Maher v Burden
[2022] VSC 617
•19 October 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TESTATOR FAMILY MAINTENANCE LIST
S CI 2016 01961
| THOMAS CELESTINE MAHER | First Plaintiff |
| NOEL ANNE MAHER | Second Plaintiff |
| v | |
| CHRISTINE BURDEN and DAMIEN MAHER (who are sued as the Executors of the Will of MAUREEN BROWN, deceased) | Defendants |
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JUDGE: | Moore J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 September 2022 |
DATE OF JUDGMENT: | 19 October 2022 |
CASE MAY BE CITED AS: | Maher v Burden |
MEDIUM NEUTRAL CITATION: | [2022] VSC 617 |
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BANKRUPTCY – Claim for further provision from a deceased estate – Action commenced by a person who subsequently became bankrupt – Proceeding stayed – s 60 of the Bankruptcy Act 1966 (Cth) – pt IV of the Administration and Probate Act 1958 – Cox v Journeaux (No 2) (1935) 52 CLR 713; Faulkner v Bluett (1981) 52 FLR 115; Daemar v Industrial Commission of New South Wales & Ors (1988) 12 NSWLR 45; Re Lofthouse [2001] FCA 25; Owens v Comlaw [2006] VSCA 151; Moss v Eaglestone [2011] NSWCA 404; Duckworth v Water Corporation [2012] WASC 30; Sheehan v Brett Young (No. 3) [2016] VSC 39; Berryman v Zurich Australia Ltd [2016] WASC 196; Muir v Angeles [2020] NSWSC 1056; Thompson v Cyati [2021] QDC 15.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | No appearance | No appearance |
| For the Defendants | Mr A Verspaandonk | Kathy Wilson Legal |
HIS HONOUR:
Introduction
The first plaintiff, Thomas Celestine Maher, is the eldest of the eleven children of Thomas P Maher and Maureen Brown who died in 1975 and on 18 June 2014 respectively.[1] The defendants are the executors of Maureen Brown’s estate who are two of the plaintiff’s siblings.
[1]Although the second plaintiff, the wife of Thomas Celestine Maher, remains a party to the proceeding, her counsel has informed the Court that she does not press an independent claim in the proceeding. It is accordingly convenient to refer to Thomas Celestine Maher as ‘the plaintiff’.
Maureen Brown’s last will was executed on 22 September 2009 and probate was granted to the defendants on 26 November 2015. By her will, Maureen Brown made various gifts, including real property, to some of her children including the plaintiff.
On 23 May 2016, Thomas Celestine Maher issued a proceeding pursuant to Part IV of the Administration and Probate Act 1958 seeking further provision from Maureen Brown’s estate for his proper maintenance and support. The determination of that claim has been delayed, principally as a consequence of other proceedings brought against the estates of Thomas P Maher and Maureen Brown. [2]
[2]Including Maher v Maher [2019] VSCA 161 and see Maher v Kuperholz [2022] VSC 224.
The plaintiff was declared bankrupt on 16 November 2021. The issue which arises is whether, in light of his bankruptcy, s 60(2) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) operates to stay the plaintiff’s Part IV claim.
In order to resolve this controversy, on 22 July 2022, I made orders pursuant to r 47.04 of the Supreme Court (General Civil Procedure) Rules 2015 that the following questions be determined:[3]
Question 1:Is the proceeding an action to which s 60(2) of the Bankruptcy Act applies?
Question 2: Is the proceeding an action to which s 60(4) of the Bankruptcy Act applies?
Question 3:In the circumstances which have happened is the proceeding stayed?
[3]Although the plaintiff was represented by Senior Counsel at the directions hearing on 22 July 2022 and supported the making of orders under r 47.04, he did not file any submissions in accordance with the timetable fixed on that day and did not appear at the hearing of the questions for determination.
For the reasons which follow, these questions are answered as follows:
Question 1: Yes.
Question 2: No.
Question 3: Yes
Question 1: Is the proceeding an action to which s 60(2) of the Bankruptcy Act applies?
Section 58 of the Bankruptcy Act provides that, when a debtor become bankrupt, his or her property vests in the Official Trustee. Section 60(2) provides that:
An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
The plaintiff is a person who ‘subsequently becomes a bankrupt’ within the meaning of the section.
The word ‘action’ in s 60(2) is defined in s 60(5) to mean ‘any civil proceeding whether at law or in equity’. In Re Lofthouse, Gray J described s 60(5) as being ‘plainly a definition of great width’ and as ‘casting a net widely’.[4] He went on to consider the purpose and operation of s 60(2) as follows:[5]
Section 60 is not the provision that vests the right of action in the trustee in bankruptcy. It has a different, and in some respects wider, role. It operates to stay pending proceedings unless the trustee elects to prosecute or discontinue them. It also provides the machinery for a defendant or other party to a pending proceeding to force the making of an election. It is directed towards the protection of the bankrupt's creditors, by preventing the unnecessary dissipation of the assets of the estate in fruitless litigation. In my view, s 60 also has the purpose of protecting a defendant or other party to a pending proceeding. A defendant or other party to a pending proceeding suffers an immediate detriment upon the plaintiff becoming a bankrupt. The detriment is that if the defendant or other party should be successful in the proceeding, and should obtain an order that the plaintiff pay the costs of the proceeding, the order will be effectively unenforceable because of the bankruptcy. The rationale behind s 60(2) and 60(3) is therefore, at least in part, to protect those whom the bankrupt has been suing. Such protection would be lost if the word "action" in s 60 were to be construed as excluding a proceeding in which the bankrupt has sued as a trustee for someone else.
In my view, s 60 has been enacted deliberately as a broad provision, so as to encompass any proceeding brought by a bankrupt before bankruptcy. The exceptions have been expressed quite narrowly. The intention is that, once a bankruptcy occurs, no further costs should be incurred in a proceeding unless the trustee in bankruptcy makes an election to continue the proceeding. If such an election is made, the trustee in bankruptcy will ordinarily become substituted as plaintiff in the pending proceeding, in the capacity of trustee in bankruptcy for the former plaintiff. The trustee in bankruptcy will thereby become liable for the costs of the proceeding in the event that it is unsuccessful and a costs order is made in favour of the defendant in the proceeding or some other party to it. The trustee in bankruptcy may be entitled to an indemnity in respect of those costs out of the bankrupt estate, as expenses of the administration of the estate, to the extent to which the estate has assets. The trustee in bankruptcy will obviously consider whether continuing to prosecute the proceeding will be likely to have any benefit to the estate of the bankrupt, and therefore to the bankrupt's creditors. One of the elements that the trustee in bankruptcy will take into account is whether the bankrupt is suing in a personal capacity or some other capacity, particularly that of trustee for someone else. If the bankrupt has sued as trustee for another person, and the estate will not benefit, the trustee in bankruptcy would no doubt usually elect not to continue to prosecute the proceeding. This would protect any defendant, and perhaps other parties to the proceeding, with respect to costs. Of course, it may impact on the beneficiary of the trust of which the bankrupt claims to be trustee. The beneficiary may be forced to institute proceedings in his or her own right to enforce the trustee's legal right, as can be done where there are "exceptional circumstances". See Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432.
[4][2001] FCA 25, [16].
[5]Ibid [19]-[20].
These observations were referred to with approval by the Court of Appeal in Owens v Comlaw.[6] Ashley JA, with whom Redlich JA agreed, distilled a number of propositions from the provisions of the Bankruptcy Act and various authorities including Re Lofthouse. Relevantly in relation to s 60(2) they included the following:[7]
[6](2006) 201 FLR 275, [40].
[7]Ibid [42], citations omitted.
…
(2)Section 60(2) operates to stay an action which is on foot at the time when a person is made bankrupt until the trustee makes an election to prosecute or discontinue the same within the period made relevant by the giving of notice under sub.s (3). That is so where the proceeding is an “action” within the meaning of sub.s(5), provided always that it is not an action excluded from the operation of subs.(2) by sub.s (4).
…
(4)The question whether an action is one to which s 60(2) applies, assuming that it fits the description in sub.s (5), and is not excluded by operation of sub.s (4), is not necessarily dependent upon the action or its subject matter being “property” which vested in the trustee under s 58(1). There may nonetheless be such a connection between the action and the estate as to make s 60(2) applicable. This case is an illustration of such a connection.
…
(10)So far as - qualifying proposition (2) - there may be cases where s 60(2) does not operate although the action falls within the sub.s (5) definition, and is not excluded by sub.s (4), this action is not akin to the kinds of matters mentioned by Cooper J in Griffiths, or hinted by Kirby P in Daemar.
In Poesch v Grosvero, Derham AsJ considered whether a Part IV claim brought by a claimant who was subsequently declared bankrupt was stayed by operation of s 60 of the Bankruptcy Act.[8] Consistent with the manner in which the case was argued before him,[9] his Honour considered that the question of whether the proceeding was stayed by operation of s 60 was dependent upon whether the right to make a claim for family provision under Part IV was property within the meaning of the Bankruptcy Act.[10] In addressing that question, his Honour referred to various authorities which establish that a right to apply for relief under Part IV is a personal right which, if the applicant is an undischarged bankrupt, does not vest in the Official Receiver with the consequence that s 60 does not operate to stay proceeding under Part IV. As his Honour stated, ‘whether the statutory right to make a claim under s 91 of Part IV is a species of property that vests in the bankrupt’s trustee, the authorities are all one way, and the answer is clearly in the negative’.[11] Because the right to bring a claim under Part IV was not a species of property which vested in a trustee in bankruptcy, the Part IV proceeding was not stayed under s 60.
[8][2013] VSC 596 (‘Poesch').
[9]The principal contention advanced by the plaintiff was that claims under Part IV were not part of the property to be divisible amongst the plaintiff’s creditors and therefore not property for the purposes of s 58 of the Bankruptcy Act.
[10]Poesch (n 8) [10].
[11]Poesch (n 8) [29].
With respect, I am unable to reconcile the approach which Derham AsJ adopted to the operation of s 60(2) with Ashley JA’s statement in Owens v Comlaw that the question of whether an action is one to which s 60(2) applies ‘is not necessarily dependent upon the action or its subject matter being “property” which vested in the trustee under s 58(1)’.[12] As Ashley JA stated, there ‘may nonetheless be such a connection between the action and the estate as to make s 60(2) applicable’.[13] Owens v Comlaw does not appear to have been the subject of submissions before Derham AsJ.
[12]See discussion at [9] of these reasons.
[13]Ibid.
The reasons for judgment in Poesch v Grosvero also do not contain any reference to s 60(5) of the Bankruptcy Act and the breadth of the definition of ‘action’. On the plain meaning of the words of s 60, a proceeding for further provision under Part IV is a civil proceeding and accordingly an ‘action‘ within the meaning of s 60(2).
These matters were considered in some detail by Hallen J in Muir v Angeles.[14] His Honour observed that the word ‘action’ in s 60 had been ‘construed broadly’ and the definition in s 60(5) was ‘extremely wide’.[15] His Honour then referred to a number of authorities, including Re Lofthouse, and observed that Gray J’s observations about the scope of s 60(2) ‘would suggest a reading of “action” that is not confined to choses in action which would vest in the trustee in bankruptcy by operation of s 58’.[16] After referring to the Court of Appeal’s judgment in Owens v Comlaw, Hallen J considered Poesch v Grosvero. His Honour was of the view that Derham AsJ’s conclusion that the proceeding before him was not stayed under s 60 did not accord with the authorities following from Re Lofthouse, where it had been held that s 60 is not constrained by s 58.[17] After referring to doubts about the correctness of Poesch v Grosvero expressed by Kunc J in Steiner v Strang (No 2),[18] Hallen J concluded that:[19]
… the plain words used in s 60(2) encompass all actions “commenced by a person who subsequently becomes a bankrupt”. The claim for a family provision order clearly falls within the definition of “civil proceedings” in the Civil Procedure Act and it does not matter whether that claim is one that is vested in the bankrupt’s trustee in bankruptcy.
[14][2020] NSWSC 1056 (‘Muir’).
[15]Ibid [65].
[16]Ibid [69].
[17]Ibid [84].
[18][2017] NSWSC 891, [43].
[19]Muir (n 14) [87].
With respect, for the reasons I have explained, I agree with Hallen J’s analysis and conclusions as being consistent with the terms of the Bankruptcy Act and the judgment of the Court of Appeal in Owens v Comlaw affirming the principles set out in Re Lofthouse. The approach to s 60(2) in Poesch v Grosvero is inconsistent with binding authority in this Court and the terms of the Bankruptcy Act.
Question 1 is accordingly answered in the affirmative.
Question 2: Is the proceeding an action to which s 60(4) of the Bankruptcy Act applies?
Section 60(4) of the Bankruptcy Act provides an exception to the general rule in s 60(2) that any proceedings commenced by a person who subsequently becomes bankrupt are stayed until the trustee makes an election to prosecute or discontinue the proceedings. The section provides that:
(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.
In Cox v Journeaux(No 2), Dixon J stated in relation to the predecessor provision to s 60(4)(a)[20] that, in determining whether an action was for personal injury or wrong: [21]
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.
[20]Being s 63(3) of the 1924 Act which provided: ‘…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’.
[21](1935) 52 CLR 713, 721.
This principle was applied by Kirby P in Daemar v Industrial Commission of New South Wales & Ors which concerned the court’s supervisory jurisdiction over a tribunal which, in exercising its jurisdiction, was alleged to have damaged the reputation of a claimant who was bankrupt.[22] Kirby P stated that:[23]
Although it is true that the claimant contends that a “wrong” has been done to him and that he has suffered hurt and even “defamation” in the course of the judgments of the Commission, these contentions are irrelevant to the task of identifying, for the purpose of s 60(4)(a) of the Act, the nature of the action exempted from the stay. 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 of and benefits derived from such litigation as not being legitimately entitlements of the creditors. In the present case the so called “wrong” of which the claimant complains is the very source of the financial problems which have led to his bankruptcy. It is therefore to be classified not as a “wrong” which is exempted from the operation of s 60(2) and the statutory stay provided for but as of the very essence of the subject matter to which s 60(2) is addressed.
[22](1988) 12 NSWLR 45.
[23]Ibid, 56, emphasis added.
In Faulkner v Bluett,[24] Lockhart J discussed the distinction in the authorities between rights of action which vest in the Official Trustee and those that do not. His Honour stated that:[25]
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:… Where the essential cause of action is the personal injury done to the person or feelings of the bankrupt the right to sue remains with the bankrupt.
As Erle J said in an oft-cited passage in Beckham v Drake: “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 or property.“
[24](1981) 52 FLR 115.
[25]Ibid, 119, citations omitted.
In Sheehan v Brett Young (No 3), after analysing the authorities, John Dixon J summarised the position as is presently relevant by stating that the essential nature of a wrong is personal and therefore one which remains with the bankrupt ‘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’.[26]
[26](2016) 50 VR 467, [62].
In Moss v Eaglestone,[27] the issue was whether a claim made by a bankrupt against his former solicitor for failing to bring a claim for defamation in a proceeding for breach of contract was in respect of a ‘personal injury or wrong’ done to the bankrupt, and therefore a claim of the kind with which s 60(4) was concerned. Allsop P identified the action as being one for the loss of a chose in action, which was actionable in tort if something of value had been lost, and actionable in contract if there had been a breach of contract.[28] His Honour identified that, in considering the operation of s 60(4), it was also necessary to consider the operation of s 116(2)(g), being a ‘cognate provision’[29] which excluded from property that was divisible amongst a bankrupt’s creditors:
[27](2011) 285 ALR 656 .
[28]Ibid [22].
[29]Ibid [4].
(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; 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.
Allsop P stated that ss 60(4) and 116(2)(g) could be seen to ‘run together’:[30]
… the former permitting the action to proceed at the instance of the bankrupt, the latter providing that the right to damages in such an action does not vest and fall in for the benefit of the creditors.
[30]Ibid [29].
After analysing the statutory history and the common law of bankruptcy, Allsop P returned to the legislative history of ss 60(4) and 116(2)(g) and continued as follows in relation to the Bankruptcy Act:[31]
[31]Ibid [63]-[67].
In 1966, the Act was passed. As enacted, it contained s 60(4) and introduced s 116(2)(g). Subsequent amendments to those sections have not affected the exemption in respect of personal wrongs. The 1966 Act was preceded by the "Report of the Committee Appointed by the Attorney-General of the Commonwealth to Review the Bankruptcy Law of the Commonwealth" in 1962. The committee was chaired by the Hon Sir Thomas Clyne, Federal Judge in Bankruptcy (the "Clyne Report"). There was no direct discussion in the Clyne Report regarding s 60. Comments were made, however, about the new s 116(2)(g). Paragraph 164 stated that the Committee considered that it should be expressly provided that the property divisible amongst creditors was not to include any right to recover damages or compensation, stating:
Such a provision appears to the Committee to be a necessary corollary to clause 60(4) of the Bill, which authorizes a bankrupt to continue, in his own name and for his own benefit, any action or proceeding commenced by him before his bankruptcy for any personal injury or wrong done to himself or to any member of his family. The proposed provision will also make it clear that damages or compensation recovered in respect of such an injury or wrong are equally protected.
Thus, when one comes to the words of ss 60(4) and 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 ss 60(4) and 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 ss 60(4) (and 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 ss 60(4) ("in respect of") and 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.
In Duckworth v Water Corporation,[32] Edelman J (as a member of the Supreme Court of Western Australia), considered whether a claim in unconscionable conduct was within the exception in s 60(4). In dealing with the exception in paragraph (a) (‘personal injury or wrong done to the bankrupt’), his Honour observed that a claim for damages for unconscionable conduct ‘might be thought to fall within the words of “wrong done to the bankrupt”’.[33] However, in referring to Daemar, Cox v Journeaux (No 2) and Faulkner v Bluett, his Honour observed that, as is apparent from the above discussion, the phrase ‘personal injury or wrong’ had a ‘long history of interpretation’.[34] In applying those principles, his Honour concluded that the claim for unconscionable conduct did not fall within the exception in s 60(4) because ‘[i]t does not seek recovery for injury to the person or to the mind’.[35]
[32](2012) 261 FLR 185 (‘Duckworth’).
[33]Ibid [84].
[34]Ibid [89].
[35]Duckworth (n 32) [89].
More recently in Berryman v Zurich Australia Ltd,[36] Tottle J undertook an extensive examination of the authorities and concluded that, because s 60(4) and s 116(2)(g) are ‘complementary provisions’:[37]
[36](2016) 310 FLR 108 (‘Berryman’).
[37]Ibid [60]-[62], citations omitted.
… 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’:…
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:... 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:…
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:… 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.
Applying the above principles, it is clear that the plaintiff’s Part IV claim is not an action within the exception in s 60(4)(a) of the Bankruptcy Act. In that action, subject to the various requirements set out in Part IV of the Administration and Probate Act 1958, the Court has power to order that provision be made out of the estate of a deceased personal for the ‘proper maintenance and support’ of an eligible person.[38] An action for relief of that type is not an action in respect of ‘any personal injury or wrong’ because, as expressed by Edelman J in Duckworth, the Part IV action does not seek ‘recovery for injury to the person or to the mind’.[39]
[38]Section 91(1) of the Administration and Probate Act 1958.
[39]Duckworth (n 32) [89].
As to the exception in s 60(4)(b), the apparent breadth of the phrase ‘in respect of’ may suggest that plaintiff’s Part IV claim is an action in respect of ‘the death of … a member of his … family’. However, as observed by Tottle J in Berryman, although ‘in respect of’ is an expression of broad import, it is comprised of words with a ‘chameleon quality’ which take their meaning from the context in which they are used.[40] Here there are a number of interrelated matters of context which lead to the conclusion that the plaintiff’s Part IV claim is not within the exception in s 60(4)(b).
[40]Berryman (n 36) [61].
To ensure their harmonious operation, ss 60(4) and 116(2)(g) are to be construed together. Adopting that approach, the ‘action’ in respect of ‘the death of … a member of his or her … family’ embraced by s 60(4)(b), is to be understood as being, in the language of s 116(2)(g), an action ‘to recover damages or compensation’ for the death of the family member, that is, an action for wrongful death. The plaintiff’s Part IV claim is not such an action.
This interpretation is consistent with and gives effect to the substantive distinction between person and property reflected in the terms of ss 60(4) and 116(2)(g) and the underlying policy considerations which that distinction reflects, as explained by Allsop P in Duckworth. A claim under Part IV of the Administration and Probate Act 1958 is an application for an order for provision for a claimant’s maintenance and support. That is quintessentially a matter which concerns a bankrupt claimant’s property or estate, rather than being about any personal injury or wrong they may have suffered. Further, as the defendants submitted, s 116(2)(g) prevents the fruits of those excepted actions referred to in s 60(4) from passing to creditors as a matter of public policy. If a family provision claim was within the contemplation of s 60(4), the protection of the fruits of such a claim would also be expected. However, a family provision order is not so protected.
I also respectively agree with the view expressed by Barlow KC DCJ in Thompson v Cyati that, although the death of a family member is a necessary precursor to a family provision application, such an application is, in substance, in respect of the deceased’s estate and the applicant, not in respect of the death of the family member.[41] A Part IV claim is an application for provision or further provision for proper maintenance and support out of the estate of the deceased. Alternatively, a family provision claim may be characterised as being in respect of a will, not a death.[42] A claimant’s success in such a claim is, in substance, predicated upon a finding of an abuse of testamentary freedom in the making of the relevant will. Death is a necessary precursor in that it is only at that point that the will takes effect and the adequacy of provision may be determined; however no rights arise out of the death as such.
[41][2021] QDC 15.
[42]Noting that, where the deceased made no will, the intestacy provisions are considered to have been adopted as the will of the deceased: see Iwasivka v State Trustees [2005] VSC 323, [5] per Hansen J.
Question 2 is accordingly answered in the negative.
Question 3: In the circumstances which have happened, is the proceeding stayed?
Because this proceeding is an action to which s 60(2) of the Bankruptcy Act applies and not within the exceptions in s 60(4), by operation of s 60(2) it is stayed ‘until the trustee makes election, in writing, to prosecute or discontinue the action’.
However, in the circumstances which have happened, the trustee has not in fact made an election of the type referred to in s 60(2). Relevantly, the trustee wrote to the defendant’s solicitors on 29 March 2022 in the following terms:
Please take this letter as confirmation pursuant to section 60 of the Bankruptcy Act1966 (the Act) that I have made the election not to continue the Proceeding.
Notwithstanding the above, the Bankrupt may elect to continue the Proceeding in accordance with section 60(4) of the Act.
Although it is apparent from this correspondence that the trustee has expressly stated that he will not continue with the proceeding, by contemplating that the plaintiff may continue the proceeding, it is also clear that the trustee has not elected to discontinue the proceeding. Section 60(2) establishes a binary choice for a trustee: to either prosecute or discontinue an action. By electing not to continue the proceeding himself, but by not discontinuing the proceeding, the trustee has not acted within the confines of this decisional framework.
Because the trustee has not made an election of the type referred to in s 60(2), s 60(3) operates to deem the trustee to have abandoned the proceeding. Section 60(3) states:
If the trustee does not make such an election within 28 days after notice of the 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.
Although the trustee must accordingly have been taken to have abandoned the proceeding, s 60(2) does not provide that the stay provided by the section ceases upon a deemed abandonment. As a result, the stay continues to operate. The correct analysis is that the proceeding, not the underlying cause of action, is stayed. It follows that, upon discharge, the plaintiff would, subject to any other application which might be brought, be entitled to continue the proceeding.
For the above reasons, Question 3 is answered in the affirmative.
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