Maples v Siteberg Pty Ltd
[2013] FMCA 123
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MAPLES v SITEBERG PTY LTD | [2013] FMCA 123 |
| BANKRUPTCY – Application to set aside bankruptcy notice – whether an abuse of process – earlier bankruptcy notice discussed – pending proceedings in Supreme Court of NSW. |
| Bankruptcy Act 1966, s.30 |
| Maxwell-Smith v S & E Hall Ltd, in the matter of Maxwell-Smith [2006] FCA 825 Russell v Polites Investments Pty Ltd [2012] FCA 11 Williams v Spautz (1992) 174 CLR 509 |
| Applicant: | BRUCE JOHN MAPLES |
| Respondent: | SITEBERG PTY LTD |
| File Number: | SYG 2017 of 2012 |
| Judgment of: | Altobelli FM |
| Hearing date: | 5 February 2013 |
| Date of Last Submission: | 5 February 2013 |
| Delivered at: | Sydney |
| Delivered on: | 5 March 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr Skinner |
| Solicitors for the Applicant: | Frontier Law Group |
| Counsel for the Respondent: | Mr Johnson |
| Solicitors for the Respondent: | Crisp Legal |
ORDERS
The application filed 18 September 2012 is dismissed.
The applicant pay the respondent’s costs as agreed or as assessed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2017 of 2012
| BRUCE JOHN MAPLES |
Applicant
And
| SITEBERG PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction and background
One gets the impression that the present dispute between the parties is merely a relatively inconsequential skirmish in the litigation war that they are engaged in. The applicant asks the court to set aside a bankruptcy notice issued by the respondent on 29 June 2012 on the grounds that it is an abuse of process. The respondent opposes this, denies there is an abuse of process, but quite frankly acknowledges that even if the court dismisses the application, the creditor’s petition that it will cause to issue will probably be the subject of further litigation.
The prospect of further litigation does not seem to concern either party. The war between them arises out of a failed business venture the vehicle of which was the Southern Highlands Trust, a unit trust of which the applicant is settlor and equal unit holder with the respondent who is the Trustee. The main litigation is currently before the New South Wales Supreme Court, but there has been at times ancillary litigation in the Local Court at Camden and in the District Court of NSW. The detail of this litigation is not relevant to the present proceedings.
By way of a bankruptcy notice issued 29 June 2012 the respondent seeks to recover a debt in the sum of $100,049.10 based on two judgments for costs – one for $30,049.10 on 29 June 2012, and one for $70,000 dated 28 April 2010. An earlier bankruptcy notice dated 11 March 2011 claimed $123,205.51 for various judgments which included the judgments referred to in the bankruptcy notice sought to be set aside. In June 2011 the parties agreed unconditionally and by consent to withdraw and dismiss the first bankruptcy notice with each party to pay their own costs.
Contentions
The applicant contends that the bankruptcy notice of 29 June 2012 is an abuse of process because, firstly, it is identical to the earlier bankruptcy notice agreed to be set aside and, secondly, because its real purpose is to put an end to the Supreme Court proceedings and not to invoke the bankruptcy jurisdiction of this court. The respondent contends that the two bankruptcy notices are not identical, and that there is no improper purpose as the judgment debts are merely sought to be recovered.
Applicable law
This court clearly has jurisdiction to set aside a bankruptcy notice as an abuse of process under s.30 Bankruptcy Act 1966; Maxwell-Smith v S & E Hall Ltd, in the matter of Maxwell-Smith [2006] FCA 825 (3 July 2006). Neither party contended to the contrary.
A useful statement of the relevant law is found in Russell v Polites Investments Pty Ltd [2012] FCA 11 at paragraphs 45-46 inclusive where his Honour Justice Flick said:
45. It may be accepted that it is an abuse of process to pursue bankruptcy proceedings “for the purpose of stifling litigation”: Bayne v Baillieu; Bayne v Riggall [1908] HCA 39; (1908) 6 CLR 382 at 396 per Griffith CJ. The power of the Court to prevent such an abuse of process may also be readily accepted. The “ultimate principle involved is that a court will not allow its process to be abused”: Rozenbes v Kronhill [1956] HCA 65; (1956) 95 CLR 407 at 417. Dixon CJ, Webb and Fullagar JJ there said that a court would “look strictly at the conduct of a creditor using or threatening bankruptcy proceedings” and at whether “the creditor has used, or attempted to use, a pending petition, or a threat of a petition, in order to extract from the debtor money which the debtor is not bound to pay, or in order to obtain some secret and unfair advantage over other creditors”.
46. In the context of an application to set aside a bankruptcy notice, Gyles J in Killoran v Duncan [1999] FCA 1574 relevantly observed:
[12] Whilst there is no debate about the jurisdiction of the Court to set aside a bankruptcy notice as an abuse of process where it can be concluded that it was simply to put pressure on the debtor rather than to genuinely invoke the Court’s jurisdiction, I am not satisfied that that is the position here. There is nothing to indicate that the respondent creditor does not genuinely intend to pursue the matter if there is default in complying with the notice. In my opinion, there is nothing special about abuse of process in this field, and, if a person wishes to resort to the jurisdiction of the Court for appropriate orders, then it will be an unusual case in which that will be prevented.
[13] There is no evidence here of any collateral purpose or of any undue pressure being applied. It is correct, I think, that the time to judge abuse of process is the time that the bankruptcy notice is issued and that subsequent events have relatively slight relevance. They may be relevant insofar as they throw light upon circumstances which might have been appreciated and foreseen at the time of the issue of the notice.
[14] If, contrary to my view, however, there were a prima facie case of abuse of process, the remedy is discretionary and, in my view, if circumstances following that time had altered significantly so that it would not be appropriate to set aside the notice, I think that the jurisdiction of the Court is wide enough to give effect to that. I have in mind here that whilst the immediate parties to the application are those with the most interest in the matter, the body of creditors generally also have an interest and I cannot be certain one way or the other about the position of solvency. It may be most unfortunate if a bankruptcy notice were set aside in circumstances where the debtor is in fact insolvent: [[1999] FCA 1574].
See also: Maxwell-Smith v S & E Hall Pty Ltd [2006] FCA 825, 233 ALR 81 at [41] to [49] per Jacobson J; Cavoli v Etl [2007] FCA 1191 at [17] per Heerey J; Slack v Bottoms English Solicitors [2002] FCA 1445 at [15] to [18] per Spender J; Yang v Mead [2009] FCA 1202 at [11]; Seller v Deputy Commissioner of Taxation [2011] FCA 865 at [15] to [16]. An allegation of abuse of process, it is to be recalled, is a “serious” allegation and one not to be made without a sufficient factual foundation: cf. Conley v Commonwealth Bank of Australia [2006] FCA 1255 at [9] to [18] per Bennett J.
Much was said in submissions about the respondent’s purpose in causing the bankruptcy notice to issue, and the extent to which this manifests an abuse of process. This was discussed in the judgment of Mason CJ, Dawson, Toohey and McHugh J in Williams v Spautz (1992) 174 CLR 509 at paragraphs 34, 36 and 42:
34. The observations of the Privy Council in King v. Henderson (40) (1898) AC, at p 731 and those of Isaacs J. in Dowling (41) (1915) 20 CLR, at pp 521-522, to which we referred earlier, represent an attempt to achieve a formulation which keeps the concept of abuse of process within reasonable bounds. To say that a purpose of a litigant in bringing proceedings which is not within the scope of the proceedings constitutes, without more, an abuse of process might unduly expand the concept. The purpose of a litigant may be to bring the proceedings to a successful conclusion so as to take advantage of an entitlement or benefit which the law gives the litigant in that event.
36. It is otherwise when the purpose of bringing the proceedings is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed (42) In re Majory (1955) Ch 600, at pp 623-624 or some collateral advantage beyond what the law offers (43) Goldsmith v. Sperrings Ltd. (1977) 1 WLR, at pp 498-499; see also Varawa (1911) 13 CLR, at p 91. So, in Dowling, Isaacs J. pointed out that (44) (1915) 20 CLR, at p 524.
"if, for instance, it had been shown that the
Society had simply threatened Dowling that unless he did
what they had no right to demand from him, namely, give
up certain names, they would proceed to sequestration,
and they had proceeded accordingly, there would have
been in law an abuse of the process".However, because the Society wished to use the process for the very purpose for which it was designed, there was no abuse of process.
Is it essential to the exercise of the jurisdiction that there should be an improper act as well as an improper purpose?42. It has been suggested that the criterion for abuse of process is whether the improper purpose is the sole purpose of the moving party (52) See, for example, the use of the word "merely" by Isaacs J. in Varawa (1911) 13 CLR, at p 91. However, in more recent times it has been said, in our view correctly, that the predominant purpose is the criterion. That was the test applied by Lord Denning in Goldsmith v. Sperrings Ltd. (53) (1977) 1 WLR, at p 496 and by the English Court of Appeal in Metall and Rohstoff v. Donaldson Inc. In giving the judgment of the Court in the latter case, Slade L.J. observed (54) (1990) 1 QB, at p 469.
"(A) person alleging such an abuse must show that
the predominant purpose of the other party in using the
legal process has been one other than that for which it
was designed".It is, of course, well established that the onus of satisfying the court that there is an abuse of process lies upon the party alleging it. The onus is "a heavy one", to use the words of Scarman L.J. in Goldsmith v. Sperrings Ltd. (55) (1977) 1 WLR, at p 498 and the power to grant a permanent stay is one to be exercised only in the most exceptional circumstances (56) Jago (1989) 168 CLR, at p 34; see also Sang (1980) AC, at p 455.
The object of a criminal action for defamation
Evidence
The applicant read his affidavit sworn 14 September 2012. The respondent relied on an affidavit of Chris Kintis sworn 12 October 2012.
Discussion
There is no doubt that the onus of proof is on the applicant to establish there is an abuse of process, and that the onus is a high one: Williams v Spautz at 529. There is little doubt that the relevant time is the date of the notice ie. 29 June 2012 though the court can discern no subsequent event that would influence whether or not there is an abuse of process, or how the court would exercise the discretion it has under s.30 of the Act.
The court does not accept the applicant’s submission that the two bankruptcy notices are identical. Clearly they are not. The amounts claimed are different. The bankruptcy notices are similar in the sense that the judgments forming the sole basis of the second notice were amongst the judgments forming the basis of the first notice. There is no inference of abuse of process to be drawn from this. When the parties agreed to the dismissal of the first notice it was done unconditionally - see a letter dated 24 June 2011 from the applicant’s solicitors to the respondent’s solicitors. True it is that the said letter contains an acknowledgement by the applicants of the possibility that a later bankruptcy notice might be issued, but that does not demonstrate any abuse of process per se. It was a prescient letter in this regard. This was a risk the applicant contemplated, and could have protected himself from at the time. It is not an abuse of process for the respondent to do one year later what was contemplated by the applicant at the time. There can be no suggestion of estoppel.
An assertion of abuse of process necessarily invites a detailed examination of the conduct and motives of not just the alleged abuser, but of the one making the allegation, especially when it is submitted the abuse of process is meant to stifle litigation in another court. There is nothing before the court to indicate that the respondent, as the applicant’s creditor, does not genuinely intend to pursue the matter if there is default in complying with the notice. Indeed when counsel for the applicant reminds the court that refusal to set the notice aside is not “the end of the world”, as a creditor’s petition can be contested, is there not an implicit recognition of the risk, indeed the likelihood, of precisely that happening in this case? There is a singular absence of any evidence of collateral or improper purpose. There is no inordinate delay in this case. The respondent is owed money and has signalled through the bankruptcy notice its intent to invoke the bankruptcy jurisdiction of this court.
Turning to the applicant’s conduct, what is clearly apparent is his failure to take any steps to forestall the issue of the bankruptcy notice. There is no evidence of any attempt to stay, vary or set aside the orders for costs that forced the notice. There is no appeal from these orders. There is no application to pay by instalments. There is not even a hint of some defence. Moreover there is no evidence of the applicant’s solvency that might constitute the clearest indication of the bankruptcy jurisdiction being improperly invoked. Indeed the only inference that might be drawn is that the applicant’s solvency is dependant on the successful conclusion of the litigation which it claims is sought to be stifled. Even if that were the case, however, it does not amount to an abuse of process. In any event the applicant’s cause of action would rest in his trustee in bankruptcy, so it is difficult to see how anything is stifled.
Even if some motive of the respondent related to the Supreme Court proceedings, the evidence of which could only be inferred, there is no evidence to show it is the respondent’s predominant purpose.
The applicant’s claim fails.
Orders
The application filed 18 September 2012 is dismissed.
The applicant pay the respondent’s costs as agreed or as assessed.
I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Altobelli FM
Date: 5 March 2013
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