James Hutchinson v Monash Health

[2013] FWC 8173

[2013] FWC 8173

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Application for unfair dismissal remedy

James Hutchinson
v
Monash Health
(U2013/9060)

DEPUTY PRESIDENT SMITH MELBOURNE, 22 OCTOBER 2013

Application for relief from unfair dismissal—jurisdiction—bankruptcy.

Introduction

[1] Mr James Hutchinson seeks relief in relation to his termination of employment by Southern Health trading as Monash Health (Monash Health). Mr Hutchinson was dismissed on 16 April 2013. By notice dated 1 August 2013 Monash Health raised a jurisdictional objection to the matter continuing before the Fair Work Commission (the Commission).

[2] Monash Health submitted that Mr Hutchinson was an undischarged bankrupt, 1 that his right of action under the Fair Work Act 2009 (Cth) (the Fair Work Act) concerns his ‘property’ as defined in s 5 of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) and is vested in the trustee of his estate in bankruptcy. No application was made by the Trustee and therefore Mr Hutchinson lacks standing to make the application. The matter was heard on 2 September 2013 when the decision was reserved. However, on 4 September 2013, His Honour Senior Deputy President Richards handed down a decision dealing with the point argued. The parties were directed to the decision and asked to comment upon it in light of their submissions. Final submissions were lodged on 18 September 2013.

[3] Mr Rinaldi of counsel was given permission to appear for Monash Health and Mr Champion of counsel was given permission to appear for Mr Hutchinson.

The jurisdictional argument

[4] This is a matter which involves consideration of the Bankruptcy Act, theFair Work Act and the interaction between the two.

[5] For Monash Health it was argued that the statutory cause of action on which Mr Hutchinson relies is a chose in action constituting property which vests in his trustee in bankruptcy pursuant to the provisions of the Bankruptcy Act. I note for convenience at this stage that the Trustee was aware of the proceedings and did not appear. It was common ground that the Trustee had no interest in the proceedings.

[6] Section 58 of the Bankruptcy Act provides that the property of the bankrupt, including after-acquired property, rests with the trustee. 2 It was argued that the property constituted by a statutory cause of action vests with the trustee. Mr Rinaldi submitted that the only basis upon which Mr Hutchinson could continue an action was if it was an action commenced before he became a bankrupt in relation to any personal injury or wrong3 or after becoming a bankrupt, to recover damages or compensation for a personal injury or wrong.4

[7] It was submitted that an application for an unfair dismissal remedy was not a personal injury or wrong and as such, Mr Hutchinson was prevented from making an application. In turning directly as to whether or not such an application could be considered a proprietary right, Mr Rinaldi referred to the test adumbrated in Cox v Journeaux where Dixon J stated:

“The Plaintiff says that he himself is entitled to prosecute it under the proviso as an action for personal injury or wrong done to himself. The test appears to be whether the damages or part of them 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.” 5

[8] It was submitted that the exclusionary nature of the test meant that the application for an unfair dismissal remedy was not related to pain felt by the bankrupt in respect of his mind, body or character and therefore related to his rights of property. My attention was directed to s 5 of the Bankruptcy Act which defined property thus:

“...means real or personal property of every description, whether situate in Australia or elsewhere, 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.”

[9] It was submitted that property had been interpreted to include a chose in action and that such action vests in the trustee. It was accepted by Mr Rinaldi that it must not only be property but that it is divisible amongst the creditors. 6 Mr Rinaldi took me to where Irving7 discussed the issue and referred to Geia v Palm Island Aboriginal Council.8 Mr Rinaldi submitted that if there was any aspect of the unfair dismissal jurisdiction which could be characterised as personal pain then s.392(4) of the Fair Work Act put the issue beyond doubt.

[10] Mr Rinaldi relied upon the decisions in Daemer v Industrial Commission of New South Wales 9as authority for the proposition that the scheme and purpose of the Bankruptcy Act was to ensure that a chose in action vested with the trustee. In addition, reliance was placed upon the decision of Madgwick J in Pelechowski v NSW Land & Housing Commission (Pelechowski):

“There is in reality no claim for anything in the nature of damages which would 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”: [See Cox v Journeaux (1935) 52 CLR 713 at 721] 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.” 10

[11] Finally, two decisions of the Commission were also relied upon: M Williams v Genel Investments Pty Ltd 11(Williams) and K Hampson v Circuit Finance Australia Limited12 (Hampson) which were said to maintain the line of authority that the Bankruptcy Act did not permit an application for an unfair dismissal remedy as it constituted a chose in action constituting property which vested with the trustee.

[12] Mr Champion began with the a decision of a Full Bench of the Industrial Relations Commission of New South Wales in Perfection Dairies Pty Ltd v Finn (Perfection):

“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.” 13

[13] The Full Bench concluded:

“We have therefore concluded that an action of the present kind may be brought by a bankrupt. In our opinion, the reasoning adopted in cases such as Griffiths v Civil Aviation Authority, preserving actions personal to the bankrupt, which have no implications for the estate, should be applied to the present appeal. The termination of the respondent’s employment and the rights provided by s 84 of the Act are sufficiently personal in their likely effect upon the respondent to retain for himself the right to bring such an application. Given, as we have found, it is a proceeding of a completely personal nature and not an action claiming damages or other sums on the basis of wrongful dismissal under a contract for personal service, and the fact that it holds no interest for the estate whatsoever, the application brought by the respondent, is not, in our view, “property”, vesting in the trustee upon the respondent’s bankruptcy.” 14

[14] In Perfection, the Industrial Relations Commission of New South Wales dealt with the decision in Pelechowski and did not accept the conclusion to the extent that it disagreed with its findings.

[15] Mr Champion argued that the statutory object of the Bankruptcy Act should not lead to the conclusion that it operated to the exclusion of the Fair Work Act under which the unfair dismissal application is made. Reverence was made to the decision of Cooper J in Griffiths v Civil Aviation Authority (Griffiths) 15 I was referred in particular to the observations in relation to the objects of the Bankruptcy Act:

“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 amongst the bankrupt’s creditors. The trustee is to get in the property and reduce it to a money sum and to disown, for example, property which would be a drain on the estate. The statutory object is also to protect the person of the bankrupt and his property in so far 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 and 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 (NSW) 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.”

(emphasis added in submissions)

[16] And later:

“...However, in my view, it was not the intention of Parliament in passing ss 60(4) and 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.”

(emphasis added in submissions)

[17] Cooper J concluded:

“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.”

(emphasis added in submissions)

[18] I was then taken to the decision of Lander J in Randall v Deputy Commissioner of Taxation and Another 16(Randall) where he held that the right to apply for judicial review and consequential relief in relation to a decision to terminate a bankrupt’s employment is not property vesting in the trustee of the Bankrupt’s estate. In the course of that decision His Honour stated:

“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 L Co Bank L 428; 99 ER 900.”

[19] His Honour then went on to cite with approval the decision in Griffiths and concluded:

“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.

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 Comm137 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 [1996] FCA 1502; 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,s58(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 parte 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.”

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) 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.

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...”

[20] A decision in Brown v Premier Pet 17(Brown) was referred to where Federal Magistrate Jarrett (as he then was) reviewed the authorities referred in this decision and concluded:

“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 s116(1) of the Bankruptcy Act 1966

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.

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.” 18

[21] Mr Champion submitted that the Commission should take a purposive approach to the Bankruptcy Act and not a literal approach. If this was adopted, it could be seen that the Bankruptcy Act does not shut a person out from earning his or her living and that the operation of the Bankruptcy Act should not leave a person bereft. It was submitted that the scheme of the Fair Work Act identified those who were to be excluded from the jurisdiction and did not include a person who was bankrupt. If the Commission was to uphold the jurisdictional argument it would create another class of exclusions. In relation to the decision in Brown, Mr Champion submitted that the outcome there was not his primary submission.

[22] Mr Rinaldi responded by disagreeing with the conclusions of the Industrial Relations Commission of New South Wales and distinguished the decisions in Griffith and Randall as not being on point. In relation to Brown he submitted that the decision is an incorrect statement of the law and should not be followed. He submitted that the cases that were on point made it clear that the applicant had no standing.

[23] Shortly after the matter was adjourned, His Honour, Senior Deputy President Richards handed down his decision in Dubow v Aboriginal and Torres Strait Islander Legal Services (Qld) Ltd T/A ATSILS. 19(Dubow) In that decision His Honour reviewed the authorities and drew on the decision in Brown and concluded that the unfair dismissal application was competent only insofar as reinstatement or re-appointment were the available remedies.

[24] Because of the proximity to the matter I was considering, I invited the parties to comment upon His Honour’s conclusions. Mr Rinaldi again relied on his early submissions that the decision in Brown should not be followed nor should the conclusion in Pelechowski. Mr Rinaldi highlighted that both counsel had adopted the view that there could be no half measures and concluded and that the matter should be determined either one way or the other.

[25] Mr Champion noted that the matter in Brown was a general protections application and that orders available to the Courts are different from that available to the Commission. He submitted that there is no principled reason why the rights of an undischarged bankrupt employee should be greater as to one type of application contrasted with the other. Mr Champion maintained his primary submission and submitted that would require a different approach from that determined by Senior Deputy President Richards.

[26] However, after providing further argument as to why it is appropriate for the application to be regarded as competent, Mr Champion submitted that given the decision in Brown and Dubow the applicant submits that if he is so limited he adopts that course.

Conclusion

[27] Division 2 of Part 3-2 of the Fair Work Act was intended to provide employees with a statutory remedy in the event of the termination of employment. It constitutes, in this respect, beneficial legislation that should be construed liberally. 20

[28] However, that doesn’t mean that language can be strained beyond that which was intended.

[29] In this case, it is clear that views are evolving and contrary views exist. Indeed, I find Mr Champion’s position to be strongly arguable particularly when consideration is given to the beneficial nature of the legislation, the impact upon the applicant in not being able to bring a claim which may assist both him and his creditors, together with the public policy that dismissed employees have been given a statutory right rather than relying on common law when it comes to termination of employment which is considered harsh, unjust or unreasonable.

[30] I am also of the view that the result in this case cannot be a half way house where an application may be considered valid but only insofar as particular relief is concerned. The full purpose of the Fair Work Act cannot be segmented. In this connection I agree with Mr Rinaldi and, although qualified, Mr Champion. The scheme of the Fair Work Act requires the Commission to consider reinstatement as the primary remedy and then if that is found to be inappropriate, to consider compensation in lieu of reinstatement (my emphasis). The two concepts are joined and it would be perverse if a decision was made that a person was dismissed harshly, unjustly or unreasonably and reinstatement was not appropriate, then for the Commission be barred from considering compensation in lieu of reinstatement. In this connection, I must respectfully disagree with Senior Deputy President Richards. The Fair Work Act must be taken as a whole and the primary submission of both counsel that a person is either in or out, in my view is correct.

[31] In my view Mr Champion makes a persuasive case that the traditional concept of a chose in action is not relevant to a statutory remedy contained in beneficial legislation. I am drawn to agree with the Full Bench of the Industrial Relations Commission of New South Wales when it concluded: . . . 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. The notion of persons having a property right in employment would no doubt, in other circumstances, lead to some unease.

[32] Whilst the Commission is not bound by the principle of stare decisis, 21 it is clear that members should follow Full Benches unless there are sound reasons for departing from those decisions. The lines of authority differ for this matter. Relevantly, the Full Bench in Williams was decided before Perfection and the decision of Senior Deputy President Action in Hampson wasdecided after Perfection.

[33] The decision of Senior Deputy President Richards has added a further complexity to the issue which creates a situation where the precedent within the jurisdiction is now mixed and may be considered less persuasive than otherwise. In my view, the authorities referred to now can give rise to the conclusion that the Bankruptcy Act should not be read as having a purpose of displacing the statutory remedy provided in the Fair Work Act for persons who are dismissed and are eligible otherwise to make an application.

[34] In the circumstances I find that Mr Hutchinson can make an application for an unfair dismissal remedy and is not prevented from doing so by the operation of the Bankruptcy Act. I dismiss the jurisdictional objection and the matter will be referred for arbitration.

DEPUTY PRESIDENT

Appearances:

M. Champion of counsel for Mr J. Hutchinson.

M. Rinaldi of counsel on behalf of Monash Health.

Hearing details:

2013.

Melbourne:

September, 2.

<Price code C, PR543478>

 1   He is due to be discharged from bankruptcy on 19 October 2013.

 2 See the Bankruptcy Act s.58(1)(a) and (6).

 3 Ibid s.60(4).

 4 Ibid s.116(2)(g).

 5 [No 2] (1935) 52 CLR 713 at 721.

 6 Bankruptcy Act s.58(6).

 7   The Contract of Employment Lexis Nexis Butterworths at paragraph 13.27 and following.

 8 (1999) 152 FLR 135.

 9 (1988) 90 FLR 473.

 10 [2000] FCA 233.

 11   PR902342 per Polites SDP, Kaufman SDP and Whelan C.

 12   PR967475 per Acton SDP.

 13   [2006] NSWIRC 137 per Wright, Staff JJ and Stanton C.

 14   Ibid at paragraph 52.

 15 (1996) 67 FCR 301.

 16 (2008) 174 FCR 441.

 17 [2012] FMCA 830.

 18   Ibid at paragraph 46-48.

 19   [2013] FWC 6171.

 20   See Wilson v. Wilson Tile Works Pty Ltd (1960) 104 CLR 328 at 335; Dodd v. Executive Air Services Pty Ltd [1975] VR 668; Walker v. Wilson (1991) 172 CLR 195 at 199 and 204, and Grout v. Gunnedah Shire Council (1994) 57 IR 243 at 259.

 21   Cetin v Ripon Pty Ltd (2003) 127 IR 205 at [48]-[49].

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