Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Sarkis v Moussa [2012] NSWCA 136
• Hearing dates: 19 March, 27 March 2012
• Decision date: 14 May 2012
• Before: Beazley JA

Decision

Summons seeking leave to appeal dismissed with costs.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: BANKRUPTCY - Summons seeking leave to appeal - Bankrupt applicant - Effect of bankruptcy on proceedings - Proceedings commenced by bankrupt before sequestration - "Action" stayed until trustee makes election - Whether summons seeking leave to appeal is "property" within meaning of s 58 - Whether summons seeking leave to appeal is an "action" within the meaning of s 60 - Whether the trustee made an election to prosecute or discontinue the "action" - Bankruptcy Act 1966 (Cth), ss 58 and 60
• Legislation Cited: Bankruptcy Act 1966 (Cth); Civil Procedure Act 2005; Corporations Act 2001 (Cth); Local Court Act 2007; Uniform Civil Procedure Rules 2005
• Cases Cited: Aware Industries Ltd v Robinson [1997] FCA 571; 75 FCR 600; Baulkham Hills Shire Council v Stankovic [2009] NSWCA 281; Campbell v Metway Leasing Ltd [2001] FCA 1311; 188 ALR 100; Cummings v Claremont Petroleum [1996] HCA 19; 185 CLR 124; Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45; Doran v Isaacs (1912) 12 SR NSW 699; Griffiths v Civil Aviation Authority [1996] FCA 1502; (1996) 137 ALR 521; Hill v Smithfield Service Centre [2002] NSWSC 999; 196 ALR 246; Lawindi v Elkateb [2001] NSWSC 865; United Telephone Company v Bassano [1886] 31 Ch D 630; Want v Moss (1889) 10 LR (NSW) 274
• Category: Principal judgment
• Parties: Toufic Laba Sarkis (Applicant); Mahmoud Moussa (Respondent)
• Representation: Counsel: P E King (Applicant); M Rollinson (Respondent); Solicitors: George Khoury & Co (Applicant); Benjamin & Khoury (Respondent)
• File Number(s): CA 2010/292546

Decision under appeal

• Citation: Toufic Laba Sarkis v Mahmoud Moussa [2011] NSWSC 1172
• Date of Decision: 2011-09-30 00:00:00
• Before: Latham J
• File Number(s): 2010/292546

Judgment

1 HER HONOUR: By notice of motion filed on 13 March 2012, Mr Mahmoud Moussa sought an order that a summons, brought by Mr Toufic Laba Sarkis, seeking leave to appeal from orders made by Latham J on 30 September 2011 be dismissed. The notice of motion sought alternatively that the summons seeking leave to appeal be stayed permanently or until further order. The notice of motion was said to be brought pursuant to the Civil Procedure Act 2005, ss 56, 61 and 67, the Uniform Civil Procedure Rules 2005 (UCPR), rr 12.7, 13.4 and 51.1, and the inherent power of the court.

2 The underlying basis for the orders sought in the notice of motion was Mr Sarkis' bankruptcy. Mr Moussa contended that the summons seeking leave to appeal has either been discontinued pursuant to the Bankruptcy Act 1966 (Cth), s 60(2), or abandoned pursuant to s 60(3).

Background to the notice of motion

3 Mr Moussa brought proceedings in the Local Court against Mr Sarkis, alleging an oral agreement between them whereby Mr Moussa was to source furniture in Lebanon, which was to be sold through Mr Sarkis' retail store. Some furniture was sold and Mr Moussa claimed $53,136.50 alleged to be payable to him by Mr Sarkis pursuant to that contract. Mr Sarkis denied the contract alleged by Mr Moussa and contended there was a different arrangement between them, which did not give rise to any liability to pay the amount claimed by Mr Moussa. The Magistrate accepted that a contract existed as alleged by Mr Moussa and judgment was entered in his favour in the sum of $53,136.50 plus interest.

4 Mr Sarkis appealed to the Supreme Court pursuant to the Local Court Act 2007, s 40(1). The appeal was heard by Latham J. On 30 September 2011, her Honour rejected Mr Sarkis' appeal and ordered that the summons be dismissed with costs.

5 On 14 October 2011, Mr Sarkis filed a summons seeking leave to appeal to the Court of Appeal from her Honour's order dismissing his summons.

6 On 31 October 2011, a sequestration order was made against Mr Sarkis' estate and trustees of his estate were appointed.

7 On 7 November 2011, Mr Sarkis filed an application for review of the sequestration order. On 27 November 2011, Mr Sarkis withdrew that application and the Federal Magistrate ordered him to pay the costs of both the trustees and Mr Moussa in relation to that application.

8 On 2 December 2011, Mr Moussa's solicitors wrote to the trustees in the following terms:

"Pursuant to s 60(3) of the Bankruptcy Act 1966 (Cth) (the Act), please treat this letter as notice of the Application Seeking Leave to Appeal commenced by way of Summons by the Bankrupt Respondent, Toufic Laba-Sarkis against our client, the Respondent, Mr. Mahmoud Moussa.

Pursuant to s 60(2) of the Act, we request that you provide us in writing with your intention to prosecute or discontinue the Application for Leave to Appeal within 28 days of the date of this letter." (original emphasis)

9 By letter dated 20 December 2011, the trustees responded to the letter of 2 December 2011, stating that the trustees "do not propose to prosecute the bankrupt's application for leave to appeal". The trustees also advised Mr Moussa's solicitors that they would not be appearing at the directions hearing in the Court of Appeal listed for 6 February 2012.

10 By email communication on 30 January 2012, the trustees confirmed to Mr Moussa's solicitors that the trustees would not be appearing at the directions hearing on 6 February 2012. The email further requested Mr Moussa's solicitors:

"... to inform the Court of the Trustee's decision not to prosecute the matter by filing in Court a copy of the Trustee's letter to your firm dated 20 December 2011 ..."

11 There were then a series of listings in the Court of Appeal not presently relevant. On 9 March 2012, Mr Sarkis filed an application in the Federal Magistrates Court under the Bankruptcy Act, s 178. Although a copy of that application was not before the Court, Mr Sarkis' counsel informed the Court that it was "a defensive or fallback application [seeking] an order ... granting leave to press the appeal in any event". Mr Sarkis' counsel submitted that if the Court found the summons seeking leave to appeal from the decision of Latham J was not "property of the bankrupt", s 60 would have no operation and the s 178 application would be unnecessary. I reject Mr Sarkis' submission as to the operation of s 60, as I explain in my reasons below.

Legislative background

The Bankruptcy Act

12 The following provisions of the Bankruptcy Act were relevant to the contentions of both parties:

"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.

...

(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.

...

60 Stay of legal proceedings

...

(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.

...

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

"Civil proceeding" is not defined in the Bankruptcy Act. Its definition is, relevantly, to be found in the Civil Procedure Act, s 3(1), to which I refer below.

"178 Appeal to Court against trustee's decision etc.

(1) If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.

(2) The application must be made not later than 60 days after the day on which the person became aware of the trustee's act, omission or decision."

The Civil Procedure Act

13 "Civil proceedings" are defined in the Civil Procedure Act, s 3(1) as "any proceedings other than criminal proceedings". (I do not consider that any relevance attaches to the use of "civil proceeding" in the Bankruptcy Act and "civil proceedings" in the Civil Procedure Act.) Matters brought in the court, therefore, are either civil or criminal proceedings. This case does not involve a criminal proceeding. It is a civil proceeding.

14 "Originating process" is defined in the Civil Procedure Act, s 3(1) to mean "the process by which proceedings are commenced". The Civil Procedure Act, s 19(1), provides that, subject to the Act, "proceedings are to be commenced and carried on in the manner prescribed by rules of court".

15 Mr Moussa relied upon the Civil Procedure Act, ss 56, 61 and 67 as the basis upon which his notice of motion was brought. Those provisions are found in Pt 6 of the Act: "Case management and interlocutory matters". Section 56 prescribes that the overriding purpose of the Act and rules of court is "to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings". The court is required to give effect to the overriding purpose when it exercises any power under the Act or rules of court: s 56(2).

16 Section 61 provides that the court may give such directions as it thinks fit for the speedy determination of the real issues between the parties in the proceedings.

17 Section 67 provides that the court may by order stay any proceedings before it either permanently, or until a specified day.

The UCPR

18 The UCPR, Pt 6 regulates the commencement of proceedings. Rule 6.1(1) provides that except by the leave of the court, a party may not take any step in proceedings unless the party has filed, relevantly, a summons in the proceedings. Rule 6.2 provides for the commencement of proceedings by the filing of, relevantly, a summons.

19 UCPR, r 12.7 provides that the court may dismiss proceedings or make such other order as it sees fit if a plaintiff does not prosecute proceedings with due despatch. (There was no evidence of any such default on the part of Mr Sarkis so as to engage r 12.7.)

20 UCPR, r 13.4 is headed "Frivolous and vexatious proceedings" and provides, relevantly:

"(1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings:

(a) the proceedings are frivolous or vexatious, or

(b) no reasonable cause of action is disclosed, or

(c) the proceedings are an abuse of the process of the court,

the court may order that the proceedings be dismissed generally or in relation to that claim ..."

21 The UCPR, Pt 51 applies to proceedings in the Court of Appeal. Rule 51.1(1) provides that Pt 51 "applies to any proceedings ... that are assigned to the Court of Appeal". Rule 51.1(3) provides that subject to Pt 51, the other provisions of the UCPR apply, "so far as applicable, to proceedings in the Court". Part 51, Div 4, deals with applications for leave to appeal. Division 1, r 51.2 is the interpretation provision for Pt 51. It provides:

"... relevant originating process means:

(a) if leave to appeal or cross-appeal is required - a summons seeking leave to appeal or a cross-summons seeking leave to cross-appeal, or

(b) in any other case - a notice of appeal or cross-appeal."

Mr Moussa's argument

22 Mr Moussa's argument in support of the orders sought in the notice of motion was straightforward. It commenced with the proposition that upon the making of a sequestration order, s 60(2) provides that any action that had been commenced by the bankrupt before the making of the order was stayed until the trustees made an election in writing to prosecute or discontinue the action. The trustees made an election to discontinue the summons seeking leave to appeal in their letter of 20 December 2011. It would follow, on this argument, that save for attending to any necessary formal requirements, such as filing a notice of discontinuance or having the summons dismissed, the summons seeking leave to appeal had effectively been brought to an end.

23 A question arose as to whether the letter of 20 December 2011 was an effective election for the purposes of s 60(2). The language of s 60 has already been set out, but I repeat it for the purposes of this consideration. It requires a trustee to make an election in writing "to prosecute or discontinue the action". In this case, the trustees' letter stated that the trustees "do not propose to prosecute the bankrupt's application for leave to appeal".

24 Confounding as it is that the trustees, entrusted with the administration of estates under the Bankruptcy Act, were unable to replicate the straightforward language of the section, I am of the opinion that the letter of 20 December 2011 was sufficient to constitute an election by them to discontinue the action.

25 If, however, adherence to the precise words of s 60(2) is necessary, as opposed to being desirable in the interests of clarity and certainty, Mr Moussa submitted that s 60(3) applied so that the action was deemed to have been abandoned. Mr Sarkis submitted that there were two possible dates when this might have occurred. The first was 9 December 2011, as on Mr Sarkis' evidence he served the trustees with a copy of the summons seeking leave to appeal on 11 November 2011. However, Mr Sarkis does not fall within the meaning of "other person" in s 60(3): see Aware Industries Ltd v Robinson [1997] FCA 571; 75 FCR 600; Campbell v Metway Leasing Ltd [2001] FCA 1311; 188 ALR 100. The other date was 30 December 2011, being 28 days after the letter of 2 December 2011. If the correct position in this case is that the proceedings were abandoned and not discontinued as I have found, then the proceedings were abandoned on 30 December 2011.

26 In my opinion, unless any of the arguments advanced by Mr Sarkis are correct, so as to defeat what appears to be a straightforward application of s 60(2) or, alternatively, s 60(3), to Mr Sarkis' summons seeking leave to appeal, Mr Moussa is entitled to the relief sought in order (1) of his notice of motion. Such order would appropriately be made under UCPR, rr 51.1 and 13.4 and, in particular, r 13.4(1)(c), as the proceedings would otherwise be an abuse of the process of the court.

Mr Sarkis' submissions

27 In opposing the relief sought in the notice of motion, Mr Sarkis advanced the following arguments:

(1) the summons seeking leave to appeal did not constitute an "action" for the purposes of subss 60(2) and 60(3);

(2) if the summons seeking leave to appeal constituted an "action" within the meaning of s 60, the letter of the trustees dated 20 December 2011 did not satisfy the requirements of s 60(2), so that s 60(3) operated according to its terms;

(3) if the "action" had been abandoned by the trustees pursuant to s 60(3), the Court would be justified in granting Mr Sarkis leave to proceed with the summons seeking leave to appeal: see Baulkham Hills Shire Council v Stankovic [2009] NSWCA 281 at [15];

(4) in any event, a summons seeking leave to appeal did not constitute property within the meaning of s 58, so that there was nothing vested in the trustees in relation to the summons seeking leave to appeal and the Bankruptcy Act had no part to play in the resolution of the question whether the orders sought in the notice of motion should be made;

(5) if the Bankruptcy Act did apply, Mr Moussa's failure to obtain leave to bring the notice of motion, being "a step in the proceedings", was fatal to the notice of motion: see s 58(3)(b); and Doran v Isaacs (1912) 12 SR NSW 699.

28 It is necessary to deal with each of these arguments in turn.

(1) Is a summons seeking leave to appeal an "action" for the purposes of subss 60(2) and 60(3)?

29 Mr Sarkis submitted that the following were not "actions" for the purposes of s 60:

(1) A personal injuries claim: see Bankruptcy Act, s 60(4). This submission is not correct. Section 60(4) exempts a personal injuries action from the operation of subss 60(2) and 60(3).

(2) An application to set aside an interim injunction: see Lawindi v Elkateb [2001] NSWSC 865 at [9]. In that case, the bankrupt was a defendant. Section 60 thus had no application. Accordingly, Lawindi v Elkateb does not assist in determining whether Mr Sarkis' summons seeking leave to appeal is an "action" for the purposes of s 60(2).

(3) An application for an examination summons under the Corporations Act 2001 (Cth): see Hill v Smithfield Service Centre [2002] NSWSC 999; 196 ALR 246. This submission is incorrect. In Hill v Smithfield Service Centre, Austin J stated, at [26] 159:

"It is plain that a proceeding for the issue of an examination summons is an action for the purposes of s 60(2)."

Later in his judgment, his Honour considered whether, notwithstanding the operation of s 60(2), the plaintiff had standing to apply for the issue of an examination summons. That is a different question from what is an "action" for the purposes of s 60.

(4) An appeal to the Federal Court from the Administrative Appeals Tribunal: see Griffiths v Civil Aviation Authority [1996] FCA 1502; 137 ALR 521. The question in issue in that case was whether a right of appeal can be described as "property" within the meaning of s 58. The right of appeal in question in that case was the appellant's right to bring proceedings in the Federal Court pursuant to the Administrative Appeals Tribunal Act 1975 (Cth), s 44. The Court held that such an appeal was not "property" within the meaning of s 58 so as to vest in the trustee. That is a different question from what constitutes an "action" within the meaning of s 60.

(5) An appeal to set aside injunctive restraints affecting the power to gain a livelihood: United Telephone Company v Bassano (1886) 31 Ch D 630. There is nothing in that decision to support the proposition that the appeal in that case was not an "action". Rather, Cotton LJ (Bowen and Fry LJJ concurring) allowed the bankrupt appellants to proceed with the appeal they had lodged before a sequestration order was made, upon the giving of security for costs. In the course of his reasons, Cotton LJ observed, at 631, "[t]he bankrupts alone could not be allowed to proceed with the appeal without giving security for costs".

Cotton LJ further commented that if the bankrupts had no interest in the appeal, the proper order would have been to dismiss the appeal, unless the official receiver made himself a party. However, as an injunction had been granted against the bankrupts restraining, inter alia, the infringement of a patent, his Lordship considered that the bankrupts were interested in the proceedings as the injunction interfered with their future power of gaining a livelihood and they had an interest in being relieved from it.

30 In advancing his submission in respect of (5) above, Mr Sarkis gave no attention to the provisions of the Bankruptcy Act 1883 (UK), which was the Act in operation at the time of the decision in Bassano. An examination of that Act reveals that there was no equivalent provision to subss 60(2) and 60(3). See also Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45 at 54.

31 In my opinion, it is apparent from the definition of "action" in s 60(5), the definition "civil proceedings" in the Civil Procedure Act and the manner in which proceedings are conducted under the UCPR, that the summons seeking leave to appeal filed by Mr Sarkis was an "action" for the purposes of the Bankruptcy Act, s 60(2).

32 This conclusion is clearly supported by the case law.

33 In Want v Moss (1889) 10 LR (NSW) 274, a defendant moved for a rule nisi to set aside a judgment in favour of a plaintiff. A sequestration order was subsequently made against the estate of the defendant. Manning J held, at 279, that the motion for a rule nisi to set aside the verdict was a "proceeding commenced" by the bankrupt that was stayed upon the making of the sequestration order. In stating that the motion was "a proceeding at law", Manning J observed, at 279:

"... as [the motion for a rule nisi] has now been abandoned by the official assignee, the only person who has any interest in the matter, I am clearly of the opinion that it cannot be allowed to continue."

34 In Daemar v Industrial Commission of New South Wales, the claimant sought orders from the Court of Appeal, namely, prerogative writs directed to the Industrial Commission. After he commenced proceedings in the Court of Appeal, the Federal Court made a sequestration order against the claimant's estate. The question for the Court's determination was whether the application for the prerogative writs was an "action" within the meaning of s 60.

35 Kirby P (Samuels and Clarke JJA agreeing) observed, at 54, that "action" was a word of wide meaning. His Honour noted that the "action" in that case involved the claimant seeking relief affecting his property "of the very kind to which s 60(2) was designed to apply". His Honour added, at 54-55:

"Obviously, the prosecution of litigation commenced before bankruptcy by a person who later becomes bankrupt can involve the potential or actual diminution of the estate of the bankrupt available to his creditors. On occasion, it can, of course, provide a benefit to the creditors. That is precisely why Parliament has provided for the trustee to make an election. This the trustee in the present case has steadfastly refused to do. As has been stated, he is therefore by s 60(3) taken by the statute to have abandoned the action ...

... as far as the apparent disharmony between s 58 and s 60 is concerned, this case clearly falls within s 60 and s 60(2) must be given its full operation. If the section is clear, as I believe it to be, the fact that it may sometimes provide a wider provision for a stay on proceedings commenced before bankruptcy than would effectively be secured by proceedings commenced after bankruptcy does not avail the claimant. Especially because the Parliament has specifically adumbrated the exceptions to the operation of the statutory stay, in the terms of s 60(4), this indicates that it attended to the way in which prior civil action should go forward at the option only of the trustee, or be stayed by the statute." (citations omitted)

36 Should there be any doubt that the summons seeking leave to appeal is an "action" within the meaning of s 60, it is displaced by the observations in Cummings v Claremont Petroleum [1996] HCA 19; 185 CLR 124 by Brennan CJ, Gaudron and McHugh JJ. Their Honours, at 130, referred first to s 60(2) and the definition of "action" in s 60(5) and stated:

"The institution of an appeal by a defendant against a judgment in favour of a plaintiff is the commencing of a proceeding. That follows from the decision of the Full Court of the Supreme Court of New South Wales in Want v Moss." (citation omitted)

37 Their Honours' observation is directly applicable to this case. It follows that the summons seeking leave to appeal is an "action" within the meaning of s 60.

(2) Did the trustees' letter of 20 December 2011 satisfy the requirements of s 60(2)?

38 I have dealt with this question above, at [22]-[26]. As I have indicated, even if the trustees' letter of 20 December 2011 did not satisfy the requirements of s 60(2), s 60(3) would operate in any event, unless there is any substance in Mr Sarkis' next submission.

(3) Should the Court grant leave to Mr Sarkis to proceed?

(4) Did the summons seeking leave to appeal constitute property within the meaning of s 58?

39 Mr Sarkis submitted that, upon its proper construction, s 60(3) did not result in the "action" being abandoned. Rather, it provided that the trustees shall be deemed to have abandoned the action. It was integral to this argument that once s 60(3) was in play, the statutory stay for which s 60(2) provided was no longer in operation. In short, s 60 had no role to play in the determination of whether Mr Sarkis could proceed with his summons seeking leave to appeal. I have already concluded that s 60 applies directly to Mr Sarkis' summons seeking leave to appeal.

40 However, Mr Sarkis also submitted that Cummings v Claremont Petroleum was authority for the proposition that an application for leave to appeal was not "property" of the bankrupt and thus was not governed by s 58. Accordingly, Mr Sarkis submitted that he had standing to prosecute the appeal.

41 In Cummings v Claremont Petroleum, it was contended that a bankrupt did not have locus standi to institute an appeal either because (i) the right of appeal was vested in the trustee, or (ii) the fact the judgment was enforceable only against property vested in the trustee meant that the bankrupt ceased to have the interest necessary to have a right of appeal.

42 The first of these contentions raised for determination the question whether a right to appeal was "property" vested in the trustee. The plurality answered that question in the negative. Their Honours first noted that s 58(1) provided that the property of the bankrupt vested in the trustee forthwith upon the bankruptcy and that "property" was widely defined in the Bankruptcy Act, s 5(1) to mean "real or personal property of every description".

43 Their Honours observed, at 133, that whilst a right to appeal may be a substantive right, the mere fact that it was a creature of statute did not mean that it had "the character of property". Their Honours noted that a chose in action may be the property of the person entitled to enforce it, but that "a liability to satisfy a judgment enforcing a chose in action is not property of the person against whom the judgment is entered". Their Honours added:

"A liability is not property of the person liable. Nor is a right to appeal against a money judgment property of the judgment debtor. Nor does such a right to appeal answer the description of property divisible among creditors ... As a matter of ordinary language, a judgment debtor's right to appeal against the judgment is not property."

The minority (Dawson and Toohey JJ) did not finally decide this point.

44 The alternate contention raised in Cummings v Claremont Petroleum was that, as the judgment was enforceable only against property vested in the trustee, the bankrupts ceased to have the interest necessary to give them a right to appeal. It was argued, therefore, that the bankrupt appellants, against whom judgment had been entered, had no locus standi to appeal against the judgment.

45 The plurality, at 137-138, accepted this submission. Their Honours stated:

"So far as a judgment entered in an action against a bankrupt creates or evidences a provable debt ... the bankrupt has no financial interest which would confer locus standi to appeal in his own name against the judgment. That is because it is fundamental to the law of bankruptcy that the bankrupt is divested of both his interest in his property and liability for his provable debts (Heath v Tang [1993] 1 WLR 1421 at 1427; [1993] 4 All ER 694 at 701)."

46 Their Honours added, at 138:

"Of course, a money judgment entered against a bankrupt has the effect of increasing the amount of the debts provable in his estate. But it is immaterial that, if an appeal against the judgment were successful, there would or might be a surplus in the estate after the remaining creditors are paid. A bankrupt's contingent interest in a surplus does not give him an interest which would allow him to sue to enforce proprietary rights and, that being so, it cannot give him an interest to appeal to minimise liabilities." (citation omitted)

47 Dawson and Toohey JJ agreed with the plurality on this question. Their Honours noted, at 147:

"... the appeal aims to set aside a liability [which constitutes] a debt provable in bankruptcy ..."

Their Honours, at 148, agreed, therefore, that each appeal should be dismissed on the basis that:

"... a judgment for a sum of money ... cannot be pursued against the appellants save though the machinery of the Act."

48 Cummings v Claremont Petroleum is thus directly contrary to Mr Sarkis' claim that he has locus standi to prosecute his summons seeking leave to appeal. However, Mr Sarkis drew the Court's attention to my judgment, sitting alone, in Baulkham Hills Shire Council v Stankovic [2009] NSWCA 281 as providing guidance as to the effect of the High Court's decision in Cummings v Claremont Petroleum. I stated, at [13]:

"Senior counsel for the Council submitted that Cummings was authority for the proposition that Mr Stankovic had no right to appear. Cummings does not stand for that proposition. Rather, it is authority for the proposition that insofar as a judgment against a bankrupt results in a judgment debt provable in the bankruptcy, the bankrupt does not have a financial interest in the appeal so as to confer locus standi to appeal in his or her own name against the judgment. The majority, Brennan CJ, Gaudron and McHugh JJ, rejected the proposition that a right to appeal was property of the bankrupt so as itself to be vested in the trustee." (emphasis added)

49 In the result in Baulkham Hills Shire Council v Stankovic, I found that Mr Stankovic had an interest in the appeal brought by the Council from the orders made in the Land and Environment Court. The subject matter of the appeal was not Mr Stankovic's personal property but the entitlement of the Council to orders under the Environmental Planning and Assessment Act 1979, s 124. I held that Mr Stankovic was the proper contradictor to that claim.

50 Whilst acknowledging that Baulkham Hills Shire Council v Stankovic was "a somewhat different case" to the current matter, Mr Sarkis contended that the case was an example of an instance where the Court was prepared to grant leave to a bankrupt to conduct an appeal. As will be apparent from the above brief summary of Baulkham Hills v Stankovic, that case was very different from this. Mr Sarkis is asserting standing to bring the summons seeking leave to appeal in respect of a claim that is only provable in his bankruptcy. Section 58(3) applies by its express terms to that claim.

51 It follows, in my opinion, that Want v Moss and Cummings v Claremont Petroleum provide a complete answer to the contention presently under consideration. To the extent that Mr Sarkis relied upon my decision in Baulkham Hills Shire Council v Stankovic, I need only say that that decision was on an entirely different point and is not relevant to the issues raised on the notice of motion before me.

(5) Was Mr Moussa required to obtain leave to bring the notice of motion pursuant to s 58(3)(b)?

52 Mr Sarkis' next submission was that Mr Moussa's notice of motion was incompetent because he had not first obtained the leave of the Federal Magistrates Court to bring the notice of motion as required by s 58(3)(b).

53 Doran v Isaacs, upon which Mr Sarkis relied in support of this submission, does not provide otherwise. In that case, a defendant, against whom a plaintiff had recovered a verdict, made an application for a new trial. Before the application was heard, the defendant became bankrupt. The official assignee of the defendant's bankrupt estate elected to prosecute the application but failed. The plaintiff then entered judgment without first obtaining leave. Street J (Pring and Gordon JJ agreeing) held that the entry of judgment was a step taken in the action without the leave of the court. The action to which his Honour referred was the action commenced by the plaintiff creditor to recover monies which, by virtue of the bankruptcy, had become a provable debt. That case fell squarely within the provision of the Bankruptcy Act 1898, equivalent to the present s 58(3)(b).

54 The terms of s 58(3) are set out above. It provides that after a debtor has become a bankrupt, it is not competent for a creditor, except with the leave of the Court, to commence any legal proceeding in respect of a provable debt or to take any fresh step in such a proceeding. According to Mr Sarkis, the notice of motion fell within the second part of s 58(3)(b) in that it was a fresh step "in the proceedings", being Mr Sarkis' summons seeking leave to appeal. In my opinion, the "proceedings" to which s 58(3)(b) refers are those specified within s 58(3)(b), that is, proceedings commenced by a creditor in respect of a provable debt. The summons seeking leave to appeal was commenced by the debtor, Mr Sarkis, to resist his liability in respect of a provable debt. Accordingly, s 58(3) has no application to Mr Moussa's notice of motion.

55 In my opinion, this contention should also be rejected.

Conclusion

56 It follows, in my opinion, that order (1) sought in the notice of motion should be made. Accordingly, my formal order in the matter is as follows:

Order that the summons seeking leave to appeal be dismissed with costs.

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Decision last updated: 14 May 2012