Payne, Re N.R. and Ors Hurst, Ex Parte K.B. and Anor

[1986] FCA 439

Re: NEVILLE ROSS PAYNE; STUART DAVID PAYNE; MICHAEL ROSS PAYNE and ALAN JOHN
PAYNE
Ex parte: KIM BREVIS HURST
And: MAURICE ALEXANDER LEVI the Trustee of the property of NEVILLE ROSS PAYNE;
STUART DAVID PAYNE; MICHAEL ROSS PAYNE and ALAN JOHN PAYNE
No. 163 of 1983X
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA
Toohey J.

CATCHWORDS

Bankruptcy - application to review trustee's decision to reject proof of debt - review by way of rehearing - debt arising out of workers' compensation claim - evidence of a compensable accident, compensation payments and continuing partial incapacity for work - whether sufficient to establish an entitlement under Workers' Compensation and Assistance Act 1981

Bankruptcy Act 1966 Pt X, s.104

HEARING

PERTH

#DATE 23:9:1986

ORDER

The respondent admit to proof the debt due by Neville Ross Payne, Stuart David Payne, Michael Ross Payne and Alan John Payne, or any of them by reason of their liability to pay compensation to the applicant under the provisions of the Workers' Compensation and Assistance Act 1981.

Note: Settlement and entry of orders is dealt

with in Rule 124 of the Bankruptcy Rules.

JUDGE1

This is an application under s.104 of the Bankruptcy Act 1966 ("the Act") to review a decision by the trustee under an arrangement made pursuant to Pt X of the Act, rejecting a proof of debt lodged by Kim Brevis Hurst.

1. The matter has a number of complications, some of which arise from the way in which the proof of debt was formulated and the response made by Mr. Hurst's solicitors to enquiries by the trustee.

2. So far as the proof of debt is concerned, the story begins with a letter dated 7 October 1985 from the trustee to Mr. Hurst. The letter included the following paragraph:
   
   

"I am aware that prior to the 11th October 1983 (the date of deeds of assignment executed pursuant to Pt X of the Act) there exists a claim by you that you were injured whilst being employed by the Debtors. The records of the business indicate that you were injured as a result of an accident on 29 February 1982. The nature of your injury was backstrain".

The letter continued by informing Mr. Hurst that any claim he might have against the debtors must be proved before the deeds were finalised otherwise that claim would be extinguished. The trustee sought a number of details relating to the accident, medical treatment, subsequent employment and any residual disability.

1. In response Mr. Hurst submitted a proof of debt on form 15 in Schedule 1 to the Act. The contents were not overly informative. Under "Date of Transaction", Mr. Hurst noted "work injury". Under "Consideration or Nature of Debt", he noted "Common law claim for damages negligence. Breach of implied terms of contract to provide safe system of work and claim under Workers Compensation & Assistance Act 1981 as amended". Under "Amount", he noted "Damages to be assessed depending upon the outcome of treatment".

2. However the proof of debt was accompanied by a letter from Mr. Hurst's solicitors, also dated 4 December 1985. The solicitors said that they had only recently been consulted by Mr. Hurst and had not had an opportunity to examine all the information he had provided to them. They referred to the fact that a claim by Mr. Hurst for workers' compensation had been admitted but that his condition had not stabilised nor did he appear to have improved greatly since his accident. The solicitors mentioned the possibility of a common law claim and referred in general terms to the strain placed on Mr. Hurst by carrying beef "on slippery floors, on different levels and down steps".

3. On 19 December 1985 the trustee wrote to Mr. Hurst care of his solicitors and sought evidence and particulars in support of his claim. The evidence and particulars required were detailed over some two pages. No reply having been received to this request, the trustee wrote again on 12 February 1986 setting a deadline of 5.00 p.m. on 14 February for the evidence and particulars.

4. Before the deadline Mr. Hurst's solicitors wrote to the trustee. They provided a considerable amount of information, but in relation to a question as to the date on which Mr. Hurst suffered injury, they wrote:
   
   

"Our client is not able to isolate any particular incident or accident which resulted in his back injuries but it is an accumulation of a number of incidents and accidents during the course of his employment which included lifting and carrying heavy bodies of beef, boxes of meat and meat products, working between levels of different height on slippery floors and up and down steps".

1. By notice dated 27 June 1986 the trustee rejected Mr. Hurst's proof of debt. In summary, the grounds were that Mr. Hurst had no current or existing claim against the debtors, that he was not entitled to any lump sum payments in lieu of weekly entitlements, that he had failed to provide evidence substantiating any incapacity, that he had no claim by reason of any breach of duty or default on the part of the debtors, that he had failed to provide any evidence to substantiate such a claim and finally, that if he did have any such claim it was contributed to by reason of his own negligence. The last of these grounds may, I think, be regarded as purely formal.

2. In support of his application to review the trustee's decision, Mr. Hurst swore an affidavit to which he annexed a number of medical reports. Counsel for the trustee objected to the use of the medical reports as being hearsay evidence but withdrew the objection. No move was made to cross-examine Mr. Hurst on his affidavit nor did the trustee adduce any evidence in opposition to its contents.

3. In Re Hanifin; Ex parte Britcher (1955) 17 ABC 24 Townley J. treated an application to reverse or vary a trustee's decision rejecting a proof of debt, made under the provisions of the Bankruptcy Act 1924, as an appeal by way of rehearing and allowed the applicant to adduce evidence. Section 104 of the present Bankruptcy Act empowers the Court to "review" a trustee's decision and, in my view, that term carries with it the notion that the parties may place before the Court such material as they wish, provided of course that it is relevant and otherwise admissible. Re Masters; Ex parte Gerovich (unreported decision of Toohey J. delivered 30 July 1985); Re Kerr; Ex parte Bannon (unreported decision of Forster J. delivered 24 July 1986). The function of the Court is not to consider the correctness or otherwise of the trustee's decision in the light of the material before him but to determine, in the light of the material before it, whether the applicant has a debt that should be admitted to proof. Of course, inconsistencies in the material provided to the trustee and that offered to the Court may properly be taken into account.

4. In his affidavit Mr. Hurst deposed to an injury sustained to his lower back on 23 February 1982 in the course of his employment by the debtors trading as Ross Payne & Co. The accident occurred while he was getting out of his employer's delivery van. He described the accident in this way "I suffered a sharp pain in the lower part of my back such that I can only describe as that my back 'went'". He was off work from 23 February until about 17 May 1982, during which time he was seen by Dr. McKenna, a general practitioner in Bunbury, and Mr. Nunn, an orthopaedic surgeon in Perth. Mr. Nunn recommended traction and Mr. Hurst was in hospital for some twelve days. On his return to work, he was given duties of a clerical nature but continued to suffer pain and discomfort in the lower part of his back, as a result of which he received physiotherapy and chiropractic treatment. The medical reports annexed to his affidavit are from Mr. Nunn and from Mr. Venerys, another orthopaedic surgeon.

5. Mr. Hurst's account of his accident, medical treatment and time off work was clear and was not contested by the trustee. During the time Mr. Hurst was off work, he was paid his wages. He has not been called upon to pay any of the costs of medical treatment, so it must be assumed that these were borne by his employer. In his affidavit Mr. Hurst referred to his employer as a "self insurer", presumably a reference to the exempt employer provision in s.164 of the Workers' Compensation and Assistance Act 1981 (W.A.). There is ample evidence of acknowledgement that Mr. Hurst suffered a compensable injury on 23 February 1982. In those circumstances it is surprising that, in their letter of 14 February 1986, Mr. Hurst's solicitors spoke of an inability to identify any particular accident. It is not surprising that the trustee was not prepared to accept the proof of debt, particularly as no claim was made for any continuing incapacity for work. In his affidavit Mr. Hurst explained the absence of any reference in correspondence with the trustee to a specific date of accident by saying:
   
   

"... the said disability sustained by me was as a result of the stresses and strains that were placed on my back over a period of time by the very nature of my work duties".

1. Mr. Hurst does not appear to have been seen by any medical practitioner since 1984. He describes himself as "unemployed Delivery Van Driver and Abattoirs Labourer" in his affidavit but there is no evidence as to when and in what circumstances he became unemployed. Counsel for the trustee did mention that Mr. Hurst ceased to be employed when the debtors ceased to carry on business. Counsel for Mr. Hurst did not challenge this assertion. Nevertheless there was no direct evidence of any present incapacity for work or an entitlement to compensation under Schedule 2 to the Workers' Compensation and Assistance Act.

2. It was not in issue that an entitlement to compensation under the Workers' Compensation and Assistance Act is a provable debt. By reason of sub-s.231(2), sub-s.82(1) of the Bankruptcy Act which deals with debts provable in bankruptcy must be read as modified by r.82. Here the Court is concerned with an arrangement under Pt X of the Act. Notwithstanding, an entitlement to compensation (though not a claim for damages in negligence - see sub-s.82(2)) is a provable debt. Sub-section 82(4) requires a trustee to "make an estimate of the value of a debt or liability provable in the bankruptcy which, by reason of its being subject to a contingency, or for any other reason, does not bear a certain value". A person aggrieved by such an estimate may appeal to the Court (sub-s.82(5)).

3. The Workers' Compensation and Assistance Act provides a statutory scheme whereby a worker may be paid compensation from the General Fund in the event of the employer being uninsured and not paying compensation due. It was suggested during the hearing that Mr. Hurst might be able to by-pass the provisions of the Bankruptcy Act. Certainly if any action he took could properly be described as enforcing a remedy against the property of the debtors in respect of a provable debt or commencing a legal proceeding in respect of the debt, sub-s.228(2) of the Act would render such a step incompetent. But these are not matters that arise directly in the present application and I say no more about them.

4. The real question before the Court is this - is there sufficient evidence that the personal injury by accident suffered by Mr. Hurst on 23 February 1982 has produced an incapacity for work, total or partial, or otherwise an entitlement to workers' compensation? The question of a common law claim can be ignored for there was no evidence of such a claim before the trustee or before the Court.

5. Sub-section 102(4) of the Act empowers a trustee, who considers that a proof of debt has been wrongly rejected in whole, to revoke his decision and admit the proof of debt in whole or in part. In practical terms, that might be the most appropriate way of dealing with this matter if Mr. Hurst furnished more adequate material to the trustee. But the Court cannot speak for the trustee or anticipate what might happen hereafter. It must deal with the application before it.

6. Notwithstanding the paucity of evidence (and there must be medical and other evidence relating to Mr. Hurst's disability that could be placed before the Court), I am satisfied that the debtors were, on the date on which they executed deeds of assignment, subject to a liability to Mr. Hurst. There was evidence of a compensable accident, of weekly payments made, of an ability to manage only "light duties" and of continuing pain and discomfort. Together they constitute a provable debt i.e. a liability in the debtors to pay compensation for total or partial incapacity for work. It will be for the trustee to make an estimate of the value of that liability and, no doubt to that end, he will require more information from Mr. Hurst. If the information is not forthcoming, Mr. Hurst runs the risk that the trustee will estimate the value of the liability at some nominal amount.

7. But I am of opinion that it is proper to reverse the decision of the trustee and direct him to admit to proof the debt due by the debtors by reason of their liability to pay compensation to Mr. Hurst under the provisions of the Workers' Compensation and Assistance Act 1981.