Ritson v Ryan

The appellant instituted proceedings in the Queensland Civil and Administrative Tribunal (“QCAT”) but was subsequently made bankrupt by a sequestration order. His QCAT proceedings were dismissed and he then sought judicial review of those dismissals. His application for judicial review was dismissed on the basis that, inter alia, the appellant’s right to apply for judicial review was “property” that vested in his trustees in bankruptcy when the sequestration order was made and that a reparation payment he received from the Defence Abuse Response Taskforce was not exempt from being divisible amongst his creditors because it was not a compensation payment. In the Court of Appeal, Cooper J, with whom Mullins P and Freeburn J agreed, held that the primary judge’s conclusions on these issues were correct. That is, first, that the appellant’s right to apply for judicial review was “property” within the meaning of the Bankruptcy Act 1966 (Cth) and therefore that that right vested in the trustee, and secondly, that the reparation payment was not compensation and accordingly was not exempt under s 116(2)(g) of that Act. The application for leave to appeal was dismissed.

Mullins P, Freeburn and Cooper JJ

22 November 2024

Background

The appellant sought leave to appeal from the decision of the primary judge to dismiss an application for judicial review of two decisions made by the Queensland Civil and Administrative Tribunal (“QCAT”). The QCAT proceedings concerned the recovery of moneys the appellant was entitled to as the assignee of the choses in action for certain debts. The Federal Circuit Court made a sequestration order against the appellant’s estate after he commenced the QCAT proceedings, but that order was suspended by the Federal Court to enable the appellant to prosecute the QCAT proceedings. At first instance, the appellant’s QCAT proceeding was dismissed and his QCAT appeal against that dismissal was also dismissed. Additionally, the appellant’s appeal against the sequestration order was also dismissed, and the Full Court of the Federal Court observed that the Federal Court does not have the power to suspend the operation of a sequestration order. [3], [7], [8], [10], [12]–[14].

The primary judge was required to consider relevantly, first, whether the appellant’s application for judicial review of the QCAT decisions is “property divisible amongst the creditors of the bankrupt” within the meaning of s 116(1)(b) Bankruptcy Act 1966 (Cth) (“the Act”) which vested in his trustees in bankruptcy and secondly, whether a reparation payment he received from the Defence Abuse Reparation Scheme came within the exemption in s 116(2)(g) of the Act. On the first issue, the primary judge concluded that the appellant’s right to apply for judicial review was properly characterised as “property” which had vested in the trustees pursuant to s 116 of the Act and accordingly the appellant lacked standing to bring those claims. On the second, the primary judge did not accept that the reparation payment was exempt under s 116(2)(g). The appellant then sought leave from the Court of Appeal to appeal the primary judge’s conclusions. [4], [16]–[19].

Did the appellant’s right to seek judicial review vest in his trustees?

Justice Cooper identified the relevant question under this ground as being not whether the right to apply for judicial review is property according to general concepts, but whether it is “property” within the meaning of the Act: Cummings v Claremont Petroleum NL (1996) 185 CLR 124, 145 (“Cummings”). [24]. Upon the making of a sequestration order, “the property of the bankrupt” vests in the bankrupt’s trustee pursuant to s 58 of the Act. That property is defined as property divisible among the bankrupt’s creditors and any rights and powers in relation to that property that would have been exercisable by the bankrupt if they had not become a bankrupt.

His Honour referred to the observation in Cirillo v Citicorp Australia Ltd (2004) 2 ABC(NS) 525, 544 [79]–[82] that “property” in this context is a wider concept than the common law concepts of choses in action and property. Based on that observation and understanding “property” in this way, his Honour held that the concept of “property” as defined in the Act is sufficiently broad to include the right to apply for judicial review. His Honour accordingly concluded that the appellant’s right to apply for judicial review is properly characterised as an incident to the choses in action which were the subject of the QCAT proceedings and unless exempted under s 116(2), that property vested in the appellant’s trustees once it devolved on him. That outcome is the consequence of the well-established principle that “a bankrupt has no right to bring or prosecute proceedings to protect, enhance or add to the property of which he has been divested on bankruptcy”: Cummings, 136. His Honour further justified this conclusion by virtue of the fact that this principle has been applied to rights of appeal and rights to apply for orders seeking prerogative relief because appeals and actions for prerogative relief take their character from: in the case of appeals, the underlying cause of action which is the subject of the decision appealed from; or, in the case of prerogative relief, from the character of the rights sought to be vindicated in which the orders were made which are the subject of the prerogative relief sought. [30]–[33].

In Cooper J’s view, the appellant’s application for judicial review took its character from the character of the rights he sought to vindicate in the QCAT proceedings. The right to bring that application vested in his trustees if it was not exempted by s 116(2) of the Act. His Honour therefore held that the primary judge’s conclusion on that issue was correct and this ground of appeal failed.

Whether the reparation payment was “protected money”

The appellant argued that the reparation payment did not form part of the property divisible amongst his creditors under s 116(2)(g) because it was “exempt money” and therefore “protected money” because it was paid to him pursuant to a right to recover damages or compensation for a personal injury or wrong. Justice Cooper referred to the principle that the exemption in s 116(2)(g) will apply where damages or compensation recovered by a bankrupt have been “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”: Cox v Journeaux (No 2) (1935) 52 CLR 713, 721. If the appellant had used damages or compensation for a personal injury or wrong to pay for or acquire property, then it would be exempted from the property divisible amongst the creditors and that property would remain vested in the appellant upon the making of a sequestration order. This ground therefore turned on the question of whether the primary judge was correct in concluding that the reparation payment was not “damages or compensation” and therefore did not fall within s 116(2)(g). [36]–[38].

The reparation payment was made in recognition that the appellant had plausibly suffered workplace bullying and harassment whilst employed by the Department of Defence, but there was no indication that the amount of the payment was estimated by immediate reference to pain felt by the appellant in respect of his mind, body or character. Further, other redress schemes have been specifically exempted under the Act while payments from the Defence Abuse Reparation Scheme have not. His Honour viewed that as a strong contextual indicator that there was no intention to exempt payments made under the latter scheme from the operation of s 116 of the Act. Accordingly, his Honour held that there was no error by the primary judge in concluding that the reparation payment did not fall within s 116(2)(g) and this ground of appeal accordingly failed as well. [39]–[41].

Disposition

His Honour held that if leave to appeal were granted, all of the proposed grounds would fail and therefore the grant of leave was not warranted. Accordingly, the application for leave to appeal was dismissed. [1], [2], [57].

A Lukacs