Robyn Smith v Chevelle Developments Pty Ltd t/as Snowden Parkes Real Estate Agents and Another [2005] NSWIRComm 109 (8 April 2005)

Last Updated: 14 April 2005

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Robyn Smith v Chevelle Developments Pty Ltd t/as Snowden Parkes Real Estate Agents and Another [2005] NSWIRComm 109

FILE NUMBER(S): IRC 4474

HEARING DATE(S): 21/03/2005

DECISION DATE: 08/04/2005

PARTIES:

APPLICANT:

Robyn Smith

FIRST RESPONDENT:

Chevelle Developments Pty Limited t/as Snowden Parks Real Estate Agents

(ACN 000 823 807)

SECOND RESPONDENT:

Anthony Abboud

JUDGMENT OF: Schmidt J

LEGAL REPRESENTATIVES

APPLICANT:

Mr JP Capsanis, solicitor

SOLICITORS:

J.P. Capsanis & Co

RESPONDENTS:

Mr BKB Cross of counsel

Real Estate Employers' Federation of NSW

CASES CITED: Aveling v UBS Capital Markets Australia Holdings Ltd [2004] NSWIRComm 261

Bowker v Software Engineers Australia and Ors [2003] NSWIRComm 213

Clark v Mayne Nickless Ltd t/as Security Express (Unreported, Industrial Relations Court of Australia, Spender J, 14 May 1996)

Cockerill v Westpac Banking Corporation (Unreported, Federal Court of Australia, Drummond J, 23 May 1991)

Daemar v Industrial Commission of New South Wales and Ors (1988) 12 NSWLR 45

Daemar v Industrial Commission of New South Wales and Anor [No 2] (1990) 22 NSWLR 178

Fuller v Beach Petroleum NL and Another (1993) 117 ALR 235

Geia v Palm Aboriginal Council [1999] QCA 389

Kennedy v Contract Solutions [2003] NSWIRComm 158

Larsen v Ondeo Nalco Australia Pty Ltd [2004] NSWIRComm 123

Mullins v Peoplebank Australia Pty Ltd [2003] NSWIRComm 457

Pelechowski v NSW Land & Housing Commission [2000] FCA 233

LEGISLATION CITED: Bankruptcy Act 1996 (Cth)

Industrial Relations Act 1996

Interpretation Act 1987

Legal Practitioners Act 2002

Property, Stock and Business Agents Act 2002

Workplace Relations Act 1966 (Cth)

JUDGMENT:

- 17 -

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

IN COURT SESSION

CORAM: Schmidt

8 April 2005

Matter No IRC 4474 of 2004

ROBYN SMITH v CHEVELLE DEVELOPMENTS PTY LTD t/as SNOWDEN PARKES REAL ESTATE AGENTS AND ANOTHER

Application under section 106 of the Industrial Relations Act 1996

JUDGMENT

[2005] NSWIRComm 109

1 This judgment concerns a motion filed by the respondents, Chevelle Developments, on 14 March 2005, seeking orders setting aside the summons filed by the applicant, Ms Smith, under s106 of the Industrial Relations Act 1996, ('the Act'), together with other orders. Ms Smith's claim concerns the contract of employment she entered with the respondents in March 2002, which was terminated in July 2003. Ms Smith became a bankrupt on 14 February 2002, prior to the employment. The summons was filed on 30 July 2004.

2 The motion was filed on 14 March 2005, after the respondents had unsuccessfully sought confirmation from Ms Smith, that she was an undischarged bankrupt. It was the respondents' case that as an undischarged bankrupt, Ms Smith had no right to commence the proceedings, given the provisions of the Bankruptcy Act 1996 (Cth).

3 After the motion was filed, Ms Smith confirmed that she had been a bankrupt when the proceedings were commenced, but asserted that the bankruptcy had been discharged on 14 February 2005. This was not put in issue by the respondents. It was Ms Smith's contention that the claims advanced were not precluded by the Bankruptcy Act.

4 The issues which arise for determination turn upon the application of the provisions of the Bankruptcy Act to the claims here advanced by Ms Smith under s106 of the Act.

5 The claims made in the summons and the money orders sought were:

1. An order declaring void, in whole or in part either from its commencement of (sic) from some other time the "Employment Agreement" made on or about 4th March 2002 between the applicant and the first respondent whereby the applicant performed work for the first respondent in the real estate industry or which was collateral thereto, save and except for moneys paid pursuant to the same.

2. An order that the contract and arrangement as between the applicant and the first respondent whereby the applicant performed work in an industry during the period 4th March, 2002 to 31st July 2003 was and is unfair in the requisite sense under s.106 of the Industrial Relations Act, 1996 in that it was:

(a) Unfair, harsh and unconscionable;

(b) Contrary to the public interest;

(c) Was designed to and did avoid the provisions of an industrial instrument.

3. An order varying the contract of employment between the applicant and the first respondent to include the following terms:

(a) The applicant is to be paid for work performed for the first respondent on the basis of a guaranteed base salary of $52,000.00 per annum plus $3,000.00 annual training and education allowance and such rates, benefits and allowances applicable to and to the standards of a real estate salesman under the Real Estate Industry (State) Award, the Annual Holidays Act, 1944, and other relevant legislation, which rates, benefits and allowances include but are not limited to the award wage, locomotion allowance, telephone allowance, pay in lieu of days off for working in excess of five days, pro rate holiday pay, and superannuation.

(b) The applicant is to be paid the equivalent of bonuses to the value of $20,000.00 per annum and/or all her entitlements to commission in relation to work performed for the first respondent for listings and/or sales of properties effected by the applicant whilst in the employment of the First Respondent.

(c) That the First Respondent is not to:

(i) unilaterally vary the applicant's conditions of employment and/or

(ii) withdraw benefits associated with the applicant's contract of employment without proper notice and reasonable cause and/or

4. Further or in the alternative, an order that the respondents or either of them pay to the applicant such sum of money in connection with the employment arrangement and any collateral arrangements, as this Honourable Commission considers appropriate.

5. An order that the respondents or either of them pay the applicant interest upon such an amount of money as is ordered to be paid to the applicant in connection with the contract or arrangement at such rtes(sic) as prescribe and in respect of such period of time as this Honourable Commission considers appropriate.

6. An order that the respondents or either of them pay the applicant's costs of an incidental to these proceedings.

7. Such further or other orders that this Honourable Commission considers appropriate.

D. PARATICULARS(sic) OF THE WAY IN WHICH THE AMOUNTS CLAIMED ARE CALCULATED

1. Pay in lieu of days off in accordance with the

Award, for the said period, being 250 days at

$87.02 per day: $21,755.00

2. Commissions/bonuses $12,000.00

3. Holiday pay for the period

4th March 2002 to 31st July 2004,

(less amount paid) to be quantified

4. Compensation $35,000.00

5. Plus statutory superannuation to be quantified

6. Plus interest, to be quantified

7. Plus costs, to be quantified.

6 On the respondents' case, there are also issues in the proceedings as to whether Ms Smith failed to ensure that she was properly licensed as a real estate agent, which will have an impact on the claims advanced. It appears that during the employment, Ms Smith did not reveal to the respondents that she was an undischarged bankrupt. The Property, Stock and Business Agents Act 2002, defines a disqualified person, who is not entitled to a licence or certificate of registration, as including an undischarged bankrupt.

7 Sections 58, 116(1) and 116(2)(g)(i), and the definition of 'property' and 'the property of the bankrupt' in s5 of the Bankruptcy Act, are relevant to the matters which here arise for determination. They relevantly provide:

58 Vesting of property upon bankruptcy—general rule

(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.

Note: This subsection has a limited application if there are orders in force under the proceeds of crime law: see section 58A.

(2) Where a law of the Commonwealth or of a State or Territory of the Commonwealth requires the transmission of property to be registered and enables the trustee of the estate of a bankrupt to be registered as the owner of any such property that is part of the property of the bankrupt, that property, notwithstanding that it vests in equity in the trustee by virtue of this section, does not so vest at law until the requirements of that law have been complied with.

(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.

(4) After a debtor has become a bankrupt, distress for rent shall not be levied or proceeded with against the property of the bankrupt, whether or not the bankrupt is a tenant of the landlord by whom the distress is sought to be levied.

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

(5A) Nothing in this section shall be taken to prevent a creditor from enforcing any remedy against a bankrupt, or against any property of a bankrupt that is not vested in the trustee of the bankrupt, in respect of any liability of the bankrupt under:

(a) a maintenance agreement; or

(b) a maintenance order;

whether entered into or made, as the case may be, before or after the commencement of this subsection.

(6) In this section, after-acquired property , in relation to a bankrupt, means property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt.

116 Property divisible among creditors

(1) Subject to this Act:

(a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge;

(b) the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge;

(c) property that is vested in the trustee of the bankrupt’s estate by or under an order under section 139D; and

(d) money that is paid to the trustee of the bankrupt’s estate under an order under section 139E;

is property divisible amongst the creditors of the bankrupt.

(2) Subsection (1) does not extend to the following property:

...

(g) any right of the bankrupt to recover damages or compensation:

(i) for personal injury or wrong done to the bankrupt, the spouse of the bankrupt or a member of the family of the bankrupt; or

"property" means real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident as to any such real or personal property.

"the property of the bankrupt", in relation to a bankrupt, means:

(a) except in subsections 58(3) and (4):

(i) the property divisible among the bankrupt’s creditors; and

(ii) any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt; and

(b) in subsections 58(3) and (4):

(i) the property, rights and powers referred to in paragraph (a) of this definition; and

(ii) any other property of the bankrupt.

Consideration

8 I am satisfied that Ms Smith's right to bring proceedings under s106 of the Act was after acquired property which vested in the trustee, as s58(2) of the Bankruptcy Act provides, being property divisible amongst the creditors of the bankrupt, (s116(1)), which did not fall within the exemptions provided by s116(2). I am satisfied that the stay of these proceedings must accordingly be ordered. The reasons for that conclusion are as follows.

9 It is plain that the employment contract in question was entered and terminated during the bankruptcy. These proceedings were also initiated during the bankruptcy. At issue in the proceedings is the fairness of the employment contract; whether it ought to be varied or declared void in the manner sought and whether money orders in connection with the contract, so varied or declared void, ought to be made. Those money orders concern award rates; commissions or bonuses; statutory superannuation and annual leave entitlements, as well as a claim for compensation and interest.

10 The income which Ms Smith earned during the course of the employment, was subject to provisions of Division 4B - Contribution by Bankrupt and Recovery of Property. Section 139L provides that income has its ordinary meaning in relation to a bankrupt, subject to various qualifications, not relevant here. It was not argued that any money orders which might flow from these proceedings, initiated after the termination of the employment contract, would be income, so defined. This is consistent with the ordinary meaning of the word income and the nature of these proceedings. Relief under s106 requires not only that an applicant satisfies the onus of establishing that the contract in question was unfair, but the Court must also be persuaded to exercise a discretion, to make money orders, just in the circumstances of the case, having regard, amongst other things, to the terms of the contract, how it operated, the conduct of the parties and the public interest.

11 The first crucial question which here requires consideration, is whether or not the right to initiate such proceedings, is property, as defined in the Bankruptcy Act. Given the width of the definition in s5, it seems to me unarguable, that it is. The nature of proceedings brought under s106 has been recently considered. Views as to whether or not the section conferred accrued rights, for the purpose of the provisions of the Interpretation Act 1987, were considered in Kennedy v Contract Solutions [2003] NSWIRComm 158; Bowker v Software Engineers Australia and Ors [2003] NSWIRComm 213; Mullins v Peoplebank Australia Pty Ltd [2003] NSWIRComm 457; Larsen v Ondeo Nalco Australia Pty Ltd [2004] NSWIR Comm 123 and in Aveling v UBS Capital Markets Australia Holdings Ltd [2004] NSWIRComm 261, where the judgment in Kennedy was overruled (see [39]).

12 That is not, however, the issue which here arises. The definition of property in the Bankruptcy Act includes 'personal property of every description' as well as 'any estate, interest or profit, whether present or future, vested or contingent, arising out of or incidental to any such real or personal property'. Those words are sufficiently wide to capture proceedings such as this, even if the right to commence proceedings under s106 are not accrued rights, for the purpose of the Interpretation Act. As Marks J characterised s106 for example in Larsen, it provides for the conduct of an investigation by the Court as to whether the contract in question was unfair and whether new rights should be granted. Section 108 provides that such orders may be made upon application of various persons or entities, including the parties to the contract in question. The section plainly grants such persons the right to initiate the proceedings - once initiated, the Court must conduct the investigation Marks J described. The question here at issue is whether the provisions of the Bankruptcy Act have displaced Ms Smith's right to commence the proceedings, by vesting them in the trustee.

13 So seen, it is clear that the characterisation of a claim brought in accordance with ss106 and 108 as involving the exercise of the right to commence proceedings in which the Court will investigate the fairness of the employment contract, shows that it is a right which falls within the definition of property as a 'future ... contingent' interest arising out of or incidental to real or personal property. Relevantly, here the claims in part allege that there were unpaid entitlements arising under various award provisions. Such a claim might be a present interest under the definition of property, were proceedings for recovery of such moneys initiated under other provisions of the Act. However, in these proceedings, the claim advanced is always dependent upon the Court forming the view that the contract is relevantly unfair.

14 A similar conclusion was reached by Spender J in Clark v Mayne Nickless Ltd t/as Security Express (Unreported, Industrial Relations Court of Australia, 14 May 1996), in relation to proceedings brought under ss127A and 127B and of the Industrial Relations Act 1988 (Cth), (the unfair contract provisions of the legislation), and ss178, 179, 179A and 179B, the provisions dealing with contraventions of awards. At p8, Spender J concluded that the claims, which he had described at p6 as being 'essentially in the nature of claims for non payment of sums which Mayne Nickless is said to have been obliged to pay him', did not fall within the exemption provided by s116(2) of the Bankruptcy Act. In that case, the claims concerned events prior to the bankruptcy, but the proceedings were commenced afterwards. Spender J concluded that it was 'for the trustee in those circumstances to consider whether in the interests of creditors they should be pursued', after referring to observations of Drummond J in Cockerill v Westpac Banking Corporation (Unreported, Federal Court of Australia, 9 March 1992) at p3, that such a bankrupt had no standing to institute the proceedings in his own name, even with the trustees' consent; 'only the trustee had standing to bring such an action'.

15 In this case, I am satisfied that given the provision made in s58 in respect of after acquired property, no different conclusion may properly flow.

16 Mr Capsanis argued that the right to bring proceedings under s106, was not a right which 'had materialised in any substance or form' and so was not a chose in action and not property, as defined. It was not a 'dealable commodity' in any form. He also explained that, in any event, the summons sought relief in relation to an alleged wrong done the applicant and so fell within the exemptions provided in s116(2). He asserted that the wrong in issue was:

The wrong is in the sense of the claim of the applicant a deprivation of a proper and fair commercial remuneration industrial outcome as a result of the contract. The wrong done is that this person has engaged in an arrangement for a period of time, induced, on the contention of the applicant, into that arrangement, only to find it was not an outcome that was expected, as a result of the representations made before the contract was entered into, et cetera. The wrong, or the harm, is deprivation of a return, a status, an outcome and, therefore, the applicant finding herself, in this case, in a position worse off. The wrong is the expectation or inducement of a certain standard and the outcome was of a much lesser standard. The wrong was the difference between those two outcomes. They are my submissions.

17 I am unable to accept those submissions. There is no definition of 'chose in action' in the Bankruptcy Act. It is defined, for example, in Butterworths Concise Australian Legal Dictionary, Second Edition, as:

An intangibly personal property right recognised and protected by the law, which has no existence apart from the recognition given by the law, or which confers no present possession of a tangible object, such as the right to payment under a loan contract or the promise to pay on a bill of exchange.

18 It is difficult to see that the right to commence proceedings under s106, given by s108, is not a chose in action, so defined. Nevertheless, it is the definition of 'property' in s5 of the Bankruptcy Act which is crucial to the question here arising. Nor is the fact that a right is statutory, or unassignable, itself a basis for excluding it from the statutory definition of property. (See Fuller v Beach Petroleum NL and Another (1993) 117 ALR 235 at 241 - 242.)

19 For the reasons given, I am satisfied that the right given to Ms Smith by s108 to pursue a claim under s106, arose only when the employment contract sought to be attacked in these proceedings came into existence. Once it came into existence, it was a right which fell squarely within s58(1)(b), as after acquired property, and accordingly vested in the trustee.

20 That right became part of the property divisible amongst the applicant's creditors, pursuant to s116(1). The exemption relating to the right to recover damages or compensation for personal injury or wrong done to a bankrupt, provided by s116(2)(g), does not apply to these proceedings. The summons does not assert any claim for compensation for injury to the body, mind or character of the applicant. It is concerned, as I noted, with the alleged unfairness of Ms Smith's employment contract.

21 This conclusion is consistent with the observations of the Court of Appeal as to the nature of the scheme established by the Bankruptcy Act in Daemar v Industrial Commission of New South Wales and Ors (1988) 12 NSWLR 45, at 50-51:

Indeed, it is so notwithstanding the fact that it deprives the bankrupt of important civil rights which he or she would otherwise normally enjoy. It is of the essence of bankruptcy, as provided for by the Act, that property which belongs to the bankrupt, including choses in action (other than those which are specifically exempted) are vested upon bankruptcy in the bankrupt's trustee. The trustee has the charge of the estate of the bankrupt. It is then for the trustee to distribute that property as the Act provides, principally for the benefit of the creditors. To secure the benefits and protections which the Act provides to a debtor, the debtor's status is changed, rights are diminished and property is controlled. It could scarcely be otherwise for if it were, valuable interests which a bankrupt might have, in the form of choses in action would not be caught in the net cast by the very wide language of s 116(1). This would be so despite the specific and limited terms of the exemption in the case of rights to recover damages or compensation provided by s 116(2) and the very purposes of gathering in the bankrupt's property.

22 The Bankruptcy Act evinces the same intention in respect of after acquired property, subject to limitations which do not here apply. This conclusion is also consistent, I note, with the approach of the Queensland Court of Appeal in Geia v Palm Aboriginal Council [1999] QCA 389, where the claim pursued was for damages for breach of contract, arising, it was alleged, from a failure to give adequate notice of termination. The bankruptcy also occurred prior to the termination of the employment in question. It was held that the proceedings did not fall within the exemption in s116(2) and at [17], it was concluded that the action could not be brought by the bankrupt, it could only be brought by the trustee, because it did not concern a claim for personal services actually rendered before termination of the contract.

23 The same conclusion follows here, where, in accordance with the statutory scheme, the claim concerns the fairness of the contract of employment, in the respects identified in Ms Smith's summons.

24 Similar conclusions were reached by Madgwick J in the matter of Pelechowski v NSW Land & Housing Commission [2000] FCA 233, in the context of proceedings to which s60 of the Bankruptcy Act, were relevant. Section 60 gives a trustee a right of election as to the further prosecution of proceedings brought prior to a bankruptcy. The proceedings in question were brought under the illegal termination of employment provisions of the Workplace Relations Act 1966 (Cth). Madgwick J concluded at [5]:

There is in reality no claim for anything in the nature of damages which would be "estimated by immediate reference to pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property": see Cox v Journeaux (1935) 52 CLR 713 at 721. The essential element of proceedings for illegal termination of employment under the Workplace Relations Act 1996 (Cth), is that one's economic relations with one's former employer have been disrupted. Those economic relations depend upon contract, or perhaps in the case of a public servant, a statutory relationship, but nevertheless of a contractual or quasi-contractual kind, that is to say, property rights are at the heart of the proceedings.

25 The same conclusions flow here in relation to the proceedings brought by Ms Smith under s106 of the Act. It is property rights which are at the heart of this litigation. For these reasons, I am satisfied that under the scheme established by the Bankruptcy Act, Ms Smith had no right to bring these proceedings. The fact that in February 2002, the bankruptcy was discharged, has no impact on this conclusion - see Daemar v Industrial Commission of New South Wales and Anor [No 2] (1990) 22 NSWLR 178 at p185. The application must accordingly be dismissed.

26 It is necessary to consider the question of costs. The usual order would be that Ms Smith bear the respondents' costs, as agreed or assessed. The motion sought such costs and in the alternative, an order that Ms Smith's solicitor bear the costs of and incidental to the motion. At the hearing it was explained that the order pressed against the solicitor was in respect of delays at two mentions, when the respondents had sought on numerous occasions, that confirmation be provided that Ms Smith was a bankrupt.

27 In resisting such an order, Mr Capsanis submitted that it was relevant that the respondents had first sought that confirmation by letter of 2 February, it was not an issue raised in the respondents' pleadings. No reasons were there given for the information sought, information 'that may in all probability have been received in confidence into the course of instruction from his client'. While the fact of bankruptcy was a public matter, any discussion with a solicitor as to 'bankruptcy status is a status between the solicitor and client and is confidential between solicitor and client, reinforced by the fact it was not a matter of particulars further to pleadings'. It was further submitted that '[t]here is a protocol and a procedure under the rules for the proper way for the respondent to approach the matter by way of notice to admit' and that the information would only have to be provided if 'a proper request for particulars' was made 'pursuant to pleadings'. The way in which the request was made was neither 'appropriate and the responses were not unreasonable', especially given that it appeared that the respondents had information about the bankruptcy for some five months, but had not raised the issue until February.

28 The relevant circumstances were that the proceedings were commenced by summons on 30 July 2004; the respondents filed their reply on 22 September 2004 and the applicant's response was filed on 22 October 2004. Annexed to an affidavit sworn by Craig John Byrnes on 11 March 2005, was a an extract from the National Personal Insolvency Index as at 17 September 2004, indicating that Ms Robyn Yvonne Smith was an undischarged bankrupt. Mr Byrnes is a Senior Employee Relations Adviser employed by the Real Estate Employers' Federation of NSW, at one stage the respondents' agent in the proceedings. He was not required for cross examination as to the circumstances in which the bankruptcy came to the respondents' attention.

29 By letter of 2 February 2005, Mr Byrnes sought confirmation that it was Ms Smith, who appeared on the register as an undischarged bankrupt and how, in those circumstances, she could maintain these proceedings in the absence of the trustee. A response was sought by 11 February, but none was received.

30 On 14 February, there was a discussion between Mr Capsanis and Mr Byrnes. There was an issue between them as to what was said, which it is unnecessary to resolve. It is sufficient to note that the information sought was not provided and that it was common ground that reference was made by Mr Capsanis to his need to obtain instructions from Ms Smith. On 23 February, Mr Byrnes wrote again, seeking a response by 25 February and advising that otherwise, an application would be made to the Court to have the matter relisted and the conciliation date, fixed for 21 March, vacated.

31 There was no response and on 3 March, a relisting was sought. At a mention on 8 March, the parties were encouraged to confer as to what effect that had on the proceedings, given the provisions of the Bankruptcy Act. A further mention was fixed for 16 March. Mr Byrnes wrote again to Mr Capsanis on 8 March, seeking confirmation of the bankruptcy. There was no response. On 10 March a further letter seeking a response was sent.

32 On 11 March, a reply was sent by Mr Capsanis. Confirmation that Ms Smith was a bankrupt was still not given, but questions were asked as to the provisions of the Bankruptcy Act relied upon and an explanation for the delay in raising the question of bankruptcy. On 14 March, Mr Byrnes advised that given the refusal to confirm that Ms Smith was a bankrupt, a motion would be filed. seeking that the originating summons be set aside. A copy of the motion and supporting affidavit were attached and advice was given that reliance would be placed upon the provisions of ss5, 58 and 116 of the Bankruptcy Act. These documents were also formally served.

33 On 15 March, Mr Capsanis replied, advising that 'As you have now provided a form of relevance for making your enquiry' it was confirmed that Ms Smith was the bankrupt person 'referred to' in the search, but that the 'bankruptcy was discharged on 14th February 2005'. At the mention on 16 March, the conciliation conference on 21 March was vacated and the motion listed for hearing instead.

34 Mr Capsanis swore an affidavit on which he relied in resisting the costs orders sought. No evidence was put on by Ms Smith. No suggestion was there made by Mr Capsanis that there was any difficulty in him being provided with instructions by his client. The only explanation given as to the failure to respond to the repeated requests for confirmation that Ms Smith was a bankrupt, was his policy to preserve client confidentiality; that his discussions with his client as to her bankruptcy status were in confidence and that until 8 March he 'held no basis from the Respondents as to relevancy of their enquiry. Consequently, until then, I was of the view I was under obligation not to discuss the matter of my clients bankruptcy status'.

35 There is obvious difficulty with such an approach. The fact of bankruptcy is a public, rather than a private matter. An applicant's status as a bankrupt, is relevant to the question of whether or not proceedings may be instituted, or pursued by the applicant, or whether such rights are vested in a trustee by the provisions of the Bankruptcy Act. There is obvious discourtesy in a legal practitioner simply ignoring enquiries of the kind here made on behalf of the respondents, as to the applicant's bankruptcy. The approach adopted also led to unnecessary costs being incurred, which I am satisfied Ms Smith ought not, in fairness to be called upon to bear. That such an issue is raised by the respondents in correspondence, rather than through a notice to admit facts, or some other formal Court process, does not provide a proper basis for an applicant's solicitor refusing to respond to the question raised, or indeed failing to seek instructions in relation to it. To the contrary, such an enquiry is entirely likely to be a more cost effective way of raising the issue, of considerable importance to an applicant such as Ms Smith, who is facing an adverse costs order, if the proceedings are likely to be dismissed, given the bankruptcy.

36 In the circumstances, I am unable to see why these unnecessary costs ought to be borne by Ms Smith, resulting as they apparently did, from Mr Capsanis' failure to obtain necessary instructions. It is appropriate that an order that he bear the costs connected with the correspondence between 23 February and 12 March 2005, and the mention on 8 March 2005, be made.

37 What those costs might properly be is another matter. The respondents elected to be represented in the proceedings, at least for a time, by an agent which is not a legal practitioner and which may therefore not engage in legal practice for fee, gain or reward (see s14 of the Legal Practitioners Act 2004). The Act permits representation by an agent. It does not regulate the costs which they may charge, if any. That, however, is not a matter which must be here determined.

Orders

38 For the reasons given, the proceedings are dismissed. The applicant is to bear the respondents' costs, as agreed or assessed, other than in relation to the costs connected with the correspondence between and 23 February 2005 and 11 March 2005 and the mention on 8 March 2005, which costs are to be borne by Mr Capsanis, on the same basis. I order accordingly.

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LAST UPDATED: 08/04/2005