Duff v Evans - [2003] FMCA 604

FEDERAL MAGISTRATES COURT OF AUSTRALIA

DUFF v EVANS

[2003] FMCA 604

BANKRUPTCY – Creditor’s petition to proceed to sequestration – whether it is appropriate in all the circumstances to exercise discretion to order sequestration – section 52 of the Bankruptcy Act.

Applicant:

ROBERT JOHN DUFF

Respondent:

JOHN EVANS

File No:

BZ 395 of 2003

Delivered on:

18 November 2003

Delivered at:

Brisbane

Hearing date:

18 November 2003

Judgment of:

Baumann FM

REPRESENTATION

Counsel for the Applicant:

Mr McQuade

Solicitors for the Applicant:

Cranston McEachern

Respondent in person.

ORDERS

A sequestration order be made against the estate of John Evans.
The applicant’s costs of and incidental to the petition, including reserved costs, if any, be taxed in accordance with the Federal Court Rules and paid from the estate of the respondent in accordance with the Bankruptcy Act 1966.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BZ 395 of 2003

ROBERT JOHN DUFF

Applicant

And

JOHN EVANS

Respondent

REASONS FOR JUDGMENT

(Settled from the ex tempore reasons)

This application before me today by the applicant is for a creditor's petition to proceed to sequestration. During the course of today's hearing, the matter has been the subject of extensive submissions and written submissions. I also gave to Mr Evans, the respondent to the application, leave to file and rely upon an affidavit sworn today much of which, it seems to me, was irrelevant to the issues before me. This is a matter which regrettably is a further event in a long history of litigation that has involved Mr Evans (“the Respondent”).
Mr Evans is a solicitor admitted in the 1940s and is now aged in his 80s. He says in his affidavit, and I accept for the purposes of these proceedings, that he had a distinguished military career and is now the recipient, as his sole income, of a military pension with a disability benefit. The debt which founded the bankruptcy notice and therefore the Act of Bankruptcy which founds the creditor's petition, arises from litigation in the Supreme Court of Queensland. I have before me and have read the reasons of McKenzie J delivered on 25 September 2001 in which he sets out some past history of the matter. In particular I refer to paragraphs 4 and 5 of those reasons which provide as follows:-
“[4] It is apparent that there have been financial problems in respect of the enterprise and proposals involving commercial entities for redevelopment of the site have been under discussion. There has been internal dissension in which the genesis of the present proceedings lies. When the matter was before me, Mr Evans, a member of the Sub-Branch and the Club sought to intervene on the basis of UCPR r 9(1)(b)(i) and/or (ii). Prima facie, it seems that he has been involved in a sub-committee concerned with a development proposal, propounded the interpretation of the rules relied on to challenge the validity of the receiver in correspondence and discussion, and supported the callings of a meeting in an abortive attempt to direct the trustees to oppose the application.
[5] I formed the view that his presence as a party was not necessary, desirable, just or convenient to enable the court to adjudicate effectively and completely on all matters in dispute connected with the proceedings. Further, the nature of his resistance to the appointment of a receiver was clear enough from correspondence and other material before me. It is essentially a question of interpretation of the relevant rules. If the objection is ill-founded the case is not in a category where a member might have standing to commence proceedings to insist on compliance with the organisation’s rules, as in Rendell-Short v Grier (1980) QdR 100.”
At paragraph 10 of those reasons McKenzie J, after finding that the appointment of the applicant and petitioning creditor in these proceedings, Robert John Duff, had been valid, made the observation that he would consider ordering that costs of those proceedings before him be paid by Mr Evans personally instead of the club and/or the sub-branch. He made a direction that in the event of the applicant wishing to pursue the question of costs against Mr Evans personally he be given notice of that intention within three days of delivery of this judgment.
Mr Evans today says that some irregularity in giving notice to him occurred. I am not able to be certain that that is the case but even if that were the case, it does not appear to me to have been a matter which troubled McKenzie J when he considered written submissions before about taking what is possibly seen as an unusual step, of ordering costs be paid by a non-party. I have before me the reasons of McKenzie J delivered on 31 October 2001. In those reasons again he deals with what he understood to be the history of the matter. In particular at paragraph 2 he says:
“The history of the matter is that an interim injunction was granted against the 1st respondent on 29 August 2001 and extended on 4 September 2001. It was granted on the foundation of evidence that when the applicant had gone to the club to assume control of it he was met by a group of men which included Mr Evans. After the applicant asserted his right to enter as receiver and manager Mr Evans advised him that he did not recognise the validity of the appointment. He demanded that the receiver and manager leave the premises, called security guards and threatened to have the guards physically remove the receiver and manager and his staff from the premises.”
Further at paragraph 4 he says:
“ It is apparent from the material before me that there was internal dissension in the club. Neither the club nor the trustees appeared to resist the applicant's argument in support of the validity of his appointment. There is material suggesting that there had been an abortive attempt to hold a meeting to require the application to be resisted.”
Further when dealing with the issue of liability for the costs arising from the substantive proceedings his Honour said at paragraph 9:
“ The reality is that the sole need for the applicant to bring proceedings at all was occasioned by the resistance by Mr Evans, perhaps encouraged by others, to the receiver and manager carrying out his functions. Notwithstanding the fact that Mr Evans had time to consider his position in the period between the initial hearing and the date of the hearing before me the applicant was forced to come to Court on the second occasion to vindicate his position.”
On the basis of those findings McKenzie J ordered that:
“The respondent in these proceedings, John David Evans, pay the applicant's costs of the application including reserve costs and costs of the application for costs to be assessed.”
Those costs were ultimately assessed by Acting Senior Registrar Mitchell who on 24 December 2002 issued an order which founds the bankruptcy notice relied upon in the petition in these terms:
“Pursuant to the order of McKenzie J made on 25 September 2001 that John Evans pay the applicant's costs of, and incidental to, the application for the declaration as to the receiver and manager's appointment, including reserve costs to be assessed, the cost statement of the applicants has been assessed and allowed on the sum of $30,975.93.”
As a result of that judgment, which I am satisfied, on all the evidence, is a final judgment capable of supporting a bankruptcy notice, a bankruptcy notice was issued. After service, an application was brought by Mr Evans in this Court to set aside the bankruptcy notice, such application having been filed on or about 26 February 2003. The matter was heard by Federal Magistrate Rimmer on 15 July 2003.

A transcript of those proceedings and copies of the submissions made at that time were before me by consent between the parties. What I do not have is a copy of the reasons for judgment, which although referred to in the transcript before me, do not appear to have been prepared in a written form, although delivered extempore on that day. The result of the application, however, was that application to set aside the bankruptcy notice was dismissed.
As a result, the petitioning creditor filed a creditor's petition which has, I am satisfied, been properly served upon the debtor. The matter came before me today. Mr Evans, who represented himself, argues on a number of grounds, some of which appear to have been argued before Federal Magistrate Rimmer, that the creditor's petition either be dismissed or, in a final submission, be stayed pending proceedings which he says have now been instituted in the Queensland State Magistrates Court in its Southport Registry, I presume for defamation. I shall come to that matter shortly.
Mr McQuade, who appears today on behalf of the petitioning creditor, provided a cogent summary of argument in relation to the matters. He reminds the Court that upon the creditor satisfying the matters required under section 52 of The Bankruptcy Act, the creditor is, prima facie, entitled to a sequestration order, and that the onus rests upon the respondent to show there is some other sufficient cause why the sequestration order ought not be made.
He also referred me to the decision of Markhoul v Barnes (1995) 60 FCR 572. The decision of the Full Court was that where an earlier application to set aside a bankruptcy notice has been dealt with and dismissed, it is not open to the respondent to again seek to challenge the validity of the bankruptcy notice at the hearing of the creditor's petition. Whilst I am under some uncertainty as to whatever findings were made by Federal Magistrate Rimmer because of the absence of any reasons available to me, it does appear as if the basis upon which Mr Evans argues today about the judgment is the same as the basis upon which he argued the judgment could not found the bankruptcy notice. I would find against him on those arguments.
Mr Evans comes to the Court today as a person who has, he says (and I accept, for the purpose of these reasons) in a bona fide and real way, sought to assist his RSL sub-branch. It has been a complex and difficult commercial transaction involving the club and which, as McKenzie J found, has clearly caused some dissension in the club and, no doubt, strong and different views. It has caused there to be communications to members, and it is about one of those communications which Mr Evans also complains.
He referred to a letter written by a Peter Harburg, who would appear to be the principal of a company, Harburg Investments Proprietary Limited. The letter, dated 21 February 2003, addressed, "To All Southport RSL Sub-Branch Members", refers to developments at the sub-branch and club. In particular, Mr Evans drew to my attention what he says is an admission by Harburg Investment Proprietary Limited, which touched upon the discretion I am required to exercise today. After dealing with matters relating to the history, as Mr Harburg presented it to members, Mr Harburg says, as follows:
“Mr John Evans' continued legal action against the receiver has proved frivolous and has cost the club and sub-branch over $60,000 in legal fees, a sum which could have been much better spent elsewhere. His latest allegation, that our endeavours to verify his claimed war service record is a personal attack is completely unfounded. We have asked for verification of his records because official Army records of World War II personnel indicate that the service numbers he supplied to the RSL have never been issued to a John David Evans. The official Army records do not list Mr Evans as ever serving in World War II in any capacity. In light of these facts, I believe it to be reasonable to ask for proof of Mr Evans' World War II service.”
Not surprisingly, Mr Evans is significantly distressed and offended by such a suggestion. It was clear, in his submissions to me today that, notwithstanding his training and admission as a solicitor and barrister, as he mentioned, in the High Court, since the 1940s, a challenge of his service record is something which goes to his very soul. As a result of those allegations, Mr Evans has informed me today, in his affidavit, that he has instructed solicitors to commence actions for defamation, and that such actions have been commenced.
The evidence available before me today of such action is very weak, notwithstanding Mr Evans, himself, tendering – which I inspected – a receipt fo $350 for funds he paid to a firm of solicitors on the Gold Coast for filing of an action. Certainly, I agree with Mr McQuade that the evidence before me goes nowhere near the test set by the decision in Ling v Endobrook Proprietary Limited (1997) 74 FCR 19.
The other issue raised by the letter of Mr Harburg that Mr Evans raises is that he says that the debt has been paid. This is in direct conflict with the direct evidence of the applicant, who says the debt has not been paid, and I accept the submission of Mr McQuade that even if, as a result of the terms of the receivership, the receiver is not, in a sense, out of pocket for costs (as I suspect they would not be, having a first charge on the income of the receivership) that does not, in any way, deal with the obligation of the receiver having the benefit of a judgment of a Superior Court to pursue that judgment if it is entitled to do so in terms of its fiduciary duty as receiver.
The final submission made by Mr Evans seeks to rely upon the general discretion offered to courts exercising jurisdiction in bankruptcy to consider whether it is appropriate in all the circumstances for sequestration to be ordered. The Act provides for some other sufficient cause. To this extent, I refer to the affidavit of Mr Evans filed today at paragraph 28 and 29. He says this:
“ I am involved as a sole applicant in proceedings on my behalf and in the interests of my fellow members of the sub-branch affecting the applicant's claim under a CA made in the name of the trustees of the sub-branch in the Supreme Court of Queensland. I believe that the debt claimed has long since been paid by the sub-branch and I believe, further, that the course of conduct on the part of the applicant and of his appointer have been motivated not by any claim of debt due by me to the applicant but in the hope and expectation that if made a bankrupt I will be able to pursue the said proceedings in the Supreme Court and in the defamation proceedings referred to above.”
Mr Evans said with all his might and I believe, from his perception, an honestly held view that he has been dealt a huge injustice by these proceedings. He does not seem to have taken on board the remarks of McKenzie J. that he could have withdrawn from it. Withdrawing from proceedings would not seem to be part of Mr Evan's character where it is clear he has been used to fighting for what he believes in and fights with all his energy.
However, there is no evidence that Mr Evans has neither a good claim against Harburg Investments or its directors or that he is in fact even solvent. In respect of his solvency, he says at paragraph 7(2), (3) and (4) of his affidavit filed on 4 August 2003 as follows:
“ Having been stripped by misfortune of my assets since I came to the Gold Coast 22 years ago, I have no assets in my estate available for the payment of any debt for trustees in bankruptcy except only the contingent asset potentially available arising from defamations which I have instructed solicitors and counsel with their good favour to initiate against the petitioner's principal, HI, Mr Peter Harburg, sole director, secretary and share holder of that corporation and his son. My only income is the regular fortnightly payments of a Veterans Affairs pension (which includes 100 per cent disability pension) arising from my voluntary military overseas service as a gunner in the AIF in World War II and in Vietnam from 1965 to 1966 as legal adviser to the commander, Australian Force Vietnam, and as judge in the military courts of Australia and New Zealand in that theatre of war. I have one other potential claimant against my estate, my bankcard creditor with the closing balance in the sum of $5106.08 as at 22 August 2003.”
I have provided in these reasons a full recitation of these matters as they all touch upon the ultimate discretion which I am required to exercise. I have formed the view that I should exercise my discretion to order sequestration and I shall do so being otherwise satisfied about the matters set out in section 52 of the Act. The order of the Court will be that Mr Evans be sequestrated and the usual order as to costs will apply.

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

Associate:

Date: