1
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Melanie Millington
v
Traders International Pty Ltd
(U2013/8345)
VICE PRESIDENT HATCHER
DEPUTY PRESIDENT ASBURY
COMMISSIONER SIMPSON SYDNEY, 23 APRIL 2014
Application for relief from unfair dismissal - jurisdictional issue - bankrupt status.
Introduction
[1] Ms Melanie Millington, the applicant in this matter, lodged an application for an
unfair dismissal remedy on 9 April 2013. Traders International Pty Ltd, the respondent, raised
a jurisdictional objection to the application, namely that it was not Ms Millington’s employer
at the time of the dismissal the subject of the application. This jurisdictional objection was
rejected by the Commission (Asbury DP) in a decision issued on 10 December 2013.1 In the
course of the hearing of that jurisdictional objection, it emerged in the evidence that Ms
Millington was an undischarged bankrupt. The Deputy President considered, in the light of
some previous Commission decisions (to which we will refer later), that this fact raised an
issue of jurisdictional significance. The Deputy President brought that issue to the attention of
the President of the Commission who, on 11 December 2013, referred it for determination by
this Full Bench pursuant to ss.582 and 615 of the Fair Work Act 2009 (the Act).
[2] With the consent of the parties, the matter has proceeded before us on the basis of
written submissions filed by the parties and without the need for a formal hearing. Upon the
matter being referred to us, we considered that the date upon which Ms Millington became a
bankrupt needed to be established factually in order for the jurisdictional issue to be properly
determined. Accordingly on 8 January 2014 we issued an order pursuant to s.590(2)(c) of the
Act requiring the parties to provide to the Commission any documents, records or other
information in their possession identifying the date upon which Ms Millington became a
bankrupt. In response to this order, Ms Millington provided us with an extract from the
National Personal Insolvency Index which showed that she was entered as insolvent on that
index on 16 June 2011. No material to any contrary effect was produced by the respondent.
Therefore we will proceed on the basis that Ms Millington became a bankrupt on or about 16
June 2011 - well before her application for an unfair dismissal remedy was lodged.
1 [2013] FWC 9679
[2014] FWCFB 888
DECISION
E AUSTRALIA FairWork Commission
[2014] FWCFB 888
2
The Bankruptcy Act
[3] The Bankruptcy Act 1966 (Cth) contains provisions which may have the effect of
preventing an undischarged bankrupt from commencing or continuing litigation. These
provisions fall into two categories. Firstly, there are provisions which apply to undischarged
bankrupts generally. Section 58 of the Bankruptcy Act relevantly provides:
58 Vesting of property upon bankruptcy—general rule
(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.
[4] The expression “the property of the bankrupt”, as relevant to the above-quoted
provisions, is defined in s.5(1) as follows:
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; ...
[5] “Property” itself is defined in s.5(1) in the following way:
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.
[6] What constitutes “property divisible among the bankrupt’s creditors” for the purpose
of the definition of “the property of the bankrupt” is then explained by s.116, which
relevantly provides:
116 Property divisible among creditors
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(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; and
(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; ...
....
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
or de facto partner of the bankrupt or a member of the family of the
bankrupt; or
(ii) in respect of the death of the spouse or de facto partner of the
bankrupt or a member of the family of the bankrupt;
and any damages or compensation recovered by the bankrupt (whether
before or after he or she became a bankrupt) in respect of such an injury
or wrong or the death of such a person; ...
[7] The second category of provisions in the Bankruptcy Act specifically pertains to
litigation that is commenced by a person who subsequently becomes a bankrupt. Section 60
relevantly provides:
60 Stay of legal proceedings
....
(2) An action commenced by a person who subsequently becomes a bankrupt is,
upon his or her becoming a bankrupt, stayed until the trustee makes election, in
writing, to prosecute or discontinue the action.
(3) If the trustee does not make such an election within 28 days after notice of the
action is served upon him or her by a defendant or other party to the action, he or she
shall be deemed to have abandoned the action.
(4) Notwithstanding anything contained in this section, a bankrupt may continue,
in his or her own name, an action commenced by him or her before he or she became a
bankrupt in respect of:
[2014] FWCFB 888
4
(a) any personal injury or wrong done to the bankrupt, his or her spouse
or de facto partner or a member of his or her family; or
(b) the death of his or her spouse or de facto partner or of a member of his
or her family.
....
(5) In this section, action means any civil proceeding, whether at law or in equity.
[8] It may be observed that in the first category of provisions, anything which meets the
description of “property divisible among the bankrupt’s creditors” (whether it is property
acquired before or after the bankruptcy), including any rights and powers in relation to
property that would have been exercisable by the bankrupt if he or she had not become a
bankrupt, vests in the trustee of the bankrupt’s estate, with the result that it is placed beyond
the control of the bankrupt person. Thus where any litigation commenced or continued by a
bankrupt person is concerned, the relevant questions will firstly be whether the right to
commence or continue that litigation is “property divisible among the bankrupt’s creditors”,
and secondly, if so, whether the exception in s.116(2)(g) applies. The first of these questions
in particular is one of some complexity, as the cases to which we will refer demonstrate.
[9] However, where the provisions in the second category apply - that is, where the
bankrupt person has become bankrupt after having commenced litigation - the question is a
somewhat different one. The litigation will be automatically stayed pending the election of the
trustee to continue or discontinue the litigation (with a failure to make an election within 28
days deemed to be a discontinuance), if the litigation can be characterised “a civil proceeding,
whether at law or in equity”, and does not fall within the exception in s.60(4).
The leading cases
[10] There are four leading cases which address the major issues concerning the operation
of s.58 (and its associated definitional provisions) and s.60. Because of the complexity of
those cases and the associated difficulty in deriving consistent principles from them, it is
necessary to address them in some detail.
[11] In Daemar v Industrial Commission of NSW2, the NSW Court of Appeal considered
whether s.60 operated to stay proceedings in which relief in the nature of prerogative writs
was sought, in circumstances where the claimant had become a bankrupt subsequent to the
commencement of the proceedings. The relief sought was in respect of a decision of the
Industrial Commission of NSW which had, in the exercise of its jurisdiction under the then
s.88F of the Industrial Arbitration Act 1940 (NSW), declared void a contract to which the
claimant was a party and ordered the claimant and another party to pay a specified monetary
amount in connection with the voided contract. The Court concluded that s.60 operated to stay
the proceedings, since the claimant’s application was plainly an “action” for the purpose of
s.60(2), and did not fall within the exception provided in s.60(4) in that the action was not in
respect of a “personal injury or wrong” done to the claimant. In the latter respect the Court (in
the judgment of Kirby P, with whom Samuels JA and Clarke JA agreed) applied the “classic
expression” of Dixon J in Cox v Journeaux (No 2)3 as follows:
2 (1988) 12 NSWLR 45; 24 IR 370
3 (1935) 52 CLR 713 at 721
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“He is a bankrupt and there is no prospect of his satisfying any order for costs made
against him in this, or as I infer, in previous litigation. Notice was given under sec. 63
(3) of the Bankruptcy Act 1924-1933 to the official receiver requiring him to elect to
prosecute or discontinue the action and he has elected not to prosecute it. The plaintiff
says that he himself is entitled to prosecute it under the proviso as an action for
personal injury or wrong done to himself. The test appears to be whether the damages
or part of them are to be estimated by immediate reference to pain felt by the bankrupt
in respect of his mind, body or character and without reference to his rights of property
(Wilson v. United Counties Bank Ltd.).”
[12] One of the claimant’s submissions which was considered by the Court in Daemar
raised the difficulty that s.58(1) and s.60(2) operated according to different criteria. The
claimant submitted that “action” in s.60(2) should be given a narrow construction in order to
avoid a “serious disharmony” between that provision and s.58 which might produce different
outcomes depending upon whether a litigant became a bankrupt before or after he or she
commenced the litigation.4 Kirby P, with whom Samuels JA and Clarke JA agreed, rejected
this submission in the following terms5:
“Fourthly, as far as the apparent disharmony between s 58 and s 60 is concerned, this
case clearly falls within s 60 and s 60(2) must be given its full operation. If the section
is clear, as I believe it to be, the fact that it may sometimes provide a wider provision
for a stay on proceedings commenced before bankruptcy than would effectively be
secured by proceedings commenced after bankruptcy does not avail the claimant.
Especially because the Parliament has specifically adumbrated the exceptions to the
operations of the statutory stay, in terms of s 60(4), this indicates that it attended to the
way in which prior civil action should go forward at the option only of the trustee, or
be stayed by the statute.”
[13] This issue of potential disharmony of outcomes was also discussed in the Full Federal
Court decision in Fuller v Beach Petroleum NL.6 That case involved an appeal against an
order made against the appellants for the payment of damages and indemnity costs. The
respondents to the appeal moved for the dismissal of the appeal as incompetent, on the basis
that the appellants had become bankrupts shortly before the first instance judgment had been
delivered and that the appellants’ appeal rights had as a result vested in the trustee of their
estates under s.58 of the Bankruptcy Act. The Full Court majority (Gummow and Whitlam JJ)
granted the motion and dismissed the appeal, holding that the statutory right of appeal
conferred by s.24 of the Federal Court of Australia Act 1976 (Cth) fell within the meaning of
the expression “personal property of every description” within the definition of “property” in
s.5 of the Bankruptcy Act.7 In the course of their judgment, Gummow and Whitlam JJ
identified the relevant question as being whether “the temporal conjunction of circumstances
which renders s.60(2) inapplicable” (because the appeal rights arose and the appeal was
instituted after the appellants became bankrupt) meant that the respondents were exposed to
an appeal by bankrupt persons who would be unable to pay their costs if unsuccessful. In
considering this question, their Honours said8:
4 (1988) 12 NSWLR 45; 24 IR 370 at 377.
5 Ibid at 379
6 (1993) 117 ALR 235
7 Ibid at 242
8 Ibid at 239
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“...it might be thought an odd result if the authority of a bankrupt to institute and
continue with an appeal were greater in the case of an appeal instituted after
sequestration than in respect of an appeal pending at the time of sequestration.”
[14] That “odd result” was avoided by the approach taken by the majority to the exception
to “property divisible amongst the creditors of the bankrupt” in s.116(2)(g). Noting the
concordance between that provision and the exception to s.60(2) contained in s.60(4),
Gummow and Whitlam JJ said9:
“What is of present significance is that s. 116 contemplates that were it not for the
express exclusion, what might be called bare rights of action to recover damages or
compensation for personal injury, rights not ordinarily assignable, would nevertheless
be treated as property divisible amongst the creditors of the bankrupt and therefore as
property which vested under sub-s.58(1).”
[15] That contextual indicator was taken into account in considering the definition of
“property” in s.5, and supported their Honours’ conclusion that the definition encompassed
rights and interests “which would not be defined as proprietary by traditional conveyancing
law”, including unassignable rights.10
[16] A dissenting judgment was delivered by Hill J. Hill J emphasised that in order for
property to vest in the trustee under s.58, it had to be “property divisible amongst the
creditors of the bankrupt”11, and he did not accept that the meaning of that expression in
s.116(1)(a) was to be regarded as widened by virtue of the exclusion provisions in
s.116(2)(g). A merely personal right, or a bare right to litigate which would not be an asset for
the payment of debts and was not capable of being turned to profit, would not constitute such
property. Hill J did not consider that the fact that a successful action might carry with it an
order for costs did not make any difference, because the right to have the court exercise a
judicial discretion in favour of the winning party could not be characterised as a right of
property. Hill J found it unnecessary to determine whether the appellants’ appeal was an
“action” to which s.60(2) would have applied if the appellants had become bankrupts after,
rather than before, the institution of their appeal.
[17] The appellants having been granted special leave appealed the Full Court’s decision to
the High Court. Before the High Court delivered its decision (Cummings v Claremont
Petroleum12), another Full Federal Court decision was issued which considered the issues
which had been discussed in Fuller. In Griffiths v Civil Aviation Authority13 the Full Court
considered an appeal from a first instance decision14 in which the trial judge (Kiefel J) had
summarily dismissed an appeal from a decision of the Administrative Appeals Tribunal which
had affirmed a decision of the respondent to vary the appellant’s commercial pilot’s licences
such that he could no longer follow his occupation as a pilot. The appellant had become a
bankrupt because of his incapacity to follow his occupation shortly before the Administrative
9 Ibid at 241
10 Ibid at 241-2
11 Ibid at 249
12 (1996) 185 CLR 124
13 (1996) 137 ALR 521
14 [1994] FCA 1528
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Appeals Tribunal had issued its decision. Kiefel J had determined, in accordance with Fuller,
that the appellant’s right of appeal to the Federal Court under s.44 of the Administrative
Appeals Tribunal Act 1975 (Cth) fell within the definition of “property” in s.5(1) of the
Bankruptcy Act and accordingly vested in the trustee under s.58(1). However her Honour had
concluded her judgment by saying:
“In Fuller Hill J in a dissenting judgment was of the view that the subject matter of the
action in question could not be regarded as "property" and was not property divisible
among creditors and further than the bankruptcy legislation did not vest a "bare right
of action" in the trustee. His Honour (73) did not consider it correct to widen the
interpretation of s 116(1) by reference to the exclusion provisions. As against the
policy view expressed by the majority His Honour pointed to the inability of the
bankrupt to pursue an appeal which involves findings of fraud against the bankrupt
and that questions of costs could be addressed on a motion for security for costs. With
respect to the majority, I consider there is much force in the reasons for judgment of
Hill J and were I free to conclude the matter otherwise I would be inclined to follow
them. The decisions of Gummow and Whitlam JJ however stand as the decision of the
Full Court in relation to bankrupt's rights of appeal regardless of its subject matter.
I therefore order that the appeal be dismissed as incompetent.”
[18] The Full Court (Spender, Einfeld and Cooper JJ) unanimously allowed the appeal and
dismissed a motion challenging the appeal’s competence. Each member of the Court issued a
separate judgment. Spender J stated that he agreed generally with the reasons of Einfeld J and
Cooper J, but stated some observations of his own. His Honour distinguished Fuller on the
basis that it involved a right of appeal in respect of a money judgment, but went on to say15:
“The present proceedings were not ‘an action commenced by a person who
subsequently becomes bankrupt’. Section 60 of the Act, which deals with actions
commenced by a person before that person became a bankrupt, does not apply to the
present case. I derive no assistance on the present question from arguments based on
what might be thought anomalous consequences in the application of s 60 of the Act,
depending on the width to be given to the definition of ‘property’ in s 5 of the Act.”
[19] The above passage appears to implicitly reject the reasoning of the majority in Fuller
that ss.58 and 116 were to be interpreted so as to produce outcomes consistent with those
under s.60(2). In a similar fashion to Einfeld J, he characterised the appellant’s pilot’s
licences, and the capacity to take proceedings in respect of those licences, as personal rights
and not “property divisible amongst the creditors”. Spender J also rejected as a “red herring”
the question of costs of the proceeding commenced or continued after bankruptcy, on the
basis that any costs order made against the appellant would not affect the administration of the
estate because it would not be provable against the estate, being a debt which arose after the
date of sequestration.
[20] Einfeld J, by reference to a number of authorities including the judgment of Isaacs J in
Commissioner of Stamp Duties (NSW) v Yeend16 and that of Brennan J in Australian Capital
15 Ibid at 523
16 (1929) 43 CLR 235 at 245-6
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Television Pty Ltd v Commonwealth17, distinguished actions which may be characterised as
“personal to the bankrupt” and having no implications for the bankrupt’s estate from property
vesting in the trustee under s.58. The characteristics of a pilot’s licence as being a non-
transferable right conferred under statute on a person based on his or her personal fitness
meant that any action taken by a bankrupt person which had as its subject matter such a
licence was personal to that person and did not vest in the trustee under s.58 of the
Bankruptcy Act. Einfeld J agreed with Kiefel J that the ratio of the majority in Fuller was not
correct, but that the point did not need to be decided.
[21] In his judgment, Cooper J identified the critical conclusion in the majority judgment in
Fuller as follows:
“What is controversial in the majority decision in Fuller is the conclusion that all rights
of action unless specifically excluded by the Act are "property" within the meaning of
s 5(1) of the Act. The reasoning of the majority in Fuller was that if it were otherwise,
s 60(2) of the Act would create an inconsistency as to how the Act dealt with civil
actions initiated by a bankrupt depending upon the temporal conjunction of the
acquisition of the right of action and the bankruptcy.”
.....
In their Honours' view, if the definition of "property" in s 5(1), s 58 and s 116(1)(a) of
the Act did not encompass all rights enforceable by action (as defined), an anomaly
would arise. This would occur because s 60(2) would operate to stay any action
brought by a party who subsequently becomes bankrupt unless excepted by s 60(4).
Anomalously, if any right of action remained outside the definition of property in s
5(1), the debtor, after becoming bankrupt, could litigate that right of action
notwithstanding that if the proceedings had been commenced prior to the bankruptcy
they would have been stayed by the operation of s 60(2). This result would occur if s
60(2) is given a literal interpretation as their Honours did (see the majority 43 FCR at
63 - 64) and is not limited to actions in which the trustee has a proper interest. Their
Honours also expressed a view that part of the statutory purpose of the Act is that
successful litigants should not be put at risk as to the unrecoverability of costs for
litigation commenced or continued by a bankrupt after sequestration of the bankrupt's
estate (43 FCR at 68) and that for that reason the conduct of all litigation after
bankruptcy was a matter for the trustee to determine.”
[22] Cooper J disagreed that any bare right of action constituted “property” for the purpose
of s.58. His Honour characterised the statutory object of the Bankruptcy Act in the following
way18:
“The statutory object of the Act is to vest the property of a bankrupt in a trustee in order
that the same may be divisible amongst the bankrupt's creditors. The trustee is to get in
the property and reduce it to a money sum and to disown, for example, property which
would be a drain on the estate. The statutory object is also to protect the person of the
bankrupt and his property insofar as his creditors are concerned as at the date of the
making of the sequestration order ...”.
17 (1992) 177 CLR 106 at 166
18 Ibid at 540
[2014] FWCFB 888
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[23] Relying upon a number of English and Australian decisions, Cooper J stated that
“Claims by or against the bankrupt which do not affect the estate of the bankrupt in any way
or interfere in the due administration of it are of no interest to the trustee”, and that the
exceptions in s.60(4) and s.116(2)(g) were not intended to be “an exhaustive statement of the
rights of action to be excluded from the property of a bankrupt which was to pass to the
trustee”. On the basis of those propositions, Cooper J held that statutory rights of appeal being
sought to be exercised by the appellant did not fall within the definition of “property” in
s.5(1) of the Bankruptcy Act, since they did not affect any property which formed part of the
bankrupt’s estate and vested in the trustee. His Honour rejected the relevance of the
possibility of a costs order being made against the bankrupt appellant for the same reasons as
did Spender J.
[24] Significantly, Cooper J’s approach was similar to that of Gummow and Whitlam JJ to
the extent that he considered that ss.58, 60 and 116 needed to be interpreted in a fashion
which gave rise to a consistency in outcomes regardless upon when bankruptcy occurred.
However, unlike them, his Honour preferred to read down s.60(2) by reference to his more
constrained approach to the notion of “property”:
“There is a unity of object and purpose in the operation of ss 58, 60 and 116 of the Act
if it is recognised that the consistent focus of attention is upon rights which the trustee
can turn to advantage for the benefit of creditors or upon rights the exercise of which
will adversely affect or delay the administration of the estate. It is these rights which
fall within the definition of "property" in s 5 and the enforcement of which by action
are stayed by s 60(2) upon a person becoming bankrupt. To interpret "property" for the
purposes of s 5 in this way avoids the injustice of denying to the bankrupt the power to
exercise a right in which the trustee has no interest and the exercise of which cannot
operate adversely on the property of the bankrupt or the administration of the
bankrupt's estate.”
[25] In Cummings v Claremont Petroleum the High Court unanimously affirmed the orders
made by the Full Federal Court majority in Fuller. However, the judgment of the plurality
(Brennan CJ, Gaudron and McHugh JJ) determined the matter on a basis quite different to
that of Gummow and Whitlam JJ. Their judgment initially made it clear that, had the
appellants’ appeals been instituted before they became bankrupts, s.60(2) would have
operated to stay the appeals. Their Honours said19:
“If the appeals by the appellants had been commenced prior to their bankruptcy, they
would have been stayed automatically pursuant to s 60(2) of the Act which provides:
‘An action commenced by a person who subsequently becomes a bankrupt is,
upon his becoming a bankrupt, stayed until the trustee makes election, in
writing, to prosecute or discontinue the action.’
The term ‘action’ is defined to mean any civil proceeding. The institution of an appeal
by a defendant against a judgment in favour of a plaintiff is the commencing of a
proceeding.”
19 Ibid at 130
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[26] However, the plurality went on to conclude that the appellant’s appeal was not
“property” which vested in the trustee under s.58(1) of the Bankruptcy Act. They said20:
“A right to appeal may be a substantive right, but it is another question whether such a
right has the character of property. Some rights created by statute can constitute
property, but a right to appeal does not have the character of property merely because
it is the creature of statute. A chose in action may be the property of the person entitled
to enforce it, but a liability to satisfy a judgment enforcing a chose in action is not
property of the person against whom the judgment is entered. A liability is not
property of the person liable. Nor is a right to appeal against a money judgment
property of the judgment debtor. Nor does such a right to appeal answer the description
of property divisible among creditors defined by s 116(1)(b), namely, "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 own benefit". The
powers referred to are powers "which are familiar to all conveyancers and are powers
properly so called", as Farwell J pointed out in In re Rose; Trustee of the Property of E
T Rose v Rose. In other words, the powers referred to are authorities to dispose of
property or interests in property for the benefit of the donee of the power or of some
other person. In this case, there is no property "over or in respect of" which the
bankrupt is or would have been capable of exercising a power. As a matter of ordinary
language, a judgment debtor's right to appeal against the judgment is not property.”
[27] That conclusion made it unnecessary to consider the argument that the appellants’
right of appeal was a purely personal right which did not vest in the trustee.21 The judgment of
the plurality went on to conclude that the appellants did not have standing to institute the
appeals because, insofar as the judgment against the appellants created or evidenced a
provable debt, the bankrupt had no financial interest in the judgment because their bankruptcy
had divested them of their interest in the property and their liability for provable debts.22 To
the extent that findings of fraud in the judgment sought to be appealed affected the personal
interests of the appellants, it was open to them to apply to the Court under s.178 of the
Bankruptcy Act for an order addressing any failure by the trustee to pursue an appeal.
[28] Dawson and Toohey JJ took a different view, although as earlier stated their
conclusion as to the disposition of the appeal was the same. They concluded that the
appellants’ right of appeal was “property” as defined in s.5(1) of the Bankruptcy Act which
vested in the trustee. Their Honours rejected a reading of “property” as limited to that which
could be turned to profit for the payment of debts, and in reasoning to this conclusion referred
to the comment of Gummow and Whitlam JJ, earlier quoted, that it would be an odd result if
the bankrupt’s capacity to institute and continue appeal proceedings were greater if the appeal
was instituted after rather than before bankruptcy. They also relied (similarly to Gummow and
Whitlam JJ) upon the “narrow scope of the exceptions to be found in s.116(2)(g)”.
[29] It follows from the conclusion reached by the majority in Cummings that, contrary to
the approach taken by Gummow and Whitlam JJ in Fuller, a legal proceeding before a court
or tribunal may not necessarily be “property” for the purpose of the vesting provisions in
s.58(1) even if it would be an “action” for the purpose of s.60(2), and that the interpretation of
20 Ibid at 133
21 Ibid at 136
22 Ibid at 137-8
[2014] FWCFB 888
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the definition of “property” in s.5(1) is not to be conditioned by a perceived need for
consistency of outcomes in the application of s.58(1) and s.60(2). That is consistent with
Daemar, and with the approach taken by Spender J in Griffiths. The distinct operation of
s.58(1) and s.60(2) has been affirmed in decisions issued since Cummings. For example, in
Sarkis v Moussa the NSW Court of Appeal (Beazley JA) stated that what constituted
“property” within the meaning of s.58 so as to vest in the trustee was a different question
from what constituted an “action” within the meaning of s.60.23
[30] Applying Daemar, it would almost certainly be the case that had Ms Millington
become bankrupt after having lodged her application, this proceeding would be stayed by
operation of s.60(2) of the Bankruptcy Act (the exception in s.60(4)(a) not being applicable on
the basis of Dixon J’s “classic expression” in Cox v Journeaux (No 2)). However that has no
bearing on the question of whether, in the actual circumstances of this case, Ms Millington’s
application was “property” for the purposes of s.58(1) - that is, “property” as defined in s.5(1)
that is “property divisible amongst the creditors of the bankrupt” under s.116(1). In that
connection, the authorities discussed above - in particular Griffiths and Cummings - identify
two relevant propositions:
(1) Not all statutory rights of action will constitute property which vests in the
trustee under s.58 of the Bankruptcy Act.
(2) Purely personal rights, including a bare, personal and non-assignable right of
action under a statute, in which the trustee has no interest and the exercise of
which cannot operate adversely on the property of the bankrupt or the
administration of the bankrupt's estate, are not property which vest in the
trustee under s.58.
Employment cases
[31] We now turn to a number of cases in which courts have considered the applicability of
ss.58 and 60 in the context of legal proceedings concerning employment.
[32] In Geia v Palm Island Aboriginal Council24 the Queensland Court of Appeal (Pincus
and Thomas JJA and Jones J) considered an appeal from a decision of the Queensland District
Court to dismiss an action on the basis that the plaintiff was a bankrupt whose cause of action
had vested in the trustee under s.58(1) of the Bankruptcy Act. The plaintiff’s claim was for
monetary damages for wrongful termination of a contract of employment. The Court
proceeded on the basis that no aspect of the plaintiff’s claim concerned recovery of payment
for services already rendered.
[33] In the Geia appeal, it does not appear to have been in contest that the
plaintiff/appellant’s claim was a chose in action constituting property vesting in the trustee
under s.58(1). Further, the appellant conceded in the appeal that the exception in s.116(2)(g)
did not apply. The appellant’s argument was rather that s.116(2)(g) was not intended to be an
exhaustive statement of actions which were excepted from the concept of “property divisible
amongst the creditors of the bankrupt”, and that the “common law of bankruptcy” excepted
the appellant’s action from the general vesting provisions.
23 [2012] NSWCA 136 at [29]
24 [1999] QCA 389, (1999) 152 FLR 135
[2014] FWCFB 888
12
[34] The Court rejected this argument. After considering the effect of the primarily English
authorities relied upon by the appellant, the Court concluded that there was no proper basis
for the provisions of the Bankruptcy Act to be read as “subject to unstated exceptions, because
of doctrines worked out in the older cases, under English statutes”. The Court then stated the
following conclusion:
“[17] We have therefore concluded that it is not the law that an action of the present
type may be brought by the bankrupt; it can only be brought by the trustee. The type to
which we refer is an action claiming damages or other sums on the basis of wrongful
dismissal, under a contract for personal service, the action not including any sum due
before termination - i.e. not including any sum for services actually rendered.”
[35] Pelechowski v NSW Land & Housing Commission25 concerned an application to the
Federal Court/Industrial Relations Court26 for review of a decision by a Judicial Registrar
dismissing a claim by the applicant in respect of the alleged unlawful termination of his
employment with the respondent. The judgment of the Court (Madgwick J) records that the
applicant had been made bankrupt by an order of the Federal Court in separate proceedings on
17 April 1998. Although this is not recorded in Madgwick J’s judgment, it can be discerned
from the decision of Walker JR which was the subject of the review application27 that the date
of bankruptcy was after the date the applicant had originally commenced proceedings in
respect of his termination of employment28, but before he had lodged his application for
review of Walker JR’s decision.29
[36] In his judgment, Madgwick J treated the application before him as one to which
s.60(2) of the Bankruptcy Act applied, notwithstanding that review application post-dated the
bankruptcy. His Honour said:
“[4] Mr Pelechowski says that, since he has suffered personal injury, he may
continue to bring this suit, despite the bankruptcy, in his own name. Part of the
complaint against Mr Pelechowski by the Department had been, as I understand it, that
he devoted unnecessarily large amounts of time to processing a worker's compensation
claim. However, the relief that Mr Pelechowski sought was of an economic nature and,
while in certain circumstances the Court could award compensation that might include
something in the way of damages for personal injury (for example psychiatric injury
arising out of the circumstances of an unlawful termination of employment), so far as I
can see, Mr Pelechowski made no such claim in the proceedings before the Judicial
Registrar. There was no assertion by Mr Pelechowski before me that he wishes to
pursue any such claim (although, I also have little doubt that some such claim will be
asserted and that today's events will spawn further voluminous proceedings). From the
material before me, as matters presently stand, any such assertion would appear to be
entirely unsustainable. In my opinion, they do not fall within paragraph 4(a) of s 60 of
the Bankruptcy Act 1966 (Cth) ("the Act").
25 [2000] FCA 23
26 Madgwick J at [1] expressed some doubt as to which Court was hearing the matter.
27 Karl Pelechowski v NSW Land & Housing Corp [1999] FCA 1110
28 Ibid at [1]
29 The date of Walker JR’s decision was 13 July 1999, so the application for review could only have been filed after that date.
[2014] FWCFB 888
13
[5] There is in reality no claim for anything in the nature of damages which would
be "estimated by immediate reference to pain felt by the bankrupt in respect of his
mind, body or character and without reference to his rights of property": see Cox v
Journeaux [1935] HCA 48; (1935) 52 CLR 713 at 721. The essential element of
proceedings for illegal termination of employment under the Workplace Relations Act
1996 (Cth), is that one's economic relations with one's former employer have been
disrupted. Those economic relations depend upon contract, or perhaps in the case of a
public servant, a statutory relationship, but nevertheless of a contractual or quasi-
contractual kind, that is to say, property rights are at the heart of the proceedings.
[6] Thus, there not having been an election within 28 days after notice of the
action was served upon the trustee by the respondent department, the trustee is deemed
to have abandoned the action, according to s 60(3) of the Act.”
[37] It is important to observe that the above reasoning concerns s.60(4)(a), and not
whether the action in question would have constituted property vesting in the trustee under
s.58(1). It may also be noted that Madgwick J’s conclusion that an employment contract
involves property rights must, with respect, be regarded as contestable in the light of other
authorities referred to in this decision.
[38] One of those other authorities is Perfection Dairies Pty Ltd v Finn30, a decision of a
Full Bench of the Industrial Relations Commission of NSW (Wright J, President, Staff J and
Stanton C). The matter concerned an application that the respondent to the appeal had made
under s.84 of the Industrial Relations Act 1996 (NSW) seeking a remedy with respect to what
he alleged was his unfair dismissal by the appellant employer. The respondent was an
undischarged bankrupt at the time that he made his s.84 application. He was successful at first
instance in obtaining orders that he be reinstated to his employment and that he be paid an
amount equating to the remuneration he would have received but for his dismissal from the
date of his dismissal to the date of his reinstatement. The appellant submitted that because of
his bankruptcy (which it only discovered after the hearing at first instance) the respondent had
no standing to commence the proceedings, the respondent’s right to commence the
proceedings being property which vested in the trustee under s.58(1) of the Bankruptcy Act,
with the result that the first instance decision was beyond the authority of the decision-maker.
[39] The Full Bench began its consideration of the appellant’s submission by referring to a
number of authorities to which we have also referred such as Griffiths, Daemar, Fuller, and
Geia. They also referred31 to the decision of the Federal Court (French J, as he then was) in
Re Heenan; Ex parte Collins32, in which his Honour, in the context of a discussion of the
common law origins of the exceptions to the vesting rule found in s.116(2)(g), quoted with
approval the following passage from the English Court of Appeal decision in Ex parte Vine;
re Wilson33 (emphasis added by the Full Bench):
“The general principle always has been that, until a bankrupt has obtained his discharge,
all his property is divisible among his creditors. But an exception was absolutely
necessary in order that the bankrupt might not be an outlaw, a mere slave to his
30 [2006] NSWIRComm 137, (2006) 151 IR 197
31 Ibid at [33]-[34]
32 (1992) 116 ALR 146
33 (1878) 8 Ch D 364 at 366-7
[2014] FWCFB 888
14
trustee; he could not be prevented from earning his own living. On that principle the
trustee could not sue for moneys due to the bankrupt in respect of his personal labour,
and, if the bankrupt could sue for them only for the benefit of his trustee, he would
really be without remedy. If he could not sue for damages in respect of a personal
wrong, such as the seduction of his daughter, or anything like that, the courts of the
realm would be closed to him for all practical purposes.”
[40] The Full Bench then went on to say:
“[38] Employment is not usually referred to, or known as, property. Whatever legal
"interest" an employee has in his or her employment, it is not a property interest. In
any event, it seems clear from reference to the relevant statutory provisions and the
case law that, although the expression "property", and cognate expressions such as
"the property of the bankrupt" and "after acquired property", are to be construed in a
very wide sense, the bankrupt's employment is not considered "property" for the
purposes of the Bankruptcy Act.
[39] Indeed, all the pertinent indications in the statute and the case law are to the
opposite effect. For example, there are a number of references in the Bankruptcy Act to
"property divisible among the bankrupt's creditors" (see, for example, s 58(6) and the
definition of "the property of the bankrupt" in s 5); it could not seriously be suggested
that the bankrupt's employment, or the bankrupt's rights as to his or her employment
could be divisible among the creditors. Indeed, the statute recognises that it is most
desirable that the bankrupt be able to earn income during the course of the bankruptcy
and also contemplates the likelihood that a bankrupt who was an employee prior to the
bankruptcy would continue to be in employment. The references we have cited from
division 4B of the statute, including the references to ss 139L and 139U are also in
point. In particular, we do not detect in the scheme of the Australian statute any
provision which would be at odds with the observation in the judgment of the English
Court of Appeal in Ex part Vine; re Wilson, where reference was made to the
necessary exception to the property of the bankrupt being divisible amongst his
creditors, ‘in order that the bankrupt might not be an outlaw, a mere slave to his
trustee; he could not be prevented from earning his living’.
[40] Also germane, in the present context, are the observations cited earlier from
the judgments in the Full Federal Court in Griffiths v Civil Aviation Authority. In this
respect, we refer to the passages emphasised in the extracts cited above from the
judgment of Cooper J. In light of those analyses, a relevant question is, would a
construction of the Bankruptcy Act which denied the bankrupt's right to take
proceedings under s 84 of the Industrial Relations Act be one which denied to the
bankrupt "the enjoyment of rights which did not affect the value of the bankrupt's
estate or the administration of the estate"? Similarly, was it the intention of Parliament,
in enacting provisions of the kind referred to earlier which, as Cooper J observed, did
not "state exhaustively the exceptions to the property in the nature of rights of action
which would not pass to the trustee", to exclude rights such as those under s 84?”
[41] The Full Bench then analysed the unfair dismissal jurisdiction under the Industrial
Relations Act in the context of the bankruptcy question in the following way:
[2014] FWCFB 888
15
“[41] Section 84 of the Act enables an employee to apply for relief in respect of the
termination of the employee's employment by the employer on the ground that the
termination was harsh, unjust or unreasonable. It is not a civil proceeding at law or
equity which relates to the property of the bankrupt. The right to commence
proceedings under s 84 is a statutory right which only the employee (s 84(1)) or an
industrial organisation of employees (s 84(2)) can exercise.
[42] If the application is not resolved by conciliation, the employee may elect to
have the matter determined by arbitration. In the event that the Commission
determines that the termination was harsh, unjust or unreasonable, the available
remedies are set out in s 89 of the Act. The primary remedy provided under s 89 is
reinstatement. It is only where the Commission considers that reinstatement is not
appropriate that compensation, in lieu of reinstatement, may be awarded. In our view,
the fact that compensation is available in such circumstances, does not alter the nature
of an application made under s 84. It is clear that the primary remedy under the Act is
reinstatement in employment: see, for example, Burge v NSW BHP Steel Pty Ltd
[2001] NSWIRComm 117; (2001) 105 IR 325 at 345; Little v Commissioner of Police
(No 2) (2002) 112 IR 212; Plummer v Stannard Bros Launch Service Pty Limited
[2005] NSWIRComm 301; (2005) 145 IR 111; and Public Service Association and
Professional Officers' Association Amalgamated Union of New South Wales (on behalf
of Peter Riley) v WorkCover Authority of New South Wales [2006] NSWIRComm 108.
[43] The matter presently before the Commission is not a decision involving a
"personal injury or wrong" done to the respondent, but a personal right of the
respondent which the creditors could not turn into any advantage to themselves.
However, the question whether the right to bring an action under s 84 is property
vesting in the trustee is assisted by an examination of how the "personal injury and
wrong" exception has developed in bankruptcy cases to exclude from the definition of
"property", and preserve to the bankrupt, the right to bring actions which are purely
personal to the bankrupt.
[44] We consider that the right to make an application pursuant to s 84 is a personal
right of the type envisaged in Griffith, where Cooper J observed, as we earlier noted:
[T]here is a unity of object and purpose in the operation of s 58, s 60 and s 116
of the Bankruptcy Act if it is recognised that the consistent focus of attention is
upon rights which the trustee can turn to advantage for the benefit of creditors
or upon rights the exercise of which will adversely affect or delay the
administration of the estate.
[45] It is these rights, as Cooper J observed in Griffiths, which fall within the
definition of "property" in s 5 and the enforcement of which, by action, are stayed by s
60(2) upon a person becoming bankrupt. To interpret "property", for the purposes of s
5 in this way avoids the injustice of denying to the bankrupt the power to exercise a
right in which the trustee has no interest and the exercise of which cannot operate
adversely on the property of the bankrupt, or the administration of the bankrupt's
estate.
[46] The right to bring a s 84 application is a personal right in which the applicant is
contending that he remains personally suitable to the position from which he has been
[2014] FWCFB 888
16
dismissed, and should be reinstated. It follows that the two questions we posed earlier
(in para [40]) should be answered respectively "Yes" and "No".
[47] We acknowledge that any money amount which the Commission ordered be
paid as compensation may, if the bankruptcy was continuing, be "income" for the
purposes of the Bankruptcy Act: see s 139L and para [22] above. Nevertheless, that
consideration would tend to support our conclusion, rather than contradict it.
[48] We have earlier (in para [15]) set out the terms of s 116(1)(b) of the
Bankruptcy Act which provides that also included in "property" divisible amongst the
creditors is (broadly speaking) the capacity to exercise, and to take proceedings for
exercising powers in, over in respect of property as might have been exercised by the
bankrupt. We have also earlier observed that employment is not usually considered
part of the employee's property. In that context, reference to s 116(1)(b) is useful
because it shows the nature of the connection between the capacity to take proceedings
and the bankrupt's property, which is necessary for the capacity to take proceedings to
itself be considered property. Although there is the kind of connection between a
bankrupt's employment and the capacity (under s 84) to take proceeding contemplated
by s 116(1)(b), because the bankrupt's employment is not part of the bankrupt's
property, so too any right or capacity the bankrupt might have to take proceedings
under s 84 in respect of his employment cannot be part of the bankrupt's property.”
[42] In Randall v The Deputy Commissioner of Taxation34 the applicant applied to the
Federal Court for judicial review of the decision to terminate his employment in the
Australian Public Service pursuant to the Administrative Decisions (Judicial Review) Act
1977 (Cth) and for constitutional writs under the Judiciary Act 1903 (Cth). The specific relief
sought by the applicant were declarations and orders (including certiorari) to quash the
decision to terminate his employment, a declaration concerning his ongoing employment in
the Australian Public Service, an order in the nature of a writ of mandamus requiring the
applicant’s reinstatement, and further orders directed at resumption of his employment duties
and the receipt of his salary and other entitlements. The respondents sought the dismissal of
the application on the basis that, because the applicant was an undischarged bankrupt
(bankruptcy having occurred prior to the commencement of the employment), the proceeding
fell within s.116(1)(b) (being one which involved the capacity to exercise powers in respect of
property as might have been exercised by the bankrupt for his own benefit) and thus vested in
the trustee under s.58(1). The respondents contended that none of the exceptions in s.116(2),
in particular s.116(2)(g), applied. They relied in particular upon Geia and Pelechowski.
[43] The Court (Lander J) framed the question to be determined in the following way:
“[37] In order therefore for property of the bankrupt (including after-acquired
property) to vest in the bankrupt’s estate the property must be of a character which is
divisible among the bankrupt’s creditors or be of a character of a right or power in
relation to that property that would otherwise have been exercisable by the bankrupt
but for the bankruptcy. Any other property does not vest.”
[44] After concluding that the proceeding was not one contemplated by s.116(2)(g), Lander
J analysed the nature of the applicant’s application. He observed that because the basis of the
34 [2008] FCA 1939, (2008) 174 FCR 441
[2014] FWCFB 888
17
application was that the applicant had been denied procedural fairness and subjected to an
improper exercise of power, he could succeed only to the extent of having the decision to
terminate his employment quashed and the matter remitted to the decision-maker to be
determined according to law. That meant that, even if the applicant was successful, no
property rights would accrue to him and therefore to his estate. In relation to the relief claimed
in respect of salary, Lander J observed that since the Court was not entitled to inquire into the
merits of the decision to terminate the applicant’s employment, it was hard to see how such an
order could be made.
[45] Lander J also pointed to the scheme of provisions in Division 4B of the Bankruptcy
Act under which the trustee was empowered to require the bankrupt to pay part or whole of
the bankrupt’s income into the bankrupt’s estate as demonstrating that the Bankruptcy Act did
not, apart from the operation of that scheme, recognise the bankrupt’s income as part of the
bankrupt’s property. This was, his Honour observed, consistent with the longstanding
principle that the bankrupt’s personal income and earnings after bankruptcy were regarded as
the property of the bankrupt, as recognised in decisions such as Nette v Howarth35 and
Federal Commissioner of Taxation v The Official Receiver36. This led to the following
conclusion:
“[74] If the bankrupt’s income does not vest in the trustee, it must be because it is
not property or at least property divisible among the bankrupt’s creditors.
[75] In those circumstances, the trustee cannot sue for wages or income due to the
bankrupt because those wages or that income have not vested in the trustee ...”.
[46] Lander J went on to conclude:
“[76] The right to seek a review of the respondent’s decision to terminate the
applicant’s employment remains with the applicant. The trustee has no interest in
seeking a review of that decision. The trustee, for example, could not ensure that if the
decision were reversed that the applicant would resume employment. If the trustee
was interested in the proceeding and brought the proceeding and the decision was
quashed as the applicant seeks in this proceeding, there would be no property in the
result which would be divisible among the applicant’s creditors. The right to seek an
order quashing the decision of the respondent to terminate the applicant’s employment
is not a right which can be exercised beneficially for the creditors, even in
circumstances where the applicant seeks the further orders which may result in a sum
of money being paid to him by way of compensation. Whether if the bankrupt
received compensation that money would become after-acquired property for which he
would have to account to his trustee does not need to be determined on this
application: see Chippendall v Tomlinson (1785) L Co Bank L 428; 99 ER 900.”
[47] In reaching that conclusion, Lander J referred with approval to Griffiths and Perfection
Dairies. His Honour distinguished Pelechowski on the basis that it was a case concerned with
the operation of s.60, not with what constituted the property of the bankrupt. He also
distinguished Geia on the basis that it involved a claim for damages, not for loss of wages.
35 (1935) 53 CLR 55
36 (1956) 95 CLR 300
[2014] FWCFB 888
18
[48] Brown v Premier Pet37 concerned a claim by the applicant that he had been dismissed
from his employment in contravention of certain of the general protections provisions
contained in Part 3-1 of the Act. The applicant, who had become a bankrupt prior to the
commencement of the employment the subject of the application, claimed as remedies
reinstatement to his employment, compensation and the imposition of a pecuniary penalty
upon the respondent. The respondent moved to have the application dismissed on the basis
that the right to bring the proceedings was property which had vested in the trustee under
s.58(1) of the Bankruptcy Act.
[49] In his consideration of this motion, the Court (Jarrett FM, as his Honour then was)
started with the proposition that a “claim for compensation arising out of a wrongful or
unlawful dismissal from employment is generally seen as “property” for the purposes of the
Bankruptcy Act”. His Honour cited Daemar and Geia as authorities for this proposition. We
would interpose at this point that Daemar does not appear to us to support this, since it was
concerned with an application for prerogative relief, but it may be accepted that Geia stands
for this proposition. His Honour also referred to paragraph [5] of Pelechowski in its reference
to proceedings for illegal termination of employment as being connected with contractual or
quasi-contractual rights that were in the nature of property rights. On the basis of those
authorities, Jarrett FM concluded that a general protections claim for compensation under the
Act was property which vested in the trustee. He came to the same conclusion with respect to
the pecuniary penalty claim, and referred in that connection to Leaman v The Salvation Army
(Victoria) Property Trust as Trustee for The Salvation Army (Vic) Social Work38, a case
which likewise involved a claim for a pecuniary penalty for alleged contravention of the Act’s
general protections provisions. However, with respect to the reinstatement claim, Jarrett FM
relied on Perfection Dairies and Randall to support the conclusion that the right to seek an
order for reinstatement did not involve the exercise of a right in respect of property for the
purpose of s.116(1) of the Bankruptcy Act. His Honour concluded:
“[47] To adopt and adapt the reasoning in Randall, the right to seek reinstatement
and thereby to be put back in a position to earn income through personal exertion
remains with Mr Brown. His trustee has no interest in seeking his reinstatement. His
trustee, for example, could not ensure that if reinstatement was offered or taken up, Mr
Brown would take up or remain in the employment. If his trustee was to bring these
proceedings, and they were successful, there would, nonetheless, be no property which
would be divisible among Mr Brown’s creditors. The right to seek an order for
reinstatement is not a right which can be exercised beneficially for Mr Brown’s
creditors.”
[50] We consider that the following propositions may be derived from the above cases:
(1) A bankrupt’s employment is not itself “property” for the purposes of the
Bankruptcy Act.
(2) Income from employment is not “property”, or “property divisible amongst the
creditors of the bankrupt” under the Bankruptcy Act, and therefore does not
vest in the trustee. Consequently, the trustee cannot institute proceedings to
recover earnings for work performed.
37 [2012] FMCA 830
38 [2011] FMCA 1037
[2014] FWCFB 888
19
(3) A statutory right for a dismissed employee to apply for reinstatement to his or
her employment is one personal to the dismissed employee, and the
determination of such an application involves an assessment of the person’s
suitability to be reinstated. The trustee does not have any interest in the
reinstatement of a bankrupt employee; an order for the reinstatement of the
employee could not be enforced by the trustee and would not result in any
property being divisible amongst the creditors of the employee.
(4) An action for damages for wrongful dismissal is a chose in action which does
however constitute “property” for the purposes of the Bankruptcy Act, and
consequently vests in the trustee.
Decisions concerning unfair dismissal rights under the Workplace Relations Act and the
Fair Work Act
[51] A number of decisions by this Commission and its predecessors have considered
whether an application for a remedy in respect of a dismissal alleged to be unfair constitutes
property which vests in the trustee under s.58 of the Bankruptcy Act. Three different
approaches may be identified. In K Hampson v Circuit Finance Australia Limited39 the
Australian Industrial Relations Commission (Acton SDP) considered whether an application
for relief in respect of termination of employment under s.170CE(a)(a) of the Workplace
Relations Act 1996 constituted property vesting under s.58. In that case, the applicant had
become a bankrupt prior to his dismissal and the lodgement of his application. The
Commission took the view that the entire application vested in the trustee under s.58, and did
not fall within the exception in s.116(2)(g). Her Honour said:
“[16] Section 170CH of the Workplace Relations Act sets out the remedies the
Commission may order if it has determined a termination was harsh, unjust or
unreasonable. Section 170CH provides that if the Commission considers it appropriate
it may make an order requiring the employer to reinstate the employee and, if
considers it appropriate, it may also make an order to maintain the continuity of the
employee’s employment and an order for the employer to pay to the employee an
amount in respect of the remuneration lost, or likely to have been lost, by the employee
because of the termination. If the Commission thinks that reinstatement is
inappropriate, the Commission may make an order requiring the employer to pay the
employee an amount in lieu of reinstatement.
[17] In his s.170CE(1)(a) application, Mr Hampson states the relief he is seeking is:
reinstatement;
an amount in relation to the remuneration lost, or likely to have been lost, by him
because of the termination;
“$3841.60 being 10% bonus based on salary”; and
“payment of shortfall of salary on dismissal”.
[18] In the circumstances, I think it is apparent that ss.58 and 116 of the Bankruptcy
Act are relevant to Mr Hampson. Accordingly, his property, excepting property
39 PR967475
[2014] FWCFB 888
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covered by s.116(2) of the Bankruptcy Act, is vested in the trustee of his estate in
bankruptcy.
[19] Further, given the nature of Mr Hampson’s s.170CE(1)(a) application and the
wide definition of “property” in the Bankruptcy Act, I consider Mr Hampson’s right of
action under s.170CE(1)(a) of the Workplace Relations Act concerns his property.
[20] I am also satisfied Mr Hampson’s right of action under s.170CE(1)(a) of the
Workplace Relations Act does not concern property which is subject to s.116(2) of the
Bankruptcy Act, in particular s.116(2)(g). I am so satisfied because, on the facts,
“there is in reality no claim for anything in the nature of damages which would ‘be
estimated by immediate reference to pain felt by the bankrupt in respect of his mind,
body or character and without reference to his rights of property’”.
[21] In light of my conclusions that Mr Hampson is subject to ss.58 and 116 of the
Bankruptcy Act and that Mr Hampson’s right of action under s.170CE(1)(a) of the
Workplace Relations Act concerns his property and it is not property which is subject
to s.116(2) of the Bankruptcy Act, it follows that Mr Hampson’s right of action under
s.170CE(1)(a) of the Workplace Relations Act is vested in the trustee of his estate in
bankruptcy. Accordingly, Mr Hampson lacks standing to make the s.170CE(1)(a)
application relevant to this matter.”
[52] In the course of her decision, her Honour referred40 to an earlier Full Bench decision,
Williams v Genel Investments Pty Ltd41, which had affirmed a first instance decision42 in
which the Commission (Watson SDP) had considered whether an application made under
s.170CE of the Workplace Relations Act was stayed by operation of s.60(2) of the Bankruptcy
Act in circumstances where the applicant had become a bankrupt subsequent to the lodgement
of his application for relief. His Honour determined that the proceeding was stayed, since it
was “an action” for the purpose of s.60(2) and was not an action in respect of “any personal
injury or wrong done to the bankrupt, his spouse or a member of his family” such as to fall
within the exception in s.60(4)(a). Although this decision is not directly on point in that it was
a case where s.60 rather than s.58 was invoked (that is, the bankruptcy post-dated, not pre-
dated, the making of the application), its reasoning concerning s.60(4)(a) is relevant insofar as
the exception in s.116(2)(g) is cast in similar (but not identical) terms to that in s.60(4). His
Honour, after analysing the relevant authorities, said:
“[27] In this case, the applicant's original application [Form R18] specified
reinstatement as the remedy sought, an amount in respect of the remuneration lost due
to the termination, and compensation/damages for shock, distress, pain and suffering.
This was elaborated upon in the applicants written materials, filed in compliance with
directions which sought:
· allegedly unpaid entitlements
· pay in lieu of notice
· economic losses in respect of `Centrelink" payments; and
40 Ibid at [11]
41 PR902342
42 Print T4278
[2014] FWCFB 888
21
· $25,000 "in respect of pain and humiliation of having to go bankrupt ...
humiliation of having to tell my friends that I have been sacked and the
inability to sleep since doing so".
[28] The first three elements plainly fall within actions in the hands of the Trustee
by virtue of s.60 of the Bankruptcy Act. The final element may not. Such an action
may be available [Coms 21 Limited, Print S3571]. In my view, however, this element
of the claim is not severable from those elements of the action which fall within the
control of the Trustee in Bankruptcy. As in Daemar the wrong which the applicant
complains of is, she asserts, the source of the financial problems which have led to
bankruptcy, and pain and humiliation suffered. The final element of the action does
not fall within s.60(4). I am not satisfied that it is possible to sever allegations and
claims for damages from the causes of action which are vested in the Trustee.”
[53] The Full Bench which heard the appeal from Watson SDP’s decision (Polites and
Kaufman SDPP and Whelan C) refused leave to appeal, stating the decision was “clearly
correct”43. However, the Full Bench regarded Watson SDP’s decision as confined to a
consideration of the operation of s.60(4), and expressed no view as to whether the unfair
dismissal claim would concern or constitute property for the purpose of s.58(1).
[54] In Dubow v Aboriginal and Torres Strait Islander Legal Service (Qld) Ltd t/a
ATSILS44 the Commission (Richards SDP) considered the position of an applicant for an
unfair dismissal remedy under the Act who had become a bankrupt prior to the lodgement of
her application and prior to the dismissal the subject of that application. Richards SDP’s
conclusion was different to that of Acton SDP; he took the view that, insofar as the applicant
sought the remedy of reinstatement, it did not vest in the trustee under s.58, but that insofar as
it sought any form of compensation, it did vest in the trustee. After referring to Hampson,
Brown and Randall, his Honour then said:
“[17] I note that there are differences between the orders the Court and the
Commission can make.
[18] The power vested in the Federal Courts to make orders under the Fair Work
Act 2009 are as follows:
545 Orders that can be made by particular courts
Federal Court and Federal Magistrates Court
(1) The Federal Court or the Federal Magistrates Court may make any order
the court considers appropriate if the court is satisfied that a person has
contravened, or proposes to contravene, a civil remedy provision.
Note 1: For the court’s power to make pecuniary penalty orders, see
section 546.
Note 2: For limitations on orders in relation to costs, see section 570.
43 At [11]
44 [2013] FWC 6171
[2014] FWCFB 888
22
Note 3: The Federal Court and the Federal Magistrates Court may grant
injunctions in relation to industrial action under subsections 417(3) and 421(3).
Note 4: There are limitations on orders that can be made in relation to
contraventions of subsection 65(5), 76(4), 463(1) or 463(2) (which deal with
reasonable business grounds and protected action ballot orders) (see
subsections 44(2), 463(3) and 745(2)).
(2) Without limiting subsection (1), orders the Federal Court or Federal
Magistrates Court may make include the following:
(a) an order granting an injunction, or interim injunction, to prevent,
stop or remedy the effects of a contravention;
(b) an order awarding compensation for loss that a person has suffered
because of the contravention;
(c) an order for reinstatement of a person.
[19] The court can order any discrete outcome. It may make any order that it
considers appropriate once it reaches the required level of satisfaction in respect of a
claim.
[20] The jurisdiction of the Commission is somewhat more conditioned. The
Commission does not have scope to make any order that it considers appropriate. It
may only do certain things for the purposes of remedy, and then only when various
matters have been taken into account. These include, by way of s.390 of the Act:
Reinstate or appoint the applicant to a new position, if the Commission considers it
appropriate to do so;
Make an order for the maintenance of continuity of a person's employment where
the person is reinstated or appointed to another position;
Make an order to restore lost pay when a person is reinstated or appointed to
another position; or otherwise
Make an order for compensation in lieu of reinstatement (subject to various
conditions being met).
[21] Section 381(1)(c) states that one of the objects of the Part is to provide
remedies if the dismissal is found to be unfair, with an emphasis on reinstatement.
[22] While the scope to make orders differs between the Commission and the
Court, and the Commission has no accrued jurisdiction to select at its own volition an
applicable form of relief, I do not think this gives rise to any issue of substance. An
application can be accepted by the Commission and be determined to the extent that it
complies with the Commission’s jurisdiction.
[23] I see no bar to an applicant who is bankrupt making an application for a
remedy of reinstatement (or reappointment to an alternative position) only (inclusive
of continuity of service). This is not a concern in which a trustee will have an interest
(or be able to act in respect of on behalf of the bankrupt applicant). Nor will it
constitute divisible property in which the bankrupt’s beneficial creditors will have an
interest.
[2014] FWCFB 888
23
[24] However, in so far as an application might seek an order for “lost pay” (s.391
of the Act) or compensation (s.392(1) of the Act), the Commission would have no
jurisdiction to entertain such a claim, as the claim for lost pay or compensation would
constitute after-acquired property and would vest in the trustee (pursuant to s.58 or
s.116(1) of the Bankruptcy Act). That is, neither the lost pay order nor the
compensation order would be wages earned before the termination by the efforts of the
Applicant and owed to her as a consequence.
[25] Given this discussion, I would adopt the approach of Jarrett FM and accept and
hear the application in relation to all matters in which a bankrupt applicant’s creditors
had no interest and in respect of which there would be no divisible property in which
the relevant creditors would have a beneficial interest. This would extend to
determining whether a dismissal was harsh, unjust or unreasonable, and whether, if so,
a bankrupt applicant should be reinstated or reappointed to another position (if
appropriate). But the balance of any application, in so far as it constituted property for
the defined purposes, would be beyond jurisdiction.”
[55] His Honour went on to identify some practical considerations that might arise from the
approach he had preferred, saying:
“[27] Having so concluded, I do not think the chain of reasoning that has led to this
conclusion is without its practical difficulties. One such practical difficulty that comes
to mind is what implication would arise - in both the Court and the Commission - if a
bankrupt’s trustee made an application in its own right for a remedy relevant to the
interests of the creditors in relation to the bankrupt’s dismissal in addition to an
application having been made by the bankrupt former employee him or herself seeking
reinstatement? Both parties would be jurisdictionally competent to make their
respective applications.
[28] Reasonably, where a trustee had cause to make an application (which would
require the bankrupt former employee’s evidence to be adduced) it would do so in
coordination with the former employee.”
[56] In James Hutchinson v Monash Health45 the same issue was considered by the
Commission (Smith DP), but a different view again was taken, namely that no aspect of an
application for an unfair dismissal remedy under the Act vested in the trustee under s.58 of the
Bankruptcy Act. The reasoning in that decision was as follows:
“[27] Division 2 of Part 3-2 of the Fair Work Act was intended to provide employees
with a statutory remedy in the event of the termination of employment. It constitutes,
in this respect, beneficial legislation that should be construed liberally.
[28] However, that doesn’t mean that language can be strained beyond that which was
intended.
45 [2013] FWC 8173
[2014] FWCFB 888
24
[29] In this case, it is clear that views are evolving and contrary views exist. Indeed, I
find Mr Champion’s position to be strongly arguable particularly when consideration
is given to the beneficial nature of the legislation, the impact upon the applicant in not
being able to bring a claim which may assist both him and his creditors, together with
the public policy that dismissed employees have been given a statutory right rather
than relying on common law when it comes to termination of employment which is
considered harsh, unjust or unreasonable.
[30] I am also of the view that the result in this case cannot be a half way house where
an application may be considered valid but only insofar as particular relief is
concerned. The full purpose of the Fair Work Act cannot be segmented. In this
connection I agree with Mr Rinaldi and, although qualified, Mr Champion. The
scheme of the Fair Work Act requires the Commission to consider reinstatement as the
primary remedy and then if that is found to be inappropriate, to consider compensation
in lieu of reinstatement (my emphasis). The two concepts are joined and it would be
perverse if a decision was made that a person was dismissed harshly, unjustly or
unreasonably and reinstatement was not appropriate, then for the Commission be
barred from considering compensation in lieu of reinstatement. In this connection, I
must respectfully disagree with Senior Deputy President Richards. The Fair Work Act
must be taken as a whole and the primary submission of both counsel that a person is
either in or out, in my view is correct.
[31] In my view Mr Champion makes a persuasive case that the traditional concept of
a chose in action is not relevant to a statutory remedy contained in beneficial
legislation. I am drawn to agree with the Full Bench of the Industrial Relations
Commission of New South Wales when it concluded: . . . Employment is not usually
referred to, or known as, property. Whatever legal “interest” an employee has in his
or her employment, it is not a property interest. The notion of persons having a
property right in employment would no doubt, in other circumstances, lead to some
unease.
[32] Whilst the Commission is not bound by the principle of stare decisis, it is clear
that members should follow Full Benches unless there are sound reasons for departing
from those decisions. The lines of authority differ for this matter. Relevantly, the Full
Bench in Williams was decided before Perfection and the decision of Senior Deputy
President Action in Hampson was decided after Perfection.
[33] The decision of Senior Deputy President Richards has added a further complexity
to the issue which creates a situation where the precedent within the jurisdiction is
now mixed and may be considered less persuasive than otherwise. In my view, the
authorities referred to now can give rise to the conclusion that the Bankruptcy Act
should not be read as having a purpose of displacing the statutory remedy provided in
the Fair Work Act for persons who are dismissed and are eligible otherwise to make
an application.”
The unfair dismissal regime under the Fair Work Act
[57] It is next necessary to consider the relevant provisions of the regime of provisions
contained in Part 3-2 of the Act in the light of the bankruptcy issue. Firstly s.394(1) identifies
who may apply for an unfair dismissal remedy as follows:
[2014] FWCFB 888
25
(1) A person who has been dismissed may apply to the FWC for an order under
Division 4 granting a remedy.
[58] Thus the right to apply belongs to “a person who has been dismissed”. Section 386
defines when a person has been dismissed for the purpose of Part 3-2. Section 386(1), which
operates subject to certain exceptions in s.386(2) and a further qualification in s.386(3),
provides:
(1) A person has been dismissed if:
(a) the person’s employment with his or her employer has been terminated on the
employer’s initiative; or
(b) the person has resigned from his or her employment, but was forced to do so
because of conduct, or a course of conduct, engaged in by his or her employer.
[59] The application must be lodged within 21 days after the dismissal took effect, or
within such further period as the Commission may allow: s.394(2).
[60] In respect of an application properly lodged in accordance with the above provisions,
s.390(1) provides that the Commission may order a person’s reinstatement or the payment of
compensation to a person, if firstly the Commission is satisfied that the person was “protected
from unfair dismissal” at the time of being dismissed, and secondly if the person has been
unfairly dismissed. The requirements for a person to be “protected from unfair dismissal” are
specified in s.382; those requirements relate to the period in which the person had been
employed and whether the person had been covered by a modern award, an enterprise
agreement, or the person’s annual rate of earnings had been below an identified amount.
Section 385 identifies what constitutes an unfair dismissal in the following terms:
A person has been unfairly dismissed if the FWC is satisfied that:
(a) the person has been dismissed; and
(b) the dismissal was harsh, unjust or unreasonable; and
(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and
(d) the dismissal was not a case of genuine redundancy.
Note: For the definition of consistent with the Small Business Fair Dismissal Code:
see section 388.
[61] Sections 391 and 392, which set out requirements which apply to the award of the
remedies of reinstatement and compensation respectively, provide:
391 Remedy—reinstatement etc.
Reinstatement
(1) An order for a person’s reinstatement must be an order that the person’s employer
at the time of the dismissal reinstate the person by:
(a) reappointing the person to the position in which the person was employed
immediately before the dismissal; or
[2014] FWCFB 888
26
(b) appointing the person to another position on terms and conditions no less
favourable than those on which the person was employed immediately before
the dismissal.
(1A) If:
(a) the position in which the person was employed immediately before the
dismissal is no longer a position with the person’s employer at the time of the
dismissal; and
(b) that position, or an equivalent position, is a position with an associated
entity of the employer;
the order under subsection (1) may be an order to the associated entity to:
(c) appoint the person to the position in which the person was employed
immediately before the dismissal; or
(d) appoint the person to another position on terms and conditions no less
favourable than those on which the person was employed immediately before
the dismissal.
Order to maintain continuity
(2) If the FWC makes an order under subsection (1) and considers it appropriate to do
so, the FWC may also make any order that the FWC considers appropriate to maintain
the following:
(a) the continuity of the person’s employment;
(b) the period of the person’s continuous service with the employer, or (if
subsection (1A) applies) the associated entity.
Order to restore lost pay
(3) If the FWC makes an order under subsection (1) and considers it appropriate to do
so, the FWC may also make any order that the FWC considers appropriate to cause the
employer to pay to the person an amount for the remuneration lost, or likely to have
been lost, by the person because of the dismissal.
(4) In determining an amount for the purposes of an order under subsection (3), the
FWC must take into account:
(a) the amount of any remuneration earned by the person from employment or
other work during the period between the dismissal and the making of the order
for reinstatement; and
[2014] FWCFB 888
27
(b) the amount of any remuneration reasonably likely to be so earned by the
person during the period between the making of the order for reinstatement and
the actual reinstatement.
392 Remedy—compensation
Compensation
(1) An order for the payment of compensation to a person must be an order that the
person’s employer at the time of the dismissal pay compensation to the person in lieu
of reinstatement.
Criteria for deciding amounts
(2) In determining an amount for the purposes of an order under subsection (1), the
FWC must take into account all the circumstances of the case including:
(a) the effect of the order on the viability of the employer’s enterprise; and
(b) the length of the person’s service with the employer; and
(c) the remuneration that the person would have received, or would have been
likely to receive, if the person had not been dismissed; and
(d) the efforts of the person (if any) to mitigate the loss suffered by the person
because of the dismissal; and
(e) the amount of any remuneration earned by the person from employment or
other work during the period between the dismissal and the making of the order
for compensation; and
(f) the amount of any income reasonably likely to be so earned by the person
during the period between the making of the order for compensation and the
actual compensation; and
(g) any other matter that the FWC considers relevant.
Misconduct reduces amount
(3) If the FWC is satisfied that misconduct of a person contributed to the employer’s
decision to dismiss the person, the FWC must reduce the amount it would otherwise
order under subsection (1) by an appropriate amount on account of the misconduct.
Shock, distress etc. disregarded
(4) The amount ordered by the FWC to be paid to a person under subsection (1) must
not include a component by way of compensation for shock, distress or humiliation, or
other analogous hurt, caused to the person by the manner of the person’s dismissal.
Compensation cap
[2014] FWCFB 888
28
(5) The amount ordered by the FWC to be paid to a person under subsection (1) must
not exceed the lesser of:
(a) the amount worked out under subsection (6); and
(b) half the amount of the high income threshold immediately before the
dismissal.
Note: subsection 392(5) indexed to $64,650 from 1 July 2013
(6) The amount is the total of the following amounts:
(a) the total amount of remuneration:
(i) received by the person; or
(ii) to which the person was entitled;
(whichever is higher) for any period of employment with the employer
during the 26 weeks immediately before the dismissal; and
(b) if the employee was on leave without pay or without full pay while so
employed during any part of that period—the amount of remuneration taken to
have been received by the employee for the period of leave in accordance with
the regulations.
[62] Section 390(3) however conditions when compensation may be ordered under s.392 as
follows:
(3) The FWC must not order the payment of compensation to the person unless:
(a) the FWC is satisfied that reinstatement of the person is inappropriate; and
(b) the FWC considers an order for payment of compensation is appropriate in
all the circumstances of the case.
[63] Additionally, s.381, which sets out the object of Part 3-2, provides in paragraph (1)(c)
that part of the object of the Part is “to provide remedies if a dismissal is found to be unfair,
with an emphasis on reinstatement” (underlining added).
[64] Some relevant observations may be made about this legislative scheme. Firstly, the
Act does not contemplate that any person other than the dismissed employee may make an
application in respect of that person’s dismissal. The right to make an application is personal
to the dismissed employee and is not assignable.
[65] Secondly, the Act does not confer upon anybody a right to relief, but only a right to
make an application (provided that specified statutory criteria are satisfied) and, once made, to
have it determined according to law. The determination as to whether a dismissal is harsh,
unjust or unreasonable involves the making of a discretionary decision (in the sense discussed
[2014] FWCFB 888
29
by the High Court in Coal and Allied Operations Pty Limited v Australian Industrial
Relations Commission46). The making of a remedial order upon a finding being made that a
dismissal is harsh, unjust or unreasonable involves the making of a further discretionary
decision. The fact that such a finding is obtained by an applicant does not entitle the applicant
to a remedy, and indeed it is possible for the Commission in the exercise of its discretion to
refuse a remedy entirely. This is consistent with the position that Part 3-2 of the Act is not
concerned with the enforcement of existing rights but rather the creation of new rights in
certain circumstances.
[66] Thirdly, the Act requires primary consideration to be given to reinstatement before any
monetary order can be made. An order to restore lost pay under s.391(3) can only be made as
a consequence of the making of a reinstatement order under s.391(1). Further, a compensation
order can only be made under s.392 upon a finding being made pursuant to s.390(3)(a) that
reinstatement is inappropriate, and such an order is, under s.392(1) made “in lieu of
reinstatement”. We respectfully adopt the analysis in this respect of Vice President Lawler in
DP World Sydney Limited v Mr Stephen Lambley47 as follows:
“[136] Under the statutory provisions that were operative for many years under the
Workplace Relations Act 1996, the authorities held that reinstatement was the “primary
remedy” for a dismissal found to be harsh, unjust or unreasonable.
[137] The reinstatement provision in the Act adopts language that is different from
the reinstatement provision in the Workplace Relations Act 1996. However, those
differences only serve to reinforce the proposition that reinstatement is the “primary
remedy” and that, if a remedy is appropriate, reinstatement should be ordered if it is
sought unless the Commission is satisfied on proper grounds that reinstatement is not
appropriate. Section 390 of the Act relevantly provides:
[not reproduced]
[138] ...The language of s.390 makes the position pellucidly clear. The Commission
“must” order reinstatement unless reinstatement of the person is inappropriate.”
[67] Fourthly, in making an order for compensation under s.392, the Commission must take
into account the matters specified in s.392(2), including under paragraph (c), in effect, the
earnings which the applicant had lost as a result of the unfair dismissal. To this extent, a s.392
compensation order bears some analogy to an order for damages for wrongful dismissal,
although it will principally relate to the time the applicant would have remained in
employment and the wages he or she would have earned in that time, discounted for various
contingencies. However, the other factors which must be taken into account under s.392(2),
together with the requirement in s.392(3) to reduce by an appropriate amount the quantum of
compensation that might otherwise be ordered to take into account any misconduct by an
applicant that contributed to the decision to dismiss the applicant and the cap upon
compensation prescribed by s.392(5), may mean that any compensation order made by the
Commission under s.392 ultimately bears little resemblance to an order for damages for
wrongful dismissal.
46 (2000) 203 CLR 194 at 204-5 [19] per Gleeson CJ and Gaudron and Hayne JJ)
47 [2013] FWCFB 9230. Vice President Lawler dissented as to the outcome in that appeal but not in a way which affected the
correctness of the quoted passage.
[2014] FWCFB 888
30
[68] Fifthly, the prohibition in s.392(4) upon a compensation order including any
component of compensation for “shock, distress or humiliation, or other analogous hurt”
caused by the manner of the dismissal means that such a compensation order is not one which
compensates for any personal injury or wrong done to the applicant.
Conclusions
[69] Having regard to the authorities to which we have referred, the propositions which we
have derived from those authorities, and the relevant provisions of the Act, we consider that
an application for an unfair dismissal remedy is not “property” which vests in the trustee
under s.58 of the Bankruptcy Act. It follows that we prefer the approach taken in James
Hutchinson over the differing approaches taken in Hampson and Dubow.
[70] The critical question for the purpose of assessing whether s.58 of the Bankruptcy Act
applies is whether Ms Millington’s application constitutes property divisible amongst her
creditors under s.116(1) of the Act. Her former employment is not itself property that
belonged to her at the time of her bankruptcy or was subsequently acquired by her under
s.116(1)(a); therefore the capacity under the Act for Ms Millington to commence unfair
dismissal proceedings in respect of that former employment does not constitute property as
defined in s.116(1)(b). That leaves therefore only the question of whether her application for
an unfair dismissal remedy is itself property divisible amongst her creditors under s.116(1)(a).
[71] As earlier discussed, the right under the Act to make an application for an unfair
dismissal remedy is personal to the dismissed employee. The Act does not confer a right to a
remedy, but only a right to make an application and have it heard according to law. The right
is therefore best characterised as a bare, non-assignable right of action. Such rights of action
are not, outside the constitutional context, usually regarded as being in the nature of
“property”.48
[72] The “primary remedy” under Part 3-2 of the Act is reinstatement. Reinstatement is
something entirely personal to the applicant for an unfair dismissal remedy. Whether that
remedy is granted or not in relation to a dismissal found to be unfair depends to a large degree
upon an assessment of the dismissed employee’s personal suitability to return to his or her
former position (or another position that is no less favourable), including the capacity for a
working relationship to be re-established between the dismissed employee and the former
employer. These are matters entirely personal to the dismissed employee. The capacity to seek
the remedy of reinstatement is not something that can be turned to the benefit of creditors by
the trustee. The trustee could not by process of law require the dismissed employee, if a
reinstatement order is made, to re-commence employment and continue in such employment
thereafter as envisaged by such an order. The earnings that the dismissed employee would
receive as the result of a reinstatement order would not constitute property divisible amongst
the creditors under s.116(1) and therefore vesting in the trustee under s.58, although such
earnings would be subject to the scheme of provisions contained in Division 4B of the
Bankruptcy Act.
[73] The capacity under s.391(3) to seek an order for pay lost or likely to have been lost as
a result of the dismissal cannot be equated to an action for damages for wrongful dismissal.
48 Georgiadis v Australian & Overseas Telecommunications Corporation [1994] HCA 6; (1994) 179 CLR 297 at 314 per
Dawson J; Hepples v Federal Commissioner of Taxation (1990) 22 FCR 1 at 23
[2014] FWCFB 888
31
An order under s.391(3) can only be made if an order for reinstatement is made under
s.391(1); it is therefore entirely ancillary to and not severable from the personal remedy of
reinstatement. Further, there is no right to a lost pay order even where reinstatement is
ordered; a lost pay order may only be made where the Commission “considers it appropriate
to do so” and is therefore discretionary in nature. The Commission and its predecessors have
not infrequently declined to make lost pay orders even though reinstatement has been
ordered.49
[74] The position in respect of compensation orders under s.392 is somewhat more
problematic. As earlier observed, s.392(2)(c) requires the Commission to take into account in
making such an order the remuneration that the dismissed employee would have received or
would be likely to receive if the person had not been dismissed. To that extent, the remedy
may be said to be analogous to an action for damages for wrongful dismissal. However, that
analogy fails on a full analysis of the position under the Act. Compensation is secondary to
the primary remedy of reinstatement; thus the Commission having found a dismissal unfair, it
may only consider the making of a compensation order once reinstatement has been
considered and found to be inappropriate, and such an order can only be made in lieu of
reinstatement. The making of a compensation order is discretionary, in that it may only be
made where the Commission considers such an order to be “appropriate in all the
circumstances of the case”.
[75] Even where the Commission determines that it is appropriate to make a compensation
order, the monetary quantum of that order may be shaped by the range of matters required to
be taken into account under s.392(2) and the requirement in s.392(3) to reduce the quantum
by reference to contributory misconduct by the dismissed employee to such a degree that it
has little or no relationship to an order for damages that a court might make in an action for
wrongful dismissal. We do not consider therefore that Geia is applicable to an analysis of the
remedial provisions in Part 2-3 of the Act. The position here is, rather, highly comparable to
the statutory unfair dismissal scheme in the NSW Industrial Relations Act which was
determined in Perfection Dairies not to give rise to rights in the nature of property that could
vest in the trustee.
[76] In Dubow, Richards SDP identified two matters in his analysis which we think
demonstrate why, with respect, the conclusion his Honour reached is not the correct one. His
Honour firstly contrasted the remedial powers of the Federal Court and the Federal Circuit
Court under s.545 of the Act (as applied to the proceedings in Brown) to the Commission’s
powers to grant a remedy in response to an unfair dismissal application. As his Honour
pointed out, the court under s.545 “can order any discrete outcome”, including “any order that
it considers appropriate once it reaches the required level of satisfaction in respect of a claim”;
this was in contrast to the “more conditioned” powers of the Commission, under which the
Commission was not empowered to make any order it considered appropriate, and could only
grant certain remedies once certain matters had been taken into account.50 We agree with the
distinction, but we disagree with his Honour that it is a distinction without substance.51 An
applicant seeking a civil remedy under Part 4-1 may in the application for relief plead the
particular remedy that is sought under s.545, and in determining that application the court can
49 E.g. Ismail Gurdil v The Star Pty Ltd [2013] FWC 6780 at [104]; Regional Express Holdings Limited t/a REX Airlines v R.
Richards [2010] FWAFB 8753 at [29]; Dale Cook v ACI Operations Pty Ltd [2012] FWA 140 at [32]-[33].
50 [2013] FWC 6171 at [17]-[20]
51 Ibid at [22]
[2014] FWCFB 888
32
grant that remedy independent of any consideration concerning potential alternative remedies
not sought by the applicant. In consequence it is possible under Part 4-1 of the Act for an
application for the remedy of reinstatement to be “severed” from an application for a
compensatory order, so that (as contemplated in Brown) a bankrupt employee could bring the
former application and the trustee could separately and independently bring the latter.
However, this is not possible with respect to an unfair dismissal application, because as we
have discussed the remedy of compensation is intertwined with and is not severable from
consideration of reinstatement.
[77] The second matter identified by Richards SDP demonstrates that this is the case. His
Honour recognised the “practical difficulty” which would arise from the conclusion he had
reached if the dismissed employee applied for reinstatement and the trustee separately made
an application for compensation under Part 3-2. That “practical difficulty” is, we consider,
insoluble in nature, in that having regard to the provisions of the Act to which we have
referred it would be impermissible for the Commission to consider the making of a
compensation order independent of the question of reinstatement. We agree with and
respectfully adopt the conclusion of Smith DP in James Hutchinson52 that the concepts of
reinstatement and compensation are “joined” and may not be “segmented”.
[78] We note from written submissions filed on behalf of Ms Millington on 1 October 2013
that it appears that Ms Millington does not seek the remedy of reinstatement, but only a
compensation order under s.392. That does not, we consider, alter the position because
regardless of that submission the Act requires the Commission, in the event that Ms
Millington’s dismissal is found to be unfair, to give primary consideration to the remedy of
reinstatement as we have earlier explained.
[79] Because Ms Millington’s application does not, we conclude, constitute property
divisible amongst her creditors under s.116(1) of the Bankruptcy Act, it follows that it does
not fall within the definition of “the property of the bankrupt” in s.5(1) of the Act, and so does
not vest in the trustee under s.58(1). That conclusion means that it is unnecessary for us to
determine to finality whether Ms Millington’s application would fall within the exception in
s.116(2)(g)(i); but we observe that Dixon J’s dictum in Cox v Journeaux (No 2) would
strongly suggest that the exception would not apply, and we find the analysis of Watson SDP
in Williams v Genel Investments, affirmed on appeal, persuasive in this respect.
[80] We would also observe that had Ms Millington’s bankruptcy post-dated the making of
her application, it is highly likely that her application would have been stayed by operation of
s.60(2); but again that is not a matter we need to determine to finality.
[81] The jurisdictional objection to Ms Millington’s application based upon her prior
bankruptcy is dismissed.
VICE PRESIDENT
52 [2013] FWC 6171 at [30]
OF THE FAIR WORK MISSION THE
[2014] FWCFB 888
33
Final written submissions:
For Melanie Millington, 1 October 2013
For Traders International Pty Ltd, 8 October 2013
Printed by authority of the Commonwealth Government Printer
Price code G, PR547479
