Nalin Kant Sharma v Victorian WorkCover Authority
[2012] VSCA 254
•18 OCTOBER 2012
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2012 0002
| NALIN KANT SHARMA | Appellant |
| V | |
| VICTORIAN WORKCOVER AUTHORITY | Respondent |
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| JUDGES | WEINBERG JA AND FERGUSON AJA | |
| WHERE HELD | MELBOURNE | |
| DATE OF HEARING | 12 OCTOBER 2012 | |
| DATE OF JUDGMENT | 18 OCTOBER 2012 | |
| MEDIUM NEUTRAL CITATION | [2012] VSCA 254 | 1st revision 28 February 2014, para [24] |
| JUDGMENT APPEALED FROM | Victorian WorkCover Authority v Sharma [2011] VSC 641 (Emerton J) | |
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BANKRUPTCY —Claim for reimbursement by Victorian WorkCover Authority under Accident Compensation Act 1985 (Vic) s 85(6) – Counterclaim by bankrupt for alleged underpayment of compensation, alleged unlawful cessation of medical and like expenses, alleged unlawful suspension of payments – Order for payment to Authority made and counterclaim dismissed – Appeal from orders commenced before bankruptcy – Whether appeal stayed – Whether appeal is action for “personal injury or wrong done to the bankrupt”– Whether bankrupt has standing to bring appeal – Whether only part of appeal could be stayed - Bankruptcy Act1966 (Cth) ss 60(2), 60(4), Accident Compensation Act1985 (Vic) s 85(6)
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr C Twidale | MLC Lawyers |
| For the Respondent | Mr D C Turner | Wisewoulds Mahoney |
WEINBERG JA:
I agree, for the reasons set out in her Honour’s judgment, with the orders proposed by Ferguson AJA.
FERGUSON AJA:
Introduction and parties
The Appellant, Mr Sharma, became bankrupt on his own petition after he filed the Notice of Appeal in this proceeding. The Respondent to the appeal, Victorian WorkCover Authority, seeks an order that the Notice of Appeal is deemed to be abandoned (because Mr Sharma’s trustee in bankruptcy did not make an election whether to continue with the appeal).[1] In the alternative, the Authority seeks an order that the Notice of Appeal be struck out because as a bankrupt, Mr Sharma does not have standing to bring or to continue the appeal. Whether such orders should be made principally turns on whether the appeal is ‘in respect of … any personal injury or wrong done’ to Mr Sharma.[2]
[1]In its written submissions, the Authority relied on the trustee having made an election not to continue the appeal. The Authority did not pursue this argument on the hearing.
[2]Bankruptcy Act 1966 (Cth) s 60(4).
The background to the appeal and current application may be shortly stated. Whilst employed by an Australian company, Mr Sharma was injured in a car accident in South Africa. He was entitled to receive benefits under the Accident Compensation Act 1985 (Vic). In accordance with that Act, the Authority paid compensation totalling $868,166.32 for Mr Sharma’s loss of income, medical and like expenses and a lump sum entitlement.
Mr Sharma brought common law proceedings for damages in South Africa against the Road Accident Fund (‘RAF’), which is the equivalent of the Transport Accident Commission in Victoria. Mr Sharma settled his claim with the RAF for
approximately R4.5 million together with an indemnity from the RAF in respect of future medical expenses.
The Authority brought proceedings against Mr Sharma seeking payment of an amount equivalent to the amount that he received in settlement of the claim against the RAF. The Authority’s claim was based on s 85(6) of the Accident Compensation Act which provides:
If a person-
(a) receives compensation under this Act in respect of any injury; and
(b)subsequently obtains damages or an award of damages, accepts a payment into court or settles or compromises a claim in respect of the injury under the law of any place outside Victoria (whether within or outside Australia)-
the Authority, employer or a self-insurer shall be entitled to recover from that person the amount of compensation paid under this Act or an amount equal to the damages or payment obtained or made, settled or compromised whichever is the lesser amount.
The trial judge ordered that Mr Sharma pay the Authority $680,178.84 together with interest. The amount ordered to be paid was the equivalent of the amount that Mr Sharma had received in settlement of his common law claim brought in South Africa. The judge also dismissed Mr Sharma’s counterclaim in which he alleged that the Authority had underpaid weekly benefits to him, had unlawfully ceased to pay his medical and like expenses and had unlawfully suspended payments of compensation at different times. The judge ordered Mr Sharma to pay the Authority’s costs of the proceeding. Mr Sharma has appealed from all of the orders made.
As I have noted, after filing the Notice of Appeal, Mr Sharma became bankrupt on his own petition. Mr Joseph Loebenstein was appointed as the trustee in bankruptcy. On 19 March 2012, the Authority’s solicitors sent a copy of the judgment, Notice of Appeal and some other documents to Mr Loebenstein. In their correspondence they stated:
Pursuant to Section 58(3) and Section 60 of the Bankruptcy Act 1966, you are required to make an election about the Appeal within 28 days.
By a letter dated 22 March 2012, Mr Loebenstein responded stating that in respect of the appeal, he was considering the matter. On 19 April 2012, Mr Lobenstein wrote to the Court of Appeal Registry noting his appointment as trustee of the bankrupt estate of Mr Sharma. His letter continued:
In respect of the above Appeal by Mr Sharma I am advised by him that he is of the view that because the action is in respect of a personal injury he may, pursuant to Section 60(4) of the Bankruptcy Act 1966, continue the appeal in his own name.
Mr Lobenstein concluded by noting that it was proposed that Dennis Anthony Turner would become the trustee on 9 May 2012 in place of him. That is what happened.
The Authority’s solicitors wrote to Mr Turner. He responded by letter dated 12 July 2012. Part of the letter reads as follows:
In the event the Court determines the Appeal is covered by the bankrupt’s estate I will elect to discontinue the action.
Carve out for personal injuries
The property of a bankrupt vests in the trustee in bankruptcy.[3] ‘Property’ is defined in s 5 of the Bankruptcy Act to mean, ‘real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property‘. Subject to certain exceptions, the bankrupt’s property is divisible amongst the bankrupt’s creditors.[4] One of the exceptions is any right of the bankrupt to recover damages or compensation for personal injury and any damages or compensation recovered by the bankrupt in respect of such injury.[5] This carve out in respect of damages and compensation for personal injury is also reflected in s 60 of the Bankruptcy Act. That section deals with legal proceedings involving a bankrupt. So far as relevant to this application s 60 provides:
[3]Bankruptcy Act s 58.
[4]Bankruptcy Act s 116(1).
[5]Bankruptcy Act s 116(2)(g)(i).
(2)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.
(3)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.
(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….
(5)In this section, action means any civil proceeding, whether at law or in equity.
The submissions of the parties
Mr Sharma submits that the appeal concerns his right to keep moneys paid to him for his injuries and to recover medical entitlements. He contends that the Authority’s claim is not a claim to his other assets but rather a claim seeking part of the moneys paid to him for his injuries. He says that the money he has been paid is not property that vests in the trustee in bankruptcy and is not available for distribution to his creditors. Nor, he says, is the claim for medical entitlements property that is divisible amongst his creditors.
Counsel for Mr Sharma submitted that the whole purpose of the Accident Compensation Act was to provide a system for the payment of compensation to injured employees. Counsel referred the Court to s 3 of the Accident Compensation Act which sets out the objects of that Act as follows:
(a)to reduce the incidence of accidents and diseases in the workplace;
(b)to make provision for the effective occupational rehabilitation of injured workers and their early return to work;
(c)to increase the provision of suitable employment to workers who are injured to enable their early return to work;
(d)to provide adequate and just compensation to injured workers;
(e)to ensure workers compensation costs are contained so as to minimise the burden on Victorian businesses;
(f)to establish incentives that are conducive to efficiency and discourage abuse;
(g)to enhance flexibility in the system and allow adaptation to the particular needs of disparate work situations;
(h)to establish and maintain a fully-funded scheme;
(i)in this context, to improve the health and safety of persons at work and reduce the social and economic costs to the Victorian community of accident compensation.
Counsel contended that under the Accident Compensation Act Mr Sharma was entitled to seek compensation for personal injuries sustained during the course of his employment,[6] and the Authority was entitled to claw back overpayments to prevent ‘double dipping.’[7] Consequently, it was put that it makes no difference to the characterisation of the claim as one in respect of personal injury whether it is a claim for compensation by Mr Sharma, or a claim by the Authority for reimbursement under s 85(6). Counsel developed the submission by taking the Court to the statement of claim. In summary, it is pleaded that:
[6]Accident Compensation Act s 84(1).
[7]Accident Compensation Act s 85(6).
·Mr Sharma was a worker who, in the course of his employment, was injured as the result of a car accident;
·Mr Sharma lodged a compensation claim;
·as a result of the accident Mr Sharma suffered significant injuries;
·as a result of the injuries, the Authority made payments of compensation to and on behalf of Mr Sharma;
·Mr Sharma brought proceedings in South Africa to claim damages;
·Mr Sharma settled that claim and was paid approximately $700,000;
·pursuant to s 85(6), the Authority was entitled to recover from Mr Sharma the amount of $700,000.
Counsel contended that it was therefore necessary for the trial judge to determine whether Mr Sharma was entitled to compensation under the Accident Compensation Act and how much he should have been paid. Counsel submitted that both of those questions relate to the personal injuries sustained by Mr Sharma and it was not the legislature’s intention to restrain Mr Sharma from prosecuting the appeal because it was the Authority which sought to claw back moneys rather than Mr Sharma seeking payment.
The Authority contended that both the claim brought by it and Mr Sharma’s counterclaim are statutory claims and they are not to be characterised as personal injury claims.
Is the appeal in respect of personal injury to Mr Sharma?
It is not in dispute that the appeal is an action that was commenced by Mr Sharma.[8] The question for determination is whether the appeal is ‘in respect of… any personal injury or wrong done to the bankrupt‘ for the purposes of s 60(4). In Cox v Journeaux,[9] Dixon J observed that the test for determining this appeared 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.’[10]
[8]Cummings v Claremont Petroleum NL (1996) 185 CLR 124, 130.
[9](1935) 52 CLR 713.
[10]Ibid 721 (citation omitted).
The parties agreed that the correct approach is to consider the pleadings to ascertain whether the action is one in respect of personal injury.[11] There are three aspects of the appeal. One aspect concerns the dismissal of Mr Sharma’s counterclaim. As I have noted above, the counterclaim concerned allegations of underpayment of weekly benefits, cessation of payment of medical expenses and suspension of compensation payments. Any entitlement to such payments under the Accident Compensation Act, clearly relates to the personal injuries that Mr Sharma sustained in the car accident. At least part of the compensation to be paid has immediate reference to the physical injuries Mr Sharma suffered. It makes no difference that the basis for the counterclaim is a statutory right to be paid compensation. The action is still one brought ‘in respect of personal injury’ for the purposes of s 60(4) of the Bankruptcy Act. In my opinion, insofar as the appeal concerns any entitlement to be paid compensation under the Accident Compensation Act, it falls within the exception in s 60(4) of the Bankruptcy Act. Mr Sharma is entitled to continue his appeal from the order dismissing the counterclaim.
[11]Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545.
The second aspect of the appeal relates to the order made requiring Mr Sharma to pay money to the Authority pursuant to s 85(6) of the Accident Compensation Act. Again the question is whether this part of the appeal falls within the exception in s 60(4). As I have said, the proceeding was brought under s 85(6) of the Accident Compensation Act for the recovery of an amount equal to the settlement amount received by Mr Sharma from the South African personal injury proceedings. As can be seen from what is set out in [13] above, among other things, the statement of claim included pleadings as to the background facts including the injuries suffered by Mr Sharma, the compensation paid and the settlement of the South African proceeding. However, those matters were not at the heart of the claim. They were merely background matters leading to the central claim for payment of moneys by Mr Sharma to the Authority. The proceeding resulted in a judgment debt that is owed by Mr Sharma to the Authority.
In considering whether this part of the appeal falls within the exception in s 60(4), it should be remembered that the words ‘in respect of’ have a very wide meaning.[12] Indeed, there is no reason to give those words as they appear in s 60(4) a restricted meaning. However, I do not think that an appeal from an order which, in effect, requires the Authority to be reimbursed for compensation it has paid, is an action by the bankrupt in respect of personal injury. There is no nexus between the personal injuries and the amount to be paid to the Authority. Rather, the nexus is between the settlement amount that Mr Sharma received and the amount to be paid to the Authority. In my opinion, what is contemplated by the section are claims such as the common law claim that Mr Sharma brought, claims for compensation under the Accident Compensation Act or similar legislation and other common law or legislative claims that may be categorised as claims for personal injury or wrong. So it is that defamation claims have been held to fall within the exception.[13]
[12]Technical Products Pty Ltd v State Government Insurance Office (Qld) (1988) 167 CLR 45, 47.
[13]King v Commercial Bank of Australia Ltd [1921] VLR 48.
I do not accept the submission of counsel for Mr Sharma that the objects of the Accident Compensation Act make it clear that Mr Sharma must be permitted to pursue his appeal. It seems to me that that focuses on the wrong question. The real question is whether a claim under that Act is within the exception in s 60(4) of the Bankruptcy Act. It is not where it is a claim such as that brought by the Authority in this case.
True it is that the amount to be paid to the Authority is referable to the amount that Mr Sharma received for his common law personal injury claim, but that is simply a mechanism for calculation of the payment to be made. The claim made by the Authority and which is the subject of the appeal is not, as Mr Sharma would have it, a claim for the money paid as compensation to him by the Authority. Nor is it a claim to the money he received in settlement of the South African proceeding. That this is so is illustrated by looking at what the Authority could have done to enforce the judgment before Mr Sharma’s bankruptcy. One option would have been for the Authority to have a warrant of seizure and sale issued. Under such a warrant the Sheriff would be entitled to seize property of many descriptions including, for example, goods and real estate owned by Mr Sharma. Once Mr Sharma became bankrupt, the Authority’s claim in respect of the judgment debt against him could no longer be enforced. Rather, the Authority’s claim was a provable debt in the bankruptcy.[14] Counsel for Mr Sharma accepted this.
[14]Bankruptcy Act s 82(1).
Once Mr Sharma was declared bankrupt, the appeal from the order for payment by him to the Authority was stayed pursuant to s 60(2) of the Bankruptcy Act. During the course of the hearing before us, counsel for the Authority accepted that the letter from the current trustee in bankruptcy did not amount to an election for the purposes of s 60(2). To recap, the trustee stated that in the event that the Court determined that the appeal is covered by Mr Sharma’s estate, he would elect to discontinue the action. Nor did counsel for the Authority (in either written or oral submissions) press any issue about whether the appeal was deemed to have been abandoned because 28 days had elapsed after notice of the appeal had been given to the trustee. Rather, counsel relied on an argument that Mr Sharma did not have standing to bring the appeal. I accept that this is so. As I have noted previously, the judgment debt is a provable debt. As the majority of the High Court said in Cummings v Claremont Petroleum NL:[15]
So far as a judgment entered in an action against a bankrupt creates or evidences a provable debt, we respectfully agree that the bankrupt has no financial interest which would confer locus standi to appeal in his own name against the judgment. That is because it is fundamental to the law of bankruptcy that the bankrupt is divested of both his interest in his property and liability for his provable debts.
Of course, a money judgment entered against a bankrupt has the effect of increasing the amount of the debts provable in his estate. But it is immaterial that, if an appeal against the judgment were successful, there would or might be a surplus in the estate after the remaining creditors are paid. A bankrupt's contingent interest in a surplus does not give him an interest which would allow him to sue to enforce proprietary rights and, that being so, it cannot give him an interest to appeal to minimise liabilities. [16]
[15](1996) 185 CLR 124.
[16]Ibid at 137-138 (citations omitted). It should be noted that the decision in Cummings concerned whether a bankrupt could institute an appeal after bankruptcy. The High Court was not concerned with the entitlement of a bankrupt to continue with an appeal commenced before bankruptcy. In that circumstance the majority noted that the appeal would be stayed under s 60(2): ibid at 130. See also, Owens v Comlaw & Ors (2006) 201 FLR 275.
One remaining issue is whether the prohibition on Mr Sharma prosecuting the appeal in respect of the payment order affects his right to continue with the appeal insofar as it concerns the dismissal of his counterclaim. If the claim and the counterclaim were indivisible, then he may be prevented from proceeding. In Moss v Eaglestone[17] the principle was expressed as follows:
…to 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).[18]
[17](2011) 285 ALR 656.
[18]Ibid at [77].
In my view, insofar as it concerns the order dismissing Mr Sharma’s counterclaim, the appeal is a separate action in respect of personal injuries. It is not dependent on any property claim by him.[19] There is therefore no reason why Mr Sharma ought to be prevented from prosecuting the appeal from the dismissal of his counterclaim.
[19]King v The Commercial Bank of Australia Limited [1921] VLR 48.
The orders that I would make are:
1.The appeal from paragraph 1 of the Judgment dated 16 December 2011 is struck out.
2.Costs reserved.
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