Barton v Malcolm Johns Legal Pty Ltd and; Malcolm Johns Legal Pty Ltd v Barton
[2014] FCCA 1287
•16 July 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BARTON v MALCOLM JOHNS LEGAL PTY LTD and MALCOLM JOHNS LEGAL PTY LTD v BARTON | [2014] FCCA 1287 |
| Catchwords: BANKRUPTCY – Application for leave to review Registrar’s decision out of time – application to set aside bankruptcy notice – Notice of Opposition to Creditor’s Petition – sequestration order made. |
| Legislation: Bankruptcy Act 1966, ss.30, 40(1)(g), 52(2)(b) Evidence Act 1995, s.91 |
| Alcantara v Buildpower Pty Ltd [2010] FMCA 626 Bailey v MCH Building Pty Ltd [2011] FMCA 124 Cain v Whyte (1993) 48 CLR 693 Curtis & Singtel Optus Pty Ltd & Anor [2014] FCCA 1286 Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 346 Melaleuca of Australia and New Zealand Pty Ltd v Duch [2005] FCA 1481 Re Gould: Ex parte Skinner (1983) 72 FLR 393 Re Majory [1955] Ch 60 Rozenbee v Kronhill (1956) 95 CLR 407 Schekeloff; Ex parte Schekeloff v The Hopkins Group Pty Ltd (1989) 22 FCR 407 Shaw v MAB Corporations Pty Ltd [2013] FCA 1231 Thomas v Nask [2011] FMCA 661 |
| Applicant: | NATHANIAL KELBURN DUNBAR BARTON |
| Respondent: | MALCOLM JOHNS LEGAL PTY LTD ACN 117 517 503 T/AS MALCOLM JOHNS & COMPANY |
| File Number: | SYG 476 of 2014 |
AND
| Applicant: | MALCOLM JOHNS LEGAL PTY LTD (ACN 117 517 503) T/AS MALCOLM JOHNS & COMPANY, LAWYERS |
| Respondent: | NATHANIAL KELBURN DUNBAR BARTON |
| File Number: | SYG 729 of 2014 |
| Judgment of: | Judge Altobelli |
| Hearing date: | 30 May 2014 |
| Date of Last Submission: | 30 May 2014 |
| Delivered at: | Sydney |
| Delivered on: | 16 July 2014 |
REPRESENTATION
SYG 476 of 2014
| Applicant: | Self-represented |
| Counsel for the Respondent: | Mr Johnson |
| Solicitors for the Respondent: | Malcolm Johns & Company |
SYG 729 of 2014
| Counsel for the Applicant: | Mr Johnson |
| Solicitors for the Applicant: | Malcolm Johns & Company |
| Respondent: | Self-represented |
ORDERS
In matter Nathanial Kelburn Dunbar Barton v Malcolm Johns Legal Pty Ltd t/as Malcolm Johns & Company SYG476/2014, leave is granted to Nathanial Kelburn Dunbar Barton to apply to review a Registrar’s decision.
In matter Nathanial Kelburn Dunbar Barton v Malcolm Johns Legal Pty Ltd t/as Malcolm Johns & Company SYG476/2014, all applications made by Nathanial Kelburn Dunbar Barton are dismissed.
In matter Malcolm Johns Legal Pty Ltd t/as Malcolm Johns & Company, Lawyers v Nathanial Kelburn Dunbar Barton SYG729/2014, any application made by Nathanial Kelburn Dunbar Barton is dismissed. A sequestration order be made against the estate of Nathanial Kelburn Dunbar Barton.
That Louise Anne Thompson be appointed as the trustee of the estate of Nathanial Kelburn Dunbar Barton.
That the costs of Malcolm Johns Legal Pty Ltd t/as Malcolm Johns & Company, Lawyers in matters SYG476/2014 and SYG729/2014 be paid from the bankrupt estate in accordance with the Bankruptcy Act 1966 (Cth).
A copy of this sequestration order be given to the Official Receiver within two days.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 476 of 2014
| NATHANIAL KELBURN DUNBAR BARTON |
Applicant
And
| MALCOLM JOHNS LEGAL PTY LTD ACN 117 517 503 T/AS MALCOLM JOHNS & COMPANY |
Respondent
SYG 729 of 2014
| MALCOLM JOHNS LEGAL PTY LTD (ACN 117 517 503) T/AS MALCOLM JOHNS & COMPANY, LAWYERS |
Applicant
And
| NATHANIAL KELBURN DUNBAR BARTON |
Respondent
REASONS FOR JUDGMENT
Introduction and background
At the request of the parties, delivery of judgment in this matter was postponed pending release of the reasons for judgment in Curtis & Singtel Optus Pty Ltd & Anor [2014] FCCA 1286. As Judge Lloyd-Jones dismissed the application in that case, the unsuccessful arguments raised have no bearing on the outcome of this case.
Apart from that, it is convenient to deal with both matters before this Court at the same time, and to deliver one set of reasons for judgment. For the sake of convenience and simplicity, Nathaniel Kelburn Dunbar Barton will be referred to as ‘Barton’, and Malcolm Johns Legal Pty Ltd will be referred to as ‘MJL’, in these reasons.
By way of brief history, on 13 February 2014, MJL obtained judgment against Barton in the Local Court in an amount of $26,026.91, plus interest. Barton agrees that the judgment related to unpaid Counsel fees that have been incurred through MJL in litigation that Barton was conducting.
On 19 February 2014, a bankruptcy notice was issued by the Official Receiver.
On 3 March 2014, Barton applied to set aside the bankruptcy notice. On 14 March 2014, Registrar Wall dismissed this application.
On 24 March 2014, Barton applied, out of time, to review the decision of Registrar Wall. Leave will need to be granted in this regard, before considering de novo the issues raised by Barton about the bankruptcy notice.
MJL caused to be presented on 20 March 2014 a Creditor’s Petition, relying on non-compliance with the bankruptcy notice.
On 24 April 2014, Barton filed a Notice Stating Grounds of Opposition to the Petition.
It is common ground that the Local Court judgment was stayed by that Court on 17 April 2014. Barton’s various applications raise a number of issues that will be discussed below.
Evidence before the Court
Barton relied on a number of affidavits as follows:
a)28 February 2014;
b)21 April 2014;
c)24 April 2014;
d)2 May 2014; and
e)23 May 2014.
There are six volumes exhibited to those affidavits.
MJL relied on the following documents:
a)Affidavit Verifying Paragraph 4 of Petition, sworn by Kylie Borodin on 19 March 2014;
b)Affidavit of Service, sworn by Kylie Borodin on 19 March 2014;
c)Affidavit of Personal Service, sworn by Timothy Zinga on 2 April 2014;
d)Affidavit of Debt, sworn by Jeffrey Choy on 30 May 2014; and
e)Affidavit of Search, sworn by Jessica Manno on 30 May 2014.
Application to review a Registrar’s decision out of time
The review of a Registrar’s decision is conducted pursuant to s.104(2) of the Federal Circuit Court Act 1999. Rule 2.03(1) of the Federal Circuit Court (Bankruptcy) Rules 2006 states that any such application must be made within 21 days after the day on which the power was exercised. The Court has power to dispense with compliance with its rules (r.1.06, Federal Circuit Court Rules 2001) if it is in the interests of justice to do so. The power is discretionary, and is not granted as a matter of course: see Melaleuca of Australia and New Zealand Pty Ltd v Duch [2005] FCA 1481 and Alcantara v Buildpower Pty Ltd [2010] FMCA 626. In this case there was no undue delay in bringing the application, and Barton provides a reasonable explanation. Leave is therefore granted to make the application out of time.
Application to set aside bankruptcy notice
Doing the best the Court can to understand Barton’s case, it seems that he invokes the Court’s general power under s.30 of the Bankruptcy Act 1966 to set aside the notice as an abuse of process. In addition, Barton relies on s.40(1)(g) of the Act by arguing that he “has a counter-claim, set off or cross-demand equal to or exceeding the amount of the judgment debt … that he …could not have set up in the action … in which the judgment was obtained.”
It is helpful to try to understand Barton’s concern about the judgment debt. The judgment debt relates to Counsel’s fees pertaining to a possible appeal against the judgment of Ward J in the NSW Supreme Court. This was part of complex legal matters in respect of which Barton had retained MJL. It would seem that, in substance, MJL had arranged money for Barton to fund his complex litigation in relation to a rural property. It is possible that the money advanced to Barton was provided by other clients of MJL on security of the said property. The loan appears to have been refinanced several times with the principal amount increasing to cover interest and further funds advanced for the litigation. Barton explained to the Court that he was, firstly, unable to reconcile the legal fees and interest incurred against the monies advanced to him and, secondly, believed that MJL was negligent. Referring specifically to the judgment debt, Barton explained to the Court that he simply did not know whether Counsel’s fees had been paid or not. Summarising his feelings about the matter, he explained to the Court:
I allege negligence. And I say that it goes very much back to that snail in the bottom cage, where everything has been shaken up to such an extent that no one really knows what’s going on. The only person who knows what’s going on is Mr Johns, and it just seems to me that he’s just sucking up the money like a vacuum cleaner. [transcript, 30 May 2014, page 18]
Unsurprisingly, Barton’s lenders now seek to recover the amount advanced to him. Barton does not want to pay. He has lodged an extensive cross-claim against the lenders and included MJL as a party. The cross-claim is complex.
The first issue is whether, in the circumstances very briefly explained above the bankruptcy notice is an abuse of process. It is important to record at this point that nowhere in his extensive evidence or in his oral submissions does Barton assert that he is solvent. Indeed, concerns about his solvency may be inferred by two matters – that he had to apply to remit the fees payable in relation to the matters before the Court, and that he told the Court that the property “is valueless. It’s not saleable”. [transcript, 30 May 2014, page 18] Implicit in Barton’s argument about abuse of process is the assertion that the, or a real purpose, of the present litigation against him is to stymie his cross-claim against others including MJL.
The onus of proof is on Barton. He has literally flooded the Court with documents in evidence containing claims that have no evidence to support them, and which paints a somewhat sorry history of what turned out to be unsuccessful litigation, during which Barton accumulated a very substantial liability for legal fees. His lack of success in the litigation is now matched by his lack of enthusiasm to pay those who financed what can now only be described as Barton’s folly. No improper purpose, or abuse of process, is discernible on the evidence. There is no attempt at extortion (picking up the words used in Re Majory [1955] Ch 60 referred to in Rozenbee v Kronhill (1956) 95 CLR 407). The debt is not a substantial one. The evidence suggests it was incurred on the instructions of Barton. The judgment has not been set aside. The creditor is entitled to pursue all remedies for recovery, including, in this case, bankruptcy in a situation where solvency is not alleged.
In relation to the alleged counter-claim, despite the volume of material before the Court, Barton has not satisfied the Court has he has a fair chance of success or prima facie case: Re Gould: Ex parte Skinner (1983) 72 FLR 393; Ebert v Union Trustee Co of Australia Ltd (1960) 104 CLR 346. The mere production of a cross-claim alleging facts which, if true, might give rise to such a claim will be insufficient to satisfy the Court: Bailey v MCH Building Pty Ltd [2011] FMCA 124 at [19]. There is no question about the extent of Barton’s commitment and emotional attachment to the cross-claim, but just as there is a legitimate interest of the public in stopping unremunerative trading (Thomas v Nask [2011] FMCA 661, applying Cain v Whyte (1993) 48 CLR 693 at 646), there is a legitimate interest of the public in stopping litigation that improperly hinders the legitimate rights of creditors as well as drains the public purse. The Court does not accept that s.40(1)(g) applies to this case.
Doing the best the Court can to understand Barton’s application to set aside the bankruptcy notice, there is no other discernible basis for doing so.
Opposition to the creditor’s petition
Doing the best the Court can to understand Barton’s Notice opposing the creditor’s petition, he submits that it is an abuse of process, that the judgment on which it has been based has in any event been stayed, that his application to set aside the bankruptcy notice had not yet been dealt with, that the “Respondent shall be solvent at the date of the hearing of the Creditor’s Petition”, that MJL had engaged in misleading, deceptive and unconscionable conduct that resulted in the Local Court judgment which should therefore be set aside, and that the Court should otherwise exercise its discretion not to grant the Petition.
The Court does not accept that the Creditor’s Petition is an abuse of process any more than the bankruptcy notice is. Barton referred the Court to the decision of Jessup J in Shaw v MAB Corporations Pty Ltd [2013] FCA 1231. There is nothing in that case that causes the Court to reconsider what it has already said on this issue. As to the assertion that MJL acted unconscionably, Barton is unable to rely on what he described as findings made by Ward J in one of the several cases forming part of the background matrix to this case due to s.91 of the Evidence Act 1995:
Exclusion of evidence of judgments and convictions
(1) Evidence of the decision, or of a finding of fact, in an Australian or overseas proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding.
(2) Evidence that, under this Part, is not admissible to prove the existence of a fact may not be used to prove that fact even if it is relevant for another purpose.
In any event, the Court expresses its doubts as to whether what Ward J said supports Barton’s contention. Barton further asserts, as part of his abuse of process claim, that MJL acted in a misleading and deceptive manner. These are matters that could have been argued at the time the judgment was obtained against Barton, and he provides no explanation as to why he did not do so. These matters do not go to abuse of process, but rather to a cross-claim, an argument already rejected earlier in these reasons. Finally, he argues about the justiciability of the Local Court claim in the Supreme Court. That Court ruled against him on this issue. It is not for this Court to review that decision, directly or indirectly. There is no basis for the claim that the sequestration order is an abuse of process.
It is indeed the case that the Local Court judgment was stayed on 17 April 2014. The judgment has not been set aside. It is not the subject of an appeal. The stay is not, in any event, an impediment to dealing with the Creditor’s Petition if it is otherwise proper to do so. Burchett J in Schekeloff; Ex parte Schekeloff v The Hopkins Group Pty Ltd (1989) 22 FCR 407, after considering earlier authorities, held that the time for considering for the purposes of s.40(1)(g) whether a judgment on which a bankruptcy notice is founded has not been stayed is the time of issue or, at the latest, service of the notice. The stay of judgment occurred well after service of the bankruptcy notice.
The application to set aside the bankruptcy notice has already been dealt with, and thus is no reason not to deal with the Creditor’s Petition.
Barton’s assertion of solvency is unsupported by the evidence. Indeed, his own evidence raises concerns about his solvency. For example, on his affidavit of 23 May 2014, he asserts “there is no equity in the mortgaged property” (para 34) and “I am receiving TFFP (Transitional Farm Family Payments) … against a backdrop of drought conditions, extreme temperatures and increased fire hazard.” (para 41(k)).
Barton raises concerns about the proceedings before the Local Court Magistrate who gave judgment against him. That is a basis for applying to set aside the judgment or appealing the same. Neither has taken place.
Barton finally argues that the Court, taking into account all the matters he places before it, should exercise its discretion and, presumably pursuant to s.52(2)(b), find that there is “other sufficient cause” not to make a sequestration order. There is no basis for doing so. An act of bankruptcy has been established to the Court’s satisfaction. The Court has jurisdiction. The debt is clearly outstanding. All other avenues under the Bankruptcy Act sought to be explored by Barton have been found to be fruitless. He has not established his solvency. There is no element of abuse of process or ulterior motive established on the evidence. On the contrary, the impression formed from all of the evidence, much of it presented by Barton himself, is that he borrowed significant sums of money to fund litigation that was unsuccessful, and he would prefer not to pay his lenders, one of whom is MJL. He appears to desire to shift responsibility for the consequences of choices he himself made. No “other sufficient cause” has been established.
Apart from Barton’s application to review a Registrar’s decision out of time, which is granted, all other applications made by Barton are dismissed. The Court is satisfied of all the matters set out in s.52 of the Act. Specifically, the Court is satisfied that Barton committed the act of bankruptcy specified in the petition. The Court is satisfied of the proof of the other matters required by s.52 of the Act. An Order for costs is appropriate.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Associate:
Date: 16 July 2014
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