IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY IN THE MATTER OF AND IN THE MATTER AND IN THE MATTER AND IN THE MATTER AND IN TH E MATTER dy a JUDGMENT Wo. cn scmeassseed cancers No. NSW 310 of 1974 AN APPLICATION UNDER SECTION 58 (3) FOR LEAVE TO INTERVENE IN APPLICATION BY BANKRUPT FOR DISCHARGE RE THOMAS BARTON EX PARTE CORPORATE AFFAIRS COMMISSION, INTERCONTINENTAL PROPERTIES PTY. LIMITED (IN LIQUIDATION OF THOMAS BARTON EX PARTE CORPORATE AFFAIRS COMMISSION, CORPORATE MINING INVESTMENTS OF AUSTRALIA (CIN LIQUIDATION OF THOMAS BARTON EX PARTE CORPORATE AFFAIRS COMMISSION, MULKANA CORPORATIC N.L. (IN LIQUIDATION OF THOMAS BARTON EX PARTE CORPORATE AFFAIRS COMMISSION, MURUMBA OIL N.L IN LIQUIDATION : OF THOMAS BARTON EX PARTE CORPORATE AFFAIRS COMMISSION, BOUNTY OIL LIMITE] Cin LIQUIDATION) ../2 AND IN THE MATTER OF THOMAS BARTON EX PARTE CORPORATE AFFAIRS COMMISSION, BEE CEE GROUP LIMITED, (FORMERLY BINUS - GENERAL INS CE COMPANY WESTMORELAND MINERALS LIMITED IN LIQUIDATION) AND HARBOUR- SIDE OIL N.L. CIN LIQUIDATION) AND IN THE MATTER OF THOMAS BARTON EX PARTE BANK OF NEW SOUTH WALES REASONS FOR JUDGMENT 6 June 1980 : LOCKHART J. The applicants, Murumba Oil N.L. (In Liquidation) - ("Murumba"), Mulkana Corporation N.L. (In Liquidation) — ("Mulkana' Corporate Mining Investments of Australia (In Liquidation) - ("C.M.I."), Intercontinental Properties Pty. Limited (In Liquidation) - ("Intercontinental"), Bounty Oil Limited (In Liquidation) - ("Bounty Oil") and Corporate Affairs Commission - ("the Commission") are seeking the leave of this Court nunc pro tunc, to the extent that such leave may be necessary, to commence certain proceedings in the Supreme Court of New South Wales Equity Division, and to take all such steps as have been taken to date and as it may hereinafter be reasonable for them to take in the future conduct of those proceedings. The applications are made under sub-section 58 (3) of the Bankruptcy Act 1966 - ("the Act"). They are opposed by the bankrupt. Counsel for the bankrupt has informed me that on his .4-/3 -3- instructions he is unable to make submissions on the substantive matters involved in the application. The Official Receiver neither supports nor opposes the applications. He submits to whatever order the Court sees fit to make. Each of the applicants Murumba, Mulkana, C.M.I. and Intercontinental instituted separate proceedings in the Supreme Court of New South Wales on 29 July 1977. Defences have been filed and counter-claims brought by some of the defendants. Bounty instituted its proceedings on 28 December 1979. The statement of claim has been filed but not yet served on the defendants. The Commission is a co-plaintif in each proceeding pursuant to section 367B of the Companies Act 1961 (N.S.W.). All proceedings are against the bankrupt and others as defendants. The Attorney-General for the State of New South Wales has caused each of the proceedings to be instituted in the name of the particular company as plaintiff, pursuant to sub-section 178 (9) of the Companies Act 1961. It is not necessary to describe the proceedings in any detail. It is sufficient to say that the causes of action in the proceedings in which the plaintiffs are Murumba, Mulkana, Intercontinental and C.M.I. are based on allegations of breaches of s. 124 of the Companies Act 1961 by failure of the directors to act honestly and with due diligence; breaches of fiduciary duty as directors; failure to exercise care as directors, and conspiracy. Those are the allegations. They are denied. The relief claimed against the bankrupt includes damages and orders for repayment or restoration of moneys. 2/4 -5- liquidation without first obtaining the leave of the Court as required by the Companies Act, 1874, the Court will, if good cause be shewn on the merits, make an order granting leave nunc pro tunc. Section 140 of the Companies Act 1874 provided: "When an order has been made for winding-up a company under this Act, no suit, action, or other proceeding shall be proceeded with or commenced against the company except with | the leave of the Court and subject to such terms vas the Court may impose. In Re "Ex parte Clarke (1896) 17 NSW LRBC 85 A. H. Simpson J. considered sub-s. 10 (2) of the Bankruptcy Act 1887 (N.S.W.) which provided: "After a sequestration order has been made except as directed by this Act no creditor to whom the debtor is indebted in respect of any debt provable in bankruptcy shall have any remedy against the property or person of the debtor in respect of the debt or shall commence any action or other legal proceedings unless with the leave of the Judge and on such terms as the Judge may impose. His Honour referred, apparently with approval, to the decision of Manning J. in Thomson's Case (supra) and his Honour said at p. 89:- "Imay also observe that under a section in the Companies Act analogous to this, s. 140, which provides that where an order has been made for winding-up a company under the Act, no suit, action, or other proceeding shall be proceeded with or commenced against the company except with the leave of the Court, and subject to such terms as the Court may impose. Manning J. has held in Thomson v. Mulgoa Irrigation Company that leave might be given after proceedings had actually been commenced nunc pro tunc. This is equivalent to saying that the leave of the Court is not absolutely necessary as a condition precedent. -4- The causes of action in the proceeding in which Bounty Oil is a plaintiff are based on allegations of fraud, misfeasance misconduct, negligence, breach of duty and breach of trust of certain of the defendants, including the bankrupt, in connection with the affairs of Bounty Oil. The allegations are denied. None of the applicants assert that their claims, the subject of the applications under sub-section 58 (3) of the Act, are necessarily provable against the bankrupt's estate; nor do they say that they are not provable. They contend that the question whether any and, if so, which of their claims may be 'provable involves complex questions of fact and law which ought not to be determined by this Court in these applications. Rather the appropriate course in all the circumstances is to proceed on the basis that leave is necessary. Counsel for the applicants has submitted that this Court has power to give the leave sought nunc pro tunc; but in the course of his argument the substantial question has arisen as to whether leave to commence proceedings against a bankrupt under sub-section 58 (3) can be given when the sequestration order precedes the commencement of the proceedings the subject of the application for leave. It is well-established by decisions of Courts in the United Kingdom and Australia, including the State of New South' Wales, that leave nunc pro tunc may be given by the Courts having jurisdiction over the winding-up of companies pursuant to the relevant sections in companies legislation. In Thomson v. The Mulgoa Irrigation Company Limited (1894) 4 N.S.W. B.C. 33 Manning J. held that where a suit is commenced against a company in a-/5 In Re Sydney Formworks Pty. Limited (in Liquidation) (1965) 82 W.N. Pt. I N.S.W. 558, McLelland C. J. In Equity held that the Supreme Court had power under s. 218 of the Companies Act, 1936 (N.S.W.) to make an order giving leave to continue the action or giving leave nunc pro tunc to commence the action. Section 218 was in substantially the same terms as s. 14 of the 1874 Act considered by Manning J. in Thomson 's Case (supra). In Rea.A. J. Benjamin (In Liquidation) and the Companies Act, 1969, 90 W. N. Pt. I N.S.W. 107, Street J. followed the decision of McLelland C. J. in Eq. and granted leave nunc pro tur to proceed with an action for damages against the company in liquidation. The application was made under sub-s. 230 (3) of the Companies Act, 1961, (N.S.W.), which is in substantially the same terms as its predecessors in the 1936 Act and the 1874 Act. In Re Wanzer Limited (1891) 1 Ch. 305, North J. dealt with two sections of the English Companies Act, 1962, namely, ss. 87 and 163. Section 87 was in substantially the same terms as the other sections in the Companies Acts to which I have referred. Section 163 provided:- "Where any company is being wound up by the Court or subject to the supervision of the Court, any attachment, sequestration, distress, or execution put in force against the estate or effects of the company after the commencement of the winding up shall be void to all intents." In that case the liquidator sought to restrain a Scotch landlord of urban property from proceeding with .+/7 further proceedings on a petition for sequestration of the stock, furniture and effects on the premises of the company in liquidation. His Lordship held that notwithstanding that the Companies Act (s. 163) rendered the relevant proceedings commenced without leave void, the Court could grant leave to proceed nunc pro tunc pursuant to s. 87. Sub-section 58 (3) of the Act provides:- "Except as provided by this Act after a debtor has become a bankrupt it is.not competent for a creditor... (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." The question arises whether the words "it is not competent" are materially different from the language of the sections in the Companies Acts and earlier Bankruptcy Acts to which I have referred; and whether, according to their ordinary and natural meaning, the words appearing in sub-s. 58 (3) mean that a creditor is not legally competent to commence proceedings without first obtaining the leave of the Court. In my opinion, sub-s. 58 (3) is to be construed in the same way as the analagous sections in the companies legislation and earlier bankruptcy legislation. I see no warrant for concluding that the different choice of language in sub-s. 58 (3) leads to so drastic a consequence as would be involved if the words "it is not competent for" were to be given a substantially different meaning from their counterparts in earlier legislation. More particularly is this so when it is remembered that the obvious .../8 intention of the sub-section is the same as that of the sections of earlier Bankruptcy Acts and Companies Acts, namely, to ensure that the property of the insolvent will be administered in accordance with the provisions of the Act; to ensure that no-one derives a benefit or advantage under those proceedings to which he is not entitled; and to enable the Court to supervise all claims propounded against the bankrupt. The question also arises whether the applications ought to be granted where, as here, they may relate to provable claims or they may not. One must take a practical view of the power conferred by sub-s. 58 (3). It is clear from the evidence that there are many complicated transactions involving the bankrupt over the years preceding the bankruptcy. Proceedings have been on foot for some time involving the bankrupt and the applicants including those the subject of these applications. In cases with such far-reaching ramifications as those and involving such complex questions of fact and law it is unreal to expect that these applications for leave are the appropriate vehicle to determine issues of such complexity. The Supreme Court proceedings may or may not succeed. They may result in provable claims; then again they may not. In Allanson v. Midland Credit Limited (1977) 30 F.L.R. 108 the Full Court of this Court comprising Bowen C. J. Riley and Deane JJ. said at p. 115 with reference to sub-s. 58 (3): "Where a Court is given power to grant leave to perform a particular act or pursue a particular course of action and the question whether the need for such .../9 -9- leave has arisen involves difficult and complicated questions of law or fact, it is permissible, in an appropriate case, to proceed on the basis that such leave is necessary rather than involve the parties in the futile exercise of determining, possibly after a series of appeals, whether the need for such leave has arisen." Those words are apposite to the present case. I have not been referred to any adverse consequences to the bankrupt or to his estate that would be occasioned by the granting of leave. Counsel for the applicants has referred to certain matters which he says may constitute prejudice to his clients if leave is refused. I need not to traverse these in depth as I do not think it necessary to do so when dealing with the application. In any event, the matters to which reference was made did not impress me as having any real bearing on the outcome of these applications under sub-s. 58 (3); save one, namely that in 1977, Intercontinental commenced proceedings in the Supreme Court Equity Division against the Bank of New South Wales. The bank filed a cross claim in those proceedings against the Official Receiver as trustee of the estate of the bankrupt and others. In 1977 C.M.I. commenced proceedings in the Supreme Court against the bank and the bank filed a cross claim in those proceedings, also against the Official Receiver as trustee of the bankrupt's estate and others. In 1977 C.M.I. and the Commission commenced proceedings in the Supreme Court of New South Wales and by cross claim, also filed in 1977, the bank was joined as a party to those proceedings. On the same day as the cross claim was filed the ..-/10 ~10~ bank filed a second cross claim in those proceedings, also against the Official Receiver as trustee of the bankrupt's estate and others. The proceedings against the bank are in respect of cheques drawn on the accounts of C.M.I. and Mulkana. They arose out of various transactions which took place in 1971 involving the sale and purchase of shares and other property and the making and repayment of various alleged loans. The bank denies liability to the plaintiffs by those cross claims against the bankrupt. It seeks indemnity or contribution from him as trustee of the funds of the various companies on the basis that, if there was any breach of trust by the bank, the bankrupt knowingly participated in those breaches and as a director of all the relevant companies he was himself a trustee of the funds of those companies. The bank has cross claims in those proceedings to which it was a party that were filed pursuant to leave granted by this Court in 1977. The actions commenced by Murumba, Mulkana, Intercontinental and C.M.I. which are the subject of the applications for leave to this Court, relate to the same or substantially the same events and circumstances as those involved in the actions of those same companies against the bank. I have briefly mentioned some of those actions. The bankrupt has been joined as a cross defendant by the bank and, as I say, leave has already been obtained by the bank to pursue those cross claims. The losses claimed by the companies, Murumba, Mulkana, ..-/11 -11- Intercontinental and C.M.I. against the bankrupt in the Supreme Court proceedings are the same, or substantially the same, as the losses claimed by those companies against the bank and the subject of the indemnity over against the bankrupt. As leave has been given in respect of those cross claims propounded by the bank against the bankrupt it is in my opinion a relevant matter to consider in favour of the granting of the applications for leave; but my primary reasons are those to which I have already referred. . Accordingly, the applications for leave under s. 58 (3) should be granted. preceding pagss are a true copy of the Reasons for Judgment herein cf his Honcur Mr. Justice Lockhart. Vy A: ssociate