Miller v Ghosh (No. 2)
[2016] FCCA 1192
•17 May 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MILLER v GHOSH (No. 2) | [2016] FCCA 1192 |
| Catchwords: PRACTICE AND PROCEDURE – Application under r.16.05(2)(a) of the Federal Circuit Court Rules 2001 (Cth) to set aside sequestration order made in the absence of the bankrupt – whether the bankrupt has given a reasonable explanation for not appearing at the hearing – whether there would be any utility in setting aside the sequestration order – sequestration order set aside. |
| Legislation: Bankruptcy Act 1966 (Cth), s. 44, 153B Federal Circuit Court Rules 2001 (Cth), r.16.05(2)(a) |
| Cases cited: Amponsem v Laundy (Exhibition) Pty Ltd [2014] FCCA 2206 Australian Beverage Distributors v Evans and Tate Premium Wines Pty Ltd [2006] NSWSC 560 |
| Applicant: | RODNEY MILLER |
| Respondent: | RATNA GHOSH |
| File Number: | SYG 235 of 2015 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 16 May 2016 |
| Delivered at: | Sydney |
| Delivered on: | 17 May 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr M Maconachie |
| Solicitors for the Applicant: | Higgins & Dix |
| Respondent appeared by telephone. |
ORDERS
Pursuant to r.16.05(2)(a) of the Federal Circuit Court Rules 2001 (Cth) orders 4, 5, and 6 of the orders made on 11 May 2016 are set aside.
The costs of the hearing of 11 May 2016 and the costs of the application to set aside the orders heard on 16 May 2016 are reserved.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 235 of 2015
| RODNEY MILLER |
Applicant
And
| RATNA GHOSH |
Respondent
REASONS FOR JUDGMENT
Introduction
On 11 May 2016 I made an order substituting Mr Rodney Miller as petitioning creditor, and a sequestration order against the estate of Dr Ghosh (Orders).
On 13 May 2016 Dr Ghosh forwarded to the Court for filing an application in a case to set aside the Orders and for other relief. Given the potential urgency of the application, I listed the matter at 2:15pm on 16 May 2016 for the purpose of determining whether to make an order ex parte to abridge the time for service of her application in a case. I arranged for my Associate to give notice of that listing to Mr Miller’s lawyers.
At the hearing at 2:15pm on 16 May 2016, Dr Ghosh appeared by telephone, and Mr Maconachie, barrister, appeared for Mr Miller. I indicated I proposed to list Dr Ghosh’s application to set aside the Orders for hearing on 19 May 2016. Dr Ghosh, however, requested that I hear her application immediately. Mr MacConachie indicated he was in a position to deal with the application. I therefore made an order that Dr Ghosh’s application to set aside the Orders be heard instanter, and I heard submissions.
Orders sought by Dr Ghosh
The principal order Dr Ghosh seeks is an order under r.16.05(2)(a) of the Federal Circuit Court Rules 2001 (Cth). That paragraph empowers the Court to vary or set aside a judgment or order after it has been entered if the order is made in the absence of a party. In the alternative, Dr Ghosh seeks an order for annulment under s.153B of the Bankruptcy Act 1966 (Cth). In the further alternative, Dr Ghosh seeks a stay of the orders I made on 11 May 2016 pending the listing of a new hearing of the application by Mr Miller to be substituted as petitioning creditor. Further, Dr Ghosh seeks an order that the matter be transferred to the Newcastle Registry of the Court.
Grounds on which Dr Ghosh relies
Dr Ghosh relies on a number of grounds for setting aside the Orders. She claims she was not personally served with the creditor’s petition. Dr Ghosh also claims that although she was aware that there had been set down for hearing Mr Miller’s application to be substituted as petitioning creditor, she was not aware that I had also set down for hearing the amended creditor’s petition. Dr Ghosh also submitted she has been unable to obtain counsel, and that she was unable to attend the hearing of 11 May 2016 because she was ill and her son was ill. Dr Ghosh also says the sequestration order has caused her severe financial hardship, and she cannot access funds to pay for her son’s medical expenses, and the staff employed at her medical practice. Finally, Dr Ghosh claims she has a costs order against Mr Miller for $3,300 which Mr Miller has not paid. She is prepared to pay the difference between the $7,000 debt on the basis of which I made the sequestration order, and the $3,300 she claims Mr Miller owes her.
Should the orders be set aside?
Whether or not I should set aside the orders of 11 May 2016 is within the Court’s discretion. There are at least three matters to consider. The first is whether Dr Ghosh has given an adequate explanation for not attending the hearing. The second is whether there would be any utility in my setting aside the orders. That largely turns on whether, if I were to set aside the Orders, Dr Ghosh would have reasonable prospects of resisting an application by Mr Miller to be substituted as petitioning creditor and, if so, his obtaining a sequestration order against her. The third matter is whether any person would suffer any prejudice if I were to set aside the Orders. I first turn to the explanation Dr Ghosh has given for not appearing at the hearing on 11 May 2016.
Explanation for non-appearance
Two of the matters on which Dr Ghosh relies on this application to explain why she did not appear on 11 May 2016 are matters on which she relied for requesting an adjournment in her emails to the Court to which I refer in my reasons for judgment of 11 May 2016. For the reasons I there gave, Dr Ghosh’s claims she was unable to obtain counsel, and the illness of her son are not satisfactory explanations for her not attending the hearing on 11 May 2016. I also do not accept Dr Ghosh’s assertion that she was unaware I had set down for hearing on 11 May 2016 both Mr Miller’s application for substitution and, if substituted, the hearing of the amended creditor’s petition. Dr Ghosh was represented by counsel on 19 April 2016 when I set down Mr Miller’s application for hearing on 11 May 2016. Dr Ghosh said that her counsel had informed her by email that the matter had been set down for hearing, but had not informed her that there was also set down for hearing the amended creditor’s petition for a sequestration order, if I were to order that Mr Miller be substituted. I was not prepared to accept that assertion without evidence of the report her counsel provided to Dr Ghosh. Dr Ghosh provided to the Court the email from her counsel, which I read. I do not accept Dr Ghosh’s counsel did not inform Dr Ghosh of the nature of the matters that on 19 April 2016 I set down for hearing on 11 May 2016.
Utility
There is, however, one matter that has excited my concern. In my reasons for judgment of 11 May 2016, I noted, and proceeded on the basis that, Dr Ghosh had not filed notice of grounds of opposition to Mr Miller’s application for substitution and, if substituted as petitioning creditor, to the making of a sequestration order. My attention was not drawn to, and I myself overlooked, the fact that in November 2015 Dr Ghosh had filed a notice of grounds of opposition which responded not only to the claims of the original petitioning creditor (Baycorp), but also to debts Mr Miller claimed Dr Ghosh owed him. Dr Ghosh raised the following three grounds in relation to Mr Miller:
9.The Supreme Court granted an Order to pay Mr Rodney Miller’s costs by instalment on 4 September 2015, which gives an automatic STAY
10.I have been granted Costs Orders against Mr Rodney Miller on 16 September 2014 by Judge Olsson of the Sydney District Court which predate and exceed the value of his costs orders against me, and which he has NOT paid me to date
11.I have traced the malware and spyware virus attacks and continuous hacking into all of my devices through my modem, back to Mr Rodney Miller, who advertises himself as a “HACKER” on Facebook. This is under current NSW Police Investigation, Event no: . . .
Ground 9 appears to be a reference to an “Instalment Order and Notice” (Instalment Notice) dated 4 September 2015 issued by the Supreme Court of New South Wales in proceedings 2014/00333115. The parties to those proceedings are Dr Ghosh and Mr Miller. The Instalment Notice provides that Dr Ghosh, as judgment debtor, pay to Mr Miller, as judgment creditor, the judgment debt by instalments of $500 per month.
It is unclear from the evidence to what judgment the Instalment Notice relates. The evidence that was read at the hearing of 11 May 2016 shows that Mr Miller has four costs judgments in his favour against Dr Ghosh. There are three judgments entered in the Local Court on 6 August 2014 for $1,444.48, $956, and $5,833.84; and there is a judgment for $7,000 entered in the District Court on 17 September 2014. During the hearing of 11 May 2016, however, counsel for Mr Miller said that the reason only the $7,000 debt was included in the amended creditor’s petition, and not the three Local Court Judgments, is that a stay order was in place in relation to the three Local Court judgments. This may suggest that Mr Miller accepts that the Instalment Notice relates to the three Local Court judgments. It is unlikely, however, that the Instalment Notice relates to the $7,000 District Court judgment. Dr Ghosh applied for an order that she pay that judgment by instalments, but that application was dismissed on 28 August 2015.
I find Dr Ghosh has no reasonable prospects of establishing that the Instalment Notice applies to the $7,000 District Court judgment. Thus, had I during the hearing of 11 May 2016 considered ground 9 of Dr Ghosh’s grounds of opposition, I would have rejected it on the ground there is no evidence that the Instalment Notice applied to that judgment.
Ground 10 raises different considerations. There is no evidence of the costs order made on 16 September 2014 referred to in that ground. Mr Miller accepts, however, that on that day a costs order in the sum of $3,300 was made in favour of Dr Ghosh against Mr Miller. I understand from Dr Ghosh’s written submissions that she accepts that the amount of the costs ordered in her favour is $3,300. This gives rise to the issue of whether it is reasonably arguable that Dr Ghosh could rely on the $3,300 costs order in her favour to reduce the $7,000 debt on the basis of which Mr Miller applied for, and obtained, the sequestration order on 11 May 2016.
In my opinion, there is such a reasonably arguable case; and such case lies in the law of set-off as it applies to judgments. I briefly considered the law relating to the setting-off of judgments in Amponsem v Laundy (Exhibition) Pty Ltd where I said:[1]
[1] [2014] FCCA 2206 at [146]-[149]
[146] There is another species of set-off that may be relevant to these proceedings; and that is the setting-off of judgments. A foundation authority is the judgment of the Court of King’s Bench in Mitchell v Oldfield.[2] In that case the plaintiff recovered a judgment against the defendant. The defendant, however, in another action, had recovered a judgment against the plaintiff and another person. The defendant obtained a rule to show cause why the debt and costs in the other proceedings should not be set-off against the judgment the plaintiff obtained against the defendant. The Court made the rule absolute holding that the judgment in the other proceeding should be set-off against the judgment the plaintiff had recovered against the defendant. Lord Kenyon said:[3]
[2] [1791] EngR 1260; (1791) 4 TR 123; 100 ER 929
[3] At 100 ER page 929
[T]his did not depend on the Statutes of Set-off; but on the general jurisdiction of the Court over the suitors in it: that it was an equitable part of their jurisdiction, and had been frequently exercised . . . .
[147] The jurisdiction to set-off judgments has been recognised in cases after [Mitchell v Oldfield]. For example, in Edwards v Hope Brett MR said:[4]
The Courts . . . always had an equitable jurisdiction, for the purpose of preventing absurdity or injustice in cases where there had been judgments for damages between the same parties in distinct actions, to set-off one judgment against the other and to allow execution to issue in respect of the balance only.
[148] And in Australian Beverage Distributors v Evans and Tate Premium Wines Pty Ltd White J, in speaking of the power to set-off judgments for costs, said:[5]
[S]et-off of judgments for costs in different actions and in different courts has long been allowed, as has the set-off of judgments for costs against judgments for debt or damages. Such set-offs do not depend upon the statutes of set-off, or the general equitable jurisdiction, but on the control a court exercises over its own proceedings.
[4] (1885) 14 QBD 922 at page 926
[5] [2006] NSWSC 560 at [68].
Counsel for Mr Miller submitted that the $3,300 should be set-off against the three Local Court debts owed by Dr Ghosh to Mr Miller because those debts were created before the $7,000 debt was created. Counsel relied by analogy on the rule in Clayton’s case[6] which is authority for the proposition that the first sum paid into a bank account is the first sum drawn out. The analogy is a weak one, however, because there is no current account between Mr Miller and Dr Ghosh. In any event, the arguably critical fact before me is that Dr Ghosh has relied on the $3,300 costs order in her favour in her notice of grounds of opposition to the creditor’s petition. The only debt on which Mr Miller relies in the amended creditor’s petition is the $7,000 District Court debt. Thus, by raising in her notice of grounds of opposition the $3,300 costs order in her favour, Dr Ghosh arguably seeks to rely on the $3,300 debt in her favour as an answer to the $7,000 debt Mr Miller claims in the amended creditor’s petition.
[6] Devaynes v Noble; Clayton’s case (1816) 1 Mer 529; 35 ER 767
In my opinion, Dr Ghosh has an arguable case that the costs order for $3,300 in her favour is available to be set-off against the $7,000 debt claimed in the amended creditor’s petition. If that is so, the debt of $7,000 claimed in the amended creditor’s petition is liable to be reduced to $3,700. That is less than the minimum debt of $5,000 s.44 of the Act requires be owed to a creditor before a creditor’s petition can be presented against the debtor. That, in turn, would be a reason for not making a sequestration order.
It is quite likely that if I were to set aside the Orders Mr Miller would seek to again amend the creditor’s petition to include the Local Court judgments. He has sworn an affidavit verifying those debts. It could be said that if he is given leave to do that, the sum of the debts will exceed the $5,000 specified in s.44 of the Act, even if the $3,300 costs order against Mr Miller is set-off, and that it is, therefore, inevitable that a sequestration will be made. That may well be so, but there are two matters to note.
First, the current amended creditor’s petition does not include the Local Court debts. It would be irregular for the Court to allow a sequestration order made on the basis of a debt specified in the creditor’s petition to stand because the debtor may owe the creditor debts not included in the creditor’s petition. Second, the evidence is unclear about the extent to which the Local Court debts are currently due and payable. As I have already noted, at the hearing of 11 May 2016 counsel for Mr Miller said that the Local Court judgments were stayed at the time the amended creditor’s petition was prepared. Although there is evidence that suggests the amended creditor’s petition was prepared by 13 April 2016, there is no evidence about when the stay orders were made, or the basis on which they were made or, if made, whether the stay has been lifted and, if so, when the stay was lifted. Given the serious consequences of a sequestration order being made against a person, the Court may not be prepared to make a sequestration order on the basis of the Local Court judgments unless evidence of these matters are before the Court.
Finally, I turn to ground 11 stated in Dr Ghosh’s notice of grounds of opposition. That does not disclose any arguable ground for resisting the making of a sequestration order.
Prejudice
It is necessary to consider the interests of the trustee in bankruptcy that was appointed as a result of the Orders. Mr Maconachie informed me that his instructing solicitor had notified the trustee of Dr Ghosh’s application. The trustee has not applied to be heard on the application. Given the short period that has passed after I made the Orders, and the trustee’s not having applied to be heard on Dr Ghosh’s application, I am satisfied the trustee will suffer no prejudice if I were to set aside the Orders.
Other matters
There is one other matter that weighs in favour of my setting aside the Orders. As I have already noted, I made the Orders on the express assumption that Dr Ghosh had not filed any notice of grounds of opposition. I based that assumption on the fact that on 19 April 2016 I had ordered that Dr Ghosh file and served a notice of grounds of opposition both in relation to Mr Miller’s application to be substituted and, if Mr Miller were to be substituted, in relation to Mr Miller’s amended creditor’s petition. I made that order, however, without realising that Dr Ghosh had already included in her notice of grounds of opposition to the creditor’s petition as originally filed grounds that referred to Mr Miller’s debts. I only appreciated this fact during the hearing on 16 May 2016.
This illustrates the potential difficulties in litigation where one of the parties is not legally represented. It is of course not the duty of the party who is legally represented actively to assist the unrepresented party; and it is certainly not the function of the Court to make out a case for an unrepresented party. Nevertheless, it is at the very least prudent, both for the lawyers who appear for the legally represented party, and for the Court, to be astute to the existence of matters that are reasonably apparent on the materials before the Court that are relevant to the determination of the issues before the Court. The need for prudence is even greater where, as in this case, a hearing is conducted in the absence of the unrepresented party. That Dr Ghosh had raised three grounds in opposition to Mr Miller’s debts was apparent on an important document that was before the Court. These were grounds that ought to have been drawn to the Court’s attention at the hearing of 11 May 2016, and are in any event matters with which, of my own motion, I ought to have acquainted myself before I delivered my reasons for judgment on 11 May 2016.
What I say in the previous paragraph is not intended to be a criticism of any one. The matter has had a complex procedural history, and there were many matters that had to be considered at the hearing of 11 May 2016. The complexity of the matters was enhanced by Dr Ghosh’s sending communications to the Court without Dr Ghosh appearing before the Court to explain the matters she had raised in those communications. Nevertheless, it is a matter that weighs in favour of setting aside the Orders that grounds relevant to the making of the sequestration order were before the Court, but these were not considered by me. Given I have found that one of the grounds on which Dr Ghosh relies in her grounds of opposition is arguable, Dr Ghosh should be given the opportunity to have that ground heard.
Application for transfer
I am not sure that the Court at its Newcastle Registry has the capacity to hear matters in bankruptcy. In any event, on the material that is before me, I am not satisfied, on the matters asserted by Dr Ghosh, that it would be appropriate to have the matter transferred to another registry of the Court.
Relief
I do not propose to set aside all of the Orders. I propose that the orders that Mr Miller be substituted as petitioning creditor and granting Mr Miller leave to rely on the amended creditor’s petition stand. I propose, however, to set aside the sequestration order, the order for costs, and the order appointing Mr Newton as trustee. I also propose to list the matter for directions. I will also reserve the question of the costs, both of the hearing of 11 May 2016 and the hearing of 16 May 2016.
The effect of the orders, when made, will be that there will be on foot an amended creditor’s petition based on the $7,000 District Court debt and, at the very least, there will be an issue whether, having regard to the $3,300 costs order that Dr Ghosh has against Mr Miller, a sequestration order should be made against the estate of Dr Ghosh.
I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Date: 17 May 2016
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