Murch, in the matter of Annesley v Annesley
[2022] FedCFamC2G 435
•2 June 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Murch, in the matter of Annesley v Annesley [2022] FedCFamC2G 435
File number(s): MLG 306 of 2022 Judgment of: JUDGE A KELLY Date of judgment: 2 June 2022 Catchwords: BANKRUPTCY – Application for review of registrar’s decision to make sequestration order against estate of respondent – lengthy acrimonious litigation between parties culminating in orders for costs against respondent – whether petitioner has established elements required for making of order – solvency – whether respondent has shown cause against making of order – decision of registrar affirmed. Legislation: Bankruptcy Act 1966 (Cth), ss 40, 41, 43, 44, 52, 104, 109
Competition and Consumer Act 2010 (Cth), Sch 2 ss 52, 70
Federal Circuit and Family Court of Australia Act 2021 (Cth), ss 256
Bankruptcy Regulations 2021 (Cth), reg 102
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth), r 4.05
Vexatious Proceedings Act 2014 (Vic)
Cases cited: Akers as a joint foreign representative of Saad Investments Company Limited (in Official Liquidation) v Deputy Commissioner of Taxation (2014) 223 FCR 8
Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137
All Class Insurance Brokers Pty Ltd (In Liquidation) v Chubb Insurance Australia Ltd (No 2) (2021) ACSR 78
Bechara v Bates (2021) 286 FCR 166
Bechara v Bates (No 2) [2020] FCA 659
Boensch v Somerville Legal [2021] FCAFC 79
Civic Video Pty Ltd v Warburton (2013) 216 FCR 61
Commonwealth Bank of Australia v Doggett [2017] FCA 1176
Culleton v Balwyn Nominees Pty Ltd (2017) 343 ALR 632
Culleton v Balwyn Nominees Pty Ltd (No 2) [2017] FCAFC 12
Deputy Commissioner of Taxation v Cumins (2008) 6 ABC(NS) 12
Harris v Caladine (1991) 172 CLR 84
Kleinwort Benson Australia Pty Ltd v Crowl (1988) 165 CLR 71
Li v Wu [2020] FCA 776
Murch & Ors v David Paul Annesley & Ors [2020] VSC 837
Port of Melbourne Authority v Anshun (1981) 147 CLR 589
R.G. Murch Nominees Pty Ltd v Paul David Annesley & Ors [2019] VSC 107
Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132
Re Sarina; Ex parte Wollondilly Shire Council of Wollondilly (1980) 43 FLR 163
Robert George Murch & Ors v David Paul Annesley & Ors [2021] VSCA 83
Robert George Murch & Ors v David Paul Annesley & Ors [2021] VSCA 126
Rusca Bros Services Pty Ltd v DLaw Pty Ltd, in the matter of Rusca Bros Services Pty Ltd [2019] FCA 562
Sarina v Wollondilly Shire Council (1980) 48 FLR 372
Stratton v Bowles (No 2) (2015) 12 ABC(NS) 404
Toyota Finance Australia Ltd v Berro [2022] FCA 497
White v Overland (2001) 67 ALD 731
Williams v Spautz (1992) 174 CLR 509
Worrell As Trustee of the Estate of John Martin Wedgwood, A Bankrupt v Power and Power (1993) 46 FCR 214
Wren v Mahony (1972) 126 CLR 212
Division: Division 2 General Federal Law Number of paragraphs: 108 Date of hearing: 31 May 2022 Place: Melbourne Solicitor-advocate for applicants: Mr. John Dunne Solicitor for the Applicants: John Dunne & Associates First Respondent: In person Second Respondent: No appearance ORDERS
MLG 306 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF PAUL DAVID ANNESLEY AND SHARLENE PHYLIS ANNESLEY
BETWEEN: ROBERT GEORGE MURCH
First Applicant
R G MURCH NOMINEES PTY LTD
Second Applicant
AND: PAUL DAVID ANNESLEY
First Respondent
SHARLENE PHYLIS ANNESLEY
Second Respondent
ORDER MADE BY:
JUDGE A KELLY
DATE OF ORDER:
2 JUNE 2022
THE COURT ORDERS THAT:
1.Pursuant to ss 202-203 of the Federal Circuit and Family Court of Australia Act2021 (Cth), direct that the parties be allowed to appear and to make submissions before the Court by video and audio link.
2.The application for review filed on 27 April 2022 be dismissed.
3.The order made on 21 April 2022 be affirmed.
4.The petitioners’ costs of the application for review (including reserved costs), be taxed and paid out of the bankrupt estate of the first respondent in accordance with s 109(1)(a) of the Bankruptcy Act 1966 (Cth).
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
KELLY A, J
Introduction
These reasons for judgment explain why orders are made dismissing an application for review of a decision by a registrar who, on 21 April 2022, made an order for the sequestration of the respondent’s estate pursuant to ss 43 and 52 of the Bankruptcy Act 1966 (Cth) (Act). Orders are also made dismissing the debtor’s application pursuant to s 256(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) for a review of that exercise of power.
Upon this de novo review, the petitioners, Mr Robert George Murch and RG Murch Nominees Pty Ltd (collectively, the petitioners) established a prima facie entitlement to the making of a sequestration order and, despite the opportunity afforded to him to do so, the first respondent, Mr Paul Annesley (the debtor), has not demonstrated his solvency. Nor has he demonstrated some other sufficient cause against the making of that order. In light of the parties’ protracted and acrimonious litigation, nothing is shown in the circumstances of the case why the court should otherwise exercise its residual discretion not to affirm the making of that order.
Background
By application filed on 27 April 2022, review is sought of the exercise of power by a registrar who on 21 April 2022 made an order for the sequestration of the estate of the debtor.
In 2013, the debtor’s wife, who had been registered as proprietor of certain land in Bulla, in the state of Victoria (property), sold that property to a purchaser, Bankseea Pty Ltd (of which the debtor is and/or was a director), and who obtained mortgage finance from ANZ Bank for that purpose. Following default, ANZ obtained an order for possession and, after extensive litigation, exercised its power of sale as mortgagee in possession, selling the property to the petitioner, RG Murch Nominees, which completed the purchase on 14 September 2018.
On 9 October 2018, RG Murch Nominees secured its registration as proprietor of the property.
Despite the terms of sale providing for vacant possession, from 15 September 2018 and for some time thereafter, the debtor and his wife remained in, and seemingly refused to relinquish, possession of the property. Located upon the property were several items of earthmoving and like equipment and certain livestock some of which also remained on the property for a time. In September 2018, Mr Murch and his wife met with the debtor and asked him to remove all of the plant and equipment which he apparently agreed, but then refused, to do.
Further, since September 2018 the debtor had attended upon the property and removed some but not other items of equipment. In the exercise of rights of self-help, Mr Murch also removed certain, but not all, items of the equipment, transferring them to an auction house in Geelong for storage. Mr Murch also issued a notice to the debtor asserting a claim for substantial storage fees in relation to, it seems, all of the equipment. For present purposes, it is sufficient to note that on 30 September 2021, orders were made in proceedings before the Victorian Civil and Administrative Tribunal (VCAT) dismissing the claim that the petitioners were authorised to sell the uncollected equipment and also dismissing the debtor’s claim for its return. Findings in that proceeding included that the debtor did not own certain of the equipment. There is no evidence of any subsisting application by way of review or appeal from the VCAT decisions.
It is unnecessary to rehearse the extensive history of litigation and suffices to say that the debtor and his spouse have been singularly unsuccessful in proceedings which they have instituted or, in some cases, defended. Included in that litigation have been a large number of criminal or quasi-criminal proceedings brought by or against the debtor or his spouse in relation to the alleged commission of violence by or against Mr Murch and perhaps his wife. The intensity of the acrimony between the parties is in part spelled-out in the reasons for judgment in R.G. Murch Nominees Pty Ltd v Paul David Annesley & Ors [2019] VSC 107, [1]-[5], (Sloss, J) and Robert George Murch & Ors v David Paul Annesley & Ors [2021] VSCA 83, [15]. As the reasons of Sloss J confirm, on 31 October 2018, following an un-edifying confrontation on the property between the debtor and Mr Murch on 22 September 2018, the debtor lodged a notification of appointment of controller on behalf of his company, Annesley Investments Pty Ltd, purporting to appoint himself and his spouse jointly as controllers pursuant to an alleged security charge over the whole of the property and the chattels of RG Murch Nominees, apparently doing so for the purpose of enforcing a security interest over all such property.
Undeterred, it was also necessary for the Supreme Court of Victoria to again make orders on 26 October 2020; on this occasion for the removal of a series of further caveats lodged by the debtor over the titles comprised in the property and enjoining the lodging of any further caveats.
Insofar as I can glean the genesis of much of the litigation, following the default by Bankseea to its mortgagee, ANZ, the Annesley interests maintained that the debtor’s spouse, Sharlene, remained “the real owner of the property”, asserting a failure by Bankseea to pay the full price for the purchase of the property in 2013. However it may have been conceived, the Annesley interests then sought to ascribe complicity in the petitioners in some kind of fraud by ANZ such that they were alleged to be “the receiver of stolen property”: Robert George Murch & Ors v David Paul Annesley & Ors [2021] VSCA 83, [14]. In short, the debtor complained of the mortgagee’s exercise of power of sale and the entry into, execution and completion of the contract for the sale of the property by ANZ to RG Murch Nominees.
I note the debtor and related parties were legally represented at some stages of various Supreme Court proceeding. Sloss, J concluded at [67], [75] and [88] that in the absence of any evidence supporting it, orders should be made for the removal of the purported security interest claimed by the debtor and related parties and further, for the removal of the registration of the purported appointment of a controller respecting that interest. The orders made by her Honour also enjoined the debtor from purporting to act as controllers of R.G. Murch Nominees or from lodging or attempting to lodge with ASIC any document in relation to that company without first obtaining leave of that Court. Orders for the removal of the purported security interest alleged by the debtor and his related entity were also made. This proceeding is concluded.
Later, on 11 December 2020, in proceedings brought in the Supreme Court of Victoria by Mr Murch and others against the debtor, his spouse and related parties, orders were made, relevantly, against the debtor, pursuant to the Vexatious Proceedings Act 2014 (Vic) restraining him from commencing any further proceedings against the plaintiff’s in relation to, amongst other things, the property, without leave of the Court: Murch & Ors v David Paul Annesley & Ors [2020] VSC 837. The full extent of other proceedings involving applications for personal safety intervention orders are summarised in that decision at [28]. The debtor’s application for leave to appeal from the decision was dismissed: [2021] VSCA 83, [27]. Beach, Emerton and Kennedy JJA at [27]-[28] found that on the evidence before the primary judge no other conclusion was available but that the debtor “had frequently commenced and conducted vexatious proceedings against the plaintiffs.” The Court summarised at [17], what it described as a “veritable blizzard of proceedings” involving multiple applications and appeals pursued by one or other of the Annesleys, including the debtor, since September 2018. It is not without some irony that the debtor employed this expression in his affidavit made on 26 May 2022 in support of his grounds in opposition to the petition, however, he adopted the position that it was the petitioners, and not he and related parties, who had initiated those many proceedings.
The extensive litigation has given rise to several costs orders against the debtor and relevantly:
(a)on 24 December 2018, in an application made by the debtor and his spouse (before the commencement of a proceeding and in which the Prothonotary had declined to accept the proposed writ), counsel for the proposed plaintiffs were unable to advance any submission why they should not be required to pay the costs of and incidental to the hearing on that day; accordingly, an order for costs was made against them;
(b)on 27 May 2019, an order was made for the permanent stay of a proceeding brought in the Supreme Court of Victoria by the debtor and his spouse and a further order was made that the plaintiffs pay the petitioner’s costs on an indemnity basis.
I note at least three other substantial order for costs against the debtor have also been made.
On 28 May and 7 July 2020 respectively, orders were made quantifying the joint liability of the debtor and his spouse for costs in the sum of $10,369.52 and $9,822.86; in all $23,030.37.
On 11 May 2021, the Court of Appeal also made orders, including against the debtor, for costs: Robert George Murch & Ors v David Paul Annesley & Ors [2021] VSCA 126, [13].
Thus, since 2014, the debtor and others have engaged in proceedings variously in the Magistrates’ Court, County Court, Supreme Court, Court of Appeal and VCAT. Putting aside the many applications to restrain the commission of apprehended violence made against or by the debtor, his spouse and related parties, orders for costs have been made against the debtor and have now been quantified in the sum of $23,030.37. Irrespective of the matters now asserted by the debtor, there is no subsisting appeal from the making of those costs orders.
Petition
On 11 November 2021, bankruptcy notice BN 254733 was issued against the debtor and his spouse (Notice) which required them within 21 days after service, to pay the petitioner $23,030.37 or to make satisfactory arrangements for the settlement of that debt.
The first respondent was served with the Notice on 16 December 2021. No application was made to set aside that Notice. Nor was any application made to a court to otherwise satisfy it that he had a counter-claim, set-off or cross-demand equal to or exceeding the amount of the judgment debts. In so failing to comply with the requirements of the Notice or otherwise to satisfy a court that he had such a counter-claim, set-off or cross-demand, the debtor committed an act of bankruptcy on 6 January 2022 in failing to comply with it within the requisite period.
Insofar as the debtor annexed to his submission a series of communications embodied in an email chain spanning the period 24 December 2021 – 24 January 2022, this included a claim appearing to demand damages for the unlawful detention of certain plant and equipment over the period October 2018 to December 2021. A related VCAT application, also annexed to the debtor’s submission, made a claim for the return of a Lusty Low-loader and damages for loss of use of that equipment asserted to be “$925,000 approx” (though this was not particularised). For reasons examined in further detail below, at least for the purposes of s 52(2) of the Act, I regard this claim as being without substance.
On 10 February 2022, the petitioners presented a petition for the sequestration of the estate of the debtor and his spouse relying upon their failure to pay $23,030.37 being the aggregate of the costs ordered to be paid in the Supreme Court proceedings referred to above.
An affidavit verifying the petition was made by the petitioner’s director on 10 February 2022.
Service of the Notice was proved. An affidavit verifying the matters relied upon as establishing the commission of an act of bankruptcy together with a search of the National Personal Insolvency Index (NPII) was also filed. The NPII search records disclosed an earlier petition being presented against the debtor’s estate in 2018 and that although described in the NPII as “current”, an order made on 7 June 2018 confirms that this, unrelated, petition was dismissed.
On 11 February 2022, the petitioners filed a certificate of consent to act as trustee.
Although the return date of the petition was 24 March 2022, it appears no step was taken by the debtor in this proceeding prior to that date. On 24 March 2022, a registrar made certain orders including that any application for a further adjournment be supported by affidavit. The court also ordered that the further hearing of the petition be adjourned to 21 April 2022 and that “the respondents file and serve any notice of opposition and any affidavit material in support by 13 April 2022, including if the respondents rely on grounds of solvency, any affidavit which sets out his and her current financial position, including details of all assets, liabilities, income and expenses.” The terms of that order undermine one of the complaints now made. An appreciation of that order is also of some importance in the exercise of discretion to dismiss the petition consequent upon the findings and decision made in this application for review: cf Culleton v Balwyn Nominees Pty Ltd (2017) 343 ALR 632, [7] (The Court).
On 20 April 2022, a notice of appearance (dated “13apr2022”) was filed by the debtor as a “Self Represented Litigant.” It does not appear his spouse has ever appeared in the proceeding. This is explained by the circumstance she had not been served with the petition.
On the same date, the debtor filed a notice stating his grounds of opposition which read:
I, Paul ANNESLEY being a Director of Annesley Investments Pty Ltd ACN 123100943 Lodge the Form B5 on the grounds, the Murch Bankruptcy Application MLG306/2022 for the debt of $23,000 against myself, Paul Annesley, conflicts with the VCAT Application C6616/2021 on behalf of my company Annesley Investments has a claim against the Creditor Robert Murch & R G Murch Nominees of $925,000 to be heard in VCAT which is a far greater (sic) than the claim in the Bankruptcy Notice.
In contrast with later documents relied upon by the debtor it may be noted that those grounds acknowledged the debt claimed by the petitioners as being in the sum of $23,000.
As stated, on 21 April 2022, an order was made for the sequestration of the debtors’ estate. For reasons below, it may be noted that the petitioner’s costs were fixed at $8,683.44.
Although the petition sought orders for the sequestration of the estates of the debtor and his spouse, the final note to the order is that no order was made against the second respondent. Again, the apparent reason explaining why the sequestration order was made only as against the debtor and not his spouse is that she had not been served with the creditors’ petition.
The reasons of the registrar noted that it was not apparent the debtor opposed the petition on the basis of solvency and that no evidence of solvency had been adduced before her. Insofar as the ground of opposition placed reliance upon any claim of substance as made in the VCAT proceeding referred to in his grounds, the registrar was not satisfied there was any bona fide claim of substance as between the same debtor and creditor. The registrar also observed that a very substantial time had elapsed between the date of any alleged wrong and the institution of proceedings by the debtor or related entities, in VCAT or in the Supreme Court of Victoria.
Application for review
An unsigned application for review dated 26 April 2022 was lodged electronically with the registry of this court. The application for review in Form B3A was stated to have been prepared with the assistance of the debtor’s sister. For reasons which, despite enquiry, remain entirely unexplained, the application was not issued in the registry until 18 May 2022.
Having regard to the imperative requirement to hear and determine such applications with due expedition, the matter was listed for directions on 19 May 2022. On that date, counsel for the petitioner drew attention to the debtor’s unsworn affidavit filed in support of the application for review noting that it appeared to advance grounds which were quite different from those that had been pressed before the registrar. It was quite fairly and properly submitted that in all the circumstances, the debtor should be afforded an opportunity to file a further notice of grounds and supporting affidavit stating the precise bases on which the petition was opposed: see, e.g., Culleton v Balwyn Nominees Pty Ltd (2017) 343 ALR 632, [9] (the Court).
At the hearing on 19 May 2022, orders were made to this effect. Having regard to one of the submissions that was made at the de novo hearing, I observe the order made on 19 May 2022 provided that the proceeding be set down for final hearing on 31 May 2022.
Consideration
This is a de novo hearing of a creditor’s petition.
By his application for review, the order sought by the debtor is that the creditor’s petition be dismissed “as an abuse of process by Robert Murch & his company, as Registrar Stone has made an error in Law, by the registrar’s decision in making a sequestration order ruling for an amount under $10,000.00 and not allowing me the opportunity to file details of my solvency. Bechara v Bates (No 2) [2020] FCA 659. Harris v Calladine (1991) 172 CLR 84 at 85.”
Section 43(1) of the Act confers jurisdiction to make a sequestration order against the estate of a debtor upon proof of the matters which that section prescribes. The power to do so is further constrained by, amongst others, the requirements of s 52.
The costs orders referred to in the Notice (and annexed to the petition) are final judgments for present purposes: Act, par 40(3)(c)-(d). The orders for costs obtained in the Supreme Court proceedings have been quantified and are not the subject of any subsisting appeal. I reject the submission that these cost orders are void ab initio as a result of the dismissal, in February 2022, of criminal charges brought against the debtor. Whatever reasons were held by a jury of 12 for dismissing those charges remain known to that jury alone.
Service of the Notice was proved. By its terms, the Notice afforded the respondents certain time within which to address the requirements of that notice. They did not do so. As the costs orders created a joint and several liability, in failing to pay or make satisfactory arrangements respecting the payment or securing of payment of the debts created by those orders, the debtor committed an act of bankruptcy.
As noted, there was no evidence of any application to set aside the Notice.
Conformably with the notation to the registrar’s order made on 21 April 2022, I agree the date of commission of an act of bankruptcy by the debtor was 6 January 2022.
One condition against the presentation of a creditor’s petition is that the act of bankruptcy upon which the petition was founded “was committed within six months before the presentation of the petition.” In this case, the applicants presented their petition on 10 February 2022.
An affidavit verifying the matters in par 4 of the petition was made. Affidavits of search and debt have been filed by the petitioner and his solicitor respectively. They have been served.
I am satisfied by the evidence before me that at the time of commission of the act of bankruptcy, the debtor was personally present and had a dwelling-house in Australia. Likewise, I am satisfied by the creditors’ proofs of each of the matters required by s 52(1). Being satisfied of proof of the matters in s 52(1), the petitioners have a prima facie right to the making of a sequestration order and the Court is thereby empowered to make an order for the sequestration of the debtor’s estate: Deputy Commissioner of Taxation v Cumins (2008) 6 ABC(NS) 12, [14]-[18] and [64] (Gilmour J), citing Cain v Whyte (1933) 48 CLR, 639, 645-646, 648 (The Court).
Dismissal of petition
By s 52(2) of the Act, a Bankruptcy Court may dismiss a petition in circumstances where it has not been satisfied with proof of the matters required by s 52(1); alternatively, where it has been satisfied by the debtor that he or she is able to pay his or her debts or that for some other sufficient cause a sequestration order ought not to be made.
In his application for review of the exercise of power by the registrar, the debtor relied upon two affidavits apparently made by him on 29 April and 26 May 2022 respectively. The first such affidavit filed on 29 April 2022 was not signed on any page but was accepted for filing. Although the affidavit might have been rejected on that basis, having regard to the requirement to hear and determine an application for review as soon as is reasonably possible, and as the debtor was self-represented, I concluded it was as well to consider its contents. It is convenient to examine the evidence in the debtor’s affidavits insofar as they might inform solvency or any other reason why the petition ought to be dismissed. I note, however, the standard of proof established by s 34A of the Act is, in general, proof on the balance of probabilities.
The debtor raised four grounds of opposition by his further notice dated 26 May 2022. By way of overview, the grounds read as follows:
1.Grounds of opposition to the decision & orders made by Registrar Stone on 21 April 2022 Case No: MLG306/2022 be set aside under the Federal Circuit Court of Australia, Bankruptcy Act 1966, Section 104 & Section 40, as Registrar Stone has made an error in law. By the Registrar’s decision in making a Sequestration Order ruling for an amount under $10,000 and not allowing an opportunity to file details of solvency. Bechara v Bates (No 2) [2020] FCA 659. Judge Kelly declared Registrar Stone’s Orders – De Novo on 19 May 2022, thus making possible for new grounds of opposition with submissions and an affidavit, which is this application.
2.Paul Annesley did not commit to act of bankruptcy, as alleged in the creditor’s petition during the court hearing by John Dunne, solicitor for Murch. There is no evidence filed by the Applicant, Robert Murch that the act of bankruptcy has been committed by the debtor Paul Annesley within the six (6) month period before the presentation of the creditor’s petition. Section 40 Bankruptcy Act 1966.
3.Paul Annesley stated to Registrar Stone at the hearing on 21 April 2022, ‘I could pay the debt to Murch of $8,683.44 today, as I had the funds available’. Registrar Stone refused my request to pay the debt to Murch on three occasions. I have never been served the notice of Bankruptcy Application by Murch and there is no evidence of this. It was brought to my attention, by my sister Susan completing a Federal Court check and noticed the Murch Bankruptcy application against myself. I have participated in this process before Registrar Edwards on 24 March 2022 and Registrar Stone on 21 April 2022, without the adherence to proper process being achieved. Before making her orders, Registrar Stone never mentioned nor referenced me as being insolvent. Paul Annesley can pay his debts and is not insolvent pursuant to the Bankrutpcy Act 1999. Harris v Caladine (1991) 172 CLR 84 at 95.
4.Paul Annesley has recovered property and has in his possession of a value at $171,800.00, which Murch attempted to sell at Ritchies Auctions. Murch has still in his possession, Annesley’s property to the value of $80,000.00. Annesley has a counter claim application in VCAT C6616/2021 against Murch & his company to the value of $925,000.00. Paul Annesley is truly solvent.
It is convenient to address some of the issues raised by those grounds immediately.
Ground 1 was in essentially introductory terms and, as explained to the debtor in the course of the hearing, it was largely irrelevant whether the registrar had committed any error of law because the court was concerned to conduct its own de novo hearing of the petition.
Insofar as this ground included reference to ss 40 and 104 of the Act, I have found that the debtor committed an act of bankruptcy on the basis provided by par 40(1)(g) and 40(3)(b) of the Act; that is, an act of bankruptcy grounded upon a failure within the time specified in the Notice to comply with its requirements or to satisfy a Bankruptcy Court that he had a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt (being a claim of a kind that he could not have set up in the proceeding in which the orders for costs were obtained). Otherwise, the reference to s 104 of the Act was nonsensical.
Further and contrary to the debtor’s repeated submissions, the registrar’s decision in making an order for the sequestration of his estate was not grounded on an amount of less than $10,000: see Act, s 44(1)(a). The debtors repeated reference to the sum of $8,683.44 was an erroneous reference to the amount of the costs fixed by the order made on 22 April 2022.
The suggestion that the registrar had not afforded the debtor an opportunity to file details of solvency was untenable having regard to the orders made on 24 March 2022. In any event, a further opportunity to do so was afforded by the orders made on 19 May 2022. While the debtors reference to Bechara v Bates (No 2) [2020] FCA 659 was not explored, it may be understood as a reference to the nature of an application for review from a registrar’s decision: see also Harris v Caladine (1991) 172 CLR 84, 95 (Mason CJ and Deane J).
The remaining issue addressed by the debtor in Ground 1 merely served to state that orders had been made on 19 May 2022 allowing him an opportunity to file new grounds of opposition, any affidavits and submissions (each of which opportunities he has now taken).
Ground 2 expressly asserts that the debtor has not committed an act of bankruptcy. For the reasons above, I have rejected that contention. I also reject the assertion there was no evidence that the act of bankruptcy relied upon was committed by the debtor within the period of six months before the presentation of the petition. While Ground 2 erroneously refers to s 40, I treat the debtor, a self-represented litigant, as intending to refer to par 44(1)(c) of the Act.
Ground 3 also seeks to resist the petition on the basis of matters occurring before the registrar. The debtor repeatedly contended he had submitted before the registrar that he could pay the debt of $8,683.44 on that day but that the registrar had ignored the submission. I reminded him again that the hearing before me was a de novo hearing of the petition.
Ground 3 also asserted the debtor had never been served with the petition (“Bankruptcy Application”). Service of the petition is required by r 4.05(a) of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth). However, there was evidence of such service and I am satisfied, absent proof to the contrary, that the petition was taken to have been received by, and served on, the debtor when that petition would have been delivered to the debtor’s last known address: see Bankruptcy Regulations 2021 (Cth), reg 102. For this purpose, service at the last known address of a person is to be determined objectively and it does not matter under this regulation whether or not the debtor is in fact living at that last known address: Toyota Finance Australia Ltd v Berro [2022] FCA 497, [41]-[45] (Burley J) citing Civic Video Pty Ltd v Warburton (2013) 216 FCR 61, [74]-[80] (Jacobson J). A swathe of documents, many of which had been lodged by the debtor, contain the address being the last known address of the debtor at which service was effected in accordance with the regulations.
As was correctly submitted, the petition was served at the address which has always been used by the debtor throughout this and in other proceedings, including by the affidavit made by the debtor on 26 May 2022. As will later appear, the debtor put into evidence a record of the result of a criminal trial dated 23 February 2022 which included the same “last known address.”
For completeness, I treat the issue of service as having long since passed. Having appeared on two occasions, both before a registrar and in this court in relation to the hearing of the petition, “no issue of service could sensibly arise at the de novo hearing”: cf Bechara v Bates (2021) 286 FCR 166, [52] (The Court). No suggestion was made that the deponent as to service should be cross-examined and, absent such a challenge the court is entitled to infer service was properly effected: cfCulleton v Balwyn Nominees Pty Ltd (2017) 343 ALR 632, [97].
Ground 3 also complained of the registrar’s failure to mention to him the issue of his solvency. The express terms of the order made on 24 March 2022 undermine this complaint. Each of Grounds 3-4 assert that the debtor is solvent and this is an issue dealt with below.
Ground 4 contains an assertion that the debtor has recovered property which has a value of $171,800 and that the creditor has possession of other property belonging to the debtor valued at $80,000. It also contends the debtor has a counterclaim in VCAT against the petitioners “to the value of $925,000.” While there was a paucity of evidence in relation to each these matters, they are also addressed below. Ground 4 also asserted that the debtor was “truly solvent” but again cogent evidence on this issue (as distinct from mere assertion), was altogether lacking.
Solvency
By s 52(2), the court is conferred a discretion to dismiss a petition where satisfied that a debtor is able to pay his or her debts or that, for other sufficient cause, a sequestration order ought not to be made. It cannot be ignored that solvency occupies a central role in the exercise of jurisdiction under the Act. More particularly, in light of the quasi-criminal nature of the proceeding, it recognises the public interest directed to sequestration orders not being made against the estate of persons who are solvent. One aspect of the public interest arises from the critical importance of recognising the interests of creditors (other than the petitioner), of being paid in full, should not be prejudiced by the making of a sequestration order that should not be made. A corollary of that public interest is the due administration of an insolvent estate for the general body of existing and potential creditors. Contextually, delay is inimical to such proper administration. As importantly, an order for the sequestration of a person’s estate effects a change in the debtor’s status with the significant personal consequences that this entails: Wren v Mahony (1972) 126 CLR 212, 223-225; Kleinwort Benson Australia Pty Ltd v Crowl (1988) 165 CLR 71, 82; Re Sarina; Ex parteSarina v Council of the Shire of Wollondilly (1980) 43 FLR 163, 165-166; Sarina v Council of the Shire of Wollondilly (1980) 48 FLR 372, 376-377; Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137, 148; Culleton v Balwyn Nominees Pty Ltd (2017) 343 ALR 632, [40]-[46], [55]; Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132, [55]; Bechara v Bates (2021) 286 FCR 166; Boensch v Somerville Legal (2021) FCR 293, [85]-[88]. In Boensch, the Full Court considered the scope of obligations owed towards self-represented litigants in bankruptcy proceedings.
The de novo hearing in this proceeding was conducted with those principles very much in mind. As applied to this case, the proceeding was one in which a party was self-represented. Upon settled principles, the court was entitled to be mindful of the history and background of the proceeding, the nature of application as a de novo hearing, the steps taken to allow that the debtor had an understanding of the application he had initiated and his evident intelligence.
It is also of some importance to note that the debtor’s original notice stating the grounds of his opposition to the petition filed on 20 April 2022 did not assert solvency: Culleton v Balwyn Nominees Pty Ltd (2017) 343 ALR 632, [7]. The ground relied upon by the debtor before the registrar appeared to contest the grant of relief on the basis that “my company Annesley Investments has a claim against the Creditor Robert Murch & R G Murch Nominees of $925,000 to be heard in VCAT which is a far greater (sic) than the claim in the [Notice].”
The debtor now seeks to put his solvency in issue. As noted, as a result of his application for review, the debtor has now been afforded yet a further opportunity to file evidence and he has done so. The cogency of the evidence relied upon as establishing solvency falls for assessment in the context of the combined circumstances that: an order was made on 24 March 2022 drawing the debtor’s attention to the need to file an affidavit as to solvency including by detailing his assets, liabilities, income and expenses; following the making of the sequestration order on 21 April 2022, the debtor now complains that he was not afforded an “opportunity” to address his solvency; at the directions hearing on 19 May 2022, counsel for the petitioner quite properly drew the Court’s attention to the marked change in the grounds of opposition to the petition (including reliance on solvency), and; the order made on 19 May 2022 allowed the debtor a further opportunity to file evidence and submissions, including as to solvency.
Despite the order made on 24 March 2022, the debtor again contended, that the registrar had not allowed him the opportunity to file evidence of his solvency. This ignored that his application for review engaged a requirement for a de novo hearing; the debtor now being well aware of the entitlement to establish solvency, has sought to take, and taken, that opportunity.
The petitioners correctly submitted that the test of solvency is a mixed asset and cash flow test that is often expressed in terms of whether a debtor is able to pay his or her debts as and when they fall due from the assets and resources which are reasonably available to him or her within an appropriate period of time: Re Sarina; Ex parte Wollondilly Shire Council (1980) 43 FLR 163 (Deane J), (appeal dis’d) Sarina v Wollondilly Shire Council (1980) 48 FLR 372 (Bowen CJ, Sweeney and Lockhart JJ). It is well settled that under s 52(2), the onus of proving solvency lies upon the debtor: see, e.g., Toyota Finance Australia Ltd v Berro [2022] FCA 497, [67].
The debtor relied upon a valuation dated 23 July 2019 of certain items of earthmoving and other equipment which had been valued on the basis of fair market value at $171,800 and on the basis of an auction realisation value at $126,000. Contentions made as to the ownership of property comprised in the various items of equipment did not, in and of themselves, establish solvency. As other items of evidence confirms, it remains an open question whether particular items of property had been disposed of and whether they had ever been or are now owned by the debtor. I also accept the submission that the valuation relied upon is nearly 3 years old.
In addition, the debtor relied upon extracts of certain ANZ bank statements for the period 31 December 2021 – 4 April 2022 and which indicated various withdrawals, deposits and balances from time to time in that period. Those statements did not establish the debtor’s solvency. Relatedly, I accept that the test of solvency is to be applied at the date of the hearing and in this context the investigations of the trustee in bankruptcy to this point demonstrate that the current balance of the debtor’s two ANZ accounts is $Nil and $1.24 respectively.
There was no evidence of the debtor’s current income or expenses. Other than as described above, nor was there evidence of his assets and liabilities.
Grounds 3-4 in the debtor’s notice dated 26 May 2022 asserted solvency, however, the evidence did not demonstrate it. Such evidence as there was did not rise to a level where a finding of solvency could be made. I am not persuaded by the debtor’s generalised assertions of solvency. For present purposes, I disregard submissions made from the bar table that were unsupported by evidence. Insofar as the evidence went, I do not accept the debtor’s evidence proved his solvency. His affidavit was lacking in clarity and was otherwise entirely obscure as concerned any cogent proof of his assets, liabilities, income and expenses. Having had at least four months to do so, the failure to adduce cogent evidence of solvency is the more notable.
Other sufficient cause
Debtor in possession of the property
The debtor’s substantive submission for dismissal of the petition rested upon a premiss that the petitioners had always known the debtor and his wife remained in possession of the property and that, pursuant to the special conditions of the contract of sale under which he had purchased it, responsibility to secure vacant possession rested with the petitioner. It was then said that absent an order for possession whether from a court or VCAT, the petitioner had no lawful entitlement to possession and in particular, no recourse to avenues of self-help to do so.
Attention was drawn to the terms of a contract of sale dated 6 August 2018 executed by ANZ as vendor and RG Murch Nominees as purchaser (contract of sale). The particulars of sale stated that settlement was due on 3 September 2018 and that the sale was subject to the special conditions annexed thereto. The debtor exhibited an extract of those special conditions and drew attention to cll 28, 29 and 30. As he noted, by cl 30.1, the purchaser acknowledged having had an opportunity to undertake extensive due diligence in relation to the property including, without limitation, the matters referred to in special conditions 28 to 31 inclusive (Special Conditions). Next, attention was drawn to cl 28 of the Special Conditions, which addressed the subject, Goods, and by which RG Nominees acknowledged and agreed that no goods, chattels or movable articles on the property were sold pursuant to that contract and further that it would not make any requisition, objection, claim or seek compensation from the vendor, including because any such items remained on the property at settlement.
Attention was then drawn to cl 29, Articles, goods, animals or rubbish and any activities or use of the Land, which variously provided that: the vendor made no representation that any such items would be removed from the property either before or after settlement (cl 29.1(b)); the vendor would not be responsible for the removal of any such items from the property whether before or after settlement (par 29.2(b)); from settlement, the purchaser assumed all responsibility for and any liability associated with any matters under Special Condition 29.2 (cl 29.4); the purchaser purchased the property subject to all liability associated with any matter under Special Condition 29.2 (par 29.5); the purchaser acknowledged and agreed it would not require ANZ to do anything as a consequence with any matter under Special Condition 29.2 including, relevantly, removal from the property of any person, articles, goods, animals or rubbish that may be on the Land before, on or after settlement (par 29.6(b)).
Whether or not, properly construed, Special Condition 29.6(b) of the contract of sale amounted to anything more than an acknowledgement and agreement by the purchaser operating as an express negative stipulation that it would not and could not require the mortgagee in possession, ANZ, to remove the debtor or any articles, goods, animals or rubbish situate on the property before, on or after settlement, I consider the argument that the petitioners’ entry onto the land was unlawful, absent an order from VCAT or a court (and so undermined the basis for the creditor’s petition), is unsound.
As the solicitor advocate for the petitioners properly submitted, ANZ sold the property to the purchaser as mortgagee in possession. It was only able to do so because it had obtained an order for possession in the County Court of Victoria, a fact that was established by the evidence.
Although I was left to examine the issue for myself, I do not accept the debtor’s submission that RG Nominees was denied any lawful entitlement to possession of the property upon settlement of the contract of sale with ANZ in September 2018. The title obtained by the purchaser upon settlement was the title held by ANZ, including its lawful entitlement to possession as established by the order obtained in the proceedings brought against the Annesley interests. The judgment for possession obtained by ANZ finally determined its entitlement to possession of that property. For the purposes of considering the exercise of discretion conferred by s 52(2), I regard the judgment given in that proceeding as effecting a merger of all of the rights and entitlements in contest, including whether the Annesley interests (including the debtor), had any lawful entitlement to possession of the property: see, eg, Port of Melbourne Authority v Anshun (1981) 147 CLR 589. Relatedly, no attempt was made to explain any alleged fraud on the part of ANZ or why, on any basis, it could attach to the petitioners.
As best I understood it, the debtor relied upon s 52 in the Australian Consumer Law, contained in Sch 2 of the Competition and Consumer Act 2010 (Cth). While it may be accepted that this provision affords a right to undisturbed possession of certain goods, the reach of this provision relates to the supply of goods by a person to a consumer. Without descending into the many definitional and related aspects of this provision, nothing in the circumstances of the present case engages that provision as between the petitioner and the debtor. Quite why the debtor seized upon this provision was not explored, however, I note in an earlier VCAT proceeding brought by the petitioners, relief was sought under s 70 of the Australian Consumer Law authorising the disposal of ‘uncollected goods’ remaining on the property. In this regard, for reasons published by VCAT on 30 September 2021, the parties’ respective claims and cross claims were dismissed, either on the facts or because they were seen to be misconceived.
Contrary to the debtor’s broad assertion, I regard self-help to obtaining possession as having been available, albeit that the petitioners bore a consequential responsibility to bring any assets so recovered to account in the bankruptcy. Other risks of self-help need not be addressed.
At this point, it is necessary to maintain the distinction between possession of the property itself and possession of the plant and equipment. As to the property, I have concluded the petitioner’s obtained a title to the property including, upon settlement, to possession. As to the plant and equipment, Special Condition 28 made clear that no goods, chattels or moveable articles were sold under the contract. The petitioners have not suggested otherwise. As the facts examined below confirm, the petitioners had no intention of retaining possession of any item of plant or equipment – their difficulty was that they could not secure the debtor’s co-operation in its removal or his adherence to the agreement to do so, whether by 31 October 2018 or at all. Against that background, steps were taken to secure the storage of some items and proceedings were taken, albeit unsuccessfully, to secure an order authorising their disposal.
Insofar as the principles considered above would impose a consequential responsibility on the petitioners to bring any assets so recovered to account in the bankruptcy, it would apply to any plant and equipment remaining on the property: cfAkers as a joint foreign representative of Saad Investments Company Limited (in Official Liquidation) v Deputy Commissioner of Taxation (2014) 223 FCR 57, [134] (Allsop CJ, Robertson and Griffiths JJ agreeing). However, a person does not need recourse to court to create a right of self-help: Worrell As Trustee of the Estate of John Martin Wedgwood, A Bankrupt v Power and Power (1993) 46 FCR 214 [8]-[10], [35] (Wilcox, Ryan and Gummow JJ); Rusca Bros Services Pty Ltd v DLaw Pty Ltd, in the matter of Rusca Bros Services Pty Ltd [2019] FCA 562, [10] (Markovic, J). These principles inform the proper exercise of discretion conferred on the court by s 52(2) of the Act to dismiss a petition. As concerns the discretion conferred by s 52(2), the debtor’s assertion that he was entitled to exclusive possession of the property in 2018, is of no substance.
Alleged cross-claim – the “Lusty Low-loader”
Within the morass of materials relied upon in this review there is reference to a VCAT proceeding related to a Lusty Low-loader. As the debtor agreed, he is not the applicant in that proceeding. Rather, the applicant is one of his corporate entities. So much was proved by the various VCAT documents put into evidence by the debtor.
The nature of the claim brought in the VCAT proceeding is for damages for loss of use of the vehicle alleged to be for an amount exceeding $900,000. I am not satisfied there is any substantive basis for the claim, particularly in circumstances where the petitioners’ evidence demonstrates that the Lusty Low-loader was purchased by Mr Murch from a finance company default having been made by a previous owner under a finance agreement. Mr Murch exhibited a receipt issued to him for the purchase of the Lusty Low-loader and search results obtained from the Personal Property Securities Register confirming the finance company had granted a discharge of its security interest over that equipment in December 2018. Nothing in the evidence suggests any challenge by the debtor to the sale of this item to Mr Murch.
Moreover, in the reasons published by VCAT on 30 September 2021, a finding was made that the debtor did not own the Lusty Low-loader. His claim for its return was dismissed.
In any event, I am not satisfied there is any bona fide or substantive cross-claim as would engage the discretion in s 52(2) to dismiss the petition. As the debtor agreed, the matters the subject of the supposed cross-claim date back to 2018 and in the intervening period there has been a veritable blizzard of proceedings brought by him and related parties against the petitioners: cf Act, 41(6C)(b). Indeed, the Supreme Court has now restrained the institution of certain such proceedings by the debtor.
Petitioners initial dealings with the property and the debtor
In addition to the contract of sale and the extract of special conditions, the debtor also exhibited two statements made by the petitioner on 22 September and 18 November 2018 respectively, each such statement having been made to Victoria police in relation to events occurring before and during 2018, and which may be summarised as follows:
(a)in 2018, the first petitioner, Mr Murch, was aged 73 years;
(b)in 2016, Mr Murch discovered the property was advertised for sale by an agent but that difficulties were being encountered with “issues with the owner of the property”;
(c)in early 2017, after receiving a telephone call from the solicitors acting for ANZ bank, Mr Murch attended a meeting with those solicitors in the course of which he was advised of the issues ANZ had encountered in securing possession of the property. In a later meeting, ANZ’s lawyers reiterated their warnings about the debtor to Mr Murch after which he executed a contract of sale to purchase the property from ANZ;
(d)although the contract provided for possession on 3 September 2018, shortly before that date Mr Murch was informed that the debtor had lodged several caveats, as a result of which settlement was delayed for about a week; however, settlement did occur;
(e)on 15 September 2018, Mr Murch attempted to contact the debtor. It had been his intention to contact the debtor for the purpose of obtaining entry to the property but he was unable to contact him. In light of his inability to do so, Mr Murch instead travelled to the property and being locked out, cut the lock to a gate and, with his wife drove around and inspected the property. During this inspection, as Mr Murch was about to close one of the gates to a paddock, a white Mercedes SUV drove onto the property. After the driver of that vehicle, the debtor, got out Mr Murch walked over, introduced himself and shook hands. The debtor stated he was still the owner of the property;
(f)while Mr Murch and the debtor were engaged in that conversation, another vehicle arrived and its three occupants, dressed in black and who “all appeared to be rough” got out. One was introduced to Mr Murch by the debtor as his legal advisor. The two other occupants took occasion to walk around Mr Murch’s vehicle several times;
(g)in the course of discussion between Mr Murch, the debtor and his lawyer, Mr Murch was told by the lawyer that “I was in a lot of trouble and that I would be going to jail because of my complicity with the ANZ bank in a colossal fraud” and further that I was the receiver of stolen property. According to Mr Murch, “the conversation was amicable until I got sick of the fellow dressed in black accusing me of criminal offences.” When Mr Murch asked them to leave the property they ignored his request. In his second police statement, Mr Murch expanded upon his dealings with the debtor’s lawyer, Savvas, and provided further detail of the warnings made by that lawyer that he, Mr Murch, would end up in jail for trespassing upon his client’s property;
(h)Mr Murch and the debtor talked further upon the topic of the debtor “clearing his belongings off my property. He asked me if any of the items were sold with the property and I advised him no, that all the items left on the property belonged to him.” In the context that it was the debtor who exhibited the police statements, I note that according to the version given by Mr Murch to police in September 2018, the debtor “asked for 30 days to clear the property which I gave him until 31 October which was six weeks away to clear his stuff. ANNESLEY agreed and thanked me.” In his second police statement, Mr Murch expanded on this discussion and explained that although the debtor had asked for 30 days to remove his plant and equipment from the property, he had replied “I said to him that I will do better than that, you have a lot of stuff I will give you until 30 October 2018, which was about six weeks.” Nothing in any other evidence adduced by the debtor contained any explicitly suggestion that he contested these central events as described by Mr Murch;
(i)in the period 15-20 September 2018, the petitioners contacted the debtor leaving text messages confirming that the property was to be cleared by 31 October 2018. In his second police statement, Mr Murch recounted one telephone call with a person who identified himself as the debtor’s ‘caretaker’ who said that if he “ever went to the property again there would be trouble and he warned me to keep away from the place”;
(j)despite these matters, the debtor has consistently declined to remove the plant and equipment and, until police intervention, declined to vacate the property.
Events leading to criminal charges
On 22 September 2018, Mr Murch, then aged 73, drove with his wife to ascertain whether the debtor had commenced the process of removing the plant and equipment from the property. Upon arrival, he discovered a new lock had been fitted to the front gate of the property. Being unable to cut that lock with the use of bolt cutters, Mr Murch instead cut the wire fence adjacent to the gate. He repeated this process as he drove around the property.
As Mr Murch and his wife were returning to the driveway of the property he observed three males, each holding baseball bats. Mrs Murch’s wife rang 000 to try and get the police to attend the property. While Mr and Mrs Murch waited in their vehicle for the police to attend they observed a white Ford F150 utility driving through the paddocks towards them. The driver of the vehicle (who turned out to be the debtor), drove his vehicle around the Murch’s vehicle “revving its engine really loudly” and “spinning the wheels causing dust to fly everywhere.”
From Mr Murch’s first police statement, he then proceeded to drive the Ford F150 rapidly toward their vehicle stopping just short of colliding with it but at the same time “screaming something out to us. I could tell the person was extremely angry.” What next happened led to the laying of charges against the debtor:
Then out of nowhere the Ford rammed us from behind by using the back of his car to ram the back of my car at about 20 km/h. When he hit our car Robin and I were thrown around my car very violently. The driver started pushing my car towards the other males that was standing near the building. My car was being pushed and I managed to start my car and I started driving towards a second exit of the property.
Mr Murch’s first police statement then recounted the ensuing car chase which played out across the paddocks of the property and on the adjoining road and in which the Murch’s vehicle was rammed by the Ford F150 at least once and in which another car also became involved.
In his second police statement, Mr Murch recounted a series of communications occurring on 1 October 2018 in which a person, Mario Lantzer, who identified himself as the debtor’s lawyer and from whom he received a text stating “My client has legal rights, he has possessory and legal rights” and asked the petitioners to provide proof of their ownership of the property.
Annexed to the debtor’s submissions was a record of the result of a criminal proceeding dated 23 February 2022 brought against him in the County Court of Victoria in relation to two charges of engaging in reckless conduct endangering serious injury and one charge of intentionally damaging property and in which the jury was discharged having returned a verdict of not guilty on each charge. While the debtor submitted the result of this criminal proceeding had included findings by the trial judge that the petitioners were guilty of trespass and other matters I do not accept this record, or any other evidence, contains justification for this submission. I also reject the debtor’s broad submission that all of the civil proceedings arising between the parties should have been stayed pending the determination of the criminal proceedings against him.
Other arguable claim?
The debtor’s generalised assertions denying the commission of an act of bankruptcy or the existence of genuine and arguable claims “for an amount greater than the debt of $8,683.44” were otherwise not substantiated by any evidence. Further, having regard to the debtor’s submissions, it seems clear that claims of the kind sought to be raised as justifying dismissal of the petition are in fact claims of (i.e. causes of action owned by) entities related to the debtor, rather than the debtor himself. In any event, no attempt was made to demonstrate, whether by evidence or otherwise, that any such claims were of substance.
Debt of less than $10,000
The debtor’s first affidavit addressed the following matters and in relation to which I observe a contention was framed in terms that the registrar had erroneously made a sequestration order for a sum less than $10,000. On the facts, the debtor’s joint liability for the aggregate sum of $23,030.37 was established by the final orders. To the extent the debtor drew attention to the costs order of $8,683.44 as somehow demonstrating a liability for a sum less than $10,000 this was irrelevant in that the said sum of $8,683.44 was the amount of the costs fixed by the registrar’s order made on 22 April 2022. These matters were reiterated in the debtor’s second affidavit and by his written and oral submissions. The point is without any substance.
Abuse of process
One of the labels applied by the debtor in his affidavit and submissions was that the issue of the bankruptcy notice and presentation of the creditor’s petition was frivolous, vexatious and “a complete abuse of the court’s legal process”. The bases on which this submission was made were threefold: (1) the petition related to a civil dispute between ANZ and the debtor or associated parties relating to the property that had been ongoing since 2014; (2) in executing the contract of sale, the petitioners gave the acknowledgements contained in, relevantly, Special Condition 29.6; (3) that the petitioners had full knowledge the debtor and his wife were “in exclusive possession [of the property] when he signed the ANZ contract of sale”: see debtor’s affidavit made 26 May 2022 at par 2(a)-2(c). For the purposes of making out this complaint, the debtor relied upon the terms of the contract of sale and Mr Murch’s two police statements, each of which have been summarised above. Viewed broadly, the debtor conflated notions of unlawful physical possession with exclusive possession. He did so, both in relation to the property and the plant and equipment which he had refused to remove from that property.
It was correctly submitted that the principles relating to abuse of process were examined in Williams v Spautz (1992) 174 CLR 509. The reasoning in that decision confirms that the onus of satisfying the court there is an abuse of process lies upon the party alleging it and that the onus is a heavy one. In all the circumstances it is unnecessary to trace those principles further.
In the course of oral argument, I sought to ascertain from the debtor the precise basis upon which this aspect of his submissions were framed. In doing so, the debtor explicitly disclaimed any criticism of the solicitor advocate who had represented the petitioners in this proceeding. Having done so, this aspect of the abuse of process argument can be put entirely to one side. For the avoidance of doubt, nothing in the evidence would justify any criticism of that lawyer.
In my opinion, however elusive some of the distinctions in this area of the law may be, I am not satisfied that the petitioners have threatened or used the present proceeding for the purpose of obtaining any collateral advantage and not for the purpose for which such proceedings are properly designed and exist: Williams v Spautz (1992) 174 CLR 509, 528 (Mason CJ, Dawson, Toohey and McHugh JJ, at 554, Gaudron J agreeing), 535 (Brennan J), 552 (Deane J).
Accepting the civil dispute had been ongoing since at least 2014, the litigation with ANZ has concluded. The rights and liabilities determined in that litigation have merged in the judgment. By the judgment it obtained, ANZ secured an order for possession. Having done so it entered into, executed and completed a contract of sale as mortgagee in possession, selling the property to RG Murch Nominees. The first basis for the alleged abuse of process is groundless. The second and third bases for the abuse of process submission have been addressed earlier.
Finally, I agree in the submission that since the present application is a hearing de novo of the petition, other complaints of a want of procedural fairness (apparently based upon the registrar’s failure to address solvency or his offer to pay the costs fixed on 22 April 2022), are irrelevant. To the extent of any procedural fairness (which I do not accept), the series of orders made in this proceeding confirm the debtor has been afforded opportunities to establish his solvency. Likewise, by its express terms, the bankruptcy notice afforded him several opportunities to address or secure payment within the time and in the terms which it provided.
Residual discretion
Nor am I satisfied of any other sufficient cause why such an order ought not be made.
It is inappropriate to catalogue or circumscribe the infinitely variable circumstances which may constitute “other sufficient cause”: Stratton v Bowles (No 2) (2015) 12 ABC(NS) 404, [27]. The breadth of the discretion conferred by s 52(2) and the correlative duty upon a Bankruptcy Court to examine the circumstances of a case to consider whether, for other sufficient cause, a petition should be dismissed, is well established: see, Commonwealth Bank of Australia v Doggett [2017] FCA 1176, [31]-[32]; Ramsay Health Care (2017) 261 CLR 132, [68], [110]. If a sufficient other cause is shown, this merely engages the discretion to dismiss the petition.
In Stratton, Beach J held that since the power to make a sequestration order was expressed in permissive, not mandatory, terms in the circumstance that a debtor had demonstrated the existence of some other sufficient cause within the meaning of par 52(2)(b) “does not entitle him or her to have a sequestration order refused” [2015] FCA 43, [27]-[30]. The reasoning in Stratton was endorsed in Li v Wu [2020] FCA 776, [96(g)]; see also Toyota Finance Australia Ltd v Berro [2022] FCA 497, [34]-[37] (Burley J) and cases cited.
As to other cause, some further observations are required. First, the orders made by Sloss J above were grounded on findings which deny any security interest of the kind asserted by the debtor or his company in either the property or the chattels that were situated on it. Secondly, in the VCAT proceedings, the debtor’s belated claims for damages based upon the withholding of the equipment were dismissed. Thirdly, amongst the reasons provided by that tribunal, findings were made that certain items of equipment were not owned by the debtor. Relatedly, the evidence showed that Mr Murch had purchased one such item of equipment from a financier in 2018 (i.e., the Lusty Low-loader), thereby negating debtors assertions of ownership of that item of property. Fourthly, the findings by VCAT do not affirmatively establish ownership of the remaining items of equipment. Fifthly, having regard to the history of litigation which has ensued from 2014 to date, there must be some force in the observation that the debtor has had every opportunity to establish title to any item of equipment. Although the submissions were not framed in these terms, it is difficult to ignore that the debtor could and should properly have brought claims to resolve ownership of the equipment well prior to this date. Orders made by the Supreme Court on 27 May 2019 permanently stayed claims then being pursued by the debtor and his spouse against the petitioners. Orders made on 26 October 2020 enjoin the debtor from lodging further caveats on titles to the property. The order made on 11 December 2020 restrains the debtor (and others) from commencing any proceeding against the petitioner or related parties in relation to certain properties without the Court’s leave. While these orders do not expressly apply to the institution of a proceeding in relation to ownership of the equipment, it informs consideration of the delay that has occurred concerning any such claim. Sixthly, even assuming in favour of the debtor ownership of any remaining item of equipment, this says nothing in or of itself to the question of his solvency. Whatever issues the debtor might seek to press in relation to his ownership of any items of plant of equipment that still remain on the property, these may be addressed with his trustee.
The debtor asserted a misunderstanding of his entitlement to prove a cross-claim and proceeded to refer in general terms to the many civil and criminal proceedings in which he and the petitioner and related parties had been involved. As I understood his submission, the debtor maintained that, but for the Covid-19 pandemic, there would have been no delay in the criminal proceedings brought against him and, as the argument ran, such charges as had been laid would have been dismissed at some stage after 2018. Upon that premise it was said there would have been no foundation for any civil proceedings with the result that no order for costs would ever have been made and so the present proceeding would never have been commenced. The debtor also submitted that in all of those circumstances any civil proceedings would have been stayed until after the completion of the criminal proceedings (which have now been completed).
As concerns the issues in this proceeding, a short answer to these contentions is at least twofold. First is that final orders for costs have been made and those costs have now been quantified. Secondly, to the extent the court retains residual discretion to dismiss a petition for other sufficient cause, the circumstance that the petition is grounded upon unsatisfied costs orders is itself a matter to be taken into account having regard to all of the facts and circumstances.
Quite late in the course of the debtor’s oral submissions it seemed to be faintly suggested that he had not appreciated the matter was to proceed by way of final hearing on 31 May 2022. Having regard to the express terms of the order made on 19 May 2022 I reject that submission, particularly in circumstances where I had asked the debtor whether he understood the orders made on that date and he had confirmed that he did so.
To the extent it may be relevant to the exercise of the residual discretion, I note the affidavit in reply of Mr Murch made on 27 May 2022 identified no less than three other orders by the Costs Registrar in which orders for costs made in his favour against the debtor had been quantified in a total sum in excess of $130,000 all of which remain unpaid.
Having regard to the regrettable and extensive history of litigation which has occurred since at least 2014 and upon a re-examination of the evidence relied upon in this de novo review, applying the principles in Stratton, I would not have exercised the residual discretion reposed in the court to dismiss the petition under par 52(2)(b) in this case.
As has been observed, litigation is not to be conducted by ambush: cf White v Overland (2001) 67 ALD 731, [4] (Allsop CJ); All Class Insurance Brokers Pty Ltd (In Liquidation) v Chubb Insurance Australia Ltd (No 2) (2021) ACSR 78, [122] (Allsop CJ). In a bankruptcy context, the broader interests of a body of creditors is also very much at issue. There is a point at which parties must accept responsibility for the manner in which they choose to conduct litigation. This is no less so where a debtor seeks to establish solvency. Accepting the centrality of solvency in the exercise of the bankruptcy jurisdiction, the opportunity conferred by par 52(2)(a) for a debtor to establish his or her solvency to the requisite standard does not devolve a responsibility upon the court or a creditor to do so. To the contrary, upon the public policy considerations identified above, principles informing the centrality of solvency remain as a constant beacon for the court to be ever vigilant against the making of a sequestration order where par 52(2)(a) is engaged. As the interests of all other creditors (other than the petitioner), of being paid in full should not be prejudiced by the making of a sequestration order that should not be made, it is inimical to their interests to make such an order where solvency is established.
Conclusion
For the reasons I have given, the debtor’s application for the review of the exercise of power by the registrar should be dismissed. Where the court dismisses an application for review of the exercise of power by a registrar who has made a sequestration order, the preferable course upon review is to affirm the order of the registrar. To do so has a consequential advantage of providing continuity in the process of the administration of the bankrupt estate, including discharge of the debtor’s obligation to file and serve his or her statement of affairs.
The application for review of the registrar’s power in making a sequestration order against the debtor’s estate should be dismissed with costs. In accordance with the usual practice, those costs should be payable in accordance with par 109(1)(a) of the Act: Culleton v Balwyn Nominees Pty Ltd (No 2) [2017] FCAFC 12, [9] (the Court).
I certify that the preceding one hundred and eight (108) numbered paragraphs are a true copy of the Reasons for Judgment of Judge A Kelly. Associate:
Dated: 2 June 2022
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