Federal Court of Australia Wengel (Trustee), in the matter of Maroon, a bankrupt [2024] FCA 921 File number(s): NSD 891 of 2024 Judgment of: NESKOVCIN J Date of judgment: 15 August 2024 Catchwords: BANKRUPTCY – administration of bankrupt estate – bankrupt a plaintiff in a proceeding in the Supreme Court of New South Wales – proceeding stayed by operation of plaintiff's bankruptcy – applicant required to make election as to whether or not to prosecute or discontinue the proceeding – application for an extension of time within which to make election – exercise of Court's discretion – application granted Legislation: Bankruptcy Act 1966 (Cth) ss 30(1)(b), 33(1)(c), 60(3) Cases cited: Abeyratne v Trkulja (1998) 90 FCR 253 Aquamore Credit Equity Pty Ltd v Maroon (No 2) [2024] FCA 14 Aquamore Credit Equity Pty Ltd v Maroon [2023] FCA 1399 Newman v Bain (2013) 213 FCR 370; [2013] FCA 558 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 31 Date of hearing: 15 August 2024 Solicitor for the Plaintiff: Mr S Mullette of Matthews Folbigg Lawyers ORDERS NSD 891 of 2024 IN THE MATTER OF THE BANKRUPT ESTATE OF NADIA MAROON SEAN WENGEL IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF NADIA MAROON Plaintiff order made by: NESKOVCIN J DATE OF ORDER: 15 August 2024 THE COURT ORDERS THAT: 1. Pursuant to ss 30(1)(b) and 33(1)(c) of the Bankruptcy Act 1966 (Cth), for the purposes of s 60(3) of the Bankruptcy Act, the time by which the plaintiff may make an election in respect of Supreme Court of New South Wales proceeding number 2021/00293487 is extended to Friday, 29 November 2024. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT NESKOVCIN J: INTRODUCTION 1 On 16 January 2024, the plaintiff was appointed the Trustee in bankruptcy of the bankrupt estate of Ms Nadia Maroon (the Bankrupt). The Bankrupt is an elderly woman of 83 years who claims to have limited English speaking ability. 2 The Bankrupt is a plaintiff in Supreme Court of New South Wales proceeding number 2021/00293487 (NSWSC proceeding). On 7 June 2024, the solicitors for the third and fourth defendants to the NSWSC proceeding served on the Trustee a Notice under s 60(3) of the Bankruptcy Act 1966 (Cth) requiring the Trustee to make an election within 28 days after the Notice whether or not to prosecute or discontinue the NSWSC proceeding. 3 Pursuant to s 60(3) of the Bankruptcy Act, the Trustee had until 5 July 2024 to elect whether or not to prosecute or discontinue the NSWSC proceeding. In the absence of an election, the Trustee would be deemed to have abandoned the NSWSC proceeding: s 60(3). 4 By an application dated 5 July 2024, the Trustee sought orders pursuant to ss 30(1)(b) and 33(1)(c) of the Bankruptcy Act to extend the time for the Trustee to make an election in respect of the NSWSC proceeding to Friday, 29 November 2024. 5 The application is self-evidently urgent. There are two further matters to note: first, the Trustee's solicitor, Mr Jacob Reardon, informed the Court at a case management hearing on 25 July 2024 that the NSWSC proceeding is presently adjourned to 22 August 2024; and second, on 8 February 2024, the Bankrupt filed an appeal seeking to challenge the sequestration order by which she was made bankrupt. The appeal was listed for hearing on 15 August 2024. On 24 July 2024, the appeal was dismissed for want of prosecution. 6 At the ex parte hearing on 15 August 2024, the Trustee read and relied upon the following affidavits in support of the application: (a) an affidavit of the Trustee sworn on 5 July 2024; and (b) affidavits of Mr Reardon sworn on 24 July 2024, 9 August 2024 and 14 August 2024. 7 For the reasons set out below, I am satisfied it is appropriate and I will make an order under ss 30 and 33(1)(c) of the Bankruptcy Act to extend the deadline by which the Trustee must make an election to prosecute or discontinue the NSWSC proceeding to Friday, 29 November 2024. background Short term facility agreements to fund development 8 On 9 March 2018, Aquamore Credit Equity Pty Ltd, as trustee of the Spring Park Unit Trust, entered into a facility agreement with Waterview Developments Pty Ltd to provide funds to Waterview to fund the development of a property in Point Frederick (Point Fredrick Property). The facility agreement had a limit of $1,086,746.99 and a loan term of four months. The Bankrupt and her sons, Christopher, Allan and Michael Maroon (Bankrupt's sons), provided guarantees and the Bankrupt's sons provided an unregistered mortgage on the Point Fredrick Property as security under the facility agreement. 9 On 11 April 2018, Aquamore and Waterview entered into a second facility agreement with a limit of $2,459,893.05 and a loan term of one month. The Bankrupt and the Bankrupt's sons provided guarantees and the Bankrupt's sons provided a registered mortgage on the Point Fredrick Property as security under the second facility agreement. 10 Waterview failed to repay the second facility agreement by 11 May 2018, which constituted an event of default under both facility agreements. 11 On 26 July 2018, Aquamore commenced a proceeding in the Supreme Court of New South Wales (2018 Proceeding) seeking possession of the Point Fredrick Property and judgment against Waterview, the Bankrupt and Bankrupt's Sons for the sum of $4,001,360.40 owing under the facility agreements. The Bankrupt and the Bankrupt's sons did not file a defence in the 2018 Proceeding. 12 On 1 November 2018, orders were made by consent for possession of the Point Fredrick Property and consent judgment was entered against the Bankrupt and Bankrupt's Sons in the sum of $4,682,115.45 and indemnity costs. 13 On 26 March 2021, Aquamore, as mortgagee in possession, sold the Point Fredrick Property. NSWSC proceeding 14 On 15 October 2021, the Bankrupt and Bankrupt's sons commenced the NSWSC proceeding against Aquamore and four other defendants. 15 As against Aquamore, among other things, it was alleged that: (a) Aquamore breached its duties as mortgagee exercising the power of sale over the Point Frederick Property; and (b) the facility agreement and the second facility agreement should be set aside as unjust within the meaning of the Contracts Review Act 1980 (NSW) or on the grounds of unconscionability. 16 The second defendant to the NSWSC proceeding is Berhero Pty Ltd trading as Acuity Funding, a finance broker retained by Waterview and the Bankrupt's sons. As against Acuity, the Bankrupt and Bankrupt's sons claim damages for negligence, misleading and deceptive conduct claim under s 18 of the Australian Consumer Law being Schedule 2 of the Competition and Consumer Act 2010 (Cth) and breach of contract. 17 The third to fifth defendants to the NSWSC proceeding are Juris Australia Lawyers Pty Ltd, Mr Ejaz Khan and Ms Baltej Kaur. As against those parties, the Bankrupt and the Bankrupt's sons claim damages for negligence and breach of retainer for failing to advise the Bankrupt to obtain independent legal advice before signing the guarantees and providing securities to Aquamore. 18 At a case management hearing on 25 July 2024, Mr Reardon informed the Court that Ms Kaur's location is unknown and she has not taken an active role in the NSWSC proceeding. Sequestration orders against the Bankrupt's sons and the Bankrupt 19 On 13 November 2023, sequestration orders were made against the Bankrupt's sons and the Trustee was appointed as the trustee in bankruptcy of their estates: Aquamore Credit Equity Pty Ltd v Maroon [2023] FCA 1399. 20 On 26 January 2024, a sequestration order was made against the Bankrupt and the Trustee was appointed as the trustee in bankruptcy of her estate: Aquamore Credit Equity Pty Ltd v Maroon (No 2) [2024] FCA 14. Trustee's requests for information 21 Prior to issuing the application, the Trustee requested information in relation to the NSWSC proceeding from Sparke Helmore Lawyers, solicitors for Juris and Mr Khan, and Ms Donna Moscardo, the Bankrupt's former solicitor. The responses from Sparke Helmore Lawyers and Ms Moscardo were unhelpful, to say the least. Attitude to the application 22 The Trustee's solicitors served the application and supporting affidavits on the first to fourth defendants to the NSWSC proceeding or their solicitors. The solicitors for the first defendant have indicated that Aquamore does not oppose the application. Sparke Helmore Lawyers have indicated that Juris and Mr Khan do not seek to be heard in relation to the application and are content to abide the outcome. The solicitors for the second defendant did not respond to indicate Acuity's position in relation to the application. CONSIDERATION 23 Section 30(1)(b) of the Bankruptcy Act provides: 30 General powers of Courts in bankruptcy (1) The Court: … (b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter. 24 Section 33(1)(c) of the Bankruptcy Act provides: 33 Adjournment, amendment of process and extension and abridgment of times (1) The Court may: … (c) extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with a bankruptcy notice), for doing an act or thing or abridge any such time. 25 Section 60 of the Bankruptcy Act relevantly provides as follows: 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. … (5) In this section, action means any civil proceeding, whether at law or in equity. 26 The power to extend time is a broad discretionary power. It is unfettered and must be exercised with a view to doing justice between the parties: Abeyratne v Trkulja (1998) 90 FCR 253 at 262 (North J). 27 In Newman v Bain (2013) 213 FCR 370; [2013] FCA 558, Gilmour J identified (at [59]-[64]) the following considerations as apt to inform the exercise of the Court's discretion under s 33(1)(c) to extend the deadline under s 60(3) of the Bankruptcy Act, namely: (a) the extent of any delay by a trustee in seeking an extension; (b) whether there is a satisfactory explanation for any such delay; (c) the prejudice to a defendant if an extension is granted; (d) the reasonable expectation that there should be some degree of finality in the decision-making by a trustee in bankruptcy; (e) the prejudice to the trustee in bankruptcy if no extension is granted; and (f) the merits of the action in respect of which an election is to be made. 28 The Trustee seeks an extension of the election deadline to Friday, 29 November 2024 to: (a) obtain a satisfactory response to the Trustee's information requests; (b) obtain advice from the Trustee's solicitors as to the merits of the NSWSC proceeding; (c) undertake such further or other investigations as the Trustee may be advised and consider necessary in respect of the NSWSC proceeding; (d) consider whether the continuation of the NSWSC proceeding is in the interest of creditors; and (e) consider the prospect for settlement with the defendants to the NSWSC proceeding. 29 The Trustee submitted that upon an application of the Newman factors, the Court ought to exercise its discretion to grant the extension sought on the basis that: (a) the application was brought in a timely manner having regard to the failure of Ms Donna Moscato and the extended delay of Sparke Helmore to respond to information requests; (b) the Trustee has had (and continues to have) some difficulties in obtaining information with respect to the NSWSC proceeding and has been unable to assess and seek proper advice as to the merits of the claims'; (c) the extension is relatively minor as the NSWSC proceeding was commenced in 2021; (d) there is no material prejudice to the defendants in granting the extension; and (e) were the extension not granted, the Trustee would be rushed into a complex decision without the benefit of all relevant information, proper forethought, and advice as to the merits of the Bankrupt's claims in the NSWSC proceeding. 30 I am satisfied that in the present circumstances the Court should exercise its discretion under s 33(1)(c) of the Bankruptcy Act to extend the time by which the Trustee must make an election to prosecute or discontinue the NSWSC proceeding to Friday, 29 November 2024. In particular, I observe that: (a) the Trustee has not delayed in making the application, having done so on 5 July 2024 after numerous unsuccessful attempts to obtain information in relation to the NSWSC proceeding; (b) the Trustee is not in a position to make an informed choice about whether to make the election because he has not been provided with all of the information about the NSWSC proceeding requested from Sparke Helmore Lawyers and Ms Donna Moscardo, despite Ms Moscardo's obligation to provide such information under s 77A of the Bankruptcy Act; (c) the extension sought is relatively modest, particularly in the overall context of the NSWSC proceeding which has been ongoing since October 2021; (d) there is no material prejudice to the defendants to the NSWSC proceeding in granting the extension and none of the defendants sought to oppose the application; and (e) the prejudice to the Trustee if an extension is not granted is potentially significant, in that he will be rushed into making a decision of some complexity as to whether to prosecute or discontinue the NSWSC proceeding and would need to do so without the benefit of informed, legal advice in relation to the merits of the Bankrupt's claims. 31 On that basis, I am satisfied that it is appropriate and I will make an order under ss 30 and 33(1)(c) of the Bankruptcy Act to extend the deadline by which the Trustee must make an election to prosecute or discontinue the NSWSC proceeding to Friday, 29 November 2024. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Neskovcin. Associate: Dated: 15 August 2024