g IRCK CO Ke JUDGMENT NO. -ssvsccesssorssssel sosessvsnses IN THE INDUSTRIAL RELATIONS COURT _OF AUSTRALIA No. QI 96/1021 UEBENSLAND DISTRICT REGISTRY NDUSTRIAL RELATIONS ; MCOURT OFA ISTRALIA QUEENSLAND DISTRICT REGISTRY pooween JOHN REGINALD CLARK ENED ; = 14 MAY 1996 applicant MAYNE NICKLESS LIMITED ACN 004 073 410 trading as SECURITY EXPRESS Respondent CORAM : Spender J PLACE: Brisbane DATE: 14 May 1996 MINUTES OF ORDER THE COURT ORDERS THAT: (1) the application in QI 96/1021 be dismissed. (2) there be no order as to costs in these proceedings. Note: Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules. IN THE INDUSTRIAL RELATIONS COURT _OF AUSTRALIA No. QI 96/1021 QUEENSLAND DISTRICT REGISTRY BETWEEN : JOHN REGINALD CLARK Applicant AND : MAYNE NICKLESS LIMITED ACN 004 073.410 trading as SECURITY EXPRESS Respondent CORAM : Spender J PLACE: Brisbane DATE: 14 May 1996 REASONS FOR JUDGMENT On 20 March 1996, Mayne Nickless Limited trading as Security Express filed a Notice of Motion seeking that an application which Mr John Reginald Clark had filed on 13 February 1996 in this Court hye struck out as being "unlawful" on the ground that the applicant was at the commencement of this application and still is a bankrupt. The notice of motion also sought that Mr Clark pay the respondent's costs of and incidental to the action, including this application, to be taxed. The original application by Mr Clark was an application in the original jurisdiction of the Industrial Relations Court. While it does not appear from the material filed by Mayne Nickless Limited, it seems that the basib of the relief claimed in the motion is to be found in O 20 r 2 of the Industrial Relations Court Rules which rule provides: " Where in any proceeding it appears to the Court that in relation to the proceeding generally or in relation to any claim for relief in the proceeding: (a) no reasonable cause of action is disclosed; (b) the proceeding is frivolous or vexatious; or (c) the proceeding is an abuse of the process of the Court; the Court may order that the proceeding be stayed or dismissed generally or in relation to any claim for relief in the proceeding. " Essentially, the applicant on the motion submits that, as a consequence of the acceptance of the debtor's petition presented by Mr Clark on 22 May 1995, the right that Mr Clark had against Mayne Nickless which is referred to in his application of 13 February this year in this Court vested in his trustee in bankruptcy; that it was not competent for him to bring the application which he purported to, but that that power lay with his trustee; and the right of action is properly described as the property of the bankrupt divisible amongst his creditors. It was submitted that where a bankrupt has no standing, an action which he commenced was properly to be characterised as frivolous and vexatious. In Graham Douglas Cockerill v Westpac Banking Corporation (Pincus J, 23! May 1991, unreported), the learned judge said at page 5: " In The Metropolitan Bank, Limited v Pooley (1985) 10 App. Cas. 210, a bankrupt sued on a cause of action which, it was held, had passed to the trustee. The Lord Chancellor said that the bankrupt had no standing and the action was therefore 'frivolous and vexatious'. " There does not seem to be in the original jurisdiction of the Industrial Relations Court an order similar to 0 52 r 18 of the Federal Court Rules which permits a respondent to an appeal to have the competency of an appellant determined. However, in a somewhat roundabout route, it seems to me that if a person purports to bring a proceeding but has no standing to bring that proceeding, it is possible for the Court to conclude that in those circumstances the proceeding is both vexatious and an abuse of process, and therefore the Court may make the orders permitted by O 20 r 2. The crucial question is whether the right to bring the application which Mr Clark purported to exercise on 13 February 1996 in this Court is a right that had passed to his trustee on his bankruptcy on 22 May 1995. The application of Mr Clark is said to be made under the Industrial Relations Act 1988 and refers to a number of sections of that Act and subsections of those sections, those sections being 127A, 127B, 178, 179, 179A, and 179B. The application claims an amount of $7,393,035.45 being for the recovery of costs incurred for, and then follows a large number of various items. That figure claimed is i calculated from items which are referred to in a log of claims against Mayne Nickless which is summarised as follows: "1. The Amount of $7,393,035.45, being for the recovery of costs incurred for: Rostered Days Off (Employees), Casual Replacement Staff for Rostered Days Off (Employees), Annual Leave Payment (Employees), Casual Replacement Staff for Annual Leave (Employees), Annual Leave Loading (Employees), Sick Leave (Employees), Casual Replacement Staff for Sick Leave (Employees), Public Holidays (Employees), Shift Loadings (Employees), Meal Allowances (Employees), Cribb Time (Employees), Overtime Payments (Employees), Workers Compensation (Employees), Superannuation (Employees), Staff Training (Employees), Agents Costs, Additional Vehicle Variable Costs, Variation in Fuel Costs, Variation in Fixed Costs, Mechanical Tools Cost, Corporate Advertising, Lease Payouts, Depot Rental, Depot Outgoings, Depot Electricity Costs, Depot Telephone Costs, Stationery, Communications Allowance, Accounting Costs, Uniform Cost (Employees), Local Business Allowance, Kodak Australia Allowance. " The detailed breakdown of that claim is as follows: Incurred Rostered Days Off (Employeés) $50,787.61 Casual Replacement Staff for Rosterd (sic) Days Off (Employees) 60,985.52 Annual Leave payments (Employees) 84,646.02 Casual Replacement Staff for Annual Leave (Employees) 101,642.54 Annual Leave Loading (Employees) 14,813.05 Sick Leave (Employees) 32,679.41 Casual Replacement Staff for Sick Leave (Employees) 40,657.02 Public Holidays (Employees) 43,122.35 Shift Loadings (Employees) 47,343.62 Meal Allowances (Employees) 26,723.58 Cribb Time (Employees) 46,739.24 Overtime Payments (Employees) 152,175.93 Workers Compensation (Employees) 169,478.86 Superannuation (Employees) 52,257.98 Federally Legislated Superannuation Guarantee (Employees) 16,729.25 Staff Training (Employees) 16,508.74 Agents Costs 1,499,784.40 Additional Variable Costs (Vehicles) 629,583.90 Variation In Fuel Costs (Vehicles) 687,926.62 Variation in Fixed Costs (Vehicles) 239,797.77 Mechanical Tool Costs (Agreement notes Vehicle Labour By Owner of Vehicle Therefore Tools Required) 12,714.81 { Corporate Advertising 16,978.86 \ Lease Payouts 164,912.38 Depot Rental 98,976.22 Depot Outgoings 5,938.57 Depot Electricity 6,344.63 Depot Telephone Costs 109,635.19 Stationery 9,897.62 Communications Allowance 13,628.26 Accounting Costs (Including Office Equipment ) 52,989.97 Uniform Costs (Employees) 10,339.69 Local Business Allowance 494,881.09 Kodak Australia Allowance 1,252,494.58 LOG OF CLAIMS SUB TOTAL $6,265,284.28 INTEREST 1996 @ 18% COMPOUNDING 1,127,751.17 LOG OF CLAIMS TOTAL $7,393,035.45 The application claims an additional amount of $316,674.60 being for the replacement of forfeited personal items and costs to date. The application claims that the administration costs of the Insolvency Trustee Service of Australia be a direct billing to Mayne Nickless Limited and also claims interest at the rate of 18 per cent per annum up to and including judgment. In an affidavit of Mr Clark filed on 13 February 1996, there is an item in respect of personal assets forfeited which includes a house and depot at an address in Karralee and two motor vehicles, which items are said to total $296,614, and then expenses detailed in that affidavit which total $25,060.60. Those items include an _é item, 'Document Preparation (inclusive of visits to Courts in association with correct procedures in document preparation, Rules, Acts, etc.,) @ $20.00 per Hour for 955.80 hrs', totalling $19,116, and 'Purchase of respective Court Rules, Acts and Regulations, etc.,' of $700. These two items together make up the sum referred to in paragraph 3 of the application. It can be seen from the voluminous material which Mr Clark has submitted that his large claim arises out of his dealings with Mayne Nickless Limited, and as he made plain in his submissions today, arises directly out of the consequences of the sole agreement he had with Mayne Nickless Limited and which made him an agent of Mayne Nickless Limited in the conduct of the matters the subject of his log of claims. It is plain from his brief against Mayne Nickless Limited that the events giving rise to his claims occurred during a period which commences in March 1988 and continues until and concludes in about 4 November 1994. It is clear therefore that his claims, which are essentially in the nature of claims for non-payment of sums which Mayne Nickless is said to have been obliged to pay him, were in existence at the time of his bankruptcy on 22 May 1995. The short point on this motion is whether on his bankruptcy those claims vest in this trustee for the benefit of his creditors. Under the Bankruptcy Act 1966, s 58(1) provides: " 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 ... " The term 'the property of the bankrupt' which appears in s 58(1) (a) is defined in s 5 of the Bankruptcy Act as meaning: " 'the property of the bankrupt', in relation to a bankrupt, means: (a) except in subsections 58(3) and (4): (i) the property divisible among' the bankrupt's creditors; and (ii) any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt; and (b) in subsections 58(3) and (4): (i) the property, rights and powers referred to in paragraph (a) of this definition; and j (ii) any other property of the bankrupt. " 'Property' in s 5 is defined very widely: " 'property' means real or personal property of every description, whether situated 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; " Section 116 (1) provides: " 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. " Section 116(2) provides: " 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 thé 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 became a bankrupt) in respect of such an injury or wrong or the death of such a person. " The claims that Mr Clark relies on in | application do not come within the exclusion or limitation referred to in s 116(2)(g). As Pincus J noted at p 3 in Cockerill v Westpac Banking Corporation, to which earlier reference has been made: " The question whether the word 'property' in this provision includes rights of action is discussed { in McDonald, Henry and Meek's Australian Bankruptcy Law and Practice (5th edition by Darvall and Fernon) Volume 1, para. 613. The learned editors' view is that the vesting under s. 116 and s. 58 covers rights of action. The editors suggest that in determining what rights of action vest in the trustee 'regard must be had to the limitations placed upon the literal construction of the bankruptcy statutes by the cases cited'. Those cases excluded, for example, certain 'personal' causes of action: Coffey v Bennett [1961] V.R. 264." His Honour said: " It is my view that the property which vests in the trustee includes causes of action, but it is not clear to me that the exceptions from vesting include rights of action other than _ those expressly excepted by s.116(2) (g). However, it is unnecessary now to decide the point just mentioned, because there is no reason to think that under the common law of bankruptcy, the right of action claimed here would not have passed to the trustee, nor is the right excluded by s.116(2)(g); is not one for a 'personal injury or wrong' done to any of the bankrupts. " / Subsequent to the decision of Pincus J, a matter with Cockerill as the first applicant, Ivor Worrell as the second applicant, with Westpac Banking Corporation as respondent, came before Drummond J, and in a judgment on 9 March 1992, having referred to the conclusion of Pincus J that the applicants had, at the time before him, no standing in respect of their action alleging misleading statements, his Honour said at p 3: "In coming to this conclusion, Pincus J referred to The Metropolitan Bank Ltd. & Anor. v Pooley (1885) 10 App. Cas. 210. This is clear authority for the proposition that a bankrupt who sues after bankruptcy on a cause of action that vested in his trustee upon bankruptcy has no standing to {$ maintain the action. See page 219, 223, and 224. See also W. R. Henry & Son v Hodge [1963] V.R. 111 and Bailey v Thurston & Co. [1902] 2 K.B. 397 at 400. Proceedings instituted by an applicant who at the time has no standing to institute them are incurably a nullity. See Ingall v Moran [1944] K.B. 160 at 164-165 and Minister of State for the Interior v R. T. Company Pty. Ltd. & Ors. (1961) 107 C.L.R. 1 at 7. The First Applicants thus had no standing to institute the proceedings in their own name, even though they may have had the consent of the trustee to do that: only their trustee had standing to bring such an action. " I am satisfied in this case that the claims which Mr Clark had against Mayne Nickless Limited were claims which on his bankruptcy became vested in his trustee, and that it was not competent for him personally to bring this application. The claims are substantial. I am not, of course, making any indication as to their validity. But they claim a substantial monetary sum, and it is for the trustee in the discharge of his functions to consider whether in the interests of creditors they should be pursued. In those circumstances it seems to me that pursuant to O 20 r 2 of the Industrial Relations Court Rules, I ought to, and I do, dismiss these proceedings. There is a final matter and that is the claim for costs in the notice of motion. Section 347 of the Industrial Relations Act 1988 has the heading 'Costs Only Where q Proceeding Instituted Vexatiously Etc', and s 347(1) provides: "A party to a proceeding (including an appeal) in a matter arising under this Act shall not be ordered to pay costs incurred by any other party to the proceeding unless the first-mentioned party instituted the proceeding vexatiously or without reasonable cause. " In a sense it might be said that Mr Clark instituted these proceedings without reasonable cause, in that he, being a bankrupt, had no personal interest after the date of his bankruptcy in the prosecution of the claims which he says he had anterior to his bankruptcy; those claims, if they are to be prosecuted, being claims that might be prosecuted only by his trustee. It is, of course, however, understandable that the intricacies of bankruptcy law and their application to him were matters of which he was unaware at the time he filed his application. In that sense the institution of his application cannot have been said to have been unreasonable. / Mr Clark has been and is acting on his own behalf. I think probably the better view is that the threshold requirement of s 347(1) has been made out, and that the discretion to consider the awarding of costs is one that falls to be considered by me. But in all the circumstances of the case, including his bankruptcy and including the basis on which I have determined the notice of motion, and indeed the contents of that notice of motion, I decline to make any order as to costs in these proceedings. I certify that this and the preceding ten (10) pages are a true copy of the reasons for Judgment herein of the Honourable Justice Spender. \ Associate Date go *(ax 19796 The applicant appeared in person. Counsel for the respondent instructed by Date of Hearing Mr P Dutney QC and Mr P Hack Blake Dawson Waldron 14 May 1996