Do Australia’s bankruptcy laws breach its freedom of movement obligations?
In 1972, Australia signed the United Nations International Covenant on Civil and Political Rights (ICCPR), before ratifying the Convention in 1980. In doing so, the nation agreed, among other commitments, to uphold Article 12 which codifies the freedom of movement. However, Australian bankruptcy law continues to provide that limitations may be imposed on a bankrupt’s international travel, with scholars and bankrupts alike asserting that such restrictions are too harsh and constitute a breach of Australia’s obligations under international law.
Australian bankruptcy law provides that a bankrupt’s international travel is at the discretion of the trustee of their bankruptcy. Section 77 of the Bankruptcy Act provides that a bankrupt must surrender their passport to the trustee, whilst section 272 requires that a bankrupt seek their trustee’s approval before leaving the country. The law was not designed as a punitive measure, but rather to facilitate the efficient administration of a bankrupt’s estate. This rationale was predicated on the basis that proper administration of an estate requires the bankrupt to be physically present in Australia, and that by seizing their passport, the bankrupt will be unable to flee.
Relevantly, in Re Tyndall, the court noted that:
“Restrictions upon such travel under the bankruptcy legislation must be seen as being aimed at ensuring the proper administration of the bankruptcy laws and of bankrupt estates under such laws and not as a penalty imposed upon a citizen as a consequence of inability to pay debts leading to the making of a sequestration order.”
In Weiss v Official Trustee in Bankruptcy the court said at 43:
“I am conscious of the fact that the evidence revealed in [the bankrupt's] public examination suggests that [the bankrupt] has committed various offences against the Bankruptcy Act 1966 (Cth) which have characteristics involving nondisclosure and concealment. However, these are matters to be litigated at the proper time. It is a basic principle that a resident of Australia is entitled to expect that he may travel freely notwithstanding the fact that he is a bankrupt provided it will not lead to his staying overseas in order to defeat or delay his creditors and provided it will not interfere with the due administration of his bankrupt estate (see Tyndall's case at 15). It is to secure the proper administration of bankrupt estates that bankrupts are required by the Bankruptcy Act 1966 (Cth) to give their passports to the trustee (par. 77(a)) and to obtain the permission of the trustee before travelling overseas (par. 272(c)). This interference with the travel of bankrupts is not for the purpose of punishing or expressing disapproval of them for offences or alleged offences against the Bankruptcy Act 1966 (Cth).”
The considerations Australian Courts often deliberate, although not exclusive, are:
- Is the proposed visit genuine?
- Is the bankrupt likely to return to Australia as promised?
- Will the visit hamper the administration of the estate?
Meanwhile, Article 12 of the ICCPR provides that everyone shall be free to leave any country, including their own, except where restrictions are necessary to “protect national security, public order, public health or morals or the rights and freedoms of others.”
In Re Tinkler, Nicholas J recognised that “a trustee’s decision to refuse a bankrupt permission to travel overseas is in a special category because it affects the freedom of movement of a person who may not have committed or been charged with any offence.” Further, in Re Hicks, the court noted that a trustee’s power to restrict travel can significantly affect the bankrupt’s freedom.
Accordingly, in its 2015 Report on Traditional Rights and Freedoms – Encroachments by Commonwealth Laws, the Australian Law Reform Commission called for review of section 77, asserting that the requirement ‘may not be a proportionate response to concerns about bankrupt individuals absconding.’ In doing so, it posited that travel restrictions should only be imposed subject to ‘precise criteria and judicial oversight’.
In reaching this conclusion, the ALRC relied on submissions made by Associate Professor Christopher Symes who argued that the requirement for bankrupts to surrender their passport fails to reflect the reality of the modern era. Namely, it is common for people to frequently travel internationally, and enhanced technological affordances make international communication a seamless process, rendering it possible for estates to be effectively administered even where bankrupts are not physically present in Australia.
Despite this, the Australian Government has not taken steps to adopt the ALRC’s recommendation.
On one view, the law appears to need reform but equally, Australia should be permitted to regulate these issues to protect the legal rights of various parties. Finding the right balance is the key. However, the issue is complex as while the existing model fails to accommodate commercial reality, it would also be impractical to require a court to hear an application every time one of Australia’s 15,000+ bankrupts wishes to travel abroad.
Ultimately, while no definitive solution is apparent, it is worth noting that directors of insolvent Australian companies are not subject to the same limitations as personal bankrupts. Further, in no comparable jurisdiction, including the UK, USA, Canada, New Zealand, South Africa, Malaysia, Singapore, India or Ireland, is forfeiture required. As such, there is merit to the argument that bankrupt estates can be effectively administered without unduly restricting travel.
So, should the process be flipped on its head whereby Australian bankrupts are not required to surrender their passports to the trustee and free to travel as they wish? On one view the answer is yes and this could be achieved by reforming the existing practice by transferring the burden onto the bankruptcy trustee to object to travel in any event, rather than requiring the bankrupt to seek permission in the first place.
Any time a bankrupt has sought to rely on the ICCPR in supporting an application for travel, it has been held that Australia’s international agreements have no direct legal effect on domestic law as the provisions have not been incorporated in domestic legislation. Perhaps it is time that Australia updates its bankruptcy laws to not only reflect current times, but to simultaneously uphold its international human rights obligations.
Are beneficiary's always entitled to access trust documents?
Trust documents are commonly understood to include ‘those which evidence or record the nature, value and condition of trust assets.’ Relevantly, trust documents have been distinguished from those which are merely prepared by the trustee for their own purposes, with Hartigan Nominees deeming that documents which disclose deliberations about how the trustee should exercise their discretionary powers, are not trust documents. Similarly, certain correspondence between trustees does not constitute trust documents.
While beneficiaries of a trust have a prima facie right to inspect trust documents, disputes between the beneficiaries of a trust and Trustees, regarding access to documents and information are commonly encountered, with case law offering competing perspectives as to the circumstances which give rise to the provision of trust documents to beneficiaries.
In Re Londonderry’s Settlement, the Court held that as trust documents are property of the trust, the beneficiaries retain a proprietary interest in them. In doing so, it noted that this interest in trust property gives rise to the right to access trust documents.
Conversely, in Schmidt v Rosewood Trust, the court held that a beneficiary does not have an equitable interest that gives rise to an inherent right to view trust documents and that a trustee may therefore refuse a beneficiary’s request to inspect trust documents. However, as the Court retains an inherent jurisdiction to oversee the correct administration of trusts, a beneficiary may seek that the Court compel the trustee to enable inspection by the beneficiary.
Although the High Court is yet to make an explicit ruling as to the preferred approach, it relied on Schmidt in the 2017 decision of Palmer v Ayres to support the Court’s authority to compel the provision of information. Schmidt has also been followed in recent cases in the both the Federal Court and the New South Wales Supreme Court, whilst the Victorian Supreme Court relied on the Londonderry approach in the 2016 decision of Duetsch v Trumble.
In circumstances where the Court has adopted the Schmidt approach, it has relied on the following considerations to determine whether disclosure is warranted to safeguard the proper administration of the trust:
- Scope of requested documents
The Courts have traditionally been less inclined to grant access where the beneficiary seeks a wide scope of documents. Relevantly, requests for access to all documents have typically been perceived as a ‘fishing expedition’, with the Court instead favouring access in circumstances where select documents are sought to address a specific issue in the administration of the trust.
- Documents already disclosed
The disclosure of trust documents serves to ensure the beneficiary has sufficient information to evaluate the proper administration of the trust. As such, if a Court deems that the trustee has already made genuine attempts to provide appropriate information, it will likely determine that no further disclosure is required.
- Confidentiality
Trustees have traditionally been entitled to reject access to trust documents containing confidential information on the basis that disclosure is not in the best interest of all beneficiaries. Although there exists debate over whether confidentiality remains a full defence to disclosure, Justice Hammerschalg in Silkman posited that is nevertheless remains a necessary consideration.
- Secrecy
In some circumstances a trust deed may contain a provision which mandates that the details of the trust remain secret from its beneficiaries. Although the courts are yet to consider whether such a provision inhibits disclosure, the existence of a secrecy provision will likely be a relevant consideration of the Court in determining whether to exercise its discretion.
- Necessity
As the Court’s jurisdiction to intervene in trust matters serves to ensure proper administration of the trust, access will only be granted where beneficiaries ought to be privy to the documents. As such, if the requested documents will not cure a deficiency in the trust, the court is unlikely to exercise its discretion to order disclosure. To date, case law fails to signal a clear precedent as to how a court will determine a beneficiary’s request to access to trust documents, however, it does appear that the limited approach contained in Schmidt is being preferred by courts over the expansive approach contained in Londonderry.
Federal Court rules 'casual' worker entitled to paid leave
The Federal Court of Australia recently handed down a significant decision in the matter of WorkPac Pty Ltd v Rossato [2020] FCAFC 84, redefining Australia’s employment law landscape.
Mr Rossato was employed by WorkPac between July 2014 and April 2018. During this time, he supplied labour to companies within the Glencore Group under six consecutive contracts, all of which specified that he was a casual employee.
As such, WorkPac contended that pursuant to sections 86, 95 and 106 of the Fair Work Act 2009 (Cth), Mr Rossato was employed on a casual basis and was therefore not entitled to paid annual leave, compassionate leave or personal/careers leave. Further, it contended that section 116 precluded Mr Rossato from claiming payment for public holidays. Finally, WorkPac sought declarations that as a ‘Casual Field Member’, Mr Rossato was barred from claiming corresponding entitlements under the applicable enterprise agreement.
In the event that the Court found against WorkPac’s submissions, it sought declarations that it was entitled to restitution of the casual loading included in Mr Rossato’s hourly rate.
WorkPac noted that casual employment arises in the absence of a “firm advance commitment as to the duration of the employee’s employment or the days/ hours the employee will work.” Despite this, it asserted that as the terms of Mr Rossato’s contract specified that he was a casual employee, there was no need to have regard to how the contract was performed in practice.
The Court rejected this argument, contending that the presence or absence of the “firm advance commitment” should be assessed with regard to the employment contract as a whole. In doing so, it noted that whilst the description of the party’s relationship is relevant, it is not conclusive, and regard should also be had to whether WorkPac:
- provided for the employment to be regular or intermittent;
- permitted Mr Rossato to elect whether to offer employment on a particular day; and
- permitted Mr Rossato to elect whether to work and the duration of the employment.
The Court concluded that in spite of the language used in his employment contract, Mr Rossato was not a casual worker under the Fair Work Act or the Enterprise Agreement. Rather, the parties had agreed on employment of indefinite duration, which was stable, regular and predictable. As such, Mr Rossato was entitled to paid annual leave, paid personal/carer’s leave, paid compassionate leave and payment for public holidays.
The Court also rejected WorkPac’s claim for restitution for the causal loading paid to Mr Rossato, contending there was no relevant mistake and no failure of consideration.
Ultimately, this case highlights the need for employer’s to carefully consider the nature of work being undertaken by staff in order to prevent the risk of ‘double dipping’. It follows the 2018 decision of WorkPac v Skene [2018] FCAFC 131 which similarly held that employees who receive casual loadings may nevertheless be entitled to annual and personal leave.
Insolvency industry bears brunt of COVID-19 concessions
A survey conducted by ARITA, Australia’s peak body for insolvency and restructuring experts, has revealed the substantial impact the Government’s response to COVID-19 has had on the industry.
As outlined in a previous update, the Government has introduced a series of temporary measures in response to the pandemic, including; increasing the minimum amount for a statutory demand from $2,000 to $20,000, suspension of director's personal liability for insolvent trading and an additional safe harbour provision.
Conducted on April 17, the survey of almost 200 insolvency professionals indicated that as a result, insolvency levels have fallen significantly below the standard.
Relevantly, 38.6% of insolvency professionals surveyed reported that their current level of work was significantly less than this time last year and a further 17.8% said it was slightly less. Moreover, 31% of respondents indicated that the quantity of ‘safe harbour’ advisory work was down on the same time last month.
As the current environment continues to place pressure on the industry, more than half of all insolvency firms have registered, or intend to register, for the Government’s JobKeeper subsidy, indicating that year-on-year revenue has declined by at least 40%. The survey also revealed that 13.6% of firms are very concerned about their viability in the next 6 months and a further 42.4% are slightly concerned, with 19% having recently implemented redundancies.
In presenting the findings of the survey, ARITA CEO John Winter noted that, ‘In a typical year, we see around 8,000 natural insolvencies. There is always a natural level of insolvencies as businesses go through their natural lifecycle and it’s a healthy process. What we are seeing is that even businesses that are insolvent are delaying taking action to deal with that.’
Despite acknowledging that the Government efforts had been effective in supporting many businesses struggling in light of the pandemic, he warned that ‘a side effect of that is that businesses that under normal circumstances would have been wound up, are continuing to trade. Many of them will continue to rack up debts with unwitting creditors – quite likely SME’s themselves who are already under financial pressure, too.’
Finally, he acknowledged the ‘genuine concerns from insolvency professionals that, without the behavioural handbrake of insolvent trading laws, directors of businesses large and small are going far deeper into insolvency than they otherwise would have, with no chance of turning their business around. And it’s creditors who will wear the cost of that down the line.’
The survey follows an earlier study conducted by the ABS in April which found that two thirds of Australian businesses were experiencing a reduction in turnover or cash flow and that 64% reported a reduction in demand for their products or services.
Legislators simplify will-making process in the wake of COVID-19
Last week the Queensland Government passed legislation in an effort to allow wills and enduring power of attorney’s to be witnessed via video conference.
Pursuant to regulation 9 of the COVID-19 Emergency Response Bill 2020 (Qld), the Government is entitled to make regulations where an Act permits or requires the signing or witnessing of a document. This regulation making power affords the making of “modified requirements or arrangements”. In effect, the legislation allows the Court to dispense of the formal witnessing requirements and determine whether an informally made will is valid.
The move follows a Practice Direction issued by the Queensland Supreme Court on the same day which allows applications for informal wills to be heard by a Registrar rather than a judge.
Specifically, the Direction grants a Registrar power to constitute the Supreme Court and hear and decide application under section 18(2) of the Succession Act 1981 (Qld). In doing so it dispenses the requirement for a party be in the physical presence of the testator, provided the Registrar is satisfied that:
- A solicitor drafted, witnessed or supervised the will’s execution;
- The deceased intended for the document to take immediate effect;
- The testator executed the will in the presence of one or two witnesses via video conference;
- The witnesses were able to identify the documents executed; and
- The reason the testator was unable to execute the will in person arose from complications relating to the COVID-19 pandemic.
The direction was issued in accordance with Rule 452(2) of the Uniform Civil Procedure Rules 1999 (Qld) and applies only to documents executed between 1 March 2020 and 30 September 2020.
Queensland is not alone in embracing technology, with a number of other jurisdictions also introducing modifications to the will-making process. In New South Wales, temporary regulations made under section 17 of the Electronic Transactions Act 2000 (NSW) facilitate witnessing via video conferencing, while across the ditch the Epidemic Preparedness (Wills Act 2007 – Signing and Witnessing of Wills) Immediate Modification Order 2020 alters section 11 of the Wills Act 2007 to permit the use of audio-visual links.
COVID-19: FWC approves reduction in redundancy pay
The Fair Work Commission (FWC) has approved the first application for a reduction in redundancy pay during the COVID-19 pandemic.
Employers may apply to the FWC to vary redundancy pay under section 120 of the Fair Work Act 2009. The section allows an application to be made where the employer either (a) obtains other employment for the redundant employer, or (b) cannot pay the redundancy pay the employee is entitled to. The FWC has discretion to reduce the amount of redundancy pay (including to a nil amount) if it is considered necessary.
In Mason Architectural Joinery Pty Ltd [2020] FWC 1897, the small business Mason Architectural Joinery Pty Ltd (Mason Joinery) had taken many steps to reduce its overheads in the wake of a downturn of business. These steps included reduction of spending, sale of the company car and redundancy of two employees.
The employee was entitled to 3 weeks’ notice of termination and 7 weeks’ redundancy pay under the Joinery and Building Trades Award 2010. Mason Joinery was able to pay the employee his accrued annual leave and accrued roster days off entitlements as well as the notice amount. Mason Joiner was however unable to pay the full redundancy pay. Mason Joinery sought an order decreasing the redundancy amount.
Commissioner McKinnon was satisfied that Mason Joinery was under significant financial strain. The Commissioner noted that the business had not received income for two months and had lost some pre-booked jobs resulting in the viability of the business being highly dependant on the how long the pandemic situation would last.
The Commissioner noted that the employee was able to secure a new job only 8 days after his termination. The new job also paid $2 an hour more than the previous position with Mason Joinery. The notice of termination that the employee received was equivalent to 15 days’ pay and covered that 8 days of non-employment.
The employee had also taken a holiday that was pre-booked during his employment with Mason Joinery from 15 March 2020 to 21 March 2020 (a month after he started his new job). Upon his return the employee was required to self-isolate for 14 days. The Commissioner held that as the employee had been paid out his accrued annual leave the employee suffered no loss in this regard as the amount was sufficient to cover both the holiday and period of self-isolation.
Accordingly, the Commissioner held that it was appropriate to reduce the amount of redundancy pay for the employee to 1 week’s pay.
Fair Work decision signals warning for COVID-19 redundancies
In a previous update we noted that while Covid-19 has created a unique situation, standard employment law procedures still apply and must be followed. A recent case in the Fair Work Commission (FWC) demonstrates the risks resulting from a failure to follow the appropriate procedures.
In Australian Municipal, Administrative, Clerical and Services Union v Auscript Australasia Pty Ltd [2020] FWC 1821, the FWC assessed an application bought by the Union alleging that Auscript failed to consult in respect of employee redundancy and closure of sites.
In January 2020, Auscript decided to close offices in Hobart and Adelaide as well as downsizing one of its Sydney offices. This was done without consultation with the Australian Municipal, Administrative, Clerical and Services Union (ASU). The ASU and Auscript agreed to develop a joint Consultation and Communication Protocol (the Protocol) to avoid further potential failure in Auscript complying with their obligations under the Auscript Australasia Enterprise Agreement 2010.
Auscript sought to make further redundancies in response to the impact of Covid-19 on its transcription work. Auscript alleged that restrictions in Courts and Tribunals as well as its own forecasts necessitated the sudden decision to maintain the viability of its business. Auscript claimed that it fulfilled its obligations under the Protocol. The ASU disagreed and sought the urgent assistance of the FWC.
At a conference the FWC issued a statement which among other things noted that the parties agreed to “abstain from any compulsory redundancy until at least the parties finalise a strategy … to preserve as many jobs as possible and communicate the identified options clearly to staff so they can make informed decisions”. No agreement was able to be reached after the conference and Auscript would not commit to engage in further consultation. Auscript sought to press ahead with closing the Melbourne office and implement redundancies in Queensland. The matter was then progressed to a hearing.
Upon perusing the evidence, Commissioner Yilmaz determined that Auscript had not given genuine consideration to options other than redundancy. The Commissioner was not satisfied the participation in the conference by Auscript was not genuine, describing its actions as a “mere formality”. The Commissioner criticised Auscript’s communication to employees, labelling it an “empty offer” and not “genuine consultation.” Further, Commissioner Yilmaz concluded it was clear the company had already made a decision unable to be influenced by employees or their representatives.
While it was accepted by all parties that it was a necessity that major decisions had to be made, the Commissioner noted that “an obligation to treat staff with dignity” remained. Accordingly, the Commissioner made an order in favour of the ASU.
High Court clarifies definition of ‘officer’ under Corporations Act
In Australian Securities and Investments Commission v King [2020] HCA 4, the High Court of Australia recently examined the scope of the definition of the term “officer of a corporation” in section 9 of the Corporations Act 2001 (Cth). The Court unanimously held that there is no requirement that a person be a named officer of the corporation to be captured by the definition. The test to establish whether a specific individual is an officer is whether they have the capacity to “significantly affect the financial standing of the company”.
Case Facts
Mr King, was the CEO and executive director of MFS Ltd, the parent company of the MFS Group of companies. The MFS Group was involved in funds management and financial services.
The Premium Income Fund (PIF) was a managed investment scheme operated by the MFS Group with an entity known as MFS Investment Management Pty Ltd (MFSIM) acting as the responsible entity. In June 2007, MFSIM entered into a $200 million loan facility with the Royal Bank of Scotland to be applied solely to the PIF. On 27 November 2007, MFSIM and senior personnel in the MFS Group arranged for $150 million to be drawn down from the loan facility. $147.5 million was disbursed by MFSIM to pay the debts of other companies in the MFS Group.
While two disbursements were made, only one was ultimately relevant to the High Court. A disbursement of $130 million was made on 30 November 2007 to an entity known as MFS Administration that acted as the treasury company of the MFS Group. On the same day the funds were received, MFS Administration paid $103 million to Fortress Credit Corporation (Australia) II Pty Ltd (Fortress). This money was paid in satisfaction of a short-term loan made to another MFS Group entity that was due to be repaid on that same date.
This series of events culminated in ASIC bringing enforcement proceedings against MFSIM and several of its officers for breaches of the Corporations Act. MFSIM was held to have contravened subsections 601FC(1) and (5) in relation to its duties as the responsible entity of PIF, and had breached section 208(1) by providing a financial benefit to a related party. Ay trial and on appeal to the Queensland Court of Appeal, Mr King was found to been knowingly involved in MFSIM’s contraventions and by consequence of section 79(c), was also held to have contravened sections 601FC(5) and 209(2).
Legal Issues
ASIC further contended Mr King was liable under s 601FC as an officer of MFSIM despite the fact he had ceased being a director on 27 February 2007 some nine months prior to the events. The Queensland Court of Appeal had held that Mr King was not an officer in the sense of having capacity to “affect significantly the corporation’s financial standing”. The Court deemed it was necessary for AISC to show Mr King had acted in an office of MFSIM in order to fall within the definition of s 9(b)(ii). ASIC appealed this finding contending that the Court had misconstrued the definition of “officer” by requiring ASIC
High Court Findings
The High Court unanimously found that the Court of Appeal erred in ruling that ASIC was required to prove Mr King had acted in an office of MFSIM in the sense of being in a ‘recognised position with rights and duties attached to it’. The Court adopted a literal interpretation of s 9, stating that subsection (b)(ii) required an inquiry into the role the person in question plays in the corporation. Such an inquiry is made on a case by case basis, considering the entire facts and circumstances of the individual and corporation including: the role of a person; what they did or not do to fulfil that role; and the relationship between their actions or inaction and the financial standing of the corporation.
Mr King was involved in the management of MSFIM and had not only the capacity to affect the financial standing of the entity, but actively intervened in its management. Accordingly, Mr King was held to be an officer of MSFIM despite not holding a formal executive role at the time of transaction.
JCL Comment
Importantly this decision makes it clear that individuals who hold a named office in a corporation will be captured by paragraph (a) of the s 9 definition, individuals who do not hold a named office may be captured by paragraph (b). This reasoning is consistent with the ‘shadow director’ regime which similarly provides that individuals that do not hold the office of director may still be considered a director where they have the capacity and custom of being able to affect the company.
This case is also important as it was made in the context of a group of companies. The Court expressly noted that corporate structure would not assist in avoiding liability for breaches of statutory prohibitions.
Does an employee owe a fiduciary duty for credit limit increases?
Employees owe certain fiduciary duties to their employers. Generally, this means an employee cannot do either of the following things:
- Make or pursue a personal gain in circumstances in which there is a real and substantial possibility of a conflict of interest arising between the personal interests of the employee and the interests of the employer (the no conflict duty); and
- Make or pursue a personal gain based by using his or her position as an employee or by using information or opportunities received in the course of his or her employment (the duty of trust).
As these duties are quite broad in scope a variety of circumstances could constitute a breach of either duty. A recent case in the Queensland Court of Appeal examined whether an employee owed a fiduciary duty to his employer in regard to providing a credit limit increase to a customer.
In Metal Manufactures Limited v Johnston & Anor [2020] QCA 42, a company was permitted to purchase goods on credit up to an amount of $20,000 which was later extended to $50,000. However, the company was unable to keep within this agreed credit limit and, with the assistance of an employee of its supplier, was ultimately able to purchase goods up to an amount of $325,797.50.
The supplier sought to recover this owing account; however, the company was wound up in insolvency prior to trial leaving no possibility of recovery. A case was instead bought against the company’s director and the employee of the supplier.
The supplier alleged a breach of fiduciary duty on the part of their employee for allowing the company to purchase goods beyond their credit limit in contravention of section 182(2) of the Corporations Act 2001 (Cth). The case against the director was that he had knowingly, or ought to have know, assisted the employee in breaching his duty. The case was accordingly dependant on successfully proving a breach of duty by the employee.
There is a long line of authority establishing that employees owe a fiduciary duty to their employers. This is also expressly indicated in section 182(2) of the Corporations Act. Not all employees will owe a fiduciary duty however and accordingly it must be established that a particular employee owes by looking at all circumstances of the case.
In this case the Court did not find that a fiduciary duty was established. Whilst the employee was a store manager, he was not a senior employee in the overall context of the business, did not have discretionary power to allow a customer credit beyond what was already agreed. On this basis the employee was not deemed to be in a position of special trust or confidence.
Even if a fiduciary duty had been established, the claim still may not have succeeded. While the Court was willing to accept that the employee had deliberately allowed unauthorised supply beyond the credit limit which was “consciously wrongful” and took deliberate steps to conceal the conduct, the Court was not willing to label the conduct dishonest in the sense of impropriety.
The basis for this finding was an absence of evidence demonstrating the employee received some personal benefit, either from his employer in terms of commission, salary increase or promotion; or from the company or director in the form of a bribe.[iv]
Whilst a fiduciary duty could not be established on these particular facts, it may still be possible for an employee of a similar position or standing to be considered a fiduciary of their employer. Additionally, further causes of action may be pleaded against an employee; simply not being in a fiduciary relationship will not be sufficient to avoid liability.
COVID impact on civil trials
COVID-19 has had an impact on a number of businesses and institutions. Courts and Tribunals are still operating with some modifications to their general procedures. A recent case in the Australian Capital Territory (ACT) saw judicial consideration given to the effects of the virus in deciding an application to adjourn proceedings.
In Talent v Official Trustee in Bankruptcy (No 5) [2020] ACTSC 64, the applicant sought an adjournment of the proceedings on the basis of medical advice, specifically that they suffered from leukaemia which placed them at a greater risk if exposed to the virus. The application was supported by a letter from the applicant’s doctors stating they “strongly support [the applicant] self-isolating until further notice”. The application related to a proceeding regarding a claim relating to a property in which the applicant resided. The property formed part of a deceased estate.
A number of additional circumstances were considered including the age of the applicant’s solicitors, being 59 and 56; the medical conditions of the legal representatives including suffering from asthma, obesity; the respondent senior counsel being unable to travel by air and residing in Queensland resulting in the junior counsel having to conduct the matter.
Whilst the Respondent was appreciative of the health concerns of the applicant and their legal representatives, the adjournment was opposed on the basis that the proceedings could still be conducted via video link. The Respondent argued that it was pertinent to have the proceedings determined as soon as possible to give effect to the will of the deceased.
Elkaim J agreed that it was important to give effect to the will and that a good deal of the case could be conducted from a remote location. However, it was noted at [14] that it is important to give the litigants an opportunity to appear at court:
On the other hand, litigants have a right to appear in court to not only give evidence but also to observe the running of their case. This will involve providing instructions, sometimes very promptly. There is no doubt that many procedures within a litigated case can be effectively conducted through remote forms of communication. However, I think there can be an important distinction with a final hearing.
Elkaim J then moved to considering the practical consequences of the adjournment. The primary consideration was the impact the current climate had on property values. It was noted that property value was likely to be substantially reduced which would result in the true value of the property not being obtained if it were sold. A secondary consideration was the necessity of the applicant having to leave the residence if it were to be sold. Elkaim J noted that this would expose the applicant to a higher level of risk that may have a tragic result.
No specific prejudice aside from general delay could be identified as being suffered by the Respondent if the adjournment was granted. On that basis, Elkaim J was satisfied that the potential consequences balanced in favour of granting the adjournment. Elkaim J concluded noting that “We are living in an unprecedented and unpredictable atmosphere.”
From this case it is apparent that while the typical procedural principles will apply to an adjournment application, the ultimate decision will be coloured by the practical consequences of making any such order.
