Berryman v Zurich Australia Ltd
[2016] WASC 196
•1 JULY 2016
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: BERRYMAN -v- ZURICH AUSTRALIA LTD [2016] WASC 196
CORAM: TOTTLE J
HEARD: 18 FEBRUARY 2016
DELIVERED : 1 JULY 2016
FILE NO/S: CIV 2217 of 2014
BETWEEN: BRUCE ALAN BERRYMAN
Plaintiff
AND
ZURICH AUSTRALIA LTD
Defendant
Catchwords:
Bankruptcy - Bankruptcy Act 1966 (Cth) s 60(4) and s 116(2)(g) - Where insurer had agreed to pay fixed sum benefit if plaintiff suffered total and permanent disability - Where plaintiff suffered personal injury and commenced action to recover benefit - Where plaintiff subsequently became bankrupt - Whether action automatically stayed pursuant to s 60 of the Bankruptcy Act - Whether right of action vested in trustee pursuant to s 58 and s 116 of the Bankruptcy Act - Whether action was 'in respect of a personal injury or wrong done to the bankrupt' within the meaning of s 60(4) and s 116(2)(g) - Whether action to recover benefit for personal injury under insurance policy vests in trustee or remains with bankrupt
Legislation:
Acts Interpretation Act 1901 (Cth)
Bankruptcy Act 1924 (Cth)
Bankruptcy Act 1966 (Cth)
Insolvency Act 1915 (Vic)
Insurance Contracts Act 1984 (Cth)
Life Insurance Act 1995 (Cth)
Result:
Preliminary question 1 is answered 'yes'
Preliminary question 2 does not arise
Category: A
Representation:
Counsel:
Plaintiff: Mr M D Howard SC & Mr W Zappia
Defendant: Mr G D Cobby
Solicitors:
Plaintiff: Shine Lawyers
Defendant: Turks Legal
Case(s) referred to in judgment(s):
Moss v Eaglestone [2011] NSWCA 404
Sands v State of South Australia [2015] SASCFC 36
Beckham v Drake (1849) 2 HLC 579; 9 ER 1213
Bride v Peat Marwick Mitchell [1989] WAR 383
Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545
Cox v Journeaux (No 2) (1935) 52 CLR 713
Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45
Deputy Commissioner of Taxation v Dick [2007] NSWCA 190; (2007) 242 ALR 152
Duckworth v Water Corporation [2012] WASC 30
Farrah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Faulkner v Bluett (1981) 52 FLR 115
Fletcher v Westpac [2012] WASCA 154
Millane v Shire of Heidelberg [1936] VLR 8
O'Grady v Northern Queensland Co Ltd (1990) 169 CLR 356
Re Nguyen; Ex parte Official Trustee in Bankruptcy (1992) 35 FCR 320
Rogers v Spence (1846) 12 Cl & F 700; 8 ER 1586
Sheehan v Brett-Young (No 3) [2016] VSC 39
State Government Insurance Office (Qld) v Crittenden (1966) 117 CLR 412
Technical Products Pty Ltd v State Government Insurance Office (Qld) (1989) 167 CLR 45
Wilson v United Counties Bank Limited [1920] AC 102
Table of Contents
Introduction
The facts
The statutory framework
The parties' submissions
Zurich's submissions
Mr Berryman's submissions
The authorities
Disposition
The meaning of 'in respect of' and 'for' in s 60(4) and s 116(2)(g) of the Act
Purpose of s 116(2)(g) and s 60(4)
Is Mr Berryman's action in respect of a property right and not a personal injury?
Is it necessary for Mr Berryman's injury to have been 'done to' him?
The decision in Cork v Rawlins
Answers to the preliminary questions
TOTTLE J:
Introduction
The plaintiff, Mr Berryman, commenced an action against the defendant, Zurich, for damages for breach of a 'Zurich Protection Plus' insurance policy that provided for him to be paid $2 million in the event that he became totally and permanently disabled. Mr Berryman became bankrupt after commencing the action. Zurich applied by chamber summons for an order that the action be dismissed on the ground that the proceedings are deemed to have been abandoned by operation of s 60(3) of the Bankruptcy Act 1966 (Cth) (the Act).
In the course of argument it was agreed by counsel that the issues raised by the chamber summons would be tried as preliminary issues for which purpose the following preliminary questions were formulated:
(1)on the facts stated in the amended writ of summons may [Mr Berryman] continue the action in his own name by operation of s 60(4) of the Act, [Mr Berryman] having been declared bankrupt on 10 August 2015;
(2)if the answer to question 1 is no, should the action be dismissed, notice of the action having been given to [Mr Berryman's] trustee in bankruptcy on 31 August 2015 and the trustee having made no election to prosecute the action?
The facts
The facts set out in the amended writ are as follows.
Mr Berryman is a self-employed carpenter. On 17 June 2009 he entered into a policy of life insurance with Zurich, which carries on business as an insurer within the meaning of the Insurance Contracts Act 1984 (Cth) and a life insurance business within the meaning of the Life Insurance Act 1995 (Cth).
It was a term of the policy that upon Mr Berryman becoming totally and permanently disabled within the meaning of the policy, Zurich would pay to him a total and permanent disability (TPD) benefit of $2 million.
On 7 July 2009 Mr Berryman suffered an accident whilst at work. A large granite rock crushed his right foot.
On 16 November 2009 Mr Berryman made a claim upon Zurich for payment of the TPD benefit which was declined by Zurich. On 29 August 2014 Mr Berryman commenced this action. He claims damages for breach of contract in the sum of $2 million.
The statutory framework
The parties agree that the answer to question 1 turns upon the proper construction of s 60(4) and s 116(2)(g) of the Act and their application to the facts. I begin by outlining the relevant statutory framework.
Section 5 of the Act provides that 'property' means 'any real or personal property of every description, whether situate in Australia or elsewhere and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property'. A chose in action is property: Re Nguyen; Ex parte Official Trustee in Bankruptcy (1992) 35 FCR 320. Section 5 contains a separate definition of the phrase 'the property of the bankrupt': except in s 58(3) and (4), this means
(i)the property divisible among the bankrupt's creditors; and
(ii)any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become bankrupt.
Property that is divisible amongst the creditors of the bankrupt includes, by s116(1)(a), all property that belonged to the bankrupt at the commencement of the bankruptcy and, by s 116(1)(b), the capacity to bring proceedings for exercising all powers over the property of the bankrupt.
Section 116(2) sets out various categories of property which are not divisible amongst the creditors of a bankrupt. Section 116(2)(d) excludes from property divisible amongst a bankrupt's creditors certain policies of life assurance or endowment assurance in respect of the life of the bankrupt or the spouse or de facto partner of the bankrupt or the proceeds of such policies received on or after the date of the bankruptcy.
Section 116(2)(g) excludes from property divisible amongst a bankrupt's creditors:
any right of the bankrupt to recover damages or compensation:
(i)for personal injury or wrong done to the bankrupt, the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt; or
(ii)in respect of the death of the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt;
and any damages or compensation recovered by the bankrupt (whether before or after he or she became a bankrupt) in respect of such an injury or wrong or the death of such a person.
Section 58 of the Act provides that when a debtor becomes bankrupt, 'the property of the bankrupt' vests in the Official Trustee.
Section 60(2) provides that, subject to the Act, an action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes an election, in writing, to prosecute or discontinue the action.
Section 60(3) provides that if the trustee does not make an election within 28 days after notice of an 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.
Section 60(4) preserves the right of a bankrupt to continue with an action in respect of the rights specified in s 116(2)(g). It reads as follows:
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.
The parties' submissions
Zurich's submissions
In summary, Zurich's submissions were as follows.
1Any right Mr Berryman had to sue it for breach of the policy was a chose in action, that is, a proprietary right, that was property for the purposes of s 5 of the Act and therefore vested in his trustee in bankruptcy by operation of s 58(1) unless it was excluded from the property divisible amongst his creditors by s 116(2).
2The policy was not a 'policy of life assurance' the benefits of which are excluded from property divisible amongst Mr Berryman's creditors by reason of s 116(2)(d)(i) of the Act, (Mr Berryman did not challenge this submission and did not rely upon the exception contained in s 116(2)(d)(i) of the Act).
3The test for determining what constitutes a 'personal injury or wrong' within the meaning of s 60(4) and s 116(2)(g)(i) is 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.
Cox v Journeaux (No 2) (1935) 52 CLR 713, 721 (Dixon J).
4A bankrupt's claim for damages for personal injury which is ancillary to, or directly consequential upon or inseverable from an interference with the bankrupt's property rights is stayed by s 60(2): Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545.
5Mr Berryman's claim is in contract and is not in respect of a 'personal injury or wrong' because the claim does not satisfy the test stated in Cox v Journeaux. Any damages recoverable fall to be assessed by reference to the breach of the contractual promise to pay $2 million upon the occurrence of the agreed contingency and not upon the extent of Mr Berryman's injury or any pain suffered by him as a consequence of it. Thus, the required nexus between the damages recoverable by Mr Berryman should he succeed on his claim in contract and any pain suffered by him is absent even though his entitlement to make a claim on the policy only arose because he suffered an injury.
6Mr Berryman is unable to claim damages for Zurich's failure to pay the TPD benefit 'without reference to his rights of property' since his claim in contract is founded upon rights conferred upon him by the agreement, and those rights are choses in action and therefore rights of property.
7For an action to fall within the s 60(4) exception it must be an action for personal injuries 'done' to the bankrupt and not an action in respect of personal injuries 'suffered' by a bankrupt.
Mr Berryman's submissions
In summary, Mr Berryman's submissions were as follows.
1The prepositional phrase 'in respect of' in s 60(4) of the Act is central to the correct construction of that sub-section. Mr Berryman relies upon the observations of members of the High Court in O'Grady v Northern Queensland Co Ltd (1990) 169 CLR 356 to the effect that the expression 'in respect of' is an expression of 'broad import' (per Toohey and Gaudron JJ at 374) and is a phrase that is 'indefinite … subject to any contrary indication … it requires no more than a relationship, whether direct or indirect, between two subject matters' (per McHugh J at 376).
2In this case there was a direct and close relationship between the injury suffered by Mr Berryman and the action commenced by him so that the words of s 60(4) are satisfied. Mr Berryman points to the fact that he suffered an injury that resulted in the definition of 'total and permanent disablement' in the policy being satisfied, and says that without the injury, he would have had no action at all.
3The fact that his action depends upon a contractual cause of action does not mean that his action is not 'in respect of' his personal injury. The fact that the action was brought in contract does not take it outside the ambit of s 60(4).
4Approaching the construction of s 60(4) from a characterisation of the right of action as a 'chose in action' distracts from the true question that is to be resolved under s 60(4).
5The test that holds that the existence of a 'personal injury or wrong' for the purposes of s 60(4) depends on 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' constitutes an unwarranted gloss on the statutory provision that is not supported by a close analysis of the relevant authorities.
The authorities
The issue raised by the first preliminary question ‑ whether a benefit payable pursuant to a policy of disability insurance is outside the ambit of property divisible amongst creditors; and if so, whether the bankrupt may continue an action in his or her own name to recover that benefit - has not previously been considered by any Australian court.
The absence of authority and the submissions made on Mr Berryman's behalf about the status of Dixon J's observations in Cox v Journeaux require a close analysis of the authorities. The reasoning in the authorities emphasises the importance of construing s 60(4) and s 116(2)(g) against the background of their legislative history.
Section 60(4) and s 116(2)(g) of the Act embody the 'common law of bankruptcy' as developed by the English courts exercising bankruptcy jurisdiction: Faulkner v Bluett (1981) 52 FLR 115, 118 (Lockhart J).
In the common law of bankruptcy the seminal case on the exception to the general rule that all the property of a bankrupt was divisible amongst his or her creditors is Beckham v Drake (1849) 2 HLC 579; 9 ER 1213. In that case the plaintiff, who had been dismissed from his employment, brought a claim for liquidated damages in the amount of £500 for breach of the employment contract. The plaintiff became bankrupt. He succeeded in his claim at first instance, lost on appeal and appealed to the House of Lords. The Lord Chancellor referred the question of whether the right of action vested in the assignee of the bankrupt's estate or whether it remained with the bankrupt to the judges for their opinion. Seven of the nine judges were of the opinion that the action passed to the assignee.
Williams J held that it had been established by the authorities that an assignee of a bankrupt's estate could not maintain an action:
to recover damages for bodily or mental sufferings or personal inconvenience sustained … by the bankrupt; the foundation of which is, perhaps, that it would in many cases be attended with extremely harsh and unjust consequences if the discretion, as to whether a redress for wrongs of this nature should be sought, was to be entrusted to anyone but the very person who has received the injury (HLC 597; ER 1220).
Williams J drew a distinction between a claim for unliquidated damages for 'bodily or mental sufferings or personal inconvenience' and a claim that could be made the subject of an action of debt, which, his Honour said, it would be difficult to argue should not be maintained by the assignees of the bankrupt's estate (HLC 598; ER 1220).
Erle J expressed the exception to the general rule that all rights of a bankrupt passed to his assignee in the following frequently cited passage:
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 (HLC 604; ER 1222).
Erle J applied the principle to the facts of the case as follows:
In the present case, then, the promise of the defendant is to be considered; and the promise is, to continue the relation of master and servant for seven years, and pay wages. As to that part of it respecting the continuance of this relation, it has no reference to the feelings of the bankrupt, so as to be analogous to the promises and cause of action which are decided to be excepted, and it is not the substance of the promise which is considered in the award of damage; but as to the other part, namely, the paying of the wages, it is the consideration for the promise of service. The substance of the promise, then, for the breach of which this action was brought, relates immediately to the property of the bankrupt, being the payment of money, and therefore the first ground above mentioned, namely, that the contract relates to the person, is true only in respect of the consideration for the promise, which is personal skill and labour, and not in respect of the promise itself, and which is alone important on the present occasion; and for that reason the first ground fails (HLC 606; ER 1223).
Wightman J expressed the test in very similar terms at HLC 617; ER 1227.
In his opinion, Maule J stated the exception in the following terms:
There is no doubt that the right to bring an action for an injury to the person, character, or feelings of a bankrupt, does not pass to the assignees, and that the right to bring an action for the payment of money agreed to be paid to the bankrupt does pass. And it appears to me that the present action is in effect an action on a contract to pay money (HLC 621 - 622); ER 1228).
In a subsequent passage his Honour placed emphasis upon the fact that the right in question was a right to bring an action for the payment of money, and stated:
Thus, although a right of action for not marrying or not curing, in breach of an agreement to marry or cure, would not generally pass to the assignees, I conceive that a right to a sum of money, whether ascertained or not, expressly agreed to be paid in the event of failing to marry or to cure, would pass. The agreement of the parties that money shall be paid as compensation makes, as it seems to me, the right to recover that money a part of the personal estate of the bankrupt, as much as a recovery, before the bankruptcy, of a judgment in an action for an injury to the person or character of the bankrupt, would do (HLC 622; ER 1229).
The House of Lords was constituted by Lord Brougham and Lord Campbell. Lord Brougham placed emphasis on the distinction between injuries personal to the bankrupt and injuries to his property and stressed that a breach of contract claim in respect of property or a proprietary right passed to a bankrupt's assignee.
In Lord Campbell's reasoning the decisive factor was that the claim was a claim in debt. His Lordship approved of the distinction drawn by Maule J between a claim for damages in respect of harm to the person, character or feelings of a bankrupt and a claim for a money sum in discharge of a contractual obligation to pay such a sum if the contingency of harm to the bankrupt's person, character or feelings occurred (HLC 645; ER 1237).
Wilson v United Counties Bank Limited [1920] AC 102 involved a 'mixed' claim; that is, a claim in which part of the damages award related to an injury to the bankrupt's property and part to an injury to his person. Major Wilson entrusted the defendant bank with the care of the financial side of his business during his absence on military service. On his return from service he discovered that the bank had failed to take steps to pay his debts and had allowed for judgment to be entered against him in actions brought by several creditors. Major Wilson became bankrupt. Both he and his trustee sued on an alleged oral contract that included a term that the bank would maintain the credit of Major Wilson as a trader. A jury awarded £45,000 in damages for financial loss to Major Wilson's estate and £7,500 for injury to his credit and reputation. Judgment was entered in respect of all of the damages for Major Wilson and his trustee jointly. Amongst several issues before the House of Lords there was an issue as to who was entitled to the £7,500. It was held that Major Wilson was entitled to those damages on the basis that the right of action in respect of damage to his credit and reputation fell within the Beckham v Drake exception.
The Lord Chancellor, Lord Birkenhead (who, whilst agreeing with Lord Atkinson's judgment on the issue generally, made some brief observations of his own), cited the test formulated by Erle J for determining whether a claim vests in the bankrupt or the assignee (111). Lord Atkinson also cited Erle J's test (130). Viscount Finlay referred to Beckham v Drake and the earlier case of Rogers v Spence (1846) 12 Cl & F 700; 8 ER 1586 and concluded:
On principle and from these two cases it appears clear that, while all causes of action for damage to the property vest in the trustee, any cause of action for damage to the person or reputation of the bankrupt would remain vested in him in spite of his bankruptcy (120).
In Cox v Journeaux, Dixon J (as his Honour then was) was dealing with an application to dismiss an action on three grounds: first, there was no reasonable cause of action; secondly, the action was frivolous or vexatious; and, thirdly, the right of action vested in the plaintiff's trustee in bankruptcy. His Honour, sitting as a single judge, dismissed the action on the basis that the statement of claim disclosed no reasonable cause of action and that the proceedings were frivolous. Technically, therefore, his Honour's observations on the bankruptcy issue were obiter dicta. The statutory provision upon which the application to Dixon J was based was s 63 of the Bankruptcy Act 1924 (Cth). This was the equivalent of s 60 of the Act. Section 63(3) of the 1924 Act provided:
Every action or proceeding at law or in equity commenced by any person, against whom a sequestration order is afterwards made, shall, upon the sequestration order being made, be stayed until the official receiver or trustee makes election to prosecute or discontinue it … Provided that any bankrupt may continue, in his own name and for his own benefit, any action or proceedings commenced by him previous to his bankruptcy for any personal injury or wrong done to himself or to any member of his family.
The plaintiff's trustee had elected not to prosecute the action. The plaintiff argued he was entitled to prosecute the action himself on the basis that it was an action for personal injury or wrong done to him. Dixon J stated:
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) (721) (footnote omitted).
Millane v Shire of Heidelberg [1936] VLR 8 involved a mixed claim. The defendant had entered the plaintiff's property, demolished a half-built house and removed the material. The plaintiff sued for trespass. He claimed special damages for the value of lost materials and wasted labour and general damages of £2,000 for annoyance to him personally. The plaintiff subsequently became bankrupt and the trustee declined to continue the action. The action was stayed until the plaintiff was discharged from bankruptcy at which point he sought leave to proceed with the action. The Full Court of the Victorian Supreme Court granted leave to the plaintiff to pursue the claim for general damages but held that the claim for special damages had vested in the trustee and had been abandoned. The applicable statutory provision was s 176 of the Insolvency Act 1915 (Vic) which was, relevantly, no different in its terms to s 63 of the 1924 Act set out above. The Court traced the development of the common law principles governing the exception to the rule that all property of a bankrupt vests in the trustee and summarised the position as follows:
So far the cases make clear that, in a case of trespass, if the cause of action is exclusively confined to injury to property, it will pass to the representative in bankruptcy, but if the injury to property is nominal only, and the substantial complaint is personal injury or annoyance, the cause of action remains in the bankrupt (18) (references omitted).
In Faulkner v Bluett, the plaintiff sued the Commonwealth and one Brigadier Flint for negligent advice, in the form of alleged representations that the Commonwealth would place an order with a company for a patented product (Trisal clips), for use by the armed forces. The plaintiff was the major shareholder and governing director of the company. She sought damages in respect of unsecured loans made to the company, share capital injected into the company, expected profits from the foreshadowed contract, and the value of the patents (which she had refrained from selling in expectation of the order). After commencing proceedings the plaintiff became bankrupt. She subsequently applied for declarations that she was entitled to continue the action in her own name under s 60(4) and that her right to recover damages fell within the exception provided for by s 116(2)(g), so that it did not vest in her trustee.
Lockhart J made the following observation about the cases in which the common law principles had been discussed:
The common thread running through these cases is that where the primary and substantial right of action is direct pecuniary loss to the property or estate of the bankrupt, the right to sue passes to the trustee notwithstanding that it may have produced personal inconvenience to the bankrupt: Wetherell v Julius (1850) 10 CB 267; 138 ER 108; Wage on Bankruptcy (1904 ed), p 201 (119).
In the course of his disposition of the case Lockhart J posed the question, 'what then is the character of the right of action in the present case?' His Honour answered that question by applying the test formulated by Erle J in Beckham v Drake, and applied by Dixon J in Cox v Journeaux.In so doing he observed:
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" (122).
In Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45, a bankrupt applied to the Court of Appeal for orders in the nature of prerogative relief seeking to expunge judicial criticism made of him in proceedings before the Industrial Commission. The Court (Kirby P, Samuels & Clarke JJA) held that the application was stayed by force of s 60(2) of the Act. Kirby P referred to the passage of Cox v Journeaux cited earlier as the 'classic expression' of the meaning of s 60(4) of the Act in its context. In a later passage of his reasons Kirby P referred to the exemption created by s 60(4)(a) as follows:
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 and benefits derived from such litigation as not being legitimately entitlements of the creditors.
Bride v Peat Marwick Mitchell [1989] WAR 383, a decision of the Full Court of this Court (Malcolm CJ, Wallace & Brinsden JJ), concerned an action brought against a firm of chartered accountants, two of the partners of which had been appointed to act as receivers and managers of the appellants' property. Following the appointment of the receivers and managers the appellants had become bankrupt. Upon their discharge from bankruptcy they commenced an action against the respondent firm alleging misconduct in the course of the receivership. The appellants' standing to sue was raised as a threshold question. In addressing this question, Malcolm CJ (Wallace & Brinsden JJ agreeing) stated in relation to s 116(2)(g) of the Act:
It is well-settled that the exception in par (g) of s 116(2) applies only to claims for damages for physical or other injury to the person, such as a motor vehicle accident claim, and claims for damages for injury to reputation or feelings such as a claim for damages for slander: McDonald, Henry & Meake, Australian Bankruptcy Law and Practice (5th ed, 1977) pars 613-615, pp 276 - 279 and the cases there cited (391).
His Honour cited Lockhart J's observation about the common thread running through the common law cases to which I have made reference already and held that the damages claimed by the appellants would be assessed by reference to the value of their assets and thus, for that reason, the claim had vested in their trustee and the action should be dismissed. The appellants tried unsuccessfully to characterise their claim as one which sounded in damages in respect of both diminution of their estate and injury to their reputation or feelings (that is, a mixed claim). Malcolm CJ reviewed the authorities in relation to such claims and referred to Wilson v United Counties Bank Ltd and Australian decisions in which Wilson had been followed but determined on the facts that the plaintiffs should not be given leave to amend to plead a cause of action for loss of reputation, inconvenience or distress.
In Mannigel v Hewlett Phelps (unreported, NSWCA, 12 June 1991), Handley JA, with whose reasons Kirby P and Meagher JA agreed, held (at pp 4-5) that claims for damages for loss of credit, mental distress, inconvenience and injury to the plaintiffs' 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 but claims consequential upon losses to their property and financial interests as a result of breaches of professional duty owed by their solicitors. Handley JA held that the plaintiffs sued on indivisible causes of action which formed part of their property and which vested in the official receiver on their bankruptcy.
Re Dosanjh; Ex parte Duus (1995) 56 FCR 521 was a case in which the bankrupt's trustee contended that special damages in respect of hospital bills, forming part of a settlement of a personal injury claim received by the bankrupt, formed part of the estate that vested in the trustee. Referring to s 116(2)(g) Kiefel J observed that '[t]he distinction sought to be drawn in the Act is as between wrongs to a bankrupt's property and those purely personal to him' (523C). Her Honour then cited Dixon J's statement of the test in Cox v Journeaux. Her Honour held that the loss referrable to hospital expenses was a consequential loss flowing from a cause of action for injury to the person of the bankrupt and had no reference to his rights of property, and went to add:
In this case, in any event, the "heads of damage" referred to, while commonly issued as shorthand expressions by lawyers, in so far as they suggest separate claims in an action for personal injury have the tendency to mislead and to distract from the real inquiry, which is as to whether the moneys are paid as compensation for the injury or wrong done (524E).
In Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545, the Full Court of the Federal Court (Lockhart J, O'Loughlin & Merkel JJ) was concerned with a mixed claim in which the bankrupt sought to pursue in his own name an appeal against the dismissal of claims arising out of the respondent bank enforcing securities it held over the bankrupt's real property. The claims which had been dismissed included claims for personal injuries and wrongs allegedly done to him and his family. The respondent successfully applied to dismiss the appeal on the ground that it was incompetent. In the course of his judgment Lockhart J referred to his reasoning in Faulkner v Bluett and to a number of the mixed claim cases and, following a review of the appellant's statement of claim, held that he could not be satisfied that it was possible to sever allegations and claims for damages into those plainly concerning causes of action which related to divisible property, which vested in the trustee, and those which were in respect of personal injury or wrong, which vested in the appellant.
In their joint judgment, O'Loughlin and Merkel JJ quoted extensively from Lockhart J's judgment in Faulkner v Bluett and held that the injury suffered by the bankrupt arose as a direct result of the alleged infringements of his financial and property rights. Adopting Lockhart J's language in Faulkner v Bluett their Honours held that 'the primary and substantial right of action is direct pecuniary loss to the property or estate of the bankrupt' (564).
It would appear from the research undertaken by counsel and from my own research that Cork v Rawlins [2001] Ch 792 is the only case in which a court has considered whether benefits payable under an insurance policy as a result of permanent disablement occasioned by an accident are retained by the bankrupt insured or pass to his or her trustee. The facts in Cork v Rawlins were very similar to those of the present case. Mr Rawlins, a self-employed landscape gardener, took out two insurance policies under which a benefit was payable in the event he became permanently disabled (permanent disability was defined to mean such a disability as would prevent Mr Rawlins from carrying on any gainful occupation at any time during his life). Mr Rawlins was injured and made a claim. He became bankrupt. The insurer agreed that the benefit was payable. The issue was whether the benefit vested in the trustee for the benefit of creditors or whether Mr Rawlins was entitled to the benefit himself. The Court of Appeal (Peter Gibson, Chadwick & Keene LJJ) concluded that the benefit payable under the insurance policies did not fall within the common law exception and that the trustee was therefore entitled to the benefit.
Whilst acknowledging that the Court of Appeal was dealing with a different statutory regime, one in which there was no equivalent to s 60(4) and s 116(2)(g), the reasoning in the case is instructive because the relevant common law principles of bankruptcy, now embodied in s 60(4) and s 116(2)(g), were applied. Peter Gibson LJ summarised the argument put on Mr Rawlins' behalf as follows:
Mr Doyle does not pursue the argument advanced below that the monies payable under the policies relate to the bankrupt's pain and suffering or were calculated by reference to that pain and suffering. But he submits that where a policy provides that a sum is to be paid by the insurer in the event of the permanent disability of the insured, the circumstances giving rise to the payment are so inherently tied up with the pain and suffering of the insured or his person that it is wholly inequitable and contrary to the principles underpinning the Act that such monies should be appropriated by the trustee for the creditors … So, Mr Doyle says, the cause of action triggered by personal disability is of a nature peculiarly personal to the bankrupt, relating to the bankrupt's needs, as his disablement must be assumed to impact on his ability to provide for and maintain himself and his family. He asks this court to go beyond the contractual label of the chose in action and to consider the substance of the claim. He insists that the quantum of the policy monies has nothing to do with the question whether they fall within the common law exception. He says that the test is whether the contractual claim relies in any way on the pain and suffering of the bankrupt. If so, he says, the policy monies go to the bankrupt and not to his creditors [24].
Peter Gibson LJ (Chadwick & Keene LJJ agreeing) was unable to accept the argument put on Mr Rawlins' behalf for five reasons.
(i)It was not founded directly on any authority.
(ii)The policies were purchased through the payment of premiums which would otherwise have formed part of the estate available to his creditors.
(iii)The right in question was a contractual right to receive a sum of money. In this respect reference was made to the distinction drawn by Erle J and Maule J in Beckham v Drake between a contractual right to receive a sum of money and a right to sue for unliquidated damages in respect of personal inconvenience to the bankrupt or pain to him in respect of his body, mind, or character.
(iv)The benefits under the policies did not become payable upon satisfaction of a test of pain and suffering but on satisfaction of what was described as a contractual test of 'employability'.
(v)The argument put on Mr Rawlins' behalf involved a considerable extension of the common law exception because the only connection with the pain and suffering of the bankrupt was that his disablement was the contractual contingency on which the monies assured had become payable. If such an extension were thought desirable, it was for Parliament, not the courts, to give effect to it.
In Moss v Eaglestone [2011] NSWCA 404; (2011) 83 NSWLR 476 the issue was whether a bankrupt's action against his former solicitor for damages for loss of a chance to prosecute a defamation action fell within the exception provided for by s 60(4). Allsop P (with whose reasons Campbell and Young JJA agreed) reviewed the history and policy of the common law of bankruptcy for the purpose of considering the construction of s 60(4) and its application to the facts of that case.
At [31] Allsop P observed that Lockhart J's decision in Faulkner v Bluett read with the decision of Dixon J in Cox v Journeaux constituted the foundation for understanding the meaning of s 60(4).
At [45] to [59] Allsop P referred to the English authorities and to the clear distinction between injuries to the bankrupt's person and injuries to his property. His Honour noted the rationale for the development of the exception in the following terms:
Thus, to give solace for the hurt to the person or personal feelings to general creditors was considered harsh and unjust. The recognition of this underlying proposition in the English common law of bankruptcy is important when one comes to appreciate the scope or limits on the words used in the Australian legislation that can be seen to have brought into express statutory form the pre-existing common law [55].
Allsop P traced the history of the legislation in Australia. His Honour reached the conclusion that the bankrupt's claim against his former solicitor remained with the bankrupt. His Honour set out his reasons for that conclusion as follows:
Thus, when one comes to the words of s 60(4) and s 116(2)(g) it is to be recognised that the background and context are, through various Colonial and State, and later Commonwealth provisions, reflective of, and embodying, the notions within the common law of bankruptcy. That assists in appreciating that the distinction (in s 60(4) and s 116(2)(g)) between person and property is a substantive one. It was a distinction made by courts and judges of the highest authority who declared it to be unjust and harsh that the estate of the bankrupt and the participating creditors should be swelled and advantaged by a wrong to the person or reputation of the bankrupt.
The terms of s 60(4) (and s 116(2)(g)) reflect that distinction of substance. The words "action commenced by him or her…in respect of any personal injury or wrong done to [him or her]" require the substance of the matter to be examined. Assuming the underlying facts in the appellant's favour, if the solicitor had commenced the action for defamation against News, it would not have been stayed under s 60(2) and it would have enured for the appellant's benefit under s 116(2)(g). It was a wrong to his reputation. The product of an action to vindicate such a personal wrong did not under the common law, or s 116(2)(g), swell the bankrupt's estate divisible among creditors. It was personal vindication. What is different on the hypothesis that the direct claim has now been lost is that the bankrupt now has a claim for the loss of that chose in action (that would not have fallen into his estate). There is the interposition of a claim (in contract, or tort, or both) for negligence, separating the appellant from the underlying claim for defamation (which has been lost). There is no sound reason in logic or policy why that claim should now enure for the benefit of creditors, when the primary claim did not.
The prepositional phrase and preposition in s 60(4) ("in respect of") and s 116(2)(g)(i) ("for") are sufficiently flexible to be amenable to that width of construction. The words of Dixon J in Cox v Journeaux are likewise apt to cover the matter. The damages being the value of the chose will be estimated in significant respects by the immediate reference to the reputational harm.
There is no reason in policy for, nor do the words of ss 60(4) or 116(2)(g) require, the Court to characterise an action for professional negligence for the loss of a valuable right to sue for defamation as concerned with property of the estate of the bankrupt and not his person [64] - [67].
Allsop P then proceeded to review the modern case law and concluded that there was nothing in the cases that contradicted the conclusions he had come to.
The facts in Fletcher v Westpac [2012] WASCA 154 were similar to those in Bryant v Commonwealth Bank of Australia. The appellant brought an action against his bank, the respondent, claiming losses suffered by reason of breaches of duties said to be owed in the context of a sale by the bank of real property the appellant had mortgaged to it. The appellant formulated his claim for damages in two ways, both of which involved assessments of the value of the real property. At first instance the appellant's claim was dismissed. After the appeal had been commenced the appellant became bankrupt. The respondent applied to dismiss the appeal. In response to the dismissal application the appellant contended that he and family members had suffered distress as a result of the respondent's conduct and that the appeal thus fell within the s 60(4) exception. Newnes JA (Pullin & Murphy JJA agreeing) cited Dixon J's statement of the principle in Cox v Journeaux and rejected the appellant's contention, noting that his claims at first instance were framed entirely in terms of losses in respect of the value of his real property.
Sands v South Australia [2015] SASCFC 36; (2015) 122 SASR 195 was another mixed claim case. The Full Court of the Supreme Court of South Australia (Blue, Stanley & Nicholson JJ) was asked to consider, amongst other questions, whether, by operation of the Act, a bankrupt's cause of action in defamation was bifurcated upon his becoming bankrupt, so that part remained with the bankrupt (the claim for general damages for injury to feelings and loss of reputation) and part vested in the trustee under s 116(1)(a) (the claim for special damages for lost wages and earning capacity). The Court reviewed the common law cases including the more recent English decisions on mixed claims. The Court held that the statute did not operate to bifurcate the cause of action for defamation. In the course of the judgment reference was made to the decision in Cox v Journeaux for the purposes of dismissing a suggestion that there was any reason to construe the reference by Dixon J to 'damages or part of them' as suggesting that a single cause of action is bifurcated by bankruptcy. There is no suggestion in the judgment that the test postulated by Dixon J was not the correct test. Speaking of what could be drawn from the decision of the English Court of Appeal in Ord v Upton [2000] Ch 352, in which it was held that a claim for damages for medical negligence involved one cause of action which vested in the trustee who would hold any damages received for pain and suffering on constructive trust for the bankrupt, the Full Court observed:
It is apparent that, given the very different statutory regimes that now apply in England and Australia, as the Court of Appeal recognised, decisions on one statutory regime no longer have application to the other regime [136].
In Sheehan v Brett-Young (No 3) [2016] VSC 39 the plaintiff, a solicitor, applied for leave to file an amended statement of claim alleging misfeasance in public office against the Law Institute of Victoria and various related parties and malicious prosecution against the State of Victoria. At the material times the plaintiff was a bankrupt and the defendants contended that by operation of the Act the claims were no longer maintainable by him. For the purposes of considering whether the plaintiff's claims fell within the exception in s 116(2)(g), John Dixon J considered a number of the authorities and at [62] identified the considerations relevant to the assessment of the character of the proposed claims as follows:
(a)It is important to consider the specific nature of the claims made, by reference to the way they are pleaded or otherwise substantiated in relevant documents before the court in determining whether the claims vest in the trustee or are personal in the nature;
(b)If proceedings arise out of property of the bankrupt that has passed to the trustee, the bankrupt will have no interest in or entitlement to that property and the cause of action will have vested in the trustee;
(c)Where the primary and substantial right of action is direct pecuniary loss to the property or estate of the bankrupt, notwithstanding that it may have produced incidental personal inconvenience to the bankrupt, it will vest in the trustee;
(d)Where damage to reputation or a personal claim extends beyond incidental personal inconvenience to the bankrupt but would not in and of itself form the basis of a separate cause of action, the bankrupt has no standing in respect of a claim arising out of property that has passed to the trustee;
(e)When the essential nature of the wrong is personal, the cause of action remains with the bankrupt. A cause of action for personal injury, which can include compensation for loss of capacity to earn income is the classic example of an action that will remain with the bankrupt;
(f)The essential nature of the wrong is personal where the damages or part of them are to be assessed by reference to the loss sustained by the bankrupt in respect of his mind, body or character and without reference to his rights of property. In this context, the concept of 'mind, body or character' is only constrained by reference to the objects and purpose of the Bankruptcy Act. It is well recognised that impairment of earning capacity is compensable without reference to any property right of a plaintiff who sustains injury to his mind body or character. It is not within the contemplation of the Bankruptcy Act that compensation for damage to such a personal asset should be available for the payment of provable debts;
(g)Claims can be mixed and in the case of unseverable 'mixed claims', the better view is that the cause of action passes to the trustee in so far as it relates to the property of the bankrupt and remains with the bankrupt in so far as it relates to his person or character, as is the case in England; however,
(h)It is clear, in Australia, that where a claim is mixed and severable, the personal claim may be severed.
The decision in Sands v South Australia does not appear to have been drawn to the attention of John Dixon J. Considerations (g) and (h) in the passage cited above are not supported by the Full Court's reasoning in Sands v South Australia.
Disposition
I have concluded that Mr Berryman's right to compensation is a right that falls within s 116(2)(g) and that his action is one that falls within s 60(4). The analysis and reasoning that has led me to that conclusion is as follows.
The meaning of 'in respect of' and 'for' in s 60(4) and s 116(2)(g) of the Act
Section 60(4) and s 116(2)(g) are complementary provisions. Context and statutory purpose require that they be construed in a way that ensures they operate harmoniously. That being so, in my view the prepositional phrase 'in respect of' in s 60(4), the preposition 'for' in s 116(2)(g)(i) and 'in respect of' in s 116(2)(g)(ii) have the same meaning and 'in respect of' does not have an ambit that is wider than 'for': cf State Government Insurance Office (Qld) v Crittenden (1966) 117 CLR 412, 414 - 417 (Taylor J) and Deputy Commissioner of Taxation v Dick [2007] NSWCA 190; (2007) 242 ALR 152 [93] (Santow JA).
Like the phrase 'in relation to', 'in respect of' and 'for' convey the requirement of a relationship between two subject matters and are of 'broad import'. They are words, however, with a 'chameleon quality' and they take their meaning from the context in which they are used: Technical Products Pty Ltd v State Government Insurance Office (Qld) (1989) 167 CLR 45, 47. In the context of these provisions they serve to identify the nature of the loss to which the damages or compensation in s 116(2)(g), and the action in s 60(4), relate. In the absence of any textual or contextual warrant restricting its ambit, the relationship may be direct or indirect: O'Grady v Northern Queensland Co Ltd (1990) 169 CLR 356, 376 (McHugh J).
Purpose of s 116(2)(g) and s 60(4)
Plainly the purpose of these sections is to protect a bankrupt's right to compensation for personal injury or wrong from his or her creditors. It is important to appreciate the underlying principle as developed by the common law of bankruptcy, that is, that it was considered harsh and unjust to give the solace for the hurt to the person or personal feelings of the bankrupt to general creditors: Moss v Eaglestone at [55] and [64]. To adapt Kirby P's words in Daemar v Industrial Commission of New South Wales compensation for such personal injury or wrong was not part of the 'legitimate entitlements' of the creditors.
Is Mr Berryman's action in respect of a property right and not a personal injury?
Zurich's submissions emphasise that Mr Berryman sues to enforce a contractual right (property) and that his remedy is to be estimated by reference to the policy and not by immediate reference to his physical injury. On this basis Zurich submits that Mr Berryman's action does not satisfy the test set out in Cox v Journeaux. It contends that permitting Mr Berryman to pursue his claim would involve a departure from the construction of s 60(4) that has been adopted by the courts.
I do not accept Zurich's submissions. My reasons are as follows.
First, that Mr Berryman is suing to enforce a contractual right does not compel the conclusion that the action is outside the s 60(4) exception. That conclusion is not supported by precedent or principle.
As to precedent: although there are observations in Beckham v Drake to the effect that a claim in contract vests in the bankrupt's assignee, Major Wilson's claim in Wilson v United Counties Bank Limited was a claim for breach of an oral contract. More recently, in Moss v Eaglestone, Allsop P treated the bankrupt's claim for damages for professional negligence as one that could be brought in contract or tort and it was not relevant to determine the precise nature of the cause of action.
As to principle: s 60(4) and s 116(2)(g) focus on the substance of the claim not the form of the action. There is nothing in the text of the provisions or in the context that supports the proposition that the legal basis of a claim is determinative. The focus on the substance of the action reflects the underlying statutory intent.
In Moss v Eaglestone Allsop P emphasised the necessity to have regard to the substance of the matter rather than the form of the action. Kiefel J made the same point in Re Dosanjh; Ex parte Duus by drawing attention to the real enquiry, that is, whether the monies were payable as compensation for the injury or wrong done. To focus on whether the amount is payable pursuant to a contract or indeed whether the amount is fixed by the contract distracts from the real enquiry. Provided that there is a relation between the amount of compensation and the nature of the injury, neither the fact that the claim is contractual in nature nor that it is for a fixed amount, negate the essential character of the payment as compensation for injury.
By way of illustration: assume a bankrupt brings an action for breach of an agreement to settle a claim for personal injuries in which the amount of the damages for pain and suffering is recorded in the agreement as a liquidated sum. The original claim was a claim for damages for personal injuries. The interposition of the contractual claim does not change the character or substance of the injury for which compensation is payable. It remains a claim for compensation in respect of a personal injury suffered by the bankrupt. Nor does the fact that the quantum has been fixed by agreement change the character or substance of the action ‑ the damages in the original claim would, but for the settlement, have been estimated by reference to the pain felt by the bankrupt. There is no policy reason for holding that such a claim should vest in the bankrupt's trustee with the result that the bankrupt would be denied the compensation that would have been payable had the settlement agreement been honoured. Such a result would be anomalous and unjust. Parenthetically, as noted in my review of the authorities, the bankrupt in Re Dosanjh; Ex parte Duushad in fact settled his claim and the relevant amount claimed by his trustee was paid pursuant to a deed of release.
Secondly, whilst the authorities draw a distinction between an injury to a bankrupt's property or property rights and an injury to his or her person or reputation, there is a clear distinction to be drawn between the character of the rights to which reference is made in the authorities and those conferred by Mr Berryman's policy.
The property rights referred to in the authorities are rights that have a value to be estimated by reference to criteria other than the insured bankrupt's personal injury and the extent of that injury. In contrast the rights under a policy of disability insurance are only valuable if the insured suffers an injury of the nature specified in the policy. The value is entirely dependent on the insured suffering a personal injury of sufficient seriousness to meet the policy conditions.
In the context of this case the distinction between property rights whose value is estimated by reference to matters other than injury to the bankrupt and the rights under the policy serves to reinforce the central importance of the personal injury to Mr Berryman (in other words the substance of the matter) in assessing whether his action is within s 60(4).
Thirdly, the submission that Mr Berryman's action does not fall within s 60(4) because his damages are not 'estimated by immediate reference' to his pain and suffering does not reflect Allsop P's approach in Moss v Eaglestone to the application of Dixon J's test in Cox v Journeaux.
In Moss v Eaglestone, at [22] to [26], Allsop P emphasised that the bankrupt's action against his former solicitor was an action for the loss of the chance of winning the defamation action. His Honour explained that the assessment of the value of that lost chance was to be undertaken, not on the balance of probabilities as to what would have happened in the action (that is, by immediate reference to the injury) but by reference to the chance of success and the difficulties involved, even if the assessment was less than 50%. Allsop P referred to authorities, including Johnson v Perez (1988) 166 CLR 351, which stated the principle that in lost chance cases involving personal injury claims, damages are awarded on the basis of the value of the lost chance of success and not the personal injuries themselves.
Moss v Eaglestone was thus a case in which the damages that might be awarded to the bankrupt were not to be estimated entirely by immediate reference to the reputational harm. The damages were to be estimated by reference to the value of the loss of the chance and in 'significant respects', but not solely, by immediate reference to the reputational harm: Allsop P at [66].
In Mr Berryman's action the critical fact is the injury to his foot. The injury and its consequences are the facts by which his entitlement to compensation is to be determined. Had he not suffered the injury and had it not had the effect of a 'total and permanent disability' within the meaning of the policy, he would have had no claim. The substance and nature of his claim are not altered by the interposition of the policy between his injury and his action, just as in Moss v Eaglestone the interposition of the requirement to assess the value of the bankrupt's lost chance (an assessment that involves factors other than the extent of the reputational damage) did not alter the nature and substance of bankrupt's claim.
In a most significant and critical respect, Mr Berryman's damages are determined by reference to his injury. That the amount of compensation is fixed does not detract from the proposition that immediate reference must be made to the nature of Mr Berryman's injuries and their consequences to determine whether he is entitled to the TPD benefit.
The process of reasoning followed by Allsop P in Moss v Eaglestone involved focussing on the nature of the injury and the substance of the bankrupt's claim, not permitting the formulation of the cause of action to play a determinative role. The reasoning process is that of an intermediate Court of Appeal of another Australian jurisdiction concerning the interpretation and application of Commonwealth legislation. Unless I am convinced that it is plainly wrong, which I am not, I should follow it: Farrah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [135]. With respect, I consider the approach in Moss v Eaglestone to be right and I have no hesitation in following it.
Is it necessary for Mr Berryman's injury to have been 'done to' him?
Zurich submitted that in order for an action brought to enforce a right to damages or compensation to be within s 60(4) the personal injury had to be 'done to' the plaintiff by a third party. It contended that it was not sufficient for a personal injury to have been suffered by the plaintiff as a result of an accident not caused by a third party.
Zurich's submissions were premised on construing the phrase 'personal injury or wrong done to the bankrupt' where it appears in s 60(4) and s 116(2)(g)(i) as comprehending only a personal injury done to the bankrupt or a wrong done to the bankrupt.
Zurich supported its submissions by reliance on the decision of Edelman J in Duckworth v Water Corporation [2012] WASC 30. In that case Edelman J was required to consider a submission to the effect that a bankrupt's claim for damages for unconscionable conduct was a claim for a 'wrong done to the bankrupt' within the meaning of s 60(4). In the course of rejecting this submission his Honour stated:
In Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45 at 55, Kirby P said that it 'is understandable that a person unversed in the principles of statutory construction and unaware of legal authority on the meaning of s 60(4)(a) of the [Bankruptcy] Act should have taken [these words] ... in isolation'. The phrase "personal injury or wrong" has a long history of interpretation. The words are a paregmenon. 'Wrong' and 'personal injury' have the same connotation and derivation. [85]
Edelman J went on to refer to Cox v Journeaux, Faulkner v Bluett and Bryant v Commonwealth Bank of Australia to explain how s 60(4) had been construed. In doing so His Honour was not considering the question raised by Zurich's submission, namely whether s 60(4) should be construed as only applying to actions brought in respect of personal injuries if they were injuries 'done to the bankrupt'.
I do not accept Zurich's submission that an action only falls within s 60(4) if the personal injury was done to the bankrupt by a third party. My reasons are as follows.
First, a purposive approach to the interpretation of a statute may require the word 'or' to be interpreted disjunctively or conjunctively: Acts Interpretation Act 1901 (Cth) s 15AA, Pearce and Geddes, Statutory Interpretation in Australia (8th ed, 2014) at [2.29]-[2.30].
Secondly, it is possible to read the 'or' between 'personal injury' and 'wrong done' in both s 116(2)(g)(i) and s 60(4) disjunctively without straining the language of the sections. There are no grammatical or syntactical reasons why these sections cannot be interpreted as being concerned with a 'personal injury to the bankrupt' or a 'wrong done to the bankrupt' as opposed to a 'personal injury done to the bankrupt' or a 'wrong done to the bankrupt'.
Thirdly, there is no policy reason why s 116(2)(g) and s 60(4) should only apply to rights to damages or compensation, or actions in respect of damages or compensation, for personal injuries if the personal injuries are done to a bankrupt by a third party as opposed to being occasioned by an accident with no third party involvement.
Fourthly, interpreting the provisions as only applying to personal injuries done to the bankrupt by a third party is inconsistent with the statutory purpose of reserving to the bankrupt the solace for personal injury.
The decision in Cork v Rawlins
As I have noted, Cork v Rawlins is the only decision that either counsel or I have been able to find in which a court has considered whether benefits payable under an insurance policy as a result of permanent disablement caused by an accident are divisible amongst a bankrupt insured's creditors or whether those benefits may be retained by the bankrupt.
Both the English Court of Appeal in Ord v Upton and the Full Court of the Supreme Court of South Australia in Sands v South Australia have drawn attention to the existence of very different statutory regimes in England and Australia with the consequence that decisions on one statutory regime no longer have application in the other regime.
Having regard, however, to the common origins of the respective statutory regimes and the extent to which the common law bankruptcy principles underpin the Australian statutory provisions, I have considered the reasoning in Cork v Rawlins carefully. I am not persuaded that I should follow it for the following reasons.
First, my task is to construe s 60(4) and s 116(2)(g) and apply those provisions to the facts. At the risk of repetition, for the reasons stated in Sands v South Australia, to which I have referred above, in relation to that statutory construction exercise the decision in Cork v Rawlins is of limited value as a precedent.
Secondly, whilst Mr Berryman's argument, like that of the bankrupt in Cork v Rawlins, is not founded directly on authority, Mr Berryman's argument is supported by the reasoning of the Court of Appeal in Moss v Eaglestone.
Thirdly, to the extent to which the reasoning in Cork v Rawlins is based on the proposition that the claim was made in contract and was thus founded on property rights, for the reasons I have outlined above, I do not consider that is a determinative factor which should be permitted to distract from the substance of the claim.
Fourthly, the concern expressed in Cork v Rawlinsthat the bankrupt's claim represented a significant extension of the common law principles is not a relevant concern in this jurisdiction in light of the legislative intervention in the form of s 116(2)(g) and s 60(4). In Cork v Rawlins the Court of Appeal was considering an extension of a common law exception to the statutory regime, whereas this case concerns the construction of the statutory regime itself.
Fifthly, I am not persuaded by the argument that the premiums paid to maintain a disability insurance policy would have been available to creditors if the policy had not been acquired and thus the policy benefits should be divisible amongst creditors. The argument is founded on a proposition that is speculative. Moreover, in so far as it is an argument that has a policy element to it, in my view the policy that the solace for personal injury or hurt to the bankrupt should not be divisible amongst the general creditors should be accorded precedence.
Answers to the preliminary questions
Accordingly, the answers to the preliminary questions are as follows.
(1)On the facts stated in the amended writ of summons may the plaintiff continue the action in his own name by operation of s 60(4) of the Act, the plaintiff having been declared bankrupt on 10 August 2015? Yes.
(2)If the answer to question 1 is no, should the action be dismissed, notice of the action having been given to the plaintiff's trustee in bankruptcy on 31 August 2015 and the trustee having made no election to prosecute the action? The question does not arise.
I will hear the parties in relation to the terms of the orders and with respect to costs.
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