CATCHWORODS BANKRUPTCY - arbitration on foot - whether "action" for purposes of election by trustee. Bankruptcy Act 1966 s.60 Re: Warren Thomas Brown Ex parte: Alan Richard Taylor & Anor Qld E889 of 1987 PINCUS J. BRISBANE 6 JuLyY 1988 ~ IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISTON ) Qld E889 of 1987 BANKRUPTCY DISTRICT OF THE SOUTHERN ) DISTRICT OF THE STATE OF QUEENSLAND ~ RE: WARREN THOMAS BROWN Bankrupt EX PARTE: ALAN RICHARD TAYLOR Applicant QUEENSLAND ELECTRICITY COMMISSION Respondent MINUTES OF ORDER JUDGE MAKING ORDER: PINCUS J. DATE OF ORDER: 6 JULY 1988 WHERE MADE: BRISBANE THE COURT DECLARES THAT: 1. the arbitration by the firm of W.T. Brown against the Queensland Electricity Commission relating to work at the Tarong Power Station referred to in the papers 1s unaffected by the provisions of s.60(2) and s.60(3) of the Bankruptcy Act 1966. THE COURT ORDERS THAT: 1. the application be otherwise dismissed; 2. there be no order as to costs. NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION ) ~ Qid E889 of 1987 BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND RE: WARREN THOMAS BROWN Bankrupt EX PARTE: ALAN RICHARD TAYLOR Applicant QUEENSLAND ELECTRICITY COMMISSION Respondent PINCUS J. 6 JULY 1988 EX TEMPORE REASONS FOR JUDGMENT This is an application for an extension of time to make an election to continue an arbitration. A sequestration order was made against the bankrupt on17 July 1987, at which time the bankrupt and/or his partner had a claim under arbitration on foot against the respondent relating to a works contract. The arbitration was consensual; a clause in the contract provided for resolution of disputes by arbitration. It is unnecessary to go into the rather complex history of the arbitration. The relevant provisions of the Bankruptcy Act 1966 are as follows: "60(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. 60(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. 60(5) In this section, 'action' means any civil proceeding, whether at law or in equity." There is authority for the view that the Court may extend the time mentioned in s.60(3): Re Faulkner; Ex parte Official Receiver (1981) 52 F.L.R. 109, followed in Re Vescovi; Ex parte Knight (unreported, 9 March 1988). The question which has been raised before me in a preliminary way 1s whether the word 'action' in s.60(2) includes pursuit of a claim by arbitration. The word 'proceeding' undoubtedly can, in some contexts, include the making of claims other than in court. The question is whether, 1n this context, 1t does so. The corresponding provision of the 1924 Act used the expression: "Every action or proceeding at law or in equity ..." in s.63(3), whose wording appears to have been adapted from s.10(6) of the New South Wales Bankruptcy Act 51 Vic. No. 19. Although the New South Wales provision 1s drawn in rather a different style from s.60''s, the language chosen in the Commonwealth statute of 1924 and in the present statute is quite similar to it. In Want v. Moss (1889) 10 L.R.(N.S.W.) 274, a question arose in the Full Court whether the provision covered a motion for a rule nisi for anew trial. Stephen J. said it did not, remarking: "... the word 'proceedings' was, I think, intended to anclude proceedings at law other than actions, such as applications for prohibitions, mandamus, and the like." The other judges held such a motion was caught, relying mainly on policy considerations. A similar result followed in Kerle v. Smith (1897) 18 L.R.(N.S.W.) 211. Under a differently phrased provision having a corresponding purpose (s.79 of the Insolvency Act 1890(Vic.)), questions arose whether an appeal was caught (Sims v. Demamiel (1896) 21 V.L.R. 634) and the like. Mr McGill for the respondent argued that the use of the expression "whether at law or in equity" in the definition of "action" could be explained on the basis that proceedings in equity used not be called "actions" and that explanation has some substance: Willison v. Warburton (1873) 4 A.J.R. 66. But the use of that expression suggests that the legislature had 1n mind court proceedings, as does the choice of the word "action" itself and the words "prosecute or discontinue the action" in sub-s.(2). The applicant is also helped, albeit slightly, by the history to which I have referred; previous corresponding provisions appear to have been applied only to court proceedings, and despite the difficulties which had arisen as to the precise scope of its predecessors, the Federal Parliament made no attempt to expand the reach of the provision. Mr McGill also argued that treating the institution of an arbitration as commencement of an action for the purposes of s.60(2) would be a convenient outcome. That may be so, but on the other hand s.60(3) can have a drastic effect upon the rights of the creditors if the trustee is dilatory or (as is suggested to have occurred here) had special difficulties in making an election within the requisite time of 28 days; I see no reason to strain the language for or against the trustee. I hold that the making of a claim under an arbitration clause i1n a contract and proceeding towards arbitration in accordance with that clause does not constitute commencing an action within the meaning of s.60(2). It appears to me convenient to express my conclusion in the form of a declaration. It will be declared that the arbitration by the firm of W.T. Brown against the Queensland Electricity Commission relating to work at the Tarong Power Station referred to in the papers is unaffected by the provisions of s.60(2) and s5.60(3) of the Bankruptcy Act 1966 and the application will he otherwise dismissed. There will, in the circumstances, be no order as_ to costs. + certify thar this and the ZL preceding "anes are a true copy of the reasons for judgment herein of His Honour Mr Justice Pincus g Angeles *Kesociate Dated 6 July 1988 Counsel for the applicant: Mr C. Newton Solicitors for the applicant: Henderson Trout Counsel for the respondent My D.J. McGill Solicitors for the respondent Crown Solicitor Date of Hearing 6 July 1988