Was the complaint within the AFCA scheme's jurisdiction?
103 I reject the submission of the trustee and the bank that whatever rights or powers Mr Kent sought to exercise in his complaint were rights in relation to property divisible amongst his creditors (as defined in s 116 of the Bankruptcy Act) that had vested in the trustee.
104 Relevantly, under s 5(1) of the Bankruptcy Act, 'property' means personal property of every description and 'the property of the bankrupt' means, relevantly, his or her rights and powers in relation to property divisible amongst his or her creditors that would have been exercisable by him or her had the bankruptcy not occurred. By force of s 58(1), the property of the bankrupt vests in the trustee forthwith on him or her becoming bankrupt and all after acquired property vests in the trustee as soon as it is acquired by, or devolves upon, the bankrupt.
105 Next, s 116(1)(a) and (b) identify, subject, relevantly, to s 116(2)(g), that the property of the bankrupt divisible amongst his or her creditors includes all property that belonged to, or vested in, the bankrupt and after acquired property that devolves before his or her discharge, as well as the capacity to exercise and take proceedings for exercising all such powers in, over or in respect of property as the bankrupt might have exercised for his or her own benefit in the period beginning at the commencement of the bankruptcy up to his or her discharge. Thus, subject to any exception in the Act, including, as I explain below, s 116(2)(g)(i), ordinarily, a right to take legal proceedings for a breach of contract, tort or statutory claim, being a cause of action in respect of, or otherwise amounting to, property, will vest in the trustee immediately on the bankruptcy or when, if before the bankrupt's discharge, the right comes into existence as after acquired property.
106 However, s 116(2)(g)(i) excepts from property of the bankrupt, relevantly, any right that he or she has to recover compensation for personal wrong done to the bankrupt and any compensation awarded in respect of such a wrong. The provision applies to rights to sue for, first, personal injury and, secondly, personal wrong done to the bankrupt and the different possible remedies of damage or compensation. In Cox v Journeaux (No 2) (1935) 52 CLR 713 at 721, Dixon J considered an analogue of s 116(2)(g) in relation to a pleaded claim of a conspiracy to injure the bankrupt which his Honour found did not evince any cause of action based on the asserted facts. In that respect, Dixon J, relying on the reasoning in Wilson v United Counties Bank Ltd [1920] AC 102 at 111 per Lord Birkenhead LC and 128133 per Lord Atkinson, said:
The plaintiff says that he himself is entitled to prosecute it under the proviso as an action for personal injury or wrong done to himself. 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.
(emphasis added)
107 In Wilson [1920] AC 102, the House of Lords upheld the jury's award of £7,500 damages to Major Wilson in respect of the United Counties Bank's breach of contract to maintain his credit and reputation while he was away on active service in World War I. His trustee in bankruptcy received over £45,000 from the jury in respect of Major Wilson's estate's financial loss for the same negligence. Lord Birkenhead LC agreed with Lord Atkinson and both applied what Erle J had given as advice to the House in Beckham v Drake (1849) 2 HLC 579 at 604; 9 ER 1213 at 1222. In that case, the bankrupt had attempted to sue for breach of a contract of service that provided for him to serve the employer for seven years at a fixed wage of 3 guineas per week which provided that any party in default had to pay the other £500. Their Lordships held that the right to sue for £500 damages passed to the bankrupt's assignees (ie equivalent to the modern trustee in bankruptcy). Lord Atkinson found (at 131, and see the similar findings at 111112 per Lord Birkenhead LC and at 136, 140 per Lord Parmoor) that the United Counties Bank's negligence "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".
108 In Sands v South Australia (2015) 122 SASR 195 at 227 [124][125], Blue, Stanley and Nicholson JJ held that, in Cox 52 CLR at 721, Dixon J had not suggested that a single cause of action bifurcated upon bankruptcy. Rather, the Full Court recognised that, in Wilson [1920] AC 102, Lord Atkinson had found that Major Wilson had two distinct causes of action. Blue, Stanely and Nicholson JJ held (at 231 [137]) that, in contrast, where the bankrupt sued on one indivisible cause of action, involving both financial and personal claims, the bankrupt's ability to maintain control of the proceeding after bankruptcy depended on its characterisation as being predominantly a claim within or outside an exception such as is now found in s 116(2)(g)(i). Thus, in Re Dosanjh; Ex parte Duus (1995) 56 FCR 521 at 523C, Kiefel J analysed decisions, including that of Lockhart J in Faulkner v Bluett (1981) 52 FLR 115 at 119, and held that the characterisation of a cause of action, for the purpose of determining whether it vests in the trustee or remains with the bankrupt after the bankruptcy, depended on whether the claim to damages is assessed by immediate reference to the bankrupt's rights of property or his or her mind, body or character.
109 It follows that a proceeding involving a cause of action with more than one head of damage, at least one of which involves, predominantly, the bankrupt's mind, body or character, and another or others, only incidentally, his or her property, will be characterised as remaining with the bankrupt, as Lockhart J explained in Bluett 52 FLR at 119. The characterisation process includes examining the initiating process, pleadings and other relevant documents: Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545 at 549G, 554FG per Lockhart J, 557F558B, 564BD per O'Loughlin and Merkel JJ; Samootin v Shea [2010] NSWCA 371 at [79][81] per Campbell JA, with whom Beazley and Hodgson JJA agreed. And, as Barker, Moshinsky and O'Callaghan JJ held in Luck v Chief Executive Officer of Centrelink (2017) 251 FCR 295 at 300301 [19][25], the characterisation of whether an action falls within the exceptions in ss 60(4) and 116(2)(g)(i) requires consideration of the substance of the particular cause of action: see too Moss v Eaglestone (2011) 83 NSWLR 476 at 486497 [31][77] per Allsop P, with whom Campbell and Young JJA agreed. But, as Allsop P pointed out in Moss 83 NSWLR at 494 [68], the difficulty arises where property and personal damage arise from the same wrong or cause of action and the degree to which the personal claim is severable from, or directly related to, or consequential upon, the property claim. Characterisation of the essential nature of an indivisible cause of action will determine whether it is within the exception in s 116(2)(g) or not: see too Mannigel v Hewlett Phelps [1991] NSWCA 186 per Handley JA at 3, with whom Kirby P and Meagher JA agreed.
110 Importantly, the words of the exception in s 116(2)(g)(i) of the Bankruptcy Act are broader than the exclusion from the automatic stay in s 60(4)(a). The latter allows an action that the bankrupt had commenced before his or her bankruptcy to continue if it is "in respect of ... any personal injury or wrong done to the bankrupt" (emphasis added), whereas s 116(2)(g)(i) excepts from property divisible amongst the bankrupt's creditors "any right of the bankrupt to recover damages or compensation ... for personal injury or wrong done to the bankrupt". A right to recover damages or compensation may or may not be pursued by an action (defined in s 60(5) as meaning "any civil proceeding, whether at law or in equity"), that is, a curial proceeding, and can, for example, be settled by agreement or pursued in administrative proceedings or an alternate dispute resolution process such as mediation, arbitration or the AFCA scheme: see Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45 at 53F54B per Kirby P, with whom Samuels JA at 57BC and Clarke JA at 57DE agreed.
111 Here, if Mr Kent retained one or more causes of action that did not vest in the trustee by the time of the deed or had a basis to satisfy AFCA that his complaint related to the provision by the bank of a financial service to him and arose from a contract or obligation imposed by a law (in accordance with rules B.2.1 and B.3.1), the trustee had no power to resolve his complaint.