Commonwealth Bank of Australia Ltd v Jordanou
[2018] FCCA 2972
•24 October 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| COMMONWEALTH BANK OF AUSTRALIA LTD v JORDANOU | [2018] FCCA 2972 |
| Catchwords: BANKRUPTCY – Review of a registrar’s sequestration order – judgment debt obtained in a state court – debtor declined to give evidence – petitioning creditor’s debt proved – merits of debtor’s counterclaim against petitioning creditor not tested – bankrupt wanted to go behind judgment – principles on impeaching a judgment – finality of litigation – interests of third parties – relation back principle – application for review dismissed. |
| Legislation: Bankruptcy Act 1966, s.52. |
| Cases cited: Ali v Retail Decisions Pty Ltd [2012] FCA 1130 Compton v Ramsay Health Care Australia Pty Ltd (2016) 246 FCR 508 Corney v Brien (1951) 84 CLR 343 Garcia v National Australia Bank Ltd (1998) 194 CLR 395 In re Flatau; Ex parte Scotch Whisky Distillers Ltd (1888) 22 QBD 83 In re Fraser; Ex parte Central Bank of London [1892] 2 QB 633 Yerkey v Jones (1939) 63 CLR 649 |
| Applicant: | COMMONWEALTH BANK OF AUSTRALIA LTD (ACN 123 123 124) |
| Respondent: | SUZANNE JORDANOU |
| Interested Party: | MR PETER DANIEL JURATOWICH IN HIS CAPACITY AS THE TRUSTEE OF THE BANKRUPT ESTATE OF SUZANNE JORDANOU |
| File Number: | MLG 60 of 2017 |
| Judgment of: | His Honour Judge Wilson |
| Hearing date: | 9, 10 and 11 May 2018 |
| Date of Last Submission: | 6 August 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 24 October 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr B Carew |
| Solicitors for the Applicant: | HWL Ebsworth Lawyers |
| Counsel for the Respondent: | Mr D Connors |
| Solicitors for the Respondent: | Rothwell Lawyers |
| Counsel for the Interested Party: | Mr D C Harrison |
| Solicitors for the Interested Party: | SLF Lawyers |
I ORDER that the application for review of a registrar’s decision filed on 4 April 2017 is dismissed and I DIRECT that the applicant, the respondent and the trustee each file and serve any written submissions on the question of costs on which they rely by 4pm on 7 November 2018.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 60 of 2017
| COMMONWEALTH BANK OF AUSTRALIA LTD (ACN 123 123 124) |
Applicant
And
| SUZANNE JORDANOU |
Respondent
And
| PETER DANIEL JURATOWICH IN HIS CAPACITY AS THE TRUSTEE OF THE BANKRUPT ESTATE OF SUZANNE JORDANOU |
Interested Party
REASONS FOR JUDGMENT
Introduction
In this proceeding Suzanne Jordanou applied to review an order made on 14 March 2017 for the sequestration of her estate. She also sought orders adjourning the further hearing of the creditor’s petition that led to the sequestration order pending the hearing and determination of an appeal in the proceeding in the Supreme Court of Victoria that gave rise to the issue of the creditor’s petition against her.
In their briefest form, the relevant facts in this litigation may be relevantly stated, although it has been necessary to develop some of them below.
On 23 November 2016 the bank obtained judgment against Ms Jordanou for $4 510 777.96 (“the judgment debt”). On 28 November 2016 the bank served a bankruptcy notice upon Ms Jordanou with which she did not comply. She had until 19 December 2016 do so. On 12 January 2017 the bank issued a creditor’s petition against Ms Jordanou. On 14 March 2017 a sequestration order was made against Ms Jordanou’s estate.
The judgment debt in the Supreme Court of Victoria was founded on a guarantee given on 12 July 2007 by Ms Jordanou in favour of the bank (“the guarantee”). It related to a loan facility provided by the bank to Watermark Developments Pty Ltd (“WD”). Ms Jordanou said she had been appointed as a director of WD by her husband from whom she was estranged and that she took no part in the business carried on by WD. She said that until the bank made a demand under the guarantee she was not aware that she had given the guarantee. She said her estranged husband’s accountant placed documents in front of her and, without explaining the nature and effect of those documents to her, asked her to sign the documents, which she did.
Ms Jordanou said that criminal proceedings were pending against her, against her husband and against the husband’s business associate and accountant, Mr Robert Zaia. Ms Jordanou said that when the case brought by the bank on the guarantee came on for hearing she instructed the solicitor then representing her to apply for an adjournment on the basis that she was unwell and on the additional basis that her husband and Mr Zaia were facing criminal charges. While a dispute emerged in the case before me on point, Ms Jordanou said that her solicitor informed the trial judge, the Honourable Justice Kennedy, that –
a)Ms Jordanou would not give evidence;
b)Ms Jordanou no longer sought an adjournment; and
c)the trial was to proceed on an undefended basis.
Ms Jordanou said those comments by her solicitor were untrue. However, she said she remained silent. Judgment was then entered against Ms Jordanou. She said she knew she will need to seek the Court of Appeal’s leave to appeal out of time if she is successful in her application before me to review the decision of the registrar made on 14 March 2017.
In making this application, counsel for Ms Jordanou conceded that irrespective of the arguments Ms Jordanou may wish to agitate on the merits of the substantive claim under the guarantee, including a claim based on Yerkey v Jones,[1] Commercial Bank of Australia Ltd v Amadio[2] and Garcia v National Australia Bank Ltd,[3] Ms Jordanou needed to overcome the obstacles associated with attempts to go behind the judgment as were considered in cases such as Corney v Brien,[4] Wren v Mahony[5] and Ramsay Health Care Australia Pty Ltd v Compton.[6] At a lower judicial level, the authorities that have considered the issue include Wolff v Donovan,[7] Ali v Retail Decisions Pty Ltd[8] and my own decision in Iosifidis v Hanson Construction Materials Pty Ltd.[9]
[1] (1939) 63 CLR 649
[2] (1983) 151 CLR 447
[3] (1998) 194 CLR 395
[4] (1951) 84 CLR 343
[5] (1972) 126 CLR 212
[6] (2017) 261 CLR 132
[7] (1991) 29 FCR 480
[8] [2012] FCA 1130
[9] [2016] FCCA 998
The bank opposed all applications brought by Ms Jordanou. It contended –
a)Ms Jordanou could not invoke Amadio principles nor Garcia principles and therefore her prospects of successfully obtaining leave to appeal against the decision of Kennedy J out of time were doomed;
b)the version of events given by Ms Jordanou about the conduct of the defence in the proceeding before Kennedy J was inherently implausible and did not lead to her complaining about the conduct of the defence by her then solicitor, whether to the Legal Services Commissioner, the trustee in bankruptcy or to anyone else; and
c)based on the High Court’s observations in Ramsay Health Care Australia Pty Ltd v Compton, this court should not go behind the judgment given by Kennedy J in the specific circumstances of this case.
One of the questions for me was whether I should set aside the sequestration order, the effect of which would be to allow Ms Jordanou to seek leave to appeal out of time against the orders of Kennedy J.
Synopsis
For the reasons that follow, in my judgment no basis was shown for setting aside the sequestration order. I dismiss this proceeding.
The history in greater detail
Several issues emerged for separate consideration, as is sufficiently evidenced from the foregoing. But they were set against a factual backdrop that unfolded chronologically from a date prior to the respondent’s first advance to WD of $1.87m in July 2007. Not all facts were easily verified as notices to admit were challenged and other factual matters emerged from Ms Jordanou’s own pleadings or in affidavits filed in the Supreme Court litigation tried before Kennedy J.
Ms Jordanou’s role and position with WD was an illustration on point. In its statement of claim in the Supreme Court proceeding, the bank alleged in paragraph 3 that Ms Jordanou was at all relevant times a director and secretary of WD. In her further amended defence Ms Jordanou asserted that at no time did she appreciate that she may have been a director or secretary of WD or that she may have given a guarantee in favour of the bank for $1.87m. She asserted in particulars that she did not sign a consent to act as a director or secretary of WD and that she did not have any understanding that when WD was incorporated she had been nominated to act as director or secretary. She said that while she may have signed guarantee documents she was unaware as to the nature and extent of what she was signing. As part of her counterclaim, she stated in paragraph 25 that even though she may have appeared on ASIC records as a director of WD she took no actual part in the business of WD.
Taking that last point first, it must be observed that since the decision of Morley v Statewide Tobacco Services Ltd[10] the law does not permit a director to not be actively engaged in the affairs of the company.
[10] [1993] 1 VR 423
Returning to the narrative, it was not disputed that the respondent in this proceeding advanced to WD a very considerable sum. It was comprised of –
a)$1.87m described as the first loan facility on 5 July 2007;
b)$1 912 500 described as the second loan facility on 5 July 2007; and
c)$1.87m described as the third loan facility on 6 July 2007.
Ms Jordanou’s signature appeared on an instrument of guarantee dated 12 July 2007 pursuant to which she guaranteed the due and punctual performance by WD of its obligations to the bank in respect of the first second and third loan facilities. No suggestion was made in this case that the guarantee was formally defective in some way or that it was unsupported by consideration, for example.
On 21 November 2016 the trial of the Supreme Court proceeding came on for hearing before the Honourable Justice Kennedy. Ms Jordanou was represented by Mr Bradley, her solicitor. Immediately after appearances were announced Mr Bradley informed her Honour that Ms Jordanou was at home and was not in court. Her Honour invited the parties to consider converting the day to a judicial mediation. Eventually both parties accepted her Honour’s proposal for judicial mediation, albeit over the bank’s initial protest.
This dispute did not resolve. The trial resumed the following day on 22 November 2016 before her Honour.
Counsel for the bank opened to the effect that three loans and Ms Jordanou’s guarantee of them was admitted as also was the quantum of the debt. Counsel for the bank opened on the law relating to unconscionability and even on the law relating to penalties as most recently propounded by the High Court in Paciocco v Australia and New Zealand Banking Group Ltd.[11]
[11] (2016) 258 CLR 525
Her Honour, having heard from Mr Carew for the bank, invited Mr Bradley to open on behalf of Ms Jordanou. Mr Bradley said he was only calling Ms Jordanou who would give evidence of her special disadvantage that was exploited by the bank. After discussion concerning the exchange of documents on which Ms Jordanou wished to rely, Mr Bradley and Mr Carew conferred then returned to court. Upon her Honour resuming on the bench, the following exchange took place[12] –
[12] Transcript of proceeding S CI 2013/04082 before the Supreme Court of Victoria (22 November 2016) 103, in court book for MLG 60 of 2017 at 130
HER HONOUR: Alright, I think that was about half an hour break, but I was told that you both wanted it.
MR CAREW: Yes. The position has changed fundamentally in regard to the running of this case. I’ll let Mr Bradley speak to it. Mr Bradley’s client’s position is that she will not be defending this proceeding.
…
MR BRADLEY: Thank you, Your Honour. I am instructed, Your Honour, that the matter is undefended. My client’s instructed that she just simply cannot take the stand. There’s other issues that are important to her that relate to her criminal matter and her husband’s matters, her illness as well, and she simply just cannot deal with those particular issues. And those other persons that – there are other people who are affected by a similar set of circumstances that could have otherwise given evidence, but the issue being is that she cannot go on, and those are my instructions.
…
The transcript of the proceeding before Justice Kennedy revealed that her Honour was at pains to ensure that Ms Jordanou was not in any way disadvantaged. Her Honour cautioned Mr Bradley against doing something that was not appropriate in respect of admitting proofs. Her Honour’s investigation into precisely how Ms Jordanou was then proceeding was as follows[13] –
[13] Ibid 105-106, in court book for MLG 60 of 2017 at 132-33
HER HONOUR: … I’m trying to understand what exactly – what part you now wish to play in this matter. Are you wanting to be excused from here on, or are you content to sit there and let Mr Carew simply adduce evidence of the debt?
MR BRADLEY: I would – I would accept that I could stay and allow Mr Carew to adduce evidence of the debt.
HER HONOUR: All right. But you are not proposing to lead any positive unconscionability defence, is that what I’m noting?
MR BRADLEY: No. Without Ms Jordanou, that’s not possible, Your Honour, because she’s the central part of the case.
…
HER HONOUR: All right. So although we’ve had openings, is it correct for me to record that you are not proposing to call Ms Jordanou, and you are not proposing to lead any positive defensive unconscionability?
MR BRADLEY: Yes, Your Honour.
…
Mr Carew then formally proved his client’s case based on documentation that it included a certificate of indebtedness. Mr Bradley remained at the bar table and even told her Honour that he did not challenge the arithmetic in respect of the debt alleged in relation to each guarantee. Her Honour repeated how her Honour did not want to push Mr Bradley into anything. Her Honour then put to Mr Bradley that he would have to concede that the debt was proved. Mr Bradley agreed. Her Honour, with her Honour’s customary courtesy, thanked Mr Bradley and Mr Bradley thanked her Honour.
Her Honour then delivered reasons for judgment.
Immediately thereafter, Ms Jordanou protested. The transcript recorded the exchange in the following terms –
MS JORDANOU: Your Honour, I haven’t actually had a chance to say anything, and what I have discussed with Mr Bradley in the office is not what he came out and said. The reason why I can’t - - -
HER HONOUR: Ms Jordanou, I’ve just pronounced judgment, I’m afraid, and I am a little troubled by this, but your solicitor has just given me a position which I’ve now taken and delivered judgment that you would not be leading evidence – that he would not lead evidence from you. Mr Bradley, I don’t know if you want to say something about this somewhat irregular state of affairs that’s going on here.
MR BRADLEY: Yes, Your Honour, and I apologise for that. What my client was attempting to elucidate to Your Honour was that her reason for not wishing to give evidence in the matter and conceding what we’ve gone through today was in relation to her issues with her criminal proceedings. And she was worried extensively in relation to those matters.
HER HONOUR: Well it troubles me that this is the reason, because I have not been asked for an adjournment, and I keep emphasising that, on the basis of the criminal proceeding. The only basis for the adjournment that was sought yesterday was on the basis of her health.
…
HER HONOUR: And I emphasised that – and I actually offered you an opportunity to make an application for an adjournment on that basis - - -
…
Her Honour pointed out that judgment had been delivered and that such judgment stood. Her Honour said again that there would be judgment for $4 510 777.96 with costs on the standard basis.
In the trial before me Mr Bradley gave evidence about the events leading to the submissions that have been quoted above, especially his communicating Ms Jordanou’s instructions not to call any evidence in opposition to the bank’s claim. Mr Bradley’s affidavit sworn 24 April 2017 was marked as an exhibit. Without objection, Mr Connors of counsel for Ms Jordanou examined Mr Bradley more broadly, beyond Mr Bradley’s affidavit. After a degree of evidence had been adduced from Mr Bradley, Mr Carew eventually objected. By agreement between counsel, Mr Connors resumed his examination in chief of Mr Bradley, focusing more relevantly on the way the case unfolded before Justice Kennedy.
Mr Bradley was asked about the events of 22 November 2016, particularly during the short adjournment that her Honour allowed. Mr Bradley said that he conferred jointly with Ms Jordanou, her husband and with Robert Zaia during that adjournment. Mr Bradley said they discussed whether grounds existed to assert a privilege against self-incrimination. Mr Bradley said that during those discussions he provided advice and, based on that advice, Mr and Ms Jordanou provided Mr Bradley with instructions. Relevantly to Ms Jordanou, Mr Bradley said Ms Jordanou told him she did not want to give evidence as in doing so she may have incriminated herself so she said she could not give evidence. Mr Bradley said he faithfully conveyed to her Honour that Ms Jordanou simply did not wish to give evidence. Thereafter, Mr Bradley remained at the bar table. Mr Bradley said he did not recall Ms Jordanou disagreeing with Mr Bradley in what he had conveyed to Kennedy J. He also said Ms Jordanou did not terminate her retainer with Mr Bradley because of any allegation about the events before her Honour on 22 November 2016. He also said he did not recall apologising about his performance in court.
Based on Mr Bradley’s evidence, it seemed to me to be a fair distillation of events before Kennedy J that Ms Jordanou freely gave instructions to Mr Bradley that she would not be giving any evidence in opposition to the bank’s case for the enforcement of money claims under the guarantee. In those circumstances, her Honour was satisfied about the bank’s formal proofs so her Honour gave judgment in the sum ordered. If I may respectfully say, it could not be said that there was any irregularity in her Honour’s approach to the trial or to the entry of judgment. No evidence was led to support any contention urged in Ms Jordanou’s counterclaim. She was invited many times to say whether Mr Bradley was accurately conveying the situation. Only after judgment was delivered did she speak up to which her Honour perfectly properly pointed out that judgment had by then been given.
It could not be said that the issue of Ms Jordanou’s silence before Kennedy J was not explored in depth. It was. Being very concerned about the matter, especially about the possibility that so much rode on this issue I took up with Ms Jordanou why she instructed Mr Bradley to make submissions about the case being undefended if that was contrary to her instructions. The following exchange between Mr Carew for the bank and Ms Jordanou before me was very telling[14] –
[14] Transcript of proceeding (10 May 2018) 86
Do you see at lines 16 to 17 – have a look at lines 16 to 17 on this page, when – Mr Bradley is speaking to her Honour. See that? - - - Yes.
He’s communicating, your ..... giving very plain terms, isn’t he? - - - Yes.
Yes. And you understood that at the time? - - - Yes.
And you didn’t tap him on the shoulder to say that’s wrong; correct? - - - Correct.
Didn’t do anything about it; correct? - - - I didn’t know that I could.
You don’t think you can even tap your lawyer on the shoulder or pass him a note. Do you not think you can do that in a courtroom? - - - At the time.
HIS HONOUR: Sorry, at the time what? - - - At the time I wouldn’t have known what to do.
A lot of people have legal representation for that very reason. They don’t understand the subtleties of what goes on in court and they entrust their lawyers to speak the language that the judge speaks. They might not understand it precisely, but they trust their legal people to be faithful and convey what their wishes are. If we keep reading from page 105 and ’04 to the transcript there’s a lot of things that are exchanged between the judge and Mr Bradley which have your case going in a particular direction. Mr Carew is pursuing with you why you didn’t do something about it – anything, somehow [to] communicate with Mr Bradley or try to pass him a note, pull on his robe, do anything, but say, “You’re not conveying this properly. You’re sending me down the toilet. What are you doing?” But there’s no evidence of that. [T]hat’s the point that’s being made. Is there a reason for that, that you feel more comfortable telling me about now? - - - Maybe because I was probably too scared to do it. I didn’t know what my rights were at the time. I didn’t realise – I’ve probably been to court a bit more now in the last few years, and I have a greater understanding of the whole situation. At that time I hadn’t been well leading up to that time going into court. I had made it very clear that I was happy to speak. I don’t know where he has got this information, where – why he thought we would go undefended.
Her answers to my questions were unpersuasive. They did not align with the evidence given by Mr Bradley on the same issue. I accept without reservation that the consequences of Kennedy J’s orders were catastrophic for Ms Jordanou. But that highlighted all the more why a rational explanation was needed to underpin the instructions given to Mr Bradley for Ms Jordanou not to contest the bank’s claims. I searched for that evidence in this case but found none. As far as I could tell, based on the evidence Mr Bradley gave, Ms Jordanou genuinely and seriously wished to extricate herself from the litigation before Kennedy J and she gave instructions to Mr Bradley to give effect to that wish. Her Honour accepted Mr Bradley at his word and proceeded on the basis that the case was undefended.
In this litigation Ms Jordanou wanted me to go behind the judgment of Kennedy J. For that matter, she had to do so. Otherwise, her Honour’s judgment stood and so did the regularity of the sequestration order. In order for Ms Jordanou to go behind the judgment she needed to successfully invoke the principles relating to going behind a judgment as most recently propounded by the High Court of Australia in Ramsay Health Care Australia Pty Ltd v Compton.[15] There, the High Court reviewed the leading learning on point from such cases as Wren v Mahony,[16] Corney v Brien[17] and In re Fraser; Ex parte Central Bank of London.[18] It is necessary to descend to the detail of Ramsay in order to better understand its utility for present purposes.
[15] (2017) 261 CLR 132
[16] (1972) 126 CLR 212
[17] (1951) 84 CLR 343
[18] [1892] 2 QB 633
In that case, Compton gave a personal guarantee of a company’s obligations to pay Ramsay Health Care. The company was later placed in liquidation. As the company had gone into liquidation, Ramsay Health Care sued Compton under the guarantee in the Supreme Court of New South Wales. At the trial, both parties were represented by counsel. Compton relied on a defence that had failed and the trial judge awarded judgment in favour of Ramsay Health Care. Compton did not appeal nor did Compton comply with a bankruptcy notice nor with a creditor’s petition. Instead, Compton contested the creditor’s petition before the Federal Court. The judge did not investigate whether the debt was in fact owed, deciding instead not to go behind the judgment. The Full Court (Siopis, Katzmann and Moshinsky JJ)[19] concluded that substantial reasons had been shown for going behind the judgment and that the primary judge should have investigated whether the debt was truly owing. Ramsay Health Care appealed to the High Court of Australia. The majority of the High Court (Kiefel CJ, Keane and Nettle JJ, Edelman J agreeing)[20] dismissed the appeal from the Full Court of the Federal Court. The following propositions of law emerged from the reasons of the majority of the High Court –
a)applying the reasoning from Wren v Mahoney, the overarching obligation imposed by s 52 of the Bankruptcy Act is for a bankruptcy court (me, in this case) to be satisfied that there is in truth and reality a debt;
b)the power to go behind a common law judgment obtained after a contested trial exists beyond the categories of fraud, collusion or miscarriage of justice and despite the caution usually exercised by courts when exercising that power the power nevertheless exists;
c)in further application of Wren v Mahoney, when a bankruptcy court scrutinises the debt propounded by the judgment creditor it does not do so in some way impeaching the judgment but rather it does so while investigating whether some miscarriage of justice has occurred;
d)applying In re Fraser; Ex parte Central Bank of London, when a bankruptcy court is undertaking the scrutiny required by s 52 of the Bankruptcy Act into whether there is in truth and reality a debt owing to the petitioning creditor, it does so to protect the interests of third parties, particularly in respect of other creditors of the debtor; and
e)applying Ex parte Lennox; In re Lennox,[21] In re Flatau; Ex parte Scotch Whisky Distillers Ltd[22] and Corney v Brien,[23] a judgment debt may usually be taken to be sufficient evidence of a debt for the purposes of s 52 of the Bankruptcy Act, yet where the merits of the claim and counterclaim have not been tested in adversarial litigation the judgment debt may not be a reliable indication of the real debt.
[19] Compton v Ramsay Health Care Australia Pty Ltd (2016) 246 FCR 508
[20] (2017) 261 CLR 132 [97]
[21] (1885) 16 QBD 315
[22] (1888) 22 QBD 83
[23] (1951) 84 CLR 343
Several issues emerged in this case from those observations of the majority.
The first related to the real and true basis on which the sequestration order was made in this case. The question became whether the debt was owed in fact and in law, truly and in reality, tested in adversarial litigation. The Honourable Justice Kennedy concluded that the debt was proved. This was not a case of a default judgment. Her Honour required counsel for the bank to make good the bank’s proofs. Those proofs were mostly documentary as to both liability and quantum. The bank’s counsel took her Honour through the bank’s evidence. That evidence included the guarantee given by Ms Jordanou, notices of demand, a certificate of indebtedness and non-payment. Counsel for the bank explained the commercial setting of the borrowings and the purpose of the loan. It seemed to me that her Honour had proof of the fact and reality of the debt that Ms Jordanou guaranteed. The debt was very considerable. It was not paid. The bank was entitled to look to Ms Jordanou pursuant to the guarantee for payment of the amount owed. Ms Jordanou failed to pay that amount as guaranteed. The bank moved for judgment. It proved its entitlement. The judgment was unimpeachable.
In Ramsay, the majority pointed out that a creditor should not be able to make a person bankrupt on a debt that is not provable. The debt on which the bank obtained judgment in this case was far from not provable. The majority also pointed out that the notion that a party is bound by the conduct of his or her case has never been a sufficient reason not to look behind a consent judgment or a default judgment. This observation addressed the suggestion that Mr Bradley conducted Ms Jordanou’s case by failing to lead evidence of her counterclaim in such a way that led to the entry of judgment against Ms Jordanou for a very considerable sum. I do not agree. On the evidence of Mr Bradley outlined above Ms Jordanou specifically instructed Mr Bradley that she did not wish to enter the witness box (erroneously described as “the stand”) to give evidence on the basis of the risk of her incriminating herself. It was readily apparent that Kennedy J did not wish to force Mr Bradley to take a step in the proceeding he had not considered or in respect of which he was not instructed to take or make. Ms Jordanou had sat in court listening to his submissions without protest.
I do not accept that Ms Jordanou’s unfamiliarity with the legal process provided an explanation for her silence while Mr Bradley informed her Honour that no evidence would be led on the counterclaim. In my view, Ms Jordanou’s decision not to lead evidence on the counterclaim was deliberate and it was made on the advice of Mr Bradley. In those circumstances I do not say in this case, as the primary judge said in Ramsay Health Care Australia Pty Ltd v Compton,[24] that Ms Jordanou is bound by the way her defence was conducted. That is to invert the relevant enquiry. In my view, according to s 52 of the Bankruptcy Act I needed to be satisfied that there was in truth and reality a debt on which the sequestration order was based. I am so satisfied in this case. In reviewing the material that was before Kennedy J for satisfaction of the debt owed by Ms Jordanou, I am in no way seeking to impeach her Honour’s judgment. I was concerned in this case whether the debt on which the judgment was based was truly a basis for making the sequestration order. That is how the High Court in Ramsay analysed matter, following In re Fraser; Ex parte Central Bank of London. Having read the transcript of the proceeding before Kennedy J several times as well as the court book in this case that incorporated the transactional documentation, as well as having heard viva voce from Ms Jordanou and Mr Bradley, I am persuaded that the debt was genuine and that the judgment debt on which a sequestration order was based was in truth and reality a valid judgment debt.
[24] [2015] FCA 1207
It next became necessary to address Ms Jordanou’s assertion that she wished to set aside the judgment debt with a view to seeking leave to appeal out of time against the judgment and orders of Kennedy J. Naturally, it was a matter for the Court of Appeal of the Supreme Court of Victoria if I were to conclude that the judgment of Kennedy J should be impeached. It was not possible for me to gainsay what the Court of Appeal might have done on the hearing of any such application. But undoubtedly the Court of Appeal would examine the utility of making the order sought, especially having regard to the fact that Ms Jordanou chose not to advance the very counterclaim on which her contentions against the bank were premised. At one point, Ms Jordanou was advancing an argument about unconscionability in the form best understood against the High Court’s decision in Amadio. She was also advancing at one point an argument based on Garcia. She chose not to adduce evidence of those grounds, apparently fearing the risk of self-incrimination if she gave evidence. Of course, it is not up to me to presuppose how the Court of Appeal may deal with Ms Jordanou’s application. But undoubtedly, a relevant and possibly determinative factor relevant to the exercise of the Court of Appeal’s discretion to grant Ms Jordanou leave to appeal out of time would be her legal representative’s submissions before Kennedy J that Ms Jordanou’s counterclaim was not being advanced. The issue occupied quite a deal of time before me.
In the end, I was not persuaded that the judgment debt ordered by Kennedy J was anything but valid and regular.
I dismiss this application to review the decision to make a sequestration order against Ms Jordanou.
Before concluding, it is relevant to address the submission addressed by Mr D C Harrison of counsel for the trustee. Mr Harrison pointed out that this proceeding has been on foot since January 2017 and the administration of this estate has been held up since then. Mr Harrison relied upon the public interest of the finality of litigation. There was merit in that contention. But that submission must be read and understood in context, as a majority of the High Court in Ramsay devoted a special portion of its reasons to the subject, headed “finality in litigation”. There, the majority addressed the circumstances that presented themselves in this case where the merits of a counterclaim had not been tested in adversarial litigation and therefore a judgment debt did not have the practical guarantee of reliability. Under the rubric of finality in litigation, the majority of the High Court in Ramsay referred to the way that a bankruptcy court (me, in this case) is concerned, not to discipline litigants or to protect the finality of the administration of justice as between the parties to litigation, but to protect the interests of third parties who are not participants in the litigation that led to the judgment in question. Self-evidently, an array of persons beyond the bank will be affected by the sequestration order in this case including creditors affected by operation of the relation back principle. This is not therefore a matter of the bankruptcy court sloughing off a judgment debtor’s application to set aside the sequestration order saying “enough is enough”. To the contrary. It is squarely a matter of the bankruptcy court protecting the interests of third parties who were not participants in the skirmishing between the bank and Ms Jordanou before Kennedy J. Accordingly, while relevant, questions relating to the finality litigation are subordinated to the more pressing matters which I have canvassed above.
Conclusion
I dismiss this application. I will hear the parties and the question of costs. I direct the parties and the trustee to file and serve any written submissions on which each relies on the question of costs by 7 November 2018.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of his Honour Judge Wilson
Date: 24 October 2018
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