Marks v Australia and New Zealand Banking Group Ltd
[2013] FCCA 1883
•15 November 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MARKS v AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD | [2013] FCCA 1883 |
| Catchwords: BANKRUPTCY – Whether the fact that an appeal is pending constitutes sufficient reason to permit an extension of time for compliance – whether the appeal was instituted bona fide – finding no bona fide appeal instituted – discretionary factors militate against the granting of relief – failure to seek and obtain stay of execution of supporting judgment – no special circumstances demonstrated - application dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth), s.41 Foreign Judgments Act 1991 (Cth) |
| Ahern v Deputy Commissioner of Taxation [1987] FCA 312 Australia and New Zealand Banking Group Ltd v Marks [2013] QSC 186 Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 Conway v Jackson [2001] FCA 230 Pak Sun Liew v JNS Technologies (M) Sdn Bhd [1999] FCA 1428 Re Baker; Ex parte Baker v Staples [1995] FCA 703 Re Geard; Ex parte Reid (1994) 217 ALR 191 Re Ngyuen; Ex parte Deputy Commissioner of Taxation [1995] 54 FCR 403 |
| Applicant: | CLARE ELIZABETH MARKS |
| Respondent: | AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD |
| File Number: | BRG 746 of 2013 |
| Judgment of: | Judge Burnett |
| Hearing date: | 9 September 2013 |
| Date of Last Submission: | 9 September 2013 |
| Delivered at: | Brisbane |
| Delivered on: | 15 November 2013 |
REPRESENTATION
| The Applicant appeared on her own behalf. |
| Counsel for the Respondent: | Mr W. Peden |
| Solicitors for the Respondent: | Gadens Lawyers |
ORDERS
The application filed on 27 August 2013 be dismissed.
Unless application is made for any other order within seven (7) days of the date of this order the applicant pay the respondent’s costs to be assessed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 746 of 2013
| CLARE ELIZABETH MARKS |
Applicant
And
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD |
Respondent
REASONS FOR JUDGMENT
Introduction
On 29 July 2013 bankruptcy notice 163572 issued. It was served upon the applicant debtor, Clare Elizabeth Marks, on 6 August 2013. By application made on 27 August 2013 the debtor seeks to set aside the notice. She also applied for collateral interim relief and an order that the time for compliance with the notice be extended to the date upon which an appeal she has instituted in the Queensland Court of Appeal is determined and orders are made.
The judgment supporting the bankruptcy notice was entered by Daubney J on 22 March 2013. He ordered, inter alia:
“(a) the judgment of the High Court of the Republic of Singapore dated 27 December 2012 whereby it was ordered that the Respondent, being Clare Elizabeth Marks, pay AUD$11,102,778.56 to the Applicant, being Australia and New Zealand Banking Group Limited ACN 005 357 522, be registered under Part 2 of the Foreign Judgments Act 1991 (Commonwealth);
(b) the amount payable by the Respondent (the Judgment Debtor) to the Applicant (the Judgment Creditor) is the judgment mentioned in paragraph (a) above;
…”
It is the background to this judgment that enlivens the controversy in this case.
Background
The debtor guaranteed a loan made by the respondent creditor bank to Scott Francis Tyne and a third party. Mr Tyne is the debtor’s de facto husband. The third party is a corporation controlled by him. The borrowers defaulted, the security provided by the debtor’s guarantee was called upon and enforcement proceedings commenced in Singapore on 8 September 2011 (“the money proceedings”). The amount of the alleged default was $11,747,558.51.
Clause 22 of the guarantee provided:
“This Guarantee is governed by, and shall be construed in accordance with, the laws of Singapore. The Guarantor irrevocably submits to the non-exclusive jurisdiction of the courts of Singapore or of any other court as the Bank may elect, waives any objections on the ground of venue or forum non convenience or any similar grounds and consents to service of process by mail or in any other manner permitted by the relevant law.”
On 19 September 2011, the creditor issued process in the Supreme Court of Queensland seeking recovery of possession of real property possessed by the debtor. She had provided that property which was owned solely by her as security for the loan (“the recovery proceedings”). It was alleged in those proceedings that the creditor had entered into the guarantee, that the borrower was in default and that accordingly the debtor was liable to the creditor. The debtor’s liability was secured by the mortgage granted by her over her real property. The creditor sought to enforce its security by commencing the recovery proceedings. The debtor entered an appearance and filed a defence to that action on 19 September 2011.
Subsequently, on 25 January 2012, the debtor was served with process related to the money proceedings that had issued out of the High Court of the Republic of Singapore. In the money proceedings, the creditor, by writ, claimed for judgment in respect of matters particularised in its statement of claim. The statement of claim sought judgment against the debtor in the sum of $11,747,558.51, being monies owing pursuant to her guarantee. Curiously, it also pleaded the facts relevant to the debtor’s security alleging that she had provided a first registered mortgage over property and that it sought to exercise its power of sale pursuant to s.84 of the Property Law Act1974 (Qld). However, it did not claim relief with respect to that matter in the money proceedings.
The debtor did not enter a timely appearance to the money proceedings and accordingly final judgment was sought and obtained against her in the sum of $11,747,558.51 on 28 February 2012 in default of her appearance (“the first Singapore judgment”).[1]
[1] At paragraph 32 of her affidavit the applicant refers to a judgment of $11,747,558.51 which was entered in default of her appearance on 4 April 2012. This appears to be a mistake on her behalf, as the only Singapore judgment in evidence in respect of that sum was that of 28 February 2012.
On 9 May 2012 the first Singapore judgment was ordered by Daubney J to be registered in Queensland under Part 2 of the Foreign Judgments Act 1991 (Cth).
The matter returned to the High Court of Singapore in October 2012, at about the same time the debtor’s recovery proceedings came on before Dalton J in the Supreme Court of Queensland. Her Honour heard and determined an application for summary judgment concerning that claim. Her Honour dismissed the debtor’s contentions that the application was not suitable for summary determination. The debtor contended that the first Singapore judgment had not been determined on the merits and informed her Honour that the first Singapore judgment was to be challenged. Two issues were contended for by the debtor as giving rise to a need for trial. They were allegations:
a)Of misleading and deceptive conduct on the creditor’s part in respect of its seeking the supplemental security; and
b)That the facility agreement not being binding because at the time it was executed the debtor’s husband was not authorised by the borrowing corporation to enter into it.
Her Honour was not persuaded that these matters were sufficient to demonstrate that she had any real prospects of defending the recovery proceedings. She gave judgment for the creditor against the debtor on 12 October 2012, ordering that it recover possession of the debtor’s property. On 9 November 2012 the debtor appealed the order of Dalton J (“the possession order appeal”). Notwithstanding the commencement of that appeal the enforcement warrant issued.
Concurrent with those matters, as indicated to Dalton J, proceedings continued in the High Court of Singapore. On 2 October 2012 the debtor applied to that court to set aside the first Singapore judgment obtained on 28 February 2012 in default of her appearance. That application returned on 30 October 2012 and at that hearing Registrar Wong ordered that the first Singapore judgment be conditionally set aside upon:
a)The debtor entering an appearance; and
b)Her filing a defence within four weeks of the date of that order.
Accordingly, the debtor did enter her appearance and she filed a defence and counter claim on 12 November 2012. Her defence and counterclaim coincidentally mirrored the defence and counter claim which she filed in the recovery proceedings. It will be recalled that in the recovery proceedings Dalton J found that the defence did not enliven any real prospects of defence.
The creditor filed a notice of appeal against the order of Registrar Wong permitting the debtor leave to enter an appearance and defend. That appeal was heard and allowed on 27 December 2012. In allowing the appeal, the learned Judicial Commissioner of the High Court of Singapore ordered:
“1. the decision of the Assistant Registrar Ms Wong Shi Hui Janice given on the 30th day of October 2012 in Summons No. 5043 of 2012/T ordering that Judgment under Order 13 dated 29 February 2012 against the 3rd Defendant be set aside conditional on the 3rd Defendant entering an appearance to these proceedings within 3 days and filing a Defence within 4 weeks, be set aside;”
The Judicial Commissioner reinstated the first Singapore judgment with a minor adjustment in the quantum, ordering that there be judgment in the sum of $11,102,778.56 (the second Singapore judgment). That judgment has not been appealed.
Subsequently on 22 March 2013 following application made by the bank Daubney J ordered that that the second Singapore judgment be registered in Queensland under Part 2 of the Foreign Judgments Act 1991 (Cth). The second registered judgment supported the bankruptcy notice the subject of this application.
The debtor subsequently applied to the Supreme Court of Queensland to set aside registration of the second foreign judgment. That application was made on 16 May 2013 and came on before Mullins J in July 2013. By orders made on 24 July 2013 her Honour dismissed the application. On 20 August 2013 the debtor then filed a notice of appeal against the Order of Mullins J dismissing the debtor’s application to set aside the second registered judgment. I note that the debtor has not sought, nor sought and been refused, a stay of execution of the registered judgment pending appeal. The principle grounds of appeal advanced are:
“1. Her Honour erred in denying the appellant’s application to set aside registration of a judgment of the High Court of Singapore entered against the appellant by Daubney J on 22 March 2013.
2. Her Honour erred in finding that the appellant had contractually submitted to the jurisdiction of the High Court of Singapore
3. Her Honour erred in finding that the appellant had voluntarily submitted to the jurisdiction of the High Court of Singapore.”[2]
[2] Annexure CEM-3 to the affidavit of C. E. Marks filed on 27 August 2013.
Time for Bringing Application
In its written submissions, the creditor contended that the application was filed 23 days after service of the bankruptcy notice and accordingly was not within time as required by s.41(6A) of the Bankruptcy Act 1966 (Cth). However, the debtor filed a notice of appeal against the order of Mullins J which in turn itself followed an application seeking to set aside the order of Daubney J registering the second Singapore judgment. This order gave rise to the judgment which supported the bankruptcy notice. As the notice of appeal was filed on 20 August 2013 it was filed before the time for compliance with the bankruptcy notice had lapsed and therefore satisfies the requirements of s.41(6A): Conway v Jackson [2001] FCA 230. It follows I am satisfied that the Court’s jurisdiction to entertain this application has been enlivened.
Extension of Time
The substantial matter in the application was the question of whether or not the bankruptcy notice ought be set aside, or time for compliance with it be extended. In this case the debtor seeks to have the Court go behind the judgment and examine whether or not she is truly indebted to the creditor as it alleges. There is no question that a Court exercising this jurisdiction has the power to do so: Ahern v Deputy Commissioner of Taxation [1987] FCA 312 at [40].
The debtor contends that there is a genuine dispute between her and the creditor and accordingly she is not in fact indebted as alleged. She asserts five grounds:
a)She contends that she has always denied indebtedness. Her submission in that regard is noted but is subject to other matters discussed below. Notwithstanding her assertion, the fact remains that at the time of the issue of the notice she was indebted to the creditor as evidenced by the judgment of Daubney J of 22 March 2013 which she had unsuccessfully sought to have set aside.
b)The issue of indebtedness has never been decided on the merits. Strictly this is correct. The debtor suffered judgment by default in December 2012. However, the merits of her purported defence were considered by Dalton J in her judgment of 12 October 2012 when considering the recovery proceedings. That judgment was favourably commented upon by Mullins J in her judgment of 24 July 2013. The fact remains that neither judge considered the matters raised by the debtor were sufficient to justify the debtor proceeding to trial on the merits in the Supreme Court of Queensland. Accordingly, while her submission in asserting that there has been no trial on the merits is strictly correct, there appears to be no reason why it would be expected that the High Court of Singapore would view the debtor’s case any differently to the Supreme Court.
c)The creditor has gone to considerable effort to avoid a conventional trial. Respectfully, that submission overreaches. The creditor sought to proceed to judgment because of the debtor’s default of appearance, as it was permitted to do. When the matter came back before the Judicial Commissioner a review on the merits was argued in the sense that the Judicial Commissioner examined the debtor’s claims in order to assess whether she ought to have been permitted leave to defend. In this regard it is relevant to note that the defence to the money proceedings is materially similar to the defence in the recovery proceedings. It was in respect of the defence to the recovery proceedings that Dalton J concluded the debtor had no real prospects of success and accordingly proceeded to enter summary judgment against her. Although the debtor appealed that judgment I note that the debtor agreed to withdraw that appeal. It was the defence before Dalton J in the recovery proceedings that was commented upon by Mullins J in the decision to set aside the registration of the second Singapore judgment.
At page 3 of the notes of argument before the Judicial Commissioner, legal representatives for the bank noted the three points sought to be made by the debtor as:
1.The bank has sought to recover the same debt in Queensland and in Singapore;
2.The decision of Dalton J in the Queensland summary judgment proceedings for possession was premised upon a finding of res judicata because at that point in time it was a default judgment in Singapore but which judgment was subsequently set aside; and
3.In both Queensland and Singapore the debtor asserts that there is no debt owing by the borrower to the bank.
Although the notes of argument do not disclose the full reasoning of the Judicial Commissioner it seems apparent that the Judicial Commissioner accepted the submissions of the bank. I note that on the return of that application the debtor was absent. Importantly however the debtor’s contention that the bank had gone to considerable effort to avoid a conventional trial is patently incorrect. It was simply exercising rights available to it under the rules of Court.
d)The creditor short circuited the Queensland proceedings by commencing in Singapore. The purpose of the Singapore proceedings was to recover money. The purpose of the Queensland proceedings was to recover possession of land which had been provided as mortgage security for the borrowings the subject of the guarantee. As is explained in the reasons of Mullins J, the proceedings in Queensland are properly commenced in Queensland given that this is the only jurisdiction in respect of which orders of the kind sought relating to the land could be made. Likewise, the money proceedings in Singapore are properly commenced in Singapore given the agreement struck between the debtor and the bank and in particular provided for in clause 22 of the guarantee. The proceedings are not inconsistent. Although there was a common factual subtext, the relief sought in each is distinct and separate.
e)The appeal will decide the whether the registration of that judgment ought to be set aside.
I have addressed the first four matters above, however the fifth matter is the most substantial matter raised by the debtor. In summary she contends that the second Singapore judgment should not have been registered. If that is so then the bankruptcy notice which relies upon it must also fail for want of “final judgment or final order” necessary to satisfy the requirements of s.41 of the Bankruptcy Act 1966 (Cth).
The substantive issue in the application is or whether or not there is “no genuine dispute” or that the appeal is not based upon “genuine and arguable grounds.” The debtor has commenced an appeal in the Queensland Court of Appeal against the decision of Mullins J dismissing her application to set aside the registration order made by Daubney J on 22 March 2013. The debtor has not exhibited the grounds of appeal but raises many matters in her affidavit justifying her contention that she has a defence and right of action against the creditor and that Mullins J erred in not addressing those matters.
However, those matters are not entirely material for this application. Here the question to be resolved is whether or not the Court is of the opinion that the proceeding to set aside the judgment has been instituted bona fide: s.41(6C)(a). There is no contest that they have been commenced within time and that the debtor will seek to prosecute the appeal with due diligence. However, the creditor denies the debtor’s contention that the appeal is bona fide.
When considering the approach to appeals and whether or not they have been instituted bona fide, the authorities establish conflicting principles concerning applications of this kind. In Pak Sun Liew v JNS Technologies (M) Sdn Bhd [1999] FCA 1428, Kenny J addressed those differences as follows:
“13 There have been differences in the cases about the principles which are to govern applications such as the present. In Re Baker; ex parte Baker v Staples (unreported, Federal Court, 4 September 1995), Keifel J held that an extension of time should ordinarily be granted where there is a “genuine and arguable” appeal being diligently prosecuted against a judgment founding a bankruptcy notice. A not dissimilar approach was adopted by Weinberg J in Benaharon and by Ryan J in Beckwith v Pedler [1999] FCA 1312. A different approach has been adopted in other cases. In Re Geard; ex parte Reid (unreported, Federal Court, 11 February 1999) Sheppard J refused an application to extend time, stating as follows:
“The critical question then is how the discretion should be exercised. As earlier stated, the parties have made, both orally and in writing, detailed submissions concerning the issues which will arise for determination on the appeal and have invited the Court in effect to express a view, provisional though it may be, on the likely outcome of the appeal. To a degree I have felt obliged to look at the matter for myself, but I think it most undesirable that a judge of this Court should in effect undertake some provisional review to determine the correctness or otherwise of a judgment of another court especially where that judgment is under appeal to the Court of Appeal which has jurisdiction to hear appeals in the normal course. I prefer to approach the matter in a different way.
The debtor has not made any application for a stay of proceedings pending the outcome of the appeal. Why he has not done so is not clear to me but the judgment which has been recovered against him is a final judgment and execution upon it has not been stayed. It would seem to me to require quite special circumstances before a court exercising jurisdiction in bankruptcy would, in effect, do what has not been done in the court in which the judgment has been obtained by extending the time for compliance with the bankruptcy notice when no application to stay the judgment has been made. ...
A further factor is that this is an application to extend time for compliance with a bankruptcy notice; it is not the hearing of a bankruptcy petition. The refusal of the application will not affect the status of the debtor but it will mean that he, in all probability, will commit an act of bankruptcy. That act of bankruptcy will be available to the petitioning creditors or to any other creditor upon which to base a bankruptcy petition at any time in the period of six months after the act of bankruptcy has been committed. Otherwise the debtor's position will remain unaffected by what the Court does.
If the appeal is ultimately dismissed and the judgment stands with the consequence that the bankruptcy proceedings go on, it may be quite important to the petitioning creditor, whoever he or she may be, to the general body of creditors and to the trustee in bankruptcy, that there be, for the purposes of the administration of the bankrupt estate, an act of bankruptcy committed at an earlier time than would be case if this application were acceded to.”
Sheppard J's approach has been followed in Re Smith (unreported, Federal Court, 4 May 1994), Agrillo v Codisposto (unreported, Federal Court, 16 December 1994), Bryett v Deputy Commissioner of Taxation (1997) 37 ATR 1411, and Wenkart v Abignano (unreported, Federal Court, 28 August 1998).
14 In Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264, Lehane J made it clear, at 270-271, that whilst a failure to apply for a stay was a relevant factor to which weight would be attached, it was not necessarily conclusive on the question whether an extension of time should be granted. This point was emphasised in Warner v Frost [1999] FCA 830 in which Hely J said:
“For myself, I think with respect, that the view of Lehane J is to be preferred and I propose to follow it but the problem is that really the only matters which were relied upon in support of a stay were these: first, the existence of an arguable appeal. Second, the application for a stay was made but at least inferentially a reason for its refusal was the inability on the part of the applicant to put up security in sufficient sums. Thirdly, the impact of a change in status consequential upon the refusal of the stay. Fourthly, no showing of any prejudice to the respondent should an extension be granted and, finally, the appeal is likely to be heard and decided in a period of eight months or less.
In my view, these factors are insufficient to outweigh the proposition that the Court in which this judgment was obtained has declined to stay its execution and something more than an arguable appeal needs to be shown before the Bankruptcy Court would grant an extension of time for compliance with the bankruptcy notice, which would produce a similar effect to the granting of a stay. Really nothing has been shown in this case other than that there is an arguable appeal and that the consequence of refusing an extension will be the commission of an act of bankruptcy ...”
On the hearing of these applications, both counsel for the applicants and for JNST submitted that, in Warner v Frost, Hely J had correctly stated the principles which ought to govern the exercise of discretion on these applications.”
At the outset it is agreed that the Court has a broad and general discretion. Further, a significant consideration is that the debtor has not applied for or successfully sought a stay of execution of the judgment the subject of appeal. Accordingly this application is in effect a de-facto application for stay. More than an arguable appeal is required to establish a basis for the exercise of a court’s discretion to grant a stay. Finally, its seems common that it is desirable that a court in considering an application where the judgment is subject to appeal should not be too quick to express a view, one way or the other, on the correctness of a judgment of another court, particularly one which is subject to appeal. In making that observation I particularly note the judgment in Re Baker; Ex parte Baker v Staples [1995] FCA 703.
In this case the debtor has not included in her material a copy of the notice of appeal. However, a draft outline of appeal was provided. From its terms it is difficult to discern the precise points advanced against the decision of Mullins J and how it is contended that her Honour erred in refusing to set aside the decision of Daubney J.
In refusing the relief sought it was submitted before Mulllins J that:
a)Given the terms of the guarantee the debtor had not submitted to the jurisdiction of Singapore and therefore the Courts in Singapore had no jurisdiction over Australia and New Zealand Banking Group Ltd v Marks [2013] QSC 186 at [15]; and
b)That the judgment obtained in Singapore was obtained as an abuse of process because the creditor was purportedly seeking similar relief in both jurisdictions.
Her Honour dealt with the construction point concerning jurisdiction at [22] and the abuse point at [23] of her judgment.
The creditor does not accept that the debtor has an arguable defence because the starting point for setting aside the foreign judgment is, in its contention, Singapore and not Queensland.
It follows that unlike the decision in Re Baker there was no concession in this case by the creditor that the appeal was at least arguable. That matter is significant; as Lehane J, in referring to Re Baker, observed in Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 at 270:
“In view of a concession by the judgment creditor that the appeal was at least arguable, her Honour did not consider it necessary to determine whether the appeal instituted by the judgment debtors could be said to have more than slight prospects: her Honour proceeded on the basis that once it is accepted that an appeal is arguable, it is not appropriate for a court considering an application to extend time for compliance with a bankruptcy notice to consider whether the prospects of the appeal are to be regarded as more than slight. The mere fact that it is arguable, once it is determined that the appeal has been instituted in good faith and is being diligently prospected, produces the consequence (her Honour held) that, ordinarily at least, an extension of time will be granted.”
Here there is no consensus that the applicant has an arguable appeal. It follows that the circumstances supporting the reasoning in Re Baker are not open here. In this instance the facts are more analogous to those then being considered in Re Geard; Ex parte Reid (1994) 217 ALR 191, where the judgments in question were not said to be arguable.
It follows that, for reasons similar to those expressed by Lehane J at 270, I too should give considerable weight to the fact that here, as in Re Geard and Byron v Southern Star Group Pty Ltd, no stay has been granted or sought of the judgment supporting the bankruptcy notice. Although I do not wish to express any view on the prospects of appeal, I note that the matters raised on the appeal have now been agitated before both Mullins J and Dalton J on earlier occasions. Furthermore, when an appeal was brought against the decision of Dalton J that appeal was subsequently abandoned (in making that observation I note that it is possible the appeal was abandoned because the first Singapore judgment, the subject of registration, was subsequently set aside). I am not satisfied that the appeal has been instituted bona fide.
Further, the date of the hearing of the appeal is unknown. It is likely that following the hearing of the appeal there will be sometime before judgment is delivered. Ultimately judgment may not be delivered until sometime well in to the future. That necessarily means that an extension of some time may be required. In Re Ngyuen; Ex parte Deputy Commissioner of Taxation [1995] 54 FCR 403 at 407, Heerey J observed in respect of these matters:
“Extension of time for compliance with a bankruptcy notice may have important adverse consequences for the judgment creditor. For example, if a sequestration order is subsequently made the commencement of the bankruptcy may be later than would otherwise have been the case, which in turn may affect rights of recovery by the trustee in relation to property.”
I am also mindful that the commission of an act of bankruptcy, although serious, does not carry with it grave consequences brought about by the making of a sequestration order. It always remains open to a court on the hearing of any petition for sequestration to adjourn the hearing pending the resolution of the appeal by the Court of Appeal. An application for sequestration may also be more proximate to a hearing date permitting a more informed consideration of the appeal insofar as that may be relevant.
In my view the debtor has not demonstrated any special circumstances that would take this application out of the ordinary. It follows that for those reasons I am not prepared to exercise the Court’s discretion to enlarge time and dismiss the application.
I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Judge Burnett
Date:15 November 2013
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