Mejias v Federal Express (Australia) Pty Ltd
[2007] FMCA 1817
•18 October 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MEJIAS v FEDERAL EXPRESS (AUSTRALIA) PTY LTD | [2007] FMCA 1817 |
| BANKRUPTCY – application to set aside bankruptcy notice – assessed costs under order of Industrial Court of NSW – failure to file certificate in court with enforcement jurisdiction – no ‘final’ judgment to support bankruptcy notice – notice also invalid for failure to attach certificate of judgment – cross demand exceeding amount of costs order – whether notice should be set aside in absence of extension of time for compliance with notice – discretionary power to extend time – whether automatic extension where affidavit in support did not comply with rules – bankruptcy notice set aside on all grounds. |
Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41(3)(a), 41(6A), 41(6A)(b), 41(7), 306, 306(1)
Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), rr.3.02(1), 3.02(1)(b)(ii), 3.02(2), 3.02(2)(a), 3.02(2)(c)
Industrial Relations Act 1996 (NSW), ss.106, 182(3)
Legal Profession Act 2004 (NSW), ss.367A, 368, 369
Abigroup Ltd v Abignano (1992) 39 FCR 74
Adams v Lambert (2006) 225 ALR 396, [2006] HCA 10
American Express International Inc v Held (1999) 87 FCR 583
ANZ Banking Group Ltd v Menso [2006] FMCA 1522
Cawood v Cawood, unreported, Federal Court of Australia, Sackville J, 8 December 2000
Commonwealth Bank of Australia v Horvath (Junior) (1999) 161 ALR 441, [1999] FCA 143
Crimmins v Glenview Home Units [1999] FCA 515
Federal Express v Mejias (No 2) [2005] NSWIRComm 481
Federal Express v Mejias [2005] NSWIRComm 474
Genovese v BGC Construction Pty Ltd [2006] FCA 105
Glew v Harrowell of Hunt & Hunt Lawyers(2003) 198 ALR 331, [2003] FCA 373
Harris v Deputy Commissioner of Taxation [2007] FMCA 290
Hubner v Australia and New Zealand Banking Group Ltd (1999) 88 FCR 445
Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71
Mejias & Federal Express Australia Pty Ltd [2006] NSWIRComm 1016
Plant v Ken Smith Electronics P/L & Others [2000] FMCA 7
Re Francis; Ex parte Gartrell (1983) 77 FLR 80
Re Sterling; Ex parte Esanda Ltd (1980) 44 FLR 125
Rixon v Bryett (2001) 112 FCR 295, [2001] FCA 963
Rixon v Bryett [2001] FCA 433
The Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33
Webb v Hunter (1995) 59 FCR 24
| Applicant: | RIC MEJIAS |
| Respondent: | FEDERAL EXPRESS (AUSTRALIA) PTY LTD |
| File Number: | SYG 2004 of 2007 |
| Judgment of: | Smith FM |
| Hearing date: | 18 October 2007 |
| Delivered at: | Sydney |
| Delivered on: | 18 October 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr M Adamo |
| Solicitors for the Applicant: | Webb Lawyers |
| Counsel for the Respondent: | Mr P Walsh |
| Solicitors for the Respondent: | Baker & McKenzie |
ORDERS
The requirements of Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) rr.3.02(1) and 3.02(2) are dispensed with to the extent that the applicant’s affidavit filed on 29 June 2007 did not comply with those rules.
If necessary, the time for compliance with Bankruptcy Notice NN2089/07 issued on 25 May 2007 is extended until the making of this order.
Bankruptcy Notice NN2089/07 issued on 25 May 2007 is set aside.
The respondent must pay the applicant’s costs, including reserved costs, as agreed or taxed under the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth).
The applicant must provide a copy of this order to the Official Receiver within 2 days.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG2004 of 2007
| RIC MEJIAS |
Applicant
And
| FEDERAL EXPRESS (AUSTRALIA) PTY LTD |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
Mr Mejias was employed by Federal Express (Australia) Pty Ltd (“Federal Express”) from 1999. In May 2002 he was appointed to the position of “senior security specialist, job grade 27 (management & professional structure)”. He was employed in that position until April 2005, when he was dismissed for serious and wilful misconduct. The grounds of his termination were subsequently investigated in the New South Wales Industrial Relations Commission, and the dismissal was upheld on 3 February 2006 (see Mejias & Federal Express Australia Pty Ltd [2006] NSWIRComm 1016). An appeal was brought, but was discontinued.
Mr Mejias maintained further claims against his employer in relation to remuneration and reimbursement for expenses incurred during his employment. In the course of presenting these claims to his employer he sent emails to it, which became the subject of applications by Federal Express to the New South Wales Industrial Commission in Court Session. It alleged that his conduct constituted contempt of that Court. Applications by Federal Express to initiate contempt charges and for related orders were addressed by Marks J in two judgments, in each of which his Honour ordered Mr Mejias to pay Federal Express’s costs (see Federal Express v Mejias [2005] NSWIRComm 474, and Federal Express v Mejias (No 2) [2005] NSWIRComm 481). The costs orders were made on 21 December 2005 and 23 December 2005. Formal proceedings in relation to contempt were subsequently brought against Mr Mejias, but it is unnecessary for me to trace their course.
Mr Mejias’s present application to this Court, is to set aside a bankruptcy notice based upon his failure to pay those costs. He has formal objections to the notice, and also argues that he has “a counter‑claim, set‑off or cross demand equal to or exceeding the amount of the judgment debt or sum payable”, within s.40(1)(g) and s.41(7) of the Bankruptcy Act 1966 (Cth). It is convenient first to consider the latter contention.
While the contempt proceedings were on foot, Mr Mejias filed on 16 March 2006 a summons in the Industrial Court of New South Wales for relief under s.106 of the Industrial Relations Act 1996 (NSW). This was supported by an affidavit and evidence, in which he particularised claims for unpaid overtime, and for unpaid work hours beyond 38 hours per week, not being hours while he was on call. Those claims were particularised at about $150,000. A further claim was made for $8680, on the basis that Mr Mejias had been unfairly refused a determination that he should be paid that amount under an “on‑call policy”. A fourth claim was particularised in an amount of $33,299.55, being reimbursement of unpaid business expenses, as itemised by Mr Mejias’s accountant in schedules which were attached to his affidavit.
His claims in relation to unpaid overtime, the extended hours of his work, and the on‑call allowance, were supported by lengthy diary records, which he claimed to have presented to his manager. These indicate that at times he did work extraordinarily long hours in relation to security matters arising in his responsible territory of Australia and New Zealand. His case to the Industrial Court is that the base salary set in his original employment offer of $69,636 was inadequate and unfair, because he had been promised that he would not be asked to work extended hours.
The proceeding in the Industrial Court is still on foot. Federal Express has filed a reply, putting in issue whether he should fairly be paid any amounts beyond his adjusted annual salary, and whether there was any unfairness in his not having access to the on‑call and recall salary supplements, and making an unparticularised general denial of a failure to reimburse. The uncontested evidence is that, on Mr Mejias’s part, he has been actively pursuing the proceeding in the Industrial Court, and that delays have been the result of slowness to file evidence on the part of Federal Express.
Mr Mejias has given extensive evidence to this Court, as has Federal Express’s New South Wales human resources service manager, and both of these people were cross‑examined. Considering all their evidence, I am not persuaded that Mr Mejias’s claims are not genuine and properly brought before the Industrial Court. I consider that he has claims which deserve to be finally determined on their merits, and which “in justice, [he should] be permitted to have heard and determined in the usual way” (see Glew v Harrowell of Hunt & Hunt Lawyers(2003) 198 ALR 331, [2003] FCA 373 at 12, and the previous authorities cited by Lindgren J in that judgment).
It is not easy for me to assess the prospects of all his claims on the present evidence. However, I would find that at least his expenses claim, and his claim to have been unfairly excluded from the on‑call allowance, have been shown to have substance and prospects of success on the evidence which he has presented to this Court. I make that finding, noting that the respondent has not attempted to meet in this Court an evidentiary onus raised by Mr Mejias’s evidence. I find that his evidence supporting these claims is sufficient to meet the tests identified in Glew v Harrowell. As to his other claims, I would not find at present that he has prospects of obtaining orders for anywhere near the amounts he has claimed, and the outcome of those claims is left speculative on the present evidence.
However, my findings in relation to the expenses and on‑call claims indicate that Mr Mejias has now, and had at the times when he commenced his Industrial Court case and when the bankruptcy notice was issued and served, “a claim equal to or exceeding the amount of” the amount which has been assessed as his liability under the two costs orders made by Marks J.
I therefore am satisfied that Mr Mejias has a cross demand in terms of s.40(1)(g) of the Bankruptcy Act. I shall consider below whether he is entitled to have the bankruptcy notice set aside on that basis. This requires me to examine submissions made by Federal Express that this would not be appropriate. However, I shall defer that consideration until after I have identified two other grounds for setting aside the notice.
The costs orders of the Industrial Court were assessed by a cost assessor, who on 14 December 2006 gave a certificate under ss.367A, 368 and 369 of the Legal Profession Act 2004 (NSW), which reduced a claim made by Federal Express to an amount of $39,901.84, not including the costs of the assessment. The certificate was filed in the office of the Industrial Registrar, who provides the registry for the Industrial Court, and a copy of the certificate was given to Federal Express, stamped “Filed 16 Jan 2007”.
Federal Express then applied to the Official Receiver for the issue of a bankruptcy notice, and one was issued on 25 May 2007, being number NN2089/07. The bankruptcy notice identifies in paragraph 1 a debt of “$39,901.84, as shown in the Schedule”, and paragraph 2 alleges: “a copy of the judgments or orders relied upon by the creditor is attached”. However, I find on the evidence before me that the notice as issued and served did not attach any document purporting to be a judgment or order. In particular, it did not attach the orders made by Marks J, nor the costs assessment, nor the certificate of assessment stamped by the Industrial Registrar. More importantly, it did not attach a judgment or order of a competent court able to enforce the judgment of the Industrial Court, as is required by s.182(3) of the Industrial Relations Act. This provides:
182Recovery of amounts ordered to be paid (other than penalties)
(1)For the purposes of the recovery of any amount ordered to be paid by the Commission (including costs, but not including a criminal or civil penalty), the amount is to be certified by the Industrial Registrar.
(2)A certificate given under this section must identify the person liable to pay the certified amount.
(3)A certificate of the Industrial Registrar that:
(a) is given under this section, and
(b) is filed in the office of a court having jurisdiction to give judgment for a debt of the same amount as the amount stated in the certificate,
operates as such a judgment.
…
There is no evidence before me that the certificate of the Industrial Registrar has ever been filed in the office of a court having jurisdiction to give judgment in the sum assessed for the costs under the costs orders. I find that it has not been so filed.
This finding raises the issue whether there was in existence at any relevant time in relation to the issue or service of, or time for compliance with, the bankruptcy notice a “final judgment or final order, being a judgment or order the execution of which has not been stayed” within the language of ss.40(1)(g) and 41(3)(a) of the Bankruptcy Act. I find on clear authority that there was not, as a result of the omission to obtain a judgment of a court of competent jurisdiction for the purposes of s.182(3)(b) of the Industrial Relations Act (see Plant v Ken Smith Electronics P/L & Others [2000] FMCA 7 at [14]). The principle which was applied by Raphael FM in that case is that a judgment or order is not “final” unless it is a “judgment upon which the creditor was in a position to issue execution” (see Abigroup Ltd v Abignano (1992) 39 FCR 74 at 80‑81, also Cawood v Cawood, unreported, Federal Court of Australia, Sackville J, 8 December 2000). This ground alone establishes that the bankruptcy notice was not properly issued, and could not give rise to an act of bankruptcy.
A further ground arises from the form of the bankruptcy notice. I have noted that it did not attach any documents purporting to be the judgments or orders relied upon by the creditor. I also note that the Schedule explaining the debt had no amount next to item 1 of the Schedule in relation to “amount of judgments or orders”, but had the amount of $39,901.84 against item 2, which is intended to identify any amount claimed as legal costs additional to the amount of a judgment or order upon which the notice is based. Note 1 to the Schedule requires that “a certificate of taxed or assessed costs” in support of an amount claimed in item 2 “must be attached to this Bankruptcy Notice”. This also was not done in the present case.
The absence of any attachments identifying a judgment debt upon which the bankruptcy notice was based is a defect in compliance with the statutory requirements in relation to a valid bankruptcy notice. Authorities in the Federal Court before Adams v Lambert (2006) 225 ALR 396, [2006] HCA 10 established very clearly that the failure to attach the judgment or order giving rise to the debt relied upon was a defect resulting in the notice being a nullity, which was incapable of being validated by s.306(1) of the Bankruptcy Act (see in particular Commonwealth Bank of Australia v Horvath (Junior) (1999) 161 ALR 441, [1999] FCA 143 and American Express International Inc v Held (1999) 87 FCR 583).
Those cases were applied in later cases, including by Lee J in Genovese v BGC Construction Pty Ltd [2006] FCA 105. In that case, Lee J also cited The Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33, whose correctness must be re‑examined in the light of Adams v Lambert. However, Finkelstein J’s judgment in Horvath was decided before Australian Steel, and applied principles expressed in judgments which remain good authority, in particular Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71. Applying these principles, Finkelstein J addressed the application of s.306(1), by addressing whether the attachment of the order or judgment was an essential requirement of the Bankruptcy Act. His Honour’s discussion leading to [14] in his judgment, pointed out the central importance that a recipient of a bankruptcy notice should be able to establish unambiguously from the notice itself what judgment or order was relied upon for the claimed debt. In my opinion, this reasoning remains sound, notwithstanding Adams v Lambert, and I would respectfully follow that line of cases. I note that a similar conclusion was arrived at in a considered judgment of Wilson FM in ANZ Banking Group Ltd v Menso [2006] FMCA 1522 at [66] and preceding. I am certainly not persuaded that his Honour’s conclusion was clearly wrong, and should not be followed.
Counsel for Federal Express relied upon Adams v Lambert, and submitted that the absence of an attached judgment or order was only a defect which was “formal” within s.306, and therefore could be overlooked in the present case, due to the absence of evidence of substantial injustice to the present applicant. He pointed to evidence which, although not entirely clear, suggested that Mr Mejias received the bankruptcy notice under cover of a solicitor’s letter, which also enclosed a copy of the two decisions of Marks J and of the certificate of determination of costs by the assessor. On the evidence before me, I find it probable that Mr Mejias was aware of those documents.
I would accept that, as in Horvath, Mr Mejias was probably not misled by the failure of the notice to attach the documents which were thought by Federal Express’s solicitor to support the issue of the bankruptcy notice. However, on his Honour’s reasoning in Horvath, that is not an answer once it is found that one of the requirements made essential by the legislation is the identification of the judgment relied upon, by way of attachment of the critical document confirming an immediately enforceable obligation under a court judgment. As I have pointed out, in the present case it was, in fact, impossible for Federal Express’s solicitor to attach such a document at the time of the issue of the notice. The present circumstances therefore illustrate why the legislation has made the attachment of a proper certificate of judgment to the notices an essential requirement. In my opinion, the absence of any attached certificate of judgment resulted in the present bankruptcy notice being irredeemably defective.
The two defects in the issue of the bankruptcy notice which I have found above, establish that the bankruptcy notice issued on 25 May 2007 was a nullity, incapable of giving rise to an act of bankruptcy. In my opinion, they both clearly justify the exercise of this Court’s jurisdiction to set aside the bankruptcy notice.
The Court’s powers to set aside a bankruptcy notice and to extend time for its compliance are broad and discretionary (see Re Sterling; Ex parte Esanda Ltd (1980) 44 FLR 125 at 130, and Re Francis; Ex parte Gartrell (1983) 77 FLR 80 at 86). Federal Express raised issues as to the appropriateness of the exercise of that jurisdiction in the present case, based on the form of Mr Mejias’s application filed in this Court and his supporting affidavit filed with it on 29 June 2007. Its counsel argued that those documents did not comply with formal requirements, and that this was necessary before it could give rise under s.41(7) of the Bankruptcy Act to an automatic extension on the time for compliance with the notice. Also, no application for an extension under s.41(6A) had been made before time for compliance expired. He argued that an act of bankruptcy therefore had occurred, and that it was now too late to set aside the bankruptcy notice. Any power that the Court now had to exercise a power to extend time for compliance nunc pro tunc, would not be appropriately exercised in such circumstances.
Counsel for Mr Mejias principally argued that s.41(7) applied, so that an extension under s.41(6A) was unnecessary. He did, however, make an oral application under that provision, in the event that the Court found that this was necessary. He also applied orally for orders dispensing with strict compliance with the rules as to the contents of the original affidavit.
It is not disputed that the principal application to set aside the bankruptcy notice was filed one day before the time for compliance was due to expire. The Court, therefore, in my opinion would have power if necessary to extend the time for compliance, exercising powers under s.41(6A)(b), even if the first application for the exercise of that power was made orally at today’s hearing.
The appropriateness of doing that is, however, another matter (cf. Hubner v Australia and New Zealand Banking Group Ltd (1999) 88 FCR 445 at 449). In Rixon v Bryett [2001] FCA 433, Moore J discussed the appropriateness of exercising the power of extension so as to make clear that no act of bankruptcy had occurred before a bankruptcy notice was set aside (see also his Honour’s subsequent judgment reported at (2001) 112 FCR 295). His Honour took the view that the power to extend under s.41(6A) was available, and could appropriately be exercised nunc pro tunc, in circumstances where the Court had found a fundamental defect in the bankruptcy notice as issued.
Mr Mejias’s principal application used Form 2 under the Bankruptcy Rules, and included an incomplete application under s.41(6A). It is arguable that the present application did contain an application for an interim order extending time for compliance. As I have indicated, I also have before me an oral application for extension. Although, an automatic extension under s.41(7) might operate in the present case, this is open to doubt, as I shall explain below. I therefore consider that it is appropriate to make an order extending time under s.41(6A). I can see no reasons, taking into account all the circumstances of the present case, and in the interests of the administration of justice, why an order extending time should not be ordered, so as to make clear that no act of bankruptcy has occurred before the setting aside of the bankruptcy notice. In the light of the two fundamental defects in the bankruptcy notice which I have identified above, Mr Mejias would probably have good grounds for resisting any sequestration proceeding relying on a non‑compliance with the notice. However, I consider that the Court should exercise all available powers, in an attempt to put this beyond doubt.
Whether an automatic extension under s.41(7) did arise upon the filing of Mr Mejias’s application to set aside, or could by the exercise of procedural discretions be made to arise, are matters not beyond doubt. It provides:
41(7)Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter‑claim, set‑off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter‑claim, set‑off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied.
Counsel submitted on behalf of Federal Express that Mr Mejias’s application to the Court did not meet the language of that provision, because there were defects in the supporting affidavit. He submitted that it did not comply with the requirements of this Court’s bankruptcy rules, in particular r.3.02(1)(b)(ii) and more importantly, r.3.02(2)(a) and (c). These require the affidavit in support to show:
3.02(2)(a)the full details of the counter‑claim, set‑off or cross demand; and …
3.02(2)(c)why the counter‑claim, set‑off or cross demand was not raised in the proceeding that resulted in the judgment or order in relation to which the bankruptcy notice was issued.
It is clear that these full details were subsequently shown to the Court in affidavits filed by Mr Mejias, and it was not disputed that the claims now pending in the Industrial Court could not have been set up in a counter‑claim, set‑off or cross demand in response to the contempt proceedings which gave rise to the costs order. However, relying on authorities, including Webb v Hunter (1995) 59 FCR 24, and statements by Branson J in Crimmins v Glenview Home Units [1999] FCA 515, counsel argued that compliance with the rules was required for the original affidavit, before the Court could characterise the application to set aside as one answering the description in s.41(7). Most of these authorities were based on the previous language of s.41(7), when it operated expressly upon the filing of an affidavit meeting the statutory description. However, it was submitted that Branson J had applied those authorities in the context of the present provision.
I am not sure that Branson J ultimately held that a failure to comply with formal requirements in relation to the original affidavit was still fatal to a stay arising under s.41(7). Certainly, she thought that compliance with the formal requirements was relevant, and even important to the characterisation of the application to the Court which was supported by the affidavit. However, she appears to have thought that extrinsic evidence could clarify the nature of the application, and also that the Court would be able to dispense with strict requirements of the rules in relation to the supporting affidavit, if the application to the Court could be characterised as one coming within s.41(7).
In my opinion this would be the appropriate construction of s.41(7) in the context of the present Bankruptcy Rules. They carry with them the Court’s general dispensing powers, and in my opinion it would be appropriate in cases such as the present to exercise those powers. I note that there is at least one authority where they have been exercised in similar circumstances to the present (see Harris v Deputy Commissioner of Taxation [2007] FMCA 290).
Looking at the application as filed, and at the very brief affidavit which was filed with it, in my opinion it was clear from them that Mr Mejias was seeking to set aside the bankruptcy notice on the ground that he had a claim currently being litigated in the Industrial Relations Commission for an amount exceeding the amount relied upon under the bankruptcy notice. I consider the documents filed by him should therefore be properly characterised as an application coming within s.41(7). If I am correct, then an automatic extension operated, and for that reason also no act of bankruptcy could have occurred so as to render futile the setting aside of the bankruptcy notice.
However, out of abundant caution, I also propose to include in my orders an order dispensing with the formal requirements of the rules to the extent that they were not satisfied by the affidavit filed in support. No substantive arguments against the exercise of those discretions were presented to me, as I understood the submissions of counsel for Federal Express.
Summarising all my above conclusions, I have decided that the bankruptcy notice was a nullity when issued, because it was not supported by a “final” judgment for the debt relied upon, and because it lacked an essential requirement in its identification of the judgment relied upon. If I am correct in those conclusions, no act of bankruptcy could have arisen, even if time for compliance was not extended automatically by s.41(7) or by order under s.41(6A). It would clearly be appropriate now to set aside the bankruptcy notice.
If I am wrong in relation to that reasoning, I have also made findings of fact which address the character of the claim in the Industrial Relations Commission and which would provide a third basis for an order setting aside the bankruptcy notice. This is that I have arrived at the satisfaction identified in s.40(1)(g) as to the existence of a claim exceeding the amount of the sum payable under the costs assessment, which could not have been set up in the proceeding in which the costs order and assessment arose. My conclusions in relation to s.41(7), or my proposed order under s.41(6A), would preserve the utility of implementing those findings by ordering the setting aside of the bankruptcy notice.
For all these reasons, Mr Mejias is entitled to the relief he seeks, and costs.
I certify that the preceding thirty‑five (35) paragraphs are a true copy of the reasons for judgment of Smith FM
Associate: Lilian Khaw
Date: 12 November 2007
3
24
0