Balwyn Nominees Pty Ltd v Culleton

Case [2016] FCA 1578

FEDERAL COURT OF AUSTRALIA

Balwyn Nominees Pty Ltd v Culleton [2016] FCA 1578

File number: WAD 492 of 2016
Judge: BARKER J
Date of judgment: 23 December 2016
Catchwords:

BANKRUPTCY – creditor’s petition – where creditor’s petition based on failure to comply with bankruptcy notice requiring payment of judgment debt – whether court of bankruptcy should “go behind” judgment on which judgment debt based – whether respondent debtor had counter-claim equal to or exceeding amount of judgment debt for purposes of s 40(1)(g) of Bankruptcy Act 1966 (Cth) – whether creditor’s petition abuse of process – whether sequestration order would deprive respondent debtor of property otherwise than on “just terms” contrary to s 51(xxxi) of Constitution – whether Court satisfied that respondent debtor able to pay his debts for purposes of s 52(2) of Bankruptcy Act 1966 (Cth) – whether respondent debtor entitled to account under s 30(2) of Bankruptcy Act 1966 (Cth)

PRACTICE AND PROCEDURE – service – whether bankruptcy notice and creditor’s petition served – where notice of appearance entered by respondent debtor

PRACTICE AND PROCEDURE – application for trial by jury – whether Court should exercise discretion to direct trial of question of fact before a jury under s 30(3) of Bankruptcy Act 1966 (Cth) – whether right to trial by jury under s 116 of Constitution – whether right to trial by jury under s 80 of Constitution – application dismissed

PRACTICE AND PROCEDURE – application for adjournment of hearing – whether adjournment should be granted for respondent debtor to obtain legal representation – whether adjournment should be granted for service of notices under s 78B of Judiciary Act 1903 (Cth) – where adjournment previously granted – where respondent debtor previously expressed desire to appear as self-represented party/advocate – application dismissed
Legislation:

Constitution ss 51(xxxi), 80, 116

Bankruptcy Act 1966 (Cth) ss 30(2), 30(3), 31(1), 40(1), 40(1)(g), 41, 43, 43(1), 43(2), 44, 44(1), 44(1)(a), 44(2), 44(3), 47, 47(1), 52, 52(1), 52(1)(b), 52(1A), 52(2), 52(3), 60(3), 74(5), 86(1), 149(1), 153A(1), 153B, 156A, 178

Federal Court of Australia Act 1976 (Cth) ss 37M, 40

Judiciary Act 1903 (Cth) s 78B

Federal Court (Bankruptcy) Rules 2016 (Cth) RR 1.04, 4.04, 4.04(1)(a), 4.04(1)(b). 4.05, 4.06, Pt 4

Federal Court Rules 2011 (Cth) RR 10.11, 10.12

Cases cited:

Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd and Others (1999) 95 FCR 299; [1999] FCA 1151

Bayne v Bailieu (1908) 6 CLR 328; [1908] HCA 39

Culleton [2016] FCA 1193

Culleton v Dakin Farms Pty Ltd [2015] WASCA 183

Culleton v Dakin Farms Pty Ltd [2016] WASCA 152

Culleton v Macquarie Leasing Pty Ltd (No 2) [2015] FCA 1478

Dakin Farms Pty Ltd v Elite Grains Pty Ltd [No 2] [2013] WADC 160

Glew & Anor v Shire of Greenough [2006] WASCA 260

Glew v The Governor of Western Australia (2009) 222 FLR 416; [2009] WASC 14

Harding v Deputy Commissioner of Taxation (2008) 172 FCR 206; [2008] FCA 1403

Re Finlayson; Ex parte Finlayson

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AGLC
Balwyn Nominees Pty Ltd v Culleton [2016] FCA 1578
Case
[2016] FCA 1578
Decision Date

CaseChat Overview and Summary

Balwyn Nominees Pty Ltd initiated bankruptcy proceedings against Rodney Norman Culleton, seeking sequestration of his estate on the basis of his failure to comply with a bankruptcy notice demanding payment of a judgment debt. The case before the court involved several significant legal questions. Firstly, the court had to determine whether it should consider the merits of the District Court judgment upon which the bankruptcy notice was based. Secondly, it had to decide whether Culleton had a counter-claim equal to or exceeding the judgment debt, which might preclude sequestration under section 40(1)(g) of the Bankruptcy Act 1966 (Cth). The court also considered whether the creditor's petition constituted an abuse of process and if the sequestration order would deprive Culleton of property contrary to section 51(xxxi) of the Constitution. Additionally, the court assessed whether Culleton was able to pay his debts, as required by section 52(2) of the Bankruptcy Act, and whether he was entitled to an account under section 30(2) of the Act.

The court concluded that the creditor's petition and relevant documents were properly served on Culleton. Regarding the District Court judgment, the court found that it was not flawed and that the creditor's petition was not an abuse of process. The court rejected Culleton's constitutional arguments, finding them unconvincing and without foundation. The court also dismissed applications for a trial by jury and an adjournment to obtain legal representation. Ultimately, the court ordered the sequestration of Culleton's estate, stayed all proceedings under the sequestration order for 21 days, and directed that the creditor's costs be paid from Culleton's estate.

Orders

Orders of the court

1. The estate of Rodney Norman Culleton be sequestrated under the Bankruptcy Act 1966 (Cth). The Court notes that the date of the act of bankruptcy was 30 August 2016.

2. There be a stay of all proceedings under the sequestration order for a period of 21 days.

3. The petitioning creditor’s costs (including any reserved costs) be taxed and paid out of the estate of Rodney Norman Culleton in accordance with the statute.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In all of these circumstances, I find that the creditor’s petition and other relevant documents were served on the respondent debtor as required by s 52(1)(b) of the Bankruptcy Act and R 4.05 of the Bankruptcy Rules.IS THE DISTRICT COURT JUDGMENT FLAWED? The respondent debtor submits that the District Court judgment upon which the bankruptcy notice is founded is flawed both as a result of a fact finding error made by the trial judge, and because the trial judge lacked the constitutional status to make a binding decision because he had not taken an oath of allegiance to the Queen when appointed to his office. I will deal with the first issue in this section and the second issue in the next section. As to the first issue, the respondent debtor says that he has an appeal against the trial judge’s judgment in train and, for that reason, the Court should be loath to make an order sequestrating his estate at this point. As to the alleged fact finding error, the respondent debtor contends, as noted in para 4 of the grounds of opposition set out at [14] above, that the agreement as found between the petitioning creditor “and the Defendant Company” was nothing more than an invitation to treat, not a concluded contract. In para 5 of the grounds of opposition he states that the evidence did not disclose any dealings with the petitioning creditor except an “un-concluded invitation to treat which could not found damages for breach of contract”. At a second para 5 he says that, as a consequence, the Court is required now to go behind the District Court judgment to determine if there is any amount owing at all. The petitioning creditor contends that the District Court judgment is a final judgment which followed a trial of the action between the petitioning creditor and Mr and Mrs Culleton, amongst other parties. It says that judgment has been the subject of appeals and challenges by the respondent debtor (and Mrs Culleton) which have been wholly unsuccessful and that the judgment has been upheld twice by the Court of Appeal of the Supreme Court of Western Australia. It also notes that an application for special leave to appeal to the High Court of Australia by Mrs Culleton from the first Court of Appeal judgment was dismissed following abandonment. The sequence of litigation may be summarised as follows. In 2011, Dakin Farms Pty Ltd and Balwyn Nominees, the petitioning creditor, commenced an action in the District Court of Western Australia against Elite Grains Pty Ltd (then associated with Mr Culleton and Mrs Culleton), as well as against Mr Culleton and Mrs Culleton. After a contested trial during which Elite Grains and Mr and Mrs Culleton were legally represented, judgment was obtained in October 2013 by the plaintiffs, and the defendants’ counter‑claim was dismissed: see Dakin Farms Pty Ltd v Elite Grains Pty Ltd [No 2] [2013] WADC 160. Mr and Mrs Culleton then brought an appeal against the decision of the District Court in the Court of Appeal. It was dismissed in its entirety in May 2015 with reasons published in September 2015. See Culleton v Dakin Farms Pty Ltd [2015] WASCA 183 (Culleton [2015] WASCA). Further reference is made to this judgment below.

Ratio Decidendi

Legal Principle Established

I reject the submission.WILL THE RESPONDENT DEBTOR BE DEPRIVED OTHERWISE THAN ON “JUST TERMS” OF SOME PROPERTY, CONTRARY TO THE CONSTITUTION, SHOULD A SEQUESTRATION ORDER BE MADE AGAINST HIM ON THE CURRENT APPLICATION? Again this is one of the issues that is thrown up by the respondent debtor’s submissions, and, in particular, in his Submission filed 16 December 2016. It is a particularly difficult argument to follow. He refers to s 51(xxxi) of the Constitution, which he rightly observes guarantees “just terms” in the acquisition of any property from an individual by authority of the Commonwealth Parliament. His argument, as he expresses it, at the top of p 4 of his Submission, is that the orders of the trial judge in the primary District Court proceeding constitutes an “Arbitrary Order” against him, “taking property from me” and thus the Constitutional just terms provision has been violated. The simple answer to the proposition is that the District Court of Western Australia, exercising judicial power in relation to a contractual dispute between the relevant parties to the litigation, did not deprive Mr and Mrs Culleton of any property he or they were possessed of. A judgment was entered against them requiring them to pay damages. Even if broader principles of law derived from the Constitution mean that the District Court of Western Australia, at material times, was exercising judicial power under the Constitution, the judicial orders made by the District Court do not in any way involve the confiscation of property to which s 51(xxxi) of the Constitution refers. There is also merit in the submission of counsel for the petitioning creditor that the Commonwealth Parliament has the express legislative power to make a law in relation to bankruptcy, pursuant to s 51(xxxi) of the Constitution, and so it follows that a sequestration order made on the strength of the District Court orders also cannot be considered to involve some arbitrary confiscation, not on just terms, of the respondent debtor’s property. As I said in the course of argument at the hearing, the constitutional arguments made on behalf of the respondent debtor are not convincing. In fact, they are not even arguable. They are made by persons, no doubt doing the best that they can, without any apparent formal instruction as to the tenets of Australian constitutional law. They fail conceptually and logically at almost every turn. It follows that the “just terms” and related arguments are without any foundation and should be disregarded. As to other “constitutional” or broader philosophical submissions and observations made by the respondent debtor in his affidavit of 12 December 2016 or in the respondent debtor’s Submission filed 16 December 2016, none have any substance so far as the questions raised in this proceeding are concerned, and I have no regard to them.DOES THE ISSUING OF THE S 78B NOTICE AFFECT THE EXERCISE OF THE JURISDICTION OF THE COURT? I have noted above that on 18 November 2016 the respondent debtor filed a notice under s 78B of the Judiciary Act at the same time as he filed his appearance and grounds of opposition. The terms of the s 78B notice are set out above. There was no evidence before the Court that at the time of the hearing the notice had been served on any of the Attorneys.