A id Io —_— oO CATCHWORDS BANKRUPTCY - application for extension of time for trustee to make election whether to continue bankrupt's Supreme Court action - notice of the action served - long delay by trustee - notice containing incorrect action number and not all defendants' names - whether notice effective - whether any estoppel to a claim that action had been abandoned - amendment of notice. Bankruptcy Act 1966, ss.33(1)(b), 33(1)(c), 60(2), 60(3) Ajayi v. R.T. Briscoe (Nigeria) Ltd. (1964) 1 W.L.R. 1326 Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. (1955) 1 W.L.R. 761 Re Faulkner, Ex parte Official Receiver (1981) 52 F.L.R. 109 ANDREW JOHN WELINSKI v. NEVILLE PATRICK TEMPLE NO. W127 of 1986 Jackson J. 8th April 1987 Sydney 79 APR 1987 FEDERAL COURT OF AUSTRALIA. PRINCIPAL . REGISTRY A '4 cy IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION NEW SOUTH WALES AND ) ) ) ) BANKRUPTCY DISTRICT OF THE STATE OF ) No. W127 of 1986 ) ) ) ) THE AUSTRALIAN CAPITAL TERRITORY RE: ANDREW JOHN WELINSKI Debtor EX PARTE: NEVILLE PATRICK TEMPLE CORAM: JACKSON J. DATE: 8th April 1987 PLACE: Sydney MINUTES OF ORDER THE COURT ORDERS THAT: 1. Leave be granted to amend the notice of action, a copy of which is Annexure "A" to the affidavit of Chris Bouris filed in the Court on 24th December 1986, by deleting the words and figures "Suit No. 4396 of 1985" where they twice appear and substituting the words and figures "Suit No. 4396 of 1984", 2. The trustee's application for an extension of time be refused. NOTE: Settlement and entry of orders is dealt with in Order 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF No. W127 of 1986 NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY RE: ANDREW JOHN WELINSKI Debtor EX PARTE: NEVILLE PATRICK TEMPLE CORAM: JACKSON J. DATE: 8th April 1987 PLACE: Sydney REASONS FOR JUDGMENT The applicant became trustee in bankruptcy of the estate of Andrew John Welinski ("the bankrupt") on 18th February 1986 and the proceedings before me are concerned with a suit (No. 4396 of 1984) in the Supreme Court of New South Wales in which the bankrupt is plaintiff, Valhorne Investments Pty Limited ("Valhorne"), Vladimir Horne and Judith Mary Horne and various other persons are defendants. The amended summons in those proceedings seeks, amongst other things, a declaration that Valhorne Investments Pty Limited holds in ry 2. trust for the bankrupt half or such other portion of land described in the schedule to the amended summons as might be determined by the Court, and other consequential relief including a declaration that the bankrupt's interest has priority over any interest of five of the defendants who were, it seems, purchasers of the land. Section 60(2) of the Bankruptcy Act 1966 provides that:- "(2) An action commenced by a person who subsequently becomes a bankrupt is, upon his becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action." and s.60(3) provides that:- "(3) If the trustee does not make such an election within 28 days after notice of the action is served upon him by a defendant or other party to the action, he shall be deemed to have abandoned the action." On 7th April 1986 Valhorne Investments Pty Limited and the Hornes sought to utilise s.60(3) to compel the applicant to elect whether to prosecute or discontinue the action to which I have referred. In this regard a notice dated 7th April 1986 purporting to be a "notice of the action" in terms of s.60(3) was given to the applicant by Messrs Peter Tesoriero & Balogh, solicitors, acting on behalf of Valhorne Investments Pty Limited and the Hornes. The notice was in the following form:- reasons. as "No. 3. "RE: ANDREW JOHN WELINSKI . NOTICE PURSUANT TO SECTION 60 OF THE BANKRUPTCY ACT TO: Neville Temple llth Floor 55 Clarence Street SYDNEY NSW 2000 Whereas Valhorne Investments Pty Limited, a Company having its registered office at 29 Wentworth Avenue, Killara and Vladimir Theordore Horne and Judith Mary Horne, Real Estate Agent and Secretary respectively both of 29 Wentworth Avenue, Killara, are the First Second and Third Defendants in the Supreme Court of New South Wales, Sydney Registry, Equity Division proceedings commenced by the Bankrupt, Andrew John Welinski in respect of Suit No. 4396 of 1985 and whereas you are the Trustee in Bankruptcy of the Bankrupt Estate TAKE NOTICE that within 28 days after service of this Notice on you excluding the day on which this notice is served on you, you are required pursuant to Section 60 of the Bankruptcy Act 1966: (a) to provide in writing in respect of the Supreme Court proceedings of New South Wales Suit No. 4396 of 1985 and an election advising the said Valhorne Investments Pty Limited, Vladimir Theordore Horne and Judith Mary Horne of your intention to prosecute of (sic) discontinue the action. (b) service of any such written election may be effected for and on behalf of Valhorne Investments Pty Limited, Vladimir Theordore Horne and Judith Mary Horne on Messrs. Peter Tesoriero & Balogh, Solicitors DX 9562 CHATSWOOD. AND FURTHER TAKE NOTICE that if, within the period set out above you fail to comply with either of the above mentioned requirements of this Notice, you shall be deemed to have abandoned the action. DATED this 7th of April 1986," The efficacy of the notice is put in issue for two First it is said that the suit was wrongly described 4396 of 1985" when its correct number was 4396 of 1984. Secondly it is said that the notice did not include the names of the defendants in the suit other than Valhorne and 4, the Hornes. Each of these matters is said to be fatal to the efficacy of the notice. On 5th May 1986 the applicant telephoned Miss Balogh, a member of the firm of Peter Tesoriero & Balogh, and told her that the bankrupt had only just returned from South Africa and had been informed of the bankruptcy proceedings over the preceding weekend. I am satisfied that Exhibit D, her note of the telephone conversation, accurately records what occurred in it and that the applicant said that he had no funds in respect of the estate and would not commit himself at that time but that he should be in a position to do so, i.e. to advise as urgently as possible if he were in fact proceeding with the litigation, in approximately a fortnight's time. I am satisfied that he asked that Miss Balogh forward to him the documents which she had in relation to the action. On 8th May 1986 Miss Balogh forwarded to the applicant certain documents together with a letter which was in the following terms:- "I refer to telephone conversation between the writer and Mr. Temple and confirm that in respect of Mr. Temples enquiries relating to the partnership dispute between the Bankrupt and Valhorne Investments Pty. limited, the Trustee might obtain some assistance by having access exhibit reference JW2 in the Supreme Court proceedings No. 4841 of 1983. The exhibit I refer to an Affidavit of the Bankrupt sworn the 23rd of December 1983. Copy of these documents should be able to be obtained from the Court file. 5. In the interim, I enclose herein for your attention twenty pages being numberically (sic) numbered page 27 to 47 of a document prepared by Valhorne Investments Accountant, relating to trading of the Company for the period 27.5.72 to 21.3.78. You are requested to note that Holland J. on the 19th of Marh (sic) 1980, gave judgment in respect of the proceedingss Suit No. 1967 of 1979 and found that the partnership had existed between the Plaintiff and the First Names Defendant, the Company, but further found that the partnership had been dissolved and declared it to be dissolved on the 23rd of May 1978. I have requsted (sic) from the Accountant, advice in respect of the original twenty pages which would form part of this document and also instructions in respect of the period 21st of March 1978 to the 23rd of May 1978 and am awaiting from him, further advice. I trust that this will assist you in respect of your enquiries. I look forward to receiving a copy of the Bankrupts Statement of Assets and Liabilities as soon as practicable and your further advice as to this matter generally." A meeting of creditors of the bankrupt was held at the applicant's office on 3rd June 1986 and Miss Balogh attended. She spoke to the applicant on that occasion, being dissatisfied with some of the comments he had made concerning the question whether there was money owed by Valhorne to the bankrupt or vice versa and I am satisfied that she raised the question of the notice with Mr Temple, stating that his failure to do anything was causing prejudice to her clients. On 17th June 1986 she wrote to the applicant in the following terms:~ "I refer to Notice served on you pursuant to Section 60 of the Bankruptcy Act and I note that to date, you have failed to provide me in writing your election advising of your intention to prosecute or discontinue the action initiated by the Bankrupt and in which my client Val Horne Investments Pty. Ltd and 6. others are the Defendants. The Notice was dated the 7th of April 1986. At an informal meeting of Creditors on the 3rd of June 1986, you advised that certain action was proposed by you in respect of the matter. Notwithstanding that advice, I note that I have received no communication from you either in respect of the Notice hereinbefore mentioned or the advice provided on the 3rd of June 1986. Should I fail to receive your written advice in respect of what action is proposed by you relating the Supreme Court Action initiated by the Bankrupt, I will seek further instructions from my client." The "certain action" to which the third paragraph of the letter refers was a request which the applicant had told Miss Balogh he proposed to make to the ANZ Banking Group Limited, the largest creditor in the bankruptcy, to fund the continuance of proceedings in the Supreme Court. In fact the applicant did make an informal approach to that Bank to do so, but the Bank was not prepared to accede to the suggestion. There was no response to the letter of 17th June 1986 and on 27th August 1986 Miss Balogh wrote again to the applicant stating:- "I refer to previous correspondence in respect of the above matter and in particular to my letter of the 7th of April 1986 enclosing Notice pursuant to Section 60 of the Bankruptcy Act. I note that I have yet to receive any notification from you. I would be pleased if you could advise as a matter of urgency in respect of this matter. I further request that you advise in respect of the proof of debt submitted on behalf of my client company, Valhorne Investments Pty. Limited under covering letter of the 24th of June 1986 and when it is anticipated that a creditors meeting will be held." Once again there was no response to the letter. A further letter was sent on 9th October 1986 by Miss Balogh in the following terms:- "I refer to previous correspondence in respect of the above matter and in particular, my letters of the 7th of April 1986 and 27th of August 1986, to which I note that I have not received a reply. I would be pleased if you could advise me as to what urgency [sic] have been made by you to administer the bankruptcy estate and in particular to deal with my client's claim. I await your urgent advice." Again there was no response. On 31st October 1986 Miss Balogh wrote a further letter:- "I refer to previous correspondence in the above matter and note that I have not had the benefit of an acknowledgment and a reply. I am instructed to file and serve Notice of Motion at the expiration of fourteen days from the date hereof, seeking a dismissal of the proceedings." That letter too was not replied to and on 19th November 1986 Valhorne and the Hornes filed a Notice of Motion in the Supreme Court of New South Wales in suit No. 1169 of 1984 in which they sought the following relief:- "1. A declaration that the Plaintiff has abandoned proceedings No. 1169 of 1984, , 8. 2. THAT the Statement of Claim bearing Suit No. 1169 of 1984 be dismissed. 3. THAT proceedings in Suit No. 4396 of 1984 be dismissed for want of prosecution. Releasing the Defendant from complying with all previous orders made in respect of Suit Nos. 1169 of 1984 and 4396 of 1984. 4, THAT the First Defendant be at liberty to take possession of the funds in Account No. 0416877 being a Select Term Investment Account with the United Permanent Building Society, Victoria Avenue, Chatswood and to deal with such funds as it deems fit." As the references to file numbers of the various matters referred to in the Notice of Motion show, there had been other litigation between the bankrupt, Valhorne and the Hornes but in particular there had been proceedings in suit No. 1967 of 1979 in which Holland J. made a declaration that the bankrupt and Valhorne had carried on a business in partnership between 14th August 1974 and 23rd May 1978. Holland J. also ordered that there be referred to the Master in Equity the question of what constituted the assets of that partnership. On 10th April 1980 His Honour made an order in relation to the costs of those proceedings that Valhorne pay the bankrupt four-fifths of the plaintiff's costs of the hearing before him during the period 24th October 1979 to 14th November 1979, and of appearances before him on 19th and 28th March 1980. The order for costs has never been enforced and although the bankrupt has indicated to the applicant that he would provide the sum of $1,200.00 which apparently was needed 9. to obtain a taxation of the costs, the bankrupt has not done so. I turn then to consider the issues before me. As I have said, the applicant contends that the notice of 7th April 1986 was ineffective for the reasons which I have stated. Alternatively he contends that the effect of the correspondence and events which occurred was that Valhorne and the Hornes are estopped from contending that at the expiration of 28 days from the service of the notice the applicant is deemed to have abandoned the action. If these contentions fail, it is asked that an extension of the period of 28 days fixed by s.60(3) be granted. I shall deal with those contentions in that order. Efficacy of the notice What is required by s.60(3) is that there be served "notice of the action". There is no statutory form and the question in respect of any document purporting to be a"notice of the action" is simply whether it satisfies that test. Here the notice identified the bankrupt, identified the Court (and Division of it) in which the proceedings were pending, named the persons who were the first, second and third defendants in the proceedings and identified correctly their status in the action. I quite fail to see why the 10. notice was not "notice of the action" because it did not name the other eight defendants in it. In fact the only objection which could be taken to the notice was that it gave the wrong year as part of the file number of the suit. I do not think that the letter had the effect that the document was not a "notice of the action". It must be borne in mind that it was not necessary for the notice to state the number of the action at all provided it gave sufficient indication of it. I am satisfied that the notice was sufficient to do so in this case. I am asked by Valhorne and the Hornes in any event to exercise the power conferred by s.33(1)(b) of the Bankruptcy Act to allow an amendment of the notice so that it shows the correct number of the action. Section 33(1)(b) provides that:- "(1) The Court may - (b) at any time allow the amendment of any written process, proceeding or notice under this Act;" and I see no reason why the notice in question is not a "notice under this Act" in terms of s.33(1)(b). I am quite satisfied that the trustee was not in the slightest degree misled by the misdescription of the file number of the action in the notice, and I propose to grant the amendment sought. ll. Promissory Estoppel The second ground relied on was that of promissory estoppel. It was said that the effect of Miss Balogh's letters was that it was apparent that she was not relying upon the "essentiality" of time and could not now do so. It is unnecessary, in my view, to decide whether the effect of the letters was as the submission contends or whether the letters simply recognize the possibility that the trustee might apply for an extension of time within which to elect. It is unnecessary because in cases of promissory estoppel the effect of the representation may be brought to an end on reasonable notice (see Ajayi v. R.T. Briscoe (Nigeria) Ltd. (1964) 1 W.L.R. 1326 and Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. (1955) 1 W.L.R. 761). In this regard the letter of 31st October 1986 gave the applicant notice in the clearest fashion that he had only fourteen more days in which to make up his mind, and he failed to do so. That notice period was, in my view, entirely reasonable. Extension of Time A further aspect to be dealt with is the contention that I should extend the time fixed by s.60(3). It is clear that s.33(1)(c) gives a power to extend the time of 28 days referred to in that s.60(3) notwithstanding that the time has expired. (see Re Faulkner, Ex parte Official Receiver (1981) 52 F.L.R. 109 at 112-113.) 12. This is a case where the trustee's delay in dealing with the question whether the action should proceed has continued for many months and no reason which I regard as satisfactory has been given for that delay. All that appears is that the applicant had no funds and hoped to delay having to make a decision as long as possible. A large sum of money is held pending the resolution of the proceedings and all that can be said by the applicant at the present time is that if funds become available to do so he will proceed to a taxation of the costs the subject of Holland J.'s order and with the proceeds obtained in consequence of the taxation from that will then proceed with the action in question. I should add that on the morning of the second day of these proceedings Miss Bouris, who was appearing for the applicant, tendered a letter from her firm, Messrs N.R. Lenehan & Associates, in the following terms:- "This is to advise that we are prepared to bear any outlay incurred in preparation of a Bill of Costs for taxation in relation to the Judgment given by Mr. Justice Holland in this matter. We will not seek to recover this from you should the estate not recover funds sufficient to meet it. Upon your instructions and forwarding of the necessary files we will immediately instruct Cost Consultants in this regard." I reserved the question whether I should admit the document, objection having been taken to it essentially on the ground of its lateness. I propose to admit the document but, having done so, I place little weight upon it. Even if the bill of 13. costs is taxed there is yet a considerable time to elapse before anything happens with the action. I should add in passing that I regard it as quite undesirable for a solicitor for a trustee in bankruptcy to be himself funding the trustee's litigation. A further factor which I take into account is that the bankrupt's contention is apparently that the land, or the money into which the land has been converted, is property of the former partnership between the bankrupt and Valhorne. It is difficult to see why, if the proceedings in suit No. 4369 of 1984 do not go ahead that will prevent the Master in Equity from conducting the enquiry which Holland J. ordered. [In all the circumstances I refuse the application for an extension of time. The orders which I shall make are:- 1. I grant leave to amend the notice a copy of which is Annexure "A" to the affidavit of Chris Bouris filed in the Court on 24th December 1986 by deleting the words and figures "Suit No. 4396 of 1985" where they twice appear and substituting in lieu thereof the words and figures "Suit No. 4396 of 1984," 2. The trustee's application filed 24th December 1986 is refused. 14, I shall hear the parties as to costs. I certify that this and the /3 preceding pages are a true copy of the Reasons for Judgment of his Honour Mr Justice Jackson. Associate: fyfessuer Dates 8th April 1987