Industrial Court of New South Wales CITATION: Rose v Meriton Apartments Pty Ltd and anor [2007] NSWIRComm 264 APPELLANT: John Emanuel Rose PARTIES: RESPONDENT: Meriton Apartments Pty Ltd and another FILE NUMBER(S): IRC 3505 of 2006 CORAM: Wright J President; Walton J Vice-President; Boland J CATCHWORDS: Appeal - Unfair contract - Motion to strike out or stay - Motion to add appellant as party to contract - Construction of s 108(a) - Whether appellant is "party to the contract" - Whether definition of contract in s 105 is applicable - Definition includes term "arrangement" - Arrangements - Whether proceedings caught by Bankruptcy Act - Whether valid election required under ss 60(2) and (3) - Whether assignment effective - Leave to appeal granted - Appeal upheld - Declarations as to motions - Costs reserved. Bankruptcy Act 1966 (Cth) LEGISLATION CITED: Industrial Arbitration Act 1940 Industrial Relations Act 1996 Baker v Sheridan [2005] NSWCA 408 Brien v P and E Phontos Pty Ltd (in the Estate of Metchler) (1999) 91 FCR 209 Cirillo; Ex parte Official Trustee in Bankruptcy Re (1996) 65 FCR 576 Crowe v UCS Developments Pty Ltd (2003) 130 IR 266 Custom Credit Corporation Ltd v Goldsmith [1976] AR (NSW) 98 Daemar v Industrial Relations Commission of New South Wales & Ors (1988) 90 FLR 469 Fish & Anor v Solution 6 Holdings Ltd & Ors (2006) 227 ALR 241 Freeman v Joiner [2005] FCAFC 149 Great Scott International v Cosmetic Suppliers (No 2) (2005) 147 IR 95 Jambrecina v Official Trustee in Bankruptcy [2003] FCA 1352 Kitson v Hardwick (1872) LR 7 CP 473 CASES CITED: Metrocall Inc v Electronic Tracking System Limited (No 2) (2000) 102 IR 309 Nagle (t/a W.D. & J.L. Nagle & Sons) v Tilburg (1993) 51 IR 8 Nguyen; Ex parte Official Trustee in Bankruptcy Re (1992) 35 FCR 320 Ramsey v Hartley [1977] 1 WLR 686 Robyn Smith v Chevelle Development Pty Ltd t/as Snowden Parkes Real Estate Agents & Anor [2005] NSWIRComm 109 Rose v Meriton Apartments Pty Ltd and Anor [2006] NSWIRComm 298 Sin Yong Yim & Tae Sik Kim v Industrial Relations Commission of NSW & Hyun Sung (Marco) Choi [2007] NSWCA 77 Stobbart v Mocnaj (1996) 16 WAR 318 Temsign Pty Ltd v Biscen Pty Ltd (1998) 157 ALR 83 Virtue v New South Wales Department of Education and Training (1999) 92 IR 428 Willoughby and Others v Clayton Utz (2005) 193 FLR 373. HEARING DATES: 30 July 2007 DATE OF JUDGMENT: 30 November 2007 APPELLANT: Mr A Street SC D'Arcy Sloman Solicitors (Mr V D'Arcy, Solicitor) LEGAL REPRESENTATIVES: FIRST RESPONDENT: Submitting appearance SECOND RESPONDENT: Mr D Shoebridge of counsel Rockliffs Solicitors & Attorneys (Ms M Rockliff, Solicitor) JUDGMENT: INDUSTRIAL COURT OF NEW SOUTH WALES FULL BENCH CORAM: WRIGHT J, President WALTON J, Vice-President BOLAND J Friday 30 November 2007 Matter No IRC 3505 of 2006 JOHN EMANUEL ROSE v MERITON APARTMENTS PTY LTD & ANOR Application by John Emanuel Rose for leave to appeal and appeal against a judgment of Justice Marks given on 31 October 2006 in Matter No IRC 2131 of 2005 JUDGMENT OF THE COURT [2007] NSWIRComm 264 1 The appellant, John Emanuel Rose, seeks leave to appeal and, if granted, appeals the interlocutory decision of Marks J, delivered on 31 October 2006 in Rose v Meriton Apartments Pty Ltd and Anor [2006] NSWIRComm 298 ("Rose v Meriton"). Background 2 On 27 April 2005, the appellant commenced proceedings by summons seeking relief under s 106 of the Industrial Relations Act 1996 ("the IR Act") against two named respondents. The first respondent was Meriton Apartments Pty Ltd ("Meriton") and the second respondent was Owners Corporation Strata Plan No 56443 ("Owners Corporation"). 3 The appellant sought a declaration, pursuant to s 106, that "the contract consisting of a Deed between the First Respondent and Regis Towers Real Estate Pty Ltd ("Regis Towers") (now in administration, and formerly known as Cesscut Pty Limited), and, additionally, consisting of a contract or collateral arrangement between the Second Respondent and Regis Towers Real Estate Pty Ltd (in administration)" ("the contract") was unfair, harsh or unconscionable or against the public interest. Consequential orders were also sought declaring the "contract" wholly or partly void, or varying it in the manner as set out in the summons. The appellant, as sole director and shareholder of Regis Towers, claimed to have suffered considerable personal loss and damage by reason of the unfairness of the contract. 4 On 6 September 2006, the appellant sought, by motion, to amend the proceedings so as to add the appellant as a party to the contract. 5 On 21 June 2005, the appellant became a bankrupt for the purposes of the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act"), some two months after proceedings were commenced. 6 On 4 January 2006, solicitors for the second respondent wrote to Mr Whitton, the appellant's trustee in bankruptcy, directing his attention, in particular, to s 60(2) and (3) of the Bankruptcy Act and thereby purporting to give him notice for the purposes of s 60(3). Sections 60(2) and (3) relevantly provide 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. 7 On 7 January 2006, Mr Whitton responded in writing to the second respondent as follows: As you stated, I am fully aware of the relevant provisions of the Bankruptcy Act. I have sought advice in relation to these proceedings and as a result have assigned the chose in action constituted by the unfair contract proceedings no: 2131 of 2005 to Mr John Rose. I understand that Adrian Barwick of Employment Lawyers acts for Mr Rose in such proceedings. 8 The relevant assignment was effected by a deed of assignment on 20 December 2005. Marks J appeared to accept that the decision by Mr Whitton to assign the chose in action "was made in good faith and in the best interests of the creditors". 9 Both respondents then challenged, by motion, the validity of the actions of the trustee in bankruptcy, claiming that the proceedings were deemed to have been abandoned under s 60(3) of the Bankruptcy Act on the basis of a failure to make a valid election under s 60(2). 10 The respondents further submitted that the appellant lacked standing under s 108 of the IR Act to apply for relief under s 106. Sections 108(a) and (b), respectively, which we will set out in full later in this judgment, restrict standing in relation to instituting proceedings under s 106 to "any party to the contract" or "any person who, but for the making of such an order, would be a party to the contract". 11 In the interlocutory judgment of 31 October 2006, Marks J dealt with the motions filed by the parties. The four motions may be briefly described as follows: (i) an application filed by the appellant on 27 August 2006 to amend the proceedings so as to add the appellant as a party to the contract in question; (ii) a motion filed by Meriton on 23 February 2006 to strike out the proceedings commenced under s 106 on the basis that the appellant lacked standing under s 108 of the IR Act, or, alternatively, to dismiss the proceedings on the grounds that the proceedings are deemed to have been abandoned by the trustee in bankruptcy, for the purposes of s 60(3) of the Bankruptcy Act ; (iii) the Owners Corporation sought by motion filed on 2 March 2006 to have the proceedings struck out on the basis that the appellant lacked standing under s 108; and (iv) the Owners Corporation sought by motion filed on 23 February 2006 that the proceedings be dismissed, or permanently stayed, or stayed pending provision by the appellant of security for costs, on the basis that the proceedings were deemed to have been abandoned for the purposes of s 60(3) of the Act. 12 His Honour ultimately resolved the matter at first instance by dismissing both the appellant's summons for relief and the motion to amend the proceedings. Relevant Statutory Provisions 13 The relevant legislative provisions within the IR Act are as follows: 105 Definitions In this Part: contract means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument. unfair contract means a contract: (a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument. Note. The jurisdiction of the Commission under this Part is exercisable only by the Commission in Court Session. 106 Power of Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (2A) A contract that is a related condition or collateral arrangement may be declared void or varied even though it does not relate to the performance by a person of work in an industry, so long as: (a) the contract to which it is related or collateral is a contract whereby the person performs work in an industry, and (b) the performance of work is a significant purpose of the contractual arrangements made by the person. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. (6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss. 108 Who may apply for order An order may be made under this Division on the application of: (a) any party to the contract, or (b) any person who, but for the making of such an order, would be a party to the contract, or (c) an industrial organisation of employers whose members employ persons working in the industry to which the contract relates, or (d) an industrial organisation of employees whose members are employed in the industry to which the contract relates, or (e) an association registered under Chapter 6 of which a party to the contract is a member, and not otherwise. 14 The most relevant provisions of the Bankruptcy Act are as follows: 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. Note 1 : This subsection has a limited application if there are orders in force under the proceeds of crime law: see section 58A. ... (2) Where a law of the Commonwealth or of a State or Territory of the Commonwealth requires the transmission of property to be registered and enables the trustee of the estate of a bankrupt to be registered as the owner of any such property that is part of the property of the bankrupt, that property, notwithstanding that it vests in equity in the trustee by virtue of this section, does not so vest at law until the requirements of that law have been complied with. (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. (4) After a debtor has become a bankrupt, distress for rent shall not be levied or proceeded with against the property of the bankrupt, whether or not the bankrupt is a tenant of the landlord by whom the distress is sought to be levied. (5) Nothing in this section affects the right of a secured creditor to realize or otherwise deal with his or her security. (5A) Nothing in this section shall be taken to prevent a creditor from enforcing any remedy against a bankrupt, or against any property of a bankrupt that is not vested in the trustee of the bankrupt, in respect of any liability of the bankrupt under: (a) a maintenance agreement; or (b) a maintenance order; whether entered into or made, as the case may be, before or after the commencement of this subsection. (6) In this section, after-acquired property , in relation to a bankrupt, means property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt. 60 Stay of legal proceedings (1) The Court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit: (a) discharge an order made, whether before or after the commencement of this subsection, against the person or property of the debtor under any law relating to the imprisonment of fraudulent debtors and, in a case where the debtor is imprisoned or otherwise held in custody under such a law, discharge the debtor out of custody; or (b) stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this subsection, against the person or property of the debtor: (i) in respect of the non-payment of a provable debt or of a pecuniary penalty payable in consequence of the non-payment of a provable debt; or (ii) in consequence of his or her refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt; and, in a case where the debtor is imprisoned or otherwise held in custody in consequence of the non-payment of a provable debt or of a pecuniary penalty referred to in subparagraph (i) or in consequence of his or her refusal or failure to comply with an order referred to in subparagraph (ii), discharge the debtor out of custody. (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 a member of his or her family; or (b) the death of his or her spouse or of a member of his or her family. (4A) Notwithstanding paragraph (1)(b), this section does not empower the Court to stay any proceedings under a proceeds of crime law. (5) In this section, action means any civil proceeding, whether at law or in equity. … 134 Powers exercisable at discretion of trustee (1) Subject to this Act, the trustee may do all or any of the following things: (a) sell all or any part of the property of the bankrupt; (aa) accept, without terms or conditions, or subject to terms and conditions, a sum of money payable at a future time as the consideration or part of the consideration for the sale of any property of the bankrupt; (ab) lease any property of the bankrupt; (ac) divide among the creditors, in its existing form and according to its estimated value, property that, by reason of its peculiar nature or other special circumstances, cannot readily or advantageously be sold; (b) carry on a business of the bankrupt so far as may be necessary to dispose of it or wind it up for the benefit of creditors; (c) postpone the winding-up of the estate; (d) prove in respect of any debt due to the bankrupt; (da) mortgage or charge any of the property of the bankrupt for the purpose of raising money for the payment of the debts provable in the bankruptcy; (e) compromise any debt claimed to be due to the bankrupt or any claim by the bankrupt; (f) make a compromise with a creditor or a person claiming to be a creditor in respect of a debt provable, or claimed to be provable, in the bankruptcy; (g) make a compromise in respect of any claim arising out of the administration of the estate of the bankrupt, whether the claim is made by or against the trustee; (h) deal with property to which the bankrupt is beneficially entitled as tenant in tail in the same manner as the bankrupt could deal with it if he or she were not a bankrupt; (i) obtain such advice or assistance as he or she considers desirable relating to the administration of the estate or to the conduct or affairs of the bankrupt; (ia) refer any dispute to arbitration; (j) bring, institute or defend any action or other legal proceeding relating to the administration of the estate; (k) execute powers of attorney, deeds or other instruments for the purpose of carrying the provisions of this Act into effect; and (m) employ the bankrupt: (i) to superintend the management of the whole, or a part, of the property of the bankrupt; (ii) to carry on the bankrupt's trade or business for the benefit of the bankrupt's creditors; or (iii) to assist in any other way in administering the property of the bankrupt; and, in consideration of the bankrupt's services, make such allowance to the bankrupt out of the estate as the trustee considers reasonable; (ma) make such allowance out of the estate as he or she thinks just to the bankrupt, the spouse of the bankrupt or the family of the bankrupt; (n) superintend the management of the whole, or a part, of the property of the bankrupt; (o) administer the property of the bankrupt in any other way. (1A) An allowance made to the bankrupt in pursuance of paragraph (1)(m) may be reduced by the Court upon the application of an interested person. (3) Subject to this Act, the trustee may use his or her own discretion in the administration of the estate. (4) The trustee may at any time apply to the Court for directions in respect of a matter arising in connexion with the administration of the estate. Note : Section 178 allows an application to be made to the Court by the bankrupt, a creditor or any other person who is affected by an act, omission or decision of the trustee. 15 It is to be noted that the first respondent made no submissions and it is to be taken that it submits to the orders of the Court. Issues Raised on Appeal 16 There are two principal issues which arise on the appeal. 17 The first issue concerns whether or not the appellant has standing, pursuant to s 108 of the IR Act, to bring proceedings under s 106. 18 The second issue involves consideration of a number of matters relating to the construction of the relevant provisions of the Bankruptcy Act. Those matters may be summarised as follows: (a) whether s 60 applies to these proceedings, and thus (i) whether the trustee is required to make a valid election to prosecute or discontinue the action commenced by the appellant under ss 60(2) and (3), and (ii) whether the exemption to such a requirement, provided for in s 60(4), applies; (b) if the trustee is required to comply with ss 60(2) and (3), has there been a valid election made by the trustee in this instance; and, (c) of what relevance is the assignment which was made to the appellant, and what is the effectiveness of that assignment in law, for the purposes of determining the validity of the election. Leave to Appeal 19 It is necessary to firstly consider whether leave to appeal ought to be granted in this instance. 20 We consider that the aforementioned issue concerning s 108 of the IR Act raises a matter of general importance for the jurisdiction of the Court and warrants granting leave to appeal. The issues arising with respect to the Bankruptcy Act may not be so described, but we consider that it is important to resolve those issues in the public interest and, therefore, s 188 requires that leave be granted. Consideration of Stated Issues 21 We shall consider the aforementioned issues seriatim. Because of the conclusion we have reached as to the standing of the appellant under s 108 of the IR Act to bring the proceedings, it will be necessary to make a determination in relation to the construction of the provisions of the Bankruptcy Act. Standing under Section 108 22 Under the provisions of s 108 of the IR Act, in order to obtain standing to bring such proceedings, an applicant must either be a "party to the contract" (s 108(a)), or a "person who, but for the making of such an order, would be a party to the contract" (s 108(b)). 23 As previously noted, the proceedings were initiated by the appellant in his personal capacity, whilst the requisite contracts were executed by the corporate entity, Regis Towers, with Meriton and with Owners Corporation, thus giving rise to the following considerations: (i) Does the appellant lack standing, as contended by the respondent, and as determined at first instance, to commence the relevant proceedings on the basis that he is not a "party to the contract"? (ii) Should the summons have been amended by order of the Commission to include the appellant as a party to the contract, as requested by the appellant? 24 In our opinion, the fundamental question, however, must ultimately be whether the appellant has standing to bring the proceedings under s 108. The First Instance Judgment 25 At first instance, the appellant was determined to have no standing to commence the proceedings under s 106, on the basis that he was not a party to the contract sought to be impugned, as required by s 108(a) of the IR Act. Notably, s 105 was not considered by Marks J, and it was assumed that the appellant's application to amend the summons to add Mr Rose as an additional party, was solely intended to ensure that the proceedings were validly commenced, pursuant to the requirements as to standing set out in s 108. 26 His Honour also concluded that the appellant could not obtain standing by relying on the provisions of s 108(b). His Honour made the following findings with respect to the interpretation of s 108(b): 58… Nor, does it seem to me, that the applicant is entitled to rely in any way on the provisions of s 108(b). That subsection operates on the basis that an order has been made removing a party to a contract. It only applies to a person who was a party to the contract prior to and "but for" the making of an order under s 106. It cannot be used to entitle a person to commence proceedings who is made a party to the contract pursuant to any order. 27 The proceedings were declared a nullity on these grounds. Further, his Honour held that the Court did not have the power to amend the summons as requested, finding: 62 There must be grave doubt about whether this Court is entitled under s 106 of the Industrial Relations Act to grant relief at the suit of a person who is not party to a contract for a contract found to be unfair to be varied so as to make that person a party. Any relief granted under s 106 by way of variation of a contract must be directed to relieving any unfairness found to exist. There is no assertion contained in the proposed amended summons for relief that would justify any consideration as to why the applicant should be made a party to the contracts other than an assertion that he personally lost the benefit of monies which he invested in a company and by reason of "the personal loss of financial benefit" which he suffered because of the alleged unfairness of the contract. 63 I agree in general terms with the observations of Boland J in this Court in Gough and Gilmore (sic) Holdings Pty Ltd v Caterpillar of Australia [2001] NSWIRComm 92 at [43] doubting the ability of this Court to vary a contract by adding a party. Submissions 28 In challenging the findings of Marks J as to the question of standing, the appellant contended as follows: (i) Pursuant to the relevant provisions of the IR Act, the Commission has jurisdiction to determine the appellant's application for relief. On this basis, the application to amend the summons so as to include the appellant as a party merely sought to invoke jurisdiction of which the Court is already seized; (ii) Section 106(1) empowers the Commission to make an order in relation to a "contract whereby a person performs work in any industry". The proceedings in this instance involved such a contract or arrangement, according to the appellant, who summarised the details thereof as follows: in early 1999, the appellant in his personal capacity purchased property in real estate developed by Meriton. The appellant was principal director and shareholder of Regis Towers. In April 1999, Meriton executed a Deed with Regis Towers, whereby, for the consideration in the sum of $1,750,000, Meriton agreed, inter alia , to procure a Caretaker Agreement between Regis Towers and Owners Corporation. Under the terms of the Caretaker Agreement, executed in August 1999, the appellant was to personally perform work as a caretaker, work to be performed in an industry in and of New South Wales; (iii) Section 108(a) of the IR Act states that "any party to the contract" may seek an order of the Commission under s 106 with respect to a relevant contract. The broad definition of "contract" contained within s 105, which includes "arrangement" and "collateral arrangement", ought to be applied in interpreting ss 106 and 108, and is applicable in this instance. Relief pursuant to s 106 is, therefore, available to an applicant who may not be a party to a contract as understood by the common law, but who is a party to an arrangement. In this instance, the appellant is a party to the relevant contract or arrangement, based, in part, on the term contained therein that he was to perform work as a caretaker. Applying the definition of "contract" in s 105, which does not confine that word to its strict common law definition, the appellant is thus a "party to the contract" as required by s 108(a); (iv) Further, the appellant also has standing pursuant to s 108(b) of the IR Act, as the appellant could be made a party "through the exercise of the power under s 108(b) in a common law sense", given that he is already a party in the sense contemplated above. It is the ability to make such an order, whether or not exercised, which satisfies the requirements of s 108(b). 29 Owners Corporation rejected the appellant's submissions as follows: (i) The appellant lacks standing to bring the proceedings under s 108. The appellant is not a party to the contract sought to be impugned, and, at first instance, did not allege to be a party to an "arrangement" (within the meaning of s 105), as is now claimed by the appellant. (ii) Further, the appellant does not have standing pursuant to s 108(b), as that provision only refers to a situation where a party to a contract seeks an order that they no longer be a party to an unfair contract. Consideration 30 In this instance, the appellant has applied for relief under s 106, although clearly not personally a party to the contract, in a common law sense. However, that consideration does not, of itself, resolve the question of standing, as there is no requirement in the relevant standing provisions that the right to bring proceedings is restricted only to common law contractual parties. Nor, for that matter, would the application by the appellant to have the contract amended to add the appellant as a party resolve that question, as its resolution requires, in our view, an assessment as to whether the appellant meets the requirements, in particular, of s 108(a) of the IR Act. 31 With regard to the latter issue, in order for the proceedings to be validly commenced, the appellant is required to be a "party to the contract", for the purpose of establishing standing under s 108(a). If the appellant cannot be so characterised as subject to the provisions of s 108, and thus lacks standing to initiate the proceedings under that provision, the appellant would also lack standing to apply to have the proceedings amended by including an additional, individual party to the relevant contracts. The appellant would thus need to have standing as a "party to the contract" in order to seek the relevant amendment, as contended by the second respondent. 32 Further, we do not agree with the contention that the appellant is not a "party to the contract", and thus lacks standing, because he is not specifically named as an individual contracting with either respondent in the relevant agreements. What is required is that the appellant is able to be characterised as a "party to the contract", pursuant to s 108(a). In our opinion, the appellant may be so characterised. Although not identified as a party to a contractual agreement, in the conventional common law sense, we consider that the appellant is, nevertheless, a party to an "arrangement", as that term is contemplated by s 105. Preliminary Issues in Considering Evidence of an Arrangement 33 The issue of whether the appellant is a party to an arrangement was raised by way of a strike out motion by both respondents. The correct approach to take in dealing with such strike out motions is set out in the decision of Wright J, President, in Virtue v New South Wales Department of Education and Training (1999) 92 IR 428, wherein his Honour identified the applicable principles as follows (at 447-448): (1) The discretion of a court to determine a case at an early stage, when appropriate, has been repeatedly accepted. (2) As a general rule it is desirable that an objection to jurisdiction be determined as early as circumstances will conveniently admit so that the tribunal does not embark on a hearing which it lacks authority to conduct. The course of a court entertaining a challenge to jurisdiction in a preliminary or threshold way is often a sensible one where a party has a substantial threshold argument which, if it succeeds, will knock out the claim and save the costs and inconvenience that attend a protracted hearing of proceedings on the merits. (3) However, a further general proposition is that all issues arising should be dealt with in the substantive proceedings unless the basis for a challenge, either on jurisdictional grounds, or for lack of a reasonable cause of action, be clearly demonstrated. (4) Threshold relief of the kind sought here must be conserved to a clear case where it is plain that the invocation of the jurisdiction impugned is wholly misconceived or, upon analysis, lacks an arguable legal foundation. (5) Necessarily, refusal of relief at the threshold will not finally determine that jurisdiction exists for any order which the Court might make between the parties. This is because, to secure relief, the claimants must demonstrate that no order could be made which would be within jurisdiction. The resulting burden is a heavy one. (6) Accordingly, whilst it is desirable for a case to be determined at an early stage it is only open to do so at the appropriate stage of the proceedings. That is, where the facts, either established by evidence or plainly agreed in terms, enable the Court to determine what the contract or arrangement is or, at least, the parameters of the contract or arrangement. In other words, unless the facts are sufficiently established to enable the Court to be satisfied it has the necessary material to reach a clear and final decision on the question then the appropriate stage has not been reached for such a determination to be made. (7) Similarly, the jurisdiction to terminate an action summarily for want of a cause of action is to be sparingly employed and ought not to be used save where the lack of the cause of action was clearly demonstrated. 34 Where they relate to a challenge to standing the foregoing principles came to be examined in a particular context in the decision in Metrocall Inc v Electronic Tracking System Limited (No 2) (2000) 102 IR 309 ("Metrocall Inc No 2"). In terms of relevant procedure, and consistent with the approach in Nagle (t/a W.D. & J.L. Nagle & Sons) v Tilburg (1993) 51 IR 8, the Full Bench in Metrocall Inc (No 2) upheld Schmidt J's decision to join the Managing Director as an additional applicant as "not an unusual decision in the context of a procedural application" and "one well within her Honour's discretion" (at [9]). It was open to her Honour to find, on the basis of the "limited evidence" available at first instance, "for the purposes of the motion that there was, or was arguably, an arrangement involving the appellant and both respondents to which the (Managing Director) was a party" (at [17]). 35 By way of analogy, in Great Scott International Pty Ltd v Cosmetic Suppliers Pty Ltd (No 2) (2005) 147 IR 95, the Full Bench of the Commission in Court Session considered the appropriate procedure to be followed where dealing with an application to amend a summons (commencing proceedings under s 106) to join an additional applicant. In their judgment, Wright J, President, Walton and Schmidt JJ upheld an appeal against the decision of Marks J to refuse joinder of the director of the appellant corporation (as previously described) as an additional applicant. The Full Bench held: [28] In this case, once the appellant had established that there was an arguable basis for the claim that (the director) was a party to the arrangement, as in Metrocall , the proper approach was to permit the joinder, so that the question of whether or not the necessary facts could be established, was left to be determined on the evidence at the hearing. Absent a joinder order, there would be no basis upon which the question could arise for determination at trial. This approach is entirely consistent with that in Nagle .... 36 We note for completeness that no threshold issue in relation to jurisdiction under s 106 has yet been raised in the proceedings. In particular, the question has not been answered as to whether these are contracts "whereby a person performs work in any industry": this issue has not been in contention in these proceedings but will no doubt be considered in the next stage. We would note that a deliberation of the relevant issues can be seen in Fish & Anor v Solution 6 Holdings Ltd & Ors (2006) 227 ALR 241 at [18]-[20], [34], [43]) (see also Sin Yong Yim & Tae Sik Kim v Industrial Relations Commission of NSW & Hyun Sung (Marco) Choi [2007] NSWCA 77). Relationship between s 108 and s 105 37 As a matter of construction, it is clear that the reference to contract in s 108(a) has the wider meaning given to that expression in s 105 of the IR Act. This conclusion follows from the opening words of s 105, and is consistent with the decision of the Commission in Court Session in Metrocall Inc (No 2) (confirmed in Great Scott International Pty Ltd v Cosmetic Suppliers Pty Ltd & Anor). 38 Metrocall Inc (No 2) involved an appeal against the first instance judgment of Schmidt J to join as an additional applicant, in proceedings commenced under s 106, the Managing Director of the respondent corporation, who, although not named personally as a party to the contract, had been involved in formulating the relevant arrangement between the corporate parties, and was required to personally perform work under the terms of that arrangement. On appeal, the Full Bench (Wright J, President, Hungerford and Kavanagh JJ) determined that it was open to her Honour to find that the Director could have validly commenced proceedings himself as a party to an "arrangement" (and, therefore, a party to a contract, as that term is defined in s 105, and pursuant to s 108 involving both the Director, the appellant, and the relevant corporate entities). With respect to the construction of ss 105, 106 and 108, the Full Bench found: 15 We now turn to the construction of the word "contract" as it appears in s 108 of the Act. The meaning of s 108 was considered by Wright J, President in Hyde v Energy Australia (1999) 92 IR 409 at 423 albeit in relation to an argument somewhat different to that made in these proceedings. In Hyde the respondent's major argument relied upon s 108 in relation to a single summons brought by nine different applicants and submitted that it was significant the summons was brought as an application, not by a party to a contract, but by nine persons apparently acting as a group. The summons, it was said, was therefore brought "otherwise" than in accordance with the provisions of s 108. It was thus necessarily bad and could not be proceeded with. However, each of the applicants was party to a separate, but somewhat similar, contract of employment with the respondent and the applicants also accepted that their summons, as filed, should be read as proposed by the respondent; that is: it was intended to refer to a series of separate contracts, as defined, between the individual applicants and the respondent and not, as literally pleaded, a single contract between the applicants and the respondent. In relation to the respondent's submissions as to invalidity his Honour held, inter alia, that: The submissions of the respondent as to limitations said to arise as to the Court's jurisdiction from the terms and form of s 108 of the Act should not be accepted. Section 108 does not, on its proper construction, preclude the bringing of proceedings such as the present. The intention of the limitations expressed in that section is, in general terms, to limit those who may make an application to the parties to the contract, as defined, or to registered organisations and thus precludes non-parties to such contracts from having standing to commence such proceedings . The origin of s 108 is subsection (2C) of s 88F of the Industrial Arbitration Act 1940, which was included in that section by Act No. l62 of 1985 and which was apparently intended to preclude applications by a non-party of the kind considered in F Sharkey & Co Pty Ltd v Metropolitan Water Sewerage and Drainage Board [1981] 2 NSWLR 824; [1981] AR (NSW) 286 and Metropolitan Water Sewerage and Drainage Board v Judges of the Industrial Commission of New South Wales [1981] AR (NSW) 305 (emphasis added). 16 We consider that his Honour's analysis of s 108 is correct and, in particular, that its intention is to limit those who may bring an application under s 106 to the parties to the contract, that word being given the extended meaning provided to it by s 105. It is to be observed that s 105 is a definitions provision for the whole of Part 9 of the Chapter 2 of the Act, which Part includes both s 106 and s 108. Further, s 105 plainly states that the definitions apply to Part 9 without any qualification. There is, therefore, no basis in either the text of s 105 or in the construction of Part 9 viewed as a whole whereby it could be found that a reference to a "contract" in s 108 is to be construed other than by reference to the extended meaning of that term provided by s 105 (emphasis added). Whether there is a Sufficient Basis to Establish Standing 39 The decision of Custom Credit Corporation Ltd v Goldsmith [1976] AR (NSW) 98 considered the term "arrangement" (in the predecessor provision to s 106, viz., s 88F of the Industrial Arbitration Act 1940), and observed, at 131, as follows: In our view, it is not a matter for comment that there is no definition in s 88F or, for that matter, in any other part of the Industrial Arbitration Act of 'contract'; there is just no reason why there ought to be. It would not be disputed, we believe, that the meaning of `contract' is not peculiarly within the knowledge of lawyers, but rather is known to the community at large, who would know, as one reads in Anson's well-known treatise on this branch of the law, that a `contract is an agreement enforceable at law, made between two or more persons, by which rights are acquired by one or more to acts or forbearances on the part of the other or others'. But it must be true to say, we think, that it is significant that Parliament did not see fit to include in the Act any definition of `arrangement', which is not a term of art and is not a word which has a very precise meaning. Looking at the setting in which it is used in s 88F, we are of the opinion that in one of its meanings `arrangement' embraces transactions which do not give rise to contracts or obligations, that is to say, obligations enforceable at law; but we are also of the opinion that in another meaning it embraces a situation where there exist two or more separate contracts which, notwithstanding their separateness, are, given the facts, so sufficiently associated with each other in a practical sense as together to constitute an arrangement of which each contract is a part . 40 It can be seen that the reasoning above supports the finding of the arrangement in the current matter. Under the terms of the relevant arrangement, it is apparent that the appellant was to personally perform the work of caretaker, and was also closely associated with the execution of the relevant contract as principal director and shareholder of the corporate entity known as Regis Towers. 41 As we have stated, there has been no substantive examination of the relevant contractual arrangements and the appellant's connection with those arrangements. The material upon which we are able to rely at this stage of the proceedings includes the originating summons filed by the appellant on 27 April 2005, which provides a summation of the relevant contractual arrangement between the parties as follows: (a) In early 1999, the appellant was principal director and shareholder of Cesscut Pty Ltd (later known as Regis Towers). (b) Between February and March 1999, the appellant personally purchased approximately ten units in an apartment complex known as "The Regis Towers", developed by Meriton. (c) On 20 April 1999, following certain representations made by or on behalf of Meriton to the appellant and others, a deed was executed by Meriton with Regis Towers whereby, for consideration in the sum of $1,750,000, Meriton agreed, inter alia , to procure a Caretaker Agreement between Regis Towers and Owners Corporation. In this sense, the appellant purchased the right to undertake caretaker duties. Under the terms of the Caretaker Agreement, the appellant and others were to perform work in an industry in and of New South Wales. The appellant personally invested funds of $525,000, with the balance funded by way of a Vendor Finance Arrangement with Meriton Finance Pty Ltd. (d) In August 1999, by hand of the appellant, Regis Towers executed the Caretaker Agreement with Owners Corporation. (e) Contrary to the representations made by Meriton to Regis Towers and the appellant, the standard of the strata scheme pertaining to the relevant complex (herein the caretaker duties were to be completed) was not satisfactory, in that it did not comply in certain respects with the Building Code of Australia and, consequently, the remuneration payable under the Caretaker Agreement was insufficient to permit Regis Towers and the appellant to discharge their duties under that Agreement, resulting in considerable loss to both Regis Towers and the appellant. (f) A compulsory administrator was appointed to the strata scheme on 27 January 2003, and on 17 September 2004, Regis Towers and the appellant arranged for the appointment of a voluntary administrator to Regis Towers by reason of Meriton Finance Pty Ltd obtaining summary judgment against Regis Towers in the sum of $1,225,000, (a debt which had arisen in part by reason of the Caretaker Agreement being unprofitable), who in turn served a garnishment notice upon Owners Corporation, which in turn withheld funds from Regis Towers. 42 Further, the parties had admitted into evidence copies of the relevant contracts for the purpose of the interlocutory proceedings before Marks J. Those contracts may be described as follows: 1. On 20 April 1999, a deed was executed by Meriton and Cesscut Pty Ltd wherein Meriton agreed to arrange the granting by Owners Corporation to the Caretaker (Cesscut) of the caretaking and letting rights in respect of the development to be constructed by Meriton. In consideration of Meriton undertaking this action, Cesscut agreed to pay Meriton the sum of $1,750,000, which consisted of an initial deposit to be paid to Meriton on the date of the Deed, and two further sums totalling more than $1,600,000 payable to Meriton upon settlement of two separate "land contracts", wherein the appellant agreed to purchase land developed by Meriton in The Regis (cl. 3.1). Further, annual remuneration by Owners Corporation to the Caretaker was to be paid upon settlement of those land contracts. 2. On 6 August 1999 a Caretaker Agreement was executed by Owners Corporation and Regis Towers ("the Caretaker"), to appoint the Caretaker to fulfil certain duties with respect to The Regis complex. The Owners Corporation agreed to grant the Caretaker leasing and sales agency rights, and to pay the Caretaker in excess of $670,000 per annum for performance of relevant duties. Whilst the document refers to the Caretaker's employees and agents, cl. 27.2 provides as follows: [27.2] The persons used by the Caretaker to carry out the Caretaker's duties and functions, who are not the principal shareholders or directors of the Caretaker, will require the prior approval in writing of the Executive Committee of the Owners Corporation, such approval not to be unreasonably withheld.... Further, the relevant duties of the Caretaker included the principal person performing the duties of the Caretaker to reside in the complex (Sch. 2, cl. (d)). Other duties to be performed included cleaning and concierge responsibilities. 3. On 17 October 2000, the original Caretaker Agreement was varied, by agreement, by Owners Corporation and Regis Towers. The variations concerned changes to remuneration levels, an increase to the level of some services provided by Regis Towers, and to clarify some details of the arrangement between the parties to the contract. 43 Notably, there is no evidence provided in relation to the appellant's connection with either Cesscut Pty Ltd or Regis Towers. The only oral submissions provided in relation to the nature of the relevant arrangement are those previously referred to as being provided by the appellant. Conclusion – Standing under s 108 44 Applying the principles enunciated in the relevant authorities, it is clear that s 108 of the IR Act should not to be construed so as to confine the meaning of "contract" in the sense contended by the second respondent, or as contemplated by Marks J in the decision under appeal, and to effectively deny the appellant standing as a "party to the contract". It is sufficient to establish that there is an "arrangement" for the purpose of compliance with the standing requirement contained in s 108(a). The relevant contracts outlined above are part of an arrangement which meets the requirements of ss 105 and 108(a). As a party to that arrangement there is no requirement that the appellant needs to be an actual party to the common law contract(s). 45 We consider that where an applicant for relief performs personal services or work in order to fulfil relevant contractual obligations under the terms of an arrangement (although not the same as the relevant contracting entity/individual(s)), and is instrumentally involved in the formulation of a relevant contractual arrangement as the appellant appears to have been, in the capacity of principal director and shareholder of the relevant corporate entity which is a contractual party to the arrangement, prima facie that applicant is a party to the relevant arrangement, and thus a "party to the contract" for the purpose of obtaining standing pursuant to s 108(a) of the IR Act. 46 Accordingly, taking the evidence, as it presently exists, at its highest and having regard to the relevant authorities to which we have referred, we find that the appellant is party to an arrangement involving the appellant and both respondents that is within the definition of contract in s 105 of the IR Act. A conclusion that the appellant has standing under s 108(a) is open on the facts as they have been provided at this stage in the proceedings. It therefore follows that there is no reason to dismiss the proceedings for lack of standing. 47 We propose, therefore, to dismiss the motion filed on 2 March 2006 by Owners Corporation and the motions filed on 23 February 2006 by Meriton and Owners Corporation, with respect to the applications to have the proceedings struck out or stayed. We also propose to dismiss the motion filed on 27 August 2006 by the appellant seeking that the proceedings be amended. Bankruptcy Issues Whether the proceedings are "caught" by the Bankruptcy Act 48 Marks J concluded that the right to bring proceedings under s 106 constituted "property" (as defined by the Act). On this basis, it was found that the proceedings were "caught" by the Bankruptcy Act, and so became subject to the requirement for a valid election contained within ss 60(2) and (3). 49 In this respect, his Honour relied upon the decision of Schmidt J in Robyn Smith v Chevelle Development Pty Ltd t/as Snowden Parkes Real Estate Agents and anor [2005] NSWIRComm 109, wherein it was held that a bankrupt's right to bring proceedings under s 106 constituted "after acquired property" (as defined within s 58(6)) which vested in the trustee pursuant to s 58 of the Bankruptcy Act. 50 Schmidt J's reasoning in this regard turned on the construction of ss 58, 116 and the definitions of "property" in s 5 of the Bankruptcy Act. Section 116 relevantly provides as follows: 116 Property divisible among creditors (1) Subject to this Act: (a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; (b) the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge; ... is property divisible amongst the creditors of the bankrupt. (2) Subsection (1) does not extend to the following property: ... (g) any right of the bankrupt to recover damages or compensation: (i) for personal injury or wrong done to the bankrupt, the spouse of the bankrupt or a member of the family of the bankrupt; or ... 51 Section 5 of the Bankruptcy Act defines "property" and the "property of the bankrupt" as follows: Definitions " proper " means real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident as to any such real or personal property. "the property of the bankrupt" , in relation to a bankrupt, means: (a) except in subsections 58(3) and (4): (i) the property divisible among the bankrupt's creditors; and (ii) any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt; and (b) in subsections 58(3) and (4): (i) the property, rights and powers referred to in paragraph (a) of this definition; and (ii) any other property of the bankrupt. 52 The right to commence proceedings in relation to the fairness of an employment contract was held by Schmidt J to constitute "property" as a "future contingent" interest "arising out of or incidental to real or personal property" (Smith v Chevelle, par [13]). The exemption contained within s 116(2)(g) was held not to be applicable, as there was no assertion of any claim for compensation for "injury to the body, mind or character of the applicant" (at [20]). 53 Marks J concurred with this reasoning, observing that ss 60(4) and 116(2)(g) ought to be confined to claims "strictly involving personal injury or personal wrong such as defamation". His Honour found that those exemptions would not apply where a claim is characterised as being "referable to some entitlement associated with property whether personal or real, or whether tangible or intangible" (at par [21]). 54 There can be no doubt that the entitlement to prosecute the proceedings which existed prior to the bankruptcy must be defined as "property". Under s 58(1), upon bankruptcy, all "property of the bankrupt", defined in s 5 of the Bankruptcy Act as (i) "property divisible among the bankrupt's creditors" and (ii) "any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt", vests in the trustee. Section 116 of the Bankruptcy Act defines "property divisible among creditors" as (a) all property which belongs to, has vested in or devolved upon, or has been acquired by the bankrupt, either prior to, or during, the bankruptcy, and (b) the capacity to exercise, and take proceedings for exercising, all powers with respect to property. In our view, the proceedings commenced by the appellant in this instance fall clearly within these provisions, applying the broad definition of the term "property" contained in s 5 of the Bankruptcy Act. That definition refers to "property" as "real or personal property of every description", including "any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident as to any such real or personal property". 55 On this basis, we concur with the determination at first instance that the present proceedings are caught by the Bankruptcy Act, and must be the subject of a valid election, pursuant to the requirements contained within ss 60(2) and (3). We also agree that the exemption from this requirement in s 60(4) does not apply in this instance. Section 60(4) requires that an action may be continued in the bankrupt's own name where the action in question is in respect of, inter alia and relevantly, "any personal injury or wrong done to the bankrupt". It is apparent that any loss or damage alleged to have been suffered by the appellant does not constitute personal injury or wrong done to the appellant, and may be said to arise, on the contrary, from business and property transactions carried out by the parties. Loss or damage suffered in that context is not relevant for the purpose of invoking the exception to ss 60(2) and (3). Validity of the Election The first instance judgment 56 His Honour determined that, as a "matter of construction", and on a prima facie basis, the trustee's correspondence of 7 January 2006, wherein it was advised that the right to litigate had been assigned to the appellant, constituted a valid election to prosecute the action, on the basis that the assignment would be "inconsistent with a determination not to proceed with the action", and that the intention of the trustee ought to be ascertained "not only from the language used but from the course of action proposed" in determining whether not there had been an election (at [23]). 57 Further, it was found at first instance that a trustee is entitled to assign property, including a chose in action, to a third party, either before or after an election has been made, as there is no obligation conferred by s 60(2) of the Bankruptcy Act upon a trustee to personally prosecute, or direct the prosecution of, the relevant action. His Honour referred to the decision of Madgwick J in the Federal Court of Australia in Brien v P and E Phontos Pty Ltd (in the Estate of Metchler) (1999) 91 FCR 209 ("Brien") to support this finding. Consideration 58 In our view, the trustee made the relevant election under ss 60(2) and (3) in his correspondence of 7 January 2006, indicating that an assignment of a chose in action had been made to the appellant. We agree with the reasoning of Marks J in this respect, and find that his Honour's approach in this regard is consistent with that applied in Brien and in Baker v Sheridan [2005] NSWCA 408 ("Baker v Sheridan"). 59 The decision of the Federal Court in Brien is authority for the proposition that an election may be valid, although an assignment of the relevant chose in action (as "property") is made to a third party, whether that assignment is made before or after the election in question. Further, little formality is required in communicating an intention to prosecute an action in order to comply with ss 60(2) and (3). Madgwick J reasoned as follows: 11 The Act appears at least to contemplate that, upon a bankruptcy occurring, persons who have been sued should not be further troubled by the suit unless the independent trustee has formed the opinion that the action is worth pursuing. The mere act of election will not necessarily and does not of its own force expose the trustee to personal liability for costs. It seems that the "preferable opinion" is that the trustee should be substituted as the plaintiff in the action: Ryan v Hopkinson (1993) 16 FamLR 659 per Priestley JA…. 12 However, there is nothing to stop a trustee, after an election to prosecute the action, from assigning the rights of the bankrupt estate in the action to a third party. The third party may then be substituted as the plaintiff. On such an assignment and substitution, the trustee would have no continuing power to influence the course of the proceedings, except by agreement with the assignee. Thus, the purpose of the Bankruptcy Act is not to assure the defendants in an action begun by a bankrupt that, if the trustee elects to prosecute the action, then he or she will necessarily remain personally available to meet costs or to direct the manner of further prosecution of the action. 13 These considerations affect the meaning to be accorded to the expression "to prosecute" in s 60(2). The phrase cannot mean "to prosecute personally" or "to prosecute under the trustee's direction". Once it is appreciated that the phrase, on the contrary, may include the meaning, "to prosecute or to arrange the prosecution of the action by any assignee who is not a bankrupt", the nature of the election is illuminated. The ability so to elect is obviously not retroactively vitiated by the subsequent assignment of the right to conduct the action in question. 14 Neither, in my opinion, is there any warrant to constrict the notion of an "election" in s 60(2) so as to make it impossible for an assignment which pre-dates the election to take effect. To interpret the notion of the trustee's "election" as the respondents contend is apt to have a number of unfortunate effects. One is to give an unwarranted benefit to the defendants in the action. Another is to disappoint the assignee. A third may be to prevent the bankrupt's estate from retaining either the consideration for the assignment or the rights in the action…. 15 It is apparent, from the trustee's having assigned the right to conduct the action, that it was the trustee's intention that the action should continue. It would be the trustee's implied obligation to the assignee not to fail, except for reasonable cause, to take available steps to make the assignment effective. The Act expressly requires no formality of an election except that it be in writing and implicitly it only requires that such election be communicated to the defendant(s) in the action and to the forum court within a reasonable period or periods. The written assignment in this case may therefore have amounted to an election contemplated by the Act. However, it is unnecessary to decide that question. 16 These considerations lead me to think that the expression "to prosecute" in s 60(2) should be interpreted as including the meaning "to arrange the prosecution of the action by an assignee, who is not a bankrupt, whether or not the assignment occurs before or after the trustee's election to prosecute". 60 This judgment was endorsed by Mason P in the New South Wales Court of Appeal in Baker v Sheridan, at least in terms of what might constitute a valid election. In that matter, the provision of a Notice of Assignment, indicating that the litigation in question would be prosecuted by and through an assignee was held to be valid. The election was found to be clear and unconditional, and it was contended that it would be absurd to suggest that the Official Receiver "in the one breath" discontinued or abandoned the appeal in question, "while at the same time indicating that an assignee claiming through the trustee would be prosecuting the appeal" (at [39]). 61 These decisions appear to provide support for his Honour's claim that the trustee's intentions with respect to the election ought to be ascertained "not only from the language used but from the course of action proposed", and the contention that, on this basis, the election was prima facie valid. Further, it is clear that an election will not be rendered invalid because it was made contemporaneously with an assignment to a third party. 62 It is important to note that Marks J determined that the election was valid only on a prima facie basis, a conclusion which does not appear to be substantiated by the relevant case law to which the first instance judgment referred, and which permitted his Honour to subsequently find that the election was, in fact, invalid on the basis that the assignment to the appellant was ineffective in law. We do not agree with his Honour's approach in this regard, for reasons which we shall set out presently in our judgment. Effectiveness of the Assignment The first instance judgment 63 Having determined that the election was prima facie valid, his Honour then concluded that the assignment of a chose in action to an undischarged bankrupt was ineffective in law, although it was acknowledged that there are no specific provisions within the Bankruptcy Act expressly prohibiting such a transaction, and s 134 of the Bankruptcy Act empowers a trustee in bankruptcy in broad terms to "sell all or any part of the property of the bankrupt". 64 The judgment of Wheeler J in the Supreme Court of Western Australia in Temsign Pty Ltd v Biscen Pty Ltd (1998) 157 ALR 83 ("Temsign") was followed by his Honour in reaching this conclusion (whilst acknowledging a line of authority which was contrary in its reasoning to that of Temsign). In that matter, a purported assignment to an undischarged bankrupt was held to be ineffective, based on a consideration of both the operation of s 58 and of relevant policy considerations. It was determined that if an assignment of a chose in action was made to a bankrupt, that "property" would immediately re-vest in the trustee as "after acquired property", pursuant to s 58(1)(b), creating a circuitous situation. Further, the policy objective behind s 60 was to restrict the circumstances in which a bankrupt might prosecute an action. 65 Temsign stressed the importance of policy considerations underlying the Bankruptcy Act as a whole, as summarised by Kirby P in the New South Wales Court of Appeal in Daemar v Industrial Commission of New South Wales and Ors (1988) 90 FLR 469 ("Daemar"), as follows (at 473-4): [The Act operates] upon the debtors becoming a bankrupt, to transfer property rights, including certainly the right to sue in respect of the claims to property, from the bankrupt to the trustee. This is so, notwithstanding that it involves personal inconvenience to the bankrupt.... Indeed, it is so notwithstanding the fact that it deprives the bankrupt of important civil rights which he would otherwise normally enjoy. It is of the essence of bankruptcy, as provided for by the Act, that property which belongs to the bankrupt, including choses in action (other than those which are specifically exempted) are vested upon bankruptcy in the bankrupt's trustee. The trustee has the charge of the estate of the bankrupt. It is then for the trustee to distribute that property as the Act provides, principally for the benefit of creditors. To secure the benefits and protections which the Act provides to a debtor, the debtor's status is changed, rights are diminished and property is controlled. It could scarcely be otherwise for if it were, valuable interests which a bankrupt might have, in the form of choses in action would not be caught in the net cast by the very wide language of s 116(1). Submissions 66 In summary, the appellant made the following submissions in relation to the effectiveness of the assignment: (i) Section 134 of the Bankruptcy Act includes a power to assign property vested in the trustee. There is no warrant to read in a limitation in s 134(1)(a) "excluding any sale, transfer or assignment to the bankrupt". (ii) In this instance, the chose in action is property that vested, when the appellant became a bankrupt, in the trustee under s 58(1)(a). Section 58(1)(b) is not directed to and is distinct from property caught by and within s 58(1)(a). (iii) Neither s 58(1)(a) nor s 58(1)(b) are directed to a re-vesting of property already vested in the trustee. The circularity construction adopted by the trial judge assumes a construction of s 58(1)(a) and (b) that catches a re-vesting of property already vested in the trustee. There is no warrant for this construction. (iv) On its face, s 58(1) is concerned with property not vested in the trustee and it is in no way apparent that there was any legislative purpose intending to catch property already vested in the trustee. Accordingly, a harmonious construction of s 58 with s 134 is readily able to be achieved by recognising that s 58(1) is not concerned with property already vested in the trustee. In these circumstances, the reference to "after acquired property of the bankrupt" does not include property already vested in the trustee. Accordingly, there is no circuitous situation. (v) Section 134 ought not to be read down based on the irrelevant notion that the bankrupt is somehow the subject of a legal disability. A bankrupt does not "cease to be a person in the eyes of the law" upon bankruptcy, and reliance upon policy considerations, which are in no way apparent, to effectively prohibit any assignment of a chose in action to a bankrupt is contrary to Article 7 of the Universal Declaration of Human Rights. (vi) The decision by Wheeler J in Temsign (applied by Bennett J in Jambrecina v Official Trustee in Bankruptcy [2003] FCA 1352 and followed by Master Newnes in Willoughby and Others v Clayton Utz (2005) 193 FLR 373) is flawed in principle, is contrary to the proper construction of the provisions and should not be followed. (vii) The reasoning of Willes J in Kitson v Hardwick (1872) LR 7 CP 473 at 478-9 strongly supports the appellant's construction. That reasoning was followed in Re Nguyen; Ex parte Official Trustee in Bankruptcy (1992) 35 FCR 320 (" Nguyen ") and Bankrupt Estate of Cirillo & Grieves; Ex p Official Trustee in Bankruptcy (1996) (1996) 65 FCR 576 (" Cirillo ") and followed by Ipp J in Stobbart v Mocnaj (1996) 16 WAR 318. It should be followed here. 67 The second respondent also made the following submissions on this point, indicating that the construction placed upon ss 58 and 134 at first instance had been correct: (i) The assignment to an undischarged bankrupt was ineffective in law, and the reasoning in Temsign was correct. The interests of third parties involved in litigation with a bankrupt ought to be protected. (ii) Even if the assignment was effective, it would, nevertheless, re-vest immediately in the trustee pursuant to s 58(1)(b). There is no basis for the appellant's claim that s 58(1) is directed only at property which has not previously been vested in the trustee. Further, the provisions of ss 58 and 134 are consistent when the latter is construed as not granting the trustee an unlimited capacity to assign property to any person, including an undischarged bankrupt. (iii) Contrary to the appellant's submissions, Temsign is supported by the reasoning of the Full Federal Court in Freeman v Joiner [2005] FCAFC 149 to the extent that the Full Court held that there was no bar to the trustee commencing fresh proceedings on the same cause of action or a bankrupt, on discharge, doing so. Consideration 68 His Honour placed significant emphasis upon the decision of Temsign. That judgment deals with very similar considerations to those with which we are presently concerned; namely, whether an assignment to an undischarged bankrupt is effective in law. 69 Given the reliance placed upon that decision, it is appropriate to consider it in some detail. In that judgment, Wheeler J found two difficulties in assigning a chose in action to a bankrupt. Firstly, it was simply not possible to assign to a bankrupt because the relevant chose in action would then re-vest pursuant to s 58(1)(b) in the trustee. There were, moreover, important policy considerations dictating against such an assignment. Section 60 appears to be directed at preventing a bankrupt from litigating in his or her own name. It was contended as follows, with respect to s 60 (at 90): If the purpose of s 60 is the protection of other parties from litigation commenced by a bankrupt, in part for the reason that a bankrupt will neither be personally at risk as to costs, nor able to meet an order for costs, a power in the trustee to assign the action to the bankrupt would appear to be contrary to this objective. Similarly, such a power would not appear to promote orderly administration of the estate, nor to assist in removing uncertainty. Her Honour continued at 93: ...(I)t may be thought, applying the expressio unius rule, that the provision in subs (4) for a bankrupt to continue certain actions "in his own name" is evidence of a legislative intention that a bankrupt ought not to be permitted to continue other actions in his own name: this would tend to suggest a lack of power in the trustee to assign to the bankrupt. 70 Wheeler J distinguished the reasoning in Temsign from that in Cirillo, wherein it was contended that the power of sale under s 134 of the Bankruptcy Act extended to a power to sell to the bankrupt, on the basis that the assignee had been discharged from bankruptcy prior to the relevant assignment. Her Honour similarly did not follow the judgment in Nguyen, a matter involving an assignment to a discharged bankrupt and another whose bankruptcy was unclear, wherein French J had endorsed the English decision of Kitson v Hardwick (followed in Ramsey v Hartley [1977] 1 WLR 686). In the latter judgment, Willes J rejected the notion that a chose in action would re-vest in a trustee immediately upon assignment, his Honour finding as follows in relation to such an argument (at 479): That at first sight would seem to be a plausible argument. But I apprehend the law is not so stringent and unjust. There is some property which a bankrupt may deal with and which cannot be claimed by the trustee. For instance, the proceedings of manual labour. These he may clearly hold; and with these he might purchase the goods or the debts from the trustee, and the trustee could no more seize the goods than he could the money itself…. 71 Willes J also pointed out the potential benefits to assigning a chose in action to a bankrupt, as follows (at 478): Having had much experience in bankruptcy, I have seen the advantage of giving the debtor a chance of getting back the business, especially where it is one which depends upon the personal influence or skill of the individual. In many cases a higher price might be obtained from him than a stranger would be willing to give. We are bound to put the ordinary construction upon the words of the Act, unless the doing so will be manifestly inconsistent and contrary to the general scope and policy of the legislation: and, when the Act says the trustee may sell the estate to any person, and that any person buying may sue in his own name in respect of it, I see nothing inconsistent or contrary to the policy of the Act in holding that a sale to the bankrupt himself is not even voidable. 72 These policy considerations, however, were outweighed by the "specific policy underlying s 60", according to Wheeler J (at 91), and it was the latter policy which ultimately led to the final determination. 73 The conclusion in Temsign that a purported assignment to an undischarged bankrupt is ineffective has been endorsed by Madgwick J in Brien, wherein it was observed that: [13]...(O)nce it is appreciated that the phrase, on the contrary, may include the meaning, "to prosecute or to arrange the prosecution of the action by any assignee who is not a bankrupt ", the nature of the election is illuminated (emphasis added). See also [17] in Brien ; Bennett J in Jambrecina v Official Trustee in Bankruptcy at [30-31]; Mason P in Baker v Sheridan at [38]; and Master Newnes in Willoughby & Ors v Clayton Utz . 74 In our opinion, neither the considerations of statutory construction nor policy that we have referred to in the authorities, particularly Temsign, ought be grounds for prohibiting the assignment of a chose in action to a bankrupt, whether discharged or undischarged. 75 The powers granted to the trustee to "sell all or any part of the property of the bankrupt" under s 134 ought to be interpreted broadly. As observed by the appellant, there are no express limitations upon that provision within the Bankruptcy Act, and any relevant limitation must be implied. 76 We prefer the submission put forward by the appellant with respect to the proper approach to the construction of ss 58 and 134. We do not agree that s 134 ought to be read so as to avoid any possible circularity in terms of its operation with the provisions in s 58. On the contrary, s 58 ought to be read as subject to the wider power provided to the trustee in s 134. We thus agree with the appellant's submissions that s 58(1) ought not to be interpreted as referring to any re-vesting in the trustee of (after-acquired) property assigned to the bankrupt. 77 This approach is consistent with a line of authority rejected at first instance by Marks J, but which we adopt as correct, determining that an assignment by a trustee of a chose in action to a bankrupt is entirely effective (see Kitson v Hardwick; Nguyen; Cirillo; Stobbart v Mocnaj and Freeman v Joiner to the extent that those cases accept, expressly or implicitly, that an assignment to a bankrupt is possible). 78 We do not propose to follow the decision in Temsign for the reasons that follow. 79 There is clearly some discrepancy between the divergent lines of authority, and it would appear that divergent views therein reflect differing conclusions as to the purpose of the Bankruptcy Act. In our opinion, it is not appropriate to construe s 134, particularly as it operates in combination with s 58, as intending to preclude any assignment of a right to bring proceedings to an undischarged bankrupt on policy grounds, as occurred in Temsign and in the interlocutory judgment. We do not agree with Marks J that the bankrupt's rights to bring proceedings should be so severely proscribed, for the necessary limitations placed upon a bankrupt as a consequence of the legislative provisions within the Bankruptcy Act are only one aspect of the objectives of that statute, and ought to be reasonable in their application. 80 It is clear that the Bankruptcy Act is concerned with protecting the interests of creditors. Kirby P in Daemar refers to the bankrupt's property vesting in the trustee so that the property might be distributed "principally for the benefit of the creditors". There is no proper basis to conclude that s 60, in particular, is designed to protect the interests of third parties involved in litigation by prohibiting a bankrupt from litigating in all instances other than those set out in s 60(4). There is, however, a balancing exercise which the trustee must embark upon. As Branson J observed in Cirillo, at (585), the "principal duty of the trustee is to consider the interests of creditors of the bankrupt estate in question as a whole". However the trustee may also be mindful of the "legitimate interests of the bankrupt and to the legitimate interests of other parties likely to be affected by the trustee's decision". Thus, it may be appropriate for the trustee to act in the interests of the bankrupt, where those interests do not conflict with the interests of creditors. 81 We agree with the appellant's submission that s 134 empowers the trustee to do a number of things which might benefit the bankrupt (see, for instance, s 134(1)(m) which provides that the bankrupt may be employed to carry on the bankrupt's trade or business for the benefit of the creditors, or s (1)(ma), which provides that allowance may be made out of the estate as is appropriate for the bankrupt). Whilst the rights of a bankrupt ought certainly to be circumscribed, where necessary, to ensure that the trustee is able to fulfil the trustee's duty to relevant creditors, there is nothing in the Bankruptcy Act which would indicate that that circumscription ought to be applied where assigning a right to litigate to a bankrupt may be a real benefit to the creditors, as was the case in the present instance. Indeed, s 134 imposes no such limitation upon the trustee in dealing with the bankrupt's property. 82 We have noted above that the decision in Temsign allows for an assignment on discharge of bankruptcy but not to a undischarged bankrupt, and that the decisions in Cirillo and Nguyen relate to assignments concerning discharged bankrupts. We have taken the view that those latter cases do not address any distinction between undischarged and discharged bankrupts in relation to an effective assignment and, where they do consider the effectiveness of an assignment, they emphasise the balance of the duties of the trustee to creditors, the bankrupt and other parties. However, there is no basis, in our view, to conclude that the assignment is ineffective because the appellant is an undischarged bankrupt. 83 The conclusion derives from our construction of the Bankruptcy Act and its policy considerations. Sections 134 and 58 are concerned with the interests of creditors and the interests of the bankrupt, where they do not conflict with the interests of the creditors. It is the intention of the Bankruptcy Act that the Trustee administers the estate in the interests of the creditors and the bankrupt, and exercises those powers for the public welfare: Freeman at [16]. To find the assignment was ineffective in this matter would be detrimental to the interests of the creditors and the bankrupt, and result in a curtailment of legal rights which would go against the public interest. Potential benefits to both parties, in the event the chose in action is eventually realised, would be lost. Such a limitation would not be consistent with the duty of the trustee to maximise the return from estate assets. The Bankruptcy Act does seek to significantly curtail the rights of the bankrupt (see Daemar at 473-4), but it is not conceivable that it would prevent the assignment of a chose in action where to make the assignment may be in the interests of the creditors and the bankrupt. In our view such an approach is consistent with the correct view of s 60 of the Bankruptcy Act. 84 This construction of the Bankruptcy Act is emphasised when regard is had to s 108B of the Industrial Relations Act. It is abundantly clear that to disallow the assignment of the chose in action would adversely affect both the interests of the creditors and the bankrupt, contrary to the policy considerations of the Bankruptcy Act. This is because, if the assignment is only available on the discharge of bankruptcy, then it would be rendered ineffective by s 108B of the IR Act, which takes a strict approach, see Crowe v UCS Developments Pty Ltd (2003) 130 IR 266. That section states that an action under the Division in relation a contract that has been terminated must be made no later than 12 months after the termination of the contract. It follows that to prevent the assignment of the chose in action while the appellant is bankrupt and to only allow the appellant to be assigned the chose in action on discharge might, by virtue of s 108B, effectively time bar the appellant. Here any argument regarding a distinction between undischarged bankrupts and discharged bankrupts becomes futile, because disallowing the assignment on the basis of the distinction could destroy the chose in action. This would be to the detriment of both the appellant and the creditors and be inconsistent with intentions of the Bankruptcy Act. 85 Given that to disallow the assignment might put creditors and the appellant in an unfair position contrary to the purpose of the Bankruptcy Act, undischarged and discharged bankrupts should not be treated differently in this context, so that the appellant's status as an undischarged bankrupt prohibits the assignment of the chose in action. Such a view is inconsistent with the intentions of the Bankruptcy Act which seeks to protect the interests of creditors and the legitimate interests of the bankrupt. 86 For these reasons, we do not consider that the assignment to the appellant as a bankrupt was invalid. Effect upon the validity of the election of the assignment being ineffective The first instance judgment 87 Having previously stated that the correspondence of 7 January 2006 constituted, prima facie, an election to prosecute the action in question, his Honour then concluded that the election was invalid on the basis that the trustee's correspondence containing the election contemplated that the "proceedings were to be continued by reference to and having regard to the purported assignment". There was no "clear, unconditional election on the part of the trustee to continue the action in his own right absent any assignment to the bankrupt applicant" (at [53]). The election was held to be invalid because it contained, as an "integral component", an assignment which was ineffective. The proceedings were thus deemed to have been abandoned. A similar argument was upheld in Temsign by Wheeler J, at (93), where it was considered that as the assignment was invalid, the course of action taken by the trustee in assigning the chose to the bankrupt "amounted to a refusal to make election with the result that he is deemed to have abandoned the action". Submissions 88 The appellant submitted that the validity of an election ought not to be seen as dependent upon the efficacy of the assignment. In this instance, the trustee clearly expressed an intention that the proceedings were to be prosecuted, without any explicit or implicit reference to any "condition" which related to the assignment, in keeping with the requirements in s 60(2) that an election be unconditional. 89 The respondent, on the other hand, argued that the determination by Marks J that the trustee's election was prima facie valid was incorrect. Whilst it is appropriate that the relevant correspondence must be construed by reference not only to its terms but also from surrounding circumstances, the election was not valid if the trustee was purporting to elect to have the proceedings continued by an undischarged bankrupt. Consideration 90 It is difficult to reconcile his Honour's earlier reasoning with the ultimate determination that the election was invalid because it was somehow conditional upon an (ineffective) assignment. It is not clear on what basis the validity of the election became dependent upon the efficacy of the assignment, and we agree with the appellant's submission that his Honour appeared to be erroneously reading an implicit condition into the election. In order to comply with ss 60(2) and (3), the trustee must make a valid election. The validity of an election depends upon the trustee indicating in writing, even implicitly, an intention, that the relevant chose in action will be prosecuted or discontinued. 91 As Madgwick J determined in Brien, there is no requirement, in order to comply with ss 60(2) and (3), for formality in terms of how the election is expressed. Further, where prosecution of an action has been assigned to a third party prior to an election, the assignment does not render the election invalid, but merely serves as a (further) indicator that the trustee intended that the litigation in question would proceed (although Madgwick J did say all this on the basis that it was an assignment other than to a bankrupt at [13]). There is no basis for concluding that an election will be rendered invalid if an assignment is ineffective, or that there is any obligation upon a trustee to assess whether a relevant assignment is effective in law. There is simply no basis for the distinction made by his Honour between an election which is prima facie valid, and subsequently invalid on the basis that the relevant assignment is ineffective. 92 In our opinion, the assignment was not rendered ineffective on the ground that it was made to an undischarged bankrupt, and thus could not render the election invalid as a consequence of it being ineffective in law. Effect of a valid assignment upon election 93 As there has been a valid assignment made by the trustee by deed of assignment made on 20 December 2005, is the subsequent election made on 7 January 2006 invalidated on that basis? His Honour held at first instance (at [29]) that where an assignment by a trustee to a bankrupt is found to be effective, any subsequent election will then be invalid on the ground that the trustee would have no entitlements, rights or interests with respect to the proceedings for the purpose of making an election, having previously assigned the same to another party (see also Temsign at 93for similar reasoning). 94 We do not agree with this conclusion. The act of assigning a chose in action to the appellant does not result in the trustee having no right to make a subsequent election. Similar reasoning was rejected by Madgwick J in Brien, where it was raised by the respondents, his Honour determining that an election made after an assignment was valid, further observing as follows, at [14]: Further, it is not the case that upon an assignment of the right to the benefit of a particular action, the trustee is irrevocably disconnected from the action: the trustee might buy back such a right. Had the trustee done so here, then, as I apprehend it, the objection taken could not be sustained. The applicant might, indeed, still do so. It would be odd if the ability to elect could be extinguished and then resurrected in that way. Conclusion 95 In conclusion, ss 60(2) and (3) of the Bankruptcy Act have been complied with by the trustee in terms of the requirement that a valid election be made within the specified time limit. The election constituted by the communication of 7 January 2006 indicated a clear intention that the proceedings would be continued, albeit by the bankrupt appellant rather than by the trustee personally. We do not agree with the determination at first instance that the election was rendered invalid on the grounds that the assignment to the appellant was ineffective in law. The efficacy of an assignment of a chose in action has no bearing upon a subsequent election made by a trustee. 96 Moreover, in our opinion, the assignment was not ineffective, and does not render the election invalid by virtue of the fact that it is effective, contrary to the conclusion reached by Marks J. We do not agree that the power of the trustee to dispose of the bankrupt's property under s 134 ought be tempered by the re-vesting provisions of s 58(1)(b). Further, there appears to be no express or implied limitations upon the trustee based on policy grounds to deal with the bankrupt's property so as to deny that person the right to litigate. On the contrary, if, ultimately, under relevant policy considerations underlying the Bankruptcy Act, the trustee's principal duty is to the bankrupt's creditors, there is no proper basis for preventing the bankrupt from litigating where that litigation may ultimately benefit both the relevant creditors. 97 We propose to make orders having the effect of declaring that the motions filed by Meriton and Owners Corporation on 23 February 2006, and the motion filed on 2 March 2006 by Owners Corporation to have the proceedings dismissed, should be dismissed. We also propose to make a similar order that the appellant's motion to amend the proceedings so as to add the appellant as a party to the contract should be dismissed. Orders 98 We make the following orders: 1. Leave to appeal is granted; 2. The appeal is upheld; 3. The decision at first instance is quashed; 4. The Full Bench orders that the application filed by John Emanuel Rose on 27August 2006 to amend the proceedings so as to add the appellant as a party to the contract in question be dismissed; 5. The Full Bench orders that the motion filed by Meriton Apartments Pty Ltd on 23 February 2006 to strike out the proceedings commenced by the appellant under s 106 of the Industrial Relations Act 1996 should be dismissed; 6. The Full Bench orders that the motion filed by Owners Corporation Strata Plan No 56443 on 2 March 2006 to strike out the proceedings commenced by the appellant under s 106 of the Industrial Relations Act 1996 be dismissed; 7. The Full Bench orders that the motion filed by Owners Corporation Strata Plan No 56443 on 23 February 2006 that the proceedings be dismissed, or permanently stayed, or stayed pending provision by the appellant of security for costs, be dismissed; 8. The proceedings in Matter No IRC 2131 of 2005 is remitted to a judge of the Industrial Court to be dealt with in accordance with this judgment; 9. The appellant shall file and serve submissions as to costs within 14 days. The respondents have 14 days in which to file and serve a reply. The appellant has a further seven days to respond. Unless the parties or any one of them require to be heard orally on the question of costs, costs will be dealt with on the papers. If the parties reach a consent position in respect of costs, the appellant shall file short minutes of order reflecting the consent position. _______________________ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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