McElligott v Boyce
[2013] FCA 804
•13 August 2013
FEDERAL COURT OF AUSTRALIA
McElligott v Boyce [2013] FCA 804
Citation: McElligott v Boyce [2013] FCA 804 Appeal from: Boyce v McElligott (No 2) [2012] FMCA 909 Parties: LORAIN RONDA MCELLIGOTT v PETER GERARD BOYCE, ALAN WILLIAM CLARKE, SIMONE ELIZABETH PEARCE and GEOFFREY JOHN BARR File number: QUD 352 of 2012 Judge: COLLIER J Date of judgment: 13 August 2013 Catchwords: BANKRUPTCY AND INSOLVENCY – application to set aside sequestration order of Federal Magistrate – bankruptcy notice founded on costs order made by Court of Appeal of Queensland in related litigation – allegations of fraud by applicant against respondent creditors – whether genuine dispute in relation to debt – whether Federal Magistrate should “look behind” decision of Court of Appeal Legislation: Corporations Act 2001 (Cth) ss 109X, 459C, 459E, 459H Cases cited: McElligott v Boyce [2011] QCA 117 cited
Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 citedDate of hearing: 8 March 2013 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 28 Counsel for the Appellant: The Appellant appeared in person Counsel for the First, Second, Third and Fourth Respondents: Mr M Jones Solicitor for the First, Second, Third and Fourth Respondents: Butler McDermott Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 352 of 2012
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN: LORAIN RONDA MCELLIGOTT
AppellantAND: PETER GERARD BOYCE
First RespondentALAN WILLIAM CLARKE
Second RespondentSIMONE ELIZABETH PEARCE
Third RespondentGEOFFREY JOHN BARR
Fourth Respondent
JUDGE:
COLLIER J
DATE OF ORDER:
13 AUGUST 2013
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
The amended notice of appeal filed in Court on 8 March 2013 be dismissed with costs.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 352 of 2012
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN: LORAIN RONDA MCELLIGOTT
AppellantAND: PETER GERARD BOYCE
First RespondentALAN WILLIAM CLARKE
Second RespondentSIMONE ELIZABETH PEARCE
Third RespondentGEOFFREY JOHN BARR
Fourth Respondent
JUDGE:
COLLIER J
DATE:
13 AUGUST 2013
PLACE:
BRISBANE
REASONS FOR JUDGMENT
This is an appeal from a decision of a Federal Magistrate (as he then was) in Boyce v McElligott (No 2) [2012] FMCA 909. In that case his Honour made an order sequestrating the estate of the appellant, Ms McElligott, and refused Ms McElligott’s application for a stay pending commencement of proceedings by her in the High Court of Australia. In her amended notice of appeal filed in Court on 8 March 2013 Ms McElligott, who is self-represented, appeals on the following two grounds:
1.Under ss 5(2) and 23 of the Federal Court of Australia Act (1976) the court may set aside an order at any time if the order was obtained by fraud.
2.A matter of fraud should rightfully be heard separately and solely in an independent hearing. Ref Judgements Fraudulently obtained: The forgotten equity Geno [sic] Dal Pont:
As observed by Kirby P in Wenhoorth v Rogers (No 5): 13
Whilst it is true that the Court has a large inherent jurisdiction, so far as challenges to judgments on the ground that they were procured by fraud is concerned, that jurisdiction has been exercised for more than a century by courts of equity, and upon principles built up over many years.
In the same case, Kirby P, in what is arguably the leading modern judgment in the area, outlined the elements which the applicant must establish for equity to set aside a judgment on the ground of fraud. 14 First, as in all actions based on fraud, the particulars of the fraud alleged must be made with specificity. Secondly, the claim must be based on newly discovered facts. Thirdly, it must be shown that responsibility for the fraud lies with the party entitled to the benefit of the judgment. From a procedural viewpoint, such an action is an independent proceeding, where fraud is the sole issue to be resolved. The action in equity takes on none of the characteristics of the proceedings which gave rise to the judgment under impeachment. For this reason, questions of issue estoppel are irrelevant to the equitable proceeding. Similar to other equitable proceedings, it is an action in personam – this is a personal obligation, if fraud is made out, to give up the fruits of unconscionable conduct. Hence, the proper way to invoke the jurisdiction is by separate proceedings commenced in equity. The equitable jurisdiction applies equally to consent orders and judgments.
(Reproduced from the original.)
In ground 2, which is in the nature of a submission rather than a ground of appeal, I understand that the case to which Ms McElligott refers is actually Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 540.
Ms McElligott seeks three orders, namely:
1.An order that the sequestration of the estate of Lorain McElligott be set aside.
2.An order that an act of bankruptcy occurred on 19 April 12 be set aside.
3.That the appointment of the trustee be reversed.
Background facts
Ms McElligott was a client of a law firm which traded under the name Butler McDermott (“the firm”). The four respondents to the appeal are partners of that firm.
It appears that some time ago Ms McElligott and a company of which she was the sole director and shareholder, Westwood Enterprises (Qld) Pty Ltd (“Westwood”), engaged the first respondent, Mr Boyce, to undertake legal work. The firm rendered an account in respect of that work but it was not paid. On 8 July 2009 the respondents served a statutory demand on Westwood under s 459E of the Corporations Act 2001 (Cth) (“Corporations Act”) for the sum of $5,270.62, being the debt claimed. Ms McElligott took the view that the statutory demand was defective because it failed to include a statutory notice, and accordingly no steps were taken to satisfy it.
On 17 August 2009 the respondents filed an application in the Supreme Court of Queensland for the winding up of Westwood based on its deemed insolvency resulting from Westwood’s failure to meet the statutory demand in accordance with s 459C of the Corporations Act.
After a number of adjournments the winding up application came before Daubney J. Following a short hearing in which Ms McElligott sought to raise a genuine dispute as to the nature of the debt within the meaning of s 459H of the Corporations Act, Daubney ordered that Westwood be wound up.
Ms McElligott then brought an application in the Supreme Court of Queensland for an order terminating the liquidation of Westwood. The application was unsuccessful.
The matter came before the Court of Appeal of Queensland in McElligott v Boyce [2011] QCA 117. In that case Ms McElligott sought an extension of time in which to appeal against the order of Daubney J that Westwood be wound up. Her grounds of appeal in that Court included:
· Late Discovery of a serious defect in the statutory demand and service.
·Late discovery of compelling circumstantial evidence leading to linking of delivery of statutory demand on Westwood Enterprises by Peter Boyce at Butler Mcdermott Lawyers with the blacklisting and boycotting actions of ‘all the valuers on the sunshine coast’ against Westwood in 2005 as a result of my complaints to the The Valuers Registration Board of Qld and reports produced by me called Towards Consistency (2002) and a second report called Toward Transparency (2005) in what amounts to perjury and abuse of process and misrepresentation to the court. It is now clear that the statutory demand was bought against Westwood Enterprises by way of a retaliatory action and in order to silence and punish me as a result of my attempts to bring attention to the potential for fraud misdealings and corruption in the valuations and finance industries due to the lack of the transparency and accountability in the relationship between the banks and the valuers.
The “serious defect” referred to in the grounds of appeal was the absence of the following statement from the statutory demand:
A failure to respond to a statutory demand can have very serious consequences for a company. In particular, it may result in the company being placed in liquidation and control of the company passing to the liquidator of the company.
There was no dispute that this statement, which appears in the statutory form in bold type, was absent from the statutory demand served upon Westwood.
The lead judgment of the Court of Appeal was delivered by Muir JA, with whom Chesterman and White JJA agreed.
In relation to the issue of the absence of the warning statement on the statutory demand, Muir JA observed as follows:
[12] A defect in the form of a statutory demand is not necessarily fatal to the validity of a statutory demand in the absence of proof of substantial injustice. The absence of the warning statement has been held not to require the setting aside of a statutory demand. There is no basis for concluding that the absence of the warning statement led to any injustice to Westwood, substantial or otherwise. There is clear evidence that the debt supporting the statutory demand was due and owing. Moreover, the applicant admitted that Westwood had no assets. There was an assertion by the applicant in the course of the hearing at first instance that a bank account existed, but it was not revealed whether that bank account was Westwood’s, the applicant’s or in the name of some other person or entity. Nor was anything said about whether the account was in credit and, if so, to what extent.
[13] The point is made by counsel for the first to fifth respondents that there is no reason to believe that had there been no defect in the statutory demand, matters would have turned out differently. The point is sound. Payment was demanded by Butler McDermott in their letter of 9 June 2009. They made plain their intention to sue and no attempt was made to pay the small amount in question before or after the winding up order was made. It would also appear that, if there was a genuine dispute about the amount claimed, it would only have been in respect of one of the four matters for which accounts had been rendered: the Land Court matters concerning real property valuations.
(Footnotes omitted.)Further, his Honour found in summary:
·There is a strong public interest in the finality of litigation and a party is bound by the conduct of his or her case at first instance (at [15]). Ms McElligott ought not be entitled to raise an argument concerning the defect in the statutory demand which she did not raise before the primary judge.
·Ms McElligott’s claims concerning the “compelling circumstantial evidence” alleged to have been discovered “leading to linking of delivery of statutory demand ... by Peter Boyce ... with the blacklisting and boycotting actions of ‘all the valuers on the sunshine coast’ against Westwood in 2005” had little, if anything, to do with the winding up application (at [19]). The evidence supported a finding that Butler McDermott did the work for which it claimed in the statutory demand. Ms McElligott’s claims concerning the alleged ulterior motive of the firm in seeking to wind up Westwood were fanciful.
·The primary judge gave Ms McElligott appropriate opportunity to make any argument she wished to advance (at [23]).
·Ms McElligott’s submission before the primary judge that she did not understand that the document served on her was a statutory demand was implausible. It was plain from the evidence that the statutory demand was served under cover of a brief letter stating that the enclosed statutory demand and affidavit of the first respondent were served in accordance with s 109X of the Corporations Act (at [23]).
·The primary judge raised with Ms McElligott the absence of evidence concerning Westwood’s solvency. Ms McElligott did not seek to put on any material, and stated that “the company itself ... doesn’t own any assets as such. It owns nothing as such” (at [24]).
·Merely to assert the existence of a “genuine dispute” is not to bring one into existence. Nothing before the primary judge or before this Court cast any doubt on the first respondent’s entitlement to hold the belief that there was no genuine dispute as to the existence and amount of the subject debt (at [29]).
·Ms McElligott had ample time to prepare a case opposing the application for the winding up of Westwood.
The Court of Appeal accordingly dismissed the application for an extension of time to appeal against the order that Westwood be wound up, and ordered costs against Ms McElligott.
Subsequently Ms McElligott sought special leave to appeal the decision of the Court of Appeal to the High Court of Australia, however the application was refused. The Federal Magistrate in the judgment the subject of this appeal observed that Ms McElligott had subsequently brought another application to the High Court – out of time – directed specifically against the costs order against her, and relying upon the same factual matters which had been the subject of determination by Courts already (at [19]). The Federal Magistrate considered that the prospect of success of Ms McElligott in respect of this application was very low (at [20]).
Decision of the Federal Magistrates Court (now the Federal Circuit Court)
The bankruptcy notice issued to Ms McElligott was founded on the costs order made against her by the Court of Appeal in McElligott v Boyce [2011] QCA 117.
The Federal Magistrate explained:
[22] … There was an application to set aside that bankruptcy notice determined by me. The basis of the argument raised by the respondent then is the same as the argument she raises now. I dismissed the application to set aside the bankruptcy notice. The bankruptcy notice has not been complied with and an act of bankruptcy has been committed as of 16 April, 2012.
His Honour continued:
[23] A petitioning creditor who proves an act of bankruptcy is prima facie entitled to the making of a sequestration order and subject to the formalities of s.2 of the Bankruptcy Act 1966 being complied with, a sequestration order ought ordinarily be made. The respondent can seek to demonstrate that there are reasons for which a sequestration order ought not be made. One of them is to demonstrate that there is no genuine debt owed by the respondent debtor to the petitioning creditor and the authorities like Wren v Mahony (1972) 126 CLR 212 – and there are many others – demonstrate that a Court exercising bankruptcy jurisdiction has the power to “go behind” a judgment to determine whether a debt is truly owed.
While noting that the allegations made by Ms McElligott concerning Mr Boyce’s conduct were the subject of a separate application to the Federal Court, his Honour noted that that application did not appear to reveal a cause of action against Mr Boyce. His Honour continued:
[27] To go behind the judgment of a Court of Appeal would be to determine that the costs order made by the Court of Appeal was wrongly made, that there was no reason to make the costs order or a different order as to costs ought to have been made. I am aware that the costs order is the subject of an application to extend time within which to bring an application for special leave to appeal to the High Court. But it seems to me that there is nothing in any of the arguments that have been raised which would suggest that the Court of Appeal’s costs order is wrong. The appeal to the Court of Appeal was unsuccessful. This was ordinary commercial litigation. The ordinary rule is that costs follow the event. The Court of Appeal made such an order and there is nothing to suggest that the order is likely to be set aside, discharged or varied because, for all intents and purposes, the Court of Appeal is the final Court of Appeal in this State subject to applications for special leave.
[28] For all of those reasons I am not satisfied I ought to go behind the judgment of the Court of Appeal. I am satisfied of the formal requirements set out in s.52 of the Bankruptcy Act 1966. I am satisfied that I ought to make an order sequestrating the estate of the respondent, Lorain Ronda McElligott, and I so order.
His Honour then refused to grant Ms McElligott’s application for stay of his orders pending the commencement of proceedings by Ms McElligott in the High Court.
Consideration
Ms McElligott filed a detailed outline of submissions on 11 February 2013. In summary, she contends:
·Fraud must be heard separately and solely in an independent hearing.
·There was a conflict of interest in the respondents because:
o Ms McElligott had publicly called for more transparency and accountability in the valuations industry;
o the second respondent, Mr Clarke, oversaw a clerkship of Mr Terence Boyce, who is the brother of the first respondent and who was involved in the failure of the Boyce Garrick mortgage scheme.
·The prescribed warning statement had been omitted from the statutory demand served on Westwood. Accordingly there has been a false statement of a material fact. Butler McDermott has been involved in similar conduct in the Queensland Civil and Administrative Tribunal.
·The first respondent, Mr Boyce, falsely stated that he did not know of genuine disputes regarding amounts charged to Westwood for work done by the firm. That Mr Boyce is a solicitor compounds this falsehood.
·The decision of the Court of Appeal of Queensland concerning the absence of the prescribed warning statement from the statutory demand sets a dangerous precedent.
·A serious error of law and grave injustice occurred as a result of the misleading and deceptive conduct of Mr Boyce and the misrepresentation provided by the removal of the warning statement from the statutory demand.
·It was clear that the first respondent was seeking to use the winding up proceedings to coerce Westwood into paying an alleged debt without affording Westwood a reasonable opportunity to ascertain or have it established that the debt was properly payable.
In my view Ms McElligott’s grounds of appeal have no merit. Further, her submissions raise matters which are pointless and irrelevant to the claim before me.
Issues which are relevant to the claim before me are:
·It is not in dispute that the Court of Appeal has heard, and made findings on, a number of factual matters also raised before me, including the alleged fraudulent conduct of Mr Boyce, the omission of the warning statement from the statutory demand served on Westwood, alleged conspiracies and cover-ups, whether Ms McElligott had demonstrated the existence of a genuine dispute concerning her indebtedness to the respondents, and the alleged failure of Daubney J to accord Westwood and Ms McElligott a fair hearing at the hearing of the winding up application. The findings of the Court of Appeal in respect of all of these matters were unfavourable to Ms McElligott.
·The Court of Appeal made a costs order against Ms McElligott. The bankruptcy notice served on Ms McElligott was founded on the debt arising from that costs order.
·The order made by the Federal Magistrate sequestrating the estate of Ms McElligott followed the service of the bankruptcy notice, the failure of Ms McElligott to comply with that bankruptcy notice, and the petition of the respondents for a sequestration order.
It is clear that Ms McElligott in the Court below sought to persuade his Honour to go behind the decision of the Court of Appeal of Queensland, and – in substance – purport to set aside the costs order made in the Court of Appeal proceedings. Not surprisingly, his Honour refused on both counts.
In my view the approach of the Federal Magistrate was correct, for the reasons given by his Honour at [27] of the primary judgment, and which I have set out earlier in these reasons. There is no basis upon which his Honour below could find a “genuine dispute” concerning the debt owed by Ms McElligott to the respondents based upon the costs order of the Court of Appeal of Queensland. In McElligott v Boyce [2011] QCA 117 their Honours comprehensively considered and determined issues before the Court relevant to the order made to wind up Westwood. Ms McElligott was unsuccessful in her application to that Court for an extension of time in which to appeal against the winding up order. As a general proposition costs follow the event, and so the Court of Appeal ordered in that case.
Ms McElligott claims fraud perpetrated by the respondents upon her. There is no evidence of fraud in this proceeding.
Ms McElligott’s appeal is misconceived. It ought to be dismissed with costs.
I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. Associate:
Dated: 12 August 2013
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