Mahommed v Cox
[2024] FedCFamC2G 1299
•28 November 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Mahommed v Cox [2024] FedCFamC2G 1299
File number(s): SYG 897 of 2023 Judgment of: JUDGE GIVEN Date of judgment: 28 November 2024 Catchwords: BANKRUPTCY – Review of Registrar decision dismissing application to set aside Bankruptcy Notice – where applicant alleges existence of counter-claim/set-off for purposes of s 40(1)(g) of Bankruptcy Act Legislation: Bankruptcy Act 1966 (Cth) ss 33, 40, 244
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 254, 256
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) r 2.02
Cases cited: AHH22 v Minister for Immigration, Citizenship and Multicultural Affairs [2023] FedCFamC2G 426
Bechara v Bates (2021) 286 FCR 166
Cassimatis v Australian Securities and Investments Commission (2016) 334 ALR 350
Ebert v The Union Trustee Co of Australia Ltd (1960) 104 CLR 346 at 351
James v Abrahams (1981) 34 ALR 657
Mahommed v Cox as Administrator of the Deceased Estate of Dixon [2022] FCA 886
Mahommed v Cox as Administrator of the Deceased Estate of Dixon [2023] FCAFC 107
Pattison v Hadjimouratis (2006) 155 FCR 226
Stec v Orafanos [1999] FCA 457
Ward v Westpac Banking Corporation Ltd [2023] NSWCA 11
Division: General Federal Law Number of paragraphs: 46 Date of hearing: 19 January 2024 Place: Sydney The Applicant: In person Counsel for the Respondent: Mr D Allen Solicitor for the Respondent: Shaba & Thomas Lawyers ORDERS
SYG 897 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF DAVID WILLIAM DIXON
BETWEEN: PETER SHAH MAHOMMED
Applicant
AND: KAREN ANN COX AS ADMINISTRATOR OF THE DECEASED ESTATE OF DAVID WILLIAM DIXON
Respondent
ORDER MADE BY:
JUDGE GIVEN
DATE OF ORDER:
28 NOVEMBER 2024
THE COURT ORDERS THAT:
1.The application made on 19 September 2023 (review application) is dismissed.
2.In addition to order 2 made on 31 August 2023, the applicant must pay the respondent’s costs and disbursements, of and incidental to the review application, as agreed or failing agreement to be taxed in accordance with the Federal Court Rules 2011 (Cth).
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE GIVEN:
Before the Court is an application for review of a decision by a Registrar by which he dismissed an application to set aside a Bankruptcy Notice (originating application) with costs (review application) by making orders in the following terms:
1. The application to set aside Bankruptcy Notice BN259819 issued on 6 May 2023 be dismissed.
2. The Applicant pay the Respondent’s costs of and incidental to the application fixed in the amount of $28,598.94.
(Registrar’s Orders)
At the time the Registrar’s Orders were made, the Registrar had power to make them pursuant to s 254(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (Court Act), read together with r 2.02 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (Rules).
Section 256(1) of the Court Act has the effect that a party to a proceeding in which the Registrar has exercised delegated powers under s 254 may apply to the Court for review of the exercise of that delegated power within a prescribed time.
BACKGROUND
The background to these proceedings has been derived from the written submissions of the parties, the Court Book, material available on the Court’s electronic file and relevant judgments which were delivered by various Courts in relation to the subject matter which forms the background to these proceedings and which were determined by the time of the hearing of the review application.
In 2020, proceedings No 2020/00247595 were commenced by the applicant and one other plaintiff in the Supreme Court of New South Wales Equity Division against, inter alia, the respondent (Supreme Court proceedings). The background to the Supreme Court proceedings is relevantly the background to the subject matter of alleged debts relevant to these proceedings. The genesis of the Supreme Court proceedings was summarised by the New South Wales Court of Appeal in Ward v Westpac Banking Corporation Ltd [2023] NSWCA 11 at [12] to [15] per Griffiths AJA, being the judgment in an application for leave to appeal from an interlocutory decision made in the Supreme Court proceedings, by which the applicants were ordered to provide security for costs of the respondents. By its judgment, the Court of Appeal granted leave to appeal, but ultimately dismissed the appeal with costs.
On 25 March 2022, the applicant, Mr Mahommed, filed a creditor’s petition pursuant to s 244 of the Bankruptcy Act 1966 (Cth) (Act) for administration of the deceased estate of the late David William Dixon (Federal Court proceedings) over which Ms Cox (who is the ex-wife of the deceased) was appointed Administrator by the Supreme Court of New South Wales on 27 November 2020 (Court Book (CB) 43). The creditor’s petition the subject of the Federal Court proceedings was opposed by Ms Cox.
The Federal Court proceedings were determined by Burley J on 29 July 2022 (see Mahommed v Cox as Administrator of the Deceased Estate of Dixon [2022] FCA 886 (FCA judgment)) in which the applicant was found to have failed to establish that any debt was owing by the deceased at the time of his death within or was still owing within the meaning of ss 244(1)(a) and 244(11) of the Act, respectively. The result of the FCA judgment was the dismissal of the applicant’s creditor’s petition, with costs.
Ms Cox proceeded to have the costs of the Federal Court proceedings taxed, and the Federal Court issued a Certificate of Taxation in respect of them on 20 January 2023 (costs certificate). The costs certificate certified Ms Cox’s costs as $25,900 which went on to form the relevant judgment debt (judgment debt).
On 16 May 2023, the official receiver served the applicant (by hand) with a Bankruptcy Notice (reference “BN 259819”) issued on 6 May 2023 (Bankruptcy Notice) and the costs certificate.
On 2 June 2023, the applicant brought the originating application seeking to set aside the Bankruptcy Notice and to extend the time for compliance with it under s 33 of the Act. That application was based upon four separate groups of alleged set-offs, said to derive from counter-claims the applicant alleges has against the respondent.
On 14 July 2023, the Full Federal Court upheld the FCA Judgment on appeal: see Mahommed v Cox as Administrator of the Deceased Estate of Dixon [2023] FCAFC 107 per Markovic, Goodman and McElwaine JJ (FCAFC judgment).
Meanwhile, back in the Supreme Court proceedings, the plaintiffs there (including the instant applicant) failed to provide security for costs as ordered and the proceedings were dismissed on 18 August 2023.
On 24 August 2023, the originating application seeking to set aside the Bankruptcy Notice was returned before a Registrar of the Court on which occasion the following orders were made:
1. The matter be adjourned to 2:00pm on 31 August 2023.
2. The time for compliance with Bankruptcy Notice Number BN 259819 issued on 6 May 2023 be extended up to and including 4pm on 31 August 2023.
3. By 4pm on 28 August 2023 the Applicant and Respondent provide written submissions as to costs.
The adjourned hearing proceeded on 31 August 2023, at the conclusion of which the Registrar’s Orders were made dismissing the application to set aside the Bankruptcy Notice.
On 6 September 2023, the respondent filed a creditor’s petition in the Federal Court against the applicant based on the costs of the Registrar’s Orders (CB 1150 to 1153).
On 19 September 2023, the applicant filed the instant review application (CB 951 to 953).
On 6 October 2023, the applicant filed his grounds of opposition to the creditor’s petition (CB 1154 to 1161).
REVIEW APPLICATION
Review principles
Pursuant to r 2.02(3) of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (Bankruptcy Rules).
2.02 Exercise of powers by Registrars
…
(3) Subject to any direction by the Court or a Judge to the contrary, an application under subsection 256(1) of the Act for review of the exercise of a power of the Court by a Registrar must be made by filing an application in accordance with Form B3A within 21 days after the day on which the power was exercised.
Accordingly, by reference to the date of the Registrar’s Orders, any application for review of the Registrar’s decision was required to be made by 21 September 2023 and the review application made on 19 September 2024, was made within time.
The exercise of the Registrar’s delegated power derives its validity from the availability of review by a judge of this Court: see Bechara v Bates (2021) 286 FCR 166 (Bechara v Bates) at [3] per Allsop CJ, Markovic and Colvin JJ and AHH22 v Minister for Immigration, Citizenship and Multicultural Affairs [2023] FedCFamC2G 426 (AHH22). In Bechara v Bates at [17] Allsop CJ, Markovic and Colvin JJ said the following about the nature of a review of a Registrar’s decision:
To underpin the validity of the delegation of judicial power of the Commonwealth to a non‐judicial court officer there must be a rehearing de novo before a judge of the Court (whether Circuit Court or Federal Court). The review does not hinge, or focus, upon error in the decision of the registrar. It is a hearing de novo, in which the matter is considered afresh on the evidence and on the law at the time of the review, that is at the time of the hearing de novo. The importance of the de novo rehearing is Constitutional, being the supervisory condition that enables judicial power to be delegated to a registrar. All the jurisprudence stems from this requirement marked out by the High Court in the landmark decision in 1991 of Harris v Caladine [1991] HCA 9; 172 CLR 84, which is discussed in many of the cases referred to below.
As this Court has previously observed, a review application is not an appeal (see AHH22 (supra) at [24]). An application brought under s 256(1) of the Court Act should be heard on a de novo basis: Pattison v Hadjimouratis (2006) 155 FCR 226 at [3] to [20] per Nicholson J and [39] per Jacobson J and Cassimatis v Australian Securities and Investments Commission (2016) 334 ALR 350 at [12] per Edelman J. Accordingly, the task of the Court is to hear the application afresh, unaffected by the Registrar’s conclusions, and to make a decision as to whether the Bankruptcy Notice should be set aside.
Relief sought
By the review application, the applicant seeks the following relief:
1. That Orders 1 and 2 made on 31 August 2023 by the Registrar be set aside.
2. That Bankruptcy Notice BN259819 issued on 6 May 2023 be set aside.
3. That the Respondent pay the Applicants’ costs of and incidental to the Application filed on 2 June 2023 for a lump sum amount of $ 45,962.50.
4. That the Respondent pay the costs of and incidental to this Application on a lump sum basis.
5. Such further relief as the Court deems fit in the premises
Having set out the nature of a review application at [20] to [21] above, the task of this Court is to determine, afresh, the originating application to set aside the Bankruptcy Notice, not to ascertain whether the decision of the Registrar is affected by error, despite multiple written submissions to that effect from the applicant, including an allegation apprehended bias.[1]
[1] Applicant’s written submissions filed on 5 January 2024 at [27(i)]
The originating application contained seven grounds. The first ground simply says that the applicant claims multiple rights of counterclaim, set-off or cross demand, the value of each of which is claimed to exceed the amount of the judgment debt. The second ground, together with its particulars, asserts that no counter-claim was “set up” or is capable of being established by the applicant in his proceedings before the Federal Court.[2] Ground 7 simply repeats the relief sought (see [14] above).
[2] FCA Proceedings No. NSD 679 of 2022 under s 244 of the Act or in FCA Costs Assessment Proceedings No. NSD209 of 2022, in which the judgment debt was obtained
Accordingly, it is only truly grounds 3 to 6 of the originating application which set out the applicant’s alleged entitlement to relief. Those grounds can be summarised as follows:
(a)Ground 3 – a liquidated debt in the amount of $1,472,379.70, allegedly owed to the applicant by the deceased and was the subject of written demands for payment that were not contested (first counter-claim).
(b)Ground 4 – a liquidated debt in the amount of $1,400,000 plus interest allegedly owed to the applicant by the deceased, said to have been the subject of written demands for payment (second counter-claim).
(c)Ground 5 – “wrongful conduct” on the part of the respondent in respect of the Lovedale Property which has allegedly caused the applicant to lose the net present value of the Lovedale Property (third counter-claim). The FCA judgment records the value of the Lovedale property as being estimated at $1,500,000.[3]
(d)Ground 4 – because of the “wrongful conduct” of the respondent in respect of the Maitland Property the applicant is unable to recover, and claims loss to the net present value of and his rights to occupy and possess the Maitland Property (fourth counter-claim). The FCA judgment records the value of the Lovedale property as being estimated at $450,000.[4]
(collectively, the counter-claims).
[3] FCA Judgment at [50] per Burley J
[4] FCA Judgment at [50] per Burley J
Evidence
At the hearing of the review application the following affidavits were read:
(a)for the applicant, each of the following Affidavits deposed by him was read:
(i)affirmed on 2 June 2023 (first Mahommed Affidavit);
(ii)affirmed on 13 July 2023 (second Mahommed Affidavit);
(iii)affirmed on 11 August 2023 (third Mahommed Affidavit);
(iv)affirmed on 21 August 2023 (fourth Mahommed Affidavit);
(v)affirmed on 27 November 2023 (fifth Mahommed Affidavit); and
(vi)affirmed on 5 January 2024 (sixth Mahommed Affidavit).
(b)for respondent, the following Affidavits made by Ms Cox were read:
(i)sworn on 22 November 2023 (first Cox Affidavit); and
(ii)sworn on 1 December 2023 (second Cox Affidavit).
At hearing, the applicant appeared in person. The respondent was represented by her Counsel. The Court Book (which comprises of 2 volumes) was tendered by the respondent and marked by the Court as Exhibit “1R”.
When invited to make oral submissions the applicant indicated that he intended to rely written submissions filed on 5 January 2024. On the morning of 19 January 2024, being the date of the hearing before this Court, an additional written submission was emailed to the Court’s Registry by the applicant’s solicitor, headed “APPLICANT’S OPENING ADDRESS” which commenced by informing the Court that:
Mr Smits, Solicitor for the Applicant was unable to fly to Sydney, booked for 6 AM, to attend the Hearing and was delayed by random personal domestic drama, the urgent resolution of which required his personal input…
No adjournment was sought.
The applicant made the following brief submissions in addition thereto:
(a)Ms Cox has acted unlawfully and dishonestly, since 23 July 2020;
(b)“the deceased, in his personal capacity, was the rightful, full, only, legal and beneficial owner”[5] of properties situated at:
(i)713 Lovedale Road Allandale (Lovedale Property); and
(ii)49 Bruce Street East Maitland (Maitland Property);
(collectively, the properties);
(c)that the properties were not subject to any security interest other than those claimed by Westpac[6] because the deceased was the registered proprietor of each of them; and
(d)the properties are trust assets in respect of which Mr Mahommed is the equitable owner and subject to other security interests.
[5] Applicant’s written submissions filed on 5 January 2024 at [12]
[6] Applicant’s written submissions filed on 5 January 2024 at [12]
The applicant says that the question of beneficial or equitable ownership of each of the each of the properties underpins, and is determinative of, the substantive issues of these proceedings.
The respondent says that there are no bona fide counter-claims with a fair chance of success which have or can be identified, and that in any event there is no mutuality sustaining any claimed set-offs.
Legislation
Section 40(1)(g) of the Act provides as follows:
40 Acts of bankruptcy
(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 fixed for compliance with the notice; or
(ii) where the notice was served elsewhere—within the time specified 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;
For the respondent it is contended that “It is difficult to ascertain what the claimed set-offs are”.[7] In respect of each of them other than the first alleged counter-claim, that statement is accurate.
[7] Respondent’s written submission filed on 23 November 2023 at [11]
In respect of the first alleged counter-claim, the applicant maintains that he is owed by the deceased, and therefore his estate, a liquidated debt in the amount of $1,472,379.70 in respect of which he claims he is entitled to a set-off such that it forms the first counter-claim. The amount is said to be the subject of written demands for payment which were not contested. The reason why it is not difficult to identify the origin of this alleged counter-claim is that it was the very subject of the Federal Court proceedings and the originating application (to set aside the Bankruptcy Notice) details that this alleged debt was the subject of the pleadings in the Supreme Court of NSW.[8]
[8] Originating application at [3]
Before the Federal Court, and despite having presented a creditor’s petition referable to an alleged total debt of more than $5 million, the present applicant “confined his case to one single debt of $1,472,379.70 (plus interest)”.[9] The existence of that debt was disputed by the respondent. The Federal Court considered, and determined, whether the alleged debt existed (FCA judgment at [20] to [44]) concluding that the evidence adduced did not demonstrate that a debt was owing by the deceased at the time of his death, nor in fact that any debt was owing.
[9] FCA judgment at [8]
On appeal, the question of the existence of the debt was again discussed by the FCAFC judgment at [21] to [25] which relevant to this issue concluded as follows at [52]:
The fact that Ms Cox remained silent in response to various demands made by the appellant for payment does not establish that the money as demanded was payable. Nor does it matter that Loire did not dispute the statutory demand of Vestecorp dated 30 July 2018, signed by the appellant, which claimed an amount of $1,472,379.70 as then due and did not resist the subsequent winding up application. Whilst these matters may evidence an acknowledgement or an admission binding on Loire, they did not bind Mr Dixon as the guarantor and who was not a party to the winding up application. The Deed does not contain a clause which binds the guarantor to determination of any amounts payable by the debtor to the creditor and nor does it contain a prima facie evidence certificate clause. Accordingly, the appellant was required to prove his status as a creditor in the estate of Mr Dixon: Begley v A-G (NSW) (1910) 11 CLR 432 ; Re Kitchen, ex parte Young (1881) 17 Ch D 668.
While it is the case that the FCA Judgment determined the question of whether an order for administration of the deceased’s estate should be made under s 244 of the Act, the underlying factual question as to whether the debt was owing (being the alleged debt said to give rise to the first counter-claim) does not conceivably alter for the purposes of these proceedings and, more specifically, the question of whether the Bankruptcy Notice ought be set aside. No further or better evidence than was presented to the Federal Court in the proceedings which resulted in the FCA judgment has been furnished in this review application to establish the debt in relation to the alleged first counter-claim. Accordingly, I agree with the submissions made for Ms Cox that, on the evidence, there remains no basis upon which the Court could be satisfied for the purposes of s 40(1)(g)(i) of the Act that there exists a reasonably arguable counter-claim constituted by the alleged liquidated debt in the sum of $1,472,379.70.
The second counter-claim is described in the same terms as that the subject of the first counter claim, but alleged to be in the sum of $1,400,000. Quite how this sum is arrived at, and its basis, are difficult to ascertain. Much less has evidence been provided so as to give rise to any conclusion that there is a bona fide counter-claim which would enjoy any prospect of success, or that any proceedings have been commenced or are even contemplated in pursuit of such a counter-claim. Absent such evidence, there does not appear to be any basis by which the Court would be satisfied for the purposes of s 40(g) of the Act and, in fact, I am not.
The respondent says that determination of the above issues may be of little consequence because the applicant’s failure to prove that he is a creditor of the deceased estate in his proceedings in the Federal Court, being the FCA Judgment the FCAFC Judgment (see [11] above) give rise to issue estoppel. Ms Cox additionally relies on the fact of the dismissal of proceedings in the New South Wales Supreme Court in which Mr Mohammed’s made claims against the deceased estate.
The orders of each of the Federal Court and the Supreme Court of NSW in respect of the matters with which they dealt are final (including by reference to appeal proceedings therefrom). It is not strictly necessary to determine whether these proceedings are either the subject of an issue estoppel or, as has also been suggested by Ms Cox and abuse of process. The fact is that given:
(a)the factual findings which underpin the FCA judgment, which was upheld on appeal;
(b)the fact of the dismissal of the Supreme Court proceedings, albeit by reason of the plaintiffs[10] failing to pay security for the defendants’ costs; and
(c)the speculative and haphazard allegations which allegedly give rise to the proposed counter-claims;
the applicant simply has not satisfied the Court for the purpose of s 40(1)(g) of the Act on the basis of the evidence before the Court. The orders of each of the Federal Court and the Supreme Court of NSW in respect of the matters with which they dealt are final (including by reference to appeal proceedings therefrom).
[10] Of whom the applicant was one
Each of the third and fourth counter-claims allege wrongful conduct on the part of the respondent in respect of the Lovedale and Maitland Properties (respectively).
The applicant’s submissions make serious allegations of wrong-doing on the parts of many and using seemingly unrestrained language to do so including dishonesty, illegality, conspiracy and subterfuge. Based on these allegations the Court is asked to infer mala fides and conspiracy on the part of, inter alia, Ms Cox. However, the there is nothing before me which would cause me to either find or infer that the respondent was engaged, or intends to engage in, unlawful conduct in respect of the properties (or allow Westpac to do so), despite the applicant inviting the Court to so conclude.
Ms Cox says that given the respective losses in the Federal Court, Full Federal Court and Supreme Court of New South Wales, it cannot be said that Mr Mahommed’s claims have a reasonable fair chance of success, even if they are not found to lack bona fides. To the extent that by the fourth counter-claim Mr Mahommed made allegations that Ms Cox has engaged in “wrongful conduct”, she says that not such conduct has been properly identified, there is no cause of action manifest and that the quantum of the alleged set-off is neither stated nor established. Based on the evidence before the Court, I agree.
Lastly, I also accept the submission made for Ms Cox that for the alleged counter-claims to be sustained by mutuality, any alleged set-off would be a claim made against the deceased estate and not a purported set-off against a claim by Ms Cox against Mr Mohammed. In other words, Ms Cox says she is not personally liable for a claim against the estate, relying on Ebert v The Union Trustee Co of Australia Ltd (1960) 104 CLR 346 at 351 per Dixon CJ, McTiernan and Windeyer JJ; Stec v Orafanos [1999] FCA 457 at [24] per Beaumont, Branson and Sundberg JJ and James v Abrahams (1981) 34 ALR 657 at 666 per Deane and Lockhart JJ. Prima facie, that is so. The applicant says there exists sufficient evidence of personal liability to him by the respondent. However, I am not persuaded that the matters set out in the applicant’s Affidavit and as summarised at [30] of his written submissions do so. On their face, and despite attempts to cast them as personally liabilities the matters which are generally alleged there remain within the ambit of Ms Cox’s conduct as the administrator of the deceased’s estate. I am not satisfied that the broad allegations of alleged wrongdoing in respect of the Lovedale and/or Maitland properties satisfy the definition prescribed by s 40(1)(g) of the Act.
CONCLUSION
I am not satisfied that there is any basis, but specifically nothing arising pursuant to s 40(1)(g) of the Act which warrants the Bankruptcy Notice being set aside. In doing so on a de novo basis, I have ultimately reached the same conclusion as did the Registrar. Accordingly, the review application seeking to set aside the orders made by the Registrar on 31 August 2023 must be dismissed, with costs. I will so order.
I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Given. Associate:
Dated: 28 November 2024
2
12
3