Bennett v Carley [2003] ACTSC 3 (7 February 2003)

Last Updated: 7 February 2003

Jan Elizabeth Bennett and Another v Michael Carley and Others

[2003] ACTSC 3 (7 February 2003)

CATCHWORDS

PRACTICE AND PROCEDURE - strike out application - whether cause of action of bankrupt plaintiff wholly vests in Trustee in Bankruptcy.

Bankruptcy Act 1996

Wilson v United Counties Bank Limited [1920] AC 102

General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125

Williams and Humbert Ltd v W&H Trade Marks (Jersey) Ltd [1986] AC 368

Faulkner v Bluett (1981) 52 FLR

No SC 838 of 2001

Judge: Connolly J

Supreme Court of the ACT

Date: 7 February 2003

IN THE SUPREME COURT OF THE )

) No SC 838 of 2001

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: JAN ELIZABETH BENNETT

First Plaintiff

AND: TROY IAN BENNETT

Second Plaintiff

AND: MICHAEL CARLEY

First Defendant

AND: CHRISTOPHER SPELLMAN-MARRIOTT

Second Defendant

AND: BRIAN WILLIAM JENNINGS

Third Defendant

ORDER

Coram: Connolly J

Date: 7 February 2003

Place: Canberra

THE COURT ORDERS THAT:

1. Paragraph 2A of the second defendant's notice of motion be dismissed.

2. The second defendant bring in short minutes giving effect to paragraphs 2B and 2C of the second defendant's notice of motion.

3. Costs be reserved.

1. This is an application by way of notice of motion of 22 November 2002 that there be judgment for the second defendant in respect of the first plaintiff's claim, and, alternatively, to stay the first plaintiff's claim. The substantive action is in the form of a claim for damages for professional negligence in the provision of accounting and financial services. The claim was originally brought in the name of the plaintiff Jan Elizabeth Bennett. She brought the action against her former adviser, claiming negligence in the preparation of certain taxation returns and certain dealings with the Commissioner for Taxation. The second defendant also sought, in the alternative, to strike out certain particulars of damages claimed by the first plaintiff in the event that the first plaintiff's claim was allowed to stand.

The Strike Out Application

2. The first plaintiff became bankrupt on 30 November 1999, and by a Deed of Assignment dated 29 May 2002 between the Official Trustee in Bankruptcy as her Trustee of the estate pursuant to the Bankruptcy Act 1996 and Troy Ian Bennett, the first plaintiff's son, the Trustee assigned the role of trustee to Troy Bennett, and consented to him continuing with the claim. As a consequence, I as Master made orders on 21 June 2002 adding the second plaintiff to the claim and making consequential amendments to the pleadings.

3. The strike out claim is based on the proposition that the whole of the claim the first plaintiff had against the second defendant was vested in the Trustee upon bankruptcy, and so the first plaintiff personally has no cause of action remaining. Counsel for the second defendant, Mr Crowe, acknowledged that there is a line of authority flowing from Wilson v United Counties Bank Limited [1920] AC 102 which establishes that, while it is the general proposition that a bankrupt's cause of action vests in the Trustee, there are certain types of action that do not, particularly actions going to damage to reputation, inconvenience vexation or distress. Mr Mossop, for the first plaintiff, made the argument that this is the present situation.

4. The test to be applied in a strike out application, or to stay proceedings, is a high one. In the oft cited decision of General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, Barwick CJ said at 129 that:

"The test to be applied has been variously expressed; `so obviously untenable that it cannot possibly succeed'; `manifestly groundless'; `so manifestly faulty that it does not admit of argument'; `discloses a case which the Court is satisfied cannot succeed'; under no possibility can there be a good cause of action'; `be manifest that to allow them' (the pleadings) ` to stand would involve useless expense.'"

5. Mr Mossop argued that the question of to what extent the first plaintiff's cause of action remains personally with her, and to what extent it has been vested in the Trustee and assigned to the second plaintiff, should not be determined as a preliminary point on a strike out application. Given that the validity of the assignment of the cause of action to the second plaintiff is not under challenge, that cause of action will go to trial in any event. The whole of any cause of action, which the first plaintiff may have had but for the bankruptcy, must now be vested either in the plaintiff or the assignee, the second plaintiff. As one or other of the plaintiffs have the right to sue, Mr Mossop says that they are both pleaded as plaintiffs to avoid any lacuna.

6. It seems to me that the submission that the first plaintiff has no remaining cause of action is a question which, following the line of authority of Wilson v United Counties Bank, can involve quite complex issues of fact and law, and on that basis it would seem inappropriate to deal with it by way of a strike out application. Moreover, because the second plaintiff has been joined the matter will go to trial in any event. A strike out application against the first plaintiff as an individual will not obviate the need for a trial on the question of the claimed negligence and breach of duty of care on the part of the financial adviser (and his then partners, who have subsequently been joined to the proceedings). As was said in Williams and Humbert Ltd v W&H Trade Marks (Jersey) Ltd [1986] AC 368 at 435-436 per Lord Templeman:

"... if an application to strike out involves a prolonged and serious argument the judge should, as a general rule, decline to proceed with the argument unless he not only harbours doubts about the soundness of the pleading but, in addition, is satisfied that striking out will obviate the necessity for a trial or will substantially reduce the burden of preparing for trial or the burden of the trial itself."

7. As Mr Mossop noted, in those cases where courts have held that a cause of action brought by a plaintiff individually had been vested in the Trustee and accordingly either struck out the plaintiff's claim or ordered that it be stayed, the Trustee had elected not to continue with the proceedings, so the effect of the interlocutory order was to obviate the need for any trial.

8. This is clearly not the case here. Even if the relief sought was granted, the claim insofar as it is vested in the Trustee, which on the second defendant's argument is the whole of the cause of action, will proceed and must go to trial. It was apparent in the argument that the plaintiffs' have drafted the amended statement of claim following the inclusion of the second plaintiff in such a way so as to seek to plead an individual cause of action remaining with the first plaintiff pursuant to the principles set down in Wilson v United Counties Bank.

9. Lockhart J summed up the test well, it seems to me, when he said in Faulkner v Bluett [1981] FCA 5; (1981) 52 FLR 115 at 119 that:

"The common thread running through these cases is that where the primary or 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 well 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."

10. It follows that I am not satisfied that the second defendant has established that he is entitled to the relief sought, and the matter should not be dealt with by way of a strike out. The issue of which cause of action vested in the Trustee and which remain with the first plaintiff personally remain for trial. I should add that in argument counsel for the first plaintiff made submissions based on the present state of the pleadings emphasising the way they had been drafted so as to preserve the first plaintiff's individual cause of action in accordance with the appropriate test, and I am satisfied that this is certainly a matter that ought to go to trial. The week after I reserved this decision a further notice of motion was filed by the plaintiffs to further amend the statement of claim in such a way, it seems to me, so as to further reinforce the claimed separate nature of the causes of action of the first and second plaintiffs. It seems to me that even though I have, after consideration, dismissed the second defendant's notice of motion to strike out or stay the claim, I ought to reserve costs until I have heard from the parties and dealt with the proposal to further amend the statement of claim.

The Particulars of Damage

11. The complaint by the second defendant in relation to the particulars of damage may be simply dealt with. By letter of 10 October 2002 the plaintiffs set out to the second defendant the particulars of damages. In this letter the plaintiffs set out personal losses claimed by the first plaintiff as well as pecuniary losses claimed by the second plaintiff. The letter also says:

"The first Plaintiff is also entitled to financial losses flowing from damage to the business she ran in partnership with her husband, Ian Bennet, Beander Retail Services, particulars of which will be provided later in this letter of particulars."

12. At page 8 of the letter of 10 October 2002 the plaintiffs there set out in some detail the way they say that this arises. Shortly put, it is claimed that the first plaintiff and her husband had established a business in 1997, which had developed a good reputation as the provider of commercial cleaning services. It is said that this business had a number of contracts. It is said that these contracts provided that the contract could be terminated as a result of the bankruptcy of the contractor. It is not clear whether the business was incorporated, or indeed what form it took. It is said that Beander Retail Services declined to take up offers for fear of breaching their obligations and possibly suffering losses under these contracts."

13. The letter claims that the entity, Beander Retail Services, did not seek to renew contracts because of fear that the bankruptcy of a principal, Mr Bennet, would have an adverse impact on the relationship between Beander Retail Services and its clients. This appears to be a loss suffered by the entity. In any event, it is, it seems to me, too vague in its present form. Any claimed loss flowing from the actions of the defendants through this cleaning enterprise should, it seems to me, be pleaded with appropriate precision, and a vague assertion by way of particulars is not sufficient. I order that these particulars be struck out. The particulars were identified by way of a marking to an annexure to an amended form of the notice of motion of 22 November 2002 filed in court on 19 December 2002, and I would give leave to the defendant to bring in short minutes giving effect to pars 2B and 2C of the amended notice of motion. Paragraph 2A of the notice of motion, which sought to strike out the first plaintiff's cause of action, is dismissed. I will hear the parties as to costs.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.

Associate:

Date: 7 February 2003

Counsel for the plaintiffs: Mr D Mossop

Solicitor for the plaintiffs: Bradley Allen

Counsel for the second defendant: Mr R Crowe

Solicitor for the second defendant: Minter Ellison

Dates of hearing: 29 November and 20 December 2002

Date of judgment: 7 February 2003