Lion Finance Pty Ltd v NASR

[2016] FCCA 1595

FEDERAL CIRCUIT COURT OF AUSTRALIA

LION FINANCE PTY LTD v NASR [2016] FCCA 1595

Catchwords:
BANKRUPTCY – Application to review a Registrar’s decision to make a sequestration order – preliminary argument about whether s.104(2) of the Bankruptcy Act creates a discretion on the Court as to whether to review as a preliminary issue – statutory interpretation.

Legislation:

Acts Interpretation Act 1901 (Cth), s. 33

Federal Circuit Court Rules 2001, r. 20.03, 13.07

Federal Circuit Court (Bankruptcy) Rules 2006, r. 2.02

Federal Circuit Court of Australia Act 1999, s.102, 104
Bankruptcy Act 1966, s.52

Cases cited:

In the Marriage of Harris v Caladine (1991) 172 CLR 84
Pattison v Hadjimouratis (2006) FCAFC 153

Totev v Sfar (2008) 247 ALR 180

Ward v Williams (1955) HCA 4

Applicant: LION FINANCE PTY LTD

Respondent: ROSTOM NASR

File Number: SYG 2005 of 2015

Judgment of: Judge Altobelli

Hearing date: 20 June 2016

Date of Last Submission: 20 June 2016

Delivered at: Sydney

Delivered on: 23 June 2016

REPRESENTATION

Counsel for the Applicant: Mr Parsons

Solicitors for the Applicant: CLH Lawyers

Counsel for the Respondent: Mr Walker

Solicitors for the Respondent: Sage Solicitors

Counsel for the Trustee: Mr O’Hara

Solicitors for the Trustee: Gadens Lawyers

The Supporting Creditor appeared in person.

ORDERS

1. The matter be adjourned to 1 November 2016 at 10:00am for Final Hearing.

2. By no later than 17 October 2016, the petitioning creditor advise the Respondent of the evidence upon which it intends to rely for the hearing of the creditor’s petition.

3. By no later than 24 October 2016, the Respondent notify the Applicant of which witnesses it requires for cross-examination at the time of the Final Hearing.

4. Any other evidence is to be filed and served no later than 26 October 2016.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 2005 of 2015

LION FINANCE PTY LTD

Applicant

And

ROSTOM NASR

Respondent

ORAL REASONS FOR JUDGMENT

1. This matter came before me earlier this week on 20 June 2016.  Mr O’Hara of counsel appeared for the trustee.  Mr Walker of Counsel for the Respondent Debtor, Mr Nasr.  Mr Parsons of Counsel appeared on behalf of Lion Finance, the Petitioning Creditor.  Mr Proctor appeared representing himself as being a Supporting Creditor.  A preliminary issue was raised in argument on 20 June 2016 and the present reasons for judgment explain my ruling in that regard.

2. The substantive matter before the Court is the Respondent Debtor’s application to review a decision made by a Registrar of this Court on 9 February 2016, which was to make a sequestration order. It is uncontentious that the Registrar’s powers to make the sequestration Order was a delegated power under, firstly, s.102(2)(i) the Federal Circuit Court of Australia Act 1999 and rule 2.02 of the Federal Circuit Court (Bankruptcy) Rules 2006 and, further, item 9 of schedule 2 of the Federal Circuit Court (Bankruptcy) Rules 2006 which in itself refers to s.52(1) of the Bankruptcy Act.

3. It is uncontentious that s.104(2) of the Federal Circuit Court of Australia Act (‘the Act’) grants to the Respondent Debtor the right to apply to the Court for review of that exercise of power, that is, the Registrar’s exercise of power.  Section 104(3) empowers the Court to review the said exercise of power and to make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised. 

4. The issue that arises in this preliminary matter pertains to the nature of the Court’s power under s.104(3). Mr Parsons for the Petitioning Creditor points out that s.104(3) is in permissive terms as it uses the word “may”. He acknowledges that rule 20.03 of the Federal Circuit Court Rules 2001 (‘the Rules’) which is the rule governing the procedure on a review of a Registrar’s powers, is framed in mandatory terms, that is, the review:

   (a)     must proceed by way of a hearing de novo.

5. However, he submits that when the Act and the Rules are properly understood, it is clear that s.104(3) means that the Court has a clear discretion to review and is not mandated to do so and thus must exercise its discretion to review as a preliminary issue before engaging in the review itself. In short, he submits that s.104(3) does not create an automatic right of review and that the Court must consider all relevant matters before it decides to embark on the review.

6. He submits, for example, that it would be absurd for a situation to arise where the Court must consider an application for review and proceed by way of a hearing de novo under rule 20.03(a) if such application were unsupported by any evidence at all or inferentially if the only evidence supporting it was irrelevant. He submits this demonstrates at least part of the rationale for s.104(3) in that the Court must retain a discretion not to determine a bare application for review unsupported by any evidence whatsoever.

7. He submitted that the discretion granted by s.104(3) is a statutory discretion to be exercised by reference to the material filed in support, that is, the Court must decide by reference to that material whether it will then go on to review the exercise of power by the learned Registrar.  Specifically, on the facts of this case, he submits the Court must consider the evidence as to the Respondent’s reasons for not attending at the hearing of the Creditor’s petition and his communication with the Trustee subsequently in order to decide whether the court should then review the exercise of the Registrar’s power. 

8. Mr Walker for the Respondent Debtor submits that his client is entitled by s.104(2) of the Act to review the Registrar’s exercise of power without reference to any notion of a preliminary issue as to whether the discretion should be exercised. He says this is consistent, firstly, with rule 20.03(a) which states:

   Must proceed by way of a hearing de novo.

9. And, secondly, he submits it’s consistent with the Full Court of the Federal Court’s decision in Totev v Sfar (2008) 247 ALR 180 per Emmett J at paragraphs 9 to 15, the effect of which is that – and here I quote from his submissions:

   (a) It is not sufficient for the judge who hears the review application to be satisfied that the registrar made no error.

   (b) There must be a complete re-hearing of the facts and the law as they exist even when the matter is before the judge.

   (c) The judge begins afresh and exercises himself or herself any discretion exercised by the registrar.

   (d) The parties commence the proceedings again.  In the case of bankruptcy the petitioner must start again and make out the case for sequestration order. 

   (e) The judge must be satisfied having regard to the material before him or her as to the matters referred to in section 52 of the Bankruptcy Act.

10. Thus he submits there is no onus on the Respondent Debtor to make out a case for review or to satisfy the Court as to any threshold matter.  The Petitioning Creditor, he asserts, is in effect put to proof as to the matters justifying the making of the sequestration order consistent with a hearing de novo.

11. Potentially broad implications flow from acceptance of either proposition.  If the Respondent Debtor’s submission is accepted, the mere filing of an application for review of the Registrar’s decision triggers a hearing de novo of the Creditor’s petition.  That bare application subsists even if unsupported by evidence because, it is contended, a hearing de novo puts the Petitioning Creditor to proof of the matters asserted in the petition and does not ipso facto require any further evidence from the Respondent Debtor.  There is no threshold or preliminary issue.  The constitutional validity of the delegation of power to the Registrar essentially depends on there being no precondition at all to the review of exercise of power and the hearing de novo.  Here, he relies on the High Court’s decision In the marriage of Harris v Caladine (1991) 172 CLR 84 at 95.

12. However, if the Petitioning Creditor’s submission is accepted, rule 20.03(a) is inconsistent with s.104(3) and to that extent must be read down. There will always be a discretion in the Court as to whether it should entertain an application to review the exercise of the power of a Registrar, a discretion that is, in effect, preliminary to the discretion involved in actually reviewing the Registrar’s exercise of power.

13. Whereas the Respondent Debtor’s submission is supported by reference to authority, that is, Totev v Sfar, (though there are several other cases to the same effect, for example, Pattison v Hadjimouratis (2006) FCAFC 153 at paragraphs 40 to 43), the Petitioning Creditor’s submission is not so supported and the Court’s own research could not find any authority to support the Petitioning Creditor’s submission.

14. There can be no question in this Court’s view about the validity of the scope of and the operation of rule 20.03. The High Court’s decision in Harris v Caladine means that any review of an exercise of a power by a Registrar must proceed by way of a hearing de novo by a chapter 111 Judge.  The Court is, notwithstanding, entitled to make rules that govern the procedure of such an application for review, including, for example, prescribing a form or a fee or a time limit within which such application must be filed provided that such procedural rules do not detract from or fundamentally obstruct the substantive process of the hearing de novo.

15. The Court must be entitled to regulate its own procedures, even when it is constitutionally bound to hear a matter de novo. There is even, therefore, the possibility of summary dismissal of a review application pursuant to rule 13.07 of the Federal Circuit Court Rules 2001 in an appropriate case.  An application for review is not a constitutional trump card that can be played so as to defeat other legitimate rules about how it should be played.  To the extent that Mr Walker submitted to the contrary, it was neither correct nor a necessary precondition to the Court’s acceptance of his basic submission. 

16. The Court does not accept Mr Parson’s submission that s.104(3) creates a discretion which is a precondition to the exercise of another discretion merely because the section uses the word “may”.  The interpretation of s.104(3) is no less subject to the High Court’s decision in Harris v Caladine than is rule 20.03 of the Rules. If the Petitioning Creditor’s interpretation of s.104(3) were accepted, it would create not a procedural prerequisite to a hearing de novo but a substantive one which would be quite inconsistent with the High Court’s decision in Harris v Caladine.

17. In any event, notwithstanding s.33(2A) of the Acts Interpretation Act 1901 (Commonwealth), s.104(3) may well be an example of a discretionary power which is coupled with a duty to exercise the power.  That “may” can mean “must” in certain circumstances was confirmed by the High Court in Ward v Williams (1955) HCA 4 at paragraphs 7 and 8 below:

    7. In the Supreme Court the case was decided by the interpretation which was placed upon the phrase "”may”, if satisfied etc., by order require the said person to comply with all or any of the requisitions of the notice or otherwise to abate the nuisance". These words were interpreted as imposing upon the magistrate a duty, when satisfied of the occurrence of a statutory nuisance, to exercise his authority by making an order of one or other of the kinds described, and as arming him with a discretion only to select the kind or order appropriate to the case. Street C.J. said : - "It is true that he is given a discretion in one sense, but once the nuisance is proved, then it seems to me that under the section the magistrate must make an order. He is given a discretion as to the form which that order may take and evidence may be directed to that issue for the purpose of informing the magistrate so that he may decide whether he will or will not direct specific work to be done, and if so, what the nature of that work should be" (1953) 19 LGR 190, at p 192 . Owen J. stated the same conclusion thus : - "The only discretion vested in a magistrate under s. 66 (2), if he is satisfied that a nuisance exists, is as to the form of the order which he shall make. He is, in my opinion, bound to make an order where he is satisfied that the nuisance exists, but it may take any one of three forms" (1953) 19 LGR 190, at p 192 . Herron J. said : - "The magistrate's jurisdiction is, by s. 66 (2), limited to determining whether the alleged nuisance exists, and if so, how it is to be eradicated or abated having regard to the health of the occupants of the building" (1953) 19 LGR, at p 193 .

    8. In considering the correctness of this interpretation it is necessary to bear steadily in mind that it is the real intention of the legislature that must be ascertained and that in ascertaining it you begin with the prima facie presumption that permissive or facultative expressions operate according to their ordinary natural meaning. "The authorities clearly indicate that it lies on those who assert that the word 'may' has a compulsory meaning to show, as a matter of construction of the Act, taken as a whole, that the word was intended to have such a meaning" - per Cussen J. : Re Gleeson [1907] VicLawRp 71; (1907) VLR 368, at p 373 . "The meaning of such words is the same, whether there is or is not a duty or obligation to use the power which they confer. They are potential, and never (in themselves) significant of any obligation. The question whether a Judge, or a public officer, to whom a power is given by such words, is bound to use it upon any particular occasion, or in any particular manner, must be solved aliunde, and, in general, it is to be solved from the context, from the particular provisions, or from the general scope and objects, of the enactment conferring the power" - per Lord Selborne : Julius v. Bishop of Oxford (1880) LR 5 AC 214, at p 235 . One situation in which the conclusion is justified that a duty to exercise the power or authority falls upon the officer on whom it is conferred is described by Lord Cairns in his speech in the same case. His Lordship spoke of certain cases and said of them "(they) appear to decide nothing more than this : that where a power is deposited with a public officer for the purpose of being used for the benefit of persons who are specifically pointed out, and with regard to whom a definition is supplied by the Legislature of the conditions upon which they are entitled to call for its exercise, that power ought to be exercised, and the Court will require it to be exercised" (1880) LR 5 AC, at p 225 .

18. Indeed, an explanation of the permissive language in s.104(3) may well be found in paragraph 9 of the High Court’s judgment:

    9.  In New South Wales the legislature intervened as early as 1858 to restrain the development of the notion that permissive words may have a compulsive effect and, by 22 Vict. No. 12, s. 8, declared that wherever in an Act a power is conferred on any officer or person by the word "may" or the words "it shall be lawful" or "it shall and may be lawful" such words shall mean that the power may be exercised or not at discretion, a provision now contained in s. 23 of the Interpretation Act of 1897 but restricted to the word "may" : see Smith v. Watson [1906] HCA 80; (1906) 4 CLR 802, at pp 811, 819, 827 and Re Fettell (1952) 52 SR (NSW) 221, at p 226 ; 69 WN 186 . The words "at discretion" are strong and, though it may readily be conceded that the section lays down a rule of construction which like other rules of construction will give way to clear indications of a contrary intention, there must be reasons which satisfy the mind that a statute to be construed does not intend that the power it confers should be exercised or not at discretion before it can be held that the power must be exercised on demand, assuming of course the fulfilment of any conditions precedent the statute may lay down. A distinction obviously exists between the possession by a person interested, on the one hand, of a right to call upon the officer upon whom a power is conferred to exercise his discretion and, on the other hand, of a right to call upon him to exercise the power. The former means no more than that, when called upon, the officer is under a duty to exercise his discretion according to law, the latter that he is under a duty to take whatever active measures may be authorized by the power. In construing a statute conferring a power by permissive or facultative expressions, it is important not to mistake indications or evidences, found in the context or subject matter, of an intention that a right to call for the exercise of the discretion should exist, for indications or evidences of an intention that the officer in whom the power is reposed should be under a duty, upon request and upon fulfilment of the necessary conditions, to do the thing authorized. In the subject matter and context of s. 66 (2) there are few positive considerations to be found in support of the interpretation which makes it obligatory upon the magistrate, once he is satisfied that the statutory nuisance exists, to make an order of one description or another. But there is one consideration which is usually accounted very strong. It is that the power is conferred upon a judicial tribunal and to be invoked by a judicial proceeding. Jurisdiction and powers are conferred on judicial bodies, usually for the enforcement of rights and the protection of interests, and permissive language will often in such a case be used not because it is intended to give the tribunal a discretion to grant or refuse the remedy, but because, although it is intended or contemplated that persons interested will be entitled to the remedy the tribunal is empowered to give, it is also intended, or at all events taken for granted, that the existence of the interest and the validity of the claim to the remedy of a person seeking it will be for the tribunal to determine. It is no more than an instinctive recognition of the truth of Ulpian's dictum - nemo qui condemnare potest, absolvere non potest (Dig. 50 : 17 : 37). No doubt in the construction of s. 66 (2) the fact that it is a magistrate or justices who are empowered and that the proceeding is by complaint is a consideration of weight. To this may be added the fact that by an amendment made by Act No. 16 of 1944 the magistrate may in addition to making an order impose a penalty.

19. Such an interpretation in no way detracts or fetters the Court’s role in a review application because the third line of the section makes it plain that the Court “may make any order or orders it thinks fit.”  The Court therefore does not accept that there is any preliminary or threshold issue to be determined in the context of the review application, and it will proceed to make directions for the orderly hearing of the same.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Judge Altobelli

Date: 6 July 2016