Commonwealth Bank v Madigan
[2005] FMCA 1140
•17 August 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| COMMONWEALTH BANK v MADIGAN | [2005] FMCA 1140 |
| BANKRUPTCY – Application for sequestration order founded upon creditor’s petition – where respondent debtor failed to comply with the bankruptcy notice – where the debtor failed to satisfy the court that he had a counter-claim, set-off or cross-demand equal to or exceeding the sum of the bankruptcy notice – whether the debtor has raised “other sufficient cause” why a sequestration ought not to be made as provided by s.52(2)(b) of the Act. |
| Bankruptcy Act 1966, s.52 District Court Act 1973 (NSW), s.127 Federal Court Act and Rules |
| Bernard Madigan v The Commonwealth Bank of Australia [2002] NSWCA 88 Re Schmidt; Ex parte Anglewood Pty Ltd (1968) FLR Re Maddestra; Ex parte Penfolds Wines Pty Ltd (1993) 44 FCR 303 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 |
| Applicant: | COMMONWEALTH BANK OF AUSTRALIA |
| Respondent: | BERNARD ERNEST MADIGAN |
| File Number: | SYG 1470 of 2005 |
| Judgment of: | Raphael FM |
| Hearing date: | 11 August 2005 |
| Date of Last Submission: | 11 August 2005 |
| Delivered at: | Sydney |
| Delivered on: | 17 August 2005 |
REPRESENTATION
| Counsel for the Applicant: | Mr M Lee |
| Solicitors for the Applicant: | Henry Davis York |
| For the Respondent: | In Person |
ORDERS
Sequestration order made against the estate of Bernard Ernest Madigan.
The applicant creditor’s costs (including any reserved costs) are to be taxed and paid from the estate of the respondent debtor in accordance with the Federal Court Act and Rules.
A copy of this sequestration order is to be given to the official receiver in Sydney within two days in accordance with the Bankruptcy Regulations.
Mr M J Robinson of PPB be appointed trustee of the bankrupt’s estate.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1470 of 2005
| COMMONWEALTH BANK OF AUSTRALIA |
Applicant
And
| BERNARD ERNEST MADIGAN |
Respondent
REASONS FOR JUDGMENT
I have before me an application for a sequestration order founded on a creditor's petition dated 7 March 2005. The act of bankruptcy alleged in the petition is the failure of the respondent debtor to comply on or before 3 March 2005 with the requirements of a bankruptcy notice served upon him on 24 January 2005 or to satisfy the court that he had a counter-claim, set-off or cross-demand equal to or exceeding the sum specified in paragraph 1 of the bankruptcy notice. That sum is the amount of $118,824.42. Mr Lee, who appears on behalf of the creditor, has provided me with the required evidence pursuant to the Bankruptcy Act 1966 (Cth) (the “Act”) and regulations and it is for me today to consider whether or not I am satisfied of all the matters required under s.52 of the Act, and in particular whether the debtor has raised "other sufficient cause" why a sequestration ought not to be made as provided by s.52(2)(b) of the Act. The debtor has filed a notice of opposition.
These proceedings are part of a lengthy and wide-ranging dispute between the debtor and the creditor which commenced in 1998. At that time there was a renegotiation of a housing loan in circumstances which it is not necessary for me to rehearse. Following that, it appears that the debtor obtained a duplicate certificate of title and used that document to effect the sale of a property. The debtor sought, through the sale of his property, to repay the bank the money secured on it and that repayment took place between 22 October 1999 and 10 November 1999. What was not paid by the debtor were the expenses of the bank in relation to the mortgage which the bank claimed it was entitled to charge by virtue of clause E14 of the memorandum of mortgage T340042 registered with the Land Titles Office.
The debtor maintains that when he requested what is colloquially described as a “payout” figure from the bank he was provided with two amounts, one on 22 October 1999 in the sum of $474.27 and one on 10 November of $752.87 which are noted in his bank account statement. He paid those monies and the mortgage was discharged. But after the discharge his account with the Commonwealth Bank of Australia (“CBA”) was debited with additional sums for the costs which:
“the bank shall pay concur or sustain or be put to in connection with the account of the debtor or the mortgagor or the mortgage premises or this mortgage or the exercise of any rights, power, authority, discretion or remedy conferred on the bank under or by virtue of this mortgage.” [cl E14 supra]
The bank had proceeded against the debtor for the loan moneys in the Supreme Court. The debtor settled that claim but cross-claimed. The cross-claim was heard in the District Court where Judge Ainslie-Wallace held that in regard to the debiting of the account after payout:
“The main thrust of the cross-claimants argument in this regard [debiting a filing fee and $65 for a transcript of the hearing before the Supreme Court on 16 November 1999] was that in debiting these items from his account the bank was paying to itself costs of the litigation prior to there being made an order for costs in its favour”
was not sustained. Her Honour found that the withdrawal from the investment housing loan account was a withdrawal of expenses and charges which fell squarely within the ambit of covenant E14 and the bank was entitled to debit the account as it did.
The debtor sought to appeal against that judgment. Leave to appeal was required because the amount involved was less than $100,000. Between the date on which he received the judgment of the District Court and the date the application for leave to appeal was made the debtor discovered what he considered another “illegal” action on the part of one of the Bank’s solicitors. This was therefore a matter which could have been raised before the Court of Appeal. Leave to appeal was refused: Bernard Madigan v The Commonwealth Bank of Australia [2002] NSWCA 88 (11 March 2002, Mason P, Meagher JA and Powell JA). Mr Madigan, the debtor, sought special leave of the High Court of Australia to appeal against that decision but Special Leave was refused. After these proceedings the debtor was presented with a bill of costs from the CBA for the District Court action. The bill of costs, which was assessed in the ordinary way and made a judgment of the District Court, forms the basis of the Bankruptcy Notice in these proceedings. Mr Madigan argues that the bank misled the Court of Appeal by its submission that the proceedings involved an amount of less than $100,000. Mr Madigan is incorrect in this assertion. The relevant section is s.127 of the District Court Act 1973 (NSW), which is set out in the following form:
127 Right of appeal to Supreme Court
(1) A party who is dissatisfied with a Judge’s judgment or order in an action may appeal to the Supreme Court.
(2) The following appeals lie only by leave of the Supreme Court:
(a) an appeal from an interlocutory judgment or order,
(b) an appeal from a judgment or order as to costs only,
(c) an appeal from a final judgment or order, other than an appeal:
(i) that involves a matter at issue amounting to or of the value of $100,000 or more, or
(ii) that involves (directly or indirectly) any claim, demand or question to or respecting any property or civil right amounting to or of the value of $100,000 or more,
(d) an appeal from a judgment or order on an application for summary judgment under the rules,
(e) an appeal from an order made with the consent of the parties.(3) In any other case, an appeal lies as of right.
This clearly relates to the substantive claim and not the costs. The bank was entitled to argue as it did and was upheld in that argument Mason P at [13].
The debtor has said many harsh things about the solicitor from the Commonwealth Bank. He has accused him of offences under the Crimes Act. He has reported him to the NSW Police Force. The police have now determined not to proceed with their investigations into this matter and to refer it to the Legal Services Commission. The solicitor has responded by commencing defamation proceedings against Mr Madigan. These proceedings are to be given their initial hearing in November 2005. Mr Madigan seeks to file a cross-claim for $40 million not only against the solicitor but also against the bank. Mr Justice Hislop has made an order that no such cross-claim can be filed until after the determination of the preliminary proceedings in November. Mr Madigan asks that this court adjourn the petition until after that time so that he may file a cross-claim and thus be able to rely upon the provisions of s.52(2)(b); Ling v Enrobook Pty Limited (1997) 74 FCR 19. The authorities have made it clear that before the court can exercise its discretion not to proceed with the petition on that basis, the alleged cross-claim must have certain qualities:
·The debtor must show that the claim is a genuine and serious one which he or she has not reasonably be able to litigate: Re LHF Wools Ltd [1970] Ch 27);
·The claim must be a “real claim” that is “likely to succeed:, having “sufficient validity…. To justify a dismissal or adjournment of the petition”: Re Schmidtl Ex parte Anglewood Pty Ltd (1968) FLR at 111 at 116; Re Kosetzky; Ex parte Milder Elfman Szmerling Kryxer Pty Ltd (1966) 67 FCR 101 at 106; Re Capel; Ex parte Caram Finance Australia Ltd (unreported, Fed Ct of Aust, Finn J, 9 April 1998);
·If the claim is less than the petitioning creditor’s claim, the proper course is to required the debtor to pat the difference if the debtor desires to avoid a sequestration order: Re James; Ex parte Carter Holt Harvey Roofing (Aust) Pty Ltd (No 2) (1994) 51 FCR 14; Re Coci; Ex parte Barwick Management Pty Ltd (Unreported Fed Ct of Aust, RD Nicholson J, 19 September 1997);
·“It is not in the public interest to allow insolvent debtors to prosecute litigation generally” Ling v Enrobook at [26-27]; Australia & New Zealand Banking Group Ltd v Prestia [2001] FCA 792 at [32] per Hely J;
·The fact that the debtor’s claims have been dismissed by another court as abuses of process “are a barrier in the way of the [debtor’s] contention that he has a genuine and serious claim against the [creditor] which is likely to succeed if he is permitted to litigate the claim”, particularly where the claim is :highly speculative”: Commonwealth Bank of Australia v Gargan [2004] FCA 707 at [24] per Hely J.
The court will also be reluctant to grant the debtor the relief he seeks if the litigation in which the cross-claim is asserted is long running and unlikely to be resolved soon: Re Maddestra; Ex parte Penfolds Wines Pty Ltd (1993) 44 FCR 303
I am not satisfied that Mr Madigan’s proposed cross-claim does have reasonable prospects of success. He has read to me part of the statement of claim. He seeks punitive or exemplary damages against the bank. But the actions for which he seeks those damages are actions which either have been the subject of previous proceedings and thus involve an issue estoppel or actions which could have been brought in previous proceedings and thus involve an Anshun estoppel; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.
Mr Madigan has expressly disclaimed any request for me to go behind the judgment of the District Court. Even if he had not done so I do not think this would avail him. I would not be prepared to go behind a judgment where the facts which sustain an allegation of fraud were known to the debtor before argument concerning the matter in the Court of Appeal. For these reasons I dismiss the debtor’s notice of opposition.
I am satisfied that the debtor committed the act of bankruptcy alleged in the petition as amended. I am satisfied with the proof of the other matters required by s.52 of the Act. I make a sequestration order against the estate of Bernard Ernest Madigan. I order that the applicant creditor’s costs (including any reserved costs) be taxed and paid from the estate of the respondent debtor in accordance with the Federal Court Act and Rules. Under the Bankruptcy Regulations a copy of this sequestration order is to be given to the official receiver in Sydney within two days. The court notes that the date of the act of bankruptcy is 3 March 2005. The court notes that a consent to act as trustee has been signed by M. J. Robinson of PPB and has been lodged with official received in Sydney. I order that Mr Robinson be appointed trustee of the bankrupt’s estate.
I certify that the preceding nine (9) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date:
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