ZYX (pseudonym initials) v Cable [No 4]
[2023] WADC 15
•17 FEBRUARY 2023
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: ZYX (pseudonym initials) -v- CABLE [No 4] [2023] WADC 15
CORAM: HERRON DCJ
HEARD: 2 FEBRUARY 2023
DELIVERED : 17 FEBRUARY 2023
FILE NO/S: CIV 874 of 2019
BETWEEN: ZYX (pseudonym initials)
Plaintiff
AND
BARRY THOMAS CABLE
Defendant
Catchwords:
Civil procedure - Defendant declared bankrupt on debtor's petition - Whether District Court action stayed pursuant to s 58(3) Bankruptcy Act 1966 (Cth) - Cause of action tort of battery claiming unliquidated damages - Whether provable in bankruptcy pursuant to s 82(2) of the Bankruptcy Act 1966 (Cth)
Legislation:
Bankruptcy Act 1966 (Cth)
Result:
District Court action not stayed
Representation:
Counsel:
| Plaintiff | : | Mr T J Hammond |
| Defendant | : | No appearance (self-represented) |
Solicitors:
| Plaintiff | : | Rightside Legal |
| Defendant | : | Not applicable |
Case(s) referred to in decision(s):
Baker v Paul [2012] NSWSC 392
Carter v Walker (2010) 32 VR 1
Cornelius v Barewa Oil & Mining (NL) (in liq) (1982) 42 ALR 83
Coventry v Charter Pacific Corp Ltd (2005) 227 CLR 234
Foots v Southern Cross Mine Management Pty Ltd (2008) 241 ALR 32
Kent v Redhead [2017] SADC 55
Polis v Zombor [2019] FCA 69
Quinlan v Riseley [2016] WADC 173
ZYX v Cable [No 3] [2023] WADC 10
HERRON DCJ:
On 19 January 2023, by debtor's petition, the defendant, Barry Thomas Cable, was declared bankrupt. A certificate of appointment of trustee issued pursuant to the Bankruptcy Act 1966 (Cth) confirmed joint trustees, John Shanahan and Matthew Vines, were appointed joint trustees. Thereafter correspondence was sent informing the court that pursuant to s 58(3) of the Bankruptcy Act the District Court proceedings against Mr Cable were automatically stayed. At a hearing on 2 February 2023, I determined that s 58(3)(b) of the Bankruptcy Act did not operate as a stay of the District Court proceedings. I gave brief oral reasons for why I determined the District Court proceedings were not stayed by the bankruptcy proceedings. I said I would deliver written reasons for decision for why I made that ruling. What follows are my reasons for decision.
The history of the bankruptcy proceedings and the correspondence forwarded to the court by Hall Chadwick is explained in the judgment I delivered on 7 February 2023 in ZYX v Cable [No 3][1] which I adopt without repeating.
[1] ZYX v Cable [No 3] [2023] WADC 10 [21] - [29].
The plaintiff's cause of action against the defendant is in tort. As pleaded in the amended statement of claim, the plaintiff says that she was sexually assaulted by the defendant on numerous occasions from 1968 to 1972 when she was a child. As originally pleaded the plaintiff's claim was in negligence for a breach of a duty of care said to be owed by the defendant to her. In the alternative, the plaintiff pleaded a cause of action in battery. At trial, the plaintiff abandoned the cause of action based on a breach of a duty of care said to be owed to her by the defendant and informed the court the sole cause of action against the defendant was in battery.
A cause of action in battery is a claim in tort.[2] The plaintiff claims unliquidated damages for injuries, principally psychiatric injury, she claims she has suffered as a result of the sexual assaults and batteries upon her by the defendant over an extended period when she was a child.
[2] Fleming, The Law of Torts (10th ed), pages 31 - 32; Carter v Walker (2010) 32 VR 1 [215].
The District Court proceedings were commenced in 2019. As I have earlier explained, the defendant was declared bankrupt on 19 January 2023, shortly before this matter was due to proceed to trial on 8 February 2023.
To determine whether the defendant's bankruptcy has any impact on the District Court proceedings, in particular whether it operates as a stay of those proceedings, it is of course necessary to consider the provisions of the Bankruptcy Act.
Bankruptcy Act 1966 (Cth)
Section 58(3) of the Bankruptcy Act states:
(3)Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b)except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
Section 60(1) of the Bankruptcy Act states:
(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.
Section 82(1) and s 82(2) of the Bankruptcy Act states:
(1)Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
(1A)Without limiting subsection (1), debts referred to in that subsection include a debt consisting of all or part of a sum that became payable by the bankrupt under a maintenance agreement or maintenance order before the date of the bankruptcy.
(2)Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy.
Plaintiff's submissions
The plaintiff submits that the District Court action is not a 'provable debt' because the cause of action is a claim in tort for unliquidated damages for personal injury and, by s 82(2), is 'not provable in bankruptcy'. For the reasons which follow I agree with that submission and find s 58(3) does not operate as a stay of the District Court proceedings.
The law
In Cornelius v Barewa Oil & Mining (NL) (in liq) Burt CJ said:[3]
In my opinion s 82(2) of the Bankruptcy Act when speaking, as in terms it does, of the 'nature' of the demand, is using that word in its ordinary dictionary meaning so that the question raised by the subsection in any particular case is: What is the essential quality of the demand made? Hence for present purposes the question must be whether a claim or a demand for damages for the tort of conspiracy is a claim or a demand 'in the nature of unliquidated damages' or whether it is not. The answer to that question does not depend upon the whim of the pleader. It is to be answered by the substantive law. A claim for damages for fraudulent misrepresentation remains a claim or demand for unliquidated damages even if the relief as claimed is for a liquidated amount: Ex parte Baum; Re Edwards (1874) 9 Ch. App. 673. A conspiracy to injure is only actionable if it results in damage and the damages are in all such actions unliquidated. To quantify the damage in a pleading cannot, in my opinion, change the 'nature' of the demand or the 'nature' of the cause of action. It remains a demand 'in the nature of unliquidated damages' and it arises 'otherwise than by reason of a contract, promise or breach of trust' and hence it is a demand not provable in bankruptcy.
[3] Cornelius v Barewa Oil & Mining (NL) (in liq) (1982) 42 ALR 83, 84.
Wickham J held:[4]
In respect to the cause of action in damages for conspiracy the respondent while claiming damages quantified the damages in par. 29 of the statement of claim in money sums. The pleading, however, is that the respondent 'suffered loss and damage'. The demand may properly be described as a demand for liquidated damages in the sense that that is the way in which the demand is expressed. It is, however, not the expression of the demand but the nature of the demand which is decisive as to whether or not a liability is provable in bankruptcy. The claim here is for damages for conspiracy with a plea as to the valuation of those damages. This is a demand in the nature of unliquidated damages arising otherwise than by reason of contract, promise or breach of trust within the meaning of s 82(2) and for that reason is not provable in bankruptcy and for that reason is not released under the provisions of s 240.
[4] Cornelius v Barewa Oil & Mining (NL) (in liq) (89) - (90).
In Coventry v Charter Pacific Corp Ltd[5] the plurality (Gleeson CJ, Gummow, Hayne & Callinan JJ) said:[6]
The central question in the appeal hinges on the meaning of s 82(2) of the Bankruptcy Act 1966 and, in particular, what is meant by a demand in the nature of unliquidated damages arising otherwise than by reason of a contract or promise. That expression, used to identify an exception to the definition of debts provable in bankruptcy, has been held not to include a claim for unliquidated damages for fraudulent misrepresentation which induced the party misled to make a contract with the bankrupt (a 'bilateral' case). That is, such a claim for damages has been held to be a debt provable in the bankruptcy, and a claim that was to be set off against a claim by the bankrupt estate. But a claim for unliquidated damages for fraudulent misrepresentations where the representations induced the claimant to make a contract with another (a 'tripartite' case) has been held not to be a claim provable in the bankruptcy. The bankrupt having made no contract with the party who claims damages from the bankrupt, the claim for damages for fraudulent misrepresentation has been held to be a demand arising otherwise than by reason of a contract or promise.
(citations omitted)
[5] Coventry v Charter Pacific Corp Ltd (2005) 227 CLR 234.
[6] Coventry v Charter Pacific Corp Ltd [5].
The plurality further explained:[7]
But what also emerges clearly from Ex parte Llynvi Coal and other cases of the time is that the meaning of the expression 'demands … arising otherwise than by reason of a contract or promise' was determined upon an assumption that the litigious world (apart from claims for breach of trust) could be divided into claims arising in contract and other claims. This last class of other claims was identified as claims for 'personal torts'. The intention of the 1869 English Act was described in Ex parte Llynvi Coal by James LJ (57) as being that '[e]very possible demand, every possible claim, every possible liability, except for personal torts, is to be the subject of proof in bankruptcy, and to be ascertained either by the Court itself or with the aid of a jury' (emphasis added). Nonetheless, the legislative intention was described (58) as being that 'the bankrupt is to be a freed man - freed not only from debts, but from contracts, liabilities, engagements, and contingencies of every kind.
[7] Coventry v Charter Pacific Corp Ltd [37].
In Quinlan v Riseley[8] Scott DCJ found that based on Coventry v Charter Pacific Corp Ltd a claim for unliquidated damages for deceit, in circumstances where the plaintiffs were induced by fraudulent representations by the defendant to make a contract to purchase shares from a third party, was a claim for damages arising otherwise than by reason of a contract or promise and was not therefore provable in bankruptcy. Accordingly, he found that leave of the Federal Court was not required for the District Court action to proceed.
[8] Quinlan v Riseley [2016] WADC 173 [13] - [19].
In Foots v Southern Cross Mine Management Pty Ltd[9] the majority of the High Court held that a costs order made in Supreme Court proceedings commenced before the appellant became bankrupt, when the costs order was made after he became bankrupt, was not a provable debt as it was made after the bankruptcy and did not involve any antecedent obligation to pay costs. It did not fall within s 82(1) as incidental to a provable debt.
[9] Foots v Southern Cross Mine Management Pty Ltd (2008) 241 ALR 32.
In Baker v Paul[10] Slattery J said:
It is well-established in authority that claims of breach of fiduciary duty are claims at least analogous to claims in contract and are provable in bankruptcy: See Emma Silver Mining Co v Grant (1880) 17 Ch D 122 per Jessel MR at 130 and Barewa Oil and Mining NL (in liquidation) v ISIM Mineral Development Pty Limited (1981) 38 ALR 288. Claims in damages for tort are not provable in bankruptcy.
(emphasis added)
[10] Baker v Paul [2012] NSWSC 392 [47].
The court held that proceedings for contempt of court orders arising out of dealings with property belonging to an associated defendant were not an action for recovery of a provable debt.
In Kent v Redhead,[11] which has some similarities to the circumstances of the plaintiff's claim in this case in that the plaintiff sought damages for assault against the defendant who was convicted of an offence of assault causing harm and was later declared bankrupt after the commencement of court proceedings, Soulio J held on the basis of Coventry that the plaintiff's right to pursue his claim for tortious damages was available pursuant to s 82(2).[12] That is, it was not provable in bankruptcy.
[11] Kent v Redhead [2017] SADC 55.
[12] Kent v Redhead [9].
Finally, in Polis v Zombor[13] Murphy J, held that potential claims based in deceit or misleading and deceptive conduct do not seek to recover an original debt by an action for breach of contract and are instead claims for damages for loss of a chance to recover some of it.[14] When considering the proper statutory construction of s 82 Murphy J explained:[15]
[13] Polis v Zombor [2019] FCA 69.
[14] Polis v Zombor [40].
[15] Polis v Zombor [32] - [39].
32Section 82(1) of the Bankruptcy Act provides a wide definition of debts provable in bankruptcy, subject to some carve-outs in following subsections. In Ex parte Llynvi Coal & Iron Co; Re Hide (1871) 7 LR Ch App 28 at 31, cited with approval in relation to s 82 in Coventry v Charter Pacific Corp Ltd (2005) 227 CLR 234; [2005] HCA 67 (Coventry) at [37], James LJ said in relation to an equivalent provision:
Every possible demand, every possible claim, every possible liability, except for personal torts, is to be the subject of proof in bankruptcy, and to be ascertained either by the Court itself or with the aid of a jury. The broad purview of this Act is, that the bankrupt is to be a freed man, freed not only from debts, but from contracts, liabilities, engagements, and contingencies of every kind. On the other hand, all the persons from whose claims, and from liability to whom he is so freed are to come in with the other creditors and share in the distribution of the assets.
33The purpose of s 82 is to capture and have proved in the bankruptcy a broad range of debts and liabilities. It is aimed at ensuring that the assets of the bankrupt are distributed rateably among creditors, that one creditor does not obtain an undue advantage over other creditors, and at bringing about the discharge of the debtor from future liability for his or her existing debts, so that the debtor may start afresh without lingering disabilities and with the immunities achieved through bankruptcy remaining in place: McMaster at 72-73; Official Receiver v Todd (1986) 14 FCR 177 at 188 (Spender J).
34Section 82(2) provides a carve-out from the definition of provable debt. Understood in conjunction with s 82(1) it means that an unliquidated claim for damages that arises by reason of a contract, promise or breach of trust is a provable debt, and an unliquidated claim that is not by reason of a contract, promise or breach of trust is not provable. Liquidated claims for damages are provable unless such claim falls within one of the other carve-outs.
Whether the proposed claims are for unliquidated damages
35The distinction between liquidated and unliquidated claims was classically described by Odgers in Pleading and Practice, 12th ed, 1939, p 47-8 in the following terms, approved in Spain v Union Steamship Company of New Zealand Ltd (1923) 32 CLR 138 at 142 (Knox CJ and Starke J):
…whenever the amount to which the plaintiff is entitled (if he is entitled to anything) can be ascertained by calculation or fixed by any scale of charges, or other positive data, it is said to be liquidated or 'made clear'. But an action in which the amount to be recovered depends upon all the circumstances of the case, and no one can say positively beforehand whether the plaintiff will recover a farthing, or 40 shillings, or £100, is an action for unliquidated damages.
36Section 82(2) speaks of the nature of the demand, meaning its essential quality. The question is whether the relevant claim or demand for damages is 'in the nature of unliquidated damages'. The answer does not depend on how the claim is expressed in the pleading, although the pleading will often be the best evidence of the true character of the demand: Cornelius v Barewa Oil & Mining (NL) (in liquidation) (1982) 42 ALR 83 (Cornelius) at 84 (Burt CJ) and 89 (Wickham J); Coventry at [69], and at [143]-[144] (Kirby J).
37In my view the proposed claims for deceit, misleading or deceptive conduct and/or unconscionable conduct are claims for unliquidated damages.
38There is no draft pleading in evidence but the proposed claim for misleading or deceptive conduct is a statutory claim under s 18 of the Australian Consumer Law (ACL) in Schedule 2 of the Competition and Consumer Act 2010 (Cth), and the claim for unconscionable conduct is likely to be brought as a statutory claim under s 20 of the ACL. Section 236 of the ACL provides that a person who suffers loss or damage because of conduct that contravenes those provisions may recover the amount of the loss or damage by an action for damages.
39It is clear that a statutory action for damages for misleading or deceptive conduct is a claim for an unliquidated amount: see Coventry at [6] and [71], and ACCC v Black on White Pty Ltd (2004) 138 FCR 314; [2004] FCA 363 at [30] (Spender J) in relation to the predecessor provisions in ss 52, 82 and 87(1A) and 87(1B) of the Trade Practices Act - 18 - 1974 (Cth). The same is true of the proposed claim for unconscionable conduct. A claim for damages for deceit also obviously cannot be 'made clear' before judicial determination.
Conclusion
Based on those authorities, I am satisfied the plaintiff's claim is a claim for unliquidated damages in tort, which does not arise by reason of a contract, promise or breach of trust, and therefore pursuant to s 82(2) of the Bankruptcy Act the claim in the District Court proceedings is not provable in bankruptcy. Therefore, it is unnecessary to seek the leave of the Federal Court to proceed with the action pursuant to s 58(3)(b) of the Bankruptcy Act. Nor does s 58(3) operate as a stay of the District Court proceedings.
Accordingly, I ruled that the District Court proceedings were not stayed and the trial remained listed to commence on 8 February 2023.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
KG
Associate to Judge Herron
16 FEBRUARY 2023
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