A Personally Injured Bankrupt?

Does damage to “body, mind and soul” in commercial proceedings amount to “personal injury”?

In Garrett v Mildara Blass Limited [2015] SASC 176 the Honourable Justice Peek considered an application by Andrew Garrett (“Garrett”), an undischarged bankrupt, filed in proceedings commenced by the bankrupt in 1996.  The subject application sought 14 orders to be made in that action.

Mr Garrett was bankrupted by sequestration order on 15 May 2015.  Prior to Mr Garrett becoming bankrupt, Mr Garrett was a party to numerous proceedings in the Supreme Court of South Australia, which resulted in the declaration of Mr Garrett as a vexatious litigant in 2007.

Section 60(2) of the Bankruptcy Act 1966 (Cth) (“the Act”) provides that an action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming bankrupt, stayed until the Trustee makes a written election to prosecute or discontinue the action.    However, certain exceptions to this general rule exist.  Of particular relevance, section 60(4) provides that a bankrupt may continue, in his own name, an action commenced by him before he became bankrupt, in respect of any personal injury or wrong done to the bankrupt, his spouse or a member of his family.

Mr Garrett made submissions that the stay in section 60(2) of the Act did not apply to his application because, amongst other things, his application was filed prior to becoming bankrupt and, in the alternative, the application would not be stayed against Mr Garrett in his capacity as trustee for the Garrett Family Trust.  These submissions were rejected.

Of particular interest, Mr Garrett submitted the subject proceedings fell within the personal injury exception contained in section 60(4) of the Act on the basis that “the finding that he is a vexatious litigant damaged his body, mind and soul”.   The 1996 proceedings were of a commercial nature only.  The Court considered previous authorities in respect of what constituted personal injury proceedings and, specifically, Cox v Journeaux (No 2) [1935] HCA 48 in which Dixon J stated that the test for whether an action is in respect of a ‘personal injury or wrong’ was “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”.   By reason of these previous authorities, the Court held that Mr Garrett’s declaration as a vexatious litigant did not amount to a personal injury.

It is clear from the decision that the Courts are not prepared to allow adverse orders made in commercial proceedings to be a deemed “personal injury” to the bankrupt so as to allow the bankrupt to trigger exceptions under the Act.

For more information, please contact:
Kelly Fussell

Kelly Fussell
Senior Associate
p.  +61 8 8124 1959
e.  Email me

Mark Gowans

Mark Gowans
Director
p.  +61 8 8124 1953
e.  Email me

This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this report, or what it means for you, your business or your clients' businesses, please feel free to contact us.

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