Macquarie Leasing Pty Ltd v Culleton
[2014] FCCA 1714
•31 October 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MACQUARIE LEASING PTY LIMITED v CULLETON | [2014] FCCA 1714 |
| Catchwords: BANKRUPTCY – Sequestration order – opposition based on non-service of Bankruptcy Notice – respondent is unrepresented litigant – whether notice served in accordance with r.16.01 – application to re-open evidence before judgment – solvency – security held by respondent – whether other sufficient cause – sequestration order made. |
| Legislation: Bankruptcy Act 1966, s.52(1) Corporations Act 2001 (Cth) |
| ANZ Banking Group Ltd v Foyster [2000] FCA 400 Barghouthi v Transfield Pty Ltd [2002] FCA 666 Bhagwanani v Martin (1999) 204 LSJS 449 Burwood Municipal Council v Harvey (1995) 86 LGERA 389 Cavi v Whyte [1932] HCA 6 Carey v Freehills [2014] FCA Civic Video Pty Ltd v Warburton [2013] FCA 934 Clark v New South Wales (No 2) [2006] NSWSC 914 Dietrich v R [1992] HCA 57; 177 CLR 292 Drake v Stanton [1999] FCA 1635 Farcourt v Mercantile Credits Ltd [1983] HCA 25 Galea v Galea (1990) 19 NSWLR 263 Hamod v State of New South Wales and Anor [2011] NSWCA 375 Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22 MacPherson v R [1981] HCA 46 Michael v Western Australia [2007] WASCA 100 Minogue v Human Rights and Equal Opportunity Commission (1999) 84 FCR 438 NAGA v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 944 Nagy v Ryan [2003] SASC 37 Napiat Pty Ltd v Salfinger; In the Matter of Salfinger (No 7) [2011] FCA 1322 R v Zorad (1990) 19 NSWLR 91 Rajski v Scitec Corporation Pty Ltd (Court of Appeal, 16 June 1986, unreported) Re Florance; Ex parte Turimelta Properties Pty Ltd [1979] FCA 58 Re Poulson; Ex parte Hempenstall Bros Ltd (No 1) (1929) 1 ABC 54 Robertson v Banham & Co [1997] 1 WLR 446 Smith v New South Wales Bar Association (1992) 176 CLR 256 Skalkos v Recoveries Limited (2004) 141 FCR 107Spotlight Pty Ltd v NCON Australia Ltd [2012] VSCA 232 SZRUR v Minister for Immigration and Border Protection [2013] FCAFC 146 Thomas v Nash [2011] FMCA 661 Tomasevic v Travaglini [2007] VSC 337 |
| Applicant: | MACQUARIE LEASING PTY LIMITED ACN 002 674 982 |
| Respondent: | RODNEY NORMAN CULLETON |
| File Number: | SYG 3241 of 2013 |
| Judgment of: | Judge Altobelli |
| Hearing dates: | 15 July 2014, 17 September 2014 |
| Date of Last Submission: | 17 September 2014 |
| Delivered at: | Sydney |
| Delivered on: | 31 October 2014 |
REPRESENTATION
| Counsel for the Applicant: | Ms Glover |
| Solicitors for the Applicant: | Douros Jackson Lawyers |
| Respondent: | In person |
ORDERS
A Sequestration Order be made against the estate of Rodney Norman Culleton.
The Applicant’s costs (including any reserved costs and the costs of all appearances) be taxed and paid from the estate of the respondent in accordance with the Bankruptcy Act 1966.
NOTES
(A)The date of act of bankruptcy is 28 October 2013.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3241 of 2013
| MACQUARIE LEASING PTY LIMITED ACN 002 674 982 |
Applicant
And
| RODNEY NORMAN CULLETON |
Respondent
REASONS FOR JUDGMENT
Introduction
By way of a Creditor’s Petition filed 23 December 2013 the application petitions for a sequestration order to be made against the estate of the Respondent.
By way of Notice stating grounds of opposition to the petition, filed 18 June 2014, the Respondent opposes the same. The grounds set out in the Notice are as follows:
1. The debtor has not committed an act of bankruptcy by reason that the Applicant did not serve on the Respondent the Bankruptcy Notice;
2. More particularly, service of the Bankruptcy Notice by placing it in a sealed envelope, addressed to the Judgment Debtor, and leaving it affixed to the padlocked gates at 329 (Lot 13061) Mckenzie Road, Williams in the Sate of Western Australia on 5 October 2013, did not constitute service of the Bankruptcy Notice:
a. pursuant to regulation 16.01 of the Bankruptcy Regulations 1996 (Cth) as 329(Lot 13061) Mckenzie Road, Williams in the State of Western Australia was not the last known address of the Respondent;
b. alternatively, there is proof to the contrary, to the effect that the Respondent did not receive or was not served with the Bankruptcy Notice by the above means.
The only issue raised in the Notice of Opposition, therefore, relates to service of the Bankruptcy Notice on the Respondent.
Background
Matters of background are uncontentious. On 8 March 2013, the District Court of Western Australia entered judgment in favour of the Applicant against the Respondent in the sum of $94,304.66. It was a default judgment, and the debt arose out of two chattel mortgage agreements.
On 19 August 2013, the Official Receiver issued a Bankruptcy Notice in respect of the said debt, addressed to the Respondent.
On 5 October 2013, the said Bankruptcy Notice was placed in a sealed envelope addressed to the Respondent, and left affixed to padlocked gates at 329 (Lot 13061) McKenzie Road, Williams in the State of Western Australia. This matter was not put in contention by the Respondent. He maintained, however, that he did not receive it.
If service was effected in accordance with the relevant legislation, the Respondent committed an act of bankruptcy by failing to comply with the said Notice on or before 28 October 2013.
The Creditor’s Petition was presented. The matter was adjourned four times before it came before this Court; on most occasions to allow the Respondent to file further evidence.
At the hearing, the Applicant was represented by solicitor and Counsel, and the Respondent represented himself, though he was legally represented at most other stages of the proceedings.
The Respondent did not ask the Court to further adjourn the matter, and indeed it is quite unlikely that any such adjournment would have been granted. The Respondent did not seek in any way to amend the grounds of opposition. The argument was limited at that time, therefore, to the issues raised by the Respondent. The Respondent was told by the Court that if his opposition to the petition was not granted, a sequestration order may well follow. Neither party sought to cross-examine the others’ witnesses.
Respondent as unrepresented litigant
Despite the fact that at one stage the Respondent had been legally represented he clearly was not on 15 July 2014 when the matter first came before the Court, and thereafter. The respondent is clearly an intelligent and articulate man but lacked legal knowledge and experience. Representing himself, he also lacked impartiality.
The Full Court of the Federal Court in SZRUR v Minister for Immigration and Border Protection [2013] FCAFC 146 (29 November 2013) recently considered the Court’s duty to unrepresented litigants at [37] quoting extensively from the case cited:
Consideration
37.In Hamod v State of New South Wales and Anor [2011] NSWCA 375 the Court, Beazley, Giles and Whealy JJA, said:
Courts’ duty to unrepresented litigants
[309] Courts have an overriding duty to ensure that a trial is fair: Dietrich v R [1992] HCA 57; 177 CLR 292. This entails ensuring that the trial is conducted fairly and in accordance with law: MacPherson v R [1981] HCA 46; 147 CLR 512 per Gibbs CJ and Wilson J at [16] 525. The duty reposes in the individual judicial officer hearing a case. In the context of an unrepresented litigant, the duty requires that a person does not suffer a disadvantage from exercising the recognised right of a litigant to be self-represented: R v Zorad (1990) 19 NSWLR 91 at 94–95. In MacPherson Mason J, at [31] 534, noted that:
A trial in which a judge allows an accused to remain in ignorance of a fundamental procedure which, if invoked, may prove to be advantageous to him, can hardly be labelled as “fair”.
[310] However, the court’s duty is not solely to the unrepresented litigant. The obligation is to ensure a fair trial for all parties. For this reason, the duty is usually stated in terms that require that the impartial function of the judge is preserved, whilst also requiring the judge to intervene where necessary to ensure the trial is fair and just: Tomasevic v Travaglini [2007] VSC 337; 17 VR 100 at [95]; Barghouthi v Transfield Pty Ltd [2002] FCA 666; 122 FCR 19, 23; NAGA v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 944, [11]; Nagy v Ryan [2003] SASC 37, [52]–[53].
[311] Insofar as the duty relates specifically to an unrepresented party, it has been said that a trial judge has an obligation to take appropriate steps to ensure that the unrepresented litigant has sufficient information about the practice and procedure of the court, so far as is reasonably practicable for the purpose of ensuring a fair trial. The application of that principle will vary depending upon the circumstances of the case: Jae Kyung Lee v Bob Chae-Sang Cha per Basten JA at [48]. See also Abram v Bank of New Zealand (1996) ATPR 41-507, 43,341, 43,347; Microsoft Corporation v Ezy Loans Pty Ltd (2004) 63 IPR 54; Pezos v Police (2005) 94 SASR 154.
[312] Although the duty of a trial judge to assist an unrepresented litigant is cast in active terms, it does not extend to advising the accused as to how his or her rights should be exercised: R v Gidley (1984) 3 NSWLR 168. Rather, the judge has to put the unrepresented litigant in the position of being able to make an effective choice, a duty which applies notwithstanding the adversarial character of a criminal trial: McPherson per Mason J at 534. The duty is the same in a civil proceeding, with such modifications as are called for to take account of civil procedures. However, it is not the function of the court to give judicial advice to, or conduct the case on behalf of, the unrepresented litigant: Bhagwanani v Martin (1999) 204 LSJS 449; [1999] SASC 406; Clark v New South Wales (No 2) [2006] NSWSC 914.
[313] The touchstone at all times remains that of fairness. In Rajski v Scitec Corporation Pty Ltd (Court of Appeal, 16 June 1986, unreported) Samuels JA, at 14, stated:
But the court should be astute to see that it does not extend its auxiliary role so as to confer upon a litigant in person a positive advantage over the represented opponent … At all events, the absence of legal representation on one side ought not to induce a court to deprive the other side of one jot of its lawful entitlement … An unrepresented party is as much subject to the rules as any other litigant.
[314] Thus, a trial judge is entitled to reprimand an unrepresented litigant if the judge believes that the litigant is trifling with the court: see Galea v Galea (1990) 19 NSWLR 263 at 283 per Meagher JA; Michael v Western Australia [2007] WASCA 100 at [64] per Steytler P (McLure JA and Miller AJA agreeing); Jae Kyung Lee v Bob Chae-Sang Cha at [84] per Basten JA.
[315] There may be a fine tension in striking the balance between providing assistance to an unrepresented litigant and ensuring a fair trial for all parties. However, it is the task of the judge to strike that balance. In Minogue v Human Rights and Equal Opportunity Commission (1999) 84 FCR 438 at 446 the Full Federal Court dealt with the tension between the duty of the trial judge to ensure a fair trial and the requirement of impartiality:
A trial judge often faces something of a dilemma. While he or she may be bound to provide some advice and assistance to an unrepresented litigant, the authorities make it clear that the Judge should not intervene to such an extent that he or she cannot maintain a position of neutrality in the litigation: Burwood Municipal Council v Harvey (1995) 86 LGERA 389 at 397 (NSW CA), per Kirby P. However, the boundaries of legitimate intervention are flexible and will be influenced by the need for intervention to ensure a fair and just trial: Panagopoulos v Southern Healthcare Network (unreported, Supreme Court, Vic, Smith J, 15 September 1997) at 6.
[316] The position can be stated no more clearly than reiterating that the judge must remain at all times the impartial adjudicator of the matter, measured against the touchstone of fairness.Chief Justice Allsop said at [53]:
Dealing with litigants as persons is difficult.
He reiterated this point at [54 – 55]:
54.He should have been sworn and possibly, at the end of that evidence, he may have been required to be told of the inadequacy of the matters thus far, and of the issues that he had to address. He may not have been able to do so, but that is not the point. These are difficult cases. Nevertheless, that difficulty does not mean that they should be dealt with other than with due procedural care and, where necessary, important formality.
55.The appellant is entitled, and was entitled, to a hearing reflecting the indicia of the exercise of the judicial power of the Commonwealth. He may well have lost his case, but he is entitled to lose his case after a hearing which has afforded him procedural fairness as an incident of the exercise of the judicial power of the Commonwealth.
How do these principles apply for the facts of this case? The emphasis must be on providing to the litigant in person a fair hearing whilst not being unfair to the other litigant. Sometimes, as in this case, this can only be achieved by attempting to identify the litigant in person’s substantive issue or concerns, notwithstanding that they may be poorly articulated, often without reference to the relevant law or legal principle. The focus must often be on substance rather than form provided there is no prejudice to the respondent litigant, and further provided the hearing is conducted in a manner that reflects the indicia of an exercise of the judicial power of the Commonwealth.
The Evidence
The Applicant relied upon the following documents:
a)Creditor’s Petition, filed 23 December 2013;
b)Affidavit of Service, filed 23 December 2013
c)Affidavit of Service of Creditor’s Petition and notification of adjourned hearing by text, filed 29 April 2014;
d)Affidavit of Gavin Francis, filed 23 June 2014;
e)Affidavit of Ryan Crow, filed 23 June 2014;
f)Applicant’s list of objections, filed 10 July 2014;
g)Affidavit of Debt, filed 14 July 2014;
h)Affidavit of Searches, filed 14 July 2014;
i)Affidavit of Michael George Leedham, filed in Court 14 July 2014;
j)Affidavit of Searches, sworn 15 July 2014; and
k)Applicant Creditor’s Outline of Submissions.
The Respondent relied upon the following documents:
a)Affidavit of Rodney Norman Culleton, sworn 28 April and filed 14 May 2014;
b)Affidavit of Rodney Norman Culleton, sworn 12 May and filed 14 May 2014;
c)Notice stating grounds of opposition to petition, filed 18 June 2014; and
d)Affidavit of Rodney Norma Culleton, filed 18 June 2014
The Applicable Law
Subject to the Court being satisfied that the Applicant has established the matters set out in s.52(1) of the Bankruptcy Act 1966 (Cth) (‘the Act’), and subject to determination of issues raised in the Notice of opposition, the Court may make a sequestration order. The issues raised by the Respondent relate to service of the Bankruptcy Notice. If the said Notice has not been served, there is no relevant act of bankruptcy upon which to seek sequestration. Regulation 16.01 of the Bankruptcy Regulations 1996 states:
Service of documents
(1) Unless the contrary intention appears, where a document is required or permitted by the Act or these Regulations to be given or sent to, or served on, a person (other than a person mentioned in regulation 16.02), the document may be:
(a) sent by post, or by a courier service, to the person at his or her last-known address; or
(b) left, in an envelope or similar packaging marked with the person's name and any relevant document exchange number, at a document exchange where the person maintains a document exchange facility; or
(c) left, in an envelope or similar packaging marked with the person's name, at the last-known address of the person; or
(d) personally delivered to the person; or
(e) sent by facsimile transmission or another mode of electronic transmission:
(i) to a facility maintained by the person for receipt of electronically transmitted documents; or
(ii) in such a manner (for example, by electronic mail) that the document should, in the ordinary course of events, be received by the person.
(2) A document given or sent to, or served on, a person in accordance with subregulation (1) is taken, in the absence of proof to the contrary, to have been received by, or served on, the person:
(a) in the case of service in accordance with paragraph (1)(a) or (b)--when the document would, in the due course of post or business practice, as the case requires, be delivered to the person's address or document exchange facility; and
(b) in the case of service in accordance with paragraph (1)(c), (d) or (e)--when the document is left, delivered or transmitted, as the case requires.
The issue that arises in this case is whether the Notice was served on the Respondent at his “last known address” for the purposes of Reg.16.01(1)(c). A number of cases have considered the meaning of these words, and thus a number of principles have been established by these cases.
a)It does not matter whether the debtor actually resides at the particular address or not: Drake v Stanton [1999] FCA 1635 at [5] per Tamberlin J; Napiat Pty Ltd v Salfinger; In the Matter of Salfinger (No 7) [2011] FCA 1322 at [64] per Foster J.
b)The expression “last known address” does not expressly refer to the debtor’s residence or place of abode: Drake v Stanton at [5]; Napiat v Salfinger at [64].
c)The expression refers to the address that has been made known by the debtor to the world at large at the time closest to the date in question: Drake v Stanton at [8]; Napiat v Salfinger at [64]; Skalkos v Recoveries Limited (2004) 141 FCR 107; Magafas v Carantinos (2008) 222 FLR 185 at [15] per Raphael FM.
d)A business address can be a debtor’s last known address: Skalkos at [36].
e)A debtor’s last known address may be the address with which he had such a degree of connection with the premises that they may properly be described as his last known address: Drake v Stanton; Skalkos at [37].
f)A debtor cannot have two or more last known addresses within the meaning of the regulations: Napiat v Salfinger at [67].
g)The last known address does not necessarily have to be a residential address, but may be a business address, including a business address which is not occupied by the debtor personally pursuant to some legal or equitable entitlement: Napiat v Salfinger at [67].
h)The regulation is to be construed in light of the fact that the purpose of the rule is that Court process should be brought to the person’s attention: Civic Video Pty Ltd v Warburton [2013] FCA 934 at [70] citing Robertson v Banham & Co [1997] 1 WLR 446, which was itself referred to in Skalkos at [32].
i)The question of what address has been made known by the debtor is to be determined objectively on all of the facts of the case. In some instances it may be information that has been supplied to the world at large. In others it may be the most recent address supplied to the creditor: Civic Video v Warburton at [76].
j)Ordinarily a creditor is under an obligation to take steps to ascertain the debtor’s most recent address as made known by him or her in readily accessible public records: Civic Video v Warburton at [78].
The Respondent’s case
The Respondent’s evidence is that he lived with his wife at the property where the Bankruptcy Notice was served between 1997 and 2010. He describes this property as having an area of about 2500 acres and comprising seven different lots, and bordered by several different roads, and having approximately four gates. He asserts that his company has a business in Guyra NSW, and that since 2010 he has been flying from his home in Perth back and forth to Guyra. He deposes that his home is in South Perth, and that he has rented houses in Perth since 2010 and continues to do so. He deposes to the belief that the house on the property at which the Bankruptcy Notice was served has been empty since 2010, and that a third party contractor was engaged to do the cropping on the property for the last eight years. Despite this sworn evidence, the Respondent informed the Court from the Bar Table that the property in question is used by one of the businesses he conducts, Elite Grains, and that there is a factory at the front of the said property.
The Respondent also deposes to a series of communications with officers of the Applicant in 2013, both before and after the date of service, but what is clear from his own evidence is that there is no assertion that he told the said persons that he was living in Perth. When the Court pointed out to him that this was the effect of his own evidence, he insisted from the Bar Table to the effect that he “would have told them” and “they should have known”.
On the basis of the Respondent’s own evidence, the Court finds that:
1. At the time of service of the Bankruptcy Notice the Respondent was not living at the property where the notice was served.
2. Notwithstanding this, the respondent did conduct a business from the property.
3. The Respondent did not inform the Applicant of where he was in fact living in Perth.
The Applicant’s case
The Applicant’s case is that the property where the Bankruptcy Notice was served was in fact the respondent’s last known address for the purposes of regulation 16.01. The evidence it led establishes without controversy that:
· An envelope containing the Bankruptcy Notice was affixed to the padlocked gates at 329 (Lot 13061) McKenzie Rd, Williams in the state of Western Australia.
· The Respondent’s address in the Chattel Mortgage is the property in question.
· There is no business record of the Respondent informing the Applicant that his address was anything other than the address at the property in question.
· The Respondent and his wife were registered proprietors as joint tenants of the said property.
· The Respondent was a director, secretary and shareholder of the Elite Grains Pty Ltd which has, as its principal place of business, the property in question.
· The deponents of two affidavits filed on behalf of the Applicant record representations attributed to the Respondent which result in at least an inference that he was physically on the property, or working the property, in the year before the date of service.
· An Affidavit sworn by the Respondent on 21 August 2013, in the context of Supreme Court proceedings involving his company, Elite Grains Pty Ltd, provides his address as the property in question.
From the Bar Table the Respondent sought to explain his Affidavit of 21 August 2013 as something that he gave in his capacity as director of Elite Grains Pty Ltd, and not personally, and thus if any representation as to address was made in the Affidavit, it was that the company’s address was at the property in question.
Apart from the Affidavit of the Respondent sworn 21 August 2013, the other factual matters referred to above are established by reference to records of statutory authorities maintained under the Transfer of Land Act 1983 (WA) and the Corporations Act 2001 (Cth).
On the basis of evidence led on behalf of the Applicant, the Court finds that:
1. The property in question was clearly a place from which the Respondent conducted business, at the very least through Elite Grains Pty Ltd.
2. He may not have lived there permanently, but he was certainly at the property at various times in the year preceding the date of service.
3. When all the evidence is viewed objectively, the information that the Respondent conveyed to the world at large, either actively, or passively, is that his business address at the property in question was his last known address for the purpose of regulation 16.01. The degree of connection that he had with the property leads to the conclusion that it was his last known address.
4. All reasonably available public records indicate that the address in question was the Respondent’s last known address.
5. Even if the Respondent’s contention were accepted that his Affidavit on 21 August 2013 deposed to the Company’s address, this is still consistent with the findings made above.
Proof to the Contrary: Regulation 16.01(2)
To the extent that the Respondent argued that because he had not in fact received the Bankruptcy Notice, there was proof to the contrary for the purposes of Regulation 16.01(2), this is clearly not sustainable. The Respondent did not challenge the evidence of the process server as to delivery. Delivery of the Bankruptcy Notice was therefore an uncontested fact in this case, and sub-regulation (2) does not apply. In any event, as the Full Court of the Federal Court in Skalkos acknowledge at [25], citing the High Court’s decision in Farcourt v Mercantile Credits Ltd [1983] HCA 25 at 97-97, provided that delivery is not disproved the fact of non-receipt does not displace the result that delivery is deemed to have been effected.
Discussion
Counsel for the Applicant in submissions asked rhetorically how, on the evidence, including that of the Respondent himself, could the Applicant possibly have known that he was living elsewhere other than the property in question? When the evidence is viewed objectively, the answer is there is no reasonable way the Applicant could have known. Whilst the purpose of the Regulation is that Court process should be brought to the person’s attention, clearly the law does not adopt a paternalistic approach. Debtors are reasonably expected to protect their own interests in commercial transactions and one simple way of doing so is to facilitate clear communication with creditors about fundamental matters such as where they live, and how documents may be sent to them. Whilst the consequences of finding that the property in question is the Respondent’s last known address is a drastic one – sequestration as it turns out – there are broader public interests to be considered, as well as the private interests of the Applicant Creditor. If the respondent is insolvent, for example (and no evidence was led by the Respondent on this issue), then there is a legitimate public interest in preventing insolvent trading: Cavi v Whyte [1932] HCA 6 cited in Thomas v Nash [2011] FMCA 661 at [4]. The Respondent may well regard the outcome of this case as a harsh one for him, but it is consistent with the law. Regulation 16.01 is a statutory attempt to balance the often competing interests of creditors and debtors. It provides a clear and relatively simple regime for the service of bankruptcy documents. It recognises the legitimate interests of debtors to be notified of matters relating to them, but also recognises that the complexity of the business and personal affairs of the debtors, some of whom might also be unscrupulous at times (a comment not directed to the Respondent in this case), also requires alternate reasonable methods of effecting service on them.
Application to re-open evidence before judgment
This matter was initially heard on 15 July 2014. The next day, 16 July 2014, after judgment had been reserved, the Respondent filed an interim Application seeking orders the effect of which were to re-open the evidence and adduce the further evidence contained in an Affidavit of the Respondent sworn 16 July 2014. The said Application did not, regrettably, come to the attention of chambers until several weeks later. On 19 August 2014 the Application was adjourned to 17 September 2014 for determination. The Respondent filed a further Affidavit sworn 15 September 2014. Both affidavits go to the issue of whether leave should be granted to re-open the evidence, and the evidence that would be adduced if that leave were granted. The Applicant formally opposed the Application by the Respondent.
The circumstances in which a court should grant leave to re-open the evidence was discussed in a recent decision of White J in Carey v Freehills [2014] FCA 818 (31 July 2014) at [8] – [12]:
[8] The overriding consideration on which the Court acts on an application of the present kind is the interests of justice. Will those interests be better served by allowing or rejecting the application to re-open? See: Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22 at [24]. In Bradshaw, Kenny J identified four recognised classes of case in which a court may grant a re-opening in circumstances like the present, noting that these classes may overlap and are not exhaustive. Those classes are fresh evidence, inadvertent error, mistaken apprehension of the facts, and mistaken apprehension of the law.
[9] The present application appears to be of the first kind, namely, a case in which a litigant wishes to adduce new or additional evidence.
[10] The High Court referred to the exercise of the discretion to allow a re-opening of a matter after judgment has been reserved and before judgment is delivered in Smith v New South Wales Bar Association (1992) 176 CLR 256. Mr Schlicht drew attention to the following passage in the judgment of the plurality (at 266 and 267):
It is again necessary to distinguish between the considerations which may bear on a decision to re-open and the processes involved in reconsideration once a case has been re-opened. If an application is made to re-open on the basis that new or additional evidence is available, it will be relevant, at that stage, to inquire why the evidence was not called at the hearing. If there was a deliberate decision not to call it, ordinarily, that will tell decisively against the application. But assuming that that hurdle is passed, different considerations may apply depending on whether the case is simply one in which the hearing is complete, or one in which reasons for judgment have been delivered. It is difficult to see why, in the former situation, the primary consideration should not be that of embarrassment or prejudice to the other side. In the latter situation the appeal rules relating to fresh evidence may provide a useful guide as to the manner in which the discretion to re-open should be exercised. But those considerations bearing on re-opening are not decisive of the question whether, a matter having been re-opened by reason of error, further evidence can be called.
[11] Mr Schlicht emphasised the passage which indicates that, in the case of an application to re-open before judgment has been delivered, the primary consideration should be the embarrassment or prejudice to the other side.
[12]The authorities also indicate that courts should not readily allow a case to be re-opened once judgment has been reserved. The public interest in finality of litigation and the associated requirement that parties present all their evidence and submissions at the one hearing provide the underlying rationale for that approach: Spotlight Pty Ltd v NCON Australia Ltd [2012] VSCA 232 at [17]-[18]
The Court must have regard to the fact that the Respondent was representing himself in this case. His Application raised two new issues – that of security held by the Creditor/Applicant, and that of his solvency. It could not be reasonably inferred that he made a deliberate choice not to call the evidence, and raise these issues, in his original opposition to the petition. The only reasonable inference that can be drawn is that he was not aware of the potential significance of these issues at the time of the hearing on 15 July 2014. In the interests of justice he should be allowed to raise these new matters, particularly given the serious consequences of sequestration. However the Respondent also sought to lead further evidence about service of Bankruptcy Notice issue, but gives no adequate explanation as to why this could not have been adduced on 15 July. Notwithstanding this, the application was made almost immediately after the hearing. Moreover, the Applicant’s pragmatic approach, no doubt actively encouraged by the Bench, was that it would not really be embarrassed or prejudiced by granting the application, as the further evidence did not advance the respondent’s case. In these circumstances leave will be granted.
The Solvency Issue
The substance of the respondent’s argument is that he is able to pay his debts for the purposes of s 52(2)(a) of the Bankruptcy Act and that the Court should thus dismiss the petition. The onus was clearly on him to establish this: Re Poulson; Ex parte Hempenstall Bros Ltd (No 1) (1929) 1 ABC 54. He gives limited evidence about this, and much is left to inference. His Affidavit of 15 September 2014 presents his case as to solvency at its highest. A company called Australian Keg Company Pty Ltd has enjoyed success in proceedings in the Federal Court of Australia, both at first instance and on appeal, in litigation about a patent. Doing the best the Court can to understand the Respondent’s case, the monies that will flow to him from the costs awarded, let alone the substantive judgment, will mean he is clearly able to pay his debts. Australian Keg Company Pty Ltd has 4 directors of which the Respondent is one. He holds 2 of the 4 issued shares. Nothing is known about the Company’s financial position. Nothing is known about how any asset of the Company might devolve to the Respondent. Nothing is known about whether the judgment can be enforced, how long it could take and what could be recovered. The evidence about the quantification of a costs order is speculative at best, and even then enforcement issues arise. In ANZ Banking Group Ltd v Foyster [2000] FCA 400 Hely J said at [17]:
The onus of proving sufficiency of assets lies on the respondent. It is not sufficient for the respondent simply to establish that he has assets which exceed his liabilities in value. It must also be established that the assets are available to be realised and that they are capable of ready realisation.
The Respondent has come nowhere near discharging the onus on him. He has failed to establish that he is able to pay his debts for the purposes of s 52(2)(a) of the Bankruptcy Act.
The Security Held by the Respondent
The Respondent had much to say about the fact that the Applicant held security in respect of the debt, and the manner in which the Applicant exercised its rights in relation to that security.
The evidence establishes that the Applicant’s security consisted of a Chattel mortgage over a Kenworth prime mover granted to it by Elite Grains Pty Ltd, and guaranteed by the Respondent. The Creditor’s Petition filed 23 December 2013 includes a statement that the Applicant Creditor does not hold security over the property of the Respondent. That is clearly correct. It holds security from a third party, Elite Grains Pty Ltd, and guaranteed by the Respondent. The Applicant is therefore not a ‘secured creditor’ for the purposes of s 44 of the Act. Secured creditor is defined in s 5 of the Act to mean ‘a person holding a mortgage, charge or lien on property of the debtor as a security for a debt due to him or her from the debtor’. The security was thus not provided by the debtor, or over property of the debtor. To the extent to which it could be said that the sale of the security could extinguish the debt owed by the debtor, or reduce it below the threshold set out in s 44(1), there is simply no evidence before the Court that establishes this. In fact, the Respondent agreed with the contention that the Kenworth prime mover was sold at public auction for $57 500. Of course the Respondent asserts this is not its true market value, an assertion easy to make but not proved on the evidence. Indeed the only evidence the Respondent sought to lead in relation to the value of the truck was based on a ‘sight unseen’ valuation, that is, the truck was valued from photographs and information supplied. The judgment debt is in the amount of $94 304.66. In any event the Respondent’s contention is fundamentally flawed because it is not his property, but that of Elite Grains Pty Ltd. This company is in liquidation; and the liquidator has given notice of disclaimer of onerous property including the Kenworth prime mover in question. The Respondent is a director and shareholder of Elite Grains Pty Ltd. There was no suggestion, for example, that the security property was held on trust for the Respondent as in Re Florance; Ex parte Turimelta Properties Pty Ltd [1979] FCA 58 (17 September 1979). There is simply no basis for the respondents concerns about the security held, in the present context.
Other sufficient cause why the sequestration order sought not be made
As the Respondent was representing himself, and having regard to the seriousness of the Application, the Court is prepared to consider all of his evidence to ascertain whether there is “other sufficient cause” for the purposes of s.52(2)(b) why the sequestration order ought not be made.
The Respondent paints with a broad brush in his affidavits, and was permitted to be expansive in his submissions. Much of the material he relied on, and the submissions he made, constituted his opinion, was hearsay, or was irrelevant. He was given the benefit of the doubt with all of his evidence being subjected only to weight assessment.
There is nothing in the conduct of the proceedings by or on behalf of the Applicant, or in the way in which it purported to exercise its security interests, that is relevant for s.52(2)(b) purposes. Indeed it would appear that it simply acted in acceptance with its legal rights and in a commercially prudent fashion. There is no discernable reason why the Supreme Court of New South Wales proceedings between one of the Respondent’s companies and the Applicant would have any bearing on the present application. There is no evidence whatsoever of a cross-claim or counter-claim other than the bare assertion of the same.
In short, there is no evidence that would enliven s.52(2)(b) of the Bankruptcy Act.
Further evidence about service of the Bankruptcy Notice
This evidence consisted of a Rural Property Lease between the respondent and his wife as Lessor, and Elite Grains Pty Ltd as Lessee. This evidence detracts in no way from the Court’s findings about service of the Bankruptcy Notice.
Conclusion
Having regard to all of the evidence, the Court is satisfied that there is proof of the matters required to be established under s.52(1) of the Bankruptcy Act 1966. In particular the Court is satisfied that service on the Respondent has been effected in accordance with Regulation 16.01.
Having regard to all of the evidence, the Court is satisfied that the grounds for granting the petition set out in s.52 of the Bankruptcy Act have been established. The petition should be granted. Counsel for the Applicant tendered a short form Bill of Costs. Given that the Applicant was unable to comment on this the more appropriate order is for costs as agreed or as assessed.
I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Associate:
Date:31 October 2014
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