Bowles v Stratton (No.2)
[2016] FCCA 1064
•6 May 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BOWLES v STRATTON (No.2) | [2016] FCCA 1064 |
| Catchwords: BANKRUPTCY – Creditor’s petition – Family Court costs order basis for bankruptcy notice and petitioning creditor’s debt – cross-claim in State court on foot – no “other sufficient cause” – sequestration order made. |
| Legislation: Bankruptcy Act 1966, ss.33, 43, 52, 52(1), 52(2), 52(2)(a), 52(2)(b), 52(5) Federal Court of Australia Act 1976 (Cth), s.25(1AA)(a) |
| Cases cited: Cain v Whyte (1933) 48 CLR 639 Federal Commissioner of Taxation v Cumins (2008) 101 ALD 78 Re Lewin; Ex parte Milner (1986) 11 FCR 312 Re Verma; Ex parte Deputy Commissioner of Taxation (1984) 4 FCR 181 Russell v Polites Investments Pty Ltd [2012] FCA 11 Rozenbes v Kronhill (1956) 95 CLR 407 Stratton v Bowles (No 2) [2015] FCA 43 |
| Applicant: | ROBIN BOWLES |
| Respondent: | MELINDA STRATTON |
| File Number: | MLG 1528 of 2014 |
| Judgment of: | Judge Hartnett |
| Hearing date: | 11 April 2016 |
| Delivered at: | Melbourne |
| Delivered on: | 6 May 2016 |
REPRESENTATION
| The Applicant: | In Person |
| The Respondent: | In Person |
ORDERS
The interim application of the Respondent filed on 6 April 2016 is dismissed.
A sequestration order be made against the estate of Melinda Margaret Stratton.
The Applicant creditor’s costs be taxed and paid from the estate of the Respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
Order number four of the orders made on 2 October 2014 be discharged.
The Court notes that the date of the act of bankruptcy is 14 July 2014.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1528 of 2014
| ROBIN BOWLES |
Applicant
And
| MELINDA STRATTON |
Respondent
REASONS FOR JUDGMENT
These proceedings are as to a creditor’s petition filed by the Applicant on 28 July 2014. The Applicant who resides in North Fitzroy in the State of Victoria appeared at the hearing as a litigant in person. She can no longer afford legal representation in respect of this matter. The Respondent who resides in Macquarie Park in the State of New South Wales, appeared at the hearing by telephone link, at her request. She has throughout the proceedings appeared as a litigant in person. She has also throughout, stated that she is “insolvent” though that is not of itself, determinative of the creditor’s petition.
The Applicant applies to the Court for a sequestration order under s.43 of the Bankruptcy Act 1966 (Cth) (‘the Act’) against the estate of Melinda Margaret Stratton. The quantum of the debt stated in the creditor’s petition is in the sum of $14,110.85 pursuant to a costs order of the Family Court of Australia in Sydney, dated 13 September 2013, of $14,000 together with accrued interest of $110.85. A bankruptcy notice, based on this debt said to be due and owing, was served on the Respondent on 30 April 2014. There was non-compliance with that bankruptcy notice, albeit various extensions of time for compliance were granted by the Court. The relevant date of the act of bankruptcy is 14 July 2014.
Personal service of the creditor’s petition was dispensed with by order of Registrar Pringle on 26 August 2014. In order 2 of the orders made by Registrar Pringle on 26 August 2014, there was set out the means by which the creditor’s petition was to be served upon the Respondent. Order 3 of those orders provided as follows:-
“3. Service of the creditor’s petition be deemed to be effected on 11 September 2014 upon condition that the events referred to in paragraph 2 occur by 29 August 2014.”
There was compliance with order number 2 and consequently service of the creditor’s petition in this proceeding was deemed to be effected on 11 September 2014. The Respondent confirms that she has the creditor’s petition in her possession.
The Respondent filed a Form 5 notice stating grounds of opposition to application, interim application or petition (the Form 5 notice) on 15 September 2014. An affidavit sworn 9 September 2014, filed on 15 September 2014, was also relied upon by the Respondent. The grounds of opposition, as set out in the Form 5 notice, were as follows:-
“1. Ms Stratton has filed an appeal in the Family Court in Sydney: EA51 of 2013. Orders sought in this appeal include payment by Mrs Bowles to Ms Stratton of all Ms Stratton’s .costs associated with legal proceedings related to Mrs Bowles publication of the book ‘Have You Seen My Child’. This will result in a requirement that Mrs Bowles pay Ms Stratton’s debt associated with the costs order of 13 September 2013 in addition to costs related to adjournment of bankruptcy proceedings and bankruptcy proceedings.
2. The costs order of 13 September 2013 was made unjustly, it is based on wrongful dismissal (by orders made on 12 April 2013) of Ms Stratton’s orders seeking injunctions restraining publication, sale and promotion of the book ‘Have You Seen My Child’ and orders seeking that the Family Court request the AFP investigate Mrs Bowles with the view to prosecution for breach of s121 of the Family Law Act 1975 as a result of her publication of the book.
3. Ms Stratton is seeking substantial damages for aggravated defamation against Mrs Bowles for the highly defamatory content of the book she published: ‘Have You Seen My Child’. Defamation proceedings are list in the Supreme Court in Sydney: 2013/178073. Damages will exceed any interlocutory costs orders.”
The Respondent also relied on submissions dated 1 October 2014.
The creditor’s petition came before the Court for hearing on 2 October 2014. The Court upon considering the evidence before it in the proceedings, delivered ex tempore reasons for judgment and ordered as follows:-
“1. There is leave to the Applicant to amend the Creditors Petition electronically filed on 25 July 2014 and stamped with a seal of filing dated 28 July 2014 at Part 1, paragraph 4, by deleting the date of 21 May 2014 and inserting in lieu the date of 14 July 2014.
2. Re-verification and re-service of the petition so amended be dispensed with.
3. A sequestration order be made against the estate of MELINDA MARGARET STRATTON.
4. The Applicant creditor’s costs be taxed and paid from the estate of the Respondent debtor in accordance with the Bankruptcy Act 1966.
The Court notes that the date of the act of bankruptcy is 14 July 2014.”
The Court granted leave to amend the creditor’s petition pursuant to s.33 of the Act.
The Respondent appealed the orders made on 2 October 2014. That appeal proceeded before Beach J as a single Judge of the Federal Court of Australia exercising appellate jurisdiction of that Court pursuant to s.25(1AA)(a) of the Federal Court of Australia Act 1976 (Cth). His Honour determined to allow the appeal on the basis that the appellant in those proceedings (the Respondent to these proceedings) had established that, pursuant to s.52(2)(b) of the Act there was “other sufficient cause a sequestration order ought not to be made.” The exercise of my discretion had miscarried.
Section 52 of the Act is as follows:-
“(1) At the hearing of a creditor's petition, the Court shall require proof of:
(a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b) service of the petition; and
(c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
(1A) If the Court makes a sequestration order, the creditor who obtained the order must give a copy of it to the Official Receiver before the end of the period of 2 days beginning on the day the order was made.
Penalty: 5 penalty units.
Note: See also section 277B (about infringement notices).
(1B) Subsection (1A) is an offence of strict liability.
Note: For strict liability, see section 6.1 of the Criminal Code .
(2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:
(a) that he or she is able to pay his or her debts; or
(b) that for other sufficient cause a sequestration order ought not to be made;
it may dismiss the petition.
(3) The Court may, if it thinks fit, upon such terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days.
(4) A creditor's petition lapses at the expiration of:
(a) subject to paragraph (b), the period of 12 months commencing on the date of presentation of the petition; or
(b) if the Court makes an order under subsection (5) in relation to the petition--the period fixed by the order;
unless, before the expiration of whichever of those periods is applicable, a sequestration order is made on the petition or the petition is dismissed or withdrawn.
(5) The Court may, at any time before the expiration of the period of 12 months commencing on the date of presentation of a creditor's petition, if it considers it just and equitable to do so, upon such terms and conditions as it thinks fit, order that the period at the expiration of which the petition will lapse be such period, being a period exceeding 12 months and not exceeding 24 months, commencing on the date of presentation of the petition as is specified in the order.”
Beach J in his judgment of 3 February 2015 at paragraph 25 found substance to both dimensions of the appellant’s complaint that I had failed to address adequately:-
“…the appellant’s leave to appeal challenge to the Family Court’s dismissal of her injunction application, also in substance embracing leave to appeal against the Family Court costs order. It was said that this constituted a “sufficient cause” for the purposes of s 52(2)(b). Alternatively, the appellant contended that her Honour was in error in not adjourning over the petition pending the outcome of such challenge; I clarified with the appellant that she sought to raise such a ground, although the matter was not expressed with clarity, and some of the language used was more directed to the extension of time for compliance with the bankruptcy notice.”[1]
[1] Stratton v Bowles (No 2) [2015] FCA 43, [25].
On 3 February 2015 orders made in the Federal Court of Australia provided as follows:-
“1. Paragraphs 3 and 4 of the orders of Judge Hartnett made on 2 October 2014 in Federal Circuit Court proceeding MLG 1528 of 2014 be set aside.
2. The respondent’s creditor’s petition filed on 28 July 2014 be remitted to her Honour for redetermination in accordance with these reasons.
3. The costs of the hearing before her Honour on 2 October 2014 be reserved to her Honour for further determination.
4. There be no order as to the costs of this appeal.”
Following the remittal of the creditor’s petition to the Court, and to me personally, the further hearing of the petition was adjourned on more than one occasion by the Court, whilst the Court awaited the handing down of the Full Court of the Family Court of Australia appeal decision in matter number EA 51 of 2013. The Court was mindful of the reasons for judgment of Beach J of 3 February 2015 and in particular paragraph 51 thereof which was relevantly as follows:-
“…Indeed, it may be that her Honour in the first instance merely adjourns the further hearing of the petition until the outcome of the Family Court challenge is known, perhaps on the undertaking by the appellant to prosecute that challenge with all due diligence.”[2]
[2] Stratton v Bowles (No 2) [2015] FCA 43, [51].
On 28 August 2015 the Full Court of the Family Court of Australia made the following orders:-
“(1) That within 14 days of the date of these orders, the second respondent to appeal EA 51 of 2013:
(a) shall file with the Eastern Region Appeal Registrar a written undertaking (in a form acceptable to the Registrar) that she will use her best endeavours to remove from the internet the book … and that she will not in future publish or permit to be published in any manner (including on the internet) that book; and
(b) serve copies (endorsed as to the date of service) of that undertaking on the appellant and on the solicitor for the first respondent.
(2) Within 14 days of the date of service of a copy of the undertaking referred to in Order 1 of these orders on the appellant, she shall lodge with the Registry Manager of the Sydney Registry of the Family Court of Australia the sum of $12,000 to be held as security for any costs awarded to the second respondent in relation to Appeal EA 51 of 2013.
(3) In the event that the appellant fails to lodge the security provided for in Order 2 of these orders, then Appeal EA 51 of 2013 in so far as it is directed to, or affects, the second respondent to the appeal shall stand dismissed.”
The Applicant (in these proceedings) and Second Respondent to appeal EA 51 of 2013 complied with order number 1 of the orders made on 28 August 2015 as set out in paragraph 13 above. The Respondent (in these proceedings) and appellant in appeal EA 51 of 2013 did not comply with order number 2 therein. She filed a further application.
On 17 September 2015, in response to a stay application filed by the Respondent, the Full Court of the Family Court of Australia made the following orders in matter number EA 51 of 2013:-
“1. The operation of Orders 2 and 3 of the orders made by the Full Court on 28 August 2015 be stayed pending the disposition by the High Court of the application for special leave to appeal those orders filed 10 September 2015.
2. (a) Notwithstanding the provisions of Order 2 of the orders made by the Full Court on 28 August 2015, in the event that the application for special leave to appeal those orders is refused by the High Court, then the applicant-appellant, Ms Stratton, will have fourteen days from the date of the decision of the High Court, to lodge with the Registry Manager of the Sydney Registry of the Family Court of Australia the sum of $12,000 to be held as security for any costs awarded to the second respondent in relation to Appeal EA 51 of 2013.
(b) In the event that the applicant-appellant fails to lodge the security provided for in Order 2(a) of these orders, then Appeal EA 51 of 2013 in so far as it is directed to, or affects, the second respondent to the appeal, shall stand dismissed.
3. The application in an appeal filed 9 September 2015 be otherwise dismissed.
4. There be no order for costs in relation to the application in an appeal filed 9 September 2015.”
On 17 December 2015 the High Court of Australia refused the Respondent’s special leave application filed on 10 September 2015. The reasons in matter number S183/2015 were as follows:-
“1. The applicant and the first respondent were parties to parenting proceedings in the Family Court of Australia. In the course of those proceedings, the applicant applied for injunctions to restrain the ongoing publication of an electronic book which discussed events associated with the parenting proceedings and for related orders. The application was brought against the first respondent and the second respondent, who had written the book. The Family Court of Australia (Loughnan J) dismissed the application.
2. The applicant appealed to the Full Court of the Family Court. The second respondent filed an application for security for costs in the sum of $12,000 and proffered an undertaking to use her best endeavours to have the book removed from the internet and not to publish the book in future. The Full Court (Bryant CJ, Finn and Strickland JJ) ordered that the applicant pay security for costs within 14 days of being served with the second respondent's undertaking, and that the appeal be dismissed as regards the second respondent if the applicant failed to do so.
3. The applicant now seeks special leave to appeal from the orders of Full Court. The applicant does not have legal representation. The application therefore falls to be dealt with under r 41.10 of the High Court Rules 2004 (Cth).
4. We would refuse special leave. The proceedings below involved questions of practice and procedure which were resolved by the Full Court through the application of well-settled principles. The proposed appeal to this Court would enjoy no prospect of success. The application is dismissed.
5. Pursuant to r 41.10.5, we direct the Registrar to draw up, sign and seal an order dismissing the application.”
No security for costs as ordered in the Full Court of the Family Court of Australia on 17 September 2015 (see order number 2(a) as contained in paragraph 15 herein) has been lodged by the Respondent in the Sydney Registry of the Family Court of Australia. Nor, as the Respondent conceded, shall any sum be lodged by her. The Respondent remains insolvent. Accordingly the Respondent’s appeal in proceedings EA 51 of 2013 is dismissed.
Despite the above described litigation outcomes, the Respondent filed, on 24 December 2015, and in the general registry of the Family Court of Australia, it being a date when the Applicant asserts the Eastern Region Appeals Registry Sydney was closed, an application dated 23 December 2015. The orders sought by the Respondent were as follows:-
“1. That Order 2(b) of Orders made on 17 September 2015 is stayed pending the results of my reinstatement application to reinstate appeal EA51 of 2013 in respect of the second respondent
2. That appeal EA51 of 2013 in respect of the second respondent is reinstated and listed for hearing as soon as possible”
The Applicant first became aware of the reinstatement application in January 2016, when the Respondent told the Supreme Court of New South Wales, in proceedings she has instituted in that Court, to which I shall return, that she had made a further application in the Family Court of Australia. The Applicant’s response is that the Respondent is engaging in an “abuse of process”. The Applicant will not participate further in applications filed by the Respondent in the Family Court of Australia.
The Respondent filed, on 6 April 2016, an interim application in these proceedings in which she sought interim orders as follows:-
“The applicant seeks the following interim orders:
1. Stay of the 11 April 2016 hearing of the application to enforce the 28 July 2014 creditors petition pending the hearing of this application for a stay of those proceedings.”
The Respondent also sought final orders as follows:
“1. A permanent stay of proceedings related to the Creditors Petition filed 28 July 2014 due to abuse of process.
2. Costs.”
The interim application was short served upon the petitioning creditor but the Court allowed the interim application to proceed on the 11 April 2016. The Respondent, relied upon her earlier affidavits sworn 9 September 2014 and 10 June 2014 and a further affidavit filed by her on 6 April 2016, together with submissions dated 8 April 2016.
For completeness sake I note that in the Respondent’s submissions dated 8 April 2016, at the end of those submissions, the Respondent included the following:-
“38. My orders sought as stated in my Application posted to the Federal Circuit Court and Mrs Bowles were misrepresented in the sealed application returned to me. My orders sought regarding my application to stay the proceedings being heard on 11 April 2016 are as follows:
A. FINAL ORDERS SOUGHT BY APPLICANT
On the grounds stated in the supporting affidavit or statement of claim, the applicant seeks the following orders:
1. A permanent stay of proceedings related to the Creditors Petition filed 28 July 2014
2. Costs.
3. In the alternative, the hearing of the Creditors Petition be adjourned until the appeal EA51 of 2013 has been determined.
4. Order restraining Mrs Bowles from filing any further applications in the Bankruptcy Court related to the creditors petition whilst the above orders are in force.
B. INTERIM ORDERS SOUGHT BY APPLICANT
The applicant seeks the following interim orders:
1. Adjournment of the 11 April 2016 hearing of the Creditors Petition pending a hearing of the application for a permanent stay of proceedings.
2. Adjournment of the 11 April 2016 hearing of the Creditors Petition pending determination of appeal EA51 of 2013.”
The Applicant in the creditor’s petition relied upon an affidavit of debt sworn by the Applicant on 31 March 2016 and an affidavit of search sworn by the Applicant on 11 April 2016. The proceedings were stood down to allow the Respondent the opportunity to have that document emailed to her so that she could read, and address, same.
Part 2 of the creditor’s petition contains the affidavit verifying the creditor’s petition sworn on 18 July 2014 by the Applicant. In addition, the Applicant relied upon the affidavit sworn by Amanda Mason, filed 28 July 2014, verifying paragraph 4 of the creditor’s petition.
The Applicant also relied upon submissions filed by her on 8 April 2016, an affidavit of Caitlin Bowden sworn 24 September 2014 and filed 24 September 2014, and an affidavit sworn and filed by Ms Bowles on 15 June 2015.
The life of the creditor’s petition has been extended within the 12 month period pursuant to s.52(5) of the Act by an order made on 18 June 2015 with the Court considering it just and equitable to do so.
Consideration
At the hearing on 11 April 2016, the Applicant again tendered evidence to establish those matters which the Court required proof as to pursuant to s.52(1) of the Act. Such matters as required have been proved by the Applicant. On the hearing of the matter the Respondent did not challenge the proving of those matters and took no issue with the Court's indication to her that it was satisfied as to that evidence.
Like the earlier hearing on 2 October 2014, the creditor’s petition and whether there ought be a sequestration order or not revolved around those matters required under s.52(2) of the Act which the Respondent has the onus of establishing. Both parties accepted that the central issue for the Court was a consideration of those matters of which the Court can be satisfied by the Respondent debtor, as set out in ss.52(2)(a) and (b) of the Act.
In relation to the question of whether the Respondent is able to pay her debts (s.52(2)(a)), the Respondent put forward no evidence to indicate that she was able to do so. Indeed, her evidence before the Court was that she remains the holder of a pension card and on Centrelink benefits. She has a substantial excess of liabilities over assets which since the 2 October 2014, has only increased in quantum. She again indicated to the Court that she was insolvent, and makes no challenge to the Court concluding that is the case. The Respondent failed to discharge the onus of establishing the matters set out in s.52(2)(a). The Court notes however that the Respondent has a Master of Business Administration and is pursuing further University qualifications such that she may well in the future years, be able to repay some part or all of her debt due to the Applicant.
The principle issue before the Court remains that which it was on the last occasion, namely, that as set out in s.52(2)(b) of the Act.
The Respondent puts before the Court the following matters:-
a)that she has filed an application for reinstatement of proceedings number EA 51 of 2013 in the Family Court of Australia. Thus the creditor’s petition should be adjourned pending the determination of that application; and
b)that she has a substantial damages claim for defamation against the Respondent, which claim if substantiated will exceed the quantum of the Family Court costs order together with accrued interest owed by her to the Applicant. Thus, the creditor’s petition should be adjourned pending the determination of the defamation proceedings in the New South Wales Supreme Court.
A petitioning creditor has a “prima facie right” to a sequestration order once proof of the matters required by s 52(1) has been satisfied (Federal Commissioner of Taxation v Cumins (2008) 101 ALD 78 (Cumins) at [14] per Gilmour J; Cain v Whyte (1933) 48 CLR 639 (Cain v Whyte) at 646 and 648, the Court agreeing with Henchman J; Russell v Polites Investments Pty Ltd [2012] FCA 11 (Russell v Polites) at [23]-[24] per Flick J; Rozenbes v Kronhill (1956) 95 CLR 407 at 414 per Dixon CJ and Webb and Fullagar JJ). Nevertheless, there is a discretion to refuse such an order for inter alia “other sufficient cause” (s 52(2)(b)).
In paragraph 30 of His Honour Beach’s J reasons His Honour said:-
“even if “other sufficient cause” has been shown, that merely enlivens the Court’s discretion to refuse to make a sequestration order. The power in s 52(2) is permissive, not mandatory. Even if a debtor can bring himself or herself within s 52(2)(b), that does not entitle him or her to have a sequestration order refused (Russell v Polites at [24] per Flick J).”
In the exercise of my discretion, I determine earlier in time, but with not sufficient consideration of the issues in that ex tempore judgment as determined by the appeal Court, that the Respondent’s Family Court of Australia proceedings did not establish “other sufficient cause”. Having now awaited the outcome of the proceedings both in that Court, and the High Court of Australia it is apparent that the Respondent’s applications in respect of the debt due and owing are at an end. Her reinstatement application will in all probability be struck out, dismissed or stayed. Her claims to have a genuine, arguable and meritorious case cannot be accepted given the conclusion of the litigation in the High Court of Australia and her failure to lodge the requisite security for costs payment. The mere fact that the Respondent has chosen to lodge a further application does not without more require the Court to stay the creditor’s petition hearing (Cumins at [14] per Gilmour J) or defer the making of a sequestration order. In the circumstances of this case, that outcome would be an extraordinary injustice to the Applicant. The application for reinstatement must be considered as vexatious.
The existence of a cross-claim
On 11 June 2013, the Respondent filed a statement of claim for defamation and aggravated defamation against a number of defendants, one of whom was Ms Bowles.
On the evidence before the Court, looking to matters as they now exist, the Court determines that the Respondent has not established that her defamation claim is reasonably arguable factually and legally as discussed below.
The judgment debtor must point to grounds having “a real chance of success on appeal” (Re Lewin; Ex parte Milner (1986) 11 FCR 312 at 318 per Pincus J). Mere assertion is not sufficient. The onus is on the judgment debtor to establish the substantial nature of the grounds of challenge (Re Verma; Ex parte Deputy Commissioner of Taxation (1984) 4 FCR 181 at 187-8 per Beaumont J; Cumins at [18] per Gilmour J).
As to the existence of a cross-claim in this instance His Honour Beach J said as follows:-
38. The existence of a cross-claim (in the present case, the appellant’s defamation proceedings against the respondent in the NSW Supreme Court) may be a “sufficient cause” if the claim, if successful, well exceeds the judgment debt.
39. An important distinction is to be made between a cross-claim which is likely to succeed and a cross-claim which is a bona fide and reasonably arguable claim, but where it is not established by the judgment debtor that it is likely to succeed. In the former case, where it is established that the claim is likely to succeed, such a claim may warrant the refusal of a sequestration order (Rigg v Baker at [66] per French J; Singh v Deputy Commissioner of Taxation [2011] FCA 889 (Singh) at [14] per Collier J). In the latter case, only a basis for adjourning the creditor’s petition may be established, but the refusal of a sequestration order may not be justified (Rigg v Baker at [66] per French J).
40. There is a theoretical question. If you have the latter case, do you establish a “sufficient cause” at all? Some authorities suggest that you do not and that only cases in the former category fit within s 52(2)(b) (St George Bank Ltd v Helfenbaum [1999] FCA 1337 at [13] per Sundberg J; ICM Agriculture Pty Ltd v Young (2009) 260 ALR 515; [2009] FCA 1169 at [85] per Lindgren J; Hilellis v Mobil Oil Australia Ltd [2000] FCA 1139 at [8] per Hely J; Singh at [14] per Collier J; Totev v Sfar (2008) 167 FCR 193 at [85]-[87] per Cowdroy J). In my view, these authorities support what was said in Rigg v Baker that cases in the former category support a refusal of a sequestration order, whereas cases in the latter category support only an adjournment of the petition. In such a case, a “sufficient cause” has not been shown. The discretion to adjourn does not then arise under s 52(2), but rather arises more generally as to when the petition should be decided. In any event, there is little doubt that one way or the other the discretion to adjourn arises in the latter case (Re Schmidt; Ex Parte Anglewood Pty Ltd (1968) 13 FLR 111 at 116 per Gibbs J).
41. The present case falls in the latter category at most.
42. Finally, it should be said that a judgment debtor does not establish a bona fide and reasonably arguable claim by merely producing a statement of claim in a separate proceeding or by pointing to such litigation. There must be sufficient evidence or other material to show that it satisfies both criteria to justify an adjournment; to demonstrate that it is reasonably arguable or of substance may require prima facie verification of the key factual elements as well as demonstrating legal tenability.”[3]
[3] Stratton v Bowles (No 2) [2015] FCA 43, [38] – [42].
The relevant evidence placed before the Court by the Respondent is very limited. A Notice of Motion has been filed in the NSW Supreme Court Case number 2013/178073 which is listed for hearing on 13 May 2016. That Notice seeks orders that the proceedings be struck out as against the First Defendant or in the alternative the proceedings be permanently stayed as against the First Defendant. The Applicant is not the First Defendant. The Respondent in these proceedings has been ordered to provide discovery of documents on 11 December 2015 and 18 March 2016 as asserted by the Applicant and has failed to do so to date. The Respondent is instead seeking to stay the operation of any such orders until after the Applicant in these proceedings provides answers to her interrogatories. The Applicant’s evidence is that that the Respondent “has initiated the proceedings for improper motives”.
The Applicant further deposes:-
“d. On the grounds of proportionality, the publication cannot be demonstrated to cause her damage (Bleyer v Google [2014] 88 NSWLR 670 at [57]). In those proceedings, McCallum J stated: ‘Once it is recognised that proportionality between the resources required to determine a claim and the interest at stake is relevant to the exercise of the court’s procedural powers, it is a small and logical step to conclude that there will be cases in which the disproportion is so vast as to warrant the stay or dismissal of the proceedings.’
e. Only about 30 downloads of the publication have been demonstrated. My costs to date in those proceedings exceed $87,000. (Attachment 3 3) Expected additional costs are likely to be $130,000 if the case proceeds to trial. If the respondent received any damages they would be nominal, much less than my costs in running the case so far, which have, save about $3,000, been awarded against her.
…
j. The respondent has provided no evidence that her ‘cross claim’ is likely to succeed. It is not a bona fide and reasonably arguable claim and it is one that has been brought for improper purposes.”[4]
[4] Applicant’s affidavit of final debt filed on 31 March 2016, [12].
The Court cannot be satisfied on the evidence before it that the defamation proceeding instituted by the Respondent against the Applicant is likely to succeed. Whilst the proceedings currently remain on foot, the progress of same and ultimate outcome is impossible to discern on the material before the Court. The creditor’s petition will expire, even with further extensions of time, on 27 July 2016. No adjournment is practicable even were it established by the Respondent, which it is not, that there was sufficient evidence or other material to justify any such adjournment. Further, even were it established by the Respondent, which it is not, that she had satisfied s.52(2)(b) of the Act, in the exercise of the Court’s discretion a sequestration order in the circumstances of this proceeding would nevertheless be made.
Finally, the costs order made against the estate of the Respondent on 2 October 2014 was, on appeal reserved for further determination by me. Given the remittal of the proceedings and in the exercise of my discretion, I shall discharge the earlier costs order made on 2 October 2014.[5]
[5] Bankruptcy Act 1958 (Cth), ss. 32, 37.
I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of Judge Hartnett
Associate:
Date: 6 May 2016
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