Commonwealth Bank of Australia v Oswal (No.3)
[2012] FMCA 1223
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| COMMONWEALTH BANK OF AUSTRALIA v OSWAL (NO.3) | [2012] FMCA 1223 |
| BANKRUPTCY – Application for sequestration order. |
| BANKRUPTCY – Application in a case to set aside previous orders for substituted service of the creditor’s petition. |
| PRACTICE AND PROCEDURE – Application to set aside previous orders for substituted service. |
| PRACTICE AND PROCEDURE – Application to transfer proceedings to the Federal Court. |
| Bankruptcy Act 1966 (Cth), s.40(1)(g) Federal Magistrates Act 1999 (Cth), s.39(1), (2), (3) and (6) Federal Magistrates Court Rules 2001 (Cth), r.8.02(4) |
| Clarke v West Australian Newspapers Ltd [2010] FMCA 502 Commonwealth Bank of Australia v Oswal [2012] FCA 772 Commonwealth Bank of Australia v Oswal [2012] FMCA 1082 Commonwealth Bank of Australia v Oswal (No. 2) [2012] FMCA 1167 Commonwealth Bank of Australia v Pankaj Oswal (In His Personal Capacity And As Trustee Of The Burrup Trust) [2012] WASC 128 Deputy Commissioner of Taxation v Cumins [2007] FMCA 1841 Genovese v BGC Construction Pty Ltd [2006] FMCA 1507 Re Mendoca; Ex parte Commissioner of Taxation (1969) 15 FLR 256 |
| Applicant: | COMMONWEALTH BANK OF AUSTRALIA |
| Supporting Creditor | DEPUTY COMMISSIONER OF TAXATION |
| Respondent: | PANKAJ OSWAL |
| File Number: | PEG 249 of 2012 |
| Judgment of: | Lucev FM |
| Hearing date: | 17 December 2012 |
| Date of Last Submission: | 17 December 2012 |
| Delivered at: | Perth |
| Delivered on: | 17 December 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr JA Thomson SC |
| Solicitors for the Applicant: | Corrs Chambers Westgarth |
| Counsel for the Supporting Creditor: | Ms M-J de Reus |
| Solicitors for the Supporting Creditor: | Australian Government Solicitor |
| Counsel for the Respondent: | Mr van der Zanden (appearing only on the application to set aside orders for substituted service) |
| Solicitors for the Respondent: | Hotchkin Hanley |
ORDERS
The time for service of the Applicant’s Application in a Case filed today be abridged.
The Creditor’s Petition and the Respondent’s Application in a Case filed 11 December 2012 be transferred to the Federal Court.
The Respondent pay the costs of the Applicant’s and Supporting Creditor’s costs of the Applicant’s Application in a Case filed today, if not agreed, to be taxed by a Registrar of this Court pursuant to Division 40 of the Federal Court Rules 2011 (Cth).
The costs in this Court of the Creditor’s Petition’s Application and the Respondent’s Application in a Case filed 11 December 2012 be reserved for determination as part of the transferred Federal Court proceedings.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 249 of 2012
| COMMONWEALTH BANK OF AUSTRALIA |
Applicant
And
| DEPUTY COMMISSIONER OF TAXATION |
Supporting Creditor
And
| PANKAJ OSWAL |
Respondent
REASONS FOR JUDGMENT
(Ex tempore reasons edited from the transcript)
Applications
There are three applications before the Court today. They are:
a)an application by the respondent, Mr Oswal, to set aside orders for substituted service made against him at the instance of the applicant, the Commonwealth Bank of Australia,[1] and the supporting creditor, the Deputy Commissioner of Taxation[2] on 21 November 2012 and 5 December 2012 respectively;
b)an application by the CBA seeking the issuance of a sequestration order against Mr Oswal consequent upon the filing of a creditor’s petition; and
c)a further application apparently filed today, and if not filed today the subject of an undertaking to be filed today, which seeks to have the proceedings transferred to the Federal Court.
[1] “CBA”.
[2] “Deputy Commissioner”.
Mr Oswal appears only on the application in a case to set aside the orders for substituted service, and has not filed a notice of grounds of opposition to the application for a sequestration order.
Facts
Much of the prior history in relation to this matter is set out in this Court’s judgment in Commonwealth Bank of Australia v Oswal.[3] For present purposes the following summary of the prior proceedings is sufficient:
[3] [2012] FMCA 1082 (“Oswal (No. 1)”).
a)by the creditors petition, filed on 16 October 2012, the CBA seeks to have the Court issue a sequestration order against the estate of Mr Oswal;
b)the creditors petition alleges Mr Oswal owes CBA US$4,821,655.46. It is alleged that those monies are owing pursuant to a judgment of the Supreme Court of Western Australia on 11 May 2012 in Commonwealth Bank of Australia v Pankaj Oswal (In His Personal Capacity And As Trustee Of The Burrup Trust)[4] and represents money owing to the CBA by Mr Oswal in his capacity as guarantor of a debt owed to the CBA by Garuda Aviation Pty Ltd,[5] an Australian registered company of which Mr Oswal was and remains a director,[6] and which had defaulted on a loan agreement[7] with the CBA;
[4] [2012] WASC 128 (“Guarantor Action Judgment”).
[5] “Garuda”.
[6] Affidavit of Victoria Ashley MacMillan, sworn 16 November 2012, Annexure VAM 25 (“Ms MacMillan’s November 2012 Affidavit”); Guarantor Action Judgment at para.3 per Le Miere J.
[7] “Loan Agreement”.
c)a bankruptcy notice[8] was served on Mr Oswal on 30 July 2012, in accordance with orders for substituted service and service out of the jurisdiction made by the Federal Court on 12 July 2012 as a consequence of the judgment in Commonwealth Bank of Australia v Oswal.[9] Mr Oswal did not comply with the requirements of the Bankruptcy Notice by 20 August 2012, or satisfy a court exercising bankruptcy jurisdiction that he had a counterclaim, set-off or cross-demand that he could not have set up in the action in which the Guarantor Action Judgment was obtained.[10] No applications have been made by Mr Oswal in this Court in relation to the Bankruptcy Notice, but an application has now been made in relation to the Bankruptcy Notice in the Federal Court, no doubt as a consequence of the Federal Court having originally dealt with the Bankruptcy Notice issues;
[8] “Bankruptcy Notice”.
[9] [2012] FCA 772 (“Bankruptcy Notice Judgment”).
[10] Bankruptcy Act 1966 (Cth), s.40(1)(g).
d)the debt the subject of the Guarantor Action Judgment remains unpaid, and is therefore still owing,[11] and there is no evidence that a stay of execution of the Guarantor Action Judgment has been ordered;[12]
[11] Affidavit of Peter William Ficko, sworn 16 November 2012 at para.3 (“Mr Ficko’s Affidavit”).
[12] Oswal (No. 1) at para.1 per Lucev FM.
e)on 21 November 2012 and 5 December 2012 on the application of the CBA and the Deputy Commissioner, this Court made orders for substituted service of various documents related to the creditor’s petition action, and in particular, for substituted service of those documents on various Perth law firms, electronic service on one of those law firms, and service out of the jurisdiction to a postal address in India.[13] The matter of the creditor’s petition was listed for final hearing today, but the two applications in a case having been brought, it is necessary to address them first;
f)on 11 December 2012, as earlier indicated, Mr Oswal filed and served an application in a case seeking to set aside the orders for substituted service and service out of the jurisdiction on Mr Oswal of the creditors petition, made by this Court on 21 November 2012 and 5 December 2012. Mr Oswal contends that the Court should not have granted leave to serve the creditor’s petition out of Australia, or by way of substituted service, because there was no good arguable case for making a sequestration order, that argument including, but not to be limited to, whether there was a good arguable case that Mr Oswal was carrying on business in Australia at the relevant time;
g)on 14 December 2012, Mr Oswal filed an application in the Federal Court seeking an order that the Federal Court’s ex parte orders made on 12 July 2012 giving CBA leave to serve the Bankruptcy Notice outside of Australia and, by way of substituted service, be discharged.[14] In the Federal Court Application, Mr Oswal contends that the Federal Court’s earlier ex parte orders should not have been made in circumstances where there was no or insufficient evidence as to whether the applicant had a good arguable case that a failure to comply with the Bankruptcy Notice could ground a petition by the applicant for a sequestration order against Mr Oswal’s estate. The Federal Court Application goes directly to the alleged act of bankruptcy relied upon by the CBA in the creditor’s petition proceedings. It would appear from Mr van der Zanden’s affidavit, and from what Senior Counsel for the CBA says in submissions, that the Federal Court Application has been listed, for a first directions hearing on Wednesday 19 December 2012;
h)earlier this afternoon, as previously indicated, or later this afternoon, if not already done, there has been filed, or will be filed, an application in a case by the CBA seeking orders:
i)first, that the time for service of its application be abridged: that order will be made;
ii)second, that the creditor’s petition and Mr Oswal’s application in a case dated 11 December 2012 be transferred to the Federal Court; and
iii)third, that Mr Oswal pay the CBA’s costs of today’s hearing.
There is a minute of proposed orders from the CBA in which there is an indication that slightly different orders are sought, including an order that the matters to be transferred be consolidated into one proceeding. As the Court observed during the course of submissions, if the applications are transferred to the Federal Court consolidation is then a matter for the Federal Court, and not this Court.
[13] See Oswal (No. 1) and Commonwealth Bank of Australia v Oswal (No. 2) [2012] FMCA 1167 (“Oswal (No. 2)”).
[14] “Federal Court Application”.
Transfer of proceedings
It is appropriate to deal with the application to transfer the matter in this Court to the Federal Court first because if the matter is to be transferred, it becomes unnecessary for the Court to deal with the other issues.
The making of an order to transfer proceedings from this Court to the Federal Court is discretionary, and any order which is made is not one in respect of which an appeal lies.[15] There are certain mandatory factors which the Court is required to take into account under the FM Act as set out in s.39(3)(a)-(d) of the FM Act, and other factors under the Federal Magistrates Court Rules 2001 (Cth), in particular r.8.02(4)(a)-(e), consideration of which is made mandatory by s.39(3)(a) of the FM Act.
[15] Federal Magistrates Act 1999 (Cth), s.39(1), (2) and (6) (“FM Act”).
The Court, in terms of those factors, must first look to whether or not there are pending proceedings in an associated matter in the Federal Court. The Court considers that there are now, by reason of the Federal Court Application, pending proceedings in an associated matter in the Federal Court. Those proceedings in the Federal Court are logically and procedurally anterior to the proceedings presently on foot in this Court, and if Mr Oswal were to be successful in having the Bankruptcy Notice substituted service orders set aside, then without service of the Bankruptcy Notice there could be no application for a creditor’s petition by the CBA, and no order for substituted service of the creditor’s petition in this Court, and no ability in this Court to make a sequestration order as is currently sought by the CBA. So, the Court takes the view that the proceedings are relevantly associated matters.
The Court must then look at the sufficiency of resources of this Court to hear and determine the proceeding, and the capacity to have an earlier hearing of proceedings than might be the case in the Federal Court. If the creditor’s petition had had to be heard, it would have been heard today by this Court, as would the application with respect to substituted service of the creditor’s petition, that is, absent the Federal Court Application. Absent a hearing today, however, the matter could not have been listed before early March 2013, and if not got on in early March then not until significantly later in the year in this Court. So, whilst the Court has the resources to deal with the matter, the hearing of the matter in this Court would probably not now be until well into next year, and that is a factor which might, in the circumstances which have arisen, including the filing of the Federal Court Application, favour a hearing in the Federal Court.
With respect to a question of general importance, although the issues on their face appear to be relatively straightforward which would ordinarily have been dealt with by this Court, or indeed a Registrar of this Court with respect to the sequestration order application proper, it does appear from the submissions made today that there may be an issue of general importance arising in relation to the application the Federal Court judgment in Re Mendoca; Ex parte Commissioner of Taxation,[16] and possibly other judgments of the Federal Court in relation to the issues arising in Re Mendoca. It does, therefore, appear that there may indeed be a question of general importance which arises and which, if it is to involve a reconsideration of Re Mendoca, ought properly be reconsidered by the Federal Court as a federal superior court of record, rather than this Court.
[16] (1969) 15 FLR 256 (“Re Mendoca”).
In terms of cost and convenience of the hearing and determination the parties, the Court considers that there will be a saving of judicial time, and cost to the parties, if the matter is transferred to the Federal Court. It appears to this Court that the Federal Court will likely need to assess the merits of the Federal Court Application with respect to substituted service of the Bankruptcy Notice first. If the Federal Court Application were to be successful, that would be determinative of the other two applications with respect to substituted service of the creditor’s petition and the creditor’s petition itself. The Federal Court could then make all necessary orders in the one sitting. Even if the Federal Court Application with respect to substituted service orders in relation to the Bankruptcy Notice were not successful, the matters are sufficiently interrelated to enable the Federal Court to hear and determine all of the matters in one sitting, as many of the same issues are likely to rise, particularly in relation to the substituted service applications, and it therefore would be more efficacious, in terms of cost and convenience, to have all of the matters heard and determined in the one court, namely the Federal Court, as was submitted by Senior Counsel for the CBA. In that regard, the Court notes that, in the broad sense, these proceedings actually commenced in the Federal Court because the bankruptcy notice substituted service orders were made in the Federal Court rather than in this Court, and it was only upon the application for the creditor’s petition being made that the matter formally came before this Court.
In terms of the availability of particular procedures appropriate to the class of proceeding, given that this Court and the Federal Court have essentially concurrent jurisdiction in bankruptcy, and bearing in mind the harmonisation of the bankruptcy rules between both courts, there is little practical difference in the particular procedures available for hearing between these courts, and that is a factor which is probably neutral in the assessment of a transfer.
The CBA wants a transfer of the proceedings to the Federal Court. The Deputy Commissioner does not oppose that course. To the extent that Mr Oswal was able to make submissions on this issue, there was no indication of any opposition. In that respect, it is the view of the Court that the wishes of the parties ought to be respected and indulged, where other factors favour a transfer,[17] and this factor therefore favours a transfer to the Federal Court.
[17] Clarke v West Australian Newspapers Ltd [2010] FMCA 502.
With respect to the interests of the administration of justice, the Court has previously said that the interests of the administration of justice are directed to a consideration of the interests of the management of justice – that is, the management of the proceedings pending before the Court.[18] In this particular case, having regard to what the Court has already said concerning the cost and convenience of the matter being heard in the Federal Court being the most efficacious course, it is appropriate that, in the interests of the administration of justice also, the matter be heard in the Federal Court.
[18] Genovese v BGC Construction Pty Ltd [2006] FMCA 1507 at para.28 per Lucev FM.
The exercise of discretion does not require a Court, absent statutory direction to the contrary, to give equal weight to all of the factors to be considered in the exercise of the discretion.[19] In this particular case, however, the factors which favour transfer of the matter to the Federal Court include the cost and convenience of the matter if heard in the Federal Court rather than this Court, the wishes of the parties, and the interests of the administration of justice, as well as a possibility that there is a genuinely arising question of general importance. Those factors outweigh those which are neutral or possibly weigh against the transfer of the matter to the Federal Court.
[19] Deputy Commissioner of Taxation v Cumins [2007] FMCA 1841 at para.47 per Lucev FM.
Conclusion, orders and costs
The Court has, therefore, concluded that there ought to be a transfer of the matter to the Federal Court. It follows that there will be an order transferring the proceedings in this matter to the Federal Court as sought by the CBA in the application in a case, but not as sought in the minute of proposed order because there will be no order for consolidation of the applications, that, upon the transfer, being a matter for the Federal Court.
With respect to costs the Court considers that there ought to be costs orders in the following terms:
a)that the respondent pay the costs of the applicant of today’s hearing; if not agreed, to be taxed by a Registrar of this Court pursuant to Division 40 of the Federal Court Rules 2011; and
b)that otherwise the costs of the applicant’s application and the respondent’s application in a case filed 11 December 2012 be reserved for determination as costs in the Federal Court proceedings.
I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of Lucev FM
Date: 20 December 2012
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