John William Burden v Walgett Shire Council

Industrial Relations Commission (NSW)|2006-07-01|Before: Haylen J

CITATION: John William Burden v Walgett Shire Council [2006] NSWIRComm 169

APPLICANT: John William Burden PARTIES: RESPONDENT: Walgett Shire Council

Unfair contract - Industrial Relations Act 1996 - s 106 - applicant a bankrupt at time proceedings commenced - at conciliation respondent raises capacity of applicant to commence and maintain the proceedings - trustee in bankruptcy gives authority to applicant to continue the proceedings and purports to retrospectively authorise the commencement of the proceedings - applicant and trustee in bankruptcy apply for Trustee to be joined or substituted as the applicant - respondent argues that the proceedings are a nullity because of operation of Bankruptcy Act 1966 (C'wth) and joinder or substitution not available - provisions of s 108B relied upon by respondent - substance of application held to effectively make application by Trustee under s 106 - that application available under s 108B(3) - exceptional circumstances found to exist justifying the making of late application.

CATCHWORDS: Unfair contract - Industrial Relations Act 1996 - s108B(3) - exceptional circumstances justify making of late application by Trustee in bankruptcy - bankrupt applicant commences s 106 proceedings in time - question of capacity of bankrupt applicant to commence and continue the proceedings - substance of application considered.

Bankruptcy Act 1966 (C'wth) - s 58(1)(b) - bankrupt commences proceedings under s 106 Industrial Relations Act 1996 (NSW) - respondent challenges capacity of applicant to commence and maintain the proceedings - Trustee in Bankruptcy authorises continuation of the proceedings and purports to retrospectively authorise commencement of proceedings - whether s 106 proceedings are "property" vesting in the Trustee.

Arnold (on behalf of Australians for Animals) v Queensland and anor (1987) 73 ALR 607 at 613 Australia and New Zealand Banking Group Ltd v Larcos (1987) 12 NSWLR 286 Australian Building Construction Employees and Builders Labourers Federation v The Master Builders Association of New South Wales (1986) 69 ALR 515 Baldry v Jackson [1976] 2 NSWLR 415 Bride v Peat Marwick Mitchell [1989] WAR 383 Chorlton v Dickie (1879) 13 ChD 160 Colley v Futurebrand FHA Pty Ltd (2005) 63 NSWLR 291 Cook v Hathway (1869) LR 8 Eq 612 Cotterill v Bank of Singapore (Australia) Ltd (1995) 37 NSWLR 238 Crowe v UCS Development Pty Ltd (2003) 130 IR 266 at [41] Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 133 Daemar v Industrial Commission of New South Wales & ors [1988] 12 NSWLR 45 at 50F Federal Commission of Taxation v Official Receiver (1956) 95 CLR 300 at 327 Francis v National Mutual Life Association of Australasia Ltd [1999] 2 QdR 335 at 357 Fuller v Beach Petroleum NL (1993) 43 FCR 60 Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297 at 303 - 304 Great Scott International Pty Ltd v Cosmetic Suppliers Pty Ltd (2005) 147 IR 95 Griffiths v Civil Aviation Authority (1995) 137 ALR 521 Hagans v UnitedGlobalCom Inc & ors [2004] NSWIRComm 164 at [35] CASES CITED: Harris v Western Australian Exim Corp (1994) 129 ALR 387 Hughes v Pump House Hotel Co Ltd (No 2) [1902] 2 KB 485 Johnston v English (1886) 55 LT 55 K v Cullen (1994) 125 ALR 38 Loxton v Moir (1914) 18 CLR 360 at 379) Movitor Pty Ltd (1996) 64 FCR 380 at 391-392 National Provincial Bank Ltd v Ainsworth [1965] AC 1175 at 1247-1248 Perfection Dairies Pty Ltd v Finn [2006] NSWIRComm 137 at [38]) Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 610 Pridmore v Magenta Nominees Pty Ltd (1999) 160 ALR 458 at [58] and [59] R v Moore; ex parte AWU Graham R v Turbet; ex parte ABCE & BLF (1978) 144 CLR 335 Re Tosich Construction Pty Ltd; ex parte Wily (1997) 140 ALR 18) Re Wiseu (1983) 4 IR 67 at 72 Re Z (1970) 15 FLR 420 Roman Catholic Archbishop of Perth v AA to JC inclusive (1995) 18 ACSR 333 at 348 Smith v Chevelle Developments Pty Ltd t/as Snowden Real Esate [2005] NSWIRComm 109 Sneade v Wotherton (1904) 1 KB 295 at 297 The Queen v Toohey; ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 at 342 UTSA Pty Ltd (in Liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 251 on appeal 21 ACSR 457 Willoughby v Clayton Utz unreported [2005] WASC 47 at [24]) WorkCover Authority v Lucon Australia Pty Ltd (2002) 112 IR 332 at 349

APPLICANT: Mr D Chin of counsel SOLICITORS: Rice More & Gibson

LEGAL REPRESENTATIVES: RESPONDENT: Mr A Assaf of counsel SOLICITOR: Mr G A Murphy

5 - INDUSTRIAL COURT OF NEW SOUTH WALES CORAM: HAYLEN J 18 May 2006

Matter No IRC 2390 of 2005 JOHN WILLIAM BURDEN v WALGETT SHIRE COUNCIL Application under s 106 of the Industrial Relations Act 1996 JUDGMENT [2006] NSWIRComm 169

1 On 11 May 2005, solicitors acting for John William Burden filed in the Court's Registry a Summons for Relief under s 106 of the Industrial Relations Act 1996. Mr Burden had been employed by Walgett Shire Council since mid-October 2001 until that employment was terminated with effect from 31 December 2004. In the application, Mr Burden sought the payment of accumulated bonuses under the terms of the contract that had been withheld and the payment of redundancy. In a formal Reply, Walgett Shire Council contested Mr Burden's claims for the amounts of money sought and denied that there had been any unfairness in the terms or operation of the contract of employment. 2 The application was listed for conciliation on 16 November 2005. Shortly before the commencement of the conciliation, representatives of the respondent raised with Mr Burden's legal representatives a threshold question, namely, the alleged status of the applicant as an undischarged bankrupt and the fact that proceedings had been commenced by the applicant at a time when he was an undischarged bankrupt. In light of those matters, by consent, the application was stood over with leave to have it relisted after the parties had further discussions and the applicant's legal representatives had sufficient time to consider Mr Burden's circumstances. 3 By facsimile dated 13 March 2006, solicitors acting for the Council wrote to the Court indicating that the parties were attempting to resolve the matter but opposed any attempt to have the matter relisted for conciliation. That correspondence then set out in short detail the disability said to flow from Mr Burden's status as an undischarged bankrupt. In short, the correspondence alleged that, in late October 2001, the Federal Court of Australia had made a sequestration order against the applicant and that the applicant was not to be discharged from bankruptcy until October 2010. At the time of filing the application, Mr Burden was therefore an undischarged bankrupt. It was alleged that the right to litigate was "property" within the meaning and operation of the Bankruptcy Act, 1966 (C'wth) and that the applicant's right to take advantage of s 106 of the Industrial Relations Act 1996, coming into existence subsequent to the date of bankruptcy, resulted in that right, as property, automatically vesting in the Trustee. In addition, it was asserted that, as the cause of action had vested in the Trustee by virtue of the operation of the Bankruptcy Act 1966, the applicant had no standing to bring the action and the proceedings were therefore a nullity as was every step in the proceedings. It was stated that if the applicant attempted to relist the matter for conciliation, the respondent would take all necessary steps to have the matter dismissed. 4 On 23 March 2006, the applicant and the Trustee filed a Notice of Motion dated 16 March 2006 seeking an order pursuant to the Industrial Relations Rules that the Trustee of the property of John William Burden, a bankrupt, be joined as an applicant in the proceedings. A further order sought, pursuant to s 170 of the Industrial Relations Act 1996, the proceedings be amended to make "the Trustee of the property of John William Burden "a bankrupt, an applicant in the proceedings "nunc pro tunc". When the matter was listed again to programme the applicant's Notice of Motion, there was no appearance for the defendant. The applicant's Notice of Motion was listed for hearing and, in light of the correspondence from the respondent, a direction was made that, if those matters were to be raised in the proceedings, they should properly be raised by way of notice of motion and a timetable was established to allow those steps to be taken. Leave was also granted to the applicant to amend his Notice of Motion. 5 On 4 April 2006, the respondent filed a Notice of Motion seeking an order pursuant to s 162(2)(h) of Industrial Relations Act 1996, namely, that the proceedings brought by Mr Burden be dismissed. The grounds in support of the Notice of Motion set out, in a summary way, the issues that had been raised in the respondent's correspondence with the Court in March 2006. Pursuant to leave granted to the applicant, on 7 April 2006, an amended Notice of Motion was filed seeking the following orders: 1. An order pursuant to IRC (83)(c) be (sic) "The Trustee of the Property of John William Burden" a "Bankrupt" joined or substituted as an applicant to the proceedings. 2. An order that pursuant to s 170 of the Industrial Relations Act 1996 that the proceeding be amended to make "The Trustee of the Property of John William Burden" a "Bankrupt" an applicant in the proceedings nunc pro tunc. 6 When the motions were listed for hearing, the Court heard the applicant's motion first then immediately proceeded to deal with the respondent's motion at the conclusion of evidence and argument on that motion. As it eventuated, the evidence and submissions were the same in both matters. THE EVIDENCE 7 The applicant read two affidavits from Mr Serow, solicitor for the applicant. His evidence was that he had taken instructions from Mr Burden and the Trustee and had confirmed that, at the time of initiating the proceedings, Mr Burden was a bankrupt owing approximately $14,000. Mr Burden was of the belief that had the respondent not terminated his employment and paid the bonuses under the contract then he would have been able to have been discharged from bankruptcy. It was not until the day of the conciliation in November 2005 that Mr Serow became aware that Mr Burden was an undischarged bankrupt. 8 On 5 December 2005, Mr Serow received correspondence from the Trustee, W J Fletcher. In that correspondence, Mr Fletcher as trustee of Mr Burden's bankrupt estate, authorised Mr Serow "to act on behalf of the bankrupt in relation to the claims against the Walgett Shire Council". This authority was forwarded to solicitors acting for the respondent. The respondent replied that the Trustee's authority to continue the proceedings did not assist Mr Burden as he did not have standing to commence the proceedings which could not be remedied by the Trustee's authority. It was again asserted that the respondent was of the view that the proceedings were a nullity. Mr Serow responded to that letter asserting that there were grounds permitting Mr Burden to proceed with the application. 9 A further development occurred by letter dated 28 March 2006 signed by the Trustee Mr Fletcher. In this document, forwarded to the applicant's solicitors, the Trustee reiterated his previous authority to the solicitors authorising them to act on behalf of the bankrupt in relation to the claim against Walgett Shire Council in the s 106 proceedings. Apparently, in order to deal with the respondent's response to the giving of that authority the Trustee went further, stating: If there is any doubt in relation to the bankrupt's capacity to commenced (sic) these proceedings, I, as Trustee, now retrospectively elect to continue the proceedings in accordance with s 60(2) of the Bankruptcy Act 1966. 10 Mr Burden's evidence was that, in approximately July 2002, he was informed that he had been made bankrupt, the Trustee of his property had informed Walgett Shire Council of his status as a bankrupt and deductions were made from his pay each week and directed to the Trustee. Mr Burden then noted that, in approximately mid-2004, the respondent became subject to administration but, in the meantime at the end of July 2003, the respondent had issued him with a new contract in which he was redeployed as Group Manager - Service Management of the Council. On 31 December 2004, his contract as Group Manager - Service Management was "prematurely" terminated. 11 In approximately late 2004, Mr Burden was informed by the appointed administrator of the respondent that the respondent would not pay any of the bonuses that he had expected to receive and that those bonuses amounted to approximately $28,000. At the time of the termination of his contract, Mr Burden remained indebted as a bankrupt in the sum of approximately $14,000 and he noted that had he received the bonus payments he would have been able to discharge his debts to the Trustee. 12 In mid-November 2004, Mr Burden instructed solicitors in relation to matters arising from his employment with the respondent. He did not indicate at that time that he was an undischarged bankrupt as he did not believe that his status as a bankrupt was relevant to any issue. He confirmed that it was only at the conciliation held on 16 November 2005 that the respondent raised for the first time with his legal representatives his status as a bankrupt as an impediment to the proceedings. 13 For the respondent, the affidavit of its solicitor, Gervais Murphy, was read. In March 2006, Mr Murphy had a search conducted of the National Personal Insolvency Index of the Insolvency Trustee Service of Australia in relation to Mr Burden. A copy of the Federal Court sequestration order was placed before the Court indicating that on or about 24 October 2001 the Federal Court of Australia had made the order against Mr Burden. It was noted that Mr Fletcher of Bentleys Brisbane had been appointed Trustee in bankruptcy in relation to Mr Burden's estate. 14 Mr Murphy stated that, pursuant to a contract made on or about 15 October 2001, the respondent employed Mr Burden as a Group Manager Infrastructure Management for a period of four years commencing on 8 October 2001 and terminating on 7 October 2005. On or about 8 November 2004, Mr Murphy stated that the respondent had lawfully terminated the contract with effect from 31 December 2004. It was noted that at 31 December 2004 Mr Burden was an undischarged bankrupt. Mr Burden was also an undischarged bankrupt at 11 May 2005, being the date on which the proceedings were filed. SUBMISSIONS 15 In the applicants' submission, the issue raised by the respondent revolved around the application of certain provisions of the Bankruptcy Act 1966 (C'wth). Those provisions were: (i) 58.(1) Subject to this Act, where a debtor becomes a bankrupt: (a) the property of the bankrupt, not being after-acquired property vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and (b) after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee, or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee. ... (6) In this section, "after-acquired property" in relation to a bankrupt, means property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt. ... (ii) 116. (1) Subject to this Act: (a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; (b) the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge; (c) property that is vested in the trustee of the bankrupt's estate by or under an order under section 139E; and (d) money that is paid to the trustee of the bankrupt's estate under an order under section 139E; is property divisible amongst the creditors of the bankrupt. (2) Subsection (1) does not extend to the following property: ... (g) any right of the bankrupt to recover damages or compensation: i. for personal injury or wrong done to the bankrupt, the spouse of the bankrupt or a member of the family of the bankrupt; or ... (iii) The interpretation provisions in section 5 provide: 'property' means real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property; ... 'the property of the bankrupt", in relation to a bankrupt, means: (a) except in subsections 58(3) and (4): i. the property divisible among the bankrupt's creditors, and ii. any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt; .. . 16 The application for joinder or substitution had been made because the respondent had asserted that because of his bankruptcy the applicant did not have capacity to commence the proceedings. To make good this assertion, the respondent had to establish that, by virtue of s 58(1)(b) of the Bankruptcy Act 1966 (C'wth), the applicant's "right" to seek relief under s 106 of the Industrial Relations Act 1996 vested in the Trustee prior to the commencement of the proceedings on 19 May 2005. There was no issue that the applicant became a bankrupt after commencing employment with the respondent and remained an undischarged bankrupt at the time of the commencement of the s 106 proceedings. It was clearly the respondent's contention that the applicant's "right" to commence proceedings constituted "after-acquired property" that vested in the Trustee pursuant to the provisions of s 58(1)(b) of the Bankruptcy Act 1966 (C'wth). 17 The applicants submitted that contention must fail in light of the judgment of the Court of Appeal in Colley v Futurebrand FHA Pty Ltd (2005) 63 NSWLR 291. In that case, Handley JA, supported by Giles JA, held that the filing of an application under s 106 resulted in a right to accrue or to be acquired or vested for the purpose of s 30 of the Interpretation Act 1987 and the common law presumption against interference with vested rights. That result followed because, upon the filing of an application, the applicant acquired a legally enforceable right to have the Court hear and determine the application according to law. In the applicant's submission it followed that, at all times prior to the filing of the summons by the applicant, the applicant did not acquire or accrue or have vested in him any legally enforceable right. Up until the time of filing, the applicant had a mere "right" to take advantage of s 106 which had not been converted into an acquired or accrued right. The only act or event that could convert the mere right to take advantage of s 106 into an acquired right was the filing of an application. 18 The question then arose whether the applicant's mere "right" to take advantage of s 106 fell within the notion of "after-acquired property" within the meaning of s 58(1)(b) of the Bankruptcy Act 1966 (C'wth). The term "after - acquired property" was specifically defined as "property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt" (s 58(6). 19 It was submitted that the mere right to take advantage of s 106 was not property "acquired by" or which devolved on the applicant for the following reasons: (a) in accordance with the decision in Colley , the applicant did not acquire any legally enforceable right until he commenced the proceedings under s 106. Therefore, even if the right to take advantage of s 106 could be regarded as a future or contingent interest within the definition of "property" in s 5 of the Bankruptcy Act 1966 (C'wth), it had not been acquired by the applicant for the purpose of s 58(1)(b) until at least the filing of an application; (b) a statutory right to take proceedings, such as a right to appeal, did not of itself have the character of property for the purposes of s 58(1) - see Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 133; (c) the meaning of "choses in action" is that of a right enforceable by action or a right of action itself ( Loxton v Moir (1914) 18 CLR 360 at 379). A choses in action may be the property of a person entitled to enforce it ( Cummings v Claremont Petroleum NL at 133; Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297 at 303 - 304). However, the Court of Appeal in Colley established that, prior to the filing of an application, the applicant did not have any right enforceable by an action or any right of action as such because he had no ascertainable right or entitlement defined by reference to past facts such as rights to compensation or a right to bring an action for damages for negligence (see Georgiadis at 304); (d) in National Provincial Bank Ltd v Ainsworth [1965] AC 1175 at 1247-1248, Lord Wilberforce stated: Before a right or interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability. The High Court in The Queen v Toohey; ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 at 342 approved that statement. Any right to take advantage of s 106 lacked the character of "property" because the potential claimant had no definable or ascertainable right or entitlement by reference to past events. The mere right to take advantage of a statute was distinguishable from those statutory rights that can constitute property as identified by the High Court in Cummings at 133, such as a statutory duty on the Commissioner for Taxation to pay to an employee any excess tax and a corresponding legal right in the taxpayer to have this duty performed (see Federal Commission of Taxation v Official Receiver (1956) 95 CLR 300 at 327). 20 The decision of Schmidt J in Smith v Chevelle Developments Pty Ltd t/as Snowden Real Estate [2005] NSWIRComm 109 relied upon the broad definition of "property" in s 5 of the Bankruptcy Act 1966 (C'wth) to hold that the right to commence proceedings under s 106 was a "future ... contingent" interest. It was submitted that this approach was erroneous as it did not give proper consideration to whether such an interest was "after-acquired" property, namely, property (albeit comprising a future or contingent interest) that had been acquired by or devolved on a bankrupt for the purposes of s 58(1)(b) and s 58(6) of the Bankruptcy Act 1966 (C'wth). Colley had made clear that the only legally enforceable right that was acquired by a claimant under s 106 was the right to have the Court hear and determine the application according to law upon the filing of an application. 21 It was submitted that in these circumstances the applicant had standing to commence these proceedings under s 106 of the Industrial Relations Act 1996. The proceedings were competent and the respondent's proposition and motion had to fail. It was accepted that the earliest that any relevant property could have vested in the Trustee was when the applicant acquired the right to have the Court hear and determine the application according to law upon the filing of the Summons for Relief. 22 The applicant having commenced the action and having relevantly acquired a right, the applicant's motion now sought to have the Trustee substituted or joined as the applicant in the proceedings. Section 170 of the Industrial Relations Act 1996 permitted the Trustee to be substituted as the applicant. In applying that section the Court was required to consider what was necessary in the interests of justice. The power could be exercised at any stage of the proceedings and on such terms as the Court thought fit (s 170(2)). 23 It was submitted that the applicants' motion was no more than the substitution of the party that had succeeded to the rights of an existing party by whom the proceedings were properly commenced. This was similar to the proceedings as they developed in Hagans v UnitedGlobalCom, Inc & ors [2004] NSWIRComm 164 at [35]: the summons otherwise remained unaltered. The application to amend did not constitute a fresh application but an amendment to the original application for an order as contemplated by s 170(1) of the Act (see Great Scott International Pty Ltd v Cosmetic Suppliers Pty Ltd (2005) 147 IR 95. 24 In the alternative, the Court might grant the applicants' motion to substitute the Trustee as an applicant even if the right to commence proceedings under s 106 of the Act was held to have been vested in the Trustee prior to the filing of the summons. This followed because the applicants sought that the power to amend the summons be exercised nunc pro tunc in light of the wide power of amendment contained in s 170. 25 In relation to the power under s170, it was submitted that the interests of justice required the orders to be made nunc pro tunc because the Trustee had given consent to the continuation of the proceedings, the Trustee had given consent to continue the proceedings retrospectively, the amount of the debt giving rise to the bankruptcy could be discharged by the bonuses owing to the applicant, and, further, to deny the substitution of the Trustee as the applicant would have the practical effect of denying the applicant the opportunity of an early discharge of his bankruptcy. There was no prejudice to the respondent as a result of the substitution as it would have had to have met the same case whether the applicant or the Trustee was the applicant. 26 The provisions of s 108(B)(1) were not a bar to the substitution of the Trustee: there was no new case being made against the respondent. There was no other relevant prejudice to the respondent. 27 The respondent's case was erected upon a number of well established principles arising from the operation of the Bankruptcy Act 1966. It was argued that the consequences of Mr Burden being an undischarged bankrupt at the time of filing of the summons were: (a) the cause of action on which the summons was based was property within the meaning of the Bankruptcy Act and therefore vested in the Trustee prior to the filing of the summons by Mr Burden; (b) Mr Burden therefore had no standing to commence the proceedings; (c) the proceeding, and every step that followed, was a nullity. (d) the Trustee cannot now be joined or substituted as an applicant because the proceeding was a nullity and also because of the operation of the limitation period under s 108(B) of the Act. 28 It was argued by the respondent that, by the terms of the applicant's amended notice of motion, it might be inferred that the applicant accepted the proposition that the cause of action underlying the summons had vested in the Trustee and that the Trustee was the proper applicant. In any event, the respondent submitted that the applicant's right of action under s 106 was "property" within the meaning of the Bankruptcy Act 1966 and therefore became vested in the Trustee when a right of action arose, which was on 31 December 2004. 29 The expression "property" under the Bankruptcy Act 1966 is one of extremely wide import. The definition of property must be read in conjunction with s 116 (1)(a) of the Bankruptcy Act 1966 that makes it clear that all property of the bankrupt (save for certain property which is not relevant for present purposes) is property divisible amongst the creditors. 30 The general purpose of the Bankruptcy Act 1966 was to transfer the property of the bankrupt to the Trustee in Bankruptcy for the purposes of distribution to creditors (see Daemar v Industrial Commission of New South Wales [1988] 12 NSWLR 45 at 50F. For the purposes of the Bankruptcy Act 1996, the term "property" included the right to litigate (see Daemar at 50F; re Movitor Pty Ltd (1996) 64 FCR 380 at 391-392; Cotterill v Bank of Singapore (Australia) Ltd (1995) 37 NSWLR 238; UTSA Pty Ltd (in Liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 251, on appeal, 21 ACSR 457; and Re Tosich Construction Pty Ltd; ex parte Wily (1997) 140 ALR 18). The definition of "property" in s 5(1) of the Bankruptcy Act 1966 was so broad as to encompass what might be described as a bare chose in action, such as an action relying upon s 52 of the Trade Practices Act 1974 (see Cotterill and Re Movitor at 392). 31 Section 106 of the Industrial Relations Act 1996 had been described as conferring upon a potential applicant a right to apply for an order and a mere right to take advantage of the section (Colley at [30] and [33]). The respondent submitted that a potential applicant's right to take advantage of the section is a bare chose in action capable of vesting in the Trustee in Bankruptcy. In the present case, the applicant's right to take advantage of s 106 occurred on 31 December 2004 being the effective date of termination of his employment. Thus, the applicant's right of action on that date vested in the Trustee by operation of s 58(1)(b) of the Bankruptcy Act 1966. That section operates such that "after acquired property" of the bankrupt vests as soon as it is acquired by, or devolves on, the bankrupt, upon the official Trustee or the registered Trustee (see Pridmore v Magenta Nominees Pty Ltd (1999) 160 ALR 458 at [58] and [59]). A chose in action vests in the Trustee both upon and after bankruptcy (a proposition confirmed by the High Court in Cummings v Claremont Petroleum NL (1996) 137 ALR 1 at 5 and 7.4 and also Willoughby v Clayton Utz, unreported, [2005] WASC 47 at [24]).

32 As the cause of action vested in the Trustee by operation of s 58(1)(b) of the Bankruptcy Act 1966, the applicant had no standing to bring the action in May 2005 (see Willoughby v Clayton Utz at [25]; Bride v Peat Marwick Mitchell [1989] WAR 383; Daemar at 187). It necessarily followed that once the cause of action vested in the Trustee, the applicant had no right to institute proceedings in respect of that cause of action. The institution of proceedings in those circumstances would be a nullity and so would every step in the proceedings (Francis v National Mutual Life Association of Australasia Ltd [1999] 2 QdR 335 at 357).

33 Once these propositions were accepted, it followed that the Trustee could not now be joined or substituted as a party to the proceeding as there was no valid proceeding on foot. The action was never properly constituted and the Court did not have power to make an order which would overcome that deficiency (Francis v National Mutal Life Association of Australasia Ltd). If, contrary to the respondent's submission, it was considered that the proceedings were not a nullity, the Trustee cannot now be joined or substituted as a party because of the time bar provisions of s 108B of the Industrial Relations Act 1996 (see BEA Systems Pty Ltd v Industrial Relations Commission of NSW, unreported, [2005] NSW CA 227 at [11]). Here, there was not a mistake in the name of a party so there was no room for any exception under Part 20, Rule 4(3) of the Supreme Court Rules to apply. DELIBERATION 34 It is appropriate to state immediately that if these matters presently before the Court were to be considered solely on the application of s 170 of the Industrial Relations Act 1996 there would be strong grounds to grant the amendment sought and in either form. The justice of the circumstances here involve the fact that the Trustee not only has given authority for the proceedings but has expressly stated that his authority is to operate retrospectively to the time when the application was lodged in May 2005. In addition, the Trustee seeks to assume carriage of the matter as the applicant in his position as the Trustee for the estate of Mr Burden. Those matters would justify the orders sought under s 170 of the Act. However, the respondent points out that the provisions of the Bankruptcy Act 1966 and the status of Mr Burden when he commenced the proceedings must be considered and those matters bear upon the Court's power to either join the Trustee or substitute the Trustee as the applicant. 35 In relation to the application of the Bankruptcy Act 1966, a central plank in the respondent's argument is the wide meaning attributed to the word "property". Indeed, recently, a Full Bench of the Court acknowledged that the expression "property" and cognate expressions such as "the property of the bankrupt " and "after-acquired property" were to be construed in a very wide sense (see Perfection Dairies Pty Ltd v Finn [2006] NSWIRComm 137 at [38]). In that case, it was held that because of the special and peculiar nature of an application for reinstatement under s 84 of the Industrial Relations Act 1996, such an application made by a person who was bankrupt was not "property" in any relevant sense for the operation of the Bankruptcy Act 1966 and was therefore not to be considered property that vested in the Trustee but remained available to the bankrupt as a personal statutory remedy. 36 Precisely what comes within the term "property" in the Bankruptcy Act 1966 when considering litigation has frequently proved to be difficult: the High Court in Cummings divided three to two on the question of whether a right to appeal in an action brought to enforce a liability of the defendant was "property" within the meaning of that term in s 58(1) of Bankruptcy Act 1966. In Fuller v Beach Petroleum NL (1993) 43 FCR 60, the Full Court of the Federal Court divided two to one in determining that the appellant's right of appeal vested in the Trustee of the Estate of the appellant and that right of appeal was "property" within the meaning of s 5(1) of the Bankruptcy Act 1966 and therefore vested in the Trustee upon the appellant's bankruptcy pursuant to s 58(1) of the Act. In that case, a sequestration order had been made against the appellant who had been found liable for several claims in tort and for breach of his fiduciary duty as a director of a company and had filed a notice of appeal against the judgment. In Griffiths v Civil Aviation Authority (1995) 137 ALR 521, a differently constituted Full Federal Court distinguished the majority judgment in Fuller and held that an appeal against a decision that the appellant was not a fit and proper person to hold a commercial pilot's licence was of a personal nature and therefore was not "property" that vested in the bankrupt's Trustee and therefore the bankrupt had standing to prosecute the proceedings. 37 In Daemar, the Court of Appeal held that a proceeding by way of summons claiming orders in the nature of prerogative relief together with damages and declaratory relief directed to orders made in the Industrial Commission under s 88F of the Industrial Arbitration Act 1940 was an "action" of the kind that was stayed by the operation of the Bankruptcy Act 1966 on the subsequent bankruptcy of the claimant to that summons. In addition, such a summons was held not to fall within the exemptions provided in the Bankruptcy Act 1966 in respect of actions for any "wrong done to the bankrupt". 38 In Smith v Chevelle, Schmidt J held that an applicant had no standing to bring a s 106 claim because of the operation of ss 5, 58 and 116(2) of the Bankruptcy Act 1966 - the right to bring such proceedings being "property" as defined in ss 5 and 58 and not being exempted by s 116(2) of the Bankruptcy Act 1966. That case involved a mixture of claims, including claims of breach of contract, asserted award rights and statutory rights such as under the Annual Holidays Act as well as challenging the contract as being unfair. Having regard to the breadth of the claim, it is understandable why her Honour reached that decision, but all of the cases referred to above demonstrate the need to carefully analyse the nature of the claim being pursued by the bankrupt and to closely scrutinise the provisions of the Bankruptcy Act 1966 in order to determine whether or not the proceedings can properly be regarded as "property" vesting in the Trustee and leaving the bankrupt without standing to personally pursue the relief claimed. That is why in some cases an appeal may be "property" and in other cases will fall within the exemptions provided by the Bankruptcy Act 1966. Similarly, a claim such as that dealt with in Chevelle under s 106 may well be "property" but, as in Perfection Dairies Pty Ltd, a claim under s 84 of the Act may not be "property". 39 There is much to be said for the applicants' analysis that there is no relevant "right" to bring proceedings under s 106 and that there was no relevant "property" for the purposes of the Bankruptcy Act 1966 until such an application was filed. Proceedings under s 106 are not the same as a right to award wages or contract remuneration: generally, s 106 creates new rights. Accepting the first steps in the applicant's argument, however, leaves Mr Burden's position unclear once the application was filed in May 2005. In the course of discussion, Counsel for the applicant appeared to accept that, once the application under s 106 was filed, the "property" in that claim then passed to the Trustee as "after-acquired property". It seems that Mr Burden has taken no other steps in these proceedings after they were filed but attended for conciliation as required by s 109 of the Industrial Relations Act 1996, a listing taken at the initiative of the Court. In March 2006, both Mr Burden and the Trustee became applicants on the present Notice of Motion. It is arguable, nevertheless, that the "entitlement" rather than the "right" to commence proceedings under s 106 may have devolved to the Trustee, at least after Mr Burden was terminated. 40 The respondent's position is that the application filed is a nullity and therefore there is nothing before the Court to which the Trustee could be joined or substituted. The respondent dismisses the Trustee's retrospective authorisation of the commencement of the proceedings, simply arguing that the proceedings were already a nullity and there was nothing therefore to authorise. That approach fails to come to grips with the applicant's argument that the Trustee was entitled to give retrospective authority and that once given it was to be given full force and effect. Neither party has cited any authority for this proposition although it seems to have been contemplated by Master Newnes in Willoughby's case at [26]. The position is to be distinguished from that in Francis where Ambrose J held that a deed of assignment given by the official trustee assigning causes of action to the bankrupt could not have retrospective effect because of the terms of s 199 of the Property Law Act 1974: it seems however that no argument was put that retrospectively itself was not available. Clearly, in that case, it was the provisions of the Property Law Act 1974 that prevented a retrospective assignment but there has been no submission in the present proceedings of any statutory provision having a like effect on the Trustee's purported retrospective authorisation of the proceedings commenced by Mr Burden in May 2005. There remains, therefore, a real prospect that the applicants may succeed in this argument. 41 The respondent then argued that, if the Court was persuaded that there was in existence a valid application, then the joinder application would be defeated by the time bar imposed by s 108B of the Industrial Relations Act 1996. Section 108B was originally introduced in 2002, commencing on 24 June 2002. An amendment inserting sub-section 3 was introduced by the Industrial Relations Amendment Act 2005, being assented to on 1 December 2005 and commencing on 9 December 2005. The terms of s 108B, as amended, are as follows:

[IRA 108B] Time for making application 108B (1) An application for an order under this Division in relation to a contract that has been terminated must be made not later than 12 months after the termination of the contract. (2) The Commission does not have jurisdiction to extend the time for making any such application or to accept an application made after the time prescribed by subsection (1). (3) The Commission may accept an application made within 3 months after the time prescribed by subsection (1) if the applicant satisfies the Commission that there are exceptional circumstances justifying the making of the late application. 42 In the present case, it is the terms of s 108B(3) that need to be considered having regard to the fact that the primary 12 month limitation on commencing proceedings expired on 1 January 2006 and that the Notice of Motion was filed within three months of that date, namely, 23 March 2006: the first requirement for the operation of s 108B(3) has therefore been satisfied. In addition to being brought in the extended three month period, the Court has to be satisfied that there are exceptional circumstances to justify the making of a late application. The term "exceptional circumstances" is not defined and might therefore be approached on the basis of ordinary English usage. According to the Macquarie Dictionary, 3rd ed. the word "exceptional" means "forming an exceptional or unusual instance; unusual; extraordinary". In Re Z (1970) 15 FLR 420, Joske JA was considering the terms of the Marriage Act and whether the circumstances of the case were "so exceptional and unusual as to justify" the making of an order. His Honour considered dictionary meanings of the word, stating: The Shorter Oxford English Dictionary gives to 'exceptional' the meaning 'of the nature of or forming exception, unusual', and to 'unusual' the meaning 'not often occurring, different from what is usual, out of the common, remarkable, exceptional'. To 'usual' it gives the meaning 'something which ordinarily happens'; to 'remarkable', 'extra-ordinary, unusual, uncommon'. It will be seen that 'exceptional' and 'unusual' have much the same meaning and that the addition of 'unusual' to 'exceptional' does not elucidate the meaning of either and does little more if anything than add emphasis. In Martin v Martin (1941) N1 1 it would seem that the meaning given to 'exceptional' is 'out of the ordinary' and this view, together with the dictionary meanings cited, leads me to the opinion that the legislation enables the Judge to exercise his discretion in the case which appears to him to be 'out of the ordinary'. In considering whether a case appears to him to be 'out of the ordinary' it is proper to bear in mind the objective of giving the judge a discretion is to protect the institution of marriage so that it does not fall into disrepute and also to protect the particular parties who are seeking to marry, since the marriage of such young people is often subject to substantial pressures and frequently breaks down almost immediately or very soon after it takes place owing to these pressures. 43 In K v Cullen (1994) 125 ALR 38, Moore J adopted the analysis of Joske J in Re Z: I intend to be guided by this approach. In the present case, insofar as any application has to meet the requirements of s 108B(3), I am satisfied that there are "exceptional circumstances" justifying the making of the late application. The circumstances of the present application are indeed unusual if not unique: the claim had already been filed within time and the Trustee had given retrospective authority, within time, to commence and continue the proceedings. If the form of the application had been attended to in May 2005 and even at the time of conciliation in November 2005 then the application would have been within the primary 12 months set down by s 108B(1). In addition, the respondent was aware of Mr Burden's status as a bankrupt well before the termination of his employment and at the time that he filed the proceedings in May 2005. No attempt was made to disclose the respondent's objection to the proceedings until they were listed in November 2005. That combination of circumstances is sufficiently unusual and out of the ordinary to constitute exceptional circumstances for the purposes of the operation of s 108B(3). 44 Having considered the operation of s 108B(3) of the Act it is then necessary to consider the real nature of the application. As stated earlier, while there is force in the analysis and submissions of the applicants, there are serious issues that nevertheless arise in order for the application filed by Mr Burden to be considered "alive". While these questions are of forensic interest, they do raise complexities about the scheme of the Bankruptcy Act 1966. I am, however, of the view that this case may be properly addressed upon the application of the provisions of the Industrial Relations Act 1996 and without determining the issues arising under the Bankruptcy Act 1966. 45 Mr Burden was terminated on 31 December 2004. Under the provisions of s 108B he had to bring his application by 1 January 2006: in fact, he filed his application under s 106 on 14 May 2005. On 23 March 2006, by notice of motion, Mr Burden and the Trustee sought to join the Trustee in Bankruptcy in relation to his estate. That motion was subsequently amended but, in substance, the Notice of Motion was brought by both Mr Burden and the Trustee seeking to have the Trustee take the action that had been started by Mr Burden on all the issues of fact and law relied upon by Mr Burden in his earlier application. In my view, the substance of the application is one whereby the Trustee seeks to take action under s 106 in relation to Mr Burden's claim against Walgett Council. It has long been accepted that courts will look to the substance of the application rather than its form and procedures to decide questions of validity (see WorkCover Authority v Lucon Australia Pty Ltd (2002) 112 IR 332 at 349; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 610; R v Turbet; ex parte ABCE & BLF (1978) 144 CLR 335; Re Wiseu (1983 ) 4 IR 67 at 72; R v Moore; ex parte AWU Graham (1976) 11 ALR 449); the real issue is the characterisation of the application (Crowe v UCS Development Pty Ltd (2003) 130 IR 266 at [41]). For example, the failure to nominate a representative for an unincorporated association seeking to exercise the right of appeal to the Federal Court was a failure going to regularity rather than to competence and the matter could be rectified by an appropriate amendment of the record nunc pro tunc by substituting for the name of the unincorporated association the name of a representative (see Wilcox J in Arnold (on behalf of Australians for Animals) v Queensland and anor (1987) 73 ALR 607 at 613. 46 The Rules of the Commission require the originating process to be in "or to the effect of" the forms set out in Schedule 2 of the Rules except proceedings under s 106 are to be in a particular form. It is abundantly clear from the terms of the Notice of Motion filed by the Trustee that he seeks to incorporate and adopt the grounds and reasons originally filed by Mr Burden but to do so in his role as the Trustee of the bankrupt estate of Mr Burden. There is no suggestion of a new cause of action being pleaded and the relief sought by the Trustee relates to the personal services provided by Mr Burden. It is Mr Burden's status as a bankrupt that potentially may remove his capacity to commence and maintain proceedings depending on the nature of those proceedings. On the approach that I propose to adopt, it matters not whether the property (being the cause of action) devolved upon the Trustee either at the point of termination of Mr Burden or immediately after Mr Burden's application was filed in May 2005. The substance of the Rules of the Commission relating to the commencement of proceedings require that the respondent be informed of the nature of the claim that they are required to meet. Any application that is, in effect, in the forms appearing in the Schedule to the Rules will be effective in commencing proceedings principally if that criterion is met: again, there is no doubt in the present proceedings that in seeking to be substituted or joined as the applicant, the Trustee was seeking to take action in his own right on all the grounds of fact and law set out in Mr Burden's application filed in May 2005. The respondent was, therefore, not deprived of any opportunity to properly meet or understand the case brought against it, especially in circumstances where the current proceedings had got no further than the listing of conciliation and where the respondent was aware from an early date of Mr Burden's status as a bankrupt. 47 The flexibility of the Commission's Rules is highlighted by Part 13 containing Rule 83 (General Powers), Rule 84( Directions Generally), Rule 85 (concerning Directions where procedure wanting or in doubt), Rule 88 (dealing with waiver of compliance with procedural requirements) and Rule 89 (supplementary practice before the Full Commission adopting in sub-rule 5 the practice and procedure of the Supreme Court in certain circumstances). 48 In terms, the Commission Rules do not deal with the substitution of a plaintiff or an applicant. It is to be noted that over the years the Rules of the Commission have followed closely those Rules of the Supreme Court that appear to be of relevance to the jurisdiction exercised by the Commission. Any objection to the strict want of form in the Trustee's application by way of Notice of Motion is adequately dealt with by the joint operation of Rule 84 and Rule 88: to the extent necessary I would waive strict compliance with Rule 18A to treat the Notice of Motion as in fact a Summons for Relief under s 106 of the Act in the form filed by Mr Burden in May 2005. That document may be considered as having been filed on 23 March 2006. As a result of that direction the Trustee should file and serve within 14 days of the date of this judgment, a Summons for Relief under s 106 in the same terms as that filed by Mr Burden in May 2005 but nominating Mr Fletcher as Trustee of the estate of the bankrupt Mr Burden as the applicant rather than Mr Burden and making all necessary consequential amendments following from that alteration. 49 Under the Supreme Court Rules, prior to the commencement of the Civil Procedure Act, a variety of mechanisms were made available and applied liberally in order to reduce the technicality that had previous attended joinder of causes of action and parties and amendment of proceedings. Under Part 8 Rule 8, provision was made for the addition of parties and it was considered that read in conjunction with Part 8, Rule 9 and Rule 11(1)(d) the powers given to the Court to substitute a plaintiff or defendant were not confined to cases where there had been a mistake in the names of the original parties (Hughes v Pump House Hotel Co Ltd (No 2) [1902] 2 KB 485). Rule 9 dealt with the removal of parties who cease to be proper or necessary parties and Rule 11 dealt with the further conduct of proceedings that specifically provided, after joinder or substitution, procedural powers regarding service, amendment and appearance in the Court. Where a substitution of a party occurs, the person substituted is in exactly the same position as the former party (Chorlton v Dickie (1879) 13 ChD 160; Johnston v English (1886) 55 LT 55) and unless the Court makes other orders, the substituted party is bound by the acts of the original party and may be liable for all the costs of the proceedings from the beginning of the action (Cook v Hathway (1869) LR 8 Eq 612). Amendment under Part 20, Rule 1 of the Supreme Court Rules generally was regarded as taking effect from the date of commencement of the original proceedings rather than from the date of amendment (Sneade v Wotherton (1904) 1 KB 295 at 297; Baldry v Jackson [1976] 2 NSWLR 415; Australia and New Zealand Banking Group Ltd v Larcos (1987) 12 NSWLR 286; Harris v Western Australian Exim Corp. (1994) 129 ALR 387; Roman Catholic Archbishop of Perth v AA to JC inclusive (1995) 18 ACSR 333 at 348). The course proposed by the Court in the present application therefore gives recognition to the spirit of these Rules as they may operate in the absence of specific rules for substitution in the Commission Rules or as influencing the exercise of the powers specifically granted to the Commission under its own Rules. 50 In taking control of these proceedings, as he is entitled to do, the present proceedings are distinguished from those faced by the Full Federal Court in Australian Building Construction Employees and Builders Labourers Federation v The Master Builders Association of New South Wales (1986) 69 ALR 515. In that case a federally registered trade union of employees was seeking de-registration of a federally registered employer's organisation. After commencing the proceedings, but before the matter was heard, the employees union itself was deregistered and, by motion, sought to substitute for the applicant an officer of a registered trade union in New South Wales and the registered trade union in New South Wales. While the Court was of the view that neither applicant were sufficiently interested in the proceedings to give them standing to make or maintain the application, Beaumont J in a separate judgment, found that, in addition, the attempted substitution was contrary to the purposes of the Act deregistering the federal union and that the motions for substitution were, in fact, to subvert the purposes of the deregistration Act and an attempt to indirectly do that which was prohibited directly. I am unable to detect any such difficulty in the present case: indeed, on one view, the taking of the proceedings by the Trustee is supportive of the objects of the Bankruptcy Act 1966. 51 In the particular circumstances of this case, it is appropriate that Mr Burden's name be removed as an applicant and that the Trustee of his estate be substituted as the applicant. As a matter of form, the applicant should be fully identified as follows: W J Fletcher, the Trustee of the property of John William Burden, a bankrupt.

The Trustee's motion is granted in the terms indicated above. The respondent's motion is dismissed. The Trustee shall file and serve a substituted Summons for Relief under s 106 reflecting the above orders and shall do so within 14 days of the date of this judgment.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

At a glance

Court

Decision date

Before

Source

Judgment (16 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (30)