Coventry v Charter Pacific Corporation Ltd

Link copied
Case Copied 81 min read

HIGH COURT OF AUSTRALIA

GLEESON CJ,
GUMMOW, KIRBY, HAYNE AND CALLINAN JJ

MICHAEL JOHN COVENTRY AND
LYNETTE HELEN COVENTRY (AS
TRUSTEES OF THE MIKE AND LYN

COVENTRY FAMILY TRUST) & ANOR   APPELLANTS

AND

CHARTER PACIFIC CORPORATION
LIMITED & ANOR  RESPONDENTS

Coventry v Charter Pacific Corporation Limited [2005] HCA 67

15 November 2005
B68/2004

ORDER

1.        Appeal of the first appellant dismissed for want of prosecution.

2.        Appeal of the second appellant dismissed with costs.

On appeal from the Supreme Court of Queensland

Representation:

No appearance for the first appellant

M M Stewart SC with C A Wilkins for the second appellant (instructed by McMahons)

D F Jackson QC with N J Owens for the first respondent (instructed by Allens Arthur Robinson)

No appearance for the second respondent

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

  1. GLEESON CJ, GUMMOW, HAYNE AND CALLINAN JJ.   The issue to be decided in this appeal is whether a claim for unliquidated damages for contravention of a statutory prohibition is a debt provable in the bankruptcy of the person who contravened the prohibition and, by that conduct, induced the claimant to make a contract with a third party.

  2. In this case, the statutory prohibition, contained in s 995(2) of the Corporations Law of Queensland, prohibited misleading or deceptive conduct in connection with dealings in securities. The provision for an action for damages was s 1005 of the Corporations Law.

  3. Satisfaction of the criteria for proof of a debt has a significance beyond the allowance of the proof in the administration of the sequestrated estate.  As these reasons later demonstrate, the provisions for set‑off engage those criteria.  So also do those provisions dealing with the competence of proceedings against the person or property of the bankrupt, and with the consequences of discharge and release of the bankrupt.

  4. If the claim for unliquidated damages made pursuant to the Corporations Law is a debt provable in that person's bankruptcy, discharge from bankruptcy operates to release that person from that claim[1]. If it is not a debt provable in the bankruptcy, discharge from bankruptcy does not operate to release the bankrupt from the claim and, subject to any question of limitation of actions, the claim can be pursued against the former bankrupt after discharge. Moreover, s 58(3) of the Bankruptcy Act 1966 (Cth) does not prevent the claimant, during the bankruptcy, from commencing a legal proceeding in respect of the claim or enforcing any remedy against the person or the property of the bankrupt in respect of that claim. The sub‑section denies such competency to a creditor only in respect of "a provable debt".

    [1]Bankruptcy Act 1966 (Cth), s 153(1).

  5. The central question in the appeal hinges on the meaning of s 82(2) of the Bankruptcy Act 1966 and, in particular, what is meant by a demand in the nature of unliquidated damages arising otherwise than by reason of a contract or promise. That expression,…

CaseChat AU logo

Keep reading for free

Create a free CaseChat account to read Coventry v Charter Pacific Corporation Ltd and more:

  • Read every judgment in full
  • Ask AI and get answers linked to paragraphs
  • See how each paragraph was cited in later cases
  • Download judgments as PDF or Word
Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details
Case
[2005] HCA 67
Decision Date

CaseChat Overview and Summary

The High Court of Australia considered an appeal by Michael Coventry and Andrew Coventry against a decision of the Court of Appeal of the Supreme Court of Queensland. The dispute arose from misleading and deceptive conduct by the Coventry brothers, which induced the respondent, Charter Pacific Corporation Ltd, to enter into a deed and make loans to a third party, Evtech Pty Ltd. The loans were not repaid, and the shares acquired by Charter Pacific became worthless. Both brothers were subsequently made bankrupt and discharged. Charter Pacific commenced proceedings against them, seeking damages for misrepresentations, misleading and deceptive conduct, and breaches of contract.

The central legal issues before the High Court were whether Charter Pacific's claim for unliquidated damages, arising from the misleading and deceptive conduct, constituted a debt provable in the bankruptcy of the appellants under the *Bankruptcy Act 1966* (Cth). Specifically, the court had to determine if the claim arose "otherwise than by reason of a contract, promise or breach of trust" as required by s 82(2) of the *Bankruptcy Act*.

The High Court noted that the outcome of the case was anomalous, stemming from the continued application of language in the *Bankruptcy Act* that originated from an 1869 English Act, without accommodation for the development of statutory causes of action and differing legal outcomes. The court found that the claim for damages for misleading and deceptive conduct, even though it induced Charter Pacific to enter into a contract with a third party, was not a debt provable in bankruptcy. This conclusion was reached despite the anomaly it created, as the court found itself unable to repair such issues through interpretation alone.

The appeal of the first appellant, Michael Coventry, was dismissed for want of prosecution. The appeal of the second appellant, Andrew Coventry, was also dismissed with costs. No order for costs was made against the Coventry Trustees, as the court considered the application of the *Bankruptcy Act* in that context to be problematic.

Orders

Orders of the court

1. Appeal of the first appellant dismissed for want of prosecution.

2. Appeal of the second appellant dismissed with costs.

Background

Background to the litigation

At once it must be said that to distinguish between a case where the bankrupt's conduct induced the claimant to make a contract with the bankrupt and the tripartite case where the conduct induced the claimant to make a contract with another is anomalous. But it is a particular example of anomalies of the kind identified by the Australian Law Reform Commission as long ago as 1988 in its General Insolvency Inquiry[5]. The Commission recommended changing the law governing both personal and corporate insolvency to remove anomalies of this kind. Amendments were made to Corporations legislation[6]. The Commission's recommendations about this aspect of personal insolvency law have not been carried into effect.[5]Australian Law Reform Commission, General Insolvency Inquiry, Report No 45, (1988), vol 1 at 315-319.[6]See now Corporations Act 2001 (Cth), s 553(1). The facts In 1992 and 1993, Mr Michael Coventry, one of the first appellants, and his brother, Mr Andrew Coventry, the second appellant, made representations to the first respondent ("Charter Pacific") which induced Charter Pacific to make a deed. The parties to the deed were Charter Pacific, Evtech Pty Ltd, Barry Tabe as trustee of the Tabe Trust, Michael John Coventry and Lynette Helen Coventry as trustees of the Mike and Lyn Coventry Family Trust and Belrida Enterprises Pty Ltd as trustee of the Quinn Family Trust. Andrew Coventry was not a party. By the deed, made on 24 March 1993, Charter Pacific agreed to buy some shares in Evtech from other parties to the deed and to lend money to Evtech. The representations made by the Coventry brothers were later found to have been misleading and deceptive. The money which Charter Pacific lent to Evtech under the deed was not repaid. Some further money which Charter Pacific lent to Evtech was likewise not repaid. The shares that Charter Pacific acquired proved ultimately to be worthless. Both the brothers Coventry were made bankrupt in 1994 and both were discharged from bankruptcy in 1997.The proceedings below and the appeal to this Court In June 1994, Charter Pacific commenced an action in the Supreme Court of Queensland against a number of parties. Andrew Coventry was named as fifth defendant. Michael Coventry and Lynette Helen Coventry were sued "as trustees of the Mike and Lyn Coventry Family Trust". It is convenient to refer to Michael and Lynette as the Coventry Trustees. The action came to trial in 2000, that is to say after the discharges of Andrew and Michael Coventry from bankruptcy. The trial lasted 157 hearing days spread over a period of about 18 months. As ultimately formulated in a further Amended Statement of Claim that was delivered during the trial of the action, Charter Pacific claimed against the Coventry Trustees and against Andrew Coventry damages for what were described as "misrepresentations, misleading and deceptive conduct and/or breaches of contract". Various other claims were made against other parties to the proceeding but their detail need not be noticed.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

GLEESON CJ, GUMMOW, HAYNE AND CALLINAN JJ KIRBY J
As noted at the start of these reasons, this result is anomalous. But the anomaly of the result stems ultimately from adopting the language used in the 1869 English Act without making any later accommodation not only for the provision of statutory causes of action of the kind at issue in this case but also for the differential outcomes revealed so long ago by the decisions in Jack v Kipping and Re Giles.Conclusion and Orders As earlier indicated, the appeal of the first appellant should be dismissed for want of prosecution. Charter Pacific contended that it should have an order for costs against the first appellant. An order for costs could not be made against Michael Coventry if the claim which Charter Pacific made against him, as one of the Coventry Trustees, was a proceeding in respect of a provable debt. Without the leave of a court having jurisdiction in bankruptcy under the Bankruptcy Act 1966, and on such terms as that court thinks fit, Charter Pacific may take no fresh step in such a proceeding[72]. And if no order could be made against one of two trustees, it is not immediately apparent why an order should be made against the other trustee. Indeed to make an order creating a liability in respect of which that other trustee would apparently have a right to contribution or indemnity from the bankrupt may itself present some question about the application of the Bankruptcy Act 1966.[72]Bankruptcy Act 1966, s 58(3). In the particular circumstances of this case, where no substantial argument has been advanced on the hearing of the appeal on the issues just mentioned, or on the issue of whether the claim against the Coventry Trustees was a claim for a debt provable in the bankruptcy of Michael Coventry, and where an order for costs should be made against the second appellant, Andrew Coventry, no order for costs should be made against the Coventry Trustees. The appeal of the second appellant should be dismissed with costs. The joint reasons[73] in this appeal[74] acknowledge that the conclusion reached by their Honours is "anomalous". Reaching an anomalous conclusion, in the interpretation of a law of general application throughout the Commonwealth, enacted by the Federal Parliament in 1966, does not represent a congenial outcome. At least, it is not congenial to me because of the purpose, ordinarily to be attributed to the Parliament, that the laws that it enacts will be rational and designed to advance a coherent and discernible policy. [73]Reasons of Gleeson CJ, Gummow, Hayne and Callinan JJ ("the joint reasons") at [7], [72].[74]From the orders and judgment of the Court of Appeal of the Supreme Court of Queensland in Charter Pacific Corporation Ltd v Belrida Enterprises Pty Ltd (2003) 179 FLR 438 at 460 [80]. Textual mistakes, intractable ambiguities and unthinking re-enactments of past legislation can sometimes bring the judicial interpreter to a conclusion that anomaly is inescapable and cannot be repaired by a court[75]. The danger of copying language in Australian legislation, originally enacted far away and long ago, may be seen in this appeal in an acute form. The assumptions of the original legislative language (such as the postulate that demands arising "by reason of a contract [or] promise" are readily identifiable and easily distinguished from other demands, such as in tort) have been shaken by a century that has involved the further development of legal doctrine[76]. Indeed, so substantial are the changes of legal understanding that have occurred in the interim that a contemporary Australian judge, reading words borrowed from English statutes of the nineteenth century, inevitably sees things differently than would have been the case when those words were read by judges in England at that time.[75]See discussion in R v Lavender (2005) 79 ALJR 1337 at 1350 [69]; 218 ALR 521 at 537-538.[76]See eg Groom v Crocker [1939] 1 KB 194 at 205; Hawkins v Clayton (1988) 164 CLR 539 at 574; cf Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387 at 440; (1935) 54 CLR 49 (PC).

Ratio Decidendi

Legal Principle Established

Established by: GLEESON CJ, GUMMOW, HAYNE AND CALLINAN JJ, KIRBY J

Full text does not contain this section.