HIS HONOUR: The above matter came before the Court by motion on notice. The motion sought interlocutory injunctions and permanent injunctions. There was no claim for damages or compensation.
The cause of action for the Court, on 4 July 2024, was said to be a cause of action in defamation.
It is alleged that the defendants published imputations against the plaintiff that the plaintiff was struck off the roll of solicitors and had committed fraud. On the material before the Court at present, each of those imputations, if they were published, were incorrect. The plaintiff, who became ill, gave notice to the Law Society of NSW that he was ceasing practice as a solicitor, as a consequence of which, the Law Society of NSW appointed a manager for his practice from the time, or shortly after the time, that he was to have ceased the conduct of the law practice.
On 4 July 2024, the Court, as presently constituted, issued ex tempore reasons for judgment, the effect of which was that the Court indicated that it would grant interlocutory injunctions in terms to be resolved by the Court and directed the plaintiff to file a Short Minute of Order.
The proceedings on 4 July 2024 were listed at short notice. The Court intimated that it had read the plaintiff's affidavit. It had not had an opportunity to read the defendants' affidavits. Nevertheless, the Court had read both sets of submissions.
The affidavits, or one of them, filed by the defendant, referred to the circumstance that the plaintiff was the subject of a Bankruptcy Order in the Federal Court of Australia on 15 December 2022. The plaintiff has not filed a Statement of Claim in defamation (or any other cause of action) against the defendants and, as stated, the motion on notice does not seek damages. It does seek leave for the plaintiff to commence proceedings by a Statement of Claim.
Until the submissions were filed on the form of the orders, and the Court, as presently constituted, rejected the form provided by the plaintiff and suggested other wording, it was not drawn to the attention of the Court that the plaintiff had been the subject of the Bankruptcy Order and was currently an undischarged bankrupt.
The summons, within which the motion is sought to be agitated, was filed in the Court on 18 January 2024 and seeks permanent injunctions. The motion was the subject of a notice filed on 11 June 2024.
Upon the Court being informed of the bankrupt status of the plaintiff, the Court re-listed the matter, to deal with the effect of the said status on the capacity of the Court to issue orders. At the hearing, the plaintiff accepted that he was an undischarged bankrupt and informed the Court that he was currently seeking to appeal the bankruptcy orders. It is unclear what, if any, stage those hearings and/or appeals have reached.
The difficulty created by the bankruptcy status arises as a result of the Bankruptcy Act 1966 (Cth) (hereinafter "the Act"). Initially, the plaintiff relied upon the provisions of s 60(4) of the Act and, after prompting by the representative of the defendant, relied upon s 116(2)(g) of the Act.
Essentially, the plaintiff relies upon the fact that the harm or wrong occasioned to him by the defamation is affecting his ability to be employed and, because a bankrupt is entitled to be employed and earn wages, the wrong done to him is not one that relates to property that vests in the trustee. Further, the plaintiff relies on the fact that defamation is a wrong and that he is, therefore, entitled to commence proceedings without the permission of the trustee.
The provisions of s 60(4) of the Bankruptcy Act permit a bankrupt, notwithstanding the other provisions in s 60, to continue, in the name of the bankrupt, an action commenced by the bankrupt before the bankrupt was rendered bankrupt. The provisions of s 60 are in the following terms:
BANKRUPTCY ACT 1966 - SECT 60
Stay of legal proceedings
(1) The Court may, at any time after the presentation of a petition, upon such terms and conditions as it thinks fit:
(a) discharge an order made, whether before or after the commencement of this subsection, against the person or property of the debtor under any law relating to the imprisonment of fraudulent debtors and, in a case where the debtor is imprisoned or otherwise held in custody under such a law, discharge the debtor out of custody; or
(b) stay any legal process, whether civil or criminal and whether instituted before or after the commencement of this subsection, against the person or property of the debtor:
(i) in respect of the non - payment of a provable debt or of a pecuniary penalty payable in consequence of the non - payment of a provable debt; or
(ii) in consequence of his or her refusal or failure to comply with an order of a court, whether made in civil or criminal proceedings, for the payment of a provable debt;
and, in a case where the debtor is imprisoned or otherwise held in custody in consequence of the non - payment of a provable debt or of a pecuniary penalty referred to in subparagraph (i) or in consequence of his or her refusal or failure to comply with an order referred to in subparagraph (ii), discharge the debtor out of custody.
(2) An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.
(3) If the trustee does not make such an election within 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action.
(4) Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of:
(a) any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or
(b) the death of his or her spouse or de facto partner or of a member of his or her family.
Note: See also subsection 5(6).
(4A) Notwithstanding paragraph (1)(b), this section does not empower the Court to stay any proceedings under a proceeds of crime law.
(5) In this section, action means any civil proceeding, whether at law or in equity.
As can be seen from the foregoing extract, any action commenced by a person who subsequently becomes bankrupt, is stayed until the trustee makes an election. If the trustee does not make an election, the trustee shall be deemed to have abandoned the action.
Further, the Court may discharge orders and stay legal processes in the case of imprisonment and the like. Plainly, s 60 of the Act relates to proceedings that were commenced prior to a person becoming bankrupt.
An action that had been commenced is stayed until the election of the trustee, and, as stated, if there be no election, abandoned. The stay of proceedings commenced before a person became bankrupt does not apply to an action commenced by a person before the person became bankrupt in respect of a personal injury or wrong done to the person, the spouse of the person or the person's family, including personal injury or wrong that resulted in death.
The provisions of s 60 of the Act do not apply to the plaintiff in these proceedings. The proceedings now before the Court were not commenced before the plaintiff became bankrupt.
The provisions of s 116(2)(g) of the Act relate to an exception to property that is otherwise divisible amongst creditors. Subsection 60(1) defines the property of a person who is rendered bankrupt which vests in the trustee and is divisible amongst the creditors of the bankrupt. Subsection 2 exempts certain property. S 116 of the Act is in the following terms:
"BANKRUPTCY ACT 1966 - SECT 116
Property divisible among creditors
(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.
(2) Subsection (1) does not extend to the following property:
(a) property held by the bankrupt in trust for another person;
(b) the bankrupt's household property that is:
(i) of a kind prescribed by the regulations; or
(ii) identified by a resolution passed by the creditors before the trustee realises the property; "
It is unnecessary to extract the other subsections of s 116. As can be seen from the foregoing extract, paragraph 116(2)(g) of the Act exempts from property divisible amongst creditors of the bankrupt, any right of the bankrupt "to recover damages or compensation" "for personal injury or wrong" done to the bankrupt or bankrupt's family (including the death of a family member), and any damages or compensation recovered as a consequence of any such proceedings or in respect to any such injury or wrong, whether or not the damages or compensation were received before or after the person became bankrupt.
The plaintiff submits that defamation is a wrong or injury. The classic definition of "damages or compensation…for personal injury or wrong" is that which depends on "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". [1]
The foregoing classic definition has been applied many times and in different circumstances and, generally, compares or differentiates the originating process and pleadings that claim a direct pecuniary loss to the property of the bankrupt, which passes to the trustee, as against that which has caused personal injury to the person or feelings of the bankrupt. [2]
It is clear that the "wrong done to the bankrupt" in s 116(2)(g) applies in a way that ensures that it does not extend to that which cannot be categorised as claims for personal injuries or personal wrongs. Further, the provision does not apply to anything other than the recovery of damages or compensation.
A wrong, including personal injury, in the context of s 116(2)(g), includes damage to reputation, which, in the context of the classic definition recited above, is "pain felt…in respect of…character" and does not relate to the property of the bankrupt. A claim for defamation damages falls within the exception in s 116(2)(g) of the Act. [3] So too does an action for damages for slander.
However, the current proceedings are not proceedings for damages or compensation. All that is sought in the Summons and the Notice of Motion, apart from costs, is injunctive relief.
The foregoing does not suggest that injunctive relief can never be the subject of relief for damages or in proceedings that are otherwise for damages or compensation for a personal injury or wrong at the behest of a bankrupt. One may well imagine that, in such proceedings, injunctive relief may be necessary in order to preserve the capacity of a Court to resolve the issues between the parties.
Nevertheless, such a situation is not now before the Court as presently constituted and does not require determination or further discussion.
The plaintiff also relies on the provisions of the Civil Procedure Act 2005 (NSW) and the Uniform Civil Procedure Rules 2005 (NSW) (hereinafter "UCPR"). Such reliance is, in this matter, misconceived.
The Civil Procedure Act and the UCPR expressly empower the Court to grant interlocutory relief and injunctive relief. However, such relief may be granted which is not otherwise contrary to law. Moreover, even if such were not the case, the Bankruptcy Act would override the provisions of any State legislation. [4]
In the circumstances, if an Order were issued on 4 July 2024, it is to be vacated and the Motion and Summons is to be dismissed. The Court makes the following Orders:
1. To the extent necessary, the Court vacates any and all Orders that may have been made in this matter on 4 July 2024;
2. The Court dismisses the Summons filed on 18 January 2024 and the Motion, notice of which was filed on 11 June 2024;
3. The plaintiff shall pay the defendants' costs of and incidental to the proceedings.
[2]
Endnotes
Cox v Journeaux (No 2) (1935) 52 CLR 713; [1935] HCA 48 at CLR 721 (Dixon J).
Samootin v Shea [2010] NSWCA 371 at [79] (Campbell JA); Moss v Eaglestone (2011) 83 NSWLR 476; [2011] NSWCA 404; Faulkner v Bluett (1981) 52 FLR 115 at 119; [1981] FCA 3.
McMahon v John Fairfax Publications Pty Ltd (No 7) (2013) 277 FLR 418; [2013] NSWSC 933 at [14]‑[46] (McCallum J).
The Constitution, s 109.
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Decision last updated: 20 August 2024