Moss v Eaglestone

The nature of the action against the respondent 20The first step in the analysis is to understand the nature of the appellant's action against the respondent insofar as it is a claim for the loss of the right to sue in defamation. It is to be noted at the outset, that there was no argument before the primary judge that either the principal proceeding or the claim against the respondent was hopeless or for some reason bound to fail. That said, the pleading was in a form inviting a strike out application. 21The loss of a right of or chose in action by the wrongful conduct (whether in contract or tort) of a solicitor may entitle the client to sue the solicitor. The suit against the solicitor, if available, will be for the loss of the right or chose in question and its value. The task of the court (if liability be shown) is to value the lost right or chose. In Kitchen v Royal Airforce Association [1958] 1 WLR 563 at 575 Lord Evershed MR (with whom Parker LJ and Sellers LJ agreed) said: "... what the court has to do (assuming that the plaintiff has established negligence) in such a case as the present, is to determine what the plaintiff has by that negligence lost. The question is, has the plaintiff lost some right of value, some chose in action of reality and substance? In such a case, it may be that its value is not easy to determine, but it is the duty of the court to determine that value as best it can." 22The action is for the loss of the chose in action. The wrong is actionable in tort if something of value has been lost; a claim in contract will be available if there has been a breach of contract. Here it can be accepted that the action is one in contract or tort for the asserted negligent performance of the retainer or for failure to follow instructions. The assessment of the value of that lost chose (in tort or contract) is to be undertaken, not on the balance of probabilities as to what would have happened in the action, but by reference to the chances of success and the difficulties involved, even if the assessment is less than 50 per cent: Kitchen at 576 (Parker LJ), The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64 at 119 (Deane J), cited in Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 at 354 (Mason CJ, Dawson J, Toohey J and Gaudron J). Young CJ in Nickolaou v Papasavas, Phillips & Co [1988] VR 682 at 687 said of a professional negligence action against a solicitor for failing to bring proceedings to recover damages for personal injury: "The present case, however, is not a personal injuries case. The loss which the first appellant suffered as a result of the respondents' negligence was not injury to his person, but the loss of a chance of recovering damages for the personal injuries alleged to have been sustained by him in the accident on 4 September 1976. In assessing the value of that chance it is first of all necessary to estimate the first appellant's prospect of establishing in an action instituted within the limitation period that the unidentified driver was negligent and that his negligence caused the accident. ... Having estimated the first appellant's prospect of obtaining a judgment against the Incorporated Nominal Defendant, the next step in valuing the first appellant's lost chance is to estimate as best the court can what damages the first appellant might have recovered if the action had been brought." 23On appeal the majority of the High Court in Nickolaou v Papasavas, Phillips & Co [1989] HCA 11; 166 CLR 394 at 402-403 (Wilson J, Dawson J, Toohey J and Gaudron J) specifically endorsed these comments saying: "The Full Court rejected the approach taken by the trial judge, that damages should be assessed as at the date of the hearing of the claim against the solicitors. Young C.J. stressed that the action giving rise to the appeal was 'not an action for damages for personal injuries, but an action for damages for breach of duty as a solicitor, whether sounding in contract or in tort'. Furthermore, said the Chief Justice, the loss which Mr. Nikolaou suffered by reason of the respondent's negligence 'was not injury to his person, but the loss of a chance of recovering damages for the personal injuries alleged to have been sustained by him in the accident on 4th September 1976'." 24In Johnson v Perez [1988] HCA 64; 166 CLR 351 handed down on the same day as Nickolaou , Wilson J, Toohey J and Gaudron J said the following at 367: "The starting point is that 'a plaintiff who has been injured by the negligence of the defendant should be awarded such a sum of money as will, as nearly as possible, put him in the same position as if he had not sustained the injuries': Todorovic v. Waller [1981] HCA 72; (1981) 150 CLR 402, at p 412; see also Livingstone v. Rawyards Coal Company (1880) 5 App Cas 25, at p 39. In each of the present cases the respondent would, but for the negligence of his solicitor, have recovered damages for personal injuries against his employer. It is that loss for which he is to be compensated; he is not to be compensated as if his claim against his solicitor was a claim for damages for personal injuries." 25All these statements can be accepted as uncontroversial. The relevance of these expressions of principle depends on the context. Once it is proved that the chose lost was of real value, its value is to be assessed not by proof on balance of probabilities as at the date of the negligence action as if the solicitor were the defendant in the personal injuries claim, but by reference to loss of a valuable chance. That valuation is to be made at the time of the loss of the chose, although evidence of later events can be admitted in certain circumstances. What is clear, however, is that in seeking to prove the value of the lost chose, the plaintiff would be entitled and required to lead evidence of what would or might have occurred at trial by way of appropriate evidence to be led. Thus, it would be important in the preparation and running of any such case for the plaintiff to bring the best available evidence that would have been available, including in particular the evidence on damages, had the matter been prepared and brought to trial by the solicitor in the manner and at the time required by good practice or by following instructions. 26The professional negligence action may be in contract or tort or both. It will or may involve questions of the terms and extent of the solicitor's retainer, the scope and content of the duty of care, whether the duty was breached, any contributory negligence and the value of the lost chose, including the prospects of succeeding and of proving the damages said to have been suffered and any prospect of settlement.

Sections 60(4) and 116(2)(g) 27Section 60(4) finds its place in the section (s 60) concerning the stay of legal proceedings in Div 4 of Pt IV of the Act dealing with the effect of bankruptcy on property and proceedings. Section 58 vests the property of the bankrupt, including after acquired property, in the Official Trustee or the registered trustee. The word "property" is widely defined in s 5(1) as being "real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property". The general definition of property in s 5 needs be read in conjunction with the meaning of "the property of the bankrupt" for it is the property of the bankrupt, as defined by s 5(1) , which vests automatically upon the commencement of the bankruptcy in the official trustee, by virtue of s 58(1). The phrase "the property of the bankrupt" is defined (except in sub-ss 58(3) and (4)) as follows: "(i) the property divisible among the bankrupt's creditors; and (ii) 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" 28Section 116 deals with property divisible among the creditors of the bankrupt being (in s 116(1)(a)) all property that is vested in the bankrupt at the commencement of the bankruptcy, or is acquired or becomes vested, during the course of the bankruptcy (after acquired property). Section 116(1)(b) includes in property divisible amongst creditors "the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge". Thus, the wide definition of property in s 5(1) is incorporated in s 116(1)(a): see Griffin v Pantzer [2004] FCAFC 113; 137 FCR 209 at 232 [62] per Allsop J (Ryan J and Heerey J agreeing). There can be no doubt, therefore, that choses in action are prima facie included as property in the bankrupt's estate, subject to the exemptions in s 116(2)(g). In Rogers v Asset Loan Co Pty Ltd [2006] FCA 434 at [37] Greenwood J said: "The notion of property of the bankrupt within s 5(1) of the Bankruptcy Act seems to have the same meaning for the purposes of both s 58(1) and 116(1) of the Bankruptcy Act ", citing Cummings v Claremont Petroleum NL [1996] HCA 19; 185 CLR 124 and Cirillo v Citicorp Australia Ltd [2004] SASC 293 at [75]-[79] per Perry J, Bleby J and Gray J. With respect, I agree. 29Sections 60(4) and 116(2)(g) can be seen to run together: the former permitting the action to proceed at the instance of the bankrupt, the latter providing that the right to damages in such an action does not vest and fall in for the benefit of the creditors. 30In due course, attention will be directed to the prepositions and prepositional phrases in both provisions, in particular "in respect of" in s 60(4) and "for" and "in respect of" in s 116(2)(g)(i) and (ii).

The exclusion from the property of the bankrupt of actions for personal wrongs 31The history and operation of ss 60 and 116 were discussed by Lockhart J in Faulkner v Bluett [1981] FCA 3; 52 FLR 115. That decision, read with Dixon J in Cox v Journeaux (No 2) [1935] HCA 48; 52 CLR 713, is the foundation of understanding the meaning of s 60(4). Some further discussion is appropriate, however, in order that the policy informing s 60(4) is clear, so that the words of the provision guided by its context can be applied to this fact situation.

English statutory background 32The exclusion of actions for personal wrongs from the bankrupt's estate has its genesis in the English "common law of bankruptcy" developed in particular in the 1830s and 1840s: Faulkner v Bluett at 118-119 per Lockhart J. No like provision to s 60(4) or s 116(2)(g) is contained in English bankruptcy or insolvency legislation. The analogous provisions of the English law are ss 9 and 38 of the Bankruptcy Act 1914 (UK) (the "1914 UK Act") and s 306(1) (vesting of bankrupt's estate in trustee), s 283 (definition of bankrupt's estate) and s 436(1) (definition of property) of the Insolvency Act 1986 (UK) (the "1986 UK Act"). Section 9 of the 1914 UK Act provided for the general and discretionary power of the court to stay proceedings pending against a bankrupt. Section 38 set out the property divisible amongst creditors, without an exemption based on actions for personal injury as in s 116(2)(g). Neither of these provisions contained express reference to an exemption for a right in the bankrupt to bring an action in respect of, or damages awarded for, personal wrongs. This was left to the common law. The 1986 UK Act, likewise, does not express the distinction the subject of ss 60(4) and 116(2)(g). 33The history of conceptions of "property" in the English Acts and the legislative development of other exclusions from the bankrupt's estate shed light on the policy considerations informing the exclusion of some property from that divisible amongst creditors. There are two principal operative considerations in dealing with ss 60(4) and 116(2)(g), with equivalent principles of the common law, and with other statutory exemptions, not relevant here. These principles are: first, leaving the bankrupt with a reasonable allowance for his or her future support and maintenance, and secondly, the personal nature of exempted property which never forms part of the bankrupt's distributable assets. 34Developments between 1825 and 1869 radically altered the legislative landscape of English bankruptcy and insolvency law and introduced the system of laws upon which the Australian legislation was (and is) founded. The injustices of the system as it existed before these reforms are documented in Sir William Holdsworth A History of English Law (First published 1903) (7 th ed, 1956, reprinted 1966), Vol 1, at 470-472 and Vol 8 at 229-245 and see generally V M Lester Victorian Insolvency: Bankruptcy, Imprisonment for Debt, and Company Winding-up in Nineteenth-Century England (Clarendon Press, 1995) and W Cornish et al The Oxford History of the Laws of England Vol XII (Oxford University Press, 2010) at 779-823. 35The exclusions that developed at common law in the 1830s and 1840s are best understood in the context of the contemporaneous legislative developments. These developments saw the focus of the law change from being a mechanism for the protection of creditors to one that included a concern for the plight of the bankrupt. This concern can be seen to be reflected in development of legal and social values reflected in what was said by Deane J (albeit in dissent) in Kleinwort Benson Australia Ltd v Crowl [1988] HCA 34; 165 CLR 71 at 82. 36It was not until the nineteenth century (in particular the second half) that bankruptcy procedures were extended in their application beyond trading and mercantile men to non-traders and that imprisonment for debt was abolished: see generally An Act to amend the Laws relating to Bankrupts 1825 (6 Geo IV, c 16) (the "1825 UK Act"), An Act to establish a Court in Bankruptcy 1831 (1 & 2 Will IV, c 56) (the "1831 UK Act"), An Act to amend the Law relating to Bankruptcy and Insolvency in England 1861 (24 & 25 Vict, c 134) (the "1861 UK Act"), the Bankruptcy Act 1869 (32 & 33 Vict, c 71) (the "1869 UK Act"), the amending Act of 1883: Bankruptcy Act 1883 (46 & 47 Vict, c 52) (the "1883 UK Act"), the Debtor's Act 1869 (32 & 33 Vict, c 62) and the 1914 UK Act. 37Relevantly for present purposes, legislation during this period consolidated the numerous bankruptcy Acts then operative: the 1825 UK Act, s 1, established a Bankruptcy Court: the 1831 UK Act, s 1, dealt with the appointment of Official Assignees by the Lord Chancellor for the administration of bankruptcy proceedings: the 1831 UK Act, s 22, and introduced the automatic vesting of the bankrupt's personal estate in the Assignee or Assignees: the 1831 UK Act, s 25. 38By the 1869 UK Act, the concept of the property of the bankrupt as meaning the property divisible amongst creditors was introduced. The 1869 UK Act also contained the broad definition of property which is reflected in the Act, s 5, today (see also the 1861 UK Act, s 229). Included in the property divisible amongst creditors was property vested in the bankrupt at the commencement of the bankruptcy and after acquired property (s 15(3)), as well as the capacity to exercise and take proceedings to exercise power over or in respect of the bankrupt's property, except the right of nomination to a vacant ecclesiastical office (s 15(4)). Also included within the property divisible were goods in the bankrupt's possession by the consent of the true owner (s 15(5)). 39Excluded from property divisible amongst creditors was any property of the bankrupt held on trust (s 15(1)) and the "tools (if any) of his trade, and the necessary wearing apparel and bedding of himself, his wife and children, to a value, inclusive of tools and apparel and bedding, not exceeding twenty pounds" (s 15(2)). The 1883 UK Act and the 1914 UK Act both contained similar provisions: ss 44 and 38 respectively. 40These exclusions were consistent with rehabilitation of the bankrupt, rather than being referable to the quality of the goods exempted, the latter being a matter of interest to the common law. As an aspect of that rehabilitation, the bankrupt should be left with the resources necessary to live an ordinary and decent life. As stated in H J Stephen New Commentaries on the Laws of England (1842, Butterworth, London) (reprinted 1979, Garland Publishing Inc, New York) Vol II, at 204 (founded upon Blackstone's Commentaries): "A bankrupt thus certified, is not only clear from his debts, but entitled to a decent and reasonable allowance out of his effects, for his future support and maintenance, and to put him in a way of honest industry. This allowance is also in proportion to his former good behaviour, in early discovering the decline of his affairs and thereby giving his creditors a larger dividend." 41There was, however, no express provision dealing with the bankrupt's right to bring an action for personal injuries or wrongs done to him or her vesting in the trustee (except, as mentioned, for the right to appoint to ecclesiastical office). The rules concerning this topic had been developed by the courts in the 1830s and 1840s in the common law, to which cases I will come. 42As will be seen shortly, Australian legislation took a slightly different course (at least in form, though not in substance) by expressing the right of the bankrupt to pursue personal actions. In Australia, the expression of the bankrupt's right to sue, reflective of the common law, was contained in some Colonial and State Acts (referred to at [61] below) and the first Australian Commonwealth Act: Bankruptcy Act 1924 (Cth) (the "1924 Act"). It was not until 1966 that the exclusion of personal actions and their product from divisible property was removed from the common law of bankruptcy and placed into the statute in s 116(2)(g). It is important, therefore, to understand that common law and the legal policies informing it in order better to appreciate the content and operation of a provision such as s 60(4) and the cognate provision, s 116(2)(g).

The common law of bankruptcy 43In Cox v Journeaux at 721, Dixon J expressed the test for the operation of the proviso to the 1924 Act, s 63(3) as follows: "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." 44The proviso to s 63(3) was in the following terms (noting the preposition "for"): "Provided that any bankrupt may continue, in his own name and for his own benefit, any action or proceedings commenced by him previous to his bankruptcy for any personal injury or wrong done to himself or to any member of his family." 45The expression of the matter by Dixon J was based on what had been said by Lord Birkenhead LC and Lord Atkinson in Wilson v United Counties Bank [1920] AC 102 at 111-112 and 128-133, respectively. In that case, Major Wilson and his trustee in bankruptcy sued the bank and its manager for damages for breach of contract to supervise the affairs of Major Wilson and his credit (and thus reputation) whilst he was on service during the Great War. It was alleged that through the negligence of the bank in the discharge of the duty undertaken he was made bankrupt. The jury awarded 45,000 pounds damages for the loss occasioned to Major Wilson's estate and 7,500 pounds damages for the injury to Major Wilson's credit and reputation. The former passed to the trustee, the latter enured for the benefit of Major Wilson. 46Lord Birkenhead at 111-112 referred to the seminal case of Beckham v Drake (1849) 2 HLC 579; 9 ER 1213 and in particular the reasons of Erle J, whilst also agreeing with Lord Atkinson's detailed reasons. The expression of the matter by Erle J upon which the Lord Chancellor relied (at 111), and thus upon which Dixon J relied in Cox v Journeaux , was as follows: "The right of action does not pass where the damages are to be estimated by immediate reference to pain felt by the bankrupt in respect of his body, mind, or character, and without immediate reference to his rights of property. Thus it has been laid down that the assignees cannot sue for breach of promise of marriage, for criminal conversation, seduction, defamation, battery, injury to the person by negligence , as by not carrying safely, not curing, not saving from imprisonment by process of law." (Emphasis added in Wilson by Lord Birkenhead LC.) 47Lord Atkinson's detailed analysis at 128-133 addressed the question whether Major Wilson was entitled to keep the damages for the injury to his credit and reputation in particular in circumstances where the same breach of contract caused the loss to his estate and the injury to his credit and reputation. His Lordship's conclusion was that the "right of action in respect of this injury" (see 128) did not pass to the trustee. His credit and repute were personal (and of great value) to Major Wilson, and were not part of his assets. His property did not lessen or depreciate by damage to them. Thus a clear distinction was made between property and person; compensation for injury to the former being part of the estate for the benefit of creditors, compensation for injury to the latter being personal to the bankrupt. 48Lord Atkinson then examined the case law in support and elucidation of the above essential proposition. He first referred to Brewer v Dew (1843) 11 M & W 625; 152 ER 955; which concerned exemplary (termed "vindictive") damages for trespass to goods. Such damages, beyond the mere value of the goods, remained for the plaintiff bankrupt to sue for. He then referred to Rogers v Spence (1846) 12 Cl & F 700; 8 ER 1586 which concerned the breaking and entering of the plaintiff's premises. The plaintiff was made bankrupt. Lord Campbell drew the clear distinction between injuries done personally to the bankrupt (including his right to possession of property) and injuries done to his property. Lord Campbell discussed the circumstances of mixed injury (to person and to property). Lord Atkinson (at 129) quoted the following from Lord Campbell's reasons in Rogers v Spence : "It may possibly be that the law will give an action to the bankrupt for the personal injury which has been sustained by him, and will give an action to the assignees for the injury which has been done to the property; as, for example, in the case which has been put during the arguments, of the owner of a ship being on board, and the ship being run down on the high seas, and the ship going to the bottom, and the owner escaping and afterwards becoming bankrupt: it is possible that he may maintain an action for the personal injury done to him, and that the assignees may maintain an action for the injury done to the property. But it is not necessary at all in this case to enter into the consideration of such questions." 49Lord Atkinson then discussed Beckham v Drake . This case concerned the dismissal of a servant within the agreed period of service. The agreement for service contained a (penal) provision for the payment of 500 pounds upon breach by either side. After he became bankrupt, the servant sued for the 500 pounds. He claimed that the action was personal to him as being based on the product of his personal services and labour. The House of Lords was advised by seven judges (two judges to the contrary) that the plea of bankruptcy was an answer to the action and that the Court of Exchequer Chamber had correctly so found in reversing the Court of Exchequer of Pleas. Lord Atkinson referred to the reasons of Erle J (in the passage earlier cited); and (at 130) to the reasons of Maule J who said: "There is no doubt that the right to bring an action for an injury to the person, character , or feelings of a bankrupt, does not pass to the assignees, and that the right to bring an action for the payment of money agreed to be paid to a bankrupt does pass. And it appears to me that the present action is in effect an action on a contract to pay money." Thus, the principle relied upon by Lord Atkinson was the clear distinction between person and property. 50That said, Lord Atkinson was also concerned with the question of mixed injury (to which Lord Campbell had directed remarks in Rogers v Spence ). Baron Parke in Beckham v Drake also directed some comments to this question that were set out by Lord Atkinson at 130-131. Parke B did not decide the question because it was clear that this was a suit to recover property. He posited, however, the following that was set out by Lord Atkinson in Wilson at 130: "Who then are to sue for the breach of contract where part belongs to the assignee, part of the bankrupt? .... Either the right of action on the contract must be divided, and each sue, or the right of action altogether must remain in the bankrupt, or altogether be transferred to the assignees, or both must join, the contract being entire, and sue for damages. ... I should feel considerable difficulty in deciding the question, but this case does not depend upon it ..." 51In Rose v Buckett [1901] 2 KB 449 (referred to by Lord Atkinson at 131) the Court of Appeal was concerned with a wrongful entry case in which the plaintiff's goods were converted and the plaintiff suffered significant personal annoyance. Given that no substantial damage was inflicted on property or goods the action was held not to pass. 52Lord Atkinson, in support of the treatment of the injuries as separate, then referred (at 131-132) to Brunsden v Humphrey (1884) LR 14 QBD 141 and the view of the majority of the Court of Appeal (Brett MR and Bowen LJ, Lord Coleridge LCJ dissenting) that the one wrongful act led to distinct and different causes of action - to property and person. (See in New South Wales, Marlborough Harbour Board v Charter Travel Co Ltd (1989) 18 NSWLR 223 at 230-231, 233 and approved in England in Derrick v Williams [1939] 2 All ER 559, Lord v Pacific Steam Navigation Co Ltd (The 'Oropesa') [1943] P 32 and Taylor v O'Wray & Co [1971] 1 Lloyd's Rep 497, but see more recently in England, Stock v London Underground Ltd , The Times, 13 August, 1999, Bovis Construction (South Eastern) Ltd v Greater London Council (1985) 9 Con LR 1, Marc Rich & Co AG v Bishop Rock Marine Co Ltd [1994] 3 All ER 686 at 691 - Saville LJ in the Court of Appeal and Ord v Upton [2000] Ch 352, discussed in the note by G Watt entitled "The Fall of Humpty Dumpty's Wall: Putting Negligence Together Again" (1999) 8 Nottingham Law Journal 89.) It is to be noted at this point that in Ord v Upton the Court of Appeal considered that a claim for medical negligence for personal injury vested in the trustee, on the basis that some of the damages were for past economic loss, and the cause of action was indivisible. Nevertheless the trustee in bankruptcy was to hold damages for personal harm (such as pain and suffering) on trust for the bankrupt. 53Lord Atkinson then (at 131-132) concluded as to the separateness of the actions: "In the present case by parity of reasoning it would seem to follow that the negligence of the defendants gave rise to two distinct causes of action, the one consisting of injury to the bankrupt's estate, the other personal and consisting of injury to his character, credit and repute; the first passing to his trustee, the second remaining vested in himself. If that be so, independent actions could have been instituted against the defendants, the one by the trustee the other by the bankrupt; each claiming damages in respect of the right of action vested in him. I do not think any insurmountable difficulty is created in the present case by the fact that both sue as plaintiffs, since the damages to which they are respectively entitled have been separately found." 54Lord Atkinson then (at 132) distinguished Addis v Gramophone Co Ltd [1909] AC 488, since there was an express agreement to maintain Major Wilson's credit and reputation. 55It is important to appreciate the clear basis upon which Lord Atkinson founded the distinction: property and person. Erle J, Maule J and Parke B were not the only judges in Beckham v Drake to base their analyses on the distinction. Williams J at 2 HLC at 599; 9 ER at 1220 (in this respect, with whom Cresswell J agreed: 2 HLC at 613; 9 ER at 1225) referred to Rogers v Spence and said: " ... no action can be maintained, either by an executor or by an assignee, to recover damages for bodily or mental sufferings or personal inconvenience sustained by the deceased or by the bankrupt; the foundation of which is, perhaps, that it would in many cases be attended with extremely harsh and unjust consequences if the discretion, as to whether a redress for wrongs of this nature should be sought, was to be intrusted to any one but the very person who has received the injury." Thus, to give the solace for the hurt to the person or personal feelings to general creditors was considered harsh and unjust. The recognition of this underlying proposition in the English common law of bankruptcy is important when one comes to appreciating the scope or limits on the words used in Australian legislation that can be seen to have brought into express statutory form the pre-existing common law. 56Of the judges in the majority, Wightman J (2 HLC at 617; 9 ER at 1227), Parke B (at 2 HLC at 625-626; 9 ER at 1230) and Lord Brougham (at 2 HLC at 639-640; 9 ER at 1235) also expressed the matter based on the distinction between person and property (cf Wilde LCJ at 2 HLC at 631-633; 9 ER at 1232-1233). 57Lord Abinger CB in Howard v Crowther (1841) 8 M & W 601; 151 ER 1179 was equally clear about the norm involved in the distinction, being the justice of the matter. In the context of a claim for the seduction of the plaintiff's sister (also his servant) his Lordship said (at 8 M & W at 604; 151 ER at 1180): "Nothing is more clear than that a right of action for an injury to the property of the bankrupt will pass to his assignees; but it is otherwise as to an injury to his personal comfort. Assignees of a bankrupt are not to make a profit of a man's wounded feelings; causes of action, therefore, which are, as in this case, purely personal, do not pass to the assignees, but the right to sue remains with the bankrupt." Alderson B and Gurney B agreed, the former stating ( ibid ): "The service, for the loss of which this action is brought, is of more value to one than another, and the loss of it is therefore only a personal injury. Assignees can maintain no action for libel, although the injury occasioned thereby to the man's reputation may have been the sole cause of his bankruptcy." 58The distinction is also clearly stated by Tindal CJ in Hancock v Caffyn (1832) 8 Bing 358 at 366-367; 131 ER 432 at 435. 59The reasons of Erle J in Beckham v Drake and the decision in Wilson were applied, without question, by the Court of Appeal (Sir Thomas Bingham, MR, Steyn LJ and Hoffmann LJ) in Heath v Tang [1993] 1 WLR 1421. 60As well as this distinction between person and property was the operation of rules concerning the assignment (or not) of choses in action and the comparative position of executors and assignees in bankruptcy. Some of the reasoning in Beckham v Drake concerned the question of survivability of the personal action, as did the reasons of Littledale J in Wright v Fairfield (1831) 2 B & Ad 727 at 732-733; 109 ER 1314 at 1316. It is unnecessary to explore the intricacies of the maxim actio personalis moritur cum persona as giving content to the modern Australian statute. See generally as to the maxim in this context, H R Weinberg "Tort Claims as Intangible Property: An Exploration from an Assignee's Perspective" (1975) 64 Kentucky Law Journal 49. That said, to the extent that it is relevant (and leaving aside statutory change) the statement of Williams J, Webb J and Kitto J in Poulton v The Commonwealth [1953] HCA 101; 89 CLR 540 at 602 is binding: "In the second place, if it were true that the Commonwealth were guilty of conversion of the Donlons' wool, it would be the Donlons alone who could elect to waive the tort and take the proceeds of sale. This would be so, both because there was not in fact any purported assignment to the plaintiff of the right of action for the tort, and because, according to well-established principle, the right was incapable of assignment either at law or in equity: Dawson v. Great Northern & City Railway Co . (1905) 1 KB 260, at pp 270-271; Defries v. Milne (1913) 1 Ch 98." See R P Meagher, J D Heydon and M J Leeming Meagher Gummow and Lehane's Equity: Doctrines and Remedies (4 th Ed, LexisNexis, 2002) at 281 [6-480].

The Australian legislative history of ss 60(4) and 116(2)(g) 61In some of the Colonial and State bankruptcy statutes express provision was made for excluding from the stay of actions by the bankrupt, actions for any personal injury or wrong done to himself or his family: see Insolvency Act 1841 (NSW) (5 Vic, No 17 (NSW) 1), s 33; Bankruptcy Act 1887 (NSW), s 10(6); Bankruptcy Act 1898 (NSW), s 10(7); Insolvency Act 1874 (Qld), s 88 and Insolvency Act 1915 (Vic), s 176. In Tasmania, South Australian and Western Australia, the Acts were modelled on the English provisions and did not expressly reserve these actions to the bankrupt: Bankruptcy Act 1870 (Tas), s 12; The Insolvent Act 1886 (SA), s 221 and Bankruptcy Act 1892 (WA), s 10, respectively. 62The first Commonwealth bankruptcy legislation, the 1924 Act, whilst based substantially on the then existing English legislation, like the New South Wales, Victorian, and Queensland Acts, contained a proviso to the provision dealing with the stay of the bankrupt's actions in s 63, saving to the bankrupt actions for personal wrongs, with which proviso Dixon J dealt in Cox v Journeaux . There was no precise equivalent of s 116(2)(g) in the then equivalent provision (s 91) dealing with property divisible among creditors of the estate, though it dealt with property held on trust, policies of life insurance or annuities, the ordinary tools of the bankrupt, goods under hire, and property of a married woman subject to a restraint on anticipation. However, s 91 further provided that "subject to this Act", the property divisible "shall include": "(ii) the capacity to exercise, and to take proceedings for exercising, all such powers in or over or in respect of property as might have been exercised by the bankrupt for his own benefit at the commencement of the bankruptcy or before his discharge". This provision (in particular in the context of the proviso in s 63(3)) was wide enough to incorporate the common law of bankruptcy and thus exclude from the divisible estate the proceeds of personal actions. 63In 1966, the Act was passed. As enacted, it contained s 60(4) and introduced s 116(2)(g). Subsequent amendments to those sections have not affected the exemption in respect of personal wrongs. The 1966 Act was preceded by the "Report of the Committee Appointed by the Attorney-General of the Commonwealth to Review the Bankruptcy Law of the Commonwealth" in 1962. The committee was chaired by the Hon Sir Thomas Clyne, Federal Judge in Bankruptcy (the "Clyne Report"). There was no direct discussion in the Clyne Report regarding s 60. Comments were made, however, about the new s 116(2)(g). Paragraph 164 stated that the Committee considered that it should be expressly provided that the property divisible amongst creditors was not to include any right to recover damages or compensation, stating: "Such a provision appears to the Committee to be a necessary corollary to clause 60(4) of the Bill, which authorizes a bankrupt to continue, in his own name and for his own benefit, any action or proceeding commenced by him before his bankruptcy for any personal injury or wrong done to himself or to any member of his family. The proposed provision will also make it clear that damages or compensation recovered in respect of such an injury or wrong are equally protected." 64Thus, when one comes to the words of ss 60(4) and 116(2)(g) it is to be recognised that the background and context are, through various Colonial and State, and later Commonwealth provisions, reflective of, and embodying, the notions within the common law of bankruptcy. That assists in appreciating that the distinction (in ss 60(4) and 116(2)(g)) between person and property is a substantive one. It was a distinction made by courts and judges of the highest authority who declared it to be unjust and harsh that the estate of the bankrupt and the participating creditors should be swelled and advantaged by a wrong to the person or reputation of the bankrupt. 65The terms of ss 60(4) (and 116(2)(g)) reflect that distinction of substance. The words "action commenced by him or her ... in respect of any personal injury or wrong done to [him or her]" require the substance of the matter to be examined. Assuming the underlying facts in the appellant's favour, if the solicitor had commenced the action for defamation against News, it would not have been stayed under s 60(2) and it would have enured for the appellant's benefit under s 116(2)(g). It was a wrong to his reputation. The product of an action to vindicate such a personal wrong did not under the common law, or s 116(2)(g), swell the bankrupt's estate divisible among creditors. It was personal vindication. What is different on the hypothesis that the direct claim has now been lost is that the bankrupt now has a claim for the loss of that chose in action (that would not have fallen into his estate). There is the interposition of a claim (in contract, or tort, or both) for negligence, separating the appellant from the underlying claim for defamation (which has been lost). There is no sound reason in logic or policy why that claim should now enure for the benefit of creditors, when the primary claim did not. 66The prepositional phrase and preposition in ss 60(4) ("in respect of") and 116(2)(g)(i) ("for") are sufficiently flexible to be amenable to that width of construction. The words of Dixon J in Cox v Journeaux are likewise apt to cover the matter. The damages being the value of the chose will be estimated in significant respects by the immediate reference to the reputational harm. 67There is no reason in policy for, nor do the words of ss 60(4) or 116(2)(g) require, the Court to characterise an action for professional negligence for the loss of a valuable right to sue for defamation as concerned with property of the estate of the bankrupt and not his person.

The modern case law and that relied on by the parties and disposition of the appeal 68None of the cases relied on by the parties in argument contradicts these conclusions. All recognise the distinction between person and property. The difficulty arises, as often is the case, where property and personal damage arise from the same wrong or cause of action. The dividing line in these cases has been drawn by reference to whether the personal action is severable from, or directly related to, or consequential upon, the property claim. These difficulties do not arise here; the limitation on the grant of leave to appeal was to the claim for defamation. That is a separate cause of action. Nevertheless, it is instructive to examine these Australian cases. 69In Daemar the summons for prerogative relief against the Industrial Commission was an action under s 60. Kirby P (with whose reasons Clarke JA agreed) concluded that the personal hurt of which the plaintiff complained from the reasons was inseverable from the claim concerning property. As Finn J said in Rana v Musolino [2009] FCA 1050 at [39] discussing Daemar , the action for prerogative relief takes its character in part from the rights sought to be vindicated in the underlying claim. This supports the view earlier expressed that the professional negligence action for the loss of the personal claim maintains or derives its character from that of the action that has been lost. 70The respondent relied on Morgan v Steble (1872) LR 7 QB 611. There, a claim for a breach of duty by attorneys in not getting the best price for an equity of redemption in premises entrusted to them for sale was barred by the interposition of the bankruptcy. There was an averment that the defendants knew that bankruptcy would ensue if a reasonable price were not obtained. The loss of value in the equity of redemption was plainly a matter of property. Blackburn J, Mellor J and Lush J considered Hodgson v Sidney (1866) LR 1 Ex 313 in point. In Hodgson the claim was for fraudulent misrepresentation whereby the plaintiff made certain advances which were lost, and thereafter he went bankrupt. The claim was, in addition to the pecuniary loss, for damage to character and credit. The case turned on a pleading question. Martin B delivered the judgment of the Court (Pollock CB, Martin B, Bramwell B and Channell B). The plea, which was to the whole declaration, was expressed to be (see LR 7 QB at 315) "except as to the claim in respect of the plaintiff's becoming or being adjudicated bankrupt, and suffering the alleged personal annoyance, and being put to trouble and inconvenience, and being injured in character and credit". Thus, the plea was directed only to the pecuniary claim. In argument, Bramwell B had stated (see LR 7 QB at 314): "The plaintiff's only cause of action is a direct pecuniary loss. The claim as to the adjudication is clearly too remote." The statement in the reasons (at LR 7 QB at 315) that the exception was of no effect is to be understood in this light, Martin B saying (at 315): "The plea may be taken as if pleaded to the whole declaration; and, therefore, as we are of opinion that the pecuniary damage claimed and alone capable of being recovered passes to the assignees, our judgment is for the defendant." 71Bramwell B made some obiter comments, separately at 315-316: "I only wish to add that, assuming that there was special damage recoverable, I do not think that the cause of action can remain partly in the bankrupt to recover such damage, and partly can pass to the assignees to recover the pecuniary and ordinary damage. If two several torts had been committed there would be no reason why the bankrupt should not recover in respect of one, and the assignees in respect of the other. But where, as in this case, there is but one single cause of action resulting in direct pecuniary and in special damage, the bankrupt cannot say that enough of it remains in him to enable him to recover the special damage." 72The respondent submitted that these decisions, though not referred to in Wilson , remain persuasive. Even if that be the case, they direct attention only to the difficulty of the mixed injury. It is unnecessary to resolve the doubt expressed by the authors of Williams and Muir Hunter: The Law and Practice in Bankruptcy (19 th Ed, Stevens & Sons, 1979) at 293 whether Morgan v Steble remains good law. It, and Hodgson , can be distinguished as concerned with the consequences of being made bankrupt consequent upon the interference with property and concerned with the question of mixed injury for the wrong in question. These cases reflect the reasoning of the Full Court of the Federal Court in Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545 at 554 and 564 and this Court in Mannigel v Hewlett Phelps [1991] NSWCA 186 (BC 9101907). 73In Bryant , Lockhart J held (at 554) that general damages for loss of business reputation, loss of standing in the community, loss of amenities of family life, stress and suffering and exemplary damages were "consequential upon the loss or damage ... which is referable to the proprietary claims" and thus passed to the trustee. O'Loughlin J and Merkel J likewise (at 564) said that injuries arising as a direct result of infringements of financial or property rights passed to the trustee. Their Honours agreed with Handley JA in Mannigel and applied Lockhart J in Faulkner v Bluett insofar as his Honour had concluded that a personal claim that is directly related to the property claim passed to the trustee: Faulkner v Bluett at 119 and 122. 74In Mannigel , the plaintiffs had sued their former solicitors for professional negligence in connection with purchase of land and the construction of a home on the land. They claimed damages for their economic loss and for the loss of their credit and reputation, inconvenience, mental distress and strain. It was formally admitted that these latter damages were the consequences of the economic loss. Handley JA (with whom Kirby P generally agreed and Meagher JA agreed) said: " The plaintiffs claims for damages for loss of credit, for mental distress, inconvenience and for injury to their physical and mental health therefore were not claims 'without reference to their rights of property' within the principle stated by Dixon J On the contrary those claims were consequential on damages to the plaintiff's financial and property interests as a result of alleged breaches of professional duty by the solicitors. The plaintiffs in the present case sue on indivisible causes of action in tort and contract. Those causes of action formed part of the property of the plaintiffs which vested in the Official Receiver on their bankruptcy. No separate cause of action to recover damages for any personal injury or wrong has been pleaded or exists in the circumstances. Accordingly the proceedings in the Common Law Division of this Court were stayed by the operation of s60 subs(2) on 3 December 1979 and remained stayed throughout the bankruptcy." Kirby P noted in addition: "As to the indivisible character of the causes of action upon which the appellants sued, I would merely add that in the agreed facts which were tendered at the trial the following agreed fact appears: '5. The damages particularised in para17(e), (f) and (g) of the amended statement of claim are alleged by the plaintiff to be the consequence of the other damages particularised in para17(a), (b) (c) and (d) but are not alleged to be otherwise the result of the alleged breaches of duty by the defendants.' This agreed fact made clear the character of the alleged damages as they were presented to the trial judge and on the basis of which the separated question was answered by him. It is true that they bear, at first glance, the character of personal wrong. However both in the pleadings and in the agreed facts they are related to the causes of action in contract and tort sued upon. Those causes of action are not of the character which are saved by s60(4)." 75Daemar can be seen to be similarly founded - the personal injury was inseverable from the financial wrong complained of that was the subject of the suit in the Industrial Court. See also Murdaca v RAMS Mortgage Corp and Owens v Comlaw (No 62) Pty Ltd [2006] VSCA 151; 201 FLR 275. 76It is to be recalled that Erle J in Beckham v Drake and Dixon J in Cox v Journeaux used the expression "and without immediate reference to his rights of property". This phrasing supports the approach in Faulkner v Bluett , Mannigel , and Bryant . 77No one submitted that any of these Australian cases, Faulkner v Bluett, Mannigel, Bryant or Daemar should not be followed. What they permit is a conclusion, that to the extent that damages for personal injury or wrong are inseverable from or directly consequential upon interference with property rights, a claim for them does not survive the stay brought about by s 60(2). This would not mean, however, that the action here for the lost chose in action, being the defamation claim, was stayed under s 60(2). It is an action that is referable to or "in respect of" a personal wrong. Whilst the claim for defamation against News may have comprised part of the same controversy or matter as contained in the matter litigated before Delaney DCJ if one were engaged in an analysis of federal jurisdiction, it was not inseverable from the contract claim or consequential upon it as arising out of that cause of action. There was a separate and distinct cause of action for defamation for the publication of the appellant's antecedent criminal record. This circumstance was distinguishable from Hodgson , Morgan v Steble , Mannigel and Bryant where the "personal" injury flowed from, as one of the effects of, the damage to property. It remains for another occasion to explore how far cases such as these should be taken to deny a bankrupt a substantive claim for non-pecuniary and personal damage which would otherwise fall within the description of the consequence of "personal injury or wrong" because of its connection to an otherwise indivisible cause of action, and whether, and if so to what extent, ss 60(4) and 116(2)(g) can be seen to operate to divide the value of an action between trustee and bankrupt, or the extent to which the approach of the Court of Appeal in Ord v Upton is to be, or might be, applied under the Act. In this respect, the following passage from Lockhart J's reasons in Faulkner v Bluett at 119 is relevant: "There is still some doubt whether a right of action passes to the trustee where one and the same cause of action results in substantial damage to the property of the bankrupt as well as substantial injury to his person or annoyance to his feelings: Beckham v. Drake ; Hodgson v. Sidney ; Morgan v. Steble . In England the accepted view seems to be that such a cause of action passes to the trustee so far as it relates to the property of the bankrupt, and remains with the bankrupt so far as it relates to his person or feelings: Wilson v. United Counties Bank Ltd . Some of the problems that arise from this notion of a "mixed action" appear from cases such as Wilson v. United Counties Bank Ltd . and Beckham v. Drake ." See also Bride v Peat Marwick Mitchell [1989] WAR 383 at 392-393 and Coyne v Commercial Equity Corporation Ltd (1998) 20 WAR 109 at 116-117 and the cases there cited. 78The appellant's claims against the respondent initially were not limited to the claim for defamation: see the discussion by Campbell JA at the leave application. Such claims, to the extent that they can be seen to be consequential upon the loss of the property and financial claims were apparently stayed by s 60(2) applying the cases to which I have last referred. In any event, no leave was granted to appeal in respect of these claims. 79Restricting consideration to the claim for the lost defamation case, on the proper construction of ss 60(4) and 116(2)(g) of the Act, the claim for professional negligence was not stayed under s 60(2), but survived for prosecution in the name of the appellant under s 60(4). At the moment, the pleading is insufficiently clear or coherent to permit the matter to proceed. Indeed, counsel for the appellant properly accepted that the pleading should be struck out with liberty to replead within 28 days. Given the closure of the Court and Registry during January, I would order the time for liberty to replead be until the end of the second week of term of 2012, that is, 10 February. 80The orders that I would make are: (1)Appeal allowed. (2)Set aside the orders of the Supreme Court made on 13 November 2009, and in lieu thereof order that: (a)the statement of claim be struck out, with liberty to replead up to and including 10 February 2012 and the notice of motion dated 31 July 2009 be otherwise dismissed; and (b)costs of the motion be costs in the cause. (3)Respondent to pay the appellant's costs of the appeal. 81CAMPBELL JA: I agree with Allsop P. 82YOUNG JA: I agree with Allsop P.

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