Meaning of an action in respect of "any personal injury or wrong" (s 60(4)(a))
39 Subsection 60(5) provides that "action" means any civil proceedings whether at law or in equity. The test as to the meaning of the words "personal injury or wrong done to the bankrupt" is 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: see Cox v Journeaux (No 2) (1935) 52 CLR 713 at 721 per Dixon J.
40 The meaning of s 60(4)(a) was also considered by the Full Court of the Federal Court in Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545. O'Loughlin and Merkel JJ concluded that (at 564):
… Mr Bryant's causes of action, as pleaded in his statement of claim, are essentially claims which are referable to his financial and property rights. That is not to deny him his right to allege "personal injury or wrong done to" him or members of his family. But if the injury that was suffered or the wrong done arose as a direct result of the alleged infringements of his financial or property rights, as was the case in Faulkner v Bluett, then "the primary and substantial right of action is direct pecuniary loss to the property or estate of the bankrupt". (at 119) To apply the language of Handley JA in Manningell v Hewlett to Mr Bryant's circumstances his claims for stress and suffering were "consequential upon alleged breaches" of duty said to be owed to him by the Bank as a mortgagee or secured creditor and were not claims "without reference to [his] rights of property", within the principle stated by Dixon J in Cox v Journeaux.
41 The Court concluded that the loss complained of arose from direct pecuniary loss to the bankrupt's property.
42 The respondents have in effect submitted that in determining whether s 60(4) applies to the proceedings, the proper approach is to regard the proceedings as stemming from the termination of the applicant's employment. The respondents rely upon Pelechowski v NSW Land and Housing Commission [2000] FCA 233 in support of the proposition that s 60(4) does not apply to such proceedings. In Pelechowski, a judicial registrar had dismissed an application by the applicant for relief, finding that there was no substance in the application and that the applicant had been guilty of serious misconduct. Madgwick J concluded that proceedings for unlawful termination of employment under the WRA did not fall within the Cox test and thus s 60(4) did not apply, because an essential element of the proceeding was that one's economic relations with one's former employer had been disrupted and property rights were at the heart of such proceedings. His Honour's reasons were delivered ex tempore. His Honour noted that the applicant had principally sought reinstatement, that the relief sought was essentially of an economic nature, and that the application did not appear to have made any claim for compensation in the way of damages for personal injury. I am bound to follow this judgment unless I conclude it is plainly wrong. I have not reached that view.
43 Interestingly, in Pelechowski, the applicant had been an employee of the Department of Housing. His Honour noted that "[t]hose economic relations [with one's former employer] depend upon contract, or perhaps in the case of a public servant, a statutory relationship, but nevertheless of a contractual or quasi-contractual kind, that is to say, property rights are at the heart of the proceedings" (at [5]). His Honour's view therefore was that insofar as termination proceedings were concerned, no distinction was to be made between those employed pursuant to statute and other employees in the context of s 60(4).
44 Section 60(4) was also considered by the Court of Appeal of New South Wales in Daemar v Industrial Commission (NSW) (1988) 12 NSWLR 45 ("Daemar"). In Daemar, the applicant sought prerogative relief (as well as damages and declaratory relief) in relation to orders made by the Industrial Commission of New South Wales. Pursuant to s 88F of the Industrial Arbitration Act 1940 (NSW), the Commission had declared void a contract between a Mr Sheath (who was the applicant in the proceedings) and a company with which Mr Daemar was associated. The proceedings then commenced by Mr Daemar sought relief in relation to criticism of him by the Commission in its reasons.
45 Kirby P, with whom Samuels and Clarke JJA agreed, held that the proceedings brought by Mr Daemar did not fall within the exemption provided in s 60(4) of the Bankruptcy Act. His Honour noted the terms of s 116 of the Bankruptcy Act which provided for property which was divisible amongst the bankrupt's creditors and lists the exemptions of designated "property". His Honour continued (at 50 - 51):
These provisions make it clear that the scheme and purpose of the Act is, upon the debtor's becoming a bankrupt, to transfer property rights, including certainly the right to sue in respect of claims to property, from the bankrupt to his trustee. This is so, notwithstanding that it involves personal inconvenience to the bankrupt: see Faulkner v Bluett (1981) 52 FLR 115 at 119. Indeed, it is so notwithstanding the fact that it deprives the bankrupt of important civil rights which he or she would otherwise normally enjoy. It is of the essence of bankruptcy, as provided for by the Act, that property which belongs to the bankrupt, including choses in action (other than those which are specifically exempted) are vested upon bankruptcy in the bankrupt's trustee. … It could scarcely be otherwise for if it were, valuable interests which a bankrupt might have, in the form of choses in action would not be caught in the net cast by the very wide language of s 116(1). …
It is necessary to keep the general purpose of the Act in mind, and the scheme by which those purposes are effected, when approaching the contentious issue about the operation of s 60…
46 His Honour analysed the applicant's proceedings in the context of s 60 as follows (at 54):
[t]he "action" commenced by this claimant is undoubtedly one whereby he seeks relief affecting his property. His is not the disinterested act of a public spirited citizen seeking, for whatever reason, to vindicate the rule of law. The whole purpose of his case is to seek specific redress against an order of the Commission which he claims to have been unjust and to have damaged him. His "action" is therefore of the very kind to which s 60(2) was designed to apply. Obviously, the prosecution of litigation commenced before bankruptcy by a person who later becomes bankrupt can involve the potential or actual diminution of the estate of the bankrupt available to his creditors. On occasion, it can, of course, provide a benefit to the creditors. That is precisely why Parliament has provided for the trustee to make an election.
47 His Honour said (at 55 - 56):
… the words ["wrong done to the bankrupt"] cannot be taken in isolation. They must, in accordance with the ordinary canons of construction, be read in the context in which they appear. The meaning of the expression, taken from that context, has been explained in numerous cases. In Australia, the classic expression is that contained in the judgment of Dixon J in Cox v Journeaux …
Applying that test to the present case, the action brought by the claimant cannot be categorised as he submits. Although it is true that the claimant contends that a "wrong" has been done to him and that he has suffered hurt and even "defamation"… these contentions are irrelevant to the task of identifying, for the purpose of s 60(4)(a) of the Act, the nature of the action exempted from the stay. The exemption is limited to those cases where it has been considered appropriate to sever the personal interests of the person subsequently made bankrupt from his property, and to reserve to him the prosecution of and benefits derived from such litigation as not being legitimately entitlements of the creditors. …
48 His Honour went on to take into account, in characterising the proceedings, the fact that the "wrong" was "the very source of the financial problems which have led to his bankruptcy" and that the proceedings involved "the very essence of the subject matter to which s 60(2) is addressed" (at 56). In the present proceedings, there is nothing to suggest that the applicant's bankruptcy was connected in any way with the "personal injury" or "wrongs" of which the applicant now complains. However, his Honour's preceding observations concerning the nature of cases in which the exemption in s 60(4) applies are of general application.
49 An issue which has arisen in a number of cases is whether it is possible to sever or separate certain causes of action which would fall within s 60(4) from other aspects of the proceedings. In Byrant, Lockhart J (at 548-549) discussed a number of cases where there were mixed causes of action, some of which were found to have vested in the trustee and others not. From the cases considered by Lockhart J, his Honour distilled the principle that a claim for damages for injury to personal and mental health will not fall within the exemption in s 60(4) where the claim cannot be made without reference to the bankrupt's rights of property.
50 The Supreme Court of Queensland recently considered the issue of severance of claims under s 60(4) in Hamilton v Young [2007] QSC 160. The Court in Hamilton considered the issue of whether a claim for damages for the cost of raising an unplanned child can be characterised as claim for damages for "personal injury or wrong". The Court was not asked to stay the part of the bankrupt's claim for personal injuries, but was asked to stay that part of her action claiming damages for the cost of raising her child. Douglas J (at [11]) considered that the word "wrong" in s 60(4) identified a personal tort affecting the person or feelings of the bankrupt, and not, as in the circumstances in Hamilton, the loss to her of property caused by the expense of bringing up her child.