Re Sheila Irene Collins Ex Parte: Official Trustee In Bankruptcy v Jay Morris Bracher [1986] FCA 99 (4 April 1986)

FEDERAL COURT OF AUSTRALIA

Re: SHEILA IRENE COLLINS
Ex Parte: OFFICIAL TRUSTEE IN BANKRUPTCY
And: JAY MORRIS BRACHER
No. W913 of 1980
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Burchett J.

CATCHWORDS

Bankruptcy - election of trustee under s.60 - Notice to elect by "defendant or other party" - Whether "other party" includes the bankrupt plaintiff - History of the provision as throwing light on its meaning - Eiusdem generis rule - Whether extension of the time limited under s.60 should be granted.

Bankruptcy Act 1966, s.60(2), (3)

Re Summerhayes; Ex parte The Official Assignee (1890) 1 BC(NSW) 24

Bennett v. Gamgee (1876) 46 LJ Ex(NS) 33, and on appeal (1877) 46 LJ Ex(NS) 204; 36 LTNS 48

Re Kwok; Ex parte Rummel (1981) 61 F.L.R. 336

Stag Line Limited v. Foscolo, Mango & Company Limited (1932) AC 328

Humber Conservancy Board v. Federated Coal and Shipping Company Limited (1928) 1 K.B. 492

Lake Macquarie Shire Council v. Ades (1977) 1 N.S.W.L.R. 126

Re Faulkner; Ex parte Official Receiver (1981) 52 F.L.R. 109

Holmes v. Goodyear Tyre & Rubber Co. (Aust) Ltd. (1984) 55 A.L.R. 594

HEARING

SYDNEY
4:4:1986

ORDER

THE COURT DECLARES THAT:

The letter dated 22 September 1980 referred to in the
application did not constitute a notice for the purpose
of s.60(3) of the Bankruptcy Act 1966.

THE COURT ORDERS THAT:

The respondent pay the applicant's costs of this
application.

Note: Settlement and entry of order is dealt with in Rule 124 of the Bankruptcy Rules.

DECISION

This application raises a short but novel point. The application is made by the Official Trustee in Bankrutcy seeking a declaration that a certain letter dated 22 September 1980, written to the applicant by the Acting Public Solicitor, who had been representing the bankrupt in an action brought in the District Court prior to her bankruptcy, did not constitute a notice for the purposes of s.60(3) of the Bankruptcy Act 1966. Alternatively, an order is sought granting an extension of the time limited by s.60(3) of the Bankruptcy Act for the making of an election either to prosecute or to discontinue the action in the District Court. The respondent is the defendant in the District Court action.

2. A sequestration order was made against Mrs Collins on 22 September 1980. On the same day the letter in question was sent by the Acting Public Solicitor to the Official Receiver who was acting on behalf of the Official Trustee in Bankruptcy, the trustee of the estate. The material parts of the letter were as follows:

"I write to inform you that I act for Mrs
Sheila Collins of 220B Pennant Hills Road,
Carlingford.

On the 10 September, 1980 legal assistance
was granted to Mrs Collins to pursue a debt
owed to her by a Jay Morris Bracher. A
Statement of Liquidated Claim was filed in
the District Court and served on the
defendant on Monday, 16 September, 1980.

On 22 September, 1980 Mrs Collins and her
husband were declared bankrupt and on (sic)
order for sequestration of their estate made
by Mr. Justice Lockhart.

The Petitioning Creditor in this matter was
the Commercial Banking Company of Sydney
Limited.

I now write to enquire whether you would
consent to my acting on behalf of Mrs Collins
to recover this debt, notwithstanding that a
sequestration order has been made.

If you require any additional information or
have any queries, would you please contact my
Miss Tanner on 231 0922, Ext. 4163 or
communicate with her in writing at the above
postal address.

I hope to hear from you shortly."

A series of letters followed in which the Official Receiver sought assurances in respect of the costs of the proceeding as a legally aided action. Finally, on 10 February 1982 the Official Receiver wrote to the Public Solicitor a letter signed by him which included the following:

"As you have agreed to indemnify the Official
Trustee against all costs associated with the
action against the defendant Mr. Bracker
(sic) in the District Court and in the event
of an appeal to a higher Court, against all
costs incurred with such action. (sic)

Accordingly you have my approval to continue
proceedings on behalf of the Official
Trustee.

No doubt, any documents requiring the
endorsement of the Official Trustee will be
submitted to me for same."

3. Whilst this correspondence was going on between the Public Solicitor's Office and the Official Receiver's Office, the action in the District Court appears to have remained dormant. On 14 July 1983 the solicitors for the respondent, the defendant in those proceedings, wrote to the Official Receiver a letter, headed with a reference to the District Court action, which included the following:

"We hereby give you notice pursuant to s.60(2)
of the Bankruptcy Act 1966 of these
proceedings."

4. The Official Receiver wrote back on 20 July 1983 the following reply:

"I refer to your letter of 14th July 1983 and
advise that the Public Solicitor was
authorised in writing on the 10th February
1983 to prosecute the action."

5. It seems to me that the letter of 20 July 1983, whilst expressed somewhat obliquely, does evince a clear election made by the Trustee to prosecute the action. Accordingly, unless the action had already been abandoned, s.60 offers no bar to its continuance. But the respondent contends that the letter written by the Acting Public Solicitor on 22 September 1980 was a notice served upon the Trustee by an "other party to the action", namely the plaintiff herself, within the meaning of s.60(3), and that the failure of the Trustee to elect within 28 days after receipt of that letter is fatal to the maintenance of the action.

6. Sub-ss. (2) and (3) of s.60 of the Bankruptcy Act read as follows:

"(2) An action commenced by a person who
subsequently becomes a bankrupt is, upon his
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 by a defendant or
other party to the action, he shall be deemed
to have abandoned the action."

7. In Re Summerhayes; Ex parte The Official Assignee (1890) 1 BC(NSW) 24 at 25 Manning J. discussed s.10(6) of the Bankruptcy Act 1887(NSW) which appears to have been a progenitor of s.60 (2) and (3) of the present Act. Manning J. held that the Official Assignee was not barred, by an abandonment of an action wrought by his failure to elect within time, from bringing a subsequent action founded on the same cause of action. He said:

"(O)n looking at the section it seems to me
clear that the official assignee is not
barred from bringing a fresh action by this
one having been abandoned. Before the Common
Law Procedure Act was passed the law in
England was that a plea of the bankruptcy of
the plaintiff was an absolute answer to any
action commenced by him, and the action was
put an end to at once; but under the Common
Law Procedure Act such plea could not be
pleaded until the trustee made his election
and declined to continue. If he refused or
neglected to continue the action he did not
thereby lose his right to maintain a new
action for the same matter, the distinction
being pointed out by Kelly, C.B., in Bennett
v. Gamgee, between an action and a right of
action, and by Cleasby, B., in the same case,
that the trustee did not take the position of
the bankrupt solely, but represented the
interest of all the creditors."

Bennett v. Gamgee, the decision in which was reported at 46 LJ Ex 33, was appealed to the Court of Appeal, the decision of which is reported in 36 LTNS 48. Manning J. at p 25 of the report of Summerhayes' Case cites from the decision of the Court of Appeal a passage in the judgment of Cockburn C.J. which includes the following:

"Before the passing of the Act (i.e. the
Common Law Procedure Act 1852) parties were
in this relative position: the assignee in
bankruptcy might, if he gave security for the
costs, continue the bankrupt's action. On
the other hand, if the defendants were minded
to avail themselves of the plea of bankruptcy
puis darrein continuance, there was nothing
to prevent their doing so. It was a good
plea in bar to the action, and the assignee
might then, if he thought well, commence
a fresh action. Then the Act steps in to
interfere with the pleading by the defendants
of the plea puis darrein continuance without
giving notice to the assignee; so that
under the Act the assignee may, if he elects
to do so, continue the bankrupt's action
subject to his giving security for costs. If
he does not, the defendant will be in the
same position as if the Act had not passed.
But the Act stops there; it does not go on to
say that because the assignee does not elect
to continue and give security for the costs
that that proceeding on his part shall bar
him from bringing a fresh action against the
defendant."

8. Manning J. treats this passage as authoritative upon the construction of s.10(6) of the Bankruptcy Act 1887 (NSW). His decision has since been accepted as applicable to the present s.60(2) and (3) in Re Kwok; Ex parte Rummel (1981) 61 FLR 336 where at 343 Rogerson J. said:

"But the fact that the trustee decides, or is
treated as deciding, to abandon the
bankrupt's action does not prevent him from
enforcing the right to the chose in action
which vested in him on bankruptcy by a new
action of his own. The reasoning of Bennett
v. Gamgee and Summerhayes' case seems to me
to be as apposite and applicable now as it
was when those decisions were reached."

9. It seems to me that the language of s.60(3) must be interpreted against the history of the provision which is alluded to in the passages I have cited from the judgment of Manning J. in Summerhayes' Case. The position, as it was following the passing of the Common Law Procedure Act 1852 is succinctly stated in Bullen and Leake (1862 edition) at p.507 as follows:

"Where the bankruptcy of the plaintiff occurs
subsequently to the commencement of the
action, it can only be pleaded as a defence
subject to the provisions of the Common Law
Procedure Act 1852 s.142, giving the assignee
the choice of continuing the action commenced
by the plaintiff."

If the bankruptcy occurred after the bringing of the action, but before the defendant had pleaded, the plea was required to be pleaded to the further maintenance of the action; if the bankruptcy had occurred after the defendant had already pleaded, the plea was required to be pleaded puis darrein continuance. S.142 provided for the obtaining of a Judge's order specifying a reasonable time for the assignees to make their election, and permitted the pleading of the bankruptcy where the assignees "neglect or refuse to continue the action" within the time limited by the order.

10. The modern procedure dispenses with the taking out of an order of a Judge limiting a time for election, and with the technicalities of pleading, but it seems to me that the object is the same. Section 60 puts an end to the action unless it is prosecuted by the trustee. It gives the defendant "or other party to the action" a means to bring the matter to finality if the trustee should delay his election. But the whole procedure is in substitution for pleas which could formerly have been filed to bar the further maintenance of the action. I do not think that the words "or other party to the action" were intended to embrace the bankrupt plaintiff himself.

11. The construction which is suggested by the history of the provision is not inconsistent with a strict examination of its language. Had the provision been intended to embrace a notice served by any party to the action including the bankrupt plaintiff, there would have been no need to refer to a defendant and the provision need only have referred to "any party to the action". Some more restricted meaning is suggested by the phrase "defendant or other party to the action". In Stag Line Limited v. Foscolo, Mango & Company Limited (1932) AC 328 at 334 Lord Buckmaster referred to a charter party containing a clause which gave liberty to the vessel "to call at any ports in any order for bunkering or other purposes". He said:

"The word 'bunkering' must have some
demonstrative and limiting effect, and the
phrase 'or other purposes' following it
cannot be so construed as to disregard the
fact of the first example and assume that any
purpose is thereby permitted. If that were
so, the word 'bunkering' might be left out...
I can find nothing kindred to bunkering or
associated with the operation that is
involved in landing two men at a port that is
not on any part of the specified route."

By parity of reasoning, it seems to me that the persons who have something in common with the defendant and may naturally be designated by the expression "defendant or other party to the action", include other parties who are in the position analogous to that of a defendant, such as cross-defendants, and not the plaintiff himself.

12. It may have been difficult to apply the eiusdem generis rule, if the history of the provision had not cast light upon its purpose (cf. in the Stag Line Case the views of Lord Atkin at p.341 and Lord Macmillan at p.349, and see also Humber Conservancy Board v. Federated Coal and Shipping Company Limited (1928) 1 KB 492 at 495 and Lake Macquarie Shire Council v. Ades (1977) 1 NSWLR 126 at 130), but the language should not be looked at wearing blinkers excluding that purpose.

13. Accordingly, I do not think an extension of the time limited by s.60(3) is strictly necessary in this case. However, there is authority that the Court has jurisdiction, under s.33(1)(c) of the Act, to extend the time limited by that provision: Re Faulkner; Ex parte Official Receiver (1981) 52 FLR 109; Holmes v. Goodyear Tyre & Rubber Co. (Aust) Ltd. (1984) 55 ALR 594 at 598. I am clearly of opinion that, if an extension is required, this is an appropriate case in which to grant it. The defendant in the action was, at all times preceding the election of the Official Trustee to prosecute the action entirely unaware of the letter which he now claims constituted a notice to elect. Nothing was put to me which amounted to any significant prejudice. I am satisfied that in all the circumstances this is a proper case to extend time for making an election under s.60 and if it were necessary I should make an order extending the time.

14. In the result I make a declaration that the letter dated 22 September 1980 referred to in the application did not constitute a notice for the purpose of s.60(3) of the Bankruptcy Act 1966 and I order that the respondent pay the applicant's costs of this application.