Papoutsakis v Dunn

Proceedings below

1. Mr Papoutsakis is a resident of Tasmania. He was self-represented in this Court and in the underlying proceedings. The respondents are both solicitors in the employ of a firm called Dentons, which was retained by Prime Capital Securities in Local Court proceedings to recover an amount of $26,606.63 the subject of an invoice issued by Prime Capital Securities to Mr Papoutsakis. Prime Capital Securities obtained default judgment against Mr Papoutsakis and brought bankruptcy proceedings against him for non-payment of that judgment.
2. Mr Papoutsakis became a bankrupt on 21 May 2018 by a sequestration order made by a registrar in the Federal Circuit Court. The primary judge found that Mr Papoutsakis remained an undischarged bankrupt notwithstanding that more than three years had elapsed since the sequestration order: at [4(9)-(11)].
3. Mr Papoutsakis argued below that the proceedings fell within the exception to s 58 of the Bankruptcy Act in s 116(2)(g), being a right of a bankrupt to recover damages "for personal injury or wrong done to the bankrupt" (as a result of the distress caused by the default judgment in the Local Court proceedings leading to his bankruptcy).
4. Section 58(1) of the Bankruptcy Act provides: (1) Subject to this Act, where a debtor becomes a bankrupt: (a) the property of the bankrupt, not being after‑acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and (b) after‑acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.
5. Sections 116(1) and (2) of the Bankruptcy Act provide: (1) Subject to this Act: (a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; and (b) 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; and … is property divisible amongst the creditors of the bankrupt. (2) Subsection (1) does not extend to the following property: … (g) any right of the bankrupt to recover damages or compensation: (i) for personal injury or wrong done to the bankrupt, the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt; or (ii) in respect of the death of the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt; and any damages or compensation recovered by the bankrupt (whether before or after he or she became a bankrupt) in respect of such an injury or wrong or the death of such a person; …
6. The statement of claim filed 9 November 2023 was dismissed by the primary judge on the basis that Mr Papoutsakis was an undischarged bankrupt at the time so had no standing to bring the proceedings claiming damages against the respondents. Although that reasoning was dispositive, his Honour went on to consider two further grounds for dismissing the proceedings, which he also accepted. It is not necessary to refer to these other grounds.

Jurisdictional objection

1. The NSW Cross-vesting Act provides in ss 7(4), (6) and (7): 7 Institution and hearing of appeals … (4) Subject to subsections (6) and (7), where it appears that a matter for determination in a proceeding by way of an appeal from a decision of a single judge of the Supreme Court (not being a proceeding to which subsection (5) applies) is a matter arising under an Act specified in the Schedule referred to in subsection (3), that proceeding shall be instituted only in, and shall be determined only by - (a) the Full Court of the Federal Court or of the Federal Circuit and Family Court of Australia, as the case requires, or (b) with special leave of the High Court, the High Court. … (6) Where - (a) the Full Court of the Supreme Court commences to hear a proceeding by way of an appeal, and (b) before the Court determines the proceeding, it appears to the Court that the proceeding is a proceeding to which subsection (4) applies, the Court shall, unless the interests of justice require that the Court proceed to determine the proceeding, transfer the proceeding to the Full Court of the Federal Court or of the Federal Circuit and Family Court of Australia, as the case requires. (7) Where the Full Court of the Supreme Court - (a) determines a proceeding to which subsection (4) applies as mentioned in subsection (6), or (b) through inadvertence, determines a proceeding to which subsection (4) applies, nothing in this section invalidates the decision of that Court.
2. The Acts specified in the Schedule referred to in s 7(4) include the Bankruptcy Act 1966.
3. The qualifications in ss 7(6) and (7) relating to circumstances where this Court commences to hear an appeal or has determined an appeal, do not apply here.
4. In HSBY, the joint judgment said of s 7(5)(a) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) (the Commonwealth Cross-vesting Act), (which is in substantially the same terms as s 7(4)(a) of the NSW Cross-vesting Act), that if it appears that a matter for determination in an appeal from a decision of a single judge of the Supreme Court of a State is a matter arising under an Act listed in the Schedule, the appeal is required to be instituted in, and determined by, the Full Court of the Federal Court. The joint judgment held that s 7(5) of the Commonwealth Cross-vesting Act directs appeals of that kind to the Full Court of the Federal Court irrespective of the source of the federal jurisdiction that had been exercised by the Supreme Court at first instance: see, in particular [75]-[76], [104]-[105], [120]-[123]. The joint judgment explained that a matter "'arises under' a law if the right or duty in question in the matter owes its existence to that law or depends upon that law for its enforcement": at [106].
5. In this case, the right in question in the matter for determination on appeal is Mr Papoutsakis' standing to sue, notwithstanding that he was an undischarged bankrupt. On Mr Papoutsakis' case, that right owes its existence to s 116(2)(g) of the Bankruptcy Act. On the respondents' case, that asserted right is denied by s 58 of the Bankruptcy Act. That is, Mr Papoutsakis' standing to sue depends on whether the statutory exception to s 58 of the Bankruptcy Act (s 116(2)(g)) applies. As a result, s 7(4)(a) of the NSW Cross-vesting Act requires that any such appeal from a single judge of the Supreme Court be heard by the Full Court of the Federal Court.
6. Accordingly, the appeal is incompetent. Likewise, the proposed appeal the subject of the summons seeking leave to appeal is incompetent.
7. As to relief, in the alternative to his opposition to the motion, Mr Papoutsakis seeks an order that the appeal proceedings be transferred to the Full Court of the Federal Court. That application is declined. The qualification in s 7(6) of the NSW Cross-vesting Act relating to the circumstances in which this Court may transfer proceedings to the Full Court of the Federal Court does not apply because this Court has not commenced to hear the appeal: Eberstaller v Poulos (2014) NSWLR 395; [2014] NSWCA 211 at [27]-[28].
8. The appropriate orders are that the notice of appeal be dismissed as incompetent and the summons seeking leave to appeal be dismissed.

Costs of the appeal and the leave application

1. The respondents say that (1) the costs of their motion filed 1 October 2024 seeking a temporary stay of these proceedings pending the High Court's decision in HBSY should be costs in the cause, and (2) the costs of the putative appeal and the summons seeking leave to appeal should follow the event. They accept that Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.41(1) stands against a costs order in their favour as they failed to file a motion challenging the competency of the appeal within 28 days after service of the notice of appeal.
2. Nevertheless, the respondents ask the Court to "otherwise order" costs in their favour under r 51.41(2)(a), pointing to three matters: (i) the novel circumstances of the High Court's pending decision in HBSY, (ii) that Mr Papoutsakis has not incurred any unnecessary legal costs on account of their failure to comply with r 51.41(1)(i), and (iii) and the lack of merit in the proposed appeal itself. Subject to three qualifications, that submission is accepted.
3. The first qualification is that it is unnecessary and inappropriate to express a view on the merits of the proposed appeal.
4. The second qualification is that the respondents should only have their costs of the appeal proceedings on and from 23 September 2024 when they first informed Mr Papoutsakis by email that they intended to object to the competency of the appeal.
5. The third qualification is that the respondents should not have any costs of the summons seeking leave to appeal filed 13 August 2024. That is because the respondents did not foreshadow the competency objection when the Registrar made directions on 22 May 2024 for the filing of a summons seeking leave to appeal, given the terms of s 101(2)(l) of the Supreme Court Act 1970 (NSW). The orders of this Court on the competency objection will render this procedural step by Mr Papoutsakis futile.

2024/218114 1. Notice of appeal filed 7 June 2024 is dismissed as incompetent. 2. Appellant to pay the respondents' costs in this Court on and from 23 September 2024.

2024/297356 1. Dismiss the summons seeking leave to appeal. 2. Make no order as to costs of the summons, to the intent that each party pay their own costs of the summons.

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