LEE -v- THE STATE OF WESTERN AUSTRALIA [2023] WASCA 165 (27 November 2023)

Section 60(4) of the Bankruptcy Act 1966 (Cth)

1. The questions before the primary judge turned on the application of s 60(4) of the Bankruptcy Act. Section 60 relevantly provides:

(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.

...

(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[.]

1. Section 60 is in part connected with the scheme of the Bankruptcy Act addressing the passing of property of the bankrupt consequent on the making of a sequestration order.
2. By s 58 the general rule is that property, other than after-acquired property, vests forthwith in the official trustee or the trustee in bankruptcy. After-acquired property vests as soon as it is acquired by or devolves on the bankrupt. Both 'the property of the bankrupt' and 'after-acquired property' is limited to property which is divisible among the bankrupt's creditors. Certain property as listed in s 116(2) is not divisible among the creditors of the bankrupt. The non‑divisible property includes, by s 116(2)(g)(i), any right of the bankrupt to recover damages or compensation for personal injury or wrong done to the bankrupt.
3. Section 60, consistently with the vesting of the bankrupt's rights of action in pending proceedings, provides for what is to happen with pending proceedings commenced by a bankrupt before his or her bankruptcy. The provision accommodates the circumstance that not all property of the bankrupt vests in his or her trustee in bankruptcy. Section 60(4) operates to the extent that pending proceedings are 'in respect of' subjects whereby the relevant chose in action is not property of the bankrupt divisible among the bankrupt's creditors. The bankrupt may continue those proceedings in his or her own name.
4. This court has recently had occasion to discuss these provisions of the Bankruptcy Act and the applicable principles that flow therefrom in other litigation involving Mr Lee. See Lee v Lawfirst Pty Ltd[5] and Lee v Law Complaints Officer.[6] We adopt those observations in full but will not repeat them.
5. For present purposes it is enough to mention the following:
   1. Section 60(4) and s 116(2)(g) are complementary provisions.
   2. One purpose of s 60(4) and s 116(2)(g) is to protect a bankrupt's right to compensation for personal injury or wrong from his or her creditors. The legislation reflects a distinction of long standing between actions relating to rights to the person and actions relating to rights concerning property. It is derived from a historical foundation that it was considered unjust and harsh that the bankrupt's estate should be swelled by a wrong to the person or reputation of the bankrupt.
   3. Both s 60(4) and s 116(2)(g) focus on the substance of the claim in question rather than the form of the action.
   4. The exception in s 60(4)(a) applies to that narrow class of action where it relates to the 'personal' - the injury is one to the bankrupt's person, character or feelings. As was stated by Dixon J (as his Honour was then) in Cox v Journeaux (No 2):

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.[7] (citations omitted)

1. This may be distinguished from those claims where the primary and substantial right of action is direct pecuniary loss to the property or estate of the bankrupt.

1. This court may strike out an appeal notice if the appeal is incompetent or has not been validly commenced.[8]
2. In both appeals Mr Lee purported to appeal as of right.
3. The appeals assumed that the primary judge was in error in not characterising the actions commenced by Mr Lee as actions in respect of a personal injury or wrong done to Mr Lee. If that was correct the associated choses in action were not divisible among Mr Lee's creditors. In other words if, contrary to the primary judge's conclusions, the actions were in respect of a personal injury or wrong done to Mr Lee, then - as a matter of law - Mr Lee's rights the subject of action CIV/2011/2022 and action CIV/2660/2015 were not property of the bankrupt that vested in the trustee in bankruptcy. Nor, by parity of reasoning, was any right to appeal after-acquired property. An appeal to vindicate Mr Lee's rights would be competent. Mr Lee could not be shut out from vindicating his rights by an erroneous finding at first instance of the part of the primary judge.
4. The position was different if the primary judge was correct in his conclusions.
5. Mr Lee had no standing to appeal against the orders made by the primary judge if the actions were not in respect of a personal injury or wrong done to Mr Lee. In that event the associated choses in action were divisible among Mr Lee's creditors. They would have vested in Mr Lee's trustee in bankruptcy. Mr Lee lacked a relevant right or interest so as to enable him to appeal. The appeals were necessarily incompetent.
6. Accordingly, the competency of each appeal depended on whether, contrary to the primary judge's determination, the proceedings commenced by Mr Lee in CIV/2011/2022 and CIV/2660/2015 were each an action in respect of any personal injury or wrong done to Mr Lee. To the extent that the primary judge was correct the appeals were incompetent and had to be dismissed. To the extent that the primary judge was incorrect the appeals were competent.
7. So understood the question of competency was bound up with the merits of the appeals.

The competency of appeal CACV/87/2023 The nature of the primary proceedings in action CIV/2011/2022

1. Appeal CACV/87/2023 is the appeal against the orders made in action CIV/2011/2022. As mentioned, action CIV/2011/2022 was an action for pre-action discovery. The application arose out of an access application by Mr Lee seeking access to documents under the Freedom of Information Act 1992 (WA). Mr Lee claimed that the Department of Justice, on behalf of the State, had wrongly failed to produce documents in answer to his access application.
2. By an amended originating summons dated 24 October 2022 Mr Lee claimed that he:

may have an action for breach of duty, breach of contract and breach of statutory duty against the [State] based on documents produced or the failure to produce documents as sought in [an access] application by [Mr Lee].[9]

1. However, before the primary judge it was clarified that Mr Lee did not intend to proceed with any claim for breach of contract or negligence.[10] In addition, Mr Lee said that he intended to rely on a claim based on the tort of misfeasance in public office.[11] The primary judge deprecated the introduction of the latter claim as not being deposed to in Mr Lee's supporting affidavit material.[12] Whether this is the case or not is not to the point. The character of Mr Lee's claim is to be discerned from the amended originating summons. The cause of action which Mr Lee said he may have, and which Mr Lee wished to assess by obtaining documents for pre-action discovery, was grounded in an alleged breach of statutory duty rather than the tort of misfeasance in public office.
2. The amended originating summons identified potential losses claimed by Mr Lee in the form of legal costs (including adverse costs orders) incurred by Mr Lee in other proceedings. The relevant losses were described as follows:

this may then have an effect on costs orders made against [Mr Lee] in GDA 11 of 2019, Lee v Department of Justice [2020] WASC 105, CACV 50 of 2020, Lee v Department of Justice [2021] WASCA 152 and GDA 4 of 2020, Lee v Department of Justice WASC 119 [sic] and costs orders paid by [Mr Lee] and counsel's fees. [Mr Lee] is of the view that the alleged breaches if established caused the losses suffered by [Mr Lee].[13]

The primary judge's conclusion in relation to action CIV/2011/2022

1. The primary judge identified Mr Lee to be contending that the action was in respect of the earlier defamation proceedings - those earlier proceedings being, self-evidently, a matter concerning a personal injury or wrong done to the bankrupt.[14]
2. After characterising the nature of the action,[15] in terms that are not challenged on appeal, the primary judge resolved two things favourably to Mr Lee. First, his Honour accepted that the pre-action discovery action was a potential gateway to a prospective substantive claim. It was the substantive claim which had to be considered in determining whether the action was in respect of a personal injury or wrong done to Mr Lee.[16] Second, although his Honour expressed some doubt as to the viability of a private law claim for breach of statutory duty for a contravention of the Freedom of Information Act, he assumed there might be such a claim as a matter of law.[17]
3. The primary judge said there was no evidence that there were documents that should have been produced in answer to the access application.[18] Mr Lee challenged this finding by ground 1. It is not necessary to resolve that challenge. First, the issue is irrelevant to whether the action was one in respect of any personal injury or wrong done to Mr Lee; it does not impact on the competency of the appeal. Second, the suggested absence of evidence was not what the primary judge relied on in resolving the s 60(4) point against Mr Lee.
4. Two independent reasons were given by the primary judge for resolving the s 60(4) question adversely to Mr Lee. Each reason responded to a different strand of argument presented by Mr Lee. First, the primary judge stated:

[T]he difficulty Mr Lee faces, in seeking to characterise his prospective claims as falling with s 60(4)(a) of the Bankruptcy Act, is that the underling [sic] losses claimed by him are the costs orders and counsel fees suffered or incurred in various other proceedings. The proposed actions, as I understand them, will not be seeking damages which are estimated by immediate reference (or any reference) to pain felt by Mr Lee in respect of his mind, body or character. As noted, the pecuniary losses he wishes to pursue concern costs orders and legal fees which he suffered or incurred. The choses in action which may arise in relation to those payments vested in the trustee in bankruptcy as part of Mr Lee's estate, in my view.[19]

1. This first reason was challenged by ground 2.
2. Second, so far as Mr Lee relied on a connection between action CIV/2011/2022 and the earlier defamation proceedings, the primary judge said that the pre-action discovery proceedings were too remote from and unconnected with the earlier proceedings.[20] This reason was not challenged by any ground of appeal. However, it was raised in Mr Lee's written submissions in support of the appeal. Accordingly, it appeared that Mr Lee sought to reprise the argument that he relied on before the primary judge notwithstanding the lack of any ground of appeal that articulated the argument.
3. In relation to the second reason, the primary judge observed that it would be odd if the earlier defamation proceedings could justify the continuance of action CIV/2011/2022. The court had already determined that the injury or wrong did not arise, the earlier proceedings having been determined adversely to Mr Lee.[21] This finding was challenged by ground 3. That, like ground 1, may be put to one side. The primary judge's observation was advanced in support of his Honour's second reason. The second reason stood or fell by itself irrespective of the primary judge's additional observation in support of the second reason. Moreover, the suggested error the subject of ground 3 was not determinative of the competency of the appeal.

1. Mr Lee challenged the primary judge's conclusion that action CIV/2011/2022 was not an action in respect of a personal injury or wrong done to him for the purpose of s 60(4) of the Bankruptcy Act. In that regard Mr Lee's ground 2 provided:

The court erred in law by finding that the proposed claims do not fall within s 60(4)(a) and s 116(2)(g) of the Bankruptcy Act. [Primary reasons [47.6], [47.8]]

Particulars of Error

The appellant's affidavits filed herein support his contention that the court erred in law and that action CIV 2011 of 2022 is in respect of a personal injury or wrong.

1. On appeal Mr Lee alleged he had suffered loss being a personal loss of credit and reputation. Mr Lee referred to other litigation in which he was concerned, namely, this court's decision in Lee v Lawfirst Pty Ltd. There, among other things, the court (Murphy & Vaughan JJA) accepted that insofar as Mr Lee, by that appeal, sought to contend that a claim for non-financial loss in respect of alleged harm to his credit and reputation was reasonably arguable for pleading purposes, the appeal would come within s 60(4) of the Bankruptcy Act.[22] That decision is plainly concerned with a very different claim made by Mr Lee against his former solicitors. It has no bearing on the present pre-action discovery application against the State in action CIV/2011/2022 - the pre-action discovery application being a prequel to a possible breach of statutory duty claim against the State if there was some contravention of the Freedom of Information Act.
2. Indeed, the true significance of Lee v Lawfirst Pty Ltd to the present appeal is not in the context of a claim seeking to recover damages for loss to personal credit and reputation. It is, instead, in the context of a claim seeking to recover damages for loss comprising own and adverse costs (that being another aspect of Mr Lee's claim in Lee v Lawfirst Pty Ltd). In that respect the court held:

The claims at common law and in equity for financial loss [being own and adverse costs] caused by the alleged defaults of Lawfirst in their engagement as [Mr Lee's] solicitors were claims in respect of the diminution of [Mr Lee's] assets. They were not claims in respect of any personal injury or wrong done to Mr Lee. To this extent, the appeal cannot be characterised as an action within the meaning of s 60(4) of the Bankruptcy Act.[23]

1. The suggested breach of statutory duty claim does not seek damages for loss of credit and reputation. The suggested damages are concerned only with legal costs (including adverse costs orders) incurred by Mr Lee. So understood Mr Lee was seeking, by action CIV/2011/2022, to recover a direct pecuniary loss to his property or estate; the claim was not concerned with injury to Mr Lee's person, character or feelings. The primary judge was manifestly correct, for the reasons that his Honour gave as reproduced at [35] above, to reject the characterisation of action CIV/2011/2022 as an action in respect of a personal injury or wrong done to Mr Lee.
2. The primary judge was also correct, for the reasons that his Honour gave, to reject Mr Lee's contention that action CIV/2011/2022 was in respect of a personal injury or wrong done to Mr Lee so far as the action was in respect of Mr Lee's earlier defamation proceedings.
3. In this regard Mr Lee submitted that action CIV/2011/2022 was in respect of the defamation proceedings due to a loss of credit and reputation which related to the State's conduct - Mr Lee referred to the entry of judgment and publication of reasons for decision in the defamation proceedings and other litigation.[24] There was and is no relevant connection. It is not enough that, having failed in the earlier defamation proceedings, Mr Lee seeks to revisit factual matters which arose in the context of that litigation and the events with which the litigation was concerned. In any event whether action CIV/2011/2022 is in respect of the defamation proceedings is besides the point. Mr Lee must establish that action CIV/2011/2022 is in respect of a personal injury or wrong done to him. The nature of the asserted loss that underpins the claim informing Mr Lee's action in CIV/2011/2022 belies any such characterisation.
4. Mr Lee failed to establish that the proceedings he had commenced in CIV/2011/2022 was an action in respect of a personal injury or wrong done to him. It followed that appeal CACV/87/2023 was incompetent and had to be dismissed. The appeal was, in any event, without merit. The lack of merit in ground 2, which had no reasonable prospect of succeeding, meant that the appeal could not succeed. That also provided a reason for the dismissal of the appeal.

The competency of appeal CACV/88/2023 The nature of the primary proceedings in action CIV/2660/2015

1. Appeal CACV/88/2023 is the appeal against the orders made in action CIV/2660/2015. Action CIV/2660/2015 was commenced by writ. The nature of the proceedings appears from a reamended statement of claim dated 6 May 2020. Mr Lee claims damages for causes of action alleging misleading conduct and misfeasance in public office. There are, in substance, two matters complained of:
   1. A letter which recommended that the Geordie Bay General Store at Rottnest Island retain a licence which enabled it to continue to sell certain pharmaceutical products in competition with a pharmacy business carried on by Mr Lee at Rottnest Island.
   2. The swearing of affidavits in proceedings in the State Administrative Tribunal concerning a rent review clause in a lease agreement. The lease agreement was between the RIA and Kingsfield.
2. There are detailed pleas as to the loss and damage Mr Lee claims to have suffered. Mr Lee alleges that, in relation to the letter, a decision not to cancel the Geordie Bank General Store licence was made on the basis of or was influenced by the letter.[25] He contends for a counterfactual whereby but for the letter:

Mr Lee would have been able to increase sales of Schedule 2 Products from 1 April 2010, and would have derived additional profits during the period from 1 April 2010 to 31 December 2011.[26]

1. As to the affidavits, Mr Lee refers to Kingsfield making rent review payments in an additional amount of approximately $15,000.[27] Self-evidently that is damage allegedly suffered by Kingsfield rather than Mr Lee. Accordingly, this part of the claim by action CIV/2660/2015 may be put to one side. The relevant aspect of the claim by action CIV/2660/2015 is the alleged damage for additional profit that Mr Lee says he would have derived between April 2010 and December 2011. Mr Lee also seeks exemplary damages.[28]

The primary judge's conclusion in relation to action CIV/2660/2015

1. The primary judge gave short reasons for rejecting Mr Lee's submission that the substance of the claim in action CIV/2660/2015 was for a personal injury or wrong done to Mr Lee. His Honour stated:

The manner in which Mr Lee has articulated the relief he seeks for his misfeasance in public office claim, by reference to an asserted diminution in earning capacity, demonstrably shows that the claim is one for loss to the property or the estate of the bankrupt. The plaintiffs' case is based upon a loss of profits. The claim is simply not pleaded as a claim for damages referable to any injury to Mr Lee, or emotional distress, or hurt feelings.

I therefore accept the submission of the defendants that the plaintiffs' action for loss of earnings or additional profits, stemming from the misfeasance claim pleaded in CIV 2660 of 2015, is more properly characterised as loss to the property or estate of the bankrupt than any personal injury to the person or feelings of the bankrupt.[29]

1. The primary judge only refers to the misfeasance in public office claim. It is obvious, however, that his Honour's reasoning applied equally to the misleading conduct claim. The damages claimed by the misleading conduct claim referred back to those damages particularised for the purpose of the misfeasance claim.[30]
2. The primary judge mentioned that Mr Lee had also submitted that he pursued a personal wrong in the form of an action for the tort of malicious prosecution. His Honour pointed out, with respect correctly, that no such claim was pleaded.[31] In any event a claim for malicious prosecution would have the same difficulty as the pleaded claim - the loss claimed was 'profit based' and thus, in the primary judge's view, outside the purview of s 60(4)(a) of the Bankruptcy Act.[32]

1. Both grounds of appeal challenged the primary judge's conclusion that action CIV/2660/2015 was not an action in respect of a personal injury or wrong done to Mr Lee for the purpose of s 60(4) of the Bankruptcy Act. The grounds stated:
   1. The court erred in law by finding that the action brought by Mr Lee by way of the writ of summons in CIV 2660 of 2015 (which includes the claim for exemplary damages) is thus [sic] not an action for personal injury or wrong done to Mr Lee within the meaning of s 60(4)(a) of the Bankruptcy Act. [Primary reasons [54]]
   2. The court erred in law by finding that the claim is one for loss to the property or the estate of the bankrupt. The plaintiff's case is based upon a loss of profits. The claim is simply not pleaded as a claim for damages referable to any injury to Mr Lee, or emotional distress, or hurt feelings. [Primary reasons [53.1]]
2. Mr Lee submitted that the reamended statement of claim dated 6 May 2020, at pages 23 - 37, set out a claim for damages based on loss to his personal credit and reputation. He said further that damages were sought in relation to that claim in the prayer for relief. The submission was then developed in various ways in Mr Lee's appellant's case. In substance Mr Lee pointed to various narrative pleas and, irrespective of the lack of any plea to that effect as part of his pleaded case, asserted that this must have damaged his reputation.
3. On a fair reading of the pleading there is no basis - let alone a properly arguable basis - for Mr Lee's submission that the reamended statement of claim set out a claim for damages based on loss to his personal credit and reputation. Nothing is gained from reproducing verbatim the pages Mr Lee has invited the court to consider. The submission simply misrepresents the effect of what is pleaded. It is enough to point to [47] above which does reproduce the nub of Mr Lee's claim for damages. Relevantly, action CIV/2660/2015 sought damages for alleged additional profit that Mr Lee was not able to derive due to the alleged contravening conduct the subject of the proceedings. There is no mention of any claim for damages for loss to Mr Lee's personal credit and reputation.
4. The primary judge was correct, for the reasons that his Honour gave as reproduced at [49] above, to conclude that action CIV/2660/2015 was not an action in respect of a personal injury or wrong done to Mr Lee for the purpose of s 60(4) of the Bankruptcy Act. Mr Lee was seeking, by action CIV/2660/2015, to recover profits that he might otherwise have derived thereby augmenting his property or estate. The claim was not concerned with injury to Mr Lee's person, character or feelings. Insofar as Mr Lee failed to establish that the proceedings he had commenced in CIV/2660/2015 was an action in respect of a personal injury or wrong done to him it followed that appeal CACV/88/2023 was incompetent and had to be dismissed.
5. In addition, for the same reasons, neither ground 1 nor ground 2 had a reasonable prospect of succeeding. That also meant that appeal CACV/88/2023 ought to be dismissed.[33]

1. For these reasons we made orders in each of appeal CACV/87/2023 and appeal CACV/88/2023 to the effect that:
   1. The appellant's appeal notice is struck out on the basis that the appeal is incompetent.
   2. The appeal is dismissed.
2. We also made orders for costs in favour of the relevant respondents who participated in the appeals. The costs were fixed in a modest amount ($506) to reflect that the work done for the respondents largely consisted of filing a respondent's notice of intention on the appeal. The costs orders followed the event.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Referring to Kingsfield Holdings Pty Ltd.

[2] Lee v The State of Western Australia [No 2] [2023] WASC 247 (primary reasons).

[3] Kingsfield Holdings Pty Ltd v Rutherford [2016] WASC 117.

[4] Kingsfield Holdings Pty Ltd v Sullivan Commercial Pty Ltd [2021] WASC 289.

[5] Lee v Lawfirst Pty Ltd [2023] WASCA 59 [20] - [29].

[6] Lee v Law Complaints Officer as the Delegate of the Legal Profession Complaints Committee [2023] WASCA 60 [23].

[7] Cox v Journeaux (No 2) [1935] HCA 48; (1935) 52 CLR 713, 721.

[8] Supreme Court (Court of Appeal) Rules 2005 (WA), r 5A, r 43(2)(fa)(i).

[9] Amended originating summons dated 24 October 2022 par 1(g).

[12] Primary reasons [47.4] - [47.5].

[13] Amended originating summons dated 24 October 2022 par 9.

[15] Primary reasons [47.1] - [47.2].

[24] Mr Lee mentioned Lee v Department of Justice [2020] WASC 105 and Lee v Department of Justice [2021] WASCA 152.

[25] Reamended statement of claim dated 6 May 2020 par 97(a).

[26] Reamended statement of claim dated 6 May 2020 par 97(d)(i).

[27] Reamended statement of claim dated 6 May 2020 pars 98 - 99.

[28] Reamended statement of claim dated 6 May 2020 par 100.

[29] Primary reasons [53.1] - [53.2].

[30] Reamended statement of claim dated 6 May 2020 par 104(a).

[33] Supreme Court (Court of Appeal) Rules, r 43(2)(g)(i).