Morton v TRKULJA and Anor (No.1)

[2004] FMCA 186

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MORTON v TRKULJA & ANOR (No.1) [2004] FMCA 186

PRACTICE AND PROCEDURE – BANKRUPTCY – Application to reopen case to call fresh evidence – applicant a trustee in bankruptcy – considerations relevant to application – whether respondents prejudiced – whether in the interests of justice to our case to be reopened.

Bankruptcy Act 1966, ss.77C, 130

Smith v New South Wales Bar Association (1992) 176 CLR 256
Watson v Metropolitan (Perth) Passenger Transport Trust [1965] WAR 88
Londish v Gulf Pacific Pty Ltd (1993) 45 FCR 128
Urban Transport Authority v Nweiser (1992) 28 NSWLR 471

Applicant: ROBERT WILLIAM MORTON (AS TRUSTEE OF THE PROPERTY OF MICHAEL TRKULJA, A BANKRUPT)

First Respondent: MILKA TRKULJA

Second Respondent: MIRA TODORAN

File No: MZ 657 of 2002

Delivered on: 24 March 2004

Delivered at: Melbourne

Hearing date: 10 March 2004

Judgment of: Phipps FM

REPRESENTATION

Counsel for the Applicant: Mr Percy

Solicitors for the Applicant: John Curtain & Associates

Counsel for the Respondent’s: Mr Broadfoot

Solicitors for the Respondent’s: Allan McMonnies

ORDERS

1. That subject to any objections to admissibility the applicant have leave to reopen his case and adduce the evidence described in paragraphs 3-6 and 10-12 (including any similar affidavits by the second respondent to that described in these paragraphs) of his affidavit sworn 3 February 2004 and paragraphs 6-17 of his affidavit sworn 19th February 2004.

2. That the applicant have leave to recall each of the respondents for the purpose only of cross-examining them on the further evidence called pursuant to paragraph 1.

3. That costs be reserved.

4. That the Court certifies that it was reasonable to employ an advocate.

5. That the hearing be adjourned to a date to be fixed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MZ 657 of 2002

ROBERT WILLIAM MORTON (AS TRUSTEE OF THE PROPERTY OF MICHAEL TRKULJA, A BANKRUPT)

Applicant

And

MILKA TRKULJA

First Respondent

And

MIRA TODORAN

Second Respondent

REASONS FOR JUDGMENT

1. The applicant has applied to reopen his case and call additional evidence. 

2. The applicant is the trustee in bankruptcy of Michael Trkulja.  The respondents are his mother and sister.  The applicant alleges that in 1986 the second respondent purchased a house in Spotswood, that the house was sold and the proceeds applied to the purchase of a property in the name of both respondents in West Melbourne.  The applicant alleges that the respondents hold the West Melbourne property as trustees for the bankrupt.

3. At the hearing the applicant relied on evidence of payments which he submitted were made by the bankrupt towards repayment of the loan given to the respondents by the Commonwealth bank. The Commonwealth bank holds a mortgage over the property.  The fresh evidence which the applicant wishes to lead is as follows:

   i)Two applications by the bankrupt to the ANZ bank, one for a credit card and the second, to increase the credit card limit, and the history of transactions on those credit cards. Both applications give the West Melbourne property as the bankrupt’s address and gives the period he has lived there.  Both forms have provision for residential status and value of property.  In one of the forms the option "home owned" is ticked and the other options crossed out.  In the other form no selection of the options has been made. A value of the property is given at $420,000 in the original application and  $450,000 in the credit limit increase application.  For "amount owing" on the property one form says "Nil" and the other has a line indicating the same thing.  Both documents came into existence prior to the hearing.  The applicant learned of their existence subsequent to the hearing.

   ii)Two affidavits filed by the second respondent in the County Court of Victoria.  One only is referred to in the applicant's affidavit.  I was informed of the second by Counsel for the applicant.  He said that it had only just been obtained and that the reference to the West Melbourne property was the same as the first affidavit.  A judgment has been obtained by a third party against the second respondent in the County Court.  She has made two applications to pay the debt by instalments.  In the affidavits in support of both she has referred to the West Melbourne property.  She has said that the property is in joint names with her mother who resides in it and then has included a statement, "Although I am registered as part owner it is my mother’s property and she lives in it.  I cannot sell my share or find another loan.  My mother is a 75 years pensioner."  Both these affidavits have come into existence since the hearing.

   iii)Evidence of four deposits into the home loan account for the West Melbourne property, three made prior to the hearing and one after the hearing. Three are cash deposits, and one is a cheque deposit. In his affidavits in support the applicant gives evidence of investigations he has made about the source of funds for these deposits. The cheque is from a real estate agency, Central Real Estate and a search has shown that that is a corporation, Central Real Estate Pty Ltd, and that a Mr Greg Super is its sole director. Mr Super has told the applicant that the source of funds was over payment of rent by the bankrupt for his business premises at 138 A’ Beckett Street and that the bankrupt told him to pay the amount into the home loan account. Mr Super sent the applicant a copy of his instructions and a completed home loan repayment slip bearing the account name of "Ms M Todoran" and the account number of the West Melbourne home loan account. The applicant said that he recognised the bankrupt’s handwriting which had completed the repayment slip with the date 26 June 2003 for sum of $2100. The repayment slip was signed by the bankrupt and in the bankrupt's handwriting was written "GRAG (sic) PAY TO M. TODORAN A\C”. By the use of a notice under s.77C of the Bankruptcy Act 1966, the applicant has obtained from the Commonwealth bank copies of both respondents’ bank statements.  The source of funds for the cash deposits is not in those bank statements.  Some of the bank statements were obtained after the hearing.

   iv)The applicant has inspected the immigration file of the second respondent at the offices of the Department of Immigration and Multicultural Affairs.  Amongst that file he found a "Supplementary Information Sheet" dated 9 February 1987 apparently signed by the second respondent.  In her answer to question 11 on the information sheet "what funds would you had to support yourself if an extension of status is granted (give details of your funds...)".  The second respondent listed "$5,000 as travellers cheques" and "Full Board & Support by My Brother".

4. The High Court considered the question of reopening a case in Smith v New South Wales Bar Association (1992) 176 CLR 256. Brennan, Dawson, Toohey and Gaudron JJ said at 266 - 267;

   31. The question whether the appellant should have been allowed to call further evidence falls for answer in a context in which there was a re-opening of the central issue in the case. Different reasons were given by Samuels A.P. and by Mahoney J.A. for not allowing the appellant to produce further evidence. Samuels A.P. said that he would not take the further evidence into account "because it is all material which was available to be tendered when the original application was before this Court". On the other hand, Mahoney J.A. (though he apparently had regard to the affidavit of Dr Gabrael) excluded the further evidence because it provided "no basis for interfering with (the earlier decision)". Meagher J.A. contented himself with the statement that the application to "consider additional evidence ... must fail".

   32. It is again necessary to distinguish between the considerations which may bear on a decision to re-open and the processes involved in reconsideration once a case has been re-opened. If an application is made to re-open on the basis that new or additional evidence is available, it will be relevant, at that stage, to enquire why the evidence was not called at the hearing. If there was a deliberate decision not to call it, ordinarily that will tell decisively against the application (7) Barker v. Furlong (1891) 2 Ch 172, at p 184; Hughes v. Hill (1937) SASR 285, at p 287. But assuming that that hurdle is passed, different considerations may apply depending on whether the case is simply one in which the hearing is complete (8) As, for example, in Watson v. Metropolitan (Perth) Passenger Transport Trust (1965) WAR 88; Murray v. Figge (1974) 4 ALR 612. or one in which reasons for judgment have been delivered (9) As, for example, in In re Scott and Alvarez's Contract (1895) 1 Ch 596. It is difficult to see why, in the former situation, the primary consideration should not be that of embarrassment or prejudice to the other side (10) As suggested by Sheppard J. in Joyce v. G.I.O. (N.S.W.) reported in Ritchie's, op cit, vol.2, pp 8551-8552. But cf. Watson v. Metropolitan (Perth) Passenger Transport Trust; Murray v. Figge; Hughes v. Hill. In the latter situation the appeal rules relating to fresh evidence may provide a useful guide as to the manner in which the discretion to re-open should be exercised. But those considerations bearing on re-opening are not decisive of the question whether, a matter having been re-opened by reason of error, further evidence can be called.

   33. Not every case involving error will invite further evidence: it will depend entirely on the issue that is opened up. If the issue is one that invites further evidence, then, prima facie and subject to the ordinary rules of evidence, that evidence should be allowed. We say prima facie because there may be situations in which the particular evidence involved would cause embarrassment or prejudice such that, in the circumstances, it would be unfair to allow it.

5. A more stringent test was adopted by Wolff CJ in Watson v Metropolitan (Perth) Passenger Transport Trust [1965] WAR 88 at 99.  Watson is referred to in the extract cited above from Smith.  In Londish v Gulf Pacific Pty Ltd (1993) 45 FCR 128 a Full Court of the Federal Court (Neaves, Burchett and Ryan JJ) at 139 noted that the views of Wolff CJ were strictly obiter and that the joint judgment in Smith had rejected the stringent test.

6. This is not a case where there has been a deliberate decision not to call the evidence.  It is a case where the hearing is complete and judgment has not been given.  It is therefore a situation where the joint judgment in Smith says that it is difficult to see why the primary consideration should not be that of embarrassment or prejudice to the respondents.  In Urban Transport Authority v Nweiser (1992) 28 NSWLR 471 Clarke JA said at 478:

   The principle which should guide the Court in determining whether to grant an application for leave to reopen is whether the interests of justice are better served by allowing or rejecting the application as the case may be.

7. In the joint judgment in Smith it was said that it was necessary to distinguish between the considerations which may bear on a decision to reopen and the processes involved in reconsideration once a case has been reopened.  Considerations may apply about the admissibility of some of the proposed new evidence if leave to reopen is given.  For instance, there may be an issue about the credit card applications made by the bankrupt.  He was not called to give evidence.  Whether the apparent statements in the credit card applications that the bankrupt owned the property are admissible may be a matter of debate.  Even if they are not admissible in their own right there is then the additional consideration of whether the respondents or either of them can be recalled and cross-examined about the credit card applications.  If I otherwise consider that leave should be given to reopen and call the additional evidence then I consider the questions of admissibility are to be dealt with once the case has been reopened.

8. All of the fresh evidence which the applicant seeks to call is documentary evidence, supplemented by oral evidence to establish the identity of the documents and put them in context.  The documents are either the second respondent’s documents (the County Court affidavits) or the documents produced by the Commonwealth Bank and Mr. Super.  The use to which the applicant seeks to put the documents is set out in his affidavits.  There can be no embarrassment or prejudice to the respondents.  They and their legal advisers will be able to obtain access to the documents and inspect them prior to the resumed hearing.  They know how the applicant says they may be relevant to his case.  They may incur costs additional to those which might have been incurred if the evidence had been called at the original hearing.  If the circumstances justify it, they can be compensated by an order for costs no matter what the ultimate result in the litigation.

9. If it is relevant, I do not consider that the failure to discover the evidence prior to the hearing should prevent the applicant from reopening his case.  The second respondent’s County Court affidavits came into existence after the hearing and so could not have been discovered with.  The applicant's affidavit in support of the application to reopen says that Commonwealth Bank documents were subpoenaed for the hearing but not all documents at the date of the hearing were produced.  Subsequent events led the applicant on a chain of inquiry which led to his discovering the additional documents.

10. The applicant is a trustee in bankruptcy.  He has no personal knowledge of the events and it is reasonable to infer that he has not had the cooperation of the bankrupt.  The trustee has had to conduct his own inquiries and has been dependent upon obtaining information from third parties.  It could be said that he should not have proceeded with the trial of the proceeding in the absence of complete production of documents by the Commonwealth Bank in response to the subpoena.  That may have meant an adjournment and costs.  A significant amount of work had already been carried out by the trustee in investigation, as the evidence showed.  Nothing suggests a lack of sufficient diligence by the applicant.  Not all documents subpoenaed were produced and plainly the applicant made a decision not to incur further cost and to proceed with the hearing.  An adjournment might not have been granted in any event.

11. An explanation for the failure to discover the evidence prior to the hearing is not a necessary precondition for an application to reopen to succeed.  The fresh evidence may assist in the determination of the question of beneficial ownership of the West Melbourne property. 

    
    

    I am satisfied that the interests of justice are better served by allowing the applicant to call the further evidence.  I am satisfied that there is not embarrassment or prejudice to the respondents that cannot be compensated by an order for costs.

12. The applicant swore two affidavits in support of the application one on 3 February 2004 and the other on 19 February 2004. In the first affidavit evidence of a search conducted pursuant to a search warrant issued under s.130 of the Bankruptcy Act 1966 is given.  Counsel for the applicant did not seek to have evidence of what occurred during the search included in the application to reopen.

13. The orders that I will make are that subject to any objections to admissibility, the applicant have leave to reopen his case and produce the evidence described in paragraphs 3-6 and 10-12 (including any similar affidavits by the second respondent to that described in these paragraphs) of his affidavit’s sworn 3 February 2004 and 6-17 of his affidavit’s sworn 19th February 2004 and to recall each of the respondents for the purpose only of cross-examining them on the further evidence called.

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Phipps FM

Associate:  

Date: