Bechara v Bates (No 3)

Case [2023] FCA 1559

FEDERAL COURT OF AUSTRALIA

Bechara v Bates (No 3) [2023] FCA 1559  

Appeal from: Bates v Bechara (No 2) [2021] FCCA 1809, Bates v Bechara (No 3) [2021] FedCFamC2G 155 and Bates v Bechara (No 4) [2021] FedCFamC2G 304
File number: NSD 38 of 2022
Judgment of: MARKOVIC J
Date of judgment: 11 December 2023
Catchwords: BANKRUPTCY – appeal from orders made by the Federal Circuit and Family Court of Australia (then the Federal Circuit Court of Australia) following review of a decision made by a registrar to make a sequestration order against the estate of the appellant – where review is a hearing de novo – whether primary judge erred in finding that the Federal Circuit Court’s jurisdiction was invoked under s 43 of the BankruptcyAct 1966 (Cth) – the proper construction of s 43(1)(b) of the Bankruptcy Act – whether subss 43(1)(b)(i) to (iii) of the Bankruptcy Act are to be read cumulatively and not alternatively – whether Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256 is plainly wrong – whether Re Vassis; Ex parte Leung (1986) 9 FCR 518 is plainly wrong – whether primary judge erred in analysis of evidence against rr 4.04, 4.05 and 4.06 of the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) – whether primary judge erred in finding that non-compliance with the Bankruptcy Rules was not of such a nature as to cause substantial injustice within the meaning of s 306(1) of the Bankruptcy Act – whether primary judge erred in finding that appellant was required to comply with r 2.04 and r 2.06 of the Bankruptcy Rules on a review application – appeal dismissed
Legislation:

Bankruptcy Act 1966 (Cth) ss 41 subs (3)(c)(i), 43 subs (1)(a) and subs (1)(b), 47, 52 subs (1) and subs (2), 306 subs (1)

Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) r 1.04

Federal Circuit and Family Court of Australia Act 2021 (Cth) s 189(2)

Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) rr 1.03, 1.04, 2.04, 2.06, 4.04, 4.05 and 4.06

Federal Circuit Court of Australia Act 1999 (Cth) s 57(2) and s 104(2)

Federal Circuit Court Rules 2001 (Cth)
Cases cited:

Adams v Lambert (2006) 228 CLR 409

Bechara v Bates (2021) 286 FCR 166

Bechara v Bates (No 2) [2020] FCA 659

Bhagat v Global Custodians Ltd [2002] FCA 926

Carver v de Robillard [2006] FCA 1041

Compton v Ramsay Healthcare Australia Pty Ltd (2017) 256 FCR 345

de Robillard v Carver (2007) 159 FCR 38

Fuller JR, in the matter of Alford v Alford (2017) 252 FCR 168

Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71

Owners of the Ship Shin Kobe Maru v Empire Shipping Co Inc (1994) 181 CLR 404

Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256

Re Vassis; Ex parte Leung (1986) 9 FCR 518

Robson v Body Corporate for Sanderling at Kings Beach CTS 2942 (2021) 286 FCR 494

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AGLC
Bechara v Bates (No 3) [2023] FCA 1559
Case
[2023] FCA 1559
Decision Date

CaseChat Overview and Summary

In Bechara v Bates (No 3), the appellant, Ms Bechara, appealed against the orders of the primary judge which had upheld the sequestration order against her estate. The Federal Circuit and Family Court of Australia was tasked with determining the validity of the creditor's petition presented by the respondent, Mr Bates, and whether the court had the requisite jurisdiction to entertain the petition. Ms Bechara contended that the primary judge erred in his interpretation of section 43(1)(b) of the Bankruptcy Act 1966 (Cth) and in finding that Mr Bates had established the necessary requirements of subsections 43(1)(b)(i) to (iii). She argued that the subsections should be read cumulatively and not alternatively, and that the primary judge's interpretation of relevant sections was flawed.

The court considered Ms Bechara's arguments and found that the primary judge had not erred in his interpretation of the relevant sections of the Bankruptcy Act. The court held that the language of the Act and the use of the word "or" in subsections 43(1)(b)(i) to (iii) indicated that the subsections should be read alternatively. The court also found that Mr Bates had satisfied the requirements of the relevant subsections, thereby establishing the court's jurisdiction to entertain the creditor's petition. Additionally, the court held that the primary judge did not err in his analysis of evidence against rules 4.04, 4.05, and 4.06 of the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) and in finding that non-compliance with the Bankruptcy Rules was not of such a nature as to cause substantial injustice within the meaning of section 306(1) of the Bankruptcy Act.

In light of the above findings, the court dismissed Ms Bechara's appeal. The appellant was ordered to pay the respondent's costs of the appeal, with such costs to be paid out of the appellant's estate in accordance with the priority in section 109(1)(a) of the Bankruptcy Act 1966 (Cth). The respondent was given the opportunity to file an application for payment of his costs to be assessed as a lump sum, with specific requirements outlined in the court's orders. If the parties were unable to agree on the appropriate order as to costs, the court would decide the matter on the papers unless a party requested an oral hearing.

Orders

Orders of the court

1. The appeal is dismissed.

2. The appellant is to pay the respondent’s costs of the appeal, with such costs to be paid out of the appellant’s estate in accordance with the priority in s 109(1)(a) of the Bankruptcy Act 1966 (Cth).

3. On or before 8 January 2024 the respondent is to file any application for payment of his costs to be assessed as a lump sum together with an affidavit in support, in accordance with paragraphs 4.10 to 4.12 of the Costs Practice Note (GPN-Costs), and submissions, not exceeding three pages in length.

4. In the event that an application is filed by the respondent in accordance with Order 3 above:

(a) the parties are to confer and on or before 15 January 2024 provide the Associate to Markovic J proposed consent orders as to costs; or

(b) if the parties are unable to agree on the appropriate order as to costs, on or before 22 January 2024 the appellant is to file and serve any affidavit in response, in accordance with paragraphs 4.13 to 4.14 of the Costs Practice Note (GPN-Costs), and her submissions, not exceeding three pages in length.

5. In the event that the parties are unable to agree on the appropriate order as to costs, unless a party requests an oral hearing, the question of costs will be dealt with on the papers.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The reasons for making the orders now the subject of appeal are found in three decisions of the primary judge: (1)reasons published on 5 August 2021: see Bates v Bechara (No 2) [2021] FCCA 1809 (first judgment or PJ1); (2)reasons published on 15 October 2021: see Bates v Bechara (No 3) [2021] FedCFamC2G 155 (second judgment or PJ2); and(3)reasons published on 30 November 2021 in relation to costs: see Bates v Bechara (No 4) [2021] FedCFamC2G 304 (costs judgment).HISTORY OF THE PROCEEDING The troubled procedural history of this proceeding leading up to its remittal to the Federal Circuit Court can be found in the reasons of Allsop CJ in Bechara v Bates (No 2) [2020] FCA 659 and of a Full Court of this Court in Bechara v Bates (2021) 286 FCR 166 (Allsop CJ, Markovic and Colvin JJ) (Bechara (FCAFC)). The relevant facts for the purpose of the appeal are set out below. On 11 December 2015 bankruptcy notice no. BN 186864 claiming the sum of $127,936.91 arising from judgments of the Local Court of New South Wales and Supreme Court of New South Wales was issued by the Official Receiver on behalf of Mr Bates and served upon Ms Bechara. On 30 December 2015 Ms Bechara applied to set aside the bankruptcy notice. That application was dismissed by a registrar on 5 April 2016 (5 April 2016 Order). On 7 April 2016 Mr Bates presented a creditor’s petition which was amended on 17 May 2016 to reflect a new hearing date, in accordance with orders made by a registrar on 13 May 2016. The creditor’s petition stated:1.The respondent debtor owes the applicant creditor the amount of $127,936.91 for nonpayment of judgment sums ordered against the respondent debtor in finalised Local Court proceedings No 2014/00159095 and finalised Supreme Court proceedings No 2015/00115082, as per final judgment given by the General Division of the Local Court of NSW in Sydney on 20 March 2015 and 2 April 2015, and final judgment given by the Common Law Division of the Supreme Court of Sydney on 18 November 2015, plus the interest accrued since date of judgments.2.The applicant creditor does not hold security over the property of the respondent debtor. 3.At the time when the act of bankruptcy was committed, the respondent debtor:(a)was ordinarily resident in Australia;(b)had a dwelling house or place of business in Australia;(c)was carrying on business in Australia either personally or by an agent or manager;4.The following act of bankruptcy was committed by the respondent debtor within 6 months before presentation of this petition:The respondent debtor failed to comply on or before 5 April 2016 (being the extended date for compliance) with the requirements of a bankruptcy notice served on her on 16 December 2015 or to satisfy the Court that she had a counter-claim, set-off or cross demand equal to or more than the sum claimed in the bankruptcy notice, being a counter-claim, set-off or cross demand that she could not have set up in the action in which the judgment referred to in the bankruptcy notice was obtained. 5.The applicant creditor provides the following information, to the extent it is known to the applicant creditor, for use by the Australian Financial Security Authority:(a)the registered business name of the respondent debtor is Bechara & Company(b)the business address of the respondent debtor is Suite 216, 303 Castlereagh Street, HAYMARKET NSW 2000.

Ratio Decidendi

Legal Principle Established

Rule 4.06 of the Bankruptcy Rules is titled “Additional affidavits to be filed before hearing”. It relevantly provides:(1)Before the hearing of a creditor’s petition, the applicant creditor must comply with this rule.(2)The applicant creditor must file an affidavit that:(a)states that the documents required to be served under rule 4.05 have been served, and when and how they were served; and (b)has attached to it a copy of the documents that were served and proof of service in relation to the documents. CONSIDERATION I address each category of error alleged by Ms Bechara (summarised at [48] above) in turn below.Jurisdiction The first category of error alleged by Ms Bechara concerns the question of whether the Federal Circuit Court had jurisdiction to entertain the creditor’s petition presented by Mr Bates. Ms Bechara’s challenge to the primary judge’s reasons is two-fold: first, she contends that the primary judge erred in his construction of s 43(1)(b) of the Bankruptcy Act; and secondly, she contends that the primary judge erred in finding that Mr Bates had established each of the requirements of subss 43(1)(b)(i), (ii) and (iii) of the Bankruptcy Act.The construction of s 43(1)(b) of the Bankruptcy Act Ms Bechara submits that the primary judge fell into error because Mr Bates, as creditor, did not establish a prima facie entitlement to the making of a sequestration order on the bases relied upon in paragraph 3 of his creditor’s petition. This was because the Federal Circuit Court could not have been satisfied on the balance of probabilities that Ms Bechara: (1)was ordinarily resident in Australia; and (2)had a dwelling house in Australia; and (3)had a place of business in Australia; or (4)was carrying on business in Australia personally or by an agent or by an agent or manager, when the act of bankruptcy occurred on 5 April 2016. Ms Bechara contends that s 43(1)(b) of the Bankruptcy Act requires each aspect of paragraph 3 of the creditor’s petition to be proved and that the legislation makes it clear, by inserting the word “or” at various points, that paragraphs 3(a), (b) and (c) of the creditor’s petition are cumulative and not alternative. At the heart of this submission is Ms Bechara’s contention that the proper construction of s 43(1)(b) of the Bankruptcy Act requires subss 43(1)(b)(i) to (iii) to be read cumulatively and not alternatively. To that end, Ms Bechara submits that: the decision in Re Mendonca is not binding on this Court; this Court ought to reconsider the decision in Re Mendonca as it misreads the language in s 43(1)(b) of the Bankruptcy Act to arrive at an unnaturally narrow construction of what the legislation is intended to mean; and if the legislature had intended the requirements of s 43(1)(b) to be read alternatively then it would have used the word “or” at the end of each subsection. She submits that instead the legislature inserted the word “or” sparingly at the end of s 43(1)(b), between subs (iii) and subs (iv), “for a reason”, without further explanation.