Marsh, Brett Cedric v Hospital Cost Consutants Pty Ltd
[1997] FCA 1398
•11 DECEMBER 1997
FEDERAL COURT OF AUSTRALIA
BANKRUPTCY - Bankruptcy Act 1966 (Cth) s 40(1)(g) - bankruptcy notice based on amount of judgment - application to set aside bankruptcy notice - whether applicant has counter-claim equal to or exceeding judgment debt.
Bankruptcy Act 1966 (Cth), s 40(1)(g)
Legal Profession Act 1987 (NSW)
Local Courts (Civil Claims) Act 1970 (NSW)
BRETT CEDRIC MARSH v
HOSPITAL COST CONSULTANTS PTY LTD
NG 8056 of 1997
BRANSON J
SYDNEY
11 DECEMBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 8056 of 1997
BETWEEN:
BRETT CEDRIC MARSH
APPLICANTAND:
HOSPITAL COST CONSULTANTS PTY LTD
RESPONDENTJUDGE(S):
BRANSON J
DATE OF ORDER:
11 DECEMBER 1997
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
The application be dismissed.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 8056 of 1997
BETWEEN:
BRETT CEDRIC MARSH
APPLICANTAND:
HOSPITAL COST CONSULTANTS PTY LTD
RESPONDENT
JUDGE(S):
BRANSON J
DATE:
11 DECEMBER 1997
PLACE:
SYDNEY
REASONS FOR JUDGMENT
By an application dated 8 September 1997, the applicant seeks orders setting aside a bankruptcy notice served on him on 18 August 1997 and extending time for compliance with such bankruptcy notice on the grounds that he has applied to set aside the judgment on which the bankruptcy notice was based and that he has a counter-claim.
The applicant was not legally represented at the time that he completed and filed the application. The “affidavit” which was filed in support of the application did not comply with the Federal Court Rules. The applicant at the hearing swore that the contents of the “affidavit” were true and the respondent took no point in respect of its formal defects.
BACKGROUND FACTS
The applicant is a former employee of the respondent. The terms upon which he was offered employment are set out in a letter dated 15 March 1994. So far as is here relevant, those terms are as follows:
“Remuneration:
Your total Remuneration Cost will be $80,650 per annum, (or its equivalency (1)) made up as follows:
Base Salary $65,000
Service Compensation Plan (2)
(Estimate) $13,700
Superannuation $ 1,950
Total Remuneration Cost $80,650
...
(2) As a senior employee you will be a participant in the Sales and Service Compensation Plan. The Sales and Service Compensation Plan provides the opportunity for reward based on your success within the group as well as that of the company. Estimates indicate you will have the opportunity to receive up to $14,000 as part of the Sales and Service Compensation plan. Payment is 3 monthly and is based on a prorated total. Commission is guaranteed for the first 3 months to allow you to settle in.
...
Business Related Expenses
HCC will reimburse all business related expenditure. Expense claims must be supported by receipts and submitted at regular intervals.
...
HCC will reimburse you for phone rental and all business related phone calls.
...
Termination
Your employment with Hospital Cost Consultants may be terminated by either side giving one months’ [sic] notice, or the payment/forfeiture of one month’s salary as the case may be ...”.
Gregory Craig King (“Mr King”), the Chief Executive Officer of the respondent gave affidavit evidence as follows:
“7.I say that I stated expressly to the Applicant that any and all entitlements to bonus remuneration, save and except that expressed to be guaranteed within the first quarterly period of employment, was conditional upon the Applicant meeting performance related revenue generation targets.
8.I say that at the time of commencement of employment by the Applicant with the Respondent, the Applicant was informed orally by me that:
(a)the applicant’s performance related revenue generation target for the purposes of entitlement to bonus remuneration subsequent to the first quarter employment was $162,500
(b)first quarter guaranteed bonus remuneration entitlement was included within the total possible bonus remuneration earned within the first year of employment and not additional to such amount
(c)the performance related revenue generation target was reset each year at which time earnings attributed to an employee were also reset to nil
(d)entitlement to bonus remuneration arose only upon the receipt by the Respondent of revenue receivable from its clients.
9.I say that at no time during the period within which the Applicant was employed by the Respondent did the Applicant meet or exceed his performance related revenue generation target such that he became entitled to bonus remunderation [sic].”
The applicant resigned his employment with the respondent by a handwritten letter dated 3 November 1995 addressed to Mr King. The substantive part of the letter reads:
“I forward in writing my effective resignation of 2nd November 1995 as Senior Applications Consultant.”
The terms of the letter of resignation are explained by the fact that the applicant had given oral notice of his resignation on 2 November 1995.
On 6 November 1995, the respondent obtained from the Supreme Court of New South Wales an ex-parte interlocutory order in a proceeding in which the respondent was the plaintiff and the applicant was the defendant. The order itself was not placed in evidence. Although counsel for the respondent referred to the order as an interlocutory injunction, I must assume from the whole of the evidence that it was, or included, an Anton Piller order directing the applicant to allow officers or agents of the respondent to enter his premises to search for and remove property of the respondent.
The Supreme Court proceeding in which the Anton Piller order was obtained was settled. Draft consent orders dated 15 December 1995 incorporating terms of settlement were signed on behalf of both parties. It may be assumed that such draft orders were reflected in a formal order of the Supreme Court. The consent orders include the following paragraphs:
“3.Order that the defendant pay the plaintiff’s costs of these proceedings up to and including 8 December 1995 as agreed, assessed or taxed within 7 days of such agreement, assessment or taxation.
...
5. Note that it is agreed between the plaintiff and the defendant that:-
(a)subject to the defendant’s rights in defamation, the defendant releases the plaintiff from and against any and all actions, suits, claims, demands, proceedings, damages, liability, causes of action or other obligations whatsoever, present, future or contingent arising out of:-
(i)the facts, matters and circumstances which relate to or concern the subject matter of these proceedings;
(ii)the employment of the defendant by the plaintiff; and
(iii)the resignation by the defendant as an employee of the plaintiff on 3 November 1995;
(b)without affecting the ongoing obligations of the defendant in relation to confidentiality, the plaintiff releases the defendant from and against any and all actions, suits, claims, demands, proceedings, liabilities, causes of action or other obligations whatsoever present, future or contingent arising out of:-
(i)the facts, matters and circumstances which relate to or concern the subject matter of these proceedings;
(ii)the employment of the defendant by the plaintiff; and
(iii)the resignation by the defendant as an employee of the plaintiff on 3 November 1995;
provided that such release does not affect the rights of the plaintiff with respect to data or property owned by the plaintiff or its clients that may be or come into the possession of the defendant.
(c)the plaintiff acknowledges it is liable to pay the defendant expenses (which are subject to clarification), holiday pay, unpaid wages and bonus. The plaintiff is to pay the expenses due to the defendant within 7 days of written clarification or confirmation that the amount of all expenses were properly incurred in the course of the defendant’s employment and otherwise in accordance with the terms of the letter from the plaintiff to the defendant dated 17 November 1995;
(d)the defendant acknowledges he is not entitled to 4 weeks’ pay in lieu of notice for his resignation from the plaintiff’s employ and that there may be an adjustment for tax owing and previously deducted from wages at a rate yet to be determined;
(e)...”.
The reference in subparagraph 5(c) of the consent orders to “the letter from the plaintiff to the defendant dated 17 November 1995” is a reference to a letter signed on behalf of the respondent by Mr King. The substantive part of that letter reads as follows:
“I refer to your expense claim submitted to me on 3 November 1995.
It would assist in processing your expense claim if you could provide or clarify the following:
1. Please provide original receipts.
2.If a receipt is not available please provide an explanation of the item of expense.
3. The expense summary should be set out with:
. date of expense
. description of expense
. any detail relating to the expense eg. dinner with xxx & xxx
. amount and currency etc.
4.The current expense summary list items of expense as “?”. I need detail as to the nature of this expense before I can process these items. There are a number of receipts for restaurant meals etc. Please provide details as to who was present & purpose.
5.In claiming any entertainment in particular please note my memo of September regarding expenses - copy attached.
6.There are a number of receipts, hotel bills, room upgrades, bar bills, etc that might relate to personal expenditure. Please review these and provide detail of the expense.
7.Phone accounts. Please review these and subtract any items of a personal nature.
8. Please do not include any expense related to your bonus.
9.There are a number of receipts that do not provide details as to where they are from. Please note on them the appropriate detail.
10.There is a taxi receipt of a Saturday night. You might like to review this to ascertain whether it is an appropriate business expense for HCC.
11.You indicated that there are still some outstanding phone accounts. If you have received these then please include them when you re-submit your expense claim.
Please re-submit your expense claim at your earliest convenience.”
On 24 July 1996, the respondent made application to the Supreme Court of New South Wales for the assessment of its party/party costs in the Supreme Court proceeding. Such application was made pursuant to s 202(1) of the Legal Profession Act 1987 (NSW) (“the Legal Profession Act”) which provides, so far as is here relevant, as follows:
“(1) A person who ... is entitled to receive ... costs as a result of an order for the payment of an unspecified amount of costs made by a court ... may apply to the proper officer of the Supreme Court for an assessment of the whole of ... those costs.”
The solicitors then acting for the applicant sought his instructions concerning the application “as a matter of urgency”. The Supreme Court of New South Wales referred the costs assessment to Mr Ian Dwyer of Messrs Laurence & Laurence, solicitors. Mr Dwyer on 15 August 1996 wrote to the applicant’s solicitors inviting written submissions in relation to the application for assessment. The applicant’s solicitors by letter dated 20 August 1996 again sought the applicant’s instructions “as a matter of urgency”.
The applicant gave evidence on this application that he was in New Zealand from June 1996 to October 1996 and did not receive the correspondence from his solicitors concerning the application for the costs of the proceeding in the Supreme Court of New South Wales to be taxed in time usefully to respond to it.
On 5 September 1996, a certificate was issued as to the determination of costs in the proceeding in the Supreme Court of New South Wales. Such costs were assessed in the sum of $21,606.83 and the costs of the assessment were fixed at $297.50. Under s 208J(3) of the Legal Profession Act, on the filing of such a certificate in the office or registry of a court having jurisdiction to order the payment of that amount of money, it is taken to be a judgment of that court for the amount of unpaid costs. The certificate of 5 September 1996 was filed in the Local Court of New South Wales in Burwood. Subsequently, a certificate of judgment issued under the Local Courts (Civil Claims) Act 1970 (NSW) which recorded that the respondent had recovered judgment against the applicant in the amount of $21,904.33 (ie. the aggregate of the amounts in which the costs were assessed and the costs of the assessment). The bankruptcy notice is founded upon the above certificate of judgment and claims the amount of the judgment plus $44.10 interest accrued since the date of the judgment. It requires payment of the sum of $21,948.44 or the making of an arrangement to the respondent’s satisfaction for the settlement of the debt.
The respondent accepts that it has not paid to the applicant the “expenses (which are subject to clarification), holiday pay, unpaid wages and bonus” referred to in paragraph 5(c) of the consent orders dated 15 December 1995.
The applicant on 19 September 1997 (ie. one month after the service on him of the bankruptcy notice) instituted in the Local Court proceedings against the respondent claiming the sum of $21,599.70 plus interest of $4,671.45 and fees of $127.00, amounting in all to $26,398.15. It appears from a handwritten document dated 6 November 1995 prepared by the applicant addressed to Mr King that the amount of the applicant’s claim against the respondent in the Local Court has been calculated as follows:
One month’s salary - 6 November 1995 - 5 December 1995
Net salary - $2,375.00
Car allowance - $ 416.66
Rent allowance - $1,800.00 ________
$4,591.66
Salary 1-3 November 1995
Net salary - $ 328.89
Car allowance - $ 57.69
Rent allowance - $ 249.23
_______
$ 635.81
Holiday pay for 13-2/3 days
Net salary - $1,498.29
Car allowance - $ 262.82
Rent allowance - $1,135.39
_______
$2,896.50
Outstanding bonus 28/9/95 to 6/11/95 - $9,261.96
Expenses October/November 1995 - $2,754.43
TOTAL - $20,140.36
The handwritten document of the applicant dated 6 November 1997 shows the above figures to amount to the sum of $20,140.71, however, it appears that the figures should arithmetically amount to $20,140.36. A further $1,458.99 was requested by the applicant to be paid to the Australian Tax Office, bringing the total claimed by the applicant to $21,599.70.
CONSIDERATION
It is the claim now made in the Local Court proceeding which the applicant relies upon for the purposes of s 40(1)(g) of the Bankruptcy Act 1966 (Cth) (“the Act”). Section 40(1)(g) of the Act provides as follows:
“A debtor commits an act of bankruptcy in each of the following cases:
...(g)if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or final order the execution of which has not been stayed, has served on the debtor in Australia ... a bankruptcy notice under this Act and the debtor does not:
(i)where the notice was served in Australia - within the time specified in the notice; ...
(ii) ...
comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; ...”.
There is no evidence before the Court to show how the applicant has calculated the net salary figures set out in the handwritten document of 6 November 1995 or to justify the claims in respect of car allowance and rent allowance made by that document. Moreover, by paragraph 5(a) of the consent orders dated 15 December 1995, the applicant, subject to his rights in defamation, released the respondent from all claims etc arising out of the employment of the applicant by the respondent. Such release may be read as subject to the respondent’s acknowledgment recorded in paragraph 5(c) of the consent orders. Paragraph 5(c) itself, of course, is to be read subject to paragraph 5(d) by which the applicant acknowledged that he was not entitled to four weeks’ pay in lieu of notice.
The applicant contended that the agreement between the parties recorded in paragraph 5 of the consent orders made in the Supreme Court of New South Wales has been repudiated by the respondent and that such repudiation has been accepted by the applicant by his institution of proceedings in the Local Court to recover four weeks’ pay in lieu of notice. I do not accept such contention. At the heart of the agreement recorded in paragraph 5 of the consent orders are the qualified mutual releases contained in subparagraphs (a) and (b). Subparagraphs (c) and (d) record acknowledgments, and subparagraph (c) records an agreement by the respondent to pay the expenses due to the applicant within seven days of written clarification or confirmation in accordance with the terms of the letter of 17 November 1995 being received by the respondent. The evidence before me does not establish that such written clarification or confirmation has been received by the respondent. Nor does anything before me suggest that the respondent’s acknowledgments have been withdrawn or the qualified release given by the respondent disregarded by the respondent.
There is further no evidence before me to show how the applicant has calculated holiday pay entitlements and outstanding bonus entitlements as claimed by him in the document of 6 November 1995 and in the Local Court proceeding. However, I note that by paragraph 5(c) of the consent orders the respondent acknowledged a liability to make payments to the applicant under the above heads. David Genner (“Mr Genner”), Senior Project Manager of the respondent, has given affidavit evidence in which he calculates the holiday pay due to the applicant by the respondent at $2,896.50 and the amount of salary due to the applicant by the respondent at $211.93. I treat such evidence as an admission made by the respondent. However, Mr Genner in his affidavit has gone on to calculate that on balance the applicant owes the respondent $4,298.52 in addition to the amount claimed by the bankruptcy notice. There is insufficient evidence before me on which to make findings in accordance with these calculations made by Mr Genner.
The question of law for my determination is that of whether the applicant has satisfied the Court that he has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment was obtained.
In my view, and notwithstanding that the certificate of judgment is issued by the Local Court of New South Wales at Burwood, the action or proceeding in which the judgment was obtained, within the meaning of s 40(1)(g) of the Act, was the proceeding in the Supreme Court of New South Wales. It was in that proceeding that the order was made by consent that the applicant pay the respondent’s costs of the Supreme Court proceeding. It was in reliance on the Supreme Court order that the application for the assessment of the costs under the Legal Profession Act was made. There has at no time been a relevant action or proceeding in the Local Court of New South Wales at Burwood. Nor was there relevantly an action or proceeding before the costs assessor who issued the certificate of 5 September 1996. Although the assessor was required to give the parties concerned a reasonable opportunity to make written submissions to him (Legal Profession Act, s 208(1)) and was further required to consider various matters specified by the Legal Profession Act (see ss 208B and 208G), his duties were plainly administrative and not judicial, and his performance of them did not give rise to an action or proceeding before him.
The applicant does not contend that his counter-claim, set-off or cross demand arises out of the agreement recorded in the consent orders dated 15 December 1995. Indeed, his claim as formulated is incompatible with its so arising, even if the issue of the mutual releases is put to one side. The applicant contends that his claim arises out of his employment contract with the respondent. If it does so arise, in my view, it is a claim which could have been set up by cross-claim in the Supreme Court proceeding (see s 78 of the Supreme Court Act 1970 (NSW)). Moreover, I am unable to be satisfied that such claim is equal to or exceeds the amount of the judgment debt. There is simply inadequate evidence before me to ground such a satisfaction. I turn to issue this in more detail below.
If the claim of the applicant is regarded as a claim arising out of the agreement recorded in the consent orders dated 15 December 1995, I am again unable to be satisfied that the claim is equal to or exceeds the amount of the judgment debt. If the claim is viewed as one made under the agreement recorded in the consent orders of 15 December 1995, the claim for salary in lieu of notice must be disregarded. There is insufficient evidence before me to allow me to be satisfied that the claim for expenses has been clarified or confirmed in accordance with the letter dated 17 November 1995. The evidence before me on the issue of the applicant’s claim for outstanding bonus payments tends to suggest on balance that no amount is owing to the applicant under this head; if any amount is owing, it is an amount, I find, significantly less than $ 9,261.96.
The application to set aside the bankruptcy notice will be dismissed.
As the evidence before me does not indicate that the applicant has applied to set aside the judgment on which the bankruptcy notice is based, no issue under s 41(6C) of the Bankruptcy Act arises. I will hear the parties on whether, in the circumstances, an extension of time for compliance with the bankruptcy notice should be ordered pursuant to s 41(6A) of the Act.
I certify that this and the preceding eleven (11) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson
Associate:
Dated:
Counsel for the Applicant: Mr R P Freeman Solicitor for the Applicant: Paul Etherington & Associates Counsel for the Respondent: Mr M Cohen Solicitor for the Respondent: D’Angelo Solicitors Dates of Hearing: 29, 30 October 1997 Date of Judgment: 11 December 1997
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