Sands v State of South Australia
[2012] SASC 159
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
SANDS v STATE OF SOUTH AUSTRALIA
[2012] SASC 159
Reasons for Decision of The Honourable Justice Kelly
12 September 2012
DEFAMATION - ACTIONS FOR DEFAMATION - OTHER PROCEEDINGS BEFORE TRIAL - STAYING ACTION
BANKRUPTCY - ADMINISTRATION OF PROPERTY - PROPERTY AVAILABLE FOR PAYMENT OF DEBTS - PROPERTY NOT DIVISIBLE AMONGST CREDITORS - DAMAGES FOR PERSONAL INJURY
BANKRUPTCY - PROCEEDINGS IN CONNECTION WITH SEQUESTRATION - PETITION AND SEQUESTRATION ORDER - EFFECT OF BANKRUPTCY ON PROPERTY AND PROCEEDINGS - ACTIONS BY AND AGAINST BANKRUPT - ACTIONS BY OR ON BEHALF OF BANKRUPT - CONTINUANCE BY BANKRUPT OF ACTIONS
Plaintiff instituted proceedings against the defendant for alleged defamatory remarks made during the course of a murder investigation, as well for alleged breaches of statutory duty, duty of care, duty of confidence and duty of privacy - Plaintiff made bankrupt by sequestration order on 18 June 2012 - Defendant applies for a declaration that the action is stayed, pursuant to s 60(2) of the Bankruptcy Act 1966, and will remain stayed until plaintiff elects to limit his claim to damages for loss of personal reputation - Defendant applies, in the alternative, for a declaration that the matter is stayed, and the extent to which the plaintiff is required to limit his case to allow it to proceed - Whether claims other than defamation claim are stayed by operation of s 60(2) of the Bankruptcy Act 1966 - Whether plaintiff must confine his claim for damages to damages for loss of reputation in order to continue the action.
Held: Action not stayed under s 60(2) of the Bankruptcy Act - Nature of the damages claim are damages or compensation for the injury or wrong suffered by the plaintiff - All claims brought by the plaintiff of a personal rather than proprietary nature - Precise ambit of damages which may be recoverable to be determined following hearing of the evidence.
Bankruptcy Act 1966 (Cth) s 60, s 60(2), s 60(3), s 60(4), s 60(4)(a), s 116, s 116(2)(g), s 116(2)(n), s 116(2)(D), s 116(3), s 116(4); Criminal Law (Forensic Procedures) Act 1998 (SA); Telecommunications (Interception and Access) Act 1979 (Cth); Insolvency Act 1986 (UK), referred to.
Cox v Journeaux (No 2) (1935) 52 CLR 713; Moss v Eaglestone (2011) 257 FLR 96; Re Dosanjh; Ex parte Duus (1995) 56 FCR 521; Mulkerrins v PricewaterhouseCoopers [2003] 1 WLR 1937, applied.
Mannigel v Phelps [1991] NSWCA 786; Ord v Upton [2000] Ch 352; Grady v HM Prison Service [2003] EWCA Civ 527, discussed.
Sands v Channel Seven Adelaide Pty Ltd & Anor (2009) 104 SASR 452; Khan v Trident Safeguards Ltd [2004] EWCA Civ 624, considered.
SANDS v STATE OF SOUTH AUSTRALIA
[2012] SASC 159CIVIL: Reasons for Decision
KELLY J.
Introduction
By an application dated 25 July 2012 the defendant applied for a declaration that the plaintiff’s action is stayed pursuant to s 60(2) of the Bankruptcy Act 1966 (Cth) (“the Act”), and that the action will remain stayed until the plaintiff elects to limit his claim to damages for loss of personal reputation.
The plaintiff was declared bankrupt by sequestration order with effect from 18 June 2012. The defendant contended that as a consequence his claims with the exception of the defamation claim for general damages are stayed by operation of the Act. On 6 September 2012 I ruled against the defendant and declined to grant the declaration sought. At that time I indicated that I would provide reasons in due course. As the defendant wishes to appeal, however, I give my reasons now.
Background to the Action
The plaintiff has sued the defendant for alleged defamatory remarks made during the course of a murder investigation. The claim, which was commenced in September 2005, includes as well claims for alleged breaches of statutory duty, duty of care, duty of confidence and duty of privacy.
On 19 September 2005, when the original Statement of Claim was filed, the plaintiff claimed for damages on the basis of defamation only. The plaintiff alleged that defamatory statements were made by members of the South Australia Police Force (SAPOL) in the course of investigating the murder of Corinna Marr.
Corinna Marr was shot dead in her home on 4 July 1997. In the course of the investigation into her murder the plaintiff was one of the persons interviewed by the police. The investigations by the police have not yet resulted in the charging of anyone in relation to the murder.
The plaintiff alleges that SAPOL published information to The Advertiser or alternatively advised them of the existence of court documents as a result of which The Advertiser published stories on 28 February 2004 and 3 March 2004. In addition, a press conference was held on 3 March 2004 in which the media were advised of an affidavit sworn by Detective Keane.
The articles and press conference relate to the actions taken by the police under the Criminal Law (Forensic Procedures) Act 1998 (SA) in the course of investigating the murder. At the press conference, Detective Superintendent Symons made statements related to Mr Keane’s affidavit and referred to information which was subject to the Telecommunications (Interception and Access) Act 1979 (Cth) (“the TIAA”) and the Criminal Law (Forensic Procedures) Act 1998 (SA).
The plaintiff sought and was granted leave to amend his Statement of Claim by a Master of the Court in a decision delivered on 17 February 2010. The substantive amendments which were allowed by the Master included additional causes of action based on breach of statutory duty, breach of duty of care, breach of confidence, breach of privacy and misfeasance in public office. The plaintiff was also permitted to add two new imputations to the natural and ordinary meaning of the press statements and the media release, namely that he was the prime suspect and that police had information placing the plaintiff at the scene of the murder which the plaintiff knew about and refused to challenge. A Further Amended Statement of Claim pleading these additional causes of action and imputations was filed on 18 February 2010.
There followed lengthy and protracted interlocutory proceedings before two different Judges of this Court, none of which are relevant to the present application.
The action was eventually listed for trial to commence on Tuesday 4 September 2012. The present application occurred within the context of several other pre-trial applications made by both parties.
Background to the Present Application
On 18 June 2012 the plaintiff’s estate was sequestrated by order of the Federal Magistrates Court. The plaintiff claims that his bankruptcy is the result of costs orders which were made against him in relation to the trial of Sands v Channel Seven Pty Ltd (SCCIV-05-543) and which totalled in excess of $1,500,000.
On 20 June 2012 the defendant’s solicitors wrote to the plaintiff’s solicitors and advised that, as a result of the sequestration order, it was their view that various aspects of the plaintiff’s claim had been assigned under s 58 of the Act to the plaintiff’s trustee. In that letter the plaintiff was asked to respond within seven days clarifying what, if any, parts of the Statements of Claim he considered were not vested in the trustee. That letter was copied to the plaintiff’s trustee in bankruptcy, Mr Gregg Robertson Johnson (“the trustee”). On 22 June 2012, the defendant’s solicitors wrote again to the plaintiff’s solicitors, and requested that the plaintiff’s case as to special damages be incorporated into the Statement of Claim to enable the defendant to plead a position in response.
The plaintiff’s solicitors responded on 28 June 2012, proposing that the trial be split and that the action proceed on the action of liability only in the first instance, with the question of damages to be addressed at a later date.
On 27 June 2012 the defendant’s solicitors wrote to the trustee outlining the proceedings and requesting that the trustee give consideration to expediting his decision as to whether to elect to prosecute or discontinue the action under s 60 of the Act.
On 4 July 2012, the defendant’s solicitors wrote to the plaintiff’s solicitors advising that the defendant was unwilling to consent to splitting the trial. The letter set out the reasons for the defendant’s opposition, including that the stay effected by s 60 of the Act prevented the obtaining of an order for a split trial. In response, the plaintiff’s solicitors wrote to the defendant’s solicitors and requested that the defendant refrain from pressing the trustee for costs. That response dated 9 July 2012 stated that if the defendant were to consent to the plaintiff’s request, the trustee could be joined as a party to the proceeding and the issue relating to special damages would be resolved.
On 13 July 2012, the defendant’s solicitors wrote the plaintiff’s solicitors, refusing to provide an undertaking not to press the trustee for costs and foreshadowing an application for security for costs from the trustee if he elected to prosecute the action.
On 18 July 2012, the trustee wrote to both the plaintiff’s solicitors and the defendant’s solicitors, confirming that, pursuant to s 60(2) and s 60(3) of the Act, he had only until that date to make an election to prosecute or discontinue the proceedings. Accordingly, he requested further time in which to make an election as to whether to prosecute the action. The defendant’s solicitors responded on 19 July 2012, requesting that the trustee identify what steps he had taken to investigate whether to make an election and indicating that it would be unlikely that the defendant would consent to an election after 26 July 2012.
On 20 July 2012, the plaintiff’s solicitors wrote to the defendant’s solicitors to advise that, in their view, the whole of the plaintiff’s action fell within the ambit of s 60(4). Consistently with that view, the plaintiff’s solicitors contended that the action was not stayed under the Act.
On 25 July 2012 the defendant then filed the interlocutory application (FDN 110) seeking a declaration that the plaintiff’s action is stayed pursuant to s 60(2) of the Act until the plaintiff irrevocably elects to limit his claim to damages for loss of personal reputation. The defendant also sought, in the alternative, a declaration that the plaintiff’s action is stayed and a declaration as to the extent the plaintiff is required to limit his case to allow it to go forward.
At the hearing of the application on 6 August 2012, the defendant argued that the plaintiff’s claim extended beyond alleged injury to his feelings and reputation in defamation to include:
·breach of statutory duty in communicating telephone intercept information and other information in an affidavit to other persons,
·breach of common law duty of care in communicating such information to other persons, and failing to take steps in the proceedings before the Magistrate to ensure the plaintiff’s anonymity,
·breach of common law duty of privacy in communicating such information to other persons, and failing to take steps in the proceedings before the Magistrate to ensure the plaintiff’s anonymity,
·breach of an equitable duty of confidence in communicating such information to other persons, and
·an entitlement to damages sought including special damages, loss of earning capacity and exemplary damages.
It followed, according to the defendant, that the plaintiff’s action was stayed. The defendant contended that, in order to avoid the continuance of that stay, the plaintiff’s trustee was required to make an election and be joined as a co-plaintiff in the proceedings. Alternatively, the plaintiff was required to abandon those aspects of his claim which extended beyond a claim for alleged injury to feelings and general reputation in defamation, and possibly such damages for the allegation of breach of privacy or breach of equitable duty of confidence.
The plaintiff argued that the decision of the New South Wales Court of Appeal in Moss v Eaglestone[1] confirmed the power of this Court to deal with the personal injury claims contemplated by s 60(4) of the Act, and to deal with special damages claims which are consequential upon personal claims. It was clear from that decision that an action in defamation is an action in respect of a personal injury within the meaning of s 60(4) of the Act. The plaintiff claimed that other breaches identified in the Statement of Claim resulted in an injury to his person and not to his property, with the effect that those breaches also fell within the ambit of s 60(4).
[1] Moss v Eaglestone (2011) 257 FLR 96.
During the hearing on 6 August 2012, counsel for the trustee, Mr Ryder made submissions to the effect that the plaintiff’s claims for pure economic loss were likely to vest in the trustee. The trustee further contended in written submissions that the declarations sought by the defendants should not be granted until after the trustee’s application had been dealt with in the Federal Magistrates Court and, if an extension of time was granted, until such time as the trustee had made his election.
On 14 August 2012 the Federal Magistrates Court ordered that the trustee be granted an extension of time until Thursday, 16 August 2012 to make an election whether to prosecute the action. Following grant of the order, the solicitors for the trustee wrote to the solicitors for the plaintiff and defendant to advise that the trustee intended to prosecute that part of the action that vested in him as trustee. That letter did not expressly state what portion of the action the trustee considered vested in him. However, in a written argument prepared for the hearing on 16 August 2012, the trustee submitted that the action was a mixed action, and that the claim for damage to the property of the plaintiff, such as damage to his business or professional practice, vested in the trustee. He argued that special damages such as those for loss of employment and earnings capacity was property vesting in him and therefore available to creditors for distribution. The trustee further submitted that the defendant’s application for a stay was otiose, by reason of the election of the trustee to continue to prosecute those portions of the action that vested in him.
On 16 August 2012, it was ordered that the trustee be joined as second plaintiff. A Third Further Amended Statement of Claim was filed on 20 August 2012 which reflected that order.
By interlocutory application filed 22 August 2012, the defendant applied for an order that the plaintiffs secure to the defendant the sum of $330,000 to the Court as security for the defendant’s costs. By consent on 27 August 2012 the trustee agreed to secure the defendant the sum of $330,000 to the Court as security for the defendant’s costs. On 3 September 2012, however, the trustee advised that he was not in a position to satisfy the order for costs.
During argument on 5 September 2012, Mr Ryder advised that, contrary to his initial position, the trustee took the view that all of the claims were personal to the plaintiff. He said:[2]
We all agree that the defamation claim remains open to the plaintiff on its own. So the trustee, obviously, does not have a claim with respect to that item. However as I understand it, the balance of the claim made would be the breach of statutory duty, the breach of a duty of care, the breach of a duty of confidence and the breach of a duty of privacy which we would say they are personal claims that remain with the plaintiff in person because they amount to wrongs as that term is used in the Bankruptcy Act.
On that basis, Mr Ryder sought leave to withdraw.
[2] Transcript of Proceedings, Sands v State of South Australia, Supreme Court of South Australia, Kelly J, 5 September 2012 at 164.
On 5 September 2012, permission was granted to the trustee to withdraw and, to give effect to that, it was ordered that paragraphs 3B and 3C, as well as the second-named plaintiff, be struck out from the Statement of Claim filed 20 August 2012. After hearing further argument on 6 September 2012, I refused the defendant’s application filed 25 July 2012 and ruled that the action was not stayed under the provisions of s 60(2) of the Act.
Following permission for the trustee to withdraw as co-plaintiff, the defendant maintained that the plaintiff’s actions, at least insofar as the plaintiff claimed damages for economic loss, were stayed by operation of s 60(2) of the Act.
The issue which therefore arises for determination is whether the plaintiff’s pleaded claims, or any parts of them, fall within the exception under s 60(4) and s 116(2)(g) of the Act.
The Bankruptcy Act 1966 (Cth)
For convenience I set out below the relevant provisions of the Act:
60 Stay of legal proceedings
(1)The Court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit:
(a) discharge an order made, whether before or after the commencement of this subsection, against the person or property of the debtor under any law relating to the imprisonment of fraudulent debtors and, in a case where the debtor is imprisoned or otherwise held in custody under such a law, discharge the debtor out of custody; or
(b) stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this subsection, against the person or property of the debtor:
(i)in respect of the non payment of a provable debt or of a pecuniary penalty payable in consequence of the non payment of a provable debt; or
(ii)in consequence of his or her refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt;
and, in a case where the debtor is imprisoned or otherwise held in custody in consequence of the non payment of a provable debt or of a pecuniary penalty referred to in subparagraph (i) or in consequence of his or her refusal or failure to comply with an order referred to in subparagraph (ii), discharge the debtor out of custody.
(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, 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.
Note: See also subsection 5(6).
(4A)Notwithstanding paragraph (1)(b), this section does not empower the Court to stay any proceedings under a proceeds of crime law.
(5)In this section, action means any civil proceeding, whether at law or in equity.
…
116 Property divisible among creditors [see Table B]
(1)Subject to this Act:
(a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; and
(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 or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge; and
(c) property that is vested in the trustee of the bankrupt’s estate by or under an order under section 139D or 139DA; and
(d) money that is paid to the trustee of the bankrupt’s estate under an order under section 139E or 139EA; and
(e) money that is paid to the trustee of the bankrupt’s estate under an order under paragraph 128K(1)(b); and
(f) money that is paid to the trustee of the bankrupt’s estate under a section 139ZQ notice that relates to a transaction that is void against the trustee under section 128C; and
(g) money that is paid to the trustee of the bankrupt’s estate under an order under section 139ZU;
is property divisible amongst the creditors of the bankrupt.
(2)Subsection (1) does not extend to the following property:
(a) property held by the bankrupt in trust for another person;
(b) the bankrupt’s household property that is:
(i)of a kind prescribed by the regulations; or
(ii)identified by a resolution passed by the creditors before the trustee realises the property;
(ba) personal property of the bankrupt that:
(i)has sentimental value for the bankrupt; and
(ii)is of a kind prescribed by the regulations; and
(iii)is identified by a special resolution passed by the creditors before the trustee realises the property;
(c) the bankrupt’s property that is for use by the bankrupt in earning income by personal exertion and:
(i)does not have a total value greater than the limit prescribed by the regulations; or
(ii)is identified by a resolution passed by the creditors; or
(iii)is identified by an order made by the Court on an application by the bankrupt;
(ca) property used by the bankrupt primarily as a means of transport, being property whose aggregate value does not exceed the amount prescribed by the regulations or, if before the trustee realises the last mentioned property the creditors determine by resolution a greater amount in relation to that property, that greater amount;
(d) subject to sections 128B, 128C and 139ZU:
(i)policies of life assurance or endowment assurance in respect of the life of the bankrupt or the spouse or de facto partner of the bankrupt;
(ii)the proceeds of such policies received on or after the date of the bankruptcy;
(iii)the interest of the bankrupt in:
(A)a regulated superannuation fund (within the meaning of the Superannuation Industry (Supervision) Act 1993); or
(B)an approved deposit fund (within the meaning of that Act); or
(C)an exempt public sector superannuation scheme (within the meaning of that Act);
(iv)a payment to the bankrupt from such a fund received on or after the date of the bankruptcy, if the payment is not a pension within the meaning of the Superannuation Industry (Supervision) Act 1993;
(iva)a payment to the bankrupt under a payment split under Part VIIIB of the Family Law Act 1975 where:
(A)the eligible superannuation plan involved is a fund or scheme covered by subparagraph (iii); and
(B)the splittable payment involved is not a pension within the meaning of the Superannuation Industry (Supervision) Act 1993;
(v)the amount of money a bankrupt holds in an RSA;
(vi)a payment to a bankrupt from an RSA received on or after the date of the bankruptcy, if the payment is not a pension or annuity within the meaning of the Retirement Savings Accounts Act 1997;
(vii)a payment to the bankrupt under a payment split under Part VIIIB of the Family Law Act 1975 where:
(A)the eligible superannuation plan involved is an RSA; and
(B)the splittable payment involved is not a pension or annuity within the meaning of the Retirement Savings Accounts Act 1997;
(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;
Note:See also subsection 5(6).
(k) amounts paid to the bankrupt under a rural support scheme prescribed for the purposes of this paragraph;
(l) amounts paid to the bankrupt under a rural support scheme prescribed for the purposes of this paragraph, where the amounts are paid in circumstances prescribed for the purposes of this paragraph;
(m) prescribed amounts paid to the bankrupt under a rural support scheme prescribed for the purposes of this paragraph;
(ma) prescribed amounts paid to the bankrupt under a rural support scheme prescribed for the purposes of this paragraph, where the amounts are paid in circumstances prescribed for the purposes of this paragraph;
(mb) amounts paid to the bankrupt by the Commonwealth as compensation in relation to the loss of:
(i)an amount covered by paragraph (k), (l), (m) or (ma); or
(ii)property purchased or acquired wholly or partly with such an amount;
(n) property to which, by virtue of subsection (3), this paragraph applies;
(p) amounts paid to the bankrupt under subsection (2C) or (4);
(q) any property that, under an order under Part VIII of the Family Law Act 1975, the trustee is required to transfer to the spouse, or a former spouse, of the bankrupt;
(r) any property that, under an order under Part VIIIAB of the Family Law Act 1975, the trustee is required to transfer to a former de facto partner of the bankrupt.
(2B)Where, because of a resolution passed by the creditors, or an order made by the Court, under paragraph (2)(b), (c) or (ca), property that is vested in the trustee ceases at a particular time to be property divisible among the creditors, then, immediately after that time:
(a) the property revests in the bankrupt;
(b) the trustee is discharged from the trustee’s liabilities in respect of the property; and
(c) the bankrupt becomes subject to those liabilities.
(2C)Where:
(a) property used by the bankrupt primarily as a means of transport is vested in the trustee; and
(b) as at the time when the trustee realises that property:
(i)no other property has remained vested in the bankrupt by virtue of paragraph (2)(ca); and
(ii)no other property has, because of a determination by the creditors under paragraph (2)(ca), revested in the bankrupt by virtue of subsection (2B);
the trustee shall pay to the bankrupt so much of the proceeds of realising that property as, when added to the aggregate of the amounts (if any) that the trustee has previously paid to the bankrupt under this subsection, does not exceed the prescribed amount within the meaning of paragraph (2)(ca).
(2D)In subsections (3) and (4):
exempt loan money, in relation to a particular time, means so much of the principal sum of a loan to the bankrupt, or to the bankrupt and another person or other persons, as was repaid, before that time, out of exempt money.
exempt money means money of any of the following kinds:
(a) an amount to which subsection (1) does not extend because of subparagraph (2)(d)(ii) or (iv);
(b) damages or compensation of a kind referred to in paragraph (2)(g);
(c) amounts covered by paragraph (2)(k), (l), (m), (ma) or (mb).
outlay, in relation to property, in relation to a particular time, means all of the following:
(a) the money paid for the purchase, or used in the acquisition, of the property;
(b) the money paid before that time in respect of the extensions, alterations and improvements, if any, of the property constructed or made since that purchase or acquisition.
protected money, in relation to a particular time, means:
(a) exempt money; or
(b) exempt loan money in relation to that time.
(2E)Nothing in this Act or the Legislative Instruments Act 2003 prevents regulations made for the purposes of paragraph (2)(k), (l), (m) or (ma) from applying to amounts paid before the regulations take effect.
(2F)Regulations made for the purposes of paragraph (2)(k), (l), (m) or (ma) may make provision in relation to a matter by applying, adopting or incorporating any matter contained in an instrument or other writing as in force or existing from time to time.
(3)Where, at any time, the whole, or substantially the whole, of the money paid for the purchase, or used in the acquisition, of particular property is protected money, paragraph (2)(n) applies to the property.
(4)Where, as at the time when the trustee realises particular property to which paragraph (2)(n) does not apply, the outlay in relation to the property is in part protected money and in part other money, the trustee shall pay to the bankrupt so much of the proceeds of realising the property as can fairly be attributed to that protected money.
By virtue of the provisions in s 60(4)(a) a bankrupt’s right to claim damages or compensation in respect of any personal injury or wrong done to the bankrupt is not stayed by the operation of s 60(2). The bankrupt may either institute or continue proceedings to recover any such damages or compensation and, by virtue of the operation of subsections 116(2)(g), (2)(n), (2D), (3) and (4) of the Act, the proceeds of any successful claim is not property divisible among the creditors.
The Pleadings in this Action
I will say something now about the plaintiff’s presently pleaded claims. He claims damages, both aggravated and special, for injury to his character, reputation, and credit as a consequence of alleged defamatory publications by the defendant. As I understand the pleadings he also pleads various other causes of action in respect of which he also alleges that he suffered consequential loss and damage. Those other actions, which Mr Wells QC conveniently referred to in argument as the “extraneous causes of action”, appear to be based on alleged breaches of a duty of care owed by the defendant to the plaintiff, breaches of statutory duty said to arise out of the operation of the Criminal Law (Forensic Procedures) Act 1998 (SA) and the Telecommunications (Interception and Access) Act 1979 (Cth), as well as breaches of confidence and a duty of privacy said to be owed to the plaintiff.
As far as I understand the plaintiff’s submissions, they are to the effect that he has suffered an injury to his character, reputation and credit as a result of the conduct of the defendant alleged in the pleadings. In consequence of that injury, he claims damages, including aggravated and special damages.
The nature of the damages claimed is to some extent elucidated in a document filed on 11 May 2012 titled “Updated Special Damages with Accounting Report”. That document identifies the plaintiff’s special damages as the loss of approximately $410,000, which arose out of the plaintiff’s sale of properties following the costs orders against him in the action of Sands v Channel Seven Adelaide Pty Ltd & Anor,[3] as well as loss of income, both past and future, in excess of $600,000 as a consequence of the termination of his employment as Messenger Press. All of these losses are said to have been caused as a result of the injury to the plaintiff’s character, reputation and credit (clause 30 of the Statement of Claim). The aggravated and special damages are alleged to be in consequence of the various breaches of the various duties (statutory duty, duty of care, confidence and privacy) owed to the plaintiff.
[3] Sands v Channel Seven Adelaide Pty Ltd & Anor (2009) 104 SASR 452.
It appears then that the nature of the relief claimed in respect of each of the pleaded causes of action is both general and special damages in consequence of injury to the plaintiff’s character, reputation and credit. There is no doubt that a significant portion of the damages claimed in respect of each of the causes of actions pleaded relates to lost earnings (past and future) and other financial loss (the loss of the six properties).
I make it clear that in deciding the issue which arises on this application I have left aside consideration of the significant causation issues which will inevitably arise on those pleadings. These include, but are not necessarily confined to, the question whether any of the duties said to be owed to the plaintiff as alleged in the pleadings exist at law, and if they do exist, whether they or any of them have been breached as alleged. In addition, I have not overlooked the issue that it may not be possible for a plaintiff to recover damages for injury to reputation and character in a claim other than for the tort of defamation, or the extent to which damages might ultimately flow if any of the alleged statutory breaches are proved. I have also left aside the causation issues which arise in relation to the proof of the damages claimed in the event that the claims or any of them are successful. It will be for the plaintiff in due course to prove as a matter of causation any of the special damages claimed by him.
The claim is therefore, as the trustee initially submitted, a hybrid claim in that it includes a claim for general damages as well as a claim for specific pecuniary loss. There are a number of authorities in Australia and England which discuss the issues where a bankrupt seeks to pursue hybrid claims of this nature. It is, as Millet LJ observed in Mulkerrins v PricewaterhouseCoopers,[4] one of the more intractable problems in the law of insolvency. As I understand the authorities, Australian Courts have adopted a slightly different approach to the English Courts on this question.
[4] Mulkerrins v PricewaterhouseCoopers [2003] 1 WLR 1937 at [6].
The Law
One of the seminal authorities, at least in Australia, concerning those claims a bankrupt may institute or continue in his own right and for his own benefit is Cox v Journeaux (No 2).[5]In that case, after applying the test evolved in England over some time, Dixon J said:[6]
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 111, 128-133).
[5] Cox v Journeaux(No 2) (1935) 52 CLR 713.
[6] Cox v Journeaux(No 2) (1935) 52 CLR 713 at 721.
This is the test which has been applied by many courts when considering the meaning of the phrase “in respect of any personal injury or wrong done to the bankrupt” contained within s 60(4) of the Act.
In the more recent authority of Mannigel v Phelps,[7] the New South Wales Court of Appeal discussed the test enunciated by Dixon J in Cox with particular reference to the meaning of the words “without reference to his rights of property”.
[7] Mannigel v Phelps [1991] NSWCA 186.
The facts in that case were that the plaintiffs sued their former solicitors for professional negligence in connection with the purchase of land and the construction of a house on that land. The plaintiffs pleaded their case in both contract as well as tort. The claim was for damages for economic loss and, in addition, for loss of the plaintiffs’ credit and reputation, inconvenience, mental distress and strain, and for injury to their physical and mental health. The plaintiffs admitted that the damages they claimed under each of those heads was in consequence of the alleged breaches of duty said to be owed by their solicitors. For that reason, the Court of Appeal found that their claims were consequential on damage to their financial and property interests and, accordingly, were not properly characterised as “without reference to their rights of property”. The Court also found that the plaintiffs’ case was based on indivisible causes of action in both tort and contract. It followed that the causes of action in contract and tort were not personal injuries or wrong within the meaning of s 60(4) of the Act.
A more recent authority from New South Wales is Moss v Eaglestone.[8] In that case the Court, applying the same test, found that a plaintiff’s claim in negligence against his former solicitor fell within the definition of “a personal injury or wrong” within the meaning of s 60(4) and s 116(2)(g) of the Act.
[8] Moss v Eaglestone (2011) 257 FLR 96.
In that case, the appellant had retained a solicitor to act for him in respect of a claim based on breach of contract against a newspaper. That action was unsuccessful, and the appellant subsequently commenced proceedings against the solicitor. The procedural history is somewhat complicated, but the Court ultimately dealt with a submission that the appellant’s complaint, insofar as it alleged a failure on the part of his former solicitor to include a claim for defamation, was an action in relation to a personal injury or wrong done to the bankrupt within the meaning of s 60(4) of the Act.
Allsop P, with whom both Campbell and Young JJA agreed, discussed in helpful detail the history and operation of the relevant provisions of the Act. After discussing the history of the common law relating to bankruptcy and insolvency in England, which informs to some extent the statutory provisions in the Australian Bankruptcy Act, his Honour went on to discuss some of the Australian authorities. I have been greatly assisted by that analysis.
As Allsop P observed, all of the authorities recognise the distinction between person and property. The difficulty arises where property and personal damage arise from the same wrong or cause of action. The dividing line in the authorities appears to have been drawn by reference to whether the personal action is severable from or directly related to or consequential upon, the property claim. In the latter instance, where the damages claimed for the 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) of the Act.[9]
[9] Moss v Eaglestone (2011) 257 FLR 96 at [77].
Allsop P concluded as follows:[10]
It remains for another occasion to explore how far cases such as these should be taken to deny a bankrupt a substantive claim for non-pecuniary and personal damage which would otherwise fall within the description of the consequence of "personal injury or wrong" because of its connection to an otherwise indivisible cause of action, and whether, and if so to what extent, ss 60(4) and 116(2)(g) can be seen to operate to divide the value of an action between trustee and bankrupt, or the extent to which the approach of the Court of Appeal in Ord v Upton is to be, or might be, applied under the Act. In this respect, the following passage from Lockhart J's reasons in Faulkner v Bluett at 119 is relevant:
"There is still some doubt whether a right of action passes to the trustee where one and the same cause of action results in substantial damage to the property of the bankrupt as well as substantial injury to his person or annoyance to his feelings: Beckham v Drake; Hodgson v Sidney; Morgan v Steble. In England the accepted view seems to be that such a cause of action passes to the trustee so far as it relates to the property of the bankrupt, and remains with the bankrupt so far as it relates to his person or feelings: Wilson v United Counties Bank Ltd. Some of the problems that arise from this notion of a "mixed action" appear from cases such as Wilson v United Counties Bank Ltd and Beckham v Drake."
[10] Moss v Eaglestone (2011) 257 FLR 96 at [77].
Ord v Upton,[11] referred to in Moss, is an English authority where the Court found that a bankrupt’s claim for damages for negligence as a result of treatment he received from a doctor was stayed by operation of the relevant provisions of the Insolvency Act 1986 (UK). The reasoning of Aldous LJ, who delivered the judgment of the Court, is interesting. His Honour accepted that the claim by Mr Ord was a single cause of action for personal injury. However, he reasoned that the true nature of the claim was an action for negligence and that the result of the negligence was damage. The compensation awarded would be money, the objective being to put the injured party in the same position as he would have been in had he not sustained the wrong. While it was a single cause of action, it was actually a hybrid claim, in part personal and in part relating to property.
[11] Ord v Upton [2000] Ch 352.
The Court then concluded as follows:[12]
It is a claim for damages for injury to his body and mind and also his capacity to earn and can therefore be considered as a "hybrid" claim, in part personal and in part relating to property. I have come to the conclusion that such an action vested in the trustee. It would only have remained with Mr Ord if it fell within an exception established by the authorities to be excluded from the definition of property now found in section 436 of the Act of 1986. To do so it must relate only to a cause of action personal to the bankrupt. All causes of action which seek to recover property vest in the trustee whether or not they contain other heads of damage to which the bankrupt is entitled.
The decision in Ord appears to have turned on the interpretation of the relevant sections in English insolvency legislation.
[12] Ord v Upton [2000] Ch 352 at 361.
In Re Dosanjh; Ex parte Duus[13] Kiefel J considered the meaning of s 116(2)(g) of the Act when determining an application by a trustee for a declaration that a sum of money, representing out of pocket expenses recovered by a bankrupt as part of damages recovered for personal injuries, was property divisible amongst the creditors. The damages in that case had been notionally allocated as general damages, out of pocket expenses, past economic loss and future economic loss. Her Honour Kiefel J considered that on a plain reading of the words of s 116(2)(g) the settlement monies received by the bankrupt in that case were damages or compensation recovered in respect of personal injury and as such not available to the creditors.
[13] Re Dosanjh; Ex parte Duus (1995) 56 FCR 521.
Dosanjh was referred to in Ord. However, the English Court concluded that the reasoning in Dosanjh was irrelevant, as Dosanjh was concerned with the effect of statutory provisions which were in very different terms to those contained in the Insolvency Act 1986 (UK).
It is true that the English Act does not contain any provision which explicitly excludes from the property divisible amongst creditors the right of the bankrupt to recover damages or compensation “for personal injury or wrong done to the bankrupt”.
Nevertheless, as the analysis of Allsop P in Moss so clearly demonstrates the substantive principles in English bankruptcy and insolvency law inform Australian bankruptcy legislation and, in particular, the content in s 60(4) of the Act which refers to “any personal injury or wrong”.
A similar point about the English legislation appears to have been made by Sedley LJ in Grady v HM Prison Service:[14]
The principle underlying this seemingly metaphysical question is that a bankrupt forfeits his assets, beyond the means of subsistence, to his creditors. The qualification that a viable legal claim does not pass to the trustee with the bankrupt's other assets if it represents redress for some wrong personal to the bankrupt is not, as Mr Johnson suggested it was, an exception to the statutory provision devised by the common law. It is the accepted construction, known to Parliament long before the passage of the 1986 Act, of a thing in action in the context of the insolvency legislation…
[citation omitted]
[14] Grady v HM Prison Service [2003] EWCA Civ 527 at [19].
It does seem to me, therefore, that the reasoning of Kiefel J in Dosanjh concerning the characterisation of a claim which contains various heads of damages, some of which are for pecuniary loss and some which are for non-pecuniary loss, runs counter to the reasoning adopted in England, in particular in Ord.
Kiefel J concluded as follows:[15]
Support for the trustee's contention concerning separate treatment of "heads of damage" is however to be found in Linklater v Mount (unreported, Federal Court, von Doussa J, 29 October 1990) at p 8, where his Honour draws upon the reference by Dixon J in Cox v Journeaux (at 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, in so far as they suggest separate claims in an action for personal injury have the tendency to mislead and to distract one from the real inquiry, which is as to whether the moneys 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) 175 CLR 327) 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 (sic) per Stephen J at 173, 179 and per Mason J at 194 and Van Gervan v Fenton at 332-333), although 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 moneys paid here were in truth compensation for the injury or wrong done.
[15] Re Dosanjh; Ex parte Duus (1995) 56 FCR 521 at 524.
I do not accept Mr Wells QC’s contention that her Honour’s reasoning in that case was confined only to the issue of the out of pocket expenses. It seems clear from the final paragraph in her Honour’s judgment that she considered that the whole of the monies paid by way of compensation to the bankrupt as a result of the settlement of his damages claim for personal injuries was not available to the creditors:[16]
All the moneys paid by way of compensation under the deed of release were moneys paid in respect of personal injury within the meaning of s 116(2)(g). Those moneys 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.
[16] Re Dosanjh; Ex parte Duus (1995) 56 FCR 521 at 524.
It is my view that all of the claims brought by the plaintiff, whether in defamation, breach of various statutory duties, or breach of a duty of privacy and confidence said to be owed to the plaintiff, are of a personal rather than a proprietary nature. The nature of the damages claimed, assuming for the moment that a causal connection can be established between the wrong and the damages claimed, are in truth damages and/or compensation for the injury or wrong suffered by the plaintiff. Insofar as there are aspects of the damages claimed which include substantial pecuniary loss, I am content to rely on the reasoning in Dosanjh, even though on the view I take that authority cannot be reconciled with the approach taken in the English authorities. (I note in passing that at least one court subsequent to the decision in Ord considered that the House of Lords in Mulkerrins left open the question whether Ord was correctly decided).[17]
[17] Khan v Trident Safeguards Ltd [2004] EWCA Civ 624 at [84].
It follows that in my view all of the plaintiff’s claims are within the exception in s 60(4) of the Act. The precise ambit of the damages which might ultimately be recoverable can be left to be determined after the evidence is concluded.
There is another reason why in the circumstances I am not prepared to make the order sought by the defendant. I acknowledge that neither party addressed me about the implications of the defendant seeking to pursue an order for a stay in circumstances where the trustee himself does not. Nevertheless, in light of the comments of the Court in Mulkerrins, (a decision I have read after hearing argument on this application), it seems to me there is a real issue whether the defendant should be permitted to press the argument under s 60 of the Act when the trustee himself does not.
I acknowledge that in Mulkerrins there was an order made at first instance in favour of the bankrupt against the trustee in bankruptcy on that very point. Although the trustee did not seek to appeal the decision, the defendants did. Here no order was made. The trustee simply conceded the point and withdrew.
These are my reasons for declining to grant the defendant’s application for a declaration that the plaintiff’s action is stayed by operation of the Act.
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