Vok v Madden
[2008] FMCA 1275
•25 August 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| VOK & ANOR v MADDEN | [2008] FMCA 1275 |
| BANKRUPTCY – Review of Registrar’s sequestration orders – creditor relied upon ex parte judgment of NSW Industrial Relations Commission – compensation for unfairness upon termination of employment contract – no sufficient reasons shown for going behind judgment – mistaken description of debtor with a business name – no effect on validity of bankruptcy notice or petition – rectification of immaterial errors in order for substituted service and petition – service in accordance with substituted service order established – applications for review dismissed. |
| Bankruptcy Act 1966 (Cth), ss.52(1), 52(2)(b), 109(1)(a), 306, 309(2) Federal Court Rules (Cth), O.7 r.1(3)(c), O.35 r.7(3) Industrial Relations Act 1996 (NSW), ss.106, 106(5), 182, 182(3)(b) |
| Adams v Lambert (2006) 228 CLR 409 Wolff v Donovan (1991) 29 FCR 480 Wren v Mahony (1972) 126 CLR 212 |
| Applicants: | GEORGE & EVA VOK |
| Respondent: | BERNARD GEORGE MADDEN |
File Numbers: | SYG 3166 of 2007 SYG 3167 of 2007 SYG 1371 of 2008 |
| Judgment of: | Smith FM |
| Hearing dates: | 26 June, 23 July, 25 August 2008 |
| Delivered at: | Sydney |
| Delivered on: | 25 August 2008 |
REPRESENTATION
| Counsel for the Applicants: | Mr Vok for Mrs Vok and in person |
| Counsel for the Respondent: | Mr A Searle |
| Solicitors for the Respondent: | Hicksons Lawyers |
ORDERS IN SYG 3166 of 2007
The orders made by Registrar Tesoriero on 16 July 2007 in SYG2095/2007 are corrected under Federal Court Rules O.35 r.7(3) by substituting in Order 1 reference to Bankruptcy Notice No. NN 1980/07 in lieu of NN 1979/07.
The application for review of the Registrar’s orders made on 15 January 2008 is dismissed.
The sequestration order made on 15 January 2008 against the estate of George Vok is affirmed.
The respondent creditor’s costs, including all reserved costs, but not including his costs incurred by reason of the adjourned listings on 26 June 2008 and 23 July 2008, be taxed and paid from the estate of the applicant bankrupt in the priority fixed by s.109(1)(a) of the Bankruptcy Act 1966 (Cth).
ORDERS IN SYG 3167 of 2007
The orders made by Registrar Tesoriero on 28 March 2008 in SYG3167 of 2007 are corrected under Federal Court Rules O.35 r.7(3) by including an order that paragraph 1 of the petition is amended by substituting a reference to Bankruptcy Notice No. NN 1979/07 in lieu of NN 1980/07, and that further verification and service is dispensed with.
The application for review of the Registrar’s orders made on 28 March 2008 is dismissed.
The sequestration order made on 28 March 2008 against the estate of Eva Vok is affirmed.
The respondent creditor’s costs, including all reserved costs, but not including his costs incurred by reason of the adjourned listings on 26 June 2008 and 23 July 2008, be taxed and paid from the estate of the applicant bankrupt in the priority fixed by s.109(1)(a) of the Bankruptcy Act 1966 (Cth).
ORDERS IN SYG 1371 of 2008
The application is dismissed.
The respondent creditor’s costs, including all reserved costs, but not including his costs incurred by reason of the adjourned listings on 26 June 2008 and 23 July 2008, be taxed and paid from the estates of the bankrupt applicants in the priority fixed by s.109(1)(a) of the Bankruptcy Act 1966 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 3166 of 2007
SYG 3167 of 2007
SYG 1371 of 2008
| GEORGE VOK & EVA VOK |
Applicant debtors
And
| BERNARD GEORGE MADDEN |
Respondent creditor
REASONS FOR JUDGMENT
(revised from transcript)
I have before me three applications. The first, in SYG3166 of 2007, is an application by Mr Vok seeking a review of a sequestration order made against his estate by Registrar Segal on 15 January 2008. Mr Vok’s application requires an extension of time, but, as will appear, I have not found it necessary to consider this part of his application. The second application, in SYG3167 of 2007, is brought by Mrs Vok seeking review of a sequestration order against her estate made by Registrar Tesoriero on 28 March 2008. The third application, in SYG1371 of 2008, is brought by Mr and Mrs Vok seeking to set aside the two bankruptcy notices which were relied upon in the petitions giving rise to the two sequestration orders.
Essentially, all the applications rely on the same contentions, which have been presented by Mr Vok in evidence and submissions on behalf of himself and his wife. My present judgment explains my orders in all three applications.
Both petitions rely upon the same judgment debt entered against Mr and Mrs Vok in the District Court of NSW, which was also the basis of the two bankruptcy notices. The judgment gave enforceable effect to orders of the Industrial Relations Commission of New South Wales in Court Session, by which Mr and Mrs Vok were made personally liable for amounts also ordered against their company, Electromagnetic Spectrum Pty Ltd (“ESPL”), in proceedings under s.106 of the Industrial Relations Act 1996 (NSW) brought by the petitioning creditor, who is now the respondent to all three applications, Mr Madden.
Before examining the contentions of Mr Vok, I shall sketch the nature of the claim in the Industrial Commission, and how it proceeded. Mr Madden’s claim arose out of his employment by ESPL, which commenced under a written contract of employment made on 17 July 2000, and continued until it was terminated without notice on 2 February 2004. On that day, he was locked out of his office and was told by Mr Vok on the telephone at home that he was immediately terminated.
On 7 December 2004, Mr Madden commenced his proceedings in the Industrial Relations Commission, naming ESPL and Mr and Mrs Vok as the three respondents. Section 106 of the Industrial Relations Act gave the Industrial Relations Commission a broad discretion to vary contracts of employment which were found to be unfair and to make compensatory orders, including against directors of employing companies. It is unnecessary for me to identify the various ways in which Mr Madden sought to identify unfairness in the terms with which he was employed and, more importantly, in the manner and consequences of the termination of his employment.
The proceedings in the Industrial Commission passed through interlocutory stages without its three respondents filing replies or evidence in accordance with the Commission’s Rules. The application was therefore set down for an ex parte hearing before Kavanagh J on 22 September 2005, when counsel for the respondents appeared and successfully obtained the vacating of that hearing. Directions for the respondents to file a reply and list of issues were made by Kavanagh J, and the parties were later notified of a conciliation hearing set down before Backman J on 15 November 2005. The respondents’ previous counsel was also notified.
However, the respondents did not file appearances nor any other documents, and the hearing notifications were returned “unclaimed”. There was no attendance by them nor on their behalf at the conciliation hearing. Backman J said there had been “flagrant disregard” of the Court’s processes, and set the matter down for an ex parte hearing on 20 February 2006.
Within days of 15 November 2005, the respondents’ counsel claimed that the non‑attendance on 15 November 2005 was the result of his mistaken belief that the conciliation hearing would be held in Phillip Street rather than Hospital Road, notwithstanding that the notifications had clearly identified the latter venue. However, no application to set aside Backman J’s default orders was made until shortly before the ex parte hearing which she had appointed.
On 17 February 2006, the respondents applied to Backman J to vacate the appointed ex parte hearing. Her Honour heard arguments, and declined to make that order, publishing her reasons on 20 February 2006 (see Madden v Electromagnetic Spectrum Pty Limited & Others [2006] NSWIRComm 49). She did not consider that satisfactory explanations had been given for the respondents’ failure to comply with timetables and directions, she was not persuaded that a satisfactory explanation had been given for their absence on 15 November 2005, and she considered that their explanations for the late application to set aside her orders were also inadequate. She concluded:
taking into account the prejudice which would flow to the applicant if the ex parte hearing did not proceed, I therefore declined to grant the application.
On 20 February 2006, Walton VP refused another application to vacate the hearing, which then proceeded before Backman J. The respondents appeared with their counsel, but withdrew after she again refused to adjourn the hearing.
Backman J gave judgment on Mr Madden’s summons on 7 November 2006. She examined the contract of employment of Mr Madden by ESPL, and found that it was unfair within s.106 because it failed to make provision for payment in the event of summary termination, and because it failed to make provision for adequate redundancy or severance payments (see Madden v Electromagnetic Spectrum Pty Limited and Others [2006] NSWIRComm 354 at [44]). She considered what monetary orders should be made in favour of Mr Madden under s.106(5), and ordered the payment of a $50,000 termination payment agreed in the employment contract, an additional sum for fair and reasonable notice, compensation for unpaid entitlements including annual leave and superannuation contributions, and an additional redundancy payment. Backman J explained how she arrived at the various sums involved, which totalled $142,215.38, and also ordered the payment of interest and costs.
Her judgment explained the basis for making Mr and Mrs Vok personally liable as well as their company:
59The first respondent, as the applicant’s employer for the duration of his employment, should be liable for the payment of monetary orders. The second and third respondents in my view were both instrumental in engineering the applicant’s summary termination of employment thereby avoiding the making of appropriate termination payments otherwise payable to him. This conduct as I have found occurred without an explanation or justification for the termination, and without any notice to the applicant. The evidence which establishes this conduct has already been canvassed in detail. Accordingly the first, second and third respondents should jointly bear responsibility for the unfairness of the contract: see Brown and Others v Rezitis and Others [1970] HCA 56; (1970) 127 CLR 157 at 165, 168; AFMEPKIU New South Wales Branch v Daniel and Ors [2006] NSWIRComm 206.
The orders made by Backman J were certified by the Deputy Industrial Registrar in a certificate dated 12 December 2006 under s.182 of the Industrial Relations Act. The heading to the certificate identifies Mr Vok as “George Vok trading as Bezzera Coffee Machines”. On the evidence before me, this was the first time that this description appeared in the heading of a document in the Industrial Commission, and is unclear how the reference to a business name came to be included in the certified order. Possibly it derived from some confusion in the originating summons, which at para.10 pleaded that the first respondent, ESPL, “is and was at all material times carrying on an importation business trading as ‘Bezzera Coffee Machines’ under the Business Names Act”, but the list of respondents at the end of the summons referred to Mr Vok as so trading.
Whatever the reason for, and correctness of, Mr Vok being attributed personally with this business name, in view of [59] of Backman J’s judgment there could have been no doubt that the order of the Industrial Commission intended to impose liability on ESPL as the corporate employer of Mr Madden, and that Mr Vok was being made personally liable for the reasons indicated by her Honour. I do not consider that, even if it was incorrect, the description of Mr Vok in the certificate of the Commission’s order reflected any error which is material to the validity of any subsequent proceedings in bankruptcy based on the Industrial Commission’s order.
The certified order of the Industrial Relations Commission could not be enforced without being registered in the District Court (see s.182(3)(b) of the Industrial Relations Act and Mejias v Federal Express (Australia) Pty Ltd [2007] FMCA 1817 at [14]). Such registration occurred, and a judgment was entered in the District Court on 19 February 2007 against ESPL and Mr and Mrs Vok in the amount of $166,793.83. A certificate of judgment was issued on 7 March 2007, which also describes Mr Vok as “George Vok trading as Bezzera Coffee Machines”. The certificate of judgment was then attached to the two bankruptcy notices addressed separately to Mr and Mrs Vok, which were both issued by the Official Receiver on 17 May 2007. The bankruptcy notice addressed to Mr Vok continued to describe him with a reference to the business name, in the same manner as the Industrial Relations Commission certified order and the certified judgment of the District Court.
On 16 July 2007 Registrar Tesoriero made orders allowing substituted service of both bankruptcy notices pursuant to s.309(2) of the Bankruptcy Act. I do not consider it necessary for me to examine the evidence in support of the making of those orders. Paragraph 1 of the orders allowed Mr Madden to serve the notices on three locations in relation to each of Mr and Mrs Vok, being known addresses of their lawyers and also of ESPL. Paragraphs 2, 3, 4 and 5 provided:
2.Service in accordance with this order shall be deemed good and sufficient service of the Bankruptcy Novice upon the Debtor.
3.The Bankruptcy Notice shall be deemed to be served on the Debtor on 30 July 2007.
4.A copy of the Bankruptcy Novice to be served pursuant to para 1 of this order is to be annexed to any affidavit proving that service.
5.The copies of the Bankruptcy Notice for service and proof of service all be amended by deleting the words in paragraph 3 of the notice “after service on you of this Bankruptcy Notice” and substituting “after 30 July 2007”.
An error occurred in the wording of para.1 of the order relating to the bankruptcy notice addressed to Mr Vok, which stated:
1.Service of Bankruptcy Notice No. NN 1979 of 2007 addressed to George Vok trading as Bezzera Coffee Machines may be effected by serving the Bankruptcy Notice together with a sealed copy of this order (and any extension of Bankruptcy Notice) as follows: …
Mr Vok now points out that the reference to the number of the bankruptcy notice in this paragraph is to the bankruptcy notice addressed to his wife and not himself, which was number NN1980 of 2007. However, Mr Madden submits that this was a manifest slip arising from a word‑processing error, and that it is clear that the Registrar intended to refer to the bankruptcy notice NN1980, which was in fact “addressed to George Vok”. I shall consider this point further below, and also the conflicting evidence on whether service was properly effected in accordance with the two orders of Registrar Tesoriero.
There was non‑compliance by both Mr and Mrs Vok with the bankruptcy notices, which undoubtedly came to their attention. If service had been duly performed, they both committed acts of bankruptcy on 20 August 2007.
Separate creditors petitions were filed against Mr and Mrs Vok on 12 October 2007. The two petitions took different courses in the Registrars’ lists, arising from difficulties in relation to service. No issue is now taken in relation to service of the petitions on either Mr or Mrs Vok. In any event, they are to be taken to have been duly served since they have appeared in response to the processes (see Federal Court Rules O.7 r.1(3)(c) and De Robillard v Carver (2007) 159 FCR 38 at [86]).
The petition against Mr Vok was listed before Registrar Segal on 19 November 2007. His listing report notes that “respondent in person at 9.46 am, but left before 2nd call”, and that at 10.50 am he acceded to an adjournment application which Mr Vok had made before leaving, by adjourning the petition to 15 January 2008. On 11 January 2008 Mr Vok filed affidavits and a notice of opposition raising various challenges to the Industrial Relations Commission judgment. However, he did not appear on 15 January 2008, and the sequestration order was made in his absence.
In relation to Mrs Vok, a notice of grounds of opposition in similar terms was filed on 20 March 2008, and on 28 March 2008 Mr Vok appeared for his wife before Registrar Tesoriero. The Registrar made a sequestration order against her after, presumably, hearing from Mr Vok.
As I have indicated, I am now addressing applications to review the making of both sequestration orders, and also to set aside both bankruptcy notices. This requires me to conduct a de novo consideration of whether Mr Madden has established his entitlement to the making of sequestration orders, and whether the Court’s discretion would be properly exercised by making the orders (see Pattison v Hadjimouratis (2006) 155 FCR 226, and Totev v Sfar [2008] FCAFC 35).
Mr and Mrs Vok’s contentions have been unclearly presented by them to the Court, with a large quantity of documents which are difficult to digest and are repetitive in their attachments. Unfortunately, Mr Madden’s affidavits are also extensive and suffer from the same problem of repetitious attachments. In an attempt to provide focus, Mr Vok filed a “list of contentions” on 14 July 2008, which contains 10 contentions. Unfortunately, as elaborated by him today, some of them overlap and others need splitting. I therefore propose to address 10 points which I have distilled from all of Mr Vok’s evidence and submissions to me.
Mr and Mrs Vok’s first point is that the sequestration order against Mr Vok is “invalid” because it was made by Registrar Segal in the absence of Mr Vok, in circumstances where he had formed an expectation that the listing on 15 January 2008 would be adjourned on his application supported by the material he had filed on 11 January 2008.
However, the evidence before me does not, in my opinion, provide support for an argument that there was a denial of procedural fairness on that occasion. I can find no evidence of anything being said to Mr Vok by Registrar Segal on 19 November 2007, or by any other person subsequently, including Mr Madden’s representatives, which allowed Mr Vok to assume that the petition would be further adjourned on 15 January 2008. It therefore appears to me that he took a risk that the matter might proceed in his absence, when he neither attended nor arranged to be represented on that day.
In any event, I do not consider that matters of procedural fairness at the hearing before the Registrar should now cause me to set aside the sequestration order in circumstances where, as I shall explain, I cannot find other reasons for not proceeding to make a sequestration order on Mr Madden’s petition. I have now conducted a full and de novo consideration of the petition and Mr Vok’s opposition, and Mr Vok has in the course of his review application been given more than ample opportunity to present to the Court all the material and submissions upon which he relies in opposition to the petition.
Mr and Mrs Vok’s second point is that the addresses shown for Mr Vok, and to a lesser extent for Mrs Vok, on the petitions and bankruptcy notices are different and are also not their appropriate addresses. It is unclearly submitted that these circumstances prevent the bankruptcy court being satisfied as to due service of both the bankruptcy notices and the petitions.
However, these submissions reflect confusion as to how the Court may be satisfied as to due service of the bankruptcy processes. The petitioning creditor is not bound by any particular description of an address for a debtor which is inserted in a bankruptcy notice or petition. Rather, the petitioning creditor must satisfy the Court that there has been service of the bankruptcy notice and of the petition in accordance with relevant legal requirements. Where service has been effected in accordance with orders for substituted service, or, in the case of petitions, is taken to have been properly effected under the Rules, it is irrelevant how the debtor’s addresses were described in the documents.
In relation to both the present bankruptcy notices, I am satisfied as to due service in accordance with the two substituted service orders made by Registrar Tesoriero on 16 July 2007. This required service by posting to three addresses which were not Mr and Mrs Vok’s addresses shown in the notices. I am satisfied that this occurred, and it is therefore immaterial whether their addresses shown in the notices were also correct or appropriate places where they might have been located.
In relation to both petitions, I have noted above that both Mr and Mrs Vok made appearances before the Court to contest the petitions, and are therefore to be taken to have been duly served under the Rules. It is therefore also immaterial how their addresses were described in the petition or any other document. Moreover, in both matters there are on the file affidavits of due service of the petition, and the circumstances shown as to service in those affidavits has not been contested.
I therefore do not consider that any point of invalidity to the bankruptcy notices, nor ground of opposition to the petitions, can be made out by reason of the appearances of the addresses on the documents identified by Mr Vok. My above reasoning does not require me to address whether, in fact, any of the stated addresses were incorrect or inappropriate.
Mr and Mrs Vok’s third point relies upon the incorrect reference in Registrar Tesoriero’s substituted service order in relation to the bankruptcy notice addressed to Mr Vok, which I have referred to above, i.e. that it mis‑described the number of that notice. Mr Madden’s counsel submits that this was an error in the Registrar’s order which can be cured nunc pro tunc pursuant to the Federal Court’s power under O.35 r.7(3) of the Federal Court Rules or an equivalent implied power, which is available to this Court when exercising its bankruptcy jurisdiction (see Roskell v Snelgrove [2008] FCA 427 at [38] and [40]). That rule provides:
A clerical mistake in a judgment or order, or an error arising in a judgment or order from an accidental slip or omission, may at any time be corrected by the Court.
It is submitted that there was an “accidental slip” on the face of Registrar Tesoriero’s order, when considered in the context of the two bankruptcy notices and the second order made by him at the same time in relation to the notice addressed to Mrs Vok. I accept that submission. It is, in my opinion, manifest that there was a slip in this order, and that it would now be appropriate to exercise the Court’s power to rectify it by retrospectively amending the order to refer to the correct numbering of the bankruptcy notice against Mr Vok.
The need for that correction, and indeed the prior error in the form of the order which was issued by the Court, can have had no bearing on the actions taken to comply with the order. Indeed, it was so insignificant, that it appears to have been overlooked by everybody until recent times. There is no evidence that anyone at any time has been misled by the wrong numbering in the reference to the bankruptcy notice addressed to Mr Vok. I therefore do not consider that this contention gives rise to any invalidity in the bankruptcy notice, or its service, or affecting the making of the sequestration order.
I note that a similar rectification order is also required to allow amendment of the petition addressed to Mrs Vok, so as to correct a reference to the number of the bankruptcy notice issued in relation to Mrs Vok. I am satisfied that this insignificant error was probably also overlooked by accident at the time when the sequestration order was made. It is clear, in my opinion, that an amendment would have been ordered, and that further verification and service would have been dispensed with.
Mr and Mrs Vok’s fourth point is that the Court cannot be satisfied that either of the bankruptcy notices was served in the form required by the two substituted services orders. It will be recalled that para.5 of Registrar Tesoriero’s orders on 16 July 2007 required that:
The copies of the Bankruptcy Notice for service and proof of service all be amended by deleting the words in paragraph 3 of the notice “after service of you on this Bankruptcy Notice” and substituting “after 30 July 2007”.
The only evidence of service which was before the two Registrars when they made the sequestration orders were affidavits sworn by a solicitor in the firm representing Mr Madden. She deposed to due service by posting to each of the three addresses copies of documents which are identified as annexures to her affidavits. But the annexed bankruptcy notices do not carry the amendment ordered by the Court, but are the unamended notices as originally issued by the Official Receiver. This difficulty was not raised by Mr or Mrs Vok in opposition to the petitions, but was adverted to by me in the course of the hearing of the matters before me, and gave rise to an adjournment at the request of Mr Madden to present further evidence and submissions.
The new evidence consisted of further affidavits by the solicitor, in which she said that, contrary to her first affidavit, correctly amended notices were in fact posted in accordance with Registrar Tesoriero’s orders. Her new evidence was supported by evidence from a clerk at the solicitor’s firm, who asserted that she was responsible for copying and preparing the documents for posting. Both of those persons were cross‑examined, and maintained the more recently presented version of events. Their evidence left me unclear how the original false affidavits came to be made. However, I am persuaded to accept the second affidavits from the solicitor, supported by the evidence of the solicitor’s clerk, that duly amended notices were in fact posted in accordance with the substituted service orders.
I am confirmed in making that finding by evidence of Mr Vok in an affidavit which was filed before the recent evidence from Mr Madden’s solicitors. In this affidavit, Mr Vok deposed to having received a bankruptcy notice, and to his wife having received a bankruptcy notice, copies of which are respectively attached to his affidavit. Those notices carry the amendment ordered by the Court. No other explanation for Mr Vok being in possession of the duly amended bankruptcy notice appears to me to arise from the evidence, and it confirms in my mind that in fact correctly amended bankruptcy notices were enclosed with the Court’s order and the covering letters which were posted to Mr and Mrs Vok in accordance with the two substituted service orders. I am therefore satisfied as to due service of the bankruptcy notices upon which each petition relies, and that the acts of bankruptcy relied upon in the petitions occurred.
These findings of fact spare me from interesting issues as to the consequences of a failure to serve a bankruptcy notice showing amendments ordered in a substituted service order, where the Court’s order was also served with the unamended notice. In this respect, my researches were assisted by Registrar Segal, who drew my attention to judgments of the Federal Court in Clyne v Deputy Commissioner of Taxation (Lockhart J, 13 August 1982), Vincent v State Bank of NSW (Foster J, 3 November 1995), and Re Darby; Ex parte Pacific Publications Pty Ltd (Sundberg J, 9 November 1995). I was inclined to think that the absence of any amendment to the served notice could have given rise to confusion about the date for compliance, even where the substituted service order was also served. Clyne might appear to be distinguishable because, in that case, no confusion would arise because an incompletely marked amendment to the notice was clarified by the concurrently served order.
For the above reasons, I do not accept the fourth point argued by Mr and Mrs Vok.
Mr and Mrs Vok’s fifth point commences a series of contentions, in effect, inviting the Court not to accept the formal affidavits of debt in support of the petitions, and to look behind the judgment debt which is relied upon, i.e. the judgment of the District Court giving effect to the certified order of the Industrial Relations Commission. They submit that the first reason for doing this in relation to Mr Vok’s petition, is because Mr Vok was wrongly named in the Industrial Relations Commission certified order, in the District Court’s judgment, the bankruptcy notice, and in the petition, as “George Vok trading as Bezzera Coffee Machines”.
Mr Vok submits that, in fact, he never traded personally in that name, but at all times was managing director of ESPL when it used the business name. He submits that ESPL used the name for a period of time which included the employment of Mr Madden, but which had ceased before the commencement of the Industrial Relations Commission proceeding.
Whether these matters are proved by any evidence before me is not clear, but I am prepared to assume that there might be such evidence. However, I do not consider that the erroneous attribution to Mr Vok with a business name in these circumstances gives rise to the invalidity of the bankruptcy notice, nor gives rise to a reason for looking behind the judgment upon which the notice and petition are based. As I have explained above, the extrinsic evidence explaining the Industrial Relations Commission proceedings, and most importantly, the judgment of Backman J which informs the certified order of the Industrial Relations Commission, makes it very clear that in fact a personal liability was imposed by those orders on Mr Vok. It is immaterial to the reality of the basis for that liability that his name was mistakenly associated with the business name in the headings of the subsequent certificate of the order and the judgment which made it enforceable against Mr Vok personally. The mistake does not provide a reason for doubting whether there was “in truth and reality a debt due to the petitioning creditor” (cf. Wren v Mahony (1972) 126 CLR 212 at 224).
Nor, in my opinion, does the mistake otherwise affect the validity of the bankruptcy notice and petition addressed to Mr Vok. As I have indicated above, in my opinion, no irregularity resulted from the inclusion of a reference to the business name in the description of the debtor, since the bankruptcy notice accurately reflected the terms of the judgment relied upon. Moreover, if there was irregularity, then, in my opinion, it was of a nature which can be overlooked pursuant to s.306 of the Bankruptcy Act, and should be overlooked, because no substantial injustice has occurred. The business name was immaterial to the identification of the debt alleged in the notice and petition, and to the identification of the debtor who was alleged to be liable in his personal capacity (see Adams v Lambert (2006) 228 CLR 409, and compare Matheson v Scottish Pacific Business Finance Pty Ltd [2005] FCA 670).
Mr and Mrs Vok’s sixth point is that the Court should look behind the formal evidence of the judgment debt because the orders of the Industrial Relations Commission were entered after the ex parte hearing which occurred in the circumstances I have described above.
It is well established that a bankruptcy court does have power to “go behind” a certified judgment, and not to accept the formal affidavit of debt, particularly where the judgment is a default judgment (see Wren v Mahoney (supra) and Wolff v Donovan (1991) 29 FCR 480 at 481 and 486). However, this usually requires the Court to have been persuaded that there are “substantial reasons … for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner”.
In the present context, the reference to “a debt due to the petitioner” needs some refinement, since the present judgment was the product of the exercise of broad discretions given to the Industrial Relations Commission under s.106 of the Industrial Relations Act. However, I am prepared to accept that it might be possible for the bankruptcy court to examine a default judgment arising under that power, to see whether it should be disregarded because it was not arrived at by a fair procedure or reflected an improper assessment of relevant matters.
The evidence before me, however, does not persuade me that the bankruptcy court should disregard the orders of the Industrial Relations Commission which have given rise to the District Court judgment in the present matter. Although the procedures in the Industrial Relations Commission did include the exercise of default powers, it is clear that Backman J satisfied herself as to matters of relevance in relation to due process, and I am not persuaded that the considerations which she refers to in her judgment of 20 February 2006 and her later judgment do not show a proper assessment of procedural fairness or relevant evidence.
Moreover, Mr and Mrs Vok had rights to challenge Backman J’s orders in the Industrial Relations Commission, and have exercised those rights, albeit unsuccessfully. As I have indicated, they unsuccessfully challenged the order for an ex parte hearing after it was made and before the final judgment of Backman J. Moreover, while the proceedings in bankruptcy have been on foot, a further application was made to the Industrial Court for an extension of time to allow an appeal from Backman J’s final orders. This was addressed by Marks J on 13 June 2008 (see Vok and Anor v Madden [2008] NSWIRComm 118). His Honour considered Mr Vok’s arguments that Backman J was misled in relation to significant pieces of evidence, which appear to have been the same arguments which I shall address below. However, he was not persuaded that Backman J failed to take into account any relevant evidence. He also concluded that procedural considerations provided reasons for refusing the application for extension of time.
It appears to me that Mr and Mrs Vok were afforded over the whole course of their proceedings in the Industrial Relations Commission very ample opportunities to fully defend the summons which gave rise to Backman J’s judgment. Although they now complain that they failed to enjoy those rights as fully as they now desire, I am not persuaded that they have shown a sufficient reason arising from the circumstances of the ex parte hearing to cause a bankruptcy court to ignore or go behind the resulting judgment.
In this respect, I note that Mr Vok, as well as applying to the Industrial Relations Commission, has also recently applied to the District Court to set aside its judgment. His motion was adjourned on 22 July 2008, and is listed again on 26 August 2008. I have taken into account that fact, and considered whether or not to adjourn the present proceedings again. However, no evidence nor submissions have been presented to me by Mr and Mrs Vok to show that they have any prospects of success in that application. Prima facie the District Court acted only in a ministerial capacity when entering its judgment to allow the enforcement of Industrial Relations Commission orders. I am not satisfied that the mere existence of Mr Vok’s motion in the District Court provides a sufficient ground for declining to affirm the Registrars’ sequestration orders today nor for further adjourning these proceedings.
Mr and Mrs Vok’s seventh point, which also invites the Court to go behind the Industrial Relations Commission order or otherwise refuse to make a sequestration order, is that they have “a genuine and valid Cross Demand” which is particularised in evidence they have presented to the Court. They allege that Mr Madden upon the termination of his employment was in possession of property of ESPL, being a motorcar, a computer, an attaché case, a telephone and some documents of the company, and that he has not returned these items. The evidence of Mr Madden before this Court is that he was never asked to return this property, and that at all times it has remained available for repossession by ESPL. He says that the registration of the car expired, and that he has made no use of it since then. He says that he gave oral evidence to Backman J about these matters.
The evidence about the details of these matters is not clear. Mr Vok has an onus of proof in this respect to establish some factual matter of genuine substance which was not raised before Backman J, and which would have been likely to have led her Honour not to make an award in favour of Mr Madden upon which a sequestration order should have been based.
In my opinion, his evidence is far from raising even a claim of substance in this respect. As Marks J observed in his review of Backman J’s judgment, it is impossible to detect whether she was advised about Mr Madden’s possession of these items during the oral hearing on 20 February 2006. Nor is it apparent from her judgment whether any failure to take these matters into account affected the quantum of the compensation she awarded to Mr Madden. Her judgment makes no mention of the chattels, nor papers, nor any possible continuing use of the motorcar, but it is not possible to reconstruct her discretionary reasoning to form any conclusion whether this was because she did not think these matters to be material, or because she was unaware of them.
In all the circumstances, I am not persuaded that Mr Vok’s evidence in this Court about these matters sufficiently provides reasons for going behind Backman J’s order, so as to render the judgment debt unreliable. I do not consider that it establishes any invalidity in the bankruptcy notices, nor sufficient reason not to accept Mr Madden’s affidavits of debt or to decline to make sequestration orders.
Mr and Mrs Vok’s eighth point is that Backman J was in error in including an amount of $17,800 as compensation for a loss by Mr Madden arising from the failure by ESPL to make superannuation contributions required under law. Mr Vok argued that ESPL had been pursued by the Australian Taxation Office for the unpaid contributions to be paid to it and not to Mr Madden. However, he has not presented any evidence that at any time ESPL ever paid these amounts to either the Taxation Officer or to an appropriate superannuation fund or to Mr Madden. On all the evidence, including Mr Madden’s evidence about his claimed loss, I consider it more likely than not that Backman J’s conclusion that it was appropriate to include this sum as a component of Mr Madden’s compensation was properly arrived at. I am certainly not satisfied that there is any reason to find to the contrary.
Mr and Mrs Vok’s ninth point, which they numbered contention 7, makes a general assertion that “Mr. Madden dishonoured the Employment Agreement entered into on 17th July 2000”. This appears to rely upon Mr Vok’s argument that it was dishonourable or in breach of contract for Mr Madden to have continued in possession of the employer’s property after the termination of his employment. However, it does not appear to me that this contention does more than attempt to address in different terms the contentions which I have already addressed above.
Mr and Mrs Vok’s tenth point is of a similar nature. They argue in contention 8 that:
The proceedings commenced by Mr. Madden in the Industrial Relations Commission on 7th December 2004 were futile and had no prospect of success.
However, manifestly Mr Madden’s claim was not futile and did succeed. On all the evidence before me I can see no reason for doubting that it was open to Backman J to have arrived at orders in exercise of her jurisdiction under the Industrial Relations Act. I can see no sufficient reason for the bankruptcy court now to decline to give effect to that judgment, by allowing Mr Madden to rely on it in support of the debt upon which the petitions are based. I do not consider that any of the matters which I have addressed above should give rise to the bankruptcy court exercising its discretion to decline to make sequestration orders, if those matters were viewed from the perspective of s.52(2)(b) of the Bankruptcy Act.
Conclusions
For the above reasons, I am not persuaded to accept any of the points made by Mr and Mrs Vok in opposition to the petitions and as grounds for setting aside the two sequestration orders. I am satisfied on the evidence before me as to proof of the matters identified in s.52(1) of the Bankruptcy Act, based on my acceptance of the affidavit verifying the petition as sufficient evidence. I am satisfied as to all other matters required to be established under the Bankruptcy Act and Rules before the making of sequestration orders on the two petitions, and have not found any sufficient discretionary reason for the Court to dismiss the petitions. I note that Mr and Mrs Vok have not presented any evidence seeking to persuade the Court that they are able to pay their debts, in particular the debt owed to Mr Madden.
I am, therefore, not persuaded that any grounds for setting aside the Registrars’ two sequestration orders have been made out, nor that there is ground for setting aside either of the bankruptcy notices.
I consider that all three applications before me should be dismissed and that the two sequestration orders should be affirmed.
I certify that the preceding sixty-three (63) paragraphs are a true copy of the reasons for judgment of Smith FM
Associate: Lilian Khaw
Date: 9 September 2008
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