National Australia Bank Limited v Neil
[2009] FMCA 826
•21 August 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| NATIONAL AUSTRALIA BANK LIMITED v NEIL | [2009] FMCA 826 |
| PRACTICE AND PROCEDURE – Transfer of proceedings – availability of video link facilities. PRACTICE AND PROCEDURE – Application to restrain solicitor from acting for one party – principles discussed. BANKRUPTCY – Creditor’s petition – opposition to creditor’s petition. |
| Bankruptcy Act 1966 Federal Magistrates Act1999, ss.45, 52 |
| Chapman v Rogers [1984] 1 QdR 542 Clay v Karlson (1997) 17 WAR 493 CNH Capital Australia Pty Ltd v Pratley (No 2) [2009] FMCA455 Jeffrey v Associated National Insurance Co Ltd [1984] 1 QdR 238 National Mutual Holdings Pty Ltd & Ors v The Sentry Corporation (1988) 19 FCR 155 Neil v Reward Property Group Pty Ltd [2008] FMCA 1583 Sherwood Overseas Co Pty Ltd v Jaymac International Pty Ltd [2008] FMCA495 Yamaji v Westpac Banking Corporation (No1) (1993) 115 ALR 235 |
| Applicant: | NATIONAL AUSTRALIA BANK LIMITED |
| Respondent: | PETER CHRISTISON NEIL |
| File Number: | BRG 226 of 2009 |
| Judgment of: | Wilson FM |
| Hearing date: | 14 August 2009 |
| Date of Last Submission: | 14 August 2009 |
| Delivered at: | Brisbane |
| Delivered on: | 21 August 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr R.W. Morgan |
| Solicitors for the Applicant: | Mark O’Dea Lawyer |
| Counsel for the Respondent: | N/A |
| Solicitors for the Respondent: | Self represented |
ORDERS
That paragraphs 1, 2(b) and 3 of the interim application filed 27 July 2009 are dismissed.
That the application by the respondent to restrain the applicant’s solicitor from continuing to act on the applicant’s behalf is refused.
It is declared that it is in the interests of the administration of justice that disclosure be made in these proceedings of:
(a)The applicant creditor’s file relating to the application for and approval of an Equipment Loan to Steelsmart Technologies Pty Ltd secured by an Equipment Loan and Goods Mortgage;
(b)The file of the applicant creditor relating to the application for, and if approved, the approval of a Debtor Finance Facility Agreement to Steelsmart Pty Ltd;
(c)The applicant creditor’s lending policies and criteria relating to the said facilities.
That the applicant creditor disclose such documents by list to be filed and served within twenty-eight (28) days of the date hereof.
That the respondent debtor advise the applicant within fourteen (14) days of service of such list of those documents he wishes to inspect.
That the applicant provide particulars of the “other sufficient cause” relied upon him in opposition to the creditor’s petition within twenty-one (21) of today’s date.
That the respondent debtor make file and serve an affidavit pertaining to the issue of solvency within twenty-eight (28) days of today’s date.
That the matter be listed for review on 2 October 2009 at 9.30am.
That the matter be listed for hearing in Brisbane on 16 October 2009 at 10.00am.
NOTATIONS:
The parties are to give consideration to the production of documents disclosed by electronic means.
The parties are to give consideration to the use of video link facilities in conducting the hearing of this matter.
The respondent debtor is given leave to appear by telephone at the review on
2 October 2009.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 226 of 2009
| NATIONAL AUSTRALIA BANK LIMITED |
Applicant
And
| PETER CHRISTISON NEIL |
Respondent
REASONS FOR JUDGMENT
On 3 April 2009 the applicant creditor caused a Creditor’s Petition to be issued against the respondent debtor. The creditor had obtained a default judgment in the District Court of Queensland at Southport on 21 November 2007 for $130,802.38. That judgment remains partially unsatisfied, presently in the amount of $112,888.71, according to the affidavit evidence of the applicant.
A Bankruptcy Notice was served on the respondent debtor on 4 March 2009. No application was made to extend the time for compliance with that Bankruptcy Notice, nor was any application made to set it aside. The respondent debtor has, by failing to comply with the terms of the Bankruptcy Notice, committed an act of bankruptcy.
It was necessary for the applicant to obtain an order that the Creditor’s Petition be served on the respondent by way of substituted service. That was effected on 26 June 2009. The respondent debtor filed a notice of appearance on 3 July 2009 and a Notice stating grounds of opposition to the petition on 8 July 2009.
When the matter came before a Registrar on 10 July 2009 it was referred to me. Directions were made by the Registrar for the respondent debtor to file any application and supporting material. Pursuant to those directions on 27 July 2009 an application was filed by the respondent debtor seeking three orders, which are in substance:
a)Seeking a transfer of the proceedings to the Perth Registry of this Court;
b)For certain disclosure to be made by the applicant;
c)That a settlement conference be held at the Perth Registry of the Court.
It is convenient first to deal with the application pertaining to disclosure because consideration of that matter will inform the consideration of the other two matters raised by the respondent debtor.
The respondent debtor was sued pursuant to a guarantee given by him of an Equipment Loan and Goods Mortgage dated 26 May 2006 taken out by Steelsmart Technologies Pty Ltd. In his voluminous evidence filed in support of the application the respondent debtor seeks to rely on a number of matters that are said to impugn his liability under that guarantee. First, it is said that the debtor was misled by the applicant creditor regarding its approval of a Debtor Finance Agreement to Steelsmart Pty Ltd, a related company to Steelsmart Technologies Pty Ltd. The applicant contends that the creditor’s representatives represented that such facility had been approved, when it had not. He says that had he known of that fact he would not have executed the guarantee.
Secondly, the respondent debtor argues that in making the loan to Steelsmart Technologies Pty Ltd the applicant creditor bank owed him a duty of care as a prospective guarantor, and breached that duty. It is said that the applicant creditor committed mal-administration in the granting of the loan, and its conduct was misleading and deceptive and unconscionable. The latter two elements invoke reliance on the Trade Practices Act 1974.
Thirdly, the respondent debtor relies upon the applicant creditor bank’s failure to comply with its own lending practices and procedures, which had they been followed would have meant that the loan to Steelsmart Technologies Pty Ltd would not have been approved, and therefore the guarantee not required.
These arguments, which I have distilled from the debtor’s lengthy material, attack the validity of the guarantee upon which he was sued.
The next ground of attack raised by the respondent debtor is that the proceedings against him in the District Court of Queensland ought not to have been commenced, nor should judgment have been entered, because of the respondent debtor’s referral of the matter to the Banking and Financial Services Ombudsman. The debtor argues that once such a referral was made, the bank’s ability to bring proceedings against him, or to continue those proceedings, was inhibited.
The respondent debtor’s attack on the judgment that has been obtained against him, and the guarantee that underlies it, in my view necessitates the disclosure of documents by the applicant creditor bank. Section 45 Federal Magistrates Act1999 requires me to be satisfied that it is in the interests of the administration of justice that such disclosure be permitted. I am so satisfied. In order to be properly appraised of the bank’s documents, the strength of the case against him, and to obtain documents that may assist in his own case, in my view the bank’s files relating to the approval of the two loans to which I have made reference, together with the bank’s lending policies and procedures should be disclosed to the applicant.
I am not satisfied that the documents particularised at sub paragraphs (a) and (b) in the interim application of the respondent debtor are required to be disclosed. Except to the extent that I have indicated, they do not appear to be relevant to the dispute between the parties which is in the bankruptcy jurisdiction of this Court. It must be remembered that in determining whether or not to grant the respondent debtor the relief he seeks it is not necessary for this Court to make a final and binding determination as to the validity of some or all of the respondent’s arguments. That is a matter for the appropriate State Court with jurisdiction. If this Court is satisfied that it is appropriate to go behind the judgment that was obtained against the respondent because there is a real doubt as to its correctness, this Court nevertheless need not proceed to determine the merits of the dispute between the applicant and the respondent to the extent that the State Court would.
The applicant seeks to transfer these proceedings from the Brisbane Registry to the Perth Registry of the Court.
Section 52 Federal Magistrates Act provides:
“(1) The Federal Magistrates Court may sit at any place in Australia.
(2) The Federal Magistrates Court or a Federal Magistrate may, at any stage of a proceeding in the Federal Magistrates Court, order that:
(a) the proceeding; or
(b) a part of the proceeding;
be conducted or continued at a place specified in the order, subject to such conditions (if any) as the Federal Magistrates Court or Federal Magistrate imposes.”
Rule 8.01 of the Federal Magistrates Court Rules 2001 provides that:
“(1) A party who files an application or response in a proceeding may apply to have the proceeding heard in another registry of the Court.
(2) In considering an application, the Court must have regard to:
(a) the convenience of the parties; and
(b) the limiting of expense and the cost of the proceeding; and
(c) whether the matter has been listed for final hearing; and
(d) any other relevant matter.”
These Rules have been considered most recently by Lucev FM in Sherwood Overseas Co Pty Ltd v Jaymac International Pty Ltd [2008] FMCA495 at [7] – [19] and in Neil v Reward Property Group Pty Ltd [2008] FMCA 1583, a decision involving a debtor with the same name as the present debtor.
Reference was also made by the respondent debtor in his written submissions to the decision of the Full Federal Court in National Mutual Holdings Pty Ltd & Ors v The Sentry Corporation (1988) 19 FCR 155. That decision involved the construction of Federal Court Rules which are in different terms to the Federal Magistrates Court Rules, but nevertheless the decision provides a useful analysis of the relevant principles to be applied when the Court exercises its discretion to transfer or not transfer proceedings from one registry of the Court to another. At the outset it should be observed that in National Mutual Holdings Pty Ltd & Ors v The Sentry Corporation the proceedings were much more extensive than in the present case before the Court as appears from page 156.4 of the decision.
The decision of the Full Court focuses primarily on the tests to be applied and whether an applicant for transfer must demonstrate that there is manifest preponderance of convenience in trying to the matter in one place or the other. The Full Court held that such a test should not be applied. At page 162 it was said:
“The power conferred on the Court or a judge by s.48 is in terms wholly unfettered. It should be exercised flexibly having regard to the circumstances of the particular case. It would be regrettable and unwise if the Court were to circumscribe the general power conferred by s 48 within inflexible rules or impose inelastic constraints upon its exercise. As the power may be exercised subject to conditions, the Court or a judge is in a position to mould orders under the section to take account of the many and varied circumstances that arise in particular cases.
The power conferred by s 48 recognisees the national character of this Court. The factors which the Court is entitled to take into account in considering whether one city is more appropriate than another for interlocutory hearings or for the trial itself are numerous. The Court must weight those factors in each case. Residence of parties and of witnesses, expense to the parties, the place where the cause of action arose and the convenience of the Court itself are some of the factors that may be relevant in particular circumstances.
The balance of convenience will generally be a relevant consideration, but not necessarily determinative of each case. A party commences a proceeding by filing an application in a particular registry of the Court. If that party or another party wishes to have the proceeding conducted or continued in another place he may apply to the Court for an order under s 48 or O 10, r 1(2)(f) or O 30, r 6 as the case may be. There is no onus of proof in the strict sense to be discharged by the party seeking to conduct or continue the proceedings elsewhere. It should be noted that the Court may exercise its powers under O 30, r 6 either on the application of a party or of its own motion. The Court must, however, be satisfied, after considering all relevant matters, that there is sound reason to direct that the proceeding be conducted or continued elsewhere. Its starting pointy is that the proceeding has been commenced at a particular place. Why should it be changed? On the one hand, if the party who commenced the proceeding chose that place capriciously the Court would be justified in giving no weight to the choice of place. At the other end of the scale, a proceeding may have continued for some time at the place of commencement with many steps having been taken there, for example, filing of pleadings and affidavits, discovery and inspection. Due weight would be given by the Court to such matters before directing that the proceeding should continue qt a different place.
The balance of convenience is important, but its weight must vary from case to case. Ultimately the test is: where can the case be conducted or continued most suitably bearing in mind the interests of all the parties, the ends of justice in the determination of the issues between, and the most efficient administration of the Court. It cannot and should not, in our opinion, be defined more closely or precisely.”
The respondent debtor lives in Perth. The applicant creditor carries on business throughout Australia. The applicant creditor has properly commenced proceedings in the Brisbane registry of the Court. The judgment upon which it relies was given by the District Court of Queensland. It has obtained orders from this Court in Brisbane pertaining to service of the bankruptcy notice and the creditor’s petition. In both Neil v Reward Property Group Pty Ltd at [50] – [52] and in CNH Capital Australia Pty Ltd v Pratley (No 2) [2009] FMCA455 at [18] – [20] members of this Court considered such matters to weigh in favour of proceedings remaining in this registry.
The applicant creditor’s counsel contended that on the issues raised by the respondent debtor, other than as to solvency, the proceedings will be largely a documents case. I agree. The respondent contends that two bank officers, Ms Manners and Mr Kerr, will be relevant witnesses in the proceedings. They both reside in Western Australia. The applicant creditor eschewed an intention to call its officers to give evidence, but the respondent indicated that he may well do so himself. The forensic disadvantage of calling an opponent’s witnesses as to give evidence in his own case may be further considered by the respondent debtor in due course. At this stage, I proceed on the basis that there is, however, a possibility that two bank officers, residing in Perth, will be required to give evidence in these proceedings.
The applicant is a 69 year old semi retired solicitor, according to his evidence. The respondent claims that he is under the care of a cardiologist in Western Australia for which he has provided some supporting evidence. There is, however, no evidence that if the respondent travels to Queensland it will endanger his health. Nevertheless, I accept that if the respondent were required to travel to Brisbane to conduct these proceedings it would be inconvenient for him.
In my view all of the matters to which I have referred can be dealt with quite simply by conducting the proceedings utilising modern technology such as video link.
The applicant creditor has properly commenced the proceedings in the Brisbane registry of this Court. The respondent resides in Perth. The respondent is a qualified legal practitioner and will suffer no disadvantage if proceedings are conducted via video link. The applicant creditor has engaged legal representatives in Queensland. The respondent is self represented. The applicant should not be put to the expense of engaging legal practitioners to represent it in Western Australia where that would involve an unnecessary duplication of resources. If the applicant retained its present advisors it would be required to incur expense in them travelling to Perth for the further conduct of these proceedings.
In my view, having regard to the issues that have been raised in the evidence to date, the proceedings can be satisfactorily conducted utilising a video link. This will, in my view, limit the expense and cost of the proceedings to both sides. It will enable them to conduct their cases from their most convenient location.
If the applicant obtains pro bono legal assistance in Western Australia, as he has evinced intention to seek, his representative will also be able to appear by video link.
There has been no evidence adduced by the respondent as to when the matter could be listed for hearing in the Perth registry of this Court. This registry is able to offer the parties a hearing on 16 October 2009. That will facilitate the expeditious resolution of the matter.
The respondent debtor also points to the fact that the documents giving rise to his liability are stated to be governed by the law of Western Australia. The respondent debtor extrapolates from this that the proceedings will be more conveniently heard in the Courts of Western Australia. That submission overlooks two matters. The first is that the present proceedings are in a Federal Court, exercising Federal jurisdiction, which is the same whether based in Brisbane or Perth. The second matter is that, for reasons I have already set out above, it may not ultimately be necessary for the Court to finally decide the rights and wrongs of the legal dispute between the parties. It may be sufficient for the respondent debtor to prove that he has a strongly arguable case that the judgment that was obtained against him ought be further investigated.
In my view, on the evidence presently before the Court, and taking into account the matters that I am required to consider under Rule 8.01(2) of the Federal Magistrates Court Rules the proceedings should remain in the Brisbane registry of this Court.
The respondent debtor seeks that there be a settlement conference in these proceedings. It is always open to the parties to negotiate a compromise to their dispute. However, it is another matter for the Court to force parties to mediate. The applicant creditor resists being forced to alternate dispute resolution. It has sued the respondent debtor in the District Court of Queensland and obtained a judgment, it has issued a bankruptcy notice that has not been complied with, it has been put to the expense of having the creditor’s petition served by substituted service, and it seeks a sequestration order against the estate of the respondent debtor. The respondent debtor seeks to avoid any liability under the guarantee. It is difficult to see in those circumstances the benefit of alternate dispute resolution. I decline to make the order sought by the respondent.
In his Notice of grounds of opposition the respondent debtor claims that he is solvent. This is a relevant consideration under section 52 Bankruptcy Act. The respondent debtor has not yet put on any affidavit evidence as to his solvency, and he should be required to do so. I will make directions to that effect. The respondent should also be required to properly particularise any “other sufficient cause” that he relies upon under s.52 Bankruptcy Act so that the applicant creditor knows clearly the case it has to meet.
Finally, in his oral submissions before the Court the respondent debtor sought an order that the applicant creditor’s solicitor, Mr O’Dea be restrained from acting on behalf of the applicant creditor in these proceedings. This was said to arise from Mr O’Dea’s role as a material witness in the proceedings. In my view, it is one thing for a solicitor to observe appropriate rules of professional conduct and not continue to act in proceedings where he or she is likely to be a witness on an important issue, and quite another for the Court to take the dramatic step of precluding a solicitor from continuing to act for a client where he or she has been engaged to do so. Obviously cases where a solicitor has a conflict of interest, or is in possession of confidential information, fall into the latter category. The distinction was one recognised by Drummond J in Yamaji v Westpac Banking Corporation (No1) (1993) 115 ALR 235 at 236-7.
Cases such as Jeffrey v Associated National Insurance Co Ltd [1984] 1 QdR 238, Chapman v Rogers [1984] 1 QdR 542 recognise the potential difficulty that a solicitor acting for a party may face if called as a witness in the proceedings but do not provide support for the Court’s jurisdiction to restrain such a solicitor from so acting. In Clay v Karlson (1997) 17 WAR 493 at 494-5 Templeman J seems to have based his decision to restrain the solicitor there from acting on the basis that the solicitor had a personal interest in the outcome of the litigation, a fact that is absent in the present case.
It is by no means certain that Mr O’Dea will be required to give evidence. The applicant creditor bank may concede the facts sought to be established by the respondent debtor, as to the timing of the applicant’s legal action in the District Court, but argue that there is no legal consequence to any breach of the Code of Banking Practice.
I am not persuaded that there is any basis to restrain the applicant creditor’s solicitor from continuing to act on its behalf.
I will make the orders as set out at the commencement of these reasons.
I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Wilson FM
Associate: B. Schmidt
Date: 26 August 2009
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