National Australia Bank Limited v Larter (No.2)
[2007] FMCA 595
•20 April 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| NATIONAL AUSTRALIA BANK LIMITED v LARTER (No.2) | [2007] FMCA 595 |
| BANKRUPTCY – Application for a sequestration order − consideration of a preliminary issue − where the creditor obtained judgment on an application for summary dismissal in the District Court − where the respondent claimed a defence in this court under the Garcia v National Australia Bank defence − where the defence was not raised in the District Court proceedings − whether the District Court proceedings were known to the respondent − whether the Court ought to exercise its discretion to go behind the judgment on which the petition is based to see whether it was properly obtained − whether the principles in Port of Melbourne Authority v Anshun estop the respondent from now raising the defence − whether special circumstances exist in this case which create an exception to the Anshun estoppel doctrine. |
| Bankruptcy Act 1966, s.52 Federal Magistrates Court (Bankruptcy) Rules 2006 |
| National Australia Bank v Wanda Larter [2007] FMCA 422 Garcia v National Australia Bank Ltd [1998] 194 CLR 395 Wren v Mahoney [1971-72] 126 CLR 212 Commonwealth Bank of Australia v Jeans [2005] FCA 978 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Deangrove Pty Ltd v Commonwealth Bank of Australia [2003] FCA 268 Jeans v Commonwealth Bank of Australia [2003] FCAFC 309 Port of Melbourne Authority v Anshun Pty Ltd (1981) 36 ALR 3 Westpoint Corporation Pty Ltd v Coles Supermarkets Australia Pty Ltd (1996) 71 CR 584 Stuart v Sanderson & Anor (2000) 175 ALR 681 Re Crum; Ex parte Noyes Bros. (Sydney) Limited (1937) A.B.C Vol. 9 281 |
| Applicant: | NATIONAL AUSTRALIA BANK LIMITED |
| Respondent: | WANDA LARTER |
| File Number: | SYG2677 of 2006 |
| Judgment of: | Raphael FM |
| Hearing date: | 11 April 2007 |
| Date of Last Submission: | 11 April 2007 |
| Delivered at: | Sydney |
| Delivered on: | 20 April 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr J. White |
| Solicitors for the Applicant: | Dibbs Abbott Stillman |
| Counsel for the Respondent: | Mr J. Emmett |
| Solicitors for the Respondent: | Horton Rhodes |
ORDERS
Judgment for the applicant creditor on the preliminary issue.
There be a sequestration order against the estate of Wanda Larter.
Applicant creditor’s costs (including any reserved costs) be taxed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006 and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.
A copy of the sequestration order be given to the Official Receiver in Sydney within two days.
THE COURT NOTES:
The date of the act of bankruptcy is 11 September 2006.
Consent to act as trustee has been signed by Scott Darren Pascoe and had been lodged with the Official Receiver in Sydney.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG2677 of 2006
| NATIONAL AUSTRALIA BANK LIMITED |
Applicant
And
| WANDA LARTER |
Respondent
REASONS FOR JUDGMENT
On 20 March 2007, I made orders of which the undermentioned two are relevant to these reasons:
“1. The court will hear the following separate issue:
Whether the Court ought to exercise its discretion to go behind the judgment on which the petition is based, on grounds 2 and 3 identified in the “Notice stating grounds of opposition to application, interim application or petition” filed 13 March 2007:
(i) Having regard to the following judgments:
(a) National Australia Bank Limited v Electra Electrical Products (Aust) Pty Limited (unreported, District Court of New South Wales, 3800/05, Robison DCJ, 10 April 2006) (Exhibit SAT 3 to the Affidavit of Stacey Amanda Taylor sworn 16 March 2007); and
(b) National Australia Bank Limited v Electra Electrical Products (Aust) Pty Limited [2007] NSWDC 3 (Exhibit SAT 7 to the Affidavit of Stacey Amanda Taylor sworn 16 March 2007);
(ii) and on the assumption that there is a prima facie case that the debtor will establish the admissible factual matters contained in the affidavits of Wanda Larter and Bruce Ian Larter each sworn 13 March 2007, and filed in opposition to the petition.
2. Respondent to file and serve any further evidence upon which she intends to reply on or before 27 March 2007.”
My reasons for making those orders were set out in my judgment National Australia Bank v Wanda Larter [2007] FMCA 422 when the application for a sequestration order had come on for hearing before me. At that time Mrs Larter had also sought that I should adjourn the bankruptcy petition pending the hearing of an appeal from the dismissal of a cross-claim that Mrs Larter owned by assignment against the judgment creditor to whom she was indebted as guarantor of the obligations of a company known as Electra Electrical Products (Aust) Pty Ltd which was run by her husband. Those reasons explained why I was not prepared to grant the adjournment and the circumstances which led up to the hearing of this preliminary issue. Mrs Larter claims that the court should now look behind the judgment obtained by the creditor to see whether it was properly obtained or whether she was a person to whom the dicta in Garcia v National Australia Bank Ltd [1998] 194 CLR 395 applied. If the dicta of the High Court in that case applied to Mrs Larter then, to use the words of Barwick CJ in Wren v Mahony [1971-72] 126 CLR 212 at page 224:
“…it has been made quite clear by the decision of the past that where reason is shown for questioning whether behind the judgment or as it is said, as the consideration for it, there was in truth and reality a debt due to the petitioning creditor, the Court of Bankruptcy can no longer accept the judgment as such satisfactory proof.”
In this particular case the investigation of Mrs Larter’s claim would take up considerable court time and would require evidence and cross-examination. I was persuaded by the applicant creditor that the particular circumstances of the history of the litigation between the bank and Mrs Larter took her case out of the ordinary and required first a consideration whether she had forfeited the right to the investigation as the debtor had been held to have done in Commonwealth Bank of Australia v Jeans [2005] FCA 978.
The judgment obtained by the Bank in the District Court was obtained on an application for summary judgment that was heard by his Honour Robison J, who gave judgment on 10 April 2006. His Honour states at p.2 of his judgment:
“The claim against the defendants relies upon various matters which have been set forth in that statement of claim. It was alleged that there was an overdraft facility secured by an agreement reached between the plaintiff and the first defendant on or about 1 February 2000. …The proceedings also alleged that there was a guarantee and this is a guarantee of indemnity dated 20 August 1999 between the second defendant and third defendants and Signature Down Holdings Pty Limited as trustee for the May Win Discretionary trust.
…
The defence as currently filed was filed on 29 November 2005. That defence really tells the Court very little when it comes to the issues which have been joined between the respective parties in these proceedings. In various portions of the defence there are suggestions that the defendants admit certain things, do not admit others, do not recall other matters, do not know and cannot admit various other matters.”
His Honour goes on to say at page 8 of his judgment
“In the written submissions of Mr White, who appears for National Australia Bank, he has set forth the effective position of the bank when it comes to the applications for relief before the Court at this stage. He has set out the background circumstances concerning the registered mortgage debenture, the guarantee and indemnity, and the overdraft facility, and he has made references to the affidavit of Ms McManus, which I have already noted and taken into account.
…
He correctly says that apart from a defence pleaded under the Limitation Act the defendants plead no positive defence to the Statement of Claim. He says that the defence consists largely of do not admit averments, and I have already referred to that in the earlier part of this judgment.”
His Honour then goes on to discuss the Limitation Act defence, before stating at page 11:
“…He [Mr White] correctly asserts that as the limitation defence is the only substantive defence to the NAB’s claim summary judgment should be entered for the plaintiff. He goes on to say that there remains no real question to be determined in the absence of the defence, and he therefore seeks that summary judgment be entered.
It is also important of course, particularly given the significant nature of this application, and mindful of the principles in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 that an application of this nature must not be granted lightly. There really needs to be no triable issue at all demonstrated on the pleadings for the Court to effectively accede to an application such as this brought by the bank.
With the greatest respect to Mr Kells he asserted in his oral submissions last Friday that there is a triable issue here, that there is a question of the reputation of his respective clients. I have taken that submission into account. In particular I have taken that into account when I read his written submissions provided to the Court today. I must say none of those written submissions, nor his further submissions today persuade me to find to the contrary.”
His Honour then went on to find that there was no equitable set-off in the case, before stating at page 18:
“…the fact of the matter remains that the core issues raised by the statement of claim have really not been met by the defendants. That is the nature of the documentation which has been, in my view, comprehensively set forth in the affidavit material of Miss McManus. None of that material has been disputed on the pleadings. The material is there and it is effectively the basis of the proceedings brought by the bank against the defendants….
…the limitation defence cannot possibly succeed, given the uncontested body of evidence before the court, none of which has been opposed by the defendants. No objection has been taken to any of this material and therefore it is entirely open to this court to give appropriate weight to that material as uncontested as it is, relied upon by the bank.
Therefore in these circumstances and having regard to the principles in General Steel and other authorities this court does find that the orders sought by the plaintiff, National Australia Bank Limited, insofar as it’s [sic] application for judgment is concerned have been properly made out and therefore I propose to accede to the orders sought in the bank’s motion to the extent that judgment can be given for the plaintiff on the statement of claim pursuant to Part 13 Rule 13.1.”
It will be seen from the extracts of the judgment quoted above that no suggestion or hint of a Garcia (supra) defence was raised by Mrs Larter at the hearing. I have no doubt that if it had been his Honour, sensible of the views of the High Court expressed in General Steel Industries (supra), would not have given the Bank the summary judgment it sought. It is also a fact that the Garcia defence was not raised as a ground for setting aside the bankruptcy notice that eventually followed the judgment of Robison J and it did not appear as a defence to the debt until it was articulated in an affidavit dated 13 March 2007 attached to the notice of grounds of opposition to the bankruptcy petition. The relevant allegations made by Mrs Larter in that affidavit are contained in clauses [5]-[11]:
“5. In or about August 1999 my husband made an application to the Bank for the Bank to issue an overdraft in favour of Electra, I am lead to believe.
6. On or about August 20, 1999 my Husband and I were asked to attend at the Marrickville Branch of the Bank, at which Electra held its account with the Bank.
7. When my husband and I arrived at the Bank I was introduced to Mr Martin Shanly, Electra’s Business Banking Manager at the Marrickville Branch, he told us there were a couple of papers the Bank required for security and both were to sign in relation to the Port Hacking Rd Property.
8. My husband and I were then taken to Mr Shanley’s office and asked to sit down. Mr Shanely put the two pages I/we were to sign over to our side of the desk. We had a general discussion on the state of Electra’s business affairs for about 10 minutes, after which, I/we were asked to sign the two pages where the stickers were placed.
9. The document was never explained to me/us at that time, nor was I/we given the opportunity to read the document, or informed of its contents. I/We were never informed as to the true nature of the document to be signed, i.e. the document to be signed was a personal guarantee and indemnity for the overdraft facility that my husband had arranged. We were not informed of any rights or responsibilities we had in relation to what we were signing, nor of any liabilities we could incur as a result of our signing the document, further, we were not informed that we should seek independent advice before signing the document.
10. In fact, I did not become aware there was a problem until I was served with the bankruptcy documents by Mr Kells. I only now realise that I was asked to sign the document in question because I was a part owner with my husband of a property we then had at Port Hacking Road, Caringbah.
11. Naturally, I therefore gave no further thought to the matter knowing that when the Porting Hacking Rd Property Settled I had signed the release so that settlement could take place with the bank I though that was the end of it, That is until I was served with the bankruptcy papers in 2006.” [sic]
There was some debate at the hearing before me as to whether Mrs Larter was saying that she was unaware of the proceedings until she was served with the bankruptcy petition. Mrs Larter does not say this in terms. She does not say anything about the proceedings before Robison J or her part in them. The creditor has placed on the file an affidavit of service of the bankruptcy notice to which there is annexed a copy of the certificate of judgment. The fact of service was not challenged even if it was not admitted. The only evidence I have is that contained in Mrs Larter’s affidavit. I am not satisfied from that document that the existence of the proceedings in the District Court or the consequent bankruptcy notice were unknown to Mrs Larter. She has asserted at the very heel of the hunt a defence that, for reasons which have not been satisfactorily explained, she did not raise on any previous occasion, even though she was aware of the facts which gave rise to the defence and was not prevented by fraud or incapacity from properly instructing her legal advisers.
In Commonwealth Bank of Australia v Jeans (supra) Hely J was asked to go behind the judgment in circumstances where the vitiating defence was one that Sackville J had prevented Mr Jeans from raising at trial by way of withdrawal of admissions: Deangrove Pty Ltd v Commonwealth Bank of Australia [2003] FCA 268. An appeal to the Full Court from that judgment was dismissed: Jeans v Commonwealth Bank of Australia [2003] FCAFC 309. In Jeans Hely J says at [10]:
“The debtor has given notice of intention to oppose the creditor’s petition on a number of grounds. One of those grounds is that the Bankruptcy Court ought to exercise its discretion to go behind the judgment of the Federal Court in considering the creditor’s petition. The ground on which the debtor seeks to go behind the judgment is the same ground on which he sought to withdraw his admission during the course of the Federal Court proceedings. He wishes to assert that he did not sign the guarantee which is the foundation of the judgment debt against him, but that his signature on that guarantee was forged by Mr Cleary.”
His Honour opines, with reference to the authorities, that whilst there are occasions when the court of bankruptcy is obliged to go behind the decision this will not be done as a matter of course. In particular, where there has been a full hearing a debtor would need to make out a prima facie case of fraud or collusion or miscarriage of justice. In his Honour’s view because the fundamental issue of whether or not a debt was owed by Mr Jeans to the Bank was the subject of a full determination and “the debtor had a reasonable opportunity to raise whatever grounds he wished to rely upon to resist the Bank’s case based upon the guarantee” (at [18]) he should not exercise his discretion to go behind the judgment in order to investigate a matter that the proper administration of justice had required not be heard. Mrs Larter’s creditor takes the same position.
Hely J did not make reference to that line of cases which establish what is now known as the “Anshun estoppel” principle: Port of Melbourne Authority v Anshun Pty Ltd (1981) 36 ALR 3; because those cases are concerned with the failure of a party to raise an issue in one set of proceedings which would have determined the matters in dispute who seeks to raise that issue in later proceedings. Mr Jeans squarely raised his issue but was not permitted to argue it. The instant case seems to me to fall squarely within the principles enunciated by the High Court in Anshun:
“…there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff’s claim, and its subject matter it would be expected that the decendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings, eg expense, importance of the parituclar issue, motives extraneous to the actual litigation, to mention but a few: see the illustrations given in Cromwell v County of Sac (94) US at 356-7).” (at page 12)
There are of course exceptions to Anshun in cases where a conclusion could be drawn that ‘special circumstances’ exist such that a failure by a party to raise a defence in the earlier proceeding is not unreasonable. In Westpoint Corporation Pty Ltd v Coles Supermarkets Australia Pty Ltd (1996) 71 FCR 584 Nicholson J considered the authorities at [7] in relation to ‘special circumstances’:
“In Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 at 507, Deane, Toohey and Gaudron JJ referred to the principle in Henderson v Henderson (1843) 3 Hare 100; 67 ER 313 emphasising the qualification that the Court would not permit the same parties to open the same subject of litigation "except under special circumstances". Dawson J at 512 said:
"The majority discussion of Henderson v Henderson in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 was upon the basis that the latter case was not one of res judicata; there was a cause of action remaining (1981) 147 CLR 589 at 597. The question was whether the plaintiff ought to have been allowed to pursue that cause of action having regard to the fact that the right asserted could and should have been raised in the earlier action in which judgment had been entered. To have allowed it to do so may have resulted in contradictory judgment which ought not be permitted save in special circumstances."
He therefore recognised the possibility of "special circumstances" preventing the application of the principle in Henderson v Henderson as applied in Anshun.”
There is no fixed definition of ‘special circumstances’, as noted by Emmett, Conti and Selway JJ in Wong v Minister for Immigration [2004] FCAFC 242:
“[38] …The Court…has a discretion, if it determines that special circumstances exist, to allow an issue to be raised, even where it is found that the point was unreasonably omitted from the earlier proceeding: see Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 at 558. However, the circumstances in which that would be permitted must…be exceptional, constituting ‘special circumstances’: see BC v Minister for Immigration & Multicultural Affairs [2002] FCAFC 221 at par [30]. What will be sufficient to constitute special circumstances is by no means fixed and may involve consideration of a wide range of factors, all of which bear upon the general discretion of the Court where justice requires the non-application of the general principle: see BC v Minister for Immigration & Multicultural Affairs [2001] FCA 1669 (Sackville J) at [50] referring to Port of Melbourne Authority v Anshun (No 2) [1981] VR 81; see also Bryant v Commonwealth Bank (1995) 57 FCR 287 at 296,298-299, citing Yat Tung Investments Co Ltd v Dao Heng Bank Ltd [1975] AC 581.”
In Stuart v Sanderson & Anor (2000) 175 ALR 681 Madgwick J considered ‘special circumstances’ existed preventing application of the Anshun principle in a case in which the applicant faced quasi-criminal charges. The applicant, a member of the Armed Services, was charged with theft and subsequently discharged by a summary authority. The applicant sought in the review hearing to reagitate issues which were referred to in a general way but not pursued in earlier proceedings before Beaumont J. Madgwick J held that prima facie the Anshun principle was appropriate in this case given the claims made arose out of substantially the same facts and it would have been expected that the submissions would have been raised in the previous proceedings. His Honour states at [31]:
“Thus, where a party has behaved unreasonably in not raising a matter in the earlier proceedings, that party will in general not be permitted to later litigate it, unless there are special circumstances. Applying that approach, it seems to me that the matter now relied upon was so relevant to the subject matter of the proceedings before Beaumont J that it was unreasonable not to rely on it then. The question then becomes whether there are special circumstances that could avoid the prima facie operation of the rule.”
The applicant successfully argued the Court should exercise its discretion in its favour given the ‘special circumstances’ pertinent to her case:
“[32] There appear logically to be two broad considerations that might be relevant to the determination of whether special circumstances exist. First, circumstances may in some way account for the unreasonable conduct involved in not having pressed the matter in the earlier proceeding, so as to excuse it. No such consideration seems to be present in this case. Second, circumstances may mean that application of the Anshun rule would work such a degree of hardship or of injustice on a party as to justify the displacement of the prima facie rule.
[33] One such circumstance suggested by the applicant was that, although the present proceedings are of an administrative nature, they seek in substance to establish a miscarriage of justice with respect to criminal convictions. Such convictions obviously entail serious consequences (including, in this case, deprivation of liberty and discharge from the Army). More importantly however, it appears that the doctrine of Anshun estoppel does not apply adversely to an accused person in a criminal cases. …Therefore, in my view, the extended doctrine of abuse of process, expounded in Anshun, ought not apply to criminal proceedings in a manner which prevents an accused person from asserting his or her innocence, nor am I aware of any authority that suggests otherwise. The analogical force of this should, in my view, be given weight in the present case: here, the applicant seeks belatedly to raise a question which could have been raised in the criminal proceedings or in earlier civil proceedings concerning that criminal process. The Court should be slower to shut her out than if merely civil rights or remedies were at issue throughout.
…
[35] The consequence for the respondents of the applicant being allowed to take her present point would not go beyond inconvenience and expense, albeit to a not insignificant degree. The respondents can however, at least in part, be compensated by a costs order: see Anshun per Brennan at 615. …
[36] The orderly processes of the Court have been to an extent disrupted but that has to be weighed against the vindication of an important right. It seems to me that it would be right to regard this case as one where special circumstances exist. In coming to this conclusion, I do not overlook that there has been significant delay by the applicant. As the decision in Newington v Beneficial Finance Corporation Ltd [2000] FCA 338 shows, even where, without fault, a litigant discovers fresh evidence that might win the case, mere delay can defeat that litigant. Parties can hardly be in a better position because they have belatedly thought of another point of law. However, vindication of criminal charges, necessarily involving moral turpitude, a possible miscarriage of justice in the hearing of such charges, and a denial of an important process right before a body other than a court capable of inflicting criminal punishment are at stake here.”
The facts which fall for my consideration do not bring Mrs Larter within such exception. She has provided no substantial reasons for her failure to argue the Garcia defence. She has provided no substantial reasons for her delay in bringing the Defence to the notice of the court and the mere existence of such a Defence comes nowhere near the “vindication of criminal charges” considered by Madgwick J.
Whilst it would be unwise to look at all applications to go behind a judgment through the lense of Anshun I do not think it is unreasonable to have regard to the important principle of finality as expressed in that case when deciding whether or not to exercise the court’s discretion. Mrs Larter clearly had an opportunity to raise the Garcia defence at the hearing of the application for summary judgment. She did not do so. She did not appeal and seek leave to argue it on appeal. She did not use it to argue for the setting aside of the bankruptcy notice. I am of the view that I should not exercise my discretion to allow it to become an issue now. In saying this I distinguish this case from that of Re Crum; Ex parte Noyes Bros. (Sydney) Limited (1937) A.B.C Vol. 9 281 where the judgment obtained against the wife who had signed a guarantee without explanation was one obtained by default.
The hearing on 11 April 2007 was also to be the hearing of the petition. I was provided with the required affidavits of service, search and debt. I am satisfied that the debtor committed the act of bankruptcy alleged in the petition. I am satisfied of the matters required by s.52 Bankruptcy Act 1966. Accordingly I would make a sequestration order against the estate of Wanda Larter. I would note that a consent to act as trustee has been signed by Scott Darren Pascoe and has been lodged with the Official Receiver in Sydney. I would note that the date of the act of bankruptcy is 11 September 2006. I order that the applicant creditor’s costs, including any reserved costs, be taxed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006 and paid from the estate of the respondent debtor in accordance with the Act. Under the Bankruptcy Regulations a copy of the sequestration order shall be given to the Official Receiver in Sydney within two days.
I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Raphael FM.
Associate:
Date:
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