Baker v Rigg

[2007] HCATrans 594

[2007] HCATrans 594

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S17 of 2007

B e t w e e n -

DAWN MARIE BAKER

Applicant

and

STEPHEN JAMES RIGG

Respondent

Application for special leave to appeal

GUMMOW J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 5 OCTOBER 2007, AT 9.37 AM

Copyright in the High Court of Australia

MR T.E.F. HUGHES, QC:   May it please the Court, I appear with MR C.P. TAYLOR for the applicant who was the applicant for
annulment of the sequestration order.  (instructed by Paul Stubbs Law Office)

MR T.G.R. PARKER, SC:   May it please the Court, I appear with my learned friend, MR D.C. PRICE, for the respondent.  (instructed by Maurice Blackburn Cashman)

GUMMOW J:   Yes, Mr Hughes.

MR HUGHES:   Your Honour, I do not propose to reiterate the content or any part of the content of our summary of the argument.  The Court will have read it and taken it into account.  In the first paragraph of his reasons, the primary judge aptly observed that the circumstances in which the applicant sought the annulment of the sequestration order were unusual.  A primary unusual feature of the case is that as noted by the primary judge at paragraph 19 of his reasons at application book 4.  The applicant deposed in her affidavit supporting the annulment application that her only debts were debts that arose out of her endeavours to save herself from eviction from her home of more than 30 years that she had inherited under her husband’s will.  “Otherwise” she said, “she was solvent”. 

The applicant, your Honours, “was not required to attend for cross‑examination”, as observed by the primary judge at paragraph 16 of his reasons, page 4 of the application book.  As at the date of the annulment hearing the only other crystallised debt payable by her, apart from the debt created for the costs judgment connected with the caveat proceedings, was by a cruel twist of fated, your Honours may think, owed to the respondent, Mr Rigg, because the mortgagee of the homestead block, the Commonwealth Bank, had assigned to him a judgment debt that the applicant had incurred by agreeing in 2001 in an attempt to stave off eviction to pay to the bank the interest that would accrue in future on the balance of Rigg’s debt to the bank, a debt that he had incurred in clear breach of his obligations under the deed of residence. 

It was a debt under a mortgage that Rigg had given over the homestead block thereby imperilling the applicant’s right of residence in it.  That was a debt for about $47,000.  We say that on ordinary principles of contribution, the applicant would have a clear claim to a set off against Rigg in respect of any attempt by him to enforce against her the debt that had been assigned to him by the bank.

GUMMOW J:   Mr Hughes, we have to find or be persuaded that we will be able to find sufficient error in the judgment of Justice French, who gave the leading judgment for the majority in the Full Court, to achieve an intervention by this Court.

MR HUGHES:   Yes, your Honour.

GUMMOW J:   Now, where is the error by Justice French?

MR HUGHES:   The principal error of Justice French was his failure to pay any regard to the fact that the primary judge expressed his own opinion that the appeal to the Court of Appeal of New South Wales is arguable.  He failed to notice that Mr Rigg’s notice of appeal to the Full Court of the Federal Court did not contain any challenge to the primary judge’s opinion that the appeal was arguable.  That comes out of application book pages 26 and 27 where the grounds of Mr Rigg’s appeal to the Full Court are set out.  If, as the primary judge said, his own opinion was that the applicant’s appeal to the Court of Appeal is arguable, any misdescription, if there was one, of President Mason’s opinion is immaterial. 

In that connection we point to what Justice Cowdroy, the dissenting judge, said at paragraph 113, application book 43.  Justice Wilcox, the primary judge, your Honours, did not say “I think the appeal is arguable only because President Mason has formed that view”.  He formed his own view and the proposition that it is not contextually permissible to treat what the primary judge said as expressive of his own view is ill founded.  Each of the majority judges, we say, was wrong in treating the potential liability of the applicant under the Supreme Court costs order as if it created existing indebtedness.  See Justice Spender, your Honours, at application book page 15, paragraphs 17 and 18; Justice French at paragraph 74 of his reasons, application book 33.  See, if I may ask your Honours, Justice Cowdroy contra at paragraph 105, application book page 41.

GUMMOW J:   Now, what do you say as to the treatment of this question by Mr Parker in his written submissions on page 70?  I think it is paragraphs 12 and 13.

MR HUGHES:   What we say, your Honour, is that the respondent does not contend – see his summary of argument, paragraph 13, I think it is page 69 – that the availability of a viable cross-claim by the debtor against the petitioning creditor or against a third party arising from a transaction closely related to the petitioning creditor’s debt, cannot provide a proper ground for adjourning a creditor’s petition until the cross-claim is determined.  My learned friend’s argument, as articled in his summary, is that the availability of such a cross-claim provides only a discretionary ground for an adjournment.  The short answer which we venture to make to that proposition is that there can be, and there were here, circumstances which ordain that the only proper course, had all the facts been known to

the magistrate who made the sequestration order, would have been for her to have granted an adjournment of the creditor’s petition until after the appeal to the Court of Appeal had been determined. 

On reflection, your Honours, it may be seen that in this case an issue of general importance arises, an issue that is complimentary to and perhaps transcends the question of justice for this applicant who has lost her inheritance for much less than its value.  The issue is whether it is legitimate to utilise the procedures of the Bankruptcy Act to snuff out an arguable appeal in a case in which the only beneficiaries of that process would be the respondents to that appeal.

GUMMOW J:   Now, was this proposition put below?

MR HUGHES:   I was not below, your Honour.

GUMMOW J:   I realise that, but that is not our problem.  Was it put below?

MR HUGHES:   Not in those terms, but on these facts it is an evident proposition.  There are no other persons other than the respondents to this appeal who have claims provable in this bankruptcy.  It is quite clear where one looks at the facts that the costs judgment on which the sequestration order was obtained was dated 27 June 2005.  It appears – I can tell your Honours this – from page 144 of the Federal Court appeal book.  That judgment, however, was founded on a costs assessment dated 16 September 2003, nearly two years previously, as appears from page 145 of that appeal book. 

It is significant that despite the availability to Mr Rigg for nearly two years of the costs assessment on which the costs judgment was based, the bankruptcy notice founding Mr Rigg’s creditor’s position was not issued until eight days after the notice of appeal to the Court of Appeal was filed.  This gives rise to an obvious inference as to the purpose underlying the issuing of this bankruptcy notice.  I see the light is off, your Honours.  I apologise for exceeding my time, but this is a proper case for special leave both because of the impact upon the interest of justice of the Full Court’s treatment of this claim for annulment and because of an underlying issue of general importance that I have endeavoured to articulate.  If the Court pleases.

GUMMOW J:   Thank you.  Yes, Mr Parker.

MR PARKER:   It is submitted at page 70 of the application book the problem that the applicant faces in this case is that it was necessary to show that the order ought not to have been made, and that required ‑ ‑ ‑

GUMMOW J:   Which order?

MR PARKER:   That is the sequestration order.  The test is, had all the material which is now put being put before the registrar, would the registrar had been required not to make the order ‑ ‑ ‑

GUMMOW J:   Where do we find the test of 153B of the Bankruptcy Act?

MR PARKER:   We brought a copy along.  I think it is quoted in the judgments, but your Honours will see on the second page of what I have handed to the Court, it is ‑ ‑ ‑

GUMMOW J:   We have both had to grapple with it at times, but we do not know it by heart.

MR PARKER:   It is subparagraph (1) “ought not to have been made” and what has been held in Federal Court authority which has not been questioned at any stage of this litigation, including today, is that where a matter that is put before the court is a discretionary matter, that is, put before the court as requiring the registrar to have not proceeded to sequestration, that must be a matter which would require the registrar not to proceed.  It is not enough to put something before the court and invite the court to, in effect, exercise the discretion de novo.  That is the important point.  It is not, “I challenge de novo”.  It is not even a question of looking at something that the registrar is taking into account and challenging on a House v The King basis. 

You have to show the registrar had no alternative but to proceed.  The short answer to this application, in our submission, is that even if it be accepted that there was an arguable cross‑claim, and passing over that issue for the minute, the existence of an arguable cross‑claim would be a matter which at best could be taken into account.  The registrar might, depending upon the strength of the cross-claim, not merely its arguability, and depending upon other factors, have regard to that and say, “Well, on that basis I will not proceed”, but you cannot say that the registrar was required to do that.  It would have been open to the registrar, particularly if satisfied that the appeal was not arguable, or even if arguable was weak, then not to exceed ‑ ‑ ‑

GUMMOW J:   What is the leading authority on this in the Federal Court, on this phrase “ought not to have been made”?

MR PARKER:   It is referred to by Justice French at paragraph ‑ ‑ ‑

GUMMOW J:   He referred to the authorities, I know.  Paragraph?

MR PARKER:   Paragraph 62 of his Honour’s judgment at page 30 of the application book.  It is a decision of Justice Fisher at first instance in a case called Re Frank; Ex parte Piliszky 16 FCR 396. Then, as his Honour recorded between lines 20 and 30, it was approved by the Full Court in Hudson litigation.  Now, at no stage of this litigation has that principle been questioned.  So we simply say, even if it was arguable, that is not enough.  This was a weak claim for reasons that we gave.  This was a claim against my client which depended upon a factual allegation that he had manufactured a false sense of crisis.  It was based on conversations that he had with his aunt in which she said that he had, in effect, hustled her into this transaction and which he denied that.  He said that so far from that it was actually driven by her wishes. 

Justice James heard that in the Supreme Court.  It took four weeks and at the end of that his Honour found on the facts that the case put against my client was not right, as a matter of fact.  Now, we would submit that, in fact, the primary judge did not ever make his own assessment of whether the appeal against my client was arguable, but for the reasons I have given, whether he did so or not is not enough.  Based upon a cross‑claim depending upon reversing those findings of fact about which nothing was shown – nothing was shown in the sense that there was nothing put before Justice Wilcox, which would suggest that there had been something overlooked by his Honour Justice James, something radically wrong with those findings of fact – you just could not say that the registrar, had the registrar been apprised of the existence of that cross-claim, would have been required not to proceed to sequestration.  It would have been a discretionary matter.  Now, that is the answer to the application.

The issue of general importance which is said to arise is not one that was raised below.  There was at first instance a fleeting suggestion that there was some form of abuse of process in these proceedings, something which my friend has perhaps picked up with his reference to snuffing out litigation.  For reasons that we have given, that is an overstatement.  The actual outcome of these proceedings is not to snuff out the litigation.  It is to vest the conduct of this appeal in the official trustee who then signed it to the applicant’s daughter who unfortunately is a woman of straw and it was only when that had happened, namely, the applicant had been allowed to go bankrupt, the assignment had taken place, the matter had come before the Court of Appeal and the President of the Court of Appeal had said, “I am not going to let the assignee, who is a woman of straw, run this litigation without providing security”.  It was only at that point that the annulment application came forward. 

That was an important factor which his Honour Justice French referred to in his judgment, which at the least went to discretion.  It is a

considerable overstatement to say that this is all about snuffing out litigation.  Let me make it perfectly clear. We would be quite happy to fight this weak appeal in the Court of Appeal if there was some prospect that if the appeal fails there would be some recovery for costs.  But what has happened is that in separate caveat proceedings the applicant has brought proceedings against my client and lost and has not paid the costs.  In proceedings before Justice James, four weeks, my client has faced those proceedings and has won those.  Those costs will not be paid.  Now the applicant wants to keep litigating but wants to do so through an assignment to her daughter who is unable to meet the costs and then, when required to provide security, says, “Well, no, I would like to go back and get an annulment so I can pursue this appeal as it is perceived without putting up the security”.  That is what this litigation is all about.  It is about whether there should be security for the appeal. 

Now, for that reason, we say it is an overstatement but, furthermore, at first instance there was an issue raised about whether this was in some form an abuse of process.  That allegation was not sustained by the primary judge, Justice Wilcox, and it was not continued forward on appeal.  It is too late to bring it up now and it obviously depends upon factual matters such as how it was and why that the period of time to which my friend referred had lapsed between the making of the order for costs and the application being made for bankruptcy.  We simply say there is nothing before the court that would allow the court to draw an inference for the first time at this level on that issue, particularly as the issue was raised and then abandoned at first instance.

GUMMOW J:   Thank you, Mr Parker.  Anything in reply, Mr Hughes?

MR HUGHES:   Yes, very briefly.  My learned friend has described the appeal to the Court of Appeal as weak.  It is an appeal in a situation in which the solicitors had a conflict of interest staring them in the face, in the case of a client who was of limited education and no business experience.  It is not in controversy, your Honours, that they failed altogether to draw her attention to the conflict or to seek her fully‑informed consent.  The appeal against the solicitors in a matter closely connected with the bankruptcy, has been described by the primary judge as a strong one.  It cannot be ruled out of the equation.  My learned friend has said, as he said in his reply to my submissions this morning, that it cannot be taken that Justice Wilcox formed the view that the appeal was arguable.  Your Honour, that is, with respect, an example of forensic hardihood.

GUMMOW J:   There is a lot of that around, Mr Hughes.

MR HUGHES:   Sometimes it does not work or should not.  To impute to Justice Wilcox a proposition contrary to what he said is totally inappropriate

and I flag that point in my written outline.  One only has to look at the sequence of events in this case to form the view that this appeal to the Full Federal Court was designed to snuff out the widow’s appeal, the applicant’s appeal.  It is a case in which ordinarily the impecuniosity of a litigant does not prevent him or her from pursuing claimed rights and, in this case claimed rights which we say in our outline had a reasonable basis.  The conduct of this respondent, Mr Rigg, in doing away with the widow’s home was totally wrong.  There is an arguable appeal which should be allowed to go forward.

GUMMOW J:   We will take a short adjournment.

AT 10.01 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.03 AM:

GUMMOW J:   There are insufficient prospects of success in this Court in demonstrating error in treatment of the facts and the law by Justice French who gave the leading judgment for the majority in the Full Court of the Federal Court, to warrant a grant of special leave. No question of general principle respecting the operation of section 153B of the Bankruptcy Act 1966 (Cth) arises. Special leave is refused with costs.

We will adjourn to reconstitute.

AT 10.04 AM THE MATTER WAS CONCLUDED