Daemar v Industrial Commission of New South Wales

[1988] HCATrans 211

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S33 of 1988

B e t w e e n -

JAMES ARTHUR DAEMAR

Applicant

and

INDUSTRIAL COMMISSION OF NEW

SOUTH WALES and WILLIAM FREDERICK

SHEATH

Respondents

Application for special

leave to appeal

HASON CJ

WILSON J

Daemar

DEANE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 16 SEPTEMBER 1988, AT 11.38 AM

Copyright in the High Court of Australia

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MR D.A. STAFF, QC: If the Court pleases, I appear with my

learned friend, MR R.G. KAYE, for the applicant.

(instructed by A.G. Robinson & Associates)

MS H.A. COONAN: If Your Honours please, I would wish to announce a submitting appearance on behalf of the

first respondent, the Industrial Connnission,

and I appear for the second respondent.	(instructed
by Griffiths Delaney & Co)

MS D. HANNIGAN: If the Court pleases, I appear on behalf of

the Attorney-General for the Cormnonwealth of Australia.

We appeared as animus curia in the court below and we

were the third-named respondent in these proceedings
but a notice of discontinuance has been filed against us.

(of the Australian Government Solicitor)

MR STAFF:  Your Honour, the central question here is the

construction of section 60(2) of the BANKRUPTCY ACT.

There is a secondary question about the meaning

of section 116 but that will not take Your Honours

very long to consider.

The appellant had cormnenced proceedings in the

Supreme Court of New South Wales for a review in the

nature of orders for prerogative writs against the

Industrial Connnission alleging in the summons, as

I understand it, because the summons is not among the

papers, that the Cormnission had acted without jurisdiction

in making an order against him.

Before that matter came on for hearing he became

bankrupt and thus the question arose in the Court of

Appeal whether the proceedings, which he had instituted

for prerogative relief - and I should say, as well, some other relief, but I will come to that in a moment - were

the subject of the stay automatically imposed by	section 60(2).
The question which concerned the Court of Appeal was whether that subsection, by the word "action" as defined by section 60, operated to impose an impediment to the prosecution of a claim for prerogative relief by
a person who had become bankrupt after the claim arose.

Now, I should tell Your Honours that the summons

claimed not merely prerogative relief but damages and

costs which clearly, on any view, one would have said was a claim to relief which fell within section 60(2).

Certainly, we would not attempt to argue otherwise. And the Court of Appeal, the judgment being that of Mr Justice Kirby, with which the other members of the

court concurred, in part, proceeded upon the view that

the action, as they described it, was one not only for
prerogative relief but as well for damages, costs and

the like.

Now, it is our submission, the Court of Appeal fell

into error there because whilst the proceedings or the

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action in so far as it claimed that particular relief of

damages and the like may well have been the subject of

the stay imposed by section 60(2) there is, in our

submission, no basis for saying that so far as the

summons claimed prerogative relief, it fell within
section 60(2).

In short, what we would submit is that section 60 must be construed in the light of the general policy

and object of the Act; that being to preserve

property of the bankrupt divisible among his creditors

and that the stay provision is directed only to a stay

of proceedings cotmnenced by the bankrupt before

bankruptcy in respect of his property which, for the

purposes of bankruptcy, is divisible amongst creditors.

A claim for prerogative relief, in our submission,

is not of that nature. It is a claim made in

vindication primarily of the public law by a person who

has locus standi. The applicant relied for locus

standi on the fact that he was affected by the order

which the Industrial Cotmnission had made but the

principal relief sought was simply the establishment of

the fact that there had been a lack of jurisdiction in	the Cotmnission to act against him, and that is-: the duty
of the Cotmnission to act within jurisdiction is a
consequence of the public law. This applicant was simply seeking to vindicate an appropriate locus standi,
the public law of the Cotmnonwealth and that is the way
in which we submit that the Court of Appeal should have
approached the matter.

The question of the meaning of "action" in

section 60(2) to which I should, perhaps, take

Your Honours shortly was described by the President,

Mr Justice Kirby, as being a substantial question and for

what comfort we get from that I draw Your Honours'

attention to it. Section 60, Your Honours - one

sees in subsection (1) empowers the Court to:

discharge an order made ..... against the

person or property of the debtor under

any law relating to the imprisonment of

fraudulent debtors and -

to -

discharge the debtor out of custody, or

(b) stay any legal process ..... instituted

..... against the person or property of the

debtor -

and then subsection (2) follows:

An action cotmnenced by a person who subsequently

becomes a bankrupt is, upon his becoming a

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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 ..... is

served upon him by a defendant or other

party to the action, he shall be deemed to

have abandoned the action.

And then:

(4) Notwithstanding anything contained in

this section, a bankrupt may continue, in

his own name, an action commenced by him

before he became a bankrupt in respect of -

(a) any personal injury or wrong done to the

the bankrupt, his spouse or a member of his

family; or

(b) the death of his spouse or of a member of

his family.

And then, finally:

(5) In this section, "action" means any civil

proceeding, whether at law or in equity.

Now, the submissions which we would make in

favour of the view that "action" does not, in

section 60(2) or in the definition section, subsection (5),

embrace a proceeding such as the present for relief in

the nature of prerogative relief are, in substance, threefold.

First, we say, that "action" in the context of the

BANKRUPTCY ACT ought not to be construed as embracing a

proceeding asserting a public law right; in this case,

the right to have a tribunal act only within its

jurisdiction. We would add, in support of it, that

the purpose of relief in such a case is primarily and

principally the vindication of the law itself

notwithstanding that the grant of relief may have a

consequential effect upon the personal interest of

the applicant for relief or of some other person and

the possibility of such interest being favourably

enhanced is a reason why a particular applicant may have

a locus standi to assert the vindication of the public

law or the public right.

The principle that the vindication of the public

law is the primary purpose of prerogative relief was

accepted by Mr Justice Kirby at page 36 at the foot of

the page, about line 25, going over to line 14 or 15

on page 37. I do not propose to take Your Honours to

them. Your Honours will be aware of a string of

authorities over, perhaps, the last two centuries or

more to similar effect to the passage cited by the

President from FARQUHARSON V MORGAN. So that once

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recognizing that purpose of the law one, in our submission,

needs to look closely at section 60(2) to see whether

there is, in the context of the BANKRUPTCY ACT, some

reason to read the definition of "action" contained in

subsection (5) as meaning only a civil proceeding,

whether at law or in equity, in respect of the property
of the bankrupt divisible amongst his creditors.

Secondly, we would submit that the consequence of construing "action" as embracing such a proceeding as

we have described is to enable or to impose a serious

and drastic impediment upon the vindication of the public

law because a bankrupt, particularly where he has

corrnnenced a proceeding with that object in view, though

his motivation, of course, may be found in his

personal interest than the vindication of the law

but having corrnnenced it before his bankruptcy there is,

in our submission, no reason to impose a stay on his

proceeding with that action after bankruptcy, and

we point to the fact that he is only precluded from

corrnnencing actions after the corrnnencement of his

bankruptcy - that is, a new action - he is only prevented

from making such a claim after bankruptcy if it is a

claim in respect of the property divisible amongst his

creditors. For instance, a bankrupt who held property

on trust for somebody would have no bar to an action

brought by him as a trustee in respect of the trust

property erected by section 58 and, of course, section 116

which specifically excludes, amongst other things, trust

property from property divisible amongst creditors.

But, by contrast, section 60(2), if construed in

the broad way which the Court of Appeal construed it, would

seem to impose a stay upon a proceeding brought by a

bankrupt before bankruptcy as trustee of trust property

because he had become subsequently bankrupt. That would
be, we would submit, an extraordinary consequence which
strongly points to a more limited reach of action than

that which the Court of Appeal gave to the words.

Appeal, conceded that, for example, section 60(2) would Indeed, the Attorney-General, before the Court of not stay a proceeding by a person who became bankrupt

after corrnnencing the proceeding in the Family Court for

relief affecting his status only. That was an important

concession, we submit, upon which we sought to rely in
the Court of Appeal or, rather, the applicant did, and to
which we point in support of the argument which we are
here putting. And the Attorney-General also conceded
that there was or appeared to be a conceptual difficulty
or an apparent unfairness in depriving a bankrupt of the
capacity to pursue proceedings against a decision which

he claims to be void or voidable, a concession, again,

no doubt made seriously and on consideration which points

to the result for which we would contend.

Then, thirdly, we would submit that the lack of

consistency in consequence of bankruptcy, where the
relevant claim has been instituted before the bankrupt is

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made bankrupt and, on the other hand - where it is

said an automatic stay arises or takes effect - the

lack of a stay in respect of proceedings brought by

a bankrupt after his bankruptcy connnenced is a fact

which points again to the reach of section 60(2)

being more limited than the Court of Appeal would have

it.

Mr Justice Kirby, in his judgment, described

the arguments as put as being not without force.

The respects in which we would submit Mr Justice Kirby

fell into error are, firstly, at page 41 where

His Honour said that:

The word "whether" -

in section 60(5) suggested an assumption by the

draftsman -

that all civil proceedings would either be in law

or in equity.

Now, we do submit tt2t that is an error because one cannot

draw from the use of the word "whether" in that phrase

in subsection (5) any support for the proposition

which His Honour says could be assumed. The words

"whether in law or in equity" are a well-known description.

They sometimes have been said to cover every form of

proceeding and, at other times, to refer only to more

limited proceedings and it is a large piece of weight to

put on the word "whether", in our submission, and one

which is an undue amount of weight.

Secondly, His Honour held that there was no ambiguity.

At page 42, lines 1 to 3, His Honour said:

Secondly, even if one were to approach the

word "action" ..... with a view to confining its

operation where an ambiguity arose, in this case,

at least, there is none.

And, that, we would submit, is a second error into which
His Honour fell.	The ambiguity, we submit, arises from

the description of "action" in subsection (5), the

consequences to which we have pointed and the impediment

to which we have pointed to the vindication of the public

law and, indeed, it is a drastic impediment to place

in this particular circumstance on the bankrupt, in our

submission.

MASON CJ: The proceeding, if it went ahead and were

successful,would result in property divisible amongst

the creditors?

MR STAFF:	No, Your Honour, it would, rather, result in the property divisible amongst the creditors being, as it were,
confined to property notincluding the debt which arose from
the order of the Industrial Connnission. In other words,
what happened, Your Honour, was that the Industrial

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Cormnission made an order which imposed the liability upon the present applicant to pay money. That created an additional creditor, I suppose, any

subsequent bankruptcy, and the effect of quashing that

order would simply be to reduce the liabilities. It would not touch the property but it would reduce the

creditors.

MASON CJ: Yes.

DEANE J: It may be, may it not, that the correct position

is the &.lf-way house which would not help you and that
is that-there are some forms of prerogative relief
which would not come within this kind of action but if
the form of prerogative relief is one which essentially

involves an appeal it does come within it? I mean,

an appeal dealing with property or imposing

liability.

:MR STAFF:  We would seek to answer Your Honour in this way:

we would say the question is whether the action is one

which is in respect of property divisible amongst the

bankrupt's creditors. That, we say, cannot be the case

here because its only consequential effect is one upon a

particular creditor, not upon the property divisible

amongst creditors. It, I suppose, in one sense may be

said indirectly to enhance the amount of property

available to the creditors who ultimately prove and

remain creditors but its real effect is to eliminate

a creditor and that is not to affect, in our submission,

the property of the bankrupt.

DEANE J:	I follow the way you put it.
:MR STAFF:	That is the way we would seek to answer Your Honour.

True, we concede - and I think I tried to make this

clear earlier but perhaps I did not make it perfectly

clear - that the claim to damages, being a claim which

would result in property if successful, is clearly

within the ambit of the stay. We could not think of

any argument to the contrary of that, Your Honour. But	so far as the claim to prerogative relief is concerned,	I think Your Honours understand the way we put it and
I would only be repetitious to continue that. But may I
just call on one other reason of His Honour
Mr Justice Kirby for his conclusion. There are really
two but they are very short. They are both at page 43 - and may I say in passing I do not seek to make anything
of the English cases which are upon a statute which
does not contain a provision such as this one. The
matter fourthly referred to by the learned President,
apparent disharmony between 58 and section 60 is concerned,
he says, does not matter to his mind. It is, in our
submission, as I have already put, a matter which gives
rise to some ambiguity in the terms of section 60(2).

And then, finally, His Honour seems to see an

impossibility of severing the prerogative claim from the

claim to damages and declaratory orders in respect of

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property of the bankrupt. So, for those reasons, we

submit that plainly His Honour fell into

error, an error in which the other members of the court

joined. So far as the nature of relief is concerned,

we say it is of general public - the question is one

of general public importance. It is a question which

would affect any bankrupt of whom,Your Honours would know, there are many in the community and it is a

broad reach of a Commonwealth statute which, in our

submission, raises a substantial impediment to prerogative

relief and thus to the vindication of public law.

For those reasons, we submit, the case is one for

special leave.

MASON CJ: Yes, thank you, Mr Staff. Yes, Ms Coonan?

MS COONAN:  Thank you, Your Honour. Your Honours, it is

unfortunate that the document that my friend, Mr Staff,

has referred to, being the summons for review, does not

appear in the appeal papers nor has a copy been handed

to Your Honours but it is very clear, Your Honours,
that whilst the action was, in some respects, prerogative

in nature and sought prerogative relief, it also sought

a number of declarations of right; it also sought

unspecified damages and it also sought costs and

it is the submission of the second opponent that it is,

by its very nature, stayed by the force of the Act by

the applicant's subsequent bankruptcy after he commenced

the action.

Your Honours, the first basis on which it is

contended that this matter is caught is the wide language

of section 60 of the Act. It is clear, Your Honours,

that it operates to stay all actions on its face and

in its clear language except in very limited and defined

circumstances. Your Honours have been taken to the

section but, Your Honours, its width, in my respectful

submission, is emphasized by the definition of "action"

which is contained in section 60(5). Your Honours,

that appears at page 33 of the judgment where that

section says: 

In this section, "action" means any civil

proceeding, whether at law or in equity.

Well, Your Honours, it is very broad and, in my

respectful submission, was intended to be so. Parliament

has specifically provided for a stay to apply to and

include any civil proceeding commenced by a person who

subsequently becomes a bankrupt unless, of course, the

trustee makes an election or unless the action comes

within the type of action to which the exemption applies.

Now, Your Honours will be aware that much of the case

in the Court of Appeal was taken up in a consideration

of whether orrot, in section 60(4) - whether the provisions
of section 60(4) could exempt this particular applicant

from the force of section 60(2) and Your Honours will know

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that the decision was that in that respect

Their Honours were of the view that that section did not apply.

Your Honours, section 60 of the BANKRUPTCY ACT,

in its operation, intention and effect, in my respectful

submission, therefore picks up all civil proceedings

which relate - and this is the test, in my submission, Your Honours - in some tangible degree to the property

or estate of the bankrupt which on bankruptcy vests in

the trustee. Your Honours, that is reinforced not

only by section 60 but also by section 116. And in

the present case, Your Honours, there can be no doubt

that even if the applicant's action seeks in part

the vindication of a public right, the purpose and
effect of the proceedings is an action to relieve the

applicant of pecuniary liability. Now, Your Honours,
there can be absolutely no doubt, in this particular
case, that that is the motivation of the applicant and
he sees it as a means to bring it about to seek

prerogative relief but it is certainly not severable from

or in any way distinct from his action to be relieved

of a pecuniary liability and, Your Honours, the action

has the potential to enlarge or diminish his estate,

depending on whether or not the decision of the

Industrial Connnission was quashed, and as such,

Your Honours, the right of action must vest in the

trustee.

Your Honours, as to the apparent disharmony between

the operations of section 60(8) and section 60(2),

it is clear from His Honour's judgment, His Honour

Mr Justice Kirby, that it did not matter in this case

simply because even if the bankrupt were to commence an action now it would still be a matter which would

affect property and thereby vest in the trustee.

Your Honours, my final submissions is that from

the force of the Act and the clear language of the

before the Court of Appeal, it is impossible to sever	section and the way in which the summons was brought
a claim and give it any separate effect which is -
the part of it that relates to prerogative relief and the part that relates to the bankrupt seeking to be
relieved from his pecuniary liability. They are one and
the same and they are all bound up, in my respectful
submission. Thank you, Your Honours.

MASON CJ: Thank you, Ms Coonan. Yes, Mr Staff?

MR STAFF:  Your Honour, only one thing: we would submit that

there is no discernible policy objective to be served

by construing section 60(2) as having the breadth which

the Court of Appeal has done. If Your Honours please.

MASON CJ: Notwithstanding the submissions of Mr Staff, the

Court considers that the decision of the Court of Appeal

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is not attended with sufficient doubt to justify the

grant of special leave to appeal. The application

is therefore refused.

AT 12.08 PM THE MATTER WAS ADJOURNED SINE DIE

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