Worchild v University of Queensland Law Society

REASONS FOR JUDGMENT 1 This is a Notice of Motion filed by the second respondent in the principal proceedings on 19 May 2005, and heard by this Court on 23 June 2006. Mr Worchild ('the applicant') is the applicant in those proceedings. The Notice of Motion seeks orders: 1. That pursuant to O 20 r 2 and relying upon O 10 r 4 of the Federal Court Rules the applicant's proceedings be dismissed. 2. In the alternative that the applicant's proceeding be stayed pursuant to O 20 r 2 and relying upon O 10 r 4 of the Federal Court Rules. 3. The applicant pay the second respondent's costs of and incidental to this motion and the proceeding. 4. Such further or other orders as the Court deems appropriate. 2 The Notice of Motion is supported by the first respondent. 3 This Notice of Motion was first before the Court on 25 May 2006. On this date I adjourned the Motion, on the basis that the second respondent in the principal proceedings failed to comply with rules in relation to the filing and service of material in accordance with the Federal Court Rules. 4 I also noted at that time that by the hearing on 23 June 2006 I would expect the parties to know of the outcome of the applicant's appeal against the making of a sequestration order against him. That appeal was heard in May. I adjourned the Motion on the basis that the sequestration order appeal would reveal the competence of these proceedings being brought by the applicant. That appeal has not yet been determined. Mr Worchild on the hearing of the Motion said of his appeal: 'The matter hasn't been dealt with as such. But I think it would be safe to assume that the appeal will fail. All my appeals fail, so proceed on that basis.' I then asked: '…if we are to proceed on the basis that at the moment there is a sequestration order against you, why is it then competent to bring these proceedings?' 5 Before dealing with the Notice of Motion it is necessary to briefly set out the history of litigation. 6 On 27 February 2003, the applicant, Mr Worchild, purchased what is commonly referred to as an 'L Card' for $10.00 from the Queensland University of Technology Association of Law Students. An 'L Card' is a plastic student discount card that entitles its holder to various discounts, including free entry to various venues and discounted drinks. 7 The first respondent, the University of Queensland Law Society ('UQLS'), is a student organisation. The second respondent, Ms Jacobs, was at the material time the President of the Griffith Gold Coast Student Law Association, the organisation responsible for issuing the 'L card' to the applicant. 8 The circumstances which led to the litigation are set out in the judgment of Cooper J in Worchild v The Drink Nightclub (Qld) Pty Ld [2004] FCA 642 at pars 11 - 12: '[11] The applicant alleged that over a period of twelve months he had not been able to purchase any drinks at the first respondent´s nightclub, at the discounted rate he alleged was allowable upon presentation of the card, and asserted that from 21 June 2003 he had been denied entry to the nightclub on Saturday nights and Sunday mornings, notwithstanding presentation of the L Card. [12] He deposes to a conversation with one Candice Jacobs of the Student Law Assn at Griffith University, Gold Coast campus ('SLA') on 12 October 2003, wherein it is alleged that she told him that she 'negotiated the contract' with the first respondent which contract was confirmed in writing and a facsimile copy of the writing was received by her. She is alleged to have stated in that conversation about a month after the L Cards had been sold that she was contacted by one Andrew Hutchinson of the first respondent, who requested that the terms of the 'offer be amended to exclude Saturday nights'. The applicant states in his affidavit that the amendment was 'only made to the Griffith University terms and conditions'.' 9 Cooper J dismissed the applicant's proceedings against the Drink Nightclub (Qld) Pty Ltd on 24 May 2004, stating at par 37: 'The Court orders that the proceedings be dismissed pursuant to O 20 r 2 [of the Federal Court Rules] on the basis that they disclose no cause of action, are embarrassing in a pleading sense and there exists no demonstrable basis upon which the applicant may make out on his own behalf, or on behalf of the group members, a cause of action which has a prospect of succeeding at trial.' A costs order was made against Mr Worchild. 10 On 22 October 2004, the applicant brought proceedings in the District Court of Queensland, seeking damages for the applicant's time and expense, and for the costs he was ordered to pay in the Federal Court proceedings before Cooper J. It was alleged by the applicant that he was induced to commence the proceedings brought in 2004 in the Federal Court by various representations made by members of the UQLS, namely its secretary Mr Goss, and the second respondent. As a consequence he suffered loss, including costs and other fees, because of the doomed proceedings. 11 On 10 June 2005, in proceedings BD3799 of 2004, McGill DCJ struck out this claim, giving the applicant liberty to re-plead within six weeks, and dismissed the applicant's application for summary judgment. 12 On 30 June 2005, the applicant filed an application with the Court of Appeal seeking leave to appeal the order made by McGill DCJ, the applicant citing some 28 grounds. He did not replead within the time allowed by McGill J, or at all. On 5 October 2005, the Court of Appeal, McPherson and Gerrard JJA and Douglas J, in judgment Appeal No 5302/05, refused leave. 13 Douglas J, with whom the other judges agreed, said of the applicant: 'The learned District Court Judge struck out his pleading. In detailed reasons for judgment his Honour concluded that the allegations relied on to support the applicant's claim in fraud did not support such a cause of action both because the representations pleaded could not support such a cause of action and because the pleading did not sufficiently allege that the representations were made with the intention that the plaintiff should act on them by commencing proceedings in the Federal Court. In my view his Honour was correct in that analysis. His Honour also pointed out that a claim made purportedly for damages for misleading and deceptive conduct contrary to section 52 of the Trade Practices Act 1974 (Commonwealth) failed to allege that the first defendant was a trading corporation, nor was it alleged that any other representations relied on were made by it in trade or commerce, nor, his Honour concluded, was there a proper pleading of a breach of section 52 in respect of which the second defendant could have been knowingly concerned, she being a natural person. He also pointed to the failure to plead that either defendant was engaged in trade or commerce in respect of a claim purportedly made pursuant to section 38 of the Fair Trading Act 1989 and pointed out that there were no allegations in the pleading of material facts which would show that the plaintiff was a consumer for the purposes of that Act. His Honour went on to deal in detail with the claim for damages for negligence purportedly made in the pleading. He concluded that part of the pleading dealing with the duty to take reasonable care was defective, but that otherwise the pleading was not sufficiently inadequate to satisfy the test in General Steel Industries Inc v. The Commissioner for Railways (NSW) (1964) 112 CLR 125. He was of the view, however, that it was clearly not reasonably foreseeable that the plaintiff would respond to the representations alleged, assuming they were made and assuming they involved a breach of duty, by commencing proceedings in the Federal Court against the nightclub and its director. See paragraph 30 of his Honour's decision.' 14 On 20 October 2006, the applicant filed an application for special leave to appeal to the High Court, citing four grounds of appeal. On 12 April 2006 (Worchild v University of Queensland Law Society Inc & Anor [2006] HCATrans 181), the High Court dismissed the application, Gummow J saying: 'McGill DCJ granted applications by the respondents to strike out the claim and statement of claim on the basis that they disclosed no reasonable cause of action, while giving the applicant liberty to replead and dismissing in turn his application for summary judgment. His Honour found that the representations alleged were incapable of supporting a cause of action in fraud, negligence or under s 52 of the Trade Practices Act or s 38 of the Fair Trading Act 1989 (Q). An application for leave to appeal to the Court of Appeal was refused by McPherson and Jerrard JJA and Douglas J. The applicant's written case raises no question of principle nor any reason to doubt the correctness of the decision of McGill DCJ or of the Court of Appeal, and moreover the proceedings before the District Court were interlocutory in nature. There would be no prospects of success on any appeal to this Court. Special leave is refused.' 15 I turn now to the present application before the Court. 16 The applicant is an undischarged bankrupt. A sequestration order was made against him by Rimmer FM on 12 October 2005. The debt on which the bankruptcy proceedings were based were the costs ordered by Cooper J to be paid by Mr Worchild in respect of his failed Federal Court proceedings. The material indicates that he has not filed a Statement of Affairs. 17 A letter from the Insolvency and Trustee Service Australia, by Official Receiver Mr Peter Aburn, dated 15 June 2006, stated: 'I confirm that the Official Trustee in Bankruptcy has not given Mr Worchild consent or approval to initiate any litigation. Mr Worchild has not contacted the Official Trustee seeking to obtain such consent or approval. The Official Trustee has not assigned any right or rights vested in it nor given consent to Mr Worchild or any other person to pursue in the Courts any chose in action vested in the Official Trustee as a consequence of the Official Trustee becoming trustee of Mr Worchild's bankruptcy.' 18 The principal submission by the second respondent, supported by the first respondent, is that it is not competent for the applicant to bring the principal proceedings. 19 On a debtor becoming bankrupt, the Bankruptcy Act 1966 (Cth) ('the Bankruptcy Act') s 58 provides: '58 Vesting of property upon bankruptcy - general rule (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. (2) Where a law of the Commonwealth or of a State or Territory of the Commonwealth requires the transmission of property to be registered and enables the trustee of the estate of a bankrupt to be registered as the owner of any such property that is part of the property of the bankrupt, that property, notwithstanding that it vests in equity in the trustee by virtue of this section, does not so vest at law until the requirements of that law have been complied with. (3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor: (a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or (b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding. (4) After a debtor has become a bankrupt, distress for rent shall not be levied or proceeded with against the property of the bankrupt, whether or not the bankrupt is a tenant of the landlord by whom the distress is sought to be levied. (5) Nothing in this section affects the right of a secured creditor to realize or otherwise deal with his or her security. (5A) Nothing in this section shall be taken to prevent a creditor from enforcing any remedy against a bankrupt, or against any property of a bankrupt that is not vested in the trustee of the bankrupt, in respect of any liability of the bankrupt under: (a) a maintenance agreement; or (b) a maintenance order; whether entered into or made, as the case may be, before or after the commencement of this subsection. (6) In this section, after-acquired property, in relation to a bankrupt, means property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt.' 20 Section 116 of the Bankruptcy Act relevantly provides: '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; (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; (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; 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 of the bankrupt or a member of the family of the bankrupt; or (ii) in respect of the death of the spouse 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; …' (Emphasis added) 21 Property is defined in s 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.' 22 The effect of the above provisions of the Bankruptcy Act was explained by Kirby P in Daemer v Industrial Commission NSW (1988) 79 ALR 591 at 597. Kirby J said at par 116: 'These provisions make it clear that the scheme and purpose of the Act is, upon the debtor's becoming a bankrupt, to transfer property rights, including certainly the right to sue in respect of claims to property, from the bankrupt to his trustee. This is so, notwithstanding that it involves personal inconvenience to the bankrupt: see Faulkner v Bluett (1981) 52 FLR 115 at 119. Indeed, it is so notwithstanding the fact that it deprives the bankrupt of important civil rights which he or she would otherwise normally enjoy. It is of the essence of bankruptcy, as provided for by the Act, that property which belongs to the bankrupt, including choses in action (other than those which are specifically exempted) are vested upon bankruptcy in the bankrupt's trustee. The trustee has the charge of the estate of the bankrupt. It is then for the trustee to distribute that property as the Act provides, principally for the benefit of the creditors. To secure the benefits and protections which the Act provides to a debtor, the debtor's status is changed, rights are diminished and property is controlled. It could scarcely be otherwise for if it were, valuable interests which a bankrupt might have, in the form of choses in action would not be caught in the net cast by the very wide language of s 116(1). This would be so despite the specific and limited terms of the exemption in the case of rights to recover damages or compensation provided by s 116(2) and the very purposes of gathering in the bankrupt's property. It is necessary to keep the general purpose of the Act in mind, and the scheme by which those purposes are effected, when approaching the contentious issue about the operation of s 60 upon the claimant's amended summons.' 23 In Cummings v Claremont Petroleum NL (1995 - 1996) 185 CLR 124 at p 132, Brennan CJ, Gaudron and McHugh JJ stated: 'Broadly, and not precisely, the effect of bankruptcy is to divest a bankrupt of his property, to vest that property in a trustee and to make it available for the payment of provable debts. The right to commence or take a fresh step in legal proceedings or to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt are, in general, denied to creditors when sequestration is ordered (s 58(3)). The right of the bankrupt to prosecute proceedings that he has commenced is restricted by s 60(2). The bankrupt's concerns as to the administration of his property and the payment of his creditors can be addressed by the Court in the exercise of its supervisory jurisdiction over the conduct of the trustee. Section 178 of the Act provides: "If the bankrupt, a creditor or any other person is affected by any act, omission or decision of the trustee, he may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable."' 24 Lockhart J in Faulkner v Bluett (1981) 51 FLR 115 at p 119, after a review of the cases, 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 nothwithstanding that it may have produced personal inconvience to the bankrupt: Wetherell v Julius (1850) 10 CB 276; 138 ER 108; Wage on Bankruptcy (1904 ed), p. 201. 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. As Erle J said in an oft-cited passage in Beckham v Drake (1849) 2 HLC 579; 9 ER 1213: '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 or property.' 25 In Cox v Journeaux (No 2) (1935) 52 CLR 713 at p 721, Dixon J stated the test to be applied when determining whether an action is for personal injury or wrong: '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 (Wilson v. United Counties Bank Ltd. (1920) AC 102, at pp. 111 and 128 - 133).'