Bankrupt may not initiate dispute resolution procedure in relation to rights accrued prior to bankruptcy

Kaiser v Faulkner [2006] VCAT 1302

What this case illustrates is simply that upon bankruptcy the right to seek compensation or the waiver or diminution of legal costs through the dispute process under the Legal Practice Act, 1996 vests in the trustee in bankruptcy and never revests in the bankrupt even if not taken up by the trustee.

This is a very boring case indeed. Mr Kaiser went bankrupt. His property, including “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” vested in his trustee: s. 58 Bankruptcy Act, 1966 (Cth.) read with the definition of “property” and “property divisible among creditors”. Then he instituted a dispute resolution request — whether a pecuniary loss or costs dispute is not stated. Then he referred that dispute to the Legal Profession Tribunal when Professional Standards was unable to resolve it by negotiation. Then he was discharged from bankruptcy. Mr Butcher found that the making under s. 123 of the Legal Practice Act, 1996 was a right only the trustee could exercise. The trustee indicated that he did not wish to pursue the matter. Mr Butcher found he had no jurisdiction, the discharge of the applicant’s bankruptcy not having resulted in the transfer back to him of the right which had vested in but not been taken up by the trustee. Interestingly, Mr Butcher purported to dismiss the dispute rather than rule that he had no jurisdiction.

The bankrupt appeared unrepresented. Sam Tatarka appeared for the solicitor.


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