Kumar v Bathini

Case [2015] FCA 632

FEDERAL COURT OF AUSTRALIA

Kumar v Bathini [2015] FCA 632

Citation: Kumar v Bathini [2015] FCA 632
Appeal from: Application for extension of time: Bathini v Kumar [2015] FCCA 1190
Parties: AAKASH KUMAR and ALOKE KUMAR v MALA BATHINI and ANIL BATHINI
File number: VID 274 of 2015
Judge: MORTIMER J
Date of judgment: 25 June 2015
Catchwords:

PRACTICE AND PROCEDURE – Application for extension of time in which to appeal from dismissal of application for review of sequestration order – consideration of relevant factors – no satisfactory explanation for delay – prejudice to creditors where long-standing history of litigation – no reasonable prospects of success – application for extension of time refused

BANKRUPTCY AND INSOLVENCY – discretionary nature of s 52(2) Bankruptcy Act 1966 (Cth) – alleged claim against creditors – no error by Federal Circuit Court – application for extension of time refused

Legislation: Bankruptcy Act 1966 (Cth), ss 52(2), 60(2)
Federal Court Rules 2011 (Cth) r 36.03
Cases cited:

Barton v Malcolm Johns Legal Pty Ltd (No 2) [2015] FCA 166
Bathini v Kumar [2012] VCC 1604
Bathini v Kumar [2015] FCCA 1190
Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; 203 CLR 194
House v The King (1936) 55 CLR 499
Hunter Valley Developments Pty Ltd v Cohen [1984] FCA 186; 3 FCR 344
Jopar v The Queen [2013] VSCA 83; 228 A Crim R 519
Krpina v Arrow Sun Australia Pty Ltd [2015] FCA 63
Kumar v Bathini [2014] FCC 1592
Kumar v Bathini [2014] VSCA 77
Newman v Bain [2013] FCA 558; 213 FCR 370
Norbis v Norbis [1986] HCA 17; 161 CLR 513
Re Dolman; Ex parte Elder Smith Goldsbrough Mort Ltd (1967) 10 FLR 384
Toms v Harbour City Ferries Pty Limited [2015] FCAFC 35
Totev v Sfar [2006] FCA 470; 230 ALR 236
Vaysman v Deckers Outdoor Corporation Inc [2014] FCAFC 60; 222 FCR 387
WAAD v Minister for Immigration & Multicultural Affairs [2002] FCAFC 399
Westpac Banking Corporation v Tsatsoulis [2003] FCA 406
Date of hearing: 19 June 2015
Place: Melbourne
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 57
Counsel for the Applicants: Mr J M Selimi
Solicitor for the Applicants: Radebe and Associates
Solicitor for the Respondents: Mr J Selvamuthu of Mathew James Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 274 of 2015
BETWEEN:

AAKASH KUMAR
First Applicant

ALOKE KUMAR
Second Applicant
AND:

MALA BATHINI
First Respondent

ANIL BATHINI
Second Respondent

JUDGE:

MORTIMER J

DATE OF ORDER:

25 JUNE 2015

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The application for an extension of time in which to appeal from the orders of the Federal Circuit Court made on 17 April 2015 is refused.

2.The respondents’ taxed costs of and incidental to the application be treated as costs and expenses in the administration of the applicants’ estate pursuant to s 109(1)(a) of the Bankruptcy Act 1966 (Cth).

Note:    Entry of…

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Kumar v Bathini [2015] FCA 632
Case
[2015] FCA 632
Decision Date

CaseChat Overview and Summary

Kumar v Bathini was a case heard in the Federal Circuit Court of Australia. The applicants sought an extension of time to appeal against the dismissal of their application for review of a sequestration order. The applicants, who had a history of litigation with the respondents, were seeking to challenge the sequestration order on the basis of an alleged commission agreement. The respondents, who were creditors, had obtained a sequestration order against the applicants following litigation in the County Court of Victoria and the Victorian Court of Appeal.

The legal issues in the case revolved around the discretionary nature of section 52(2) of the Bankruptcy Act 1966 (Cth) and whether the applicants were entitled to an extension of time to appeal. The applicants argued that the Federal Circuit Court had erred in dismissing their application for review of the sequestration order. The court had to consider the relevant factors in deciding whether to grant an extension of time, including the explanation for the delay, any prejudice to the creditors, and the prospects of success of the proposed appeal.

The court found that the applicants had not provided a satisfactory explanation for the delay in seeking an extension of time. The applicants had a long-standing history of litigation with the creditors, and the creditors would be prejudiced if the extension of time was granted. The prospects of success of the proposed appeal were also poor, as there was no real reason to consider that the commission claim had reasonable prospects of success. The court held that the applicants had not shown that there was "other sufficient cause" for the sequestration order to be set aside. The application for an extension of time was refused, and the respondents' costs were to be treated as costs and expenses in the administration of the applicants' estate.

Orders

Orders of the court

1. The application for an extension of time in which to appeal from the orders of the Federal Circuit Court made on 17 April 2015 is refused.

2. The respondents’ taxed costs of and incidental to the application be treated as costs and expenses in the administration of the applicants’ estate pursuant to s 109(1)(a) of the Bankruptcy Act 1966 (Cth).

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

Background

Background to the litigation

It seems the applicants’ trustees in bankruptcy were not initially notified of the application for an extension of time in which to seek leave to appeal, but were subsequently informed. They were not parties to the review before the Federal Circuit Court, and no application was made for them to be parties to this application: cf Krpina v Arrow Sun Australia Pty Ltd [2015] FCA 63 at [36] where, on an appeal, Beach J sets out the usual position in relation to trustees. FACTUAL BACKGROUND The Federal Circuit Court set out the relevant factual background, which is not contentious in any material sense between the parties, and I take this summary from her Honour’s reasons, and from the affidavit material before me. That affidavit material included the decisions of the County Court of Victoria in Bathini v Kumar [2012] VCC 1604 and the Victorian Court of Appeal in Kumar v Bathini [2014] VSCA 77, to which I refer below. Each of those decisions sets out in considerable detail much of the factual background to the underlying disputes between the applicants and the respondents, as well as the course of litigation between them. The parties have a long and somewhat antagonistic history, relevantly since 2008. They began with a commercial relationship in relation to the provision of educational services to international students. The respondents to this application (whom I shall describe as the creditors) were operating an educational institution called Chelsea International College. It was operated through a company, called Chelsea International College Pty Ltd. The applicants claim the relationship began with an oral agreement in approximately June 2008 whereby the creditors would give the applicants “exclusive marketing rights” in relation to the college and the applicants agreed to procure foreign students to attend the college, and would be paid a commission by the creditors (the calculation of that alleged commission need not be set out here) where students were referred and enrolled. This oral agreement, the applicants claimed, was altered in October 2008 by the applicants and the creditors entering into a partnership agreement instead. The applicants alleged they agreed to waive their commissions in return for a pooling of resources between the parties and an agreement going forward to work as partners. It was this partnership agreement which became the subject of the litigation which led to the sequestration order against the applicants. The creditors brought proceedings in the County Court of Victoria, seeking damages and to have the partnership agreement declared unenforceable, on the basis that they had been induced to enter into it by the misleading and deceptive conduct of the applicants. There was alleged to have been a misleading and deceptive representation to the petitioning creditors, namely, that the applicants had bought a college, the Australian Institute of Tourism and Commerce, for $440,000. After a trial lasting some ten days, judgment was given in favour of the creditors.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Since the sequestration order remains in force, the applicants are unable to take any further steps in this proceeding: Bankruptcy Act 1966 (Cth), s 60(2). THE FEDERAL CIRCUIT COURT REVIEW DECISION The question for her Honour, as it had been for Registrar Caporale, was whether the discretions in s 52(2) of the Bankruptcy Act should be exercised. Section 52(2) provides:If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:(a) that he or she is able to pay his or her debts; or(b) that for other sufficient cause a sequestration order ought not to be made;it may dismiss the petition. Her Honour noted, and it remains the case before me, that the parties agreed the applicable principles had been set out in Totev v Sfar [2006] FCA 470; 230 ALR 236 at [40]-[44], by Allsop J (as his Honour then was). I set out here the relevant parts of her Honour’s reasons for judgment at [13]-[27]:13.The debtors argued that, because the County Court found that the partnership agreement was void, they are now able to claim all the commissions that were owed to them under the agreement. They say that they did not file proceedings earlier because they hoped to have the partnership agreement upheld. The debtors actually claimed in their original defence in the County Court filed on 9 December 2009 that they had the commission agreement with the petitioning creditors and said it constituted a setoff against the claim brought against them by the petitioning creditors. However, in an amended defence filed on 1 October 2010, the debtors abandoned the commission claim.14.The trial in the County Court commenced on 3 October 2012 and ran for 12 days. The debtors in the preparation for the hearing were represented by a particular solicitor who filed on their behalves both the defence and the amended defence. However, they were not represented at the commencement of the trial. Part way through the trial, they gained legal representation. Their counsel sought on two occasions to be permitted to re-amend the defence to include the commission claim. The County Court refused that application on both occasions.15.The appeal to the Court of Appeal does not appear to have included any ground of appeal in relation to the County Court’s refusal to allow the reinstatement of the commission claim. There is a copy of the special leave application to the High Court before this court. It did not raise as an issue that the County Court erred in not permitting the reinstatement of the commission claim.16.The Court of Appeal noted that the debtors conceded before the Court of Appeal that they were not legally entitled to bring the claim for commission. Counsel for the debtors before the court today said that that concession had been made because the debtors were aware that leave had not been granted to revive the commission argument and so, on that basis, they were not legally entitled to claim commission. As I have mentioned, there was no appeal ground that leave should have been granted for the commission claim to be revived.17.The debtors rely particularly on a passage from Totev v Sfar at [44], which said that:Alternatively, the circumstances may reveal a claim of a character and nature in which likelihood of success cannot be predicted with accuracy, but in the circumstances the petition should be dismissed or an adjournment of the petition should be granted: see the approach of Sundberg J in Ling v Commonwealth [1996] FCA 1646; (1996) 68 FCR 180 at 195-196, with which Wilcox J and Whitlam J agreed.18.The debtors submitted that this is such a case because here there is simply oath against oath. The debtors and creditors respectively have said on affidavit that there was and was not an oral agreement regarding the commission. The debtors submitted that, in such circumstances, the court should allow the matter to be determined by the Supreme Court. The debtors submitted that this court should not be making judgments about the credibility of the debtors’ claim.19.The petitioning creditors argued against that. They said that there are many features of this case which reveal the character and nature of the commission claim and which indicate that the commission claim is not likely to succeed. They said that there is an Anshun estoppel argument. They said that there is an overwhelming likelihood that, if this matter were to go to the Supreme Court, it would be immediately rejected on Anshun principles. The debtors said that Anshun does not apply because they tried to run their argument, but were not permitted to do so. They said that takes them outside the normal range of Anshun cases.20.The position is that this court cannot determine definitively whether Anshun estoppel would apply in this case or not. That would be a matter for the Supreme Court. However, there are a number of features already mentioned which suggest that there is a solid basis to the Anshun arguments. The commission claim was raised in the County Court. It was abandoned in the County Court. The debtors had the same lawyers acting for them when both of those steps were taken. It is true that the debtors attempted to reinstate their commission claim in the County Court without success. Although they appealed against the County Court judgment, they did not appeal the refusal to allow the commission claim to be run. The other telling point is that, although the Supreme Court writ regarding the commission claim was issued on 22 October 2014, it has not been served.21.Counsel for the debtors disputed a claim by counsel for the creditors that the matter would not be heard in the Supreme Court until next year. Counsel for the debtors said that the Anshun point could be heard and determined in weeks in the Supreme Court. That may be true, but it cannot be determined until the writ is served. It seems to me that it is extremely telling that the debtors chose not to serve the writ.22.There was some debate about why it had taken so long for the writ regarding the commission claim to be filed at all in the Supreme Court. Counsel for the debtors explained that they did not wish to set aside the partnership agreement because it would have given them a one-third share in the college and they perceived that as being more valuable than their $1.2 million commission claim. That might explain the delay between the judgment of the County Court on 22 October 2012 and the refusal of special leave on 15 October 2014. However, it does not explain the delay in serving the writ.23.It seems to me that in the context of this case there is a reasonable prospect that the Anshun argument will be resolved in favour of the creditors. However, it also seems to me that there are surrounding circumstances in this case which support a decision that the sequestration order should not be set aside. The decision of Allsop J, as his Honour then was, in Totev v Sfar said that the discretion in s.52(2) of the Act should be informed by a number of factors, including public interest considerations. There has been a very long history to this matter. The bankruptcy notices were issued in 2012. There has already been protracted litigation in the County Court, Court of Appeal and the High Court.24.Another factor is the stage of the litigation. As I have said, the writ was issued on 22 October 2014, but it has not been served. The litigation [is] at an extremely early stage.25.The next factor is the length of time for the vindication of any claim. The parties were in considerable dispute about how long it might take for the Supreme Court proceeding to come to a conclusion. I am not in a position to determine that matter, other than to say, again, that the litigation is at an extremely early stage.26.Allsop J said in in Totev v Sfar that what the debtors needed to show was that there was a real claim, which is likely to succeed. There is other authority to the effect that the claim does not need to be more likely than not to succeed, rather, that there be a prima facie case. However, even on the lower test, it seems to me that there is no real reason to consider that this is a real claim which has reasonable prospects of success. The claim is based on an oral agreement. There is no evidence, other than the debtors’ assertions, of the existence of that agreement. The creditors point out that the alleged agreement seems odd in that, if it concerned marketing rights for Chelsea International College, it would be expected that Chelsea International College would have been party to the agreement. Moreover, there is the Anshun argument.27.Taking into account all the matters referred to by Counsel, I do not consider that there is “other sufficient cause”, such that the sequestration order made by the registrar ought to be set aside. There will be orders accordingly.THE PARTIES’ SUBMISSIONS ON THE APPLICATION

Ratio Decidendi

Legal Principle Established

By the time of the hearing of the application the applicants and the creditors were represented by counsel, and had filed written submissions in support of their respective positions, which I have read and considered, including a reply handed up by the applicants’ counsel in court. The parties made detailed oral submissions, which I have also taken into account.CONSIDERATION OF THE EXTENSION OF TIME APPLICATION At the start of the hearing, counsel for the applicants made a submission that the extension of time application should be referred to a Full Court, to be heard together with an appeal if an extension of time was granted, on the basis there is a conflict of authority about s 52(2) of the Bankruptcy Act. I pointed to the parties’ agreed position before the Federal Circuit Court that Totev was the applicable authority and counsel confirmed this. Counsel’s attempted reliance on paragraph [26] of her Honour’s reasons (extracted above) does not alter the relevance of that concession, which was properly made. In [26] her Honour was doing nothing more than making a cautious supplementary observation. There was no contest between the parties before her Honour on the applicable principles, nor was there any before me. I informed the parties that in any event there had been a direction from the Chief Justice that the extension of time application be dealt with by a single judge and that was what would occur. If an extension of time were granted, whether the appeal then went before a Court constituted by one or three judges would be a matter for the Chief Justice. Somewhat inconsistently, counsel for the applicants then moved to a submission that it would be sufficient for an appeal to be heard by a single judge. This recognised, properly, that there was no relevant conflict of authorities raised by this appeal. In considering whether to extend the time in which a notice of appeal may be filed, the Court takes into account three principal matters: any explanation for the delay, any prejudice to the respondent or other parties which might be occasioned if the extension of time were granted and the prospects of success of the appeal if an extension of time were to be granted. These considerations were set out in Hunter Valley Developments Pty Ltd v Cohen [1984] FCA 186; 3 FCR 344 at 348-349 and have been applied consistently in this Court, by single judges and Full Courts. The way the explanation for the delay is to be balanced against the prospects of success of the proposed appeal will vary from case to case. I respectfully agree with observations of Besanko J in Vaysman v Deckers Outdoor Corporation Inc [2014] FCAFC 60; 222 FCR 387 and his Honour’s reliance on Jopar v The Queen [2013] VSCA 83; 228 A Crim R 519, where his Honour said (at [89], relying on Jopar):In this case, the correct decision on the application for an extension of time is finely balanced. The delay is very substantial and, as I have said, the explanation for it, far from satisfactory. Nevertheless, I agree with the approach taken by the Court of Appeal of the Supreme Court of Victoria in Jopar v The Queen (2013) 228 A Crim R 519 at [60]: Scrutiny is thus invited of the reasons for the delay and the merits of the proposed appeal. These two considerations are not necessarily in equipoise. Where the merits of the proposed appeal are very poor, even a satisfactory explanation for the delay might not justify an extension. On the other hand, where the merits of the putative appeal are very good, but the explanation for the delay is poor, the court may incline towards granting an extension. The discretion reposed in the court must be exercised according to the individual facts of each case.