Allan Paul Endresz v The Commonwealth Of Australia and Dawn May Endresz v The Commonwealth Of Australia and Jozsef Endresz v The Commonwealth Of Australia and William Arthur Forge v The Commonwealth Of Australia
[2017] FCCA 352
•1 March 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ALLAN PAUL ENDRESZ v THE COMMONWEALTH OF AUSTRALIA and DAWN MAY ENDRESZ v THE COMMONWEALTH OF AUSTRALIA and JOZSEF ENDRESZ v THE COMMONWEALTH OF AUSTRALIA and WILLIAM ARTHUR FORGE v THE COMMONWEALTH OF AUSTRALIA | [2019] FCCA 352 |
| Catchwords: BANKRUPTCY – Application to set aside bankruptcy notice – application for an adjournment of the present proceeding – in the alternative, the application to set aside the bankruptcy notice be dealt with on a final basis. |
| Legislation: Bankruptcy Act 1966, ss.30(1), 41(6A), 41(6C) |
| Cases cited: Australian Securities and Investments Commission (ASIC) v Endresz (2014) 228 FCR 316; [2014] FCA 786 Bryant v Commonwealth Bank of Australia (1994) 217 ALR 251 Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 Commonwealth of Australia v Davis Samuel Pty Limited and Ors (No 8) [2014] ACTSC 312 Endresz v Australian Securities and Investments Commission (No 2) (2015) 228 FCR 334; [2015] FCAFC 33 Howarth, Re; Ex parte Mortgage Acceptance Nominees Ltd (1993) 43 FCR 58 Hovan v Goycolea-Silva [2003] FCA 234 Renowden v McMullin (1970) 123 CLR 584; [1970] ALR 865; (1970) 44 ALJR 283 Shell Company of Australia Co Ltd v Esso Australia Ltd [1987] VR 317 |
| Applicant: | ALLAN PAUL ENDRESZ |
| Respondent: | THE COMMONWEALTH OF AUSTRALIA |
| File number: | MLG 1910 of 2016 |
| Applicant: | DAWN MAY ENDRESZ |
| Respondent: | THE COMMONWEALTH OF AUSTRALIA |
| File number: | MLG 1911 of 2016 |
| Applicant: | JOZSEF ENDRESZ |
| Respondent: | THE COMMONWEALTH OF AUSTRALIA |
| File number: | MLG 1912 of 2016 |
| Applicant: | WILLIAM ARTHUR FORGE |
| Respondent: | THE COMMONWEALTH OF AUSTRALIA |
| File number: | MLG 1913 of 2016 |
| Judgment of: | Judge Riley |
| Hearing date: | 20 February 2017 |
| Date of last submission: | 24 February 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 1 March 2017 |
REPRESENTATION
In MLG1910 of 2016:
| Advocate for Allan Paul Endresz: | In person |
| Solicitors for Allan Paul Endresz: | None |
| Counsel for the respondent: | Justin Hogan-Doran |
| Solicitors for the respondent: | Australian Government Solicitor |
In MLG1911 of 2016:
| Advocate for Dawn May Endresz: | Allan Paul Endresz |
| Solicitors for Dawn May Endresz: | None |
| Counsel for the respondent: | Justin Hogan-Doran |
| Solicitors for the respondent: | Australian Government Solicitor |
In MLG1912 of 2016:
| Advocate for Jozsef Endresz: | Allan Paul Endresz |
| Solicitors for Jozsef Endresz: | None |
| Counsel for the respondent: | Justin Hogan-Doran |
| Solicitors for the respondent: | Australian Government Solicitor |
In MLG1913 of 2016
| Advocate for William Arthur Forge: | In person |
| Solicitors for William Arthur Forge: | None |
| Counsel for the respondent: | Justin Hogan-Doran |
| Solicitors for the respondent: | Australian Government Solicitor |
ORDERS, in each of MLG1910 of 2016, MLG1911 of 2016, MLG1912 of 2016 and MLG1913 of 2016:
The applicant’s oral application for an adjournment be refused.
The application filed on 6 September 2016 and amended on 20 February 2017 be dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1910 of 2016
| ALLAN PAUL ENDRESZ |
Applicant
And
| THE COMMONWEALTH OF AUSTRALIA |
Respondent
MLG 1911 of 2016
| DAWN MAY ENDRESZ |
Applicant
And
| THE COMMONWEALTH OF AUSTRALIA |
Respondent
MLG 1912 of 2016
| JOZSEF ENDRESZ |
Applicant
And
| THE COMMONWEALTH OF AUSTRALIA |
Respondent
MLG 1913 of 2016
| WILLIAM ARTHUR FORGE |
Applicant
And
| THE COMMONWEALTH OF AUSTRALIA |
Respondent
REASONS FOR JUDGMENT
Introduction
There are before the court four related applications pursuant to s.30(1) and s.41(6A)(a) of the Bankruptcy Act 1966 (“the Act”) to set aside four bankruptcy notices on the basis that there is or will be an ex debito justitiae application to set aside the judgment on which the bankruptcy notices are based. The four matters were heard together.
Allan Endresz and William Forge both appeared at the hearing before this court without the benefit of legal representation. Allan Endresz, notwithstanding that he is not a barrister or solicitor, was given leave to appear for Jozsef Endresz and Dawn Endresz, who are his elderly parents. They signed authorities for Allan Endresz to represent them, and he sought the leave of the court to do so. That leave was granted in accordance with the approach taken by Pagone J in Australian Securities and Investments Commission (ASIC) v Endresz (2014) 228 FCR 316; [2014] FCA 786 and the Full Court of the Federal Court in Endresz v Australian Securities and Investments Commission (No 2) (2015) 228 FCR 334; [2015] FCAFC 33.
The four applicants were defendants, along with some others, in the matter of Commonwealth of Australia v Davis Samuel Pty Limited and Ors (No 8) [2014] ACTSC 312 (“the principal judgment”). That proceeding concerned allegations that $8,725,000 was stolen from the Commonwealth by an associate of the present applicants. The principal judgment was handed down on 21 November 2014. The orders are long and complicated. However, it is sufficient to note that Allan Endresz and Jozsef Endresz were ordered to pay the Commonwealth $18,633,178.47 and Dawn Endresz and William Forge were ordered to pay the Commonwealth $12,715,615.17. Part of those debts have been paid but many millions remain outstanding. There is no dispute as to the amount of the debts.
On 23 December 2014, an appeal was filed against the principal judgment. The appeal was dismissed for want of prosecution on 30 June 2016.
In the meantime, on 29 February 2016, the applicants commenced proceedings ex debito justiciae in the ACT Supreme Court to have the judgment declared a nullity. The essence of the applicants’ ex debito justiciae claim was that the original writ did not have endorsed on it a claim for breach of fiduciary duty, but only a claim for money had and received. There were numerous iterations of the statement of claim which pled breach of fiduciary duty but the writ itself did not have that claim endorsed on it.
The ex debito justiciae application was heard on 11 May 2016 and judgment was reserved. The bankruptcy notices were issued on 4 August 2016. The applications to set aside the bankruptcy notices were filed on 6 September 2016. Various hearings were adjourned by consent and the time for compliance with the bankruptcy notices was extended until 20 February 2017, when the matter was heard in this court.
By the time of the hearing in this court, judgment in the ex debito justiciae application had been handed down. That happened on 13 January 2017. The essence of the decision was that the applicants’ ex debito justiciae application was dismissed, and the applicants were given until 3 February 2017 to seek leave to appeal. They did not do so.
The grounds as originally contained in the applications to set aside the bankruptcy notices were identical with the exception of the numbers of the bankruptcy notices. The original grounds in Allan Endresz’s application were as follows:
1. The Bankruptcy Notice BN 193327 issued on 4 August 2016 and served on the Applicant on 16 August 2016 (Bankruptcy Notice), be set aside pursuant to sections 30 (1) and 41 (6A) (a) of the Bankruptcy Act 1966 (Cth) and rule 3.02 of the Federal Court (Bankruptcy) Rules 2016 as the Applicant had instituted an ex debito justitiae application in ACT Supreme Court Proceedings 75/1999 (judgment reserved) to set aside the judgment upon which the Bankruptcy Notice is based.
2. Alternatively, the Bankruptcy Notice be set aside pursuant to sections 30 (1) and 41 (6A) (b) of the Bankruptcy Act 1966 (Cth) and rule 3.02 of the Federal Court (Bankruptcy) Rules 2016 as an abuse of process.
The applicants said that ground 2 was based on the same argument as ground 1, being the argument that the breach of fiduciary duty claim was not endorsed on the writ. However, because the judgment on the ex debito justiciae application was no longer reserved by the time of the hearing in this court, the applicants sought and were granted leave to amend ground 1 as follows (with variations as to the numbers of the bankruptcy notices):
The Bankruptcy Notice BN 193327 issued on 4 August 2016 and served on the Applicant on 16 August 2016 (Bankruptcy Notice), be set aside pursuant to sections 30 (1) and 41 (6A) (a) of the Bankruptcy Act 1966 (Cth) and rule 3.02 of the Federal Court (Bankruptcy) Rules 2016 as the Applicant intends to institute an ex debito justitiae application in ACT Supreme Court of Appeal in proceeding 67 of 2014 to set aside the judgment upon which the Bankruptcy Notice is based.
Allan Endresz explained to the court on 20 February 2017 that he had attempted to file another ex debito justiciae application in the ACT Court of Appeal on 10 February 2017 but the registrar had not at that stage accepted it for filing. The applicants sought an adjournment of 14 or 30 days of the application to this court to enable the registrar to determine whether or not to accept the ex debito justiciae application sought to be filed on 10 February 2017.
As judgment on the adjournment application was to be reserved, the parties were given leave to file evidence about the response of the registrar to the proposed ex debito justiciae application. On 22 February 2017, a judge directed the registrar of the ACT Court of Appeal to reject for filing the applicants’ proposed new ex debito justiciae application.
Allan Endresz foresaw that possibility, and advised the court if that happened, he would seek to file another ex debito justiciae application. He argued that the bankruptcy notices should be set aside because of that proposed application.
The parties agreed that, as they had argued the substantive issues fully, the court could proceed to determine the matter on a final basis, if the application for an adjournment was refused.
Legislation
Subsection 30(1) of the Act provides that:
The Court:
(a)has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and
(b)may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.
Subsection 41(6A) of the Act provides that:
(6A)Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:
(a)proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or
(b)an application has been made to the Court to set aside the bankruptcy notice;
the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.
Subsection 41(6C) of the Act provides that:
(6C)Where:
(a)a debtor applies to the Court for an extension of the time for complying with a bankruptcy notice on the ground that proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and
(b)the Court is of the opinion that the proceedings to set aside the judgment or order:
(i) have not been instituted bona fide; or
(ii) are not being prosecuted with due diligence;
the Court shall not extend the time for compliance with the bankruptcy notice.
Case law
In cases where the court does not consider that:
a)the proceedings to set aside the judgment debt are not bona fide; or
b)the proceedings are not being prosecuted with due diligence,
the court still has a discretion about whether or not to extend time for compliance with the bankruptcy notice: Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 at 270-1.
The considerations to apply in considering whether to extend time for compliance with a bankruptcy notice are not the same as the considerations that apply in considering whether to make a sequestration order, because the consequences of the latter are much more serious: Byron at 270. Where no stay has been sought of the judgment on which the bankruptcy notice is based, it is only in an exceptional case that the court should extend time for compliance with a bankruptcy notice: Byron at 270-272. Indeed, in Hovan v Goycolea-Silva [2003] FCA 234, Emmett J refused to extend time where there was no evidence of “irreparable damage” to the debtor if time was not extended.
While the court should be reluctant to embark on an assessment of the merits of an appeal, where the prospects appear slight, the court will be less ready to grant an extension of the time for compliance with the bankruptcy notice: Bryant v Commonwealth Bank of Australia (1994) 217 ALR 251. Similarly, when an appeal against the original judgment has already been dismissed: Byron at 271.
In considering an application to extend time for compliance with a bankruptcy notice, the court should consider the prejudice to the debtor and the creditors of the decision being made one way or the other: Howarth, Re; Ex parte Mortgage Acceptance Nominees Ltd (1993) 43 FCR 587. Solvency or otherwise is not relevant at the bankruptcy notice stage: Bryant at 254.
Consideration
There would clearly be some prejudice to the applicants if the bankruptcy notices were not set aside, as they would be one step closer to bankruptcy. No other prejudice to them was suggested and none is apparent.
It was not suggested that there would be any special prejudice to the Commonwealth if the bankruptcy notices were set aside, although setting aside would have an impact on the date of the act of bankruptcy, if any.
The applicants have not sought a stay of the judgment on which the bankruptcy notice is based. Consequently, it would only be in exceptional circumstances that the court could set aside the bankruptcy notice: Byron. The applicants have not pointed to any exceptional circumstances and none are apparent.
The applicants did file an appeal against the judgment on which the bankruptcy notices are based. However, that has been dismissed for want of prosecution.
Allan Andresz submitted that the applicants could not appeal against the judgment on which the bankruptcy notice is based because it is a nullity. That is not correct.
The applicants’ attempts to deal with the underlying judgment by way of ex debito justiciae applications have been dismissed or not accepted for filing.
Although the court should be somewhat circumspect about embarking on a consideration of the merits of the judgment on which the bankruptcy notice is based, it may do so if the prospects of any application to set it aside appear to be particularly weak or strong. In the present case, the prospects do appear to be particularly weak. That is because the applicants themselves did not pursue the appeal they lodged, and because the ex debito justiciae application lodged on 11 May 2016 was dismissed on 13 January 2017, and a further application has been rejected for filing as an abuse of process.
Before this court, the applicants relied on Renowden v McMullin (1970) 123 CLR 584; [1970] ALR 865; (1970) 44 ALJR 283 and Shell Company of Australia Co Ltd v Esso Australia Ltd [1987] VR 317 to support the argument that the fact that the breach of fiduciary duty claim was not endorsed on the writ meant that the principal judgment, on which the bankruptcy notices were based, was a nullity. However, Shell v Esso essentially accepted the principle elucidated in Renowden v McMullin. Renowden v McMullin was considered in the judgment of 13 January 2017 and the applicants’ arguments were rejected.
In all the circumstances, I consider that any future attempts by the applicants to set aside the principal judgment on which the bankruptcy notices were based have little prospect of success, whether because their applications are likely to be refused for filing or because they are likely to be dismissed.
Consequently, there is not sufficient reason to adjourn the present applications and not sufficient reason to set aside the bankruptcy notices. The oral applications for adjournment will be refused and the substantive applications will be dismissed.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Judge Riley
Date: 1 March 2017
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