Davy v ABS Business Sales Pty
[2017] FCCA 2651
•31 October 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DAVY v ABS BUSINESS SALES PTY & ORS | [2017] FCCA 2651 |
| Catchwords: PRACTICE AND PROCEDURE – Application to reinstate Fair Work proceedings – where Applicant is an undischarged bankrupt – whether applicant has standing – application dismissed. |
| Legislation: Bankruptcy Act 1966, ss. 5, 58(1), 116(1), 116(2)(g), 139L(1)(a)(vii) Fair Work Act 2009 (Cth) ss. 45, 545(2)(b), 545(3), 546, 550, 570(1), 570(2) |
| Cases cited: Brown v Premier Pet T/as Bay Fish [2012] FMCA 830 |
| Applicant: | RONALD DEAN DAVY |
| First Respondent: | ABS BUSINESS SALES PTY TRADING AS ABS BUSINESS SALES BRISBANE |
| Second Respondent: | PETER BENJAMIN MOLONEY |
| Third Respondent: | KENNETH ALLSOP |
| File Number: | BRG 389 of 2015 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 11 September 2017 |
| Date of Last Submission: | 11 September 2017 |
| Delivered at: | Brisbane |
| Delivered on: | 31 October 2017 |
REPRESENTATION
| The Applicant appeared in person by telephone link |
| Counsel for the First, Second and Third Respondents: | Mr Quinn |
| Solicitors for the First, Second and Third Respondents: | Macpherson Kelley |
ORDERS
The application in a case filed on 28 June, 2017 is dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 389 of 2015
| RONALD DEAN DAVY |
Applicant
And
| ABS BUSINESS SALES PTY trading as ABS BUSINESS SALES BRISBANE |
First Respondent
| PETER BENJAMIN MOLONEY |
Second Respondent
| KENNETH ALLSOP |
Third Respondent
REASONS FOR JUDGMENT
By his application in a case filed on 28 June, 2017 the applicant seeks to have his initiating application filed on 5 May, 2015 reinstated.
The first, second and third respondents oppose the application.
Background
This matter first came before the Court on 29 June, 2015. On that date Judge Vasta made orders directing the parties to file and serve affidavits and referred the matter to a registrar of the Court for mediation.
Neither party appeared for the mediation on 7 August, 2015.
The matter returned for mention before Judge Vasta on 30 October, 2015. Again, orders were made for the parties to file certain material and the matter was fixed for 29 March, 2016 for hearing.
On 16 March, 2016 his Honour vacated the hearing date and made further orders for the filing of material.
The application next came before the Court on 16 June, 2016. On that occasion there was no appearance by the applicant. Judge Vasta ordered:
That the Application and Statement of Claim in these proceedings filed by the Applicant on 5 May 2015 be struck out pursuant to s.17A of the Federal Circuit Court of Australia Act 1999 (Cth) and r.13.10 of the Federal Circuit Court Rules 2001 (Cth), on the basis that the Applicant does not have standing to commence the Application and Statement of Claim pursuant to s.116 of the Bankruptcy Act 1966.
On 28 June, 2017 (so more than one year later) the applicant filed the present application in a case seeking to “reinstate BRG389/2015 struck out 16-6-16.” It is that application which is the subject of these reasons.
The application in a case was listed for hearing before Judge Vasta on 7 August, 2017. During the course of that hearing matters came to light that led Judge Vasta to disqualify himself from further hearing any of these proceedings. The application was adjourned and subsequently transferred to me.
On 11 September, 2017 the application came before me for hearing. The applicant appeared by telephone link. The respondents appeared by counsel.
The Applicant’s claims
The order that the applicant seeks to have set aside was made in his absence. He also alleges, it seems, that it was secured by the respondent’s fraud or that of their solicitor. On the applicant’s arguments, rr.16.05(2)(a) and (b) of the Federal Circuit Court Rules2001 are potentially engaged. They are in the following terms:
(2) The Court or a Registrar may vary or set aside a judgment or order after it has been entered if:
(a) it was made in the absence of a party; or
(b) it was obtained by fraud…
The applicant’s affidavit filed 28 June, 2017 makes allegations that “In early June 2016 I was due in court for a Trial commencing on 6 June and expected to take two weeks. Because of this I wrote to the Federal Circut (sic) Court asking for an adjournment of my Hearing on 16 June. Apparently this letter was never received. Sa (sic) result Judge Vasta dismissed my application and the File was closed,” and that “The “No standing” claim arose from a phone-call from M&K solicitor Katie Jacklin and Ms Hanningan of BRI Ferrier in Cairns about my having no right to make my application to the Federal Court. This misrepresentation of facts/lie is laid bare in the letters from my Trustee.” He goes on to say “Perjury attracts heavy penalties!”
The respondents submit that there is no valid basis for the order of 16 June, 2016 to be set aside. They claim the application filed is effectively an appeal. Therefore, they argue, this Court is not an appropriate forum for the matter to be reconsidered.
Consideration
The respondents draw my attention to the matter of Wint v Medimobile Pty Ltd [2016] FCCA 102. In that case, I set out certain criteria which ought be demonstrated before a judgment or order is set aside pursuant to FCCR 16.05(2)(a). Wint was a summarised form of what I had earlier suggested in Clifford & Mountford [2006] FMCAfam 450, should be the approach on an application such as the present In Clifford I suggested that:
34. … the following principles emerge in respect of applications under r.16.05(2)(a):
a. The discretion to be exercised is unfettered, but nonetheless to be exercised judicially and bearing in mind the public interest in there being an end to litigation.
b. There are three criteria, each of which should usually be demonstrated before a judgment or order is set aside under r.16.05(2)(a), namely:
i. a reasonable explanation for the applicant’s absence at the trial or hearing;
ii. material arguments available to the applicant that might reasonably lead to the making of an order different to that sought to be set aside; and
iii. no prejudice to the party with the benefit of the orders sought to be set aside that is not able to be adequately addressed by the Court.
c. Matters relevant to the three criteria set out above will include, but will not necessarily be limited to:
i. Whether a party with notice of proceedings disregarded the opportunity of appearing at and participating in the trial;
ii. Delay, if any, in bringing the application to set aside and whether, if during the period of delay the successful party has acted on the judgment, or third parties have acquired rights by reference to it;
iii. the conduct of the applicant since the judgment or order sought to be set aside was made.
Absence
The applicant’s case is that he was absent from the hearing before Judge Vasta on 16 June, 2016 because he was the defendant in a criminal trial in another court. That is not disputed by the respondents.
The applicant’s affidavit filed 28 June, 2016 however, proffers no reasonable explanation as to why he failed to appear at the hearing on 16 June, 2016. He claims that he wrote to the Court seeking an adjournment but there is no evidence that such a letter was ever received on behalf of the Court. The respondents submit that, in the absence of any evidence, the Court ought not accept that such a letter was sent and that in any event, it was unreasonable for the applicant to request an adjournment by merely writing to the Registry and then, without receiving any response to that request, for the applicant to assume that an adjournment had been granted. I accept that submission. But more than that, it is entirely inappropriate for the applicant to merely write to “the Court” to seek an adjournment of the proceedings. In Buljubasic v Buljubasic (1999) FLC 92-865 the Full Court of the Family Court of Australia dealt with a similar issue. Before the trial judge in that case, the appellant had sought an adjournment of the proceedings by sending a facsimile to the Court requesting the adjournment. He did not appear on the day fixed for hearing and the trial judge proceeded in his absence. At [26] to [30] Lindenmayer J, with whom Finn and Warnick JJ agreed, said:
26. The business of the court would come to an end if people could simply stay away from the court on the listed date for hearing and be assured that their matter would not proceed in their absence, and effectively obtain an adjournment, without merit, merely because the court felt constrained not to proceed with the matter in their absence.
…
28. The real heart of the appeal, as presented for the appellant, relates to the way that his Honour dealt with the facsimile transmission received by his Honour on the day following the hearing although it had been sent by the husband on the morning of the previous day.
29. Just before I come to that, I think it is appropriate to observe that in this modern day there seems to be a tendency for people to believe that it is an appropriate way to communicate with courts, or this court at least, by sending facsimile transmissions to the registrar in the belief that they will come to the attention of the trial Judge. Ordinarily speaking, that is not a proper way for any litigant to seek to communicate with the court. Whilst it is appropriate to communicate with the registry about procedural matters in that fashion, no doubt, it is not an appropriate way for a litigant, whether represented or unrepresented, to seek to communicate with the judge who is to hear the case.
30. Ordinarily speaking, if a party to proceedings, whether represented or otherwise, seeks to have an indulgence from the court in the form of an adjournment or an extension of time for doing something which has been listed to be disposed of on a particular day, the litigant has an obligation either to appear before the court in person to seek that indulgence or to send a legal representative on his or her behalf to make a proper application to the court for that relief. It is not, generally speaking, an appropriate way to seek an adjournment of proceedings which are listed for hearing before the court to send a letter, whether by facsimile or otherwise, to the registry on the morning of the hearing setting forth the request for an adjournment and stating the grounds upon which the application is made.
Whilst I am satisfied that the applicant was before another court for the purposes of a criminal proceeding against him on the day that Judge Vasta made the orders he now seeks to impugn, there is, nonetheless, no explanation, reasonable or otherwise, as to why the applicant failed to appear on that date. Specifically, and without intending to be exhaustive, there is no explanation as to:
a)whether he was on bail at the time;
b)whether he sought an indulgence from the criminal court so that he could appear before Judge Vasta;
c)whether he had legal representation in the criminal matter that might have assisted him to deal with the appearance before Judge Vasta;
d)whether he could instruct a legal representative to appear for him to request the adjournment; and
e)whether he could instruct legal representatives to appear for him to respond to the summary dismissal application before Judge Vasta.
The applicant was not required to appear personally before Judge Vasta. He might have appeared by a legal practitioner. Indeed, parties to applications like that commenced by the applicant here, often do not personally attend court if they have instructed lawyers in the application.
I am not satisfied that the applicant has given an explanation, adequate or otherwise, for his absence from the proceedings before Judge Vasta.
Material arguments to suggest that a different order might be made
However, an explanation for the failure to appear is but one matter to be considered. Does the applicant have any material arguments available to him that might reasonably lead to the making of an order different to that sought to be set aside?
Judge Vasta did not deliver written reasons for the orders made dismissing the applicant’s application summarily. However, the record of the order made on 16 June, 2016 provides some guidance:
AND UPON THE EVIDENCE GIVEN TO THE COURT ON THIS DAY THAT:
A. The applicant is an undischarged bankrupt; and
B. That no notice was afforded to the Official Trustee in Bankruptcy nor was any consent given from the Official Trustee in Bankruptcy to the applicant to ensue with these proceedings.
THE COURT ORDERS ON A FINAL BASIS:
1. That the Application and State of Claim in these proceedings filed by the applicant on 5 May 2015 be struck out pursuant to s.17A of the Federal Circuit Court of Australia Act 1999 (Cth) and r.13.10 of the Federal Circuit Court Rules 2001 (Cth), on the basis that the applicant does not have standing to commence the Application and Statement of Claim pursuant to s.116 of the Bankruptcy Act 1966.
The formal order suggests that the applicant’s application was dismissed because he had no entitlement to pursue his claims. To use the words of the respondents’ submissions, he had “no standing” to commence the proceedings. To determine the validity of that submission consideration must be given to the applicant’s claims in his primary proceedings.
In his initiating application the applicant claimed relief arising out of alleged contraventions of ss.45 and 546 of the Fair Work Act 2009 (Cth) by the first respondent and for which he claimed the second and third respondents had accessorial liability pursuant to s.550 of the Act. He alleged that at relevant times he had been employed by the first respondent as a real estate sales person. In particular he claimed:
a)the first respondent contravened an Award that applied to his employment because it failed to pay annual leave to him in accordance with clause 25 of that Award;
b)the first respondent contravened the Award because it failed to pay superannuation on his behalf in accordance with clause 22 of the Award;
c)the first respondent contravened the Award because it entered into a commission only remuneration arrangement with the applicant where the applicant:
i)had not agreed to the arrangement in writing (clause 16.2(a));
ii)had not been issued with a real estate agent’s licence or was not otherwise authorised to perform duties of a real estate agent (clause 16.2(b));
iii)had not been engaged as a real estate sales person or been an active licensed agent for an aggregate period of 12 months in the five years prior to his employment with the first respondent (clause 16.2(c)); and
iv)has not able to demonstrate (with the present or any past employer) that he had achieved the minimum income threshold in clause 16.3 of the Award (clause l6.2(f)).
d)the first respondent further contravened the Award when it failed to pay the applicant wages in accordance with clause 14 and/or schedule E 3.4(e) of the Award;
e)the second respondent was involved in the contraventions by the first respondent; and
f)the third respondent was involved in the contraventions by the first respondent.
His statement of claim relevantly prayed for the following relief:
25. The Applicant seeks the following Orders:
a. Pursuant to S 45 of the Act, a declaration that the First Respondent contravened a term or terms of a Modern Award, namely any or each of Clauses 14, 16, 22 and 25.
b. Pursuant to S 550 of the Act, a declaration that the Second Respondent was involved in a contravention of terms of a Modern Award by the First Respondent.
c. Pursuant to S 550 of the Act, a declaration that the Third Respondent was involved in a contravention of terms of a Modern Award by the First Respondent.
d. Compensation pursuant to S 545 of the Act for loss suffered because of the contraventions of S 45 of the Act. (see attached 'Schedule of Loss').
e. Pursuant to S 546 of the Act, pecuniary penalties to be paid to the Applicant by the First Respondent for contraventions of S 45 of the Act.
f. Pursuant to S 546 of the Act, pecuniary penalties to be paid to the Applicant by the Second Respondent for being involved in contraventions of S 45 of the Act by the First Respondent.
g. Pursuant to S 546 of the Act, pecuniary penalties to be paid to the Applicant by the Third Respondent for being involved in contraventions of S 45 of the Act by the First Respondent.
…
Although the applicant’s claim for compensation is calculated according to the amounts that he claimed were payable to him as set out in his statement of claim, this was nonetheless for compensation. The Court has power to make such an order pursuant to s.545(2)(b) of the Fair Work Act. However, it is apparent from s.545(3) that the Fair Work Act draws a distinction between an order for compensation and an order for the payment of an amount that an employer was required to pay to an employee under the Fair Work Act or a fair work instrument. Whilst the amount of the compensation sought by Mr Davy was calculated by him by reference to what he alleged he should have been paid by the first respondent, his claim was for the former – compensation – rather than the latter – money payable under the Act or the Award.
It is not in dispute that the applicant was made bankrupt on 19 January, 2012. He remains an undischarged bankrupt. The respondents’ argue that by reason of his status as an undischarged bankrupt the applicant “lacked standing” to commence these proceedings.
Section 58 of the Bankruptcy Act 1966 (Cth) relevantly provides that:
58 Vesting of property upon bankruptcy—general rule
(1) Subject to this Act, where a debtor becomes a bankrupt:
(a) the property of the bankrupt, not being after‑acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and
(b) after‑acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.
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 as meaning:
the property divisible among the bankrupt’s creditors; and
any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt; ...
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.
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; and
is property that is divisible among creditors.
Ordinarily, claims such as those made by the applicant in these proceedings will vest in a debtor’s trustee in bankruptcy upon the making of a sequestration order. In particular, a claim arising out of a wrongful or unlawful dismissal from employment is generally seen as property for the purposes of the Bankruptcy Act which vests in a bankrupt’s trustee: Cox v Journeaux (1935) 52 CLR 713 at 721; Daemar v Industrial Commission of New South Wales & Ors (1988) 12 NSWLR 45; Geia v Palm Island Aboriginal Council (1999) 152 FLR 135; Re Pelechowski, in the matter of Pelechowski v NSW Land & Housing Commission [2000] FCA 233 at [5]. It seems to me that a claim for compensation arising out of a breach of the general protections provisions of the Fair Work Act (as the applicant’s claim is here) should be similarly treated: Brown v Premier Pet T/as Bay Fish [2012] FMCA 830 at [13] – [20].
So too, a claim for the imposition of pecuniary penalties: Leaman v The Salvation Army (Victoria) Property Trust as Trustee for The Salvation Army (Vic) Social Work [2011] FMCA 1037 at [4] – [6] and Brown v Premier Pet T/as Bay Fish at [22].
The exceptions provided for in s.116(2) of the Bankruptcy Act, and specifically s.116(2)(g) do not apply. Section 116(2)(g) of the Act provides that s.116(1) does not apply to:
(g) any right of the bankrupt to recover damages or compensation:
(i) for personal injury or wrong done to the bankrupt, the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt; or
(ii) in respect of the death of the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt;
and any damages or compensation recovered by the bankrupt (whether before or after he or she became a bankrupt) in respect of such an injury or wrong or the death of such a person;
Note: See also subsection 5(6).
In Rana v Musolino [2010] FCA 476, McKerracher J discussed the qualification of s.116(2). His Honour said at [49] – [50]:
49. To qualify for s 116(2) of the Bankruptcy Act, the right to compensation must be one for any estimated by immediate reference to pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property”: (Cox v Journeaux (at 714)) (emphasis added).
50. In determining whether a chose in action is property which remains with the Trustee or a right which does not, it is the character of the cause of action as pleaded or claimed that is important. Where the primary and substantial right of action is direct pecuniary loss to property or the estate of the bankrupt, the right to sue passes to the trustee notwithstanding that it may have produced personal inconvenience to the bankrupt. Where the essential cause of action is injury to the personal feelings of the bankrupt, the right to sue remains with the bankrupt: Faulkner v Bluett (1981) 52 FLR 115 at 119. In Rogers v Asset Loan Co Pty Ltd [2007] FCA 195, Greenwood J noted (at 49) that the accepted test, as formulated by Sir Owen Dixon in Cox v Journeaux at 721 was:
whether any part of the damages arising out of the contravention 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.
(my emphasis)
There is evidence from the respondent’s solicitors of conversations they have had with the applicant’s trustee in bankruptcy (or his agent) to the effect that the trustee in bankruptcy has “no interest” in these claims because they arose after the applicant’s bankruptcy and concern only his income. The trustee’s agent suggests that the applicant’s trustee in bankruptcy has “no interest” in the applicant’s post-bankruptcy income.
The applicant annexes to his affidavit filed 28 June, 2017 two letters from BRI Ferrier. The first is addressed to the Registrar of this Court and signed by a person named Glenn Miller who identifies himself as the “Joint and Several Trustee” of the Bankrupt Estate of Ronald Dean Davy. Mr Miller in that letter says:
Income of a bankrupt earned after the date of bankruptcy is not property divisible amongst creditors of the bankrupt estate but rather is dealt with under Sections 139l to 139ZI of the Act. I am required to make an assessment of the Bankrupt’s income for each year of his bankruptcy in order to determine whether the Bankrupt is liable to make a contribution to the estate in accordance with the provisions of the Act.
In the current matter, and based on the advice of Ms. Jacklin as to the nature of that matter, any monies received by the Bankrupt in relation to his claim for unpaid wages would not be property as referred to in Section 116(1)(b), but would be classified as income earned after the date of his bankruptcy and be assessable in accordance with Sections 139L to 139ZI of the Act.
(my emphasis)
Section 139L(1)(a)(vii) of the Bankruptcy Act defines “income” as including:
the amount of any money, or the value of any other consideration, received by a person other than the bankrupt from another person as a result of work done or services performed by the bankrupt, less any expenses (other than expenses of a capital nature) necessarily incurred by the first-mentioned person in connection with the work or services.
However, the claims made here by the applicant are not for payment of income, but rather compensation for contraventions of the Fair Work Act. I have set out his claims above. The amounts he seeks are not for unpaid wages or amounts payable to him by the employer under the Fair Work Act or a fair work instrument, but rather for compensation. That the amount claimed by way of compensation is calculated by reference to amounts Mr Davy says were payable to him under the Fair Work Act or a fair work instrument is not to the point. A claim arising out of a wrongful or unlawful dismissal from employment is generally seen as property for the purposes of the Bankruptcy Act. Mr Davy’s claim is not one for restoration of his income, but one for compensation. The right to sue vested in the trustees of his bankrupt estate.
It is clear from Judge Vasta’s order of 16 June, 2017 that Mr Davy’s principle application was dismissed because he had no entitlement to pursue his cause of actions, not because he failed to appear.
I am not satisfied that Mr Davy has any material arguments available to him that might reasonably have led to the making of an order different to that sought to be set aside.
The respondents claim that due to the applicant’s delay in bringing this application in a case, a delay of approximately one year and 12 days after the orders of Judge Vasta, they may suffer prejudice if the order is set aside. No particular prejudice was identified and I am not satisfied that any particular prejudice is likely to flow to the respondents if the orders sought by Mr Davy were made.
However, Mr Davy has not provided any explanation, reasonable or otherwise, about the delay between the making of Judge Vasta’s order and the commencement of the present application. The delay is substantial and is, of itself, sufficient to refuse Mr Davy’s application.
Insofar as the application seeks to have the orders made on 16 June, 2016 set aside pursuant to r.16.05(2)(a) of the Rules, that application must fail.
Fraud
The second ground arguably raised by Mr Davy in his application is fraud on the part of the respondent’s solicitors. He claims, I think, that by failing to raise the contents of the letter sent by BRI Ferrier regarding the classification of any monies the applicant might receive at the conclusion of these proceedings and the interest of the trustee in those monies (to which I have referred above) at the hearing on 16 June, 2016 the respondent’s solicitors have committed “perjury”.
The respondents submit that the applicant’s affidavit filed 28 June, 2017 does not disclose any fraud or attempt to mislead. They further submit that the opinion of Mr Davy’s trustee as to a matter of law is inadmissible in any event and was therefore properly omitted.
I accept that submission. I am not satisfied that the respondent’s solicitors have committed “perjury” as the applicant alleges. Nor was the order of Judge Vasta obtained by any fraud on the part of the respondents or their solicitors.
Conclusion
Mr Davy has not provided a reasonable explanation for his failure to appear before Judge Vasta on 16 June, 2016. He has provided no explanation for his delay in bringing this application and he has not demonstrated that he has any material arguments that might reasonably lead to the making of an order different to that which he now seeks to have set aside. Moreover the order he now seeks to impugn was not obtained by fraud.
The application must therefore be dismissed.
The respondents seek their costs of the present application. Subsections 570(1) and 570(2) circumscribe the Court’s power to make an order for costs in an application such as the present. To order Mr Davy to pay the respondents costs, I must be satisfied that he instituted the proceedings vexatiously or without reasonable cause, or that Mr Davy’s unreasonable act or omission caused the respondents to incur the costs. I am satisfied of neither of those things. There should be no order as to costs.
I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 31 October, 2017.
Date: 31 October 2017
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