Re Dosanjh; Ex parte Duus

[1995] FCA 163

CATCHWORDS

BANKRUPTCY - property available to creditor - whether money received as special damages available to creditor

Bankruptcy Act 1966 ss 60(4), 116(1), 116(2)(g), 116(2)(n), 116(2D)(b)

Cox v Journeaux (No 2) (1935) 52 CLR 713 Refd
Faulkner v Bluett (1981) 52 FLR 115 Cons
Mannigel v Hewlett Phelps (unreported decision of New South Wales Court of Appeal, 12.6.91) Cons
Beckham v Drake (1849) 2 HLC 599 Cons
Wilson v United Counties Bank Ltd [1920] AC 102 Cons
Re Linklater Ex parte:  Mount (unreported decision of von Doussa J 29.10.90) Cons
Griffiths v Kerkemeyer (1977) 139 CLR 161 Refd
Van Gervan v Fenton (1992) 66 ALJR 828 Refd

Re Manjit Dosanjh;  Ex parte: Ross Andrew Duus
No QB843 of 1994

Kiefel J  Brisbane 29 March 1995

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT
OF THE STATE OF QUEENSLAND  No. QB843 of 1994

RE:MANJIT DOSANJH

EX PARTE:ROSS ANDREW DUUS Trustee of the Estate of MANJIT DOSANJH

JUDGE MAKING ORDER:     Kiefel J.

DATE OF ORDER:                29 March 1995

WHERE MADE:                   Brisbane

MINUTES OF ORDERS

THE COURT ORDERS THAT:

1. The application be dismissed.

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

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT
OF THE STATE OF QUEENSLAND  No. QB843 of 1994

RE:MANJIT DOSANJH

EX PARTE:ROSS ANDREW DUUS Trustee of the Estate of MANJIT DOSANJH

CORAM:  Kiefel J.

DATE:  29 March 1995

PLACE:  Brisbane

REASONS FOR JUDGMENT

The trustee seeks a declaration that the sum of $29,313 is property which is divisible amongst the bankrupt's creditors under s.116(1) Bankruptcy Act 1966 and for orders declaring that the trustee has a beneficial interest in properties to which those monies have been applied. The sum is in fact the amount owed by the bankrupt to the petitioning creditor, a hospital authority, and represents charges for services rendered to him consequent upon a motor vehicle accident in which he was injured.

By a deed of release dated 20 February 1992 the bankrupt agreed to accept the sum of $300,000 plus his reasonable legal costs in full settlement of all claims for damages for personal injuries which he may have against the driver of the vehicle in question, one Olano.  He had previously brought action in the Supreme Court of Queensland for damages.  In a letter dated 18 February 1992 from his then solicitors to the Department of Social Security it was said that the amount of $300,000
had been notionally allocated by them (perhaps for the purpose of advising their client as to its acceptance) as follows:

General Damages  $60,000.00

Out of Pocket Expenses including
              hospital bills  30,000.00

Economic loss from date of accident
              to date of trial  50,000.00

Future Economic loss  160,000.00

It does not appear that any attempt was made to levy or execute upon the bankrupt's property for the hospital charges unpaid, and bankruptcy proceedings were commenced.

On 4 March 1992 Mr Dosanjh and his wife purchased land at Black Diamond Crescent, Edens Landing for the sum of $123,000 and on about 11 March 1993 further land at Wantana Crescent, Edens Landing for $55,000.  A reference in an affidavit by the insolvency clerk to the possibility that the bankrupt may have previously owned the second-mentioned land is not borne out by independent records.  The bankrupt has advised the trustee that he constructed a house at Wantana Crescent at a cost of about $100,000.  All these monies were said to have been paid from the proceeds of the settlement of his claim for damages.

Section 116(2)(g) of the Act provides that the property divisible amongst creditors does not extend to:

"(g)any right of the bankrupt to recover damages or compensation -

(i)for personal injury or wrong done to the bankrupt, the spouse of the bankrupt or a member of the family of the bankrupt;  or

(ii)in respect of the death of the spouse 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 became a bankrupt) in respect of such an injury or wrong or the death of such a person;"

(and see s.60(4) which preserves the right of the bankrupt to continue such an action). Property acquired from monies paid by way of such damages or compensation is also exempt. Section 116(2D)(b) provides that money being damages or compensation referred to in paragraph (2)(g) is "exempt money" which is later defined as "protected money" and sub-s.(3) provides that where the whole or substantially the whole of the money paid for the purchase or acquisition of a particular property is protected money, paragraph (2)(n) applies to the property.  That paragraph provides that such property is not divisible amongst creditors.

Proceedings with respect to property are, by s.116(1)(b) available to the creditors:

"(b)the capacity to exercise, and to take proceedings for exercising, all such powers in, over or in respect of property as might have been exercised by the bankrupt for his own benefit at the commencement of the bankruptcy or at any time after the commencement of the commencement of the bankruptcy and before his discharge;"

On a plain reading of s.116(2)(g) the settlement monies received by the bankrupt and which were applied to the properties were damages or compensation recovered by the bankrupt in respect of personal injury, and the property is then not available to his estate.

The trustee's point however is that one ought to view the settlement as payment for various "Heads of Damage" and that only those which are described, in practice, as "General Damages" and "Future Economic Loss" are those which could be said to relate to personal injury.  "Special Damages", in the trustee's submission are not. 

The distinction sought to be drawn in the Act is as between wrongs to a bankrupt's property and those purely personal to him,

"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 (Wilson v. United Counties Bank Ltd [1920] AC 102 at pp. 111 and 128-133)",

(per Dixon J., Cox v. Journeaux (No. 2) (1935) 52 CLR 713, 721). In Faulkner v. Bluett (1981) 52 FLR 115, 119 Lockhart J., after tracing the history of the cases which first created this distinction, went on:

"The common thread running through these cases is that where the primary and substantial right of action is a 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."

The decision of the New South Wales Court of Appeal in Mannigel v. Hewlett Phelps (unreported, 12.6.91) would seem to me to accord with that view.  The substantial claim was for damages for breach of professional duty in relation to the purchase of land and a contract for the construction of a house on it.  Whilst there were also claims for damages for mental distress, inconvenience and injury to mental health, these were regarded as merely consequential on damages to financial and property interests.  It was, as the Court pointed out, the cause of action which formed part of the property vesting in the Official Receiver.  There were not separate causes of action with respect to personal harm.  Those claims could not be said to be claims "without reference to their rights of property" within the principle stated by Dixon J. in Cox v. Journeaux. I consider this to be consistent with the description in s.116(1)(b) of the proceedings being "in respect of property".  Consistently, the same would apply to the right to recover monies or compensation in fact received "in respect of" personal injury or wrong in s.116(2)(g).

In Faulkner v. Bluett 119, Lockhart J. went on to discuss the English authorities which refer to "mixed" claims, relating to both property and the person and in particular Beckham v. Drake (1849) 2 HLC 599;  9 ER 1213  and Wilson v. United Counties Bank Ltd[1920] AC 102.  In the former, the question whether the bankrupt retained the right to action for personal loss was not necessary for the resolution of the case, which turned principally upon whether a claim for breach of contract for personal services qualified as property which passed to the assignee in bankruptcy.  Baron Parke (HLC 628 et seq) did refer to the difficulty in determining who might
then have the right of action and the conduct of it and, whilst inclining to the view that both the bankrupt and the assignee might, does not appear to have concluded the question.  In Wilson v. United Counties Bank Ltd where it was held that whilst the right to claim damages for loss occasioned to the bankrupt's estate passed to the trustee, that with respect to damages for injury to the bankrupt's credit and reputation remained in him, Viscount Finlay (120) and Lord Atkinson (131), who dealt expressly with the point, seem to have regarded the claims in any event as separable causes of action.  In Mannigel however the claims were held to be "indivisible" (5).

Support for the trustee's contention concerning separate treatment of "heads of damage" is however to be found in Linklater v. Mount (unreported, von Doussa J. 29.10.90), 8, where His Honour draws upon the reference by Dixon J. in Cox v. Journeaux, 721 in the passage set out above, that the test is whether the damages "or part of them ..." are referable to the person and not property.  Any "part" would however in my view be referable to a separable cause, and in any event would relate only to a claim, as His Honour says, which has no regard to rights of property which, with respect, on my view was the case with respect to the claims for loss of enjoyment of property in Linklater.

It follows in my view that the claim for loss referable to hospitalisation for accident-related injury is a mere consequential loss flowing from a cause of action for injury to the person of the bankrupt.  It has no reference to his rights of property.

In this case, in any event, the "heads of damage" referred to, while commonly issued as shorthand expressions by lawyers, insofar as they suggest separate claims in an action for personal injury have the tendency to mislead and to distract one from the real enquiry, which is as to whether the monies are paid as compensation for the injury or wrong done.  When a plaintiff suffering such injuries becomes "in need" of services or goods by reason of the injuries, whether they be gratuitous services (as considered in Griffiths v. Kerkemeyer (1977) 139 CLR 161 and Van Gervan v. Fenton (1992) 66 ALJR 828) or hospital services or goods such as a wheelchair, it is the existence of that need or the need itself which is the loss to be compensated (see Griffith v. Kirkemeyer per Stephen J. at 173, 179 and per Mason J. at 194;  and Van Gervan v. Fenton at 829, 830), though the reasonable cost of those services may be quantified by reference to accounts in fact rendered. The reference to "general" and "special" damages, often used in practice for ease of calculation tends to obscure the true nature of the loss.  So viewed, the monies paid here were in truth compensation for the injury or wrong done.

All the monies paid by way of compensation under the deed of release were monies paid in respect of personal injury within the meaning of s.116(2)(g). Those monies and the properties acquired with them are, by reason of the following provisions referred to above, exempt. The two properties the subject of the application are not divisible amongst the creditors.

The application will be dismissed.  I will hear the trustee's legal representatives with respect to the question of costs.

I certify that this and the preceding seven pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel.

Associate

Date:29 March 1995

Counsel for the applicant:  Mr S.R. Eleftheriou

Solicitors for the applicant:  Gregg & Kubler

Date of Hearing:  15 December 1994

Place of Hearing:  Brisbane

Date of Judgment:  29 March 1995