Randall v DCT

[2008] FCA 1939

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(Decision by: Lander J)

Randall
vDCT

Court:

Judge:
Lander J

Subject References:
Administrative Law
Interlocutory Application
Brought By Respondent
Sought That applicant's Application for Review of Decision Terminating Employment Under Public Service Act 1999 (Cth) Be Dismissed or Stayed
Grounds That Applicant Was A BankADMINISTRATIVE LAW
Interlocutory application
Brought by respondent
Sought that applicant's application for review of decision terminating employment under Public Service Act 1999 (Cth) be dismissed or stayed
Grounds that applicant was a bankrupt and lacked standing
Whether s 60(2) of the Bankruptcy Act 1966 (Cth) applied to stay proceeding
Whether proceeding was prop-erty within meaning of ss 116 and 5 of Bankruptcy Act 1966 (Cth)
Application dismissed
Bankruptcy
Interlocutory Application
Control Over Person and Property of Bankrupt
Bank-Rupt's Trustee Had Filed Notice of Discontinuance
Whether Bankrupt's Application for Review of Deci-Sion Under Public Service Act 1999 (Cth) Amounted to PrBANKRUPTCY
Interlocutory application
Control over person and property of bankrupt
Bank-rupt's trustee had filed notice of discontinuance
Whether bankrupt's application for review of deci-sion under Public Service Act 1999 (Cth) amounted to property divisible among creditors within meaning of Bankruptcy Act 1966 (Cth)
Discussion of Div 4B of Pt VI of Bankruptcy Act 1966 (Cth)
Bankrupt's personal earnings or income after bankruptcy do not vest in trustee
Right to seek re-view of respondent's decision to terminate employment remains with applicant
Applicant has standing
Application dismissed
Practice and Procedure
Application for Security for Costs
Natural Person Will Not Have to Provide Security for Mere Reason of Impecuniosity
No Other Ground for Application Advanced
Application Dismissed
Application for security for costs
Natural person will not have to provide security for mere reason of impecuniosity
No other ground for application advanced
Application dismissed

Legislative References:
Administrative Decisions (Judicial Review) Act 1977 (CTH) - The Act
Bankruptcy Act 1924-1950 (CTH) - The Act
Bankruptcy Act 1966 (CTH) - The Act
Bankruptcy Amendment Act 1991 (CTH) - The Act
Federal Court of Australia Act 1976 (CTH) - The Act
Income Tax and Social Services Contribution Assessment Act 1936-1953 (CTH) - The Act
Judiciary Act 1903 (CTH) - The Act
Public Service Act 1999 (CTH) - The Act

Case References:
Abebe v The Commonwealth - (1999) 197 CLR 510
Affleck v Hammond - [1912] 3 KB 162
Attorney-General v Quin - (1990) 170 CLR 1
Barton v Minister for Foreign Affairs - (1984) 2 FCR 463
Cirillo v City Corp Australia - [2004] SASC 293
Clyne v Deputy Commissioner of Taxation - (1984) 154 CLR 589
Cox v Journeaux - (1935) 52 CLR 713
Daemar v Industrial Commission (NSW) - (1988) 12 NSWLR 45
Fitz-patrick v Keelty - [2008] FCA 35
Re Roberts - [1900] 1 QB 122
James v ANZ Banking Group Ltd (No 1) - (1985) 9 FCR 442
Knight v Beyond Properties Pty Ltd - [2005] FCA 764
Pearson v Naydler - [1977] 3 All ER 531
Re Gillies - (1993) 115 ALR 631
Williams v Chambers - (1847) 10 QB 335
Chippendall v Tomlinson - (1785) L Co Bank L 428
Griffiths v Civil Aviation Authority - (1996) 67 FCR 301
Perfection Dairies Pty Ltd v Finn - [2006] NSW IR Comm 137
Cummings v Claremont Petroleum NL - (1996) 185 CLR 124
Ex parte Vine; Re Wilson - (1878) 8 Ch D 364
Nette v Howarth - (1935) 53 CLR 55
Federal Commissioner of Taxation v The Official Receiver - (1956) 95 CLR 300
Geia v Palm Island Aboriginal Council - (1999) 152 FLR 135
Pelechowski v NSW Land and Housing Commission - [2000] FCA 233

Hearing date: 2 December 2008
Judgment date: 22 December 2008

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Decision by:
Lander J

[1] On 17 September 2007 Registrar Christie made a sequestration order against the estate of the applicant. The Official Trustee in Bankruptcy was appointed to administer his bankrupt estate.

[2] On 4 February 2008 the applicant was offered employment as an Australian Public Service employee under s 22 of the Public Service Act 1999 (Cth) (the PSA Act 1999) with the Australian Taxation Office (the ATO).

[3] On 16 February 2008 he accepted that offer and on 21 February 2008 he commenced ongoing employment with the ATO.

[4] It was a condition of his employment that for the first three months of the period of employment the applicant would be on probation and that his employment could be terminated during that period if the ATO were not satisfied with his work performance or behaviour.

[5] On 16 May 2008 the second respondent, who is a delegate of the first respondent, terminated the applicant's employment pursuant to s 29 of the PSA Act 1999.

[6] On 13 June 2008 the applicant commenced this proceeding seeking judicial review of the decision to terminate his employment pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the ADJR Act) and for the issue of the constitutional writs pursuant to s 39B of the Judiciary Act 1903 (Cth).

[7] The applicant sought a declaration that the decision was void and of no effect and that he is an ongoing Australian Public Service employee. He also sought an order for the issue of a writ of certiorari quashing the respondents' decision to terminate his employment and an order requiring the respondents to do all things necessary to enable the applicant to resume his duties as an ongoing employer with the ATO and receive his salary in that office.

[8] Lastly, he sought an order that the respondents pay damages for wrongful dismissal.

[9] When the applicant commenced employment he was a bankrupt as a consequence of a sequestration order made on 17 September 2007.

[10] On 24 September 2008 the Official Trustee wrote to the respondent's solicitors:

I have received advice in relation to the action commenced by the bankrupt for wrongful dismissal that it is an action that cannot be characterised as one for a "personal wrong" done to a bankrupt. As that is the case then the right of this action is one that vests in the Trustee pursuant to s 58 and 116 of the Bankruptcy Act. Further, as the date of bankruptcy preceded the date of the commencement of the action, the bankrupt was not competent to bring the action in the first place.

Although this action vests in the trustee, it is a matter which the trustee is not inclined to take over or join in the action and respectfully leave the issue up to the respondent to decide whether they wish to seek the action to be struck out.

[11] On 9 October 2008 an officer of the Official Trustee signed a notice of discontinuance but that notice of discontinuance has not been filed.

[12] On 10 October 2008, with the consent of the applicant, I made an order dismissing the applicant's claim for damages for wrongful dismissal.

[13] On 15 October 2008 the applicant filed an amended application pursuant to leave given on 10 October 2008. The amended application continues to seek relief under both the ADJR Act and the Judiciary Act.

[14] The applicant seeks declarations and orders pursuant to ss 16(1)(a) and 16(1)(b) of the ADJR Act seeking to quash the decision to terminate his employment; a declaration since 16 May 2008 that the applicant has been an ongoing Australian Public Service employee; an order in the nature of certiorari quashing the termination of the applicant's employment with the Australian Public Service; an order in the nature of a writ of mandamus requiring the first respondent to reinstate the applicant as an ongoing employee with the ATO; and an order pursuant to s 16(1)(d) of the ADJR Act that the respondents be directed to do all things necessary to enable the applicant to resume his duties and to receive his salary and other entitlements as an ongoing employee with the ATO.

[15] The respondents have objected to the competency of the application on the ground that the applicant lacks standing to bring the application because the applicant is a bankrupt.

[16] The respondents have filed a motion seeking alternative orders: first, that the applicant's application for review be dismissed or, alternatively, stayed on the basis that the applicant lacks standing; and secondly and alternatively, the applicant provide security for costs. It is that notice of motion which is the subject of these reasons. I will continue to call the parties by their description in the proceeding.

[17] Section 58(1)(a) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) provides that where a debtor becomes a bankrupt "the property of the bankrupt" vests forthwith in the bankrupt's trustee and s 58(1)(b) provides that any "after-acquired property" of the bankrupt vests as soon as it is acquired in the bankrupt's trustee.

[18] Section 60(2) of the Bankruptcy Act provides that an action commenced by a person who subsequently becomes bankrupt is upon the making of the sequestration order stayed until the trustee makes an election in writing to prosecute or discontinue the action. Section 60(4) of the Bankruptcy Act provides that a bankrupt may continue an action commenced by him or her before he or she became bankrupt in respect of any personal injury or wrong done to the bankrupt.

[19] The "property of the bankrupt" which is referred to in s 58(1) is relevantly defined in s 5 of the Bankruptcy Act as meaning:

(i)

the property divisible among the bankrupt's creditors; and

(ii)

any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt; ...

[20] "Property" is defined in s 5 to mean:

... real or personal property of every description, ... 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.

[21] Section 116 deals with property divisible among creditors which is the property of the bankrupt: s 5. It relevantly provides:

(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.

[22] Section 116(2) provides limitations on what otherwise would be divisible property. Section 116(2)(g) is relevant and it provides:

(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 of the bankrupt or a member of the family of the bankrupt; or

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

[23] The respondents argued that the concept of property is a very broad one and has to be understood in light of the principle that the creditors are to have the benefit of "every beneficial interest which the bankrupt has, every species of right or which by any possibility of profit can be made" : Cirillo v City Corp Australia [ 2004] SASC 293 at [78] (citing re Buckle ( 1969) 15 FLR 460 at 466).

[24] The respondents contended that the applicant's proceeding falls within s 116(1)(b) and thus s 58 because the proceeding involves the capacity to exercise powers in respect of property as might have been exercised by the bankrupt for his own benefit. Thus it is that the proceeding, the respondents contended, vests in the trustee.

[25] They contended that the exceptions in s 116(2), and in particular s 116(2)(g), do not apply. That exception, it is contended, only applies where damages are to be assessed by reference to "the pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property" : Fitzpatrick v Keelty [ 2008] FCA 35 at [39]-[47] and Daemar v Industrial Commission (NSW) ( 1988) 12 NSWLR 45.

[26] In particular, the respondents relied upon a decision of the Court of Appeal in Queensland in Geia v Palm Island Aboriginal Council ( 1999) 152 FLR 135. In that case, the appellant, who was a bankrupt, sued the respondent for money said to be due under a contract of employment or for damages for breach of contract arising out of wrongful dismissal. The District Court Judge dismissed the proceeding on the ground that the cause of action had vested in the Official Trustee. The bankrupt appealed but the appeal was dismissed on the ground that an action for damages for wrongful dismissal (not including services actually rendered) vests in the Official Trustee. The Court of Appeal distinguished such claims from contracts for personal service which do not vest in the Official Trustee.

[27] The respondents also relied upon a decision of Madgwick J in Pelechowski v NSW Land and Housing Commission [ 2000] FCA 233. In that case, the applicant, who was a bankrupt, applied to the Industrial Relations Court for reinstatement as a result of unlawful termination of his employment by the first respondent. Madgwick J found that the trustee had not elected to prosecute the action (s 60(2)) and so the action was deemed to have been abandoned (s 60(3)).

[28] The applicant contended that the question is whether the proceeding is after-acquired property within the meaning of s 58(6). Section 58(6) provides:

58(6) In this section, after-acquired property, in relation to a bankrupt, means property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt.

[29] The applicant contended that in Cummings v Claremont Petroleum NL ( 1996) 185 CLR 124, the majority of the High Court held that the right to appeal against a money judgment was not property within the meaning of the definition in the Bankruptcy Act. At p 133 Brennan CJ, Gaudron and McHugh JJ said:

A right to appeal may be a substantive right, but it is another question whether such a right has the character of property. Some rights created by statute can constitute property, but a right to appeal does not have the character of properly merely because it is the creature of statute. A chose in action may be the property of the person entitled to enforce it, but a liability to satisfy a judgment enforcing a chose in action is not property of the person against whom the judgment is entered. A liability is not property of the person liable. Nor is a right to appeal against a money judgment property of the judgment debtor. Nor does such a right to appeal answer the description of property divisible among creditors defined by s 116(1)(b), namely, "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". (Footnotes omitted.)

[30] The applicant submitted that the question on this application is whether the right to bring an application for judicial review and consequential relief in relation to a decision to terminate a bankrupt's employment is property within the meaning of s 5 of the Bankruptcy Act and, more particularly, is property divisible among the bankrupt's creditors within the meaning of s 116(1)(b) of that Act.

[31] The applicant relied upon Cummings 185 CLR 124 and Griffiths v Civil Aviation Authority ( 1996) 67 FCR 301, being a decision of the Full Court of this Court in which the Court held that a proceeding in the Federal Court pursuant to s 44 of the Administrative Appeals Tribunal Act to challenge a decision of the Administrative Appeals Tribunal was not property divisible among the creditors of the appellant's estate vesting in the trustee of that estate.

[32] The applicant also relied upon a decision of the Industrial Relations Commission of New South Wales in Perfection Dairies Pty Ltd v Finn [ 2006] NSW IR Comm 137 in which the Commission comprising Wright J, Staff J and Stanton C held that employment is not property for the purpose of the Bankruptcy Act.

[33] The applicant contended that the decision in Geia 152 FLR 135 was an action claiming damages on the basis of wrongful dismissal. The issue before the Court of Appeal, it was said, was not whether such an action was property within the meaning of the Act but whether the action could be said to be impliedly exempt by reason of "the common law of bankruptcy".

[34] The applicant contended that insofar as the respondents relied on Pelechowski v New South Wales Land and Housing Commission [ 2000] FCA 233, that proceeding had been commenced before the making of the sequestration order which meant that the action was caught by s 60(2) of the Act. To that extent, it was contended it was not in point.

[35] The purpose of the Bankruptcy Act is to ensure that all of the bankrupt's property, both real and personal at the time of the sequestration order and any property acquired by the bankrupt after the sequestration order, vests in the bankrupt's trustee in order that it is available to be divided among the bankrupt's creditors. At the same time as the property vests the bankrupt's creditors lose the right to recover their debts from the bankrupt in exchange for a right to prove their debts in the administration of the bankrupt's estate: s 58(3) ; Clyne v Deputy Commissioner of Taxation ( 1984) 154 CLR 589 at 594. The scheme is that the bankrupt's property will be distributed equally or rateably among the bankrupt's creditors : Cummings 185 CLR 124.

[36] The property of the bankrupt is the same whether it is property of the bankrupt at the time of the sequestration order or property acquired after the bankrupt's estate is sequestrated. It is, because the provisions of ss 5 (property of the bankrupt) and 58(6) (after-acquired property), the same in the sense that it is property divisible among the creditors. "Property" is defined in s 5 and has the same meaning in relation to both property at the date of the sequestration order and after-acquired property.

[37] In order therefore for property of the bankrupt (including after-acquired property) to vest in the bankrupt's estate the property must be of a character which is divisible among the bankrupt's creditors or be of a character of a right or power in relation to that property that would otherwise have been exercisable by the bankrupt but for the bankruptcy. Any other property does not vest.

[38] Section 60(4) is part of the scheme of the Act which excises from the bankrupt's property at the time of the sequestration order property that would otherwise be divisible among the bankrupt's creditors being any action for personal injury or wrong done to the bankrupt, the bankrupt's spouse or member of the family, or any action for the death of the bankrupt's spouse or member of the family by allowing the bankrupt to continue the action notwithstanding the sequestration order. An action of that kind must be an action in which the damages claimed are assessed by 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 ( 1935) 52 CLR 713 at 721.

[39] Section 116(2)(g) completes the excision from the bankrupt's estate by excluding from property divisible among the bankrupt's creditors the right to recover damages or compensation for actions of the kind in s 60(4) and specifically excludes any damages or compensation recovered for proceedings of that kind from the property of the bankrupt divisible among the bankrupt's creditors.

[40] Sections 60(4) and 116(2)(g) must be understood as allowing the bankrupt to retain a right to bring action and a right to retain damages of property that would be otherwise property divisible among the bankrupt's creditors. In other words, but for ss 60(4) and 116(2)(g), an action to recover damages for personal injury or wrong done to the bankrupt or his or her family and for damages or compensation recovered would be property divisible among the bankrupt's creditors.

[41] Section 116(2) also exempts other property from property divisible among the bankrupt's creditors for different reasons. Only one exception is relevant. The bankrupt is entitled to retain household property and that property which is for use by the bankrupt in earning income by personal exertion: s 116(2)(b) and (c); the idea being that the bankrupt should be entitled to live modestly and earn an income for the purpose of maintaining the bankrupt and the bankrupt's family.

[42] The policy underlying the provision was explained by the Court of Appeal in Ex parte Vine; Re Wilson ( 1878) 8 Ch D 364 at 366-367 where James LJ (Cotton and Thesiger LJJ agreeing) said:

The general principle always has been that, until a bankrupt has obtained his discharge, all his property is divisible among his creditors. But an exception was absolutely necessary in order that the bankrupt might not be an outlaw, a mere slave to his trustee; he could not be prevented from earning his own living. On that principle the trustee could not sue for moneys due to the bankrupt in respect of his personal labour, and, if the bankrupt could sue for them only for the benefit of his trustee, he would really be without remedy.

[43] In those circumstances, the kinds of action contemplated by ss 60(4) and 116(2)(g) do not assist in determining whether the right to bring this proceeding is property divisible among the bankrupt's creditors. This is not a proceeding of the kind contemplated by s 60(4) or s 116(2)(g). The question must be answered by reference to whether a proceeding of the kind brought by the applicant is property divisible among the bankrupt's creditors. That question must be addressed by reference to s 116(1).

[44] This proceeding is for an order quashing the respondents' decision to terminate the applicant's employment by reason of a failure by the second respondent to accord the applicant procedural fairness and by the improper exercise of power.

[45] He has sought relief under ss 16(1)(a) and 16(1)(b) of the ADJR Act. These paragraphs empower the Court to make the following orders:

(a)

an order quashing or setting aside the decision, or a part of the decision, with effect from the date of the order or from such earlier or later date as the court specifies;

(b)

an order referring the matter to which the decision relates to the person who made the decision for further consideration, subject to such directions as the court thinks fit;

[46] If the applicant succeeds in this proceeding the applicant will not thereby be entitled to resume his employment. He will succeed only to the extent that he is entitled to have the impugned decision quashed and to have the matter remitted to the decision-maker to make a decision according to law. He cannot expect the Court to make the decision as to whether his employment should have been terminated. The purpose of judicial review is to require the decision-maker to make his or her decision in accordance with the law : Attorney-General v Quin ( 1990) 170 CLR 1 at 36. The merits of the decision are for the person in whom the power to make the decision reposes : Attorney-General v Quin 170 CLR 1 at 36 ; Abebe v The Commonwealth ( 1999) 197 CLR 510 at 579-580. Therefore, even if the applicant is successful, no property rights will accrue to the applicant and therefore to his estate. If he succeeds he will be given the right to have a decision which affects him made according to law.

[47] True it is that the applicant has claimed relief to receive his salary. His claim is:

4.

An order pursuant to para 16(1)(d) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) that the Respondents be directed to do all things necessary to enable the Applicant to:

4.1

resume his duties as an ongoing employee with the Australian Tax Office; and

4.2

receive his salary and other entitlements as an ongoing employee with the Australian Tax Office.

[48] Now is not the time to decide whether the applicant is entitled to the relief there sought but, if the Court is not entitled to inquire into the merits of the decision, it is hard to see how the Court could make either of the orders sought.

[49] Property which is not divisible amongst the bankrupt's creditors is not property of the bankrupt which vests in the bankrupt's trustee.

[50] A bankrupt's personal earnings after bankruptcy or income do not vest in the bankrupt's trustee. They are not property of the bankrupt. In Nette v Howarth ( 1935) 53 CLR 55 at 65, Dixon J said, after referring to authorities in England and Australia:

... the rule long established in bankruptcy, [is] that the personal earnings of a bankrupt do not pass to his trustee except to the extent that they are not required for the support of himself and his family.

[51] Prior to the enactment, the Bankruptcy Amendment Act 1991 (Cth) (which was assented to on 17 January 1992), ss 131(1) and (2) of the Bankruptcy Act provided:

131.(1) Subject to this section, a bankrupt who is in receipt of income is entitled to retain it for his own benefit.

(2) The Court may, upon the application of the trustee, order that all, or such part as the Court thinks fit, of the income of the bankrupt shall be paid to the trustee for the benefit of the bankrupt's creditors.

[52] The scheme of the Act was to allow bankrupts to retain their income, after bankruptcy, for their own benefit unless the Court in the exercise of its discretion ordered that all or part be paid to the bankrupt's trustee. In those circumstances, unless an order were made under s 131(2) the bankrupt's income was not property of the bankrupt and not divisible among the bankrupt's creditors.

[53] In 1992 s 131 was repealed and a new Div 4B of Pt VI enacted which had as its objects (s 139J):

(a)

to require a bankrupt who derives income during the bankruptcy to pay contributions towards the bankrupt's estate; and

(b)

to enable the recovery of certain money and property for the benefit of the bankrupt's estate.

[54] Division 4B sets up the machinery to enable a trustee of a bankrupt's estate to oblige a bankrupt to make contributions out of the bankrupt's income to the bankrupt's estate. It obviates the need which s 131(2) (before its repeal) required that the trustee apply to the Court for an order that the bankrupt pay the whole or part of the bankrupt's income to the trustee for the benefit of the bankrupt's creditors.

[55] There is no need to inquire into Div 4B in detail. The Division requires bankrupts to pay a contribution which is assessed by the trustee: Subdiv D. The bankrupt must provide a statement which gives particulars of actual income and expected income in order that an assessment might be made: Subdiv E. The trustee must make an assessment as soon as practicable after the start of each assessment period: Subdiv F. The Inspector-General is given power to review the trustee's assessment: Subdiv G. Powers are given to the trustee to put in place a supervised account regime when the bankrupt has not paid the whole of a contribution when it became payable: Subdiv HA. Other powers are given for the collection of moneys.

[56] The scheme in Div 4B is different from that which applied under s 131. The power to make a bankrupt pay whole or part of the bankrupt's income into the bankrupt's estate has shifted from the Court to the bankrupt's trustee. The machinery to enable the trustee to make an assessment and determine the appropriate contributions and ensure that the contributions are paid is rather elaborate. The trustee's decisions are reviewable by the Inspector-General.

[57] What is important for the purpose of this application is that the Act continues to recognise, as s 131 previously did, that the bankrupt's income is not part of the bankrupt's property except to the extent that a contribution is made. If it were otherwise, there would be no need for the Div 4B machinery because the trustee would be entitled to the bankrupt's income and wages. The Act continues to recognise the principle enunciated by Dixon J in Nette v Howarth 53 CLR 55 and recognises, as the law has since 1785, that income and earnings do not form part of the bankrupt's estate : Chippendall v Tomlinson ( 1785) L Co Bank L 428 per Lord Mansfield at 432; and 99 ER 900 at 902.

[58] In that case, the plaintiffs who were bankrupt brought an action in assumpsit for work done and labour performed as attorneys or solicitors. The defendant pleaded that the plaintiffs' estate had been assigned by virtue of the commission in bankruptcy. The plaintiffs contended:

If this action will not lie, no action whatever for labour can be maintained: the rule must extend to daily labour, and the bankrupt will be able to earn nothing for his support. The assignees do not interfere, but the defence is set up by the person who has profited by the bankrupt's labour.

Lord Mansfield said "The single question is, whether the assignees are entitled to the earnings of a bankrupt, and we are clearly of the opinion that they are not. The assignees cannot let out the bankrupt; they cannot contract for his labour". In some reports of the case it is said that Mr Justice Buller said and in another report of the case Lord Mansfield said:

The bankrupt had an undoubted right to sue for the profits of his labour; but supposing a person in his situation should gain a large sum of money or considerable effects, then such money or effects would undoubtedly be liable to his assignees.

[59] If, after bankruptcy, the bankrupt's income became part of the bankrupt's estate by reason of the sequestration order, the bankrupt would be obliged week by week, or how so often he or she were paid, to account to the bankrupt's estate for the whole of that income. The bankrupt would not have the means to support himself or herself and his or her dependents.

[60] The bankrupt's income after the bankruptcy only becomes part of the bankrupt's estate to the extent that the legislation demands. When s 131 was the law only that part of the bankrupt's income as the court ordered to be paid by the bankrupt to the trustee for the benefit of the bankrupt's creditors became vested in the bankrupt's trustee. Since s 131 has been repealed, only the assessed contributions form part of the bankrupt's estate.

[61] If the bankrupt's income was regarded as property of the bankrupt and therefore property divisible among the bankrupt's creditors, the Act would not have to deal with the bankrupt's income separately.

[62] In Federal Commissioner of Taxation v The Official Receiver ( 1956) 95 CLR 300, the High Court was concerned with the precursor to s 131 of the Bankruptcy Act 1966, viz s 101 of the Bankruptcy Act 1924-1950 (Cth) (the 1924 Bankruptcy Act). In that case, the bankrupt was entitled to a sum of money from the Federal Commissioner of Taxation which represented an income refund for overpayment of taxation on income earned by the bankrupt. The income had been paid by the bankrupt's employer to the Federal Commissioner of Taxation under the Income Tax and Social Services Contribution Assessment Act 1936-1953 (Cth). The Official Receiver claimed to be entitled to the refund.

[63] Section 91 of the 1924 Bankruptcy Act relevantly provided:

the property of the bankrupt divisible among his creditors, and in this Act referred to as "the property of the bankrupt" shall ... subject to this Act ... include -- (i) all property which belongs to or is vested in the bankrupt at the commencement of bankruptcy, or is acquired by or devolves on him before his discharge.

[64] Section 101 relevantly provided:

Subject to this Act, where a bankrupt is in receipt of pay, pension, salary, emoluments, profits, wages, earnings or income, the trustee shall receive for distribution amongst the creditors so much thereof as the Court, on the application of the trustee directs: Provided that this section shall not apply to any pay, pension, salary or wages which by any Act or State Act is made exempt from attachment or incapable of being assigned or charged.

[65] Whilst the sections are not the same as ss 116 and 131 of the Bankruptcy Act, they are not relevantly different from those sections.

[66] Williams J said (at 313):

The personal earnings of a bankrupt, including his earnings by way of salary or wages, are, on the literal reading of s 91(i), after-acquired property of the bankrupt. As such they would vest in the official receiver, as and when the bankrupt received them, and, subject to s 98, would be part of the property of the bankrupt divisible amongst his creditors. But it has invariably been held that the vesting provisions of Bankruptcy Acts must not be read literally so as to vest the whole of the personal earnings of the bankrupt in his official assignee because to do so would mean that the assignee might, in the words of Lord Mansfield in Chippendale v Tomlinson: "let the insolvent out to hire, and contract himself for his personal labour" : Williams v Chambers. ( Footnotes omitted.)

[67] Williams J then referred to Dixon J's dicta in Nette v Howarth 53 CLR 55 cited above and said (at 315):

These and other cases cited to us establish that the question whether any part and if so what part of the personal earnings of a bankrupt vests in the official receiver as after-acquired property is really academic. If the official receiver claims any part of these earnings, he must apply to the Bankruptcy Court for an order. He must intervene in this specific manner. In the absence of such an order the bankrupt is free to dispose of the whole of these earnings.

[68] Fullagar J said (at 320):

In the case of personal earnings after bankruptcy, I am of opinion that, whatever may be the position under the English Act, under the Australian Act the only way in which the trustee can effectively "intervene" is by making an application for an order under s 101.

[69] He then discussed the manner in which the Commissioner of Taxation received the sum and how the Commission became obliged to pay that sum to the bankrupt. He said (at 322):

The right to receive this sum of £44 6s. 3d. really is a right to receive money which the bankrupt earned. How else did he acquire the right to payment of that sum? It is not the price of an article sold by him, or an instalment of the rent of a house let by him, or a dividend on shares owned by him. His right to payment arises because, and only because, he worked for a remuneration which is found, on a contingency which was contemplated throughout, not to have been paid to him in full.

For these reasons I am of opinion that the sum in question does represent personal earnings of the bankrupt, and that the respondent has no right in respect of that sum unless he can obtain an order under s 101 of the Bankruptcy Act.

[70] The English authorities and Australian authorities diverge in that the English authorities adopted the view that the bankrupt's earnings did form part of his estate "save only what is necessary for his support": In re Roberts [ 1900] 1 QB 122 at 129.

[71] Even so however, in Affleck v Hammond [ 1912] 3 KB 162 at 165, Vaughan Williams referred to these earnings as personal earnings. In that case, the Court of Appeal held that a bankrupt was not obliged to give security for costs in a suit for unpaid commission because the bankrupt was not a mere nominal plaintiff. The commission earnings were his "personal earnings" and did not pass to his trustee in bankruptcy.

[72] Section 131 has been repealed. However, the Bankruptcy Act still contemplates that income earned after the bankrupt's bankruptcy does not vest in the bankrupt's trustee : Re Gillies ( 1993) 115 ALR 631 at 636-637. Whilst the trustee may require the bankrupt to make contributions out of the bankrupt's income, the Bankruptcy Act contemplates that those contributions will be made out of income in the hands of the bankrupt not the trustee.

[73] The position therefore is no different from the position when s 131 was part of the Bankruptcy Act or s 101 part of the 1924 Bankruptcy Act. The bankrupt's income, after bankruptcy, does not vest in the bankrupt's trustee.

[74] If the bankrupt's income does not vest in the trustee, it must be because it is not property or at least property divisible among the bankrupt's creditors.

[75] In those circumstances, the trustee cannot sue for wages or income due to the bankrupt because those wages or that income have not vested in the trustee : Williams v Chambers ( 1847) 10 QB 335 ; 116 ER 130. Indeed, even if the Court ordered (under the repealed s 131) or the trustee assessed contributions payable by the bankrupt to the trustee, no right to recover that sum or those sums vests in the trustee against the employer. The liability to pay that sum or those sums is imposed upon the bankrupt.

[76] The right to seek a review of the respondent's decision to terminate the applicant's employment remains with the applicant. The trustee has no interest in seeking a review of that decision. The trustee, for example, could not ensure that if the decision were reversed that the applicant would resume employment. If the trustee was interested in the proceeding and brought the proceeding and the decision was quashed as the applicant seeks in this proceeding, there would be no property in the result which would be divisible among the applicant's creditors. The right to seek an order quashing the decision of the respondent to terminate the applicant's employment is not a right which can be exercised beneficially for the creditors, even in circumstances where the applicant seeks the further orders which may result in a sum of money being paid to him by way of compensation. Whether if the bankrupt received compensation that money would become after-acquired property for which he would have to account to his trustee does not need to be determined on this application: see Chippendall v Tomlinson ( 1785) L Co Bank L 428 ; 99 ER 900.

[77] The holding that an application of this kind is not property of the bankrupt which vests in the trustee is consistent with the decision of the Full Court of this Court in Griffiths v Civil Aviation Authority 67 FCR 301 where the Full Court held that an appeal to the Federal Court on a question of law from the decision of the Administrative Appeals Tribunal in relation to conditions imposed upon a bankrupt on aviation licences was not property of the bankrupt which vested in the trustee. Cooper J said in that case at 325-326:

There is a unity of object and purpose in the operation of ss 58, 60 and 116 of the Act if it is recognised that the consistent focus of attention is upon rights which the trustee can turn to advantage for the benefit of creditors or upon rights the exercise of which will adversely affect or delay the administration of the estate. It is these rights which fall within the definition of "property" in s 5 and the enforcement of which by action are stayed by s 60(2) upon a person becoming bankrupt. To interpret "property" for the purposes of s 5 in this way avoids the injustice of denying to the bankrupt the power to exercise a right in which the trustee has no interest and the exercise of which cannot operate adversely on the property of the bankrupt or the administration of the bankrupt's estate.

The right of Mr Griffiths to appeal to this Court from the decision of the Tribunal and his right to appeal from the judgment of Kiefel J are such rights and did not vest in the Official Trustee upon acquisition by Mr Griffiths. Neither Mr Griffiths' appeal from the Tribunal to the original jurisdiction of this Court, nor his appeal from the order of Kiefel J to the Full Court is incompetent in consequence of his bankruptcy.

[78] The right to sue for the bankrupt's earnings, wages or income does not vest in the trustee and therefore the right is exercisable by the applicant.

[79] I also agree, with respect, with the decision of the Full Bench of the New South Wales Industrial Relations Commission in Perfection Dairies Pty Ltd v Finn [ 2006] NSW IR Comm 137. In that case, the appellant before the Commission had summarily dismissed the respondent from employment for wilful misconduct. A Commissioner had ordered the respondent be reinstated and that the appellant pay the respondent an amount which equated to the remuneration he would have received but for the dismissal. One of the issues raised on that appeal was whether the respondent, as an undischarged bankrupt, had standing to bring the application for reinstatement. The Commission, after referring to the sections of the Bankruptcy Act to which reference has been made in these reasons and after referring to the dicta of Cooper J in Griffiths v Civil Aviation Authority 67 FCR 301, to which I have also made reference, and the judgment of the Queensland Court of Appeal in Geia v Palm Island Aboriginal Council 152 FLR 135, said at [38]-[39]:

Employment is not usually referred to, or known as, property. Whatever legal "interest" an employee has in his or her employment, it is not a property interest. In any event, it seems clear from reference to the relevant statutory provisions and the case law that, although the expression "property", and cognate expressions such as "the property of the bankrupt" and "after acquired property", are to be construed in a very wide sense, the bankrupt's employment is not considered "property" for the purposes of the Bankruptcy Act.

Indeed, all the pertinent indications in the statute and the case law are to the opposite effect. For example, there are a number of references in the Bankruptcy Act to "property divisible among the bankrupt's creditors" (see, for example, s 58(6) and the definition of "the property of the bankrupt" in s 5); it could not seriously be suggested that the bankrupt's employment, or the bankrupt's rights as to his or her employment could be divisible among the creditors. Indeed, the statute recognises that it is most desirable that the bankrupt be able to earn income during the course of the bankruptcy and also contemplates the likelihood that a bankrupt who was an employee prior to the bankruptcy would continue to be in employment. The references we have cited from division 4B of the statute, including the references to ss 139L and 139U are also in point. In particular, we do not detect in the scheme of the Australian statute any provision which would be at odds with the observation in the judgment of the English Court of Appeal in Ex part Vine; re Wilson, where reference was made to the necessary exception to the property of the bankrupt being divisible amongst his creditors, "in order that the bankrupt might not be an outlaw, a mere slave to his trustee; he could not be prevented from earning his living".

[80] Madgwick J's decision in Pelechowski v NSW Land and Housing Commission [ 2000] FCA 233 addressed only the question whether the action was for a personal injury which was the only live issue because of the provisions of s 60(2). The action in that case was commenced before the sequestration order was made and was caught by s 60(2). Section 60(2) catches all actions not excepted by s 60(4). There was no question in that proceeding whether income, wages or earnings payable to the bankrupt after bankruptcy was property of the bankrupt or property divisible among the bankrupt's creditors.

[81] In Geia v Palm Island Aboriginal Council 152 FLR 135 the bankrupt sued for damages for breach of contract or for moneys due and payable under a contract of employment. The bankrupt sought $109,692.30 in relation to a contract of employment which was for three years but which was terminated by the employer some weeks before the bankruptcy. The argument before the lower Court was whether the action was one falling within s 116(2)(g). That was rejected by the District Court Judge and not pursued in the Court of Appeal. In that court, the bankrupt argued that the cause of action was exempt under the "common law of bankruptcy". The critical issue in Geia v Palm Island Aboriginal Council 152 FLR 135 was explained (at 137):

We were referred to Affleck v Hammond [ 1912] 3 KB 162 and to Thistlethwayte v Gender Estates Pty Ltd ( 1976) 8 ALR 700, in both of which Bailey v Thurston & Co Ltd was relied on; but each of those cases concerned a different point, which was whether the bankrupt could sue for "moneys which, by his personal effort, he had earned": see Thistlethwayte ( at 702). We have mentioned above that it is conceded that no such moneys are in issue in this case, where the plaintiff says he has a right to damages, or to be paid at the agreed rate past the date when his employment was terminated.

[82] The Court went on to say:

A convenient summary of these provisions is to be found in the reasons of French J in Re Gillies;; Ex parte Official Receiver in Bankruptcy ( 1993) 42 FCR 571. In that case his Honour held that although s 131(1) which had entitled "a bankrupt who is in receipt of income" to retain it for his own benefit had been repealed, Div 4B "rests upon the continuing assumption that the income of the bankrupt does not vest in the trustee". We are in respectful agreement with that view; but it does not, of course, bear upon the question whether a cause of action for breach of a contract which would, if carried out, have produced income for the bankrupt vests in the trustee.

[83] Geia v Palm Island Aboriginal Council 152 FLR 135 was a case about a claim for damages, not a case about a claim for loss of wages. As such, it does not address the issues raised in these reasons.

[84] The application to dismiss or stay the applicant's proceeding on the ground that the applicant lacked standing is dismissed.

[85] The respondents sought, if their first application was dismissed, security for costs.

[86] Section 56 of the Federal Court of Australia Act 1976 (Cth) empowers the Court to make an order for security for costs. The power is discretionary but it must be exercised judicially: s 56(2).

[87] The general rule is that where the applicant is a natural person he or she will not be required to provide security for costs merely because he or she is impecunious : Pearson v Naydler [ 1977] 3 All ER 531 at 533 per Megarrey VC. That said, however, it is necessary to have regard to the circumstances of the case generally to determine whether the case is an appropriate one for an order for security for costs.

[88] The applicant is a bankrupt. After his bankruptcy he obtained employment with the first respondent and during the course of his bankruptcy his employment with the first respondent was terminated.

[89] Although there is no direct evidence, having regard to the proceeding itself, it may be inferred that the applicant has not been employed since his employment was terminated on 16 May 2008.

[90] That would establish that he is impecunious but, as I have said, impecuniosity itself is not a bar to bringing a proceeding : Barton v Minister for Foreign Affairs ( 1984) 2 FCR 463 ; James v ANZ Banking Group Ltd (No 1) ( 1985) 9 FCR 442 ; Knight v Beyond Properties Pty Ltd [ 2005] FCA 764.

[91] Apart from the fact that the applicant is apparently impecunious, no other ground is advanced for making an order for security for costs: O 28 r 3.

[92] It was contended that I should not infer, in the absence of evidence, that an order for security would not stifle the action. It may be, the respondents contended, that the applicant has the support of a third party especially in circumstances where, as it was the case, the applicant was represented on this application.

[93] It is true, as the respondents contended, that the applicant has not put anything before the Court by way of positive evidence that would establish that if an order for security were made that would stifle the action. I do know, however, of his personal circumstances which I have recounted. I also know that the respondents contended that if the matter were to go to trial the respondents' costs would be in the order of $21,500.

[94] I can infer, without any further evidence, that the applicant would not be in a position to provide security for costs of that order himself.

[95] The respondents have not identified any other party who might provide that security. In my opinion, if the order were made in the amount of the estimated costs or a significant part of the estimated costs, the proceeding may well be stifled.

[96] There is a further relevant matter. The application has been brought for the purpose of quashing a decision which gave rise to the termination of the applicant's employment. If the applicant succeeds in his complaints part of his impecuniosity from May 2008 may well have been caused by the respondents. It would be inappropriate for the respondents to rely upon their own actions for the purpose of defeating the applicant's proceeding.

[97] I am not prepared to make an order for security for costs.

[98] The notice of motion must be dismissed.

[99] I will hear the parties as to costs but there seems to be no reason why the respondents should not pay the applicant's costs.