Lydiard Financial Services Pty Ltd v Moran
[2006] FMCA 1341
•19 October 2006
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 PP McQuade and MGR Gronow, McDonald, Henry and Meek: Bankruptcy Law and Practice (5th edn, 1996) |
| 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 judgment or order in sum of $11,310.40 and interest thereon in the sum of $2,918.35.
The judgement or order on which the bankruptcy notice was based was an order made by the Court of Appeal of the Supreme Court of Victoria on 28 February 2003 in proceeding number 8287 of 1996.
The applicants in that proceeding were Isabella Bridget Moran and
Mr Moran (as executor of the estate of Isabella Bridget Moran).
The respondent was the creditor in this proceeding. The Court of Appeal dismissed the applicant’s application for an extension of time in which to appeal against orders made by Beach J on 15 January 1997. The Court of Appeal also ordered that “Mr John Gerard Moran do pay on an indemnity basis the costs of” the creditor. Those costs were taxed by Master Bruce on 30 June 2003 and allowed in the sum of $11,310.40.
An affidavit of service of the bankruptcy notice was sworn by Karen Elliot on 3 October 2005. Ms Elliot deposed that she served Mr Moran with the bankruptcy notice on 29 September 2005. Ms Elliot further deposed that at the time of service she asked the person served, “What is your full name?” and the person replied “I am the authorised representative of the person named on this document.” Ms Elliot also deposed that at the time of service she asked the person served, “Are you the person referred to as the debtor in these proceedings?” and the person replied, “I am the authorised representative of the person named on this document.”
Ms Elliot swore another affidavit on 14 June 2006 in relation to service of the bankruptcy notice. In that affidavit, Ms Elliot deposed that she knew that the person she served with the bankruptcy notice on
23 September 2005 was the bankrupt because she had previously served him with other court documents on a number of occasions and he had identified himself as John Gerard Moran.
On 17 October 2005, Mr Moran issued an application to set aside the bankruptcy notice. The application was returnable on 31 October 2005. On that date, Phipps FM heard the application and dismissed it with costs: Moran v Lydiard Financial Services Pty Ltd [2005] FMCA 1821. On 10 November 2005, a creditor’s petition was presented against
Mr Moran.
On 21 November 2005, Mr Moran filed and served a notice of appeal in respect of the decision of Phipps FM made on 31 October 2005. The appeal was heard before Sundberg J on 28 April 2006 and dismissed with costs on 26 May 2006: Moran v Lydiard Financial Services Pty Ltd [2006] FCA 631.
Meanwhile, on 28 November 2005, Ms Elliot swore another affidavit saying that on 26 November 2005 she had served the creditor’s petition and associated documents on the bankrupt. She deposed that, at the time of service, she asked the person served the same questions that she had asked when serving the bankruptcy notice and received the same answers.
The creditor’s petition had initially been returnable on 24 January 2006. However, it was adjourned by consent to a date to be fixed after the determination of the appeal from the decision of Phipps FM on the giving of five days notice in writing by either party. The creditor’s petition came on for hearing on 15 June 2006.
The creditor’s petition was supported by an affidavit verifying paragraphs one, two and three of the creditor’s petition sworn by Peter Ronald McCracken on 10 November 2005, an affidavit verifying paragraph four of the creditor’s petition sworn by Catherine Amy Dwyer on 11 November 2005, an affidavit of debt sworn by Peter Ronald McCracken on 14 June 2006 and an affidavit of final search sworn by Carol Kmon on 15 June 2006. The bankrupt did not attend court on the hearing of the creditor’s petition. Orders were made by the Registrar as outlined above.
The present application for review was filed on 4 July 2006 and was supported with an affidavit affirmed by Mr Moran on that date, a further affidavit affirmed by Mr Moran on 31 July 2006 and a notice of the grounds of opposition to the petition dated 31 July 2006.
When the application for review was being heard, Mr Moran indicated that he had mistakenly understood that an affidavit that he had filed in relation to his application to set aside the bankruptcy notice was before the court. He was given leave to file in this proceeding an affidavit dealing with the material that he had understood was already before the court, as well as material indicating that he was a beneficiary of his mother’s estate. That material was included in an affidavit affirmed by Mr Moran on 30 August 2006.
Mr Moran also handed up late in the hearing a photocopy of an order of the District Court of Queensland dated 1 December 1995 which provided that a debt of $80,000 owing to Mr Moran’s uncle’s estate by Mr Moran’s mother (“Mrs Moran”) be transferred to Mr Moran, Mrs Moran and two other relatives in equal shares. The provenance of that document was not established before this court. Not was any evidence given about whether the debt mentioned in the order had been discharged in the 10 years or so since the order was apparently made. Mr Moran did not satisfactorily explain how the order had a bearing on the present review. Accordingly, I am unable to take it into account.
The creditor also relied on affidavits sworn by Catherine Amy Dwyer on 13 July 2006 and 21 August 2006, an affidavit sworn by Robert Michael McGirr on 6 September 2006 and updated affidavits of search and debt sworn on 8 September 2006 and 7 September 2006 respectively.
Grounds of Opposition
Mr Moran’s notice of opposition lists nine grounds which I will deal with in order.
Ground 1: “I was not present on 15 June 2006 at the initial hearing of the matter.”
This application for review is dealt with as a hearing de novo so any procedural deficiencies in the hearing before the Registrar are not relevant.
Ground 2: “I was within the time prescribed by the rules to appeal the decision upon which the petition was based.”
This ground appears to relate to the matters mentioned in the affidavit affirmed by Mr Moran on 4 July 2006. In that affidavit, Mr Moran says that he filed an appeal against the orders of Phipps FM on
11 November 2005 and that the appeal was within the time provided by the rules. Mr Moran went on to say that the creditor’s petition was null and void because it was filed on 11 November 2005, and, by implication, was filed before an act of bankruptcy had been committed. Mr Moran also said in his affidavit of 4 July 2006 that, following Sundberg J’s dismissal of the appeal on 26 May 2006, Mr Moran filed an application for special leave to appeal to the High Court on 23 June 2006. It appears that the special leave application has not yet been determined.
The crux of Mr Moran’s submission under ground two of his notice of opposition appears to be that, in his view, the creditor’s petition was invalid because it was issued before an act of bankruptcy had been committed.
Section 40 of the Bankruptcy Act 1966 (“the Act”) provides that:
(1) A debtor commits an act of bankruptcy in each of the following cases:
…
(g)if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i) where the notice was served in Australia—within the time specified in the notice; or
(ii) where the notice was served elsewhere—within the time fixed for the purpose by the order giving leave to effect the service;
comply with the requirements of the notice or satisfy the Court that he or she has a counter‑claim, set‑off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter‑claim, set‑off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained … .
Section 41(7) of the Act provides as follows:
Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter‑claim, set‑off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter‑claim, set‑off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied.
The bankruptcy notice was issued 23 September 2005 and personally served upon Mr Moran on 29 September 2005. Mr Moran had 21 days to comply with the bankruptcy notice or apply to the court with a view to satisfying the court that he had a counter-claim, set-off or cross demand equal to or exceeding the judgment debt or sum payable under the final order, being a cross-claim, set-off or cross demand that he could not have set up in the proceeding in which the judgement or order was obtained. That meant that Mr Moran had to comply with the bankruptcy notice or apply to the court on or before 20 October 2005.
Before that date, Mr Moran did apply to have the bankruptcy notice set aside under s.40(1)(g) of the Act on the ground that he had an appropriate counter claim, set off or cross demand equal to or exceeding the amount of the judgement debt. Pursuant to s.41(7) of the Act, the effect of that application was that the time for compliance with the bankruptcy notice was extended until and including the day on which the court determined whether it was satisfied that Mr Moran had such a counter-claim, set-off or cross demand.
As Phipps FM’s decision was made on 31 October 2005, Mr Moran committed the act of bankruptcy on that date. Accordingly, it is clear that Mr Moran committed an act of bankruptcy before the creditor’s petition was issued on 11 November 2005, unless that position was altered by Mr Moran filing a notice of appeal on 21 November 2005 against the orders of Phipps FM.
In Guss v Johnstone [2000] 171 ALR 598, the High Court, in a unanimous judgement, made it clear at paragraphs [51] to [55] that an act of bankruptcy is committed at the end of the day on which a court determines that it is not satisfied of the matter referred to in s.41(7) of the Act, in circumstances where the bankruptcy notice had not otherwise been complied with within the requisite time and in circumstances where no extension had been sought or obtained under s.41(6a) of the Act. The High Court said at [51]-[55]:
By reason of s 27 of the Bankruptcy Act, the reference in ss 40 and 41 to "the Court" is, relevantly, a reference to the Federal Court. Section 14(1) of the Federal Court of Australia Act provides that the Court may be constituted by a single judge or as a Full Court. Sundberg J was exercising the jurisdiction of the Federal Court. On 30 May 1997, he declared that the Court was not satisfied that the judgment debtor, the appellant, possessed a counter-claim, set-off or cross demand of the type referred to in s 40(1)(g).
The effect of s 41(7) was to extend time for compliance with the requirements of the bankruptcy notice (which involved either paying the debt of $4,989.40, or securing its payment to the satisfaction of the Federal Court or of the respondent, or compounding the sum to the satisfaction of the respondent) until 30 May 1997. No application was made under s 41(6A) for any other extension, and no attempt was made to secure payment of the sum, pending the resolution of any other dispute between the parties, to the satisfaction of the Court.
On 30 May 1997 the Court determined that it was not satisfied of the matter referred to in s 41(7).
By the end of 30 May 1997 the appellant had not, within the time referred to in s 40(1)(g), as extended by s 41(7), either complied with the requirements of the notice or satisfied the Federal Court that he had a counter-claim, set-off or cross demand of the relevant kind. Consequently, by virtue of s 40, he committed an act of bankruptcy.
When, on 1 July 1997, on the hearing of an application made by notice of motion filed on 23 June 1997, Sundberg J refused to stay the order of 30 May 1997 by which he declared that the Court was not satisfied of the matters referred to in s 40(1)(g), Sundberg J rightly pointed out that a grant of stay on 1 July would not cancel the act of bankruptcy which had already been committed. In James v Abrahams[8], Deane and Lockhart JJ held that the language of s 41(6A), including its express stipulations as to time, makes it impossible to imply any general power in the Federal Court to extend the time for compliance with a bankruptcy notice in a case which does not fall within s 41(6A). In any event, no application was made to Sundberg J to do anything other than stay his previous orders. The only order he had relevantly made was a declaration, and, by force of the statute, that had already resulted in certain consequences. The Full Court was right to dismiss the appeal against the decision of Sundberg J of 1 July 1997.
Accordingly, it is clear that an act of bankruptcy was committed by
Mr Moran on 31 October 2005, when Phipps FM dismissed the application to set aside the bankruptcy notice, and that act of bankruptcy was sufficient to found a valid creditor’s petition.
Mr Moran also appears to argue that, perhaps for discretionary reasons, the fact that there is an outstanding application for special leave to appeal to the High Court against the decision of Sundberg J means that there should be no sequestration order against Mr Moran’s estate. There has been no stay of Sundberg J’s decision, nor would such a stay in the circumstances be of any avail to Mr Moran. Nevertheless, it is conceivable that in an appropriate case, an application for special leave to appeal from a decision upholding a refusal to set aside a bankruptcy notice could constitute grounds for refraining from making a sequestration order. Accordingly, it is necessary to consider the prospects of success of the special leave application. To be successful, an application for special leave to appeal to the High Court needs to give rise to a question of law of public importance.
The first ground mentioned by Mr Moran in his application for special leave to appeal is that Sundberg J heard the appeal from Phipps FM as a Full Court contrary to s.25(1a) of the Federal Court of Australia Act1976 (“the FCAA”). Mr Moran says that no evidence was produced to indicate that the Chief Justice had determined that a single Judge would be sitting as a Full Court in the matter. Mr Moran also says that the evidence indicates that the petitioning creditor interfered with the operations of the Federal Court in connection with the determination that a single judge would hear the appeal in this matter. However, there is no evidence to that effect. Section 25(1a) of the FCAA clearly permits an appeal from a Federal Magistrate to be heard by a single Judge of the Federal Court. In the absence of any evidence, as opposed to speculation, that there was anything untoward in the appellate jurisdiction of the Federal Court being exercised by a single judge in this case, I am unable to conclude that this ground has any prospect of success.
The second ground relied upon in the application for special leave concerns a promissory note that Mr Moran provided to the creditor on 31 January 2005. In the promissory note, Mr Moran promised to pay the creditor in twenty years time an amount which included the sum claimed in the bankruptcy notice. Sundberg J noted at paragraph [27] of his reasons for decision that:
The question is whether the respondent had accepted the note as payment of the debt that later became the subject of the notice. That is a question of fact.
At paragraph [30] of his reasons for decision, Sundberg J noted that the evidence before Phipps FM was such that:
The respondent has, by its solicitors, made abundantly clear that it does not accept the note as payment of the debt which is the subject of the notice. That is clear from the letter quoted at [28]. It is put beyond doubt by the issue of the notice (and the preceding notices). The fact that solicitors for the respondent retained the note after it was sent to them a second time is neither here nor there. Having already said in the strongest terms that it did not accept the note, the respondent was not obliged to reiterate that statement. Further, the note’s uncommercial terms – namely, payment in twenty years with no provision for interest (let alone for interest on judgment debts) – make it scarcely credible that the respondent accepted the note.
Sundberg J then went on to consider, at paragraph [34], a quotation relied upon by Mr Moran from PP Quade and MGR Gronow, McDonald, Henry and Meek: Bankruptcy Law and Practice (5th edn, 1996) at [40.1.355] which states:
A creditor who, after he or she has served a bankruptcy notice, takes from the debtor a bill of exchange or promissory note for the debt, cannot, during the currency of the bill or the note, obtain a sequestration order founded on the notice, since, until the bill or note is dishonoured, it must be treated as payment (Ex parte Matthew; Re Matthew (1884) 12 QBD 506) and the position is the same, if, although dishonoured, it is in the hands of a third person to whom it has been endorsed for value by the creditor: Re Debtor [1908] 1 KB 344.
As Sundberg J noted, this passage does nothing to assist Mr Moran because it assumes that the creditor had accepted the note. In the present case, the finding of fact was that the creditor had not accepted the promissory note. That conclusion appears to be unassailable. Accordingly I consider that the special leave application on this ground has no prospect of success.
A subsidiary ground in the application for special leave to appeal appears to be that Phipps FM and Sundberg J both dealt with the matters before them very quickly. In itself, speed in judicial decision making involves no error.
A more substantive ground in the application for special leave to appeal is that Sundberg J wrongly, in Mr Moran’s opinion, upheld Phipps FM’s rejection of an argument that Mr Moran had a counterclaim, set off or cross demand within the meaning of s.40(1)(g) of the Act.
The cross claim, set off or cross demand that Mr Moran relied upon before Phipps FM was a claim in matter number 12 of 2005 filed in the Supreme Court of Victoria at Ballarat on or about 19 May 2005.
In that proceeding, Mr Moran claimed that the creditor acted wrongfully in numerous ways in relation to its conduct as mortgagee of a farm owned by Mrs Moran. Mr Moran claimed damages from the creditor on various bases including that:
a)he was a beneficiary of Mrs Moran’s will and would have become part owner of the family farm but for the actions of the creditor;
b)he was a beneficiary of his uncle’s estate and would have become a part owner of monies advanced by the uncle to Mrs Moran and secured by a second mortgage over the farm; and
c)he was a lessee of the farm and a guarantee of a second mortgage on the farm.
Phipps FM made findings based on the evidence before him that proceeding number 12 of 2005 in the Supreme Court of Victoria at Ballarat had been dismissed by Master Evans on 21 July 2005 on the application of the creditor. Evidence before Phipps FM indicated that Master Evans, when dismissing Mr Moran’s claim, had indicated that the claim had no merit and that Mr Moran had no standing to bring the claim. Master Evans had said that the only people who might have standing to bring a claim were Mr Moran’s late mother, the second mortgagees, who did not include Mr Moran, or a lessee who had been granted a lease with the approval of the first mortgagee. Mr Moran was a lessee but his lease had not been granted with the approval of the first mortgagee.
The evidence before Phipps FM, which his Honour apparently accepted, indicated that Mr Moran appealed against the decision of Master Evans. The appeal was heard by Mandie J on 10 August 2005 and dismissed with costs. Mandie J, in dismissing the appeal from Master Evans, had stated that the proceedings bore all the hallmarks of a vexatious claim and said that Mr Moran had failed to show that he was entitled to challenge the validity of the first mortgagee’s actions, that is, the creditor’s actions. Phipps FM noted that Mr Moran had filed an appeal against the decision of Mandie J but also noted that the mere filing of an appeal did not establish that the appeal had any merit or reasonable prospects of success.
By the time Sundberg J heard the appeal from Phipps FM, the appeal against the decision of Mandie J in the Supreme Court had been stayed by the Court of Appeal pending the provision of security for costs. Sundberg J held that Phipps FM had properly applied the relevant authority, namely Bhagat v Global Custodians Ltd [2002] FCA 223 at [52] and Ebert v. The Union Trustee Co. of Australia Ltd [1960] HCA 50; (1960) 104 CLR 346 at [350] which required the court to be satisfied, on the basis of evidence, that the debtor has a genuine demand with a reasonable prospect of success. There is nothing in the way in which Phipps FM or Sundberg J dealt with the issue of the counter claim, set off or cross demand which would lead to a reasonable prospect, or any prospect, that special leave to appeal from Sundberg J’s decision would be granted.
Mr Moran also says in his application for special leave that Mandie J “only dismissed the appeal on grounds of standing” and Sundberg J erred by refusing to allow new evidence which Mr Moran contends overcame the so called problem with standing. As this was a discretionary decision, there is no reasonable prospect that special leave might be granted on this ground.
Mr Moran also says in his application for special leave that he did not raise before Phipps FM an issue relating to the invalidity of orders of the Supreme Court arising from the unlawfulness of the Act which constituted the Supreme Court of Victoria namely the Constitution Act 1975 (Vic). Mr Moran did not argue this point in any detail before Sundberg J. Accordingly, it is not to be supposed that it could form a basis for special leave being granted in this case.
The special leave application also refers to some alleged outstanding charges against Hayne J of the High Court. This matter does not appear to have any bearing on whether special leave to appeal might be granted in the present case.
Taking into account all of the matters set out in Mr Moran’s application for special leave to appeal to the High Court, I am not satisfied that there is any reasonable prospect of special leave being granted. Accordingly, I am not satisfied that the existence of the outstanding special leave application constitutes a discretionary basis for refusing a sequestration order in the circumstances of this case.
Ground 3: “The Creditors petition fails to comply with ss.43(1)(a) and 44(1)(c) of the Act and therefore is flawed by having a date on it which it claims an act of bankruptcy was committed, when that is false .”
As discussed above, an act of bankruptcy was committed on
31 October 2005 when Phipps FM handed down his decision to the effect that the court was not satisfied that the bankruptcy notice should be set aside. The creditor’s petition as filed specified the date of the act of bankruptcy as 20 October 2005. The Registrar, on 15 June 2006, granted leave to amend the creditor’s petition to alter the date specified as the date of the act of bankruptcy from 20 October 2005 to
31 October 2005, being the date of Phipps FM’s decision.
Rule 7.01 of the Federal Magistrates Court Rules 2001 provides that:
Power to amend
(1)At any stage in a proceeding, the Court or a Registrar may allow or direct a party to amend a document (other than an affidavit) in the way and on the conditions the Court or the Registrar thinks fit.
Rule 7.01 is a general power that applies to all proceedings and all documents filed in the Federal Magistrates Court, except affidavits.
In my view, the amendment permitted by the Registrar was within the rules and there is no deficiency in the creditor’s petition relating to the date of the act of bankruptcy.
Ground 4: “The affidavit annexed to the petition fails to declare that the matter had been finally dealt with.”
This ground appears to be misconceived. The creditor’s petition does state, in paragraphs one and four, that the orders on which the bankruptcy notice was based were final orders. Those paragraphs were verified by the affidavits mentioned in paragraph 10 above. Alternatively, if Mr Moran is suggesting that the matter decided by Phipps FM had not been finally dealt with, for the reasons given above, it is not to the point that there is an outstanding application for special leave to appeal against the decision of Sundberg J, given that that application has no reasonable prospect of success.
Ground 5: “The affidavit of service only states that an authorised representative of the person named on it accepted the Bankruptcy Notice.”
It is the case that the affidavit sworn by Karen Elliot on 3 October 2005 deposed to service of the bankruptcy notice on 29 September 2005 on a person who described himself as the authorised representative of the person named in the bankruptcy notice. However, Ms Elliot swore a further affidavit on 14 June 2006 and filed on 15 June 2006 in which she deposed that she knew that the person she had served was
John Gerard Moran as she had previously served him with other court documents on a number of occasions and he had identified himself as John Gerard Moran.
Additionally, in his affidavit affirmed on 4 July 2006 at paragraph two, Mr Moran referred to the relevant bankruptcy notice, being the notice numbered VN2167/2005, and then admitted that it ‘was served on me on 29 September 2005.’
Moreover, during the hearing before this court, there occurred the following conversation about the service of the bankruptcy notice, with Mr Moran responding from the bar table:
Mr Moran:I accepted the documents if she put in that I accepted them as authorised representative of the person named on that document. That’s every single time.
Riley FM:Yes, but it was to you that she gave the documents?
Mr Moran:Most of the time. I think probably all the time. Yes.
In the circumstances, it seems to me that there can be no doubt that
Mr Moran was in fact personally served with the bankruptcy notice.
Ground 6: “Registrar Agnew granted leave to amend contrary to the Rules.”
For the reasons given above, the leave given by Registrar Agnew on
15 June 2006 to amend the creditor’s petition was not contrary to the Rules.
Ground 7: “The case which gave rise to the Costs Orders upon which the Bankruptcy Notice and Creditor’s Petition, are based on a matter involving fraud”
This ground is apparently based upon Mr Moran’s view that the creditor acted fraudulently in asserting its priority as mortgagee of a farm owned by Mrs Moran. The position appears to be that, in 1982, Mrs Moran mortgaged her farm to the creditor and, on that security, $135,000 was lent by the creditor to a partnership consisting of the mortgagor and her family members.
On 12 December 1985, the parties entered into a variation of mortgage (“the first variation”). The first variation altered the interest rate and the dates for payment of interest. It appears that that variation was registered. On 28 August 1988, Mrs Moran gave another mortgage over the farm (“the subsequent mortgage”) to Patrick Francis Moran, Agnes Moran and Frederick Gerard Steinfort. The subsequent mortgage was registered.
On 26 January 1989, the creditor, Mrs Moran, and the surviving partners entered into a further variation of the mortgage (“the second variation”), which again altered the interest rate and dates of payment. Mr Moran says that the second variation was not registered and was obtained without the consent of the subsequent mortgagees. Mr Moran says that the creditor lost its priority to the subsequent mortgagees, by virtue of the second variation.
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.
The order made by the County Court giving the creditor possession of the farm was the subject of an appeal which was heard and dismissed by Beach J on 15 January 1997 in the Supreme Court of Victoria.
A further appeal to the Court of Appeal of the Supreme Court of Victoria and an application to the High Court for special leave to appeal were also made. None of those appeals or applications was successful. In all of the circumstances of this case, the court is unable to accept that there is a reasonable chance that there was a fraud against the members of Mr Moran’s family.
In any event, the fundamental problem facing Mr Moran in relation to this ground is that the judgement on which the bankruptcy notice was based was a discrete matter. The judgement arose out of an application for an extension of time in which to appeal against the decision of Beach J. That application was dismissed with Mr Moran personally being ordered to pay the creditor indemnity costs. There is no discernible basis upon which that judgement could be successfully impugned. It was a discretionary decision and Mr Moran has not said anything that would indicate that the discretion miscarried.
Even if Mr Moran’s family had been wronged in the past, it would not alter the fact that Mr Moran unsuccessfully brought an application to appeal out of time and was ordered to pay the costs of that application. Any previous wrong against the members of his family would not, in my view, in the circumstances of the case, provide a discretionary reason for not proceeding to make a sequestration order against
Mr Moran based on the costs order against him. The fact is that
Mr Moran made a very late application to the court for an extension of time in which to appeal. The application was wholly unsuccessful. In an unremarkable exercise of discretion, he was ordered to pay indemnity costs. This ground is not made out.
Ground 8: “A damages claim is before the Supreme Court claiming damages and costs, including the Cost orders in this matter.”
This ground attempts to raise a cross claim against the creditor. It is based on proceeding number 27 of 2004 in the Supreme Court of Victoria. In that proceeding, Patrick Francis Moran, Mr Moran’s uncle, who was one of the three second mortgagees, raises the allegations of fraud outlined above. Mr Moran told the court that the allegations made in the statement of claim in proceeding number 27 of 2004 are virtually identical to the allegations in proceedings numbered 12 of 2005 and 22 of 2005 in the Supreme Court of Victoria.
Those proceedings have proved unsuccessful.
Mr Moran says that he will conduct proceeding number 27 of 2004 pursuant to a power of attorney or as executor of his mother’s estate. However, neither of these roles would give Mr Moran a cross claim for the purposes of s.40(1)(g) of the Act. He would not be conducting the proceeding in his own name, and even if he were successful, no damages would flow to him in his own right.
Mr Moran then says that he will soon join in proceeding number 27 of 2004 in his own right. It seems that Mr Moran intends to do this on the basis that he is a beneficiary of his mother’s estate. However, his status as a beneficiary of his mother’s estate will not give him the standing to make the damages claim made in proceeding number 27 of 2004. Accordingly, there does not appear to be any basis upon which that proceeding could constitute a cross claim for the purposes of the Act. This ground is not made out.
Ground 9: “A debt is owing to the debtor from the solicitors for the Judgment Creditor for the unauthorized use of a copyright agreement.”
In his affidavit affirmed on 31 July 2006, Mr Moran deposed that on
31 January 2005 he had notified the solicitors for the creditor that the name John Gerard Moran had been “Common Law Copyrighted” and that any unauthorised use of his name would incur the penalty of US$500,000. Mr Moran exhibited to his affidavit a copy of the letter to the solicitors for the creditor together with a document entitled “Copyright Notice.” Mr Moran says further in his affidavit that the copyright notice was published in a nationally distributed newspaper the appropriate number of times to give the notice standing.
His affidavit exhibited an affidavit to the effect that a person by the name of Ray Platt, on 20 January 2003, had caused to be published in his paper titled ‘The Strategy’ a copy of a particular copyright notice for John Gerard Moran.
Mr Moran further deposed that, on 20 October 2003, he notified the solicitors for the creditor of two further documents, namely a “Hold Harmless with the Indemnity” agreement and a “Security Agreement”. Mr Moran also deposed that on 8 April 2005, he had sent an invoice to the solicitors for the creditor requiring payment of US$4,000,000 for the unauthorised use of the name John Gerard Moran. Mr Moran exhibited the invoice and a copy of an Australia Post Registered Mail receipt.
The creditor does not dispute the basic facts relating to Mr Moran’s copyright claim. The creditor argues that the claim is not a counter-claim, set-off or cross demand for the purposes of this proceeding because the claim is against Wisewoulds, the solicitors for the creditor, rather than the creditor itself. Mr Moran says that Wisewoulds was acting as agent for the creditor. It may be that the creditor could be sued by Mr Moran for the acts of its agent.
However, there are some more fundamental difficulties with
Mr Moran’s claim. Firstly, it is difficult to see how a person’s name could be a literary work for the purpose of the Copyright Act 1968.
If Mr Moran’s name were a literary work, then the author of the work and the owner of the copyright in it would be the people who created Mr Moran’s name, presumably his mother and father. There was no evidence of any assignment of copyright in Mr Moran’s name from his mother and father to himself.
In any event, Mr Moran’s claim as set out in the invoice to Wisewoulds is that his name was used in a writ, in a number of summonses and in two bankruptcy notices. Accordingly, Mr Moran’s claim is for the use of an allegedly copyrighted work in a judicial proceeding. Section 43(1) of the Copyright Act 1968 provides that:
The copyright in a literary, dramatic, musical or artistic work is not infringed by anything done for the purposes of a judicial proceeding or of a report of a judicial proceeding.
Accordingly, no damages lie for the use of Mr Moran’s name in the documents that he has mentioned in his invoice. Accordingly, the copyright claim cannot constitute a counter-claim, set-off or cross demand for the purposes of this proceeding. This ground is not made out.
Conclusion
For the reasons given above, the application made by Mr Moran filed on 4 July 2006 is dismissed. The usual order will be made for costs.
I certify that the preceding seventy-three (73) paragraphs are a true copy of the reasons for judgment of Riley FM
Associate:
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