Sutherland v Jatkar

The applicants, Dr Bruce Sutherland and Joybelle Triangle Pty Ltd, sought a declaration that their claim for contribution against the respondent, Dr Suhas Vishnupant Jatkar, was not a provable debt and, therefore, that Dr Jatkar was not released from it upon his discharge from bankruptcy. Dr Jatkar had been made bankrupt on 20 November 2002 and was discharged from bankruptcy on 28 November 2006. The applicants and Dr Jatkar were co-defendants in a proceeding in the Supreme Court which had been commenced by a husband and wife (the plaintiffs) in relation to an alleged misdiagnosis of the foetus during the wife’s pregnancy. The plaintiffs alleged in that proceeding that the defendants had caused them loss and damage by misdiagnosing the conditions of the foetus. On 3 March 2003 the plaintiffs commenced the proceedings in the Supreme Court seeking damages against the applicants and Dr Jatkar alleging that the plaintiffs had suffered loss as a result of the negligence of the applicants and Dr Jatkar and, or alternatively, as a result of the breach of an implied contractual term to exercise reasonable care in connection with the medical treatment provided to the wife. On 4 March 2005, before Dr Jatkar was discharged from bankruptcy, the applicants filed and served on Dr Jatkar in the Supreme Court proceedings a notice by one tortfeasor claiming contribution from Dr Jatkar under s 23B of the Wrongs Act 1958 (Vic). On 24 March 2005, also during the period of bankruptcy, Dr Jatkar filed and served a similar notice for contribution upon the applicants. The commencement of the proceedings against Dr Jatkar, and the service of notices of contribution between the potential joint tortfeasors, occurred without leave having been sought under s 58(3) of the Bankruptcy Act 1966 (Cth). On 8 June 2012 the applicants settled with the plaintiffs and, on 29 June 2012, the applicants paid the settlement sum to the plaintiffs. That resulted in the discontinuation of the plaintiffs’ claim in the Supreme Court proceedings against all three defendants (including Dr Jatkar), leaving the contribution claim between Dr Jatkar and the applicants for the determination by the Supreme Court. That claim was fixed for trial before a judge and jury and was to commence on 17 June 2013 on an estimate of 20 hearing days. In May 2013 Dr Jatkar sought a stay of the contribution claim against him and the vacation of the trial date on the basis that the applicants’ contribution claim had been commenced without leave when the respondent was bankrupt and could no longer be maintained as it was a provable debt in his bankruptcy from which he has been released. On 27 June 2013 Williams J granted a temporary stay of the contribution claim upon her Honour concluding that the contribution claims were provable debts in the bankruptcy. The applicants contended that their claim against Dr Jatkar for contribution was not a provable debt or liability within the meaning of s 82(1) of the Bankruptcy Act 1966 (Cth) because any liability to them did not arise until their liability to the plaintiffs was ascertained. Dr Jatkar contended, in respect of s 82(1), that the claim against him was a contingent claim and, therefore, that it was provable in his bankruptcy. The applicants contended that their claim for contribution against Dr Jatkar was a demand in the nature of unliquidated damages and that it arose otherwise than by reason of a contract, promise or breach of trust, namely, by way of a statutory right to contribution. Dr Jatkar contended that the demand was not for, or in the nature of, damages and that, if it was a claim for damages, it arose from the plaintiffs claim in contract. Dr Jatkar also contended that the application in this court was an abuse of process because the issue which they sought to have determined had been considered by Williams J in the Supreme Court when considering the application for those proceedings to be stayed. The liability which arises between joint tortfeasors under provisions such as s 23B of the Wrongs Act 1958 (Vic) has been described as peculiar and anomalous. Joint tortfeasors may not have direct claims against each other in respect of a joint liability which they may have to a person who has been wronged by them and, in such cases, the claims between the joint tortfeasors for contribution are independent from the claim of the plaintiff against them in tort or contract and do not arise until “payment of the liability to which [the right to contribution] relates and not before” notwithstanding that “litigation on the indemnity [can] take place before there is any liability”. The parties were agreed that Dr Jatkar’s obligation to the plaintiff was a provable debt in his bankruptcy and, therefore, that he was released from that liability by force of the Bankruptcy Act 1966 (Cth); but the parties were in disagreement about whether the separate and independent claim of the applicants against Dr Jatkar for contribution was similarly released. The applicants’ claim for contribution was made against Dr Jatkar on 4 March 2005 at a time when he was liable in respect of the claims made by the plaintiffs, but, at that time, s 58(3) of the Bankruptcy Act 1966 (Cth) prohibited commencing any legal proceedings against him in respect of a provable debt or the taking of any fresh step in any such proceeding against him without the leave of the court. The plaintiffs’ action against Dr Jatkar and the applicants’ claims for contribution against him both occurred without leave having been sought, or obtained, from the Court pursuant to s 58(3). However, at the time the claims for contribution were made, Dr Jatkar was a person liable in respect of the damage claimed by the plaintiffs against both him and the applicants. The applicants were entitled under s 23B to claim contribution from him although that entitlement was qualified by the need to seek leave under s 58(3) of the Bankruptcy Act 1966 (Cth) if the claim was a provable debt. The case was conducted on the basis that the failure to have obtained leave under s 58(3) was a procedural anomaly but not that the failure to have sought leave vitiated the applicants’ notice for contribution against Dr Jatkar. The separate and independent liability which Dr Jatkar had to the applicants, however, did not arise until 8 June 2012 when the applicants settled with the plaintiff. The first question which arises is, therefore, whether that claim was nonetheless a contingent debt or liability within the meaning of s 82(1) and therefore whether it was provable in the bankruptcy. The object of s 82(1) is to capture and to have proved in the bankruptcy a broad range of debts and liabilities extending to past and future debts