Wyeth Australia Pty Ltd v Slaven
[2009] FMCA 474
•13 May 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WYETH AUSTRALIA PTY LTD v SLAVEN | [2009] FMCA 474 |
| BANKRUPTCY – Application for leave to take a fresh step in District Court proceedings. |
| Bankruptcy Act 1966 (Cth), ss.58, 82, 152, 153 Corporations Act 2001 (Cth), ss.182, 1371H |
| Allanson v Midland Credit Ltd and Another (1977) 30 FLR 108 Australian Meat Processor Corporation Limited v O'Connor [2009] FCA 355 Otvosi v Ferella (No 2) (2005) 225 ALR 301 Re Peter Lyle Sharp; Ex Parte: Tietyens Investments Pty Ltd (in liq) & Anor [1998] FCA 1367 |
| Applicant: | WYETH AUSTRALIA PTY LTD (ACN 000 296 211) |
| Respondent: | MICHAEL EDWARD SLAVEN (TRUSTEE IN BANKRUPTCY OF SUSAN ANN DAY) |
| File Number: | SYG 784 of 2009 |
| Judgment of: | Barnes FM |
| Hearing date: | 13 May 2009 |
| Delivered at: | Sydney |
| Delivered on: | 13 May 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Furlan |
| Solicitors for the Applicant: | Anzarut & Holm Lawyers |
| Respondent: | No appearance |
ORDERS
That the applicant has leave, pursuant to s.58(3)(b) of the Bankruptcy Act 1966 (Cth), to continue or to take any fresh steps in proceedings Case Number 5441 of 2008 in the District Court of New South Wales in the matter of Wyeth Australia Pty Ltd v Susan Ann Day.
(a)such leave does not extend to the taking of any steps to enforce any judgment obtained in such proceedings against the person or property of the said Susan Ann Day without the prior leave of the Federal Magistrates Court; and
(b)Wyeth Australia Pty Ltd will not oppose Michael Edward Slaven, in his capacity a Trustee of the bankrupt estate of Susan Ann Day, from being joined in the District Court proceedings at any time.
Notes:
The Court notes that the applicant undertakes through counsel to keep Michael Edward Slaven informed of the orders sought in the District Court proceedings and to give him at least seven (7) days notice of any hearing date in those proceedings.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 784 of 2009
| WYETH AUSTRALIA PTY LTD (ACN 000 296 211) |
Applicant
And
| MICHAEL EDWARD SLAVEN (TRUSTEE IN BANKRUPTCY OF SUSAN ANN DAY) |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
The applicant, Wyeth Australia Pty Ltd, filed an application on 3 April 2009 seeking the Court's leave pursuant to s.58(3)(b) of the Bankruptcy Act 1966 (Cth) to take fresh steps in proceedings commenced by it against Susan Ann Day, the bankrupt, in the District Court of New South Wales proceedings case number 5441 of 2008. The respondent to these proceedings, Michael Edward Slaven, is the Trustee in bankruptcy of Susan Ann Day.
When the matter first came before me there was no appearance by the trustee. Although there was evidence that he had informed the applicant that he would support a proposed s.58(3) application, in order to ensure that the trustee was fully apprised of the state of these proceedings and precisely what orders were sought, the hearing was adjourned so that the solicitors for the applicant could notify the respondent of the orders made and of the adjourned hearing date and to give the applicant the opportunity to file and serve further evidence, in particular in relation to the attitude of the trustee to this application, a point to which I will return.
The evidence before the Court is that Ms Day was employed by Wyeth between 1995 and 2008 and that her employment was terminated after Wyeth discovered that she had allegedly, over a period of some five years, misappropriated company moneys of over $294,000. There is evidence of admissions by Ms Day in relation to her wrongful acts and that over $244,600 has been repaid. Wyeth has demanded repayment of the balance of the moneys said to have been misappropriated and Ms Day has not met those demands.
The District Court proceedings were commenced by Wyeth on 17 November 2008 to recover the outstanding moneys and other losses said to have been suffered as a result of Ms Day's acts. Wyeth has sought summary judgment against Ms Day on the basis that it believes her to have no defence to the proceedings. I am told that the matter is next before the District Court on 25 May 2009. After the District Court proceedings commenced, but prior to the service of the statement and claim and application for summary judgment, Ms Day presented a debtor's petition and became bankrupt on 3 December 2008.
Wyeth has proved in the bankruptcy of Ms Day in respect of its losses, the recovery of which is sought in the District Court proceedings. It now seeks leave of the Court to take fresh steps in those proceedings with a view to obtaining judgment against Ms Day. There is now evidence before the Court of the fact that the solicitor for Wyeth wrote to the trustee informing him of the orders made on the last occasion and requesting an update of the status of Ms Day's bankruptcy.
The firm at which the trustee works confirmed receipt of that letter. The trustee agreed to service of documents by way of registered mail. The applicant served the trustee by registered mail with a copy of its application, its written submissions and the affidavit evidence relied on. It sought further information from the trustee and advised of the date on which the matter would next be before the Court. In particular, it sought confirmation from the trustee in relation to acceptance of the proof of debt and consent to the application.
As attested to in the affidavit of Mr Holm, sworn on 12 May 2009 and filed on 13 May 2009, the trustee responded acknowledging accepting service of the documents and confirming that as trustee of the bankrupt estate of Ms Day he had accepted the proof of debt submitted by Wyeth Australia. He also confirmed that as trustee he consented to the application for leave under s.58(3) filed by Wyeth in this Court and did not intend to be separately represented at the hearing of this matter. The trustee also provided information as to the current status of the bankrupt estate of Ms Day. There is nothing before the Court to indicate that any concern has been expressed by the trustee or conditions sought if the leave is granted as a result of the proceedings today.
Section 58(3)(b) of the Bankruptcy Act provides that except as provided after a debtor has become bankrupt it is not competent for a creditor, except with the leave of the Court and on such terms as the Court thinks fit, to commence any proceedings in respect of a provable debt or take any fresh step in such a proceeding.
As a general principle, the Court may grant leave where the issues would be better or more comprehensively dealt with by a contested trial in the other court than could possibly be the case if the matter had to be determined in this Court after the creditor lodged a proof of debt in respect of its claim (see Allanson v Midland Credit Ltd and Another (1977) 30 FLR 108 at 114).
The first issue addressed by the applicant in this case is whether the claims against Ms Day in the District Court proceedings are in respect of provable debts. Section 82 of the Bankruptcy Act prescribes when a debt will be provable in bankruptcy. Section 82(1) provides that, subject to the Division, “all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of bankruptcy, are provable in his or her bankruptcy.” Relevantly, s.82(2) provides that “Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy.”
This exception is important in this case. On the evidence before the Court it is apparent that Wyeth claims damages against Ms Day for breaches of both express and implied terms of her employment contract and also compensation under s.1317H of the Corporations Act 2001 (Cth) for contraventions of s.182(1) (see Re Peter Lyle Sharp; Ex Parte: Tietyens Investments Pty Ltd (in liq) & Anor [1998] FCA 1367 and also Australian Meat Processor Corporation Limited v O'Connor [2009] FCA 355).
Although such demands may be in the nature of unliquidated damages, they appear to be provable debts within s.82 of the Bankruptcy Act as they appear to arise by reason of a contract between Ms Day and her former employer and also to involve allegations of breach of trust. It is relevant to note that on that basis, as submitted by counsel for Wyeth, in these circumstances any discharge of bankruptcy coming into effect under s.153(1) would not apply in relation to the matters the subject of the District Court proceedings by virtue of s.153(2)(b) which provides that the bankrupt is not released from a debt incurred by a means of fraud or a fraudulent breach of trust.
The applicant submits, and I accept, that there is justification for the District Court proceedings both on a commercial basis and also on a more general basis. Wyeth seeks to proceed against Ms Day in the District Court on the basis that she has committed a serious and systematic fraud against Wyeth over a relatively lengthy period of time resulting in financial loss to the company and that she has failed to repay all of the money misappropriated. Reference is made to the appropriateness of public scrutiny of a court to deter such conduct in the future as well as to Wyeth's concern about violation of its global code of conduct.
While some of these matters are concerns of Wyeth rather than factors necessarily relevant to the decision to be made under s.58(3)(b), they reflect the nature of the proceedings as involving serious allegations of fraud in relation to Ms Day and the implications thereof, as discussed in the Sharp case. A number of considerations have been identified in decisions of this Court and the Federal Court in relation to whether leave should be given under s.58(3)(b). One of those is whether the proceedings involve allegations of fraud or moral turpitude (see Otvosi v Ferella (No 2) (2005) 225 ALR 301 at [12]). This is a matter of some significance in these proceedings.
Other matters referred to in Otvosi v Ferella at [12] and [16] are in some respects relevant and in some respects less relevant. It must be said at the outset that the factors are not all in one way in this case. There is no suggestion that the proposed proceedings would be for the benefit of creditors generally or, indeed, that the participation of the bankrupt in proceedings involving other parties was necessary.
In addition to the nature of the proceedings however, there is also the significant factor that these pending proceedings are close to final resolution. The District Court proceedings have been commenced. All the evidence has been served and if Wyeth's application for summary judgment succeeds the matter will be disposed of within the relatively near future. The proceedings are next before the District Court on 25 May 2009 at which time it is anticipated that a date will be allocated within the next month or so for the hearing of the summary judgment application. This is a matter of some significance (see Allanson at 114 – 115).
There is also some complexity in the facts giving rise to the District Court proceedings. Again this is matter of some significance (see O'Connor at [13]). The alleged fraud was said to be perpetrated over a relatively lengthy period of time and to involve a degree of sophistication. There will be expert forensic accounting evidence before the District Court as to the mechanics of the fraud and the extent of the misappropriation. It is relevant to have regard to that and to whether the matter can be better and more comprehensively and satisfactorily dealt with by allowing the existing proceeding to continue. I consider that this is a strong factor in favour of the grant of the leave sought, together with the imminent possibility of final resolution and the nature of the proceedings. It is also relevant to bear in mind that in this instance Ms Day voluntarily sought bankruptcy.
On balance, having regard to all of the circumstances and the fact that the trustee consents to the application and has not expressed any concerns at all from the perspective of trustee or in relation to the interests of other creditors, I consider that it is appropriate that leave should be granted to Wyeth to continue the District Court proceedings.
It was foreshadowed by counsel for the applicant and I agree that it would be appropriate to impose conditions on such leave to ensure that the applicant not take any steps to enforce any judgment that it should obtain in the District Court without obtaining the leave of this Court and also to ensure that it would not oppose the trustee in the capacity of trustee of the estate of Ms Day from being joined in the District Court proceedings at any time, should the trustee seek to do so.
I consider it is also appropriate that the trustee be kept informed of the progress of the District Court proceedings so that the opportunity to participate is a meaningful opportunity. It has been indicated to me that such an undertaking can be given by the applicant though counsel. Accordingly, I consider it appropriate to make the orders sought.
RECORDED : NOT TRANSCRIBED
I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Barnes FM
Associate:
Date: 21 May 2009
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