Adrian Garfield Barwick v Ross Ian Goodridge

Judgment 1These proceedings relate to an application by the Plaintiff ("Mr Barwick") for, inter alia, a declaration that he is released from and has no further obligations in respect of a judgment of the Supreme Court of New South Wales made and entered 30 January 2008 in proceedings 11029 of 2007, and two orders of the Local Court of New South Wales arising from costs certificates awarded in costs assessments in respect of fees rendered by the Defendant ("Mr Goodridge") to Mr Barwick ("the Rights"). 2Mr Goodridge was made bankrupt prior to the hearing of these proceedings. The matter presently before me is an application by Mr Barwick for leave under Uniform Civil Procedure Rules 2005 (NSW) r 6.30 to amend his Summons to substitute Mark Julian Robinson as trustee of the property of Mr Goodridge ("the bankruptcy trustee") as Defendant in the proceedings in place of Mr Goodridge. 3I have been informed that, if that application is allowed, Mr Barwick will not press paragraph 2 of the Summons which currently seeks injunctive relief against Mr Goodridge. Had Mr Barwick not indicated his intention not to press injunctive relief, then Mr Goodridge would, in any event, have had standing to appear in the proceedings to defend the application for such relief: Lawindi v Elkateb [2001] NSWSC 865. I was also informed at the hearing that agreement in principle had been reached in respect of a settlement of the proceedings as between Mr Barwick and the bankruptcy trustee. That settlement would dispose of the proceedings if the bankruptcy trustee is substituted for Mr Goodridge as Defendant in them. 4I was also informed at the hearing that, if that application is not allowed, Mr Barwick will seek leave to discontinue the proceedings, recognising that he is likely to be required to pay Mr Goodridge's costs in doing so. The application for substitution of the bankruptcy trustee in place of Mr Goodridge as defendant is opposed by Mr Goodridge. 5In written submissions filed after the hearing, Mr Barwick submitted that "regardless of the outcome of the Application, Mr Barwick will be seeking either to discontinue or to have the proceedings dismissed with an order for costs." I gave consideration to whether this position rendered the application moot, but it does not. If the application succeeds, the proceedings initially brought against Mr Goodridge will be terminated by reason of a consensual settlement between Mr Barwick and the bankruptcy trustee with no involvement on Mr Goodridge's part, and whether Mr Goodridge is free to pursue the Rights against Mr Barwick will depend in part on the terms of the settlement. If the application fails, the proceedings will be discontinued or dismissed by reason of their unilateral abandonment by Mr Barwick, Mr Goodridge will have the benefit of that result, and the bankruptcy trustee will not be party to it. These are substantively different outcomes. 6Rule 6.30 relevantly provides that proceedings do not abate as a result of a party's bankruptcy and, if a cause of action survives bankruptcy and the interest or liability of a party to any proceedings passes from that party to some other person, the Court may make such orders as it thinks fit for the joinder, removal or rearrangement of the parties. In order to make an order under that rule, I must first be satisfied that the interest of Mr Goodridge in the proceedings has passed to the bankruptcy trustee and, if I am so satisfied, there would prima facie be good reason to make an order substituting the bankruptcy trustee for Mr Goodridge as defendant in the proceedings. A jurisdictional issue 7A preliminary question arises as to whether this Court has jurisdiction to determine the matter necessary to making an order under UCPR r 6.30, namely whether Mr Goodridge's interest in the proceedings has passed from him to the bankruptcy trustee, or whether the Federal Court of Australia has exclusive jurisdiction to deal with that question. The bankruptcy trustee and Mr Barwick contended that this Court did have jurisdiction to make such an order and Mr Goodridge contended that it did not. 8By way of background, s 27(1) of the Bankruptcy Act 1966 (Cth) relevantly provides that the Federal Court of Australia and the Federal Magistrates Court have concurrent jurisdiction in bankruptcy and that jurisdiction is exclusive of the jurisdiction of all Courts other than specified jurisdiction of the High Court and the Family Court. The term "bankruptcy" is defined in s 5, in relation to jurisdiction or proceedings, as any jurisdiction or proceedings "under or by virtue of" the Bankruptcy Act and the term "proceeding" means a proceeding under the Bankruptcy Act . Section 37(1)(f) of the Bankruptcy Act in turn deals with the exercise of the Federal Court's jurisdiction and refers, inter alia, to applications to declare for or against the title of the trustee in bankruptcy to any property. 9In Sutherland v Brien [1999] NSWSC 155, Austin J observed that this Court retained jurisdiction where the relevant proceedings were not themselves under or by virtue of the Bankruptcy Act but were within the Court's general jurisdiction, and in those circumstances the proceedings were not within the jurisdiction in bankruptcy which Bankruptcy Act s 27 vested exclusively in the Federal Court, even if an issue arose in them as to the proper construction and application of the Bankruptcy Act . In Geia v Palm Island Aboriginal Council [2001] 1 Qd R 245 at 253, the Supreme Court of Queensland held that it had jurisdiction to decide a question as to the trustee in bankruptcy's title to a wrongful dismissal action, although that question could also have been decided by the Federal Court under Bankruptcy Act s 37(1)(f). 10In Scott v Bagshaw (2000) 99 FCR 573, the Full Court of the Federal Court held that Bankruptcy Act s 31(1)(f) elucidated what fell within "bankruptcy" as defined in Bankruptcy Act s 5(1) and used in Bankruptcy Act s 27(1). The Court held that applications with the effect of declaring for or against the title of a trustee in bankruptcy to property would fall within the jurisdiction in bankruptcy which is exclusively vested in the Federal Court. The Court distinguished Sutherland v Brien and observed that the effect of the order sought in those proceedings would be a declaration made against the title of the trustees in bankruptcy, which would have a necessary adverse effect on that title and would fall within the jurisdiction in bankruptcy. 11In Meriton Apartments Pty Ltd v Industrial Court of New South Wales (2008) 171 FCR 380, the Full Court of the Federal Court had to consider whether the Industrial Court of New South Wales had jurisdiction to determine whether there had been an abandonment of proceedings by the trustee in bankruptcy. Greenwood and Branson JJ observed that a State Court's recognition of the effect of the Bankruptcy Act to determine the status of proceedings or the standing of parties did not amount to exercising jurisdiction under or by virtue of the Act. 12Branson J observed that, in respect of s 60 of the Bankruptcy Act : "The status of a proceeding commenced by a person who subsequently becomes bankrupt is a matter which must necessarily be addressed by the court in which the proceeding has been commenced. Nothing in s 27, or elsewhere in the Act, discloses an intention to deprive a State court of the power to determine the status of a proceeding before it. Whether or not a trustee has made an election in writing to prosecute or discontinue a proceeding is a mixed question of law and fact. Although the Act requires every court seized of an action commenced by a person who subsequently becomes a bankrupt to determine this question, the determination of the question does not involve the exercise of jurisdiction 'under or by virtue of [the] Act'. It relevantly involves mere recognition of the binding legal effect of the Act. Further, every court has the implied or inherent jurisdiction to determine the extent of its jurisdiction and whether there is an impediment in the way of its hearing and determining a proceeding before it." (at [8]) 13Greenwood J noted that it would be an odd result if the conferral of exclusive jurisdiction in bankruptcy in the terms of s 27 of the Bankruptcy Act on the Federal Court deprived the several Courts of the States of a jurisdiction to determine whether a plaintiff has properly engaged that Court's jurisdiction having regard to his or her standing by reason of the operation of one or more provisions of the Bankruptcy Act . His Honour noted that "[t]here is a distinction between the exercise of a court's jurisdiction in a proceeding that calls into question a provision of the Bankruptcy Act on the one hand and the exercise by that court of a jurisdiction under or by virtue of the Bankruptcy Act , on the other" (at [88]). His Honour also noted that a State Court's determination whether a proceeding could properly be commenced or maintained before it or whether the Plaintiff has standing to engage the Court's jurisdiction, by reason of any impediment going to the operation or application of a provision of the Bankruptcy Act , is not one under or by virtue of the Bankruptcy Act (at [117]). On the other hand, Perram J took the view that any question which determined the trustee's title to a right of action was within the Federal Court's exclusive jurisdiction and expressed the view that Sutherland v Brien was incorrectly decided. 14In Cordes as Trustee for Alexander George v Dr Peter Ironside P/L & Ors [2009] QCA 302, the plaintiff had asserted rights in respect of real property on the basis of an interest as trustee which was inconsistent with the rights claimed by the trustee in bankruptcy and sought orders in respect of chattels seized by the trustee in bankruptcy. The Court of Appeal of the Supreme Court of Queensland upheld a decision in the Trial Division that the Court did not have jurisdiction to determine a controversy whether the bankruptcy trustee had title to particular property, a horse and a motor vehicle, and held that jurisdiction was exercisable only by the Federal Court or the Federal Magistrates Court. Holmes and Chesterman JJA observed at [38] that: "Although the paths of reasoning in the judgments of Greenwood J and Perram J in Meriton Apartments are not identical, and the contemplated scope of bankruptcy jurisdiction is correspondingly different, both firmly endorse the conclusion in Scott v Bagshaw , that decisions involving findings for or against the trustee in bankruptcy's title to property fall within the jurisdiction of the Federal Court. This Court should not depart from an appellate decision of the Federal Court unless convinced that its interpretation is wrong. The conclusion that s 31(1)(f) provides an example of bankruptcy jurisdiction is not obviously flawed. There is no reason not to follow Scott v Bagshaw ." Their Honours also observed that the case before them fell squarely within what was described in Scott v Bagshaw since the orders the appellant sought, to the extent that they recognised title in the appellant, must have a "necessary adverse affect on the title" of the trustee in bankruptcy. 15Mr Goodridge also drew my attention to the decision in George v Fletcher (Trustee) [2010] FCAFC 53 at [19], which he contended approved the decision of the Court of Appeal in Cordes as Trustee for Alexander George v Dr Peter Ironside P/L & Ors . However, I do not read the reference to that decision in George v Fletcher (Trustee) as expressing a view about it. 16The issue which arose in Scott v Bagshaw and Cordes as Trustee for Alexander George v Dr Peter Ironside P/L & Ors was in each case an attempt to obtain final relief which was inconsistent with the trustee's title to the property and which would have involved a final determination of title of the kind referred to in s 31(1)(f) of the Bankruptcy Act . The question in Meriton Apartments , which the majority of the Full Court of the Federal Court held that the Industrial Court of New South Wales had jurisdiction to determine, was one of standing of a party to proceedings. The question before me arises in the context of the prerequisite to an exercise of the Court's discretion under UCPR r 6.30 and does not involve final relief, by way of declaration or otherwise, establishing whether or not the bankruptcy trustee holds title to the property. 17On the one hand, the amendment application in these proceedings squarely raises the question whether the prerequisite to making an order under UCPR r 6.30, that the interest of a party to the proceedings (Mr Goodridge) has passed from him to some other person (the bankruptcy trustee), and this requires a determination whether the Rights now vest in the bankruptcy trustee under ss 58 and 116 of the Bankruptcy Act , as the bankruptcy trustee contends, or remain in Mr Goodridge subject to Pt VI Div 4B of the Bankruptcy Act as Mr Goodridge contends. It is not possible to determine these questions without determining the question of the bankruptcy trustee's title to the Rights. That issue is also relevant to the exercise of the Court's discretion since, if Mr Goodridge holds title to the Rights and the bankruptcy trustee does not, it is unlikely that the Court would order that a person who did not have an interest in the Rights should be substituted for a person who did. Conversely, if the interest in the Rights had passed from Mr Goodridge to the bankruptcy trustee, it is likely that the Court would order that the bankruptcy trustee, who has such an interest, be substituted for Mr Goodridge, who does not. 18On the other hand, Greenwood and Branson JJ in Meriton Apartments have recognised that State Courts have long determined questions as to whether parties have standing to bring proceedings before them and their Honours recognised the significant practical inconvenience arising from adopting so strict a view of the exclusive jurisdiction of the Federal Court that, as soon as such a question arose, a State Supreme Court would be obliged to stay the proceedings and leave the parties to commence separate proceedings in the Federal Court or the Federal Magistrate's Court to determine such an issue. It would be an unfortunate result if, as soon as a question arose as to substitution of the trustee in bankruptcy for the bankrupt in proceedings before this Court, which would ordinarily be dealt with under UCPR r 6.30, and the bankrupt contested that substitution on the basis that the rights had not passed to the bankruptcy trustee, then the Court were obliged to stay the proceedings and the parties were left to incur the costs of further and separate proceedings in the Federal Court to determine that question. If that is the correct result, it would arise even if the bankrupt's contention that title has not passed to the bankruptcy trustee is without merit, since a determination to that effect is no less a determination of the bankruptcy trustee's title than a determination where the bankrupt's position is arguable, strongly arguable or clearly correct. That result would, as the bankruptcy trustee points out, substantially undermine the utility of UCPR r 6.30 in a bankruptcy, since the Court could not determine whether the prerequisite to its application was satisfied. I do not consider that the appellate authorities which I have reviewed above require that result. 19In my view, the Court has jurisdiction to determine the question whether the interest in the relevant property has passed from Mr Goodridge to the bankruptcy trustee, for the purposes of determining whether to make an order under UCPR r 6.30, notwithstanding that a step in the exercise of that discretion will be to form a view as to the bankruptcy trustee's title to the relevant property. Relevant provisions of the Bankruptcy Act 20It is necessary to turn to the relevant provisions of the Bankruptcy Act . The starting point is that, by reasons of ss 5, 58 and 116 of the Bankruptcy Act , a chose in action generally vests in the trustee in bankruptcy on a debtor's bankruptcy or, if the right arises during the currency of the bankruptcy, when it arises, and that right is property that is divisible among the creditors. Section 58(1)(a) of the Bankruptcy Act provides that, subject to the Act, when a debtor becomes a bankrupt, "the property of the bankrupt, not being after-acquired property" vests forthwith in the trustee of the bankrupt's estate. The term "the property of the bankrupt" is defined in Bankruptcy Act s 5(1) as meaning "the property divisible among the bankrupt's creditors" and "any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt". The term "property" is in defined in Bankruptcy Act s 5(1) as, relevantly, "personal property of every description" including "any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such ... personal property". Section 58(1)(b) in turn provides that, subject to the Act, "after-acquired property of the bankrupt" vests, as soon as it is acquired by or devolves on the bankrupt, in the trustee of the bankrupt's estate. The term "after-acquired property" is defined in Bankruptcy Act s 58(6) as meaning "property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible among the creditors of the bankrupt." 21The property which vests in the trustee in bankruptcy under s 58(1) of the Bankruptcy Act can include a chose in action: Armour v Mason [2002] NSWSC 464 at [7]-[8]. In Loxton v Moir (1914) 18 CLR 360 at 379, Rich J observed that: " The phrase 'chose in action' is used in different senses, but its primary sense is that of a right enforceable by an action. It may also be used to describe the right of action itself, when considered as part of the property of the person entitled to sue. A right to sue for a sum of money is a chose in action, and it is a proprietary right. " 22The term "property divisible among the creditors of the bankrupt" in turn includes, by reason of Bankruptcy Act s 116(1)(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". 23There is a qualification to the general position in respect of personal income of a bankrupt received after the bankruptcy. Division 4B of Pt VI of the Bankruptcy Act in turn deals with a bankrupt's obligation with respect to after acquired income and provides for the collection of monetary contributions by trustees by reference to the level of the bankrupt's income. A trustee may assess a bankrupt's income in a contribution assessment period, and if the bankrupt's income exceeds "the actual threshold amount" applicable, the bankrupt is liable to pay to the trustee a contribution to the estate from the income derived: Bankruptcy Act s 139P(1). The term "income" is defined for the purposes of Div 4B in s 139L as having its ordinary meaning, subject to specified inclusions and exclusions. Importantly, if income is received by the bankrupt after the date of bankruptcy but for work done or services performed before the bankruptcy, such income is treated as derived by a bankrupt during a contribution assessment period: Bankruptcy Act s 139M(3). 24The case law also supports the conclusion that after-acquired income of a bankrupt remains vested in the bankrupt rather than the bankruptcy trustee, subject to his or her contribution obligations under Bankruptcy Act Pt VI Div 4B. In Re Sharpe ; ex parte Donnelly ; (1998) 80 FCR 536, Lockhart J noted that Bankruptcy Act Div 4B proceeds on the assumption that after-acquired income of a bankrupt does not vest in a trustee of a bankrupt's estate, notwithstanding the definitions of after-acquired property in Bankruptcy Act ss 58 and 116. The structure of Pt VI Div 4B was further considered in Peter Andrew Gillies ; ex parte The Official Trustee in Bankruptcy (1993) 115 ALR 631; [1993] FCA 289, where French J observed that the legislative scheme in Div 4B was inconsistent with the application of Bankruptcy Act ss 58 and 116 to after-acquired income of the bankrupt. The correctness of Gillies was accepted in Re Hawkins ; ex parte Worrell (1996) 71 FCR 371 at 375; Re Sharpe ; ex parte Donnelly (1998) 80 FCR 536 at 540; Geia v Palm Island Aboriginal Council [2001] 1 Qd R 245 at 249-250. On the other hand, in Trustee of the Property of O'Reilly v Law Society of New South Wales (2001) 110 FCR 574; [2001] FCA 701 at [8], Katz J accepted the correctness of Gillies but held that there is no implied exclusion under the Bankruptcy Act derived from any general law of bankruptcy for personal earnings of a bankrupt acquired prior to the bankruptcy. Whether the Rights have passed from Mr Goodridge to the bankruptcy trustee 25The starting point for a determination whether Mr Goodridge's interest in the Rights has passed to the bankruptcy trustee turns on the identification of the nature of the Rights which, as noted above, comprise a judgment of the Supreme Court of New South Wales made and entered on 30 January 2008 in proceedings 11029 of 2007 and two orders of the Local Court of New South Wales arising from costs certificates awarded in costs assessments in respect of fees rendered by Mr Goodridge. 26In the judgment in this Court made on 30 January 2008, the Court, inter alia, noted a Heads of Settlement Agreement also dated 30 January 2008 and by consent gave j udgment for Mr Goodridge and ordered Mr Barwick to pay Mr Goodridge the sum of $1,100,000. The Heads of Settlement Agreement dated 30 January 2008 in turn provided, inter alia: that Mr Barwick would make payments to Mr Goodridge in the total amount of $900,000 by 37 instalments commencing on 31 March 2008; that time would be of the essence in respect of each payment; and that Mr Goodridge undertook and warranted that unless and until Mr Barwick failed to make any of the payments strictly by the date due and without deduction of any kind, he would not enforce or execute the judgment or (subject to another provision which is not presently relevant) any costs certificates already issued or issued at a later time in respect of any current assessment of costs claimed by Mr Goodridge from Mr Barwick. 27The first of the Local Court orders is one made on 25 January 2008 for the sum of $53,145.19, arising from a Certificate of Determination of Costs pursuant to ss 367(1) and 368 of the Legal Profession Act 2004 (NSW). The second of the Local Court orders is one made on 12 March 2008 for the sum of $47,613 arising from a Certificate of Determination of Costs pursuant to ss 367(1) and 368 of the Legal Profession Act 2004. 28The Supreme Court judgment and each of the Local Court orders was made prior to the filing of Mr Goodridge's debtor's petition on 28 July 2011. 29The bankruptcy trustee and Mr Barwick contend that the Rights, and the associated interest in these proceedings in respect of them, vested in the bankruptcy trustee on Mr Goodridge's bankruptcy, with the result that Mr Goodridge's interest in the proceedings has passed to the bankruptcy trustee for the purposes of UCPR r 6.30 and the Court may make an order for the joinder of the bankruptcy trustee, and the removal of Mr Goodridge as defendant in the proceedings. 30Mr Goodridge contends that the rights in relation to the Supreme Court judgment (primarily interest) have the character of income in respect of the provision of services or as interest payable on the use of capital. Mr Barwick contends to the contrary on the basis that the relevant rights have merged in the judgments and become property of the bankruptcy trustee. The bankruptcy trustee contends that the Rights had arisen prior to Mr Goodridge's bankruptcy notwithstanding that the income derived from them would not be received by Mr Goodridge until after the bankruptcy. 31I accept Mr Goodridge's submission that the money amounts which would be derived from the exercise of the Rights would have the character of income when received, since they would originate in the provision of his services or as interest on capital: Lockwood v Vince [2007] FCA 1946; (2007) 166 FCR 305 at [15]; Re Sharpe ; ex parte Donnelly (1998) 80 FCR 536. I do not accept Mr Barwick's contrary submission that those amounts do not have that character simply because they are payable pursuant to judgments and orders of the Court. 32It remains to address the questions whether the Rights are to be treated in the same manner as the income derived from them and whether the implied exclusion arising from Pt VI Div 4B of the Bankruptcy Act to which I have referred above extends to the Rights. Those questions require further consideration of earlier English cases, the decisions to which I have referred above and the policies underlying the Bankruptcy Act identified in the case law. 33In Beckham v Drake [1849] 2 HL Cas 579; 9 ER 1213, the House of Lords had to consider whether a bankrupt could sue for breach of a contract to employ him for several years which had occurred before bankruptcy. The bankruptcy statute then provided that "all the present and future personal estate" of the bankrupt vested in the assignees. Their Lordships distinguished the claim from one for personal injury or personal suffering and held that the cause of action had passed to the assignees. That decision was later distinguished in Bailey v Thurston & Co Ltd [1903] 1 KB 137 which related to a breach of contract which had occurred after the bankruptcy and provides no support for taking a different approach in respect of a cause of action which had arisen prior to bankruptcy. 34The earlier English decisions were carefully reviewed by the Court of Appeal of the Supreme Court of Queensland in Geia v Palm Island Aboriginal Council , where the Court noted that Bailey's case allowed that the trustee may at least sue where a contract of employment was breached prior to bankruptcy. The Court referred to the decision in Re Sharpe ; ex parte Donnelly but observed that that decision "does not, of course, bear upon the question whether a cause of action for breach of a contract which would, if carried out, have produced income for the bankrupt vests in the trustee". The Court pointed to relevant policy considerations, which I consider have substantial force, including the fact that a bankrupt's contractual rights, including for remuneration for services, may be a significant part of a bankrupt's estate. Their Honours also observed at [16]-[17] that: ... there appears to have been a collection of exceptions to the general proposition that the bankrupt's property vested in the trustee, developed in English cases to fill in what seemed to be gaps in, initially relatively simple, bankruptcy legislation. The Bankruptcy Act 1966 (Cth) has elaborate provisions on this subject [of after acquired-income], particularly in s 116 and, as to income received after bankruptcy, in Division 4B. Unless there is some pressing reason to do so, such as that it is evident that the Parliament must have intended an exception to be implied, courts should be slow to hold that the statutory scheme to which we have referred has, to some uncertain extent, to be read subject to unstated exceptions, because of doctrines worked out in the older cases, under English statutes. We have therefore concluded that it is not the law that an action of the present type may be brought by the bankrupt; it can only be brought by the trustee. The type to which we refer is an action claiming damages or other sums on the basis of wrongful dismissal, under a contract for personal service, the action not including any sum due before termination - i.e. not including any sum for services actually rendered. That decision does not deal with rights arising prior to bankruptcy where monies derived from those rights after bankruptcy would have the character of personal income of the bankrupt. 35The view that at least after-acquired contractual rights which give rise to after-acquired income should be treated in the same manner as that income finds support in the decision in Randall v Deputy Commissioner of Taxation [2008] FCA 1939, where the Court had to determine whether a bankrupt's application for review of a decision under the Public Service Act 1999 (Cth) was property divisible among creditors within the meaning of the Bankruptcy Act so that the trustee in bankruptcy could file a notice of discontinuance of that application. Lander J noted that the effect of Pt VI Div 4B of the Bankruptcy Act was that a bankrupt's personal earnings or income after bankruptcy did not vest in the trustee in bankruptcy and held that the right to seek a review of a decision to terminate the applicant's employment remained with the applicant, rather than passing to the official trustee. His Honour noted that Pt VI Div 4B continues to recognise, as did its predecessor in Bankruptcy Act 1966 s 131, that the bankrupt's income after bankruptcy is not part of his or her property except to the extent that a contribution is made (at [57]). His Honour referred to Re Gillies as authority that the income earned after the bankrupt's bankruptcy does not vest in the trustee and noted that this is because it is not property divisible among the bankrupt's creditors (at [74]). His Honour noted that the trustee cannot sue for after-acquired income because that income has not vested in the trustee (at [75]), and that the right to sue for the bankrupt's after-acquired income does not vest in the trustee and therefore is exercisable by the bankrupt (at [78]). However, that decision can be distinguished from the present facts because in that case each of the employment contract in issue, the rights arising from it and the income arising from it had arisen after the applicant's bankruptcy. 36Mr Goodridge also relies on Gardiner v Goss [2007] FMCA 1966. In that case, the question was whether a bankrupt as petitioning creditor had standing to bring proceedings in the Magistrates' Court of Tasmania and issue a creditor's petition in respect of money owed for cleaning services which were invoiced after the bankruptcy and this required determination whether the right to recover the debt remained in the bankrupt because it represented income of the bankrupt or had vested in the trustee. Reilly FM reviewed the authorities and held that the bankrupt had standing to bring the proceedings and, relevantly for present purposes, had standing to proceed with the petition based on the judgment of the Magistrates' Court. The decision in that case is consistent with the decision in Randall v Deputy Commissioner of Taxation to which I have referred above, although the bankruptcy trustee pointed out that the decision in Trustee of the Property of O'Reilly v Law Society of New South Wales had not been drawn to Reilly FM's attention in that case. 37Mr Goodridge also contends that, once it is recognised that after-acquired income of a bankrupt does not vest in the trustee in bankruptcy, then a right of action or chose in action which gives rise to that after-acquired income should also not be treated as vesting in the bankruptcy trustee. Mr Goodridge noted in submissions that, if that approach is not adopted, any contractual rights which he has to receive future income arising from retainers entered into prior to his bankruptcy would now vest in the bankruptcy trustee who would have practical control over the after-acquired income which Pt VI Div 4B does not vest in him, including the ability to give up the income which Mr Goodridge would otherwise be entitled to receive and, subject to Pt VI Div 4B, to retain. 38In my view, the Rights themselves are properly characterised as pre-bankruptcy property since the Supreme Court judgment and the Local Court orders all existed prior to Mr Goodridge's bankruptcy; the breach of the Heads of Settlement Agreement by Mr Barwick on which Mr Goodridge relies occurred by not making payments on or before six due dates between 28 April 2008 and 28 September 2008, prior to Mr Goodridge's bankruptcy; and, if Mr Goodridge otherwise makes good his defence to the proceedings, the Supreme Court judgment and the Local Court orders were enforceable from that time and Mr Goodridge was entitled to exercise the Rights prior to his bankruptcy. The fact that Mr Barwick commenced proceedings to seek to establish that the Rights no longer exist does not alter that result. If the Rights existed at all, they existed prior to Mr Goodridge's bankruptcy, notwithstanding Mr Barwick's contention they did not exist. 39Although I have not found this question to be by any means straightforward, I consider that the implied exclusion arising from Pt VI Div 4B of the Bankruptcy Act to which I have referred above extends to the Rights. I reach this conclusion because the policy which supports the treatment of after-acquired income of the bankrupt in the manner set out in Part VI Div 4B supports the treatment of rights which would give rise to that income in the same manner. That approach is consistent with the balancing of the rights of the bankrupt and the creditor in respect of after-acquired personal income reflected in Part VI Div 4B and the bankruptcy trustee (and, through it, the bankrupt's creditors) will still have access to the income from the Rights so far as it is derived by the bankrupt and falls within Div VI Part 4B. The contrary approach would create a real risk that the bankruptcy trustee could deal with rights which would give rise to after-acquired income in a manner which would be inconsistent with that policy, for example by compromising those rights in a way which made no allowance for the personal income which the bankrupt would otherwise be entitled to retain under Part VI Div 4B. 40The application of that implied exclusion, where a bankrupt receives the income arising from the relevant rights after the bankruptcy and accounts for that income on a cash basis, is not inconsistent with the view expressed in Trustee of the Property of O'Reilly v Law Society of New South Wales that there is no implied exclusion under the Bankruptcy Act derived from any general law of bankruptcy for personal earnings of a bankrupt acquired prior to the bankruptcy. The view which I have reached is consistent with the decisions in Randall v Deputy Commissioner of Taxation and Gardiner v Goss , although they dealt with rights which arose wholly after the bankruptcy. 41After I had reserved judgment in this matter, Mr Goodridge properly drew my attention to the decision in Jacks v Jakimowicz [2011] VSCA 312. In that case, the Court of Appeal of the Supreme Court of Victoria granted leave to appeal from a decision of the County Court staying proceedings brought by a bankrupt in respect of property of the bankrupt which was at least arguably acquired by use of proceeds from a personal injury claim. The Court noted that there is authority that a bankrupt may bring a proceeding in relation to property which is not "the property of the bankrupt" within the meaning of s 58(1) of the Bankruptcy Act and referred, inter alia, to the decision in Randall v Deputy Commissioner of Taxation to which I have referred above. I do not consider that decision assists in the determination of these proceedings. The question in issue in that case related to property which had been acquired by the proceeds from a personal injury claim, where such claims and property which was acquired wholly or substantially by the damages or compensation from them are expressly excluded from property divisible among a bankrupt's creditors by ss 116(2)(g), 116(2)(m), 116(2D) and 116(3) of the Bankruptcy Act . No question arose in that case as to the extension of an implied exclusion arising from Pt VI Div 4B of the Bankruptcy Act to rights which are properly characterised as pre-bankruptcy property. 42I therefore conclude that, notwithstanding that the Rights are properly characterised as pre-bankruptcy property, the implied exclusion arising from Pt VI Div 4B of the Bankruptcy Act applies to them and they do not vest in the bankruptcy trustee under s 58 of the Bankruptcy Act . Accordingly, I consider that the Rights have not passed to the bankruptcy trustee for the purposes of UCPR r 6.30 and that I should not permit the amendment under UCPR r 6.30 to join the bankruptcy trustee as defendant in these proceedings in place of Mr Goodridge, where this would substitute a person who has no interest in the proceedings in place of Mr Goodridge who has the interest in the proceedings, including in respect of any right to costs arising on the discontinuance of the proceedings. Mr Barwick's alternative application 43In written submissions filed after the hearing of this matter, Mr Barwick alternatively sought an order for joinder of the bankruptcy trustee under UCPR rr 6.19 and 6.24. There is a question whether Mr Barwick should be permitted to make that application after the completion of the oral hearing. However, in any event, I would not grant such an order where I have not found that the bankruptcy trustee has the interest in the Rights so as to have an interest in the proceedings. Where the bankruptcy trustee has no such interest, I do not accept Mr Barwick's submission that such an order would be consistent with the just, quick and cheap resolution of the real issues in dispute in the proceedings, for the purposes of Civil Procedure Act (NSW) s 56. In my view, a joinder of the bankruptcy trustee without a finding that he has the interest in the Rights would likely give rise to further disputes between the parties as to whether any discontinuance of the proceedings has occurred pursuant to a settlement or by Mr Barwick's unilateral abandonment of the proceedings leaving Mr Goodridge free to enforce the Rights. 44Alternatively, Mr Barwick contended in written submissions filed after the oral hearing that the proceedings should either be discontinued or dismissed with an order for costs; that the only substantive order to be made in these proceedings is an order for costs; that an entitlement to an order for costs is property that vests in the bankruptcy trustee pursuant to s 58 of the Bankruptcy Act ; and that the bankruptcy trustee may be joined as a defendant on that basis. I do not accept that contention. Before a question of costs arises, Mr Barwick must obtain leave to discontinue, and, consistent with the manner in which the parties conducted the oral hearing before me, the question of the proper defendant to the proceedings must be resolved prior to the grant of such leave. The resolution of that question has the real practical consequences to which I have referred above. Costs 45Mr Goodridge has been successful in respect of the motion heard before me on 26 and 27 September 2011 and I would be inclined to order that Mr Barwick and the bankruptcy trustee should pay his costs of and incidental to the motion. However, I will hear the parties as to costs and as to the orders that should now be made in respect of the proceedings generally, including the costs payable on any discontinuance of the proceedings.