Anthony Francis Said v Douglas Kay Real Estate [1995] IRCA 463

C A T C H W O R D S INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - UNLAWFUL TERMINATION - BANKRUPT - STANDING Industrial Relations Act 1988, S170EA, S170EE Bankruptcy Act 1966, ss5, 58, 60, 116. CASES: Fuller v Beach Petroleum NL and Another 117 ALR 235

Re Heenan [1993] 116 ALR 146

Wilson v United Counties Bank Limited (1920) AC 102

ex parte Vine; re Wilson (1878) 8 ChD 364

Bullock v Goodluck and the Transport Commission (1982-83) 48 ALR 217

Beckham v Drake (1941) 2HL Cas 579

ANTHONY FRANCIS SAID v DOUGLAS KAY REAL ESTATE No. VI-95/2713 Before: Chancellor JR Place: Melbourne Date: 14 September 1995

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY Matter No VI-95/2713 B E T W E E N: ANTHONY FRANCIS SAID Applicant AND: DOUGLAS KAY REAL ESTATE Respondent COURT: CHANCELLOR JR PLACE: MELBOURNE DATE: 14 SEPTEMBER 1995 RULING The applicant in this matter was employed by the respondent from 27 October 1994 to 13 April 1995. He issued proceedings in his own name on 3 May 1995 alleging unlawful termination of his employment and seeking compensation together with one week' wages, one week's wages in lieu of notice and two weeks holiday pay. The applicant is an undischarged bankrupt having become a bankrupt on 14 July 1994. The trustee of the estate is Mr Robert Ramsay. The respondent submits that the applicant has no standing before this Court as the legal right to sue in this matter vests in the trustee in bankruptcy. It is clear that if this action had been commenced before the applicant became bankrupt then the proceeding would be stayed until the trustee makes election, in writing, to prosecute or discontinue the action: see S60(2) of the Bankruptcy Act. The only exception to the stay of proceedings is contained in S60(4) of the Act which states: "....a bankrupt may continue, in his own name, an action commenced by him before he became a bankrupt in respect of - (a) any personal injury or wrong done to the bankrupt, his spouse or a member of his family." There is no specific provision in the Bankruptcy Act in relation to actions sought to be commenced after the commencement of the bankruptcy. However, as the majority in the full Federal Court matter of Fuller v Beach Petroleum NL and Another 117 ALR 235 at 239 said: "It might be thought an odd result if the authority of a bankrupt to institute and continue with an appeal were greater in the case of an appeal instituted after sequestration than in respect of an appeal pending at the time of sequestration." Section 5 of the Bankruptcy Act provides a very broad definition of property being real or personal property of every description. Fuller's case confirmed that this is to be very broadly interpreted and includes a statutory right of appeal. Section 58(1)(b) of the Bankruptcy Act provides that after-acquired property of a bankrupt vests, as soon as it is acquired in the registered trustee. Section 58(6) defines "after-acquired property" as being property divisible amongst creditors. It would seem that "property" can include the right to recover damages or compensation and any damages or compensation subsequently recovered. Section 116(1) of the Bankruptcy Act provides that 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 has devolved or devolves on him, after the commencement of the bankruptcy and before his 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 own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his discharge; .....is property divisible amongst the creditors of the bankrupt." By the application of Sections 5, 58 and 116 the property of the bankrupt vests in and devolves upon the trustee of the bankruptcy and prima facie it is the trustee who would have the right to bring proceedings in relation to the matter currently before this Court. However, similar to the exception contained in Section 60(4) of the Bankruptcy Act, Section 116(2)(g) provides that ss(1) does not extend to the following property: "Any right of the bankrupt to recover damages or compensation - (i) for personal injury or wrong done to the bankrupt...." The applicant argued that the action currently before the Court fell within the exception contained in Section 116 (2)(g) and that he was therefore entitled to bring and continue the action on his own behalf. Justice French considered the history and predecessors to Section 116(2)(g) in Re Heenan [1993] 116 ALR 146 at pages 150 to 152. He said at page 150: "The protection afforded by the Bankruptcy Act 1966 to compensation recovered in respect of personal injury arises out of the long standing principle that a right of action in a bankrupt does not pass to the trustee, "where the damages are to be estimated by immediate reference to pain felt by the bankrupt in respect of his body, mind or character": Beckham v Drake (1941) 2HL Cas 579 at 604." In Beckham v Drake the plaintiff had entered into an agreement with the defendant to serve it for a period of seven years at the fixed rate of wages of 3 guineas weekly. The agreement included that a party making default would pay to the other the sum of 500 shillings by way of special damage. The plaintiff was dismissed, then became bankrupt and later brought an action of assumpsit to recover the sum of 500 shillings. It was held that the right of action had passed to the trustee in bankruptcy. Justice French also referred to the House of Lords decision in Wilson v United Counties Bank Limited (1920) AC 102, especially at 128-32 (Lord Atkinson). In that case the House of Lords held that the right to claim damages for injury to a bankrupt's credit and reputation did not pass to the trustee in bankruptcy but remained in the bankrupt. Lord Atkinson said that the trustee cannot sue for breach of promise of marriage, criminal conversation, seduction, defamation, battery or injury to the person by negligence. Justice French also cited with approval the policy underlying the general exceptions as outlined by the Court of Appeal in ex parte Vine; re Wilson (1878) 8 ChD 364 at 166-7 where the Court said: "The general principle always has been that, until a bankrupt has obtained his discharge, all his property is divisible amongst his creditors. But an exception was absolutely necessary in order that the bankrupt might not be an outlaw, a mere slave to his trustee; he could not be prevented from earning his own living. On that principle the trustee could not sue for monies due to the bankrupt in respect of his personal labour, and, if the bankrupt could sue for them only for the benefit of his trustee, he would really be without remedy. If he could not sue for damages in respect of a personal wrong, such as the seduction of his daughter, or anything like that, the courts of the realm would be closed to him for all practical purposes." On the basis of that policy formulation it would seem to be arguable that monies due to the bankrupt in respect of his personal labour i.e. wages and holiday pay accrued to him might be recoverable on his own behalf. However, there seems to be no subsequent authority applying that proposition and indeed it seems to some extent to be contrary to the decision reached in the later case of Beckham v Drake. Further, it does not appear to be encapsulated in the words "personal injury or wrong" contained in S116(2)(g). The historical cases were considered in some detail by Justice Cox of the Supreme Court of Tasmania in Bullock v Goodluck and the Transport Commission (1982-83) 48 ALR 217. He concluded that a cause of action alleging injury to the plaintiff's reputation and feelings could be carried on by the bankrupt in his own behalf but was of the view that that part of the claim which related solely to the pecuniary loss to the plaintiff's estate could not be prosecuted unless and until the plaintiff's trustee joined in to do so on his behalf. Mr Maher for the applicant submitted that one aspect of compensation being sought was with respect to the stress, shock and embarrassment suffered by the applicant as a result of the summary nature of his termination. In my opinion, the action insofar as it relates to such a claim can be continued in the name of the bankrupt. On the other hand I rule that the action insofar as it relates to loss of wages, accrued entitlements to holiday pay, statutory entitlement to payment in lieu of notice and statutory entitlement to compensation with respect to loss of earnings relates to pecuniary loss and cannot be continued on the applicant's own behalf. The respondent submitted that the application should be dismissed as the applicant had no standing. This was the approach taken by the Full Federal Court in Fuller v Beach Petroleum, however I note that in that case the trustee was notified of the notice of motion but did not indicate any wish to pursue the appeals. In the case at hand the trustee has not been approached in relation to whether or not he wishes to join the action to prosecute it on behalf of the applicant. Taking into account: (i) the policy formulation referred to in ex parte Vine; re Wilson; (ii) the remedial nature of the Industrial Relations Act which seeks to enforce an International Convention; and (iii) the essentially no costs nature of this jurisdiction I would have thought that this was an appropriate matter for intervention by the Trustee. In any case, I have already ruled that one part of the application, albeit a relatively small one in terms of shock, distress and embarrassment can be continued on behalf of the applicant. I intend to adjourn the matter so that the trustee can be approached with a view to obtaining his joinder to prosecute the balance of the applicant's claim. I certify that this and the preceding 4 pages are a true copy of the Ruling of Judicial Registrar Chancellor. Associate : Date : 14 September 1995 Appearances: Counsel for the Applicant : Mr L Maher Solicitor for the Applicant : Sica & Co Counsel for the Respondent : Mr P Page Solicitor for the Respondent : Kennedy Guy Date of Hearing : 11 September 1995 Judgment : 14 September 1995