Catchwords
BANKRUPTCY - proceeding instituted by bankrupt before sequestration - effect of bankruptcy on proceeding - trustee did not elect to prosecute proceeding - whether bankrupt may continue proceeding in his own name - whether action is in respect of any personal injury or wrong done to the bankrupt - s 60(4) Bankruptcy Act 1966
Bankruptcy Act 1966: s 60
Beckham v Drake (1849) 2 HLC 579; 9 ER 1213
Bryant v Commonwealth Bank of Australia (1994) 51 FCR 529
Bullock v Goodluck (1983) 48 ALR 217
Cummins v Claremont Petroleum NL (1996) 185 CLR 124
Cox v Journeaux (No 2) (1935) 52 CLR 713
Daemar v The Industrial Commission of New South Wales (No 1) (1988) 12 NSWLR 45
Re Dosanjh; Ex parte Duus (1995) 56 FCR 521
Faulkner v Bluett (1981) 52 FLR 115
Holmes v Goodyear Tyre & Rubber Co (Aust) Limited (1984) 55 ALR 594
Mannigel v Hewlett Phelps, New South Wales Court of Appeal, 12 June 1991, unreported
Millane v Shire of Heidelberg [1936] VR 8
Technical Products Pty Ltd v State Government Insurance Office (Queensland) (1989) 167 CLR 45
The Trustees Executors & Agency Co. Ltd v Reilly [1941] VLR 110
The Workers’ Compensation Board of Queensland v Technical Products Pty Ltd (1988) 165 CLR 642
Wilson v United Counties Bank, Limited [1920] AC 102
JOSEPH RICHARD BRYANT v COMMONWEALTH BANK OF AUSTRALIA
NG 168 of 1995
LOCKHART, O’LOUGHLIN and MERKEL JJ
SYDNEY
4 JULY 1997
IN THE FEDERAL COURT OF AUSTRALIA)
)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG168 of 1995
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF
THE FEDERAL COURT OF AUSTRALIA
BETWEEN: JOSEPH RICHARD BRYANT
Appellant
AND: COMMONWEALTH BANK OF
AUSTRALIA
Respondent
COURT: LOCKHART, O’LOUGHLIN and MERKEL JJ.
PLACE: SYDNEY
DATE: 4 JULY 1997
MINUTES OF ORDER
THE COURT ORDERS THAT:
1.The appeal be dismissed
2.The appellant pay the respondent’s costs of the appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA)
)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG168 of 1995
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF
THE FEDERAL COURT OF AUSTRALIA
BETWEEN: JOSEPH RICHARD BRYANT
Appellant
AND: COMMONWEALTH BANK OF
AUSTRALIA
Respondent
COURT: LOCKHART, O’LOUGHLIN and MERKEL JJ.
PLACE: SYDNEY
DATE: 4 JULY 1997
REASONS FOR JUDGMENT
LOCKHART J.
The Commonwealth Bank of Australia (‘the Bank’) moves to dismiss the appeal brought by the appellant, Joseph Richard Bryant, from the judgment of a judge of the Court (Sackville J) given on 3 March 1995 in which his Honour ordered that Mr Bryant’s application be dismissed with costs. In the alternative, the Bank seeks an order for security for costs in the sum of $14,500.
On 22 March 1995 Mr Bryant filed a notice of appeal from Sackville J’s judgment. On 30 March 1995 a sequestration order was made against the estate of Mr Bryant.
The ground of the motion to dismiss Mr Bryant’s appeal is the alleged failure by Mr Bryant’s trustee in bankruptcy to elect in writing, within 28 days after notice of the appeal was served upon him by the Bank, to prosecute the appeal. The consequence of the failure of the trustee to make the election is said to be that he shall be deemed to have abandoned the appeal (s 60(3) of the Bankruptcy Act 1966 (‘the Act’)). The trustee acknowledged the notice of the appeal given to him by the Bank by letter dated 1 November 1996 in which he says:
'Having referred the request [to make the election] to my legal advisers, I am advised that this is not a proceeding in which I would be required to make an election. The continuation of the proceedings appears to be solely at the discretion of the bankrupt.'
It is not known what advice was received by the trustee, nor did the trustee play any part in the proceeding before us.
Critical to the matter before the Court is subsection (4) of s 60 which provides:
'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.'
‘Action’ for the purposes of s 60 is defined by subsection (5) as meaning:
'any civil proceeding, whether at law or in equity.'
An appeal is an ‘action’ within the meaning of subsection (5) and therefore for the purposes of subsection (2): Cummings v Claremont Petroleum NL (1996) 185 CLR 124 per Brennan CJ, Gaudron and McHugh JJ at 130; and Dawson and Toohey JJ at 142.
Mr Bryant may continue in his own name the appeal brought by him from the judgment of Sackville J if the appeal is in respect of a personal injury or wrong done to him, his spouse or a member of his family. If the appeal cannot be so described then he cannot continue the action; the right to do so being vested in his trustee who on the facts is deemed to have abandoned the appeal.
In Faulkner v Bluett (1981) 52 FLR 115 I reviewed the authorities concerning the construction of subsection (4) of s 60 of the Act at 119-121, so there is no necessity to recite here what I said there, except the following passages. At 119 I said:
'The common thread running through these cases [exceptions to the rule that rights of actions generally pass to the trustee of a bankrupt’s estate] 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) 10 CB 267, 138 ER 108; Wage on Bankruptcy (1904 ed.), p. 201. Where the essential cause of action is the personal injury done to the person or feelings of the bankrupt the right to sue remains with the bankrupt.
As Erle J. said in an oft-cited passage in Beckham v Drake (1849) 2 HLC 579, at 604, 9 ER 1213, at 1222 : “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 or property”.
There is still some doubt whether a right of action passes to the trustee where one and the same cause of action results in substantial damage to the property of the bankrupt as well as substantial injury to his person or annoyance to his feelings: Beckham v Drake; Hodgson v Sidney (1866) LR 1 Ex 313; Morgan v Steble (1872) LR 7 QB 611. In England the accepted view seems to be that such a cause of action passes to the trustee so far as it relates to the property of the bankrupt, and remains with the bankrupt so far as it relates to his person or feelings: Wilson v United Counties Bank Ltd [1920] AC 102. Some of the problems that arise from this notion of a “mixed action” appear from cases such as Wilson v United Counties Bank Ltd. and Beckham v Drake.'
At 120 I referred to the well known passage from the judgment of Dixon J in Cox v Journeaux (No 2) (1935) 52 CLR 713. At 721 his Honour said:
'... The plaintiff says that he himself is entitled to prosecute it under the proviso as an action for personal injury or wrong done to himself. The test appears to be whether the damages or part of them are to be estimated by immediate reference to pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property (Wilson v United Counties Bank Ltd.'
These are cases which concern mixed causes of action in the sense of causes of action that vest in the trustee and others that do not. The cases include the following.
In Millane v Shire of Heidelberg [1936] VR 8 the plaintiff alleged that the defendant trespassed upon the land and unlawfully removed materials. The plaintiff claimed damages not only for the loss of the materials, but also for the defendant’s allegedly high-handed and arbitrary behaviour. The Full Court of the Victorian Supreme Court (Mann CJ, Gavan Duffy and Martin JJ) held that the plaintiff was entitled to prosecute the action so far as it related to the defendant’s behaviour.
In Bullock v Goodluck (1983) 48 ALR 217 the Supreme Court of Tasmania (Cox J) held that the proceedings may be severed where the causes of action were for negligence and also misfeasance of public office. The same approach was taken by the Supreme Court of Queensland (Shepherdson J) in Holmes v Goodyear Tyre & Rubber Co (Aust) Limited (1984) 55 ALR 594 where damages were claimed for passing off and for defamation.
In Bullock the plaintiff claimed damages for alleged refusal to submit the plaintiff’s applications to the Transport Commission of Tasmania for its consideration concerning certain variations to the plaintiff’s motor vehicle cart licences. In the alternative, the plaintiff claimed damages for negligence and/or misfeasance of public office.
Cox J held at 224 that the case was capable of severance into the claim for damages for personal injury or wrong which the plaintiff was entitled to prosecute; but otherwise the claim which related solely to the pecuniary loss to his estate vested in the trustee.
In Holmes the bankrupt plaintiff claimed damage caused to his business by alleged defamation and passing off. Those causes of action were held to have passed to the trustees on the plaintiff’s bankruptcy. But the plaintiff was held to be entitled to continue in his own name that part of the action in which he claimed damages for injury to his reputation, credit and character. See also Muir Hunter, Williams Law and Practice in Bankruptcy, 18th ed, 1968, 268-9, 319-322.
In other cases courts have declined to sever the proceeding.
In Re Dosanjh; Ex parte Duus (1995) 56 FCR 521 Kiefel J considered the question of mixed claims concerning both property and person in the context of an application by the trustee of the bankrupt for a declaration that money received by the bankrupt from the settlement of a claim for personal injury arising from a motor vehicle accident was property divisible amongst the bankrupt’s creditors. Her Honour reviewed the authorities dealing with mixed claims; and held that the loss referable to hospitalization of the bankrupt for accident-related injury was a consequential loss flowing from a cause of action for injury to the person of the bankrupt; and that the amount received by the bankrupt was not property divisible amongst the bankrupt’s creditors.
In Daemar v The Industrial Commission of New South Wales (No 1) (1988) 12 NSWLR 45 the bankrupt sought prerogative writs against the Industrial Commission of New South Wales and claimed that he had suffered a personal wrong as a result of certain of the Commission judgments. Kirby P, with whom Samuels and Clarke JJA agreed, held that a ‘wrong’ of this kind did not attract exemption from the operation of s 60(2) of the Act. His Honour said at 56, after referring to the judgment of Dixon J in Cox v Journeaux:
'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” of which the claimant complains is the very source of the financial problems which have led to his bankruptcy. It is therefore to be classified not as a “wrong” which is exempted from the operation of s 60(2) and the statutory stay provided for but as of the very essence of the subject matter to which s 60(2) is addressed.'
In Mannigel v Hewlett Phelps, New South Wales Court of Appeal, 12 June 1991, unreported, Handley JA, with whose reasons for judgment Kirby P and Meagher JA agreed, said at 4 and 5 that the plaintiffs’ claim for damages for loss of credit, for mental distress, inconvenience and for injury to their physical and mental health were not claims ‘without reference to their rights of property’ within the principle stated by Dixon J in Cox v Journeaux. His Honour held that the claims were consequential to the plaintiff’s financial and property interest as a result of alleged breaches of professional duty by their solicitors. Both plaintiffs became bankrupt. His Honour held that the plaintiffs sued on indivisible causes of action in tort and contract and that those causes of action formed part of their property which vested in the official receiver on their bankruptcy.
Kirby P, whilst agreeing generally with Handley JA’s reasons for judgment, noted that it was an agreed fact before the Court that damages claimed by the plaintiffs in the relevant paragraphs of the statement of claim for loss of their credit and reputation, for inconvenience, mental distress and strain and for injury to their physical and mental health were agreed to be the consequence of the other damages claimed by them essentially for professional negligence and damages for economic loss. His Honour said at 8 that the relevant claims for damages bore at first glance the character of personal wrong, but the agreed fact made it clear when read in the light of the pleadings that these damages related to the causes of action in contract and tort which vested in the official receiver. Hence the case turned on its facts.
When an action has been brought by a person who subsequently becomes bankrupt the nature of the action is determined by examining the initiating process and pleadings and any other relevant documents in the case. How does one determine the nature of an appeal? To determine whether an appeal is in respect of a personal injury or wrong done to the bankrupt, his spouse or a member of his family one must look at the action itself which gave rise to the judgment and the subsequent appeal. If, for example, the bankrupt had claimed damages for personal injuries suffered by him in a motor car accident; but a verdict was entered in favour of the defendant and the bankrupt appealed from the judgment, it would be necessary to examine the nature of the action to determine the essential character of the appeal.
In the present case the nature of the appeal must be determined, first by examining the proceeding which resulted in the judgment from which the appeal was brought. The proceeding was a motion brought by the Bank against Mr Bryant (a notice of motion dated 6 October 1994) seeking orders that Mr Bryant’s application in that matter (G569 of 1994) be dismissed or, alternatively, stayed permanently. It was this motion that was heard by Sackville J and that led to the judgment of 3 March 1995 when his Honour dismissed the initial proceeding by Mr Bryant with costs. Does one determine the nature of the appeal by examining only the motion for dismissal of the initial proceeding (or for permanent stay thereof) or does one go back further and examine the nature of the proceeding itself brought by Mr Bryant which led to the Bank’s motion to dismiss or stay it?
In my opinion it is necessary to review the initial proceeding instituted by Mr Bryant and thus examine the statement of claim filed by him in the matter; and then turn to the Bank’s motion.
Sackville J’s analysis of the proceeding brought by Mr Bryant in this Court conveniently summarises the allegations made in the statement of claim. That summary is as follows:-
(i) At all material times Mr Bryant was the registered proprietor of ten lots of land in various parts of New South Wales, but mostly at Upper Turong, near Sofala (paragraphs 1-11).
(ii) By a series of five mortgages, executed between 12 August 1983 and 30 September 1987, Mr Bryant mortgaged his interest in each of the lots, for the purpose of securing the payment of principal, interest and other moneys agreed to be paid by him to the Bank (paragraphs 12-22).
(iii) By letters of demand dated 19 September 1991 the Bank alleged defaults under the mortgages that had not occurred in fact (paragraph 26).
(iv) On or about 4 October 1991, by a notice pursuant to s.57(2)(b) of the Real Property Act 1900 (NSW), the Bank demanded that Mr Bryant pay within one month an amount of $2,095,660.77 plus costs (paragraph 23).
(v) The notice did not comply with the strict requirements of the Real Property Act 1900, alleged a default that had not occurred, and was ‘misleading, deceptive and unconscionable and caused the applicant to be [misled] and deceived and to suffer loss and damage’ (paragraphs 27, 28).
(vi) The notice also did not comply with the strict requirements of ‘the relevant sections of the Conveyancing Act 1919’ (paragraph 29).
(vii) Mr Bryant relied on the formal demands in the letters of demand and notice and organized his affairs in accordance with the demands and notice (paragraph 24). The Bank negligently or maliciously delivered the demands and notice, knowing that Mr Bryant would rely on them as correct and lawful (paragraph 25).
(viii) On about 25 February 1992 Colin Gregory Cavanagh swore an affidavit, which was read in proceedings commenced by the Bank in the Supreme Court. In that affidavit he swore falsely that the Bank had served demands and notice in accordance with the strict requirements of the Real Property Act (paragraph 30). The affidavit was misleading, deceptive and unconscionable and caused the applicant to be misled and to suffer loss and damage (paragraphs 31, 32).
(ix) The Bank fraudulently intended to mislead, deceive and coerce Mr Bryant into leaving and losing the properties. Further, the Bank fraudulently obtained possession of Mr Bryant's real property and took action to sell the property (paragraphs 33, 35).
(x) The Bank owed a fiduciary duty and duty of care to Mr Bryant and acted (in an unspecified way) contrary to its duties (paragraphs 36-39).
Sackville J’s summary of the relief sought by Mr Bryant in his application falls into the following classes:
(i) declarations that the Bank did not have a power of sale pursuant to specified mortgages over ten identified properties (paragraphs 1-11);
(ii) declarations that various letters of demand by the Bank, all of which were dated 19 September 1991 and addressed to Mr Bryant, were misleading, invalid and/or void and, in one case, constituted harassment and coercion of Mr Bryant (paragraphs 12-29, 36-37);
(iii) declarations that a notice, dated 4 October 1991, served by the Bank purportedly pursuant to s.57(2)(b) of the Real Property Act 1900, was not issued according to law and was bad, misleading, deceptive, unconscionable, fraudulent and invalid, and also constituted harassment and coercion of Mr Bryant (paragraphs 30-32);
(iv) declarations that the notice of 4 October 1991 did not comply with the requirements of s.111(2)(b) of the Conveyancing Act 1919 and was bad, misleading, deceptive, unconscionable, fraudulent and invalid and also constituted harassment and coercion of Mr Bryant (paragraphs 33-35); and
(v) an order that the Bank be ‘punished for its actions’ and that it compensate Mr Bryant for loss and damage in respect of loss of businesses, professional reputation, standing, amenities, stress and suffering, as well as exemplary damages (paragraphs 38-39).
Sackville J then described the proceedings commenced by the Bank against Mr Bryant in the Common Law Division of the Supreme Court on 4 March 1992, claiming possession of the ten properties previously mentioned. The Bank’s claim to possession was based on Mr Bryant’s alleged defaults under the five mortgages previously mentioned. The statement of claim in the possession proceedings pleaded that a notice under s 57(2)(b) of the Real Property Act had been sent to Mr Bryant on 4 October 1991; but that no moneys had been received by the Bank in relation to the indebtedness of $2,095,660.77 pursuant to the mortgages. Mr Bryant filed a defence and cross-claim in the possession proceedings. Sackville J described them; but I need not dwell on the details including the detail of Mr Bryant’s cross-claim.
Separate proceedings were commenced by the Bank against Mr Bryant in the Commercial Division of the Supreme Court claiming moneys based on three guarantees executed by Mr Bryant. The guarantee proceedings were subsequently transferred to the Common Law Division and were heard together with the possession proceedings. These proceedings were heard before Levine J who gave judgment adverse to Mr Bryant on 27 October 1993.
It is necessary to refer also to a proceeding commenced by Mr Bryant in this Court before he commenced the proceeding which led to the Bank’s motion in that later proceeding which was heard by Sackville J.
The first proceeding was instituted in this Court on 11 October 1993 by Mr Bryant against the Bank (G785 of 1993) in which he claimed, inter alia, damages of $20 million for misleading and deceptive conduct under the Trade Practices Act 1974 (‘the Trade Practices Act’). He later filed an amended application and an amended statement of claim. The amended application sought orders varying the guarantees given by Mr Bryant to the Bank, injunctions and orders that the Bank pay Mr Bryant for loss or damage in the sum of some $20 million and also unspecified damages in respect of loss of professional business reputation, stress and for suffering exemplary damages.
The Bank filed a motion on 20 April 1994 seeking orders dismissing proceeding G785 of 1993 or permanently staying it, relying on the principle of re judicata, or cause of action estoppel: Port of Melbourne Authority v Anshun (1981) 147 CLR 589.
Mr Bryant in turn filed a motion to dismiss the Bank’s motion. Both motions were heard by Einfeld J. His Honour conveniently summarised the pleadings as containing nine broad allegations, seven of which were said by Einfeld J, despite being phrased as claims within s. 52 of the Trade Practices Act, to be essentially defences to the validity or enforceability of the guarantees and mortgages. Two of the matters were characterized by Einfeld J as cross-claims rather than defences. Einfeld J held that all the matters of defence pleaded by Mr Bryant could have been relied on by him in the Supreme Court proceedings, but he had chosen to pursue them in the Federal Court proceedings. His Honour said that all those matters should have been raised in the Supreme Court proceedings since they related to the guarantees and mortgages which had been the subject of those proceedings. Einfeld J held that judgment for Mr Bryant in the Federal Court proceedings would directly conflict with the judgment of the Supreme Court in the sense that the two judgments would declare inconsistent rights in respect of the same transactions. On 14 July 1994 Einfeld J dismissed Mr Bryant’s motion, granted the Bank’s motion, and dismissed the proceeding with costs. The judgment of Einfeld J is reported as Bryant v Commonwealth Bank of Australia (1994) 51 FCR 529. An appeal was lodged by Mr Bryant from Einfeld J’s decision which was dismissed and an application for special leave to the High Court was refused.
On 30 August 1994 Mr Bryant commenced another proceeding against the Bank in this Court challenging the validity of the Bank’s s 57(2)(b) notices. The Bank then filed its notice of motion to dismiss or stay this proceeding. It is this motion which was heard by Sackville J.
All these matters to which I have referred should be considered to determine the nature of the appeal which the Bank seeks to have dismissed on the ground alleged by it that only the trustee of Mr Bryant’s estate is competent to prosecute the appeal and that he is deemed to have abandoned the appeal by the operation of subsection (3) of s 60 of the Act.
In the motion before Sackville J the Bank relied on three grounds. First, it said that the issues of fact and law raised by Mr Bryant in this second Federal Court proceedings were determined adversely to him in the proceedings between himself and the Bank in the Supreme Court of New South Wales in October 1993. Accordingly, the doctrine commonly known as issue estoppel (see Blair v Curren(1939) 62 CLR 464) prevented Mr Bryant litigating those issues in proceedings between the same parties. Secondly, the Bank argued that, even if this be incorrect, the issues raised in the statement of claim in the proceeding brought by Mr Bryant should have been litigated in the Supreme Court proceedings. According to the Bank the failure by Mr Bryant to do so was unreasonable and he is prevented from raising those matters in fresh proceedings in this Court on the principles applied in Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589. Thirdly, the Bank argued that the matters pleaded in this second Federal Court proceeding brought by Mr Bryant, if they were to be litigated at all, should have been pleaded and pressed in the earlier proceeding in this Court; but which were dismissed on 14 July 1994 by Einfeld J, although not after a final hearing. The failure to plead and pursue those matters was said by the Bank to provide a further ground for dismissing Mr Bryant’s proceedings.
Sackville J analysed the statement of claim filed by Mr Bryant and summarised the allegations made by him in that document and the relief sought by him. His Honour also analysed the other proceedings upon which reliance was placed by the Bank in support of its motion.
His Honour found that Mr Bryant was precluded from alleging in the proceeding brought by him in the original jurisdiction of this Court that the Bank did not have the power of sale pursuant to each of the mortgages specified in the application and statement of claim. His Honour said that it also followed that Mr Bryant was precluded from alleging that the s 57(2)(b) notice was invalid, whether by reason of the failure to comply with the requirements of the Real Property Act 1900 (NSW) or any other reason. Thus, his Honour said, those portions of the application (paragraphs 1-11 and 30-33) and the statement of claim (paragraphs 23 - 25, 27, 28 and presumably 35) making those allegations could not be relied upon by Mr Bryant in the proceedings. His Honour said that a similar process of reasoning applied to the allegations of Mr Bryant in the proceeding that the letters of demand dated 19 September 1991 were invalid, void and misleading or that his alleged default had not occurred (application paragraphs 15-26 and 36-37; statement of claim paragraphs 24 and 26). His Honour said that they raised the issues determined in the proceedings before the Supreme Court (Levine J).
Hence, his Honour came to the conclusion that the amended application and statement of claim of Mr Bryant in the proceeding before his Honour constituted an attempt to raise precisely the same issues as formed the groundwork of the Supreme Court’s decision (Levine J) of 27 October 1993 which led to the entry of judgment in the Supreme Court in favour of the Bank in the sum of $2,427,329.34.
Concerning the Anshun estoppel point his Honour said that Anshun applies to certain of the issues in the case so that Mr Bryant was prevented from raising in the initial proceeding the validity of the letters of demand concerning the two accounts not mentioned in the guarantee proceedings. His Honour said that, if Mr Bryant had wished to challenge the validity or effectiveness of the letters of demand concerning the debts included in the notice, he should have done so when the proceedings were before Levine J. That question was so intertwined with the issues litigated before Levine J that it was unreasonable for Mr Bryant not to have dealt with them in the same proceedings.
Sackville J turned to other allegations in the statement of claim (non-compliance with s 111(2) of the Conveyancing Act 1919 (NSW); paragraph 29) and found that they too were governed by the Anshun estoppel and also were misconceived. His Honour turned to allegations in the statement of claim that the Bank owed Mr Bryant a fiduciary duty or duty of care ‘as mortgagee of his real property’ and that these were breached (paragraphs 36-39 of the statement of claim). His Honour held that it was not open to Mr Bryant to litigate these matters as Einfeld J had already held that the pleaded claims in the earlier set of proceedings before him based on breach of fiduciary and duty of care were not open to Mr Bryant.
In the result Sackville J dismissed the proceeding with costs.
I agree with Sackville J’s description of the amended statement of claim as a ‘lengthy and rather discursive document’. It is not easy to disentangle the various causes of action pleaded by Mr Bryant in the application from each other. Nor are the claims for relief easily severable.
The causes of action described in the application and the statement of claim essentially concern the following:
(a) the construction of the notices issued by the Bank under s 57(2)(b) of the Real Property Act;
(b) the validity of such notices;
(c) the validity of demands for payment of moneys issued by the Bank against various corporations with which Mr Bryant was associated;
(d) the question whether notices issued under the Conveyancing Act were valid.
Thus, the principal assertions made in the application and statement of claim centre upon Mr Bryant’s alleged rights under the Real Property Act and the Conveyancing Act in resisting the Bank’s enforcement of its securities guaranteed by him pursuant to various contracts.
Paragraph 39 of the application is the paragraph which concerns me most. It claims:
'39.Unspecified damages in respect of,
39.1Loss of businesses,
39.2loss of professional business reputation
39.3Loss of standing in the Community,
39.4loss of amenities of family life,
39.5stress and suffering,
39.6exemplary damages.'
These claims for damages are not particularized in the application or the statement of claim.
In my opinion when these claims for unspecified damages in paragraph 39 of the application are considered in the context of the application and pleadings as a whole and the absence of particulars with respect to them, the Court is unable to be satisfied that it is possible to sever allegations and claims for damages made by Mr Bryant into those that plainly concern causes of action which relate to the divisible property of the bankrupt and therefore are vested in the trustee of his estate, from claims which answer the description of claims for personal injury or wrong done to Mr Bryant, his spouse or members of his family.
The claim for damages in paragraph 39 of the application is in any event, it seems to me, consequential upon the loss or damage which Mr Bryant asserts was sustained by him, and which is referable to the proprietary claims which I have described earlier and which would plainly pass to the trustee upon Mr Bryan’s bankruptcy.
It follows that the appeal from the judgment of Sackville J was a right that vested in Mr Bryant’s trustee in bankruptcy upon Mr Bryant’s becoming bankrupt.
The letter from the trustee to the Bank dated 1 November 1996, the terms of which were set out earlier, constitutes in my opinion evidence that the trustee did not elect to prosecute the appeal. Accordingly, the trustee is deemed to have abandoned the appeal pursuant to s 60(3).
In my opinion the appeal should be dismissed with costs.
I hereby certify that this and the preceding twenty-four (24) pages are a true copy of the reasons for judgment herein of the Honourable Justice Lockhart.
Associate
Dated: 4 July 1997
GENERAL DISTRIBUTION
IN THE FEDERAL COURT OF AUSTRALIA)
)
NEW SOUTH WALES DISTRICT REGISTRY) NG 168 of 1995
)
GENERAL DIVISION )
ON APPEAL FROM A SINGLE JUDGE OF THE COURT
B E T W E E N: JOSEPH RICHARD BRYANT
Appellant
- AND - COMMONWEALTH BANK OF AUSTRALIA
Respondent
JUDGES: LOCKHART, O’LOUGHLIN and MERKEL JJ
PLACE: SYDNEY
DATE:
REASONS FOR JUDGMENT
O’LOUGHLIN AND MERKEL JJ
BACKGROUND FACTS
On 30 August 1994, Mr Joseph Richard Bryant instituted against the Commonwealth Bank of Australia the proceedings the subject of the present appeal. For convenience, we shall refer to the parties to the litigation as Mr Bryant and "the Bank" respectively. The proceedings came to an abrupt end. On 3 March 1995, pursuant to the Bank's application, Sackville J ordered that the proceedings be summarily dismissed and that Mr Bryant pay the Bank's costs.
On 22 March 1995 Mr Bryant lodged a notice of appeal against that judgment. The Bank subsequently moved this Court on notice of motion filed on 24 January 1997 for an order that the appeal be dismissed as incompetent: see O 52 r 18(1). Briefly stated, the Bank relies upon the fact that Mr Bryant had become a bankrupt on 30 March 1995. It claims that his trustee in bankruptcy has failed to elect to prosecute Mr Bryant's appeal and is thereby deemed to have abandoned it pursuant to s 60(3) of the Bankruptcy Act 1966 (Cth) ("the Act"). Accordingly, the Bank contends that it is entitled to have the appeal dismissed. It is the Bank's notice of motion that is under consideration in these proceedings.
Before embarking upon the substance of the Bank's application, it is necessary to recount, briefly, the history of Mr Bryant's litigation with the Bank and its effect upon him. It commenced when the Bank sought recovery of moneys it lent to Mr Bryant or to one or other of his companies. For present purposes, it is not necessary to distinguish between Mr Bryant as a primary borrower and as a guarantor to the Bank in respect of his companies' debts. The repayment of the moneys due to the Bank had been secured by various mortgages which the Bank sought to enforce by obtaining possession of properties that were the subject of the mortgages. The Bank's claims were heard before Levine J in the New South Wales Supreme Court. On 27 November 1993 judgment was entered in favour of the Bank. Mr Bryant has lodged an appeal in that matter but, for reasons that were not explained, the appeal has not been prosecuted.
Whilst the Supreme Court proceedings were still on foot, Mr Bryant instituted proceedings against the Bank in this Court. His application, filed on 11 October 1993, sought orders under the Trade Practices Act 1974 (Cth) varying the contractual arrangements subsisting between himself and the Bank. He also claimed damages in the amount of $20,000,000. On the Bank's application, the Federal Court proceedings were summarily dismissed, Einfeld J holding that the issues raised in Mr Bryant's statement of claim could have been and should have been raised by way of defence and counter-claim in the Supreme Court proceedings: see Bryant v Commonwealth Bank of Australia (1994) 51 FCR 529. On 5 August 1994, Mr Bryant lodged a notice of appeal from the decision of Einfeld J. That appeal was dismissed by a Full Court of this Court on 14 June 1995 and Mr Bryant's application for special leave to appeal to the High Court was refused. As pointed out already he issued the proceedings the subject of the present appeal on 30 August 1994.
Meanwhile the Bank had instituted bankruptcy proceedings against Mr Bryant and on 30 March 1995 a sequestration order was made against his estate. An appeal by Mr Bryant against that order was dismissed by a Full Court of this Court on 24 November 1995. The operation of the sequestration order had been stayed pending a determination of Mr Bryant's appeal but that stay was discharged when the Full Court handed down its decision. An application to the High Court by Mr Bryant for special leave to appeal was refused on 3 October 1996.
Following upon the High Court's refusal to grant special leave in the bankruptcy proceedings, the Bank served on Mr Bryant's trustee in bankruptcy, a request for an election pursuant to s 60(2) of the Act in respect of the proceedings instituted by him on 30 August 1994. The sub-section provides that:-
"[a]n 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."
The word "action" is defined as "any civil proceeding, whether at law or in equity": s 60(5). That definition means that the filing of a notice of appeal, constituting, as it does, the institution of an originating process, is encapsulated within the phrase "an action commenced": see Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 130 per Brennan CJ, Gaudron and McHugh JJ and at 142 per Dawson and Toohey JJ. In this case, Mr Bryant filed his notice of appeal on 22 March 1995, eight days before the making of the sequestration order.
If the trustee, having been served with a notice of action, does not make an election within twenty eight days thereafter to prosecute or discontinue, he is deemed to have abandoned the action: s 60(3). However, s 60(4) provides that a bankrupt may, in the circumstances there described, continue, in the bankrupt's own name, an action that he or she may have commenced before becoming a bankrupt. The sub-section provides as follows:
"(4)Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of:
(a) any personal injury or wrong done to the bankrupt, his or her spouse or a member of his or her family; or
(b) the death of his or her spouse or of a member of his or her family."
Having been served by the Bank with a notice of action, the trustee replied by letter dated 1 November 1996 in these terms:
"Having referred the request to my legal advisers, I am advised that this is not a proceeding in which I would be required to make an election. The continuation of the proceedings appears to be solely at the discretion of the bankrupt."
No further information was available to the Court to explain the decision of the trustee. Nevertheless, it is obvious that the trustee's reply can only be interpreted as a failure to elect. It remains, however, to consider the consequences of that failure.
If, as Mr Bryant has submitted, the action commenced by him before he became a bankrupt (i.e. the appeal) is in respect of "any personal injury or wrong" done to Mr Bryant, his spouse or a member of his family he will be free to continue his appeal - no adverse consequence will flow from the trustee's failure to elect. As to this, Mr Bryant has claimed in the course of his written and oral submissions that there has been such personal injury and wrong. He has submitted that by reason of the wrongful conduct of the Bank he has suffered mental deterioration, stress, a breakdown in his family relationships as well as "immense personal damage" to him, his wife, his children and his grandchildren. But if, notwithstanding these submissions, the appeal is in respect of financial or property rights rather than personal injury or wrong, then the failure to elect will, by virtue of the provisions of s 60(3) of the Act be deemed to be an abandonment of the appeal. In that case, it would be appropriate for this Court to make an order dismissing the appeal.
THE BANK’S CASE
The case for the Bank was presented on two broad fronts. First, it was submitted that the Court should look only at the contents of the notice of appeal without having regard to the causes of action or the relief sought in the application and statement of claim. If however, the Court was of the opinion that it should have regard to those pleadings, then the Bank's alternative argument was that such proceedings were wholly (and if not wholly, then substantially) commercial in nature, dealing with Mr Bryant's property rights. In either event, it was submitted that the action - whether it be the appeal simpliciter or the appeal characterised by reference to the original proceedings - was not one falling within the exceptions that are set out in s 60(4). In other words, the Bank submitted that the proceedings were not "in respect of" personal injury or wrong done to the bankrupt, his spouse or a member of his family. Of course, no question of the death of any person arises.
Although the words "in respect of" have been said to have “the widest possible meaning of any expression intended to convey some connection or relation between the two subject-matters to which the words refer: see The Trustees Executors & Agency Co. Ltd v Reilly [1941] VLR 110 at 111 per Mann CJ, the phrase must be construed in the context in which it is found as it is that context which will determine the matters to which it extends: The Workers’ Compensation Board of Queensland v Technical Products Pty Ltd (1988) 165 CLR 642, 646-7, 653-4 and Technical Products Pty Ltd v State Government Insurance Office (Queensland) (1989) 167 CLR 45, 47 and 51.
The relevant context for present purposes is the scheme under the Act, upon a debtor's bankruptcy, for the debtor's property rights, including choses in action other than those exempted in s 60(4), to vest in the bankrupt's trustee: see ss 58, 60 and 116 and Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45 at 50 per Kirby P.
In that context we would have thought that it is essential to have regard to the cause or causes of action pleaded and to the relief sought in the original proceedings when considering whether s 60(4) of the Act would entitle a bankrupt to prosecute an appeal. A simple example demonstrates this proposition. A person institutes proceedings, claiming damages for personal injuries that resulted from the alleged negligence of a defendant. Such a claim would obviously attract the provisions of s 60(4) and such a plaintiff would be entitled to continue the action notwithstanding his or her subsequent bankruptcy. But, let it be supposed that because of an adverse ruling as to the admissibility of certain evidence or a plea of issue estoppel, the plaintiff's claim was dismissed. In a literal sense, an appeal against the trial judge's refusal to admit that evidence or accede to the plea might be regarded as a matter relating to an evidentiary or estoppel issue only, having no connection with a "personal injury or wrong done" to the plaintiff. But if the appeal were to succeed and a new trial ordered, the plaintiff's claim for personal injuries would have been revived. A similar situation would arise if the plaintiff's appeal succeeded on any other ground. These examples indicate that in the usual course an appeal will derive its characterisation, for the purposes of s 60(4), from the nature of the proceeding the subject of the appeal and the grounds of appeal and the relief sought in the notice of appeal.
MR BRYANT’S “ACTION”
The notice of appeal in the present case was prepared by Mr Bryant without the benefit of legal assistance. The appeal was from the whole of the judgment of Sackville J and relied upon fifteen grounds of appeal. None of the grounds touched upon any question of "personal injury or wrong". They were stated as follows:-
"Grounds:
2. His Honour in finding that the words "Forwarded to" are the same as "Had been served" was wrong in law.
3. His Honour in finding that in order to grant possession of real property it is necessary to first grant a right of sale is wrong in law.
4. His Honour in finding that a valid notice complying with section 57(2)(b) of the Real Property Act 1900 (NSW) had been forwarded was wrong in law and against the weight of the evidence.
5. His Honour in finding that a party could rely on a patently invalid document is wrong in law.
6. His Honour misdirected himself by adding to or deleting from the pleadings relied on in the Supreme Court proceedings.
7. His Honour finding that The Conveyancing Act 1919 (NSW) was not contravened is wrong at law and against the weight of evidence.
8. His Honour erred at law in finding that the Anshun estoppel applied in proceedings not being a defence.
9. His Honour finding that evidence in one case cannot be used in a completely different case is wrong at law.
10. His Honour erred at law in finding that the appellant's case is essentially a defence of the Supreme Court actions on the mortgages and guarantees.
11. His Honour erred at law in finding that the matters raised in the Federal Court Proceedings could have been raised in the Supreme Court proceedings.
12. His Honour erred at law in finding what the appellant could and could not do, and His Honour ignored or dismissed the fact that the appellant was through no fault of his own unrepresented in both proceedings.
13. As a matter of law it was not open to His Honour to adjudicate that the matters raised in the Federal Court Proceedings could have been raised in the Supreme Court proceedings.
14. His Honour erred at law in finding that there was conflict of a judgement (sic) in favour of the appellant in this court with the judgement in the Supreme Court.
15. His Honour erred at law in finding that a Cross-Claim can form the basis of an Anshun estoppel.
16. His Honour erred at law in finding that the appellant had been warned in the Supreme Court that he would not be able to litigate the other matters in the Federal Court."
The main orders sought were that “the orders of Sackville J ... be set aside" and "[a] new trial be allowed".
The nature of the proceeding and the causes of action the subject of the appeal can be gleaned from Mr. Bryant's application and statement of claim. In his application Mr Bryant sought declaratory relief, compensatory orders and "unspecified damages" for, inter alia, loss of business, loss of reputation and standing, stress and suffering. Exemplary damages were also claimed.
If the appeal was prosecuted by Mr Bryant to a successful conclusion, subject to any issues arising in relation to the pleadings, his claims in his application and statement of claim could proceed to trial. At any trial the Court might have to give consideration, inter alia, to Mr. Bryant's claims including those relating to the "personal injury or wrong" allegedly done to him. Clearly, in the present case, the issue of whether the action (i.e. the appeal) is in respect of "any personal injury or wrong" is to be determined on the basis of the pleadings in the original proceeding.
We turn then to consider those pleadings. They were described by Sackville J at 3-7 as follows:
The relief sought by Mr Bryant in his application in the present proceedings falls into several classes:
(i) declarations that the Bank does not have a power of sale pursuant to specified mortgages over ten identified properties (paragraphs 1-11, there being no paragraph 4 in the application);
(ii) declarations that various letters of demand by the Bank, all of which were dated 19 September 1991 and addressed to Mr Bryant, were misleading, invalid and/or void and, in one case, constituted harassment and coercion of the applicant (paragraphs 12-29, 36-37);
(iii) declarations that a notice, dated 4 October 1991, served by the Bank purportedly pursuant to s.57(2)(b) of the Real Property Act 1900 (NSW), was not issued according to law and was bad, misleading, deceptive, unconscionable, fraudulent and invalid, and also constituted harassment and coercion of the applicant (paragraphs 30-32);
(iv) declarations that the notice of 4 October 1991 did not comply with the requirements of s.111(2)(b) of the Conveyancing Act 1919 (NSW) and was bad, misleading, deceptive, unconscionable, fraudulent and invalid and also constituted harassment and coercion of the applicant (paragraphs 33-35); and
(v) an order that the Bank be "punished for its actions" and that it compensate Mr Bryant for loss and damage, the damage to be in respect of loss of businesses, professional reputation, standing, amenities, stress and suffering, as well as exemplary damages (paragraphs 38-39).
THE STATEMENT OF CLAIM
The statement of claim makes a number of allegations:
(i) At all material times Mr Bryant was the registered proprietor of ten lots of land in various parts of New South Wales, but mostly at Upper Turong, near Sofala (paragraphs 1-11; there being no paragraph 4 in the statement of claim).
(ii) By a series of five mortgages, executed during the period from 12 August 1983 until 30 September 1987, Mr Bryant mortgaged his interest in each of the lots, for the purpose of securing the payment of principal interest and other moneys agreed to be paid by him to the Bank (paragraphs 12-22). (All of the mortgages were said to be registered under the Real Property Act 1900. One mortgage, over portions 67, 238, 248, 521 and 522 in the shire of Evans, Parish of Sofala, county of Foxburgh, being part of the property known as "Caralee", was said to be in "Registered Book 3563, No. 949", suggesting that it was an old system mortgage. However, it appears from the evidence that the relevant properties were subsequently been converted to Real Property Act title.
(iii) By letters of demand dated 19 September 1991 the Bank alleged defaults under the mortgages that had not occurred in fact (paragraph 26).
(iv) On or about 4 October 1991, by a notice pursuant to s.57(2)(b) of the Real Property Act, the Bank demanded that Mr Bryant pay within one month an amount of $2,095,660.77 plus costs (paragraph 23).
(v) The notice did not comply with the strict requirements of the Real Property Act 1900, alleged a default that had not occurred and was "misleading, deceptive and unconscionable and caused the applicant to be [misled] and deceived and suffer loss and damage" (paragraphs 27, 28).
(vi) The notice also did not comply with the strict requirements of "the relevant sections of the Conveyancing Act 1919" (paragraph 29).
(vii) Mr Bryant relied on the formal demands in the letters of demand and notice and organised his affairs in accordance with the demands and notice (paragraph 24). The Bank negligently or maliciously delivered the demands and notice knowing that Mr Bryant would rely on them as correct and lawful (paragraph 25).
(viii) On about 25 February 1992 Colin Gregory Cavanagh swore an affidavit, which was read in proceedings commenced by the Bank in the Supreme Court. In that affidavit he swore falsely that the Bank had served demands and notice in accordance with the strict requirements of the Real Property Act (paragraph 30). The affidavit was misleading, deceptive and unconscionable and caused the applicant to be misled and suffer loss and damage (paragraphs 31, 32).
(ix) The Bank fraudulently intended to mislead, deceive and coerce Mr Bryant into leaving and losing the properties. Further, the Bank fraudulently obtained possession of Mr Bryant's real property and took action to sell the property (paragraphs 33, 35).
(x) The Bank owed a fiduciary duty and duty of care to Mr Bryant and acted (in an unspecified way) contrary to its duties (paragraphs 36-39).
It is evident from the pleadings that Mr Bryant endeavoured to raise several causes of action. Putting to one side the legal efficacy of some of his claims, it is also evident that the pleadings have all the hall-marks of a commercial cause arising out of Mr Bryant's alleged financial or property rights. The essential claim in the pleadings is centred upon a challenge to the Bank's rights to exercise its powers as a secured creditor. In the Court below, Sackville J considered that by reason of the earlier litigation Mr Bryant was estopped from proceeding with that challenge. But the correctness of that and the other conclusions reached by Sackville J only arises if Mr Bryant is permitted to continue with his appeal. The issue that must be determined at this stage is whether "the action" by Mr Bryant including his claims for damages that are said to be consequential upon the Bank's impugned conduct, or any severable part thereof, is to be categorised for the purposes of s 60(4) as an action in respect of "personal injury or wrong" done to Mr Bryant.
For present purposes, we will assume in Mr Bryant's favour that his claims for damages for harm to his reputation and for personal injury consequential upon the allegedly wrongful conduct of the Bank, which he is seeking to impugn, are severable from the other relief sought by him: see Faulkner v. Bluett (1981) 52 FLR 115 at 119 per Lockhart J.
SECTION 60(4)
The true nature of Mr Bryant's causes of action in his original proceedings, for the purposes of s 60(4), is to found in the common law of bankruptcy. The traditional starting point is Beckham v Drake (1849) 2 HLC 579 (9 ER 1213). In that case, the plaintiff sued for damages for breach of a contract of employment when his services were terminated. The defendants successfully pleaded that, as the plaintiff had become bankrupt after the causes of action had accrued and before the commencement of proceedings, the right of action had passed to his assignee in bankruptcy. In explaining the line of demarcation between personal and property rights Erle J said at 604:
"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.
See also the remarks of Maule J at 626 and Wilde LCJ at 634.
The decision in Beckham v Drake was approved by the House of Lords in Wilson v United Counties Bank, Limited [1920] AC 102. In that case the plaintiff and his trustee in bankruptcy sued the bank for damages for breach of contract. The jury found that the bank had agreed with the plaintiff to supervise the financial aspects of his business during his absence on military service and to take all reasonable steps to maintain his credit and reputation. The jury further found that the bank had been negligent in the discharge of its duties and that its negligence had caused the plaintiff's bankruptcy. The plaintiff was awarded slightly in excess of 45,000 pounds in damages for the loss occasioned to the bankrupt's estate and a further 7,500 pounds in damages for the injury caused to the bankrupt's credit and reputation by the defendant's negligent conduct. It was held that the right to claim damages for injury to the bankrupt's credit and reputation did not pass to the trustee in bankruptcy and that the bankrupt was entitled to retain the 7,500 pounds for his personal use.
The decision in Wilson v United Counties Bank was considered by Dixon J in Cox v Journeaux (1935) 52 CLR 713. The plaintiff had commenced proceedings in the High Court "for conspiracy to injure him in the minds of the business community and the public generally". The defendants sought summary dismissal on various grounds. One of those grounds was that the estate of the plaintiff had been sequestrated after the commencement of the proceedings. The defendants argued that the action, not being one for personal injury or wrong, should be deemed to have been abandoned by the trustee in bankruptcy. Dixon J came to the conclusion that the plaintiff's case was without merit. He said:-
"An attempt to go behind the formulation of the claim for damages and look at the actual facts inevitably leads back to an examination of the cause of action, and, as my conclusion is that none exists or could be discovered, I have felt it better not to engage in a futile consideration of the hypothetical question which classification it would fall under if it had a real or colourable existence." (at 721)
However, in the course of reaching that conclusion his Honour observed that the earlier statutory equivalent of ss 60(3) and (4) had stated the common law of bankruptcy. After referring to Wilson v United Counties Bank Ltd Dixon J said:
"The test appears to be whether the damages or part of them are to be estimated by immediate reference to pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property." (at 721)
More recently, Lockhart J examined in detail the development of bankruptcy law on this subject in Faulkner v Bluett (supra). In that case the plaintiff had instituted proceedings in the High Court seeking damages from the Commonwealth arising out of the conduct of its agent, a Brigadier Flint. The claim was based on misrepresentations and negligent mis-statements. His Honour observed at 118:
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".
Lockhart J traced the development of the bankruptcy cases and their treatment of exceptions to the general rule that the property of a bankrupt vests in the trustee. After giving examples of the better known exceptions his Honour said at 119:
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; Wage on Bankruptcy (1904 ed.), P.201. Where the essential cause of action is the personal injury done to the person or feelings of the bankrupt the right to sue remains with the bankrupt. (footnotes omitted)
Lockhart J regarded the test in Wilson v United Counties Bank as stated by Dixon J in Cox v Journeaux as applicable to ss 60(3) and (4) and concluded at 122:
The right of action of the applicant is directly related to her property or her estate, namely, her shares in Trisal Engineering Pty. Ltd. and her interests in the patents or the Trisal clips. Any damages to which the applicant may be entitled would be estimated by immediate reference to her rights of property and not to pain felt by her in respect of her "body, mind or character".
More recently in Daemar v Industrial Commission of New South Wales (supra) the bankrupt sought orders, principally for relief in the nature of prerogative writs directed to the Commission, claiming that a "wrong" had been done to him by the Commission. After referring to the test in Wilson v United Counties Bank Kirby P (with whom Samuels and Clarke JJA agreed) said at 56:
Applying that test to the present case, the action brought by the claimant cannot be categorised as he submits. Although it is true that the claimant contends that a "wrong" has been done to him and that he has suffered hurt and even "defamation" in the course of the judgments of the Commission, these contentions are irrelevant to the task of identifying, for the purpose of s 60(4)(a) of the Act, the nature of the action exempted from the stay. 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" of which the claimant complains is the very source of the financial problems which have led to his bankruptcy. It is therefore to be classified not as a "wrong" which is exempted from the operation of s 60(2) and the statutory stay provided for but as of the very essence of the subject matter to which s 60(2) is addressed.
As in Daemar, the "wrong" of which Mr Bryant complains in his pleadings appears to be the very source of the financial problems which led to his bankruptcy.
Of the authorities to which the Court was referred, the one that most closely resembles the facts of this case is the unreported decision of the New South Wales Court of Appeal in Manningel v Hewlett, Phelps & Others (judgment delivered 12 June 1991). The plaintiffs had sued their former solicitors for professional negligence arising out of the plaintiffs' purchase of a parcel of land and the construction of a house on that land. They pleaded their case both in contract and tort.
The plaintiffs claimed damages for their economic loss and under pars 17(e), 17(f), 17(g) of their statement of claim, sought damages for loss of credit and reputation, for inconvenience, mental distress and strain as well as for injury to their physical and mental health. Subsequent to the issue of proceedings, both plaintiffs became bankrupt but obtained their discharge before the case was called on for hearing. The defendants applied to the trial judge for a determination (as a separate question) that the causes of action sued upon had passed to the plaintiffs' trustee in bankruptcy on the making of the sequestration orders. The trial judge upheld the defendants' submission and summarily dismissed the plaintiffs' action. The Court of Appeal noted that the trustee in bankruptcy had not been called upon to elect and concluded that the correct order should have been an order staying the proceedings until an election to prosecute or discontinue the action had been made. The appeal was allowed for that limited purpose; in all other respects the Court of Appeal upheld the decision of the trial judge. Handley JA (with whom Kirby P and Meagher JA agreed) at 4-5 described the plaintiff's claim for damages in these terms:-
The plaintiffs claimed damages in the proceedings in the manner particularised in par 17(e), (f) and (g) of their amended statement of claim but these claims were consequential upon alleged breaches of professional duty owed to them by the defendants in relation to the purchase of the land and the contract by the vendor to erect a dwelling house on it. The plaintiffs’ claims for damages for loss of credit, for mental distress, inconvenience and for injury to their physical and mental health therefore were not claims "without reference to their rights of property" within the principle stated by Dixon J. On the contrary those claims were consequential on damages to the plaintiffs’ financial and property interests as a result of alleged breaches of professional duty by the solicitors.
CONCLUSION
The remarks of Handley JA are apposite to and fairly summarise Mr Bryant's position. Mr. Bryant's causes of action, as pleaded in his statement of claim, are essentially claims which are referable to his financial and property rights. That is not to deny him his right to allege "personal injury or wrong done to" him or members of his family. But if the injury that was suffered or the wrong done arose as a direct result of the alleged infringements of his financial or property rights, as was the case in Faulkner v Bluett (supra), then "the primary and substantial right of action is direct pecuniary loss to the property or estate of the bankrupt" (at 119). To apply the language of Handley JA in Manningell v Hewlett to Mr Bryant's circumstances his claims for stress and suffering were "consequential upon alleged breaches" of duty said to be owed to him by the Bank as a mortgagee or secured creditor and were not claims "without reference to [his] rights of property", within the principle stated by Dixon J. in Cox v Journeaux.
In our opinion the Bank is entitled to an order dismissing the appeal with costs.
I certify that this and the preceding eleven
(11) pages are a true copy of the Reasons
for Judgment herein of their Honours
Justice O’Loughlin and Justice Merkel.
Associate:
Date:
Counsel for the Applicant: Mr J Bryant
appeared in person
Counsel for the Respondent: Ms R Sofroniou
Solicitor for the Respondent: Shaw McDonald
Date of Hearing: 26 February 1997
