District Court New South Wales Medium Neutral Citation: Smits v Unicomb; Smits & Mahommed v Unicomb [2016] NSWDC 26 Hearing dates: 15 March 2016 Date of orders: 16 March 2016 Decision date: 16 March 2016 Jurisdiction: Civil Before: Judge Levy SC Decision: In each case, the proceedings are stayed and transferred to the inactive list pending the resolution of bankruptcy proceedings involving Mr Smits Legislation Cited: Bankruptcy Act 1966 (Cwth), s 60(2) Category: Procedural and other rulings Parties: Leonardus Gerardus Smits (Plaintiff in both proceedings) Peter Shah Mahommed (Purported second plaintiff in 2014 proceedings) Michael Charles Unicomb (Defendant in both proceedings) Representation: Mr Smits – in person by leave Mr Mahommed – in person Mr Foley solicitor for the defendant in both proceedings File Number(s): 2015/226676 & 2014/325866 Publication restriction: None Judgment Background 1. These two proceedings have a long history of controversy based upon disputed financial transactions. This has resulted in multiple actions issued in various courts, which have included many interlocutory motions. 2. The present listing essentially concerns the ability of a person who has been purportedly joined as an additional plaintiff, to continue to take active steps in the proceedings following the bankruptcy of the initially named plaintiff, and in lieu of that plaintiff. Proceedings numbered 2015/226676 – Smits v Unicomb 1. In proceedings numbered 2015/226676, between the plaintiff, Mr Smits, and Mr Unicomb as defendant, it is common ground that consequent upon Mr Smits having been declared bankrupt on 21 January 2016, these particular proceedings must be stayed by reason of the operation of s 60(2) of the Bankruptcy Act 1966 (Cwth). 2. The consequence of that result is that these proceedings must be placed in the court's inactive list pending a determination or an election by Mr Smits' trustee in bankruptcy, or the further order of the Federal Court of Australia, as to whether the proceedings may be carried forward, or must remain stayed. 3. That position will therefore be reflected in my orders, with liberty reserved to any interested party to apply to the Registrar to have the proceedings restored to the active list at any appropriate time. Proceedings numbered 2014/325866 – Smits & Mahommed v Unicomb 1. In proceedings numbered 2014/325866, that were initially commenced by Mr Smits against Mr Unicomb, and which now purportedly also involve Mr Mahommed as an additional plaintiff, those proceedings have become more complex. 2. The determination of the present dispute in the 2014 proceedings as to whether Mr Mahommed has an entitlement to continue the proceedings requires a consideration of the following broad chronology of events that was agreed during the course of the hearing of the motion, thus obviating the need to refer to voluminous bundles of documents. That chronology is as follows: 1. On 3 November 2014, the proceedings were filed, with Mr Smits as plaintiff and Mr Unicomb as defendant. The claim involved substantial monies claimed to be owing in respect of professional services; 2. On 25 September 2015, in retrospect, according to the decision of the Federal Court of Australia delivered on 21 January 2016, Mr Smits has been found to have committed a relevant act of bankruptcy; 3. On 12 November 2015, Mr Smits assigned his right of action which is the subject of these proceedings to Mr Mahommed, a financier; 4. On either 17 or 19 November 2015, a notice of motion was filed seeking leave to file an amended statement of claim in which Mr Mahommed would be added as a plaintiff; 5. On 20 November 2015, the assignment of Mr Smits' cause of action against Mr Unicomb was purportedly approved by Mr Smits' trustee in bankruptcy. Mr Unicomb challenges the validity of that assertion. Therefore, formal proof of that assertion must be provided; 6. On 22 November 2015, Mr Mahommed purported to file an amended statement of claim in which he was named as the second plaintiff; 7. On 23 November 2015, by order of another Judge of this court in a motion before the court at that time, Mr Mahommed was joined as a plaintiff to the proceedings. That order was based upon the earlier agreement made between Mr Mahommed and Mr Smits, who had by then committed an act of bankruptcy. The fact was not known to the court at that time. In those events, Mr Smits also sought his removal from the proceedings but that order was not made. Mr Unicomb claims that underlying agreement or assignment was invalid due to the earlier act of bankruptcy; 8. On 21 January 2016, by order of the Federal Court of Australia, Mr Smits was declared bankrupt, and his estate was sequestrated; 9. On 8 February 2016, Mr Smits lodged an appeal from the orders made in the Federal Court on 21 January 2016. That appeal is yet to be determined; 10. On 3 March 2016, the orders made by the Federal Court on 21 January 2016 were stayed pending further orders of that court. Representation and positions of the parties 1. At the hearing of the present motion, by which Mr Mahommed seeks to have Mr Smits removed from the proceedings, and himself confirmed as the only remaining plaintiff in the proceedings, Mr Mahommed was self-represented, Mr Smits was granted leave to appear to assist the court, and in that process, Mr Smits supported the position taken by Mr Mahommed. Mr Foley, solicitor, who appeared for Mr Unicomb, opposed the course suggested by Mr Mahommed and Mr Smits. 2. During the course of submissions, the parties agreed that the alternative courses open were either, to accede to Mr Mahommed's application, or, as Mr Foley submitted, to stay and transfer both proceedings to the court's inactive list, pending the determination of Mr Smits' legal capacity following a final resolution of the present bankruptcy proceedings. Consideration 1. I find the latter course suggested on behalf of Mr Unicomb compelling because a pivotal issue to be determined in the proceedings is the validity or otherwise of the assignment by Mr Smits to Mr Mahommed of the underlying claimed cause of action against Mr Unicomb, where that assignment occurred after a relevant act of bankruptcy by Mr Smits. 2. In my view, the consequences of that matter can only be resolved in the context of the bankruptcy proceedings in the Federal Court. Accordingly, these proceedings must also be placed in the court's inactive list pending the finalisation of the current appeal in those proceedings. Orders 1. In each of the proceedings numbered 2015/226676 and 2014/325866, I make the following orders: 1. The proceedings are to be stayed and placed in the court's inactive list pending the further order of the Federal Court of Australia concerning the determination of bankruptcy status of Mr Smits; 2. Following the final determination of Mr Smits' bankruptcy status, any interested party may apply to the Registrar of this court to restore the proceedings to the active list; 3. Costs of the present applications are to be costs in the cause. ********** 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 March 2016