Muller v Combis

[2005] FCAFC 150

FEDERAL COURT OF AUSTRALIA

Muller v Combis [2005] FCAFC 150

JEFFREY ALAN MULLER AND LYNETTE ANNE MULLER V NICK COMBIS

NO QUD 10 OF 2005

SPENDER, KIEFEL and DOWSETT JJ
4 AUGUST 2005
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD 010 OF 2005

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	JEFFREY ALAN MULLER AND LYNETTE ANNE MULLER APPELLANTS
AND:	NICK COMBIS RESPONDENT
JUDGES:	SPENDER, KIEFEL and DOWSETT JJ
DATE OF ORDER:	4 AUGUST 2005
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1.The appeal be dismissed.

2.The appellants pay the respondent’s costs, to be taxed if not agreed.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD 010 OF 2005

BETWEEN:	JEFFREY ALAN MULLER AND LYNETTE ANNE MULLER APPELLANTS
AND:	NICK COMBIS RESPONDENT

JUDGES:	SPENDER, KIEFEL and DOWSETT JJ
DATE:	4 AUGUST 2005
PLACE:	BRISBANE

REASONS FOR JUDGMENT

THE COURT:

1. These are the reasons of the Court for dismissing the appeal by Jeffrey Alan Muller and Lynette Anne Muller against the orders of Cooper J on 21 December 2004, whereby his Honour, in each case, dismissed the applications for annulment and ordered the applicants pay the costs of the respondent, including reserved costs, to be taxed if not agreed.

2. The appeal to the Full Court of the Federal Court has been attended by serious administrative difficulties.  Amongst other things, when the appeal was called on today the appeal books, in accordance with the draft settled index for the appeal books, were not produced, or have not been produced to the Court.

3. The appellants, for their part, produced a document which essentially consisted of a document headed Amended Notice of Appeal containing amended grounds of appeal, and a copy of an affidavit which purports to be by both appellants but which in fact was signed only by the male appellant.  This document was in evidence before Cooper J. 

4. That was only part of the material before the primary judge.  It is nonetheless relevant to the disposition of this appeal, because it is the material on which the appellants wish to rely in support of their claims that his Honour erred in the conclusions that he reached. 

5. In respect of the amended grounds of appeal, it appears that the appellants were advised by a Registrar to file and serve a document by a certain date, and that was attended to by their then solicitors. 

6. There is nothing to suggest that there was leave granted by the Court to rely on those amended grounds on this appeal, but in the events that have happened, the respondent does not object to our granting the appellants leave to rely on the grounds contained in their amended notice of appeal.  Those are the grounds which are addressed in the written submissions on behalf of the respondent, who is the trustee of the estates of each of the appellants. 

7. The difficulty for the appellants on this appeal flows from the fact that they are unrepresented, and appear not to appreciate that, for an appeal to be successful, there has to be demonstrated error on the part of the primary judge.  The mere assertion that the primary judge was in error in some of his findings does not establish that there is appealable error. 

8. His Honour, in respect of the application for an annulment, in reasons for judgment published on 21 December 2004, dealt with the merits of the application.  Objection is taken by the appellants to his Honour declining to grant an adjournment which was applied for in the course of the trial on 20 December 2004, the day prior to the publication of his final reasons for judgment.  The primary judge addressed the merits of the application for an annulment.  In par 1 of those reasons, his Honour indicated that the grounds relied upon were, essentially:

   ‘1.That the applicants were unaware of the bankruptcy proceedings and were not served with the relevant documents; and

   2.That they were both, as at the date of the making of the sequestration orders, solvent.’

9. In respect of the first point, the service point, his Honour pointed out that on an application to review the making of sequestration orders by a Registrar (to Federal Magistrate Baumann), the learned Federal Magistrate found that substituted service was good and proper service, and he dismissed the application.  He made sequestration orders against each of the appellants.  There was no appeal from that determination. 

10. It follows that the issue of service was not a matter that could be a live issue before Cooper J. 

11. The second ground for the annulment relied upon was that they each asserted that they were, at the date of the making of the sequestration order, solvent.

12. His Honour’s reasons at pars 6 and following dealt with the question of solvency.  Cooper J said:

    ‘6.… The applicants have the onus of satisfying the Court that they could on 1 March 2002 pay their creditors as and when those creditors’ debts fell due for payment in the normal course of affairs.  The Court on such an occasion as this considers the assets, whether or not they could be turned quickly or reasonably to account and whether funds could be raised by borrowing against those assets in order to discharge the proper debts owed by the debtors within a reasonable time.  The case mounted by the applicants essentially revolves around parcels of shares in two United States corporations which hold or were claimed to hold valuable technology.

    7.The material does not show that it was possible to turn to account within a reasonable time any of the shareholding in a way sufficient to discharge the creditors.  I simply reject the evidence of the male applicant that he was unaware that his creditors were pressing.  The statement of affairs ultimately filed acknowledges some as creditors but generally speaking it is absolutely devoid of full and proper detail as to the state of the creditors.  The trustee in his report identifies that as a minimum at the date of bankruptcy there were creditors in an amount of $34,031,760.69 in respect of which proofs of debt of $49,378,601.42 have been lodged.

    8.Additionally that amount does not include a claim by the Deputy Commissioner of Taxation in respect of outstanding income tax and penalties nor claims by MBA Mortgages Pty Ltd or a claim by Kevin Charles Hart or a claim by Parkdale Management Pty Ltd.  Since preparing the report, a proof of debt has been lodged by the Deputy Commissioner of Taxation in the sum of $47,519,281.10.’

13. The central finding by his Honour in that part of his reasons is that which appears in the first sentence of par 7, namely:

    ‘The material does not show that it was possible to turn to account within a reasonable time any of the shareholding in a way sufficient to discharge the creditors.’

14. Then in par 9 of his Honour’s reasons, his Honour commented in respect of a creditor, the National Australia Bank which, after realisation of security, was a creditor in the amount of $1.509 million:

    ‘… No credible explanation has been given as to why the debt of the bank was not discharged.  What the files show is that there is no credit available from that bank to the applicants and that the assets which they had secured to that bank were not available for the purpose of raising any further funds.’

15. In par 11 he said:

    ‘Irrespective of what the alleged assets of the applicants were worth - and that is a matter which was not being [pursued] before me, the failure to deal with these pressing creditors in any way indicates to me that the applicants did not have the ability to raise the funds to discharge their debts as and when they fell due on 1 March 2002.  In those circumstances they fail to make out the ground they rely upon in order to have the bankruptcy or sequestration orders annulled.  That is sufficient to see the application dismissed.’

16. The appellants, in their written submissions to this Court, make the claim:

    ‘We were technically solvent at the time of the sequestration order because our easily realised assets were much greater than the sum of $140,996.82 sought under the Sequestration Order of Balcara Pty Ltd.’

17. Balcara Pty Ltd was the petitioning creditor.  The appellants’ claim in the written submissions is not the test of solvency. 

18. There have been no submissions directed to demonstrating that the material before Cooper J established that it was possible to turn to account, within a reasonable time, any of the shareholding in a way sufficient to discharge the creditors, nor to providing a basis to challenge the correctness of the inference drawn by his Honour that the failure to deal with these pressing creditors in any way indicated that the applicants did not have the ability to raise the funds to discharge their debts as and when they fell due on 1 March 2002.

19. The fact that the appellants disagree with the findings by the primary judge and assert that they are incorrect does not establish that the findings by the primary judge were wrong, or provide a basis for a successful appeal. 

20. There was material before the primary judge sufficient to support the findings which he made.  Those findings are fatal to the application for annulment.  Quite independently of the correctness or otherwise of the refusal of an adjournment, in our opinion no appealable error has been demonstrated in the reasons for judgment of Cooper J on the merits.  The appeals should be dismissed, with costs. 

I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Spender, Kiefel and Dowsett JJ.

Associate:

Dated:            15 August 2005

Counsel for the Appellants:	The appellants appeared on their own behalf
Counsel for the Respondent:	Mr Paul McQuade
Solicitor for the Respondent:	James Conomos Lawyers
Date of Hearing:	4 August 2005
Date of Judgment:	4 August 2005