Murphy v Nyoni
[2017] FCCA 143
•17 February 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MURPHY & ORS v NYONI | [2017] FCCA 143 |
| Catchwords: BANKRUPTCY – Creditors petition – application for sequestration order – whether proof of requirements – whether respondent solvent – what constitutes solvency – whether other sufficient cause not to issue sequestration order – what constitutes abuse of process in the issuance of a sequestration order – whether evidence of application to set aside judgments giving rise to debt – whether impecuniosity of debtor a basis for refusing to issue a sequestration order. |
| Legislation: Australian Consumer Law Bankruptcy Act 1966 (Cth), ss.5, 52, 306 Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), pt.4, r.4.06 |
| Cases cited: Adams v Lambert [2006] HCA 10; (2006) 228 CLR 409; (2006) 80 ALJR 679; (2006) 225 ALR 396; (2006) 3 ABC(NS) 835 Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 |
| First Applicant: | JILLIAN MURPHY |
| Second Applicant: | THERESA BEECH |
| Third Applicant: | CHIEF EXECUTIVE OFFICER OF THE DEPARTMENT OF HEALTH WA |
| Respondent: | EMSON NYONI |
| File Number: | PEG 40 of 2016 |
| Judgment of: | Judge Antoni Lucev |
| Hearing date: | 11 April 2016 |
| Date of Last Submission: | 11 April 2016 |
| Delivered at: | Perth |
| Delivered on: | 17 February 2017 |
REPRESENTATION
| Counsel for the Applicants: | Ms K Britton |
| Solicitors for the Applicants: | Dentons |
| For the Respondent: | In person |
ORDERS
A sequestration order issue against the estate of the respondent debtor, Emson Nyoni.
The costs of the creditor’s petition, which if not agreed are to be assessed by a Registrar of this Court, be paid to the applicant creditors from the bankrupt estate of Emson Nyoni in accordance with the provisions of the Bankruptcy Act 1966 (Cth).
AND THE COURT NOTES that the date of the act of bankruptcy is 7 August 2015.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 40 of 2016
| JILLIAN MURPHY |
First Applicant
| THERESA BEECH |
Second Applicant
| CHIEF EXECUTIVE OFFICER OF THE DEPARTMENT OF HEALTH WA |
Third Applicant
And
| EMSON NYONI |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicants, Jillian Murphy, Theresa Beech and the Chief Executive Officer of the Department of Health WA (collectively “Applicants”, individually, “Ms Murphy”, “Ms Beech” and “CEO” respectively) move on a creditor's petition (“Petition”) filed in this Court on 2 February 2016.
The Applicants read the following evidence in support of the Petition:
a)affidavit of James Henare Blake sworn on 12 August 2015 as to service of the bankruptcy notice (“Blake Affidavit”);
b)affidavit of Dr David Russell-Weisz sworn on 29 January 2016 verifying paragraphs 1, 2 and 3 of the Petition (“First Russell-Weisz Affidavit”);
c)affidavit of Courtney Jayne Manzoney affirmed on 1 February 2016 verifying paragraph 4 of the Petition (“First Manzoney Affidavit”);
d)affidavit of Emerald Denise Petrie sworn on 23 February 2016 as to service of the Petition (“Petrie Affidavit”);
e)affidavit of Jillian Murphy sworn on 11 March 2016 (“Murphy Affidavit”); and
f)affidavit of Cheyne Malcolm Beetham sworn on 11 March 2016 (“Beetham Affidavit”).
The Applicants relied on two additional affidavits filed on 8 April 2016, being the affidavits required by r.4.06(3) and (4) of the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) (“FCC Bankruptcy Rules”). (Although the new Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) came into effect on 1 April 2016, the Petition and supporting affidavits were filed in accordance with the FCC Bankruptcy Rules). Those two affidavits were the:
a)affidavit of Courtney Jane Manzoney affirmed 8 April 2016 as to search of the National Personal Insolvency Index on 8 April 2016 (“Second Manzoney Affidavit”); and
b)affidavit of Dr David Russell-Weisz sworn 8 April 2016 as to the continuing debt owed (“Second Russell-Weisz Affidavit”).
Opposition to the Petition
On 28 February 2016, the respondent, Emson Nyoni (“Mr Nyoni”) filed a notice of grounds of opposition to the Petition. On 18 March 2016, Mr Nyoni provided to the Applicants, a proposed amended notice of grounds of opposition (“Amended Notice of Opposition”). At hearing, leave was granted to amend the notice of grounds of opposition to the Petition in terms of the Amended Notice of Opposition.
The Amended Notice of Opposition is supported by two affidavits of Mr Nyoni, being:
a)the affidavit of Mr Nyoni sworn on 28 February 2016 (“First Nyoni Affidavit”); and
b)the affidavit of Mr Nyoni sworn on 18 March 2016 (“Second Nyoni Affidavit”).
Background
On 18 September 2013 a costs order against Mr Nyoni (“First Costs Order”) was made in favour of the Applicants (amongst others) in Federal Court of Australia (“Federal Court”) proceedings WAD 154 of 2013 (“First Proceedings”). On 19 September 2014, a certificate of taxation was issued by the Federal Court in the amount of $64,685 in respect of the First Costs Order: Blake Affidavit, Annexure “A”.
On 31 March 2014 a further costs order against Mr Nyoni (“Second Costs Order”) was made in favour of the Applicants (amongst others) in Federal Court proceedings WAD 382 of 2013 (“Second Proceedings”). On 19 September 2014, a certificate of taxation was issued by the Federal Court in the amount of $16,619.50 in respect of the Second Costs Order: Blake Affidavit, Annexure “A”.
On 6 July 2015, on the joint application of the Applicants, bankruptcy notice number 180688 for an amount of $81,304.50 was issued by the Australian Financial Security Authority (“Bankruptcy Notice”), based on the taxed costs due and owing by Mr Nyoni to the Applicants under the First Costs Order and the Second Costs Order.
The Bankruptcy Notice was personally served on Mr Nyoni on 17 July 2015: Blake Affidavit at [3].
Mr Nyoni failed to comply with the Bankruptcy Notice. On 7 August 2015, an act of bankruptcy was committed by Mr Nyoni, based on his non-compliance with the Bankruptcy Notice (“Act of Bankruptcy”).
On 2 February 2016, the Applicants jointly presented the Petition to the Court for filing, citing the Act of Bankruptcy referred to at paragraph 4 of the Petition. The matters set out in the Petition were verified by the First Russell-Weisz Affidavit and the First Manzoney Affidavit.
On 11 February 2016, Helen Louise Joyce and Paul Gerard Weston of Pitcher Partners provided a joint consent to act as trustee, in the event that a sequestration order was made against Mr Nyoni: Petrie Affidavit at [2(d)].
On 19 February 2016, the Petition and the supporting documents were personally served on Mr Nyoni: Petrie Affidavit at [2]-[3].
Identity of the first and third applicants
The First Russell-Weisz Affidavit at [2] refers to the incorrect identification of Ms Murphy and the CEO at the time of the commencement of the First Proceedings. Ms Murphy was referred to as “Jullian Murphy” and the CEO was referred to as “Chief Executive Officer of Health WA.” Those errors were continued in the First Costs Order and the Second Costs Order.
Ms Murphy has provided an affidavit as to her identity on 11 March 2016: Murphy Affidavit.
An affidavit of a solicitor aware of the correct name of the CEO was sworn on 11 March 2016: Beetham Affidavit.
Section 306(1) of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”) provides as follows:
(1) Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.
The reference to the incorrect names of Ms Murphy and the CEO is curable under s.306(1) of the Bankruptcy Act as there is no substantial injustice caused to Mr Nyoni by the defect or irregularity, and Mr Nyoni could not have been misled as to the identity of the creditors set out in the Bankruptcy Notice: Adams v Lambert [2006] HCA 10; (2006) 228 CLR 409; (2006) 80 ALJR 679; (2006) 225 ALR 396; (2006) 3 ABC(NS) 835.
The Court is satisfied as to the identity of Ms Murphy and the CEO, and is also satisfied that both Ms Murphy and the CEO are true creditors of Mr Nyoni as referred to in the First Costs Order, Second Costs Order, Bankruptcy Notice and Petition.
Submissions
Both the Applicants and Mr Nyoni filed lengthy written submissions (“Applicants’ Submissions” and “Mr Nyoni’s Submissions” respectively), and both the Applicants and Mr Nyoni made further oral submissions at the hearing of the Petition. The Court has considered the Applicants’ Submissions and Mr Nyoni’s Submissions and the oral submissions in its consideration of the issues which appears below.
Consideration
Section 52 of the Bankruptcy Act
Section 52(1) and (2) of the Bankruptcy Act relevantly provides as follows:
(1) At the hearing of a creditor's petition, the Court shall require proof of:
(a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b) service of the petition; and
(c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
(2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:
(a) that he or she is able to pay his or her debts; or
(b) that for other sufficient cause a sequestration order ought not to be made;
it may dismiss the petition.
Approach to consideration of the application for a sequestration order
The Applicants must satisfy the Court of all the matters contained in s.52(1) of the Bankruptcy Act and Part 4 of the FCC Bankruptcy Rules. The Court may dismiss the Petition if Mr Nyoni is able to satisfy the Court of the matters in s.52(2) of the Bankruptcy Act.
The Court will therefore look to see, firstly, whether the requirements for the issuance of a sequestration order under s.52(1) of the Bankruptcy Act have been satisfied, then, secondly, whether Mr Nyoni has articulated any argument sufficient to satisfy the Court that he is able to pay his debts: Bankruptcy Act, s.52(2)(a), and, if not, then thirdly, whether there is some “other sufficient cause” which would enliven the Court’s discretion to dismiss the Petition: Bankruptcy Act, s.52(2)(b).
Satisfaction of requirements for issuing sequestration order
Pursuant to s.52(1) of the Bankruptcy Act, at the hearing of the Petition the Court requires proof of:
a)the matters stated in the Petition (for which purpose the Court may accept the affidavit verifying the Petition as sufficient);
b)service of the Petition; and
c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing,
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
On the basis of the various affidavits filed by the Applicants, as to which see [2]-[3] above, the Court accepts that there are affidavits:
a)verifying the Petition;
b)of search of court records;
c)of service of the Bankruptcy Notice;
d)of search of the National Personal and Insolvency Index; and
e)of debt still owed by Mr Nyoni,
which fulfil the various requirements of s.52(1) of the Bankruptcy Act and Part 4 of the FCC Bankruptcy Rules.
On the basis of the affidavits filed by the Applicants the Court is satisfied as to the matters required to be formally proved for the making of a sequestration order against the estate of Mr Nyoni: Bankruptcy Act, s.52(1).
Whether Mr Nyoni is solvent
Solvency means being “able to pay all … debts, as and when they become due and payable”: Bankruptcy Act, s.5(2). Solvency is relevantly expressed in terms of a debtor being “able to pay his or her debts”: Bankruptcy Act, s.52(2)(a).
If Mr Nyoni can prove to the Court that he is solvent the Court may dismiss the Petition: Re Sanders; Knudsen and Yates (t/a The Hargreaves Practice) v Sanders [2003] FCA 1079; (2003) 1 ABC(NS) 408 at [22] per Bennett J (“Re Sanders”).
Solvency requires that Mr Nyoni be able to pay debts as they fall due out of his own money. This includes both cash on hand and money reasonably quickly realisable by asset realisation. Temporary lack of liquidity will not generally constitute insolvency: Sandell v Porter& Anor (1966) 115 CLR 666; (1966) 40 ALJR 71; CLR at 670 per Barwick CJ.
Account must be taken of debts “which will fall due in the reasonably immediate future pursuant to existing obligations”: Re Sanders at [27] per Bennett J, and whether Mr Nyoni will be able to pay them: Re Sanders at [26] per Bennett J; International Alpaca Management Pty Ltd v Ensor [1999] FCA 72 at [8]-[10] per Katz J (“International Alpaca”); Bank of Australasia v Hill (1907) 4 CLR 1514; (1907) 14 ALR 51; CLR at 1527 per Griffith CJ. In this case that would include any costs orders made against Mr Nyoni which have not yet been quantified: see, for example, at [53], [78]-[79] and [91] below. Even where assets exceed liabilities it is possible to find that a person is not able to pay their debts within the meaning of s.52(2)(a) of the Bankruptcy Act: Re Sanders, affirmed on appeal in Sanders v Knudsen & Yates trading as The Hargreaves Practice [2004] FCAFC 305 at [14] per Whitlam, Branson and Sackville JJ; Re Lakatos; Ex parte Lakatos v Deputy Commissioner of Taxation (1996) 33 ATR 145. What has to be proved is that assets are available to be realised and capable of ready realisation likely to result in payment of outstanding debts within a reasonable time: Re Sanders. In assessing solvency the Court ought not take account of realisable assets required for Mr Nyoni to live a reasonably comfortable and dignified existence: International Alpaca at [15]-[16] per Katz J.
If Mr Nyoni is in a position to pay debts owed within a reasonable time, no sequestration ought be made: Re Sarina, Ex parte Council of the Shire of Wollondilly (1980) 43 FLR 163; (1980) 30 ALR 266; FLR at 165 per Deane J; Sarina v Council of the Shire of Wollondilly (1980) 48 FLR 372; (1980) 32 ALR 596; FLR at 376 per Bowen CJ, CA Sweeney and Lockhart JJ.
Mr Nyoni provided no evidence of his:
a)cash flow; or
b)assets and liabilities.
The Applicants provided evidence of Mr Nyoni’s liabilities by way of the First Costs Order and the Second Costs Orders, which indicate unpaid debts in the sum of $81,304.50.
It is plain upon a consideration of the matters set out above that Mr Nyoni is not solvent. Mr Nyoni led no evidence and did not demonstrate means by which he may pay his outstanding debts, either presently or within a reasonable time by the sale of realisable assets. The Petition cannot therefore be dismissed on the basis that Mr Nyoni is able to pay his debts.
Whether other sufficient cause for sequestration order not to be made
The term “other sufficient cause” in s.52(2)(b) of the Bankruptcy Act is construed broadly by the Courts: Totev v Sfar [2008] FCAFC 35; (2008) 167 FCR 193; (2008) 247 ALR 180; (2008) 5 ABC(NS) 691 at [87] per Cowdroy J; Totev v Sfar [2006] FCA 470; (2006) 230 ALR 236; (2006) 4 ABC(NS) 325 at [44] per Allsop J (“Totev 2006”). In Totev 2006 at [37] per Allsop J (citing Cain v Whyte (1933) 48 CLR 639; (1933) 6 ABC 117; (1933) 6 ALJ 457 (“Cain”)) the Federal Court observed that:
On proof of the matters in s 52(1) of the Act, the Court will generally proceed to make an order for sequestration. It is for the debtor to persuade the Court that the public interest in dealing with the insolvent debtor and the rights of individual creditors are outweighed by other considerations.
In Cain CLR at 648 per Rich J (with whom Starke, Dixon, Evatt and McTiernan JJ agreed: CLR at 648) the High Court, in dismissing an appeal, agreed with the judgment of the Court of Bankruptcy (District of Southern Queensland), which had observed as follows: CLR at 645-646:
…To my mind, the High Court of Australia did not intend to put a limit on the meaning of the words “other sufficient cause” in Dowling v. Colonial Mutual Life Assurance Society (1915) 20 CLR 509, and I do not propose to be the first to say that such wide words as “other sufficient cause” are necessarily limited to meaning a cause in the nature of fraud or abuse of the provisions of the bankruptcy law. I can well conceive that “other sufficient cause” might arise in connection with any particular case. To my mind, it is the duty of the Bankruptcy Judge to examine in each case, if the question is raised, whether there is other sufficient cause than the fact that the debtor is able to pay his debts in full, for refusing to make an order.
I rule then that I am fully entitled to examine the contention put forward by Mr. Philp on behalf of the debtor that there is, in the present case, other sufficient cause sufficient to justify the dismissal of this petition. I approach that question with the full appreciation that, prima facie, on proof of the matters mentioned in sec. 56 (2), the Court will proceed to make an order for sequestration, and that it is for the debtor to show some cause overriding the interest of the public in the stopping of unremunerative trading, and the rights of individual creditors who are unable to get their debts paid to them as they become due. Something has to be put before the Court to outweigh those considerations before it can be said that sufficient cause is shown against the making of a sequestration order. …
In Re Svir; Ex parte Commissioner of Taxation (1998) 83 FCR 314; (1998) 39 ATR 113; (1998) 154 ALR 710; FCR at 317 per Burchett J (“Svir”) the Federal Court (after referring to the above passage from Cain) highlighted the need to have regard to the interests of the public and creditors when assessing whether an “other cause” raised by an applicant is “sufficient” for the purposes of exercising its otherwise wide discretion under s.52(2) of the Bankruptcy Act:
This exposition of the law emphasises the width of the discretion conferred by the 1966 Act upon the Court. At the same time it points to a fundamental limitation imposed by the nature of the jurisdiction in bankruptcy, which requires the Court to keep in mind, not only the interests of the individual parties before it in the particular case, but also the public interest, which may be adversely affected by the propping up of insolvency. However, in the present case that factor does not provide the bar to an exercise of discretion in the debtor's favour that it would provide in many cases, since the debtor has a paucity of creditors, other than the petitioning creditor, who would be likely to have any reason for concern. Of course, that merely removes a bar; it does not provide a positive ground constituting “other sufficient cause” why a sequestration order ought not to be made.
In summary, it can be said that an “other sufficient cause” for the purposes of dismissing a creditor’s petition is not limited and that the Bankruptcy Act confers a discretion which in its terms is unconfined: Baker v Perpetual Trustee Company Limited [2012] FCA 553; (2012) 204 FCR 593 at [35] per Katzmann J.
Grounds in the Amended Notice of Opposition
The Amended Notice of Opposition sets out four grounds of opposition, each of which is dealt with below.
Ground 1
Ground 1 is that the Act of Bankruptcy relied upon by the creditors is an abuse of process.
The particulars of this ground are as follows:
a. Applicants commenced their petition in collusion with Paul Graham and Jarman McKenna, Counsel for Shire of Kellerberrin, Darren Friend, Stan McDonnel and Frank Peczka for the express purpose of sabotaging the respondent's appeal WAD734/2016, as shown by the Orders of the Honourable Justice Mortimer.
b. The role of the applicants is depicted in Nyoni v Shire of Kellerberrin (No 6) [2015] FCA 1294 (23 November 2015), Nyoni v Pharmacy Board of Australia [2015] FCA 196 (5 February 2015), Nyoni v Shire of Kellerberrin and Ors (WAD734/2010, current appeal) and, AAT and Federal Court). and
c. The evidence in these cases will show that applicants instituted proceedings for a purpose or to effect an object beyond that which the legal process offered to assist respondents in WAD734/2015, to whom they are inextricably linked. The Court ought to dismiss the Creditor’s Petition..
(Transcribed from the original without amendment. The Court notes that the appeal referred to is in fact WAD 734 of 2015: see Annexure A2 to the First Nyoni Affidavit).
In support of ground 1 Mr Nyoni submits (see Mr Nyoni’s Submissions at [2.1.1] to [2.1.5]) that:
a)the tort of abuse of process will lie where process of a court has been employed for a purpose other than that for which it was designed, providing that damage has been suffered. Every court has the power to stay proceedings where they amount to an abuse of the court's process;
b)a person who maintains or supports legal proceedings without any direct interest in them may be liable in damages under the tort of maintenance. Where the maintainer agrees to support proceedings in consideration for a “share” of the decision, this constitutes the tort of champerty. These actions will be defeated if the defendant can establish a common interest sufficient to justify the maintenance;
c)Ms Murphy fabricated criminal charges against Mr Nyoni in 2013. That has led to proceedings P63 of 2015, WAD 347 of 2014 and WAD 734 of 2015 which are still on foot. The chronology of events discloses that the Applicants only applied for a sequestration order to undermine Mr Nyoni's appeal;
d)in order to succeed in an action for collateral abuse of process it is not necessary to allege or prove that the initial proceeding has terminated in favour of Mr Nyoni, or that there was no reasonable and probable cause for instituting the initial proceeding. It is however essential for Mr Nyoni to show that the Applicants instituted proceedings for a purpose or to effect an object beyond that which the legal process offered. Such a purpose is of crucial importance. It is not sufficient to assert that the proceedings were instituted with an improper motive. The ulterior objective needs to be identified, and it also needs to be able to be seen as the predominant purpose of those proceedings and as outweighing any legitimate purpose that they might otherwise have; and
e)the relevant proceedings in the High Court, Federal Court and the Administrative Appeals Tribunal (“AAT”) establish that the principles in Williams & Ors v Spautz (1992) 174 CLR 509; (1992) 61 A Crim R 431; (1992) 66 ALJR 585; (1992) 107 ALR 635; (1992) 34 AILR 373 (“Williams”) are engaged, and that the Applicants are engaged in an abuse of process and the Petition ought to be dismissed.
In relation to ground 1 the Applicants submit (see Applicants’ Outline of Submissions at [41]-[45] and [47]) as follows:
a)the onus of proof as to an abuse of process is on Mr Nyoni: Williams;
b)Williams also confirms that Mr Nyoni must show that the predominant purpose of the Applicants using the legal process is one other than that for which it was designed;
c)the Second Nyoni Affidavit at [4(a)] asserts that the abuse of process arises where other proceedings and appeals involving the Applicants remain on foot;
d)in order for Mr Nyoni to be successful on this ground, there ought to be evidence of the Applicants’ state of mind as to improper motive for the Court to infer that there is an improper motive: Bride & Anor v KMG Hungerfords (A Firm) (unreported, Full Court of the Federal Court of Australia, No WAG 149 of 1997, 23 April 1998) (“Bride”);
e)the Applicants deny that there was any improper motive in the issue of the Petition, or any other proceedings. There is no evidence before the Court as to state of mind so as to find that there was an improper motive on behalf of the Applicants; and
f)Mr Nyoni has failed to provide evidence of any proceedings which involve the Applicants which ought stop the Applicants from proceeding with the Petition.
Consideration of ground 1
In considering whether there is an abuse of process for the purposes of establishing “other sufficient cause” under s.52(2)(b) of the Bankruptcy Act it is necessary to start from the position that the Applicants have a legal right to proceed with the Petition, and that the power of the Court to dismiss the Petition is discretionary, which means that it is not necessarily the case that proof of abuse of process entitles Mr Nyoni to have the Petition dismissed: Rozenbes & Ors v Kronhill & Anor (1956) 95 CLR 407; (1956) 18 ABC 57; [1956] ALR 1004; (1956) 30 ALJ 470; CLR at 419 per Dixon CJ, Webb and Fullagar JJ (“Rozenbes”).
As to the criterion for abuse of process, and the onus to be satisfied, the relevant law is well established. In Williams at CLR 529 per Mason CJ, Dawson, Toohey and McHugh JJ, the majority judgment of the High Court said as follows:
It has been suggested that the criterion for abuse of process is whether the improper purpose is the sole purpose of the moving party. However, in more recent times it has been said, in our view correctly, that the predominant purpose is the criterion. That was the test applied by Lord Denning in Goldsmith v. Sperrings Ltd and by the English Court of Appeal in Metall & Rohstoff v. Donaldson Inc. In giving the judgment of the Court in the latter case, Slade LJ. observed:
“[A] person alleging such an abuse must show that the predominant purpose of the other party in using the legal process has been one other than that for which it was designed.”
It is, of course, well established that the onus of satisfying the court that there is an abuse of process lies upon the party alleging it. The onus is “a heavy one”, to use the words of Scarman LJ. In Goldsmith v. Sperrings Ltd. and the power to grant a permanent stay is one to be exercised only in the most exceptional circumstances.
The creditors must have a real intention to use the bankruptcy process for an illegitimate purpose and there must be real exertion of pressure: Rozenbes at CLR 417 per Dixon CJ, Webb and Fullagar JJ. There is an abuse of process where the real purpose is to attain some other and improper end, and not a recognised lawful end: Dowling v Colonial Mutual Life Assurance Society Ltd (1915) 20 CLR 509; (1915) 21 ALR 425; CLR at 523-525 per Isaacs J (“Dowling”). In Dowling the creditor sought the right to subject the debtor to an examination after sequestration to identify persons who had caused the debtor to publish matter defamatory of the creditor. In King v Henderson [1898] AC 720 a creditor petitioned for sequestration so as to obtain a dissolution of a partnership. As was observed in Williams at CLR 534 per Brennan J:
In both instances, sequestration was the primary object intended. In both cases, the creditor had an ulterior motive for pursuing his legal rights, but the ulterior motive did not affect the character of the result which the plaintiff intended the proceedings to achieve. The pursuit of a legitimate remedy is not converted to an abuse of process by an unworthy and ulterior motive.
Whether there is conduct amounting to an abuse of process is a question of fact, and one to be determined by a strict examination of the conduct of the creditor or creditors said to be abusing the process of the court: Rozenbes at CLR 417 per Dixon CJ, Webb and Fullagar JJ. Such an examination requires evidence of the state of mind of a creditor or creditors as to the improper motive: Rozenbes at CLR 418-419 per Dixon CJ, Webb and Fullagar JJ. A court will not be willing to infer improper motive if there is no evidence of the creditor’s state of mind as to the claimed motive: Bride. In Bride, in circumstances where there was no prospect of any distribution to creditors, within days of the sequestration order being made the creditor had applied to the Supreme Court of Western Australia for orders that Mr Bride (and the other appellant in the action before the Full Court of the Federal Court of Australia) provide substantial security for costs, and in so doing relied upon the fact that the sequestration order had been made. It was submitted that the creditor was seeking to delay, defeat and thwart pending Supreme Court actions by Mr Bride. The Full Court of the Federal Court held that “such an ulterior motive would not … disentitle the respondent from obtaining a sequestration order”, particularly where the respondent’s costs in earlier Supreme Court proceedings, and substantial costs orders in other matters, remained unpaid: Bride at page 9 per Carr, Branson and RD Nicholson JJ. The Full Court of the Federal Court in Bride cited In re King; Ex parte The Commercial Bank of Australia Limited (No 2) [1920] VLR 490; (1920) 26 ALR 272; (1920) 43 ALT 3; VLR at 510 per Irvine CJ and Mann J (“King”). In King the Full Court of the Victorian Supreme Court at VLR 510 per Irvine CJ and Mann J said that:
We are of the opinion that there is no evidence upon which we should be justified in finding that the bank’s motive in these proceedings is to stifle the litigation referred to; and secondly, that even if such a motive were, upon proper evidence, found to exist, it would constitute no ground for refusing the order absolute, if, apart from such a motive, the bank is entitled to the order.
In Re Peter Anthony Coyne; Ex parte: Binningup (South) Pty Ltd (unreported, Federal Court of Australia, No P863 of 1992, FED No. 859, 10 November 1992) at page 15 per French J the Federal Court applied King in finding that:
Mr Coyne says that the present petition is brought for a collateral purpose evidenced by the petitioning creditor's refusal of the tender of the amount of the judgment sum. He points to the fact that the directors of Binningup (South) Pty Ltd have an interest in his being made bankrupt as it would stifle litigation he has pending against related companies. If there be some such motive, that is of itself not a reason for refusing the order sought if apart from such motive the creditor is entitled to the order …
Looking then at particular (a) of ground 1 it asserts that the Petition was commenced in collusion with Counsel for the Shire of Kellerberrin (who are the first respondent in WAD 734 of 2015) and Messrs Friend, McDonnel and Peczka, who are the second, third and fourth respondents in WAD 734 of 2015, and that they colluded “for the express purpose of sabotaging” Mr Nyoni’s appeal in WAD 734 of 2015 “as shown by the Orders” of the Federal Court constituted by Mortimer J. Annexure A1 to the First Nyoni Affidavit indicates that the Notice of Appeal in WAD 734 of 2015 was filed on December 11, 2015. The Petition in these proceedings was filed on 2 February 2016: see [1] above. Plainly, the Petition was filed after the Notice of Appeal in WAD 734 of 2015. That fact alone does not, however, establish improper purpose in filing the Petition.
The thrust of particular (a) is that the alleged express purpose of sabotaging Mr Nyoni’s appeal is shown by the Federal Court orders of Mortimer J. The only Federal Court orders of Mortimer J in evidence in these proceedings are the orders at Annexure A2 of the First Nyoni Affidavit. Those orders are dated 19 February 2016, and provide as follows:
1. The appellant's oral application to join Ms Theresa Beech and Mr Robert Bateman as respondents to the appeal be dismissed.
2. The appellant's oral application to set aside evidence in the appeal be dismissed.
3. The appellant's oral application to incorporate into the appeal the seeking of relief relating to the sale of 101 Bedford Street Kellerberrin be dismissed.
4. The First, Second, Third and Fourth Respondents' application to stay the appeal pending the outcome of proceeding PEG 40 of 2016 be dismissed.
5. The appellant is to file and serve an amended notice of appeal in accordance with the matters discussed with Justice Mortimer at the case management hearing by 4:00pm on 4 March 2016.
6. The case management hearing is adjourned to 2:30 pm (AWST) on 10 March 2016.
There is nothing on the face of the orders which indicates any collusion by the persons referred to by Mr Nyoni, let alone collusion for the purpose of sabotaging the appeal in WAD 734 of 2015. The Court notes that:
a)order 1 dismissed an application by Mr Nyoni to join Ms Beech to the appeal in WAD 734 of 2015; and
b)an application to stay the appeal in WAD 734 of 2015 pending the outcome of these proceedings, an application made by each of the first four respondents therein, the Shire of Kellerberrin and Messrs Friend, McDonnel and Peczka, was also dismissed.
It might be deduced from those orders that the Federal Court considered that Ms Beech had no role to play in respect of the matters the subject of the appeal in WAD 734 of 2015, and that there was no impediment to either the appeal in WAD 734 of 2015 or these proceedings both moving forward concurrently and independently. Nothing in the Federal Court’s orders of 19 February 2016 indicates an express purpose by anyone of sabotaging the appeal in WAD 734 of 2015. That finding is also supported by the Federal Court’s Reasons for Judgment in Nyoni v Shire of Kellerberrin (No 7) [2016] FCA 135 (“Nyoni (No 7) delivered ten days later on 1 March 2016. In those Reasons for Judgment the Federal Court expressly referred to Mr Nyoni’s oral application to join Ms Beech to the appeal in WAD 734 of 2015, and the dismissal of that application: Nyoni (No 7) at [9] per Mortimer J. The Federal Court also observed that Mr Nyoni had made claims against Ms Beech in other proceedings which had been dismissed as having no reasonable prospect of success: Nyoni (No 7) at [10] referring to Nyoni v Chee Koon Hee (No 4) [2013] FCA 948, and in particular at [41] per Gilmour J. At [11]-[12] per Mortimer J in Nyoni (No 7) it was said that:
11 Gilmour J observed that Mr Nyoni had put the respondents to the expense of defending claims which were either hopeless or devoid of any reasonable prospects of success, and ordered indemnity costs against Mr Nyoni.
12 Mr Nyoni sought leave to appeal from Gilmour J’s decision, which was denied: see Nyoni v Chee Koon Hee (No 2) [2014] FCA 83. Mr Nyoni has had his opportunities to take action against Ms Beech and Mr Bateman. There was in any event no possible utility in the circumstances of this matter in joining to an appeal persons who were not parties to the proceedings below.
In Nyoni (No 7) the Federal Court went on to deal with a written interlocutory application by Mr Nyoni for a stay of the costs orders made by the Federal Court in the judgment there appealed from, that being Nyoni v Shire of Kellerberrin (No 6) [2015] FCA 1294 (“Nyoni (No 6)”) (being WAD 316 of 2010). In the course of determining that issue the Federal Court in Nyoni (No 7) made the following observations at [18]-[20] per Mortimer J:
18 This case is not similar to Wu, where (as the second to fourth respondent submitted) the judgment creditor was also the petitioning party in the appellant’s bankruptcy proceeding. On the evidence before me, the bankruptcy petition brought by Ms Beech and Ms Murphy relates to judgments in their favour in respect of separate proceedings, albeit that there may be some underlying factual connection with the current appeal. I certainly accept that is how Mr Nyoni perceives the situation. However, where a successful respondent seeks to enforce a costs order by way of a creditor’s petition in bankruptcy, both the purpose and effect of rendering an appeal nugatory is apparent.
19 This is not a case where I am satisfied the first to fourth respondents are intent on pursuing the bankruptcy of Mr Nyoni to attempt to frustrate his right of appeal. There is no such evidence before me. I accept Mr Nyoni may draw such connections but I see no objective basis in the evidence for them. Nor, as I say, do I have any evidence that Mr Nyoni’s financial circumstances are such that it is only if the costs orders are stayed that he will be able to pursue his appeal. It seems to me the bankruptcy proceedings against him by Ms Beech and Ms Murphy may pose an independent hurdle, but that is a matter which has yet to become clear.
20 This proceeding was commenced in 2010. Mr Nyoni has also had proceedings in the Supreme Court of Western Australia concerning the same subject matter: Hee v Nyoni [2014] WASC 44 and Nyoni v Hee [2014] WASCA 84. It is apparent from other cases to which I have referred that Mr Nyoni has been litigating about the demise of his pharmacy business in Kellerberrin over a substantial period of time. Substantial costs orders, including indemnity costs orders, have been made against him in a number of proceedings. There is nothing in the evidence before me to suggest that the presence of a further costs order, and the prospect that it may be enforced, will of itself have any particular chilling or practical effect on the exercise by Mr Nyoni of his right of appeal.
Nyoni (No 7) also deals with the contentions made by Mr Nyoni in particulars (b) and (c) of ground 1. Nyoni (No 7) deals specifically with the judgment under appeal in WAD 734 of 2015, namely Nyoni (No 6), and more generally with other litigation “about the demise of … [Mr Nyoni’s] pharmacy business in Kellerberrin over a substantial period of time”: Nyoni (No 7) at [20] per Mortimer J. It is significant that in Nyoni (No 7) at [19] per Mortimer J the Federal Court found that:
a)whilst there was some underlying factual connection between these bankruptcy proceedings and the appeal in WAD 734 of 2015, the Petition itself related to judgments in favour of Ms Murphy and Ms Beech in proceedings separate to the proceedings giving rise to the appeal in WAD 734 of 2015; and
b)there was no objective evidence that the Shire of Kellerberrin or Messrs Friend, McDonnel or Peczka were pursuing Mr Nyoni’s bankruptcy in an attempt to frustrate his right of appeal.
In circumstances where the Federal Court has drawn conclusions in relation to the very issues which are raised by ground 1, this Court ought to consider itself bound by those findings, or at the very least, follow them having regard to the necessity for judicial comity between higher and lower level federal courts: Suh & Ors v Minister for Immigration & Citizenship & Anor [2009] FCAFC 42; (2009) 175 FCR 515; (2009) 108 ALD 470 at [29] per Spender, Buchanan and Perram JJ; Minister for Immigration & Multicultural & Indigenous Affairs v SZANS [2005] FCAFC 41; (2005) 141 FCR 586; (2005) 215 ALR 733; (2005) 86 ALD 583 at [38] per Weinberg, Jacobson and Lander JJ (where it was said that the “correct principle is that a judgment [of the Federal Court] ought to be followed [by this Court – then the Federal Magistrates Court] unless it is plainly wrong”). This Court is also bound by authoritative obiter of the Federal Court, irrespective of the capacity in which it is pronounced by the Federal Court: Algama v Minister for Immigration & Multicultural Affairs [2001] FCA 1884; (2001) 115 FCR 253; (2001) 194 ALR 37 at [50] per Whitlam and Katz JJ (with whom French J agreed); Communications, Electrical, Electronic, Information, Postal, Plumbing & Allied Service Union Of Australia(Western Australian Division) v Fortescue Metals Group [2016] FCCA 1227; (2016) 310 FLR 1 at [55] per Judge Lucev.
There is nothing in the circumstances in Nyoni (No 7) which provides a relevant point of distinguishment between the matters under consideration in Nyoni (No 7) at [18]-[20] per Mortimer J and presently before this Court. It follows, therefore, that this Court must find that no improper purpose is made out by reason of the particulars to ground 1. The Court further observes that, in any event, the same conclusion would have to have been reached on the facts: the Applicants, to whom Mr Nyoni is indebted in a not inconsiderable sum ($81,304.50), are entitled to present the Petition and have it heard in circumstances where the debt arises from costs awarded in proceedings in the Federal Court. Further, there is no evidence (apart from mere assertion by Mr Nyoni) that the Applicants are bringing these proceedings for any purpose other than the legitimate end of obtaining a sequestration order.
The assertion by Mr Nyoni that the Ms Murphy fabricated criminal charges against Mr Nyoni in 2013 and that that has led to various proceedings in the High Court and Federal Court does not establish that the present proceedings are being brought for an improper purpose. In any event, the nature of the alleged charges, and how it is that they might establish an improper purpose for the purposes of these proceedings, is not the subject of any evidence in either the First or Second Nyoni Affidavits. Thus, no proper factual basis for the assertion has been made out.
In all of the above circumstances, the heavy onus to establish abuse of process as the basis for establishing other sufficient cause under s.52(2)(b) of the Bankruptcy Act has not been met by Mr Nyoni in relation to ground 1. Ground 1 is therefore not made out.
Ground 2
Ground 2 asserts that Mr Nyoni has applied to the High Court, Federal Court and AAT to have the judgment debt the subject of the Petition set aside and has a defence to the claim made by the Applicants such that the Petition should be dismissed.
The particulars to ground 2 are as follows:
Apart from the setting aside of the judgments upon which the Creditor’s Petition is basd, respondent has huge claims against each of the respondents from these proceedings, such that the sequestration order ought to be refused by reason of the counterclaims.
(Transcribed from the original without amendment).
In support of ground 2 Mr Nyoni submits (see Mr Nyoni’s Submissions at [2.2.1] to [2.2.3]) that:
a)the proceedings in WAD 316 of 2010, WAD 154 of 2013, WAD 382 of 2013, WAD 357 of 2014 and WAD 734 of 2015 have the Applicants inextricably linked to the Petition so that it ought to be dismissed on the basis that Mr Nyoni has substantial claims against each of the Applicants in the proceedings referred to;
b)an important distinction is to be made between a cross-claim which is likely to succeed and a cross-claim which is a bona fide and reasonably arguable claim. In the former case, where it is established that the claim is likely to succeed, such a claim may warrant the refusal of a sequestration order: Rigg v Baker [2006] FCAFC 179; (2006) 155 FCR 531; (2006) 236 ALR 629; (2006) 4 ABC(NS) 419 at [66] per French J; Singh v Deputy Commissioner of Taxation [2011] FCA 889 (“Singh”) at [14] per Collier J; and
c)where it is established that a claim is likely to succeed, the case may warrant refusal of a sequestration order. Cases in this category that fit within s.52(2)(b) of the Bankruptcy Act include: St George Bank Ltd v Helfenbaum [1999] FCA 1337 at [13] per Sundberg J; ICM Agriculture Pty Ltd v Young [2009] FCA 1169; (2009) 260 ALR 515; (2009) 7 ABC(NS) 97 at [85] per Lindgren J; Hilellis v Mobil Oil Australia Ltd [2000] FCA 1139 at [8] per Hely J; Singh at [14] per Collier J; Totev 2008 at [85]-[87] per Cowdroy J. Proceedings WAD 257 of 2014, WAD 734 of 2015 and P64 of 2015, together with the AAT process all establish that a claim is likely to succeed, and warrant refusal of a sequestration order.
The Court notes that in the First Nyoni Affidavit under the heading “Grounds of opposition to application or petition” Mr Nyoni says that:
The debtor has applied to the … Federal Court of Australia … to have the judgment debt the subject of the petition set aside and has a good defence to the claim filed in the Federal Circuit Court by the creditor such that the petition should be dismissed.
The First Nyoni Affidavit also, under the heading “Principles Applicable to Setting Aside Bankruptcy Petition”, at [5(b)] says that:
Where each of the Applicants are accused of gross misconduct in other proceedings by the Respondent, such as Jillian Murphy in the High Court, the CEO of Health in the Federal Court, Theresa Beech in the current Nyoni v Shire of Kellerberrin appeal on the setting aside of WAD154 of 2013, orders of which gave rise to this Bankruptcy proceeding, it is an abuse of process for applicants to exercise wilful blindness or selective memory loss on all these serious matters, in their effort, working in concert with respondents in WAD316/2010 and WAD734204 to pervert the course of justice.
(Transcribed from the original without amendment).
The Court notes that two days after the hearing of this matter the High Court held in Nyoni v Murphy [2016] HCASL 67 that Mr Nyoni’s application for special leave in that matter (being P64 of 2015) be dismissed, as it did “not raise any matter which would warrant the grant of special leave”: at [1] per Bell and Gageler JJ.
In relation to ground 2 the Applicants submit (see Applicants’ Submissions at [27]-[30]) as follows:
a)the Applicants are not aware of any application made by Mr Nyoni to the High Court, Federal Court or the AAT to set aside the “judgment” which forms the basis of the debt set out in the Petition;
b)Mr Nyoni has failed to provide any evidence of any proceedings filed by him in the High Court, Federal Court or the Administrative Appeals Tribunal to have any judgment set aside; and
c)even if there was any application as referred to by Mr Nyoni at paragraph 1 of the Amended Notice of Opposition, which is denied by the Applicants, the Applicants submit that:
i)an application to set aside a judgment is not a ground to dismiss the Petition;
ii)the mere fact that an appeal from a judgment is pending is not by itself a sufficient ground for staying the proceedings upon the Petition: Bryant v Commonwealth Bank of Australia & Anor (1996) 70 ALJR 306; (1996) 134 ALR 460; (1996) 90 LGERA 126; and
iii)Mr Nyoni would need to provide evidence to the Court of the prospects of any appeal: Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137.
Consideration of ground 2
Relevant and helpful in a consideration of this ground are the observations of the Federal Court in Deputy Commissioner of Taxation v Cumins [2008] FCA 353; (2008) 70 ATR 855; (2008) 6 ABC(NS) 12; (2008) 101 ALD 78 at [16]-[18] per Gilmour J (“Cumins”) where the Federal Court said as follows:
16 The Court is entitled to inquire whether a judgment is founded on a real debt. In general, a court exercising jurisdiction should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings, provided that the appeal is based on genuine and arguable grounds: Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 148; Bayne v Baillieu (1907) 5 CLR 64.
17 The mere fact that an appeal has been lodged does not without more, give rise to a duty to postpone the hearing of the petition: in Re Flatau: Ex Parte Scotch Whisky Distillers (1882) 22 QBD 83 (CA) at 84-85; nor will the court as a matter of course inquire into the validity of a judgment debt: Wren v Mahony (1972) 126 CLR 212 at 222-223.
18 The test to be applied has been described variously. The judgment debtor must point to grounds having “a real chance of success on appeal”: Re Lewin: Ex Parte Milner (1986) 11 FCR 312 at 318; or ensure “that substantial reasons are given for questioning” whether there was in truth a debt: Wren 126 CLR 212 at 225. It is not enough to rely upon mere assertion. The onus is on the applicant for a stay to show the existence of a genuine dispute by adducing evidence establishing the substantial nature of the grounds of challenge: Verma, Virendra Kumar v Deputy Commissioner of Taxation [1983] FCA 388 referred to with approval in Re Verma 4 FCR 181 at 187.
Mr Nyoni cannot merely point to an appeal or other proceedings and assert a right to have a Petition stayed or dismissed: grounds that point to a real chance of success must be set out: Re Lewin; Ex parte Milner (1986) 11 FCR 312; (1986) 67 ALR 591; FCR at 318 per Pincus J. Likewise, “[m]ere assertion is not sufficient”, and Mr Nyoni must establish the substantial nature of the grounds of challenge: Liang v LV Property Investments Pty Ltd [2015] FCA 1057 at [57] per Beach J (“Liang”), citing Re Verma, Ex parte Deputy Commissioner of Taxation (1984) 4 FCR 181; (1984) 16 ATR 18; FCR at 187 and 188 per Beaumont J; Cumins at [18] per Gilmour J. The Federal Court further observed in Liang at [61] per Beach J as follows:
61 It is important to emphasise that a judgment debtor does not establish a bona fide and reasonably arguable claim by merely producing a statement of claim in a separate proceeding or by pointing to such litigation or indeed by bare assertion; Ms Liang’s position falls into that last category. There must be sufficient evidence or other material to show that it is reasonably arguable or of substance. This may require prima facie verification of the key factual elements as well as demonstrating legal tenability.
Mr Nyoni has provided no evidence of the alleged proceedings asserted to have been commenced in order to set aside the judgments giving rise to the First and Second Costs Orders. There is, in these proceedings, no evidence of any originating process, statement of claim, response or defence, or any affidavits in any such proceeding or proceedings. Nor is there any, or any cogent, summary of what is asserted in the proceedings Mr Nyoni says are afoot. As is evident from the authorities the Court must have some proper evidence from which it can make an assessment as to the prospects of success of any application to set aside the judgments giving rise to the First and Second Costs Orders. Here, there is nothing.
Mr Nyoni’s assertion that there are “huge claims” was not properly particularised when made, has not been particularised since, and has not been established, either at all or to the requisite degree, in these proceedings. As such, the assertion cannot succeed: Liang at [57] per Beach J.
In the above circumstances, Mr Nyoni has not established that he has:
a)taken proceedings to set aside the judgments giving rise to the First and Second Costs Orders; or
b)taken other proceedings which might result in successful claims against the Applicants,
but even if there are such proceedings afoot, there is no evidence in these proceedings which establishes the reasonably arguable grounds, or grounds of some substance, necessary for the setting aside of the judgments giving rise to the First and Second Costs Orders. In the circumstances, ground 2 is not made out.
Ground 3
Ground 3 is that the bankruptcy would ultimately be an exercise in futility, a waste of public money and merely an instrument of oppression as the debt claimed by the Applicants arises from the legal costs claimed by the Applicants only, and that a sequestration order ought to therefore be refused under s.52(2)(b) of the Bankruptcy Act. The Court notes that ground 3 is not an assertion that the Court has a discretion to dismiss the Petition because Mr Nyoni has no assets, as that is the substance of ground 4.
The particulars to ground 3 and Mr Nyoni’s Submissions (see Mr Nyoni’s Submissions at [2.3.1]) are the same, namely that:
The findings in Nyoni v Shire of Kelle[r]berrin (No 6) [2015] FCA 1294 …, Nyoni v Pharmacy Board of Australia [2015] FCA 196 … , affidavit of Emson Nyoni filed 28 February 2016 and the Creditor’s Petition, … and the orders of Justice Mortimer of 19 February 2015 [2016 – see [51] above], establish another sufficient cause for dismissal of the Petition pursuant to Bankruptcy Act 1966 (Cth.) s.52(2)(b).
In relation to ground 3 the Applicants’ submit (see Applicants’ Submissions at [33]-[34]) that:
a)this ground of opposition is expanded on by Mr Nyoni at [4(c)] of the Second Nyoni Affidavit, where he states that the “creditors have caused the alleged debts through their claim of the related costs in the same proceedings”; and
b)whilst the Applicants do not necessarily understand Mr Nyoni’s argument in relation to ground 3, they say:
i)they were each joined as respondents to the First and Second Proceedings commenced by Mr Nyoni which resulted in the First and Second Costs Orders;
ii)each of the Applicants had an entitlement to defend the First and Second Proceedings commenced by Mr Nyoni;
iii)each of the Applicants were successful in their defence of the First and Second Proceedings and, were entitled to press for costs orders against Mr Nyoni; and
iv)the Federal Court was satisfied that costs orders ought to be made in favour of the Applicants as against Mr Nyoni, and made the First and Second Costs Orders, with those costs having been subsequently taxed by the Federal Court.
Consideration of ground 3
It is appropriate to observe that ground 3 is difficult to comprehend, both in its terms, and in relation to the particulars and submissions.
The applicants, by reason of the Act of Bankruptcy are entitled to file the Petition and seek that a sequestration order be made against Mr Nyoni. As is often the case in bankruptcy proceedings, the debts concerned are judgment debts, in this case arising from the First and Second Costs Orders. Given, as the Court has already concluded, that there is no evidence in these proceedings of an application to set aside the judgments giving rise to the First and Second Costs Orders, and certainly no evidence of any such applications having any substance or a reasonable prospect of success, there is no reason to have regard to the fact that the underlying debts arise from legal costs as a vitiating factor, or one which might constitute other sufficient cause for the purposes of s.52(2)(b) of the Bankruptcy Act. Thus, if what is being said in ground 3 is that it would be an exercise in futility, a waste of public money and merely an instrument of oppression to have regard to the First and Second Costs Orders as the basis for the issuance of a sequestration order, and that that would be wrong because the judgments upon which the First and Second Costs Orders are based will be set aside, there is, as set out above: see [66]-[70] above, no basis for making a finding to that effect in these proceedings. If that was what was intended by ground 3, then ground 3 cannot be made out.
Ground 3 cannot be made out on the basis of the findings in Nyoni (No 6), Nyoni v Pharmacy Board of Australia [2015] FCA 196 (“Pharmacy Board (No 1)”), Mr Nyoni’s First Affidavit or the orders of Justice Mortimer of 19 February 2016.
Insofar as the orders of Justice Mortimer of 19 February 2016 and Nyoni (No 6) are concerned the Court has dealt with those above: see [50]-[58] above.
In Pharmacy Board (No 1) the Federal Court refused to grant interlocutory injunctive relief to Mr Nyoni who complained about publication on the website of a health practitioner regulatory body of a list of conditions imposed by the Pharmacy Board of Australia upon Mr Nyoni’s licence to practise as a pharmacist. Mr Nyoni alleged in those proceedings that that conduct was misleading and deceptive under the Australian Consumer Law contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth). The application for injunctive relief was dismissed because there was no urgent need for the injunction pending trial, nor was there evidence that damages would not be an adequate remedy: Pharmacy Board (No 1) at [11] and [13]-[14] per Siopis J. The costs of Pharmacy Board (No 1) were in the cause, save for an order that Mr Nyoni pay each of the solicitors for the other parties costs in the sum of $100 by reason of Mr Nyoni’s lateness in attending the hearing: Pharmacy Board (No 1) at [15] per Siopis J. The Court notes that subsequently in Nyoni v Pharmacy Board of Australia (No 2) [2016] FCA 1397 (“Pharmacy Board (No 2)”) Mr Nyoni’s application was dismissed as against the second respondent in those proceedings as having no reasonable prospect of success, and Mr Nyoni was ordered to pay costs, including reserved costs, on an indemnity basis. In Nyoni v Pharmacy Board of Australia (No 3) [2016] FCA 1398 (“Pharmacy Board (No 3)”) a further application for an interlocutory injunction was dismissed, with costs awarded against Mr Nyoni.
The judgment in Pharmacy Board (No 1) (and the subsequent judgments in Pharmacy Board (No 2) and Pharmacy Board (No 3)) appear to arise from Mr Nyoni’s ongoing concerns with respect to conditions imposed upon his registration as a pharmacist, and bear no relation to the debts arising from the First and Second Costs Orders which are the subject of these proceedings. Therefore, there is nothing in Pharmacy Board (No 1) which assists Mr Nyoni in these proceedings, and in particular in relation to ground 3. If anything, it harms Mr Nyoni’s case because Pharmacy Board (No 1), together with the subsequent cases of Pharmacy Board (No 2) and Pharmacy Board (No 3), demonstrate that there are still further costs orders against Mr Nyoni, including costs orders on an indemnity basis, which have been made in other proceedings in favour of persons other than the Applicants.
There is otherwise nothing in the Nyoni First Affidavit which assists Mr Nyoni in relation to ground 3.
Nothing in the grounds or particulars or submissions concerning ground 3 gives rise to any basis for there being an “other sufficient cause” sufficient to refuse the sequestration order and dismiss the Petition. Ground 3 is not made out.
Ground 4
Ground 4 is that Mr Nyoni’s impecuniosity is a direct result of the Applicants’ conduct, the subject of the complaints in the relevant proceedings.
The particulars to ground 4 are as follows:
Respondent submits that the Court has the discretion to dismiss a Creditor’s Petition where the Court is clearly convinced that there cannot be any assets or any prospect of any coining into existence, the Court can refuse to make an order. See Radibh v Bank of New Zealand (1993) 45 FCR 101 (“Radich”).
(Transcribed from the original without amendment).
Mr Nyoni’s submissions in support of ground 4 are identical to his particulars: see Mr Nyoni’s Submissions at [2.4.1.].
In relation to ground 4 the Applicants’ submit (see Applicants’ Submissions at [36]-[39]) as follows:
a)Mr Nyoni appears to concede that he is impecunious;
b)the Court has the discretion to dismiss the Petition if the Court is clearly convinced (and not merely by a statement of Mr Nyoni) that there cannot be any assets or any prospect of any coming into existence: Radich v Bank of New Zealand (1993) 45 FCR 101; (1993) 116 ALR 676 (“Radich”);
c)the Court could not be satisfied as to the asset position of Mr Nyoni in circumstances where he has not put any evidence of his financial position, including details of his assets and liabilities, before the Court; and
d)in any event, it is in the interests of all creditors that a sequestration order be made against Mr Nyoni so that an independent trustee appointed to the bankrupt estate can undertake a full examination as to Mr Nyoni’s affairs and ascertain if there are in fact any assets that are available to creditors. This was the approach favoured in Radich.
Consideration of ground 4
In Re Betts; Ex parte Betts [1897] 1 QB 50 (“Betts”) at 52 the English Court of Appeal observed that:
If the Court is clearly convinced, not merely by the statement of the debtor, but from all of the circumstances of the case, that there cannot be any assets or any prospect of any coming into existence, and that, if such a receiving order is made, the only effect will be a mere waste of money and costs, then in such a case the Court has a discretion in the matter, and will be justified in exercising that discretion by refusing to make the order.
In Radich it was held that it can be sufficient to justify refusing a sequestration order if no assets will be available in an Australian bankruptcy due to a pre-existing foreign or local receiving or bankruptcy order: Radich at 112-114 per Einfeld J and 123-127 per Foster and Drummond JJ.
Courts generally exhibit a reluctance, however, to refuse a sequestration order on discretionary grounds associated with a debtor’s lack of assets because “it may only be after sequestration, with a full investigation by a trustee in bankruptcy including a possible public examination of the bankrupt and other persons, that assets come to light”: Radich at 112 per Einfeld J citing Re Leonard; Ex parte Leonard [1896] 1 QB 473 at 475 per Lord Esher MR (“Leonard”): Leonard was approved in Bayne v Blake(No 2) (1909) 9 CLR 360 at 364 per Griffiths CJ (“Bayne (No 2)”). In Bayne (No 2) at 364 per Griffiths CJ (Barton and O’Connor JJ concurring at 365) the High Court observed that:
We have been asked now to allow a further ground of appeal to be taken, viz., that there is no reason to think that there are any assets in the estate of either of the appellants. First of all, there is no evidence before us that that is the true state of the facts. But, if it were, that that is a ground for not making an order for sequestration is conclusively negatived by In re Leonard; Ex parte Leonard. As pointed out in that case, when a petition is presented it is impossible to say whether there will prove to be any assets or not. “All the petitioning creditor” said Lord Esher, M.R. “then knows or need know is that a debt is owing to him, and that, after taking the necessary steps to procure payment of that debt, he cannot get payment of it; and therefore he asks that the debtor may be made bankrupt.
“The Court cannot at that stage tell whether the proceedings in bankruptcy will have no result. If the debtor is made bankrupt, there will be a public examination of him, and then it may be ascertained whether he has any assets. At the time of the petition and adjudication the Court has not the proper materials for judging whether there are assets or not.”
(Footnotes omitted).
In Leonard and Bayne (No 2) it appears that there was not a refusal to issue a sequestration order on the basis of a lack of assets, and Betts was distinguished on the basis that it was a case in which a debtor having no assets was held to be a ground for refusing to make him bankrupt for a second time, and thereby avoiding disputes between two sets of trustees: Bayne (No 2) at 364-365 per Griffiths CJ.
No matter which approach is adopted in these proceedings, that is:
a)whether Bayne (No 2) is followed on the basis that it is not a justification for not making a sequestration order that a debtor has no current or future assets; or
b)whether Radich is followed insofar as the Court is said to have a discretion to dismiss the Petition if a debtor has no current or future assets,
it does not matter in this case because there is no evidence of Mr Nyoni’s assets before the Court. Thus, there is nothing which would preclude the possibility that a trustee administering Mr Nyoni’s estate might find assets of value. On that basis, ground 4 cannot succeed and is not made out.
The Court also observes that it is not in the public interest for the Court to prop up an otherwise apparently insolvent party by not making a sequestration order: Svir FCR at 317 per Burchett J; Totev 2006 at [37] per Allsop J, in circumstances where it is plain that, in addition to the First and Second Costs Orders the subject of the Act of Bankruptcy, there are other significant awards of costs arising from litigation in which Mr Nyoni is involved, including awards of indemnity costs: Nyoni (No 7) at [20] per Mortimer J; Pharmacy Board (No. 1); Pharmacy Board (No 2); Pharmacy Board (No 3).
Conclusion and orders
The Court has concluded that:
a)the Applicants are entitled to a sequestration order against Mr Nyoni’s estate;
b)Mr Nyoni is not solvent; and
c)it is not satisfied that there is “other sufficient cause” to refuse the sequestration order and dismiss the Petition.
It follows that there should be an order that a sequestration order issue against the estate of Mr Nyoni, with the Applicants’ costs to be paid from Mr Nyoni’s estate in accordance with the provisions of the Bankruptcy Act. The date of the Act of Bankruptcy is 7 August 2015.
I certify that the preceding ninety-three (93) paragraphs are a true copy of the reasons for judgment of Judge Antoni Lucev
Date: 17 February 2017
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