Bates v Bechara
[2021] FCCA 1693
•26 July 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Bates v Bechara [2021] FCCA 1693
File number(s): SYG 821 of 2016 Judgment of: JUDGE A. KELLY Date of judgment: 26 July 2021 Catchwords: BANKRUPTCY – application for review of exercise of judicial power by a registrar – decision by registrar to make sequestration order – where debtor files no appearance, grounds of opposition to petition or affidavit verifying grounds – where three grounds revealed progressively in the course of a de novo hearing – where first ground (service) abandoned – where second ground (jurisdiction) was not disclosed by opening submissions or until cross examination – where third ground (formal requirements) disclosed only in closing address – where application remitted by Full Court to be heard as soon as reasonably possible – where no evidence of solvency – onus on debtor to persuade court that for other sufficient reason petition ought be dismissed – application adjourned to enable petitioner to reply. EVIDENCE – leave to adduce further evidence – where debtor applies for review of exercise of power by registrar – where debtor has not filed notice of grounds for opposing petition or affidavit in support of those grounds – where no notice given that service of bankruptcy notice was in issue – where no notice given that jurisdiction was in issue – where affidavit verifying petition may be sufficient proof of matters stated – where no notice given that Bankruptcy Rules had not been complied with – where debtor’s case has not begun – where no evidence has been filed by debtor – applicable principles – whether justice of the case allows in fairness for creditor to be permitted to adduce further evidence – leave granted. PRACTICE & PROCEDURE – adjournment – where hearing part-heard – procedural history of de novo hearing – where parties afforded opportunities to make submissions, test evidence and address whether sequestration order ought to be made or petition dismissed or adjourned – where order made in state of New South Wales directing temporary restrictions and requirements on movement and gathering – where application made on last business day before final day of hearing to vacate part-heard hearing on ground debtor’s advocate “cannot legally enter Greater Sydney” to access file so as to listen to reply of the petitioning creditor – application to adjourn part-heard hearing until the end of lockdowns (predicted to be 31 July 2021) – where progressive series of lockdowns in NSW over June-July 2021 – applicable principles – application refused – debtor’s advocate afforded further opportunity to obtain file. PRACTICE & PROCEDURE – adjournment – where hearing part-heard – where respondent’s solicitors retain solicitor from another firm to appear as advocate on behalf of client – where solicitor-advocate accepts retainer – where solicitor-advocate announces appearance at commencement of hearing and participates fully in hearing – application for adjournment on fifth day of hearing – where advocate states he will withdraw from hearing if adjournment not granted – where no application for leave to withdraw has been made – duties of persons appearing in proceedings. Legislation: Bankruptcy Act 1966 (Cth) ss 32, 41, 43, 51, 52, 153A, 306
Federal Circuit Court Act 1999 (Cth) s 104
Judiciary Act 1903 (Cth) s 39B
Public Health Act 2010 (NSW)
Federal Circuit Court Rules 2001 (Cth) rr 1.06, 4.08, 20.03, Div 20.2
Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) rr 1.04, 2.01, 2.03, 2.04, 2.06, 4.04, 4.05, 4.06Public Health (Covid-19 Temporary Movement and Gathering Restrictions) Order 2021 (NSW) cll 3, 4, 6, 8, 9, 10, 11, 12, 13, 14, 15, 16, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, Sch 1, Sch 2, Sch 3
Cases cited: 4nature Incorporated v Centennial Springvale Pty Ltd (2017) 95 NSWLR 361
Bechara v Bates (No 2) [2020] FCA 659
Bechara v Bates [2021] FCAFC 34
Capic v Forward Motor Company of Australia Ltd [2020] FCA 486,
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384
Culleton v Balwyn Nominees Pty Ltd (2017) 343 ALR 632
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588
Gill v Donald Humberstone & Co Ltd [1963] 3 All ER 180
Jefferson Holdings Pty Ltd v Middle East Trading Consultants Pty Ltd (No 2) (1994) 122 ALR 717
John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1
Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75
Myers v Myers [1969] WAR 19
Newton v Ellis [2012] NSWCA 106
Opeka Pty Ltd v Mackie Group Pty Ltd [2003] VSC 183
Totev v Sfar (2008) 167 FCR 193
Tovir Investments Pty Ltd v Waverly Council [2014] NSWCA 379
Tuckiah v The King (1934) 52 CLR 335
Zdrilic v Hickie (2016) 246 FCR 532
Zetta Jet Pte Ltd v The Ship, “Dragon Pearl” [2018] FCA 878Heydon, Cross on Evidence (LexisNexis Butterworths, 12th ed, 2020)
Pearce and Argument, Delegated Legislation in Australia (LexisNexis Butterworths, 5th ed, 2017)
Number of paragraphs: 286 Dates of hearing: 14 May, 8 June, 11 June, 19 July, 26 July 2021 Place: Melbourne The Applicant: In person Solicitor for the Respondent: HWL Ebsworth Solicitor-advocate for the Respondent: Mr A.R. Martin,
Martin Legal Pty LtdORDERS
SYG 821 of 2016 BETWEEN: PHILIP BATES
Applicant
AND: MARIA BECHARA
Respondent
ORDER MADE BY:
JUDGE A. KELLY
DATE OF ORDER:
26 JULY 2021
THE COURT ORDERS THAT:
1.Pursuant to ss 67-68 of the Federal Circuit Court of Australia Act 1999 (Cth), direct that the parties be allowed to appear and to make submissions before the Court by video and audio link.
2.The respondent have leave to file the further affidavit of Alexander Richard Martin sworn on 26 July 2021.
3.The application that the hearing on 26 July 2021 be adjourned is granted.
4.The application by paragraph (4) of the application in a case dated 15 July 2021 that this proceeding be listed for mention on 16 August 2021 with a view to assessing the Greater Sydney Covid-19 lockdown and then setting a final hearing date be refused.
5.The hearing of the proceeding is adjourned to 10:00am on Monday, 2 August 2021.
6.In the further conduct of the matter, the parties and their representatives comply with all relevant State and Commonwealth health and public order regulations concerning Covid-19 including those placing certain temporary restrictions and other requirements on movement and gathering.
7.The costs of and incidental to the application in a case and the application for a further adjournment be reserved.
REASONS FOR JUDGMENT
JUDGE A. KELLY
Introduction
On the fifth day of a de novo hearing of a creditor’s petition filed on 7 April 2016 which has been remitted by the Full Court of the Federal Court of Australia to be heard as soon as reasonably possible, orders were made refusing the debtor’s application to vacate the hearing of the petition until after the lockdown of Greater Sydney.
The primary purpose of these reasons for judgment is to explain why that order was made. The secondary purpose of these reasons is to address the background and procedural history of this de novo hearing of the creditor’s petition and address the debtor’s objections to evidence.
Since the Full Court remitted the proceeding to this court, the parties have always, whether in directions hearings or the de novo hearing of the petition, participated in the hearing by audio and video link. The proceeding has been listed for hearing on 14 May, 8 June, 11 June, 19 July and 26 July 2021. Both before and during that period, the parties have been afforded and taken opportunities to file submissions and evidence, raise objections and make closing submissions. Although the court sat for an extended period to conclude the hearing on 11 June 2021, the step remaining to be completed before judgment is an oral submission in reply by the petitioner, Mr Bates, who is a barrister. The adjournment is sought by the respondent debtor, Ms Bechara, who is a solicitor. It is sought in circumstances where Mr Bates has finally complied with a request to file his outline of submissions in reply and Ms Bechara has been afforded, but not taken, an opportunity to file submissions which are responsive to that reply submission.
The substantive basis upon which Ms Bechara seeks to adjourn the part-heard de novo hearing is, it is said, that her advocate, Mr Martin, who resides on a farm in New South Wales some 650 kilometres north of Sydney on land abutting the Queensland border, “cannot legally return to Sydney” so as to obtain access to his file for the purpose of listening to Mr Bates’ reply. Upon the evidence, for nearly a decade it has been Mr Martin’s usual practice to commute each week from his farm to conduct his practice from his Sydney offices. Over the course of this hearing, he has also appeared by video link from offices in Armidale, NSW.
The ground upon which Mr Martin deposes that he cannot legally return to Sydney is, he says, by reason of restrictions presently in place in the state of New South Wales as a result of a Covid-19 lockdown affecting Greater Sydney. The acceptance of that proposition turns upon the proper construction of the applicable instrument which places temporary restrictions and other requirements on movement and gathering in the state of New South Wales being the Public Health (Covid-19 Temporary Movement and Gathering Restrictions) Order 2021 (Order). For the reasons below, I have concluded that Mr Martin is not precluded from returning to his offices in Sydney. Nor is he prevented from securing the delivery of his file to his farm. Further, Ms Bechara has not sought to identify any sustainable proposition that she may be prevented from addressing if her application is refused. Finally, I do not consider any serious injustice will be suffered by the refusal of her application if Mr Martin listens to a reply without his file. Several discretionary considerations also militate against the grant of relief.
Upon those considerations the broad relief sought by Ms Bechara will be refused. Instead, a further opportunity will be afforded to Mr Martin to retrieve his file in order that he may have access to it while listening to Mr Bates’ reply submission. Alternatively, since it is not reasonably practicable for him to work at his farm, he may decide to attend his Sydney offices and participate in the conclusion of this hearing by audio and video link.
While, ordinarily, the reasons for refusing an adjournment might be shortly stated, the history of the proceeding to date provides somewhat important context to the circumstances in which the application is refused. Having regard to the secondary purpose of these reasons, it is as well to deal with the background and procedural history of the matter to date in order that the delivery of judgment will not be further delayed once the hearing has been resumed.
Background
Since the Official Receiver issued a bankruptcy notice on 11 December 2015, this proceeding has had a troubled history. It is detailed in earlier judgments: Bechara v Bates [2021] FCAFC 34; Bechara v Bates (No 2) [2020] FCA 659. This court is concerned to determine an application by way of de novo hearing of a creditor’s petition consequent upon an application for review of a decision by a registrar of this court made on 5 July 2016 for the sequestration of the respondent debtor’s estate pursuant to s 52 of the Bankruptcy Act 1966 (Cth) (Act).
The parties and supporting creditors (save for the trustee of two other bankrupt estates) are or were legal practitioners. The petitioning creditor, Mr Bates (now aged 68 years), and those others who support the petition, claim that Ms Bechara, who conducted practice on her own account as a solicitor in Sydney, is indebted to them for substantial sums.
Since 2014, Mr Bates and Ms Bechara have been parties to a large number of proceedings. Mr Bates instituted a proceeding in a Local Court in New South Wales seeking to recover fees for accounts rendered to Ms Bechara for professional services provided by him as a barrister upon his retainer by Ms Bechara. The civil proceedings were contested extensively. Ultimately, Mr Bates obtained a final judgment for his fees, together with interest and costs. Ms Bechara unsuccessfully appealed from that judgment to the Supreme Court of New South Wales, and then applied, again unsuccessfully, for an extension of time in which to appeal to the Court of Appeal. Once Mr Bates had issued a bankruptcy notice, Ms Bechara failed in an application to set aside the notice or to obtain an extension of time and did not appeal the result.
On 7 April 2016, Mr Bates presented a creditor’s petition. On 5 July 2016, a sequestration order was made against the debtor’s estate. Ms Bechara filed an application pursuant to s 104 of the Federal Circuit Court Act 1999 (FCC Act) seeking a review of the registrar’s decision. This application was adjourned on at least two occasions, including on the basis that the debtor submitted she intended to pay out her creditors. On 8 December 2016, the application for review was dismissed in her absence. A number of proceedings followed in this, the Federal Court and the High Court of Australia. On 16 March 2021, the Full Court identified error constituted by a failure properly to conduct a de novo review, found that the creditor’s petition was not stale and ordered that it be remitted to this Court for determination “for hearing according to law as a de novo hearing of the creditor’s petition filed on 7 April 2016, to be heard as soon as reasonably possible”: Bechara v Bates [2021] FCAFC 34.
The hearing de novo of the petition has not been without difficulty. In the determination of a creditor’s petition, a Bankruptcy Court is not concerned simply to decide contested issues inter partes. Public interests and interests of other creditors are in issue. The court is to be satisfied of the matters dictated by ss 52(1)-(2) of the Act. Upon satisfaction of those matters, the powers to grant a sequestration order or to dismiss or adjourn the petition are and remain discretionary.
The conduct of a proceeding under the Act, including a creditor’s petition and any application, relevantly, for the review of exercise of judicial power by a registrar in making a sequestration order are regulated by the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) (Bankruptcy Rules) and the Federal Circuit Court Rules 2001 (FCC Rules). Ms Bechara’s entitlement to a review was not that large but was qualified by those rules. Ms Bechara’s failure to comply with such rules in seeking a review of the sequestration order has already been addressed by the Full Court which recognised that despite such non-compliance on any view her application should have been understood as an application for review pursuant to s 104(2).
Issues that were not raised before or addressed by the Full Court concern the obligation of a debtor who intends to appear at the hearing of a petition, and in particular, to oppose it, to file and serve a notice of appearance and notice stating his or her grounds of opposition (each in a prescribed Form), together with an affidavit in support of each of those grounds: Bankruptcy Rules, rr 2.06 and 2.06. Ms Bechara has never filed or served any of those documents.
Ms Bechara has neither filed evidence nor put solvency in issue.
Having achieved the remitter of the application, despite intimations that she would do so and the opportunities which were extended to her, ultimately Ms Bechara made a forensic choice to file no evidence putting solvency in issue at this review. This decision may be viewed from the perspective that, when the Full Court was concerned to decide whether, as a matter of discretion, to quash earlier orders, account was taken of an exchange with Mr Martin that his client (whose solvency had not been the subject of evidence), preferred to keep her “powder dry” and that, to do otherwise in the face of a demonstrable error to properly conduct a de novo hearing of the creditor’s petition, would, in effect, serve only to give her “an easy run in a special leave application”: [2021] FCAFC 34, [96], [157], [166]. For the avoidance of doubt, Ms Bechara was not to be criticised for not filing such evidence. Criticism, if it mattered, arose from her earlier failure to file an affidavit in support of her intended grounds of review.
Before and over the first three days of the de novo hearing, Mr Martin revealed the three grounds on which Ms Bechara relied in opposing the petition. First, the only ground of opposition as stated in the written submissions filed before the hearing was that no act of bankruptcy had been committed because service of the bankruptcy notice had not been proved. This issue had been disposed of by the Full Court, before whom Mr Martin had appeared. Although the Full Court’s reasons dismissed the complaint of service, this was not revealed by Ms Bechara’s submissions. The second ground of opposition was that jurisdictional facts, proof of which are required by s 43 of the Act, were not made out. The third and ‘principal’ ground was a want of compliance with rr 4.04, 4.05 and 4.06 of the Bankruptcy Rules.
Despite an order for service of submissions, the second and third intended grounds were not disclosed by Ms Bechara. Until Mr Bates was cross-examined, Ms Bechara had never articulated her intention to oppose the petition on the ground that jurisdictional facts were not made out. Mr Martin first revealed his ‘principal’ ground for opposing the petition in closing address, being a want of compliance with rr 4.04, 4.05 and 4.06 of the Bankruptcy Rules. In that closing address it was submitted such errors could not now be remedied.
Mr Bates was taken by surprise in relation to each ground of opposition. To address the issue of service he sought and obtained leave to file a further affidavit. To address the question of jurisdictional facts, he sought and obtained leave to file further affidavits. The closing address concluded near 5:00 p.m. on Friday, 11 June 2021 and Mr Bates said he was not able to provide a reply at that time and sought an opportunity to “reflect” on the matters raised by Mr Martin before delivering his reply.
This proceeding, both before and following remittal, is redolent of Hydra. Consistently with the manner in which Ms Bechara conducted her opposition to the petition, until the third day of hearing, she did not disclose that she had also issued a proceeding in the High Court before the commencement of the de novo hearing (seeking to stay this proceeding, to vacate this de novo hearing and to enjoin Mr Bates from proceeding with his creditor’s petition). Other relief was also sought as against the Federal Court of Australia.
Had the Bankruptcy Rules been observed, Mr Bates and this court would have been properly informed before the hearing, including a de novo hearing, of the grounds upon which it was intended to oppose the making of a sequestration order. Had those rules been observed, an affidavit would have been made by or on Ms Bechara’s behalf in support of each such ground. These failures were raised with Mr Martin. For the purposes of this judgment it is sufficient to record that he submitted this court would commit serious error by approaching the application for de novo review on the basis that Ms Bechara was obliged to state her grounds of opposition to the petition for the purposes of the application. While this is not the occasion to record my reasons for rejecting that submission, I regarded it as conflating the operation of s 104(2) and the entitlement it confers to seek review of the exercise of power by registrar, with the requirements of a debtor under the Bankruptcy Rules who intends to oppose a petition to file and serve a notice of appearance, a notice stating each of the grounds to be relied upon and an affidavit supporting each of those grounds. I pass over the failure of Mr Bates to have raised these matters at any stage since 2016.
(1) Procedural history of the hearing de novo
The application for review for the review of the registrar’s decision was framed as seeking an order pursuant to s 104(3) of the FCC Act together with an order that the creditor’s petition be dismissed. The Full Court has dealt with the bankrupt’s use of the incorrect form in her application for a rehearing. From the text of the Interim orders sought, it was explicit that relief was sought pursuant to s 104 of the FCC Act and that the challenge to the petition was grounded upon s 52(2)(b) of the Act.
In a view that would be echoed by the Full Court of the Federal Court, Allsop CJ has described the matter as having had a long, sad and unfortunate history: [2020] FCA 659, [1], [23]. Although the court encouraged the parties to confer and provide a consolidated folder of materials to be relied upon for the purposes of a de novo review, they did not do so. For the reasons below, including that an order for remittal of the application had been sought from the Full Court upon the basis of materials before, and the matters submitted to it, an initiative taken by the Full Court was adopted in also marking as an exhibit the material that was before and organised by that court for the purposes of the debtor’s appeal and application pursuant to s 39B of the Judiciary Act 1903. The parties were informed of that view and invited to make submissions against the adoption of that course. It was supported by Mr Bates. In a submission which reflected those he had made to the Full Court, Mr Martin said that he supported the adoption of any course that would see the hearing concluded without delay: Bechara v Bates [2021] FCAFC 34, [15], [176]. Given the public and private nature of bankruptcy proceedings, I concluded that it would be in the interests of justice to proceed by resort to the materials before the Full Court. Indeed, as the hearing progressed, it seemed inimical to those interests for the court to be denied access to the most reliable and complete record, particularly having regard to the haphazard approach that had been taken by the parties.
Since the remittal of the proceeding, Mr Bates has appeared on his own behalf on that, and at each subsequent, hearing. So too, Ms Bechara has been legally represented at each hearing. While Mr Martin submitted that as an authorised practitioner in New South Wales, he was entitled to appear as advocate for Ms Bechara upon instructions from another firm, no such firm has filed an appearance on behalf of the debtor. The less than satisfactory nature of this arrangement has already been the subject of comment and in circumstances where the matter has been attended by delay and confusion: Bechara v Bates [2021] FCAFC 34, [12]-[14]. Arising from those matters, it appears the Federal Court also took the initiative of offering that an amicus curiae be appointed for the application before it; however, this had been opposed.
Over a period of three months, attempts were made to conclude the hearing de novo. The court first listed the matter for hearing on 23 March 2021. It was impracticable to conclude the de novo hearing within 14 days of the remitter: cf FCC Rules, r 20.03(2). Despite attempts to conduct that review “as soon as reasonably possible”, the matter was unable to proceed on that date by reason of Mr Bates’ other commitments. The matter was relisted for hearing on 28 April 2021 and directions were given for the filing of material. At some point, the parties were reminded that the proceeding was not being run for the convenience of counsel. A notation to the order made on 23 March 2021 recorded that Ms Bechara’s lawyers foreshadowed her evidence may address the issue of her solvency.
A further notation to the 23 March order recorded that Ms Bechara had given instructions to appeal from the Full Court’s orders made on 16 March 2021. Upon later enquiry as to the status of any appeal from the Full Court’s decision as foreshadowed at the first directions hearing, Mr Martin stated that he did not have, and had not accepted, instructions to seek leave to appeal the decision of the Full Court given on 16 March 2021. This position was reiterated in the course of the hearing on 14 May 2021. The court’s enquiry was underpinned by a concern as to the utility of proceeding with the hearing, particularly in circumstances where Mr Martin had urged the Full Court to adopt the approach of the minority (Emmett J) in Totev v Sfar (2008) 167 FCR 193, [48] with a view to persuading it that the creditor’s petition case was now stale. That submission was rejected: [2021] FCAFC 34, [147], [153]-[156].
By an affidavit made on 22 April 2021, Mr Bates explained why he had failed to comply with orders for the filing of submissions which relevantly arose from his commitment to provide care to his partner who, in March 2021, had been hospitalised following delivery by ambulance on more than one occasion to the intensive care unit of a hospital.
On 28 April 2021, I granted Ms Bechara’s application for the adjournment of the hearing until 14 May 2021. The parties indicated, without elucidation, that certain deponents would be required for cross-examination. Further directions were given regulating the filing of submissions and any affidavits, including, upon Mr Bates’ application, by supporting creditors. The court reiterated its expectation that the parties’ submissions would squarely identify the issues for determination. Mr Martin submitted that “the petitioning creditor will be expected to comply with each of the requirements of the Bankruptcy Act and Rules as may be necessary to support the application for a sequestration order.” While Mr Bates was thereby reminded of the onus which he bore on the de novo hearing of his petition, in truth the generality of this statement only masked the stance which Ms Bechara was to adopt.
Accepting that Mr Bates bore the onus on matters under s 43 and had to comply with the rules, it was not until cross-examination, when Mr Bates was tested upon his recollection of events occurring as long ago as 2012, that it emerged Ms Bechara’s first ground of opposition to the petition rested upon the sufficiency of proof of jurisdictional facts: Act, par 43(1)(b).
As with each of the directions hearings, in light of the restrictions posed by the current Covid-19 pandemic, and Victorian and NSW lockdowns, the de novo hearing of the creditor’s petition was conducted by audio and video link. That the hearing was conducted in ‘open court’ in this manner to suit the parties’ convenience and may be understood in the context that, although the proceeding had been commenced in 2016 in the Sydney registry of the court, upon its remitter, the proceeding was allocated to this docket in Melbourne with Mr Bates appearing from the board room of his instructing solicitor in Sydney, while Mr Martin variously appeared from Armidale, NSW (150kms from his farm) and his offices in Sydney.
At the hearing on 14 May 2021, a number of objections were raised to Mr Bates’ evidence. After he had been cross-examined, the hearing was adjourned to 8 June 2021 to enable the parties to make final submissions. In the interim, further affidavits were filed by Mr Bates and a supporting creditor, Mr Gray, each being in proof of jurisdictional facts.
On 7 June 2021, an affidavit affirmed by Mr Bates’ solicitor deposed (as she had done several times earlier), to having conducted an updated search of the National Personal Insolvency Index (NPII), the search result for which showed that: Ms Bechara remained an undischarged bankrupt and that there were no details of any debt agreement respecting the debt upon which Mr Bates relied. The deponent further deposed to her instructions that the full amount of the subject of debt ($127,936.91) remained unpaid and outstanding. The deponent exhibited a copy of her most recent NPII search together with an email from the Australian Financial Security Authority attaching the results of that NPII search.
On 8 June 2021, before the parties were to make submissions, I heard an oral application by Mr Bates who sought leave to adduce further evidence: FCC Rules, r 20.03(c). Having granted that application, Mr Martin was invited, and indicated his desire, to cross-examine Mr Bates. He was not ready to do so. Following discussion, the hearing was further adjourned to 11 June 2021. On 8 June 2021, I drew Mr Martin’s attention to, and asked him to reflect on, the Full Court’s conclusion that by 8 December 2016, Ms Bechara plainly knew of the petition and no issue of service could sensibly arise at the de novo hearing: [2021] FCAFC 34, [52]. Nothing further was said as to this issue thereafter. Given the way in which the question of jurisdiction had emerged, I made a direction that each party serve a list of the authorities upon which they intended to rely in closing submissions. While each of them did so, only Mr Bates’ list contained any reference to the applicable provisions of the Act and rules. Expressed in other terms, Ms Bechara’s list contained no reference to rr 4.04, 4.05 or 4.06.
On 11 June 2021, the de novo hearing of the creditor’s petition took a series of further twists. A number of supporting creditors said that they appeared at the hearing, adding that they had also been asked to make themselves available for cross-examination. Upon enquiry, two of the supporting creditors confirmed that they did not seek leave to appear in the proceeding, while the third, who was represented by a solicitor, sought leave to appear for the limited purpose of representing his client during his cross-examination. Next, I heard submissions upon and made rulings in relation to the objections communicated by Mr Martin. Upon the completion of that process, Mr Martin then stated he did not seek to cross-examine the supporting creditors and so, the question of a limited grant of leave fell away.
(2) “Housekeeping” – annulment and the High Court proceeding
When inquiries were made as to the likely duration of Mr Bates further cross-examination, three matters, somewhat curiously described as “housekeeping”, were raised by Mr Martin.
First, Mr Martin foreshadowed that he would make an application upon the conclusion of the hearing for the annulment of the bankruptcy pursuant to s 153A of the Act. Secondly, Mr Martin disclosed that he had been instructed of the institution of a proceeding by Ms Bechara in the High Court of Australia. He reiterated that he had neither received, nor accepted, instructions in relation to that proceeding. Thirdly, Mr Martin said he did not have a copy of the High Court process, but stated that the named defendants to the proceeding were Mr Bates, the Federal Court of Australia and this court, two of whom had lately filed a notice of appearance (facts which had not otherwise been communicated to this court at any point). Fourthly, an adjournment was sought by Mr Martin in order that he could consider the High Court process (notwithstanding that it had been instituted by his client). Fifthly, Mr Martin stated that the solicitors who were instructing him in the present proceeding were not the solicitors on the record in the High Court proceeding. Mr Martin agreed that he had not notified Mr Bates of the application for an adjournment and that it was not supported by any evidence.
Responding to these matters, Mr Bates stated that the High Court process had been issued on 11 May 2021; that is, some days before the first date of the hearing de novo of the creditor’s petition, and that he had been served, in chambers, with that process on 26 May 2021, being after the first day of the de novo hearing. Notwithstanding that the matter was before the court on 8 June 2021, Mr Bates had not mentioned the fact of the High Court proceeding before 11 June 2021. In the interests of expedition, Mr Bates was asked to supply a copy of the High Court process both to the court and to Mr Martin. The matter was stood down in order that a copy of that application could be obtained and considered.
(3) High Court process
I accepted that Mr Martin had not known earlier than whenever he had been instructed of the institution by his client of the High Court proceeding. I also accepted that his instructing solicitors, HWL Ebsworth, could not have known of it, for they too would have been under a duty to furnish instructions to him about it. The circumstance that the institution of a proceeding in the High Court had not been disclosed by Ms Bechara, whether to Mr Martin, those instructing him, Mr Bates, or this court are matters I chose not to explore further.
Having scanned the process, it emerged that the proceeding had been filed by Ms Bechara, in person, in the Sydney registry of the High Court. Although filed on 11 May 2021, it was dated 4 May 2021 and signed by Ms Bechara. I raised with the parties the identity of each of the parties to that process and addressed the nature of the applications being pursued in that court. According to Part 1 of the application, the orders sought included: (i) certiorari quashing the Full Court’s decision pursuant to which Ms Bechara had secured the relief sought by her including the remittal of her application pursuant to s 104 for a hearing de novo of the creditor’s petition (the substantive basis for the challenge being the Full Court’s finding that the petition was not stale); (ii) an interim order from the High Court staying the de novo hearing; (iii) relief in the nature of mandamus directing that this court vacate the de novo hearing; (iv) an injunction prohibiting Mr Bates from proceeding with his creditor’s petition; (v) an order that the petition was stale; (vi) an order annulling Ms Bechara’s bankruptcy; (vii) ancillary relief.
Although I ascertained from the copy of the High Court process supplied by Mr Bates that it also included what appeared to be an extensive affidavit made by Ms Bechara, I did not take occasion to read it. I refused the adjournment application for the reasons below.
Mr Martin was afforded an opportunity to cross-examine Mr Bates upon his further affidavit. After that cross-examination, and before closing submissions, I enquired of the parties upon the appropriateness of Ms Bechara’s process in the High Court being marked as an exhibit. The adoption of that course was opposed by Mr Martin who submitted that as his application for an adjournment had been refused, and as he did not yet know the reasons why that was so, there was now no reason for this court to be concerned with the High Court process. The objection to the tender of the High Court process (including affidavits), was accepted.
An adjournment application is an application that is permitted in proceedings under the Act. It is an application of a kind that would ordinarily be required to be made by way of interim application: Bankruptcy Rules, r 2.01(1). An application for an adjournment is a matter of practice and procedure. The proper procedures governing the conduct of proceedings under the Act engage considerations of case management and here engaged the Full Court’s exhortation, by its Order, for this hearing be conducted “as soon as reasonably possible.” The reasons for doing so were explained by the Full Court in emphatic terms at [176] (terms which were relied upon by Mr Martin, repeatedly, for other purposes), as follows:
Applications for review of exercises of delegated power by registrars should be reheard by judges de novo as soon as reasonably practicable. This is especially so in bankruptcy, and even more so if it is a review of a sequestration order that changes the status of a debtor, enlivens powers of a trustee and brings about changes to property. Delay is not only prejudicial to the debtor or bankrupt, but also to the creditor and potentially to members of the public
Ms Bechara’s entitlement to seek review by the court of a registrar’s decision to make a sequestration order remained subject to all proper procedural controls: [2021] FCAFC 34, [74].
At no stage since the remitter of the proceeding had Ms Bechara opposed the hearing de novo being set down for hearing. Ms Bechara’s application for the adjournment was not made on notice, was not made by way of interim application and was not supported by any evidence, including as to why, having not opposed the hearing de novo of the creditor’ petition being set down for hearing, she had not disclosed at any stage in the period 4 May to 11 June 2021, that she had made her application seeking relief from the High Court as described above. Further, Ms Bechara had taken an active part in the conduct of the de novo hearing which she sought.
As applicant for the adjournment, Ms Bechara, must be taken to have made a forensic decision not to disclose to her lawyers, Mr Bates or to this court (until the third day of hearing), that she had instituted a proceeding in the High Court before the commencement of the de novo hearing of the creditor’s petition. On the face of that process, she had made a decision by 4 May 2021 (before the hearing of the petition began), to seek interim relief from the High Court staying the de novo hearing of the petition. Similarly, she had made a conscious decision to seek (from the High Court), as against the Federal Court, relief in the nature of mandamus directing this court to vacate the de novo hearing of the petition. Likewise, she had sought, relief against Mr Bates by way of injunction to prohibit him from proceeding with his petition.
I concluded that in the combined circumstances of: having brought a proceeding in apparently proper form and supported by an extensive affidavit before the High Court for relief of a kind which, in practical terms, would equate to an adjournment of the present hearing; having not filed any interim application in this court for such relief; having not filed any affidavit in this court in support of such an application; having not given any notice of her intention to apply for an adjournment; having not disclosed that she had instituted the proceeding in the High Court until more than a month after the date she had signed the application, and; the exhortation by the Full Court to conduct this hearing as soon as reasonably possible; the interests of justice would not be served by adjourning the hearing (which had proceeded to the point of closing submissions), in order that Mr Martin could consider the content of the High Court process that his client had instituted before the commencement of the de novo hearing, but not told him about. If it was Ms Bechara’s desire to seek the stay (being the relief sought in her High Court process), I concluded she could communicate that desire to the High Court.
Although the legitimate bounds of case management were explored in detail by the Full Court [2021] FCAFC 34, [88]-[94], and without pausing to examine the bona fides of a decision not to disclose having instituted that proceeding until the third day of the de novo hearing of the petition, it is readily apparent that there are already on foot in the High Court applications for interim relief of the kind being sought, without notice, without any application and without any evidence in this court. For those reasons, Mr Martin’s application for an adjournment arising from the disclosure by Ms Bechara of her High Court proceeding was refused.
(4) Remittal of the interim application for de novo hearing of petition
By her interim application dated 25 July 2016, Ms Bechara engaged jurisdiction for the court to review the exercise of power by the registrar to make a sequestration order: FCC Act, s 104. Having done so, the only other indication of the view taken by Ms Bechara was that Mr Bates’ petition be dismissed “pursuant to s 52(2)(b) of the Bankruptcy Act 1966.” That is, her interim application contained no reference to the further entitlement to satisfy the court that the petition should be dismissed by reason that she was solvent: Act, par 52(2)(a).
For over the past twelve months, Mr Bates, Ms Bechara and those representing her have been on notice that Ms Bechara’s solvency has not been the subject of evidence. The issue was of some concern to the Full Court in the consideration of discretionary factors which may militate in favour of or against the grant of relief under s 39B of the Judiciary Act: [2021] FCAFC 34, [166]. As the Chief Justice raised in a case management hearing on 22 May 2020:
. . . All I’m doing is raising for your and Ms Bechara’s consideration that it may be that if she is not solvent, there may be very little point in all this; however, I will not say any more. Do you take my point? I mean, if it goes back to the Circuit Court and she’s not solvent and she can’t show she’s solvent, what have we been doing in this whole exercise, assuming Mr Bates and those acting for him put together evidence sufficient to establish prima facie an order under section 52? If she is solvent, well, I understand the importance of it. I’m just raising it for your consideration and for Ms Bechara’s consideration, given the amount of time and effort that is going to go into hearing the appeal and the application in August and, if you’re successful, sending it back to the Circuit Court.
The amount of time and effort that has been expended on the case, and the deployment of public resources it has involved, will be apparent. The volume of business in this court is a matter of notoriety.
As the Chief Justice’s exchange with Mr Martin in May 2020 confirmed, the question of solvency fell for consideration, not at the date of that case management hearing, but when the creditor’s petition came on for de novo hearing. Further, in the course of argument before the Full Court, during an exchange with Colvin J, it was observed that Ms Bechara did not appear to have articulated ‘anywhere’, precisely the nature of her complaint; that is, her grounds of opposition to the making of a sequestration order, other than one “of the kind that related to other sufficient cause . . .” To this, Mr Martin responded, accepting that his client had never presented evidence to attack the sequestration order and maintained (as he did in this court), that for the purposes of engaging the entitlement under s 104 to review of a registrar’s decision, nothing further was required than the fact of the making of a sequestration order by a registrar and the filing of the application.
In closing submissions, Mr Martin stated that he had not been able to identify from the reasons of the Full Court, the power upon which the court had acted in remitting the s 104 application and making an order that the creditor’s petition be heard de novo. The Full Court concluded that the orders made by the registrar were vitiable and entailed error which was jurisdictional. Having further found the appeal was incompetent but that the petition was not stale, the Full Court then addressed the discretionary considerations in detail concluding Ms Bechara was entitled to relief under s 39B of the Judiciary Act: [2021] FCAFC 34, [95], [140]-[143], [157]-[173]. One of the discretionary considerations that may have, but had not, been raised against the grant of relief was that Ms Bechara was not solvent. Although the Full Court accepted Mr Bates did not carry a burden as to solvency, the issue had been raised and, without any information as to solvency, the court did not include solvency as a factor to be included in the exercise of discretion whether to grant or refuse relief. In that context, the primary factors which weighed in favour of relief were the absence of any hearing de novo having occurred, coupled with the centrality of solvency in the exercise of the bankruptcy jurisdiction, particularly in light of the seriousness to a debtor of the change of status to that of a bankrupt.
Having so concluded, and made orders to quash and set aside orders dismissing the interim application seeking review pursuant to s 104(2), the Full Court remitted Ms Bechara’s interim application for hearing according to law “as a de novo hearing of the creditors petition filed on 7 April 2016.” Jurisdiction to do so was conferred by s 39B of the Judiciary Act.
(5) No act of bankruptcy? – service of bankruptcy notice
One might have expected the issues arising for determination to have been properly defined.
On 12 May 2021, Mr Martin filed Ms Bechara’s outline of submissions. In those submissions, the only substantive ground of opposition to the petition was that, absent proof of service, no act of bankruptcy had been established. Mr Martin submitted that “In the absence of proper effective service, the Respondent cannot commit an act of Bankruptcy” and further, that the court should “not make a Sequestration Order in this case as there is insufficient proof that the Respondent in fact committed an act of Bankruptcy within 6 months of the presentation of the Petition nor that the Bankruptcy notice was properly served”: at [40]-[41].
By an application made on 30 December 2015 supported by her affidavit sworn on that date, Ms Bechara challenged the validity of the bankruptcy notice, doing so on the ground of service. On 5 April 2016, a registrar dismissed the application. The dismissal of that application was the catalyst for Ms Bechara’s commission of an act of bankruptcy and upon which Mr Bates’ petition was based. Putting aside the many applications made by Ms Bechara since 2014, no application was made, either for review pursuant to s 104(2) or by way of appeal from the dismissal of her application challenging the validity of the bankruptcy notice. The order made on 5 April 2016 finally determined her challenge to set aside that notice.
Mr Martin represented Ms Bechara in her proceedings before the Full Court. By its reasons for judgment, the Full Court concluded that Ms Bechara “plainly knew of the petition and no issue of service could sensibly arise at the de novo rehearing in December 2016”: [2021] FCAFC 34, [52]. The issue of service had been determined by that judgment.
Ms Bechara’s outline of submissions did not allude to her 2015 application seeking to set aside the bankruptcy notice, her affidavit sworn on 30 December 2015, the Order made on 5 April 2016 dismissing her application or the Full Court’s rejection of a challenge to service.
In light of Ms Bechara’s submission which opposed the petition solely upon Mr Bates’ inability to prove an act of bankruptcy (absent proof of service), Mr Bates sought leave to rely upon an affidavit filed late on 13 May 2021. In conducting the review of exercise of power by a registrar, the court may receive as evidence any affidavit or exhibit tendered before the registrar and may, with leave, receive further evidence: r 20.03(b)-(c). Shortly before the de novo hearing of his petition was to commence, Mr Bates filed a seven paragraph affidavit to which he exhibited a large, somewhat disorganised, volume of material addressing the issue of service that had just been raised by Ms Bechara. Leave to do so was granted.
By pars [2] and [4] of his affidavit filed 13 May 2021, Mr Bates referred to Ms Bechara’s submission contesting the issue of service and deposed: “I have compiled and paginated a set of documents from file SYG3538/2015, marked Annexure A to this affidavit. . . The documents that establish the Bankruptcy Notice was served and that the debtor admitted such service numbered as pages 1-55, especially at page 21 and paragraph [2]; and page 208.” Upon enquiry as to the question of leave, Mr Martin stated that Mr Bates’ affidavit had been received in his inbox late on 13 May 2021 and he had not yet had an opportunity “to read all of it.” When asked as to what parts of the affidavit he had been able to read, Mr Martin reiterated that he had not been able to consider it. The court brought to his attention Mr Bates’ statements at [2] and [4] above. Mr Martin agreed that the deponent had accurately summarised his submission “that the petitioning creditor has not established service of the Bankruptcy Notice.” At page 21 of the exhibit to Mr Bates’ affidavit was a copy of Ms Bechara’s affidavit made on 30 December 2015 which addressed both the Bankruptcy Notice and her appeal from judgments upon which that notice had been issued. Offered an opportunity to do so, Mr Martin read to the court par 2 of Ms Bechara’s affidavit which stated: “I refer to the Bankruptcy Notice served on me by the Respondent, a copy of which is attached to the application to set aside the Bankruptcy Notice which is filed with this affidavit” (emphasis added).
When asked as to what further time he sought to consider Mr Bates’ affidavit of sworn 13 May 2021, Mr Martin stated that a period of 60 minutes would be sufficient for that purpose. Mr Bates did not oppose that adjournment and it was granted. In the event, no objection would be raised to this affidavit or the many documents exhibited to it.
Following the adjournment, Mr Martin submitted he was bound to accept that Ms Bechara’s evidence as to service “out of her own mouth” invalidated the submissions which he had made in writing and accordingly abandoned those submissions which challenged the efficacy of service of the bankruptcy notice. In particular, Mr Martin stated “I accept that the evidence of my client coming, as it were, from her own mouth in relation to her conceding service of the bankruptcy notice on her invalidated the submissions I made on that point in my submissions.” Asked to clarify precisely what submissions were withdrawn, Mr Martin confirmed that he no longer relied upon the challenge to service of the bankruptcy notice or the attack upon service of the creditor’s petition. Upon that basis, the submissions as to the validity of the creditor’s petition, and in turn the submission that relied upon proof of an act of bankruptcy within six months of the presentation of that petition, were withdrawn. Having regard to the number of steps taken by Ms Bechara in this proceeding and other courts, the concession was properly made: Culleton v Balwyn Nominees Pty Ltd (2017) 343 ALR 632, [103].
It was surprising that the issue of service had been relied upon at the de novo hearing, particularly in circumstances where Mr Martin had appeared before the Full Court and where, by its reasons for judgment, that court affirmed Ms Bechara “plainly knew of the petition and no issue of service could sensibly arise at the de novo rehearing in December 2016”: [2021] FCAFC 34, [52]. On the second day of this hearing, that paragraph of the Full Court’s judgment was drawn to the parties’ attention. Mr Martin was asked to reflect upon the omission of any reference to it in his submissions. The present case might then be seen as a paradigm example of the duty of an advocate to draw to a court’s attention a binding authority which stands directly against a submission being put. Given the content of his outline of submissions and where he had appeared in the Full Court, the circumstance that this aspect of the Full Court’s reasoning was not drawn to this court’s attention was disappointing.
(6) Non-service of r 4.04 and 4.06 affidavits
When the hearing resumed, Mr Martin next drew attention to apparent difficulties arising from the mis-transmission, or perhaps more accurately, a failure to serve an affidavit addressing the matters required by r 4.06 of the Bankruptcy Rules. The hearing was again adjourned to allow him an opportunity to consider that material.
When the hearing resumed, Mr Martin stated that having read the affidavits he was at no disadvantage. He then sought, and obtained, confirmation from Mr Bates that this, together with the affidavits earlier identified by him, represented the totality of the evidence upon which the petitioning creditor relied. Upon that basis, Mr Martin responded that he “had no more to say on those topics at this time.” It was not until closing address that Mr Martin submitted Mr Bates had failed to comply with rr 4.04, 4.05 and 4.06, that the failure to do so was incapable of remedy and for that reason, there was no utility in the exercise of the residual discretion to adjourn the petition to allow the creditor to file evidence to rectify those omissions.
(7) Rulings on objections
Next, Mr Martin raised objection to parts of Mr Bates’ evidence. Ms Bechara had not foreshadowed any such objections, whether by her outline of submissions or otherwise. Notice of the objections in advance of the hearing might reasonably have been expected, particularly in circumstances where the rehearing was to be conducted without undue delay.
Evidence that is relevant in this proceeding is evidence that, if accepted, could rationally accept (directly or indirectly) the assessment of the probability of the existence of fact in issue. Litigants are entitled to know where they stand in relation to the evidence and to do so before a hearing is concluded: Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588, [19] (The Court). For those reasons, the court adjourned over the lunch adjournment to consider the objections, impugned documents and evidence. When the hearing resumed, the parties were informed of my rulings upon the objections and advised that reasons for those rulings would be provided.
The documents to which objection was taken fell into the following four categories: (1) appearances by supporting creditors filed in 2016 or 2021; (2) affidavits by or on behalf of three supporting creditors made in 2016 and 2021; (3) three affidavits made by Mr Bates and affirmed on 4 July 2016, 6 April and 22 April 2021; (4) earlier r 4.06 affidavits by the solicitor for the petitioning creditor relating to the hearing listed on 28 April 2021.
In substance, objection was taken that these materials had been filed in anticipation of the need to meet and counter any case that was sought to be made by Ms Bechara addressing the issue of solvency. The objection was not taken on any wider basis.
Mr Martin, who accepted his client had been afforded opportunities at both of the directions hearings to file evidence on the question of solvency, submitted that as Ms Bechara had not filed any such evidence and, there being no evidence of solvency, the service of the documents and affidavits upon which Mr Bates placed reliance were ‘otiose’. It was further submitted that Ms Bechara was not obliged to file any evidence at all. So much may be accepted. Reliance was placed upon the Full Court’s decision in Zdrilic v Hickie (2016) 246 FCR 532, [89]. There the court affirmed with reference to the statutory entitlement of review, that a debtor was entitled to “demand that a claim for relief (a sequestration order) brought by the creditor be heard by a judge as if no sequestration order had been made” and that upon an application made pursuant to s 104 for review “of an application for a sequestration order based on a creditor’s petition is the creditor; the only onus the debtor bears is the one (s)he assumes if (s)he seeks to resist the grant of an order based on proof of solvency or ‘any other sufficient cause’ under s 52 (2) of the Act].” Each of those principles was affirmed in Bechara v Bates [2021] FCAFC 34, [27(d)], [37].
Mr Martin submitted that where solvency was not in issue, supposed reliance upon evidence which sought to establish, or perhaps more precisely, to comprehensively establish, insolvency was irrelevant. Mr Martin’s reliance upon Zdrilic v Hickie at [89] must also be understood as encapsulating a submission that a prosecutor bears the onus of satisfying the court on a de novo review of the matters necessary to satisfy the court a sequestration order should be made. Contrastingly, Mr Bates “did not take on the burden of showing on a prima facie or other basis that Ms Bechara is not solvent”: Bechara v Bates [2021] FCAFC 34, [171].
Insofar as Ms Bechara objected to these documents and affidavits on the ground that they were irrelevant, I concluded that absent the filing of any evidence as to solvency by the debtor, such anticipatory evidence became irrelevant. A further objection was raised in relation to costs, it being said that if the application for review was dismissed and the making of the sequestration order confirmed, the petitioning creditor was, in effect, seeking to bolster the costs being sought in this proceeding. As I ruled at the hearing, it was preferable that issues of costs be quarantined pending the hearing and determination of the creditor’s petition: Act, ss 32, 51.
Mr Bates submitted that the fact Ms Bechara had elected not to take up the opportunity to adduce evidence of her solvency (and thereby expose herself to cross-examination), did not disentitle him from preparing for the final hearing of his petition. Accepting this to be so, particularly in circumstances where Ms Bechara had indicated at the first directions hearing that evidence of solvency may be adduced at the review, it did not meet an objection to relevance once the central question of solvency had, in effect, been conceded. Although I was not referred to it in the course of submissions on these objections, I note the Full Court accepted the entitlement of a petitioning creditor to adopt steps by way of interlocutory procedures and subpoenas to establish that a debtor is not solvent: [2021] FCAFC 34, [171]. Ultimately, the necessity for such evidence fell for consideration upon the issues at the hearing. By the time of hearing, Ms Bechara had made a forensic choice not to put her solvency in issue. Indeed, she had made a forensic decision to file no evidence at all. As confirmed by Mr Martin, the only documents upon which his client placed reliance was her application for review and the order of the registrar for the sequestration of Ms Bechara’s estate.
Sub-section 52(1) of the Act identifies matters of which the court must be satisfied before it may make a sequestration order against the debtor’s estate. Contrastingly, s 52(2) of the Act, which then confers an independent discretion to do so, is framed in terms which address three possibilities. First, it provides, in permissive terms, that if the court is not satisfied of the proof of the matters addressed by s 52(1) of the Act, it may dismiss the petition. Secondly and thirdly, s 52(2) postulates that a debtor may satisfy the court of either of the matters in pars (a)-(b), in which event, again, the court may dismiss the petition. The court is thereby authorised to dismiss Mr Bates’ petition where satisfied by Ms Bechara that she is able to pay her debts, or, satisfied by Ms Bechara that for other sufficient cause a sequestration order ought not be made. The only matters with which those second and third possibilities are concerned are that Ms Bechara has satisfied the court of her ability to pay her debts or that for other sufficient cause a sequestration order ought not to be made. Nothing in the text of s 52(2), whether viewed in isolation, or in the context of s 52(1), or the Act as a whole requires a conclusion that upon the hearing of a creditor’s petition, a petitioning creditor should be permitted to adduce evidence in rebuttal when none is required. Conversely, the text of s 52(1) expressly identifies those matters of which “the Court shall require proof”, from the creditor.
Having considered the material to which objection had been taken, I agreed that in light of Ms Bechara’s decision not to file evidence of solvency, Mr Bates’ anticipatory evidence was no longer relevant to the issues arising on this de novo hearing. As to costs, it may well be reasonable and efficient for a creditor to file anticipatory affidavits which address a debtor’s solvency, particularly, in circumstances where the court has been directed to determine a proceeding as soon as is reasonably possible, and especially where it has been foreshadowed that evidence of solvency may be adduced by the debtor.
The objections to the documents and affidavits in issue were framed solely by reference to the issue of solvency and to no other issue. That is because, in the way in which issues would emerge at the hearing, Ms Bechara had not given Mr Bates any notice that a substantive ground of her opposition to the petition was the sufficiency of proof of the jurisdictional facts required by s 43(1)(b) of the Act. Stated in other terms, had notice been given as required by the Bankruptcy Rules, the relevance of matter contained in the affidavits to which objection had been taken would have been, and would later be, viewed differently. Having regard to the duty of a Bankruptcy Court to satisfy itself of compliance with the Act and rules, together with the public interest at issue in such proceedings, the relevance of the evidence should have been informed by the intended grounds of opposition to the petition.
(8) Appearances – supporting creditors
The first series of documents to which objection was raised was the appearances by the supporting creditors. The prosecutor submitted that no objection had ever been taken to the standing of supporting creditors to appear on the hearing of his petition. Mr Bates persisted in a submission that the supporting creditors had standing to be heard.
Mr Martin submitted that it was incumbent upon Mr Bates to make out the matters stated in his petition and that if other creditors sought to appear, they stood in a second or later position of priority and remained at such position “until either the petitioning creditor succeeds with the sequestration order, is paid and withdraws as a petitioning creditor or withdraws his or her petition for some other reason.” Mr Martin submitted that supporting creditors had no standing in the proceeding as between the creditor and debtor, unless and until the petition had been concluded between them “one way or the other”.
A person who is not a party to a proceeding to which the Bankruptcy Rules applies, including a creditor’s petition, may be granted leave to be heard: r 2.03(1). Accepting that to be so, until the third day of the hearing, none of the supporting creditors had in fact appeared. When they did so appear, none of them sought leave to be heard.
I was at a loss to understand how the fact of a supporting creditor having filed an appearance could, in or of itself, be relevant where Ms Bechara had not put solvency in issue. I ruled that the appearances by supporting creditors filed in 2016 and 2021 were irrelevant.
(9) Affidavits of supporting creditors
The prosecutor sought to rely upon affidavits from three barristers (made originally in 2016, and reaffirmed in 2021), deposing to Ms Bechara’s indebtedness to them for substantial sums for which final judgments had been obtained. The matters deposed to by their more recent affidavits captured their earlier evidence and is addressed below.
Upon the objection grounded on solvency not being in issue, I ruled that these affidavits were irrelevant. While Mr Bates bore the onus of proof on the matters required by ss 43 and 52(1) of the Act, at no point before or when making these objections had opposition to the petition grounded upon the sufficiency of proof of jurisdictional facts been raised.
Had Ms Bechara given notice to Mr Bates that she intended to oppose the petition on the ground of sufficiency of proof of jurisdictional facts, the evidence of those creditors became relevant to whether she had been carrying on a business in Australia as at the date of the commission of an act of bankruptcy: Act, par 43(1)(b)(iii).
(10) Mr Bates’ affidavits
Objection was taken to three affidavits filed by Mr Bates in this proceeding.
I ruled that an affidavit affirmed by Mr Bates on 4 July 2016, was relevant. It addressed an issue of which the court must require proof, namely, that the debts upon which he relied were still owing: Act, par 52(1)(c).
I ruled that the affidavit affirmed by Mr Bates on 6 April 2021 was also relevant as addressing at [6] the requirements of par 52(1)(c) of the Act being a matter stated in the petition together with the question of service. It also addressed the procedural history of the petition which I considered was properly placed before the court.
I ruled that the affidavit affirmed by Mr Bates on 22 April 2021 was relevant as to the procedural history, both in light of the terms of the Full Court’s order and indirectly, upon matters relevant to the exercise of discretion under s 52.
(11) Rule 4.06 affidavits
I ruled that the two earlier r 4.06 affidavits by Mr Bates’ solicitor relating to earlier hearings in April 2021 were irrelevant. In light of the requirements of that rule, the matters to which they deposed had been overtaken by events and were irrelevant to the issues of which proof was required at the hearing of the creditor’s petition. This conclusion says nothing as to the reasonableness of having incurred those costs for the purposes of those hearings.
(12) Preservation of rights
My conclusion upon these objections also say nothing to the rights of supporting creditors to file an appearance, give evidence in proof of the debts which they claimed were owed to them by the same debtor or to seek leave to appear. Nor does it say anything to the reasonableness of preparing evidence which may be required pursuant to the Bankruptcy Rules where a creditor’s petition is founded on an act of bankruptcy of a kind which requires proof of a particular matter by affidavit. Whether a petitioning creditor should be allowed any costs of or incidental to the preparation of such evidence is a matter which I do not yet need to determine.
Despite having ruled upon the objections, Mr Bates sought to address further submissions respecting the supposed relevance of the appearances and affidavits of supporting creditors. In particular, he sought to rely upon John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1. Although the authority was referred to without any pinpoint reference, as I understood this submission, it was to the effect that it would be wrong to deny supporting creditors an opportunity to be heard. As noted above, until the third day of hearing, none of the supporting creditors had in fact appeared and so none of them had sought, or obtained, leave to be heard. Far from denying any of them any such opportunity, none of them had sought to exercise it. If Mr Bates was to be understood as having asserted or held some sort of general authority or proxy to appear on their behalf, this was never explained.
In light of the limited nature of the issues advanced by Ms Bechara’s written outline and with the object of seeking to avoid further delay in hearing any evidence that was to be adduced in cross-examination, I told Mr Bates that he was free to provide me with pinpoint references to any passage from the authority which he had located over lunch but that I had made my rulings and would not at that time revisit them, stating further:
HIS HONOUR: This debtor has not filed anything as to solvency and an attack upon you in cross-examination, if that is sought, it couldn’t be to demonstrate solvency. Well, even if it could, I wouldn’t be doing that. If it is sought to be said that there is otherwise some sufficient cause why I should dismiss, then it might arise at that time that you can then seek to rely upon that material. Because what is being put with respect, quite fairly, is there is no need for you to rebut something that you don’t have to rebut. So I am not going to foreclose you from trying to revive this material if you say it is appropriate, given the forensic choices that may be made in cross-examination. But, so far, I am satisfied it is not relevant.
MR BATES: Your Honour, I am perfectly satisfied with what your Honour just said because that - - -
HIS HONOUR: Please, can we please get on with this. My associate will administer the oath.
Mr Martin did not demur from the course proposed and as had been accepted by Mr Bates.
While, ordinarily, objections should be dealt with once and for all, the public and private nature of bankruptcy proceedings allow that the court may adjourn the hearing of a petition so as to permit either a creditor, any other person or a debtor who intends to oppose a petition on bona fide grounds, an opportunity to adduce evidence.
After ruling upon the objections, Mr Bates was cross-examined for the first time. It was at this point that the issue of jurisdiction first emerged.
Having regard to the time taken to deal with procedural issues and the evidence, it was necessary for the hearing to be adjourned to a second day for final submissions. In the course of discussion respecting arrangements for a further hearing date, Mr Martin enquired as to the future course of the hearing, stating “next time, I thought there might be a point where all we’re going to do is make submissions now that the evidence is closed. Well, that’s a – both the question and a statement.” I agreed that the hearing had reached the point that evidence had concluded. Mr Martin then made submissions upon the particular importance for fresh affidavits satisfying the requirements of r 4.06 at the adjourned hearing and this issue was raised with Mr Bates. In turn, Mr Bates raised three matters. First was that he wished to put a submission in relation to the appearances and affidavits of the supporting creditors. Secondly, it was said that he wished to reflect upon his evidence in light of the matters raised in cross examination. Thirdly, a submission was made in relation to accelerating the provision of transcript. As to those submissions, I reiterated the importance of parties being entitled to know where they stood in relation to objections to evidence and, for that reason, I had made a ruling, doing so in circumstances where the matter had had a long history, where each of the parties had been asked to identify each affidavit upon which they relied for the de novo hearing and that he, and Mr Martin, had each done so. I observed that Mr Bates could not be foreclosed from reflecting upon whether he wished to adduce further evidence but reminded him of the need to do so on proper notice. Mr Martin sought to confirm the court’s ‘ruling’ that the evidence had closed and whether that position had changed. No such ‘ruling’ was made or given. I drew attention to the entitlement in parties to seek to adduce evidence and that these matters could not be pre-determined, particularly, where “the net effect of [what] the cross-examination seems to have been driven to, is the question of jurisdiction, and I will be hoping to see some helpful submissions that allow the court to decide the matter without further delay.”
The hearing was adjourned for final submissions on 8 June 2021. Before that date, it became necessary for the court to intervene in a dispute over access to the transcript. The dispute was resolved by the court supplying Mr Martin a copy of the transcript on 5 June 2021.
(13) ‘Informal’ applications
On 18 May 2021, Mr Bates’ solicitors communicated with chambers and Ms Bechara’s advocate, advising of three ‘informal’ applications which their client sought to make. In short, Mr Bates: (1) sought permission to rely upon further affidavits; (2) contended for an entitlement “to present an evidential case in reply” in circumstances where cross-examination appeared “to be intended by the debtor to raise an issue of whether there is any other sufficient cause to prevent the issuing of a sequestration order, pursuant to s 52(2)(b) of the [Act].” It was said that the issue was one on which Ms Bechara bore the onus and had been raised for the first time in cross-examination; and, (3) reiterated the request that supporting creditors be permitted to appear in the proceeding where those other creditors “may have knowledge or evidence that bears on the jurisdictional issue.” In the view taken by Mr Bates, the court had both “disallowed the appearances and affidavits of the supporting creditors.” This view was mistaken. At no stage had any of the supporting creditors sought leave to appear at the hearing. The only issue upon which the court had ruled, relevantly, was the objection to the affidavits of supporting creditors being tendered in evidence by Mr Bates.
Finally, Mr Bates provided pinpoint references to those passages in John Alexander’s Clubs upon which he placed reliance. Mr Bates did not ‘cavil’ with the ruling that those appearances and affidavits were not relevant to the issue of solvency but foreshadowed a further submission that, jurisdiction having been raised, the evidence of those persons “arising out of their dealings with the debtor” ‘could’ be relevant. The principles to which the court was referred in John Alexander’s Clubs addressed an issue of joinder and in my view had no bearing upon the present case, including whether supporting creditors might choose, either to seek leave to appear upon the hearing of the petition (which they had not done), or (as distinct from being joined to the proceeding), to being substituted as petitioning creditor.
(14) Further evidence – Mr Gray & Mr Bates
Upon receipt of the foreshadowed ‘informal’ applications, a direction was given that Mr Bates file any affidavits on which he sought leave to rely in advance of the second day of the hearing, listed for 8 June 2021. The direction was given with a view to concluding the rehearing as soon as possible while at the same time allowing Ms Bechara proper notice of the material upon which Mr Bates proposed to rely (and so, apply for leave to rely), and in order that the parties could make submissions upon whether the court would receive that proposed evidence.
Conformably with the direction given, Mr Bates filed and served a further affidavit made by one of the supporting creditors, Mr Gray. Late on Saturday, 5 June 2021, a further affidavit affirmed by Mr Bates was filed. This affidavit, of 22 paragraphs, exhibited ~100 pages of material and traversed a history of the dealings between Mr Bates, Ms Bechara and/or her solicitors over the period 2009-2016. From the extensive annexures, I infer that Mr Bates delayed in filing the affidavit by reason of his ongoing dialogue with The Law Society of New South Wales and in particular, a proposal to issue a subpoena.
By his further affidavit, Mr Gray sought “leave to renew my appearance in relation to the jurisdictional issue relevant to ss. 43 and 52(2)(b) of the Bankruptcy Act 1966.” Mr Gray had not in fact appeared at the hearing at any stage. At all events, he recounted the history of his professional dealings with Ms Bechara over the period 2005 to February 2012 at which date he deposed to receiving “my final 3 briefs from Maria Bechara, the respondent debtor, for which I provided legal services, and issued invoices. As in the past, from time to time, we met in person, either at a courthouse, in my chambers or at a café.” Mr Gray deposed that in March 2015 he met with Ms Bechara “face-to-face”, at which he sought, unsuccessfully, to negotiate a settlement over his claim for payment of fees. Mr Gray recounted the history of a “costs assessment proceeding” instituted in the Supreme Court of NSW in June 2015 and in which both Ms Bechara and a lawyer she had appointed, had taken an active part. As a result of that costs assessment process, a certificate was issued upon the completion of a review and, on 10 March 2016, a judgment was entered in favour of Mr Gray for $169,745.40.
The current state of affairs as revealed by Mr Bates’ affidavit was that he had been unaware, until cross-examined on 14 May 2021, “that the respondent debtor proposed to raise jurisdictional issues in (sic) onus of her place to do so by the foresaid sections of the Act, especially s 52(2).” So far as reflecting Mr Bates’ frame of mind, his evidence was beyond question. At this point, I reflected upon the wisdom of the proposal for appointment of an amicus curiae and why the Full Court’s proposal had been opposed.
(15) Use of materials; further affidavits & notice of grounds of opposition
When the hearing resumed on 8 June 2021, the court raised for each of the parties the following matters. First was its need to understand what further evidence was sought to be relied upon together with submissions on the question of leave and any objections to the evidence. Secondly, I enquired as to why this court should not be entitled to rely upon the Full Court’s findings as embodied in its reasons for judgment. Thirdly, and relatedly, I sought submissions as to why this court should not be entitled to adopt the approach taken by the Full Court to mark as an exhibit the index to the appeal book (Appeal Book Index (ABI)) with hyperlinks to each of the documents (that had been reorganised into a more sensible order) for the purposes of the de novo hearing of the petition: [2021] FCAFC 34, [15].
Mr Bates did not oppose any reference to the reasons of the Full Court or the marking of the Appeal Book Index or its use upon the rehearing.
As concerned the evidence, Mr Bates sought leave to further rely upon the affidavits of supporting creditors, including Mr Gray’s recent affidavit, his own affidavit sworn 5 June 2021 and that of his solicitor, Ms Chai affirmed on 7 June 2021.
Mr Bates submitted that he had no forewarning until he was cross-examined that Ms Bechara’s true ground of opposition to the petition was whether the jurisdictional facts necessary for the making of a sequestration order were made out. Mr Bates accepted that the court was to require proof of the matters stated in the petition including those relevant to s 43(1)(b) of the Act. However, he emphasised the text of par 52(1)(a) that for the purposes of proof of the matters stated in the petition “(the Court may accept the affidavit verifying the petition as sufficient).” Mr Bates submitted as Ms Bechara had not raised any issue as to proof of jurisdictional facts in opposition to the petition, he should be entitled to have his verifying affidavit accepted as being sufficient proof of those matters. In a reply submission, Mr Bates complained of a want of procedural fairness concerning the failure to squarely raise jurisdictional issues.
Mr Martin’s primary submission relied upon the Full Court’s reasoning that delay was “not only prejudicial to the debtor or bankrupt, but also to the creditor and potentially to members of the public”: [2021] FCAFC 34, [176]. It was submitted that Ms Bechara would welcome the adoption of any course that saw the matter brought to a conclusion. Nothing was said respecting this court’s use of the Full Court’s reasons for the Appeal Book Index (which had been tendered on the appeal by Mr Martin, albeit at the Full Court’s invitation). Mr Martin did not object to the r 4.06 affidavit affirmed by Mr Bates’ solicitor, Ms Chai.
Otherwise, Mr Martin opposed the grant of leave to rely upon the further affidavits. To have done otherwise would have set at nought the advantage sought to be achieved by not having raised the question of jurisdiction before cross-examination. Mr Martin was unabashed in acknowledging that the notion of ‘ambush’ may well be “on the tips of everyone’s tongues”. The position adopted on behalf of Ms Bechara was, as he submitted, neither more nor less than the exercise of an entitlement to a complete rehearing of the creditor’s petition. Referring to the exercise of a right to silence in other jurisdictions, Mr Martin submitted that a debtor was perfectly entitled to sit (i.e. remain silent), and say only after the conclusion of submissions that Mr Bates had not made out his case. Unguided by reference to any authority or to the modern procedures as developed for the conduct of criminal proceedings, the generality of the submission said little to the exercise of jurisdiction in bankruptcy or, more precisely, the consequence of non-compliance with the obligations of persons who intended to oppose a creditor’s petition who had failed to serve a notice stating the grounds of her or his objection.
I do not accept that the direction, which requires occupiers not to admit “members of the public” applies to permit an occupier from preventing a tenant of non-residential or business premises from being on premises they have a legally enforceable entitlement to use. On another view, the occupier of the premises would be the person holding the lease or licence. Contextually, cll 4, 11, 24 and 24L undermine a conclusion that owners or occupiers of business premises or persons who worked at them are proscribed in all circumstances from being on such premises. In particular, “When calculating the space available for each person on premises, only the areas that are open to the public are to be included in the calculations”: cl 4(2).
As concerns Special Directions for Greater Sydney, the applicable directions apply to an ‘affected person’, the definition of which is qualified in both exclusionary and inclusive terms. Mr Martin’s affidavits and submissions are clear as to his usual place of work. But on his evidence, he has not been in Greater Sydney since 11 June 2021. Upon the evidence, Mr Martin is not a person presently staying in temporary accommodation in Greater Sydney and has not been in Greater Sydney since about 11 June 2021 (or at any time since 21 June 2021). I find he is not an ‘affected person’ within the meaning of cl 19 of the Order, and I am not persuaded Mr Martin is bound by the applicable Special directions in Part 4.
If, contrary to that view, Mr Martin is an ‘affected person’ within the meaning of the Order, the applicable direction requires that he “must not without reasonable excuse” be away from his place of residence, wherever located. Schedule 1 of the Order identifies the doing of activities which constitute a reasonable excuse for the purposes of the direction. Included amongst such accepted, reasonable excuses in being away from one’s place of residence are that it is “for the purposes of work if the person cannot work from his or her place of residence” and also for the purpose of “undertaking any legal obligations.” As noted by the Full Court, Mr Martin has accepted a retainer from another firm of solicitors to represent Ms Bechara. He has entered an appearance in the de novo hearing of the creditor’s petition. The hearing has not concluded. Upon the evidence, Mr Martin cannot discharge his obligations as an advocate from his farm by reason of the Internet connectivity problems to which he deposes.
The direction contained in the Order that persons outside of Greater Sydney must not enter Greater Sydney is qualified in circumstances where persons have, or have certain kinds of, reasonable excuse for doing so. The reasonable excuses for being away from a person’s place of residence referred to above are excuses of the kind which permit that a person may enter Greater Sydney; that is, “for the purposes of work if the person cannot work from his or her place of residence” and also for the purpose of “undertaking any legal obligations.” The evidence supports conclusions that the difficulties attending Internet connectivity at his farm prevent him from working there and, more fundamentally, having appeared on behalf of Ms Bechara, he remains subject to legal obligations to discharge his retainer to his client and his attendant duty as an officer of this court. Contextually, on 19 July, and again on 26 July 2021, Mr Martin appeared by telephone, doing so on the stated basis that Internet connectivity at his farm prevented him appearing by video link.
The reasonable excuse provided by Item 2(a) of Sch 1 of being away from a person’s place of residence, wherever located, for the purposes of work if “it is not practicable for the employee to work at the employee’s place of residence” says nothing to proscribe an employer from being at a place of work. On the assumption Mr Martin may be an employee of Martin Legal Pty Ltd, nor does it proscribe him as an employee from being at the serviced offices of that company in Greater Sydney where it is not practicable for him to work at his place of residence. Further, Items 8 and 11 of Sch 1 comprehend that a reasonable excuse for being away from a person’s place of residence include moving between places of residence including a business moving to new premises or “Undertaking any legal obligations.” .
Insofar as the Order provides directions respecting the closure of “certain premises”, none of the premises so described (including the types of ‘business premises’ expressly mentioned), is of a kind which would include Mr Martin’s legal practice. Further, the direction given in relation to the “closure of certain premises” to which it applies proscribes such premises from being “open to members of the public except as provided.” This direction is not cast in terms as to preclude Mr Martin, whether as employer or employee, from entering his offices.
Furthermore, I am not satisfied that the Order would proscribe Mr Martin, an employee or a courier from collecting the file from his Sydney office and transporting it to him at his farm.
The directions, without reasonable excuse, to remain at a person’s residence and not to enter Greater Sydney do not apply, relevantly, merely because a person enters Greater Sydney by road and then travels through Greater Sydney by the most practicable route. In both Parts 4 and 4A, the direction not to allow a visitor to a place of residence, whether in Greater Sydney or an affected area of regional NSW, wherever located, is not engaged where a “visitor is authorised by this clause” to do so. In each of cll 24(4)(a) and 24JA(4)(a) respectively, the clause authorises a person to visit a place of residence for the purposes of “engaging in work”. A courier or an employee of Martin Legal would be authorised by those provisions to visit Mr Martin’s farm to deliver to him his file.
There is no evidence that Mr Martin’s farm is in an affected region for the purposes of Part 4B.
The special directions provided by Part 4A apply only to an “affected area.” The special directions provided by Part 4B apply only to an “affected region” of NSW. The affected areas to which Part A applies are the local government area of the City of Fairfield and any other such area as may be published specified by the Chief Health Officer by notice published on the website of NSW Health for the purposes of that Part: cl 24A(b). The special directions in
Part 4A only apply to an “affected worker”, being a person whose place of residence is in an affected area or to a particular category of worker: cll 24A, 24B(1)- (1A). The affected regions to which Part 4B applies are Blaney, Cabonne, the City of Orange and any other such area as may be published specified by the Chief Health Officer by notice published on the website of NSW Health for the purposes of that Part: cl 24G(d).
It was not suggested that the Chief Health Officer had by notice published on the NSW Health website for the purposes of Parts 4A or 4B of the Order, expanded the number of affected areas or affected regions beyond the City of Fairfield, Blaney, Cabonne or the City of Orange. Treating this as an issue upon which the court may take judicial notice, the website contains no such notices. For the purposes of Parts 4A and 4B respectively, there is no evidence Mr Martin’s employees reside in an affected area or that his farm is in an affected region. Nor is there any evidence his employees are affected workers within Part 4A.
I do not see why the supposed expense of obtaining a file should be a dispositive consideration in favour of the conclusion that, after five days, the de novo hearing of the petition should be adjourned until after the lockdown in Greater Sydney, whenever that may be. As Mr Martin well-recognised at the time of making the informal application to vacate the hearing, it is somewhat remarkable after no less than five lockdowns in the state of Victoria to accept that the inability to obtain access to a file to listen to a reply address is a sufficiently cogent reason why the hearing should be put off until the end of the current lockdown in New South Wales. Giving the Order a practical operation, persons may travel to a place outside Greater Sydney by the most practicable direct route and are not prevented from doing so in response to an emergency: cl 5(c), 22, 24AA(2)(a). Part 4 recognises that the direction against travelling in a vehicle in Greater Sydney with another person who is not from the same household does not apply to a vehicle being used for the purposes of engaging in work.
Other discretionary considerations weigh against the grant of the relief sought. I do not ignore that on Mr Martin’s evidence he was aware “the Greater Sydney Covid-19 lockdown effectively commenced on 25 June 2021.” The application in a case was not lodged until the business day before the hearing was due to resume and was only filed with leave, by consent, on that date (19 July 2021). From that date he directed his professional and other staff to work from home except in the case of those who for essential reasons were permitted to leave their home. On one view of his evidence, those excepted persons could retrieve the file and have it delivered by express means either to the offices of his colleague in Armidale or to his farm.
I am not persuaded that it would be impermissible for a courier or Australia Post or employee to travel from the Sydney CBD out of Greater Sydney to Armidale or Mr Martin’s farm. To the extent the evidence assumed delivery of the file would be prevented on the basis it was non-essential travel, I am not persuaded that evidence establishes such delivery would engage or contravene any direction in the applicable provisions of the Order.
Nor am I persuaded that a person who was not an affected person for the purposes of the Order (or that such a person who had a reasonable excuse as identified in Sch 1 of the Order) would not be permitted to return from Greater Sydney or be subject to a mandatory requirement to undertake a 14 day hotel quarantine before returning to their home. Mr Martin’s evidence reframed the absence of such requirements in the Order stating “I expect this has not been emphasised in the current lockdown as the message is clear and well known locally.”
Consideration
The power to vacate or adjourn a part-heard proceeding is discretionary. Contextually, the de novo hearing of a creditor’s petition is a proceeding conducted in the bankruptcy jurisdiction of the court which is, for the reasons given, to be heard as soon as possible. This court which has jurisdiction under the Act and the Full Court’s Order inform the approach that was to be expected in this proceeding. I have identified the ‘progress’ achieved in the determination of the de novo hearing to date. Parties have filed their written outlines. Each of the parties was required to identify the evidence upon which they relied. The only material upon which Mr Martin relied was his application for review and the sequestration order. No evidence of solvency or other evidence was tendered by Ms Bechara. Evidence is concluded. Closing addresses have been made. A reply is now due.
The present application is not made before the commencement of the trial. It is made on the fifth day of a de novo hearing. Given the reply submissions the oral reply is likely to be brief. The opportunity to respond in writing to that reply was given but not taken.
Nor is it made in circumstances where a party or critical witness has become unavailable. Nor is an adjournment sought because of the illness of either legal representative.
The explanation given for the adjournment has been identified above. Mr Martin deposes that he cannot legally enter Greater Sydney. I have rejected that submission. Suffice to say if that explanation is wanting, the ground for the adjournment falls away. I accept that the Greater Sydney Covid-19 lockdown commenced on 25 June 2021 and that “Stay at Home Orders”, came into effect at 6:00 p.m. on that date and applied to persons in Sydney, including the Sydney CBD where Mr Martin’s office is based, and were extended to Greater Sydney (with effect from 26 June 2021) and other areas and that the Order remains operative to 31 July 2021.
The succession of Orders issued since 23 June 2021 serves to underline the uncertainty of when the current lockdown in NSW may come to an end. In Capic, Perram J, who was acutely conscious of the risk to the health of practitioners and parties arising from contagion and the spread of a virus, nonetheless declined to adjourn that hearing of proceeding (which had not begun). His Honour recognised that there could be no guarantee that the situation would be any better in six months – a view that has been vindicated comprehensively.
Since 2020, courts have continued to hear and determine cases as far as that has been possible.
As concerns detriment to the petitioner, that Mr Bates consented to the adjournment sought on 19 July 2021. This is a matter that I have considered but to which I attach little weight. His submissions were made in the context that he requested a further seven days in which to file submissions that had been sought from him by 2 July 2021. He has now had that further time. As observed on 19 July 2021, Mr Bates has had the better part of five weeks in which to reflect on the matters which he sought to address in a reply submission.
As concerns the asserted prejudice to Ms Bechara, her forensic decisions in the conduct of her case are amply demonstrated by: the absence of any notice of the grounds of opposition to the petition; the failure to file any affidavit in support of those grounds; the foreshadowing of evidence of solvency (of which none was filed); the content of the outline of submissions (which only put in issue the service of the bankruptcy notice); disclosure of the second ground of opposition (jurisdiction) during cross examination; the revelation of the third and principal ground of opposition during closing address; and the absence of any written response to Mr Bates’ written reply submission.
A party is entitled to a reasonable opportunity to put his or her case. Ms Bechara had the opportunity to give notice of grounds on which she intended to oppose the petition and to support those grounds by affidavit. She has tested the petitioner’s case and been afforded an opportunity to address the court on the grounds on which she sought dismissal of the petition. It should not be ignored that Mr Martin has already made his closing address.
After each party has made a closing address, it is a matter for the discretion of the court whether to grant leave to make any reply. Where leave is granted, it is trite that a reply is not the opportunity to rehearse the entirety of a party’s case or submissions. In the ordinary course, once there has been a reply that is it. The hearing is concluded. The court then delivers, or reserves, judgment and pronounces orders. The proceeding is thereby concluded.
If it was part of Ms Bechara’s case that she had an entitlement to make further submissions after Mr Bates’ reply, that cannot be assumed. It would depend upon the grant of leave to do so and absent special circumstances it is difficult to see why leave would be granted in this case. Framed in terms of case management, the procedural history above identifies the series of steps which were taken, before and during, the hearing to date to afford each of the parties opportunities to present the case which they intended to bring forward for determination.
For the reasons identified by the Full Court in remitting this petition for rehearing, it is also of relevance to weigh in account the interests of other creditors and the interests of the public. When the court is exercising its bankruptcy jurisdiction, the interests of those other creditors and the interests of the public are also important considerations. Delay is inimical to the proper conduct of an application for review of the exercise of power by a registrar and that is especially so where the review involves a registrar’s decision to make a sequestration order.
The applications to vacate and defer the hearing are made on the eve of its completion when the only step outstanding is Mr Bates’ reply. The only matters on which it may be expected a reply would be needed in this case would concern the need to address the complaints of non-compliance with the Bankruptcy Rules and whether the defects or irregularities constituted by such non-compliance are such as to invalidate the proceeding: Act, s 306(1). Mr Bates’ written submissions filed, belatedly, on 19 July 2021, have already addressed these issues in a substantive way. Having done so it is not immediately apparent that very much may now be required in oral address in reply. Mr Martin was therefore in a position to understand anything further that Ms Bechara might wish to say as to this reply. An order made on 19 July 2021 afforded Ms Bechara an opportunity to file, by 22 July 2021, further submissions addressing the matters in Mr Bates’ submissions filed on that day. No submissions were filed.
As noted, Mr Martin’s further affidavit at [31(a)-(n)] identified in summary why he sought that the de novo hearing be adjourned until the end of the Sydney lockdowns. Mr Martin framed the issue in these terms “Therefore, I have these problems:” With respect, Mr Martin had the wrong end of the telescope. The ‘problems’, if they were, marked the beginning of the enquiry. The law is concerned with solutions. Like so many other professionals and other persons engaged in activity at present, a great many legal practitioners are engaged in seeking to render the assistance sought by those clients from whom they have accepted retainers.
To address each of the ‘problems’ identified by Mr Martin’s affidavit at (31):
(a) for the reasons above, I am not persuaded of the broad propositions that Mr Martin cannot get into Sydney legally or that he is prohibited from doing so;
(b) insofar as he alludes to the risk of a $10,000 fine for entering Sydney, the Order made this day adopts the caution employed in Capic of the manner in which practitioners and parties are to conduct themselves in this proceeding (Capic order);
(c) the hearsay evidence from legal colleagues of bearing the cost of mandatory hotel quarantining after returning from overseas is not relevant. If it was, the Capic order addresses it insofar as that can be done;
(d) the risk to his staff of $10,000 fines likewise proceeds on an assumption that they, like Mr Martin, would not have a reasonable excuse for attending his Sydney office on the basis it was not reasonably practicable for them to work from their place of residence. Mr Martin has accepted the retainer from another firm of solicitors to act on behalf of Ms Bechara in this de novo hearing where he has entered his appearance in that hearing which is now in its fifth day. Why employees would be fined, where it was impossible (as distinct from reasonably practicable) to work from home in assisting Mr Martin by obtaining the file and transmitting it to his farm was not explained;
(e) no evidentiary basis was established for the belief that Mr Martin, or his staff, would be obliged to notify The Law Society of New South Wales that he, or they, had breached a public health order and so may become subject to disciplinary procedures. Doubtless, a copy of these reasons for judgment and the order made this day would be provided;
(f) I am not satisfied upon the evidence that there are no means open to arrange for the collection or transport of the file from the Sydney office. Upon the terms of the Order, a blanket prohibition has not been placed upon travel within, to or from Greater Sydney and there is no evidence of any attempt being made to communicate with the landlord or building manager where Mr Martin’s offices are located. Nor does the Order place an absolute prohibition upon access to business premises used for a legal practice. To the contrary, it establishes a density quotient, relevantly, of not more than 25 people;
(g) the paucity of the evidence that it may cost between $200 – $1,000 to transport the file “after the lockdown ends, but not before” does not usefully inform consideration of the anterior questions whether a visitor is authorised by the Order to deliver his file and whether a practitioner obliged to undertake and complete the legal obligation of representing a client in court by audio and video link is afforded a reasonable excuse to access a file or whether a reasonable excuse exists, for the purposes of such work where, on the evidence, the Internet connection at Mr Martin’s farm is inherently unreliable;
(h) for the reasons above, I do not accept the premise upon which Mr Martin advances the submission “I cannot get to Sydney legally until the lockdown ends and I shall not be acting in defiance of the NSW government’s public health orders, such that I am at risk of a $10,000 fine or disciplinary proceedings from the Law Society”;
(i) for the same reasons, I do not accept the submission that Mr Martin advances respecting the risk to his staff of fines or such disciplinary action;
(j) the premise for the submission that Mr Martin “shall not be putting myself in a position, where I have to submit to 14 days of hotel quarantine” is also rejected;
(k) the submission, repeated, of placing his staff or himself at risk has been addressed by the Capic order;
(l) Mr Martin now challenges the position that the evidence has closed, doing so on the basis that the court permitted Mr Bates to adduce further evidence. While I consider the basis for this challenge distorts the true sequence of events, contextually, the creditor’s petition was filed in April 2016. No notice of grounds on which it was intended to oppose the petition were ever served. No affidavit supporting the grounds set out in any such notice has been served. The Full Court acceded to the caution that Ms Bechara would not have an ‘easy run’ on a special leave application if forced to adduce evidence of solvency in the appeal. Upon remitter, repeated opportunities have been afforded to file evidence and none has been filed. As to the belated and principal ground for opposing the petition – asserted non-compliance with the Bankruptcy Rules – a reply submission has been served and no evidence has ever been served;
(m) the penultimate submission was that as a solicitor-advocate Mr Martin does not enjoy immunity from suit on the basis that, absent access to his file, “I might miss something” and for that reason “would be ‘inviting trouble’ to consent to appear without being able to refer to my file” appears both far-fetched and misconceived. It is only because Ms Bechara chose to keep her “powder dry” in relation to the third ground for opposing the petition that any reply is required. Had the ground been addressed properly no occasion for any reply would arise. The assumption that, without leave, Mr Martin has an entitlement to any further address is unfounded. The notion of ‘consent’ is inapt.
The fundamental questions, which have never been addressed, are whether Ms Bechara would be deprived of the opportunity of putting a sustainable proposition that may have affected the outcome of the proceeding or whether she would suffer serious prejudice in all of the circumstances where Mr Bates has now delivered a written reply. In oral submissions Mr Martin expanded upon the supposed difficulty he has encountered by reason of the Internet connectivity problems existing at his farm. He drew attention to the particular difficulty of checking the accuracy of the factual premises in Mr Bates’ reply submission in relation to the operation of s 306 of the Act. Section 306(1) provides, relevantly, that “a proceeding is not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of the court.”
Mr Martin accepted that the only reason s 306 had now been raised in reply was because his objection to compliance with the Bankruptcy Rules was raised for the first time in his closing address. On 19 July 2021, Mr Bates served his written reply and on that date an opportunity was afforded to Ms Bechara to respond in writing to that reply. She has not done so.
In the course of submissions on 26 July 2021, Mr Martin was asked to identify each of the factual premises with which his client took issue. He said he was unable to do so as he did not have a copy of Mr Bates reply. He accepted that he had made an informal application to adjourn on 14 July 2021 and that on 16 July 2021 he had filed an application in a case supported by an affidavit that he made on that date. He has since filed two further affidavits. An extension was granted to the debtor until 20 July 2021 to file any further affidavits. The extension was granted because Mr Martin said he would be in Armidale on that day. He said that he had read the reply filed by Mr Bates on that date and had not printed a copy of it. Remarkably, he also said he did not have a copy of it with him on 26 July 2021. He then said that he did not have his laptop. When this issue was explored, Mr Martin stated his laptop was situate in Brisbane.
Viewed individually or collectively, those matters do not persuade me Ms Bechara has been denied, as was submitted, procedural fairness, in not being able to deal with the factual premises upon which Mr Bates relies for the purposes of s 306(1) of the Act. On 19 July 2021, the parties were left in no doubt that if the adjournment was not granted, I would hear the reply. Upon that basis, Mr Martin’s decision to appear on 26 July 2021 without a copy of the written reply and without having considered or identified the factual premises in issue displays the failure to take the opportunity provided rather than a denial of such an opportunity.
Where it is in issue, the solvency of a person occupies a central role in the bankruptcy jurisdiction. A Bankruptcy Court will scrutinise the evidence where a debtor seeks the dismissal of a petition on the ground of solvency and will, if necessary look behind a judgment in deciding whether to grant, refuse or adjourn an application. The bankruptcy jurisdiction is not a vehicle to make solvent persons bankrupt. Those principles were fully applied in this case before and upon remittal of the proceeding. However, no evidence of solvency was filed.
Self-evidently very little now remains to be done to conclude the hearing. I am not persuaded that Ms Bechara would be prevented from presenting her case in opposition to the petition by Mr Martin not having access to his file for the purpose Mr Bates’ reply. As the extensive procedural history above indicates, the court has allowed the parties particular latitude and has done so to address each of the complaints made in the course of the hearing.
Two business days before the hearing was due to resume (and conclude) on 19 July 2021, Ms Bechara filed the application to vacate that hearing and adjourn the proceeding “until the Sydney lockdown ends.” The application was framed in terms which, on one view, appeared to anticipate that the temporary restrictions imposed on movement and gathering in the state of New South Wales put in place by the Order might be extended once that Order was repealed on 31 July 2021 and, that if this occurred, further adjournments would necessarily follow. It is unnecessary to reflect upon whether this underlies the present application. Rather, the importance of the present application lies in concluding this proceeding (and its fair, just, timely and efficient determination), conformably with the principles stated above.
In all of the circumstances, I am satisfied that Ms Bechara has been afforded ample opportunity to put any sustainable proposition that may have affected consideration of whether, for other sufficient cause, Mr Bates’ petition ought to be dismissed and, if she has discharged the onus of establishing such other sufficient cause, whether the residual discretion in s 52(2) of dismissing the petition ought to have been exercised in her favour. At no point has Ms Bechara sought to identify the sustainable proposition she would be denied making.
For the same reasons, nor am I satisfied that Ms Bechara has demonstrated any serious injustice would occur if her advocate was to hear Mr Bates’ oral reply, unaided by resort to the file he has retained. Particularly is that so where Mr Bates had filed his written reply and Mr Martin was afforded an opportunity to respond to it. As Mr Martin accepted during submissions, the need for any reply arose solely from the circumstance that it was not until Ms Bechara’s closing address that the principal and third ground of opposition was revealed. Had the further ground not been raised in closing address, I would not have allowed Mr Bates a reply.
To adapt the reasons of Burley J in Zetta Jet Pte Ltd v The Ship, “Dragon Pearl” [2018] FCA 878, at [38] (and approved on appeal, [2018] FCAFC 99, [59]), in the exercise of its discretion whether or not to adjourn, it is appropriate for the court to consider also the position of other litigants and the importance of confidence in the judicial system generally. Had this case been prepared by each of the parties in an orthodox manner, it should have taken one day for the entire hearing to be conducted. Instead, to date, five sitting days have been used and that has occurred in light of the procedural history described above. The case is one in which it has and remains reasonably practicable for the hearing to proceed by audio and video link.
Viewed broadly, the interests of litigants in at least four other proceedings have been deferred to accommodate the determination of this proceeding. In the particular circumstances of this proceeding as detailed above, in my opinion it would be contrary to the maintenance of confidence in the administration of justice to allow the wide relief sought by the application.
Finally, Mr Martin deposes that should the hearing proceed in circumstances where he cannot have access to his files he “shall have to withdraw”. He deposed at [31(n)] in these terms:
[I]f the court insists on proceeding to conclude this matter, in circumstances where I cannot have access to my files, I shall have to withdraw, and this whole sorry saga of appellate litigation commenced, when the first Federal Circuit Court judge allowed Mr Bates to proceed ex parte and if I cannot have access to my file, I cannot see how another legal practitioner could competently or adequately represent my client, because he or she also would not be able to legally access my clients file either for the same lockdown reasons.
This proceeding has been allocated to the docket of this court in the Victorian registry. At least as concerns counsel, the settled rules of practice in the state of Victoria require that:
(a)counsel having appeared at a hearing are in general obliged to be present at court and ready to represent his or her client on each occasion that the case is called on for hearing and thereby, to continue in attendance until the conclusion of the case;
(b)counsel’s practice must be conducted from their chambers and by the use of such facilities as are reasonably necessary to enable him or her to discharge his or her duties and obligations properly and in a professional manner, having regard to the nature, size and circumstances of his or her practice.
While Mr Martin appears as solicitor-advocate on behalf of Ms Bechara and is not bound by those rules of practice, nonetheless they inform the proper consideration of the matter including whether he has a reasonable excuse (if necessary) to attend his office. For the avoidance of doubt, it must be accepted that Mr Martin’s offices are in the Sydney CBD.
However, I do not accept the proposition that Mr Martin “shall have to withdraw” or the assumption upon which it was based. Mr Martin has accepted a retainer to act in this case. Mr Martin announced his appearance at the commencement of the de novo hearing of the petition on 14 May 2021 and appeared on the second, third, fourth and fifth days of the hearing. During that period he participated in the hearing in the manner described above. Having filed submissions, raised his objections, cross-examined Mr Bates and made closing submissions, the hearing is now advanced to the point of near completion. The basis for assuming an unqualified entitlement to withdraw is unfounded. Leave is required.
The system for the administration of “justice necessarily imposes upon those who practice advocacy duties which have no analogies, and the system cannot dispense with their strict observance”: Tuckiah v The King (1934) 52 CLR 335, 347. While the observations of the plurality in Tuckiah addressed very different circumstances arising in the criminal jurisdiction, they serve to explain why, in part-heard cases, the court requires observance of the obligation of counsel and those who practice as advocates, to be present at court and ready to represent his or her client on each occasion that the case is called on for hearing and thereby, without leave, to remain and continue in attendance until the conclusion of the case.
This is not the occasion to examine in further detail the particular obligations of advocates, whether they be counsel or solicitors appearing as advocates. No application for leave to withdraw has been made and no order of that kind has been granted. Whether any such application is made, it would need to be made on proper notice, supported by evidence and submissions which must be considered in all the circumstances.
Conclusion
On the evidence, I infer that Mr Martin has been aware since at least 25 June 2021 of the directions respecting the lockdown affecting Greater Sydney. Putting aside the lateness of the application to adjourn the hearing and my refusal of the application, I have concluded the appropriate course is to afford the parties an opportunity to reflect upon these reasons. More particularly, Mr Martin may reflect upon the correctness of his assertion that he cannot legally enter Greater Sydney or do so, either for the purposes of retrieving his file or participating by audio and video link from his offices to hear Mr Bates’ reply. Alternatively, he may reflect upon whether he wishes to make arrangements for his file to be retrieved and delivered out of Greater Sydney, either to his farm or the office at Armidale from which he had participated in at least one or more hearings of the matter to date.
Maintenance of confidence in the judicial process is of particular significance in all of the circumstances of this case. I am not prepared to simply vacate the hearing on the basis that the matter now be listed for mention on 16 August 2021 with a view to assessing the Greater Sydney Covid 19 lockdown and then setting a final hearing date. On the evidence adduced by Mr Martin it is within his capacity to travel from his farm to his Sydney office. On the construction of the provisions of the Order as examined above, Mr Martin is not precluded from entering Greater Sydney and he, or employees of Martin Legal Pty Ltd, are not precluded in the circumstances from retrieving the file in order that Mr Martin might have access to it for Mr Bates’ reply. Mr Martin’s evidence identifies the various means of transportation that are available to him when commuting between his farm and Sydney. There is no reason why he cannot do so for the purposes of discharging his obligations to his client and attend court for the reply. In any event, I have not been satisfied Ms Bechara would be, or has been, deprived of the opportunity to advance a sustainable proposition or that she would suffer serious injustice if her advocate was to attend court for the reply without his file.
I certify that the preceding two hundred and eighty-six (286) numbered paragraphs are a true copy of the Reasons for Judgment of Judge A. Kelly. Associate:
Dated: 26 July 2021
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