Re Sylvia Margaret Faulkner Ex Parte: the Official Receiver, Trustee of the Bankrupt Estate of Sylvia Margaret Faulkner v Daniel Joseph Noel Bluett, Official Receiver In Bankruptcy of New South Wales [1981] FCA 5; (1981) 52 FLR; 109 (6 February 1981)

FEDERAL COURT OF AUSTRALIA

Re: SYLVIA MARGARET FAULKNER
Ex parte: THE OFFICIAL RECEIVER, Trustee of the bankrupt estate of Sylvia
Margaret Faulkner
And: DANIEL JOSEPH NOEL BLUETT, Official Receiver in Bankruptcy for the State
of New South Wales (1981) 52 FLR 109
No. 190 of 1978
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT IN THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Lockhart J.(1)

CATCHWORDS

Bankruptcy - application by Official Receiver to elect to proceed with action in High Court commenced by bankrupt prior to her bankruptcy - whether time for making of such election can be extended - whether Official Receiver had abandoned the action - factors to be considered when exercising discretion to extend time

Bankruptcy Act 1966 (Cth.) ss. 33 (1) (c), 60.

Bankruptcy - High Court action commenced by bankrupt before her bankruptcy - application to continue action in her own name - whether action is for damages for personal injury or wrong done to the bankrupt within the meaning of s. 60 (4) (a) and s. 116 (2) (g) - discussion as to history and meaning of those sections.

Bankruptcy Act 1966 (Cth.), ss. 60, 116

Bankruptcy - Bankrupt commenced court proceedings prior to bankruptcy - Election by official receiver to proceed with court action - Time for making election - Extension of time for making election - Abandonment of action by official receiver - Discretion of court in extending time - Principles to be applied - Bankruptcy Act 1966 (Cth), ss. 33 (1)(c), 60. In March 1978 a sequestration order was made against the estate of the bankrupt, who, in 1974, had commenced an action in the High Court against the Commonwealth of Australia and one Brigadier Flint. On 20th September, 1978, notice of the High Court proceedings was served on the official receiver. On 17th October, 1978, Evatt J. ordered that the time to comply with the notice be extended to 1st November, 1978. On 31st October, 1978, the official receiver convened a meeting of creditors who resolved to authorize him to continue the action; the creditors however failed to provide him with any indemnity in respect of costs. Between November 1978 and July 1979 correspondence between the official receiver and the Commonwealth Crown Solicitor ensued, culminating in a letter from the Commonwealth Crown Solicitor stating that the official receiver was deemed to have abandoned the action as he had not prosecuted the same within the time specified in s. 60(3) of the Bankruptcy Act 1966 (the Act).

The official receiver applied pursuant to s. 305 of the Act to the Minister for his approval to the Commonwealth meeting the costs of the High Court action. On 6th March, 1980, approval in this regard was given. In reliance upon s. 33 (1)(c) of the Act the official receiver sought an extension of the time prescribed for making an election pursuant to s. 60(3). In opposition to the application the Commonwealth submitted that the time for making the election either could not or should not be extended because the action had been abandoned by the official receiver on 1st November, 1978.

Held: (1) Section 33(1) (c) empowered the court to extend the time for making an election under s. 60(3) notwithstanding that the time therein limited had expired.

Re Brooks (1930), 2 ABC 49; Re Greve; Ex parte Horsburgh (1967), 10 FLR 187, followed.

(2) The High Court action had not been abandoned by the official receiver on 1st November, 1978. In the absence of any indemnity for costs no fresh step was taken in that action. Correspondence between the parties made it plain that the litigation was to be continued if funds or indemnities as to costs could be found. No steps were taken to have the action struck out or dismissed for want of prosecution.

(3) In the absence of any prejudice to the Commonwealth, other than the delay itself, the discretion of the court should be exercised in favour of allowing the extension of time sought by the official receiver.

HEARING

Sydney, 1980, December 17; 1981 February 6. 6:2:1981
APPLICATION.

Application by the official receiver as trustee of the estate of the bankrupt for an extension of time limited by s. 60(3) of the Act to make an election to prosecute or discontinue an action in the original jurisdiction of the High Court of Australia.

C. Darvall Q.C. and R.L. Walker, for the applicant.

R. Mater, for the respondent.
Cur.adv.vult.

Solicitors for the applicant: Connah Steed & Co.

Solicitors for the applicant: Connah Steed & Co.

Solicitor for the Commonwealth: B.J. O'Donovan, Commonwealth Crown

Solicitor.

D. LEVIN

ORDER

1. The time for the Official Receiver as trustee of the bankrupt estate of Sylvia Margaret Faulkner to make an election in writing to prosecute or discontinue action No. 52 of 1974 in the High Court of Australia be extended up to and including 27 February 1981.

2. No order be made as to costs.

1. The application be dismissed

2. The applicant pay the respondent's costs of the application including reserved costs. Order accordingly.

DECISION

The Official Receiver, as trustee of the estate of Sylvia Margaret Faulkner ("the bankrupt"), seeks an extension of time limited by s. 60 (3) of the Bankruptcy Act 1966 ("the Act") to make an election to prosecute or discontinue an action in the original jurisdiction of the High Court of Australia ("the High Court action").

The High Court action was commenced in 1974 by the bankrupt against the Commonwealth of Australia and Charles Francis Flint ("Brigadier Flint").

It was not until December 1975 that the bankrupt filed a statement of claim. It alleges that the Commonwealth of Australia, by its agent, Brigadier Flint, represented to the bankrupt as the beneficial owner of the issued share capital in a company Trisal Engineering Pty. Limited and, as its governing director, that the Commonwealth would lodge orders in large quantities for the purchase of articles known as Trisal clips produced by Trisal Engineering Pty. Limited for use by the Australian Armed Forces, and that, relying upon those representations, the bankrupt advanced moneys to Trisal Engineering Pty. Limited for the purpose of developing and marketing the clips, refrained from disposing of her interest in the clips and the patent and other rights relating thereto and procured Trisal Engineering Pty. Limited to refrain from disposing of its interest in the clips and the patent and other rights relating thereto; and in the result, damage was sustained by the bankrupt. She claims damages of $1,246,852.00.

The Commonwealth filed a defence to the statement of claim which in essence either denies or does not admit the material allegations. If Brigadier Flint has filed a defence it is not in evidence in these proceedings.

On 15 March 1978 a sequestration order was made against the estate of the bankrupt.

This is the second application for extension of time to make an election to prosecute or discontinue the High Court action by the Official Receiver. He first sought an extension of time in 1978. It is common ground that on 20 September 1978 notice of the High Court action was served upon the Official Receiver by the Commonwealth. On 17 October 1978, Evatt J. ordered that time to comply with the notice of 20 September 1978 be extended to 1 November 1978. Following the order of Evatt J., the Official Receiver convened a meeting of creditors of the bankrupt for 31 October 1978 where they resolved that the Official Receiver be authorised to continue the High Court action. There was discussion as to whether the creditors would indemnify the Official Receiver in respect of costs relating to that action; but the creditors did not give any such indemnity.

By letter dated 1 November 1978 the Official Receiver informed the Crown Solicitor of the Commonwealth of the resolution passed at the meeting of creditors and said that, as the creditors were not able to provide him with funds and indemnities in respect of costs of the action, he was not able to proceed with it at that stage.

Correspondence ensued between the Official Receiver and the Commonwealth Crown Solicitor culminating in a letter dated 3 July 1979 from the Crown Solicitor to the Official Receiver in which the Crown Solicitor said that, as the Official Receiver had not prosecuted the action within the time specified in s. 60 (3) of the Act, he was deemed to have abandoned the action.

The Official Receiver applied to the Minister for Business and Consumer Affairs of the Commonwealth pursuant to s. 305 of the Act for his approval to the costs of the High Court action being paid by the Commonwealth. On 6 March 1980 this approval was given.

No application has been made by the Commonwealth or Brigadier Flint in the High Court to strike out the High Court action for want of prosecution.

The solicitors who had the carriage of the High Court action on behalf of the bankrupt informed her in June 1980 that they did not propose to represent her any further. The Official Receiver requested them to reconsider the decision by letter dated 12 August 1980. They informed the Official Receiver that they would act for him in his capacity as trustee of the estate of the bankrupt.

By letter dated 20 August 1980, those solicitors informed the Crown Solicitor that the Official Receiver had requested them to act on his behalf in the High Court action and that he sought to be substituted as plaintiff. They asked the Crown Solicitor to obtain the instructions of the Commonwealth as to whether it would consent to the substitution. The Crown Solicitor replied by letter of 5 September 1980 declining to give that consent.

The solicitors acting for Brigadier Flint informed the bankrupt's solicitors that they had instructions to consent to the Official Receiver being substituted as plaintiff in lieu of the bankrupt.

A summons was taken out by the bankrupt's solicitors on 18 November 1980 seeking an order that the High Court action be continued with the Official Receiver as plaintiff in substitution for the bankrupt. The application has not yet been heard by the High Court. The Commonwealth intends to oppose the application.

The Commonwealth opposes this application for further extension of time to make the necessary election.

Section 60 provides: -

"60 (1) . . .

(2) An action commenced by a person who subsequently becomes a bankrupt is, upon his 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 twenty-eight days after notice of the action is served upon him by a defendant or other party to the action, he shall be deemed to have abandoned the action.

(4) Notwithstanding anything contained in this section, 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; or

(b) the death of his spouse or of a member of his family.

(5) In this section, "action" means any civil proceeding, whether at law or in equity."

The orders sought assume that the bankrupt's rights in respect of the High Court action vested in the Official Receiver as trustee of the bankrupt's estate on the making of the sequestration order. I decided in a separate application by the bankrupt, immediately before giving judgment in this matter, that the right of action did vest in the Official Receiver. It was not disputed by the Commonwealth on the hearing of the present application that the right of action vested in the Official Receiver.

Section 60 does not itself enable the court to extend the time prescribed for making an election, either before or after its expiration. The Official Receiver relies on s. 33 (1) (c) which, so far as relevant, provides: -

"The Court may - . . .

(c) extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act for doing an act or thing or abridge any such time."

Counsel for the Commonwealth conceded towards the end of his argument that s. 33 (1) (c) was a source of power to extend time to make an election under s. 60 (3). The concession was correctly made, especially in the light of the decisions of Re Brooks 1930 2 A.B.C. 49 and Re Greve 1967 10 F.L.R. 187.

In Re Brooks Long Innes J. held that the power conferred by s. 27 (2) (c) of the Bankruptcy Act 1924 (Cth.) (the equivalent of s. 33 (1) (c) of the Act) permitted the extension of time for registration of a deed of arrangement under Part XII of the Bankruptcy Act 1924, notwithstanding that the application was not made until after the time prescribed had expired. In Re Jeanne and Hilton's Deed of Arrangement 1960 20 A.B.C. 34 Burbury C.J. doubted the correctness of this decision, but his Honour did not find it necessary to decide the question and held that if he had power to grant an extension of time, he would, on the facts of the case, refuse to do so.

Both cases were referred to by Gibbs J. in Re Greve. His Honour followed the decision of Long Innes J. in Re Brooks and held that he had power to grant an extension of time for registration of a deed of arrangement under Part XII of the Bankruptcy Act 1924 which had not been registered within twenty-eight days after its execution as required by s. 193 (1).

In my opinion, the power conferred by s. 33 (1) (c) is available to permit an extension of time for making an election under s. 60 of the Act notwithstanding that the application is not made until after the expiration of the prescribed time of twenty-eight days.

Counsel for the Commonwealth submitted that the time for making the election could not, or alternatively, should not, be extended because the Official Receiver had in fact abandoned the High Court action on 1 November 1978. That was the date of the Official Receiver's letter to the Crown Solicitor informing him of the order of the Court extending time for making the election to 1 November 1978; and in the same letter the Official Receiver informed the Crown Solicitor that, although the creditors had resolved that the Official Receiver be authorised to continue the High Court action against the Commonwealth, they were not able to provide him with funds and indemnities in respect of costs of the action, and that therefore he was not able to proceed with the action at that stage.

Counsel for the Commonwealth submitted that the lapse of time had been so long, by the bankrupt before the sequestration order and, thereafter by the Official Receiver, that the proper inference to be drawn is that the Official Receiver had abandoned the High Court action.

In the relevant correspondence between the Official Receiver and the Crown Solicitor enquiries were made by the latter as to when the former intended to continue the High Court action and as to the steps he proposed to take. Although the High Court action has slumbered over the years since it was commenced in 1974, the creditors authorised the Official Receiver to continue it; but, as they were not prepared to indemnify him for costs at that stage, he was not prepared to take any further step for the time being. Once an indemnity for costs was granted by the Minister for Business and Consumer Affairs the barrier to the future conduct of the litigation was removed. The Commonwealth knew that the absence of an indemnity for costs, by the creditors, was the reason for no fresh step being taken by the Official Receiver. Indeed, the Commonwealth took no steps to have the High Court action struck out or dismissed for want of prosecution. Each party was content to let the action lie dormant. There was no abandonment of the High Court action by the bankrupt or the Official Receiver.

That leaves the question of discretion. Counsel for the Commonwealth submitted that I should not exercise my discretion in favour of extending time to make the election as the Court granted this indulgence on an earlier occasion in 1978 and more than two years have passed since notice of the action was served upon the Official Receiver by the Commonwealth.

It is true that the delay has been considerable, both before and after the making of the sequestration order; but, since the making of the sequestration order, it has been due in the main to the absence of an indemnity for costs being given to the Official Receiver. That obstacle has now been overcome. The Commonwealth was not able to point to any prejudice that it has suffered or may suffer, other than the delay itself. I am satisfied that in all the circumstances this is a proper case to extend time for the making of an election under s. 60 of the Act.

I should add that it was not submitted on behalf of the Commonwealth that the Court's power to extend time for making an election under s. 60 could be exercised once only; and that, as this was done in 1978, it could not be exercised again.

As to costs, it was necessary for the Official Receiver to apply for this Court's leave to extend time. Although the Commonwealth opposed the application and failed, its opposition was not unreasonable in all the circumstances. There should be no order as to costs.

I extend the time for the Official Receiver as trustee of the bankrupt estate of Sylvia Margaret Faulkner to make an election in writing to prosecute or discontinue action No. 52 of 1974 in the High Court of Australia up to and including 27 February 1981. I make no order as to costs.

In 1974 Sylvia Margaret Faulkner ("the applicant") commenced an action in the original jurisdiction of the High Court of Australia against the Commonwealth of Australia and Brigadier Charles Francis Flint ("the High Court action"). It was not until December 1975 that the applicant filed a statement of claim in the High Court action. It alleges that the Commonwealth of Australia, by its agent, Brigadier Flint, represented to the applicant, as the beneficial owner of the issued share capital in a company, Trisal Engineering Pty. Limited and, as its governing director, that the Commonwealth would lodge orders in large quantities for the purchase of articles known as Trisal clips produced by Trisal Engineering Pty. Limited for use by the Australian Armed Forces; and that, relying upon those representation, the applicant advanced moneys to Trisal Engineering Pty. Limited for the purpose of developing and marketing the clips, refrained from disposing of her interest in the clips and the patent and other rights relating thereto and procured Trisal Engineering Pty. Limited to refrain from disposing of its interest in the clips and the patent and other rights relating thereto; and that, in the result, damage was sustained by the applicant.

My summary is brief, but it is sufficient to understand the essential character of the applicant's claim.

The applicant has given the following particulars of the damage claimed by her: -

"1. Unsecured loans made by the female bankrupt to Companies of which she was the major shareholder, which manufactured Trisal Clips.

(a) Trisal Engineering Pty. Limited 1964 to 1970 $158,296.00

(b) Trisal Clips Pty.
Limited 1970 to 1973 71,500.00

$229,796.00

2. Interest of 10% per annum
on the monies advanced to the
above Companies between 1964
to 1973 114,299.00

3. Share capital invested by the
female bankrupt in the two
Companies (8,000 x $2.00 full
paid ordinary shares) 16,000.00

4. Estimated expected profit to
be derived from contract with
Department of Army for supply
of Trisal Clips, which did not
eventuate (5 years @ $74,592.00
per annum) 372,960.00

5. Value of patents and other rights
(a) cost of registration of
patents 13,797.00
(b) value of patents 500,000.00 513,797.00

$1,246,852.00
"

The Commonwealth filed a defence to the statement of claim which in essence

either denies or does not admit the material allegations. If Brigadier Flint has filed a defence, it is not in evidence in this application.

On 15 March 1978 a sequestration order was made against the estate of the applicant. Daniel Joseph Noel Bluett ("the respondent") is the trustee of her estate.

On 14 November 1980 the applicant filed an application in this Court seeking certain declarations, only two of which are now sought namely, a declaration that the applicant may continue in her own name the High Court action and a declaration that the provisions of s. 116 (2) (g) of the Bankruptcy Act 1966 ("the Act") apply to the right of the applicant to recover damages in the High Court action.

The first declaration sought is based on s. 60 of the Act which, so far as relevant, provides: -

" 60 (1) . . .

(2) An action commenced by a person who subsequently becomes a bankrupt is, upon his 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 with twenty-eight days after notice of the action is served upon him by a defendant or other party to the action, he shall be deemed to have abandoned the action.

(4) Notwithstanding anything contained in this section, 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; or

(b) the death of his spouse or of a member of his family.

(5) In this section, "action" means any civil proceeding, whether at law or in equity."

The second declaration relates to s. 116 of the Act which, so far as relevant, provides: -

"116 (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 has devolved or devolves on him, after the commencement of the bankruptcy and before his 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 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.

(2) the last preceding sub-section 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;

(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 became a bankrupt) in respect of such an injury or wrong or the death of such a person . . . "

Thus,two questions arise for determination:

1. Whether the High Court action is "an action . . . in respect of - any personal injury or wrong done to the bankrupt . . . " within the meaning of s. 60 (4) (a); and

2. Whether the right, if any, of the applicant, the subject of the High Court action, is a

"right of the bankrupt to recover damages or compensation - for personal injury or wrong done to the bankrupt . . . "

within the meaning of s. 116 (2) (g).

It is convenient to consider the two questions together.

Although bankruptcy is the creature of statute law, certain rules have been formulated from time to time by the English courts exercising bankruptcy jurisdiction which limit the literal interpretation of vesting sections in bankruptcy legislation and which have been called "the common law of bankruptcy": Williams on Bankruptcy 18th Ed. p. 318.

Notwithstanding the language of s. 38 of the Bankruptcy Act 1914 (Eng.) (and of its predecessor, s. 44 of the Bankruptcy Act 1883 (Eng.) ) which provides that the property of the bankrupt divisible amongst his creditors shall comprise all such property as may be acquired by or devolve on him before his discharge, it has been established by decisions of the English courts that the personal earnings of a bankrupt pass to his trustee except such part of them as is necessary for the maintenance of the bankrupt, his spouse and family: Re Roberts 1900 1 Q.B. 122.

Also the English cases draw a distinction between personal earnings of the bankrupt and the profits of a business carried on by him, notwithstanding that the profits were due substantially to the personal effort and labour of the bankrupt, and such profits have been held to pass absolutely to the trustee of his estate: Re Rogers 1894 1 Q.B. 425; Re De Marney 1943 Ch. 126.

The rationale of the distinction between earnings of a bankrupt personal to him and those derived from a business carried on by him underlies also the distinction between rights of action that vest in the trustee of a bankrupt's estate and those that do not. Although rights of action generally pass to the trustee of a bankrupt's estate, exceptions have been created by decisions of the courts, including the following: a right of action for slander, Ex parte Vine 1878 8 Ch. 364; for seduction of a servant, Howard v. Crowther [1841] EngR 770; 8 M. & W. 601; for trespass to land or goods in the plaintiff's actual possession, at least where the only substantial damage is for the annoyance and personal inconvenience to him, Clark v. Calvert [1819] EngR 273; 8 Taunt 742 and Rose v. Buckett 1901 2 K.B. 449; for breach after bankruptcy of a contract for personal service made before bankruptcy, Bailey v. Thurston & Co. 1903 1 K.B. 137; for personal injuries arising out of certain breaches of contract such as a contract of marriage, Drake v. Beckham 11 M. & W. at p. 319.

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 notwithstanding that it may have produced personal inconvenience to the bankrupt: Wetherall v. Julius [1850] EngR 698; 10 C.B. 267; 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] EngR 843; 1849 2 H.L.C. 579 at p. 604: -

"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 of property."

There is still some doubt whether a right of action passes to the trustee where one and the same cause of action results in substantial damage to the property of the bankrupt as well as substantial injury to his person or annoyance to his feelings: Beckham v. Drake (supra); Hodgson v. Sidney L.R. 1 Ex. 313; Morgan v. Stebele L.R. 7 Q.B. 611. In England the accepted view seems to be that such a cause of action passes to the trustee so far as it relates to the property of the bankrupt, and remains with the bankrupt so far as it relates to his person or feelings: Wilson v. United Counties Bank 1920 1 A.C. 102. Some of the problems that arise from this notion of a "mixed action" appear from cases such as Wilson v. United Counties Bank and Beckham v. Drake.

The same principles are applied by the English courts with respect to staying proceedings against a bankrupt. Section 9 of the English Bankruptcy Act 1914 provides that the Court may, at any time after the presentation of a bankruptcy petition, stay any action against the property or person of the debtor. Neither the receiving order nor the adjudication operates as a stay of pending proceedings against the bankrupt unless the Court makes an order under s. 9: Realisations etc. v. Loescher 1957 1 W.L.R. 1026.

The English courts have held that the power to stay proceedings against the property or person of a debtor does not extend to actions in respect of the person or feelings of a bankrupt as distinct from an action that relates to his property or estate.

In Australia, some of the "common law of bankruptcy" has been embodied in bankruptcy legislation. An example is s. 60 (4) of the Act relating to actions commenced by the bankrupt in respect of "any personal injury or wrong done to the bankrupt, his spouse or member of his family". The first introduction of such a provision into bankruptcy legislation in Australia was by s. 33 of 5 Vic. No. 17(N.S.W.): see Salusbury, The Law and Practice in Bankruptcy in New South Wales, 2nd Ed. 1899 pp. 60 and 61. Section 33 was repeated in later bankruptcy legislation including s. 10 (6) of the Bankruptcy Act 1887 (N.S.W.); s. 10 (7) of the Bankruptcy Act 1898 (N.S.W.) and s. 63 (3) of the Bankruptcy Act 1924 (Cth.). In Cox. v. Journeaux (No. 2) [1935] HCA 48; (1935) 52 C.L.R. 713 Dixon J. construed s. 63 (3) of the Bankruptcy Act 1924 (Cth.) as stating the "common law of bankruptcy". He said at p. 721: -

"Notice was given under s. 83 (3) of the Bankruptcy Act 1924 - 1933 to the official receiver requiring him to elect to prosecute or discontinue the action and he has elected not to prosecute it. The plaintiff says that he himself is entitled to prosecute it under the proviso as an action for personal injury or wrong done to himself. 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 Limited 1920 A.C. 102 at pp. 111 and 128 - 133)."

Another example is s. 116 (2) (g) which gives statutory recognition to the principle evolved by the "common law of bankruptcy" that rights of action in respect of the person or feelings of a bankrupt do not vest in the trustee.

Counsel for the applicant relied principally on three cases in support of his contention that the applicant's right of action in the High Court action did not pass to the respondent as trustee of her estate.

The first case was Merry v. R. (1837) 13 V.L.R. 264. In my opinion it does not support the applicant's case. Higinbotham C.J. drew a sharp distinction (at p. 267) between rights of action with reference to "claims on property" and those with reference to

"wrongs or injuries done to the reputation or person, such as libel, slander or assault; these do not affect his estate in any way. It is only such personal wrongs that remain in him, and it is only in respect to such claims that he can prosecute his suit."

Then I was referred to the decision of Reed J. in Timmings v. Treadgold 1923 N.Z.L.R. 73. Nor does it support the applicant. A clear distinction was drawn between rights of action which have immediate reference to property as distinct from pain felt by the bankrupt in respect of his body, mind or character. At pp. 75 and 76 Reed J. said: -

"Mr. Jellicoe, for the plaintiff, claims that the cause of action is, primarily, personal injury to the plaintiff, and that in such a case an action can be brought in the name of the bankrupt without joining the Official Assignee. The rule of law appears to be stated by Erle, J., in Beckham v. Drake [1849] EngR 843; 2 H.L.C. 579,604: '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 of property. Thus it has been laid down that the assignees cannot sue for breach of promise of marriage, for criminal conversation, seduction, defamation, battery, injury to the person by negligence, as by not carrying safely, not curing, not saving from imprisonment by process of law;' Lord Campbell, C.J., in Stanton v. Collier 23 L.J. 116, 119 puts it thus: 'The rule which is to be deduced from Beckham v. Drake [1849] EngR 843; 2 H.L.C. 579,604 and Wetherell v. Julius [1850] EngR 698; 10 C.B. 267 is that if a cause of action is disclosed which touches only the person of the bankrupt or insolvent it does not pass to the assignees, but that if it touches his estate it does pass to them.'

The respective rights of the Official Assignee and the bankrupt are well illustrated in the recent House of Lords case of Wilson v. United Counties Bank Ltd. 1920 A.C. 102, where all the most important authorities upon the point are collected in the judgment of Lord Atkinson. In that case the verdict of the jury awarding damages to the Trustee in Bankruptcy was upheld. The damages awarded to the bankrupt were for injury caused to his credit and reputation as a trader, whilst the damages to the Trustee in Bankruptcy, who was a party to the action, were for breach of contract."

Finally I was referred to Wenlock v. Maloney & Ors. (1967) 111 Sol. Jnl. 437. Nor does it support the applicant's case. Lord Denning M.R., with whose judgment Harman and Salmon LJJ. agreed, relied on the distinction between claims in respect of the bankrupt's property and "claims for personal injuries, libel or slander or matters of that kind which remained his."

All three decisions in truth support the case for the respondent.

What then is the character of the right of action in the present case? It is common ground that it is a claim for damages for breach of a duty of the kind recognised in Hedley Byrne and Co. Limited v. Heller & Partners Limited [1963] UKHL 4; 1964 A.C. 465 and M.L.C. v. Evatt [1968] HCA 74; (1968) 122 C.L.R. 556; 1971 A.C. 793. The pleader of the statement of claim has sought to frame a cause of action based on those cases. I say nothing, of course, as to whether the pleader has in fact brought the alleged cause of action within a recognised category of the law of torts or as to its prospects of success.

The right of action of the applicant is directly related to her property or her estate namely, her shares in Trisal Engineering Pty. Limited and her interests in the patents or the Trisal clips. Any damages to which the applicant may be entitled would be estimated by immediate reference to her rights of property and not to pain felt by her in respect of her "body, mind or character".

The right of action of the applicant, if any, vested in the Official Receiver pursuant to s. 116 (1) of the Act, and does not answer the description of a right to recover damages or compensation for personal injury or wrong done to the applicant within the meaning of s. 116 (2) (g) (i). Likewise, the High Court action was stayed upon the applicant becoming a bankrupt; and she has no right to continue it in her own name under s. 60 (4) (a). In the result, the applicant fails.

I order that the application be dismissed and that the applicant pay the respondent's costs of the application including reserved costs.