Background
Lisa Testart brought Federal Court proceedings against Pierre Testart alleging Fair Work Act contraventions connected with unpaid employment entitlements between 2009 and 2017. Some earlier claims had already been dismissed in 2023. In December 2024, Ms Testart became bankrupt under a sequestration order.
After being notified of the proceeding, the trustee in bankruptcy elected in writing under s 60(2) of the Bankruptcy Act 1966 (Cth) to discontinue it. Ms Testart was copied into that communication. The sequestration order was set aside in April 2025, but Ms Testart did not seek review of the trustee’s decision within the 60-day period in r 90-80 of the Insolvency Practice Rules (Bankruptcy) 2016 (Cth). In March 2026, she sought to vacate the stay and reinstate the proceeding.
The Court’s Holding
Justice O’Callaghan treated Ms Testart’s application as one to set aside the discontinuance, rather than simply to lift a stay. The Court held that a trustee’s election to discontinue under s 60(2) does not extinguish the underlying cause of action, but the discontinuance remains operative unless and until set aside.
The Court accepted that s 23 of the Federal Court of Australia Act 1976 (Cth) gave it power, in an appropriate case, to set aside the discontinuance. It declined to exercise that power. Ms Testart knew of the trustee’s decision on 13 January 2025 and offered no sufficient explanation for waiting almost 14 months after the r 90-80 review period had expired. Her interlocutory application was dismissed; the respondent’s application seeking an order that the proceeding was discontinued was also dismissed as misconceived. No costs order was made.
Key Takeaways
- A bankruptcy trustee’s election to discontinue a pending action stops that proceeding, but does not itself determine the underlying cause of action.
- Setting aside the later sequestration order did not automatically undo the trustee’s earlier election to discontinue.
- A party seeking late procedural relief must adequately explain delay, having regard to finality, efficient case management, and the administration of justice.
Why It Matters
The decision underscores that litigants affected by a trustee’s decision in bankruptcy must use the available review process promptly. A later change in bankruptcy status will not, without more, revive a proceeding that was validly discontinued while the sequestration order remained in force.
It also confirms that the Federal Court may have power to set aside a discontinuance where necessary to protect its processes, but that power is exceptional and not available merely because reinstatement would otherwise be advantageous to the applicant.