Leczynski, Bogdan v Hont, Helen Elene

[1997] FCA 1531

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 50 of 1997

BETWEEN:	BOGDAN LECZYNSKI APPELLANT
AND:	HELEN ELENE HONT RESPONDENT

JUDGES:	LOCKHART, VON DOUSSA AND KIEFEL JJ
DATE:	13 NOVEMBER 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT

THE COURT

Two appeals are before the Court.  The primary appeal is from the judgment of a judge of the Court (Mansfield J) given on 13 June 1997, in which his Honour dismissed an application by the appellant for review of a decision of the Registrar made on 17 April 1997 that a sequestration order be made against the estate of the appellant and that the costs of the substituted creditor, Helen Elene Hont, the respondent, and of the petitioning creditor, Bank of South Australia, be taxed and paid out of the appellant's estate.  The sequestration order was stayed for 14 days to enable the appellant to meet the claim and costs of the respondent and the costs of the Bank of South Australia; but he did not do so. 

The second appeal is from the judgment of a judge of the Court (O'Loughlin J) given on 5 September 1997 concerning two notices of motion heard by his Honour.  The first notice of motion was filed by the respondent seeking security for costs against the appellant of the primary appeal.

The second notice of motion was filed by the appellant seeking declarations: that Mr Womersley filed an appearance in this Court without the authority of the respondent, that he acted without authority in a relevant action and that he abused certain proceedings and committed a contempt of Court in the face of the Court.  In that motion the appellant sought orders that the motion for security filed by the respondent be dismissed and that the action of the respondent in the proceedings be struck out.  He also sought that the sequestration order made against him be set aside and that Mr Womersley should pay costs and damages in both proceedings.

Strictly speaking, the appeal from O'Loughlin J's order concerning the security for costs is interlocutory and leave to appeal is required; but the Court has taken the view that it should entertain the appeal as if it were the motion for leave and hear full argument on it accordingly.  So in effect the motion and the appeal may both be dealt with together.  This seemed to be to us a practical and sensible course to take.

The Court considers first what has been called the primary appeal.  The relevant facts and the curial history of the proceedings are lengthy and are recited fully by Mansfield J and we are content to adopt that recitation of the facts.  It is necessary to recite only some of the facts in brief form. 

A default judgment was obtained against the appellant in the name of the respondent in the Magistrates’ Court.  Subsequent attempts by the appellant to have the judgment set aside by appeal to the Supreme Court of South Australia and to a Full Court of that Court were unsuccessful.  The judgment ultimately founded the sequestration order which was made in respect of the appellant's estate by the Registrar and the application for review of the sequestration order which was heard and refused by Mansfield J in his judgment to which we have already referred.

Mansfield J stated in his reasons for judgment, at p7, that:

“It would not be unfair to conclude that the grounds of review as identified from the application for review, the affidavits, and the written and oral submissions reflect a thorough trawling of all materials.  They are thus somewhat indiscriminate, and some clearly incorrect or irrelevant; others are more pertinent to relevant issues. 

As best I can from my perusal of that material, and from the oral submissions of Mr Leczynski, those grounds (in no order of significance) are set out below.”

The grounds of review of the Registrar's decision were considered separately by Mansfield J and each was rejected.  We shall refer to those particular grounds in turn. 

1. The summons in the Magistrates’ Court action was not served personally upon the appellant.  His Honour found that that complaint did not give rise to a ground of review and gave reasons for that conclusion. 

1. The refusal of a Magistrate to adjourn the application to set aside the default judgment which was heard and dismissed on 23 November 1993. 

1. The refusal of the Magistrate to adjourn the trial of the action. 

1. There is no debt owing to the respondent, or alternatively no debt of the amount asserted by her.  This ground of review was discussed separately by his Honour together with other grounds of review under the generic head assigned in his judgment at page 13: "The indebtedness and its amount." 

1. The debt to the Bank of South Australia or the regularity of the judgment establishing it was not made out. 

1. A bankruptcy notice issued at the request of the respondent on 27 November 1995, and the creditor’s petition issued by her on 21 December 1995, were in respect of the real amount owing.

1. The debt claimed by the respondent, upon which she was substituted as the petitioning creditor, of $22,206.49 was not in its entirety a liquidated sum as it included not just the judgment sum of $13,895 but also costs which had not been taxed. 

1. The election of the respondent to seek substitution as petitioning creditor disentitled her from proceeding once 12 months had elapsed from the creditor's petition in her own name, apparently made on 21 December 1995.

1. On the hearing of the petition the requirements of s 52(1)(a) of the Bankruptcy Act 1966 (Cth) were not satisfied. His Honour made findings adverse to the case of the appellant and insofar as it embodied the assertion that there was no indebtedness by him to the respondent he dealt with that under the generic head to which we have previously referred and will return.

1. The respondent was a secured creditor, so her debt for the purposes of s 44(1)(a) of the Bankruptcy Act is only to that extent that it exceeds her security: ss 44(2) and (3).  His Honour found that the respondent was not a secured creditor.

1. The respondent had misled the Court in that her costs in the Magistrates’ Court action had been taxed, and had pursued her petition with malice for the ulterior purpose of preventing the appellant from pursuing proceedings in the Supreme Court of South Australia, so that the petition should have been or should be dismissed. 

1. Any debt owing by the appellant to the respondent is not a liquidated debt.  Again his Honour discussed that under the heading of the indebtedness and its amount.

1. The respondent did not, in the appellant's opinion, exist.  That ground of review was rejected by his Honour.  It would seem, from what was argued before his Honour, and from his Honour's reasons for judgment, and what has been said before this Court this morning on behalf of the appellant, that this is in essence a contention that the respondent has assumed various names during the course of her life, only one of which is the name which the record presently bears as Helen Elene Hont.

Another ground of opposition was the assertion by the appellant that a sequestration order could not be made against him as he was solvent.  The principle involved is that where a debtor proves, in opposing a petition to sequestrate his estate, that at the relevant time he was solvent, then the proceedings of bankruptcy are not available to a petitioning creditor.

The primary Judge considered that question of solvency and referred to it in some detail at page 13 of his Honour's reasons for judgment.  His Honour concluded that the Registrar had not erred in his view that solvency had not been established; and added that the evidence suggested that none of the relevant assets relied upon by the appellant as establishing solvency had any real value and certainly not any readily realisable value.  The Court sees no reason to depart from his Honour's finding in that respect.

The other ground of opposition was that there was no indebtedness to the respondent because the judgment giving rise to the indebtedness was the subject of appeal.  His Honour found that the appeal had been resolved in the Supreme Court of South Australia adversely to the appellant and did not find that ground of opposition established. 

His Honour then turned to the substantive question of whether or not there was an indebtedness as alleged by the respondent of moneys due by the appellant to the respondent.  His Honour in dealing with that issue had regard to the material before the Registrar and before his Honour which he reviewed.  His Honour said that the argument as to the absence of indebtedness advanced by the appellant could be placed under the following general headings:-

First, that his Honour could and should go behind the judgment in favour of the respondent finally entered on 12 October 1994.  His Honour there had in mind, of course, the well established principles referred to by the High Court in Wren v Mahoney (1972) 126 CLR 212 and also in Corney v Bryan (1951) 84 CLR 343, as well as other cases to the same effect.

Secondly, that if the Court did go behind the judgment, the evidence would show that no amount was owing by the appellant to the respondent because either there was simply no debt at all or there was a counter claim or set off available to the appellant in a larger sum than the debt allegedly due by him to the respondent.

Thirdly, that, in any event, the debt was an unliquidated one so that it did not qualify under s 44(1) of the Bankruptcy Act to support the respondent being a substituted petitioning creditor. 

Fourthly, that the debt was not in the amount claimed by the respondent and sought to be proved as owing at the time of the act of bankruptcy on 20 November 1995 of $22,206.49.

His Honour dealt with each of those matters in turn in detailed reasons where obviously careful consideration was given to the points.  His Honour concluded that in all the circumstances the discretion which he undoubtedly had to go behind the judgment should be exercised against doing so.  He said, at p 17 of his Honour's reasons for judgment:

“I do not think that sufficient doubt is cast upon the judgment to warrant my doing so.  Indeed, even if I were to do so, I would on the material before me reach the conclusion on the merits that Mr Leczynski was indebted to Ms Hont at the time of the ultimate default judgment, and from 1 July 1992, in the sum of $13,895.  Far from being of the view that there is reason shown for questioning whether behind the judgment, there is 'in truth and reality a debt due to the petitioning creditor,' (see per Barwick CJ with whom Windeyer and Owen JJ agreed in Wren v Mahoney (1972) 126 CLR 212 at 224), I am of the view that there was such a debt.”

His Honour then found, after giving further reasons, that he was not satisfied that there existed a bona fide allegation that no real debt lay behind the judgment. 

His Honour dealt briefly with the ground of review based on s 44(1) of the Bankruptcy Act and found that it had not been established.  He also dealt with the argument that the debt claimed at the date of the commission of the act of bankruptcy, namely, $22,206.49 was the correct debt and concluded that he was satisfied that the amount of the respondent's debt upon which she was substituted as petitioning creditor was in existence as a liquidated claim at the date of the act of bankruptcy and was established by acceptable evidence before his Honour on the review and before the Registrar from whose decision the review lay.  His Honour found that that ground of review must also fail.

In the result, his Honour reached the view that the sequestration order was properly made by the Registrar.  His Honour affirmed that order in its terms and otherwise dismissed the application for review. 

The Court has carefully examined and considered the grounds of appeal set out in the notice of appeal and heard the oral argument presented by the appellant who appeared in person.  The appellant obviously has a clear understanding of the facts surrounding the matter and did not, in our view, seem to be at a disadvantage in presenting his argument notwithstanding the absence of legal representation. 

The grounds stated by the appellant in both the notice of appeal and his written outline of argument, which was given to the Court before today and which each member of the Court has read, are essentially a reiteration, and, to some extent an elaboration, of the arguments put to the primary Judge, but rejected by him.  The Court is not persuaded that there is any substance in any of the grounds of attack made against the judgment of the primary Judge.  The appeal is therefore dismissed.

The Court is of the view that the appellant should pay the costs of the respondent of the appeal and orders accordingly.

That leaves the appeal concerning the two motions to which reference has previously been made by the Court.  The learned primary Judge (O'Loughlin J) who dealt with the two motions, considered first the motion of the respondent for security for costs.  His Honour said, at p 3 of his reasons, that he did not propose to embark upon an examination of the prospects of success in this particular appeal which had just been disposed of by the Court and his Honour gave full reasons. 

His Honour then proceeded to deal with the motion for security for costs.  He stated, at p 4 of his reasons:

“Upon the premise that if this matter proceeds to argument in the Full Court and Mr Leczynski loses [which he has], I assess his prospects of being able to pay costs on the appeal as virtually zero.”

His Honour gave reasons for that conclusion. 

His Honour then proceeded to fix security in the terms set out in his orders which were numbered 1 to 7.  Those orders embraced both the motion for security for costs and the appellant's own motion to which reference has already been made. 

The appellant has not, in fact, appealed or sought to appeal against the actual order for security for costs made by his Honour, but against the costs order made by his Honour, namely, that the costs of both motions and the hearing before his Honour were to be paid by the appellant.

The other relevant order made by his Honour was that the appellant's own motion, to which reference has already been made, should be dismissed.  In the Court's opinion no error has been demonstrated on the part of his Honour in reaching the conclusions which he did.  Accordingly, the appeal against the order of his Honour dismissing the notice of motion by the appellant, is dismissed.

As mentioned earlier, leave to appeal is strictly necessary for the appeal from the orders of his Honour concerning security for costs and including, so far as relevant, the costs order made (No 4) by his Honour.  Nevertheless, the Court is of the view that it should proceed as if it had heard the appeal and accordingly dismisses the appeal in relation to order 4, also insofar as it embodies the order for costs of the motion for security.  It follows from what has been said that the order of his Honour as to costs against the appellant for his own motion should also be upheld. 

In the result both appeals are dismissed.

The appellant shall pay the costs of the respondent of the appeals against the orders made by O'Loughlin J concerning the two motions.  The taxation of costs is a matter for the taxing officer; but the Court notes that the appeals have been heard together this morning and that the same counsel appears for the respondent on both appeals.

I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment herein of the Court

Associate:
Dated:             13 November 1997

Appellant appeared in person.
Counsel for the Respondent:	Mr P Womersley
Solicitor for the Respondent:	Womersley & Co.
Date of Hearing:	13 November 1997
Date of Judgment:	13 November 1997