Lydiard Financial Services Pty Ltd v Moran - [2006] FMCA 1341

FEDERAL MAGISTRATES COURT OF AUSTRALIA

LYDIARD FINANCIAL SERVICES PTY LTD v MORAN

[2006] FMCA 1341

BANKRUPTY – Sequestration order – Review of registrar’s decision – outstanding special leave application in respect of the refusal to set aside the bankruptcy notice – no reasonable prospect of special leave being granted.

BANKRUPTY – Sequestration order – Review of registrar’s decision – whether debt owed to bankrupt for unauthorised use of allegedly copyrighted material – material used in a judicial proceeding – no damages claimable – not a relevant counterclaim.

Bankruptcy Act 1966, ss.40(1)(g), 41(6a), 41(7), 43(1)(a), 44(1)(c)
Constitution Act 1975 (Vic)
Copyright Act 1968, s.43(1)
Federal Court of Australia Act1976, s.25(1a)
Federal Magistrates Court Rules 2001, r.7.01(1)

Bhagat v Global Custodians Ltd [2002] FCA 223
Ebert v. The Union Trustee Co. of Australia Ltd (1960) 104 CLR 346
Guss v Johnstone (2000) 171 ALR 598
Moran v Lydiard Financial Services Pty Ltd [2005] FMCA 1821
Moran v Lydiard Financial Services Pty Ltd [2006] FCA 631
Scarel Pty Ltd v City Loan & Credit Corporation Pty Ltd (1986) 4 BPR 9226
Wongala Holdings Pty Ltd v Mulinglebar Pty Ltd (1994) 6 BPR 13,527

PP McQuade and MGR Gronow, McDonald, Henry and Meek: Bankruptcy Law and Practice (5^th edn, 1996)
P Butt, Land Law, Thompson, LBC: Sydney (4^th ed, 2001)

Applicant:

LYDIARD FINANCIAL SERVICES PTY LTD (PREVIOUSLY CUTHBERTS NOMINEES PTY LTD)

Respondent:

JOHN GERARD MORAN

File Number:

MLG1419 of 2005

Judgment of:

Riley FM

Hearing dates:

28 August 2006 & 8 September 2006

Date of Last Submission:

8 September 2006

Delivered at:

Melbourne

Delivered on:

19 October 2006

REPRESENTATION

Counsel for the Applicant:

Mr Gardiner

Solicitors for the Applicant:

Wisewoulds

Advocate for the Respondent:

In person

ORDERS

The application filed on 4 July 2006 is dismissed.
The creditor’s costs of and incidental to the application, including reserved costs of 17 July 2006 and 28 August 2006, be taxed pursuant to Order 62 of the Federal Court Rules and be paid in accordance with statute.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG1419 of 2005

LYDIARD FINANCIAL SERVICES PTY LTD (PREVIOUSLY CUTHBERTS NOMINEES PTY LTD)

Applicant

And

JOHN GERARD MORAN

Respondent

REASONS FOR JUDGMENT

Introduction

This is an application for review of a decision of a Registrar of this court made on 15 June 2006 pursuant to which the Registrar made a sequestration order against the estate of John Gerard Moran (“Mr Moran”). The orders made on 15 June 2006 also included orders that:
a)leave be granted to amend paragraph 4 of the petition to substitute 31 October 2005 for 20 October 2005 as the date of commission of the act of bankruptcy; and
b)re-verification and re-service be dispensed with.

Procedural history

On 23 September 2005, a bankruptcy notice was issued in respect of Mr Moran on the application of the applicant (“the creditor”).

The bankruptcy notice claimed that Mr Moran owed the creditor a debt of $14,228.75 consisting of an amount of a…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2006] FMCA 1341
Decision Date: 19 October 2006

CaseChat Overview and Summary

Lydiard Financial Services Pty Ltd v Moran was a case before the Federal Court, where the primary issue was whether a sequestration order against Mr. Moran should be reviewed, particularly in light of an outstanding application for special leave concerning the refusal to set aside the bankruptcy notice. The case also touched upon the nature of the debt owed by Mr. Moran, specifically whether it was for the unauthorised use of copyrighted material used in a judicial proceeding, and if there was a viable damages claim or relevant counterclaim.

The court had to determine if there was a reasonable prospect that special leave would be granted, which would affect the review of the registrar's decision on the sequestration order. Additionally, the court needed to assess the validity of Mr. Moran's argument regarding the priority of mortgagees and the creditor's rights to insurance monies after the family farm burnt down.

The court found that the weight of authority was against Mr. Moran’s argument concerning the postponement of the creditor to subsequent mortgagees. The documents provided did not show an alteration to the principal sum, and thus, the creditor's priority was not affected. The court also noted that the creditor had legal proceedings against Mrs. Moran and the partnership, and the County Court's actions, including the freezing of insurance proceeds and the granting of possession, were within its jurisdiction. Mr. Moran’s allegations of fraud were not substantiated.

Ultimately, the court dismissed the application filed on 4 July 2006, ruling that there was no reasonable prospect that special leave would be granted. The creditor’s costs of and incidental to the application were to be taxed and paid according to statute.

Orders

Orders of the court

The application filed on 4 July 2006 is dismissed.

The creditor’s costs of and incidental to the application, including reserved costs of 17 July 2006 and 28 August 2006, be taxed pursuant to Order 62 of the Federal Court Rules and be paid in accordance with statute.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Mr Moran refers to Scarel Pty Ltd v City Loan & Credit Corporation Pty Ltd (1986) 4 BPR 9226. That was a decision of Young J sitting in the Supreme Court of NSW Equity Division. His Honour said that:“the legal effect of a variation of a mortgage, where at least there is an alteration in the principal sum, is that a new contract has come into force compounding the terms of the previous mortgage, plus the variations.” (emphasis added) Mr Moran relies on that case for the proposition that the second variation had the effect of postponing the creditor to the subsequent mortgagees. However, Professor Butt, in Land Law, Thompson, LBC: Sydney (4th ed, 2001) refers to Young J’s decision in Scarel and then says: “However, there is also Court of Appeal authority that a variation that is not intended to rescind or terminate the existing mortgage but merely to amend its terms, does not deprive the mortgagee of the remedies available under the existing mortgage, from which it would seem to follow that the original mortgage continues, but in its amended form. This seems to be the better view.” Professor Butt refers to the NSW Court of Appeal decision in Wongala Holdings Pty Ltd v Mulinglebar Pty Ltd (1994) 6 BPR 13,527. Thus, the weight of authority appears to be against Mr Moran on this issue. Moreover, even if Scarel is good law, it expressly concerns the situation where there was an alteration to the principal sum. The documents before the court show that there was no such alteration in this case. Mr Moran then says that the creditor issued proceeding number 47 of 1992 in the Supreme Court of Victoria on 6 July 1992 against Mrs Moran seeking possession of the family farm. Additionally, the creditor issued proceedings in the County Court against the partnership on 19 February 1993 seeking monies due under the mortgage. On 12 June 1993, the homestead on the farm burnt down. The partnership made a claim on the insurance. The creditor on 7 September 1993 issued proceedings in the County Court against the partnership seeking monies due under the insurance policy. Mr Moran argues that the creditor had no right to the insurance monies as it had lost its priority to the subsequent mortgagees and it was they who were entitled to the insurance monies. The County Court froze the proceeds of the insurance claim and consolidated the three proceedings mentioned above. The trial commenced on 21 November 1994 and terms of settlement were entered into on that day but not finally signed until 1 March 1995. The creditor and Mr Moran are in dispute about what happened next. Mr Moran alleges that the creditor failed to do certain things with the result that the terms of settlement were void and of no force and effect. The creditor vigorously disputes this. One way or another, the consolidated County Court proceeding was reinstated on the basis that there had been a default under the terms of settlement and the creditor was given possession of the farm by order of the County Court. Mr Moran says that the creditor obtained possession of the farm by various fraudulent means.