Compton v Ramsay Health Care Australia Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Compton v Ramsay Health Care Australia Pty Ltd [2017] FCAFC 221

Appeal from: Ramsay Health Care Australia Pty Ltd v Compton (No 2) [2017] FCA 629
File number: NSD 886 of 2017
Judges: SIOPIS, GLEESON AND MOSHINSKY JJ
Date of judgment: 21 December 2017
Catchwords: BANKRUPTCY – personal insolvency agreements – whether proceedings relating to the creditor’s petition were stayed by force of s 189AAA of the Bankruptcy Act 1966 (Cth) – where debtor signed an authority naming and authorising a registered trustee to call a meeting of the debtor’s creditors and to take control of the debtor’s property pursuant to s 188 of the Act – whether jurisdictional nexus requirements satisfied – whether debtor was “ordinarily resident in Australia” for the purposes of s 188
Legislation:

Bankruptcy Act 1966 (Cth), ss 40, 43, 55, 57, 187, 187A, 188-211, 215-232, 244, 247

Bankruptcy Regulations 1996 (Cth), regs 1.03, 13.02, 13.03, 13.07, 13.10
Cases cited:

Agar v McCabe (2014) 67 MVR 81; [2014] VSC 309

Agar v McCabe (2015) 72 MVR 130; [2015] VSC 378

Agar v Petrov [2015] VSC 168

Akbarali v Brent London Borough Council [1983] 2 AC 309

Battenberg v Restom (2007) 5 ABC(NS) 533; [2007] FCAFC 195

Commissioners of Inland Revenue v Lysaght [1928] AC 234

Compton v Ramsay Health Care Australia Pty Ltd (2016) 246 FCR 508

Director of Public Prosecutions (NSW) v Zhang (2007) 48 MVR 78; [2007] NSWSC 308

Director of Public Prosecutions (Vic) v Cummings (2006) 46 MVR 84; [2006] VSC 327

Levene v Commissioners of Inland Revenue [1928] AC 217

Logue v Hansen Technologies Ltd (2003) 125 FCR 590

Machirus v Police [1983] NZLR 764

Mathai v Kwee (2005) 3 ABC(NS) 268; [2005] FCA 932

Napiat Pty Ltd v Salfinger (No 7) (2011) 202 FCR 264

Ramsay Health Care Australia Pty Limited v Adrian Compton [2015] NSWSC 163

Ramsay Health Care Australia Pty Ltd v Compton [2015] FCA 1207

Ramsay Health Care Australia Pty Ltd v Compton [2017] FCA 612

Ramsay Health Care Australia Pty Ltd v Compton (2017) 345 ALR 534

Re Mendonca; Ex parte Commissioner of Taxation (1969) 15 FLR 256

Re Taylor; Ex parte Natwest Australia Bank Ltd (1992) 37 FCR 194

Re Vassis; Ex parte Leung (1986) 9 FCR 518

Turner v Trevorrow (1994) 49 FCR 566
Date of hearing: 27 July 2017
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 76
Counsel for the Appellant: Mr JT Svehla
Solicitor for the Appellant: Pure Legal
Counsel for the First Respondent: Mr J Stoljar SC and Mr J Hynes
Solicitor for the First Respondent: MinterEllison
Counsel for the Second Respondent: The second respondent filed a submitting appearance, save as to costs

ORDERS

NSD 886 of 2017
BETWEEN:

ADRIAN JOHN COMPTON

Appellant
AND:

RAMSAY HEALTH CARE AUSTRALIA PTY LTD (ACN 003 184 889)

First Respondent

PAUL GERARD WESTON

Second Respondent

JUDGES:

SIOPIS, GLEESON AND MOSHINSKY JJ

DATE OF ORDER:

21…

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Details
Case
[2017] FCAFC 221
Decision Date

CaseChat Overview and Summary

Compton v Ramsay Health Care Australia Pty Ltd [2017] FCA 629 involved a creditor's petition filed by Ramsay Health Care against Adrian Compton, who had guaranteed the liabilities of Compton Fellers Pty Ltd (trading as MediChoice). The case had an extended history, including an interim application by Compton to "go behind" the Supreme Court judgment, which was denied. The appeal to the Full Court and subsequent special leave to appeal to the High Court were dismissed. On 2 June 2017, the matter was called for the delivery of judgment. The primary judge considered whether the creditor's petition was stayed by section 189AAA of the Bankruptcy Act 1966 (Cth). This issue was raised in the context of an authority signed by Compton, naming and authorising a registered trustee to call a meeting of creditors and take control of Compton's property under section 188 of the Act. The key legal issues were whether the jurisdictional nexus requirements were satisfied and whether Compton was "ordinarily resident in Australia" for the purposes of section 188.

The primary judge examined the evidence, including an affidavit by Compton and a bundle of documents emailed to the judge's associate. The judge found that Compton was not ordinarily resident in Australia, as his evidence suggested he was living and working in Virginia. The primary judge relied on Lockhart J's interpretation of "ordinarily resident" as requiring some element of permanence and a settled and usual place of abode. The judge rejected the reliance on the authority signed by Compton, noting that Compton's affidavit and other evidence indicated he was not ordinarily resident in Australia. The judge concluded that Compton's authority had not become effective under section 189AAA(1), and thus, there was no stay to prevent Ramsay Health Care from pursuing its creditor's petition.

The court's reasoning focused on the factual determination of Compton's residency and the statutory language of "ordinarily resident." The primary judge found that the evidence did not support Compton's claim of ordinary residency in Australia. The decision emphasized the importance of determining residency based on the facts of each case and the elements of permanence and a settled and usual place of abode. The court's outcome allowed Ramsay Health Care to continue with its creditor's petition, as the stay under section 189AAA did not apply.

Orders

Orders of the court

1. By 4.00 pm on 17 January 2018, the appellant file and serve proposed minutes of orders and written submissions (of no more than three pages) in support of those orders.

2. By 4.00 pm on 25 January 2018, the first respondent file and serve proposed minutes of orders and written submissions (of no more than three pages) in support of those orders.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

It should be noted that the issue concerning s 189AAA was properly raised only when the matter was called on for the delivery of judgment and the primary judge was dealing with the matter in circumstances of urgency. The primary judge did not have the benefit of the detailed submissions that were presented on the appeal. Apart from the issue relating to s 189AAA, no other aspect of the primary judge’s judgment is challenged on appeal.The procedural background As the primary judge noted in an interlocutory judgment of 30 May 2017, the proceeding has had a somewhat extended litigious history. The following summary of the procedural background is substantially based on the primary judge’s reasons for judgment dated 30 May 2017 in relation to an adjournment application (Ramsay Health Care Australia Pty Ltd v Compton [2017] FCA 612) (the May Reasons) and the reasons for judgment dated 2 June 2017 that are the subject of this appeal (Ramsay Health Care Australia Pty Ltd v Compton (No 2) [2017] FCA 629) (the June Reasons). We have also drawn on some of the documents in the Appeal Book to which we were taken in the course of the appeal hearing. In June 2015, Ramsay Health Care filed in this Court a creditor’s petition against Mr Compton. Ramsay Health Care originally maintained that Mr Compton owed it $9,810,312.33, that amount being the amount of a judgment entered pursuant to orders of the Supreme Court of New South Wales on 6 March 2015: Ramsay Health Care Australia Pty Limited v Adrian Compton [2015] NSWSC 163. Mr Compton’s liability had arisen by reason of his acting as a guarantor of the liabilities of Compton Fellers Pty Ltd (trading as MediChoice). Ramsay Health Care, MediChoice and Mr Compton had executed a “Distribution and Group Purchasing Agreement” in September 2012. Mr Compton provided a “Guarantee and Indemnity” to Ramsay Health Care in respect of the Distribution and Group Purchasing Agreement in November 2012. MediChoice went into liquidation in July 2014. In July 2015, Mr Compton filed an interim application seeking (among other things) an order that this Court “go behind” the Supreme Court judgment. That order was resisted. Part of the evidence then relied upon by Mr Compton was an affidavit sworn by Anna Stevis on 4 September 2015 setting forth a detailed account of the moneys she claimed were owing by Ramsay Health Care to MediChoice. Ms Stevis was the former General Manager and a Director of MediChoice. In November 2015, the primary judge concluded that the circumstances presented did not enliven the power to “go behind” the judgment and, even if they had, the discretion should be exercised to decline to do so: Ramsay Health Care Australia Pty Ltd v Compton [2015] FCA 1207. Leave to appeal from that decision was granted and the appeal was allowed in August 2016: Compton v Ramsay Health Care Australia Pty Ltd (2016) 246 FCR 508. Special leave to appeal from the decision of the Full Court was granted on 10 March 2017: Ramsay Health Care Australia Pty Ltd v Compton [2017] HCATrans 55. The hearing was expedited and on 4 May 2017, by “[a]t least a majority”, the High Court of Australia dismissed the appeal: Ramsay Health Care Australia Pty Ltd v Compton [2017] HCATrans 95. (The reasons for judgment of the High Court were published later, in August 2017: Ramsay Health Care Australia Pty Ltd v Compton (2017) 345 ALR 534.)

Evidence

Evidence Before The Court

On 2 June 2017, when the matter was called on for delivery of judgment, Mr Svehla (for Mr Weston) submitted that Mr Weston had been appointed as controlling trustee some time after 3.30 pm on 1 June 2017, and that a certificate had been issued by the Official Receiver to this effect after 5.00 pm on 1 June 2017. Mr Svehla in effect renewed the application for a declaration that the proceeding was stayed by force of s 189AAA. Mr Svehla relied on a bundle of documents that had been emailed to the primary judge’s associate on the evening of 1 June 2017 (which were marked as an exhibit) and an affidavit of Mr Compton sworn on 1 June 2017. No objection was taken to the admission of this material and no application was made to cross-examine Mr Compton. Mr Svehla contended that the material established that Mr Compton was ordinarily resident in Australia. Initially, he conceded that Mr Compton was not carrying on business in Australia. In reply, however, Mr Svehla sought also to rely on this basis. Mr Svehla relied on the Certificate of Appointment of Trustee and reg 13.07 of the Bankruptcy Regulations 1996 (Cth) (set out below). He did not refer to reg 13.10. Senior counsel for Ramsay Health Care made submissions on the documents that had been tendered on behalf of Mr Weston. It was submitted that Mr Compton seemed to be “not only living but working in Virginia” and that the material “suggests that he is ordinarily resident at the moment … in Virginia”.The evidence before the primary judge The evidence before the primary judge pertaining to the s 189AAA issue comprised:(a)an email from Ragu Nith of Pitcher Partners (on behalf of Mr Weston) to the primary judge’s associate dated 1 June 2017 (9.51 pm) and a bundle of documents (paginated 1 to 154) that had been attached to that email; and(b)an affidavit of Mr Compton sworn on 1 June 2017 (Mr Compton’s affidavit). The evidence included the Controlling Trustee Authority. The date and time next to Mr Compton’s signature on that document are: 31 May 2017, 9.15 pm. It would appear that the document was signed by Mr Compton in Virginia during the evening of 31 May 2017 (local time in Virginia), which was during the day of 1 June 2017 (Australian Eastern Standard Time). The document named Mr Weston as the controlling trustee. It was also signed by Mr Weston. The date alongside his signature is 1 June 2017. It is convenient to note at this point that the signing of the Controlling Trustee Authority by Mr Compton constituted an act of bankruptcy by him: see s 40(1)(i) of the Bankruptcy Act. The email from Pitcher Partners to the primary judge’s associate dated 1 June 2017 included the following statement: Please note that at 5.05 pm 1 June 2017, the Official Receiver’s office sent an email to Mr Weston confirming his appointment as Controlling Trustee over the Property of the Debtor: page 2 of the bundle is a Certificate of Appointment confirming Mr Weston’s appointment. Contained between pages 3 to 7 are the other attachments to the Official Receiver’s email at 5.05 p.m.The email from Pitcher Partners also provided a detailed chronology of the signing of various relevant documents, the provision of documents to the Official Receiver’s office, and communications with the Official Receiver.

Decision

Reasons for decision

The parties proceeded before the primary judge on the basis that regard could also be had to the affidavit of Ms Perry sworn on 25 May 2017. This affidavit indicated that Mr Compton had moved to Virginia by October 2016 and included the following:4.On 24 May 2017 I had a telephone conversation with Amy Compton pursuant to which I am informed and verily believe:…(c)Amy Compton and Adrian Compton reside in Lynchburg Virginia and have 2 children aged 8 years of age;(d)Amy Compton has moved her family to Lychburg [sic] Virginia, a small town in central Virginia, to be close to her parents to provide assistance to her to care for Adrian Compton and her family; …The decision of the primary judge In the June Reasons, the primary judge dealt with both the issue concerning s 189AAA and the issue whether a sequestration order should be made. For present purposes, it is sufficient to focus on the part of the Reasons concerning the s 189AAA issue. His Honour noted, at [7] of the June Reasons, that a preliminary obstacle to the Court entertaining the creditor’s petition was said to arise by reason of s 189AAA. His Honour set out s 189AAA and the relevant parts of s 188 at [11] of the June Reasons. After describing the procedural course of this issue, his Honour noted, at [14], that counsel on behalf of Mr Weston had submitted that s 189AAA operated by its own force “to halt any further step being taken in the present hearing”. His Honour then set out an extract from Mr Compton’s affidavit. The primary judge rejected Mr Weston’s submission for the reasons set out at [15]-[19] of the June Reasons, as follows:15.For the purposes of s 188(1)(a) of the Bankruptcy Act, no conclusion can be reached that Mr Compton is a person personally present or ordinarily resident in Australia. The expression “ordinarily resident” was explored by Lockhart J in Re Taylor; Ex parte Natwest Australia Bank Ltd (1992) 37 FCR 194 at 198:To say that a person is ordinarily resident in Australia must mean something more than that he is resident in Australia. The word “ordinarily” connotes a comparison, a measure of degree. A person may have more than one residence, but he is not necessarily ordinarily resident in each of them. The question must be determined for the purposes of s 43 of the Act at a particular time. One must ask the question whether at that time the person was ordinarily resident in Australia. The concept of “ordinary residence” for the purposes of the Act, in my opinion, connotes a place where in the ordinary course of a person’s life he regularly or customarily lives. There must be some element of permanence, to be contrasted with a place where he stays only casually or intermittently. The expression “ordinarily resident in” connotes some habit of life, and is to be contrasted with temporary or occasional residence: see [Levene v Commissioners of Inland Revenue [1928] AC 217] and [Commissioners of Inland Revenue v Lysaght [1928] AC 234]. As Lord Warrington said in Levene (at 232): “‘Ordinarily resident’ means according to the way a man’s life is actually ordered.” The concept of ordinarily resident cannot be stated in definite terms; each case must be determined on its facts and after taking into account all relevant matters: see the Canadian case of Thomson v Minister of National Revenue [1946] SCR 209 per Estey J at 231. It depends on the facts of each case whether the debtor is ordinarily resident in Australia at the time of the commission of the relevant act of bankruptcy. At first blush it may seem strange to say that a person can be ordinarily resident in more than one country at the same time; but on closer analysis it is not. Plainly you cannot be physically present in more than one place at the same time. But the lifestyles of people vary greatly. Some people in the ordinary pursuit of their lives regularly or customarily live in more than one place, each of which has an element of permanence about it and is not merely a place of casual or intermittent resort.On the limited materials available to the Court no conclusion can be reached that Mr Compton is “ordinarily resident in Australia”. His intention to return at some future date, and the fact that his wife may be the registered proprietor of a property in Mosman in Sydney, nor the fact that he holds a bank account and superannuation account in Australia, satisfy the requirements as formulated by Lockhart J, albeit not exhaustively.16.In support of the contention that Mr Compton was ordinarily resident in Australia, counsel for Mr Weston relied upon the form of the authority submitted by Mr Compton to the controlling trustee which states that his residential address is at the wife’s premises in Sydney. To bolster that submission, reliance was placed upon reg 13.07(1)(a) of the Bankruptcy Regulations 1996 (Cth) which provides as followsExtract, etc of the Index to be admissible in evidence(1)In any proceedings, a document or copy of a document that qualifies under subregulation (2):(a) is proof, in the absence of evidence to the contrary, of information on the Index that is stated in it; and(b) may be tendered in evidence without further proof.(2) A document or copy qualifies if it:(a) purports (irrespective of the form of wording used) to be an extract of information on the Index; and(b) does not appear to the Court to have been revised or tampered with in a way that affects, or is likely to affect, the information.17.For the purposes of that regulation, “evidence to the contrary” is, it is considered, provided by the very terms of Mr Compton’s affidavit. Moreover, the connections which Mr Compton has with the United States lend some support to a conclusion that he is not ordinarily resident in Australia. That material included details as to his present employment with the United States Postal Service where he apparently has regular employment and is in receipt of regular income in Virginia. 18.Although reliance on s 188(1)(c) was initially disclaimed by counsel on behalf of Mr Weston, it was belatedly relied upon. Again, however, no conclusion can be reached that Mr Compton is “carrying on business in Australia”. His affidavit merely states that he is “providing financial consultancy services” with no details provided as to the frequency or regularity with which any services have been provided in the past or even details as to the last occasion on which any such service was provided. The materials made available by the trustee also indicate that whatever services may be being rendered by Mr Compton, those services were being rendered “remotely” and “from Virginia”. Reliance upon s 188(1)(c) is rejected.19.It is accordingly concluded that any “authority” signed by Mr Compton has not “become effective” (s 189AAA(1)) and that there is no stay operative such that Ramsay Health Care cannot further pursue the hearing of its Creditor’s Petition.

Ratio Decidendi

Legal Principle Established

In relation to the Certificate of Appointment of Trustee, Ramsay Health Care submits that Mr Compton’s contention overlooks the fact that Mr Compton did not satisfy the preconditions referred to in s 188(1), which meant that he could not sign the relevant authority that led to the issue of the certificate; and moreover and irrespective, the submission ignores the “evidence to the contrary”, including the evidence contained in the affidavit of Ms Perry (as to the Comptons moving to Lynchburg, Virginia) and the evidence of Mr Compton’s employment with, and receipt of, regular income from the United States Postal Service (contained in his statement of affairs, being one of the documents contained in the bundle of documents tendered in evidence).Consideration The words “ordinarily resident in Australia” in s 188(1)(a) of the Bankruptcy Act bear their ordinary meaning as described (in the context of s 43 of the Act) by Lockhart J in Re Taylor, drawing on cases including Levene, Commissioners of Inland Revenue v Lysaght [1928] AC 234 and Akbarali (referred to in the judgment as R v Barnet London Borough Council; Ex parte Shah). As discussed by Lockhart J (at 197), whether a debtor is ordinarily resident in Australia is a question of fact and degree. Both for the purposes of s 43 and for s 188, the question whether the debtor is ordinarily resident in Australia is to be determined at a particular time. The expression conveys a person’s settled and usual place of abode (see Re Vassis at 524-525 per Burchett J; Re Taylor at 197-198). A person may have two places of residence and may be resident (or ordinarily resident) in each at the same time (Re Taylor at 198). As Lockhart J said in Re Taylor at 198 (in the passage quoted by the primary judge set out above), the concept of “ordinary residence” for the purposes of the Act “connotes a place where in the ordinary course of a person’s life he regularly or customarily lives”. In Re Vassis, Burchett J said (at 525) that if a person’s home is in Australia, a merely temporary absence will not prevent his or her being “ordinarily resident in Australia”. His Honour continued that it is a question of fact and degree at what point a temporary absence might, if sufficiently prolonged, prevent its being proper to continue to regard him or her as ordinarily resident in Australia. Burchett J quoted with approval the following statement of Lord Scarman in Akbarali (at 344): “For if there be proved a regular, habitual mode of life in a particular place, the continuity of which has persisted despite temporary absences, ordinary residence is established provided only it is adopted voluntarily and for a settled purpose.” Although Re Taylor and Re Vassis arose in the context of s 43 of the Bankruptcy Act, the approach taken is equally applicable in relation to s 188. The jurisdictional connections set out in s 188 are expressed in substantially the same terms as s 43 and there is no reason to think a different meaning was intended.