Bankruptcy & leave to proceed for a personal injuries claim

Wilson v The State of Queensland [2015] QSC 56

The plaintiff prior to becoming bankrupt had made a claim for rescission of settlement deed claim for wrongful termination of employment by first respondent in reliance on innocent representation. The defendants had brought applications to strike out the claim based on the pleadings. However, the intervention of becoming bankrupt raised the issue of whether the claim was one for a personal injury under section 60(2) of the Bankruptcy Act 1966.

Jackson J

The meaning of the expression personal injury or wrong done to himself, which appeared in the 1924 Bankruptcy Act as well as now in sections 60(4) and 116 (2)(g)(i) of the current Act, has been considered in a number of cases. That of highest authority is Cox v Journeaux (No 2) [1935] HCA 48; (1935) 52 CLR 713 at page 721, where Dixon J (as he then was) 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.”

The defendants in their written submissions, and orally before me today, referred to a number of other relevant cases. They include Pelechowski v New South Wales Land and Housing Commission [2000] FCA 233 at [5], Fitzpatrick v Keelty [2008] FCA 35 at [40] – [42] and Duckworth v The Water Corporation [2012] WASC 30 at [85] – [87]. In addition, in the course of argument, reference was made to a decision of the Court of Appeal of Western Australia in Fletcher v Westpac [2012] WASC 154 at [18] – [21].

Two points of particular relevance emerge from those cases. First, Pelechowski was a case in which Justice Madgwick held that a claim for reinstatement for what was unlawful termination of employment was not a claim or action in respect of any personal injury or wrong done to the bankrupt. There is an obvious analogy between the claim in Pelechowski and that set out in the ASSC in the present case which stems from the first defendant’s termination of the plaintiff in 1994 and his subsequent claims, either for reinstatement or compensation.

Second, it appears from a decision referred to in Fletcher that in 2011, President Allsop expressed the view that:

“To the extent that damages for personal injury or wrong are inseverable from or directly consequential upon interference with property rights, a claim for them does not survive the stay brought about by s60(2).”

See Moss v Eaglestone (2011) NSWCA 404 at [77].

Neither of the two categories of claim, as summarised above, in the ASSC is, in my view, an action in respect of any personal injury or wrong done to the plaintiff. Mr Wilson submitted that, included in the original circumstances, the subject of the statement of facts in the ASSC, was the illness he suffered due to the victimising conduct of identified individuals leading up to his termination of employment. But they are not the basis of his present claim so as to make it one for damages, for personal injury or wrong.

It follows, in my view, that without any action by me, the operation of section 60(2) of the Bankruptcy Act 1966 is such that the proceeding is stayed and I am unable to proceed to hear the application for determination of whether the ASSC should survive or whether the proceeding should be terminated.

During the course of submissions and as relied upon in the application for leave by the plaintiff, reference was made to rule 72 of the UCPR. By that rule, if a party to a proceeding becomes bankrupt, a person may take any further step in the proceeding for the party only if the Court gives the person leave to proceed. The question was raised whether, under rule 72, I could grant leave to proceed notwithstanding the operation of a stay under section 60(2) of the Bankruptcy Act.

In Beames v The State of Queensland [2010] QSC 4, Margaret Wilson J considered the operation of rule 72 in a similar context. Her Honour held that the provisions of the rule are subject to the Bankruptcy Act under which the cause of action underlying the relevant claim was vested in the trustees in bankruptcy. Her Honour’s conclusion was that while that remains so, rule 72 of the Uniform Civil Procedure Rules does not empower the Court to give the bankrupt leave to proceed with the claim without the trustees’ consent.

In Quazer v Secure Funding Pty Ltd [2010] QCA 251 at [27] it was said:

“Beames v State of Queensland is authority for the proposition that a Court does not have power under UCPR r 72 to give an undischarged bankrupt like Mr Quazer leave to proceed without the consent of his trustees in bankruptcy. They have not consented to the bringing of this appeal or Mr Quazer’s present application.”

In the present case, there is no question of consent to the application for leave having been given by the plaintiff’s trustees in bankruptcy. Mr Wilson frankly informed me from the bar table that they took the view that it is not a matter for their consent. It may be that, in this context, the use of the word “consent” is an error because the scheme provided for under section 60 operates in such a way that the proceeding is stayed unless the trustees in bankruptcy elect to the contrary under section 60(2). However, that is not a matter I need to express any concluded opinion on in order to resolve the position as it appears before me today.

The outcome is that I am unable to grant the plaintiff’s application for leave to proceed.

David Cormack – Brisbane Barrister & Mediator


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