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Insolvency and related law and policy, and more

Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related issues, in Australia and internationally. He has a strong law and policy background, is independent of any connections, and his views are his own. He gives no legal advice. 

Leave to proceed against a bankrupt; but with questions about the legal representation

In an employee’s otherwise ordinary unpaid wages case the respondent employer went bankrupt mid- hearing and the employee’s legal representation was found by the Judge to be questionable.

The matter concerned a Ms Ross’ employment at the Bombora Café, located, as the Judge describes, at Norah Head

“sandwiched between Tuggerah Lake, Soldiers Point and Cabbage Tree Harbour, on the Central Coast of New South Wales”

and home to

“a number of airy beaches, a picturesque lighthouse and various holiday facilities”.

The court case itself is less pleasant.

Employee sues for unpaid wages etc

Ms Ross was employed at the café for a period of time and then claimed she was underpaid by the café’ owners, effectively a Mr Paea. She sued in the Federal Court for compensation under the Restaurant Industry Award 2010 and for an order that the respondents be ordered to pay pecuniary penalties for breaches of the Fair Work Act 2009 (Cth). She was successful to the extent of an order in her favour of $17,500.

Apart from that substantive law, two unusual matters arose.

The café owner respondent went bankrupt during the hearing

The first was that after the matter had been heard, but before final submissions from Ms Ross, Mr Paea became bankrupt on a debtor’s petition. The consequence of s 58(3)(b) of the Bankruptcy Act was that the proceedings against him were effectively stayed, without the leave of the Court.

Leave to proceed on public utility grounds

Upon which Ms Ross said she still “wished to proceed and so here we are”. The Judge granted leave, on the grounds of “public utility”, with these reasons:

“If leave is not granted then AFSA [as the trustee] will need to determine the quantum of Ms Ross’ claim for itself on her submission of a Proof of Debt. This will require the same ground to be traversed as I have already traversed although perhaps not encumbered with the need to run a trial bearing some kind of semblance to ordinary civil procedure. It would be wasteful for me having heard the evidence to decline to decide the case and thereby to require AFSA to undertake what I have already done. In that circumstance, I propose to grant Ms Ross leave to proceed against the bankrupt estate on the grounds of public utility”.

Representation as [not by] a lawyer?

The second point was that Ms Ross was assisted throughout the proceedings by a Mr Johnston whom the Judge understood

“at some point in his life attained a law degree of some kind, but was never admitted as a solicitor and has never held a practicing certificate”.

The Judge was critical of Mr Johnston whom he had permitted

“to appear for Ms Ross as he informed me he was her friend, was assisting her and had a law degree. Given the very small nature of the case, the fact that it should never have been brought in this Court and a suspicion that between them Mr Paea and Ms Ross would have no idea what they were talking about, it seemed to me at the time that it would be useful both to Ms Ross and to me to have someone with legal qualifications involved in the case. I have come to regret this decision”.

However

“[m]y impression of Mr Johnston’s capabilities as an unqualified industrial lawyer is that his estimation of his own legal acumen substantially exceeds my estimation. To be frank, Ms Ross has succeeded despite the efforts of Mr Johnston on her behalf. I found nothing he said to me of value. He was also to my observation rude to Mr Paea which was quite unnecessary and certainly unhelpful”.

The Judge noted that

“during the course of the hearing it became apparent that Mr Johnston has been holding himself out as a lawyer. Further, he appears to have developed a habit of making inappropriate threats whilst in the course of so purportedly acting”.

“Inappropriate threats” by email?

Extracts of emails included one that Ms Ross’ civil claim “will likely result in criminal charges brought against you by The Commission of Taxation, ASIC and The Federal Police…”; and another email to a local member of parliament invited him “to have a discussion with Ms Ross on the doorsteps of her former employer with media present should he be interested”; and other emails saying he acted for Ms Ross.

Or “exemplary conduct”?

Mr Johnston said

“he had not held himself out as a solicitor; he was approached by Ms Ross; he did not give legal advice; Ms Ross had been present whilst all the letters were written which had been sent at her request; and, his conduct had been exemplary”.

The Law Society can decide

While he was “by no means sure about any of this”, Justice Perram said he would send a copy of his reasons to the President of the Law Society of NSW, noting that the conduct of a legal practice in NSW by a person who is not a qualified entity is an offence: Legal Profession Uniform Law (NSW), s 10(1).

Ross v Paea trading as Bombora Café [2020] FCA 766

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