Brown v Premier Pet

[2012] FMCA 830

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BROWN v PREMIER PET [2012] FMCA 830

INDUSTRIAL LAW – Nature of claim for reinstatement – claim personal to employee and does not vest in trustee in bankruptcy.

BANKRUPTCY – Property – property of the bankrupt – property divisible among the bankrupt’s creditors – whether claim for compensation, pecuniary penalty and reinstatement vests in employee’s trustee in bankruptcy – claim for reinstatement not property divisible among the bankrupt’s creditors.

Bankruptcy Act 1966, ss.5, 58(1)(b), 58(6), 116, 116(2)(g)
Fair Work Act 2009, ss.365, 369

Cox v Journeaux (1935) 52 CLR 713
Daemar v Industrial Commission of New South Wales & Ors (1988) 12 NSWLR 45
Ex parte Vine; Re Wilson (1878) 8 Ch D 364
Fuller v Beach Petroleum NL (1993) 43 FCR 60
Geia v Palm Island Aboriginal Council (1999) 152 FLR 135
Griffiths v Civil Aviation Authority (1995) 137 ALR 521
Leaman v The Salvation Army (Victoria) Property Trust as Trustee for The Salvation Army (Vic) Social Work [2011] FMCA 1037
Perfection Dairies Pty Ltd v Finn (2006) 151 IR 197
Randall v Deputy Commissioner of Taxation (2008) 174 FCR 441
Re Pelechowski, in the matter of Pelechowski v NSW Land & Housing Commission [2000] FCA 233

Applicant: ADAM RICHARD BROWN

Respondent: PREMIER PET T/AS BAY FISH

File Number: BRG 753 of 2011

Judgment of: Jarrett FM

Hearing date: 27 October 2011

Date of Last Submission: 27 October 2011

Delivered at: Brisbane

Delivered on: 13 September 2012

REPRESENTATION

The Applicant appeared in person

Counsel for the Respondent: Mr Pratt

Solicitors for the Respondent: Hopgood Ganim

ORDERS

1. The claims for compensation and pecuniary penalty claimed in Part H of the Form 2 “Claim under the Fair Work Act 2009 alleging dismissal in contravention of a general protection” filed on 22 August, 2011 are struck out.

2. Otherwise the application for summary dismissal in the Response filed on 9 September, 2011 is dismissed.

3. The application be listed for further directions in the Federal Magistrates Court of Australia at Brisbane at 9.30am on 20 September, 2012.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT BRISBANE

BRG 753 of 2011

ADAM RICHARD BROWN

Applicant

And

PREMIER PET T/AS BAY FISH

Respondent

REASONS FOR JUDGMENT

1. This is the hearing of an interlocutory application by the respondent to have Mr Brown’s proceedings dismissed summarily because he does not have the requisite standing to pursue the application.

2. By his application filed on 22 August, 2011 Alan Brown seeks orders against the respondent pursuant to the Fair Work Act 2009 (Cth) for certain contraventions of that Act.

3. Initially the proceedings were commenced in the small claims list of this Court, but Mr Brown confirmed that he made that request by mistake. Accordingly, parties proceeded on the basis the matter was not being dealt with under the Court’s small claims procedures.

4. In these proceedings Mr Brown seeks compensation (unspecified), reinstatement and that a pecuniary penalty be imposed upon the respondent for dismissing him from his employment with the respondent in contravention of certain general protections set out in the Fair Work Act 2009.

5. The respondent opposes Mr Brown’s application. Apart from denying the breaches of the Fair Work Act 2009 alleged by Mr Brown, the respondent asserts that Mr Brown “does not have standing to bring the proceedings under sections 58 and 116 of the Bankruptcy Act 1966 (Cth) for those reasons explained in the respondent’s solicitor’s letter to the applicant dated 6 September 2011.”

Background facts

1. The background facts can be shortly stated. 

2. Mr Brown presented his own petition for bankruptcy on 7 February, 2011. He is presently an undischarged bankrupt.

3. There is no dispute that Mr Brown was employed by the respondent on or about 14 March, 2011 and that on 15 July, 2011 his employment was terminated. He was provided with one week’s pay in lieu of notice.

4. According to the claim filed by Mr Brown on 22 August, 2011 in this Court, he lodged with Fair Work Australia a complaint (or a claim) in relation to what he describes as “unlawful working conditions (formal rostered hours exceeding 38)”. He alleges that hours after presenting the Fair Work Australia Form 8 to his employer he was dismissed in contravention of Part 3.1 of the Fair Work Act 2009. 

5. The application to Fair Work Australia was, in the first instance commenced pursuant to s.372 of the Fair Work Act 2009 because Mr Brown’s employment had not been terminated at that point. However, after his dismissal, the application was amended by the Fair Work Commissioner to whom the dispute had been referred for a compulsory conference, to be a claim pursuant to s.365 of the Fair Work Act 2009. A compulsory conference was held but the dispute was not resolved. The Commissioner issued a certificate pursuant to s.369 of the Fair Work Act 2009 in respect of the dispute.

6. At the time Mr Brown’s employment was terminated, at the time he made his application to Fair Work Australia and at the time he commenced these proceedings, he was, and remains an undischarged bankrupt. 

7. The respondent argues that in light of the nature of the relief sought by Mr Brown and the wide definition of property in the Bankruptcy Act 1966 (Cth) any right to bring the present proceedings vests in Mr Brown’s trustee in bankruptcy. It is argued that Mr Brown has no standing to commence or pursue these proceedings and they ought to be dismissed.

The Bankruptcy Act 1966

13.Section 58(1)(a) of the Bankruptcy Act 1966 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.

1. The phrase the property of the bankrupt which is referred to in s.58(1) is relevantly defined in s.5 of the Bankruptcy Act 1966 as meaning:

   a)the property divisible among the bankrupt’s creditors; and

   b)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; ...

2. “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.

16.Section 116 deals with the property divisible among the bankrupt’s creditors.  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.

1. Section 116(2) provides limitations on what otherwise would be property divisible amongst the creditors of the bankrupt. 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.

Principles

1. A claim for compensation arising out of a wrongful or unlawful dismissal from employment is generally seen as property for the purposes of the Bankruptcy Act 1966: Daemar v Industrial Commission of New South Wales & Ors (1988) 12 NSWLR 45 and Geia v Palm Island Aboriginal Council (1999) 152 FLR 135. Unless the damages sought 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” a right to recover damages or compensation for a wrong done to a bankrupt is not within the exception provided for in 116(2)(g) of the Bankruptcy Act 1966: Cox v Journeaux (1935) 52 CLR 713 at 721.

2. As Madgwick J put it Re Pelechowski, in the matter of Pelechowski v NSW Land & Housing Commission [2000] FCA 233:

   [5] … The essential element of proceedings for illegal termination of employment under the Workplace Relations Act 1996 (Cth), is that one's economic relations with one's former employer have been disrupted. Those economic relations depend upon contract, or perhaps in the case of a public servant, a statutory relationship, but nevertheless of a contractual or quasi-contractual kind, that is to say, property rights are at the heart of the proceedings.

3. There is no reason to think that those comments do not apply with equal force to a general protections claim for compensation under the Fair Work Act 2009.

4. A claim for a pecuniary penalty is also not within the exception set out in s.116(2)(g) of the Bankruptcy Act 1966.  In Leaman v The Salvation Army (Victoria) Property Trust as Trustee for The Salvation Army (Vic) Social Work [2011] FMCA 1037 Riley FM dealt with such a case. In that case, her Honour said:

   4. In this case, the bankrupt initially sought compensation and a pecuniary penalty for allegedly being dismissed in July or August 2010 in contravention of a general protection under the Fair Work Act 2009. However, on the first day of the trial of the proceeding, the bankrupt withdrew his claim for compensation. The result is that the only presently outstanding claim is for a pecuniary penalty to be paid by the respondent. The bankrupt asked for that penalty to be paid to him. The legislation permits such a penalty to be paid to a person or to an organisation.

   5. It seems to me that a pecuniary penalty does not fall within the notion of damages or compensation in s.116(2)(g) of the Bankruptcy Act 1966. That is so even if the person is seeking that the pecuniary penalty be paid to him or her. A pecuniary penalty is of a different nature. It is not intended to compensate an applicant. It is intended to punish a wrongdoer.

   6.  Consequently, the bankrupt had no standing to bring the claim for a pecuniary penalty.  The right to bring that claim vested in the bankrupt’s trustee.

5. With respect, I agree with and gratefully adopt, her Honour’s reasoning.

6. The principles to be applied to Mr Brown’s claim for reinstatement are less clear.  The claim made by the bankrupt in Re Pelechowski, In the matter of Pelechowski v NSW Land & Housing Commission (above) included a claim for reinstatement, but it was not suggested that the claim did not vest in the bankrupt’s trustee. Although the matter was not the subject of specific comment, the decision proceeds on the basis that the claim did vest. It is not a matter about which the Court in that case appears to have been addressed, or specifically turned its mind.

7. In Perfection Dairies Pty Ltd v Finn (2006) 151 IR 197, a Full Bench of the New South Wales Industrial Relations Commission had to consider whether a bankrupt’s claim for reinstatement under s.84 of the Industrial Relations Act 1996 (NSW) was after-acquired property for the purposes of s.58 of the Bankruptcy Act. The Full Bench concluded that it was not. In doing so, the Full Bench considered the competing authorities on the point.

8. The first was Daemar v Industrial Commission of New South Wales & Ors (above), in which the New South Wales Court of Appeal dealt with an application for prerogative relief by a litigant in proceedings under s.88F of the Industrial Arbitration Act 1940 (NSW), who subsequently became a bankrupt. The Court held that the proceedings were stayed by s.60 of the Bankruptcy Act 1966 because the s.88F proceeding was an action which did not fall within the exemption provided in s.60(4)(a) of the Bankruptcy Act 1966 in respect of actions for any wrong done to the bankrupt.

9. The Full Bench also considered Fuller v Beach Petroleum NL (1993) 43 FCR 60 in which a sequestration order was made against the appellant who was found liable for several claims in tort and for breach of his fiduciary duty as a director of Beach Petroleum. The appellant filed a notice of appeal against the judgment. The majority of the Full Court of the Federal Court dismissed the appeal as incompetent, holding that the appellant’s right to appeal vested in his trustee in bankruptcy. His right of appeal was held to be property for the purposes of the Bankruptcy Act 1966.

10. The Full Bench also referred to Geia v Palm Island Aboriginal Council (1999) 152 FLR 135 in which the Queensland Court of Appeal held that the statutory scheme established by the Bankruptcy Act 1966 and in particular s.116 and, as to income received after bankruptcy Division 4B of the Act, should not be read subject to unstated exceptions that were based upon doctrines worked out in the cases decided under the English bankruptcy statutes. The claim for damages for wrongful dismissal at issue in that case had vested in the applicant’s trustee in bankruptcy and could not be pursued by the bankrupt.

11. The Full bench then turned its attention to Griffiths v Civil Aviation Authority (1995) 137 ALR 521, where the Full Court of the Federal Court distinguished the majority judgment in Fuller. The application before the Full Court in Griffiths was an appeal pursuant to s.44(1) of the Administrative Appeals Tribunal Act 1977. The Full Bench explained:

    36.    …The issue in this case was a decision of the Civil Aviation Authority varying the appellant's commercial pilot licences following a finding that the appellant was not a “fit and proper person” to hold the licences. As a result of the variation, the appellant was no longer able to earn an income as a pilot and consequently his business failed and a sequestration order was made against the estate of the appellant. The respondent Civil Aviation Authority had filed a notice of motion seeking the dismissal of the appeal as incompetent because the appellant was a bankrupt and had no standing to prosecute the proceedings. Einfeld J, at 536, expressed his agreement with the reasoning of Hill J in Fuller concerning the interpretation of s 116(1)(a), observing that “the English cases are helpful in determining whether, in a particular case, a right of action can properly be described as “property” …

    37.    Cooper J held, at 540 (our emphasis):

    The definition of “property” in s 5 of the act is expressed in the broadest of terms. However, the definition is to be construed in such a way as would promote the purpose or object underlying the act in preference to a construction that would not promote that purpose or object: Acts Interpretation Act 1901 (Cth) s 15AA. Additionally, the Act is to be interpreted against the background of what has been described as the “common law of bankruptcy”: Faulkner v Bluett (1981) 52 FLR 115 at 118.

    The statutory object of the Act is to vest the property of a bankrupt in a trustee in order that the same may be divisible among the bankrupt’s creditors. The trustee is to get in the property and reduce it to a money sum and to disown, for example, the property which would be a drain on the estate. The statutory object is also to protect the person of the bankrupt and his property insofar as his creditors are concerned as at the date of the making of the sequestration order: see s 58(3) and (4) and s 60(1)(a) and (b) of the Act generally Storey v Lane (1981) 147 CLR 549 at 557.

    The Act is not concerned to protect the person of the bankrupt from legal proceedings brought by persons other than creditors or by persons seeking to enforce payment of an obligation imposed by a statute or in the exercise of a power authorised by statute: see, for example, the imposition of fines and statutory charges together with imprisonment for non-payment in Commissioner for Motor Transport v Train (1972) 127 CLR 396 and generally Re Lattouf (1994) 52 FCR 147 (FC). Nor is the Act concerned to prevent the bankrupt enforcing rights which are personal to the bankrupt and irrelevant to the attainment of the statutory objects of the Act.  In consequence, a construction of the Act which denies to a bankrupt the enjoyment of rights which do not affect the value of the bankrupt’s estate or the administration of the estate is to be avoided.

    At common law, a right of action for a personal injury done to the bankrupt where “the damages are to be estimated by immediate reference to the pain felt by a bankrupt in respect of his body, mind or character, and without immediate reference to his rights of property” (per Erle J in Beckham v Drake (1849) 2 HLC 579 at 604; 9 ER 1213 at 1222) was not property which passed to the assignee. That exception has been acknowledged and given effect to in Australia in the various insolvency statutes, including the Act: see s 60(4) and s 116(2)(g). However, in my view, it was not the intention of parliament in passing s 60(4) and s 116(2)(g) nor the predecessors of these sections, to state exhaustively the exceptions to the property in the nature of rights of action which would not pass to the trustee and thereby to identify by omission all other rights as “property” within the meaning of s 5 of the Act.

12. The Full Bench then went on to explain:

    38. 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 1966.

    39 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 1966 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”.

13. The Full Bench went on to hold that Mr Finn could pursue his application for reinstatement pursuant to s.84 of the Industrial Relations Act 1996 (NSW).

14. Perfection Dairies Pty Ltd v Finn (above) was expressly approved by Lander J in Randall v Deputy Commissioner of Taxation (2008) 174 FCR 441. In that case the applicant was a bankrupt when he took up an offer of employment as an Australian Public Service employee pursuant to the Public Service Act 1999 (Cth) with the Australian Taxation Office. A few months after he commenced his employment, the ATO (by an appropriate officer) terminated the applicant’s employment pursuant to the Public Service Act.  The applicant commenced proceedings seeking judicial review of the decision to terminate his employment pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) and for the issue of the constitutional writs pursuant to the Judiciary Act 1903 (Cth). Further, he sought a declaration that the decision to terminate his employment was void and of no effect and that he was an ongoing Australian Public Service employee. He sought an order for the issue of a writ of certiorari quashing the ATO’s 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 employee with the ATO and receive his salary in that office. He sought an order that the respondents pay damages for wrongful dismissal.

1. After noting the relevant sections of the Bankruptcy Act 1966 that bore on the issues before him, Lander J set out the relevant contentions of each of the parties and the authorities relied upon by each of them. He recorded that the respondent relied upon the judgments in Geia v Palm Island Aboriginal Council (above) and Re Pelechowski, in the matter of Pelechowski v NSW Land & Housing Commission (above), amongst others, to make good its submission that the applicant had no standing to pursue his application then before the Court. His Honour said:

   35 The purpose of the Bankruptcy Act 1966 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] HCA 44; (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 [1996] HCA 19; 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 s 5 (property of the bankrupt) and s 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.

   (my emphasis)

2. His Honour then turned to those sections of the Bankruptcy Act which “excised” from the scheme set out in the Bankruptcy Act certain proceedings and causes of action to which the bankrupt was entitled which would otherwise vest in his trustee:

   40 Section 60(4) and s 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 s 60(4) and s 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.

3. His Honour referred to and cited a passage from Ex parte Vine; Re Wilson (1878) 8 Ch D 364 at 366-367 which recognised that an exception to the general principle that until a bankrupt had obtained his discharge all his property is divisible among his creditors 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”. His Honour went on to say:

   43 In those circumstances, the kinds of action contemplated by s 60(4) and s 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).

   (my emphasis)

4. His Honour pointed out that in the case before him, the nature of the claim and relief sought by the applicant would return him no property rights if successful – he would only be entitled to have the impugned decision reconsidered and determined according to law. He would not be returned to his employment.

5. His Honour then observed:

   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] HCA 22; (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.

6. His Honour’s attention then turned to the scheme established by Division 4B of Part VI of the Bankruptcy Act 1966. That division sets out a comprehensive regime whereby a bankrupt might be liable to make contributions to his estate from his income. His Honour compared the legislative scheme that exists now for that purpose with that which existed prior to the enactment of Division 4B of Part VI of the Bankruptcy Act 1966. His Honour noted:

   56 The scheme in Division 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 Division 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 [1935] HCA 22; 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.

   …

   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.

   …

   72 Section 131 has been repealed. However, the Bankruptcy Act 1966 still contemplates that income earned after the bankrupt’s bankruptcy does not vest in the bankrupt’s trustee: Re Gillies [1993] FCA 289; (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 1966 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 1966 or s 101 part of the 1924 Bankruptcy Act 1966. 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] EngR 300; (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.

   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.

   (my emphasis)

7. His Honour then considered and expressed his agreement with the decision in Perfection Dairies Pty Ltd v Finn (above). He considered, but distinguished Geia v Palm Island Aboriginal Council (above) on the basis that the cause of action there pursued was for damages, not loss of wages. His Honour also distinguished Re Pelechowski, in the matter of Pelechowski v NSW Land & Housing Commission (above) on the basis that there was no question in that proceeding as to whether income, wages or earnings payable to the bankrupt after bankruptcy was property of the bankrupt or property divisible among the bankrupt’s creditors.

Consideration

1. Mr Brown’s cause of action accrued whilst he was bankrupt. That is to say, to the extent that it can be seen as property for the purposes of the Bankruptcy Act it is after- acquired property which might vest, as soon as it is acquired by or devolves on him, in his trustee: ss.58(1)(b) and 58(6) of the Bankruptcy Act. But should it be seen as property divisible among Mr Brown’s creditors?

2. Having regard to the principles set out above, I have no difficulty concluding that Mr Brown’s claim for compensation and for the imposition of a pecuniary penalty upon the respondent cannot be pursued by him. Those rights are property rights as discussed in the cases set out above. Those rights have vested in his trustee in bankruptcy as after-acquired property and he has no standing to pursue them.

3. In my view his claim for reinstatement can proceed.  Although neither Perfection Dairies Pty Ltd v Finn (above) or Randall v Deputy Commissioner of Taxation (above) are binding on me, both are significantly persuasive. If have set out at some length excerpts from the judgments in each because:

   a)Neither case was referred to in argument, despite them having considered most of the other authorities relied upon by the respondent, although Perfection Dairies is referred to in one of the decisions that the respondent’s solicitors sent to Mr Brown urging him to discontinue his proceedings;

   b)It was necessary to demonstrate that the reasoning in each matter was, with respect to each Court, thorough and persuasive; and

   c)It was necessary to demonstrate that each of the authorities relied upon by the respondent have been distinguished in circumstances not unlike those of this case.

4. In correspondence sent on 6 September, 2011 by the respondent’s solicitors to Mr Brown, three cases were referred to and copies were enclosed. It was said that the cases demonstrated that Mr Brown’s claim was not maintainable.  The cases were Hampson v Circuit Finance Australia Ltd [2006] AIRC 24, Roskell v Broadcast Services Australia Limited [2009] AIRC 158 and Geia v Palm Island Aboriginal Council (above).

5. Hampson was decided before Randall and Perfection Dairies were decided and so any authority it might have had is diminished by that fact. Moreover, the reasoning in Hampson relies in part on Re Pelechowski,  but does not appreciate the points of distinction that were set out in Perfection Dairies and more so in Randall. 

6. Roskell was decided after both Randall and Perfection Dairies were decided, but only Perfection Dairies is referred to in the judgment. The reasoning in Perfection Dairies was not followed, but as I have said above, it has been expressly endorsed in Randall and is, in its own right, highly persuasive.

7. Moreover, the decisions in Hampson and Roskell do not seem to take account of the differing forms of relief available in the applications before them. In the present case, three forms of relief have been claimed and each is available in the application that is permitted by the s.539(2) of the Fair Work Act 2009.  In my view, it matters not that different forms of relief are permitted in the one application or cause of action. 

8. To the extent that the proceedings seek to exercise the right to an order for reinstatement that the Court might grant pursuant to s.545(2)(c), Mr Brown is not exercising a right in respect of property for the purposes of s.116(1) of the Bankruptcy Act 1966.

9. To adopt and adapt the reasoning in Randall, the right to seek reinstatement and thereby to be put back in a position to earn income through personal exertion remains with Mr Brown. His trustee has no interest in seeking his reinstatement. His trustee, for example, could not ensure that if reinstatement was offered or taken up, Mr Brown would take up or remain in the employment. If his trustee was to bring these proceedings, and they were successful, there would, nonetheless, be no property which would be divisible among Mr Brown’s creditors. The right to seek an order for reinstatement is not a right which can be exercised beneficially for Mr Brown’s creditors. 

10. Insofar as Mr Brown’s application seeks compensation and the imposition of a pecuniary penalty, it will be dismissed on the basis that Mr Brown does not have reasonable prospects of successfully prosecuting those claims. The balance of the application will remain.

I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of Jarrett FM

Date:  13 September 2012