GR Finance Limited v Waldron - [2010] FMCA 257

FEDERAL MAGISTRATES COURT OF AUSTRALIA

GR FINANCE LIMITED v WALDRON

[2010] FMCA 257

BANKRUPTCY – Creditor’s petition – debtor’s wife previously made bankrupt on same judgment debt – sequestration order against wife under appeal – petition against husband not adjourned – judge not disqualified from considering identical grounds of opposition – sequestration order made.

Bankruptcy Act 1966, ss.37(2)(a), 49, 52(2)(b), 52(3), 52(5)

Concrete Pty Ltd v Parramatta Design & Development Pty Ltd (2006) 229 CLR 577
Ebner v The Official Trustee in Bankruptcy (2000) 205 CLR 337
GR Finance Limited v Waldron (No.2) [2010] FMCA 168
Livesey v New South Wales Bar Association (1983) 151 CLR 288
Re JRL; ex parte CJL (1986) 161 CLR 342

Applicant:

GR FINANCE LIMITED (ACN 093 549 305)

Respondent:

FRANCIS GERARD WALDRON

File Number:

SYG 2239 of 2009

Judgment of:

Smith FM

Hearing date:

8 April 2010

Delivered at:

Sydney

Delivered on:

8 April 2010

REPRESENTATION

Counsel for the Applicant:

Mr F Salama

Solicitors for the Applicant:

Marsdens Law Group

Counsel for the Respondent:

Mr B Skinner

Solicitors for the Respondent:

Bowles Lawyers

ORDERS

A sequestration order be made against the estate of Francis Gerard Waldron.
The applicant creditor’s costs, including all reserved costs, be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
Note that the date of the act of bankruptcy is 14 May 2009.
Note that a consent to act as trustee has been signed by Michael Gregory Jones and has been lodged with the Official Receiver in Sydney.
The applicant must within 2 days give a copy of this order to the Official Receiver in Sydney.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 2239 of 2009

GR FINANCE LIMITED

Applicant

And

FRANCIS GERARD WALDRON

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

This judgment includes two ex tempore judgments given in this matter. The first was delivered at the commencement of the hearing on 8 April 2010, and gave reasons for refusing Mr Waldron’s application for the adjournment of the petition against him. After it was delivered, Mr Waldron applied for me to disqualify myself from hearing the petition, on grounds of apprehended bias from pre-judgment. I refused that application and gave brief reasons, indicating that I would give fuller reasons later. My brief reasons will appear in the transcript available to the parties. The hearing of the petition was then completed. At the conclusion of the hearing, I delivered the second ex tempore judgment which is included in this judgment. It contained my full reasons for declining to disqualify myself, and for making a sequestration order.

The adjournment application

I have before me for hearing today a creditors’ petition against Mr Francis Gerard Waldron. The petition was filed on 15 September 2009 by a different creditor, Manna Trading International Pty Ltd, relying on a debt of $48,002.58 under a District Court judgment entered in 2005. The petition was adjourned in the registrars’ lists on numerous occasions, and eventually that creditor appears to have received payment of the debt. The present applicant, GR Finance Limited, then applied to be substituted under s.49 of the Bankruptcy Act. An order to that effect was made with the consent of Mr Waldron’s solicitor by Registrar Ng on 3 March 2010. The hearing of the petition with the substituted creditor was then adjourned by consent to 9 March 2010. This was the same date on which a petition by GR Finance against Mr Waldron’s wife was listed for hearing before me. On that date, the petition against Mr Waldron was transferred into my list from the registrar’s list.
GR Finance relies in the amended petition against Mr Waldron upon the same judgment debt as it relied upon in its petition against Mrs Waldron. This was a judgment of the Supreme Court of NSW entered against both of them on 15 May 2008 in the amount of $692,020.88. According to the affidavit of debt in the present petition, GR Finance currently is currently owed by Mr Waldron an amount of $811,238.07 under this judgment, including accrued interest under the judgment.
On 9 March 2010 at the conclusion of the hearing of the petition against Mrs Waldron, I gave an ex tempore judgment explaining my reasons for making a sequestration order against her (see GR Finance Limited v Waldron (No.2) [2010] FMCA 168). When the petition against Mr Waldron was then called, there was no appearance by Mr Waldron or on his behalf, and the solicitor who had been representing Mrs Waldron withdrew. However, there remained on the record in the present matter, an appearance by a different solicitor for Mr Waldron which had been filed on 19 October 2009. That different solicitor had attended court on several occasions, including 3 March 2010, but was not present on 9 March 2010.
GR Finance then sought to proceed with the petition against Mr Waldron on an uncontested basis. However, I was not satisfied that it was appropriate to proceed in the absence of Mr Waldron or a legal representative, without directing the service of an amended petition and affidavits verifying it. I gave directions for this, and for service on Mr Waldron at his address for service. There is now on the file evidence establishing more than full compliance with my directions, and this does not seem to be disputed by Mr Waldron’s new legal representatives who have appeared today.
A notice of change of solicitors for Mr Waldron was filed yesterday, indicating that he is now represented by the same solicitor who appeared for Mrs Waldron at the hearing on 9 March 2010. The new solicitors also filed a notice of grounds of opposition, which appears to repeat the contentions which had previously been made to me on behalf of Mrs Waldron, and which I had addressed in my judgment. No new evidence was filed in support of the contentions, and no evidence has been foreshadowed.
Essentially, Mr and Mrs Waldron’s contentions raise issues of construction and law, as to the effect on the liabilities of Mr and Mrs Waldron to GR Finance of a settlement deed executed by GR Finance during the pendency of the bankruptcy proceedings, under which it recovered compensation from valuers whom it alleged were liable for GR Finance’s financial losses arising from the inability of Mr and Mrs Waldron to meet their liabilities arising under the Supreme Court judgment or otherwise under the financing agreements giving rise to that judgment. It is unnecessary for me in this judgment to re-examine the contentions of Mr and Mrs Waldron, and it is enough for me to note that Mr Skinner, counsel for Mr Waldron, made no submissions in support of the present adjournment application pointing to any error of fact or law in my judgment.
Mr Skinner applied for the adjournment of the petition until the completion of an appeal in the Federal Court from my orders in relation to Mrs Waldron. The notice of appeal is in evidence before me, but no submissions have been made addressing the merits of the grounds of appeal. Prima facie, they do not appear to me to be of such obvious merit as to suggest prospects of success in the appeal or to cause me to doubt the correctness of my judgment. No doubt there are arguments which can properly be put on an appeal, but they were not shown to me in the course of the adjournment application.
Although the notice of appeal was made returnable in a directions list on 3 May 2010, the solicitors for Mrs Waldron have been informed by the Federal Court that the appeal is now listed for call-over on 21 April 2010. I infer that the Federal Court has decided that the appeal should be referred to a full bench, and that the call-over may allocate a date in the Full Court’s August sittings which occur between 2 and 25 August 2010. It appears to me probable that the appeal would not be heard earlier than that time.
There is no evidence before me that Mrs Waldron has moved on a prayer in her notice of appeal, seeking an interim order that proceedings under the sequestration order be stayed pending the hearing of the appeal. There is no evidence that a listing for such an interim application has been sought. I would assume, therefore, that the administration of Mrs Waldron’s bankruptcy is currently proceeding in accordance with the Bankruptcy Act, notwithstanding the bringing of her appeal.
It was suggested by Mr Skinner that the Federal Court might have difficulty giving a stay in Mrs Waldron’s appeal proceedings, and in a concurrent appeal by Mr Waldron against a sequestration order against Mr Waldron. However, I am unpersuaded that the Federal Court in its appellate jurisdiction would suffer any impediment. In particular, without being referred to any authorities on the point, it does not appear to me that the impediment arising by s.37(2)(a) of the Bankruptcy Act on a bankruptcy court exercising original jurisdiction under that Act, would apply to the Federal Court exercising its appellate jurisdiction.
No evidence was led in support of the adjournment of the petition as to Mr Waldron’s financial position nor the position of his creditors. There is no evidence before me as to who his creditors are, and what his current business affairs consist of. There is no evidence allowing an assessment of the implications for his current and future creditors of what might become a lengthy adjournment of the petition, before judgment was given on the appeal by Mrs Waldron. It is possible that this might not occur until after the expiry of the petition on 15 September 2010, although I note that a bankruptcy court would have power under s.52(5) of the Bankruptcy Act to extend that time for good reason for another 12 months only.
At [14] of my judgment in relation to Mrs Waldron, I noted that no evidence had been led by her pointing to an ability by her or Mr Waldron to pay their indebtedness to GR Finance, or even to pay the balance of their indebtedness after deducting the compensation received from the valuers. All the evidence before me in that proceedings and the present proceedings, suggests that Mr and Mrs Waldron are insolvent. Certainly, there is no evidence to the contrary filed in either matter.
As I have noted, no submissions have yet been made to me pointing to any reasons for doubting the correctness of my judgment in relation to Mrs Waldron. I am unpersuaded that the mere fact of the pendency of an appeal against that judgment should cause me to adjourn the present hearing, particularly in circumstances where I cannot be satisfied that such an adjournment would not be contrary to the interests of the creditors of Mr and Mrs Waldron.
I therefore refuse the application to adjourn the hearing of the petition, and I shall proceed with that hearing subject to any further applications brought by Mr Waldron.

The disqualification application

Before the hearing of the petition proceeded, Mr Skinner made an oral application that I recuse myself on grounds of apprehended bias. He submitted that my findings of fact and law in relation to the petition against Mrs Waldron might give rise to a reasonable apprehension in the mind of a fair minded lay-observer that I might not bring an impartial mind to the resolution of the issues arising in the petition against Mr Waldron, being the issues raised by his notice of grounds of opposition which was filed yesterday (cf Ebner v The Official Trustee in Bankruptcy (2000) 205 CLR 337 at [6]-[8], cited recently in Concrete Pty Ltd v Parramatta Design & Development Pty Ltd (2006) 229 CLR 577 at [110]).
No warning of this application had been given to my Chambers, and I was given no opportunity to research authorities on the question of disqualification arising from the giving of a judgment in a different matter involving similar issues. Mr Skinner cited no such authorities in the course of his submissions. The solicitor for GR Finance had been given a warning of the intended application in a letter he received late yesterday, but this notice did not reach counsel for GR Finance. He, therefore, was also unable to assist the Court with any reference to authority.
However, in the circumstances in which the application was made, including the preceding unsuccessful adjournment application, I was strongly disinclined to reserve my decision on the disqualification application and to adjourn the petition for that purpose. When giving my present reasons for declining the application, I noted that I would add citations to additional authority which supported my opinion as to the relevant principles.
I considered all the submissions which were made to me by Mr Skinner, pointing in particular to the fact that Mr Waldron’s notice of grounds of opposition to the petition made the same contentions which I had addressed in my judgment concerning Mrs Waldron. He submitted that a lay observer, having read my judgment, would form the view that I might have a closed mind in relation to the same issues when addressed in relation to the petition against Mr Waldron.
I did not accept that contention. In my view, authority does not support the disqualification of a judge merely because he has in an earlier case addressed the same issues of fact or law. In a well known, and often repeated, passage in Re JRL; ex parte CJL (1986) 161 CLR 342 at 352, Mason J said:
It needs to be said loudly and clearly that the ground of disqualification is a reasonable apprehension that the judicial officer will not decide the case impartially or without prejudice, rather than that he will decide the case adversely to one party. There may be many situations in which previous decisions of a judicial officer on issues of fact and law may generate an expectation that he is likely to decide issues in a particular case adversely to one of the parties. But this does not mean either that he will approach the issues in that case otherwise than with an impartial and unprejudiced mind in the sense in which that expression is used in the authorities or that his previous decisions provide an acceptable basis for inferring that there is a reasonable apprehension that he will approach the issues in this way. In cases of this kind, disqualification is only made out by showing that there is a reasonable apprehension of bias by reason of prejudgment and this must be "firmly established" (Reg. v. Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group [1969] HCA 10; (1969) 122 CLR 546, at pp 553-554; Watson, at p 262; Re Lusink; Ex parte Shaw (1980) 55 ALJR 12, at p 14; 32 ALR 47, at pp 50-51). Although it is important that justice must be seen to be done, it is equally important that judicial officers discharge their duty to sit and do not, by acceding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of a judge, they will have their case tried by someone thought to be more likely to decide the case in their favour.
In my opinion, an informed lay observer would often be aware that a judge may be required to decide matters containing similarities of fact, even identical facts or circumstances, particularly where a joint indebtedness of two debtors is in question in separate proceedings rather than in one petition.
In the present case, the observer might think that it is a historical accident that the petition against Mr Waldron did not proceed concurrently with Mrs Waldron’s on 9 March 2010. It only did not do so due to the withdrawal of Mrs Waldron’s solicitor, in circumstances where at that stage he had not received instructions to represent Mr Waldron. He subsequently received those instructions and now represents Mr Waldron also. He now instructs counsel to make the same contentions as to the construction of the deed of settlement and the legal implications of the receipt by GR Finance of the settlement monies on the liabilities of Mr and Mrs Waldron.
In such circumstances, a lay observer would understand that, even if an outcome might appear predictable, the judge in whose docket both matters were listed was bound to listen to any fresh arguments in the second matter, including going to the correctness of his previous reasoning which might otherwise be expected to be followed, and would be capable of considering fresh arguments with an open mind. Many authorities have referred to the expectation that a judge will be able to keep an open mind in relation to contentions or factual or legal points which have to be addressed afresh, at least where the prior judgment did not involve a “question of fact which constitutes a live and significant issue in the subsequent case or about the credit of a witness whose evidence is of significance on such a question of fact” (cf. Livesey v New South Wales Bar Association (1983) 151 CLR 288 at 300).
In the present case, essentially, the issues raised by Mrs Waldron in her notice of opposition turned upon points of law and construction of the deed of settlement between GR Finance and the valuers. My judgment addressed these points as going both to the existence of the indebtedness relied upon by GR Finance in the petition against Mrs Waldron and also as going to discretion under s.52(2)(b). However, her contentions did not turn upon any disputed issues of fact or credibility concerning herself or Mr Waldron.
In my opinion, the similarity of the issues which I addressed in my earlier judgment with the issues raised by Mr Waldron in the present petition, even if they are characterised as ‘identical’, would not lead an informed lay observer to conclude that the judge before whom both matters have been listed might not be open in the present matter to receiving fresh arguments and to reconsidering his previous opinions in relation to relevant legal principles and the construction and effect of the settlement deed.
For that reason, which I explained shortly at the end of Mr Skinner’s disqualification application, I declined to recuse myself and proceeded with the hearing of the petition.

The petition

I was taken through the evidence establishing to my satisfaction all the matters required to be established under the Bankruptcy Act and rules for the making of a sequestration order. No contention was made to me on behalf of Mr Waldron that they were not established, except in relation to the quantum of the indebtedness asserted in the amended petition and verified by the affidavits of debt.
The indebtedness relied upon by GR Finance is, in effect, the same indebtedness owed by Mrs Waldron which I accepted in the petition against her, i.e. the full amount of the Supreme Court judgment debt plus accrued interest. The debt relied upon today against Mr Waldron is a greater amount than that identified in relation to Mrs Waldron’s petition, due to the further accrual of interest.
Mr Skinner made a submission that, by reason of the receipt of the settlement sum from the valuers, the affidavits of debt should not be accepted. No evidence was presented in support of this submission or the notice of grounds of opposition, and, in effect, I was invited to take judicial notice of all my findings of fact made in my previous judgment.
Mr Skinner did not present any argument explaining why I should not follow my previous reasoning, which did not accept the same contention made on behalf of Mrs Waldron, and he declined to make any submissions in support of the notice of opposition which raised that contention. I was therefore left in the exactly same position in relation to the effects of the settlement deed and payment as I was immediately prior to my giving judgment in the petition against Mrs Waldron.
I have, before hearing the present case, reread my judgment. I have reconsidered the points I decided in that judgment. I have noted that no submissions directed at identifying error in that judgment have been made to me by either party. In my opinion, the conclusions I arrived at in that judgment as to the effect of the settlement deed and payment were correct, and I have decided now to reach the same conclusions in relation to the indebtedness relied upon in the amended petition against Mr Waldron. I am therefore satisfied that Mr Waldron is currently indebted to GR Finance for the full amount owing under the judgment against him in the Supreme Court plus accrued interest, totalling $811,238.07.

I am satisfied as to the act of bankruptcy relied upon in both the original petition filed by Manna Trading International Pty Ltd, and now also relied upon by GR Finance in its amended creditors petition. The act of bankruptcy occurred on 14 May 2009, upon Mr Waldron’s failure to comply with bankruptcy notice No.1178 of 2009, which was served by Manna Trading International Pty Ltd personally on Mr Waldron on 23 April 2009. I am satisfied that no application to the Court was brought in relation to that bankruptcy notice at any time. No challenge is made today in relation to the validity of the notice nor as to the occurrence of the act of bankruptcy based on its service and a failure to comply with its terms.
I am satisfied as to the truth of the other matters alleged in the amended petition, as established by the affidavits on the file. I am satisfied that all the relevant evidence has been properly served on Mr Waldron, both personally and on his former solicitors who were on the record at the relevant time. I am therefore satisfied that GR Finance has a prima facie right to a sequestration order against Mr Waldron.
In relation to discretionary grounds for declining to make a sequestration order, Mr Waldron has not filed nor tendered any evidence in support of his notice of grounds of opposition. However, GR Finance did not object to my taking judicial notice of the facts in relation to the indebtedness of Mr and Mrs Waldron and the circumstances of GR Finance’s settlement with the valuers which are narrated in my previous judgment. In effect, the parties treated the evidence in that case as evidence which was tendered in the present case.
I note, however, that Mr Waldron was given opportunity under my previous directions to file additional evidence. The fact that the two matters are, at this point when I am giving judgment, being decided upon an identical factual basis, is the result of decisions taken by Mr Waldron in relation to the presentation of his grounds of opposition today.
On that evidence, in my opinion, Mr Waldron has not established a discretionary reason for declining to make a sequestration order. As I have noted, Mr Skinner made no substantive submissions in opposition to the petition, apart from inviting me to assume that Mr Waldron relied upon the same submissions which had been previously put to me by Mrs Waldron. I am prepared to make that assumption, but in the absence of any substantive argument to why I should reconsider my conclusions on the same evidence and the same submissions, I am not persuaded that I should change my opinions today.
I therefore do not accept that the notice of grounds of opposition has established a reason which persuades me to decline to make a sequestration order against Mr Waldron.
I would, however, take note that my judgment in Mrs Waldron’s matter is under appeal, and I would entertain an application by Mr Waldron for an order under s.52(3) of the Bankruptcy Act staying the operation of the sequestration order for 21 days to give him an opportunity to decide whether he wishes also to appeal to the Federal Court and, if so, to apply to that Court for a stay in relation to my present judgment. As I have noted, Mrs Waldron did not seek a stay either from this Court or from the Federal Court, but it appears that she might do so. I am disposed only to give such a temporary stay on the basis of conditions which would require Mr Waldron to give reassurances in relation to his continuing presence in Australia, his lodgement of a statement of affairs, and a cap on expenditure subject to obtaining consents by his trustee. I shall discuss the terms of such conditions with counsel, if he is instructed to apply under s.52(3). [By way of postscript: no such application was made.]

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of Smith FM

Associate: Michael Abood

Date: 20 April 2010