Federal Court of Australia

Testart v Testart (No 3) [2026] FCA 1558

ORDERS

THE COURT ORDERS THAT:

1.    The applicant’s interlocutory application dated 5 March 2026 be dismissed.

2.    The respondent’s interlocutory application dated 19 June 2026 be dismissed.

3.    There be no order as to the costs of either application.

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

REASONS FOR JUDGMENT

O’CALLAGHAN J:

1    By her application dated 5 March 2026, Ms Testart (the applicant) seeks an order that the extant stay of this proceeding be “vacated” and the proceeding be “reinstated”. In her reply submissions she also asked that the proceeding be returned “to ordinary case management”.

2    By his application dated 19 June 2026, Mr Testart (the respondent) seeks an “order” that “[t]he proceeding is discontinued by operation of s 60(2) of the Bankruptcy Act 1966 (Cth)”.

3    As counsel for the respondent agreed when I made the point, the form of his application is misconceived.

4    This proceeding was originally brought by the applicant, by originating application and accompanying affidavit accepted for filing on 11 November 2021, in respect of alleged contraventions of ss 45 and 323 of the Fair Work Act 2009 (Cth): see Testart v Testart (No 2) (2023) 323 IR 146; [2023] FCA 209.

5    By orders dated 16 March 2023 in Testart (No 2), I ordered that all claims made by the applicant relating to contraventions of the Fair Work Act in respect of unpaid wages, unpaid annual leave and annual leave loading alleged to have taken place prior to 11 November 2015 be dismissed.

6    The claims the applicant makes, in what remains of her claims, concern alleged non-payment of entitlements by the respondent and alleged related contraventions of the Fair Work Act when she was in his employ between 2009 and 2017. Those claims are made in an Amended Statement of Claim filed on 8 July 2024.

7    On 13 December 2024, the applicant became bankrupt upon the making of a sequestration order against her in the Federal Circuit and Family Court of Australia, in proceeding MLG 1612 of 2024.

8    On 14 December 2024, the respondent notified the trustee of the applicant’s bankrupt estate about the existence of this proceeding.

9    On 13 January 2025, the solicitors on behalf of the trustee made an election in writing by email to my chambers to discontinue this proceeding, pursuant to s 60(2) of the Bankruptcy Act, which read:

Dear Associate

We refer to proceeding VID 661 of 2021, presently pending before his Honour (the pending proceeding).

On 13 December 2024, a sequestration order was made against the estate of the applicant in the pending proceeding by order of the Federal Circuit and Family Court of Australia (Division 2). We attach a copy of that order.

Pursuant to s 60(2) of the Bankruptcy Act 1966 (Cth), a proceeding commenced by a person who subsequently becomes a bankrupt is stayed until such time as the Official Trustee in Bankruptcy elects to prosecute or discontinue the proceeding.

We are instructed by the Official Trustee in Bankruptcy to inform the Court that the Official Trustee has today decided to discontinue the entirety of the pending proceeding. To that end, we would be very grateful if you could please bring this communication to his Honour’s attention. We have copied this correspondence to the parties to the pending proceeding.

10    On 23 April 2025, the sequestration order was set aside: see Testart, in the matter of Testart v Testart [2025] FedCFamC2G 572 (Judge J Young).

11    Sub-section 60(2) of the Bankruptcy Act provides:

(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.

12    Sub-section 60(3) provides:

(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.

13    As Gray J explained in Re Lofthouse (2001) 107 FCR 151 at 157-158 [19]:

Section 60 is not the provision that vests the right of action in the trustee in bankruptcy. It has a different, and in some respects wider, role. It operates to stay pending proceedings unless the trustee elects to prosecute or discontinue them. It also provides the machinery for a defendant or other party to a pending proceeding to force the making of an election. It is directed towards the protection of the bankrupt’s creditors, by preventing the unnecessary dissipation of the assets of the estate in fruitless litigation. In my view, s 60 also has the purpose of protecting a defendant or other party to a pending proceeding. A defendant or other party to a pending proceeding suffers an immediate detriment upon the plaintiff becoming a bankrupt. The detriment is that if the defendant or other party should be successful in the proceeding, and should obtain an order that the plaintiff pay the costs of the proceeding, the order will be effectively unenforceable because of the bankruptcy. The rationale behind s 60(2) and (3) is therefore, at least in part, to protect those whom the bankrupt has been suing.

14    Section 90-15(1) of Sch 2 of the Bankruptcy Act, the Insolvency Practice Schedule (Bankruptcy), provides that “[t]he Court may make such orders as it thinks fit in relation to the administration of a regulated debtor’s estate”.

15    A decision by a trustee in bankruptcy to elect, in writing, to discontinue an action is a decision in relation to the administration of the applicant’s (then) estate.

16    Rule 90-80 of the Insolvency Practice Rules (Bankruptcy) 2016 (Cth) provided that any application to review that election was to be made within 60 days, as follows:

90-80 Time limit on certain applications to Court for review

(1)    This section applies in relation to an application for an order under section 90-15 of the Insolvency Practice Schedule (Bankruptcy) if the application:

(a)    is made other than by the Inspector-General; and

(b)    relates to an act, omission or decision of the trustee.

(2)    The application must be made no later than 60 days after the day on which the person making the application became aware of the trustee’s act, omission or decision.

17    Here, the applicant became aware of the trustee’s decision to elect to discontinue this proceeding on 13 January 2025 because she was copied into the trustee’s email, set out at paragraph 9 above, bearing that date.

18    In her written submissions, the applicant made the following appropriate concessions (which she re-affirmed in her oral submissions):

(1)    her Fair Work cause of action was capable of being captured by s 60 of the Bankruptcy Act;

(2)    the trustee made a written election to discontinue the proceeding within 28 days after being notified of that cause of action;

(3)    the trustee’s election was made under s 60(2) of the Bankruptcy Act;

(4)    the sequestration order continues to operate until it is set aside;

(5)    being made bankrupt by a sequestration order immediately affects the status of the debtor, enlivens the powers of a trustee in bankruptcy and alters interests in property – with specific species of property vesting with the trustee; and

(6)    even if a sequestration order is set aside on appeal, the sequestration order would have continued to operate in the interim.

19    When a trustee in bankruptcy elects to discontinue a proceeding under s 60(2), that does not affect the underlying cause of action. As Cosgrave J said in Secure Funding Pty Ltd v Grummett (2026) 80 VR 200 at 224 [130]:

It is established through longstanding authority that when a trustee in bankruptcy abandons or elects to discontinue a proceeding under s 60(3), that does not affect the underlying cause of action. It is only the immediate proceeding which cannot continue (citing Freeman v Joiner (2005) 3 ABC(NS) 332, 336 [14]; [2005] FCAFC 149 per Spender, Kiefel and Dowsett JJ and the cases cited therein; Moran v Minco Holdings Pty Ltd (in liq) [2022] WASCA 93, [12] per Buss P and Mitchell JA).

20    The discontinuance operates unless and until set aside: cf Robson (as former trustee of the estate of Samsakopoulos) v Body Corporate for Sanderling at Kings Beach CTS 2942 (2021) 286 FCR 494 at 537 [218] (Colvin J).

21    As Gageler J (as the Chief Justice then was) said in New South Wales v Kable (2013) 252 CLR 118 at 138-139 [52]:

Yet a purported but invalid law, like a thing done in the purported but invalid exercise of a power conferred by law, remains at all times a thing in fact. That is so whether or not it has been judicially determined to be invalid. The thing is, as is sometimes said, a “nullity” in the sense that it lacks the legal force it purports to have. But the thing is not a nullity in the sense that it has no existence at all or that it is incapable of having legal consequences. The factual existence of the thing might be the foundation of rights or duties that arise by force of another, valid, law. The factual existence of the thing might have led to the taking of some other action in fact. The action so taken might then have consequences for the creation or extinguishment or alteration of legal rights or legal obligations, which consequences do not depend on the legal force of the thing itself. For example, money might be paid in the purported discharge of an invalid statutory obligation in circumstances which make that money irrecoverable, or the exercise of a statutory power might in some circumstances be authorised by statute, even if the repository of the power acted in the mistaken belief that some other, purported but invalid exercise of power is valid.

(Footnotes omitted.)

22    At the hearing on 30 September 2026, after reciting the concessions she made in her written submissions, Ms Testart submitted:

I also don’t argue with the proposition that if I were to commence a new proceeding that I would be statute barred under section 544 of the Fair Work Act, which sets a six year time limit, which has already been canvassed in your previous judgment. What I do - what I do - where I do differ is that I’m not seeking to start a new proceeding. And this is an application for reinstatement of a cause of action that was, in the beginning, stayed by virtue of the sequestration order, then discontinued by virtue of the trustee’s election.

But I want to clarify that that election did not determine the cause of action. It did not determine the facts of the case. It just discontinued it.

(Emphasis added.)

23    Later, her submission continued:

I do submit that the property captured in VID661/2021 is now vested back in me and I have the standing to make this application to reinstate this proceeding and to allow the proceeding to return to normal case management on an expedited basis, if appropriate, but that there – this is a cause of action, species of property now returned to me by virtue of the bankruptcy being set aside.

…

… if there is no reinstatement, there is no Fair Work proceeding because, quite properly, it would be outside the time limit. The six-year time limit for bringing a proceeding. The cause of action hasn’t been determined. The cause of action is merely sitting there waiting to be determined if the proceeding is reinstated. That’s where the proceeding is. It’s not thrown out. It’s not terminated. It’s still a proceeding sitting on the court file that can be reinstated and continued.

24    I will treat the applicant’s interlocutory application as an application to set aside the discontinuance of the proceeding.

25    In my view, the Court has power to make such an order under s 23 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) which confers power on the Court “in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders ... as the Court thinks appropriate”.

26    As Deane J said in Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 623, a power to prevent the abuse or frustration of a court’s process should be accepted “as an established part of the armoury of a court of law and equity” and that “the power to grant such relief in relation to a matter in which the Federal Court has jurisdiction is comprehended by the express grant to that Court by s 23”: cf Chen v Monash University (2016) 244 FCR 424 (s 23 empowers the court, in an appropriate circumstance and having regard to the prospects of success, to reinstate a discontinued appeal in order to prevent an abuse of process of the court or to protect the integrity of those processes, but any such power is not exercisable merely in “the interests of justice”).

27    In this case, the Court has jurisdiction because the trustee’s election under s 60(2) to discontinue the applicant’s proceeding under the Fair Work Act “did not affect the underlying cause of action”.

28    So, the question is whether I should exercise the power under s 23 of the FCA Act to set aside the discontinuance of the proceeding effected by the trustee’s election, in circumstances where the applicant declined to take the opportunity, available to her long ago, to challenge the trustee’s decision to elect to discontinue this proceeding.

29    The overarching purpose set out in s 37M of the FCA Act is the obligation of the Court to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible, including through the efficient disposal of proceedings. The overarching purpose underscores the public interest in the finality of litigation as well as the importance of maintaining public confidence in the administration of justice. Accordingly, a party who seeks a late procedural indulgence must provide a satisfactory explanation for the delay, and the Court is entitled to consider not only prejudice to the opposing party but also the impact upon the administration of justice and the efficient use of judicial resources: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; UBS AG v Tyne (2018) 265 CLR 77.

30    Having regard to that overarching purpose, I decline to grant the indulgence that the applicant seeks. The applicant agreed that she was entitled to seek a review of the trustee’s decision to discontinue the proceeding and that his election to do so was valid (see transcript at page 24, lines 34-35 and 46).

31    The applicant said this about not challenging the trustee’s decision:

And while I had a right to review a trustee’s election hidden in the bowels of the Bankruptcy Act, it wasn’t an obligation that I had to review it. It’s just an option.

That option - that option doesn’t come with a mandatory requirement that I would have to take every technical point to over - to try to overturn or set aside a trustee’s valid election. By the time the trustee had made the written election to discontinue by email on 13 January 2025, I had already lodged a review application, a judicial review application of the decision by Registrar Curnow to make a sequestration order. I had no obligation to turn my mind to whether I should review the - make an application to review the trustee’s decision. I was under no obligation to run two contemporaneous cases. And I took the most appropriate avenue. And that was to seek a judicial review.

(Emphasis added.)

32    In my view, that is an insufficient explanation for not seeking to challenge the decision within the 60-day period provided for by r 90-80 of the Insolvency Practice Rules, and instead waiting almost 14 months after the expiry of that period to make this application seeking to reinstate the proceeding. The fact of the matter is that the applicant was under the obligation she referred to if she wished to review the trustee’s decision to discontinue the proceeding and have the discontinuance set aside. And that obligation (“[t]he application must be made”) was required to be exercised in a timely way.

33    I should also add that although I am unable to accept Ms Testart’s submissions, she made them with admirable succinctness, and made appropriate and sensible concessions, for which the Court is grateful.

34    Because her interlocutory application is to be dismissed, it is not necessary to make any order with respect to Mr Testart’s interlocutory application, which, as I said above, was misconceived in any event.

35    As to costs, it is true that Ms Testart’s application failed, but not for reasons advanced by the respondent.

36    Accordingly, I will make no order as to the costs of either application.

Associate:

Dated:    22 October 2026