Re Burton, D.W.

[1991] FCA 894

IN THE FEDERAI, COURT OF AUSTRALIA	)	JUDGMENT No.	...??.%, /...?L
GENERAL DIVISION	)

BANKRUPTCY DISTRICT OF THE	)	No. QB 991 of 1988
STATE OF OUEENSLAND	)

RE:  DAVID WILLIAM BURTON

EX PARTE: PAUL FRANCIS FORSYTH and

LAUREN FORSYTH

Applicants

MINUTES OF ORDER

JUDGE MAKING ORDER:	PINCUS J.
DATE OF ORDER:	23 AUGUST 1991
WHERE MADE:	BRISBANE
THE COURT:

1.    Gives leave to commence the legal proceedings constituted by action number 2053 of 1989 and to take such steps as have been taken in those proceedings since the bankruptcy.

2.    Orders that the costs of and incidental to the application which was determined today be treated as if they were costs in the Supreme Court proceedings.

NOTE:	Settlement and entry of orders is dealt with in Rule
124 of the Bankruptcy Rules.

IN THE F E D E ~ COURT OF AUSTRALIA 1

GENERAL DIVISION	)
BANKRUPTCY DISTRICT OF THE	1 NO. QB 9 9 1 of 1988
STATE OF OUEENSLAND	)

RE :	DAVID WILLIAM BURTON
EX PARTE:	PAUL FRANCIS FORSYTH and LAUREN FORSYTH

Applicants

C O W :  PINCUS J.

PLACE: BRISBANE

m:  23 AUGUST 1 9 9 1

EX TEMPORE REASONS FOR JUDGMENT

This is an application which was filed on 1 5 August for leave to commence legal proceedings nunc pro tunc and, in particular, to commence a certain suit in the Supreme Court of

Queensland. The suit is one brought against a number of defendants, one of whom is a bankrupt, Mr. D.W. Burton. He became bankrupt in August 1 9 8 8 , and the writ was issued in the proceedings in the Supreme Court on 19 June 1 9 8 9 . A statement

of claim has been delivered and the action is, so far as it

concerns the bankrupt, one for damages for fraudulent
misrepresentation, interest, and costs.

The Supreme Court action had proceeded some distance when the point was taken that it was necessary to obtain leave to proceed under the Bankruptcv Act 1 9 6 6 , and in particular

under s.58(3)(b). That necessity being conceded, the

application is nevertheless opposed by counsel for the

l

bankrupt, substantially on the ground that the suit is one
which does not fall within the provisions of s.l53(2)(b) of
the Act. That is, it is argued by counsel for the bankrupt
that while s.l53(2)(b) excludes from the release consequent
upon discharge a debt incurred by means of fraud or a
fraudulent breach of trust, the suit with which I am concerned

does not fall within that description.

The contention which is advanced depends

substantially, as it seems to me, upon the content of the
statement of claim which, in an amended form, is placed before
me. The argument is, in substance, that the bankrupt, if he
was guilty of any fraud, was or may have been so guilty, not
personally, but merely as a principal. That is, it is
suggested that the provision to which I have referred,
s.l53(2)(b), may not cover the case in which any fraud
attributed to the bankrupt is only of a vicarious kind.
Having had the opportunity to study the statement of claim, I

do not understand how that can be supported.

There are in substance two separate sorts of

allegations against the bankrupt:  one is that he was guilty

of fraud inducing a contract, and the other is that he was
guilty of fraud, as I understand it, causing completion of the
contract. In paragraph 6 of the statement of claim, it is
said, in effect, that one Boltjes, as agent for the bankrupt,
made certain statements. Paragraph 9 of the statement of
claim describes the statements as having been made by the
first defendants, including the bankrupt, fraudulently and

either well knowing that they were false and untrue or
recklessly not caring whether they were true or false. That,
as it seems to me, is plainly an allegation of personal fraud
against the first defendants. It does not seem capable of
being read as an allegation of dishonesty on the part of Mr.
Boltjes, which dishonesty is then attributed vicariously to

the defendants.

Similarly, the second batch of allegations allege,

in paragraphs 15 and 17 of the statement of claim, that
requisitions on title were delivered to solicitors and certain
answers were provided by the solicitors as agents for the

first defendants constituting a representation.

Then paragraph 23 reads as follows:

"In the premises the First Defendants made the said representation referred to in paragraphs 15 and 17 hereof fraudulently and either well knowing that they were false and untrue or

recklessly not caring whether they were true or

false"	.
The argument which is put forward by Mr. Philp, who

has helpfully referred me to the case of Cooper v. Prichard
(1883) 11 Q.B.D. 351, is that on the basis of a change in the
bankruptcy legislation since that case, it should be held that
fraud of the kind which is here alleged is not within the
scope of s.l53(2)(b) or not wholly within the scope. The
argument which Mr. Philp advanced starts from the proposition
that it was held, on the then corresponding English section,
that the sort of fraud spoken of was not confined to fraud
committed by the bankrupt personally. Mr. Philp pointed out
that a subsequent change in the English legislation which has
been followed in Australia somewhat altered the language, and
he argued that Coouer v. Prichard would not represent the law
today. The point is, in a sense, academic, in view of the
opinion I have expressed as to the proper interpretation of
the statement of claim. But since the matter has been argued,
I should say that it is my view that it is improbable that the
change has the effect for which Mr. Philp contends. The
section which was dealt with in 1883 spoke of any debt or
liability incurred by means of any fraud or breach of trust.

The present expression is, "from a debt incurred by

means of fraud or a fraudulent breach of trust to which he was a party": that is, to which the bankrupt was a party. It may be arguable whether the expression "to which he was a party"

applies to both fraud and to fraudulent breach of trust.
Further, it would seem to me quite arguable that where

liability in fraud is held to arise vicariously, the altered

form of the section may well cover it.

It is unnecessary, however, to express a concluded

view upon that, because it is my opinion that the statement of
claim falls squarely within the description in s.l53(2)(b).
That is, if the liability is established in that suit, this
would be a debt incurred by means of fraud. The anly
practical difficulty which occurs to me is that the Supreme
Court of Queensland has jurisdiction to amend proceedings, and

5   l

the proceedings could conceivably be amended in such a way as
to raise some other cause of action - for example, a suit in
negligence. If that occurs, then it would seem to me that the
reasons which I have given would be in a sense falsified,
because the basis upon which leave to proceed was given would

no longer apply.

That may be a reason why the Supreme Court, in its

discretion, would decline to give leave to amend, to raise

some cause of action not falling within s.l53(2)(b). It has

occurred to me that one possible solution is to give leave to
proceed limited to the statement of claim in its present form.
I am, however, doubtful whether or not it would be possible,
within the jurisdiction given by s.58(3)(b), so to limit the
order. What the order seems to contemplate is that terms may
be imposed. I could impose terms, no doubt, that the
plaintiffs not seek leave to amend in such a way as to take
the matter outside the description in s.I53(2)(b), but that

would simply, if an amendment of a doubtful kind were sought,

saddle the Supreme Court with the problem with which I am

presently confronted. It seems to me that the proper course

is simply to give leave to proceed under s.58(3)(b). To use

the expression which is used in the statute, I propose to give
leave to commence the legal proceeding constituted by action
number 2053 of 1989 and to take such steps as have been taken

in that proceeding since the bankruptcy.

The other matter which it is necessary to record is

that in the helpful submissions which were made on behalf of
the applicants - and indeed the submissions, iF I may say so,
on both sides were very thorough and of assistance - it is
mentioned by MS Dalton that the applicant undertakes not to
prove in the bankruptcy, in relation to the claim, the subject
of the Supreme Court proceedings. I simply record that,
although it may very well be academic, because the discharge
will no doubt occur very shortly.

The order will then be as I have indicated, and I

will hear counsel on costs.

I will order that the costs of and incidental to the

application which was determined today be treated as if they
were costs in the Supreme Court proceedings. That is, the
party which gets a general order for costs in the Supreme
Court proceedings will be entitled thereupon to tax these
costs in this Court.

I certify that this and the

true copy of the reasons five preceding pages are a

for judgment herein of Mr.

Justice Pincus

--

-

L::  *--C-, h\ 7% vye---.

Associate