Griffiths, Roy Frederick v Civil Aviation Authority [1996] FCA 397

CATCHWORDS

BANKRUPTCY - appeal from variation of appellant's commercial pilot licence - effect of bankruptcy on proceedings - whether right of appeal is property that vests with the trustee - personal nature of action - no interest for estate

Federal Court of Australia Act 1976

Administrative Appeals Tribunal Act 1975

Bankruptcy Act 1966 (Cth)

Bankruptcy Act 1914 (UK)

Insolvency Act 1986 (UK)

Acts Interpretation Act 1901 (Cth)

Jack v Smail [1905] 2 CLR 684

Commissioner of Stamp Duties v Yeend [1929] 43 CLR 235

Cox v Journeaux (No.2) [1935] 53 CLR 713

Australian Capital Television v The Commonwealth [1992] 177 CLR

Fuller v Beach Petroleum NL & Anor [1993] 43 FCR 60

Holmes v Goodyear Tyre & Rubber Co. (Aust) Ltd [1984] 55 ALR 594

Faulkner v Bluett [1980] 52 FLR 115

Daemar v Industrial Commission of NSW [1988] 90 FLR 469

Madden v Madden & Ors [1995] ATC 4465; on appeal, Full Court of the Federal Court of Australia (Sheppard, Einfeld & Foster JJ) unreported 27 March 1996

Anthoness v Anderson [1887] 14 VLR 127

Millane v Shire of Heidelberg [1936] VLR 8

Coffey v Bennett [1961] VR 264

Queen v Miller [1893] 5 QLJ 40

Burns Philp Trustee Co. Ltd v Ironside Investments Pty Ltd [1984] 2 Qd.R.16

Pamela Adele Linklater v Michael Jaunay Mount as Trustee for

Linklater, unreported Von Doussa J 29 October 1990

Dixon v Wordsworth Court of Appeal (UK) unreported 14 December 1994

Michael Vincent Bourke & Ors v State Bank of NSW Full Court of the Federal Court of Australia (Beaumont, Einfeld and Whitlam JJ) unreported 4 August 1995

In the marriage of Woodham, D.H. and Woodham,M. [1984] FLC 91-547

Re Richter [1929] NZLR 364

Beckham v Drake [1849] 2 HLC 579, 9 ER 1213

Wetherell v Julius 10 Com. B. 267; [1850] 138 E.R. 108

Dence v Mason [1879] 41 LT 573

United Telephone Company v Bassano [1886] 31 Ch D 630

Wilson v United Countries Bank Ltd [1920] AC 102

Stanton v Collier [1954] 118 ER 1143 (CA)

McDonald and Another v Graham [1994] R.P.C.[No.12] 407

Heath v Tang and another; Stevens v Peacock and others [1993] 1 WLR 1421

ROY FREDERICK GRIFFITHS v CIVIL AVIATION AUTHORITY

No. QG 197 of 1994

SPENDER, EINFELD & COOPER JJ

BRISBANE

24 MAY 1996

IN THE FEDERAL COURT OF AUSTRALIA )

QUEENSLAND DISTRICT REGISTRY ) No. QG 197 of 1994

GENERAL DIVISION )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT

OF AUSTRALIA

Between: ROY FREDERICK GRIFFITHS

Appellant

And: CIVIL AVIATION AUTHORITY

Respondent

MINUTE OF ORDERS

THE COURT ORDERS:

1. The respondent's motion for summary dismissal of the appellant's appeal from the decision of Kiefel J on 2 December 1994 be dismissed.

2. The Appeal be allowed, and the orders of Kiefel J of 2 December 1994 be set aside.

3. The respondent's motion for summary dismissal of the appellant's appeal from the decision of Administrative Appeals Tribunal on 31 May 1994 be dismissed.

4. The application by the appellant pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 be listed for hearing by the District Registrar.

5. The respondent pay the appellant's costs at first instance (if any), and on appeal, to be taxed if not agreed.

Note: Settlement and entry of orders are dealt with in accordance with Order 36 of the Federal Court Rules.

SPENDER, EINFELD & COOPER JJ

BRISBANE

24 MAY 1996

IN THE FEDERAL COURT OF AUSTRALIA)

QUEENSLAND DISTRICT REGISTRY ) No. QG 197 of 1994

GENERAL DIVISION )

On Appeal from a Judge of the Federal Court of Australia

BETWEEN : ROY FREDERICK GRIFFITHS

Appellant

AND : CIVIL AVIATION AUTHORITY

Respondent

CORAM: Spender, Einfeld and Cooper JJ

PLACE: Brisbane

DATE: 24 May 1996

REASONS FOR JUDGMENT

Spender J:

The facts and issues on this appeal appear from the Reasons for Judgment of Einfeld J and Cooper J. I agree generally with those reasons. I wish to add a few observations of my own.

The question on this appeal is whether the exercise of the right conferred by s 44(1) of the Administrative Appeals Tribunal Act 1975 ('the AAT Act') to appeal to the Federal Court on a question of law from a decision of the Administrative Appeals Tribunal (the effect of which was to confirm the imposition of conditions on two aviation licences of Mr Griffiths) is part of the "property of the bankrupt" which, pursuant to s 58(1) of the Bankruptcy Act 1966 ('the Act'), vests, on bankruptcy or on the acquisition of the
property by the bankrupt after bankruptcy, in the trustee of the bankrupt's estate.

The proceedings for which s 44(1) of the AAT Act provides is a proceeding in the original jurisdiction of the Court under s 19 of the Federal Court of Australia Act 1976. Order 52 rule 18 of the Federal Court Rules dealing with the competency of an appeal is not applicable to such proceedings, but to appeals properly so called, i.e., proceedings in the appellate jurisdiction of the Court: see O 52 r 1. In my opinion, if a bankrupt lacked standing to bring proceedings in the original jurisdiction of the Court (because the right to bring those proceedings vested in his trustee), O 20 r 2 would apply. In those circumstances the Court could conclude that the proceedings were vexatious or, alternatively, were an abuse of the process of the Court. In The Metropolitan Bank, Limited v Pooley (1885) 10 App.Cas. 210, a bankrupt sued on a cause of action which, it was held, had passed to the trustee. The Lord Chancellor said at 219 that the bankrupt had no standing and the action was therefore "frivolous and vexatious".

The Court is not here concerned with any right of appeal the bankrupt may have in respect of a money judgment which has been made against the bankrupt, as was the case in Fuller v Beach Petroleum NL(1993) 43 FCR 60. The correctness of the judgment of the Full Court in that case is presently the subject of a reserved judgment of the High Court. The authorities referred to by Cooper J support the conclusion that a defendant's right to appeal to set aside a money judgment against the defendant is "property" within the meaning of s 5.1 of the Act; and see also Heath v Tang [1993] 1 WLR 1421.

The present proceedings concern a statutory right to bring proceedings in the Federal Court to challenge a decision imposing conditions on which a pilot's commercial licence might be used.

Mr Griffiths became bankrupt on 18 May 1994. The decision of the Tribunal the subject of the appeal this Court, was given on 31 May 1994. The exercise of the right to appeal therefore arose subsequent to the bankruptcy. If that right is properly to be characterised as "property of the bankrupt", it is "after-acquired property of the bankrupt".

The present proceedings were not "an action commenced by a person who subsequently becomes bankrupt". Section 60 of the Act, which deals with actions commenced by a person before that person became a bankrupt, does not apply to the present case. I derive no assistance on the present question from arguments based on what might be thought anomalous consequences in the application of s 60 of the Act, depending on the width to be given to the definition of "property" in s 5 of the Act. Further, in my opinion, the question of the costs of proceedings either commenced or continued after a person becomes a bankrupt, is a red herring. Costs incurred by a bankrupt in proceedings subsequent to the bankruptcy are not debts provable in that bankruptcy; they are post-bankruptcy debts. Any order for costs against a bankrupt in those circumstances would not affect the estate available to the bankrupt's creditors.

I prefer to base my conclusion squarely on the provisions of the Act which have application to the facts of this case.

Section 58 of the Act describes what does vest in the trustee. The Official Trustee is the trustee of Mr Griffiths' estate, and s 58(1)(b) then relevantly provides that after-acquired property of the bankrupt vests, as soon as it is acquired by or devolves on the bankrupt, in the Official Trustee.

By s 5 of the Act, the after-acquired property of the bankrupt means the after-acquired "property divisible amongst the bankrupt's creditors", and "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".

By s 116(1) of the Act, "property divisible amongst the creditors of a bankrupt" in the present circumstances is relevantly:-

" (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 has devolved or devolves on him, after commencement of the bankruptcy and before his discharge;"

as well as:

" (b) the capacity to exercise, and take proceedings for exercising, all such powers in, over or in respect of property as might have been exercised by the bankrupt for his own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his discharge;"

[emphasis added]

The licences the subject of the Tribunal's decision are a "commercial pilot (aeroplane) licence" for which the qualifications are set out in Regulation 5.104 of the Civil Aviation Regulations, and a "commercial pilot (helicopter) licence", for which the qualifications are set out in Regulation 5.120. Those regulations require the holding of a flight radio telephone operator licence and passes in appropriate theory and flight tests. Each of those licences is a "flight crew licence", and reg 5.09 provides:

" ...the Authority must issue a flight crew licence to an applicant if, and only if, the applicant:

(a) possesses a knowledge of the English language that is sufficient to enable him or her to exercise safely the authority given by the licence; and

(b) is qualified to hold the licence; and

(c) is a fit and proper person to hold the licence; and

(d) has paid any charge under section 66 of the Act in relation to the application and any penalty payable under that section in relation to that charge. "

The power to vary, suspend or cancel a licence appears from Regulation 269.1. The relevant ground on which the Civil Aviation Authority acted in the present case was that the holder of the licence "...is not a fit and proper person to have the responsibilities and exercise and perform the functions and duties of the holder of such a licence...".

The present question concerns the capacity to take proceedings for exercising powers in respect of Mr Griffiths' two aviation licences. If those licences are not "property", the right to take proceedings to appeal a decision affirming restrictions on those licences is not "property divisible amongst the creditors of the bankrupt" and, as a consequence, did not vest in the trustee when the right of appeal arose.

Each of the licences presently relevant is not transferable or assignable. Each of such licences is personal to the holder. Isaacs J in Commissioner of Stamp Duties v Yeend (1929) 43 CLR 235, drew the distinction at 245-6 between a right which is a personal right and a right which is a property right. The High Court was there concerned with whether an agreement between a caterer and a racing club relating to the supply of refreshments to the public was liable to ad valorem duty as a "conveyance of any property". "Property" was there relevantly defined as to include "real and personal property, and any estate or interest in any
property real or personal, and any debt, and any thing in action, and any other right or interest".

The definition of "property" in s 5(1) of the Act is in similarly wide terms:

" 'property' 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 to any such real or personal property; "

The High Court concluded that the agreement gave rise to a more personal right of selling refreshments with ancillary stipulations, and was not "property" within the meaning of the Stamp Duties Act 1920-24 (NSW).

In my opinion, a licence to drive a motor vehicle is not "property divisible amongst the creditors" within s 116(1)(a) of the Act because such a licence is not property. It follows further that a capacity to exercise or to take proceedings for exercising all such powers in, over or in respect of a driving licence is also not property divisible amongst the creditors of the bankrupt, within s 116(1)(b) of the Act.

Similarly, in my opinion, neither a commercial pilot (aeroplane) licence nor a commercial pilot (helicopter) licence is "property" that belonged to or was vested in the bankrupt at the commencement of his bankruptcy and therefore is not to be characterised as "property to be divisible amongst the creditors of the bankrupt" and, as a consequence, is not property which vested on bankruptcy in the trustee.

Further, the capacity to exercise and to take proceedings for exercising all such powers in, over or in respect of either of those licences, as might have been exercised by the bankrupt for his own benefit at any time after the commencement of the bankruptcy and before his discharge, is not property divisible amongst the creditors of the bankrupt, because the capacity to exercise and take proceedings for exercising powers over or in respect of those licences is not the capacity to exercise or to take proceedings for exercising powers over or in respect of "property".

The consequence is that the right to bring proceedings pursuant to s 44(1) of the AAT Act to challenge a decision of the Tribunal made in respect of the two licences of Mr Griffiths did not vest in the trustee when the Tribunal's decision was given on 31 May 1994, and Mr Griffiths was competent to bring those proceedings in this Court.

The contrary conclusion runs into a further difficulty, in that s 44(1) of the AAT Act provides that "a party to a proceeding before the Tribunal may appeal to the Federal Court of Australia, on a question of law from any decision of the Tribunal in that proceeding". The terms of s 44(1) would seem to preclude the trustee from appealing to the Federal Court of Australia from the decision concerning Mr Griffiths' licence.

I agree with the orders proposed.

I certify that this and the preceding eight (8) pages are a true copy of the reasons for judgment herein of the Honourable Justice Spender.

Associate

24 May 1996

IN THE FEDERAL COURT OF AUSTRALIA )

QUEENSLAND DISTRICT REGISTRY ) No. QG 197 of 1994

GENERAL DIVISION )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT

OF AUSTRALIA

Between: ROY FREDERICK GRIFFITHS

Appellant

And: CIVIL AVIATION AUTHORITY

Respondent

CORAM: SPENDER, EINFELD AND COOPER JJ

DATE: 24 MAY 1996

REASONS FOR JUDGMENT OF JUSTICE EINFELD

INTRODUCTION AND BACKGROUND

This appeal pursuant to section 24 of the Federal Court of Australia Act 1976 is from an order made by a Judge of the Court (Kiefel J) on 2 December 1994 dismissing an appeal by Roy Frederick Griffiths (the appellant) from a decision of the Administrative Appeals Tribunal (the Tribunal). The matter at stake was a decision of the Civil Aviation Authority (the respondent) pursuant to regulation 269(1)(d) of the Civil Aviation Regulations (the regulations), varying the appellant's commercial pilot licences following a finding that the appellant was not a "fit and proper person" to hold the licences. As a result of the variation, the appellant is no longer able to earn income as a pilot, and, consequently, his business has failed.

The hearing before the Tribunal concluded on 8 February 1994 and the decision was reserved. On 18 May 1994, a sequestration order was made against the estate of the appellant. On 31 May 1994, the Tribunal delivered its determination, affirming the decision of the respondent. On 28 June 1994, the appellant appealed from the Tribunal's decision to this Court pursuant to section 44 of the Administrative Appeals Tribunal Act 1975 and the matter came before Justice Kiefel in this Court's original jurisdiction under section 19 of the Federal Court of Australia Act 1976. The point of contention before her Honour, raised on a motion by the respondent dated 17 November 1994 seeking an order that the appeal to her Honour be dismissed as incompetent, was that as a bankrupt, the appellant had no standing and was not entitled to prosecute the proceedings. On this appeal an identical motion for summary dismissal of the appeal from Justice Kiefel was filed by the respondent.

RELEVANT STATUTORY PROVISIONS

The relevant Civil Aviation Regulations are as follows (emphasis added):

Variation, suspension or cancellation of licence or certificate

269.(1) Subject to this regulation, the Authority may, by notice in writing served on the holder of a licence or certificate, vary, suspend or cancel the licence or certificate where the Authority is satisfied that one or more of the following grounds exists, namely:

....

(d) that the holder of the licence or certificate is not a fit and proper person to have the responsibilities and exercise and perform the functions and duties of a holder of such a licence or certificate...'.

Regulations 5.104 and 5.120 set out the qualifications for a "commercial pilot (aeroplane) licence" and a "commercial pilot (helicopter) licence" respectively. These qualifications are personal to the licensee, including that the person holds a "flight radiotelephone operator licence" and has passed various theory and flight tests.

The relevant sections of the Bankruptcy Act 1966 (the Act) for present purposes are as follows:

Vesting of property upon bankruptcy

58.(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.

....

(6) In this section, "after acquired property", in relation to a bankrupt on or, means property that is acquired by, or devolves on, the bankrupt on or after the date of bankruptcy, being property that is divisible amongst the creditors."

Stay of legal proceedings

60.(1) The court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit -

....

(b) stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this sub-section, 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 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....

....

(2) An action commenced by a person who subsequently becomes a bankrupt is, upon his becoming a bankrupt, stayed until the trustee makes election in writing, to prosecute or discontinue the action.

....

(4) Notwithstanding anything contained in this section, a bankrupt may continue, in his own name, an action commenced by him before he became a bankrupt in respect of -

(a) any personal injury or wrong done to the bankrupt, his spouse or a member of his family; or

(b) the death of his spouse or of a member of his family.

(4A) ....

(5) In this section, 'action' means any civil proceeding, whether at law or in equity."

Property divisible amongst creditors

116.(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 has devolved or devolves on him, after the commencement of the bankruptcy and before his 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 own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his 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;

....

and any damages or compensation recovered by the bankrupt (whether before or after he became a bankrupt) in respect of such an injury or wrong or the death of such a person...

Section 5(1) of the Act provides the following relevant definitions:

'property' 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 to any such real or personal property...".

the property of the bankrupt', in relation to a bankrupt, means:

(a) except in subsection 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...".

REASONING AND DECISION AT FIRST INSTANCE

Justice Kiefel dismissed the appeal as incompetent under Order 52 rule 18 of the Federal Court Rules on the basis that prior to its institution the appellant had become a bankrupt. Following the decision of the majority of a Full Court of this Court (Gummow and Whitlam JJ) (the majority) in Fuller v Beach Petroleum NL & Anor [1993] 43 FCR 60, the appellant's right of appeal was held to be "property" within the meaning of section 5(1) of the Act which therefore vested in the trustee upon the appellant's bankruptcy pursuant to section 58(1) of the Act.

The appellants in Fuller had appealed from a decision that they were liable for certain claims in tort and for breaches of fiduciary duty as directors of Beach Petroleum. In her reasons for judgment in the present case, her Honour noted the "striking resemblance" between the chronology of events in this matter and "the sequence of events in Fuller" and therefore held, as she
felt constrained to do, that the majority decision was binding on her (AB64) --

..... as the decision of the Full Court in relation to [a] bankrupt's rights of appeal regardless of its subject matter.

Her Honour considered, however, that there was "much force" in the reasons for judgment of the dissenting judge in Fuller (Hill J), who was of the opinion that "the subject matter of the action in question could not be regarded as 'property' and was not property divisible among creditors, and further that the bankruptcy legislation did not vest a 'bare right of action' in the trustee". Justice Hill was of the view that certain rights of action, beyond those referred to in section 116(2) of the Act, remain with the bankrupt after bankruptcy, and that the issue of costs could be addressed on a motion for security for costs.

GROUNDS OF APPEAL

The appellant has appealed from the whole of the judgment of Justice Kiefel on the grounds that her Honour erred in finding:

1. that the matter under consideration was an appeal falling within the statutory right of appeal under section 24 of the Federal Court of Australia Act 1976 when it was a matter that came within the original jurisdiction of the Court pursuant to section 19 of that Act, and;

2. that the statutory rights of appeal vested in the trustee upon the appellant's bankruptcy when the rights attached to the subject matter did not vest in the trustee in bankruptcy.

The respondent once again moved the Court for orders that the appeal be dismissed as incompetent and for costs, based on the majority decision in Fuller.

ARGUMENTS ON THE GROUNDS OF APPEAL

1. That the matter came within the original jurisdiction of the Court pursuant to section 19 of the Federal Court of Australia Act.

By contrast with the present case, Fuller was an appeal that fell within the statutory right of appeal under section 24 of the Federal Court of Australia Act 1976. The issue for determination was whether the appeal before the Court was 'property' within the scheme of the Act. The majority held that "the statutory right of appeal given by section 24 ... falls within the meaning of the expression 'personal property of every description' and within the definition of 'property' in section 5(1)". It confirmed (at 238) that "[t]he institution of appellate process is the commencement of an action within the meaning of provisions such as section 60".

It is clear from the reasoning of the majority that the fact that the cause of action in issue was a statutory right of appeal as opposed to an application to the Court's original jurisdiction, was of no consequence to the conclusion that it was 'property' which vested in the trustee upon bankruptcy. If applicable on the facts, the decision of the majority applies to appeals by bankrupts generally, regardless of whether they come before the
Court in its original or appellate jurisdiction. Justice Kiefel did not therefore err in following the majority for this reason.

In deciding whether the decision of the majority in Fuller is applicable to and should govern the result of this appeal, the question to be determined is not what the nature of the current appeal is but whether, given the subject matter of the appeal, it can fairly be described as being part of the 'property of the bankrupt', that is, property divisible amongst his creditors.

2. The statutory right of appeal does not vest in the trustee in bankruptcy upon the appellant's bankruptcy when the rights attached to the subject matter do not so vest.

Before confronting this proposition of the appellant, this Court must first decide its approach to the decision of the majority in Fuller.

(a) Applicability of Fuller

I respectfully agree with Justice Kiefel that the ratio of the majority in Fuller is not correct. However, the point does not have to be decided here. Whilst acknowledging that the chronology of events in Fuller was very similar to the present matter in that the appellant became a bankrupt prior to lodging the notice of appeal, I am of the opinion that the facts in Fuller distinguish it from the matter presently before the Court, and that the decision of the majority has therefore no application to the issue in these proceedings.

In Fuller, the object of the appeal was to have a judgment debt of $44.5 million and a costs order set aside. As the majority stated (at 62):

It follows that the fate of an appeal against the order creating the judgment debt against [the bankrupts] is one in which their bankruptcy administration has a real interest. This is in addition to the cost orders made against the bankrupts by the primary judge.

The same cannot be said of the present matter which concerns variations made to personal licences held by the appellant of no value or use to the creditors whatsoever. The only possible interest the estate could have in the present case is that it not be at risk of sustaining further costs of appellate litigation. This issue of costs was also raised by the majority in Fuller but with respect I believe with Justice Hill that costs is not an issue of substance and that what is of concern is the nature of the cause of appeal. It is my view that the issue of costs should be dealt with separately, presumably in an application for security for costs. The first question to be answered is therefore whether the licences in issue are 'property' which vested in the trustee upon the appellant's bankruptcy.

(b) Are the licences 'property'?

In Jack v Smail [1905] 2 CLR 684, the relevant Act provided for a grocer's licence to be issued to certain persons for particular premises, as authorised by the Licensing Court. The High Court held, in line with the decision in Anthoness v Anderson [1887]
14 VLR 127, that such a licence was not property. Chief Justice Griffith said at 705:

it is a personal right of the insolvent to carry on business at a particular place under conditions prescribed by law.

A pilot's licence is granted on the personal fitness of the applicant and is obviously not transferable to anyone else: cf Queen v Miller [1893] 5 QLJ 40; Burns Philp Trustee Co. Ltd v Ironside Investments Pty Ltd [1984] 2 Qd.R.16. Such licences are also subject to variation, suspension or cancellation by the respondent Authority where it is satisfied that one or more of the grounds set out in the regulations exists, such as that the holder of the licence is not a fit and proper person to have the responsibilities, and to exercise and perform the functions and duties, of a holder of such a licence.

In the case of In the marriage of Woodham, D.H. and Woodham,M. [1984] FLC 91-547, the point at issue was whether an abalone fishing licence was 'property' within the meaning of the Family Law Act 1975. In deciding that the licence was personal to the owner, the Family Court (Wood SJ) noted the following characteristics of the licence as prescribed by the relevant regulations (at page 79,426) (emphasis added):

... the licence relates to the applicant personally .... [it] can only be held by one person who may for a variety of reasons fail to have it renewed by the minister on a wide range of discretionary bases ..... The licence is not transferable from one person to another, so that it is different from a wide range of other occupations in which
a government licence is necessary for the carrying on of a business, such as, for example, a taxi licence or a liquor licence ... the practice is that that person must satisfy the minister in advance that he has the qualifications and qualities necessary to be a fit and proper person to hold an abalone licence ....

It is to be noted that these licence characteristics are very similar to those created by the regulations in this matter. Moreover, in Woodham the Judge noted (at 79,427) that, to his knowledge, there had been no instances of bankruptcy proceedings against an abalone diver where a court had determined whether the licence was part of the bankrupt's estate. Similarly, there are no instances of bankruptcy proceedings which I have been able to find dealing with the issue of whether a commercial pilot's licence is to be regarded as part of the bankrupt's estate.

Furthermore, the statement of Isaacs J in Commissioner of Stamp Duties v Yeend [1929] 43 CLR 235 at 245-6 that (emphasis added):

... The test in every such case must be whether the 'right' which is either 'transferred to' or 'vested in' or 'accrues to' the alleged taxpayer, is a personal right or a property right....The standard is the inherent nature of the right that is the immediate subject matter of the agreement....If it is not in itself property, attempted assignment carries it no further. Assignability is a consequence, not a test ... ultimately the question depends on construction of the instrument as to which category it comes under ...

makes clear that it is not every such entitlement which vests in the trustee. Thus in Australian Capital Television Pty Ltd v The Commonwealth [1992] 177 CLR 106 Brennan J said at 166 that
assignability may be denied to what is, by other tests, properly found to be property. His Honour went on to say:

Nonetheless, the want of assignability of a right is a factor tending against the characterisation of a right as property.

Based on the nature of the licence prescribed by the regulations, I conclude, therefore, that the "inherent nature of the right" in this instance is personal to the appellant and that the licence cannot therefore be considered as 'property' vesting in the trustee upon the appellant's bankruptcy.

By itself, this conclusion leads necessarily to a finding that the right of appeal in this case is not 'property' vesting in the trustee upon the appellant's bankruptcy. However, this finding requires further analysis.

(i) Legislative scheme

As seen in the relevant statutory provisions set out earlier, the definitions of 'property' and 'the property of the bankrupt' provided in section 5(1) of the Act differ, with the latter expression being relevantly defined as "the property divisible among the bankrupt's creditors". Division 3 of the Act is entitled "Property Divisible Amongst Creditors", and within that Division section 116 expressly excludes from that description
"any right of the bankrupt to recover damages or compensation for personal injury or wrong done to the bankrupt..." (subsection (2)(g)). Similarly section 60, which acts to stay legal proceedings commenced by persons who subsequently become bankrupt, excludes any action in respect of "any personal injury or wrong done to the bankrupt, his spouse or a member of his family...." (subsection (4)).

The matter presently before this Court is not a decision involving a "personal injury or wrong" done to the appellant, but a personal right of the appellant which the creditors could not turn into any advantage to themselves. However, whether this right of appeal is property vesting in the trustee requires an examination of how the "personal injury and wrong" exception has developed in bankruptcy cases to exclude from the definition of 'property', and preserve to the bankrupt, the right to bring actions which are purely personal to the bankrupt.

(ii)English cases

Unlike the Australian Bankruptcy Act 1966, the English bankruptcy laws have never excluded from the definition of 'property divisible amongst the creditors', actions for "personal injury or wrong". However, in Beckham v Drake [1849] 2 HLC 579, 9 ER 1213, Erle J stated that:

The right of action does not pass where the damages are to be estimated by immediate reference to pain felt by the bankrupt in respect of his body, mind or character and without immediate reference to his
rights of property. Thus it has been laid down that the assignees cannot sue for breach of promise of marriage, for criminal conversation, seduction, defamation, battery, injury to the person by negligence... (at HLC 604)

Stanton v Collier [1854] 118 ER 1143 involved an action for damages for failure to deliver a printing press in breach of contract, the result of which was that the plaintiff's trade was ruined and he was made a bankrupt. Lord Campbell commented (at 1145-6) that:

...the rule to be deduced from Rogers v Spence....and Beckham v Drake...is that, where the cause of action and damage touch only the person of the debtor, they do not pass to the assignees; but, if they touch the personal estate, they do. Now, in the present case, the printing press had become, at the time the action was commenced, the property of the assignees; the breach for not delivering it touches that property, and would be well assigned in an action by the assignees.....I am of the opinion that the whole of the special damage here alleged.....is substantially damage to the personal estate, and there is no part which touches only the person.... It would have been quite a different thing if anything had been alleged confined entirely to the person, as in Wetherell v Julius [10 Com. B. 267], where the damage...was the imprisonment of the plaintiff.

Wetherell v Julius was a case concerning an obvious 'personal wrong' to the unfortunate plaintiff. He had been imprisoned in the debtors' prison because of his solicitor's negligence, and after his bankruptcy he sued the solicitor for damages for, inter alia, personal inconvenience and loss of rents.

In Dence v Mason [1879] 41 LT 573, a defendant, who had become a bankrupt since the trial of a passing off action, appealed
against an injunction restraining him from selling certain articles. The editor of the Law Times Report stated:

Their Lordships had at first some doubt whether the defendant was not precluded by his bankruptcy from appealing, but they ultimately decided that he could appeal from the injunction which was a personal order against him, notwithstanding the bankruptcy, though he had no interest in the order as to costs, his estate being now vested in the trustee.

In similar circumstances, in United Telephone Company v Bassano [1886] 31 Ch D 630, the Court held that the defendants, although bankrupt, still had an interest in being relieved from an injunction so as to be able to proceed with an appeal against an order that they give security for costs. Cotton LJ said at 631:

The injunction affected both the persons and the property of the defendants. The official receiver is interested in the question as affecting the trade property; the bankrupts are still interested, for the injunction restrains them from selling a particular class of machines, and if they broke that injunction they might be sent to prison. The injunction, therefore, interferes with their future power of gaining a livelihood, and they have an interest in being relieved from it.

In Wilson v United Countries Bank Ltd [1920] AC 102, a bankrupt trader brought an action for damages for breach of contract which was said to have caused "pain and humiliation and loss of credit and repute". Lord Atkinson stated at 128:

That credit and repute, though of great value to him, was not part of his assets. Injury to it, though it might do him much harm, did not lessen or depreciate his property; and it would appear to me that the right of action in respect of this injury would no more pass
to his trustee than would his right of action for slander .....

And at 131:

In the present case ..... the negligence of the defendants gave rise to two distinct causes of action, the one consisting of injury to the bankrupt's estate, the other personal and consisting of injury to his character, credit and repute; the first passing to his trustee, the second remaining vested in himself.

The principle developed in these cases, i.e. that where the cause of action and damage touch only the person of the debtor, they do not pass to the trustee upon bankruptcy, is an exception to the established intention of the bankruptcy laws that "every right vested in the bankrupt of which profit could be made, including rights of action, should pass to the assignees": Erle J in Beckham at 1225.

More recently, in Heath v Tang & Anor; Stevens v Peacock & Ors [1993] 1 WLR 1421, Heath applied for leave to appeal against the judgment on which his bankruptcy was founded. The defence to the petitioning creditor's claim being a contractual claim relied upon as a set off, he had an interest to get rid of the judgment so that he might move to have the bankruptcy order annulled. Hoffmann LJ was of the opinion that any right of set off could only be asserted by the trustee and there was "nothing sufficiently special about the petitioner's judgment to take it out of the general principle" established by the authorities that:

... a bankrupt cannot in his own name appeal from a judgment against him which is enforceable only against the estate vested in his trustee ... (at 700)

Hoffmann LJ, however, also made the following observations at 697-98 which are relevant to the present case:

The property which vests in the trustee includes 'things in action': [see section 436 of the Insolvency Act 1986]. Despite the breadth of this definition, there are certain causes of action personal to the bankrupt which do not vest in his trustee. These include cases in which 'the damages are to be estimated by immediate reference to pain felt by the bankrupt in respect of his body, mind or character, and without immediate reference to his rights of property'...

Actions for defamation and assault are obvious examples. The bankruptcy does not affect his ability to litigate such claims. But all other causes of action which were vested in the bankrupt at the commencement of the bankruptcy, whether for liquidated sums or unliquidated damages, vest in his trustee. The bankrupt cannot commence any proceedings based upon such a cause of action and, if the proceedings have already been commenced, he ceases to have sufficient interest to continue them ...

In cases in which the bankrupt is a defendant, there is of course usually no question of the cause of action having vested in the trustee. .... On the other hand, there are actions seeking relief such as injunctions against the bankrupt personally which do not directly concern his estate. They can still be maintained against the bankrupt himself and he is entitled to defend them and, if judgment is adverse, to appeal. This distinction was the basis of the decision of the Court of Appeal in Dence v Mason ...

This judgment was followed in Dixon v Wordsworth, Court of Appeal (Bingham MR, Hoffmann, Waite LLJ) unreported 14 December 1994, where Heath v Tang was said to stand for the proposition --

..... that on the vesting of a bankrupt's estate in the trustee, the right to challenge a judgment which would take effect against the estate vests in the trustee.

In McDonald and Another v Graham [1994] R.P.C.(No.12) 407 the defendant, who became a bankrupt between the hearing and judgment, argued that he was entitled to pursue appeals because they were against orders which were "wholly or in part personal to him". The plaintiff argued that Heath v Tang was applicable but the Court of Appeal followed Bassano and held at 410:

Injunctions restraining the defendant from doing acts which would amount to breaches of copyright or infringement of the patent were sufficiently personal in their likely effect upon him to retain to him the right to appeal in respect of them.

See also 428-430 where the Court also held that the defendant had "sufficient personal interest" to be allowed to pursue appeals against an Anton Piller order and a Mareva injunction for which he would seek an award of damages personal to him if successful.

(iii)Australian cases

The statement of Erle J in Beckham has been adopted by Australian courts as the test of whether a cause of action is in respect of a "personal injury or wrong": see, inter alia, Cox v Journeaux (No.2) [1935] 53 CLR 713; Faulkner v Bluett [1980] 52 FLR 115. Faulkner concerned a damages claim for negligent advice or misrepresentation and it was argued that the action came within either section 60(4) or section 116(2)(g) of the Act, Justice
Lockhart holding that the two questions should be "considered together" for convenience. His Honour dismissed the claim, finding that the right of action of the applicant was "directly related to her property or her estate". In doing so, his Honour made the following important observations about the "common law of bankruptcy" and the implications that the English decisions have on the Australian bankruptcy provisions (at 118-121):

Although bankruptcy is the creature of statute law, certain rules have been formulated from time to time by the English courts exercising bankruptcy jurisdiction which limit the literal interpretation of vesting sections in bankruptcy legislation and which have been called "the common law of bankruptcy : Williams on Bankruptcy (18th ed.) p318.

Notwithstanding the language of section 38 of the Bankruptcy Act 1914 ..... which provides that the property of the bankrupt divisible amongst his creditors shall comprise all such property as may be acquired by or devolved on him before his discharge, it has been established by decisions of the English courts that the personal earnings of a bankrupt pass to the trustee except such part of them as is necessary for the maintenance of the bankrupt ...

Also the English cases draw a distinction between personal earnings of the bankrupt and the profits of a business carried on by him ..... The rationale [of this distinction] underlies also the distinction between rights of action that vest in the trustee of a bankrupt's estate and those that do not. Although rights of action generally pass to the trustee of a bankrupt's estate, exceptions have been created by decisions of the courts, including the following: a right of action for slander, Ex parte Vine; Re Wilson ...; for seduction of a servant, Howard v Crowther ...; for trespass to land or goods in the plaintiff's actual possession, at least where the only substantial damage is for the annoyance and personal inconvenience to him, Clark v Calvert ... and Rose v Buckett ...; for breach after bankruptcy of a contract for personal service made before bankruptcy, Bailey v Thurston & Co.Ltd ...; for personal injuries arising out of certain breaches of contract such as a contract of marriage, Drake v Beckham.

The common thread running through these cases is that where the primary and substantial right of action is direct pecuniary loss to the property or estate of the bankrupt, the right to sue passes to the trustee notwithstanding that it may have produced personal inconvenience to the bankrupt: Wetherell v Julius (1850) 138 E.R.108; Wage on Bankruptcy (1904 ed.) p201. Where the essential cause of action is the personal injury done to the person or feelings of a bankrupt the right to sue remains with the bankrupt .....

His Honour went on to say at 120-121:

In Australia some of the "common law of bankruptcy" has been embodied in bankruptcy legislation. An example is section 60(4) of the Act ....Another example is section 116(2)(g) which gives statutory recognition to the principle evolved by the "common law of bankruptcy" that rights of action in respect of the person or feelings of a bankrupt do not vest in the trustee....

In Holmes v Goodyear Tyre & Rubber Co. (Aust) Ltd [1984] 55 ALR 594, the plaintiff instituted passing off and defamation actions and subsequently became a bankrupt. At 596-7 Shepherdson J in the Supreme Court of Queensland quoted from Wilson v United Countries Bank and held that the plaintiff was

entitled to continue in his own name that part of the action in which he claims damage for injury to his credit, character and reputation.....

That reasoning was adopted by a Full Court of this Court (Beaumont, Einfeld and Whitlam JJ) in Michael Vincent Bourke & Ors v State Bank of NSW unreported 4 August 1995), which added (at page 17):

However, insofar as the actions may relate to injury caused to [the applicant's] business or professional practice, such a claim may only be prosecuted by his trustee...

In Pamela Adele Linklater v Michael Jaunay Mount as Trustee for Linklater (Federal Court of Australia, unreported 29 October 1990), Justice Von Doussa held that the part of a lump sum settlement made to the applicants which related to damages for loss of enjoyment was to be regarded as damages for a wrong done to them under section 116(2)(g), and that they were entitled to have that treated as property which is not divisible amongst their creditors (at page 9). His Honour distinguished Faulkner v Bluett on the basis that the particulars of damage there did not include any claim akin to an action for loss of enjoyment of property.

In Madden v Madden & Ors [1995] ATC 4465, the bankrupt applicant sought to commence proceedings after bankruptcy challenging an income tax assessment and claiming damages for misfeasance in public office. Justice Whitlam held that the claim did not fall within the exception provided in section 116(2)(g) as the nature of the damages allegedly suffered related to the applicant's property or estate and not to pain felt by him in respect of his body, mind or character. The action was held to be "property" of the bankrupt which vested in a trustee at the time of sequestration. His Honour noted that whilst quashing the subject assessment would not result in a 'money verdict' in favour of the applicant's estate, it "may affect the debts provable in his bankruptcy". This judgment has been upheld by a majority of a
Full Court of the Federal Court (Sheppard and Foster JJ, Einfeld J dissenting, unreported 27 March 1996) although not particularly on this ground. This case is now on appeal to the High Court.

In Daemar v Industrial Commission of New South Wales [1988] 90 FLR 469, the plaintiff sought to have a monetary judgment against him set aside and judicial criticism made of him in the course of proceedings before the Industrial Commission expunged. After he became a bankrupt, he sought to continue the proceedings by virtue of section 60(4). The Court accepted the meaning of the expression "personal wrong or injury" as being that adopted by Dixon J in Cox v Journeaux, and President Kirby found (at 55-56; Clarke JA agreeing at 57) that:

Applying that test to the present case, the action brought by the claimant cannot be categorised as he submits .... The exemption is limited to those cases where it has been considered appropriate to sever the personal interests of the person subsequently made bankrupt from his property, and to reserve to him the prosecution of and benefits derived from such litigation as not being legitimately entitlements of the creditors. In the present case the so-called 'wrong' [being defamed as a result of the Commission's judgment] of which the claimant complains is the very source of the financial problems which have led to his bankruptcy ....

It was held therefore that the 'action' commenced by the claimant was stayed by the operation of section 60(2), it being "undoubtedly one whereby he seeks relief affecting his property .....".

In the course of argument in Daemar, counsel for the Attorney General's Department conceded that section 60(2) of the Act would not apply to "entirely separate personal proceedings" such as proceedings in the Family Court of Australia brought by a person subsequently made bankrupt which were unconnected with the property of the bankrupt and which only concerned personal status. At 53 President Kirby replied, however, that he:

"... [did] not wish to be taken as necessarily agreeing with [that] submission .... Such an action, like other actions, may involve orders for costs which may effectively concern the trustee acting on behalf of the creditors. It is not necessary here finally to determine the question. The point which must be made is that 'action', particularly as defined in the Act, is a word of wide meaning. Its width is emphasised by the very limited exceptions which Parliament has specifically provided for in section 60(4)..."

Likewise the majority in Fuller said at 66-67, of the argument that Parliament has, in sections 60(4) and 116(2)(g), specifically provided "very limited exceptions":

... section 116 contemplates that were it not for the express exclusion, what might be called bare rights of action to recover damages or compensation for personal injury, rights not ordinarily assignable would nevertheless be treated as property divisible amongst the creditors of the bankrupt and therefore as property which vested under section 58(1).

Along with Justice Kiefel at first instance in this case, I prefer the reasoning of Justice Hill on this point at 73 that no special significance should be read into the "express exclusion" of personal actions in section 116(2)(g), there being, as his Honour said:

... no reason to believe that section 116(1)(a) is to be interpreted any more widely than its English counterpart by virtue of the exclusion provisions of section 116(2)(g).

Justice Hill went on to express the view that the heading to Division 3, "Property Available for the Payment of Debts", suggests that subsections (1) and (2) of section 116 "together define that property out of which creditors may be paid". Thus, his Honour said, "it would be a strange concept to regard a right of appeal against a judgment imposing a liability as being property which could be available for the payment of creditors" (at 247). This viewpoint is in line with the statement of Baron Parke in Beckham at 1230-1 that:

the statute transfers not all rights of action which would pass to executors ..... but all such as would be assets in their hands for the payment of debts, and no others -- all which could be turned to profit, for such rights of action are personal estate ...

President Kirby in Daemar distinguished Bassano on the grounds of the different legislation, and clearly this Court's duty is to give effect to the purpose of the Bankruptcy Act 1966 and no other statute. However, my agreement with the reasoning of Justice Hill in Fuller concerning the interpretation of section 116(1)(a) means that the English cases are helpful in determining whether, in a particular case, a right of action can properly be described as 'property'. As Justice Hill also noted, the early English cases were followed in Australia: see Millane v Shire of Heidelberg [1936] VLR 8 (personal injury/apportionment); Re Richter [1929] NZLR 364 (personal injury); Coffey v Bennett
[1961] VR 264 (right to apply for relief under testator's family maintenance). This approach is also in line with the reasoning of Justice Lockhart in Faulkner v Bluett.

CONCLUSIONS

Despite the fact that the decisions in Fuller and Daemar mean that two present Justices of the High Court (Gummow and Kirby JJ) have expressed different views, it is my respectful opinion the reasoning adopted in the cases preserving to the bankrupt actions personal to the bankrupt which have no implications for the estate should be applied to the present appeal. The variations made to the present appellant's commercial pilot's licences are sufficiently personal in their likely effect upon the appellant to retain for himself the right of appeal in respect of them. Given its completely personal nature and the fact that it holds no interest for the estate whatsoever, the right of appeal in this case is not in my view 'property' vesting in the trustee upon the appellant's bankruptcy.

I would dismiss the respondent's motion for summary dismissal of the appeal, allow the appeal, order that the respondent's identical motion heard by Justice Kiefel be dismissed, and remit the matter to Justice Kiefel for the hearing of the appeal from the Tribunal on the merits. The respondent should pay the appellant's costs at first instance and on appeal.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

No. QG 197 of 1994

On Appeal from a Judge of the Federal Court of Australia

BETWEEN:

ROY FREDERICK GRIFFITHS

Appellant

AND:

CIVIL AVIATION AUTHORITY

Respondent

CORAM: Spender, Einfeld and Cooper JJ

PLACE: Brisbane

DATE: 24 May 1996

REASONS FOR JUDGMENT

Cooper J

On 9 August 1993 Roy Frederick Griffiths was a licensed commercial pilot holding the requisite Commercial Pilot (Helicopter) and Commercial Pilot (Aeroplane) licenses under the Civil Aviation Regulations. On that day Peter Rundle, a delegate of the respondent Civil Aviation Authority ("the CAA"), made the following decision :-

"Pursuant to Civil Aviation Regulation 269(1) and in accordance with Civil Aviation Regulation 269(1)(a), (c), (d) and (e) I hereby vary, with effect from the date of this letter, your Commercial Pilot (Helicopter) Licence 018850 and your Commercial Pilot (Aeroplane) Licence 018850 in that it is now a condition of those licenses that:

1. you are restricted to conducting flights for commercial purposes only in respect of such operations as are prescribed in Civil Aviation Regulation 206(1)(ii), (iii) and (viii); and

2. the carriage of other persons whilst you are flying an aircraft is not permitted; and

3. flights for commercial purposes by you (which is subject to the condition set out in 1. above) may only be conducted under an Air Operator Certificate which is not issued to you or any immediate members of your family or by an entity in which you have a direct or indirect or beneficial interest."

The effect of the decision was to preclude Mr Griffiths from earning his living as a pilot.

On 12 August 1993 Mr Griffiths, as a person whose interests were affected by the decision, applied as he was entitled under s 27(1) of the Administrative Appeals Tribunal Act 1975 (Cth) ("the AAT Act") to the Administrative Appeals Tribunal ("the Tribunal") for review of the decision. After a contested hearing before the Tribunal it affirmed the decision under review on 31 May 1994.

Prior to the delivery of the decision of the Tribunal, a sequestration order was made against the estate of Mr Griffiths on 18 May 1994.

After delivery of the Tribunal's decision, Mr Griffiths in the purported exercise of a right of a party to a proceeding before the Tribunal to appeal to this court on a question of law from the decision of the Tribunal in the proceeding (s 44(1) of the AAT Act), filed a notice of appeal in the Queensland District Registry of this court on 28 June 1994. The hearing of such an appeal is a hearing in the original jurisdiction of the court under s 19 of the Federal Court of Australia Act 1976 (Cth) ("the Federal Court Act").

On 17 November 1994 the respondent applied by notice of motion for an
order that "this appeal be dismissed as incompetent". The basis of the application was that, prior to the institution of the appeal to this court, the property of Mr Griffiths had been sequestrated by the order made in the bankruptcy jurisdiction of the court on 18 May 1994. Kiefel J, on 2 December 1994, dismissed Mr Griffiths' appeal as incompetent. In written reasons for judgment her Honour indicated that she felt bound by the majority decision of a Full Court of this court in Fuller v Beach Petroleum NL (1993) 43 FCR 60 to hold that Mr Griffiths' right to appeal the decision of the Tribunal to this court was property which vested in his trustee in bankruptcy, the Official Trustee and was not thereafter enforceable by Mr Griffiths.

Mr Griffiths appealed to this Full Court from the order of Kiefel J dismissing his appeal from the decision of the Tribunal as incompetent. The respondent, by notice of motion, sought to have the appeal from the order of Kiefel J dismissed as incompetent for the same reasons as had led Kiefel J to dismiss the appeal from the Tribunal.

The argument of the respondent, simply put, was that the statutory right of appeal given by s 44 of the AAT Act was property within the definition of that term as contained in s 5(1) of the Bankruptcy Act 1966 (Cth) ("the Act"). As such, it was submitted, the right to appeal from the decision of the Tribunal given on 31 May 1994 vested, pursuant to s 58(1) of the Act, in the Official Trustee as the trustee of the estate of Mr Griffiths and was only exercisable by the Official Trustee. This result was said to follow from the majority judgment (Gummow and Whitlam JJ) in Fuller.

The relevant circumstances in Fuller were that in proceedings in the original jurisdiction of this court, judgment was given on 10 June 1993 jointly against Mr Fuller and Mr Cummings and others for $44,450,000 together with costs to be assessed on an indemnity basis. On 20 May 1993 a sequestration order had been made against the estate of Mr Fuller and on 21 May 1993 a sequestration order was also made against the estate of Mr Cummings. On 1 July 1993 Mr Fuller and Mr Cummings each filed a notice of appeal against the judgment given against them. The respondent to the appeal, by notice of motion to the Full Court, sought dismissal of the appeal as incompetent on the basis of the appellants' bankruptcy. By a majority (Hill J dissenting) the appeal was dismissed as incompetent. The right of appeal in issue in Fuller was that provided for in s 24 of the Federal Court Act.

The ratio of the majority in Fuller is that a right of appeal against a judgment for a money sum provable in the bankrupt's estate is a right of personal property within the meaning of "property" as defined in s 5(1) of the Act. Accordingly, the right of appeal vests in the bankrupt's trustee by the operation of s 58(1) of the Act. The right is also property divisible amongst the bankrupt's creditors under s 116(1) of the Act.

The conclusion reached by the majority in Fuller is supported by a construction of the Act which vests in the trustee the property of the bankrupt, the administration of the bankrupt's estate and the duty to exercise rights which may affect the value of the estate. For example, by successfully appealing a judgment otherwise provable in the estate, the remaining creditors may receive a larger dividend. Likewise,
by abandoning unmeritorious litigation or onerous property, the estate may be protected from diminution on account of the cost or expense of maintaining them. That a defendant's right to appeal to set aside a monetary judgment against the defendant is "property" within the meaning of s 5(1) of the Act is a conclusion supported by authority (see for example Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45 (CA), Daemar v Industrial Commission of New south Wales [No 2] (1990) 22 NSWLR 178 (CA); W R Henry & Son v Hodge [1963] VR 111 at 112; Boaler v Power [1910] 2 KB 229 (CA) at 232-233; Bride v Australian Bank Ltd (unreported, Federal Court of Australia, 28 July 1988, French J; affirmed on appeal, 5 December 1988, Beaumont, Burchett and Lee JJ).

What is controversial in the majority decision in Fuller is the conclusion that all rights of action unless specifically excluded by the Act are "property" within the meaning of s 5(1) of the Act. The reasoning of the majority in Fuller was that if it were otherwise, s 60(2) of the Act would create an inconsistency as to how the Act dealt with civil actions initiated by a bankrupt depending upon the temporal conjunction of the acquisition of the right of action and the bankruptcy.

Sub-sections 60(2) and (4) of the Act provide :-

"60(2) An action commenced by a person who subsequently becomes a bankrupt is, upon his becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.

.....

60(4) Notwithstanding anything contained in this section, a bankrupt may continue, in his own name, an action commenced by him before he became a bankrupt in respect of:

(a) any personal injury or wrong done to the bankrupt, his spouse or a member of his family; or

(b) the death of his spouse or of a member of his family."

In their Honours' view, if the definition of "property" in s 5(1), s 58 and s 116(1)(a) of the Act did not encompass all rights enforceable by action (as defined), an anomaly would arise. This would occur because s 60(2) would operate to stay any action brought by a party who subsequently becomes bankrupt unless excepted by s 60(4). Anomalously, if any right of action remained outside the definition of property in s 5(1), the debtor, after becoming bankrupt, could litigate that right of action notwithstanding that if the proceedings had been commenced prior to the bankruptcy they would have been stayed by the operation of s 60(2). This result would occur if s 60(2) is given a literal interpretation as their Honours did (see the majority 43 FCR at 63 - 64) and is not limited to actions in which the trustee has a proper interest. Their Honours also expressed a view that part of the statutory purpose of the Act is that successful litigants should not be put at risk as to the unrecoverability of costs for litigation commenced or continued by a bankrupt after sequestration of the bankrupt's estate (43 FCR at 68) and that for that reason the conduct of all litigation after bankruptcy was a matter for the trustee to determine.

In my view the conclusion of the majority in Fuller as to all rights of action went beyond what was necessary to determine the question whether or not a defendant's right to appeal to set aside a monetary judgment against the defendant was "property" within the meaning of s 5(1) of the Act. In those circumstances this court should not be constrained to hold that a bare right of action personal to the bankrupt is
property within the meaning of s 5(1) of the Act unless convinced of the correctness of that proposition. There have been two cases in the Full Court of this court subsequent to Fuller where the issue as to the vesting of rights of action has arisen. In the first case, the rights of action directly concerned property of the bankrupt and vested in the trustee or were contended to be a claim for personal injury (defamation) falling within s 116(2)(g) and thus exempted from property vesting in the trustee (Bourke v State Bank of New South Wales unreported, Federal Court of Australia (FC), 4 August 1995, Beaumont, Einfeld and Whitlam JJ). In the second case it was not necessary to determine the issue in order to resolve the appeal (Madden v Madden, unreported, Federal Court of Australia (FC), 27 March 1996, Sheppard, Foster and Einfeld JJ, but cf Einfeld J at 38 - 44). In my view, for the reasons which follow, neither the obiter statement of the majority in Fuller as to the vesting of a bare right of action personal to the bankrupt, nor the reasoning which supported it, should be accepted and given effect to by this Full Court.

For the purpose of this appeal the relevant statutory provisions are the definitions of "property" and "property of the bankrupt" in s 5(1), s 58(1) and s 116 of the Act.

Section 5 provides :-

"`property' 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 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."

Section 58(1) of the Act provides :-

"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

Section 116(1) of the Act provides :-

"Subject to this Act:

(d) money that is paid to the trustee of the bankrupt's estate under an order under section 139E;

is property divisible amongst the creditors of the bankrupt."

The definition of "property" in s 5 of the Act is expressed in the broadest of terms. However, the definition is to be construed in such a way as would promote the purpose or object underlying the Act in preference to a construction that would not promote that purpose or object (Acts Interpretation Act 1901 (Cth) s 15AA). Additionally, the Act is to be interpreted against the background of what has been described as the "common law of bankruptcy" (Faulkner v Bluett (1981) 52 FLR 115 at 118).

The statutory object of the Act is to vest the property of a bankrupt in a trustee in order that the same may be divisible amongst the bankrupt's creditors. The trustee is to get in the property and reduce it to a money sum and to disown, for example, property which would be a drain on the estate. The statutory object is also to protect the person of the bankrupt and his property insofar as his creditors are concerned as at the date of the making of the sequestration order (see s 58(3) and (4)and s 60(1)(a) and (b) of the Act and generally Storey v Lane (1981) 147 CLR 549 at 557).

The Act is not concerned to protect the person of the bankrupt from legal proceedings brought by persons other than creditors or by persons seeking to enforce payment of an obligation imposed by a statute or in the exercise of a power authorised by
statute (see for example the imposition of fines and statutory charges together with imprisonment for non-payment in Commissioner for Motor Transport v Train (1972) 127 CLR 396 and generally Re Lattouf (1994) 52 FCR 147 (FC)). Nor is the Act concerned to prevent the bankrupt enforcing rights which are personal to the bankrupt and irrelevant to the attainment of the statutory objects of the Act. In consequence, a construction of the Act which denies to a bankrupt the enjoyment of rights which do not affect the value of the bankrupt's estate or the administration of the estate is to be avoided.

At common law, a right of action for a personal injury done to the bankrupt where "the damages are to be estimated by immediate reference to the pain felt by a bankrupt in respect of his body, mind or character, and without immediate reference to his rights of property" (per Erle J in Beckham v Drake (1849) 2 HLC 579 at 604; 9 ER 1213 at 1222) was not property which passed to the assignee. That exception has been acknowledged and given effect to in Australia in the various insolvency statutes, including the Act (see s 60(4) and s 116(2)(g)). However, in my view, it was not the intention of Parliament in passing s 60(4) and s 116(2)(g) nor the predecessors of these sections, to state exhaustively the exceptions to the property in the nature of rights of action which would not pass to the trustee and thereby to identify by omission all other rights as "property" within the meaning of s 5 of the Act.

The courts have always taken a wide view of the property which passes to the assignee or trustee. In Beckham v Drake the court was concerned with the meaning of "personal estate" and "property" which passed to an assignee under s 12 and s 63 of 6 Geo IV, c16. Erle J said (at 604; 1222) :-

"The general principle is, that all rights of the bankrupt which can be exercised beneficially for the creditors do so pass, and the right to recover damages may pass though they are unliquidated; Wright v Fairfield (2 Barn. and Adol. 727), Kearsey v Carstairs (2 Barn and Adol 716).

This principle is subject to exception. ..."

Baron Parke said (at 627; 1230 - 1231) :-

"What then is the proper construction of this section of the act, according to its words and the several cases decided upon it? The proper and reasonable construction appears to me to be, that the statute transfers not all rights of action which would pass to executors, (for rights incapable of being converted into money, such as the next presentation to a void benefice, pass to them), but all such as would be assets in their hands for the payment of debts, and no others - all which could be turned to profit, for such rights of action are personal estate. Of such the executor is assignee in law; and the nature of the office and duty of a bankrupt's assignee requires that he should have them also."

What was required was that the right was either one of a proprietorial nature, one affecting property of the bankrupt, or one affecting the due administration of the estate. The logic of such an approach is evident in the observations of North J in Warder v Saunders (1882) 10 QBD 114 at 117 - 118 :-

"... I quite agree with the Master of the Rolls that the bankrupt cannot continue the action as plaintiff. It is said that this is a hardship, for that if the plaintiff were allowed to proceed he might recover a large sum for his creditors and a surplus for himself. But, on the other hand, he might not, and we must look at the case practically. The trustee has to get in the assets, and to distribute them amongst the creditors. It is impossible that he can do so when an action affecting the amount of the assets is pending under the control of the bankrupt. I think the trustee has a right to say that a claim which is good shall be enforced, and a claim which is not good shall be abandoned, and the estate wound up on that footing. The balance of convenience is not in favour of keeping the action open if the trustee declines to proceed, and I think that practically it is best not to give the plaintiff the opportunity of keeping it open."

Claims by or against the bankrupt which do not affect the estate of the bankrupt in any way or interfere in the due administration of it are of no interest to the trustee (see Merry v The Queen (1887) 13 VLR 264 at 267 per Higinbotham CJ: "Personal wrongs within the meaning of sec 77, are wrongs or injuries done to the reputation or person, such as libel, slander or assault; these do not affect his estate in any way"; John v Neiman Holdings (1986) 84 FLR 84 at 85 where Young J held that "action" in s 60(2) of the Act had to be read down to mean a civil proceeding at law or equity which must relate to the property of the bankrupt; Beneficial Insurance Co Ltd v Hamilton (1985) 73 FLR 347 at 348 where Holland J held that the election given by s 60(2) was only available where it was still a relevant and practical matter for the administration of the estate).

Nor do the cases on either the Bankruptcy Act 1924 (Cth), or the Act, lead to the conclusion that the exceptions in s 60(4) and s 116(2)(g) of the Act were intended by Parliament to be an exhaustive statement of the rights of action to be excluded from the property of a bankrupt which was to pass to the trustee. Some examples serve to illustrate the point.

The right of a person to lodge a caveat against the grant of probate has been held to be no more than a naked right to litigate and one which did not pass to the Official Receiver under the Bankruptcy Act 1924 (Cth) (In re Finn [1942] VLR 125 at 128). A statutory right which only the bankrupt could exercise was not itself "property" which passed to the trustee (Coffey v. Bennett [1961] VR 264 at 266 - 267). However, whether property which came into existence as a result of the exercise of the right passed
to the trustee as after acquired property was a separate matter. Whether what was sought to be enforced by the right of action was a right to the property based on statute, or whether it was a claim to the property itself based upon some enforceable interest in it, was crucial to the resolution to this separate question. Thus, in Luxton v Luxton [1963] VR 540, McInerney J held (at 545 - 546) that the right of the applicant wife, although bankrupt, to bring an application under s 161 of the Marriage Act 1958 (Cth) for a declaration that she and her husband were joint tenants of their former matrimonial home and for an order for sale and distribution of the proceeds, did not vest in her trustee in bankruptcy provided her claim was based on a statutory presumption created by s 161(4)(b) of the Marriage Act 1958 (Cth). It would have been otherwise if the claim was based upon some proprietary or contractual right touching the property or estate for those rights and the right to enforce them would have vested in the trustee by s 91(i) of the Bankruptcy Act 1924 (Cth).

The exclusion from the property passing to a trustee of a bankrupt's estate of bare statutory rights to sue, which are not based upon the existence of any underlying property right or claim has continued to be given effect to since the passage of the Act (McLeod v Johns [1981] 1 NSWLR 347 at 349; Commissioner of Taxation v Swain (1988) 20 FCR 507 (FC) at 514; In the Marriage of Reed; Grellman (Intervener) (1989) 13 FamLR 566 (FC) at 569 - 571; In the Marriage of Audet; (1994) 19 FamLR 291 at 298).

In my view, "property" in s 5(1) of the Act does not include a statutory right in the nature of an appeal under s 44 of the AAT Act nor an appeal pursuant to s 19
of the Federal Court Act, with which we are here concerned. The statutory right does not affect any property which forms part of the bankrupt's estate and which vests in the trustee as property of the bankrupt. Nor will the institution and prosecution of the proceedings by Mr Griffiths delay the administration of the estate or expose it to any adverse order for costs. If Mr Griffiths fails in the proceedings against the respondent CAA, any order for costs against him is not provable in his estate because it would be a debt which arose after the date of the sequestration order (Re British Gold Fields of West Africa [1899] 2 Ch 7 (CA) at 11 - 12; In re Davis; Ex parte National Australia Bank Ltd v Official Trustee in Bankruptcy (unreported, Federal Court of Australia, 11 October 1989, Burchett J at p 10).

The question of the possibility of any adverse cost orders being made against Mr Griffiths if he fails in his appeal, and his ability to satisfy those orders is, in my view, a question separate and distinct from the proper construction of ss 5, 58, 60 and 116 of the Act. In this respect I agree with Hill J in Fuller (43 FCR at 76). The general rule is that poverty is no bar to a natural person to litigate a right of action and the power to require security for costs ought not to be used to bar the poor from the courts (Cowell v Taylor (1885) 31 ChD 34 at 38). However, in appropriate circumstances security for costs may be ordered against an undischarged bankrupt; the decisions in Barton v Minister for Foreign Affairs (1984) 2 FCR 463 and Skase v Abbott and Sun Newspapers (unreported, Federal Court of Australia, 30 July 1992, Cooper J) are examples of such orders being made. Further, the existence of the exception in s 60(4) and s 116 (2)(g) for causes of action for personal injury indicate that the question of costs in respect of that litigation which the bankrupt is entitled to institute or continue was not for the Parliament
in passing the Act either a concern of the Act or of the administration of the estates of the bankrupts.

There is a unity of object and purpose in the operation of ss 58, 60 and 116 of the Act if it is recognised that the consistent focus of attention is upon rights which the trustee can turn to advantage for the benefit of creditors or upon rights the exercise of which will adversely affect or delay the administration of the estate. It is these rights which fall within the definition of "property" in s 5 and the enforcement of which by action are stayed by s 60(2) upon a person becoming bankrupt. To interpret "property" for the purposes of s 5 in this way avoids the injustice of denying to the bankrupt the power to exercise a right in which the trustee has no interest and the exercise of which cannot operate adversely on the property of the bankrupt or the administration of the bankrupt's estate.

The right of Mr Griffiths to appeal to this court from the decision of the Tribunal and his right to appeal from the judgment of Kiefel J are such rights and did not vest in the Official Trustee upon acquisition by Mr Griffiths. Neither Mr Griffiths' appeal from the Tribunal to the original jurisdiction of this court, nor his appeal from the order of Kiefel J to the Full Court is incompetent in consequence of his bankruptcy.

I would dismiss the notice of motion as to the competency of this appeal, allow the appeal, and set aside the orders appealed from and in lieu thereof order the respondent's notice of motion as to the competency of the applicant's appeal from the decision of the Tribunal given on the 31 May 1994 be dismissed and that the respondent
pay the appellant's costs of and incidental to the appeal and the applicant's legal costs, if any, of the hearing below, to be taxed if not agreed.

I certify that this and the preceding fifteen (15) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper.

Date: 24 May 1996

Associate

Solicitors for the Applicant: Lawrence W Hewitt

Counsel for the Respondent: G A Thompson

Solicitors for the Respondent: Mallesons Stephen Jaques

Date of Hearing: 2 May 1995

Place of Hearing: Brisbane

Date of Judgment: 24 May 1996

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