Rowe v Official Trustee in Bankruptcy [2015] FCA 1261

FEDERAL COURT OF AUSTRALIA

Rowe v Official Trustee in Bankruptcy [2015] FCA 1261 Citation: Rowe v Official Trustee in Bankruptcy [2015] FCA 1261

Appeal from: Rowe v Official Trustee in Bankruptcy [2015] FCCA 220

Parties: CHAD EVERETT ROWE v OFFICIAL TRUSTEE IN BANKRUPTCY

File number: QUD 53 of 2015

Judge: RANGIAH J

Date of judgment: 18 November 2015

Catchwords: BANKRUPTCY AND INSOLVENCY – appeal from Federal Circuit Court – undischarged bankrupt – application to review decision of trustee in bankruptcy – where trustee elected to discontinue QCAT proceeding – whether proceeding constituted a "personal action" under the Bankruptcy Act 1966 (Cth) – whether statutory right of action vests in trustee in bankruptcy – where proceeding for pecuniary loss only – where chose of action is property vested in trustee – no error demonstrated – appeal dismissed

Legislation: Bankruptcy Act 1966 (Cth) ss 5, 58, 60(2), 60(4), 60(5), 116 and 178(1) Property Agents and Motor Dealers Act 2000 (Qld) ss 134A, 137 and 137(3) Queensland Civil and Administrative Tribunal Act 2009 (Qld) Sch 3, ss 13(2) and 60(1)

Cases cited: Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545 cited Cox v Journeaux (No 2) (1935) 52 CLR 713 applied Cummings v Claremont Petroleum NL (1996) 185 CLR 124 cited Faulkner v Bluett (1981) 52 FLR 115 cited Geia v Palm Island Aboriginal Council (1999) 152 FLR 135 cited Griffiths v Civil Aviation Authority (1996) 67 FCR 301 distinguished Re Nguyen; Ex parte Official Trustee in Bankruptcy (1992) 35 FCR 320 cited Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 applied

Date of hearing: 20 May 2015

Place: Sydney (via Video Link to Brisbane)

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 47

Counsel for the Appellant: The appellant appeared in person

Solicitor for the Respondent: Mr SG Muller of Rodgers Barnes & Green

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 53 of 2015

ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA

BETWEEN: CHAD EVERETT ROWE

Appellant

AND: OFFICIAL TRUSTEE IN BANKRUPTCY

Respondent

JUDGE: RANGIAH J DATE OF ORDER: 18 NOVEMBER 2015 WHERE MADE: SYDNEY (VIA VIDEO LINK TO BRISBANE)

THE COURT ORDERS THAT:

1. The appeal is dismissed. 2. The appellant pay the respondent's costs of the appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 53 of 2015

ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA

BETWEEN: CHAD EVERETT ROWE

Appellant

AND: OFFICIAL TRUSTEE IN BANKRUPTCY

Respondent

JUDGE: RANGIAH J DATE: 18 NOVEMBER 2015 PLACE: SYDNEY (VIA VIDEO LINK TO BRISBANE)

REASONS FOR JUDGMENT 1 The appellant is an undischarged bankrupt. The respondent is the trustee of the appellant's estate in bankruptcy. 2 On 4 November 2014, the appellant applied to the Federal Circuit Court of Australia pursuant to s 178(1) of the Bankruptcy Act 1966 (Cth) for review of the respondent's decision to discontinue proceedings the appellant had commenced in the Queensland Civil and Administration Tribunal ("QCAT"). 3 On 6 February 2015, the Federal Circuit Court dismissed the appellant's application for review. The appellant now appeals against that judgment.

background 4 By 2011, the appellant's marriage had broken down. The appellant and his former wife, Ms Schultz, wished to sell their matrimonial home, located at Benowa at the Gold Coast in Queensland. The appellant and Ms Schultz owned the property as tenants in common, with Ms Schultz holding a 99% interest and the appellant a 1% interest. 5 On 16 June 2011, the appellant and Ms Schultz signed a form appointing Showcase Property Pty Ltd, trading as Mint Property Sorrento ("Mint Property"), as their agent for the sale of the Benowa property. The form was in the approved form under the Property Agents and Motor Dealers Act 2000 (Qld) ("PAMDA") (now repealed). The listing was an open listing. The property was duly sold and Mint Property retained $24,066.98 from the proceeds of the sale for its commission. 6 In July 2012, the appellant commenced proceedings against Mint Property in QCAT. The standard form of the application requires the applicant to state the amounts that the applicant wants QCAT to order the respondent to pay to the applicant and explain why the applicant is seeking payment of such amounts. In his amended application, the appellant sought an order for repayment of the commission and costs, a total of $24,178.73. His explanation for seeking that order was: Money taken from me and my ex-wife when not entitled to do so for the sale of 6004 The Boulevarde Benowa Q 4217 7 One of the appellant's submissions to QCAT relied on s 137(3) of the PAMDA, which provided that an agent's appointment is ineffective if the agent fails to comply with s 134A. Section 134A required the agent to bring to the client's attention the information in the form about the effect of an open listing, an exclusive agency and a sole agency. The appellant claims that the agent failed to give him and Ms Schultz any information about the effect of an open listing. 8 The appellant was partially successful. On 3 October 2013, QCAT allowed the appellant's claim for advertising costs of $192.00 that had been paid to Mint Property, but did not allow his claim for repayment of the commission. The appellant applied for leave to appeal to QCAT's appellate tribunal. 9 On 5 February 2014, the Federal Circuit Court made a sequestration order against the appellant's estate. The Official Trustee was appointed as trustee of the appellant's estate. 10 On 1 July 2014, QCAT granted the appellant leave to appeal and allowed the appeal. A Senior Member held that the decision at first instance had failed to deal with the appellant's claim that Mint Property had not complied with s 134A. The proceeding was remitted for a further hearing. The appellant was also required to serve Ms Schultz, as she had an obvious interest in the proceeding. It is not apparent that the Senior Member was aware that the appellant was bankrupt. 11 On 11 August 2014, solicitors acting for Mint Property gave written notice to the respondent pursuant to s 60(2) of the Bankruptcy Act requiring the respondent to make an election to prosecute or discontinue the proceeding. 12 On 8 September 2014, the respondent made an election to discontinue the proceeding. The respondent also filed a notice of withdrawal of the application. 13 On 10 September 2014, the appellant commenced fresh proceedings in QCAT against Mint Property seeking the same relief. On 9 October 2014, the respondent filed a notice of withdrawal of that application. Although there is some ambiguity in the appellant's application to the Federal Circuit Court, I do not understand that decision to have been the subject of the application for review. That decision was not the subject of any submissions to this Court. 14 On 20 October 2014, the respondent provided the appellant with reasons for the decision to elect to discontinue the proceeding. The trustee's reasons were as follows: 1. Having considered the particulars of the applications, as much as it can, the trustee did not consider the merits of the cases to be such that success was assured. Further legal advice received by the trustee indicated that your chances of success were unlikely. 2. There are no funds currently in the estate and Mr Rowe does not appear to have any vesting assets, other than that which may come from distribution of matrimonial property, which would support such an action. Even if there were funds or realisable assets in the estate, it seems extremely doubtful that creditors in the administration would wish for such funds to be consumed on these proceedings and thus be denied a possible dividend. 3. Mr Rowe has not provided any other source of funding which might be available nor has he indicated how funds might be available to pay for any adverse costs order in the event the action(s) are unsuccessful. 4. No funding nor indemnity has been offered. 5. In the event that at the end of the day the applications proves to be unsuccessful the trustee may be personally liable for any cost order and as mentioned above there are no funds in the estate and it is very unlikely that any realisations will be received. 6. Importantly there appears to be very limited value to the estate even if the action(s) were successful. A costs benefits analysis indicates that the prosecution of the applications may not see additional funds flow to the estate; accordingly the trustee would be in breach of s19(1)(j) and (k) of the Act if it was to continue with the action. 15 The appellant then filed his application in the Federal Circuit Court on 4 November 2014.

The application to the Federal Circuit Court 16 The appellant's application was brought pursuant to s 178(1) of the Bankruptcy Act. The appellant sought orders that the respondent continue the QCAT proceeding against Mint Property, or, alternatively, that the appellant be permitted to continue the proceeding in the respondent's name. 17 There were three grounds set out in the appellant's application, namely that the respondent provided inadequate reasons, the respondent erred in its determination of the merits of the proceeding and the respondent did not make a decision that was just and equitable. The primary judge rejected these grounds, holding that the appellant had not shown that it was inappropriate, on the basis of the reasons given by the respondent, for the respondent to discontinue the proceeding. 18 At the hearing before the Federal Circuit Court, the appellant raised another ground, namely that the proceedings were personal to him and the respondent had no power to discontinue them. There were two aspects of this ground. The first was that the application to QCAT was not an "action" for the purpose of s 60(2) of the Bankruptcy Act. The second was that the appellant was pursuing a statutory right which does not fall within s 60(2). The primary judge held that the application to QCAT was a "civil proceeding" within the definition of "action" in s 60(5) of the Bankruptcy Act. His Honour also held that the proceeding in QCAT was not brought under a statutory right of action, and was not in respect of any personal wrong within s 60(4). 19 The primary judge also rejected an argument raised by the appellant that the respondent was required to take into account the effect of the decision to discontinue their proceeding on "other persons", including other customers of Mint Property.

the appeal to this court 20 The appellant's notice of appeal contains the following grounds: 1. His Honour erred in that the Appellant was not pursuing a statutory right of appeal, and that the Appellant's cause of action did not arise from statute rather the general law, and thus did not fall within the exemption provided in section 60(4) of the Bankruptcy Act. 2. His Honour erred in that he provided inadequate and insufficient reasons to support his decision. 3. His Honour erred [in holding] that it was not unjust or inequitable pursuant to section 178 of the Bankruptcy Act for the Respondent to discontinue the proceedings against Mint Property pursuant to the Property Agents and Motor Dealers Act 2000 (Qld). 21 As to the first ground, the appellant submits that his action in QCAT is a "personal action" that falls within s 60(4) of the Bankruptcy Act. He submits that a "personal action" is one in which the relief sued for is not property that vests in the trustee. His argument continues that QCAT may make a declaration that Mint Property contravened s 134A and, if it makes a finding of contravention, Mint Property is liable to the imposition of a penalty. He submits that neither a declaration nor a penalty is property divisible amongst the creditors. He submits that, therefore, there was no basis for the trustee to make an election under s 60(2) to discontinue his proceeding. 22 The respondent submits that the appellant's claim against Mint Property was for the payment of money and that the chose in action is property divisible amongst the creditors and is vested in the respondent, as trustee. The respondent submits that s 60(4) has no application to this case. 23 It is necessary to consider the relevant provisions of the Bankruptcy Act. 24 Section 58 provides, relevantly: (1) 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 or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee. 25 Section 60 states, relevantly: (2) An action commenced by a person who subsequently becomes a bankrupt is, upon his or her 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 28 days after notice of the action is served upon him or her by a defendant or other party to the action, he or she shall be deemed to have abandoned the action. (4) Notwithstanding anything contained in this section, a bankrupt may continue, in his or her own name, an action commenced by him or her before he or she became a bankrupt in respect of: (a) any personal injury or wrong done to the bankrupt, his or her spouse or de facto partner or a member of his or her family; or (b) the death of his or her spouse or de facto partner or of a member of his or her family. … (5) In this section, action means any civil proceeding, whether at law or in equity. 26 Section 116 of the Bankruptcy Act provides, relevantly: (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 her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her 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 or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge; ... is property divisible amongst the creditors of the bankrupt. (2) 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 or de facto partner of the bankrupt or a member of the family of the bankrupt; or (ii) in respect of the death of the spouse or de facto partner 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 or she became a bankrupt) in respect of such an injury or wrong or the death of such a person; 27 Section 5 of the Bankruptcy Act defines "property" as follows: property means real or personal property of every description, whether situate 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. 28 It is also necessary to consider the relevant provisions of the PAMDA. Section 134A provided: 134A Pre-appointment advice about types of appointment If the appointment is for the sale of a place of residence or land or an interest in a place of residence or land, before the appointment is signed, the real estate agent must specifically bring to the client's notice the information in the form of appointment about— (a) the effect of the following— (i) an open listing; (ii) an exclusive agency; (iii) a sole agency; and (b) the difference between sole agency and exclusive agency. Maximum penalty—200 penalty units. 29 Section 137 stated: (3) The appointment of a real estate agent for the sale of a place of residence or land or an interest in a place of residence or land is ineffective from the time it is made if the real estate agent commits an offence against section 134A or 135(1). 30 Section 140 provided: (1) A person is not entitled to sue for, or recover or retain, a reward or expense for the performance of an activity as a real estate agent unless, at the time the activity was performed, the person— … (c) had been properly appointed under division 2 by the person to be charged with the reward or expense. 31 In considering whether a proceeding is one which attracts s 60(4) of the Bankruptcy Act, it is necessary to examine the causes of action pleaded and the relief sought in the relevant proceeding: Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545 per Lockhart J at 550, per O'Loughlin and Merkel JJ at 557. 32 Before QCAT, the appellant alleged that the effect of ss 134A, 137 and 140 of the PAMDA was that Mint Property was not entitled to retain the commission because it had not explained the effect of an open listing and its appointment as agent was therefore ineffective. 33 The appellant's amended application sought only one form of relief, namely payment of an amount of $24,178.73. In fact, payment of a sum of money was the only form of relief that the appellant could claim. He applied to QCAT under its "minor civil disputes" jurisdiction. Schedule 3 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) ("the QCAT Act") defines "minor civil dispute" to mean, relevantly, "a claim to recover a debt or liquidated demand of money, with or without interest, of up to the prescribed amount". In respect of a minor civil dispute of that kind, QCAT, pursuant to s 13(2), can only make, relevantly, an order requiring a party to the proceeding to pay a stated amount to a stated person. The use of the word "only" appears to preclude QCAT from making declarations in minor civil disputes: cf s 60(1) of the QCAT Act. Even if QCAT has power to make declarations in its minor civil disputes jurisdiction, that was not relief that was claimed by the appellant. Further, QCAT had no power to impose a penalty for breach of s 134A of the PAMDA. 34 The appellant's claim to QCAT was a claim to recover the commission retained by Mint Property from the proceeds of the sale. Such a claim is for the recovery of a debt and is a chose in action. The word "property" as defined in s 5 of the Bankruptcy Act includes a chose in action which, pursuant to s 58, vests in the trustee upon bankruptcy: Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 133, Re Nguyen; Ex parte Official Trustee in Bankruptcy (1992) 35 FCR 320 at 325, Geia v Palm Island Aboriginal Council (1999) 152 FLR 135 at 136. 35 The appellant's action in QCAT did not come within s 60(4) of the Bankruptcy Act. In Faulkner v Bluett (1981) 52 FLR 115 at 119, Lockhart J referred to authorities deriving from "the common law of bankruptcy" and said in relation to s 60(4): 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. 36 In Cox v Journeaux (No 2) (1935) 52 CLR 713 at 721, Dixon J said of the forerunner of s 60(4): 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. 37 The appellant's claim before QCAT was for direct pecuniary loss to the appellant. No part of the claim was in respect of any injury to his mind, body or character. Therefore, s 60(4) has no application to the appellant's proceeding before QCAT. 38 The appellant relies on Griffiths v Civil Aviation Authority (1996) 67 FCR 301 to argue that, regardless of s 60(4), his was a statutory right of action which did not vest in the trustee and does not fall within s 60(2). In Griffiths, the Full Court decided that a statutory right to appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) in respect of a personal licence was not "property of the bankrupt" which, pursuant to s 58(1), vested in the trustee in bankruptcy. In Griffiths the statutory right was to appeal against a decision of the Administrative Appeals Tribunal in respect of a decision to affirm a determination which placed restrictive conditions on a personal licence. It was significant to the outcome that allowing the bankrupt to pursue the statutory right of appeal would not affect the value of the bankrupt's estate and that neither the statutory right to appeal nor the licence was assignable. The consequence was that the bankrupt was competent to bring the appeal. 39 This case is quite different to Griffiths. The allegation made by the appellant in QCAT was that Mint Property owed him a debt because it had deducted and retained a commission from the proceeds of sale when it was not entitled to do so. The proceeding does have the potential to affect the value of the estate and the chose in action is assignable. There is no argument available that the chose in action does not come within s 58(1) and s 116(1). 40 In my opinion, the chose in action is property which is vested in the trustee. It is property divisible amongst the creditors. The appellant's proceeding before QCAT fell within s 60(2) of the Bankruptcy Act. That section allowed the trustee to make an election as to whether to prosecute or discontinue the proceeding. Therefore, the appellant's first ground must fail. 41 As to the second ground of appeal, the appellant's argument seemed to be that the primary judge's reasons were inadequate because his Honour failed to deal with some of the nuances of the appellant's arguments and the reasons ought to have been more detailed. 42 In Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247, the New South Wales Court of Appeal considered the standard required of the reasons of a trial judge. Kirby P (as his Honour was then) stated at 259: This decision does not require of trial judges a tedious examination of detailed evidence or a minute explanation of every step in the reasoning process that leads to the judge's conclusion. But the judicial obligation to give reasons, and not to frustrate the legislative facility of appeal on questions of law, at least obliges a judge to state generally and briefly the grounds which have led him or her to the conclusions reached concerning disputed factual questions and to list the findings on the principal contested issues. 43 In the same case, Mahoney JA said at 273: …it will ordinarily be sufficient if…by his reasons the judge apprises the parties of the broad outline and constituent facts of the reasoning on which he has acted. 44 McHugh JA (as his Honour was then) added at 280: If an obligation to give reasons for a decision exists its discharge does not require lengthy or elaborate reasons. But it is necessary that the essential ground or grounds upon which the decision rests should be articulated. In many cases the reasons for preferring one conclusion to another also need to be given. (Citations omitted.) 45 In the present case, his Honour set out the appellant's arguments and the relevant statutory provisions. His Honour dealt with the arguments that were put by the appellant. The reasons were succinct, but informed the parties as to why the appellant's arguments had been rejected. In my opinion, the reasons were adequate. 46 The appellant's third ground, as argued, overlapped entirely with his first ground. That is, the appellant argued that his Honour erred in holding that it was not unjust or inequitable for the respondent to discontinue the proceedings against Mint Property in circumstances where, so the appellant asserts, s 60(2) did not apply. As I have rejected the first ground, I also reject the third ground. 47 The appeal must be dismissed with costs. I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rangiah.

Associate: Dated: 18 November 2015