Bates v Bechara

Case [2021] FCCA 1693

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…

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Bates v Bechara [2021] FCCA 1693
Case
[2021] FCCA 1693
Decision Date

CaseChat Overview and Summary

This case concerned an application by Ms Bechara for an adjournment of a de novo hearing of a creditor's petition. The petition had been presented by Mr Bates on 7 April 2016, following a bankruptcy notice issued in December 2015. A sequestration order was initially made on 5 July 2016, but this was later set aside by the Full Court of the Federal Court of Australia, which ordered a de novo hearing to be conducted as soon as reasonably possible. The parties involved, including supporting creditors, were predominantly legal practitioners.

The primary legal issue before the court was whether to grant Ms Bechara's application for an adjournment of the de novo hearing. The grounds for the adjournment were that Ms Bechara's legal representative, Mr Martin, claimed he could not legally enter Greater Sydney due to COVID-19 lockdown restrictions, and therefore could not access his client's file to prepare for the oral reply submissions. The court was required to determine if these circumstances warranted vacating or adjourning the part-heard proceeding, which was already in its fifth day.

Justice Kelly, in his reasoning, noted that the power to adjourn a hearing is discretionary and that the creditor's petition was to be heard as soon as possible. He observed that the application for adjournment was made late in the proceedings, not before the commencement of the trial, and not due to the unavailability of a critical witness or illness. The court found that Mr Martin had been aware of the lockdown restrictions since 25 June 2021 and rejected the submission that he was legally precluded from entering Greater Sydney. The judge considered that Mr Martin had the capacity to travel from his farm to his Sydney office or to arrange for his file to be retrieved, and that he was not prevented by the lockdown orders from doing so. Furthermore, the court was not satisfied that Ms Bechara would be deprived of the opportunity to advance a sustainable proposition or suffer serious injustice if her advocate attended court for the reply without his file.

Consequently, the court refused the application for an adjournment. Justice Kelly afforded the parties an opportunity to reflect on the reasons for this decision, particularly Mr Martin's assertions regarding his inability to enter Greater Sydney and his access to the client file. The court indicated that it was not prepared to vacate the hearing and relist it for a later date, given the progress made and the available means for Mr Martin to participate in the proceedings.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

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.

Evidence

Evidence Before The Court

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.

Decision

Reasons for decision

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.

Ratio Decidendi

Legal Principle Established

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.