Barry v Coshott (No.2)

[2015] FCCA 2108

FEDERAL CIRCUIT COURT OF AUSTRALIA

BARRY & ANOR v COSHOTT (No.2) [2015] FCCA 2108

Catchwords:
PRACTICE AND PROCEDURE – Recusal – apprehension of bias.

Legislation:

Bankruptcy Act 1966 (Cth), s.49

Coshott v Prentice [2015] FCCA 241

Applicants: STEPHEN MICHAEL BARRY AND MARTIN PEARCE BOARD

Respondent: LILJANA COSHOTT

Supporting Creditors: MAXWELL WILLIAM PRENTICE, STEPHEN MICHAEL BARRY (IN RELATION TO CERTAIN ADDITIONAL DEBTS) AND RUI OLIVEIRA

File Number: SYG 1846 of 2014

Judgment of: Judge Driver

Hearing date: 5 August 2015

Delivered at: Sydney

Delivered on: 5 August 2015

REPRESENTATION

Solicitors for the Applicant: Mr J Merewether of Merewether & Co

Counsel for the Respondent: Mr A Cheshire, with Ms C Goodhand

Solicitors for the Respondent: Martin Place Lawyers

Counsel for the Supporting Creditors: Mr J T Johnson

Solicitors for the Supporting Creditors: O’Neill Partners incorporating Sally Nash & Co

ORDERS

1. Judge Driver recuses himself from further involvement in these proceedings.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 1846 of 2014

STEPHEN MICHAEL BARRY AND MARTIN PEARCE BOARD

Applicants

And

LILJANA COSHOTT

Respondent

MAXWELL WILLIAM PRENTICE, STEPHEN MICHAEL BARRY (IN RELATION TO CERTAIN ADDITIONAL DEBTS) AND RUI OLIVEIRA

Supporting creditors

REASONS FOR JUDGMENT

(Revised from transcript)

1. This matter is part-heard from 18 June 2015.  I have made numerous rulings in the course of lengthy proceedings against the respondent (Ms Coshott) for a sequestration order, and the proceedings have reached the point where I was satisfied that prima facie a sequestration order ought to be made against her estate save for consideration of matters raised in opposition to the petition.  I have made rulings on all of those issues save for the issue of solvency. 

2. When the matter was before me on 18 June, I gave leave for the then petitioning creditor to withdraw and made orders pursuant to s.49 of the Bankruptcy Act 1966 (Cth) that the current creditors be substituted.  The proceedings then continued over the objections of counsel for Ms Coshott who sought an adjournment.  I made it clear to the representatives on 18 June that the position of Ms Coshott on solvency appeared hopeless because there was no evidence from her going to the issue of solvency. 

3. The only available evidence was that provided by Ms Coshott’s brother-in-law, Mr Ronald Michael Coshott.  I made clear that I would not regard his evidence as satisfying the question of solvency without hearing from Ms Coshott herself.  After a short adjournment, she was made available and gave oral evidence.  It became plain during her cross-examination that, to a large extent, she has placed her affairs into the hands of Mr Coshott and is dependent upon him for funds to meet her liabilities. 

4. This brought into sharp focus the question of the continuing willingness of Mr Coshott to provide that assistance and the basis of it.  Ms Coshott seemed to have some difference in understanding of the basis for Mr Coshott’s assistance in recent times.  The matter was adjourned part-heard on 18 June to resume today.  Between 1 July and 31 July 2015, I was on leave.  Accordingly, while I had given the parties the opportunity to apply for further directions or orders on 24 hours notice, the practical opportunity for doing so would have been extremely limited. 

5. When the matter resumed today, counsel for Ms Coshott orally applied for me to recuse myself.  It was conceded by Mr Johnson, who appears for supporting creditors and creditors in a different capacity, that on the basis of my reasons in particular at [45] of Coshott v Prentice[1], apprehended bias would be a real issue given the inevitable credibility issues concerning the evidence of Mr Coshott.  To put it bluntly, the only way which Ms Coshott could avoid a sequestration order before me would be to persuade me that she has funds available either from the sale of her home, in which she has a half-share, or from Mr Coshott to pay her debts. 

   [1] [2015] FCCA 241

6. In Coshott v Prentice, I found that Mr Coshott was a poor witness and that he had engaged in a sham transaction in order to obtain an advantage in the administration of his brother’s estate in bankruptcy.  A fair-minded observer aware of the facts and circumstances might reasonably apprehend that I would not bring an unprejudiced mind to the question of whether reliance could be placed on evidence from Mr Coshott of his willingness to further fund Ms Coshott’s debts and the basis of that funding. 

7. The remaining question is one of waiver.  Given the state of these proceedings, it might have been considered apparent following my judgment in Coshott v Prentice on 29 May 2015 that a recusal application ought to be made in these proceedings. However, there was, in my view, no cause to do so prior to 18 June. Ms Coshott took steps, with the assistance of Mr Coshott, to pay the sum due to the then petitioning creditors and sought an adjournment. The substitution of the current petitioning creditors under s.49 was resisted. The matter proceeded on that day with evidence from Ms Coshott and, in the light of that evidence, the credibility of Mr Coshott in these proceedings was brought into sharper focus.

8. It is extremely unfortunate that the proceedings must now be further adjourned pending the reassignment of them to another judge.  The interests of the administration of justice are not served by overly protracted or expensive proceedings in bankruptcy.  However, given that the apprehension of bias by a fair-minded observer in the circumstances in which I find myself would be plain, the only course available to me, I have concluded, is to recuse myself, and I will so order.

I certify that the preceding eight (8) paragraphs are a true copy of the reasons for judgment of Judge Driver

Associate: 

Date:  10 August 2015