Francis v Nat Mutual Life Assoc

[1998] QSC 131

IN THE SUPREME COURT  

OF QUEENSLAND
  No.  2673  of 1995

Brisbane

Before The Hon. Mr Justice Ambrose

[Francis v.  Nat. Mutual Life Assoc]

BETWEEN:

WILLIAM JAMES FRANCIS
  Plaintiff

AND:

NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA

LIMITED (ACN 004 020 437)

Defendant

REASONS FOR JUDGMENT - AMBROSE J.

Judgment delivered the 26 day of June 1998

This is an application by the defendant to strike out the plaintiff’s action which was initiated by the issue of a Writ of Summons on 22 December 1995.

The Statement of Claim in the action was not delivered until 2 March 1998.  Without analysing in detail the allegations on which the plaintiff relies, he seeks to recover a total sum of $393,066.23 paid between 30 June 1990 and 31 December 1990.  It is his case that he has causes of action under the Trade Practices Act 1974 and for negligence, breach of fiduciary duty, and the recovery of moneys paid by mistake.

In its Defence to that Statement of Claim delivered 30 March 1998, the defendant denies any liability to the plaintiff under the various causes of action pleaded.  In addition, the defendant pleads that the plaintiff became bankrupt on 16 November 1992, and that his alleged causes of action accrued prior to that date.  Paragraph 16 of the Defence then proceeds:-

“16.In the event that the plaintiff had any cause of action against the defendant (which is denied) such cause of action was property which vested in the plaintiff’s trustee in bankruptcy on 16 November 1992 for the benefit of the plaintiff’s creditors.

17.In the premises the plaintiff has no standing to bring the claims made in this proceeding.”

On the hearing of this application on 18 June 1998 it was established that on 17 June 1998 the plaintiff’s solicitors served the defendant with copy of a Deed of Assignment executed by the Official Trustee in the plaintiff’s bankruptcy assigning to him the causes of action in respect of which he issued his Writ in December 1995.

The Deed of Assignment recites the fact that the property in the plaintiff’s causes of action against the defendant vested in the Official Trustee pursuant to the Bankruptcy Act 1996 and that on 22 December 1995 “proceedings were instituted in the Supreme Court of Queensland under Writ No 2673 of 1995 pursuant to such cause of action”. 

Recital E reads:-

“E.The Assignor by these presents agrees to assign to the assignee the cause of action.”

The habendum of the Deed then provides

“1.The Assignor hereby absolutely assigns to the Assignee to the extent permissible at law or in equity as and from the 21st December 1995 all right and interest in and to the cause of action referred to in the Recitals and as is vested in the assignor.

2.Should the retrospective effect of this Deed fail, then it is deemed that this Deed will have effect as and from the date of execution by the Assignor.

3.The Assignee covenants to pay in consideration for the assignment the sum of $500.00 --”.

It is clear that pursuant to s.199 of the Property Law Act 1974 as far as the defendant is concerned, the legal assignment had effect only upon service on it of  Notice of the Assignment.  That was achieved on 17 June 1998.

For the applicant defendant reference was made to many authorities demonstrating that a cause of action which arises prior to date of bankruptcy vests in the Official Trustee and does not divest from that Trustee merely by virtue of discharge  from bankruptcy.  The authorities were considered by Drummond J in Cockerill &  Wollerill v.  Westpac Banking Corporation - (unreported decision Federal Court of Australia, 9 March 1992) where his Honour observed  with  respect  to Metropolitan Bank Ltd v.  Pooley [1885] 10 A.C. 210 -

“[Pooley’s case] is clear authority for the proposition that a bankrupt who sues after bankruptcy on a cause of action that vested in his Trustee upon bankruptcy has no standing to maintain the action. 

See also W R Henry & Son v.  Hodge [1963] VR 111 and Bailey v.  Thurston & Co [1902] 2 KB 397 at 400. Proceedings instituted by an applicant who at the time has no standing to institute them are incurably a nullity. See Ingill v.  Moran [1944] KB 160 at 164-165 and Minister of State for the Interior v.  R T Company Pty Ltd & ors (1961-62) 107 CLR 1 at 7. The first applicants thus had no standing to institute the proceedings in their own name even though they may have had the consent of the Trustee to do that: only their Trustee had standing to bring such an action -- Dismissal of the first applicants’ claims is therefore the appropriate order to make even though it will have the consequence -- that Mr Worrell (the Trustee) who became a party as a result of Pincus J’s order -- may be faced with time bar defences to at least part of the claims which would not have been available to the respondents if the first applicants had remained on the record”.

The lack of any loci standi on the part of a former bankrupt to commence and maintain proceedings relating to choses in action which existed prior to date of bankruptcy was confirmed by the High Court in Cummings v. Claremont Petroleum NL (1995) 185 CLR 124.

In Coyle v. Cassimatis (unreported Court of Appeal Qld 1 November 1993) it was accepted that where a cause of action precedes bankruptcy it vests in the Official Trustee.  The action there commenced by a bankrupt subsequent to his bankruptcy was assumed to be a nullity resulting from his incompetence to bring or maintain such an action unless an annulment of the bankruptcy was obtained.  The law regards an annulment of a bankruptcy as having the effect that the bankrupt was never in law made bankrupt and so his cause of action is deemed never to have vested in the Official Trustee.

In Minister of State for the Interior v.  R T Company Pty Ltd (1961-62) 107 CLR 1 at 7, Taylor J observed with respect to capacity to sue on behalf of an intestate estate:

“It is incumbent upon the plaintiff to establish the existence of his cause of action as at the date of his Writ -- notwithstanding that upon grant the Administrator’s title relates back to the death of the deceased whom he represents, it has been consistently held that this element of retro activity is incapable of sustaining a Writ issued before grant.

In Ingill v.  Moran [1944] 1 KB 160 Scott LJ at 164-5 observed that a Writ issued by a person in whom a cause of action did not at that time exist was “incurably a nullity. It was born dead and could not be revived. If that conclusion is right, it follows equally that the Statement of Claim was not delivered in any action recognised by the rules of the Supreme Court and all subsequent proceedings in the supposed action -- were likewise nugatory, for, if the action and the pleadings were bad, there was no valid action before the Learned Judge to try --”.

For the plaintiff it was contended -

(1)That the plaintiff on 17 June 1998 effectively got an assignment from the Official Trustee of the cause of action which he had when he became bankrupt and that that assignment operated “from the date of the Writ” and that therefore his Writ of Summons was good and the application to strike out ought be dismissed.

And in the alternative -

(2)That if the assignment did not have that effect, then this Court should make an order under either RSC O.3 r.11 or RSC O.32 r.4 to achieve the same result.

In effect, it was contended O.3 r.11 would permit the plaintiff with the assigned cause of action to be “substituted for” the plaintiff who issued the Writ of Summons in December 1995 without that assigned cause of action. This argument as I understood it assumes that the assignment effected on 16 (or 17) June 1998 would have effect in law only on that date. 

It was submitted that there was no essential difference between “adding” or “joining” a plaintiff with a cause of action to the same plaintiff without a cause of action and adding, joining or substituting any other person who had been discovered subsequent to the issue of the Writ of Summons to have allegedly the same cause of action.

It was also contended that O.32 permits orders for amendment to be made even though a time limitation has passed.

Reference was made to O.32 r.(1)(3) which it was said permits correction of the “name”  of a party if there has been a “genuine mistake which was not misleading or such as to cause any reasonable doubt as to the identify of the person intending to sue”.

Reference was also made to O.32 r.1(4) which permits an amendment to “alter the capacity in which a party sues -- if -- at the date of issue of the Writ the party might have sued”.

Reference in particular is made to Lynch v.  Keddell (No 2) [1990] 1 Qd 10 with respect to the exercise of jurisdiction under O.3 r.11 and to Bridge Shipping Pty Ltd v.  Grand Shipping SA (1991-92) 173 CLR 231 with respect to the exercise of jurisdiction under O.32 r.1(3). Those cases however involved no question of the lack of capacity in a plaintiff to sue because of the absence of a cause of action.

It was contended that O.32 r.1(4) “has application if the plaintiff had capacity in Equity but not in Law at the date of issue of the Writ” (which was achieved by  Deed of Assignment) and that it  should be ordered that the plaintiff who is deemed formerly to have sued in equity may now sue with his new found capacity in law.

It was contended that by its express terms the deed between the Official Trustee in Bankruptcy and the plaintiff has effected an assignment as at the date of the issue of the Writ. In essence, it was contended that even if s.199 of the Property Law Act operates to prevent a retroactive effect being given to the Deed of Assignment - on the basis that it had effect only when the defendant was notified of the assignment - nevertheless, in equity the effect of the agreement between assignor and assignee is to give a retroactive assignment having operative effect  on the date when the plaintiff actually issued his Writ.

This contention if correct would involve equity giving an operative effect to the deed of assignment different from that specified in s.199 of the Property Law Act.

The plaintiff has contended that there is jurisdiction under O.32 r.1 to add “a subsequent cause of action”.  One might think that one would have to have a valid Writ issued to pursue an existing cause of action before it would be possible to add another cause of action.  However, for the plaintiff, it is contended that this is not necessarily so.  It is contended that one must look at all the circumstances of the case and that the whole purpose of O.32 r.1 is to “cure“ the very sort of injustice that will result to the plaintiff in this case if he is deprived of any remedy merely because when he issued his Writ of Summons, the cause of action he sought to enforce was vested in the Official Trustee in Bankruptcy.  It is said that the point taken by the defendant is a mere technicality which should not defeat the plaintiff by reason only of his slip or the mistaken step he took in failing to obtain an assignment of the cause of action vested in the Official Receiver before instituting his proceedings.

No authority was cited for the proposition that by Deed of Assignment a creditor may assign a cause of action to take effect from a date prior to the date of assignment even though that may, as it would in the present case, deprive a potential defendant of a defence based on the statute of limitations.

In essence, it is contended that s.199 of the Property Law Act which requires notice of assignment to be given before an assignment of a chose in action becomes effective can be circumvented by assigning in terms of the Deed executed by the Official Trustee in Bankruptcy in this case.

It was submitted that s.199 of the Property Law Act does not apply to the assignment of causes in action; it only applies to assignment of other “things in action”.

It was contended on behalf of the plaintiff that the amendment to the Supreme Court rules in 1965 - particularly O.32 - made irrelevant any distinction between an irregularity and a nullity.  It is contended that the Court has a discretion to substitute a party “with a capacity” for the same party “without a capacity”.

Counsel for the plaintiff did not shrink from the inevitable consequence of the acceptance of these submissions.  A person might issue a Writ to enforce a non existing cause of action and then perhaps five or ten years later acquire a cause of action “as at the time he issued his Writ” and then apply under O.3 or O.32 to cure that “mere irregularity” by being “substituted” or “added” as a party to the Writ which he issued before he acquired the cause of action.

In essence, it was contended that accepting that the plaintiff’s Writ of Summons was a nullity because at the time he issued it, he did not have a cause of action, nevertheless, by exercise of a discretion under either O.3 r.11 or O.32, this Court has power to make an order appropriate to validate that Writ.

One difficulty of course is that it was the plaintiff who issued the Writ.  It could not be said that he “ought to have been joined or added”; he was in fact the plaintiff.  It is difficult in my view to force the circumstances of this case within the wording of either O.3 r.11 or O.32.

In fact it emerges that although the Official Trustee in Bankruptcy has been asked to consent to be added as a plaintiff in the plaintiff’s action, he has declined to do so.  I have difficulty in seeing what relevant power exists under O.3 r.11 in those circumstances.

The Official Trustee in Bankruptcy of course no longer has the cause of action which the plaintiff asserts he had when he was made bankrupt because he has assigned it to the plaintiff.  At the date the Official Trustee in Bankruptcy did assign the cause of action to the plaintiff the statute of limitations would have operated to bar his taking proceedings to enforce it.  It would be an incongruous result if the assignee of a statute barred cause of action by having to resort to O.3 r.11 or O.32 could overcome a defence to the action which the assignor was unable to meet.

Counsel for the plaintiff referred to the provisions of O.32 r.1(2) permitting the addition of another cause of action after a limitation period has run.  However, on the facts of this case, I cannot see that that permits the making of an order having the effect of rendering a Writ of Summons which is a nullity, a valid Writ of Summons.

It is clear that now the plaintiff has had assigned to him the cause of action which he seeks to pursue, he may issue a fresh Writ of Summons.  Of course, if he did so and the defendant took the point, it would be statute barred.

The plaintiff conceded that his argument under O.32 r.1(3) really comes down to substituting the plaintiff with a cause of action for the plaintiff without a cause of action - as he was when he issued his Writ of Summons.  In effect, it is contended that the plaintiff with a cause of action and the plaintiff without a cause of action are “different parties”.

In my view, by no process of mental gymnastics, can the plaintiff with a cause of action be treated as a “different party” within either O.3 r.11 or O.32 from the same plaintiff without a cause of action.

It emerged that the plaintiff when he was discharged from bankruptcy did not receive legal advice to the effect that the cause of action which he had when he became bankrupt remained vested in the Official Trustee in Bankruptcy.  He issued his Writ of Summons within a couple of days of his discharge from bankruptcy.  It is said on his behalf that he simply made a mistake.  It is clear that the plaintiff, if he had a cause of action when he issued his Writ of Summons, would have issued it within the relevant limitation period.  The mistake that he made was to issue his Writ before he obtained an assignment of his cause of action from the Official Trustee in Bankruptcy.

The real question is whether he can avoid the effect of that mistake by the form of the Deed of Assignment which he has persuaded the Official Trustee in Bankruptcy to sign and/or by application under O.3 r.11 or O.32.

The plaintiff’s argument at the end of the day is that the assignment he obtained from the Official Trustee in Bankruptcy on 16 June 1998 about two years after the cause of action vested in the Official Trustee had become statute barred, cured the nullity of the Writ based upon the fact that when it issued the plaintiff had no cause of action.  It is contended that the assignment gave him retrospectively a capacity to issue the Writ of Summons on 22 December 1995.

I am unpersuaded by the arguments advanced on behalf of the plaintiff that there exists any power under either O.3 r.11 or O.32 to breathe life into the plaintiff’s Writ of Summons issued on 22 December 1995.  Due to the absence of any cause of action in the plaintiff when he issued his Writ it was simply a nullity and in my view it remains a nullity.

The Deed of Assignment did not have the legal (or equitable) effect of vesting in the plaintiff the cause of action then vested in the Official Trustee in Bankruptcy at the time when he  issued his Writ of Summons in 1995 to pursue that cause of action.

Whether the plaintiff would have any argument for an extension of the limitation period was not debated upon this application.

In my view, the defendant’s contention is correct.  I hold that the plaintiff’s Writ of Summons was always and remains a nullity.  Steps taken in the action have been of no legal effect.  The action was never properly constituted and in my view I have no power to make any order which will overcome that deficiency.

I therefore make the order sought by the defendant and strike out the plaintiff’s action.  I order that the plaintiff pay to the defendant its costs of and incidental to the application and the action to be taxed.  Those costs are to include reserved costs if adny.

IN THE SUPREME APPEAL

OF QUEENSLAND
  No. 2673 of 1995

Brisbane

Before The Hon. Mr Justice Ambrose

[Francis v.  Nat. Mutual Life Assoc]

BETWEEN:

WILLIAM JAMES FRANCIS

Plaintiff

AND:

NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA

LIMITED (ACN 004 020 437)

Defendant

REASONS FOR JUDGMENT - AMBROSE J.

Judgment delivered   26 June 1998

CATCHWORDS:     APPLICATION TO STRIKE OUT WRIT OF SUMMONS - cause of action which arises prior to the date of bankruptcy - whether the writ of summons is a nullity - deed of assignment - power vested in O.3 r.11 and O.32 of the Supreme Court Rules.

Trade Practices Act 1974.

Bankruptcy Act 1996.

Property Law Act 1974.

Cockerill & Wollerill v.  Westpac Banking Corporation

(unreported decision Federal Court of Australia, 9 March 1992).

Metropolitan Bank Ltd v.  Pooley [1885] 10 A.C. 210.

W R Henry & Son v.  Hodge [1963] VR 111.

Bailey v.  Thurston & Co [1902] 2 KB 397.

Ingill v.  Moran [1944] KB 160.

Minister of State for the Interior v.  R T Company Pty Ltd & ors (1961-62) 107 CLR.
Cummings v.  Claremont Petroleum NL (1995) 185 CLR 124.
Coyle v.  Cassimatis (unreported Court of Appeal Qld 1 November 1993)
Lynch v.  Keddell (No 2) [1990] 1 Qd 10.
Bridge Shipping Pty Ltd v.  Grand Shipping SA (1991-92) 173 CLR 231.

Counsel:Ms K E Downes for the applicant/defendant

Mr D W M White QC for the respondent/plaintiff

Solicitors:Bain Gasteen for the applicant/defendant.

Edwards Lawyers for the respondent/plaintiff

Hearing Date:              18 June 1998.