Re Carter; Sweeney v Millyard [2000] FCA 1549 (1 November 2000)

Last Updated: 2 November 2000

FEDERAL COURT OF AUSTRALIA

Re Carter; Sweeney v Millyard [2000] FCA 1549

BANKRUPTCY - Application by the trustee in bankruptcy to extend the time, if necessary, to make an election to prosecute proceedings commenced by the bankrupts - whether a valid notice for the purposes of s 60(3) Bankruptcy Act 1966 (Cth) had been served on the trustee.

Bankruptcy Act 1966 (Cth) ss 33, 60(2), 60(3)

Aware Industries Ltd v Robinson (1997) 75 FCR 600 (FC) Foll

Re Faulkner; Ex parte Official Receiver (1981) 52 FLR 109 Cited

Re Collins; Ex parte Official Trustee in Bankruptcy v Bracher (1986) 10 FCR 209 Cited

Abeyratne v Trkulja (1998) 90 FCR 253 Cited

Brien v P & E Phontos Pty Ltd [1999] FCA 1072 Cited

Re Paterson; Ex parte Official Trustee [2000] FCA 116 Cited

Theissbacher v MacGregor Garrick & Co (a firm) [1993] 2 QdR 223 Cited

PETER BRUCE CARTER AND ANTHEA IRENE CARTER (BANKRUPT); PAUL SWEENEY v IAN C MILLYARD

Q7194 OF 2000

COOPER J

BRISBANE

1 NOVEMBER 2000

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q7194 OF 2000

IN THE MATTER OF:	PETER BRUCE CARTER AND ANTHEA IRENE CARTER (BANKRUPT)
AND:	PAUL SWEENEY APPLICANT IAN C MILLYARD RESPONDENT
JUDGE:	COOPER J
DATE OF ORDER:	1 NOVEMBER 2000
WHERE MADE:	BRISBANE

THE COURT DECLARES THAT:

1. Ian Millyard did not, by his solicitor's letter of 4 November 1999, or at all, give notice of the action sufficient for the purposes of s 60(3) of the Bankruptcy Act 1966 (Cth) to Paul Sweeney as trustee of the estates of Peter Bruce Carter and Anthea Irene Carter ("the bankrupts").

2. Paul Sweeney, by letter dated 24 February 2000 to the solicitors for Ian Millyard, made a sufficient election in writing for the purposes of s 60(2) of the Bankruptcy Act 1966 (Cth) to prosecute District Court proceedings No 236 of 1998 commenced by the bankrupts against Ian Millyard.

THE COURT ORDERS THAT:

1. Ian Millyard pay the trustee's costs of and incidental to his application, including reserved costs, if any, to be taxed if not agreed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q7194 OF 2000

IN THE MATTER OF:	PETER BRUCE CARTER AND ANTHEA IRENE CARTER (BANKRUPT)
AND:	PAUL SWEENEY APPLICANT IAN C MILLYARD RESPONDENT

JUDGE:	COOPER J
DATE:	1 NOVEMBER 2000
PLACE:	BRISBANE

REASONS FOR JUDGMENT

BACKGROUND

1 On 9 November 1998, Peter Bruce Carter and Anthea Irene Carter commenced proceedings in the District Court in Cairns, Queensland, against Ian Millyard. Mr and Mrs Carter were made bankrupt on 13 October 1999 and a sequestration order was made in respect of their estates.

2 On 4 November 1999 the solicitors for Mr Millyard wrote to Mr Paul Sweeney, the trustee of the bankrupts' estates. The letter said :

"We act for the professional indemnity insurers of Ian Millyard in an action commenced against him by Mr and Mrs Carter in the District Court at Cairns.

We enclose for your information copies of the following :-

1. Plaint presented 9th November 1998.

2. Our client's Entry of Appearance & Defence dated 17th December 1998.

We had been about to require Mr and Mrs Carter's solicitors Robinson & Robinson to list this matter for trial.

Would you please let us know whether Mr and Mrs Carter's creditors have yet had the opportunity of considering whether this litigation should be pursued. Our view is that the claim against our client has no merit at all.

Would you be good enough to respond within 14 days from the date of this letter."

3 On 16 November 1999, Mr Millyard's solicitors sent a further letter, which said :

"We refer to our letter of 4th November 1999.

Would you please respond."

4 On 18 November 1999 the trustee replied :

"I refer to your letter of 4 November 1999.

I am currently obtaining a barrister's advice on prospects and once that has been received will revert back to you.

Should you require any further information please contact Mr Jason Bettles of our office on [phone].

Yours faithfully,"

5 On 11 January 2000 Mr Millyard's solicitors again wrote to the trustee. The letter said :

"We refer to your letter of 18 November 1999 in which you advised that you were seeking counsel's advice as to whether this action would continue.

Kindly advise within seven (7) days whether you will consent to the action being discontinued.

Yours faithfully,"

6 The trustee responded by letter on 13 January 2000. The letter said :

"I refer to your letter of 11 January 2000.

I am still awaiting counsel's advice on the matter and will therefore not consent to the action being discontinued at this time.

Should you require any further information please contact Mr Jason Bettles of our office on (07) 5572 6384.

Yours faithfully,"

7 On 17 January 2000, Mr Millyard's solicitors again wrote to the trustee. The letter said :

"We refer to your letter of 13 January 2000.

It is now some two months since you advised us that you were seeking Counsel's advice as to whether the action would be continued by the Trustee.

Would you please let us have, by return, a statement of the Bankrupts' affairs so that consideration can be given to seeking security for our client's costs in the action. Should you not do so, we intend seeking instructions to apply.

Please note that this is an open letter.

Yours faithfully,"

8 The trustee wrote on 24 February 2000 :

"I refer to your facsimile to Robinson & Robinson Solicitors and Attorneys dated 21 February 2000.

I confirm that I have given Robinson & Robinson instructions to act on my behalf in the continuation of the action against your clients.

Should you require any further information please contact Mr Jason Bettles of our office on [phone].

Yours faithfully,"

9 On 25 February 2000 the solicitors for Mr Millyard advised the trustee that in their view, the letter of 4 November 1999 constituted a notice of the action for the purposes of s 60(3) of the Bankruptcy Act 1966 (Cth) ("the Act"). They further contended that the trustee had failed within the time provided for in s 60(3) to make the necessary election to prosecute the District Court proceedings, and that by force of the subsection he was deemed to have abandoned it.

10 The trustee denies that the letter of 4 November 1999 was a sufficient notice of action for the purposes of s 60(3). However, to protect his position he has sought an order pursuant to s 33 of the Act to extend the time to make an election until 24 February 2000, or for such further or other order as the Court considers appropriate.

ISSUES ON THE APPLICATION

11 Mr Millyard, by his counsel, submits that :

(a) the letter of 4 November 1999 was a sufficient notice of the action for the purposes of s 60(3) of the Act; or

(b) the entire correspondence from Mr Millyard's solicitors constituted a sufficient notice for the purposes of s 60(3) of the Act; and

(c) there is no jurisdiction or power under s 33 of the Act to extend time to make the election once the twenty-eight day period specified in s 60(3) expires.

12 The trustee, by his counsel, submitted to the contrary in respect of each issue.

CONCLUSION ON APPLICATION

13 Section 60 of the Act relevantly provides :

"60(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."

14 The question is not whether the trustee was made aware of the proceedings. The issue is whether notice of the action has been served on him. The twenty-eight day period provided for in s 60(3) does not commence to run until the trustee has been served with the requisite notice. The service of a notice of the action is a condition precedent to the running of time under s 60(3): Aware Industries Ltd v Robinson (1997) 75 FCR 600 (FC) at 602.

15 There is no prescribed form for the notice of the action for the purposes of s 60(3) of the Act. The requirements of the section were considered by a Full Court of this Court (Northrop, Davies and Sundberg JJ) in Aware Industries. In a joint judgment, their Honours said (at 602 - 603) :

"It might be thought that the requirements of s 60(3) would be satisfied by service of a document which said no more than that an action in an identified court had been commenced by the bankrupt to which the person serving the notice was a defendant. But we do not regard the notice contemplated by s 60(3) as a mere provision of the details of the action. The consequences of the effluxion of time without an election to prosecute are serious. An action which may have value will be lost. The purpose of the notice is to alert the trustee to the need to consider whether to prosecute or discontinue the action. In those circumstances it is appropriate to read s 60(3) as requiring that the notice contain sufficient information to draw the trustee's attention to the fact that time will run against the trustee upon service of the notice. Ideally a notice will be in the form of that served in Welinski v Temple (unreported, Federal Court, 8 April 1997). The document served in that case was described as a notice pursuant to s 60. It recited the existence of the action and that the persons on whose behalf it was given were the defendants in the action, required the trustee within 28 days of service to provide in writing an election advising the defendants of the trustee's intention to prosecute or discontinue the action, and stated that in default of such advice the trustee would be deemed to have abandoned the action. That notice expressly drew attention to the fact that time ran from the date of service, and that the action would be deemed to have been abandoned at the expiration of the 28-day period in default of an election to prosecute it. But given that a notice will be directed to a registered trustee, it need not have all the attributes of that served in Welinski so long as, on a fair reading, it draws the trustee's attention to the fact that time runs against him from the date of service."

16 In my view the letter of 4 November 1999 does not satisfy these requirements. The subject matter of the letter is an inquiry whether the "creditors have yet had the opportunity of considering whether this litigation should be pursued." It seeks a response within fourteen days to that question. There is nothing in the letter which indicates to the trustee that he is being put on notice to make an election within twenty-eight days of service of the letter to prosecute the District Court proceedings and that time runs from service of the notice. Nor does any other letter from Mr Millyard's solicitors, or the correspondence taken as a whole, give the trustee the requisite notice.

17 In my view the twenty-eight day period never commenced to run against the trustee. The letter of the trustee dated 24 February 2000 is a sufficient election for the purposes of s 60(2) of the Act.

18 It is unnecessary to determine whether or not there is a power to extend the time to make the election once the twenty-eight day period has expired. However, in my opinion it is now settled that there is such a power: Re Faulkner; Ex parte Official Receiver (1981) 52 FLR 109 at 113; Re Collins; Ex parte Official Trustee in Bankruptcy v Bracher (1986) 10 FCR 209 at 213; Abeyratne v Trkulja (1998) 90 FCR 253; Brien v P & E Phontos Pty Ltd [1999] FCA 1072; Re Paterson; Ex parte Official Trustee [2000] FCA 116. The obiter observations of the Queensland Court of Appeal in Theissbacher v MacGregor Garrick & Co (a firm) [1993] 2 QdR 223 at 230, do not, in my view, lead to a different conclusion.

19 If it were necessary to do so, I would have extended the time for the trustee to make the election until and including 24 February 2000.

20 The appropriate relief in the circumstances is declaratory. Costs should follow the event.

I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper.

Associate:

Dated: 1 November 2000

Counsel for the Applicant:	Mr K Howe
Solicitor for the Applicant:	Robinson & Robinson
Counsel for the Respondent:	Mr R Traves
Solicitor for the Respondent:	Miller Harris Lawyers
Date of Hearing:	20 July 2000
Date of Judgment:	1 November 2000