(5)    Nothing in this section affects the right of a secured creditor to realize or otherwise deal with his or her security.

19    Section 82 of the Act sets out those debts which are provable in bankruptcy and relevantly provides:

(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.

20    The current application is concerned with s 58(3) of the Act. That section applies to a proceeding “in respect of a provable debt”: see Morris Finance Limited v Brown (2017) 252 FCR 557 at [41] (Morris Finance).

21    Section 58(3)(b) confers a discretionary power on the Court to allow the continuation of proceedings which would otherwise fall to be dealt with via the proof of debt process. In 7Steel Building Solutions Pty Ltd v Wright [2011] FCA 328 at [10] Flick J referred to the policy behind s 58(3) which informs the exercise of the discretion as follows:

The policy behind s 58(3) has been expressed as follows by Hill J in Re Rose; Ex parte Devaban Pty Ltd (Unreported, Federal Court of Australia, Hill J, 7 October 1994) (“Re Rose”) as follows:

The obvious policy behind s 58(3) of the Act was that any proceedings in force at the time of bankruptcy should be stayed and no further proceedings should be commenced so far as they relate to the period prior to bankruptcy unless the Court gives leave. In this way the bankrupt is freed from any claims that might be made in respect to the period prior to bankruptcy and the Trustee in bankruptcy can, if the Trustee accepts the proof of debt, treat a claim against the estate like the claim of all other creditors, so that the assets of the estate are, in due course, divided pro rata among the creditors.

Another reason for staying proceedings or preventing new proceedings from being commenced is to ensure that the Trustee of a bankrupt estate is not put to expense in defending proceedings which the Trustee has no money to defend. On the other hand, the Act does contemplate that the Court will, in an appropriate case, grant leave. In that respect a case would be an appropriate case where the proceedings proposed against the bankrupt are proceedings to which other parties are involved and for the proper conduct of which it may be necessary for the bankrupt to become a party.

Section 58(3) protects a bankrupt and the property of the bankrupt against the enforcement of remedies and enables the Court to control proceedings in respect of a provable debt in the light of the objectives of the Act: Gertig v Davies (2003) 85 SASR 226 at [15].

22    At [12] his Honour noted that a factor relevant to the exercise of the discretion conferred by s 58(3) is whether the facts are complex and whether it may be preferable for them to be resolved at a hearing rather than by way of the proof of debt process referring to Allanson v Midland Credit Ltd (1977) 30 FLR 108; (1977) 16 ALR 43 (Allanson).

23    In Allanson, after determining that leave should be granted, Bowen CJ, Riley and Deane JJ said that it was unnecessary for the Court to express a final view on the effect of the stay on the operation of s 58(3). Their Honours continued at 49:

… Where a court is given power to grant leave to perform a particular act, or pursue a particular course of action, and the question whether the need for such leave has arisen involves difficult and complicated questions of law or fact, it is permissible, in an appropriate case, to proceed on the basis that such leave is necessary rather than involve the parties in the futile exercise of determining, possibly after a series of appeals, whether the need for such leave has arisen. In all the circumstances including the urgency of the matter, we consider that that is the appropriate course to adopt in this case and that we should, to the extent necessary, grant leave to Midland Credit to continue and take fresh steps in the proceedings in the Supreme Court of New South Wales. This approach would, it seems to us, be consistent with that adopted by the High Court in Talga Ltd v MBC International Ltd (1976) 50 ALJR 619; 9 ALR 359. It is an approach which was raised before us in the course of argument but not before the learned judge below.

24    In Kattirtzis v Zaravinos [2001] FCA 1158, in circumstances where an application for leave to proceed under s 58(3) of the Act had been served on the trustee but not the bankrupt, Gyles J said at [5] that it seemed to him that “the bankrupt is not a necessary party to proceedings under s 58(3) of the Act” and that he saw no particular reason why the bankrupt should be heard on this application at this stage, particularly as there was no contradictor.

25    At [8] Gyles J made two further observations in considering the application before him: first, his Honour adverted to the question of delay on the part of the applicant in seeking leave but noted that no prejudice was put forward by or to any party by reason of the delay; and secondly, his Honour noted that generally, “if there is any disadvantage to the bankrupt estate arising out of the proceedings then leave should not be granted”.

26    In Norilya Minerals Pty Ltd, in the matter of Dean Edward Ireland v Adam Jonathan Ireland as named Executor of the Estate of Dean Edward Ireland [2006] FCA 1235 at [32] (Norilya Minerals), in relation to an application for leave pursuant to s 58(3) of the Act, French J said:

32    Discharge of a bankrupt does not spell the end of the trustee’s duties to distribute to creditors such property as remains vested in the trustee. Property, including choses in action, which has vested in a trustee by reason of bankruptcy continues to be so vested after the discharge of the bankrupt. The release provision, s 153(1), does not revest in the bankrupt property previously vested in the trustee – Daemar v Industrial Commission of NSW (No 2) (1990) 22 NSWLR 178. In that case the Court of Appeal of New South Wales held that a right of action which the former bankrupt had to challenge certain orders of the Industrial Commission, remains vested in his trustee. It would seem to be implicit in the continuing responsibility of the trustee for the distribution of the former bankrupt’s estate to creditors, in respect of provable debts, that the leave requirement under s 58(3) remains in place to the extent that there is a dispute about the existence of such a debt. Such leave could authorise a resolution of that dispute in separate proceedings. The leave requirement is not expressly limited in time. Section 58(3) refers to the period ‘… after a debtor has become bankrupt’. It may be noted that the definition of ‘bankrupt’ in s 5 of the Act means a person:

(b)    who has become a bankrupt by virtue of the presentation of a debtors petition;

Provisions of the Act relating to ‘a bankrupt’ are not therefore temporally limited by that term – Official Receiver v Todd (1986) 14 FCR 177 in which it was held that liability to examination under s 81(1) of the Bankruptcy Act does not expire upon discharge. It would seem that in all but the most unusual cases, of which this is one, questions of the kind raised here would not arise in any practical sense.

should leave be granted?

27    ASH submitted that leave pursuant to s 58(3)(b) of the Act to continue with this proceeding is required in respect of the monetary relief claimed in [1] of the SFASC set out at [16] above in respect of the part which relates to services rendered prior to 2 August 2010, the date of Mr and Mrs Gioiello’s bankruptcy. It contended that that claim for relief is independent of its claims for proprietary relief and that if the latter claim fails, it is still entitled to a monetary judgment.

28    ASH does not seek leave to proceed in respect of the balance of its claims for relief in the SFASC. In its written submissions, ASH had submitted that leave was possibly required, and should be granted to the extent necessary in relation to the relief claimed in [2] of the SFASC. However, at the hearing its position was that the requirement for leave was limited to its claim for unpaid fees described at [27] above because of the operation of s 58(5) of the Act. ASH submitted that the claims for relief in [4]-[7] of the SFASC which seek orders for, and related to, a judicial sale of the Property are squarely within 58(5) of the Act as they concern ASH’s rights to “realize or otherwise deal with” its security: see Morris Finance at [47]. That position would not change if, as the evidence suggested might be the case, the Property is sold and the proceeds of sale held pending the outcome of this proceeding. In that case, while the relief sought may need to change, the same principles would apply.

29    ASH contended that the claims for declaratory relief at [2]-[3] of the SFASC set out at [16] above also came within s 58(5) of the Act. In the circumstances of this case I accept that to be so. The claim for declaratory relief is a precursor to the enforcement of the security by way of judicial sale. It arises because of the dispute between the parties about the existence of ASH’s security which needs to be established before it can seek enforcement: see Morris Finance at [53]-[57].

30    ASH’s claim at [1] of the SFASC is for judgment in the sum of $88,752.37 as monies owing under the Costs Agreement. That agreement was signed prior to the date of bankruptcy. ASH contends that only a part of its claim is a provable debt in Mr and Mrs Gioiello’s bankruptcies because the entitlement for payment, although calculated by reference to the Costs Agreement, only arose upon the actual performance of work by it. ASH said that it is possible that, once the evidence is heard, the Court will find that a substantial portion of the work was carried out after the commencement of Mr and Mrs Gioiello’s bankruptcies thus meaning that part of the claim would not be provable within the meaning of s 82(1) of the Act. ASH submitted that that possibility raises issues of fact and law concerning the temporal requirement imposed by s 82, an issue which should not be resolved in the present application.

31    Mr and Mrs Gioiello opposed the application for leave to proceed but the Trustee did not. While the question of granting leave is one between the applicant for leave and the trustee, and the primary consideration is the impact of the continuation of the proceeding on the bankrupt estates and not on the bankrupts, given Mr and Mrs Gioiello’s role in the proceeding and the position taken by the Trustee, I have considered their submissions in the exercise of my discretion. Having done so, in my opinion, for the reasons that follow, the leave sought by ASH should be granted.

32    First, as noted above, the parties have filed and served both lay and expert evidence in the proceeding. The evidence filed by ASH includes evidence of the Costs Agreement, the nature and timing of the work it alleges it undertook pursuant to the Costs Agreement and thus the extent to which work is said to have been undertaken prior to and after the date of bankruptcy and about the practice management system used by ASH and the methods adopted for the recording of work performed for clients. The evidence filed by Mr and Mrs Gioiello includes their evidence and the evidence of an accountant who undertook accounting work for Mr and Mrs Gioiello for the years ending 30 June 2010 to 30 June 2016 inclusive.

33    While not an exhaustive description of the evidence filed in the proceeding, it demonstrates that the preparation of the proceeding is well advanced. Moreover, when it is considered in light of the claims made and defences pleaded, it is clear that there are a number of factual and legal issues of some complexity to be resolved. Those issues include the scope of the Costs Agreement, whether in the circumstances ASH should be entitled to rely on it in its entirety or at all, and the quantum and quality of the work performed by ASH. Those issues are common to the whole of the monetary claim regardless of when the alleged fees were incurred. In addition a number of those issues are common to, and will need to be resolved in relation to, ASH’s claim for proprietary relief which depends upon the validity of the charge.

34    The determination of the claims in two different forums, by the proof of debt process and in the proceeding, would likely result in a duplication of effort and costs both for the parties involved and potentially the Court. In addition, if that part of the monetary claim which ASH alleges relates to work done prior to the date of bankruptcy proceeds by way of proof of debt process, the Trustee’s determination would be subject to review in this Court. If that occurred there would be a risk that the same or similar issues relying on the same evidence would arise for determination in two different proceedings.

35    Mr and Mrs Gioiello submitted that I would take into account as a relevant factor the delay on ASH’s part in making this application. True it is that this application has been made at a very late stage in the proceeding but no submission was made by the Trustee that its delay would cause any prejudice to the bankrupt estates. Mr and Mrs Gioiello contended that if leave was not granted then the remaining claim against them would be simpler because from their point of view there were no services rendered after the date of their bankruptcies and the Trustee would be left to consider the claim insofar as it was provable. But this submission ignores the common issues and the common witnesses between the two aspects of the monetary claim as well as the possibility of a second proceeding in the event that ASH was to seek a review of any decision made by the Trustee if the proof of debt process was to be adopted for that aspect of the claim predating the date of bankruptcies.

36    That the application has been made after Mr and Mrs Gioiello have been discharged from bankruptcy does not preclude the Court from granting leave to proceed: see Norilya Minerals at [32]. Mr and Mrs Gioiello pointed to the burden that they have borne in defending the proceeding because of the late stage at which the Trustee was joined by ASH. A number of things can be said about that. While ASH’s conduct in the proceeding is not free from criticism, Mr and Mrs Gioiello were also free to notify Mr Wily and upon his retirement, the Official Trustee, of the existence of the proceeding. Further, despite now being joined, the Trustee does not oppose the application for leave to proceed. Finally, the proceeding is not limited to issues which concern their capacity as bankrupts and would in any event continue with the burden of their defence falling on Mr and Mrs Gioiello.

37    Secondly, dealing with the claims in two different forums will likely delay the resolution of the bankruptcy administrations to the disadvantage of other creditors. Mr and Mrs Gioiello were made bankrupt in 2010. It is in the interests of all stakeholders that the outstanding issues in the administrations are finalised as expeditiously as possible. If a part of the monetary claim is the subject of the proof of debt process and the balance of the monetary claim and the proprietary claims remain for resolution in this proceeding that would undoubtedly add to the time required to reach a final resolution of all issues. This is particularly so in circumstances where the proceeding in this Court is well advanced.

38    Mr and Mrs Gioiello submitted that the Court would not grant leave because it has a supervisory role to protect the assets of the bankrupt estate against unnecessary waste and that ASH’s claim which, on their case, was for a relatively small amount, was likely to occupy a disproportionate amount of time and cost in its resolution in the Court. However, the quantum of ASH’s claim and its timing is a matter which is at the centre of this dispute and depends on a number of factors including, the construction of the Costs Agreement, when and whether the work claimed was in fact carried out and, subject to that, the value of that work. Further, as the proceeding is at an advanced stage, the remaining cost and use of resources is likely to be concerned with its final preparation and hearing. In any event, it is Mr and Mrs Gioiello who are carrying the burden of defending the monetary claim and, indeed, other issues in the proceeding, rather than the Trustee whose interest seems to be limited to the relief claimed at [5]-[7] of the SFASC.

39    Thirdly, as noted above, the Trustee did not oppose the application for a grant of leave to proceed. Although represented at the hearing of the application, he made no submissions in opposition to the relief sought. The Trustee’s position was to oppose leave being granted in relation to the relief sought in [5]-[7] of the SFASC. However, as noted at [28] above, leave is not required under s 58(3)(b) of the Act in relation to that relief.

conCLUSION

40    For those reasons I will grant the leave sought by ASH to proceed in relation to the claim in [1] of the SFASC. As submitted by counsel appearing for ASH, I will do so on condition that ASH not enforce any judgment obtained by it pursuant to [1] of the SFASC insofar as it relates to a provable debt against Mr and Mrs Gioiello’s property that is divisible amongst the creditors of their bankrupt estates pursuant to s 116(1) of the Act other than by way of lodgement of a proof of debt with the Trustee without the leave of this Court pursuant to s 58(3) or otherwise.

41    That leaves the question of costs of the application. Mr and Mrs Gioiello submitted that I should take into account in relation to the issue of costs that ASH delayed in bringing the application and that the extent of the leave in fact sought was narrower than was apparent from ASH’s written submissions. While a part of the original application for leave was abandoned, it was apparent that ASH required and sought leave in relation to its monetary claim insofar as it predated the date of bankruptcy. There has however been a delay in bringing the application only explained by the change in ASH’s solicitors. On the other hand, Mr and Mrs Gioiello opposed the application and have been unsuccessful.

42    The Trustee did not make any submissions in relation to the relief actually sought but appeared on the application. The solicitor appearing for the Trustee submitted that her client had not been served with the interlocutory application and that she had only received the SFASC. But counsel for ASH indicated that the application had been emailed to the Trustee. The issue was unresolved on the evidence. At the very least there had been some miscommunication at some level.

43    In the circumstances and having regard to the timing of an application that is necessary for ASH to proceed with the whole of its claim, in my opinion, costs of the application for leave to proceed should be costs in the cause.

44    I will make orders accordingly.

Associate:

Dated:    15 November 2018