Chief of Army v Rana (No.2) - [2008] FMCA 1134

FEDERAL MAGISTRATES COURT OF AUSTRALIA

CHIEF OF ARMY v RANA (No.2)

[2008] FMCA 1134

BANKRUPTCY – Sequestration order being sought – opposition to making of order for “sufficient cause” – stay.

Bankruptcy Act 1966, ss.41(1), 52(1) and 52(2)(b)
Federal Court of Australia Act 1976 (Cth), s.31A

Bayne v Blake (No 2) (1909) 9 CLR 360
Commissioner of Taxation v Cumins [2008] FCA 353
Radich v Bank of New Zealand (1993) 45 FCR 10
Rana v Chief of Army [2008] FMCA 518
Ranjit Shamsher Jung Bahadur Rana v Chief of Army [2008] HCASL 402 A7/2008
Re LHF Wools Ltd [1970] Ch 27
Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111
Williams v Spautz (1992) 174 CLR 509

Applicant:

CHIEF OF ARMY

Respondent:

RANJIT SHAMSHER JUNG BAHADUR RANA

File Number:

ADG 20 of 2008

Judgment of:

Simpson FM

Hearing date:

15 May 2008

Date of Last Submission:

15 May 2008

Delivered at:

Adelaide

Delivered on:

13 August 2008

REPRESENTATION

Counsel for the Applicant:

Mr S. Doyle

Solicitors for the Applicant:

Australian Government Solicitor

The Respondent:

In Person

ORDERS

A sequestration order be made against the estate of Ranjit Shamsher Jung Bahadur Rana.
The applicant creditor’s costs (including any reserved costs) be taxed pursuant to the Federal Court Rules and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
The Court notes that the date of the act of bankruptcy is 31 July 2007.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
ADELAIDE

ADG 20 of 2008

CHIEF OF ARMY

Applicant

And

RANJIT SHAMSHER JUNG BAHADUR RANA

Respondent

REASONS FOR JUDGMENT

I have before me a Creditor’s Petition seeking a sequestration order in relation to the estate of the respondent Ranjit Shamsher Jung Bahadur Rana. Having read the affidavit material relied upon by the applicant I am satisfied that the debtor committed the act of bankruptcy alleged in the petition. I am also satisfied with the proof of the other matters required by s.52(1) of the Bankruptcy Act 1966 (Cth) (“the Act”).
On 1 February 2008 the respondent filed a notice of opposition and his supporting affidavit sworn the same day. On 25 February 2008 the respondent filed an amended notice of opposition, a supporting affidavit sworn on the same day and a document titled “Outline of Submission”. The respondent filed two further affidavits on 28 April 2008 and 2 May 2008, both sworn on the days that they were filed. Finally, on 8 May 2008 the respondent filed a document titled “Final Summary of Argument”. I have considered all of this material together with the respondent’s oral submissions put to the Court on 15 May 2008.
The respondent’s amended notice of opposition states as follows:
Ranjit Shamsher Jung Bahdahur Rana, debtor intends to oppose the application, interim application, petition on the following grounds:
“1. “Other sufficient cause” – claim by debtor in SAD 111 of 2007 and SAD 12 of 2008 against the applicant.
2. “Other sufficient cause” – no assets.
3. “Other suuficient (sic) cause” – abuse of process.
4. Stay of proceedings – appeal pending.
An affidavit supporting the grounds of opposition is filed with this notice.”
The amended notice in conjunction with the respondent’s affidavits, outline of submission and final summary of argument documents lead me to conclude that the respondent’s grounds of opposition to the making of the sequestration order are as follows:
a)The respondent has two sets of proceedings that are currently before the Court being actions SAD 111 of 2007 and SAD 12 of 2008 that justify the Court concluding that there is “sufficient cause” within the meaning of s.52(2)(b) of the Act to decline to make the order at this stage;
b)The respondent has no assets and there is therefore a lack of utility to the making of a sequestration order which again provides “sufficient cause” to decline to make the order;
c)These proceedings are an abuse of process and there is therefore “sufficient cause” to decline to make the order; and
d)There should be a stay of these proceedings whilst the respondent’s application to the High Court is disposed of.
In his final summary of argument document the respondent correctly states the legal position that applies where a court is asked to decide whether or not there is sufficient cause to decline to make a sequestration order. The respondent refers to the well known passage from Cain v Whyte (1933) 48 CLR 639 at 646;
“Prima facie, on proof of the matters mentioned in s.52(1), the Court will proceed to make an order for sequestration, and it is for the debtor to show some cause overriding the interests of the public in stopping of unremunerative trading, and the rights of the individual creditors who are unable to get their debts paid to them as they become due. Something has to be put before the Court to outweigh those considerations before it can be said that sufficient cause is shown against the making of a sequestration order.”
The respondent also correctly refers to a passage from McDonald, Henry and Meek, Australian Bankruptcy Law and Practice para.52.2.22 which states:
“Where the debtor seeks to establish “any other cause” for exercising the Court’s discretion to decline to make a sequestration order on the grounds of a claim against the creditor or someone else for an amount equal to or greater than the amounts the debtor owes the creditor, the debtor must show that the claim is a genuine and serious one which he or she has not reasonably been able to litigate (Re LHF Wools Ltd [1970] Ch 27) and that it is a “real claim” that is “likely to succeed”, having “sufficient validity … to justify a dismissal or adjournment of the petition”: Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 at 116.”
Although not referred to by the respondent in his final summary argument document the learned authors went on to state:
“The mere existence of an “arguable claim”, counter claim or appeal by the debtor does not, however by itself necessarily constitute “other sufficient cause” to dismiss the creditor’s petition. … In determining whether to exercise it’s discretion under s.52(2)(b), the Court “will … consider the prospects of success of [the relevant] proceedings … to the extent that this is capable of being done on the material before” the Court: Commissioner of Taxation v Cumins [2008] FCA 353 at [31] (Gilmour J).”
With this understanding of the correct legal approach to cases of “sufficient cause” I address the first of the grounds referred to earlier in these reasons.
The respondent’s legal action against the applicant and others in action number SAD 111 of 2007 was addressed by me in Rana v Chief of Army [2008] FMCA 518 in which Mr Rana made an application for review of a decision of a Registrar of the Court dismissing his application seeking the setting aside of the Chief of the Army’s bankruptcy notice. The respondent sought to have the bankruptcy notice set aside on the basis that he had three potential set-off actions, one of which was action number SAD 111 of 2007. At paragraph 18 (c) I said:
“Finally, (there is) the applicant’s proceedings against the Commonwealth of Australia – Australian Defence Force (First Respondent) and Brigadier Craig Orme as delegate of Chief of the Army (Second Respondent) in the Federal Court of Australia being Action Number SAD 111 of 2007 (“the Third Set-off Action”). This application alleges unlawful discrimination contrary to the Disability Discrimination Act 1992 (Cth) and Racial Discrimination Action 1975 (Cth) as well as the tort of negligence. The applicant’s claim alleges that the unlawful discrimination occurred in about September 2003 when the applicant sought from the first respondent a change to his army record of his discharge which stated that “retention of this soldier (is) not in the interest of Australia or the Army.” The applicant sought that this be changed to say that he had been discharged for “medical or psychiatric incapacity” which would have had the effect of strengthening his position for compensation or a pension. It is further alleged by the applicant that the second respondent discriminated against the applicant on 5 April 2005 as the second respondent denied the applicant the benefits that he sought. The tortious action against the first and second respondents alleges that, in breach of a duty of care owed, the first respondent vicariously and the second respondent as principal, breached their duty by failing to change army records relating to the applicant with the result that he did not gain the benefit of the DFRDB Act.”
Later in my reasons I said at paras.28 and 29:
“28. In relation to the Third Set-off Action, I have been provided with a copy of the Application and the Form 167 filed in the Federal Court on 11 July 2007 which attaches the applicant’s Statement of Claim and the Notice of Termination of the Human Rights and Equal Opportunities Commission (“the Commission”) dated 5 July 2007. I note that the delegate of the President of the Commission reached the conclusion that the claim should be terminated as lacking in substance.
29. I note also that the applicant’s claim involves the same factual issues which have underpinned the First and Second Set-off Claims earlier referred to, albeit that the applicant now alleges that his paranoid schizophrenia is as a result of discrimination whilst in the service of the Australian Army. Paragraphs 17 and following of the applicant’s Statement of Claim deal with the negligence claim saying that not only was the decision not to carry out the alteration to the applicant’s Army record wrong and discriminatory but that it was also done negligently. Such a claim is unlikely to succeed. The applicant has failed to convince me that his claim pursuant to the Third Set-off Action has merit.”
I have considered the further material provided by the respondent in this action together with his submissions and see no reason to change the view that I expressed in my earlier decision. On that basis I consider that the respondent’s action SAD 111 of 2007 does not provide sufficient cause to decline to make a sequestration order.
The second limb of the first ground of opposition relies on the respondent’s action SAD 12 of 2008. This was an action brought by the respondent against the University of Adelaide, the Repatriation Commission, the University of South Australia, the Australian Government Solicitor and the Chief of the Army. An application for summary judgment pursuant to s.31A of the Federal Court of Australia Act 1976 (Cth) was heard by Justice Lander and a decision given on 17 March 2008. Judgment was entered inter alia for the fifth respondent (the Chief of the Army) against the applicant (Mr Rana). In relation to the claim against the Chief of the Army His Honour had this to say:
“The proceeding against the second, fourth and fifth respondents is somewhat difficult to comprehend. The proceeding against them seems to be a complaint that they should not, or specifically the fourth respondent should not, have sent Mr Rana to be examined by Professor Goldney. There is nothing in that complaint on Mr Rana’s own evidence … the case against the fifth respondent is even harder to understand. It seems to be based on the fact that the fifth respondent, having a common solicitor with the second respondent, namely the fourth respondent would have provided with the report. I am of course not satisfied that that ever would be the case, but even if it were I cannot see how any case would be brought against the fifth respondent. In any event, the proceedings against the second, fourth and fifth respondents are derived from the claims made against the first respondent. As I have held that those claims can never succeed, then nor could the proceedings against the second, fourth and fifth respondents.”
I am informed that the respondent has appealed the decision by Lander J. Nothing in the materials that the respondent has put before me leads me to conclude that the appeal is likely to be successful or that, if successful, the respondent has a good cause of action against the Chief of the Army. I therefore do not consider that the respondent has shown other sufficient cause for declining to make a sequestration order on the basis of his proceedings being action SAD 12 of 2008.
The second ground of appeal that I have identified above suggests that the fact that he has no assets provides other sufficient cause for this Court to decline to make a sequestration order. Courts are reluctant to exercise their discretion to refuse a sequestration order on this ground since “it may only be after sequestration, with a full examination by a trustee in bankruptcy, that including possible public examination of the bankrupt and other persons, that assets come to light”. (See Radich v Bank of New Zealand (1993) 45 FCR 101 at 112) Radich’s case is also authority for the proposition that it is important for Courts to ensure that people do not deliberately contrive to avoid bankruptcy by alleging destitution or ridding themselves of their assets.
The onus of proving that the respondent has no assets lies on the respondent. It is a heavy onus. It would generally speaking not be discharged merely by evidence by the debtor asserting a lack of assets. The mere fact that there are no reasons for suspecting that the debtor has any assets is not a ground for refusing to make a sequestration order. (see Bayne v Blake (No 2) (1909) 9 CLR 360 at 364-5) The respondent has not convinced me that he is totally without assets. Annexed to his affidavits are numerous documents showing that he has taken legal proceedings claiming substantial damages. The documents show that on a number of occasions the respondent has managed to settle his action with the payment of money to himself. I do not believe that the respondent is totally without assets. The respondent has not satisfied me that this is a proper basis for declining to make a sequestration order.
The respondent’s third ground of appeal that I have identified above relies upon alleged abuse of process. The respondent suggests in his document titled “Final Summary of Argument” that the applicant is using these bankruptcy proceedings “contrary to public policy to extract money what the debtor got in the deeds (sic)”. He alleges that he has been intimidated by the applicant’s process servers by applying “psychological coercion that is collateral attack of those deeds (sic)”. He then alleges that the applicant’s real intention of these proceedings has been to exert pressure which has been criminal as he has been assaulted by the applicant’s process server. The applicant denies the allegations made by the respondent.
The respondent has a very high hurdle to overcome to establish abuse of process as a ground for declining to make a sequestration order. The onus of establishing abuse of process lies on the person alleging the abuse. (See Williams v Spautz (1992) 174 CLR 509 at 529.8 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ).
The respondent had earlier alleged abuse of process in relation to the issuing of the bankruptcy notice. I addressed this matter in the respondent’s application to set aside the bankruptcy notice on this and other basis in Rana v Chief of Army [2008] FMCA 518 at paras. 12, 13 and 14. I found that there was no evidence in the numerous affidavits filed by the applicant in those proceedings that could lead to the inference that the bankruptcy notice was issued for an improper purpose. The affidavits that the respondent has filed in these proceedings does not take the matter any further. The respondent here relies upon the same basis for alleging abuse of process as was relied upon in relation to his application to have the bankruptcy notice set aside. I do not see any basis for declining to make a sequestration order on the ground of abuse of process by the applicant.
Finally, in the respondent’s amended notice of opposition, the respondent seeks a stay of these proceedings pending his application for special leave to appeal to the High Court. The respondent helpfully annexed his application for special leave to appeal to his affidavit filed on 28 April 2008. The application for special leave sought to have the judgment of the Full Federal Court of Australia given on 12 May 2006 set aside. The grounds were as follows:
“1. All the decisions are tainted with fraud as Brigadier Orme indicated adjustment disorder was not reactive depression, and that adjustment disorder was not diagnosed at the time of the applicant’s discharge. Such reactive discharge (sic) did not warrant the applicant to be discharge on psychiatric grounds “but for” the applicant going absent without leave for final full medical board and frustrating the due process.
2. Brigadier Orme has discriminated against the applicant contrary to ss. 5, 6, 10 and 39 of the Disability Discrimination Act 1992 (Cth) in terms of s.29 (Commonwealth laws and programs) and has caused him a detriment. This issue will be sought per R v Crompton as decided by the High Court, as it was not raised before the lower courts before.”
At the time that I heard argument in relation to this issue the High Court had not dealt with the application for special leave. It was put on behalf of the applicant that the respondent’s application for special leave to appeal did not have a reasonable prospect of success. This was shown to be correct: On 16 July 2008 the High Court comprising Gleeson CJ and Heydon J ordered that the application for special leave to appeal from the judgment of the Full Court of the Federal Court of Australia given and made on 12 May 2006 be dismissed. Brief reasons were given (see Ranjit Shamsher Jung Bahadur Rana v Chief of Army [2008] HCASL 402 A7/2008) The application for a stay should be refused.
During submissions the respondent appeared to raise a further basis for exercising a discretion not to make a sequestration order. The respondent’s argument was that the bankruptcy notice that the petition relies upon only includes one of two orders for costs that the applicant obtained against the respondent. The bankruptcy notice was based upon a costs order of Mansfield J made on 14 September 2005 which was taxed in the sum of $7,582.86. The respondent says that a further costs order was obtained against him by the applicant and that the total of these two judgment debts was $8,166.36. He submits that there is therefore an understatement of $583.50. The fact that the respondent owed the applicant two debts for costs, both of which it was entitled to pursue either separately or in the one bankruptcy notice, does not assist the respondent to resist the sequestration order being sought. The bankruptcy notice was not defective as the applicant is not obliged to include all debts in its bankruptcy notice. Section 41(1) of the Act specifically provides that a bankruptcy notice may be for one final judgment or two or more final judgments. It does not require that where a creditor obtains more than one judgment against a debtor that the bankruptcy notice be for all those final judgments.
For the above reasons I consider it appropriate to make the sequestration order sought. I make the orders to be found at the beginning of these reasons.

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Simpson FM

Associate: J. Semler

Date: 13 August 2008