Molina v Galloway (No 2)
[2023] FedCFamC2G 310
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Molina v Galloway (No 2) [2023] FedCFamC2G 310
File number(s): SYG 930 of 2022 Judgment of: JUDGE GIVEN Date of judgment: 28 April 2023 Catchwords: INDUSTRIAL LAW – Application for reinstatement following default judgment and imposition of penalty – solicitor as respondent employer – where reason for non-attendance at hearing and non-engagement with proceedings claimed to be inability of solicitor to open emails – ostrich-like attitude – asserted potential claim for set-off Legislation: Fair Work Act 2009 (Cth)
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 17.05
Cases cited: AHN17 v Minister for Immigration & Border Protection [2018] FCA 1598
AVC19 v Minister for Immigration, Citizenship, Migrant Services & Multicultural Affairs [2020] FCA 1752
CAL15 v Minister for Immigration & Border Protection [2016] FCA 1344
DHX17 v Minister for Immigration, Citizenship, Migrant Services & Multicultural Affairs (2020) 278 FCR 475
FBS18 v Minister for Home Affairs [2019] FCAFC 196
Kelly v Atanaskovic Hartnell Corporate Services Pty Ltd (No 3) [2023] FedCFamC2G 1
Molina v Galloway [2022] FedCFamC2G 904
Molina v Galloway [2022] FWC 776
MZABP v Minister for Immigration & Border Protection (2015) 242 FCR 585
MZYEZ v Minister for Immigration & Citizenship [2010] FCA 530
R v Qutami [2001] NSWCCA 353
Division: Division 2 General Federal Law Number of paragraphs: 53 Date of hearing: 2 March 2023 Place: Sydney Counsel for the Applicants: Mr I Latham Solicitor for the Applicants: Marrickville Legal Centre Solicitor for the Respondent: JBL Solicitors ORDERS
SYG 930 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MILENA MOLINA
First Applicant
RAYMOND ZHAI
Second Applicant
AND: BRETT GALLOWAY
Respondent
order made by:
JUDGE GIVEN
DATE OF ORDER:
28 April 2023
THE COURT ORDERS THAT:
1.The application in a proceeding filed on 15 December 2022 is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE GIVEN:
On 1 November 2022, this Court entered default judgment in favour of the applicants against their former employer, Mr Brett Galloway. On that occasion, the Court also made declarations of contraventions under the Fair Work Act 2009 (Cth) (Act) and imposed civil pecuniary penalties in respect thereof: Molina & Anor v Galloway [2022] FedCFamC2G 904 (default judgment).
BACKGROUND
The background which led to the giving of default judgment is sufficiently set out at [4] to [22] of the reasons for default judgment which were delivered ex tempore at the conclusion of that hearing with some additional matters which, while not seeming previously germane, now warrant inclusion. Namely, at the first return date in these proceedings on 29 July 2022, the following took place:
(a)Mr Galloway was represented by his now solicitor, Mr Bolton[1], albeit Mr Bolton had not filed a Notice of Address for Service to enter an appearance.[2]
[1] Apparently instructed by a Mr John Hancock (also present in Court)
[2] Mr Bolton appeared on a limited basis for that directions hearing only and the fact that it was Mr Bolton who had appeared on that occasion did not become relevant or apparent until during the cross-examination of Mr Galloway (see [27]) below
(b)Mr Bolton gave the following undertaking in Court:[3]
[3] Transcript 29 July 2022 T4.13 to T4.35
the important information for the Court is that Mr Galloway does give an undertaking that by next Wednesday 3 August [2022] he will pay the amount ordered by the Fair Work Commission on 6 April…
And so on the basis that Mr Galloway, who is a legal practitioner, undertakes to pay the order in full by next Wednesday 3 August, I’m instructed to seek that the matter be adjourned and also that there be self-executing orders as to the discontinuance of the proceedings that were commenced in respect of the non-payment of the default.
(c)Mr Galloway was not in Court.
(d)the Court made the following orders in the presence of Messrs Bolton and Hancock:
1.Until further order, or until a Notice of Address for Service is filed for the respondent, service of any documents in these proceedings upon him can be effected by sending a copy to the email address: [email protected].
2.The respondent must file and serve a Notice of Address for Service on or by 5 August 2022.
3. The respondent must file and serve a Defence on or by 12 August 2022.
4. The Applicant must file and serve any Reply on or by 16 September 2022.
5.The matter be referred to mediation before a Registrar of the Court pursuant to s 169 of the Federal Circuit and Family Court of Australia Act 2021 (Cth), at which each person participating in the mediation including legal representatives, whether attending in person or by video/audio link, is to attend for the full duration of the mediation.
6.In the event that the mediation referred to in order 5 is unsuccessful, the parties must jointly approach the Chambers to Judge Given within 7 days of the concluded mediation, with a view to the matter being relisted for a directions hearing.
7. Costs are reserved.
8. The parties have liberty to apply on 2 days’ notice.
(e)no objection was taken by Mr Bolton to the substituted service order, nor was any suggestion made that Mr Galloway had, or would have, difficulty accessing his emails.
REINSTATEMENT APPLICATION
As noted above at [1] default judgment was entered against Mr Galloway on 1 November 2022. The last date for Mr Galloway to appeal from the default judgment, to the Federal Court of Australia, was 29 November 2022. He did not do so.
Relevant to the chronology of events after the default judgment is the following:
(a)on 17 November 2022, the written reasons for default judgment (revised from transcript) were published to the parties;
(b)on 23 November 2022, the solicitors for the applicants served Mr Galloway at his Gmail address[4] with the November Orders and the judgment;[5]
(c)at 4:28pm on 29 November 2022, Mr Bolton emailed the reinstatement application and Affidavit of Mr Galloway sworn 29 November 2022 (Galloway Affidavit) to the Registry under cover of email which simply stated “kind regards” and included Mr Bolton’s contact details;
(d)after an array of correspondence between the Registry and Mr Bolton in the days which followed (by reason of the Court’s file being closed), Mr Galloway eventually elected not to pursue the reinstatement application;
(e)on or about 12 December 2022, Mr Bolton wrote to the Court to renew his request that the reinstatement application (and Galloway Affidavit in support thereof) be received for filing and given a return date. It was in those circumstances that the matter came to be listed before me on 2 March 2023;
(f)between 15 December 2022 and 2 March 2023, nothing further was filed by, or for, Mr Galloway; and
(g)at 12:25am on 2 March 2023 (being the day of the hearing of the reinstatement application), Mr Bolton served the reinstatement application on the applicants’ solicitor.
[4] Which by operation of orders made on 29 July 2022 was the address and method of service ordered by the Court as constituting his address for service
[5] Affidavit of Genevieve Barry affirmed 2 March 2023 at [3] and Annexure “GB-1”
On 15 December 2022, Mr Galloway filed an application in a proceeding in this Court (reinstatement application) seeking the following orders (formatting in original):
1.That the Judgment dated 1 November 2022 be set aside or varied;
2.That the Judgment dated 1 November 2022 be stayed until determination of this application
3.Further or Other Orders..
4.Costs ..
Despite order 2 sought by the reinstatement application, a stay was not pressed at the hearing of the reinstatement application (nor in the interim). Accordingly, no stay has been granted at any time in relation to the declarations and orders made by the Court on 1 November 2022.
Hearing
At the commencement of the reinstatement application hearing on 2 March 2023, the Court was concerned about (what appeared to be) the extremely late service of the reinstatement application, which despite having been filed on 15 December 2022, had apparently only been served in the early hours of 2 March 2023. However, Counsel for the applicants properly conceded that while his instructing solicitor had not been formally served until the day of the hearing, the applicants had themselves obtained a copy of the reinstatement application from the Commonwealth Courts Portal, such that they did not contend that they were totally caught unawares. Counsel for the applicants indicated that while the relief sought was not precisely understood by them, the hearing could proceed.
Evidence
Following exchanges between the Court and Counsel for the applicants, Mr Bolton apprehended that the evidence upon which Mr Galloway relied in support of the reinstatement application may be the subject of objections and submissions as to its adequacy. Mr Bolton sought an adjournment so that this evidence could be improved. That adjournment application was opposed, and refused.
Mr Bolton moved on the reinstatement application, although again I note that the only relief contended for was reinstatement and not a stay of the orders made on 1 November 2022 (despite the fact that the issue of Mr Galloway’s failure to comply with those orders was ventilated at several junctures during the hearing, including during his cross-examination). In support of the reinstatement application, the Galloway Affidavit was read subject to several objections.
Notably, the applicants objected to the Court receiving the Annexures to the Galloway Affidavit, which can be described as follows:
(a)Annexure “A” is a letter from Dr Joseph Grech (who appears to be a General Practitioner) to Mr Bolton dated 28 November 2022; and
(b)Annexure “B” is a letter from Mr Tim Watson-Munro, a consultant psychologist, to Mr Bolton dated 29 November 2022.
The applicants made the same objection in respect of each of the Annexures to the Galloway Affidavit, firstly on the basis of hearsay and secondly, to the extent that they contain opinion evidence, in that it had not been properly advanced as being expert evidence. Neither Dr Grech nor Mr Watson-Munro was made available for cross-examination.
Ultimately, I received the Annexures to the Galloway Affidavit on the limited basis that they recorded Mr Galloway as having made a report at a point in time (on or about the respective dates the letters bore on their face) to their respective authors about certain matters. I accept that the Annexures record Mr Galloway as claiming certain circumstances and symptoms as being extant, but do not accept them as establishing the truth of those matters, nor constituting the diagnosis of either medical practitioner.
It is well established that while statements to a psychologist can be admissible in evidence, very considerable caution should be exercised in relying upon such self-reports and that, in many cases, such statements can be given little or no weight: see R v Qutami [2001] NSWCCA 353 at [58] to [59] per Spigelman CJ, Simpson J and Smart AJ. The reports of each of Dr Grech and Mr Watson-Munro contain hearsay evidence of what Mr Galloway has told them. While I accept Dr Grech may have treated Mr Galloway for some period time, that treatment does not appear to be in relation to his mental health. Mr Watson-Munro appears (from the content of his letter) to have been retained by Mr Galloway for the purposes of preparing his letter in support of this application in a proceeding. While Mr Watson-Munro says he has known Mr Galloway since 2004, there is no suggestion that Mr Galloway has ever been treated by Mr Watson-Munro prior to consulting him for the purposes of the reinstatement application. Rather, Mr Watson-Munro says that Mr Galloway has referred work to him, and that they are friends.
Overall, the information which is contained in each of the letters which form Annexures A and B to the Galloway Affidavit are of limited probative value. Neither of the practitioners have offered an opinion in a manner which could be properly received as being an expert opinion. Further, the Court is not bound to accept as true the statements made by Mr Galloway to the practitioners, and in all of the circumstances of this case, including the timing and context of how that information was given to the practitioners by Mr Galloway, the Annexures will be given little weight. They are discussed below as and when necessary.
Reinstatement principles
The power of the Court to set aside the orders made on 1 November 2022 is contained in
r 17.05(2)(a) of the which relevantly provides that:
(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;
Unlike pursuit of an appeal to the Federal Court of Australia, an application under r 17.05 of the Rules, is not time limited. Whether or not to reinstate a proceeding is a discretionary power which requires the Court to consider whether or not it is in the interests of justice to do so: see FBS18 v Minister for Home Affairs [2019] FCAFC 196 (FBS18) at [50]. Many of the authorities which consider the principles of reinstatement in this Court arise in the context of migration proceedings, are of relevance and application to the instant proceedings which were brought in the Fair Work Division of the Court.
In MZYEZ v Minister for Immigration & Citizenship [2010] FCA 530 (MZYEZ) (which was cited with approval by the Full Court in FBS18), Ryan J considered the principles specifically relating to an application for reinstatement in this Court, of a matter dismissed in the absence of a party. His Honour found at [7] that where reinstatement is sought, a discretion falls to be exercised by the Court which requires consideration of certain factors which his Honour considered to be:
(a)whether there is a reasonable excuse for the party’s absence;
(b)the existence and nature of any prejudice that might flow to the other party from the reinstatement, and how any such prejudice might be alleviated; and
(c)whether the application for reinstatement has a reasonable prospect of success in the substantive proceeding, with that assessment (usually) to be made at an impressionistic level: see MZABP v Minister for Immigration & Border Protection (2015) 242 FCR 585 at [62] per Mortimer J (as her Honour then was), DHX17 v Minister for Immigration, Citizenship, Migrant Services & Multicultural Affairs (2020) 278 FCR 475, and Katoa v Minister for Immigration, Citizenship, Migrant Services & Multicultural Affairs (2022) 96 ALJR 819 at [16] to [18] per Kiefel CJ, Gageler, Keane and Gleeson JJ.
The decisions referred to at [17(c)] above considered applications for extension of time, which carries with it a clear prescribed time period in which to commence proceedings. However, that aspect does not materially affect the standard of assessment in the exercise of the Court’s discretion as to whether to reinstate under r 17.05 of the Rules: see AVC19 v Minister for Immigration, Citizenship, Migrant Services & Multicultural Affairs [2020] FCA 1752 at [3] to [5] per Davies J.
While the factors referred to in [17] above are not a definitive list, they are consistently considered in the exercise of the Court’s broad discretion to reinstate (see CAL15 v Minister for Immigration & Border Protection [2016] FCA 1344 at [4] per Mortimer J (as her Honour then was)), noting the caution expressed by the Federal Court in AHN17 v Minister for Immigration & Border Protection [2018] FCA 1598 at [32] where McKerracher J said:
…that whatever assistance that may be gleaned from earlier judicial decisions considering the discretion to set aside orders made in the absence of a party, those authorities can only operate as a guide to the exercise of the discretion in r 16.05…
The factors outlined in MZYEZ do in fact arise for consideration in respect of Mr Galloway’s reinstatement application and will be addressed below.
Explanation for absence
The explanation proffered by the Galloway Affidavit as to Mr Galloway’s warrant being ser out in full:[6]
[6] Galloway Affidavit at [2] to [9]
2.Up until this point of time, I have been acting for myself in the proceedings. I am now legally represented by Jonathan Bolton of JBL Solicitors.
3.This affidavit is in support of the Application in the Proceedings, which in essence seeks to set aside the judgment dated 1 November 2022. I was not present or represented at those proceedings.
4.By way of background, for the last 24 months I have been extremely unwell - physically and mentally due to a combination of stressors including but not limited to:
a.Estrangement from my wife and failed reconciliation;
b.Multiple serious and complex dental surgeries which have been debilitating and have at multiple stages led to reduced capacity to function;
c.Multiple hospitalisations in the past 6 months during this period both due to the dental surgeries as well as leg problems and mental health issues;
d.During the last 12 months, I have spent the majority of this time not working due to poor physical, mental and emotional health. I have only worked for a limited portion of time during this period and I have not been working full time.
e.My depression has been exacerbated by the loss of a two family pets in the last few months.
f.I have been dealing with multiple financial pressures (in part due to Covid) including disputes with the mortgagee of my property - National Australia Bank - which has commenced Supreme Court proceedings for possession of my family home as well as the car finance company has commenced proceedings to repossess my motor vehicle. I have had to borrow funds at a high interest rate just to get through this difficult period and I have not been able to maintain normal payments as I have not been working (as explained above).
5.I have not been able to cope with all of the pressures which I have been subject to over the 12 - 24 months.
6.This has led to the position where I have been not been in the mental and emotional position to deal with the normal day to day activities of professional and personal life.
7.The stresses of these proceedings have been exacerbated by the close relationship I had with the First Respondent over the past 8 years and which has now broken down. The resulting impact on my fragile mental state has left me unable to deal with the issues of these proceedings and I have not been able to resolve to look at the matters at hand.
8.I have been seeking assistance from a doctor. On my behalf a medical doctor's report has been prepared on my mental and physical health and which hopefully assists the Court to determine the issues giving rising to my otherwise uncharacteristic neglects in this matter as well as determination of my application to set aside the judgment. A true copy of the medical report by Dr Joseph Grech is annexed to this statement and marked "A".
9.A true copy of a letter provided by Tim Watson-Munro, a registered psychologist, whom I consulted via telephone is annexed to this statement and marked "B".
To the extent that Mr Galloway claims at [2] of the Galloway Affidavit that he was representing himself in these proceedings until becoming represented by Mr Bolton (presumably a reference to the reinstatement application), it should be noted that Mr Galloway at no time filed a Notice of Address for Service to reflect that fact, nor to even proffer an address for service which is required by the Rules. At the first Court date in July 2022, he was represented by Mr Bolton (see [27] below) albeit it can be accepted that Mr Bolton had also not filed an appearance at that time. It cannot be said that Mr Galloway was without access to legal representation, or knowledge of how to retain a lawyer for these proceedings, should he have wished to do so.
It will be observed from the content of the Galloway Affidavit that while Mr Galloway proffers an array of matters as generally affecting his wellbeing, there is nothing which specifically addresses, let alone demonstrates, that Mr Galloway was unable to attend Court on 1 November 2022. It emerged from his cross-examination that the corollary of the general factors upon which Mr Galloway relies as explaining his non-attendance at Court, were said to manifest in one particular way. Namely, Mr Galloway claims to have been unable to open his emails, albeit again without any specific date range as to this alleged affliction. This alleged inability was referred to in each of Annexures A and B to the Galloway Affidavit, being the letters from the doctor and psychologist respectively.
By his letter of 28 November 2022 to Mr Bolton, Dr Grech states that:
I am not surprised to learn from [Mr Galloway] that he has failed to attend to certain simple but necessary duties in professional life, such as reading emails in a timely manner, for instance.
By his letter of 29 November 2022 to Mr Bolton, Mr Watson-Munro states that he has read Dr Grech’s letter and had also spoken with Mr Galloway on the preceding Sunday evening (which I infer to be 27 November 2022) and:
I note from your covering letter that you seek my opinion regarding Mr Galloway’s disclosure that he failed to be present or represented on 1 November 2022 attendant to his inability to open and read emails in relation to the matter.
…
He at times has experienced avoidance reactions due to his anxiety which offers some explanation as to his tardiness/inability to open emails and to attend to his legal responsibilities. Indeed I note that it is only because of the intervention of a friend, who looked at his unopened emails, that Mr Galloway became aware of the default judgment, some weeks after it was entered.
It should be noted that the covering letter referred from Mr Bolton to Mr Watson-Munro was neither annexed to his letter nor placed before the Court in any other way. As already addressed above at [12] to [14] above, I give Mr Galloway’s self-reported information little weight, and do not accept the content of the letters as being probative expert evidence.
The explanation that the reason for Mr Galloway’s non-attendance at the hearing on 1 November 2022, namely that he was simply unable to read his emails, is undermined in other ways.
In particular, by the chronology of the events of these proceedings, the significance of some aspects of which did not crystallise until the reinstatement application. Relevantly the statement by Mr Bolton at the first Court date which is extracted at [2(a)] above is a matter of moment. In essence, Mr Galloway undertook to pay the applicants their outstanding entitlements by a certain date. Leaving aside for a moment that he failed to meet his self-imposed deadline and he did not in fact pay all the amounts required, it is open to infer from what was said to the Court for Mr Galloway on that occasion (namely that he wanted there to a self-executing regime for the discontinuance of the proceedings upon payment), that Mr Galloway hoped that by making payments, the proceedings might simply go away.
During cross-examination, Mr Galloway was at times evasive in the giving of his evidence. His evidence was simultaneously vague and self-serving. Mr Galloway gave answers by which he variously relied upon his status as a legal practitioner, but at other times sought to insist that his being a lawyer was of little consequence (in particular in relation to his compliance with Court orders). Mr Galloway claimed to have no knowledge (or at least no recollection) of a lawyer having appeared for him at the directions hearing on 29 July 2022. This was problematic given that a review of the Court file revealed that the lawyer was in fact Mr Bolton, who had proffered the undertaking referred to at [2(b)] above on Mr Galloway’s behalf, and on instructions.
Overall, I did not find Mr Galloway to be a forthright, persuasive or credible witness.
It also emerged during cross-examination that despite claims that he had been unable to attend to the simplest tasks such as opening his emails, Mr Galloway had continued to operate his legal practice throughout 2022 and had acted as a solicitor representing clients in a variety of jurisdictions and types of hearings. Despite claiming from the witness box that it is “well known that sometimes people have this problem”. By “this problem”, Mr Galloway was apparently suggesting that people can manage the affairs of others and not their own. I am not persuaded that this general assertion is one which can be readily accepted or which adequately accounts for Mr Galloway’s non-attendance at Court on 1 November 2022.
The evidence before me demonstrates that Mr Galloway represented clients in Court for a period spanning August 2022 to December 2022. The source of this evidence was initially the second applicant. By an Affidavit affirmed 1 March 2023, Mr Zhai,[7] who is a solicitor and was formerly in Mr Galloway’s employ, saw Mr Galloway on some occasions in that timeframe himself, on each of which he says he then messaged the first applicant to tell her. Other instances were apparently reported in the media. One occasion on which Mr Zhai encountered Mr Galloway representing a client in Court was on 25 October 2022, being approximately one week before the default judgment hearing on 1 November 2022. It is open to infer that the hearings which were reported either in the press, or by Mr Zhai, were not the only hearing fixtures which Mr Galloway attended during the period of August 2022 to December 2022.
[7] Read without objection and about which Mr Zhai was not cross-examined
As noted earlier, I place little weight on the reports of both Dr Grech and Mr Watson-Munro in respect of the explanation that Mr Galloway was unable open his emails and that this explains why it was that he failed to engage in the proceedings generally, but more specifically that he failed to be aware of, and attend, the hearing of the default judgment application on 1 November 2022. To the extent that each of the practitioners’ letters tangentially documented an element of depression on Mr Galloway’s part, again this was self-reported by Mr Galloway. Dr Grech stated that he had primarily beien treating Mr Galloway for a leg condition but to being aware of certain of Mr Galloway’s personal circumstances. There was nothing to suggest that Dr Grech was treating Mr Galloway for any ongoing, depressive illness. Mr Watson-Munro’s letter addresses Mr Galloway’s alleged depression on the self-reported basis only, seemingly on the basis of a telephone conversation with Mr Galloway and having received a letter of instruction from Mr Bolton.
For Mr Galloway it was submitted that he was only deprived of a hearing in this matter:
because of his mental illness, and were the court to affirm that deprivation of his basic right, that procedural fairness, then it would be doing so on the basis of someone who was mentally ill, and I believe that society’s expectation is that we take as great a care as we can of those who are unable to care for themselves.[8]
[8] Transcript 2 March 2023 T34.10 to T34.14
This broad submission, while emotive, lacks an evidentiary basis as to its underlying premise. Further, society’s expectations of the Court (other than to the extent that they coincide with the interests of the administration of justice) are not a relevant consideration in determining whether or not to reinstate. Society might be equally concerned by the proposition that someone who is said, by his own lawyer, to be so mentally ill that he is unable to care for himself, has been continuing to practice as a solicitor in Courts of law. However, other than to the extent it belies Mr Galloway’s explanation as to his incapacity, that is not a matter for this Court to resolve.
Absent specific chronologically, relevant and/or independent corroborative evidence that Mr Galloway was unable to attend the hearing on 1 November 2022, I am unpersuaded by his explanation that he was unable to focus on the subject matter of these proceedings or otherwise so incapable of managing his affairs that/because he was prevented from opening his emails. On balance, I am of the view that Mr Galloway took an ostrich-like attitude in this matter, burying his head in the proverbial sand, and assuming that if he paid the applicants (most of) their entitlements, and otherwise declined to engage, the proceedings might dwindle and discontinue: see Citibank Savings Limited v Simpson (unreported, NSW Supreme Court 20 February 1991 per McLaughlin M).
I find that the explanation for Mr Galloway’s non-engagement in the proceedings to not be reasonable. To the extent that explanation is also intended to be the explanation for his non-attendance at the hearing of the application for default judgment on 1 November 2022 (given there is no specific evidence about Mr Galloway’s condition or whereabouts on that date), I am similarly unpersuaded that it is a reasonable explanation.
This factor weighs against reinstatement.
Prejudice
In terms of the prejudice to the respective parties, each would suffer in differing ways depending on the exercise of the Court’s discretion.
For reasons which will be addressed below, the prejudice to Mr Galloway is somewhat intertwined with what is said to be the merits of his case and therefore their potential prospects of success. It is for this reason that it is convenient to first deal with any prejudice to the applicants if the default judgment were to be set aside, and the proceedings reinstatement pursuant to r 17.05 of the Rules.
The nature of the default judgment needs to be considered, especially in light of the fact that Mr Galloway has paid the applicants the majority of their entitlements in August 2022. At the hearing of the reinstatement application hearing, it was not suggested for Mr Galloway that the applicants were not entitled to those amounts. Subject to the matters which are addressed below in relation to the first applicant, there was no basis to think that the proceedings, if reinstated, would go beyond a hearing as to penalty, given that corrective action had been taken. As such, the applicants having now been paid some part of their entitlements, and having secured the default judgment in relation to penalty, there would be prejudice to them if the default judgment were to be set aside.
Balanced against the applicants’ interests, the prejudice to Mr Galloway if the default judgment is not set aside is that he has lost the ability to be heard, primarily it seems in relation to mitigating factors affecting penalty. At the reinstatement hearing no mitigating factors were traversed as being ones which Mr Galloway would wish to advance if the matter were to be reinstated, such that this could contribute to an assessment of whether penalty warranted reconsideration.
I am of the view that in all the circumstances of this case, the question of prejudice is finely balanced such as to essentially render it neutral in terms of how it weighs in relation to reinstatement by itself. However, when considered by reference to Mr Galloway’s prospects of success, the question of prejudice weighs in favour of the applicants.
Prospects
By reason of the fact that Mr Galloway did not participate in these proceedings at all, it is somewhat difficult to identify with precision (or at all), a case the prospects of which can be assessed. Mr Galloway did not file a defence in the matter, nor was any draft proposed defence provided as part of the reinstatement application.
Instead, in opening submissions at the reinstatement hearing, his solicitor said the following:[9]
…were the decision set aside, that there would be potentially a materially and a substantially different outcome were the matter heard with my client able to put on a defence and evidence in relation to matters going to the heart of the question of the termination and the amount awarded in judgment, and indeed, potentially a cross claim under part 24 of the Rules dealing with potential financial irregularities which are alleged to have occurred by the first applicant, who was in control of the – who had full access to the financial affairs of the respondent…
[9] Transcript 2 March 2023 T3.23 to T3.30
While making the above submission, which on its face seemed to suggest that Mr Galloway may seek to challenge the entirety of the proceedings, little attention was paid to the fact that he had already made payments to the applicants.
The very vague suggestion that there may be a cross-claim raised against the first applicant by reason of misappropriation of funds, when taken at an impressionistic level, confronts the following obstacles:
(a)even on Mr Galloway’s case, the allegation appears to be only made against the first applicant;
(b)there was not even the most basic assertion made that Mr Galloway denied owing the second applicant his entitlements, or that any potential set-off claim against the first applicant would affect this;
(c)there was nothing before the Court to indicate that:
(i)any actual financial irregularity had been identified, nor how it involved the first applicant, or at all; and/or
(ii)any report had been made to law enforcement, or any other relevant authority of the irregularity.
(d)Mr Galloway did raise allegations of this nature before the Fair Work Commission in Molina v Galloway [2022] FWC 776. Assuming that the alleged financial irregularities to which Mr Galloway now alludes are the same as were raised before the FWC (and certainly there was no submission put to me that they were not) then the following findings of DP Easton are relevant :
54. Mr Galloway submits that Ms Molina’s conduct of paying Mr Zhai commission payments without authorisation was conduct sufficiently serious to justify immediate dismissal. There is no doubt that Ms Molina paid commission payments to Mr Zhai using Mr Galloway’s funds. Two key questions arise: firstly, whether the payments were authorised and secondly, whether Mr Galloway could have had a reasonable belief prior to dismissal that monies were paid without authorisation.
55. The first thing to say is that if Mr Galloway had not authorised the commission payments and had discovered their existence prior to 17 March 2020, it is incredible that he concealed this knowledge from Ms Molina and Mr Zhai during their difficult discussions on 17 March 2020. Mr Galloway suggests that Mr Zhai spoke to him in a threatening way, demanding that Mr Galloway give Ms Molina access once again to the books of the business. If Mr Galloway thought that Mr Zhai had improperly received thousands of dollars from him, and felt threatened by Mr Zhai about money, it is highly likely that he would have confronted Mr Zhai about the payments.
56. Secondly, it is incongruous for Mr Galloway to regard the payments made by Ms Molina as misconduct but not regard the receiving of unauthorised monies by Mr Zhai as misconduct. Either the payments were authorised or they were not.
57. On Ms Molina’s evidence the payments were authorised, the payments were recorded by her in Mr Galloway’s accounting system, as unsophisticated as it was, and the documents recording these arrangements were continually available to Mr Galloway. Mr Galloway had ‘taken control of the financial accounts’ almost one month earlier on 20 February 2020 but he did not, on his oral evidence in cross-examination, say that he noticed any anomalies or difficulties prior to the incident on 17 March 2020.
58. Further, I am not satisfied that the second element identified in Pinawin is made out. There is no evidence of any actual investigation undertaken by Mr Galloway prior to dismissing Ms Molina, let alone a reasonable investigation for the purposes of the code. Mr Galloway relies on documents discovered after dismissal following sporadic searches of the computer used by Ms Molina.
59. In the circumstances, and on the state of Mr Galloway’s evidence, I am not satisfied that on 18 March 2020 he had reasonable grounds upon which to believe that Ms Molina had engaged in conduct sufficiently serious to justify immediate dismissal. Her application, therefore, falls to be determined by reference to the criteria in s.387 of the Act.
The nature of what is alluded to as forming a potential basis for how Mr Galloway may seek to counter the applicants’ claims is scant and vague, despite an effluxion of time in which such matters might have been properly investigated and advanced. How this allegation is said to operate as a set-off to the applicants’ claims for their entitlements is equally nebulous.
Further, given that Mr Galloway has already paid a part of the applicants’ entitlements, if the only basis upon which default judgment was to be set aside was to enable Mr Galloway to address penalty, it is even more difficult to see how the set-off might apply.
If Mr Galloway genuinely believes there to have been wrong-doing on the part of the first applicant, he should pursue that through proper channels and in an appropriate jurisdiction. On its face, as a potential counter-suit to the first applicant’s claim for her statutory entitlements, contravention and penalty under the Act, in my view the mere suggestion of potential impropriety lacks a reasonable prospect of success as to warrant the proceedings being reinstated simply so that Mr Galloway may or may not explore it: see Kelly v Atanaskovic Hartnell Corporate Services Pty Ltd (No 3) [2023] FedCFamC2G 1 at [149].
Accordingly, the lack of reasonable prospects of success, even at an impressionistic level, is such that it weighs against reinstatement.
Conclusion
Having regard to the unpersuasive and unreasonable explanation for Mr Galloway’s absence at the hearing on 1 November 2022, that the respective prejudice to the parties is slightly greater to the applicants if the matter were to be reinstated, and the lack of an arguable case, the interests of administration of justice are not served by the proceedings being reinstated.
The reinstatement application will be dismissed. I will hear the parties as to costs.
I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Given. Associate:
Dated: 28 April 2023
0
11
0