Federal Court of Australia

Official Trustee in Bankruptcy, in the matter of the bankrupt estate of Crawford [2022] FCA 657

File number(s):

VID 296 of 2022

Judgment of:

SNADEN J

Date of judgment:

6 June 2022

Catchwords:

BANKRUPTCY – administration of bankrupt estate – bankrupt lead plaintiff in group proceeding in Supreme Court of Victoria (“SCV Action”) – SCV Action stayed by operation of plaintiff’s bankruptcy – applicant required to make election as to whether or not to prosecute or discontinue the SCV Action – application for an extension of time within which to make election – exercise of court’s discretion – application granted

Legislation:

Bankruptcy Act 1966 (Cth) ss 30, 33, 60

Supreme Court Act 1986 (Vic) pt 4A

Cases cited:

Abeyratne v Trkulja (1998) 90 FCR 253

Newman v Bain (2013) 213 FCR 370

Division:

General Division

Registry:

Victoria

National Practice Area:

Other Federal Jurisdiction

Number of paragraphs:

13

Date of hearing:

6 June 2022

Counsel for the Applicant:

Mr D. Snyder

Solicitor for the Applicant:

Harris Carlson

Counsel for the First to Third Interested Parties:

Ms M. Szydzik

Solicitor for the First to Third Interested Parties:

Herbert Smith Freehills

Counsel for the Fourth Interested Party:

Mr D. Fahey

Solicitor for the Fourth Interested Party:

Maurice Blackburn Lawyers

ORDERS

VID 296 of 2022

BETWEEN:

THE OFFICIAL TRUSTEE IN BANKRUPTCY AS TRUSTEE OF THE PROPERTY OF STEELE LEE CRAWFORD, A BANKRUPT

Applicant

AND:

AUSTRALIA AND NEW ZEALAND BANKING GROUP

First Interested Party

MACQUARIE BANK LIMITED

Second Interested Party

MACQUARIE LEASING PTY LIMITED

Third Interested Party

DANIEL CHRISTIAN O’BRIEN

Fourth Interested Party

order made by:

SNADEN J

DATE OF ORDER:

6 JUNE 2022

THE COURT ORDERS THAT:

1.    Pursuant to sections 30(1)(b) and 33(1)(c) of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”), for the purposes of s 60(3) of the Bankruptcy Act, the time by which the applicant may make an election in respect of Supreme Court of Victoria proceeding number S ECI 2020 03365 be extended to Monday, 8 August 2022.

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

REASONS FOR JUDGMENT

SNADEN J:

1    The applicant is the trustee of a bankrupt estate. The bankrupt is the plaintiff in a representative action that is currently before the Supreme Court of Victoria (the “SCV Action”). The defendant to that action brought that reality to the applicant’s attention on Tuesday, 10 May 2022. Pursuant to s 60(3) of the Bankruptcy Act 1966 (Cth) (hereafter, the “Bankruptcy Act”), the applicant had 28 days from that date—or until Tuesday, 7 June 2022—to elect whether or not it wished to prosecute or discontinue the SCV Action. In the absence of such an election, it would have been deemed to have abandoned the action. By an application dated 1 June 2022, it moved this court for orders under ss 30(1) and 33(1) of the Bankruptcy Act to extend that deadline by two months to give it more time to consider what election it should make.

2    As might be appreciated, the present application was made with some haste. It made its way before me in my capacity as duty judge and was listed for hearing in the morning of Monday, 6 June 2022. At that hearing, the applicant read and relied upon an affidavit of Mr Sean Xiao, which set out an array of uncontentious facts (and which incorporated some redactions that are of no present significance). The defendants to the SCV Action very courteously appeared at the hearing but did not consent to nor oppose the application. Similarly, representatives of the plaintiff and other members of the group in the SCV Action also appeared in support of the relief that was sought.

3    At the conclusion of the hearing, I granted relief in the form of the orders that the applicant proposed (with one minor change to a date). I gave brief reasons for doing so, upon which I undertook to elaborate in writing. The following reasons are offered in discharge of that undertaking.

4    Section 30(1) of the Bankruptcy Act relevantly provides as follows:

30 General powers of Courts in bankruptcy

(1)    The Court:

(b)    may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.

5    Section 33(1) of the Bankruptcy Act relevantly provides as follows:

33 Adjournment, amendment of process and extension and abridgment of times

(1)    The Court may:

    

(c)    extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with a bankruptcy notice), for doing an act or thing or abridge any such time.

6    Section 60 of the Bankruptcy Act relevantly provides as follows:

60 Stay of legal proceedings

(2)    An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.

(3)    If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.

7    The SCV Action is a group proceeding commenced under Part 4A of the Supreme Court Act 1986 (Vic). It involves claims for damages related to payments made to the defendants (or one or more of them) in consideration of certain impugned financial arrangements. The solicitors for the bankrupt plaintiff, Maurice Blackburn Lawyers, have indicated that they hold instructions from another member of the group to make an application to be substituted as the plaintiff to the SCV Action. At the time that the present application was made, no such application for substitution was on foot. At the hearing of Monday, 6 June 2022, the court was informed that such an application had, in fact, been made, that the Supreme Court of Victoria had indicated to the parties that an order for substitution would be made if not opposed, and that the defendants were considering their position.

8    There is no doubt (and it was not controversial) that the SCV Action qualifies as an “action” for the purposes of s 60 of the Bankruptcy Act. Similarly, there is no doubt that this court has a discretion under s 33(1)(c) of the Bankruptcy Act to extend the 28-day time limit for which s 60(3) of the Bankruptcy Act provides. That discretion is a wide one, which allows for a “…flexibility often necessary to achieve fairness in particular circumstances”: Abeyratne v Trkulja (1998) 90 FCR 253, 258C (North J).

9    In Newman v Bain (2013) 213 FCR 370, Gilmour J identified (at 378-379 [59]-[64]) the following considerations as apt to inform the exercise of the court’s discretion under s 33(1)(c) to extend the deadline applicable under s 60(2) of the Bankruptcy Act, namely:

(1)    the extent of any delay by a trustee in seeking an extension;

(2)    whether there is a satisfactory explanation for any such delay;

(3)    the prejudice to a defendant if an extension is granted;

(4)    the reasonable expectation that there should be some degree of finality in the decision-making by a trustee in bankruptcy;

(5)    the prejudice to the trustee in bankruptcy if no extension is granted; and

(6)    the merits of the action in respect of which an election is to be made.

10    Presently, the applicant considers that it is not in a position properly to make an election under s 60(3) of the Bankruptcy Act. It is broadly supportive of the SCV Action continuing with another plaintiff at its helm; but it has yet to fully grapple with the potential consequences of its making an election to continue it. Those consequences are said potentially to involve its assumption of a significant liability for costs in the SCV Action.

11    It is under the light of that uncertainty that the present application is made. The extension is sought so that the applicant might:

(1)    take advice as to (or to inform) what election it ought to make with respect of the SCV Action—including advice as to the nature of the SCV Action and its prospects of success;

(2)    potentially negotiate and agree upon some form of costs indemnity related to the SCV Action;

(3)    seek direction from the Supreme Court of Victoria as to whether another group member might be substituted as plaintiff before an election is made; and/or

(4)    await any development in the SCV Action concerning any such substitution.

12    I am satisfied that the present circumstances accumulate to warrant an exercise of the court’s discretion under s 33(1)(c) of the Bankruptcy Act. In particular, I am mindful that:

(1)    the applicant has not been guilty of undue delay in making the present application;

(2)    the extension that is sought is modest, particularly in the overall context of the SCV Action, which has been ongoing for some time;

(3)    there is no material prejudice to the defendants to the SCV Action in granting the extension;

(4)    the prejudice to the applicant if an extension is not granted is potentially significant, in that it will effectively be rushed into making a decision of some complexity as to what election should be made, and would need to do so without the benefit of proper forethought and advice.

13    On that basis, I was (and very much remain) satisfied that it was appropriate to make an order under s 33(1)(c) of the Bankruptcy Act to extend the deadline by which the applicant must make an election related to the SCV Action.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Snaden.

Associate:

Dated:    6 June 2022