Peter Tomson v Frank John Boitano

Summary judgment 3Rule 13.4(1) of the Uniform Civil Procedure Rules provides that the Court may dismiss proceedings generally, or in relation to any claim for relief, in three circumstances. These are, if the proceedings are frivolous or vexatious, or if no reasonable cause of action is disclosed, or if the proceedings are an abuse of the process of the court. 4The defendants accept the demanding test for summary dismissal as set out in General Steel Industries Inc v The Commissioner for Railways New South Wales (1964) 112 CLR 125 at 129. 5However, this application turns on a question of law - namely, whether, by reason of the plaintiff's bankruptcy, he has or had standing to bring the claim. There is no reasonable prospect that the deficiencies in what is pleaded will be able to be cured by amendment; the application does not depend upon possibly contentious factual issues, and the trial which would otherwise take place would be lengthy (about 10 days - see para 43 of Mr Kozub's affidavit sworn 25 February 2011): per Macfarlan JA in Leerdam v Noori [2009] NSWCA 90 at [74]-[77]. 6Even if the Court regarded the legal issue raised to be a difficult question of law, it is not an inseparable barrier to granting summary judgment: see for example Wickstead v Browne [1992] NSWCA 272 and Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241, where the question of law as to whether auditors of a borrower corporation owed a duty of care to a financier was argued all the way to the High Court and the primary judge's decision to summarily dismiss the claim was upheld. 7The defendants submitted that on this application the Court should determine the question of law and if a determination is made against the plaintiff, it is just, quick and cheap (s 56 Civil Procedure Act 2005) that the proceedings be summarily dismissed pursuant to UCPR 13.1. 8The defendants submitted that if its arguments on standing are correct, not only are the proceedings doomed to fail, but the maintenance of these proceedings is an abuse of process. Alternatively, if the Court is satisfied that the proceedings are incompetent, the Court should dismiss the proceedings: Samootin v Shea [2010] NSWCA 371 at [65].

Background 9For the purpose of this application and taking the plaintiff's case at its highest, the following facts may be accepted. 10Between approximately 1984 and 1987, the plaintiff operated retail outlets in Australia that sold clothing. The plaintiff imported clothing into Australia from various parts of Asia for his retail business. 11Between July 1987 and March 1988, Australian Customs ('Customs') seized 5 shipments of goods that the plaintiff attempted to import into Australia from Thailand, Hong Kong and Taiwan for his retail business. 12In April 1988, Customs sought legal advice about the plaintiff's conduct and the seizures from the Commonwealth Director of Public Prosecutions (the DPP). 13In June 1988, the DPP advised Customs to obtain evidence from overseas in relation to the shipments of goods. 14Between June 1988 and January 1990, officers employed by Customs travelled overseas to obtain evidence in relation to the shipments of goods. 15In or about January 1990, Customs gave the evidence to the DPP to review and sought advice from the DPP about whether there was sufficient evidence to prosecute the plaintiff under the Crimes Act 1914 (Cth). 16In February 1990, the DPP advised Customs that there was insufficient evidence for Customs to proceed against the plaintiff under the Crimes Act . 17Between 16 July 1992 and 3 September 1992, Customs filed 20 informations under the Customs Act 1901 against the plaintiff in relation to the 5 shipments of clothing. 18Between 26 and 29 July 1993, 18 and 21 April 1994 and 30 January 1995 and 3 February 1995, the proceedings brought against the plaintiff by Customs were heard in the Sutherland Local Court. Mr Ian Rodda, a solicitor and international trade consultant, acted as solicitor for Mr Tomson in the Customs proceedings. 19On 27 June 1995, the Local Court dismissed each information Customs had filed. No order was made as to costs. 20The plaintiff appealed to the Supreme Court against the decision as to costs. 21On 27 February 1997, the Supreme Court found that the Magistrate's discretion had miscarried, and referred the question of costs back to the Magistrate to be determined according to law. 22In 1998, the plaintiff and Customs resolved the question of costs in the Local Court proceedings by Customs agreeing to pay $100,000 towards the plaintiff's costs.

The plaintiff's claims against the defendants in these proceedings 23The plaintiff alleges that he had a good cause of action for malicious prosecution against Customs but his solicitors, the defendants, failed to commence proceedings in time. 24Shortly stated, the plaintiff's claims against the defendants are as follows: (a) The first and second defendants should have advised him of the limitation period for the malicious prosecution claim, and failed to bring the malicious prosecution claim on behalf of the plaintiff in time (see para 36 SOC) (the first cause of action). (b) By no later than April 2002, the first and second defendants should have advised the plaintiff that his cause of action against the first and second defendants for the failure in (a) would become statute barred by mid-2009 (paras 39-44 SOC) (the second cause of action). (c) Between 29 April 2002 and 31 May 2006, the first defendant (and between 1 June 2006 and mid 2009, the third defendant), should have advised him that the plaintiff's cause of action against the first and second defendants for the failure in (a) would become statute barred by mid-2009 (paras 46-52 SOC) (the third cause of action). 25The loss the plaintiff alleges he suffered in relation to the first cause of action is pleaded as the loss of the benefit of the cause of action against Customs, including the opportunity to obtain a compromise of that cause of action [SOC [37]]. 26Generally, a plaintiff can seek damages for loss of a chance of a better outcome on the basis that the said better outcome had some value that was capable of being compensated by damages: Athey v Leonati [1996] 3 SCR 458. This means that the concept of loss of a chance is operative only at the point of assessment of damages - by that point, breach of duty causing injury will have been proved : Douglas, Mullins and Grant, Civil Liability Australia , Lexis Nexis at [13,075] and Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 27An action for damages against a solicitor, where the solicitor negligently failed to recommend commencing proceedings for a claim for personal injury within the statutory period, is a claim for damages for loss of a chance of recovering damages for those personal injuries: Johnson v Perez (1988) 166 CLR 351; Nikolaou v Papasavas, Phillips & Co (1989) 166 CLR 394 at 402-404. Generally, where, through the negligence of solicitors, a client's cause of action becomes statute barred, the client's right of action in negligence against those solicitors accrues at the time the action becomes statute barred and damages are to be assessed at that time: Nikolaou . 28In such a case, the plaintiff's loss crystallises when the action becomes statute barred ( Johnson v Perez at 366-367). 29The plaintiff's cause of action against Customs for malicious prosecution was a claim in tort, which was not complete until the plaintiff first suffered loss or damage. The plaintiff pleads that he first suffered loss and damage as a result of the Customs prosecution (see para 34 of the SOC). 30The plaintiff's cause of action against Customs for malicious prosecution could not be brought until the Local Court proceedings had terminated on 27 June 1995: see Williams v Spautz (1992) 174 CLR 509 at 520. It became statute barred on 27 June 2001.

Malicious prosecution 31The plaintiff was required to prove four things in his case against Customs: (a) the proceedings were of the kind to which the tort applies (generally, as in this case, criminal proceedings) and were initiated against the plaintiff by the defendant; (b) that the proceedings terminated in favour of the plaintiff; (c) that the defendant, in initiating or maintaining the proceedings acted maliciously; and (d) that the defendant acted without reasonable and probable cause: A v NSW [2007] HCA 10 per Gleeson CJ, Gummow, Kirby, Hayne, Heydon and Crennan JJ at [1]. 32The damages that are recoverable for a claim of malicious prosecution are damages to reputation, damages to person, where a plaintiff has been deprived of his liberty and damages to property through having been required to defend himself: see Smith v Commonwealth Life Assurance Society Ltd (1935) 35 SR (NSW) 552 at 557. The plaintiff was not deprived of his liberty. In addition to these three heads of damages, consequential economic loss and property damage are also recoverable: Balkin and Davis, Law of Torts, 4 th ed, LexisNexis Butterworths, 699. Damages for mental distress may also be recovered: see Smith v Commonwealth Life Assurance at 558. Aggravated and exemplary damages may also be recovered: see New South Wales v Landini [2010] NSWCA 157 per Macfarlan JA (with whom Tobias JA and Sackville AJA agreed) at [105] - [115]. 33From 1997 to at least 29 April 2002, Mr Tomson retained Barwick Boitano solicitors to act for him and advise him of his rights arising from the failed Customs prosecution. Barwick Boitano sought advice from Mr Rodney Parker QC.

The Rodney Parker QC advice 34Mr Parker QC gave advice in relation to, firstly, commencing legal proceedings; and secondly, to apply for an act of grace payment.

(i) Legal proceedings 35In his advice dated 17 June 1999, Mr Parker advised that the elements (a), (b) and (d) (as referred to earlier in this judgment) of the tort of malicious prosecution were satisfied. In so far as malice was concerned, Mr Parker QC advised that there was no evidence before him to suggest that when the customs officials instituted the prosecution they knew that Mr Tomson was innocent. There was however, a clear suggestion by Mr Rodda (a solicitor and international trade consultant, who acted as solicitor for Mr Tomson in the Customs proceedings) that Mr Grausman of Customs made a visit to Thailand before the institution of the prosecution and learnt from Customs officials there that the relevant exchange control document did not evidence the payment of other moneys by Mr Tomson. Mr Parker advised that if that were so, it may go "a long way to establishing the malicious intent necessary to establish this requirement." At that time of giving his advice, Mr Parker did not have evidence before him of people who may declare to that fact and he could not, consistently with the Bar Rules, act upon it. Mr Parker QC was therefore of the opinion on the material presented to him that in all probability an action for malicious prosecution brought by Mr Tomson against the Australian Customs Service and/or its officers would fail. 36Mr Parker QC concluded that, "Obviously inquiries should be made to see if a prima facie case for malicious prosecution may yet be established and if that additional material becomes available process should be filed as a precaution before the expiration of the time defined by the Limitation Act ." 37Mr Rodda deposed that he met with the plaintiff shortly after receiving a copy of the opinion of Mr Parker QC. He and the plaintiff examined the document and discussed the various matters raised and the options available to the plaintiff to obtain compensation. To the best of Mr Rodda's recollection he words or words to following effect, "I agree with Mr Parker's opinion. It's unlikely that you'd be able to find any additional evidence to support a malicious prosecution action so I think you are best off just doing as Mr Parker says and lodging a claim with the Ombudsman." 38No documentary material was ever sought from Customs in relation to the issue of malice, notwithstanding Mr Parker's opinion. No proceedings were commenced.

(ii) Act of grace payment 39Mr Parker QC had also advised that there was another remedy, namely that a submission should be made to the Department of Finance and Administration seeking compensation. 40The Federal House of Representatives Standing Committee on Legal and Constitutional Affairs in its inquiry into averment provisions in Customs legislation (' Modern-day usage of averments in customs prosecutions ' May 2004 at xv Recommendation 6) considered the use of the averment provisions in Comptroller-General of Customs v Tomson and Keomalavong , stated: "Given the reprehensible handling exhibited by the Australian Customs Service over the course of the investigation and failed prosecution of Mr Tomson, the Committee recommends that Mr Tomson receive appropriate compensation for commercial losses directly attributable to the seizure of the goods and to the lapse of time before the resolution of the costs issue between the parties in 1998." 41The relevant conclusions of the Standing Committee was as follows: "... the Committee cannot help but conclude that the advice given to the ACS by the DPP in 1990 was a falsely-based option, for the eventually used for a prosecution to the same standard of proof as that under the Crimes Act 1914. Furthermore, if the ACS knew that its evidence was not sufficient for a criminal prosecution under the Crimes Act 1914, it should not have used that same evidence to commence a prosecution under the Customs Act 1901 to the criminal standard of proof. This is especially so given that the ACS, as the agency responsible for the administration of the Customs Act, must have known that the criminal standard of proof ought to apply to its prosecution of Mr Tomson. The ACS can only have hoped to have succeeded if it believed that the averments were not going to be challenged. In the view of the Committee, this constitutes an abuse of the averment provision (s 245), because the ACS knew its evidence was not sufficient to satisfy the criminal standard." 42On 11 November 2005, Mr Rodda, on behalf of Mr Tomson, wrote to the Department of Finance and Administration requesting an act of grace payment of approximately $108M equivalent to business losses Mr Tomson claimed to have incurred as a consequence of charges made against him by Customs. 43On 23 January 2006, The Hon Dr Sharman Stone MP replied: "The decision to investigate and prosecute Mr Tomson was not improper or frivolous and was made in accordance with the criteria outlined in the P rosecution Policy of the Commonwealth . After examination of the available evidence it was reasonable for Customs to expect a conviction would be secured. I do not consider that there is any evidence linking Mr Tomson's borrowings and final bankruptcy in 1999 to the Customs seizures in 1988. Additionally, it has not been demonstrated that there is a direct connection between the prosecution of Mr Tomson and any claimed commercial and other losses. In Mr Tomson's case the legislation has been applied as intended and I do not consider that there are special circumstances that would warrant an act of grace payment. For these reasons, I have declined to approve an act of grace payment of approximately $108 million to Mr Tomson, pursuant to section 33(1) of the FMA Act." 44The government response, published 9 May 2006, to the Standing Committee's recommendations was to reject those recommendations. The reasons were stated as follows: " The Committee's recommendation is directed at a compensatory outcome when current evidence indicates that there is no legal or moral basis for such a conclusion. The Government notes that: · Customs did not improperly prosecute this matter. In summing up when dismissing the charges in 1995, the Magistrate rejected the defendant's submission that the prosecution was brought in bad faith. · A significant factor in Customs' investigation of Mr Tomson was that he had previously been convicted of offences under the Customs Act. ... · In June 1988, Mr Tomson abandoned Federal Court proceedings which he had commenced to recover his goods based upon advice given to him by his Counsel following Counsel's opportunity to read confidential material prepared on behalf of Customs. · Mr Tomson was not bankrupted by Customs in 1990 as claimed in media reports and Committee hearings. ... · In 1998, Customs paid agreed legal costs of approximately $100,000 to Mr Tomson's legal representatives. · The Magistrate in the Local Court concluded that there was nothing improper in the conduct of the investigation and prosecution by Customs. · Mr Tomson did not pursue legislative remedies available to him at the time of the Customs investigation. · An independent legal Counsel at the NSW Bar examined the accusations of malicious prosecution and conspiracy to pervert the course of justice. After considering all the relevant Customs files, court transcripts and other relevant material Counsel concluded that he could find no evidence to establish the allegations. In Counsel's view, the material supports the conclusion that, generally speaking, Customs adopted a proper approach to Mr Tomson's investigation and prosecution. · This independent Counsel's report was provided to the Committee and was not challenged in their report. · Mr Tomson has not provided particulars that demonstrate the connection between the prosecution and any claimed commercial losses. The Government recognises that it remains open for Mr Tomson to formally apply through normal mechanisms for an act of grace payment. ... Evaluation of any claim includes a consideration of whether the claimant acted reasonably in relation to their dealings with the particular Commonwealth agency or to what extent, if any, the claimant contributed to the loss, or what steps they took to minimise or contain that loss. In accordance with relevant provisions in the Financial Management and Accountability Act 1997, Mr Tomson will need to substantiate that the loss he claims to have suffered arose as a direct consequence of the actions or decisions of the Australian Customs Service. " 45Mr Tomson's application for payment as an act of grace was not successful. 46For the purposes of these proceedings, I accept that although the plaintiff may have had difficulties proving malice, his claim for malicious prosecution was not hopeless.

(iii) The amended defence and reply in these proceedings 47The amended defence has added paragraphs 18A to 18H, 24A to 24D and 27A to 27D. These additional pleadings raise the issue that as Mr Tomson was made bankrupt on 6 October 1999, the "first cause of action" (that the first and second defendants should have advised him of the limitation period for the malicious prosecution claim and that they failed to bring the malicious prosecution claim on behalf of the plaintiff in time) was property divisible amongst the plaintiff's creditors pursuant to s 116(1) of the Bankruptcy Act 1966 and upon discharge from bankruptcy, the first cause of action did not revert to the plaintiff. The defendants plead that the plaintiff never had and does not have standing to commence or maintain the first cause of action, and the first cause of action never was and is not maintainable by the plaintiff. 48By reply, the plaintiff pleads that if the first cause of action was property divisible amongst his creditors and was property vested in the Office Trustee pursuant to s 58(1)(b) of the Bankruptcy Act , as alleged, then the Office Trustee would have prosecuted the first cause of action to a successful conclusion and the proceeds of that cause of action would have exceeded the provable debts in the plaintiff's bankruptcy. The proceeds would have been used to discharge the provable debts and his bankruptcy, would thereby have been annulled. On the annulment of his bankruptcy the fruits of the cause of action, less the payment for the provable debts, would have reverted to the plaintiff. There is no pleading that the Official Trustee would have assigned the debt to the plaintiff. 49For the purposes of this application, it is accepted that the plaintiff's cause of action against Customs for malicious prosecution accrued on 27 June 1995 and it became statute barred on 27 June 2001. The plaintiff had a failed business venture from which he accrued a debt of $100,000 that he could not pay. It was not until 1999 that he became bankrupt as a result of legal action by the debtor of that $100,000. 50The first cause of action in this matter for professional negligence accrued to the plaintiff on or about 27 June 2001, after the expiration of the limitation period, at which time the plaintiff was bankrupt. In other words the plaintiff's first cause of action was acquired after the commencement of his bankruptcy. 51On 6 October 1999, a sequestration order was made against the plaintiff. 52On 16 November 2002, the plaintiff was discharged from bankruptcy. 53In light of these factual matters, the plaintiff's property was considered to be property divisible amongst the plaintiff's creditors pursuant to section 116(1) of the Bankruptcy Act. Of relevance to this matter is that all such properties vested with the Official Trustee according to section 58(1)(a) of the Bankruptcy Act. In addition to this, the plaintiff's right to sue passed to the Official Trustee subject to the exceptions under section 116(2) Bankruptcy Act . For present purposes the issue for this Court was whether the plaintiff fell within one of the stated exceptions under section 116(2) of the Bankruptcy Act . The exception cited by the plaintiff was for the recovery of damages or compensation for personal injury or wrong done to the bankrupt according to section 116(2)(g)(i) of the Bankruptcy Act . The prevailing issue for the Court is therefore whether the plaintiff has standing to pursue this claim. In order to determine this issue both the nature and origin of the cause of action need to be considered.

The relevant provisions of the Bankruptcy Act 54According to section 5 of the Bankruptcy Act property means: "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." 55Where a debtor becomes a bankrupt section 58(1)(a) of the Bankruptcy Act states that: "(a) the property of the bankrupt, not being afteracquired 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 ..." 56Property that is divisible amongst creditors is described under section 116(1) of the Bankruptcy Act in the following terms: "(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 (c) property that is vested in the trustee of the bankrupt 's estate by or under an order under section 139D or 139DA ; and (d) money that is paid to the trustee of the bankrupt 's estate under an order under section 139E or 139EA ; and (e) money that is paid to the trustee of the bankrupt 's estate under an order under paragraph 128K(1)(b); and (f) money that is paid to the trustee of the bankrupt 's estate under a section 139ZQ notice that relates to a transaction that is void against the trustee under section 128C ; and (g) money that is paid to the trustee of the bankrupt 's estate under an order under section 139ZU ; is property divisible amongst the creditors of the bankrupt ." 57The defendant submitted that there could be no dispute that the first cause of action was "property" within the meaning of the Bankruptcy Act . The first cause of action was acquired by the plaintiff after the commencement of his bankruptcy and before his discharge on 16 November 2002, and was therefore property divisible amongst the plaintiff's creditors, pursuant to s 116(1) of the Bankruptcy Act . 58An exception to s 116(1) is provided under s 116(2) and provides that 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." The relevant legal principles 59The issue for determination is whether the plaintiff has standing to commence his first cause of action (again, that the first and second defendants should have advised him of the limitation period for the malicious prosecution claim and that they failed to bring the malicious prosecution claim on behalf of the plaintiff in time). 60The common law is clear on this issue. The question of standing in respect of a bankrupt asks, "whether the damages or part of them are to be estimated by an immediate reference to the pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property" ( Cox v Journeaux (1935) 52 CLR 713 at 721 per Dixon J). 61Several cases have dealt with this issue in the context of professional negligence. Nikolauou v Papasavas Phillips & Co (1989) 166 CLR 394 at 402 - 404 supports the contention that where a solicitor negligently failed to recommend commencing proceedings for a claim for personal injury within the statutory period, that is a claim for a loss of chance of recovering damages for those personal injuries. 62In Mannigel v Hewlett Phelps [1991] NSWCA 186, the Court determined that a plaintiff's claim against a former solicitor for professional negligence, damages for economic loss, and mental stress and strain was not a right to recover damages for pain and suffering in respect of any personal injury or wrong. 63Further, the Court of Appeal in Samootin v Shea [2010] NSWCA 371 Campbell JA ([75] - [80]) found that where damages for pain and suffering were alleged to have resulted from a solicitor's professional negligence, the plaintiff's action is not in respect of any personal injury or wrong. His Honour explained: "[79] The test of whether a cause of action seeks "damage or compensation ... for personal injury or wrong" has been held 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": Cox v Journeaux (1935) 52 CLR 713 at 721 per Dixon J (applying in the Australian statutory context, Wilson v United Counties Bank Ltd [1920] AC 102 at 111 and 128-133, which was in turn applying Erle CJ in Beckham v Drake (1849) 2 HLC 579 ; 9 ER 12113 at 604, 1222), applied in Daemar v Industrial Commission of NSW (1988) 12 NSWLR 45 at 55-56 per Kirby P (with whom Clarke JA agreed); Mannigel v Hewlett Phelps [1991] NSWCA 186 at 2 per Handley JA (with whom Meagher JA agreed and Kirby P agreed "generally"); Arnoya Holdings Pty Ltd v Metway Leasing Ltd [1999] NSWCA 120 at [16] per Sheller JA (with whom Powell and Beazley JJA agreed). In Faulkner v Bluett (1981) 52 FLR 115 at 119 Lockhart J said: 'The common thread running through these cases is that where the primary and substantial right of action is direct pecuniary loss to the property or estate of the bankrupt, the right to sue passes to the trustee notwithstanding that it may have produced personal inconvenience to the bankrupt ... Where the essential cause of action is the personal injury done to the person or feelings of the bankrupt the right to sue remains with the bankrupt.' [80] For this purpose, the nature of the action is determined by examining the initiating process and pleadings and any other relevant documents in the case: Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545 at 549 per Lockhart J, 557-558 per O'Loughlin and Merkel JJ. [81] The "pain and suffering" for which Ms Samootin was claiming damages was pain and suffering that, on her pleaded case, allegedly arose from having lost her property through wrongful action of Ms Wagner. Thus any right of Ms Samootin to sue concerning Ms Wagner having caused her "pain and suffering" in the way alleged in the statement of claim is a right that would also have vested in the Official Trustee." 64It appears that the defendants agitate a similar position that was decided by Campbell JA in Samootin. The defendant submitted that, if as in Mannigel and Samootin, a claim for professional negligence against a solicitor, alleging damages for economic loss and mental distress caused by the solicitor's negligence, is not right to recover damages or compensation for personal injury, a fortiori, neither is a claim for professional negligence against a solicitor for allowing a claim for economic loss and mental distress against a third party to become statute barred. 65The plaintiff submitted that he had standing to pursue such claims, because damages for mental distress, damage to reputation and any aggravated or exemplary damages are part of the damages he would have claimed from Customs, and those damages are "in respect of [the plaintiff's mind], body or character and without reference to his rights of property"; see Cox v Journeaux . According to the plaintiff that being so, part of the plaintiff's claim for damages in the first cause of action against the solicitors is in respect of the plaintiff's character and is not in reference to his property rights. 66Referring to the defendant's submissions on the issue of standing, the plaintiff argued that the authorities cited by defendant are "at odds" with the decision of Allsop P (with whom Macfarlan and Young JJA agreed) in Firth v Sutton [2010] NSWCA 90 at [189] where the President explained: "The primary judge dealt with interest in a separate judgment from which there was no appeal. His Honour, correctly in my view, characterised this as a loss of opportunity action and saw interest controlled by the Civil Liability Act 2002 (NSW), s 18. His Honour awarded interest therefore on the basis of the long term bond rate. However, his Honour awarded interest only after taking into account the benefit of future entitlements under the WC Act." 67Although Sutton was a case examining the loss of a chance to pursue a claim for breach of a duty of care that could have been argued in addition to a workers compensation claim, it does not assist the plaintiff's argument. The matter is not "at odds" with the defendant's authorities. Those authorities, as I have referred to above, relate to Mannigel v Hewlett Phelps (NSWCA, 12 June 1991, unreported), Faulkner v Blewett (1981) 52 FLR 115, Nikolauou v Papasavas Phillips & Co (1989) 166 CLR 394 and Samootin v Shea [2010] NSWCA 371. These cases all address the issue of how to separate a cause of action to recover damages for any personal injury or wrong from rights of property in the context of bankruptcy. 68The passage cited in Sutton by the plaintiff has no bearing on this question of standing. The passage cited by the plaintiff specifically addresses the calculation of interest on the value of a lost cause of action in a professional negligence action. This first action clearly does not touch upon any entitlement of interest on the value of a lost cause of action. More importantly though, authorities referred to by the defendant are not "at odds" with the passage of Allsop P in Sutton. 69Alternatively, the plaintiff submitted unless and until the Court has before it the evidence on damages, no proper determination can be made about whether the plaintiff's first cause of action against the defendants falls within the exception provided by s 116(2)(g)(i) of the Bankruptcy Act by virtue of the nature of the lost cause of action the plaintiff allegedly had against Customs. The plaintiff seeks from the defendants in these proceedings the fruits of the lost cause of action against Customs and suggests for that reason the motion in so far as it seeks summary dismissal should be dismissed. I disagree. 70The question for this Court is to assess the nature and original of the lost cause of action rather than the extent of the damages. Both parties have referred to authorities containing similar facts and causes of action. While evidence might be useful in ascertaining the extent of the plaintiff's personal injuries, the question in issue is whether the lost cause of action falls within the exception under the Bankruptcy Act ( Nikolaou per Mason CJ at 399). That question is a question of origin and nature of damages rather than extent of those damages. 71In the further alternative, the plaintiff seeks leave to make amendments to paragraph 35 of his statement of claim to plead that part of his cause of action was for personal injury damages, with the result that that part of the first cause of action against the defendants in respect of the lost personal injury damages from Customs accrued to him on 27 June 1998 (3 years after the termination of Customs' proceedings) which was before the plaintiff became bankrupt. For reasons discussed earlier, this submission is untenable. 72Towards the end of its submissions on standing, the plaintiff, as an alternative to its primary arguments, submitted that if it were unsuccessful on the issue of standing, the Official Trustee would have instead successfully prosecuted the plaintiff's claim with proper legal advice. The consequence of this would have been the proceeds of the cause of action would have exceeded the provable debt in the plaintiff's bankruptcy thereby annulling his bankruptcy. 73The plaintiff's bankruptcy was not annulled; rather it was discharged after the statutory period of three years but I understand it, this hypothetical situation may have led to the plaintiff's bankruptcy being annulled. If this were the case, the plaintiff says that, firstly, this is as an important factual distinction between it and authorities such as Mannigel and Samootin. Had legal advice been sought, it would have referred to the criticism by the Standing Committee that the averment brought against Mr Tomson was an abuse of process and that there had been unsuccessful claim for an act of grace payment in the sum of $108 million. Hence, there was a potentially a large amount of damages at stake if the plaintiff's claim in malicious prosecution was successful. That legal advice would have also referred to the difficulty of proving malice. 74The duties of the trustee are that as an officer of the court, if seeking and considering the legal advice given his or her actions must be of a high standard, he or she must not pursue vexatious claims, is not to take steps that would be expensive and unrealistic in realising property to the benefit of the estate; and is not required to investigate the prospects of success in a matter. But if the Trustee sought advice and took legal proceedings for malicious prosecution on behalf of Mr Tomson, Mr Tomson would have no claim for negligence or breach of contract against the solicitors. This is because the cause of action had been pursued. 75In summary, this plaintiff's alleged pain and suffering is not made without reference to his property rights. It is difficult to see on the facts how the pain and suffering endured by the plaintiff could have arisen in isolation to or without reference to his property rights. To borrow from Lockhart J in Faulkner (at 119) it is clear that the essential cause of action by the plaintiff is the lost cause of action for malicious prosecution, rather than the personal injury done to the plaintiff. This latter cause of action is secondary against the essential cause of action for malicious prosecution which relates to direct pecuniary loss. The plaintiff's essential cause of action is consequential on damages to the financial and property interests of the plaintiff that he alleges were caused by Customs. Further, the plaintiff's cause of action against his former solicitor's negligence in not recovering damages from Customs for personal injury is not an action for personal injury under the Bankruptcy Act. It is instead the loss of a chance of recovering damages for personal injuries sustained by the alleged malicious prosecution ( Nikoalou per Wilson, Dawson, Toohey and Gaudron JJ at 403). 76As the common law tests indicate, once the nature and origin of the cause of action are determined the question of standing resolves itself. As I have characterised this as a loss of chance rather than a claim for personal injury, the plaintiff fails to meet the exception listed under s 116(2)(g) of the Bankruptcy Act. Accordingly, the first cause of action was "after acquired property", as per the general rule under s 58 of the Bankruptcy Act, that was divisible amongst the plaintiff's creditors and is therefore vested with the Official Trustee ( Bankruptcy Act s 58(1)(b)). The effect of this vesting provision meant the plaintiff had no right to bring the first cause of action.
77The conclusion that I have reached here is that the plaintiff has no standing to commence or maintain the first cause of action. If the first cause of action cannot be maintained then neither can the second and third causes of action survive. Hence, my conclusion is that the plaintiff has no standing to bring these proceedings. The plaintiff's claim is hopeless and should be summarily dismissed. 78Now, I shall consider the defendant's application for security for costs.

Security for costs 79The defendants rely upon Part 42.21 of the UCPR and the Courts inherent power to order security for costs. Part 42.21 reads: "42.21 Security for costs (1) If, in any proceedings, it appears to the court on the application of a defendant: (a) that a plaintiff is ordinarily resident outside New South Wales, or ... the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given. (2) Security for costs is to be given in such manner, at such time and on such terms (if any) as the court may by order direct. (3) If the plaintiff fails to comply with an order under this may order that the proceeding on the plaintiff's claim for relief in the proceedings be dismissed. (4) This rule does not affect the provisions of any Act under which the court may require security for costs to be given." 80If the Court has power under r 42.21 or exercises its inherent jurisdiction, the applicable principles are well settled. Beazley J (as she then was) in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 196F - 198C identified them as follows: "The law is now settled that the discretion to order security for costs is unfettered and should be exercised having regard to all the circumstances of the case without any predisposition in favour of the award of security... Notwithstanding the broad unfettered discretion with which the Court approaches an application for security for costs, there are a number of well established guidelines which the court typically takes into account in determining any such application. They are:

1. That such applications should be brought promptly...
2. That regard is to be had to the strength and bona fides of the applicant's case are relevant considerations...As a general rule, where a claim is prima facie regular on its face and discloses a cause of action, in the absence of evidence to the contrary, the court should proceed on the basis that the claim is bona fide with a reasonable prospect of success.
3. Whether the applicant's impecuniosity was caused by the respondent's conduct subject of the claim...
4. Whether the respondent's application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant a right to litigate...
5. Whether there are any persons standing behind the company who are likely to benefit from the litigation and who are willing to provide the necessary security...
6. An issue related to the last guideline is whether persons standing behind the company have offered any personal undertaking to be liable for the costs and if so, the form of any such undertaking ...
7. Security will only ordinarily be ordered against a party who is in substance a plaintiff, and an order ought not to be made against parties who are defending themselves and thus forced to litigate."

The plaintiff's financial circumstances and residence 81Mr Tomson was born on 13 May 1947 in Pakse, Laos. On 15 March 1980 he arrived in Australia with his wife and six children as a refugee from Laos. On 28 June 1983, Mr Tomson became an Australian citizen. He speaks and reads very little English. He was cross-examined using a Laotian interpreter. 82In 1987, before the first seizures by Customs, Mr Tomson owned the family home at Wakeley and had a profitable retail business. Mr Tomson deposed that by 1991 he ceased to operate the retail business because he was unable to import clothes into Australia as a direct result of Customs seizing his imported stock. After he closed down his business, he was unemployed for a time and did a number of different jobs. 83By 1994, when the Customs prosecution was still going on, he was unemployed. He attempted a business venture which failed which led to him owing a debt which he could not pay. In 1999, Mr Tomson became a bankrupt as a result of legal action by that debtor. The debt as he recalls it was about $100,000. In 2002, his bankruptcy was discharged. 84Between 1995 and 2009, Mr Tomson has been on Centrelink, Newstart allowance. He receives around $400 per fortnight. A few years later he received a pension allowance of approximately $400 per fortnight. He no longer receives any benefits from the Government. The plaintiff's most recent utility bill in Australia was an Integral Energy electricity bill dated 23 October 2009 and his most recent telephone bill in Australia was a Telstra bill dated 1 November 2009. 85Since 2009, Mr Tomson has been residing in Thailand mainly to relax his mind from the stress caused by this case and his feelings about the actions of Customs, Mr Barwick and Mr Rodda. He goes to the Temple often to pray and sometimes he and his wife will stay at the temple. He is currently living with his wife in a Buddhist temple in Thailand. He is a monk. He has returned to Australia once during 2010. Mr Tomson says that it is cheaper for him to live in Thailand than in Australia. He returned to Sydney the day before the hearing of this motion for two reasons, firstly, to give evidence; and secondly, to visit his children. 86Documents produced by the plaintiff pursuant to a notice to produce show the following. Since 17 November 2009, shortly after the issue of his current passport on 27 October 2009, the plaintiff has been in Thailand/Cambodia/Laos for the entire time (apart for the period 30 April 2010 to 30 June 2010) until he returned to Australia on about 11 April 2011 for the purposes of the hearing of this motion. Of the 510 days between 17 November 2009 and 11 April 2011, the plaintiff has spent all but 92 of those days in Thailand. Of the trip from Thailand to Cambodia, Laos, Malaysia, most were taken around the time that his visa in Thailand was about to expire and were short trips across the board returning to Thailand either the same day or within a few days of leaving. 87Mr Tomson deposed that he does not presently own any real property in Australia or overseas. He does not presently receive any income from any source. Nor does he have the assets or the income to pay money for security for costs and would be unable to pay any money that he is order to pay as security. He presently borrows money from his relatives for his living expenses. 88His six children reside in Australia. Prior to the plaintiff's son, Colin Tomson, taking over the lease of the property at Green Valley, the plaintiff had lived in that house for years. He now has a room in his son Colin's house. He keeps his belongings there and can stay there rent free. He uses that address for receipt of his mail in Australia. Mr Tomson holds a current New South Wales drivers licence and a Medicare card. He has not asked his children to finance this litigation nor has he sought litigation funding.

Whether the plaintiff is ordinarily resident outside New South Wales 89The plaintiff submitted that he has a permanent residence in Sydney. He accepted that he has spent a substantial amount of time outside New South Wales in recent times but he submitted that this does not mean that he is not ordinarily resident is New South Wales, and therefore there is no power under r 42.21 to make the order. 90The plaintiff relied upon Re Taylor; Ex parte Natwest Australia Bank Ltd (1992) 37 FCR 194, where Lockhart J stated at 198: "It depends on the facts of each case whether the debtor is ordinarily resident in Australia at the time of the commission of the relevant act of bankruptcy. At first blush it may seem strange to say that a person can be ordinarily resident in more than one country at the same time; but on closer analysis it is not. Plainly you cannot be physically present in more than one place at the same time. But the lifestyles of people vary greatly. Some people in the ordinary pursuit of their lives regularly or customarily live in more than one place, each of which has an element of permanence about it and is not merely a place of casual or intermittent resort. Most people, if asked where they were ordinarily resident at a particular time, would name but one place: their home, because that would be the only place in which they normally or customarily live, although they may travel to other places on holidays or business intermittently. Other people may have two or more houses or flats and stay for various purposes and varying lengths of time in each. It may, depending on the circumstances, be permissible to say that at a particular time they are ordinarily resident in each of the places, though they may be at that time physically present somewhere else. ..." 91The defendants relied upon Logue v Hansen Technologies Ltd [2003] FCA 81 where Weinberg J stated at [31] - [33]: "[31] There are also a number of factors which support the applicant's contention that he is "ordinarily resident" in this country. He is an Australian citizen, having been born in this country and educated here. The evidence is that he currently resides in New South Wales, and has done so continuously since July 2002. He has strong family connections, including his mother, partner and children. [32] However, there are also a number of factors which tend to negate that conclusion. These were previously summarised, and I shall not repeat them here. Whether or not he is ordinarily resident in this country seems to me to depend heavily upon his purpose for being here at this time, and in particular, whether he has formed a "settled purpose" to reside in Australia. In that regard, the applicant's two affidavits do not assist his case. [33] In his first affidavit he states that he is looking for work in Australia and overseas. He also acknowledges that one of the main reasons for his presence here now is to conduct this litigation. His second affidavit, in particular, raises real doubts as to whether he has actually formed a "settled purpose" of remaining in this country. The general tenor of that affidavit suggests that, although his desire would be to remain in Australia, and he would certainly do so if conditions allowed for that possibility, there are significant impediments to that course. As the applicant himself says, the prospects of the purchase of the IBP assets from the liquidator have diminished. If the applicant does not proceed with that transaction, the likelihood is that the restrictive covenants under the Share Sale Agreement and the Employment Agreement imposed upon him will continue to operate. As he himself conceded this makes it less likely that he will be able to find employment in his chosen field of endeavour." 92The defendant submitted it is only relevant to consider the plaintiff's residence at the time of this application. However, the test is whether the plaintiff is "ordinarily resident outside Australia". To determine whether this is so requires analysis of the plaintiff's residence over time. 93From 1980 to 2009, the plaintiff has resided in Australia, that is a very long period of 29 years. Since 2009 the plaintiff and his wife have resided outside Australia in Thailand and Laos. In 2010 he returned to Sydney once for a few weeks. He also returned to Sydney the day before the hearing of this motion for two reasons, firstly, to give evidence; and secondly, to visit his children. I accept that he has family connections in Sydney, his six children and their families. Prior to his son Colin Tomson taking over the lease of the property in Green Valley the plaintiff and his family had resided there for many years. He still keeps his belongings there and has a room in which he can stay. He can stay there rent free. He uses that address for receipt of his mail in Australia. Mr Tomson holds a current New South Wales drivers licence and a Medicare card. 94However, since 2009 the plaintiff has lived almost permanently in Thailand and Laos. He does not have any source of income nor does he have any assets in New South Wales. He currently borrows money from relatives for his living expenses. Mr Tomson acknowledges that it is cheaper to live overseas. 95While I accept that Mr Tomson still retains a connection with his family in New South Wales, I conclude that from 2009 onwards he has been ordinarily resident outside New South Wales. He still is ordinarily a resident outside the State of New South Wales. Therefore, the provision of UCPR 42.21(1)(a) is engaged. 96I turn now to consider whether an order may be made for security for costs.

(1) Action should be brought promptly 97The defendants conceded that this application has been brought promptly.

(2) The strength and bona fides of the plaintiff's case 98The plaintiff submitted that his case is a very strong one. To the contrary, the defendants contended that the plaintiff's case is weak. 99The plaintiff submitted that there are at least two serious problems with the plaintiff's submission. Firstly, the plaintiff would not have been able understand the effect of the advice from Rodney Parker QC , apparently delivered in English, noting that he speaks very little English; and s econdly, the advice itself goes nowhere near providing an accurate summary of Mr Parker's views. 100Mr Parker's views, properly understood, provide some support for the plaintiff's case. As I previously stated, the difficulty with the plaintiff's claim for malicious prosecution, is the absence of proof of malice. However, the defendants did not carry out of investigations that were alluded to by Mr Rodney Parker QC although I accept that Mr Rodda did not think that these investigation would prove fruitful. Had that been done and had interrogatories been administered before trial that deficiency may have been overcome. So far as the plaintiff's other submission is concerned, just because a person does not speak English very well does not mean that they cannot understand it. Mr Tomson may have had the advice explained to him, so I regard that submission of no assistance. 101However, while it is my overall view that the plaintiff's claim for malicious prosecution is very weak, the defendants took no steps to follow through with investigations of Customs and did not commence proceedings.

(3) Whether the applicant's impecuniosity was caused by the respondent's conduct subject of the claim 102The plaintiff submitted that he had assets and an income and was able to meet costs orders before the Customs' prosecution and it was the action of Customs that led to his bankruptcy. He submitted that had the defendants had given him proper advice he would not be impecunious. 103The plaintiff submitted that the defendants should not be permitted to rely on their own default in depriving the plaintiff of the fruits of his cause of action against Customs as a basis to then obtain security. The defendants say that it was the Customs prosecution that led to the plaintiff's impecuniosity not their alleged negligence. Mr Tomson was made bankrupt due to the costs of the malicious prosecution claim and a failed business venture not because of the defendants' actions.

(4) Whether the respondent's application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant a right to litigate 104Whether the plaintiff's application for security is oppressive, in the sense that it is being used merely to deny an impecunious application a right to litigate the plaintiff submitted that the obvious effect of success by the defendants in the motion would be to deny the impecunious plaintiff his day in court and the application is oppressive. The fact that the ordering of security will frustrate the plaintiff's rights to litigate its claim because of its financial condition does not automatically lead to the refusal of an order. Nonetheless it will usually operate as a powerful factor in favour of exercising the court's discretion in the plaintiff favour: see Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542 per Clarke J at 545. I agree that the reality is that the plaintiff is impecunious. He would not be able to lodge any amount for security for costs. He would effectively be shut out of these proceedings and this is a powerful factor of exercising this Court's discretion in his favour. 105So far as the KP Cable Investments Pty Ltd guidelines 5, 6 and 7 (referred to earlier in this judgment) Mr Thomson is an individual not a company. He had not asked his son to finance his litigation nor should he be obliged to do so. So far as guideline (7) is concerned whether persons standing behind the company have offered any personal undertaking to be liable for the costs and if so, the form of any such undertaking is not relevant. Security will only ordinarily be ordered against a party who is in substance a plaintiff, and an order ought not to be made against parties who are defending themselves and thus forced to litigate. This is not an issue in this application.

The amount of the security sought 106Mr Paul Kozub, solicitor for the defendants, estimates their clients future costs as follows: Discovery and investigations $14,200 Forensic accountants' evidence $30,000 Valuation experts' evidence $267,000 Lay evidence $18,500 Other tasks, including reporting to client $10,000 Counsel's fees for preparation for hearing $25,000 Professional fees for preparation for hearing $12,000 Counsel's fees for hearing $50,000 Professional fees at hearing including supervision Expert's fees for hearing $12,000 Total costs excluding GST $226,200 107Mr Kozub concluded that the firm of solicitors would expect to recover at least 80% of their costs after assessment on the ordinary basis. He therefore believed that an appropriate sum by way of security for costs was $180,000, being approximately 80% of $226,200. This amount was not the subject of challenge by counsel for Mr Tomson. 108Even though the plaintiff's case for malicious prosecution is weak, these proceedings involve solicitors' negligence, in that they did not take steps in relation to seeking proof in relation to malice. The plaintiff has no assets either in New South Wales or overseas and to make an order for security for costs would shut him out of this litigation. 109So far as security for costs is concerned, considering all these factors above, I have reached the conclusion that I will not exercise my discretion to make an order for security for costs either pursuant to UCPR 42.21(2) nor under the inherent jurisdiction of the Court. 110However, as previously stated, my conclusion is that the plaintiff has no standing to bring these proceedings. The plaintiff's claim is hopeless and should be summarily dismissed. The statement of claim filed 25 August 2010 is dismissed. Costs are discretionary. Usually costs follow the event. The plaintiff is to pay the defendant's costs of the proceedings.

The Court orders:

1. The statement of claim filed 25 August 2010 is dismissed.
2. The plaintiff is to pay the defendant's costs of the proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 June 2011