Facts
In Sarkis v Moussa [2012] NSWCA 136, Mr Sarkis filed a summons in the NSW Court of Appeal seeking leave to appeal a judgment of the NSW Supreme Court. A short time after Mr Sarkis filed the summons he was made bankrupt.
The respondent to the summons, Mr Moussa, gave notice to Mr Sarkis’ trustees in bankruptcy under section 60(3) of the Bankruptcy Act 1966 (Cth) (“Act”) requiring the trustees to make an election within 28 days as to whether they intended to prosecute or discontinue the leave application.
The trustees elected not to prosecute the application.
The motion
Mr Moussa then brought a motion seeking to dismiss the summons on the basis that it was an action that was stayed pursuant to section 60(2) of the Act on Mr Sarkis becoming a bankrupt, and his trustees having elected not to pursue the summons, the action was abandoned under section 60(3) of the Act.
There was a question as to whether the trustees’ “election” was valid. On this point, Mr Moussa argued that even if the Court found that the trustees’ “election” was not valid, the action was abandoned in any event as no “election” was made within 28 days of the notice being given. The Court ultimately found that the trustees’ “election” was effective.
Two main arguments were advanced by Mr Sarkis in opposing the relief sought in Mr Moussa’s motion:
1. that a summons seeking leave to appeal was not, or did not, constitute an “action” for the purposes of section 60(2) of the Act; and
2. that within the meaning of section 58 of the Act, a summons seeking leave to appeal did not constitute “property” and subsequently did not vest in the trustees – therefore, Mr Sarkis had “standing” to prosecute the application seeking leave to appeal.
Meaning of “action” for the purposes of s60 of the Act
Section 60(5) of the Act states that, “In this section, action means any civil proceeding, whether at law or in equity.” “Civil proceedings” is defined in the Civil Procedure Act 2005 (NSW)(“CPA”) as “…any proceedings other than criminal proceedings.”
The Court held that proceedings were “civil” in nature, and there being no criminal element involved, it was therefore a civil proceeding and the summons was an “action” for the purposes of section 60 of the Act. The Court relied on Want v Moss [1], Daemar v Industrial Commission of New South Wales [2] and Cummings v Claremont Petroleum [3] in support of the determination that the summons was an “action” for the purposes of section 60 of the Act.
Whether a summons seeking leave to appeal constitutes “property” within the meaning of s58 of the Act
The Court referred to the Cummings decision which held “…that whilst a right to appeal may be a substantive right, the mere fact that it was a creature of statute did not mean that it had the “character of property”.[4] Also, a liability created by a judgment made against a debtor cannot be said to be the “property” of the debtor against whom the judgment was made.
With it then established that a summons seeking leave to appeal from a judgment was not the “property” of the debtor and, therefore, did not vest in the trustee in bankruptcy, the Court was left to determine whether Mr Sarkis had standing to pursue the summons.
The Court found that Mr Sarkis did not have standing to prosecute the appeal and again followed the Cummings decision in finding that “…as the judgment was enforceable only against property vested in the trustee, the bankrupt ceased to have the interest necessary to give them a right to appeal…therefore…the bankrupt appellant…had no locus standi to appeal against the judgment.” [5]
Accordingly, although Mr Sarkis was successful on the point that the summons was not “property” within the meaning of section 58 of the Act, he was ultimately unsuccessful because he did not have standing to pursue the appeal.
Conclusion
Although an “action” in the form of a right of appeal may not constitute “property” within the meaning of the Act, if the action relates to, or affects, property that has vested in the trustee, it is the trustee, rather than the bankrupt that is the proper person to prosecute any such action, if they so elect.
For more information, please contact:
Emma Hodgman | Partner
T +61 2 8233 9650
F +61 2 8233 9555
E emma.hodgman@dibbsbarker.com
Footnotes:
1. (1889) 10 LR (NSW) 274; where a rule nisi application to set aside a verdict was found to be a “proceeding commenced”.
2. (1988) 12 NSWLR 45; where it was observed that “action” was a word of wide meaning, and an application to the Court of Appeal for prerogative writs fell within that meaning.
3. [1996] 185 CLR 124 (hereafter Cummings); where the majority observed that a defendant’s appeal against a judgment made in favour of a plaintiff constituted the commencing of a proceeding, and hence an “action”.
4. Sarkis v Moussa [2012] NSWCA 136 at [43]
5. Ibid, [44]
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