Bates v Bechara (No 3)

Case [2021] FedCFamC2G 155

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)

Bates v Bechara (No 3) [2021] FedCFamC2G 155

File number(s): SYG 821 of 2016
Judgment of: JUDGE A KELLY
Date of judgment: 15 October 2021
Catchwords: BANKRUPTCY – application for review of exercise of power by registrar – creditors petition – de novo hearing – creditor establishes prima facie entitlement to the making of sequestration order – whether debtor has satisfied the court petition should be dismissed – where solvency not in issue – whether for other sufficient cause sequestration order ought not be made – where in closing address for first time new ground for opposing petition that creditor had not complied with Federal Circuit Court (Bankruptcy) Rules 2016 – where some instances of alleged non-compliance not made out and in other instances are established – applicable principles – whether non-compliance constitutes other sufficient cause – whether petition defective or invalidated by irregularity – no defect – non-compliance constitutes irregularity – effect of irregularity – s 306(1) engaged automatically unless court of opinion substantial injustice has been caused – no evidence of prejudice – no actual prejudice demonstrated – where absence of evidence or claim preclude finding of prejudice – objection not taken at any point between institution of proceeding in 2016 and closing address in 2021 – proceeding not invalidated – debtor does not satisfy court for other sufficient cause that sequestration order ought not be made – residual discretion in s 52 does not favour refusal of relief – order affirmed.
Legislation:

Bankruptcy Act 1966 (Cth), ss 30, 41, 52, 306
Federal Circuit and Family Court of Australia Act 2021 (Cth), ss 100, 189
Federal Circuit Court Act 1999 (Cth), ss 57, 104
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth), rr 1.04, 2.04, 2.06, 4.02, 4.04, 4.05, 4.06
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), r 1.07
Federal Circuit Court (Bankruptcy) Rules 2016 (Cth), rr 1.04, 2.04, 2.06, 4.02, 4.04, 4.05, 4.06
Federal Circuit Court Rules 2001 (Cth)

Public Health (Covid-19 Temporary Movement and Gathering Restrictions) Order 2021 (NSW)

Cases cited: Adams v Lambert (2006) 228 CLR 409
Bates v Bechara [2021] FCCA 1693
Bates v Bechara (No 2) [2021] FCCA 1809
Bechara v Bates (2021) 388 ALR 414
Carver v de Robillard (2006) 5 ABC(NS) 21
Culleton v Balwyn Nominees Pty Ltd (2017) 343 ALR 632
Curtis v Singtel Optus Ltd (2014) 225 FCR 458
Deputy Commissioner for Taxation v Woodhams (2000) 199 CLR 370
de Robillard v Carver (2007) 159 FCR 38
Grant v Green and Associates Pty Ltd [2021] FCA 934
Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71
Malek v Macquarie Leasing Pty Ltd (2007) 156 FCR 552
Martin v Commonwealth Bank of Australia (2001) 217 ALR 634
Napiat Pty Ltd v Salfinger; Re Salfinger (No. 7) (2011) 202 FCR 264
Robson as former trustee of the estate of Samsakopoulos v Body Corporate for Sanderling at Kings Beach…

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AGLC
Bates v Bechara (No 3) [2021] FedCFamC2G 155
Case
[2021] FedCFamC2G 155
Decision Date

CaseChat Overview and Summary

In Bates v Bechara (No 3), the applicant, Ms Bates, filed a creditors petition for the sequestration of Ms Bechara’s estate. The matter was reviewed by the Federal Circuit Court upon an application by Ms Bechara, who argued that the registrar had exercised his power in error by not dismissing the petition on the ground that Ms Bates had failed to comply with certain procedural requirements set out in the Federal Circuit Court (Bankruptcy) Rules 2016. The court was required to determine whether Ms Bechara's failure to comply with the procedural requirements constituted a ground for dismissing the petition and, if so, whether the non-compliance caused substantial prejudice to Ms Bechara.

The court examined the nature of the procedural requirements and determined that while some instances of non-compliance were not established, others were. The court noted that procedural requirements are capable of being waived and that Ms Bechara had waived compliance with certain rules by not promptly objecting and by not articulating her complaint in her notice or affidavit. The court held that non-compliance with procedural rules constitutes an irregularity rather than a defect that invalidates the petition. The court applied the principles set out in s 306(1) of the Bankruptcy Act 1966 (Cth) and found that no substantial prejudice had been caused by the non-compliance. The court also noted that the residual discretion in s 52 of the Act did not favour refusing relief to Ms Bates.

The court affirmed the registrar's order and dismissed the application for review. The court found that the non-compliance with procedural rules did not constitute a ground for dismissing the petition and that the irregularity did not cause substantial prejudice. The court held that the principles of waiver and the need for parties to raise dispositive issues squarely applied in this case. The court concluded that the application for review was an attempt to relitigate issues that had already been considered by the registrar and that the de novo review was not concerned with detecting errors by the registrar.

In conclusion, the court dismissed Ms Bechara's application for review and affirmed the registrar's order. The court found that Ms Bechara had waived compliance with certain procedural rules and that the non-compliance did not constitute a ground for dismissing the petition. The court held that the principles of waiver and the need for parties to raise dispositive issues squarely applied in this case. The court also noted that the residual discretion in s 52 of the Act did not favour refusing relief to Ms Bates.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

Had I been of the opinion that an objection grounded on non-compliance of the kind identified in this case had the potential to cause substantial prejudice, for the reasons above, I would have made orders pursuant to s 306(1) and/or rr 1.04(1) and 4.05 of the Bankruptcy Rules to relieve from the consequences of non-compliance with such rules.Conclusion On the review of exercise of power by a registrar, the court “may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised.” FCCA, s 104(3); FC&FCAA, s 100(2): cf Robson, [2021] FCAFC 143, [223]-[239], [247]-[248]. Upon the principles stated by the Full Court in Bechara v Bates (2021) 388 ALR 414, [149]-[152], while the de novo review is pending, the registrar’s order made on 5 July 2016 “remains in existence.” As the Court explained, if upon concluding the de novo review all the matters in s 52(1) are proved and no matter in s 52(2) “arises in the way to stand in the way of a conclusion that a sequestration order ought be made, the application for review will be dismissed and the exercise of delegated authority will remain operative.” Where, as here, Ms Bechara raised issues for the first time which were not considered by the registrar, it is to distract from the core function of a de novo review to ask whether the registrar would or would not have granted or dismissed or adjourned the hearing of the petition. Upon concluding this de novo review, and not being required to embark upon a process that is concerned with identification of the detection of error by the registrar, it appears to me to be preferable not to interfere with that order. To adopt that course is to confirm that there has been but one exercise of judicial power by leaving undisturbed the order that remains in place: cf Robson, [2021] FCAFC 143, [3]-[4], [38], [40], [65], [202], [238], [298]. Conformably with that reasoning, an order has been made affirming the order made on 5 July 2016. There are three residual matters to be addressed. First, it was not suggested that the fate of Ms Bechara’s undisclosed pending application before the High Court was a matter that should be taken into account in relation to her third and principal ground of review. Secondly, insofar as Ms Bechara flagged an application for annulment during the application for review, the circumstances necessary for consideration of that application do not arise. Thirdly, each party sought costs and did so on the basis that such costs should follow the event. Directions will be made to allow them to file submissions in relation to costs, particularly in light of the Full Court orders and findings on this issue.

Ratio Decidendi

Legal Principle Established

Procedural as distinct from substantive requirements are capable of waiver. Apart from the few occasions where orders were made in her absence, more recently Ms Bechara has been legally represented by experienced practitioners. She has not made her objection to compliance with the subject rules promptly. Nor has she ever articulated her complaint in any notice stating her grounds of opposition to the petition or affirmed those grounds by affidavit. In the particular circumstances of the case, there was ample support for a conclusion that Ms Bechara waived compliance with rr 4.04, 4.05 and 4.06. In those circumstances, had it been necessary to do so, I would have been prepared to ‘otherwise order’ that, to the extent there had been a want of compliance with the subject rules, they would not apply on this de novo hearing.Discretionary considerations I do not accept the submission that the entitlement conferred by s 104(2) to seek a review of a registrar’s decision is at large. In my view, the entitlement remains subject to an obligation to comply with rr 2.04 or 2.06 of the Bankruptcy Rules. To approach the question from the perspective that Ms Bechara had a bare right to seek review and, without more, to engage the jurisdiction of review by filing an application in the prescribed form, the generality of that contention paid insufficient attention to the public and private nature of bankruptcy, including that reviews from the exercise of power by a registrar should be conducted promptly (especially upon review of the making of a sequestration order), and the need for compliance with the rules which govern the conduct of bankruptcy proceedings. To adapt the Full Court’s reasoning: “As an applicant for review of a sequestration order she was entitled (as a Constitutional imperative), subject to all proper procedural orders, to a hearing de novo of the creditor’s petition”: (2021) 388 ALR 414. [74], [89], [91]; see also, Culleton, [109]. Difficulties encountered in the determination of the de novo review of the application have arisen from Ms Bechara’s failure to reveal until closing address her intention to oppose the petition on any non-compliance with those rules. As addressed in Bates v Bechara (No 2) [2021] FCCA 1809 at [295], the failure to disclose this ground until closing address was entirely unacceptable and upon the principles identified by Allsop CJ in the authorities there referred to, this has resulted in unnecessary, avoidable, delay, the waste of valuable public resources and the incurring of significant costs which would not have occurred had the Bankruptcy Rules been observed from the outset; that is, since July 2016. It may be recalled that the concealment of the third and principal ground of opposition occurred in circumstances where it was explicitly stated no point would be taken in relation to the need for repeated compliance with r 4.06(3)-(4). To have deployed a strategy of not disclosing reliance upon non-compliance with other Bankruptcy Rules on the basis that there was no rule preventing the adoption of that course ignored the requirement that parties are obliged to ensure that dispositive issues are squarely raised in order that each party is on clear notice and cognisant of the issues to be addressed at a hearing.