Katter v Melhem (No 2)

Case [2014] FCA 1176

FEDERAL COURT OF AUSTRALIA

Katter v Melhem (No 2) [2014] FCA 1176

Citation: Katter v Melhem (No 2) [2014] FCA 1176
Parties: JOSEPH KATTER and SUSAN VERA KATTER v ROBERT GEORGE MELHEM
File number: NSD 1689 of 2013
Judge: WIGNEY J
Date of judgment: 6 November 2014
Catchwords: BANKRUPTCY – application to set aside bankruptcy notice – judgment entered against the applicants in the District Court of NSW after action compromised and terms of settlement agreed – power of the Court to go behind a judgment – principles relevant to the Court’s discretion – claim that judgment unsupported by consideration because original action not bona fide – claim that District Court jurisdiction exceeded – claim that terms of settlement operated as a penalty
Legislation: Civil Procedure Act 2005 (NSW)
District Court Act1973 (NSW)
Duties Act 1997 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)
Cases cited: ChancliffHoldings Pty Ltd v Bell [1999] FCA 1708
Commonwealth Bank of Australia v Jeans [2005] FCA 978
Corney v Brien (1951) 84 CLR 343
Cumins v Deputy Commissioner of Taxation (2008) 172 FCR 425
Emerson v Wreckair Pty Ltd (1992) 33 FCR 581
Ex parte Banner; Inre Blythe (1881) 17 Ch D 480
Eyres v Butt [1986] 2 Qd R 243
General Credits Limited v Ebsworth [1986] 2 Qd R 162
Harrison v Charalambous [1999] FCA 902
Jones v Dunkel (1959) 101 CLR 298
Lachlan v HP Mercantile Pty Ltd [2014] NSWSC 356
Olivieri v Stafford (1989) 24 FCR 413
Petrie v Redmond (1942) 13 ABC 44
Re Cosimo Longo Ex parte: Cosimo Longo [1995] FCA 1324
Re Flatau; Ex parte Scotch Whisky Distillers Ltd (1888) 22 QBD 83
Re Riviere; Ex parte Original Mont de Piete Ltd (1919) 20 SR (NSW) 77
Re Wong; Ex parte Kitson (1979) 27 ALR 405
Richards v Cornford (2010) 76 NSWLR 572
Smith v Abbott, Stillman & Wilson [2007] FCA 1256
Wigan v Edwards (1973) 1 ALR 497
Woodward Pty Limited v Kelleher [1989] NSWCA 82
Wren v Mahoney (1972) 126 CLR 212
Date of hearing: 7 April 2014
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 124
Counsel for the Applicants: R Newlinds SC with D Sulan
Solicitor for the Applicants: Piper Alderman
Counsel for the Respondent: J Hogan-Doran with B Lloyd
Solicitor for the Respondent: Madison Marcus

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1689 of 2013
BETWEEN:

JOSEPH KATTER
First Applicant

SUSAN VERA KATTER
Second Applicant
AND:

ROBERT GEORGE MELHEM
Respondent

JUDGE:

WIGNEY J

DATE OF ORDER:

6 NOVEMBER 2014

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The application to set aside the bankruptcy notice is dismissed.

2.The applicants pay the respondent’s costs.  

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


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 1689 of 2013
BETWEEN:

JOSEPH KATTER
First Applicant

SUSAN VERA KATTER
Second Applicant
AND:

ROBERT GEORGE MELHEM

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AGLC
Katter v Melhem (No 2) [2014] FCA 1176
Case
[2014] FCA 1176
Decision Date

CaseChat Overview and Summary

The case of Katter v Melhem (No 2) involves an application by Joseph and Susan Katter to set aside a bankruptcy notice served on them. The bankruptcy notice was issued by Mr Robert Melhem based on a judgment from the District Court of NSW. The applicants argue that the judgment is not valid as it was entered following a settlement agreement that was not supported by consideration, was beyond the jurisdictional limit of the District Court, and was punitive in nature. They contend that this judgment should not form the basis for a bankruptcy notice as they were not indebted to Mr Melhem as claimed.

The court was required to determine whether it had the discretion to go behind the judgment and assess the validity of the debt on which the bankruptcy notice was based. It also had to consider whether the judgment exceeded the jurisdictional limits of the District Court and if the terms of the settlement agreement amounted to a penalty. The court's reasoning involved a careful analysis of the evidence provided by the Katters, which was largely unchallenged, and the documents and affidavits related to the District Court proceedings. The court held that the judgment was valid, and the bankruptcy notice must stand, leading to the dismissal of the application with costs awarded to Mr Melhem.

The court concluded that the Katters' claims regarding the validity of the judgment and the terms of the settlement agreement were not substantiated by the evidence. The judgment was properly entered and the bankruptcy notice was valid. Therefore, the application to set aside the bankruptcy notice was dismissed, and the applicants were ordered to pay the respondent's costs.

The final orders of the court are as follows: (1) the application to set aside the bankruptcy notice is dismissed, and (2) the applicants are to pay the respondent's costs. These orders were made in accordance with Rule 39.32 of the Federal Court Rules 2011.

Orders

Orders of the court

1. The application to set aside the bankruptcy notice is dismissed.

2. The applicants pay the respondent’s costs.

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

Background

Background to the litigation

For the reasons that follow, the application to set aside the bankruptcy notice must be dismissed with costs. Facts and evidence in detail In support of their application, Joseph and Susan Katter both swore and filed affidavits. Their affidavits contain evidence concerning their dealings with Mr Melhem and persons associated with him that culminated in the signing of the deed that was the foundation for the District Court action. They also deal with the District Court proceedings and the circumstances that led them to agree to settle the proceedings. The evidence of Joseph and Susan Katter was not challenged. They were not cross-examined. The evidence relied on by Mr Melhem in opposition to the application is essentially limited to evidence from his past and present solicitors concerning the conduct of the District Court proceedings and the events that followed. The affidavits of Mr Fullick, who was Mr Melhem’s solicitor during the District Court proceeding, exhibit the affidavits that were filed and relied on in the District Court proceedings, as well as the transcript of the oral evidence. The affidavits filed in the District Court proceedings were admitted into evidence in these proceedings on the limited basis that they were evidence of what was before the District Court, but were not evidence of the facts contained in them. Mr Fullick’s affidavits also exhibit the documents, evidence and transcript relevant to the entry of the Judgment and the application to set it aside. The starting point is the unchallenged evidence of Joseph and Susan Katter in relation to the events that apparently gave rise to the District Court proceedings. It is common ground that the affidavits of Joseph and Susan Katter filed in the District Court proceedings contained essentially the same evidence in relation to those events. Following is a brief summary. In January 2009, Joseph Katter’s brother died whilst in Lebanon. For reasons it is unnecessary to delve into in any detail, Mr Katter was suspicious of the cause and circumstances of his brother’s death. It followed a short marriage to a Lebanese woman. The widowed wife made claims on the estate. There was no autopsy or investigation by Lebanese authorities into the circumstances of the death. Mr Katter’s initial attempts to find answers concerning his brother’s death were unsuccessful. It appears that Mr Katter then became desperate. In April 2010, Mr Katter was introduced to Mr Saim Semaan as being someone who might assist. Mr Semaan lived in Sydney and had some association with a brothel in Auburn. It was suggested to Mr Katter, however, that Mr Semaan also had connections in Lebanon. In mid-2010 Mr Katter met with Mr Semaan on a number of occasions in Mr Semaan’s office in the brothel. Mr Semaan said that he could arrange an inquest or an investigation in Lebanon, but that it would cost a lot of money. He estimated around $300,000 to $400,000. Despite the cost, Mr Katter apparently decided to retain the “services” of Mr Semaan to procure the investigation.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

In this proceeding, Joseph Katter and his sister, Susan Katter, apply for an order setting aside a bankruptcy notice served on them in August 2013 and January 2014 respectively. The bankruptcy notice was issued on the application of the respondent, Mr Robert Melhem, on the basis of a judgment of the District Court of NSW made on 22 July 2013 (the Judgment). The Judgment has not been set aside or varied. As will be seen, some of the facts and circumstances that underlie the Judgment are, to say the least, unusual if not bizarre. Mr Melhem sued Joseph and Susan Katter in the District Court for $550,000 plus interest said to be owing under a deed of loan. That suit went to hearing, but was settled part way through Mr Melhem’s case. The terms of settlement provided for verdict and judgment for Mr Melhem in the sum of $400,000, but that judgment not be entered if that amount was paid by a particular date, or certain other conditions were satisfied. Failing that, the plaintiff was to have leave to enter judgment for $1 million. That is what occurred. Judgment in favour of Mr Melhem was entered in the sum of $1 million. An application to set aside the Judgment was subsequently dismissed. An appeal from that dismissal was discontinued. Joseph and Susan Katter submit that the Court should “go behind” the Judgment and conclude that they are not indebted to Mr Melhem, or at least not indebted to the tune of $1 million. They contend that no monies were received by them from Mr Melhem or anyone else. On that basis they say that they were never in debt to Mr Melhem as alleged in the District Court proceedings. There is therefore no debt upon which bankruptcy proceedings can be founded. They also submit that the Judgment exceeds the jurisdictional limit of the District Court and was based on terms of settlement that operated as a penalty. As such, they submit that the judgment debt is not enforceable by way of bankruptcy notice. For the reasons that follow, the application to set aside the bankruptcy notice must be dismissed with costs. Facts and evidence in detail In support of their application, Joseph and Susan Katter both swore and filed affidavits. Their affidavits contain evidence concerning their dealings with Mr Melhem and persons associated with him that culminated in the signing of the deed that was the foundation for the District Court action. They also deal with the District Court proceedings and the circumstances that led them to agree to settle the proceedings. The evidence of Joseph and Susan Katter was not challenged. They were not cross-examined. The evidence relied on by Mr Melhem in opposition to the application is essentially limited to evidence from his past and present solicitors concerning the conduct of the District Court proceedings and the events that followed. The affidavits of Mr Fullick, who was Mr Melhem’s solicitor during the District Court proceeding, exhibit the affidavits that were filed and relied on in the District Court proceedings, as well as the transcript of the oral evidence. The affidavits filed in the District Court proceedings were admitted into evidence in these proceedings on the limited basis that they were evidence of what was before the District Court, but were not evidence of the facts contained in them. Mr Fullick’s affidavits also exhibit the documents, evidence and transcript relevant to the entry of the Judgment and the application to set it aside.

Ratio Decidendi

Legal Principle Established

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