National Australia Bank Limited v Darroch [2010] NSWSC 1129 (6 October 2010)

Last Updated: 7 October 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
National Australia Bank Limited v Darroch [2010] NSWSC 1129


JURISDICTION:


FILE NUMBER(S):
2008/283367

HEARING DATE(S):
1 October 2010

JUDGMENT DATE:
6 October 2010

PARTIES:
National Australia Bank Limited (Plaintiff)
Andrew David Darroch (First Defendant)
Surbjit Kaur Bhatti (Second Defendant)

JUDGMENT OF:
Harrison J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
S E Gray (Plaintiff)
D McCallum - with leave (Second Defendant)

SOLICITORS:
DibbsBarker Lawyers (Plaintiff)
Sweeney Tiggemann - with leave (Second Defendant)


CATCHWORDS:
PRACTICE & PROCEDURE – possession list - application for "default judgment" – where defendant bankrupt and trustee not elected to appear - where defence on foot -whether defendant has right to appear to defend proceedings despite s 60(2) Bankruptcy Act 1966 – where not clear whether plaintiff's application is actually for summary judgment pursuant to UCPR 13.1 or strike out pursuant to UCPR 14.28 – matter adjourned for further submissions.

LEGISLATION CITED:
Bankruptcy Act 1966 (Cth)

CATEGORY:
Procedural and other rulings

CASES CITED:
Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
Arnoya Holdings Pty Ltd v Metway Leasing Ltd [1999] NSWCA 120
Brimson v Rocla Concrete Pipes Ltd [1982] 2 NSWLR 937
Cole v Challenge Bank Ltd [2002] FCAFC 200
Dey v Victorian Railway Commissioners [1949] HCA 1; (1949) 78 CLR 62
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125
Re Lofthouse [2001] FCA 25; (2001) 107 FCR 151

TEXTS CITED:


DECISION:
Stand the application over for further argument.



JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COMMON LAW DIVISION

POSSESSION LIST

HARRISON J

6 October 2010

2008/283367 National Australia Bank v Andrew David Darroch and Surbjit Kaur Bhatti

JUDGMENT

1 HIS HONOUR: By what is entitled a "Notice of Motion Default Judgment for Liquidated Claim", filed in Court on 24 September 2010, the plaintiff seeks judgment against Surbjit Kaur Bhatti, the second defendant, for possession of a property in Lane Cove and leave to issue a writ of possession to enforce the judgment. Ms Bhatti's estate was sequestrated by order of the Federal Magistrates Court on 4 August 2010. She applied for an annulment of her bankruptcy, which application was heard by Federal Magistrate Barnes on 28 September 2010. The application was dismissed with costs. Her trustee did not appear to defend the present application or to prosecute her cross-claim.

2 Mr McCallum of counsel and his instructing solicitor Mr Sweeney attended before me and sought to appear for Ms Bhatti. Each of them made oral submissions in Ms Bhatti's behalf. The issue of their right to do so, and of Ms Bhatti's position generally, having regard to her current status as an undischarged bankrupt, were briefly discussed and are considered in more detail below.

Background

3 The plaintiff obtained judgment by default against the defendants on 20 August 2008. The first defendant Mr Darroch has not applied to set aside that judgment. On instructions from the plaintiff, the Sheriff proposed to take possession of the property on 30 October 2008. Ms Bhatti was advised of this by letter sent to her by the Sheriff dated 16 October 2008. On 30 October 2008 Ms Bhatti obtained an ex parte order staying execution of a writ of possession for the property until 20 November 2008. The stay was subsequently extended until 4 December 2008 and on that day until 11 December 2008. Ms Bhatti foreshadowed an application to set the judgment aside. Ms Bhatti was ordered on 11 December 2008 to serve her evidence in support of any such application by 5 February 2009. The stay was extended to 19 February 2009. On that day Ms Bhatti sought further time to serve her evidence. The Court ordered her to do so by 12 March 2009, among other orders. The matter was listed for hearing on 28 April 2009.

4 Ms Bhatti's defence was provided to the plaintiff on the afternoon of 27 April 2009. Upon the basis of evidence in an affidavit sworn by her solicitor Mr Sweeney on 28 April 2008, the plaintiff consented to the setting aside of the judgment against her. However, Ms Bhatti did not comply with orders that were made, including that she provide particulars, and on 23 July 2009 she was ordered to pay costs. The matter was listed for directions on 23 October 2009.

5 The parties were ordered to prepare for mediation. Ms Bhatti sought discovery. Between 25 November 2009 and 31 May 2010 the parties corresponded over a variety of issues and the proceedings came back to Court on occasions without much progress being achieved. On 24 June 2010 the parties attended a mediation but the matter did not settle. The matter was listed for directions on 2 July 2010 and adjourned by consent to 13 August 2010. As already noted, Ms Bhatti was made bankrupt on 4 August 2010. Mr Sweeney appeared at the directions hearing on 13 August 2010 but her trustee did not. Ms Bhatti's application in the Federal Magistrates Court to annul her bankruptcy was filed on 25 August 2010. This matter was adjourned until 6 September 2010.

6 Mr Sweeney once again appeared on that day but her trustee did not. The plaintiff sought to have the matter referred to the possession list judge as it intended to seek an order for possession against her. Mr Sweeney foreshadowed an application to remove these proceedings to the Family Court of Australia. That did not ultimately occur. Orders were made listing the matter before Davies J on 24 September 2010. On that day his Honour indicated that he would not consider the plaintiff's application to enter judgment until after Ms Bhatti's application to annul her bankruptcy had been decided. His Honour listed the matter on 1 October 2010 before me.

7 On 28 September 2010 the plaintiff's solicitor advised Ms Bhatti's trustee that the proceedings had been adjourned to 1 October 2010. The trustee was advised that the plaintiff intended to apply for judgment for possession against Ms Bhatti unless her bankruptcy had been annulled in the interim.

Consideration

8 Section 60 of the Bankruptcy Act 1966 provides as follows:

"60 Stay of legal proceedings

(1) ...

(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.

(4) Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of:

(a) any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or

(b) the death of his or her spouse or de facto partner or of a member of his or her family.

Note: See also subsection 5(6).

(4A) Notwithstanding paragraph (1)(b), this section does not empower the Court to stay any proceedings under a proceeds of crime law.

(5) In this section, action means any civil proceeding, whether at law or in equity."

9 In Arnoya Holdings Pty Ltd v Metway Leasing Ltd [1999] NSWCA 120 at [14], Sheller JA said this:

"[14] The situation is however that regardless of whether this point is taken by the parties, s 60 dictates the consequence of a trustee making an election or failing to make an election, whether to prosecute or discontinue an action. Within the meaning of “action” is included an appeal such as the appeal presently brought by Mr and Mrs Campbell. In that respect, I refer to the decision of the Full Federal Court in Bryant v the Commonwealth Bank of Australia (1997) 75 FCR 545."

10 The plaintiff contends that Ms Bhatti has no right to appear in these circumstances to prosecute her cross-claim or to propound her defence. Whereas Ms Bhatti did not contest, and I have no difficulty accepting, the correctness in this case of the former proposition, I have some concerns about the correctness of the latter. Section 60(2) provides that except for certain limited actions, legal actions brought by the bankrupt before the bankruptcy are stayed from the date of the bankruptcy until the trustee elects either to prosecute or to discontinue the action: see Re Lofthouse [2001] FCA 25; (2001) 107 FCR 151. If the trustee has not made an election, any party to the action may serve a notice on the trustee, and if the trustee refrains from making an election for 28 days the trustee is deemed to have "abandoned" the action: s 60(3). Whether there is a decision to abandon or a deemed abandonment is not of significance, but the terms of any decision to abandon should be made clear: Cole v Challenge Bank Ltd [2002] FCAFC 200. An "action" in s 60 includes a right of appeal. However, it does not appear to include a right to defend proceedings commenced against the bankrupt before the bankruptcy. If it does not, then s 60 does not apply to restrict Ms Bhatti's right to propound her defence in these proceedings on her own account.

11 When the proceedings came before me on 1 October 2010, there was insufficient time by reason of my other commitments on that day to hear detailed argument on this point. I consider that it should be addressed carefully before I proceed further with the plaintiff's application.

12 There is another matter of concern. The plaintiff's notice of motion is described as one apparently seeking default judgment. I do not understand what that means in the particular circumstances of this case. There is in the Court file a very detailed defence filed by Ms Bhatti on 5 May 2009. If I am not mistaken, it has never been struck out or withdrawn. It remains the current defence of Ms Bhatti.

13 Paragraph 20 of an affidavit sworn by Danielle Catherine Kuti on 30 September 2010, which was read by the plaintiff on the present application, is in the following terms:

"20. On the morning of 28 April 2009 DibbsBarker received for the first time an affidavit of Mr Sweeney sworn 28 April 2008 which annexed that proposed defence. At the time of receiving the affidavit of Mr Sweeney sworn 28 April 2008 I was advised by Ms Bhatti's legal team that Ms Bhatti only intended to rely on that affidavit and the defence and no longer intended to rely on any evidence previously served by her. As a result of receiving that affidavit, instructions were obtained to consent to orders that were ultimately made, including setting aside the default judgment, requiring Ms Bhatti to reply to a request for particulars from NAB and relisting the proceedings on 3 June 2009. Ms Bhatti was also ordered to pay NAB's costs thrown away by reason of the default judgment and the costs of the application."

14 Mr Sweeney's affidavit is not in the Court file and I was not otherwise taken to it. I am unaware of the significance of anything that it contains or the significance of the reference to it by Ms Kuti in the paragraph of her affidavit to which I have just referred. If the plaintiff maintains somehow that it agreed to set aside the judgment against Ms Bhatti, which it had obtained by default, on terms that were not adhered to, or otherwise upon some basis that turned out to be incorrect, then such a contention has not been adumbrated clearly before me and is not readily apparent from the terms of Ms Kuti's affidavit.

15 For present purposes the defence is significant because if it remains as a current pleading upon which Ms Bhatti is entitled to rely then what the plaintiff is actually seeking is not judgment by default at all but summary judgment. It may also be that the plaintiff says that the defence is susceptible to being struck out as disclosing no defence or because it has a tendency to cause prejudice, embarrassment or delay or is otherwise an abuse of the process of the Court. I have not heard submissions on any of these matters.

16 Neither in Ms Kuti's affidavit sworn on 30 September 2010, nor in her earlier affidavit sworn 3 September 2010, on both of which the plaintiff relies, is there any statement of a belief or other suggestion that Ms Bhatti does not have a defence to the plaintiff's claim or to any part of it. The form of the defence is not insubstantial and the nature of the matters pleaded suggests on one view that Ms Bhatti has an arguable defence. I re-emphasise that I have heard no submissions on this or upon whether the defence could withstand an application pursuant to either UCPR 13.1 or 14.28. Having regard to the principles most often associated with cases such as General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129, Dey v Victorian Railway Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91 and Brimson v Rocla Concrete Pipes Ltd [1982] 2 NSWLR 937 at 942, it does not seem to me to be possible to dispose of the plaintiff's application without submissions and detailed consideration of these further matters. As is well recognised, these and other cases to like effect point to the requirement of a high degree of certainty before a party will be deprived of the opportunity to have his or her or its claim determined in the usual way: Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552.

Result

17 In these circumstances it seems to me that I should stand this application over for further argument at some time convenient to the parties and to the Court. I should wish at that time to revisit the assumption apparently made by all concerned on the last occasion that Ms Bhatti was not entitled to appear and be heard in her defence to the plaintiff's claim in the proceedings, as well as to receive argument or submissions on the precise nature of the orders or relief sought by the plaintiff in its notice of motion, and its entitlement to that relief.

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LAST UPDATED:
6 October 2010