Fletcher v Westpac
[2012] WASCA 154
•9/08/12
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA |
| TITLE OF COURT : | THE COURT OF APPEAL (WA) | |
| CITATION | : | FLETCHER -v- WESTPAC [2012] WASCA 154 |
| CORAM | : PULLIN JA |
NEWNES JA MURPHY JA
| HEARD | : | 22 JUNE 2012 |
| DELIVERED | : | 9 AUGUST 2012 |
| FILE NO/S | : | CACV 129 of 2011 |
| BETWEEN | : | BRIAN FLETCHER AS TRUSTEE OF THE BRIAN FLETCHER FAMILY TRUST Appellant |
| AND | ||
| WESTPAC Respondent | ||
| ON APPEAL FROM: | ||
| Jurisdiction | : | SUPREME COURT OF WESTERN AUSTRALIA |
| Coram | : ALLANSON J | ||
| Citation |
| ||
| File No |
|
[2012] WASCA 154
Catchwords:
Practice and procedure - Appellant claimed as trustee of family trust against respondent - Claim dismissed - Appellant bankrupt after instituting appeal - Appellant sought to pursue appeal - Appeal stayed under Bankruptcy Act 1966 (Cth) s 60(2) - Appeal not in respect of personal injury or wrong under Bankruptcy Act s 60(4)
Legislation:
Bankruptcy Act 1966 (Cth), s 60(2), s 60(4)
Result:
Appeal stayed under Bankruptcy Act s 60(2)
Category: B
Representation:
Counsel:
| Appellant | : | In person |
| Respondent | : | Mr A J Mason |
Solicitors:
| Appellant | : | In person |
| Respondent | : | Gadens Lawyers |
Case(s) referred to in judgment(s):
Baker v Sheridan [2005] NSWCA 408
Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545
Cox v Journeaux [No 2] (1935) 52 CLR 713
Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124
Duckworth v Water Corporation [2012] WASC 30
Fletcher v Westpac [2011] WASC 277
Freeman v Joiner [2005] FCAFC 149
Mannigel v Hewlett Phelps [1991] NSWCA 186
Moss v Eaglestone [2011] NSWCA 404
Owens v Comlaw (No 62) Pty Ltd [2006] VSCA 151; (2006) 201 FLR 275
Re Lofthouse [2001] FCA 25; (2001) 107 FCR 151
Stobbart v Mocnaj (1996) 16 WAR 318
Temsign Pty Ltd v Biscen Pty Ltd (1998) 20 WAR 47
[2012] WASCA 154
PULLIN JA NEWNES JA
PULLIN JA: I agree with Newnes JA.
NEWNES JA: This appeal has been listed to consider whether the appellant may continue with the appeal. That question arises because after he commenced the appeal the appellant became bankrupt. It is common ground between the parties that he is entitled to pursue the appeal only if it constitutes 'an action … in respect of [a] personal injury or wrong' within the meaning of s 60(4) of the Bankruptcy Act 1966 (Cth) (the Act).
Background
3 The appellant's appeal arises from the sale of a property that he
owned in Bull Creek (the Bull Creek property). Prior to the sale, the appellant leased the Bull Creek property to a third party which used it to operate a health club. There were two mortgages over it. The respondent held the second mortgage, but had priority under a deed with the first mortgagee. The respondent was the appellant's banker. In July 2001, the first mortgagee sold the land. Pursuant to the deed of priority, the whole of the proceeds of sale were paid to the respondent to discharge the appellant's indebtedness to it.
4 The appellant brought an action for damages against the respondent.
The appellant said that the respondent owed him duties in law and equity to inform him about the sale in time for him to prevent it, and not to allow the sale to proceed. At the core of his claim is an allegation that between February and July 2001, the respondent, by one of its managers, made a number of undertakings to keep the appellant informed in relation to the sale of the property.
The causes of action relied upon by the appellant were, in summary,
as follows:
(a)
breach of a general duty to inform him that the sale was to take place, and not to allow the sale to proceed, the legal foundation of which was uncertain but which the judge dealt with as arising in tort;
(b)
breach of a more limited and specific duty of care to inform the appellant in time to enable him to act to prevent the sale;
(c)
promissory estoppel arising from alleged representations made by the respondent to the appellant which the appellant acted on to his detriment as a source of legal obligation; and
[2012] WASCA 154
NEWNES JA
(d) breach of a fiduciary duty to promptly inform the appellant in relation to the sale of the Bull Creek property. 6 The appellant advanced two alternative bases for assessing damages.
The first was the loss of the equity of redemption of the Bull Creek property, being the difference between its true value at the date of trial and the net proceeds of the sale, together with the loss of rental income for the period from the sale up to trial. Alternatively, the appellant claimed that the Bull Creek property was sold for less than its value and claimed the difference in value and interest, together with the loss of rental income.
7 On 10 October 2011, Allanson J dismissed the appellant's claim and
ordered the appellant to pay the respondent's costs of the action to be taxed: Fletcher v Westpac [2011] WASC 277. The appellant filed a notice of appeal on 13 October 2011.
On 23 March 2012, the respondent's costs were taxed and certified in the amount of $194,061.97.
9 The appellant became bankrupt on 26 March 2012 and, on 28 March
2012, the official trustee was appointed as trustee of the appellant's estate. Notice of the appeal was served on the official trustee by emails dated 2 April 2012 and 11 April 2012. The official trustee treated the email of 11 April 2012 as notice of the appeal for the purposes of s 60(3) of the Act. He indicated following its receipt that he did not intend to make an election under s 60(3) and in fact he did not make an election.
The statutory framework
10 Under s 60(2) of the Act, an action commenced by a person who
subsequently becomes a bankrupt is, upon becoming a bankrupt, stayed until the trustee in bankruptcy makes an election, in writing, to prosecute or discontinue the action. An 'action' means any civil proceeding, whether at law or in equity: s 60(5). An appeal is an 'action' for the purposes of s 60(2): Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124, 130. Also 'action' is apt to include an appeal: Owens v Comlaw (No 62) Pty Ltd [2006] VSCA 151; (2006) 201 FLR 275 [42].
11 If the trustee does not make an election within 28 days after notice of
the action is served upon the trustee by a party, the trustee is deemed to
have abandoned the action: s 60(3).
[2012] WASCA 154
NEWNES JA
Section 60(4) of the Act, however, provides for certain exceptions to those provisions. It provides, so far as relevant, as follows:
(4) Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of:
(a) any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or (b) the death of his or her spouse or de facto partner or of a member of his or her family.
Section 116(2)(g) is also relevant. It excludes from property that is divisible among the creditors of the bankrupt, among other things:
(g) 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.
14 The effect, therefore, is that s 60(4) permits a bankrupt to proceed in
his or her own name with an action for personal injury or wrong to such persons, and s 116(2)(g) provides that the right to damages in such an action does not vest in the trustee in bankruptcy for the benefit of the creditors. The intent is clear, namely, that the bankrupt's participating creditors should not be entitled to the benefit of compensation paid to a bankrupt for a personal injury or wrong done to any of the specified persons.
15 There is one further point. The action below and this appeal were
brought by the appellant as trustee of the Brian Fletcher Family Trust. It was not in issue that although the action and the appeal were brought by the appellant as a trustee, the appeal nevertheless fell within s 60(2): see Duckworth v Water Corporation [2012] WASC 30; Re Lofthouse [2001] FCA 25; (2001) 107 FCR 151. It was not contended that the right of appeal in this case fell outside s 60(2) because it did not relate to property that has become, or would on recovery become, property vested in the trustee under s 58 of the Act. In any event, as the Victorian Court of Appeal explained in Owens v Comlaw [42], where a right of appeal is not 'property' an appeal would nevertheless fall within s 60(2) where there is 'such a connection between the [appeal] and the estate as to make s 60(2)
[2012] WASCA 154
NEWNES JA
applicable', such as (as here) the potential on the appeal for reversing a previous adverse costs order which would benefit the estate. In Duckworth it was held that potential adverse costs orders on the appeal, increasing the amount of debts provable in the bankrupt's estate, would also be a sufficient connection [42] - [45].
The disposition of the appeal
16 The question before us is whether the appeal is 'in respect of … any
personal injury or wrong done to the [appellant] or a member of his … family' within the meaning of s 60(4)(a). If it is, the appeal may be continued by the appellant in his own name. If it is not, he cannot do so.
17 The appellant contends that the effect of the alleged breaches of duty
by the respondent has been to take him from the strong financial position he once enjoyed to one of bankruptcy and dependence on social security. This has caused him distress and it has also caused distress to his two daughters as he has been unable to fulfil promises he had made to them that he would alleviate for them the 'dominating worry' of home ownership. The appellant says that the effect of the breaches has been to change him in character from a person who was entrepreneurial and optimistic to one who is pessimistic and fearful of the future. He submits that the proceedings are therefore in respect of a 'personal wrong' that has been done to him and/or members of his family.
What constitutes a 'personal injury or wrong' within the meaning of s 60(4) was described by Dixon J in Cox v Journeaux [No 2] (1935) 52 CLR 713, as follows:
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 (721). (emphasis added)
In Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545, the appellant claimed that notices of demand issued by the respondent bank, and on which it had relied to exercise a power of sale under mortgages over the appellant's land, were invalid. The appellant claimed damages for loss of business and, in addition, damages for loss of business reputation, loss of standing in the community, loss of amenities of family life, stress and suffering and exemplary damages. The action was dismissed and the appellant appealed. The appellant's bankruptcy occurred shortly after the appeal notice was lodged. The appellant sought to continue the appeal pursuant to s 60(4). It was held that s 60(4) did not
[2012] WASCA 154
NEWNES JA
apply. Lockhart J held (at 554) that the general damages claimed for loss of business reputation, loss of standing in the community, loss of amenities of family life, stress and suffering and exemplary damages were 'consequential upon the loss or damage … which is referable to the proprietary claims' and thus passed to the appellant's trustee in bankruptcy. O'Loughlin and Merkel JJ likewise held (at 564) that those claims were not within s 60(4) as they arose as a direct result of the alleged infringement of the appellant's financial or property rights and were not claims 'without reference to [his] rights of property' within the principle stated by Dixon J in Cox v Journeaux.
20 In Mannigel v Hewlett Phelps [1991] NSWCA 186, the plaintiffs had sued their former solicitors for professional negligence in connection with a purchase of land and the construction of a home on the land. They claimed damages for their economic loss and also for loss of their credit and reputation, inconvenience, and for mental distress and strain. It was formally admitted that the non-economic claims were the consequences of the alleged economic loss. After the action was commenced the plaintiffs became bankrupt. Handley JA (with whom Kirby P generally agreed and Meagher JA agreed) rejected the plaintiffs' contention that the action came within s 60(4) of the Act:
The plaintiffs claims for damages for loss of credit, for mental distress, inconvenience and for injury to their physical and mental health therefore were not claims 'without reference to their rights of property' within the principle stated by Dixon J. On the contrary those claims were consequential on damages to the plaintiff's financial and property interests as a result of alleged breaches of professional duty by the solicitors (4).
As Allsop P put the position in Moss v Eaglestone [2011] NSWCA 404; (2011) 257 FLR 96:
[T]o the extent that damages for personal injury or wrong are inseverable from or directly consequential upon interference with property rights, a claim for them does not survive the stay brought about by s 60(2) [77].
22 In order to determine whether the appeal is in respect of a personal
injury or wrong it is necessary to consider the substance of the action, the subject matter of the appeal. The categorisation of an appeal depends upon the categorisation of the action itself which gave rise to the judgment from which the appeal is brought: Bryant v Commonwealth Bank (550).
23 I have earlier described the appellant's action. In it the appellant's
claims were framed entirely in terms of the losses in respect of the value
[2012] WASCA 154
NEWNES JA
of the Bull Creek property which he alleged resulted from the respondent's alleged breaches. There was no allegation of, or claim in respect of, any personal injury or wrong of the nature now alleged. In any event, if a claim of the latter nature had been made in the action it would not assist the appellant. Any such claim would plainly be 'inseverable from or directly consequential upon interference with property rights' and therefore not a claim for 'personal injury or wrong' within the meaning of s 60(4)(a) of the Act.
It follows that the appellant is not entitled to pursue the appeal in his
own name.
25 I have mentioned that the official trustee did not make an election
under s 60(3) of the Act. The consequence is that the official trustee is deemed to have abandoned the appeal. That leaves a question as to what should now happen to the appeal.
26 In correspondence with the appellant, the official trustee has mooted
the possibility of an assignment of the right of appeal either to a third party or, upon his discharge from bankruptcy, to the appellant. Before us the appellant said there was no prospect of his discharge from bankruptcy before his ordinary discharge date, almost three years hence. He did not suggest that the appeal should remain stayed pending his discharge and I understood him to accept (correctly in my view) that such a delay was untenable. The appellant suggested, however, there might be an assignment to one of his daughters, although it appears that no steps have yet been taken in that direction.
27 It seems to have been common ground between the official trustee,
the appellant and the respondent's solicitors that the effect of abandonment of a right of appeal is the same as the abandonment of a cause of action. In relation to an action, it has been held that the abandonment of an action by a trustee in bankruptcy under s 60(3) does not destroy the underlying cause of action, which is retained in the trustee and can be assigned, including to the bankrupt after discharge: Stobbart v Mocnaj (1996) 16 WAR 318, 323; Temsign Pty Ltd v Biscen Pty Ltd (1998) 20 WAR 47, 58; Freeman v Joiner [2005] FCAFC 149 [14] - [15]. The parties seem to have proceeded on the basis that, likewise, the right to appeal survives abandonment under s 60(3) and can be assigned.
28 Accordingly, in its written submissions the respondent contended
that the appeal should be dismissed because the delay which would be
[2012] WASCA 154
NEWNES JA
involved if there were to be an assignment of the right of appeal would
unduly prejudice the respondent.29 In oral argument, however, counsel for the respondent took a
different tack submitting, in essence, as I understood it, that the appeal should be dismissed because a right of appeal is not something which is capable of assignment as it is not property which vests in the trustee in bankruptcy, relying on Cummings v Claremont Petroleum NL. The appellant did not respond to that submission and, as he was unrepresented, I think it can be taken that, understandably, he was not able to do so.
30 I would observe, however, that to the extent the respondent's
submission was advanced as a general proposition, it seems to overstate the position. In Cummings v Claremont Petroleum NL the majority drew a distinction between, on the one hand, an appeal against a money judgment entered against the bankrupt (as in that case), which does not have the character of property, and, on the other hand, an appeal relating to property that became vested in the trustee on bankruptcy, or if the postulated appeal relates to a claim by the bankrupt for money or property that would on recovery be vested in the trustee, where the right to appeal has the character of a chose in action which vests in the trustee (133 - 134). Subsequently, in Baker v Sheridan [2005] NSWCA 408, Mason P held that the right of appeal against the dismissal of the bankrupt's claim against a third party, and the fruits of any success on the appeal, was property divisible amongst the bankrupt's creditors and could be assigned by the trustee in bankruptcy [27] - [28]. In that case the appeal had not been abandoned by the trustee in bankruptcy. The present case, of course, is different again. The present appeal is against the dismissal of a claim by the appellant against a third party but relates to property which, as it was apparently held by the appellant on trust, would not on recovery vest in the official trustee.
31 In any event, in the somewhat unusual circumstances of this case,
where the appellant is unrepresented, the appeal relates to property said to be held on trust by the appellant (although there seems to have been a paucity of evidence at trial about the trust), and it is possible that the interests of third party beneficiaries of the trust may be affected by an order for dismissal, I would not dismiss the appeal at this stage. The basis upon which the respondent now seeks the dismissal of the appeal was sprung on the appellant at the hearing and was not the subject of considered argument. The appellant and any affected parties should have an opportunity to consider their position. As matters stand, the appeal remains stayed by virtue of s 60(2) of the Act.
[2012] WASCA 154
NEWNES JA MURPHY JA
Conclusion
32 The appellant is not entitled to continue the appeal in his own name.
The appeal is stayed by virtue of s 60(2) of the Act. The respondent should have liberty to apply to dismiss the appeal.
MURPHY JA: I agree with Newnes JA.
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