Insolvency Litigation Fund v House - [2006] FMCA 526

FEDERAL MAGISTRATES COURT OF AUSTRALIA

INSOLVENCY LITIGATION FUND v HOUSE & ANOR

[2006] FMCA 526

BANKRUPTCY – Review of decision of Registrar – whether debtor able to persuade court of solvency or that the order should not have been made.

Bankruptcy Act 1966, s.52

In Re Macoun [1904] 2 KB 700
McIntosh v Shashoua (1931) 46 CLR 494
Re McVey, Ernest Andrew; Ex Parte Carswell & Co [1996] FCA 387
Re Fraser; Ex Parte Central Bank of London (1892] 2 QB 633
Corney v Brien (1951) 84 CLR 343
Wren v Mahony (1972) 126 CLR 212
Martin & Anor v Commonwealth Bank of Australia [2001] FCA 87

First Applicant:

INSOLVENCY LITIGATION FUND PTY LTD

Respondent:

JOHN AUGUSTUS WILLIS HOUSE & BETTY OLIVE HOUSE

File number:

ADG155 of 2005

Judgment of:

Raphael FM

Hearing date:

5 April 2006

Date of last submission:

5 April 2006

Delivered at:

Adelaide

Delivered on:

5 April 2006

REPRESENTATION

Solicitors for the Trustee:

Marshalls Solicitors

For the Respondents:

In person

ORDERS

Costs of the trustee's legal representation assessed in the sum of $350.00.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
ADELAIDE

ADG155 of 2005

INSOLVENCY LITIGATION FUND PTY LTD
ACN 083 043 010

Applicant

And

JOHN AUGUSTUS WILLIS HOUSE AND BETTY OLIVE HOUSE

Respondents

REASONS FOR JUDGMENT

On 12 October 2005, a sequestration order was made against the estate of John Augustus Willis House and his wife, Betty Olive House.

The decision to make that sequestration order was made by the Registrar of this Court under her delegated powers. The learned Registrar provided reasons for judgment of some six pages. Her arguments are well reasoned and her grasp of the issues thorough. But where judicial power of this type is delegated to a person who does not have the judicial authority of Chapter III of the Constitution, there is a right of review of that delegate's decisions. Mr House, as he is entitled, wishes to exercise that right.
He represents himself today. I am not entirely clear of the extent to which he represents his wife but in the light of the decision I will make at the end of these reasons that is not really a matter of much importance. The debt upon which the bankruptcy notice and the act of bankruptcy committed by Mr and Mrs House was based, arose from a judgment of O'Loughlin J in proceedings brought by the trustee of Mr and Mrs House's bankrupt son and daughter-in-law. This couple, Wyndham and Patricia, were made bankrupt at the request of the Australian Taxation Office.
They had previously run a business in the Barossa Valley in premises which Mr and Mrs House say belonged to them. As Registrar Christie sets out at [3] of her decision:
"As far as is relevant, the litigation between the trustee and Mr and Mrs House occurred as the result of a sale in 1999 of property at Tanunda. The trustee alleged that notwithstanding the fact that the real estate was registered in the names of Mr and Mrs House only, the real estate was an asset of a partnership in which Mr and Mrs House and Wyndham and Patricia were partners and that the assets that were sold included personal assets which, together with the real estate, were assets of the partnership. The trustee therefore claimed that the bankrupt estates of Wyndham and Patricia were entitled to a share of the proceeds of the disposal of the asserted partnership assets, the net proceeds of which it was claimed had been paid to Mr and Mrs House.
O'Loughlin J heard the matter on 9 September 2002. He handed down his decision on 11 December 2002. Although his Honour criticised some aspects of the evidence which was presented to him in relation to the amounts claimed to be owed, after considering in some detail the evidence before him, his Honour handed down judgment in favour of the trustee, against Mr and Mrs House jointly and severally, in the amount of $48,705. He made no order as to interest or costs, in view of what he considered to be the unsatisfactory manner in which the claim was prepared and presented."
Mr House, although expressing considerable personal regard for his Honour, did not agree with that decision but regrettably he took few steps to rectify what he considered to be the errors. He made no appeal until the time limited had expired. He did later make an application for leave to appeal out of time, which application was heard by his Honour, Selway J who, as Registrar Christie notes:
"...formed the view that the proposed appeal had no prospects of success and refused leave for Mr and Mrs House to appeal".
Mr House could have appealed that decision of Selway J to the Full Bench of the Federal Court but he did not do so. The debt remained outstanding and unpaid. Eventually it was assigned to the current petitioning creditor who, on 11 April 2005, issued a bankruptcy notice but that was not satisfied.
In her decision, Registrar Christie deals with the grounds of objection raised by Mr House to the application for the sequestration order. To my mind, she accurately sets out the law in relation to assignments of a judgment debt and the ability of an assignee to bring a petition; In
Re Macoun [1904] 2 KB 700; McIntosh v Shashoua (1931) 46 CLR 494. The learned Registrar also deals with the complaints made by Mr House concerning the previous proceedings and in particular the activities of the Australian Taxation Office. She notes that these are all matters which are, strictly speaking, irrelevant to the bankruptcy application.
Registrar Christie then dealt with the matters required under s.52(2) and discussed the ability of the Court to go behind the judgment, citing the standard authorities such as Re McVey, Ernest Andrew; Ex Parte Carswell & Co [1996] FCA 387; in Re Fraser; Ex Parte Central Bank of London (1892] 2 QB 633; and Corney v Brien (1951) 84 CLR 343; Wren v Mahony (1972) 126 CLR 212. The Registrar pointed out in her decision that the authorities are particularly reluctant in the absence of fraud to impugn a judgment that has been given in a court of competent jurisdiction after a full hearing. In this case a hearing was given, although Mr House tells me that it was conducted, so far as he was concerned, at the telephone. Criticism that he has directed at the proceedings does not seem to stem from this method of trial, it is more an attack on the background judgment against his son and daughter-in-law.
The Registrar did not consider there was sufficient reason for her to go behind the judgment given by O'Loughlin J and she then determined that the other matters required by s.52(1) and 52(2) had been met. In relation to the requirements of s.52(2), she was not satisfied that

Mr and Mrs House are able to pay their debts or that there was other sufficient cause why the order should not be made. Mr House disputes that he cannot pay his debts and it is true from a report which I have received from his trustee that he has no creditors other than the judgment creditor. But he makes that statement ignoring the judgment creditor's debt which he does not believe is legitimate.
This afternoon I provided Mr House with a lengthy opportunity to explain to me why he believed the Registrar's decision was wrong and why I should grant review by way of re-hearing and set aside the sequestration order. This application is a re-hearing of the application that was before the learned Registrar Martin & Anor v Commonwealth Bank of Australia [2001] FCA 87. Ms Forsyth tells me that she has instructions to appear on behalf of the trustee and to "assist the Court on behalf of the petitioning creditor if requested". I assume that her assistance would have run to referring me to the affidavits that were filed in response to the requirements of the Rules and which satisfied Registrar Christie that the requirements of s.52(1) had been met. I am equally satisfied.
I am also satisfied that this is not an appropriate case in which to go behind the judgment of O'Loughlin J because if truth be told, it is not so much that judgment that Mr House seeks to go behind, but the original action of the Australian Taxation Office in refusing to accept a settlement offer put by him on behalf of his son and daughter-in-law. It was their refusal to accept that offer that caused the Taxation Office to obtain a judgment against Wyndham and Patricia which led to their bankruptcy and then to the action of the trustee. It could be said that Mr House himself would have had no standing in any proceedings between the Taxation Office and his son and daughter-in-law, whatever offer he may have made to them.
Nothing I have heard today from Mr House satisfies me that a sequestration order against the estate of himself and his wife should not be made. There may be no utility in the order given the report of the trustee as to Mr and Mrs House's finances and some people may consider that the obtaining of such an order against a couple in their eighties could be considered a harsh exercise of rights. But by the same token, the creditor did not know the debtors' personal situation at the time of the hearing. It may have been that Mr and Mrs House did have assets that were available for distribution.
In all the circumstances and having regard to the affidavits filed herein I am satisfied of the matters required by s.52 of the Bankruptcy Act 1966 so that I would make a sequestration order against the debtor. The effect is that the decision of Registrar Christie will not be disturbed. There remains only the costs of these proceedings today. It was not strictly speaking necessary for the trustee to be here. The trustee in accordance with the Rules, has provided a helpful report. On the other hand there may have been every reason why the petitioning creditor should have come although Ms Forsyth did not really claim to be appearing on that company's behalf. In the circumstances, I assess the costs of the trustee's legal representation today in the sum of $350.00.

I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: