FEDERAL COURT OF AUSTRALIA

Garrett v The Commissioner of Taxation [2015] FCA 665

THE COURT ORDERS THAT:

1.    Leave is granted to the applicant to file the document headed “Submissions of applicant to amend the draft notice of appeal”.

2.    The further hearing of the application under s 37AR of the Federal Court of Australia Act 1979 (Cth), for leave to institute an appeal against the orders and judgment of Pagone J in proceeding VID 600 of 2014 be adjourned sine die on the ground that the application is by force of s 60(2) of the Bankruptcy Act 1966 (Cth) stayed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

INTRODUCTION

1    On 26 February 2015, declarations and orders were made by a judge of the Court under s 37AO of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), including an order prohibiting the applicant, Mr Andrew Garrett, from instituting proceedings in the Federal Court of Australia without the leave of the Court. In what follows I refer to these declarations and orders collectively as the vexatious proceedings order. The vexatious proceedings order was made in a proceeding in which Mr Garrett sought to challenge the validity of tax assessments, or the existence and quantum of prior tax debts. Mr Garrett wishes to appeal against the vexatious proceedings order and, on 7 March 2015, applied to the Court for leave to do so under s 37AR of the Federal Court Act.

2    In the meantime, Mr Garrett became a bankrupt within the meaning of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act). A sequestration order was made against Mr Garrett’s estate on 15 May 2015. (Mr Garrett’s application for leave to institute an appeal against the sequestration order is the subject of a separate proceeding heard at the same time as this matter.)

3    Once the sequestration order was made, a question arose as to whether Mr Garrett’s application for leave to institute an appeal against the vexatious proceedings order was stayed under s 60(2) of the Bankruptcy Act. For the reasons stated below, I conclude that s 60(2) did so operate.

4    Section 60 relevantly provides:

Stay of legal proceedings

…

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

(3)    If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.

(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 de facto partner or a member of his or her family; or

(b)    the death of his or her spouse or de facto partner or of a member of his or her family.

…

...

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

(Original emphasis.)

5    No notice has been served on the trustee under s 60(3) and the trustee has not made an election under s 60(2). Section 60(2) will therefore operate to stay Mr Garrett’s application under s 37AR of the Federal Court Act unless it is not an “action” for which s 60(2) provides or it falls within the exception in s 60(4).

PARTIES’ SUBMISSIONS

6    After the sequestration order was made, the Commissioner of Taxation and thirteen other respondents (one apparently named twice), who were served pursuant to an order made on 11 May 2015 under s 37AT of the Federal Court Act, filed submissions in which they said that, subject to the issue of costs, Mr Garrett’s current application was not stayed to the extent that the proposed appeal related to the vexatious proceedings order, because this action lacked the necessary connection with Mr Garrett’s bankrupt estate. The respondents contended that Mr Garrett’s application for leave to institute an appeal would be stayed to the extent that the appeal was an action by which he might seek to prosecute his challenge to his tax assessments and tax debt, because such a challenge would bear on the size of his bankrupt estate.

7    Mr Garrett also filed written submissions, in which he too contended that his application for leave under s 37AR of the Federal Court Act was not stayed upon the bases that: (1) the proposed appeal had not commenced, alternatively it was not property vesting in his trustee in bankruptcy and, in either case, did not fall into the category of actions to which s 60(2) referred; and (2) the exception in s 60(4) of the Bankruptcy Act applied because the appeal “relates to a wrong perpetrated on the Applicant in all of his capacities” and he had suffered “damages to mind and body” as a consequence of what he described as the respondents’ unconscionable conduct and criminal acts. In support of the latter contention, Mr Garrett sought unsuccessfully to tender a psychological assessment. Mr Garrett also relied on what he said were human rights issues under the Human Rights and Equal Opportunity Commission Act 1986 (Cth) and Charter of Human Rights and Responsibilities Act 2006 (Vic).

8    After a brief hearing on 12 June 2015, the Court made various orders, including that Mr Garrett’s trustee in bankruptcy, Mr Timothy Holden, be given relevant documents. As these orders contemplated, Mr Holden subsequently filed short submissions and his legal representative appeared at the adjourned hearing on the afternoon of 19 June 2015. In helpful submissions, the trustee submitted that “[i]f the decisions of Cummings [v Claremont Petroleum NL [1996] HCA 19; 185 CLR 124] and Duckworth [v Water Corporation [2012] WASC 30; 261 FLR 185] are distinguished from that in Griffiths [v Civil Aviation Authority (1996) 67 FCR 301] then the Applicant has standing to bring this appeal. Otherwise the action stands stayed by operation of sub-section 60(2) of the [Bankruptcy] Act”. The trustee also assisted the Court by clarifying the costs that would, and would not, be provable in Mr Garrett’s bankruptcy. Referring to Pelechowski v NSW Land v Housing Commission [2000] FCA 233, the trustee also noted that where s 60(2) applies, it does no more than stay the proceeding and the bankrupt would have the right to renew his application at the end of the bankruptcy, albeit time would have passed.

9    Mr Garrett filed written submissions dated 11 June 2015. He appeared in person on 19 June 2015 and reiterated his submission that s 60(2) did not apply and specifically relied on s 60(4). He also addressed the other principal aspect of the respondents’ submissions, which was that conditions should be imposed on the appeal, assuming leave were granted, to prevent Mr Garrett from seeking to challenge anything other than the vexatious proceeding order.

10    At the hearing on 19 June 2015 the respondents’ position shifted, with their senior counsel acknowledging that there was authority in favour of a wide meaning to be attributed to the word “action” in s 60(2), including the observations of the plurality in Cummings v Claremont Petroleum NL [1996] HCA 19; 185 CLR 124; and the decisions of Gray J in Re Lofthouse [2001] FCA 25; 107 FCR 151, Edelman J in Duckworth v Water Corporation [2012] WASC 30; 261 FLR 185 and the Court of Appeal of the Western Australian Supreme Court in Fletcher v Westpac [2012] WASCA 154. Senior counsel observed, however, that there was support for a narrower view, dependent upon a connection with the bankrupt’s estate, in Griffiths v Civil Aviation Authority (1996) 67 FCR 301. The other decisions said in written submissions to support the narrower view were Owens v Comlaw [2006] VSCA 151; 201 FLR 275 and Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45.

ANALYSIS

11    As stated above, whether Mr Garrett’s present application for leave to institute an appeal against the vexatious proceedings order is stayed by s 60(2) of the Bankruptcy Act primarily depends on whether it is an “action” for the purposes of that provision. In the context of s 60(2), the word “action” is broadly defined by s 60(5) to signify “any civil proceeding”. Mr Garrett’s application is capable of meeting this description: see, for example, the definition of “proceeding” in the Oxford English Dictionary http://www.oed.com (26 June 2015) (“A legal action or process; any act done by authority of a court of law; a step taken by either party in a legal case”); cf. Federal Court Act, s 4, to which further reference is made below.

12    Language is, however, characteristically malleable and nuanced; and there are almost always constructional choices to make by reference to text, context and purpose: see Momcilovic v The Queen [2011] HCA 34; 245 CLR 1 at [50] per French CJ. The authorities discuss the context and purpose of s 60(2) in some detail. I shall not repeat this discussion at length, although I shall touch on it in the following analysis. As appears above, I was referred to three authorities which not only discuss these matters but were also relied on to support the proposition that Mr Garrett’s application for leave to institute an appeal was not an action for the purposes of s 60(2) of the Bankruptcy Act because it lacked the necessary connection with Mr Garrett’s bankrupt estate. An examination of these authorities shows, however, that none of them actually decided that s 60(2) contains this implied limitation although certain statements within them leave open that possibility.

13    In Daemar 12 NSWLR 45, the Court of Appeal of the NSW Supreme Court held that an action by summons for orders for relief in the nature of prerogative writs directed to the respondent Commission was stayed by operation of s 60(2) of the Bankruptcy Act. The Court rejected the claimant’s principal contention that the action did not fall within s 60(2). The Court was not persuaded by the claimant’s arguments that: (1) the relief sought was traditionally held available to enforce a right arising from a public duty; (2) the section should be read so as to exclude a proceeding in which public, as distinct from private property rights, were at issue; (3) a number of old English cases had allowed a bankrupt to proceed notwithstanding bankruptcy; and (4) “the juxtaposition between his position having ‘subsequently become a bankrupt’ under s 60(2) and his position had he not commenced his proceedings before so becoming a bankrupt – or by inference, were he now to commence fresh proceedings which would fall outside the specific provisions of s 60(2)”: Daemar 12 NSWLR at 51-53. Whilst accepting that the claimant’s arguments were not “without force”, Kirby P, with whose reasons Clarke JA agreed, held that s 60(2) applied to the claimant’s summons. His Honour said that “‘action’, particularly as defined in the [Bankruptcy] Act, is a word of wide meaning” and that “[i]ts width is emphasised by the very limited exceptions which Parliament has specifically provided for in s 60(4)”: Daemar 12 NSWLR at 54.

14    Kirby P noted (at 52) that:

The claimant derived some support [for his second argument] from the concession made by counsel for the Attorney-General that s 60(2) of the Act would not apply … to entirely separate personal proceedings such as proceedings in the Family Court of Australia (by a person subsequent tly made bankrupt), which were unconnected with the property of the bankrupt and which only concerned, for example, his personal status.

His Honour subsequently stated (at 53) that “[t]here may be cases where an ‘action’ commenced by a person who subsequently becomes a bankrupt, and who is seeking relief prerogative in nature, would … fall outside … s 60(2), as that subsection was intended by the Parliament to operate” (emphasis added). This was the nearest his Honour came to allowing for the possibility that s 60(2) might not apply to an action that lacked the necessary connection with a bankrupt’s estate. His Honour did not decide the point, however, because the case before him was not of that kind; rather it was “the very kind of case that Parliament intended s 60(2) to apply to”: Daemar 12 NSWLR at 54. Samuels JA agreed (at 57) in the conclusions of Kirby P, affirming that there was “no ambiguity in the relevant provisions of s 60, and no warrant for reading down its plain words in favour of an intention gleaned from other sections of the [Bankruptcy] Act”: Daemar 12 NSWLR at 57.

15    Griffiths 67 FCR 301 held that a bankrupt had standing to institute an appeal under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) challenging the Tribunal’s decision as to the conditions to be imposed on his commercial pilot’s licences where the right to appeal arose after his bankruptcy. The case did not involve the application of s 60(2) of the Bankruptcy Act at all. The applicant became bankrupt on 18 May 1994 and the Tribunal did not give its decision until 31 May 1994, after which the applicant sought to exercise his statutory right to appeal to this Court. At issue was the application of s 116(1) of the Bankruptcy Act, not s 60(2). The effect of s 116(1) was to vest everything answering the description of property in the trustee in bankruptcy, including property acquired after the bankruptcy. Spender, Einfeld and Cooper JJ held that since a commercial pilot’s licence is personal to the holder it did not fall within s 116(1) of the Bankruptcy Act. Spender J specifically said that he derived no assistance from arguments about the application of s 60 of the Bankruptcy Act: Griffiths 67 FCR at 304.

16    It is only a statement in the reasons of Cooper J, which might be thought to support the proposition that s 60(2) may not apply to an action that lacks the necessary connection with a bankrupt’s estate. Specifically in the context of s 116(1) and the definition of property in s 5, Cooper J focussed on the way in which the Bankruptcy Act achieved its statutory object of vesting the property of a bankrupt in a trustee in order that that property may be divisible amongst the bankrupt’s creditors: 67 FCR at 323-324. In this connection, his Honour said (at 324) that “[c]aims by or against the bankrupt which do not affect the estate of the bankrupt in any way … are of no interest to the trustee” and continued, first citing Merry v The Queen (1997) 13 VLR 264:

Personal wrongs within the meaning of s 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 Pty Ltd (1986) 84 FLR 84 at 85 where Young J held that “action” in s 60(2) of the [Bankruptcy] Act had to be read down to mean a civil proceeding at law or equity which must relate to the property of the bankrupt …

17    A number of things can be said about this passage. First, as already noted, Griffiths did not involve an application of s 60 and his Honour’s focus was not on that provision, but on s 116. Secondly, the issues in John v Neiman Holdings Pty Ltd (1986) 84 FLR 84 were very different from those that presently arise. This is clear from reading the judgment in John v Neiman Holdings as a whole. Young J said, non-controversially, that s 60(5) “makes it clear that ‘action’ means any civil proceedings, whether at law or in equity” and then added (at 85) the words to which Cooper J referred, instancing the situation “where the bankrupt is only involved in the action because, for instance, he is a proper but not a necessary party in an equity suit”. Significantly, however, his Honour went on to say (at 86):

… in my view, apart from these two exceptions, viz: (1) where the bankrupt’s property is not affected because he is merely added to the litigation as a party for more abundant caution; or (2) where the litigation has progressed beyond the stage where the trustee’s decision as to what he will do about it is still material, the effect of s 60(2) is to prevent any activity in litigation in which the bankrupt is a plaintiff … until the election has been made.

Young J was not concerned with stating any broader principle than that set out above, which has no application in the present case. Furthermore, Cooper J himself was not deciding the scope of s 60(2) and was alone in saying anything that indicated that the operation of s 60(2) might depend on there being a connection between the action and the bankrupt estate beyond the fact that the bankrupt had commenced the action before becoming a bankrupt.

18    In Owens v Comlaw 201 FLR 275, Ashley JA, with whom Redlich JA agreed, held that s 60(2) applied to stay an appeal instituted by the bankrupt before the making of the sequestration order against his estate. His Honour did so after considering numerous authorities, including Daemar 12 NSWLR 45, Griffiths 67 FCR 301, Cummings 185 CLR 124, Re Lofthouse 107 FCR 151 and Duckworth 261 FLR 185. In the course of so doing, he formulated 11 propositions (at [42]). These propositions included that:

(2)    Section 60(2) operates to stay an action which is on foot at the time when a person is made bankrupt until the trustee makes an election to prosecute or discontinue the same within the period made relevant by the giving of notice under subs (3). That is so where the proceeding is an “action” within the meaning of subs (5), provided always that it is not an action excluded from the operation of subs (2) by subs (4).

(3)    “Action” is apt to include an appeal.

(4)    The question whether an action is one to which s 60(2) applies, assuming that it fits the description in subs (5), and is not excluded by operation of subs (4), is not necessarily dependent upon the action or its subject matter being “property” which vested in the trustee under s 58(1). There may nonetheless be such a connection between the action and the estate as to make s 60(2) applicable. This case is an illustration of such a connection.

…

(10)    So far as — qualifying proposition (2) — there may be cases where s 60(2) does not operate although the action falls within the subs (5) definition, and is not excluded by subs (4), this action is not akin to the kinds of matters mentioned by Cooper, J in Griffıths, or hinted by Kirby P in Daemar.

(Citations omitted.)

19    Save perhaps for the second last sentence in proposition 4 and the statement in proposition 10, these propositions are not contentious, but evidently state the effect of s 60 in light of Cummings 185 CLR 124 and subsequent cases. There is nothing contentious about the second last sentence in proposition 4 unless it was intended positively to affirm that s 60(2) would not apply if there were no connection between the action and the bankrupt estate beyond the fact that the bankrupt had commenced the action before becoming a bankrupt. I would not, however, read this sentence in this way.

20    Ashley JA’s statements, both here and in proposition 10, must be read in context. The primary issue for determination in Owens v Comlaw 201 FLR 275 was whether s 60(2) applied to the appeal, which had been commenced by a bankrupt solicitor against a decision relating to a dispute over the terms of a retainer between the bankrupt and her former clients. There were other consequential issues, which are of no present concern. The trustee in bankruptcy argued that subss 60(2) and (3) did not apply because the subject of the proceedings was income earned by the bankrupt before her bankruptcy and did not vest in the trustee. The Court rejected this argument. Ashley JA had no difficulty rejecting the premise from which the trustee’s argument started, because “even if none of the favourable consequences of a successful appeal should be characterised as ‘property’, it is evident that successful prosecution of the appeal would be likely to have favourable consequences for creditors” and, on any view, “[t]hat shows a connection between the action and the estate which, in my opinion, is quite sufficient to give s 60(2) application”. His Honour therefore had no need to decide whether the application of s 60(2) depended on there being some connection between the action and the bankrupt estate beyond the fact that the bankrupt had commenced the action before becoming a bankrupt; and did not do so. This is emphasised by his Honour’s proposition 10 (set out above). It is plain from proposition 10 that his Honour was doing no more than note that Cooper J in Griffiths 67 FCR 301 and Kirby P in Daemar 12 NSWLR 45 left open this constructional possibility.

21    So far as this Court is concerned, Cummings 185 CLR 124, Re Lofthouse 107 FCR 151, Duckworth 261 FLR 185 and Fletcher v Westpac [2012] WASCA 154 weigh against this constructional possibility. These decisions indicate that, having regard to the text, context and purpose of s 60(2), the word “action” in s 60(2) should be broadly construed to cover Mr Garrett’s application for leave to institute an appeal against the vexatious proceedings order.

22    The High Court in Cummings 185 CLR 124 accepted that a person commences an action for the purposes of s 60(2) of the Bankruptcy Act when instituting an appeal. In Cummings 185 CLR 124 the issue was whether a bankrupt had standing to appeal against judgment pronounced against him for damages, amongst other things, for conspiracy and deceit, which was delivered after bankruptcy. Section 58(1) and the definition of property in s 5 of the Bankruptcy Act, not s 60, were the critical provisions. A Full Court of this Court held there was no standing. The High Court dismissed the appeal on grounds not presently relevant: Cummings 185 CLR at 136 and 139 per Brennan CJ, Gaudron and McHugh JJ; at 146, 147-148 per Dawson and Toohey JJ. In the course of their reasons, however, Brennan CJ, Gaudron and McHugh JJ stated (at 130):

If the appeals by the appellants had been commenced prior to their bankruptcy, they would have been stayed automatically pursuant to s 60(2) of the [Bankruptcy] Act … The term “action” is defined to mean any civil proceeding (s 60(5)). The institution of an appeal by a defendant against a judgment in favour of a plaintiff is the commencing of a proceeding.

Likewise Dawson and Toohey JJ said (at 142) “the institution of an appeal has been accepted as the commencement of an action within a provision such as s 60(2)”. Both judgments cited Want v Moss (1889) 10 LR (NSW) 274, a decision of the NSW Supreme Court, in support of this proposition. Brennan CJ, Gaudron and McHugh JJ referred, in particular, to Manning J’s statement (at 279) that, “[i]t could never have been contemplated that a bankrupt, who can have no means to pay costs if he fails, should be allowed to go on and put the plaintiff to trouble and expense”. Their Honours went on to say (at 131) that “[i]n Doran v Isaacs, Want v Moss was held to be authority for the proposition that the statutory term ‘proceeding commenced’ extends to a bankrupt's motion for a new trial in an action in which the bankrupt is a defendant” (citations omitted).

23    Citing Want v Moss 10 LR (NSW) 274, Daemar 12 NSWLR 45 and Cummings 185 CLR 124, Beazley JA held in Sarkis v Moussa [2012] NSWCA 136; 262 FLR 359 at [31] that a summons seeking leave to appeal is an action for s 60(2) purposes.

24    Want v Moss 10 LR (NSW) 274, Daemar 12 NSWLR 45, Cummings 185 CLR 124 and Sarkis v Moussa 262 FLR 359 indicate that the word “proceeding” in s 60(5) bears a meaning generally co-incident with its ordinary meaning and, in particular, co-incident with the definition of proceeding in s 4 of the Federal Court Act. The ordinary meaning of the word “proceeding” was mentioned earlier (at [11] above). In the Federal Court Act, s 4, the word “proceeding” is defined as “a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal”. An application under s 37AR of the Federal Court Act, for leave to institute an appeal that is subject to a vexatious proceeding order, falls within this definition. This indicates that not only is Mr Garrett’s current application properly characterised as a “civil proceeding” within s 60(5) but also as an “action” within s 60(2). It is only if there is some implied additional requirement, such as some further connection with the bankrupt’s estate, that the application could fall outside s 60(2).

25    This latter constructional choice finds little support in Cummings 185 CLR 124 or Sarkis v Moussa 262 FLR 359, both which gave a broad interpretation to the words “action” and “proceeding”. Furthermore, the reasoning in Re Lofthouse 107 FCR 151 and Duckworth 261 FLR 185 (approved in Fletcher v Westpac [2012] WASCA 154) is inconsistent with the existence of such an implied limitation. The issue in Re Lofthouse 107 FCR 151 was whether s 60(2) applied to a proceeding in the Supreme Court of Victoria commenced by a bankrupt as trustee. Gray J said (at [14]) that he determined the question of the application of s 60 “entirely on the assumption that … even if [the plaintiff bankrupt] is successful in that proceeding… he (and therefore his bankrupt estate) will have no entitlement to any of the proceeds of that litigation”. After referring to Daemar 12 NSWLR 45 and to John v Neiman Holdings 84 FLR 84, his Honour said (at [16]) that “[i]t is clear from these authorities that the approach of the courts has been to regard the word ‘action’ in s 60 as casting a net widely.”

26    Gray J continued (at [18]-[20]):

Even if it be the case that property of which a bankrupt is a bare trustee for someone else does not pass to the trustee in bankruptcy (because such property is not available for distribution to the bankrupt’s creditors), it does not follow that s 60 must be construed as excluding proceedings brought by the bankrupt as trustee.

Section 60 is not the provision that vests the right of action in the trustee in bankruptcy. It has a different, and in some respects wider, role. It operates to stay pending proceedings unless the trustee elects to prosecute or discontinue them. It also provides the machinery for a defendant or other party to a pending proceeding to force the making of an election. It is directed towards the protection of the bankrupt’s creditors, by preventing the unnecessary dissipation of the assets of the estate in fruitless litigation. In my view, s 60 also has the purpose of protecting a defendant or other party to a pending proceeding. A defendant or other party to a pending proceeding suffers an immediate detriment upon the plaintiff becoming a bankrupt. The detriment is that if the defendant or other party should be successful in the proceeding, and should obtain an order that the plaintiff pay the costs of the proceeding, the order will be effectively unenforceable because of the bankruptcy. The rationale behind s 60(2) and (3) is therefore, at least in part, to protect those whom the bankrupt has been suing. Such protection would be lost if the word “action” in s 60 were to be construed as excluding a proceeding in which the bankrupt has sued as a trustee for someone else.

In my view, s 60 has been enacted deliberately as a broad provision, so as to encompass any proceeding brought by a bankrupt before bankruptcy. The exceptions have been expressed quite narrowly. The intention is that, once a bankruptcy occurs, no further costs should be incurred in a proceeding unless the trustee in bankruptcy makes an election to continue the proceeding.

(Emphasis added.)

If the trustee in bankruptcy made an election to continue the proceeding, then the trustee would ordinarily be substituted as plaintiff and become liable for costs in the event that a costs order were subsequently made against the plaintiff. Gray J went on to hold that s 60(2) applied to the Supreme Court proceeding commenced by the bankrupt as trustee.

27    Re Lofthouse 107 FCR 151 supports two propositions: first, s 60(2) applies to any proceeding instituted by the bankrupt before bankruptcy, irrespective of whether there is a connection between the action and the bankrupt estate beyond the fact that the bankrupt had commenced the action before becoming a bankrupt. Secondly, s 60(2) is intended to protect a respondent from a proceeding in which the respondent will be deprived of a practical opportunity to recover costs, if successful, on account of the applicant’s bankruptcy. Re Lofthouse 107 FCR 151 therefore supports the proposition that s 60(2) operates to stay Mr Garrett’s application to institute an appeal against the vexatious proceedings order.

28    The Supreme Court of Western Australia, constituted by Edelman J, followed Re Lofthouse 107 FCR 151 in Duckworth 261 FLR 185, when he too held that an action commenced by a plaintiff as trustee for a trust was stayed when the plaintiff subsequently became bankrupt. Edelman J followed Re Lofthouse 107 FCR 151 principally because it was the decision of an equivalent first instance court on the interpretation of Commonwealth legislation, which was not plainly wrong: see Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [135] and the other authorities to which his Honour referred in Duckworth 261 FLR at [28]-[31]. At the same time, however, Edelman J also gave some persuasive reasons why Re Lofthouse 107 FCR 151 should be followed: see [34]-[48].

29    The Court of Appeal of the Supreme Court of Western Australia approved Re Lofthouse 107 FCR 151 and Duckworth 261 FLR at 191 in Fletcher v Westpac [2012] WASCA 154 at [15], although there was no issue in that case that a right of appeal arising from a sale of property brought by an appellant as trustee, who subsequently became bankrupt, fell within s 60(2) of the Bankruptcy Act.

30    Applying the interpretation of s 60(2) in Re Lofthouse 107 FCR 151 and Duckworth 261 FLR 185 in this case would lead me to construe the word “action” in s 60(2) of the Bankruptcy Act as including Mr Garrett’s application for leave to institute an appeal under s 37AR of the Federal Court Act. Whilst the particular issues for decision in Re Lofthouse 107 FCR 151, Duckworth 261 FLR 185 and Fletcher v Westpac [2012] WASCA 154 were different to those which arise in this case, there are good reasons why I should not depart from the interpretation of s 60 they favour.

31    As already said, the language of s 60(2) is apt to cover all actions commenced by a bankrupt, whether or not the action has a connection to the estate beyond the fact that the bankrupt commenced the action before becoming a bankrupt. If a qualification of this kind were to be read into s 60(2), then some justification would have to be found in the context and purpose of the provision considered as a whole. There are, however, some contextual considerations that militate against the supposed qualification, including that s 60(4) sets out a specific and limited exception in which the bankrupt may continue an action “in his or her own name”. As Gray J said in Re Lofthouse 107 FCR at [20] the exception is quite narrowly expressed. Further, as noted already, s 60(5) defines the word “action” very broadly so as to cover any civil proceeding.

32    This interpretation is, moreover, consistent with a purpose of s 60(2). As Re Lofthouse 107 FCR at [19] and Duckworth 261 FLR at [44]-[45] indicate, it is not uncommonly said by the authorities that a purpose of s 60(2) is to protect the other parties to the proceeding. In Want v Moss (1889) 10 LR (NSW) at 279, in the passage from Manning J’s judgment quoted in Cummings at 130-131 by Brennan CJ, Gaudron and McHugh JJ, Manning J said that “it would be monstrous if … a bankrupt, who can have no means to pay costs if he fails, should be allowed to go on and put the plaintiff to trouble and expense”.

33    There is also the matter of authority. A single judge of this Court should follow a decision of another single judge of this Court (Woodridge v Minister for Land and Water Conservation (NSW) [2002] FCA 1109; 122 FCR 190 at [14]) and a decision of a first instance judge of an equivalent court on Commonwealth law (Re Brashs Pty Ltd (1994) 15 ACSR 477 at 483; Re York Street Mezzanine Pty Ltd (in liq) [2007] FCA 922; 162 FCR 358 at [22]-[23]; Duckworth 261 FLR at [30]-[31]), unless persuaded the decision is plainly wrong. Further, a single judge of this Court should not depart from a decision of an intermediate appellate court in another jurisdiction unless persuaded it is plainly wrong: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [135]. As I have said, in Fletcher v Westpac [2012] WASCA 154 the Court of Appeal in Western Australia approved Re Lofthouse 107 FCR 151 and Duckworth 261 FLR 185.

34    Finally, there is also the matter of potential injustice that might arise from the interpretation of s 60(2) favoured by Re Lofthouse 107 FCR 151 and Duckworth 261 FLR 185. There are various things that can be said about this. Other judges have recognised that a broad approach to s 60(2) can “doubtless cause hardship in many cases”, but that this is the necessary effect of the statutory text and policy: John v Neiman Holdings 84 FLR at 86; Duckworth 261 FLR at [41]. The effect of the stay under s 60(2) is not to preclude Mr Garrett’s access to the Court entirely: it merely prevents him at this time pursuing his current application for leave to appeal against the vexatious proceedings order. Section 60(2) merely stays the application (since it was commenced by Mr Garrett before his bankruptcy) for the duration of the bankruptcy and does not operate to dismiss or otherwise adversely determine the action. The vexatious proceeding order itself does not absolutely prevent Mr Garrett from instituting further proceedings in this Court; rather it requires that he obtain leave before he can do so.

35    Whilst Lofthouse 107 FCR 151 and Duckworth 261 FLR 185 did not specifically deal with the issue arising in this case, they nonetheless provide firm support for the propositions referred to at [27] above: namely, that s 60(2) is intended to protect a successful respondent from losing the practical opportunity to recover costs and applies to any action instituted by the bankrupt before bankruptcy, irrespective of whether there is a connection between the action and the bankrupt estate beyond the fact that the bankrupt had commenced the action before becoming a bankrupt. Re Lofthouse 107 FCR 151 and Duckworth 261 FLR 185 do not support the supposed implied limitation on pre-bankruptcy actions begun by the bankrupt that are subject to s 60(2). The interpretation of s 60(2) in Re Lofthouse 107 FCR 151 and Duckworth 261 FLR 185 should be applied in deciding whether that provision should be construed to apply to Mr Garrett’s application for leave to institute an appeal under s 37AR of the Federal Court Act.

36    If I were wrong and s 60(2) does not apply to an action instituted by the bankrupt before bankruptcy unless there is a connection between the action and the bankrupt estate beyond the fact that the bankrupt had commenced the action before becoming a bankrupt, then I would be nonetheless satisfied that there is a sufficient connection between the action and Mr Garrett’s bankrupt estate. Assuming leave were granted under s 37AR and Mr Garrett were successful on the appeal, then an appellate court might be expected to set aside the order for costs made against Mr Garrett at first instance, to the ultimate benefit of his estate. The respondents accepted that there was such a possibility. This would, so it seems to me, be a connection sufficient to satisfy an implied limitation of a kind contemplated by Kirby P in Daemar 12 NSWLR 45, Cooper J in Griffiths 67 FCR 301 and Ashley JA in Owens v Comlaw 201 FLR 275.

37    For the reasons stated, I would construe s 60(2) of the Bankruptcy Act as applying to Mr Garrett’s application for leave to institute an appeal against the vexatious proceedings order and conclude that, unless falling within the exception in s 60(4), the application that he commenced before his bankruptcy is stayed by operation of that provision.

38    I would reject Mr Garrett’s submission that his application fell within s 60(4) of the Bankruptcy Act. Section 60(4) exempts an action commenced by him before he became a bankrupt in respect of “any personal injury or wrong”. The phrase “any personal injury or wrong” has been considered and interpreted by the courts for some considerable time, as a consequence of which it now has a received meaning. As Edelman J said in Duckworth 261 FLR at 199, “‘[w]rong’ and ‘personal injury’ have the same connotation and derivation.” In Cox v Journeaux (No 2) (1935) 52 CLR 713 at 721, Dixon J said that the test for whether an action is in respect of a “personal injury or wrong” under s 60(4) was “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”. This test has been applied in many cases since then, including Faulkner v Bluett (1981) 52 FLR 115, Duckworth 261 FLR 185, Pelechowski [2000] FCA 233 at [5] and Fletcher v Westpac [2012] WASCA 154 at [18]-[24] (and the cases there cited).

39    As already indicated, the vexatious proceedings order was made in a proceeding brought under s 39B of the Judiciary Act 1903 (Cth) in which Mr Garrett sought to challenge the validity of tax assessments and the existence or quantum of prior tax debts. Mr Garrett claimed that the respondents had misconducted themselves, sought orders setting aside notices of assessment, findings that the respondents had breached various provisions of legislation, declarations that the respondents had acted contrary to various principles of law, and damages. He also sought various orders for interlocutory relief, including an order restraining the respondents from taking further enforcement proceedings, an order for discovery, and several orders that evidence adduced in other proceedings be adduced in that proceeding: Garrett v Commissioner of Taxation [2015] FCA 117 at [1]. When Mr Garrett’s application and statement of claim is examined, it is clear that the action was not in respect of “any personal injury or wrong” as that phrase has been interpreted by the authorities. Mr Garrett sought judicial review on the basis that the respondent Commissioner and other public officers have misconducted themselves with respect to his taxation liabilities. His proposed appeal is in respect of the primary judge’s disposition of that judicial review proceeding. This is not an action of a kind to which s 60(4) applies: cf. Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545 at 564 per O’Loughlin and Merkel JJ. Whilst this judicial review proceeding was brought to an end at first instance on the making of the vexatious proceedings order and not on any other basis, this does not convert Mr Garrett’s proposed appeal against this order into an action in respect of a “personal injury or wrong” under s 60(4) of the Bankruptcy Act. Nor does Mr Garrett’s asserted reliance on claimed human rights issues under the Human Rights and Equal Opportunity Commission Act 1986 (Cth) and Charter of Human Rights and Responsibilities Act 2006 (Vic) or his assertion that he has suffered “damages to mind and body” from the respondents’ asserted unconscionable conduct and criminal acts, which apparently related to his judicial review proceeding.

40    For the reasons stated, Mr Garrett’s application for leave to institute an appeal against the vexatious proceedings order does not fall within the exception in s 60(4) of the Bankruptcy Act.

41    For the reasons stated, the application by Mr Garrett for leave to institute an appeal against the vexatious proceeding order is stayed under s 60(2) of the Bankruptcy Act.

42    At this point, it is convenient to note two further matters. The first concerns the proposed nature of the appeal that Mr Garrett sought to institute. As noted, Mr Garrett’s judicial review application was brought to an end by the vexatious proceedings order. Even if the leave sought by Mr Garrett were to be granted, an appeal would lie only against that order and in itself would not be a vehicle for Mr Garrett to pursue a more wide-ranging challenge to his tax assessments or tax debts, as his draft notice of appeal apparently envisaged. Secondly, at the hearing, Mr Garrett made an oral application for leave to amend his proposed notice of appeal and was granted leave to file a note on what amendment he sought to make. A document headed “Submissions of applicant to amend the draft notice of appeal” was subsequently received. Whilst I would permit Mr Garrett to file these submissions, in view of the conclusion I have reached, it is neither necessary nor appropriate to address them. In this circumstance, I have not invited any responsive submissions from the respondents.

Associate:

Dated:    2 July 2015

SCHEDULE