Workcover Corp v Hahnheuser - [2001] FMCA 27

FEDERAL MAGISTRATES COURT OF AUSTRALIA

WORKCOVER CORP v HAHNHEUSER [2001] FMCA27

BANKRUPTCY – Creditors Petition

Applicant:

WORKCOVER CORPORATION

Respondent:

AXEL HAHNHEUSER

File No:

AZ 28 of 2001

Delivered on:

18 July 2001

Delivered at:

Melbourne

Hearing Date:

5 February 2001

Judgment of:

Phipps FM

REPRESENTATION

Counsel for the Applicant:

Mr O’Donnell

Solicitors for the Applicant:

Thomson Playford

Counsel for the Respondent:

In person

ORDERS

THAT the Estate of Axel Hahnheuser be sequestered.
THAT the Applicant’s costs including any reserved costs be paid in accordance with the Bankruptcy Act 1966.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE

AZ 28 of 2001

WORKCOVER CORPORATION

Applicant

And

AXEL HAHNHEUSER

Respondent

REASONS FOR JUDGMENT

Introduction

This is a contested creditors application for an order for the sequestration of the respondent’s estate.
As its name shows, the Applicant is the statutory body responsible for the payment of workers compensation in the State of South Australia. The statute is the Workers Rehabilitation and Compensation Act 1986 (SA) (The Act).
The respondent was employed by Adelaide Casino Pty Ltd as a security officer commencing in 1989. In December 1993 he became ill through stress and workers compensation payments commenced. Subsequently, the applicant ceased payments. This resulted in the issue going to a review officer, who found that the illness was compensable. As allowed by the Act, the applicant appealed from the decision of the review officer to a Worker’s Compensation Appeal Tribunal. The Tribunal, constituted by a single judge, overturned the review officer’s decision.
The Workers Compensation Appeal Tribunal decision was given on

19 December 1995. On 18 January 1996 a single judge of the Supreme Court of South Australia gave leave to appeal. An appeal from the Tribunal’s decision was available only a question of law. When the appeal came on for hearing before the full court of the Supreme Court of South Australia on 10 September 1996, that court came to the conclusion that there was no point of law involved and revoked leave to appeal. That left the decision of the Tribunal as the final decision.
The decision of the Tribunal was that the Respondent had never been entitled to payment of workers compensation. That brought into play s106(2) of the Workers Rehabilitation and Compensation Act 1986 (SA). It provides:
“Where on the final determination of a claim it appears that an amount to which the claimant was not entitled has been paid under this section, the corporation may recover that amount as a debt.”
The Applicant sued the Respondent in the District Court of South Australia and obtained judgment and orders for a total of $35,630.52 comprised as follows:
(1)On 24 August 1998 — $24,340.88
(2)On 24 February 1999 — Interest on the judgment fixed in the sum of $3,500
(3)On 19 November 1999 — costs of $7,789.64.
A bankruptcy notice was issued on 18 May 2000 claiming that the Respondent owed the Applicant a debt of $29,549.40. That consisted of the amounts set out above plus further interest on the judgment in the amount of $5,208.52 being interest calculated at the rate of 6% pursuant to Rule 84.19 of the District Court Rules 1992 (SA) from 25 February 1999 to 26 April 2000, being 427 days.
The bankruptcy notice complied with the requirements of s41 of the Bankruptcy Act 1966 and Regulation 4.02 of the Bankruptcy Regulations. It was served personally on the Respondent on 3 June 1999.
The date for compliance with the bankruptcy notice was 24 June 2000. Prior to that date no application was made by the Respondent to extend the time for compliance or to set aside the bankruptcy notice, nor was it otherwise complied with.
The creditors petition was issued on 18 August 2000, returnable initially on 9 October 2000 and was served personally on the respondent on

26 August 2000.
The Respondent filed a notice of intention to oppose petition dated

8 September 2000. By that notice of intention to oppose the petition and the affidavits which he has sworn and filed in support of it and by his oral arguments at the hearing, the Respondent has sought to oppose the petition on a number of grounds.
He seeks to impugn the finding made under the Workers Rehabilitation and Compensation Act that he was not entitled to workers compensation. He seeks to do this on the basis of what he alleges is the behaviour of the Applicant while the hearing before the review officer was part heard.
What the Respondent says is that in October of 1994, shortly after he had finished giving his evidence to the review officer, an employee or officer of the casino telephoned an officer of the Applicant stating that the Respondent was doing work for a computer company, I.P.C. Subsequently the Applicant commenced an investigation into this, amongst other things, interviewing the principal of the computer company I.P.C., using the compulsory powers available under Section110 of the Act and having investigators follow and observe the Respondent including following and observing him at court and near the hearing.
The Respondent says that the allegation that he was working was completely wrong, he was never asked about it and that once the matter was under investigation by the review panel, the Applicant was not entitled to conduct its own investigations.
The petition for bankruptcy relies upon the failure of the Respondent to comply with a bankruptcy notice. That bankruptcy notice is based upon the judgment of the District Court of South Australia. The basis of that judgment was that the Respondent had received interim workers compensation payments and subsequently it had been determined by the Appeal Tribunal hearing an appeal from the decision of the reviewing officer that he was not entitled to compensation.
What the Respondent seeks to do is to allege that there is no debt owing because of conduct of the Applicant outside the Review Officer and appeal process under the Workers Rehabilitation and Compensation Act. None of this contains any basis for attacking the validity or enforceability of the judgment in bankruptcy proceedings.
There is no prospect of the District Court judgment being set aside or otherwise impugned. The Applicant’s investigation of whether or not the Respondent was working whilst receiving workers compensation had no effect on the decision made by the Appeal Tribunal. In the workers compensation proceedings, it was found that as a result of a meeting on

2 December 1993 with supervising officers, the appellant became ill through stress and that he became incapacitated for work by reason of illness caused by stress.
Section 30 of the Workers Rehabilitation and Compensation Act states:
(1)Subject to this Act, a disability is compensable if it arises from employment.
(2)Subject to sub-section (2a), a disability arises from employment if –
(a) In the case of a disability (not being a secondary disability or a disease) - it arises out of or in the course of employment; or
(3)(a)     A disability that consists of an illness or disorder of the mind caused by stress is compensable if, and only if -
(a)Stress arising out of employment was a substantial

cause of the disability; and
(b)   The stress did not arise wholly or predominantly from –
(i)     Reasonable action taken in a reasonable manner by the employer to transfer, demote, discipline, counsel, retrench or dismiss the worker;
(ii)    A decision of the employer, based on reasonable grounds, not to award or provide a promotion, transfer or benefit in connection with the worker’s employment; or
(iii) Reasonable administrative action taken in a reasonable manner by the employer in connection with the worker’s employment.

The meeting on 2 December came about as a result of conflict between the Respondent and other employees at the casino and difficulties that was causing in rosters. The issue was whether it came within S18 (3) (b) (iii). The review officer found that the meeting on 2 December was reasonable administrative action but it was not conducted in a reasonable manner. Therefore he found that the illness was compensable.
The Appeal Tribunal found that the meeting of 2 December was conducted in a reasonable manner and therefore the Respondent’s stress was not compensable. Whether or not the Respondent was entitled to compensation turned on the narrow factual point of whether the meeting of 2 December was conducted in a reasonable manner. Both the review officer and the Review Tribunal found that the Respondent suffered an illness caused by stress which arose out of his employment and which was a substantial cause of his disability. It was this disability which the Applicant investigated. The investigations had no relevance to the issue on which the Respondent lost. The investigation could never have been a basis for attacking the Appeal Tribunal decision or the judgment.
Next, the Respondent relies upon counter-claims or set-offs. As well as his skills as a security officer, Mr Hahnheuser had computer programming and systems writing skills. As part of his employment, Mr Hahnheuser was required to operate the security computer system at the casino. Once his computer programming skills became apparent, these were utilised for him to commence working on an improvement to the computerised security systems. Mr Hahnheuser’s description of it is that it enabled a database to be developed of persons who were barred from the casino so that they could be recognised more easily.
In his affidavits, Mr Hahnheuser alleges that the database which he describes as “PhotoFiler 2000” was a computer program developed from scratch by him trading as Global Software Design between 26 December 1992 and 8 November 1996.
In paragraph 4 of his affidavit sworn 13 December 2000, Mr Hahnheuser says this:
“The application was conceived on the Adelaide Casino’s manual barring procedures from general experience gained during the course of the respondent’s employment as a security officer. The expectation of the application was to make the Adelaide Casino’s manual barring process more efficient providing significant cost savings to the Adelaide Casino and faster recognition of barred patrons – creating a safer environment for both the Adelaide Casino’s patronage and employees.”
In an affidavit sworn 27 October 2000 by Mr Paul Mason, Secretary of Adelaide Casino Pty Ltd and its General Manager – Support Services, he says this in paragraph 3:
“With respect to paragraph 2 of the said notice:
(a)From about late 1989 Mr Hahnheuser was employed by Adelaide Casino as a casual uniformed security officer.
(b)In the course of performing his duties as such, Mr Hahnheuser had access to the records and data (“Data”) maintained by Adelaide Casino in connection with patrons that had been banned from the Casino.
(c)Although it was not a reason for his employment as a uniformed security officer, it came to light in due course that Mr Hahnheuser had computer programming skills and these he offered to utilise in producing a computer program for Adelaide Casino to compute/manage the “Data”.
(d)From about late 1992, in lieu of performing his normal duties as a uniformed security officer, Mr Hahnheuser was allowed to spend worktime to this end, and was paid extra salary in recognition of the additional work being performed.
(e)As at about April 1993, the said program was at least partially completed and contained a significant amount of then current data.
(f)In late April 1993, Mr Hahnheuser indicated to Adelaide Casino that he was no longer prepared to provide his computer programming services as part of his existing employment as a uniformed security officer and offered a service contract on terms that were unacceptable to Adelaide Casino. In essence, the price offered was considered to be significantly higher than the value of the computer programming services to Adelaide Casino. Accordingly, Adelaide Casino did not accept Mr Hahnheuser’s offer and Mr Hahnhauser declined to perform any further work of this nature.”
Mr Hahnheuser sent a letter dated 30 April 1993 to the Casino commenced as follows:
“As a follow-up to our discussions on 29/4/93, where we were unable to come to an agreement on working conditions for a specialised computer project, I have decided to conduct all present and future projects solely through GLOBAL SOFTWARE. This results in any further work being carried out for the department, excluding uniformed security officer duties, to be conducted outside of my roster and at a rate of $79.99 per hour.”
When Mr Hahnhauser ceased his computer programming work, he returned to and continued on with his uniformed security officer duties. Mr Hahnhauser filed a considerable amount of written material and made a lengthy oral submission. From that, I have interpreted that the counter-claims are as follows:
(a)When Mr Hahnheuser ceased work on the computer program, he stored necessary data, such as the source code, for use of the computer program elsewhere on other equipment owned by him. He claimed a storage fee for the Adelaide Casino’s data so retained by him;
(b)In 1994, Adelaide Casino took steps to see if it could gain access to the database without the information held by Mr Hahnhauser. He claims this breached his copyright and so he is entitled to damages;
(c)The investigation already referred to he says was a defamation of him and he is entitled to damages. In addition he says that this activity of the Adelaide Casino caused him to lose a contract with Crown Casino in Melbourne. The proposed contract was to use the “PhotoFiler” 2000 software. He claims damages for all of this.
Each of these claims depends upon ownership of copyright in the computer program, or at least some relevant part of it being with Mr Hahnhauser. The material I have set out above from the evidence shows that it is common ground between Mr Hahnhauser and Adelaide Casino, and therefore between petitioning creditor and respondent in this proceeding, that Mr Hahnhauser conceived and did the work on the computer program in the course of his employment with Adelaide Casino.
Subsection 35(6) of the Copyright Act 1968 provides:
“Where a literary, dramatic or artistic work … is made by the author in pursuance of the terms of his or her employment by another person under a contract of service … that other person is the owner of any copyright subsisting in the work … “
By subsection 10(1) of the Copyright Act 1968, literary work includes:
“… a computer program or compilation of computer programs.”
The copyright in the computer program therefore, on the evidence in this application, belongs to Adelaide Casino. If the data stored using the computer program belongs to Adelaide Casino, there is no basis for Mr Hahnhauser claiming storage charges for data and there is no basis for a claim by him that any right he had was breached by Adelaide Casino employing somebody else in an attempt to obtain access to the data within its own computers.
Likewise, there is no basis for a claim by Mr Hahnhauser that in some way a prospective sale of the computer software to Crown Casino was prevented or affected. Again, on the evidence in this application, he had nothing to sell. He did not own the copyright in the computer program.
In addition, there is no basis for Mr Hahnheuser to claim damages or compensation. He had no agreement with Adelaide Casino to entitle him to storage charges. There was not an agreement to pay. There was not even agreement by Adelaide Casino that the data be removed from its computers and placed on Mr Hahnheuser’s computer.
The Adelaide Casino employed a software engineer to attempt to obtain access to the data compiled by Mr Hahnheuser. The attempt was unsuccessful and so even if Mr Hahnheuser had any ownership in the data no loss has been suffered.
The defamation claim is based on the circumstances surrounding the investigation by WorkCover Corporation. Adelaide Casino reported that Mr Hahnheuser might have been working whilst on WorkCover payments. WorkCover Corporation had an investigator interview the suggested employer. Investigators also conducted surveillance of Mr Hahnheuser and interviewed employees at Adelaide Casino. Mr Hahnheuser has obtained a considerable body of material using Freedom of Information legislation and has exhibited it to various of his affidavits. From that, it appears that the information given by Adelaide Casino was that Mr Hahnheuser had an involvement with Global Software Design, and the investigation was to see whether he was carrying out any work in the Global Software Design business and so earning income. The fact is, as can be seen from other material, contained in Mr Hahnhauser’s affidavits and exhibited to affidavits, that Mr Hahnheuser was using the name Global Software Design. By 1994, he was making demands for payment from the casino using a letterhead with the words ‘Global Software Design’. For Adelaide Casino to report to WorkCover Corporation that Mr Hahnheuser may have been conducting business for Global Software Design was a correct statement. He was in fact using letterhead with that name on it. Normally the use of business correspondence with a business name letterhead accompanies the carrying on of the business and hopefully income-earning activity.
In any event, the information was provided by an employer to the WorkCover Corporation, both having a duty to ensure that an employee’s WorkCover claim was properly investigated and administered. The information was given on an occasion of qualified privilege. Finally, it is put on behalf of the applicant creditor that any defamation claim is statute barred, the relevant limitation period being three years – section 36, Limitation of Actions Act 1936 (SA).
Mr Hahnheuser did not make application to set aside the bankruptcy notice on the basis of set-off or counter-claim. He must, if he is to rely on these matters, establish that the court should be satisfied that for other sufficient cause a sequestration order ought not to be made – paragraph 52(2)(b) Bankruptcy Act 1966. As well as there being no basis in the evidence in this application for saying there is any cause of action which could constitute a course of action or counter-claim against anyone there are the following factors. If there is any claim it is against Adelaide Casino for damages. There is not the necessary mutuality of debts which would justify an attack on the judgment debt. The claim, in any event, is vague, quantified only in lump sum amounts and has not been pursued, and there is evidence that Mr Hahnheuser does not intend to pursue those claims. He says in one of his affidavits that he lacks the means to do so. There is no sufficient cause why a sequestration order should not be made.
The other matter which can be relied upon by a debtor is an ability to pay his or her debts. In his affidavit of 17 October 2000, Mr Hahnheuser says that his income was then $350.80 per fortnight being a Commonwealth NEIS allowance. In addition, he received an average weekly income of $80.75 through casual work as a licensed security officer. He said that on 14 October he had $311.17 in the bank. He owned a 1978 Ford Cortina station wagon valued at $50.00 and a 1983 Honda 250cc motorcycle valued at $25.00. He says his major assets are his software products. The only one identified in his material is the “PhotoFiler”. I repeat that on the evidence in this application, he does not own the copyright in that “PhotoFiler”. In any event, whatever software he has, has not produced any income for a number of years. The inference I draw from the evidence is that his software products are valueless.
Mr Hahnheuser does not have the means to pay the judgment debt. He has virtually no assets and a small income. I find that he is unable to pay his debts.

Section 52 of the Bankruptcy Act 1966 sets out the matters requiring proof. These are as follows:
52(1)At the hearing of a creditor’s petition, the court shall require proof of:
(a)the matters stated in the petition (for which purpose the

court may accept the affidavit verifying the petition as

sufficient);
(b)service of the petition; and
(c)
the fact that the debt or debts on which the petitioning creditor relies is or are still owing;

and if it is satisfied with the proof of these matters, may make a sequestration order against the estate of the debtor.
I am satisfied by the affidavits filed of each of the matters in (a), (b) and (c). In addition, an affidavit that the debt is still owing at the hearing of the Creditor’s Petition and affidavits of search as required by O77 R19 of the Federal Court Rules were filed.
Section 52(2) then states:
“… If the court is not satisfied with the proof of any of those

matters, or is satisfied by the debtor;
(a)that he or she is able to pay his or her debts; or
(b)that for other sufficient cause, a sequestration order ought not to be made; it may dismiss the petition.”
For the reasons already given, I am not satisfied of any of the matters in paragraphs (a) and (b) of subsection 52(2).
Accordingly, an order will be made for the sequestration of the estate of the respondent debtor.

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of Phipps FM

Associate:

Date: