Keenan v Skinner
[1999] FCA 1011
•30 JULY 1999
FEDERAL COURT OF AUSTRALIA
Keenan v Skinner [1999] FCA 1011
BANKRUPTCY – creditor’s petition for sequestration based on debtor’s failure to comply with a 21 day bankruptcy notice – creditor’s claim arising from an order for costs against the debtor made in an appeal in the New South Wales Court of Appeal – certificate pursuant to section 6 of the Suitors’ Fund Act1951 – no notice of opposition to the petition nor any evidence filed by debtor – correspondence especially between parties’ legal representatives being the only evidence – failure to draw debtor’s attention to the fact that she was entitled to obtain the amount involved from the Suitors’ Fund by application to the Fund – debtor impecunious --several adjournments, by consent, of the hearing of the petition to await payment from the Fund – interest on debt and costs of bankruptcy proceedings claimed by creditor – whether the debtor owes the creditor the amount claimed – withdrawal of debtor's solicitors from the proceedings – no assistance provided to the debtor to establish her situation and rights – next friend appointed in Supreme Court but not in Federal Court proceedings – whether service of the bankruptcy notice and creditor's petition were completed according to legal requirements – exercise of discretion under s 52(2)(b) of the Bankruptcy Act to dismiss the petition for "other sufficient cause"
Suitors’ Fund Act 1951 (NSW) s 6
Bankruptcy Act 1966 s 52(1), s 52(2)(b)
Federal Court Rules Order 43, rule 4(1), 4(2), 4(7), 5(2)Dowling v Colonial Mutual Life Assurance Society (1915) 20 CLR 509, referred to
Cain v Whyte [1933] 48 CLR 639, followed
Clyne v Deputy Commissioner of Taxation [1985] 5 FCR 1, followed
Trojan v Corporation of Hindmarsh [1987] 16 FCR 37, referred to
Re Svir; Ex Parte Commissioner of Taxation [1998] 83 FCR 314, followedJOHN KEENAN V CERETHA VIOLET SKINNER by her next friend CATHERINE SKINNER
NG 8406 OF 1997
THE HON JUSTICE MARCUS EINFELD AO
SYDNEY
30 JULY 1999
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 8406 OF 1997
BETWEEN:
JOHN KEENAN
ApplicantAND:
CERETHA VIOLET SKINNER by her next friend CATHERINE SKINNER
RespondentJUDGE:
THE HON JUSTICE MARCUS EINFELD AO
DATE OF ORDER:
30 JULY 1999
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.the petition be dismissed
2.there be no order for costs on the petition or for the costs reserved during the pre-trial proceedings
Note: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 8406 OF 1997
BETWEEN:
JOHN KEENAN
ApplicantAND:
CERETHA VIOLET SKINNER by her next friend CATHERINE SKINNER
Respondent
JUDGE:
THE HON JUSTICE MARCUS EINFELD AO
DATE:
30 JULY 1999
PLACE:
SYDNEY
REASONS FOR JUDGMENT
A petition for a sequestration order has been brought in the name of the applicant, John Keenan, based on Ceretha Skinner’s failure to comply with a 21 day bankruptcy notice. The bankruptcy notice was addressed to “CERETHA VIOLET SKINNER by her next friend CATHERINE SKINNER (“the debtor”)”, and the creditor was named as “JOHN KEENAN (“the creditor”)” of “C. – NSW INSURANCE MINISTERIAL CORPORATION”. The petition similarly identified the parties. No documentation has been filed showing the appointment of the next friend or her consent to act in these proceedings.
The affidavit of service of the bankruptcy notice testified to the notice having been issued “on the application of the Judgment Creditor”, a person not identified as such anywhere in the documentation. The affidavit said, quite nonsensically, that the notice was served on “Ceretha Violet Skinner by her next friend Catherine Skinner” by delivery on her personally, whoever “her” was. The affidavit went on to say that the notice was served on a person who, having identified herself as Catherine Skinner, was asked:
Are you the person referred to in this Bankruptcy Notice as the Judgment Debtor?
No person was so named. Catherine Skinner was not “the debtor” at all. The affidavit said that she replied:
Yes, what’s this all about?
The affidavit of service of the petition also testified, equally inappropriately, to its service upon “CERETHA VIOLET SKINNER by her next friend CATHERINE SKINNER herein named The Judgment Debtor”. In fact neither Skinner is so named anywhere. The affidavit was not served upon Ceretha Skinner at all and there is no provision for service of a person “by a next friend”. The affidavit stated that the documents were handed to Catherine Skinner with words to the effect:
Are you Catherine Skinner?
She is said to have replied:
Yes I am.
The server deposed that he then said:
Are you the next friend to Ceretha Violet Skinner to whom this Bankruptcy Petition is addressed?
To which Catherine Skinner is said to have replied:
Yes we don’t know what this is all about.
I am not surprised. The applicant’s claim arose from an order for costs against Ceretha Skinner, now duly taxed, following a case in the Supreme Court of New South Wales, defended on his behalf by the NSW Insurance Ministerial Corporation (the Ministerial Corporation), as a result of injuries Ceretha Skinner had sustained in a motor vehicle collision with the applicant at South Grafton on 21 October 1983. The evidence establishes that the Ministerial Corporation (said to have been formerly the Government Insurance Office of New South Wales) acts for insured defendants in personal injury litigation arising in such circumstances. The circumstances of the accident have not been placed before the Court and there is no evidence as to the legal disability which required Ms Skinner to have a tutor in those proceedings. All that can be said is that the length of the litigation means that she is now almost 16 years older than she was when she was injured. Whatever the situation then, it seems unlikely that she is a minor now.
Damages were awarded to Ceretha Skinner at first instance but the applicant appealed and the damages were reduced by the Court of Appeal on 24 March 1993. An order for costs on the appeal was made against Ceretha Skinner but pursuant to section 6 of the Suitors' Fund Act 1951 (NSW), she was issued with an indemnity certificate entitling her, in certain circumstances provided by that Act, to be paid an amount equal to the applicant’s costs of the appeal.
The relevant statutory criteria were conveniently set out in a letter of 10 September 1998 written on behalf of the Director-General of the Attorney-General’s Department, apparently as administrator of the Suitors’ Fund (the Fund), to the applicant’s solicitors who were seeking payment from the Fund of interest on the unpaid costs. I shall indicate in due course how the interest claim arose. The letter was, in part, as follows:
I advise that pursuant to the order of a court for a respondent to pay the costs of an appellant, the onus lies on the respondent to make payment of those costs. That onus is not affected if the court also grants the respondent a certificate under the Suitors’ Fund Act 1951.
The Suitors’ Fund Act 1951 provides that the respondent may apply to the Suitors’ Fund for the reimbursement of any costs (up to the sum of $10,000) which he or she has paid to the appellant pursuant to the order of the court. Pursuant to section 6(2)(a) the respondent must satisfy the Director General that she or he is financially unable to pay those costs before the Fund will pay any costs direct to the appellant. In no situation will the Fund initiate the payment of any party’s costs on the basis of the order of a court alone. I would therefore dispute that any liability for interest which may be payable on costs owing could accrue to the Suitors’ Fund when there is no onus on the Fund to initiate the payment of such costs.
However, I also note the provisions of section 6(2)(a) of the Suitors’ Fund Act 1951 which provide that if a respondent cannot be found after a reasonable search and/or a respondent unreasonably refuses or neglects to pay the appellant’s costs, then the appellant is able to apply to the Suitors’ Fund for the payment of those costs direct.
The applicant having presented and had taxed a bill for taxation, a certificate of taxation issued on 8 March 1995. That certificate, the bankruptcy notice dated 17 July 1997 and the creditor’s petition dated 13 November 1997 all stated that Ceretha Skinner owed $5,972.03 for the taxed costs. With interest the total debt sought in the petition increased to $9500.99. There has been no notice of opposition to the petition, nor has Ceretha Skinner filed any evidence in the matter, the only documents on the file from her side being a notice of appearance and a notice of ceasing to act filed by her solicitors. She has made no attempt to establish that she is solvent. The onus of establishing solvency rests on the debtor who has committed the act of bankruptcy: Trojan v Corporation of Hindmarsh [1987] 16 FCR 37 at 47, and a letter from her then solicitors to the Court dated 14 January 1998 stated that Ms Skinner had little or no means to pay the amount claimed in the bankruptcy notice.
In fact, apart from the formal affidavits, the only evidence in the case has been correspondence, largely between the parties' legal representatives, annexed to affidavits filed on behalf of the applicant. The principal affidavit is, however, so confused and confusing that in order to understand the issues raised by the petition, it has been necessary for me to extract and set out a chronological history of the matter as has led to the applicant’s claim for what is now said to be an unsatisfied debt of $3,528.96. The situation revealed by the history is neither comfortable nor praiseworthy for any party involved.
The certificate of taxation was first brought to Ceretha Skinner’s attention by a letter of 31 March 1995 to her solicitors from R. J. Walters, solicitor for a company named GIO General Ltd on the letterhead of a body called the Transport Accident Corporation (TAC). The letter claimed the amount of the certified costs and stated:
Should the payment of your client’s debt not be made within 28 days, this matter will be referred to Solicitors who will be instructed to commence debt recovery proceedings on behalf of NSW Insurance Ministerial Corporation (formerly GIO of NSW).
Ms Skinner was told that interest in accordance with “court rules” would accrue if this debt were not paid in the time allowed. The involvement or position of Mr Walters or either of the named corporations in the subject matter of the letter was not stated.
When payment was not made, a further letter was written by the same person to the same solicitors on 30 May 1997, more than 2 years later. Apparently nothing had transpired in the interim as that letter stated:
We refer to our letter of the 31 March, 1995, copy enclosed, and note that your client has not paid the $5,972.03 owed to the NSW Insurance Ministerial Corporation.
Have you passed on our letter and advised Ms Skinner that it is upon her to discharge this debt by paying the full amount.[sic]
We are again prepared to allow twenty eight days for [sic] the date of this letter for Ms Skinner to pay this long outstanding debt.
At the end of the above period, should the monies not be paid, our file will be referred to a solicitor with instructions to commence debt recovery proceedings.
Note that the longer the debt remains unpaid so will the interest continue to accrue.
This correspondence was distinctly unsatisfactory. Headed once “JOHN KEENAN ats CERETHA SKINNER” and the second time simply “CERETHA SKINNER”, it firstly mentioned and involved three separate bodies whose connection was not explained. How an impecunious litigant, or a lawyer for that matter, is supposed to understand who are GIO General Ltd, the TAC and the Ministerial Corporation, and the relationship between them, I do not know. Secondly, all these bodies would have known Ceretha Skinner’s general financial and personal position from the litigation. Thirdly, as its authors, they would have understood what I for one cannot understand was the meaning of clause 2 of the Order entered by GIO General Ltd on behalf of the creditor following the appeal. The Order stated [sic]:
1. The appeal be upheld.
2. So much of the verdict as awards general damages and interest be set aside and in lieu thereof the component of general damages be fixed at $30,000 and interest be given or awarded in accordance with Gogic from date of accident to date of trial $20,000 and if the parties cannot agree on that, they should bring in short minutes.
3. Respondent to pay appellant’s costs of the appeal and receive a Certificate under the Suitors’ Fund Act.
Fourthly, the correspondence failed to draw to Ceretha Skinner’s attention, or remind her, that she was entitled, or probably entitled, to recover or obtain the amount involved from the Fund but that she was first required to submit an application to the Fund. In fact, all that was necessary was for the letter writer to have suggested that, in the first place at least, one or other of the letters itself might be sent onto the Fund with a one line application for reimbursement on the ground of Ms Skinner’s impecuniosity. In the knowledge that the Court of Appeal had granted her a certificate under the Suitors’ Fund Act and of her personal circumstances, the author of the letters might even have sent a copy of one of them direct to the Fund to instigate the recovery or indemnity process himself. His principals had a direct and substantive interest in the recovery of the costs from the Fund. These were after all government bodies of one kind or another. One government agency simply cannot sit back under the shelter of the bureaucracy of the other and do nothing but harass an impecunious person under a legal disability. Finally, although the second letter contained a reference to interest, there was no actual claim for interest. The debt was still as it had always been. As will appear, the first mention of any additional sum was not until 5 months later.
The affidavit as to the truth of paragraphs 1, 2 & 3 of the petition was deposed to by Mr Walters. In it he explained:
1. I am the Legal Manager of the Special Claims Unit of NSW INSURANCE MINISTERIAL CORPORATION which was created by Ministerial Order pursuant to Section 24 of the Government Insurance Office (Privatisation) Act, 1991 and which Corporation took over matters previously conducted by Government Insurance Office of New South Wales for its insured. It is the insurer of the Applicant.
2. I am a person authorised by GIO GENERAL LIMITED CAN 002 861 583 which company is responsible for the administration of the NSW INSURANCE MINISTERIAL CORPORATION under a management agreement dated 19th June, 1992 to make this Affidavit.
3. The statements contained in paragraphs 1, 2 and 3 of the Petition are within my own knowledge true, as the Applicant is the insured of the NSW INSURANCE MINISTERIAL CORPORATION (FORMERLY GOVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES) and NSW INSURANCE MINISTERIAL CORPORATION (FORMERLY GOVERNMENT INSURANCE OFFICE OF NSW) conducted litigation on behalf of John Keenan. The obligation of the NSW INSURANCE MINISTERIAL CORPORATION (FORMERLY GOVERNMENT INSURANCE OFFICE OF NSW) is to act for and maintain defended litigation as a result of injuries sustained in motor vehicle collisions. The order for costs made in paragraph 1 of the Petition arose out of such a matter and the NSW INSURANCE MINISTERIAL CORPORATION (FORMERLY GOVERNMENT INSURANCE OFFICE OF NSW) is subrogated for its costs from the Applicant, John Keenan.
Of course at the time of the letters referred to, this information, unenlightening as it is to explain their contents, was not available to Ceretha Skinner.
In fact, nothing at all was done to assist in or obtain recovery of the certified costs from the Fund on either side of the record until 7 October 1997 when Ceretha Skinner’s solicitors wrote to the Fund enclosing the Certificate of Taxation and the Order of the Supreme Court. They asked for $8,824.23 but did not state how the lesser amount contained in the Certificate had grown to that sum. In fact the difference was the interest claimed in the bankruptcy notice which had by then been served but there was no mention of that notice in the letter to the Fund.
The Fund replied on 3 November 1997 as follows:
I refer to your letter on behalf of Ceretha Skinner concerning an application for payment under the Suitors’ Fund Act 1951.
I note that the copy of the minute of the order which you provided suggests that the appeal was in respect of the quantum of damages only. If that is so, section 6B is the section of the Act under which an indemnity certificate should be issued. Please provide the original indemnity or a copy sealed by the Court.
Photocopies only of the certificate of taxation and the minute of the order have been provided. The originals or copies sealed by the Court are required.
To enable further consideration to be given to this matter, it will also be necessary for the following documents to be furnished:-
· A receipt showing that the appellant’s costs have been paid. Alternatively, if reliance is to be placed on the proviso to section 6(2)(a) the respondent should furnish a Statutory Declaration giving details of her financial position and indicating her inability to pay the whole or part of such costs and requesting in writing that payment be made directly to the appellant;
· The original or a certified (sealed) copy of the Certificate of Taxation of the respondent’s costs of the appeal. Alternatively the respondent may elect to accept 50% of the appellant’s taxed costs. In this regard, I note that you have requested payment of $8,824.23. It is not clear how that figure has been determined, but I would indicate that the addition of the appellant’s taxed costs and 50% of that amount, should your client elect to accept payment of her costs on that basis, is $8,958.04.
·A form of authority, duly witnessed by a Justice of the Peace, is necessary before payment may be made in any name other than the principal.
It will be necessary to provide brief details of the cause of action and decision at first instance and whether any further appeal proceedings have been instituted.
Please note that the Act limits the total payment in respect of this claim to $10,000.00.
In the absence of a reply, the Fund wrote again on 24 November and 17 December 1997 but apparently received no word at all.
Also during November and December, with the applicant’s petition not yet served but in fact, though unknown to Ceretha Skinner, fixed for hearing on 11 February 1998, there was correspondence between the parties’ solicitors in relation to delaying bankruptcy proceedings to permit completion of the necessary procedures for recovery from the Fund. Of the letters I have seen, I can understand why confusion may have reigned supreme. For the headings given by the applicant’s solicitors were all different. They must have mystified their recipients. A 19 November letter of the applicant’s solicitors was headed “JOHN KEENAN v CERETHA VIOLET SKINNER (NSW INSURANCE MINISTERIAL CORPORATION)”. The last of them dated 3 December 1997, headed “NSW INSURANCE MINISTERIAL CORPORATION v CERETHA SKINNER”, stated that [our client] the creditor, whoever that was, would “hold action” for another month. What was expected to be achieved over the holiday period I do not know especially as that letter informed its recipient that the office of the applicant’s solicitors would be closed from 5pm on 23 December 1997 to 9am on 5 January 1998. In fact, without further apparent notice or contact, the petition was served on 7 January 1998, the hearing date then being only one (holiday) month away.
On 14 January 1998 Ceretha Skinner’s solicitors wrote to the applicant’s solicitors seeking an adjournment of the petition on the basis that she had applied to the Attorney-General's Department to have her debt paid out of the Suitors' Fund. They pointed out that as she was a person without the means to pay the amount, there would be little incentive for her to continue seeking the recovery of the amount from the Fund were the bankruptcy to proceed.
The respective solicitors exchanged further correspondence on 29 January (applicant) headed “CERETHA SKINNER v NSW INSURANCE MINISTERIAL CORPORATION”, and 2 February 1998 (Ms Skinner), on which date her solicitors also wrote to “The Presiding Officer” of this Court enclosing a notice of appearance and some of the correspondence and requesting an adjournment for 3 months. They also wrote:
We intend no disrespect to the Court but there will not be an appearance on behalf of the respondent on 11 February 1998. The reason for this is simply that we are prepared to continue to act for Ms. Skinner in the knowledge that we won't be paid. We are not prepared to engage city agent’s for whom we will be personally liable knowing that there is no prospect of us recovering any costs from Ms. Skinner.
The file copy of this letter was noted by a Registrar of the Court:
On 6.2.98 I informed Mr Wheelahan that if he were not to appear, and wishes an adjournment for his client, he should file and serve affidavit evidence, in particular to explain the delays in setting out the Suitors’ Fund claim.
It seems that no such affidavit was filed but an adjournment was nonetheless granted to 6 May 1998 as requested. The Registrar who heard the matter stated that the petition must proceed or be withdrawn on that occasion and that no further adjournment would be granted. In fact the petition was adjourned by consent a further 5 times, apparently all on the application of Ceretha Skinner’s solicitors, each time for more or less one month. Each time costs were reserved. The Court was told that the debt was expected to be paid from the Suitors’ Fund shortly.
Meanwhile further correspondence ensued, the applicant’s being respectively headed “CERETHA SKINNER v NSW INSURANCE MINISTERIAL CORPORATION”, CERETHA SKINNER ats NSW INSURANCE MINISTERIAL CORPORATION”, and “NSW MINISTERIAL CORPORATION v CERETHA SKINNER”. The correspondence included a letter from the applicant’s solicitors of 11 August 1998, the day before a hearing date, headed “NSW MINISTERIAL INSURANCE v CERETHA SKINNER”. It itemised a claim for $9,500.99 for the debt and interest plus itemised costs on the bankruptcy petition of $3,615, although these actual totals were not supplied. If they are wrong, it is my mathematics which is at fault. The letter concluded:
We are instructed that if this debt is paid by the next date and the costs are not made that we are to seek an order for costs.
Could you please advise if payment of the debt has been made and provide us with particulars of the same.
Although there was apparently no response to the letter, the hearing of the petition was again adjourned by consent on 12 August 1998, no doubt because of the lateness of the letter of the previous day, with costs again reserved. It was further adjourned on 9 September and the hearing of the petition commenced on the then adjourned date of 29 September. It was completed on 8 October.
For the purpose of the hearing, the applicant’s solicitors wrote to Ceretha Skinner’s solicitors on 14 August 1998 that:
… if the judgment debt is paid prior to the next occasion we will attend at Court and seek an order for costs. If the debt has not been paid prior to this time we are instructed to proceed.
In a letter dated 1 September 1998 the applicant’s solicitors wrote to Ceretha Skinner’s solicitors enclosing a cheque for $5,972.03 said to have been received by them from the Fund. There was no explanation as to how they received the cheque and why they were sending it to Ms Skinner when in fact it was due in the other direction. Perhaps she had paid that amount earlier and having authorised the Fund to pay the applicant direct was now entitled to a refund. If so, the claimed interest would appear to have been wrongly calculated. If not, the situation was by this time more than a little bizarre. The letter stated:
We note however that the interest and the cost of the Bankruptcy proceedings have not been paid and we are instructed to proceed unless those amounts are paid. We refer to our calculation dated 11 August 1998 in this regard.
The reply from Ceretha Skinner’s solicitors dated 11 September 1998 advised that they were no longer acting for her and stated:
Ms. Skinner has no notice of the contents of your most recent letter. As we believe it she now believes the debt is paid and the proceedings will terminate.
Presumably the “most recent letter” was the letter of 1 September but the result, far from a termination of the proceedings, was that on 1 October 1998, the applicant’s solicitors wrote to Catherine Skinner at the address at which she was served with the bankruptcy notice and the creditor's petition. That letter, headed “NSW INSURANCE MINISTERIAL CORPORATION (JOHN KEENAN)”, advised Catherine Skinner that the cheque for $5,972.03, said to have been obtained by “her” – but in fact was obtained by Ceretha’s – former solicitors from the Suitors' Fund, was received by the applicant in part satisfaction of the amount due. This letter made nonsense of the letter of 1 September 1998 which sent the cheque to Ceretha Skinner’s then solicitors. The letter of 1 October also stated that the applicant was now seeking payment of interest on the debt of $3,528.96 arrived at by deleting the amount paid from the $9,500.99 previously claimed. It concluded:
If this amount is paid please note that our client will be seeking an order for costs on the bankruptcy proceedings, the main ground being the delay by you or your solicitors on your behalf in obtaining the payment under the Suitors Fund.
The letter did not say what would happen if the amount was not paid. The bankruptcy costs had increased to $3,935.
There having been no reply to that letter, the applicant’s solicitor sought at the hearing of the petition the sequestration of an estate called “Ceretha Skinner by her next friend Catherine Skinner” on the basis of the unpaid interest. There can be no such estate. She also sought an order for costs in these bankruptcy proceedings in the sum of $3,935 claimed in the letter to Catherine Skinner of 1 October 1998. Because refunds or subsidies provided by the Fund only become directly payable where an unsuccessful litigant does not have the means to pay the debt, it is difficult to see where and how any bankruptcy in this case will advance the applicant. However, the questions firstly raised by the facts of the case are whether a debt to John Keenan has been established against Ceretha Skinner and whether the procedures required by the Bankruptcy Act and the Federal Court Rules have been complied with. Only if both of these questions are answered in the affirmative will there be a question whether in its discretion the Court should pronounce or refuse a sequestration order.
The applicant’s solicitor submitted that interest on the unpaid certified costs is permitted by the section 95 of the Supreme Court Act, that the interest claim in this case arose from delay on the part of Ms Skinner in claiming the costs from the Fund, and that the Court of Appeal cannot be taken to have intended the indemnity certificate to have to take account of the consequences of such dilatory conduct even though it was the fault of her lawyers. I have not of course heard from the lawyers and therefore do no more than record the submission of the applicant’s solicitor. She contended that the applicant should not be deprived of his or its entitlement to interest by Ms Skinner’s failure to submit her application for indemnity in a timely fashion.
In my opinion this argument is deceptively simple but regrettably incorrect. I must first record my appreciation of the refreshing frankness and honourable conduct of the applicant’s solicitor who, in the highest traditions of the legal profession, alerted me to the need to give this case careful attention notwithstanding the absence of any opposition to the petition.
I have considerable doubts, on the facts to which I have previously drawn attention, about whether Ceretha Skinner owes John Keenan the amount claimed. The various claims made against her have been very confused. Firstly, notwithstanding the naming of the applicant as creditor in petition and the bankruptcy notice, in certain respects incorrectly, the correspondence paints a very different picture by suggesting that the money os not owed to the applicant but to the Ministerial Corporation or some form of it. Virtually throughout the correspondence there was no mention of John Keenan as the creditor to whom this money would or was to be paid when recovered.
Secondly, it took more than 4 years after the hearing in the Court of Appeal for a claim for interest to be made in the bankruptcy notice and petition notwithstanding considerable prior opportunity for the claim to be presented. Even after interest was claimed in those documents, all the inter partes correspondence and the many consent adjournments of the petition proceeded on the basis of a recovery from the Suitors’ Fund of the certified costs without reference to interest. It is most unlikely that the Court would have agreed to delay the hearing of the petition for 7 months if it had not been its understanding, as conveyed by the applicant, that there was an expectation of recovery from the Fund and that whatever was recovered would extinguish the debt and terminate the proceedings. Then in the letter of 1 September 1998, the applicant’s solicitors for some unexplained reason sent the amount recovered to Ms Skinner’s solicitors, suggesting that the debt had previously been paid or settled.
When Ms Skinner’s solicitors withdrew from the proceedings, the situation would have represented a complete nightmare to her. But instead of trying to explain the situation to her, or better still, of seeking to ensure that she obtained access to some independent free legal advice about her situation and rights, the applicant’s solicitors wrote to Catherine Skinner, accusing “you or your solicitors” of undue delay in dealings with the Fund. Catherine was wrongly accused of delay or any other misdeed at all. She had twice told process servers that she did not understand what this dispute was all about. Ceretha’s solicitor had said that Ceretha believed the matter was completed with the receipt of the cheque from the Fund. Moreover, it is questionable whether the delays were not as much caused by the Ministerial Corporation or one of its associated bodies as by anyone on Ceretha Skinner’s side of the record. These bodies had a full knowledge of the facts and of the procedures of the Fund. It is unacceptable that a government body in such circumstances stand aloof with letters and threats to, and legal process against, an impecunious litigant and then claim the financial consequences of delay. There is also some doubt whether a claim for interest is permissible where access to the Suitors’ Fund is given by order of a Court and where direct payment of the costs is determined by the Fund because of the impecuniosity of the holder of the indemnity certificate so ordered.
However, this question does not have to be finally decided because it is clear enough to me that the foundations for a successful petition have not been laid. Order 43 of the Federal Court Rules provides for the appointment by the Court of tutors, defined in Order 1 rule 4, for persons under a legal disability. Although by Order 43 rule 4(1), an order appointing a tutor is not always necessary, by rule 5(2) a tutor who is appointed must act by a solicitor and by rule 4(7), no person may be made a tutor without consent. Moreover, by rule 4(2), no tutor may take a step in the proceeding unless the consent and a certificate of the tutor’s solicitor that the tutor has no conflict of interest with the person under the disability have been filed.
None of these provisions have been complied with in this case. Accordingly, Catherine Skinner is not Ceretha’s next friend for the purpose of these proceedings as named in both the bankruptcy notice and the petition, and the service of both have not been completed in accordance with the rules governing service or substituted service. Even assuming or accepting that all the other formal matters are proved, I am therefore not satisfied that the matters required by section 52(1) of the Bankruptcy Act have been complied with and the petition must be dismissed.
I would add finally that if this matter had come down to a question of the exercise of the discretion under section 52(2)(b) of the Act, I would have declined to make a sequestration order in the exercise of discretion. Section 52(2)(b) of the Act states:
(2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:
…(b) that for other sufficient cause a sequestration order ought not to be made;
it may dismiss the petition.
In Clyne v Deputy Commissioner of Taxation [1985] 5 FCR 1, a Full Court of this Court (Fisher, Morling and Wilcox JJ) stated at 5:
The circumstances which may constitute "other sufficient cause" for dismissing a bankruptcy petition are extremely variable. It is not appropriate to attempt to catalogue or circumscribe them.
The judgment of the High Court in Cain v Whyte [1933] 48 CLR 639, a case concerning s 56 of the Bankruptcy Act 1924 (Cth), the predecessor of s 52, is the leading authority on the meaning of "other sufficient cause". There, the court agreed with the judgment of the primary judge, Henchman J, quoting him at 645:
To my mind, the High Court of Australia did not intend to put a limit on the meaning of the words "other sufficient cause" in Dowling v Colonial Mutual Life Assurance Society [(1915) 20 CLR 509]…I can well conceive that "other sufficient cause" might arise in connection with any particular case. To my mind, it is the duty of the Bankruptcy Judge to examine in each case, if the question is raised, whether there is other sufficient cause than the fact that the debtor is able to pay his debts in full, for refusing to make an order.
A creditor's delay in finalising matters in dispute with the debtor is not on its own sufficient to constitute "other sufficient cause", but in this case the delay in bringing a claim for interest has contributed to the detriment to the public interest. The Court can use a consideration of the public interest in its discretion to dismiss a petition. In Re Svir; Ex Parte Commissioner of Taxation [1998] 83 FCR 314, Justice Burchett held:
On any application to dismiss a bankruptcy petition under s 52(2)(b) "for other sufficient cause", the Court must consider not only the interests of the individual parties before it, but the public interest which may be adversely affected by the propping up of insolvency.
The following matters would have formed the basis of my rejection of sequestration on discretionary grounds:
1.the doubts about the debt
2.the nonsensity or non-existence of an estate named “X by her next friend Y”
3.the erroneous and confusing intervention of the next friend
4.the misdescriptions in the affidavits of service and in the applicant’s correspondence indicating confusion about who was claiming what from whom
5.the moving position as to whether interest was actually being sought especially during the many adjournments of the petition
6.the morality if not legality of a claim for interest in the case of a Suitors’ Fund direct payment
7.the contribution to the delays, and therefore to the accumulation of interest, by the applicant’s side of the record especially the passage of 2 years between the first 2 letters from GIO General and the applicant’s subsequent inactivity in assisting and expediting recovery from the Fund
8.the apparent likelihood that bankruptcy will mean the expenditure of further public moneys on a trusteeship which on the evidence seems highly unlikely to reap any positive financial results
9.the non-emergence of any other creditors, and
10.Ceretha Skinner’s lack of personal contribution to the delays
The petition is dismissed. In the circumstances there should be no order for costs on the petition or for the costs reserved at earlier stages of the case.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marcus Einfeld AO. Associate:
Dated: 30 July 1999
Solicitor for the Applicant: Sally Nash (Sally Nash & Co) The respondent did not appear. Dates of Hearing: 29 September, 8 October 1998 Date of Judgment: 30 July 1999
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