Australian Credit Law Bulletin - Vol 9, No 4, August 2008
A free, plain English review of recent law and items of interest for creditors, produced by Hattaway & Associates Ltd, Credit Consultants. To subscribe, visit the Australian bulletin index and enter your details on the right
Plain language disclaimer:
This bulletin is not legal advice. Do not make decisions on legal matters based on a brief commentary. Instead, get professional legal advice.
In this issue:
- On the importance of phoning debtors
Failure to call may cost you your job - Instalment order application from debtor who “has simply stalled the inevitable day”
Court turns down debtor's unrealistic application to pay over two years - 22 years prison for killer of debtor
Things go very wrong for debtor and for collector apparently working outside the legal process - A step-by-step guide to internal investigations of privacy complaints by organisations
If you deal with a privacy complaint, why not use the Privacy Commissioner’s guide?
1. On the importance of phoning debtors
SHARMAN and PUBLICATIONS AND EXHIBITIONS PTY LTD [2008] WASAT 142 (25 June 2008)
Ms Zena Sharman was employed by Publications and Exhibitions Pty Ltd as "Administration Manager" on 11 May 2006. Her duties included invoicing, debtors control, answering telephones, and general secretarial and administrative duties.
Ms Sharman became pregnant. Neil Boulos, a director of the company, became aware of her pregnancy around the last week in February 2007. From that point, she alleged that she noticed a dramatic change in his behaviour towards her. Sharman claimed that she was unlawfully discriminated against in her employment because of her pregnancy, and took her case to the WA State Administrative Tribunal.
She alleged that Boulos created an environment at work designed to make her sufficiently unhappy and frustrated so as to resign from her employment. In summary, her complaint was that he began to supervise her very closely and that, when she took sick leave as a result of her pregnancy, he called her repeatedly to try to find out when she would be back.
Boulos maintained that the problem was with Sharman because she was avoiding an important part of her work, that of debt collection. He said that he had expanded the business, and as a consequence, his outgoings had increased. This made efficient debt collection critical to the viability of the company, and Sharman was not completing that task to the required standard.
Sharman accepted that prior to her notifying Boulos of her pregnancy, Boulos had told her a number of times that the debt recovery function was not being carried out to the required standard.
Sharman said that she did not avoid the debt collection task as asserted by Boulos. She said that Boulos had asked her to complete two assignments at the same time and she was told they were of equal importance. When she was undertaking the two assignments, she would sit with the new employee in the morning to ensure that person had work to do, and then later, she would send out notices of outstanding payments to debtors.
"... All I didn't do towards that collection was make phone calls, but I was constantly sending people reminders to pay their bills," she said.
Sharman accepted that she was directed by Boulos to spend two to three hours a day chasing outstanding invoices until the debtors were brought under control. "Well, I did debt collection in a different way, I sent out invoices, I rang people I could, because they were also in the eastern states. A few WA calls were made in the afternoon. I did the debt collection in a different form, I sent out reminders, I wrote them letters."
The WA State Administrative Tribunal accepted that Sharman felt genuinely aggrieved by her situation in that she was coping with her pregnancy at a time of increased work pressure. However, in all respects, Boulos impressed the Tribunal as a reasonable employer. The Tribunal preferred the evidence of Boulos to that of Sharman.
The Tribunal found that Sharman disliked the task of debt collection and that she favoured sending reminder notices to debtors rather than making phone calls. She did not follow the direction of Boulos to spend more time on debt collection.
Her debt collection process was not efficient enough to collect sufficient funds for the company at a time when Boulos had expanded the business and consequently increased his cash outgoings. The Tribunal accepted that this was a critical time for Boulos' business (the period from at least April 2007). The behaviour of Boulos which Sharman complained of (the close monitoring of her work on the debt collection/the insistence on results), was something that occurs in the ordinary course of a small business that is under pressure to expand and to maintain its viability.
The circumstances in which Sharman found herself were not the product of discriminatory conduct by Boulos. Sharman's claim was therefore dismissed.
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2. Instalment order application from debtor who “has simply stalled the inevitable day”
Bucknell v Robins [2008] QCA 214 (1 August 2008)
Mr Bucknell sued Mr Robins, a solicitor who acted for him in the purchase of his grazing property, for negligence. On the second day of a three day trial, Bucknell abandoned his proceedings. The judge awarded no costs, but Robins appealed, and ultimately, costs of $28,696.95 were awarded against Bucknell in December 2006. Bucknell did not pay that debt or any part of it.
On 8 October 2007 Bucknell made an ex parte application (an application without involvement of the other party) against Robins for an instalment order authorising him to pay the debt by instalments. He represented himself, as he had done in all steps of his litigation. Bucknell’s evidence revealed that his income was derived from his business as a grazier and from Centrelink drought relief "exceptional circumstances" payments. Bucknell’s evidence did not include material demonstrating that he would have money available to pay by instalments. When the judge pointed this out, Bucknell said: "Well there never is … on a rural business, I'm afraid … it's always …touch and go …"
The relevant rules of the Uniform Civil Procedure Rules 1999 (Qld), r869(1) and r869(2), provide that “the court must have regard to … [among other things]
(b) the enforcement debtor’s means of satisfying the order;
(c) whether the order debt, including any interest, will be satisfied within a reasonable time;
The judge concluded that Mr Bucknell’s financial reports for 2005-2007 did not show that he had the capacity to pay instalments in those years of income.
He said,”the property has, on anecdotal information, a gross value of about $2 million. [Bucknell] is substantially in debt. The business is a very marginal operation. The business appears to be the only asset base and the sole income source (other than drought relief payment) ... I have not been provided with any projection of income and expenditure for the current year or for the 2008-2009 period or subsequent years that may be relevant. There is no independent or expert analysis of the capacity of the business to make regular instalment payments. Even if a sum of $1,000 per month was paid, the instalment order would extend over about three years.
“The applicant has not made any payments at all. It seems that he has simply stalled the inevitable day when [Robins] finally forces the issue of payment of the debt. I infer that [Bucknell] remains … aggrieved at the failure of the litigation … and has been hoping for 'better financial days' to arrive to enable him to deal with the issue in a manner least painful to himself.”
Two previous judges had told Bucknell what he needed to provide by way of evidence and to support his application. One judge told him that his ability to pay instalments could be demonstrated by his making an interim payment to reduce the debt. However, he failed to do any of the things suggested by the court. His application was supported by no good evidence.
The judge concluded that there was no merit in the application and refused it.
Bucknell tried to appeal from that decision to the Court of Appeal of the Supreme Court of Queensland. Leave will usually be granted only where there is a reasonable argument that the primary judge erred and that an appeal is necessary to correct a substantial injustice.
The Court of Appeal concluded that “plainly there was no error in the judge’s view that the evidence [of his capacity to pay instalments] was unsatisfactory.”
The Court refused the application for leave to appeal. Costs were once again awarded against Bucknell.
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3. 22 years prison for killer of debtor
R v Klein [2008] NSWSC 835 (15 August 2008)
Creditors are often critical of the legal processes for collecting debts and sometimes joke about using collectors outside the law. This case shows what can go wrong for those working outside the legal process. (Note that courts will not generally enforce gambling debts, which may have been a factor in this case.)
Danny Kalischer operated a mobile phone business at 124 Victoria Road, Gladesville for some years in the 1990s. He employed Ken Moustafa, Gaby Klein (Kalischer’s brother, also known as Gaby Kalischer), and Adam Kalnins.
Ken Moustafa and his brother, Gurkan (also known as Gary) Moustafa later set up their own mobile phone business, Replay Communications, from the premises at 124 Victoria Road. Adam Kalnins worked for them in the shop.
In 2001, another Kalischer brother, Ronny, provided Replay Communications with a consignment of mobile phones. The consignment was delivered to the premises and it was agreed that the cost of the mobile phones would be $1500. In the weeks that followed, a number of requests for payment were made by Ronny Kalischer.
At some stage Gaby Klein became aware of the debt to his brother and he too sought to recover it.
On 14 February 2001, Ronny asked his father, Peter Kay to intervene. Peter Kay, who was a professional debt collector, spoke to Ken Moustafa, without success. Ken told Peter Kay that there would be no payment until he was provided with the contact details of his other son, Danny Kalischer, who he said owed him $50,000 for gambling debts.
On the morning of 15 February 2001, Gaby Klein phoned Replay and asked if Ken and Gary Moustafa were in the shop. He was told that they were. Klein set off for Gladesville, riding a red Honda XR 650 motorcycle. He was wearing a white helmet, goggles and was carrying a backpack. Later in the morning, a man on a red Honda XR 650 motorcycle, wearing the same clothes and with the same tattoo on his leg was seen hanging around the street behind the shop for some time. Evidence from witnesses and CCTV showed Gaby Klein in the area on his motorcycle and at the service station a few doors down Replay Communications from around 11am.
At about 11.50am, Ken Moustafa left the shop for a meeting in the city. At 11.55am Gaby Klein called his brother, Ronny, from the service station pay phone. Immediately afterwards, Ronny rang Adam Kalnins, the employee at Replay. According to Kalnins, Ronny said “I’ve been told if I were you, I’d get out of there”.
Because of this, Kahlins decided to get some lunch immediately at the service station, "so that he could remain with Gary in the shop all afternoon in case something happened." On his way, he bumped into Gaby Klein, sitting on his motorcycle in the service station.
CCTV shows that Kalnins was in the service station for 2 minutes. When he returned, he found Gary Moustafa dead from a bullet wound to the back of his head at close range. There was evidence that Klein had a silver revolver a few days before and a few days after the murder.
The only evidence on behalf of Klein was from a Mr Gimenez, a friend of the dead man, Gary Moustafa, who said Gary wanted to obtain a gun and that he had a grievance against someone called Rahme. However, "Gimenez readily conceded that he was abusing both alcohol and heroin at the time and that that may have altered his perception of things."
Gaby Klein later told a psychiatrist that “2001 ruined my life...a friend died...I got charged with his murder...I choose not to remember it”.
Klein changed his story a number of times. One version said that Kalnins had requested him to provide him with an alibi whilst other persons, to the knowledge of Kalnins, robbed the store. He said that Kalnins had approached him a week before the offence and had offered him $1000 for his services, an offer which he had accepted. According to Klein, Kalnins had said that men from a business named Bravo Communications were to be involved in the robbery.
After three trials, a jury accepted that Gaby Klein was the murderer. Klein was sentenced to 22 years imprisonment with a non-parole period of 16 years and 6 months.
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4. A step-by-step guide to internal investigations of privacy complaints by organisations
Some aspects of Privacy Act 1988 (Cth) (or at least the complaints made under the Act) annoy creditors, however, it is the law. Businesses (including non-profit organisations) with an annual turnover of more than $3 million, all private health service providers and some small businesses, need to comply with it. (To determine if you have to comply with the NPPs see: Private Sector Information Sheet 12 http://www.privacy.gov.au/publications/IS12_01.html)
When faced with a complaint under the Act, a useful publication is Information Sheet 27, A step-by-step guide to internal investigations of privacy complaints by organisations from the Office of the Privacy Commissioner.
Question 2, on this checklist for example, asks, “Is the information [i.e. the complaint] about the person who wrote the correspondence?” If the answer is no, “you should clarify the writer’s authority to act either in writing or by telephone. If you proceed without the proper authority, there is a risk that you will be disclosing personal information and that you may be in breach of NPP (National Privacy Principle) 2 and NPP 4.” Good point!
More importantly, if you end up dealing with the Office of the Privacy Commissioner over a privacy complaint, it can’t hurt to show them that you used their form in an effort to try to deal with matters correctly.
The Information Sheet can be downloaded as a pdf.
