Comcare v Dunkerley

Case [2021] FCA 495


FEDERAL COURT OF AUSTRALIA

Comcare v Dunkerley [2021] FCA 495  

File number: ACD 74 of 2019
Judgment of: ABRAHAM J
Date of judgment: 13 May 2021
Catchwords: BANKRUPTCY AND INSOLVENCY– creditor's petition for a sequestration order – where respondent debtor opposed creditor's petition and making of a sequestration order – whether a debt due in truth and reality – whether to ‘go behind’ a judgment – sequestration order made
Legislation:

Bankruptcy Act 1966 (Cth) ss 40, 43, 44, 52

Federal Court of Australia Act 1976 (Cth) s 20A

Safety, Rehabilitation and Compensation Act 1988 (Cth) ss 16, 19

Cases cited:

Corney v Brien [1951] HCA 31; (1951) 84 CLR 343

Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8

Dunkerley v Comcare [2015] FCA 392

Dunkerley v Comcare [2015] FCA 1076

Dunkerley v Comcare [2015] FCA 1519

Dunkerley v Comcare [2019] FCA 1002

Dunkerley v Comcare [2020] FCAFC 8

Dunn, in the matter of Dunn v Vangsnes [2000] FCA 1051

Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52

JH v Director General, Community Services Directorate [2012] ACTSC 30; (2012) 260 FLR 21

Kazar (Liquidator) v Kargarian; In the matter of Frontier Architects Pty Ltd (In Liq) [2011] FCAFC 136; (2011) 197 FCR 113

Kessly v Beadle as Trustee of the Bankrupt Estate of Evangelina Francisca Kessly [2020] FCA 607

Kitay, in the matter of Frigger (No 2) [2018] FCA 1032

Knudsen & Yates trading as The Hargreaves Practice, in the matter of Sanders v Sanders [2003] FCA 1079

New South Wales Aboriginal Land Council v Minister Administering the Crown Land Act (Moonbi) [2014] NSWLEC 144

Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72

Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; 261 CLR 132

Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53

Sandell v Porter (1966) 115 CLR 666

Shaw v Yarranova Pty Ltd [2017] FCAFC 88; (2017) 252 FCR 262

Waterton v Lafferty [2019] FCA 1267

Wren v Mahoney [1972] HCA 5; (1972) 126 CLR 212

Division  General Division
Registry Australian Capital Territory
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 71
Date of hearing: 31 March 2021
Counsel for the Applicant: Mr. N Oram
Solicitor for the Applicant: McInnes Wilson Lawyers
Counsel for the Respondent: Respondent appeared in person

ORDERS

ACD 74 of 2019
BETWEEN:

COMCARE

Applicant

AND:

ULLA-MAIJA KATRIINA DUNKERLEY

Respondent

ORDER MADE BY:

ABRAHAM J

DATE OF ORDER:

13 MAY 2021

THE COURT ORDERS THAT:

1.The estate of Ulla-Maija Katriina Dunkerley be sequestrated under the Bankruptcy Act 1966 (Cth).

2.The applicant creditor’s costs (including reserved costs) be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act1966 (Cth).

THE COURT NOTES THAT:

1.The date of the act of bankruptcy is 27 June 2019.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal…

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AGLC
Comcare v Dunkerley [2021] FCA 495
Case
[2021] FCA 495
Decision Date

CaseChat Overview and Summary

In the matter of Comcare v Dunkerley, the case before the court involved a creditor's petition for a sequestration order, which the respondent debtor opposed. The dispute centred on whether there was a debt due in truth and reality, and whether the court should 'go behind' a judgment to investigate the matter further. The Bankruptcy Act 1966 (Cth) provides that the court may not make a sequestration order unless it is satisfied that there is a debt owing to the petitioning creditor. The legal issue for the court was whether the existence of a judgment is conclusive evidence of a debt in bankruptcy proceedings, or if the court has a discretion to investigate whether there was a good debt to support it. The court considered the principles set out in Corney v Brien and Ramsay Health Care, which provide that the court has a discretion whether to accept a judgment as the required proof of a debt in bankruptcy proceedings.

The court found that the applicant had not established a proper basis to go behind the judgments. The court examined the history of the proceedings, including the various decisions made by the Administrative Appeals Tribunal (AAT) and the Federal Court, which affirmed Comcare's decision not to pay compensation to the respondent for her injury. The court held that the respondent had not shown any reason to question the existence of the debt, and therefore, the court accepted the judgment as satisfactory proof of the petitioning creditor's debt.

In conclusion, the court made a sequestration order under the Bankruptcy Act 1966 (Cth) and ordered that the applicant creditor's costs be taxed and paid from the estate of the respondent debtor in accordance with the Act. The court found that there was a debt owing to the petitioning creditor and that the existence of the judgment was satisfactory proof of that debt. The court did not exercise its discretion to go behind the judgment, as the applicant had not shown any reason to do so.

Orders

Orders of the court

THE COURT ORDERS THAT:

1. The estate of Ulla-Maija Katriina Dunkerley be sequestrated under the Bankruptcy Act 1966 (Cth).

2. The applicant creditor’s costs (including reserved costs) be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

It is appropriate to first consider whether to go behind the judgments, as that argument is directed to whether there is a debt owing.Going behind a judgment - relevant principles The existence of a judgment is prima facie evidence of a debt: Corney v Brien [1951] HCA 31; (1951) 84 CLR 343 (Corney v Brien) at 355. However, a judgment is never conclusive evidence of a debt in bankruptcy proceedings as the Court may “go behind” the judgment to investigate whether there was a good debt to support it: Corneyv Brien at 347. For the purposes of s 52(1)(c), the Court must be satisfied that “in truth and reality” there is a debt owing. The Court has a discretion whether to accept a judgment as the required proof. As explained in Wren v Mahoney, Barwick CJ (with whom Windeyer and Owen JJ agreed) said (at 224):The judgment is never conclusive in bankruptcy. It does not always represent itself as the relevant debt of the petitioning creditor, even though under the general law, the prior existing debt has merged in a judgment. But the Bankruptcy Court may accept the judgment as satisfactory proof of the petitioning creditor’s debt. In that sense that court has a discretion. It may or may not so accept the judgment. But it has been made quite clear by the decisions of the past that where reason is shown for questioning whether behind the judgment or as it is said, as the consideration for it, there was in truth and reality a debt due to the petitioning creditor, the Court of Bankruptcy can no longer accept the judgment as such satisfactory proof. It must then exercise its power, or if you will, its discretion to look at what is behind the judgment: to what is its consideration. The relevant principles were addressed more recently by the High Court in Ramsay Health Care where Kiefel CJ, Keane and Nettle JJ explained the correct approach at [54]-[55] as follows:[54] In point of principle, scrutiny by a Bankruptcy Court of the debt propounded by a judgment creditor seeking a sequestration order in no sense involves an attempt to impeach the judgment. A Bankruptcy Court is not concerned with whether the judgment should be set aside as upon an appeal, or even as a default judgment or a judgment obtained by fraud may be set aside; nor is a Bankruptcy Court concerned to deny the effect of the judgment as “res judicata” between the parties to it. A Bankruptcy Court is not concerned to prevent the judgment creditor from invoking the ordinary processes of execution available under the general law. Rather, a Bankruptcy Court is concerned with whether the debt on which it is based is truly a basis for the making of a sequestration order. A Bankruptcy Court has a statutory duty to be “satisfied” as to the existence of the petitioning creditor’s debt; a creditor should not be able to make a person bankrupt on a debt which is not provable.[55] The scrutiny required by s 52 as to whether there is, in truth and reality, a debt owing to the petitioning creditor serves to protect the interests of third parties, particularly other creditors of the debtor. It is of critical importance to appreciate that such persons were not parties to the proceedings that resulted in the judgment debt. It has long been recognised that their interest in being paid their debts in full should not be prejudiced by the making of a sequestration order in reliance on a judgment debt which does not reflect the true indebtedness of the debtor to the petitioning creditor. In In re Fraser; Ex parte Central Bank of London, Lord Esher MR said:“The decision is based upon the highest ground – viz, that in making a receiving order, the Court is not dealing simply between the petitioning creditor and the debtor, but it is interfering with the rights of his other creditors, who, if the order is made, will not be able to sue the debtor for their debts, and that the Court ought not to exercise this extraordinary power unless it is satisfied that there is a good debt due to the petitioning creditor. The existence of the judgment is no doubt prima facie evidence of a debt; but still the Court of Bankruptcy is entitled to inquire whether there really is a debt due to the petitioning creditor.”

Ratio Decidendi

Legal Principle Established

As Banks-Smith J observed in Waterton v Lafferty [2019] FCA 1267 at [76]-[77], that the observations of Colvin J in Kitay preserves the potential in the face of an allegation of fraud, collusion or miscarriage of justice for a court to go behind a costs liability where there is not an antecedent debt, but where there is a link between the underlying determination of issues and costs by way of the exercise of discretion to order that costs follow the event after trial. Logically, that must be so. Consideration The applicant has not established there is a proper basis to go behind the judgments of Perram J, Flick J and Rares J. To explain why that is so it is necessary to consider the history of these proceedings in more detail. The background to these proceedings is accurately summarised by Griffiths J in his Honour’s reasons dismissing the respondent’s application to set aside the Bankruptcy Notice: Dunkerley v Comcare [2019] FCA 1002. It is convenient to recite that summary, relevantly from [7]-[15]: [7] Ms Dunkerley is a teacher. On 24 October 2007, she suffered an injury described as an “adjustment disorder with anxious mood” which she claimed was contributed to, in significant measure, by her employment at the former Commonwealth Department of Education, Science and Training (DEST). Although initially attempts were made to return her to work in another area of DEST, these attempts were unsuccessful and she was transferred to the Department of Industry, Innovation, Science, Research and Tertiary Education (DIISR) in May 2008. [8] Comcare initially declined liability for the October 2007 injury. On 16 June 2009, the AAT made a consent decision in which Comcare accepted liability for Ms Dunkerley’s injury suffered on 24 October 2007. [9] In March 2009, Dr George (a psychiatrist), concluded that Ms Dunkerley no longer presented with any psychiatric diagnosis and that she had full capacity to return to work. [10] On 1 September 2009, Ms Dunkerley made a claim for compensation from Comcare for aggravation of her condition arising from her interactions with a more senior colleague at DIISR in July 2009 in the context of her participation in a promotion round. This claim for aggravation was rejected by Comcare on 8 December 2009 and its decision was upheld on an internal review by Comcare on 11 February 2010. Ms Dunkerley sought a review of Comcare’s decision in the AAT. [11] Comcare’s decision was affirmed by the AAT in its decision dated 17 November 2010, which is reported as Re Dunkerley and Comcare [2010] AATA 915 (First AAT Decision). The AAT found that Ms Dunkerley’s aggravation had been suffered as a result of the feedback that she received from her more senior colleague (who was the Chair of the Selection Advisory Committee) on 17 July 2009. The feedback related to her unsuccessful attempt to obtain a promotion and the AAT found that it constituted reasonable administrative action taken in a reasonable manner in respect of her employment and that, accordingly, there was no “injury” for the purposes of s 5A of the SRC Act. [12] Ms Dunkerley appealed the First AAT Decision to this Court. The appeal was dismissed by Perram J on 3 February 2012. His Honour’s reasons for judgment are reported as Dunkerley v Administrative Appeals Tribunal [2012] FCA 41. Comcare did not seek costs against Ms Dunkerley and none was ordered.[13] Ms Dunkerley appealed to the Full Court from Perram J’s decision. On 13 September 2012, the appeal was dismissed by Lander, Logan and Barker JJ. Their Honours’ reasons for judgment are reported as Dunkerley v Comcare [2012] FCAFC 132; 131 ALD 1. An order for costs was made in favour of Comcare. Comcare did not pursue those costs and they do not form part of the basis of the bankruptcy notice which is the subject of the present proceeding. [14] Before describing the background to the three costs orders which form the basis of the bankruptcy notice, it is apt to say something about other proceedings in the AAT involving Ms Dunkerley and Comcare which preceded the making of those three costs orders. [15] In early May 2013, Ms Dunkerley reagitated her claim for compensation arising from her October 2007 injury. On 20 May 2013, Comcare denied liability to pay Ms Dunkerley compensation under ss 16 and 19 of the SRC Act from 2 March 2009 to the date of that determination in relation to Ms Dunkerley’s “adjustment disorder with anxious mood” suffered on 24 October 2007. The basis for the denial was Comcare’s determination that Ms Dunkerley had recovered from the injury suffered on 24 October 2007 by no later than 2 March 2009. Comcare’s determination that Ms Dunkerley had recovered from her injury was based on a medical report by a medical practitioner named Dr George. This decision was affirmed on internal review and Ms Dunkerley then sought review of that internal review decision in the AAT. On 18 June 2014, the AAT affirmed Comcare’s decision (the Second AAT Decision). It found that, as at 2 March 2009, Ms Dunkerley did not suffer from a “Axis 1 psychiatric disorder”, and did not at that time suffer incapacity for work nor require further medical treatment for the injury suffered on 24 October 2007. The Second AAT Decision is reported as Re Dunkerley and Comcare [2014] AATA 381.