FEDERAL CIRCUIT COURT OF AUSTRALIA
| PURNELL MOTORS PTY LTD v JONES (No.2) | [2014] FCCA 1617 |
| Catchwords: PRACTICE & PROCEDURE – Application by respondent creditor summary dismissal of proceedings – Whether debtor’s application has reasonable prospects of success – Debtor’s application summarily dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.52, 104, 153B, 154 Federal Circuit Court of Australia Act 1999 (Cth), ss.17A, 102(2)(b), Federal Circuit Court Rules 2001 (Cth), rr.1.06, 13.10 |
| Applicant: | PURNELL MOTORS PTY LTD |
| Respondent: | RICHARD JONES |
| File Number: | SYG 1012 of 2012 |
| Judgment of: | Judge Lloyd-Jones |
| Hearing date: | 2 May 2014 |
| Delivered at: | Sydney |
| Delivered on: | 24 July 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr S. Gregory |
| Solicitors for the Applicant: | Mr J Bamford of Bamford Lawyers |
| The Respondent: | The Respondent appeared in person. |
ORDERS
On the basis that Richard Jones has no reasonable prospect of success pursuant to reg.13.10(a) of the Federal Circuit Court Rules 2001 (Cth) that the Application for Review filed 18 June 2013 and Application in a Case filed 4 July 2013 be dismissed.
The costs of Purnell Motors Pty Ltd, in respect of these proceedings from 18 June 2013 up to and including today’s date, be paid from the bankrupt estate of Richard Jones on an indemnity basis.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1012 of 2012
| PURNELL MOTORS PTY LTD |
Applicant
And
| RICHARD JONES |
Respondent
REASONS FOR JUDGMENT
Introduction
Before the Court are proceedings in the matter of the Bankrupt Estate of Richard Jones (“Jones”) who, on 5 October 2012, had a sequestration order made against his estate by a registrar of this Court.
On 26 April 2013, Jones filed a first application for review of the Registrar’s sequestration order. This was subsequently withdrawn by orders of the Court on 13 May 2013 and Jones filed a second application for review on 18 June 2013 (the “Application for Review”). The Application for Review came before a registrar of this Court on 6 July 2013 and was subsequently referred to my docket for the further case management and hearing of the matter. I have previously set out in some detail the procedural history relating to these proceedings in Purnell Motors Pty Ltd v Jones [2014] FCCA 620 which was delivered on 1 April 2014. This judgment needs to be read in conjunction with this current judgment and the chronologies tendered by counsel for Purnell Motors Pty Ltd (“Purnell Motors”) which form Schedule “1” and Schedule “2” to these reasons.
The Court notes the ongoing case management has been made more difficult because of Jones’ current circumstances. Since his return to Australia from England where Jones was staying at the time of his sequestration and remained because of ill-health, a freezing of his accounts by the Trustee of his estate occurred. On return Jones states he has taken up residence in a caravan located on a property in the rural area near Dorrigo, NSW and is subject to frequent relocation. His address for service is PO Box U58, University of New England, Armidale, New South Wales, which is only cleared by Jones on an irregular basis. Jones does not possess a telephone, although he has been able to borrow a telephone facility which has enabled him to participate in telephone hearings, but this service is limited and has only been able to be accessed by the Court on pre-determined days at nominated times. Purnell Motors have assisted Jones by delivering and receiving correspondence via two different firms of solicitors, one located at Armidale and one at Dorrigo.
At various times Jones has experienced further periods of illness which has resulted in him being unable to respond to orders made by the Court in respect to the filing of submissions and responses. Details of these delays, which have been critical to the completion of these proceedings, are dealt with below.
Issues currently before the Court
The Application for Review filed on 18 June 2013 by Jones seeks the following orders:
1. Order for extension of time for application for review
2. That the order for sequestration be
annulmentannulled.3. Such other orders as the court considers just.
The Application in a Case of Jones filed on 4 July 2013 by Jones states (and seeks the following orders):
1. Order to Stay the Order for Sequestration
2. Order to transfer the matter
a. to Armidale, or in the alternative
b. to Coffs Harbour, or in the alternative
c. to Grafton, or in the Alternative
d. to Tamworth at the convenience of the Court
3. Orders to produce documents, In the case of each application for extension for freeze orders the following documents for each of the hearings on or about 20th July, 2011, 15th December, 2011, 17th January, 2012, 7th June 2012, 10th December 2012, 7th June 2013: and any other dates on which applications were heard specifically but not limited to.
a) the order(s)
b) The notice of motion to be relied on at the Hearing on the return date
c) The following material in so far as it was relied on by the Plaintiff at the hearing when the order was made:
i. The affidavits (or draft affidavits):
ii. Exhibits capable of being copied
iii. Any written submissions:
iv. Any other document that was provided to the Court: and
a) A transcript or, if none is available, a note, of any exclusively oral obligation of fact that was made and of any exclusively oral submission that was put to the Court and serve on the applicant as the Court directs
4. Order for compensation and damages
The Application in a Case of Purnell Motors filed 22 April 2014 states:
1. That leave be granted to file this Application in a Case.
2. The Court notes that pursuant to the Court’s directions on 1 April 2014, the Applicant, Richard Jones, has filed and served a document headed, ‘Basis of Relief and Witness Information’. A copy of the document is annexed hereto and marked ‘A’.
3. The Court notes that the document annexed hereto and marked ‘A’ (Schedule “3” to the current judgment) includes the following basis of relief:
“Abuse of Process – Bill of Costs
…
2. Misrepresentation of costs for preparation of submissions by Mr Gregory.
….”.
On the basis that the Applicant has no reasonable prospect of successfully relying on that basis of relief in prosecuting any claim for relief in the proceedings, insofar as the Applicant relies on that basis of relief, the Applicant’s claims for relief be dismissed; further or in the alternative, the Applicant not be permitted to rely on that basis of relief in prosecuting any claim for relief in the proceedings.
4. Further, that the Applicant not be permitted to attack the personal or professional conduct of Mr Gregory, in the proceedings, whether by attempting to prove that Counsel’s fees were other than appropriate in amount, or otherwise.
5. The Court notes that the document annexed hereto and marked ‘A’ includes the following bases of relief:
(a) “Denial of Natural Justice and right to a defence”.
(b) “Abuse of Process – Bill of Costs
1. The Bill of Costs submitted was an attempt at ‘unjust enrichment’.
….”.
(c) “Abuse of Process – Bill of Costs
….
3. Assessment delayed by the Defendant
….”
(d) “Procedures required by law were not observed specifically:
….
i. Manager Costs Assessment did not comply with LPA requirements of the Legal Professions (sic) Act”.
(e) “Abuse of Process – Bill of Costs
….
4. Denied right to a Review of Costs Assessment.”
(f) [Pertaining to the freezing orders obtained against the Applicant:]
i. “Breach of Court orders”
ii. “Breach of Undertakings
1. Undertakings were not complied with as required by law. Specifically:
a. FO of 29th June 2011 on Richard Jones
b. FO of 20th July 2011 on Richard Jones.”
iii. “Breach of rules – Freezing Orders
Freezing Orders used for security:
1. The Defendant abused the Freezing Orders on the Plaintiff and used them as security
2. The Defendant knowingly threw away the assets set aside by undertaking by non performance of the orders and undertakings”.
iv. “Bankruptcy Notice Invalid”.
v. “Abuse of Process – Freezing Orders”
vi. “Inequity”
vii. “Equity”
viii. “Estoppel”
ix. “The Freezing Orders of July 20th, 2011 created an estoppel laches”.
x. “Legitimate debt could have been satisfied”
(g) [Pertaining to the freezing orders obtained against third parties:]
i. “Fraudulent representations to the Court”
ii. “Breach of Undertakings
1. Undertakings were not complied with as required by law. Specifically:
……
a. FO of 15th December 2011 on Crest Australia
b. FO of 15th December 2011 on Sue Hombsch
Subsequent applications for extension of Freezing Orders.”
iii. “Breach of rules – Freezing Orders
Freezing Orders used for security:
1. …
2. ….
3. The Defendant sought further security in Third Party assets pending enforcement of the Judgment at their pleasure”.
iv. “The Freezing Orders against Third Parties not legitimate.”
v. “Abuse of Process – Freezing Orders on Third Parties.”
(h) [Apparently pertaining to the freezing orders generally:]
i. “By pressing a farrago of abuses of court processes the Defendant orchestrated my bankruptcy in a way which rendered any defence difficult if not impossible and in any event costly to all parties”.
ii. “Abuse of process – Undertakings”
iii. “Public Interest”
(i) “Procedures required by law were not observed specifically:
i. Application for Substituted Service of Creditors Petition.
ii. Application for Order for Sequestration.”
On the basis that the Applicant has no reasonable prospect of successfully relying on those bases of relief, or any of them, in prosecuting any claim for relief in the proceedings, insofar as the Applicant relies on those bases of relief, and each of them, the Applicant’s claims of relief be dismissed; further or in the alternative, the Applicant not be permitted to rely on those bases of relief, or any of them, in prosecuting any claim for relief in the proceedings.
6. The Court notes that the document annexed hereto and marked ‘A’ (on page 5) particularises the Applicant’s claim for “Compensation and damages”. On the basis that the Applicant has no reasonable prospect of successfully prosecuting it, the Applicant’s claim for “Compensation and damages” be dismissed.
7. On the basis that the Applicant has no reasonable prospect of successfully prosecuting them, that the Application for Review filed 18 June 2013 and Application in a Case filed 4 July 2013 be dismissed.
8. Costs.
9. Further or in the alternative, the Court notes that the document annexed hereto and marked ‘A’ includes the information provided with respect to RODNEY DALE following the Court’s directions on 1 April 2014. On the basis that the evidence which the Applicant proposes to elicit from RODNEY DALE will not assist the Applicant to prosecute successfully the claims for relief he seeks in the proceedings, pursuant to rule 15A.09 of the Federal Circuit Court Rules 2001 the subpoena to give evidence issued by the Applicant to RODNEY DALE dated 15.10.14 be set aside; further, pursuant to rule 15.01 of the Federal Circuit Court Rules 2001 the Applicant not be permitted either to call RODNEY DALE to give evidence, or to cross-examine him.
10. Further or in the alternative, that the subpoena issued by the Applicant to JOHN GERARD BAMFORD dated 15.10.13 be set aside pursuant to rule 15A.09 of the Federal Circuit Court Rules 2001 as to:
(a) Paragraph 2 of the Schedule to the subpoena on the ground that it is an abuse of process as it seeks to effect the outcome sought in paragraph 3 of the document titled ‘Attachment – sought:’ attached to the Application dated 04.07.13 and filed by the Applicant in the proceedings and is therefore premature; further or in the alternative, on the ground that it is vexatious and oppressive; and
(b) Paragraph 3 of the Schedule to the subpoena on the grounds that it is too broad and an abuse of process.
11. Further or in the alternative, the Court notes that the Applicant having represented to the Court that he was ready to proceed and that the affidavits filed to that time by the Applicant contained the total claim of the Applicant all the material on which the Applicant intended to rely, and on the basis of those representations the Court gave directions regarding the service of evidence, the Respondent prepared evidence, and the matter was listed for hearing on 30 October 2013, shortly prior to 30 October 2013 and without fore-notice the Applicant served subpoenas which resulted in the adjournment of the hearing and over 5 months thereafter the Applicant served his affidavit sworn 8 April 2014. On the basis that, now to permit the Applicant to read that affidavit would occasion further delay, irremediable additional expense to the Respondent and irremediable damage to other creditors of the Applicant, the Applicant not be permitted to rely on his affidavit sworn 8 April 2014 in the proceedings.
12. Further or in the alternative, that the matter be set down for hearing.
13. Such further or other order as to the Court seems fit.
14. Liberty to apply on 3 days notice.
Procedural Steps prior to the Hearing on 2 May 2014
The second Application for Review (filed on 18 June 2013) was listed for first directions on 1 July 2013 when it was referred to me by the Registrar. During that initial directions hearing, Jones explained his circumstances and the numerous issues that he intended to ventilate ranging from the making of freezing orders, in respect of assets that were or formerly were his, in the District Court and ultimately the sequestration order. It was apparent that Jones had not marshalled his evidence or submissions into any order suitable to proceed. However, on 1 July 2013 Jones told the Court that he was ready to proceed. It was immediately apparent to the Court that the parties had been involved in vigorously contested proceedings in the past and their relationship was not cordial. Schedule “1” is a chronology prepared by Bamford Lawyers which lists the various directions hearings and orders made by both the District Court and this Court and encompass the areas that Jones has indicated orally that he wishes to include with his Application for Review.
On 29 July 2013 the Court made directions, pursuant to which Jones served his letter dated 22 August 2013. Jones did not intimate that he proposed to rely on evidence additional to the affidavits which he had filed and served.
Shortly prior to the hearing on 30 October 2013 Jones served subpoenas to various persons to attend to give evidence.
On 30 October 2013 Jones consented to a direction in the terms of prayer 3 in the Amended Application of Purnell Motors, filed that day, regarding the evidence he proposed to elicit from counsel retained by Purnell Motors. Pursuant to that direction, Jones handed up a handwritten document.
On 30 October 2013 the Court made specific directions directing Jones to identify with specificity the oral evidence he proposed to seek to elicit from other witnesses and the time he expected it to take. Jones did not comply with that direction.
On 1 April 2014 the Court:
a)Made orders in relation to Purnell Motors’ Amended Application on 30 October 2014, in particular regarding Jones not being permitted to call the Purnell Motor’s counsel to give evidence, and delivered reasons for those orders; and
b)Ordered Jones to file and serve an outline of the basis of the relief he seeks and extended the time for Jones to comply with the directions on 30 October 2013 directing Jones to identify with specificity the oral evidence he proposed to seek to elicit and the time he expected it to take.
Jones served, and foreshadowed that he would file a document headed “Basis of Relief and Witness Information”. A copy of the document forms Schedule “3” to these reasons.
Jones also served a further affidavit of 152 pages, sworn on 8 April 2014 (“Jones’ April Affidavit”). It includes at Annexure “RJ” p.16-21” an affidavit of Mr Johnson sworn 25 March 2014 and various documents regarding the costs assessment, including the Reasons of the Costs Assessor.
On 15 April 2014 the Court:
a)Directed Jones to file and serve authorities supporting his claim the Court has power to go behind the judgment on the grounds on which Jones asks it to do so (particularly, by reference to freezing orders made by the District Court) and his submissions in support of his various applications by 28 April 2014.
b)Listed the matter for hearing of Purnell Motor’s Application filed 22 April 2014, on 2 May 2014.
On 1 May 2014, a day before the hearing listed for 2 May 2014, Purnell Motors obtained a copy of Jones’ list of authorities and written submissions from the Court having discovered that they appeared on the Court file, but had not been served.
Scope of these proceedings
In my earlier interlocutory judgment Purnell Motors Pty Ltd v Jones [2014] FCCA 620 delivered on 1 April 2014, at [61]-[62] I referred to my comments made to the parties during a directions hearing that there was a preliminary issue as to whether this Court, sitting in its bankruptcy jurisdiction should in fact be going behind a decision of the District Court, which has not been appealed and forms the basis of a number of procedural steps leading to the issue of the Bankruptcy Notice and Creditor’s Petition, also undertaken without challenge, resulting in a sequestration order being made in September 2012, 6 months prior to the first review application and over 12 months prior to it being ready to be heard in these proceedings.
From oral submissions made from the bar table Mr Gregory confirmed that the principle debt arises out of an order for costs which was assessed and judgment entered on that assessment. There has been no application to review the assessment and there has been no application made to set aside the judgment. There was an asset freezing order made against Jones in relation to his disposal of two properties for no money and he has not applied to set aside or vary those orders. There were freezing orders made against a third party to whom Jones transferred properties and he informed the District Court that he had no interest in those properties. He has made no application to set aside or vary those orders.
The Official Receiver issued a s.139ZQ Notice (of the Bankruptcy Act 1966 (Cth)) on each of those transferees on the basis that the transfers are void as against the Trustee. One of those transferees has transferred the property back to the Trustee, while the transfer of the other property back to the Trustee is still in progress. Mr Gregory indicated to the Court that is has been now 12 months since the sequestration order was made and at least a couple of years since the original judgment was entered on the Costs Assessment.
The matter originated in early 2004 when Jones purchased a series 3 Range Rover, on the belief that its diesel engine gave better fuel economy and extended engine life, which suited his work commitments in rural areas. The vehicle’s purchase was made at Purnell Motors Pty Ltd show room in Arncliffe. Approximately 6 months after the purchase, Jones arranged for Purnell Motors to fit four additional driving lights and a rear-facing work light mounted on the roof-rack of the vehicle. Jones was dissatisfied with a number of aspects of the vehicle, culminating in a failure in the vehicle’s electrical system, causing the engine to stop and all external lights to extinguish, requiring the vehicle to be returned to Purnell Motors for repair. From that point, Jones was dissatisfied with both the vehicle’s safety and performance.
Ultimately, this dissatisfaction lead to Jones, who was at that stage represented, to bring proceedings in the NSW District Court against Purnell Motors with judgment being delivered by his honour Hungerford ADCJ on 10 February 2010 with verdict and judgment for Purnell Motors against Jones. Jones was ordered to pay Purnell Motors costs totalling 80% of those costs assessed on an ordinary basis. A certificate of determination of costs was issued on 8 September 2011 for the amount $277,582.02 together with a certificate of determination of costs of the costs assessor of the same date for the amount of $5004.91.
The Costs Judgment was made on 10 September 2012 and entered on 20 September 2012 for the amount $282,686.93. This was the basis for Bankruptcy Notice BN 1900 issued on 30 March 2012 (the “Bankruptcy Notice”) and served on Jones on 16 April 2012. A creditor’s petition was issued on 9 May 2012 on the basis that Jones failed to comply on or about 7 May 2012 with the requirements of the Bankruptcy Notice served on him on 16 April 2012 or to satisfy the Court that he had a counter-claim, set off or cross demand equal to or more than the sum claimed in the Bankruptcy Notice (the “Creditor’s Petition”).
The Court accepts that Jones left the country in August or September 2012 to visit London to attend to the estate of his deceased aunt. During that visit he indicated that he suffered the first of a series of heart attacks and other health issues which have inhibited his ability to pursue issues regarding his insolvency. However, he departed the country in August or September 2012 in the knowledge of the existence of the Bankruptcy Notice demanding payment which he had failed to satisfy on or before 7 May 2012. Further, he did not advise the creditor’s lawyers of any contact details during his absence
I expressed to the parties my concern as to the scope of these proceedings, which appeared to be far ranging from the grounds pleaded in the Application for Review and the Application in a Case filed by Jones on 4 July 2013. I asked the parties to indicate their approach to these issues. Jones, from the bar table, stated that he had no intention and he hoped that no one else had any intention of going back beyond 2009/2010 and essentially is it a matter of the Costs Assessment, rather than the decision of the District Court. Jones acknowledged that the decision of the District Court should have been appealed at the time, if there was an avenue for appeal, but that was not pursued. Jones confirmed that he had not appealed the District Court decision at all, but merely the Costs Assessment and the processes undertaken since then.
Mr Gregory indicated that a judgment had been handed down on the Costs Assessment and Jones had not sought to have that decision set aside or reviewed. I put to Jones that presumably that his intention is to go back to the mechanism of coming to the costs order total which is, in effect, going back to the Costs Assessment. Jones confirmed that it was his intention to pursue that course by calling the parties issued with subpoenas on 15 October 2013, namely, Messrs Bamford, Gregory, Bryett, Dale and Ruthven. This approach was being adopted because he was prevented from appealing the Costs Assessments because he was not aware that it had been completed and that that is the major issue in bringing these proceedings.
As I indicated in my earlier judgment, I accept that the bankruptcy court has the power to go behind a judgment relied upon by a petitioning creditor. However, the authorities have indicated that the Court is reluctant to go behind a judgment and exercise a discretion to embark on a fresh trial of underlying issues in the absence of good reason for question in the judgment debt which has been relied upon in the petition.
The legal principles of going behind judgments was considered by his Honour Manousaridis in Kuhadas v Gomez [2014] FCCA 1130 at [19]-[26] where his Honour states:
19. A person in Australia is made bankrupt when a court makes a sequestration order under s.52(1) of the Bankruptcy Act 1966 (Cth) (Act). Before a court can make a sequestration order, it must be satisfied the person against whom it is sought has committed one of the “act[s] of bankruptcy” defined in s.40(1) of the Act.
20. One act of bankruptcy is defined in paragraph (g) of s.40(1) of the Act. That paragraph applies to persons who are judgment debtors; that is, persons against whom a final judgment for an amount of money has been obtained in a court. A judgment debtor commits an act of bankruptcy if he or she fails to comply with a bankruptcy notice issued under the Act demanding payment of the amount of the debt recorded in, or to be more accurate, constituted by the judgment.
21. The reason s.40(1)(g) of the Act requires that it be a judgment debt rather than some other debt which the debtor must fail to pay before the court can be satisfied a person has committed an act of bankruptcy is the nature of a judgment debt: a judgment debt “creates an obligation of its own force” and “for most purposes as between the parties, it is conclusive evidence of the existence of the obligation which it creates”. In other words, a judgment debt constitutes the highest proof of a debt that can be obtained, and thus provides the surest grounds for inferring a judgment debtor’s inability to pay his or her debts when the judgment debtor does not pay the judgment debt in response to a bankruptcy notice issued under the Act.
22. In most cases courts of bankruptcy accept judgment debts as recording a true debt, and accept a judgment debtor’s failure to pay the judgment debt demanded in a bankruptcy notice as an act of bankruptcy. A judgment debt, however, “is never conclusive in bankruptcy”; it “does not always represent itself as the relevant debt of the petitioning creditor, even though under the general law, the prior existing debt has merged in a judgment”. Courts of bankruptcy, therefore, hold in reserve the power to inquire into whether the judgment debt is in fact based on a true debt. And a bankruptcy court’s determining whether a debt recorded in a judgment records a true debt is known as “going behind the judgment”.
23. A bankruptcy court’s power to go behind a judgment has most often been exercised at the hearing of a creditor’s petition under s.52(1) of the Act. The nature and the reasons for the exercise of the power of going behind a judgment were amply described in the following passage from the judgment of the plurality in Corney v Brien:
Section 56 (2) (a) of the Bankruptcy Act 1924-1950 provides that the court at the hearing shall require proof of the debt of the petitioning creditor. Under this provision the Court of Bankruptcy has undoubted jurisdiction to go behind a judgment obtained by default or compromise or where fraud or collusion is alleged and inquire whether the judgment is founded on a real debt. In Ex parte Kibble . . . Sir W.M. James L.J. said: "It is the settled rule of the Court of Bankruptcy, on which we have always acted, that the Court of Bankruptcy can inquire into the consideration for a judgment debt". Sir G. Mellish L.J. said: "It is quite clear that in the Court of Bankruptcy the consideration for a judgment may be investigated, particularly when the judgment has gone by default" . . . . This case was discussed and followed in Ex parte Lennox . . . where the reasons why the Court of Bankruptcy will go behind a judgment debt are fully discussed. Lindley L.J. said that "the Court of Bankruptcy will not allow itself to be put in motion at the instance of a person who is not a real creditor" . . . In In re Fraser . . . Kay L.J. said: "It is old law in bankruptcy that, neither upon an attempt to prove a debt, nor upon a petition for an adjudication of bankruptcy or a receiving order against a debtor, is a judgment against him for the debt conclusive. In Ex parte Bryant . . . Lord Eldon said: 'Proof upon a Judgment will not stand merely upon that, if there is not a Debt due in Truth and Reality, for which the Consideration must be looked to'." In In re Gooch . . . Scrutton L.J. said: "The county court registrar held quite correctly that he was at liberty to go behind the judgment, and see whether there was a good debt to support it". In In re a Debtor . . . Astbury J. said "True it is that the Bankruptcy Court may, upon a prima-facie case being shown, go behind a judgment for the purpose of satisfying itself that the debt enforceable thereunder was a real debt." In Petrie v. Redmond, a case in this Court . . . Latham C.J. said: "The court (that is, the Court of Bankruptcy) is entitled to go behind the judgment and inquire into the validity of the debt where there has been fraud, collusion or miscarriage of justice. . . . Also the court looks with suspicion on consent judgments and default judgments."
24. A court of bankruptcy will not, however, go behind a judgment as a matter of course. It will do so only in certain circumstances. The circumstances in which it will do so have been described in different ways. In Corney v Brien the plurality said that s.56(2)(a) of the Bankruptcy Act 1924-1950 (Cth), which in substance was the same as s.52(1)(c), conferred “undoubted jurisdiction to go behind a judgment obtained by default or compromise or where fraud or collusion is alleged and inquire whether the judgment is founded on a real debt”. In Wren v Mahony Barwick CJ (with whose reasons Windeyer and Owen JJ agreed) said:
Circumstances tending to show fraud or collusion or miscarriage of justice or that a compromise was not a fair and reasonable one, in the sense that even if not fraudulent it was foolish, absurd and improper, or resulted from an unequal position of the parties . . . offer occasions for the exercise by the Court of Bankruptcy of its power to inquire into the consideration for the judgment.
25. In the same case, Barwick CJ stated in broader terms the circumstances in which a court of bankruptcy may go behind a judgment:
The judgment is never conclusive in bankruptcy. . . . But the Bankruptcy Court may accept the judgment as satisfactory proof of the petitioning creditor’s debt. In that sense that court has a discretion. It may or may not so accept the judgment. But it has been made quite clear by the decisions 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. It must then exercise its power, or if you will, its discretion to look at what is behind the judgment. . . . The Court’s discretion in my opinion is a discretion to accept the judgment as satisfactory proof of that debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner.
26. The court’s power to go behind a judgment debt that is exercised on an application for a sequestration order is available to be exercised after a bankruptcy notice demanding payment of the judgment debt has been issued but before the time for complying with it has expired. It is available to be exercised on an application to set aside a bankruptcy notice.
(footnotes omitted)
I considered this issue in Commonwealth Bank of Australia v Kalkbrenner [2013] FCCA 1914 at [8] where I referred to a decision of Barnes FM (as she was then) in Rookharp Pty Ltd v Webb & Anor (2011) 254 FLR 410 at [168]-[169] where her Honour stated:
Going behind a judgment
168. It is not in dispute that the court has power to go behind a judgment that forms the basis for a bankruptcy notice (and hence for a creditor’s petition) to determine whether it is founded on a real debt on the basis that a sequestration order should not be made on the petition of a person who is not a real creditor. What is in issue is whether in truth and reality there is a debt due which can found a bankruptcy notice. In Wren v Mahony (1972) 126 CLR 212 at 224–5 ; [1972] HCA 5 at [16] Barwick CJ (with whom Windeyer and Owen JJ agreed) pointed out:
… the emphasis is upon the paramount need to have satisfactory proof of the petitioning creditor’s debt. The court’s discretion in my opinion is a discretion to accept the judgment as satisfactory proof of that debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner.
169. However the court will only go behind a judgment in this manner in order to determine whether the petitioning creditor’s debt should be struck out altogether, not merely to determine whether the judgment debt should be reduced, but rather to ascertain whether the creditor has a debt upon which the bankruptcy proceedings can be founded (see Oliveri v Stafford (1989) 24 FCR 413; [1989] FCA 486 and Re Longo; Ex parte Longo (1995) 57 FCR 523 ; [1995] FCA 1324). The issues about calculation of interest and a payment of $10,000 are not such, even if made out, as to warrant going behind the judgment insofar as that is intended to be submitted for the debtor.
Throughout Jones’ written submissions he focuses on the issue of going behind the judgment in relation to the costs orders, however, Jones has had ample time to pursue any challenge to the cost determination and this could have been pursued at a time well before Jones claims that he was suffering from ill health. The judgment was founded on a real debt, in the sense considered in Wren v Mahony (1972) 126 CLR 212. The suggestion of fraud in respect to the preparation of the costs application was addressed by the Costs Assessor and was rejected. I am not satisfied that the discretion to go behind the costs judgment ought to be exercised. Consequently, the various claims raised by Jones in respect of the Court exploring issues that have been established by the Costs Assessment are not within the scope of the Review requested.
Jones, in his submissions, addressed a number of issues referred to the general case management of this matter, together with issues arising from the interim judgment in this matter, delivered on 1 April 2014. I put those aside as they have little or no bearing on the Application in a Case seeking summary dismissal.
Preparation for hearing
Throughout the period that this matter has been before the Court, Jones has appeared as a self-represented litigant. It is revealed that in some of the submissions filed Jones had previously been represented by a solicitor by the name of Mr D. Sigler of Curlington Legal, Business and Technology Lawyers. However, it is not clear at what point that retainer was terminated. It is apparent that in respect to the preparation of some documentation, Jones has been assisted by someone with legal training. A review of the documentation filed makes this clearly apparent as the original application contains grounds of review that are not clearly expressed or specific in nature and without particularisation. In contrast, the two recent submissions filed by Jones are 21 and 32 typed pages in length respectively, which respond to issues that have been ventilated in this matter and are supported by authorities relevant to the principle being discussed.
At the commencement of the proceedings, I was particularly concerned by the inadequacy of the Application for Review, coupled with lengthy oral submissions from the bar table ranging over broad aspects of this matter, a substantial part of which did not fall within the jurisdiction of a bankruptcy court.
Jones acknowledged that most of the avenues for judicial review of issues in other jurisdictions were now denied to him by the Trustee of his bankrupt estate. The limited avenue available was to challenge the sequestration, although the real focus of his concern does not specifically arise from that order.
On several occasions during direction hearings, it was pointed out to Jones that the power of this Court to go behind the judgment or order on which the bankruptcy was based was limited by a number of long standing and established line of authority. In an attempt to focus on the issue to be considered during a hearing and provide Purnell Motors notice as to what material they would require to respond, on 29 July 2013 the Court ordered:
1. By 19 August 2013 Mr Jones is to advise the solicitors for the petitioning creditor and the Trustees, in writing, the specific source of power (in the case of a section of an act or regulation, by identifying, as appropriate, the specific Act and its section(s), and/or regulation and the regulation(s)), and the specific grounds, on which he relies in seeking each prayer for relief in the Application for Review filed 18 June 2013 and Application in a Case filed 4 July 2013.
…
3. The Application be listed for hearing on 30 October 2013 at 10.15am in Court 6D, John Maddison Tower, 88 Goulburn St, Sydney.
Order 1 was not complied with.
On 15 October 2013 Jones filed, by post, 5 subpoenas with the Court. These subpoenas were addressed to:
a)John Gerard Bamford to attend Court to give evidence and produce documents;
b)Simon Gregory to attend Court to give evidence and produce documents;
c)Christopher Gary Bryett to attend Court to give evidence;
d)Rodney Dale to attend Court to give evidence; and
e)Mark Ruthven (process server) to attend Court to give evidence and produce documents.
On 23 October 2013, Purnell Motors filed an Application in a Case and on 28 October 2013 filed two Notices of Opposition to the subpoenas issued to Simon Gregory and John Gerard Bamford. At the hearing on 30 October 2013 these issues were addressed, and this is contained in the Court’s judgment in Purnell Motors Pty Ltd v Jones [2014] FCCA 620 which was delivered on 1 April 2014.
As a consequence of that decision the following orders were made on 1 April 2014:
1. Leave is granted for the Amended Application in a Case to be filed.
2. Leave is granted for the Amended Application in a Case to be returnable instanter.
3. Prayer 3 of the Amended Application in a Case was consented to by Mr Jones.
4. Jones is not permitted to call Simon Gregory to give evidence on its application, in Mr Jones’ case.
5. subpoena issued by the Mr Jones to Simon Gregory dated 15 October 2013 be set aside pursuant to Regulation 15A.09 of the Federal Circuit Court Rules 2001.
6. Mr Jones’ Application for a Stay of the Sequestration Order is dismissed.
On 15 April 2014 the following orders were made by the Court:
1 The applicant, Mr Jones, file and serve on or before 28 April 2014 written submissions and a list of authorities addressing the legal basis of his claims that this Court should go behind the judgment founding the Bankruptcy Notice upon which the Creditor’s Petition under review is based. These submissions and list of authorities must be served on either Barwick Stevens Lawyers Dorrigo or Watson McNamara & Watt Lawyers Armidale no later than close of business on 28 April 2014.
2. The application be set down for interlocutory hearing on 2 May 2014 at 10.15am at Level 6, John Maddison Tower, 88 Goulburn Street, Sydney.
On 9 April 2014 Jones filed a document identified as “Basis of Relief and Witness Information”, a copy of which is located at Schedule “3” to these reasons.
On 25 April 2014 Jones filed detailed written submissions (18 pages in length) together with a list of authorities (3 pages in length).
Hearing 2 May 2014
Application in a Case filed 22 April 2014
Mr Gregory informed the Court that Purnell Motors moved on the Application in a Case, filed on 22 April 2014 and for the purposes of that Application proposes to rely on the evidence listed below at [49] which was formally read.
Approach adopted by Purnell Motors
Mr Gregory indicated to the Court that the approach that he had adopted to the Application in a Case filed 22 April 2014 is briefly summarised as follows.
Mr Gregory stated that Jones, in his Application for Review filed on 18 June 2013, seeks specifically Order 2:
1. Order for extension of time for application for review
2. That the order for sequestration be
annulmentannulled.3. Such other orders as the court considers just.
Mr Gregory indicated that there is no criticism of Jones, but this ground is not a clear indication of the relief that he seeks. Mr Gregory acknowledged that the Court had previously drawn to Jones’ attention that there are two possible avenues that he may be intending to pursue to achieve his objective being:
a)A review of the Registrar’s decision with a view to have it set aside, which requires a preliminary step being that Jones obtain an order for an extension of time for his application to be heard before an application for review of the Registrar’s decision could proceed; or
b)An application for annulment made under s.153B of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”).
This confusion is brought about by the wording used by Jones in his application. Clarification has been sought as to which approach he was intending to pursue, but this request has not been responded to.
Mr Gregory indicated that his submissions had been prepared on the basis of the authorities to this effect, that this is an application for an extension of time as a prerequisite for an application for review of the Registrar’s decision, not an application for an annulment under s.153B of the Bankruptcy Act. Mr Gregory indicates that his arguments are advanced on the basis that the primary relief that Jones needs to obtain is an order for an extension of time for the hearing of the Application for Review. I agree that this is the appropriate approach despite prayer 2 of the Application for Review seeking annulment and the term “set aside” not being present. In those circumstances, Jones bears the onus to establish that it is not futile for the Court to rehear the application for sequestration and it is not a hearing de novo.
Alternatively, if the application was construed as an application under s.153B, the discretionary factors that would militate against annulment of the bankruptcy are relevantly the same as militate against an extension of time for a hearing to set aside a sequestration order, in that the sequestration order ought not to have been made.
Other considerations to take into account are that Mr Bamford has informed the Court that Jones cannot pay his debts as they fall due and this issue is something that none of his applications to date have sought to grapple with. The implication of the whole regime is that someone who is bankrupt will not simply be able to have the sequestration order set aside, walk free and not pay their debts when the insolvency regime is set up on the basis that it prevents such occurrences.
Evidence
Purnell Motors relied upon the following evidence:
a)In the Amended Application in a Case filed by Purnell Motors on 30 October 2013 it states that the Application is supported by the affidavits filed in the Court in these proceedings and served on Jones to date in support of Purnell Motors’ opposition to the Application of Jones to be heard on 30 October 2013;
b)Affidavit of John Gerard Bamford sworn 29 October 2013 (the “Bamford October Affidavit”);
c)Affidavit of Rodney Dale, sworn 4 October 2012 (the “First Dale Affidavit”);
d)Affidavit of Christopher Bryett, sworn 23 August 2012;
e)Affidavit of Christopher Bryett, sworn 25 September 2012;
f)Affidavit of Debt of Rodney Dale, sworn 18 September 2013;
g)Affidavit of Rodney Dale, sworn 29 October 2013;
h)Affidavit of Search of Chris Bryett, sworn 5 October 2012; and
i)Hearing Transcript of District Court proceedings, Jones v Purnell Motors Pty Ltd, 15 July 2013. p.14.35-44 (the “Transcript”).
Jones filed the following evidence, but did not seek to read the material during the hearing:
a)Affidavit of Richard Jones, affirmed 8 April 2014 (filed 9 April 2014) (“Jones’ April Affidavit”).
Both parties refer to a number of affidavits filed previously in the proceedings, but do not rely on them. These affidavits are:
a)Affidavit of Jason Lloyd Porter, sworn 18 September 2013 (the “Porter Affidavit) ;
b)Affidavit of John Gerard Bamford, sworn 18 September 2013 (the “Bamford September Affidavit”); and
c)Affidavit of Richard Jones, sworn 12 June 2013, filed 18 June 2013 (“Jones’ June Affidavit”).
For the purposes of these reasons I will consider these affidavits as read.
Application in a Case; Orders 3 and 4 – Bill of costs and Counsel’s fees
Initially, Mr Gregory sought formal orders made in accordance with the terms of Orders 3 and 4 in the Application in a Case. Mr Gregory indicated that Order 3 picks up the only witness information that Jones was directed to file and serve, setting out the Grounds on which he bases his claims for relief in these proceedings which pertained to Mr Gregory’s conduct that he misrepresented costs for the preparation of submissions. Order 4 is sought in order to prevent Jones from attacking counsel for Purnell Motors and limit him to relying on evidence before the Court. Mr Gregory confirmed that Jones should be able to read his affidavit (Jones’ April Affidavit) but only to the extent that it addresses issues contained in Purnell Motors’ Application in a Case, filed on 22 April 2014.
Jones indicated to the Court that in Jones’ April Affidavit at Annexure “RJ”, p.139-148, there is evidence in relation to Mr Gregory, specifically that he did not have in Court the invoices that he provided to the Costs Assessor. However, contained within Jones’ April Affidavit there is a copy of the Costs Assessor’s report which contains reference to comments by the Costs Assessor with respect to Mr Gregory.
Jones indicated that Jones’ April Affidavit contained a letter from him addressed to Mr Bryett, who at the time was the instructing solicitor for Purnell Motors. Jones submits that there were contentions about the time taken for the preparation of submissions. During the final day of the hearing before the District Court there was considerable argument in relation to submissions and costs in those proceedings. The judge determined that it should following normal convention and a time table was set for the provision of submissions. Jones indicated that it was his recollection in respect of the hours spent, which he suggested were inflated.
Mr Gregory referred the Court to the transcript of the District Court proceedings (Jones v Purnell Motors & Anor, District Court proceedings, No. 4712/2007, costs assessment case No. 2010/00323325) on 4 November 2009 which appeared in Jones’ April Affidavit at Annexure “RJ”, p.140. Mr Gregory acknowledged that there had been extended discussions about submissions which finalised an order being made in the District Court. Purnell Motors put on their submissions first, in accordance with the normal common law procedure. Those proceedings concerned 42 heads of loss and this was handled in submissions with a Scott Schedule that went through the particulars in the claim for those 42 claims and the supporting evidence. There was a timetable set on 4 November 2009 for the hearing of oral submissions after service of written submissions by counsel. The hearing was initially set for 16 November 2009 but required an adjournment to 23 November 2009 on the application by Mr Gregory in order to complete submissions. The letter from Curlington Legal to Mr Chris Bryett of Bamford Lawyers, dated 23 November 2009 (Jones’ April Affidavit, at Annexure “RJ” p. 147) was written to ensure that Purnell Motors provided its submissions prior to 23 November 2009.
This Court was then referred to the Costs Assessor’s reasons for determination (Jones’ April Affidavit at Annexure “RJ”, p. 90-99). In the determination the following appears:
There was objection that counsels fees are grossly unreasonable. That is ill-founded. Despite the very heavy involvement, the fact of the matter is that the litigation in question involves substantial descent into detail and that is a notoriously time consuming task. I note that Counsel claimed at $330 per hour, that I am satisfied, is a fair and reasonable rate.
The objection to the time taken by Counsel for the preparation of submissions is not made out, I am satisfied that the time claimed is fair and reasonable. The matter took a long time in the preliminaries, involved a number of substantial amendments to the claim as it developed, and a substantial number of hearing days, all of the matter involved great detail and relatively complex law.
(Jones April Affidavit at Annexure “RJ” p. 92)
I directed the question to the parties that if the Costs Assessor had taken a contrary view in respect of the amount claimed, the above comment would not have been made and the certificate would not have been issued. This was not disputed. Mr Gregory made the submission that this was the sum total of evidence on which Jones could rely on to make out the ground that there was a misrepresentation of costs for preparation of submissions. Mr Gregory requests that Jones not be permitted to rely upon his oral submissions and that he was over-looking the reasons contained in the judgment in Purnell Motors v Jones [2014] FCCA 620 which addresses the inability of Jones to successfully address matters that were determined by the Costs Assessor, in any event, in this matter.
Jones indicated that the objection to the time taken by Counsel for preparation for submissions is not made out and he was now seeking to put before the Court the nature of his objection which he would be entitled to do in a review, had that occurred. Jones contends that it is not reasonable that someone can make more than double the amount of time spent on a submission, when in the belief that a statement to his Counsel that he believed that after 48 hours he had only a couple of hours to go to complete. The invoice, however, indicates more than double the amount of time spent after that, including up to 12 hours per day spent on those submissions over the following six or seven days.
I indicated to Jones that it may be appropriate that he sought the tender of evidence from the Costs Assessor as the Costs Assessor has the function of providing a filtering process. If anything in respect of the costs claimed did not comply with the Court Rules, legislation and the appropriate practice in relation to costing, it is for the Costs Assessor to identify them, raise them with counsel seeking the costs and request justification for that costing claim.
In the absence of any evidence to the contrary I would assume as with all costs assessments that the procedures have been carried out in detail by a professional who understands the procedures, the rules that apply and the common practice of seeing multiple costs applications. Further, if the Costs Assessor determines that something is out of the ordinary, questions would be raised. There is no reference that any question has been raised and the District Court accepted from the Costs Assessment that there is no query established.
Response to Prayers 3 and 4 – Bill of Costs and Counsel’s fees
Jones submits that Orders 3 and 4 were summarily dealt with on 2 May 2014. He did not agree with that decision on the basis on which it was made. The Bankruptcy Act makes specific provisions for review of a costs assessment for the reason (amongst others) that any person (specially over a 10 month period with over 500 pages of multiple submissions for the respondent) does not always get everything right in determining what is fair and reasonable. It is not appropriate that Mr Gregory give evidence from the bar table in his own defence: Coe v NSW Bar Association [2000] NSWCA 13. Jones states that he was not required to provide any reference to the matter in his submissions of 25 April 2014 and did not do so.
Jones submits that the judgment delivered on 1 April 2014 was based on the narrow issue of Mr Gregory giving evidence and was not required and nor did it consider all the matters to be taken into consideration for going behind the judgment. Jones claims that he had no opportunity to provide any submissions to go behind the judgment. Counsel for Purnell Motors on 30 October 2013 did seek reasons for the application for an extension of time. The Court allowed Jones to summarise those reasons in oral submissions.
Counsel for Purnell Motors replied that Jones had not offered any grounds of review. A transcript would show that the Court determined that Jones should not provide those grounds at that time. Jones contends that in the Application in a Case of 22 April 2014 that Purnell Motors now seeks a “second bite of the cherry” with respect to reasons for Jones’ leave to extend the time for the Application for Review. I have summarised Jones’ written submissions, retaining the authorities upon which he relies, but have not reproduced the extracted material from those authorities.
Jones submits that the basis for relief is not futile and the orders requested by Purnell Motors should not be made. Jones states that the statement made by Mr Gregory in submissions at the hearing on 30 October 2013 that if required to respond to the subpoena and give evidence that he would be required to “return his brief”.
Jones contends that this is not valid evidence as to why Mr Gregory should not have been examined. Jones contends that on 30 October 2013 the hearing was taken up by argument about the Application in a Case filed by Purnell Motors. The hearing of 2 May 2014 was almost entirely taken up by Purnell Motors speaking to a Further Application in a Case and over 60 pages of late submissions. These have all been efforts to prevent the Court from hearing Jones’ evidence which, among other things, clearly show contempt of Court orders, contempt of undertaking by solicitors and Purnell Motors, abuses of process and failures to comply with the central requirements of the Bankruptcy Act.
To avoid any suggestion that Jones’ submissions have not been accurately addressed I reproduced the following paragraph:
19. If, as Mr Bamford exclaimed during the telephone hearing on April 15th 2014, words to the effect "my client just wants to be paid' (the Applicant does not have the benefit of a transcript), then the answer lies in September 2011 when Purnell's failed to comply with court orders " thereafter take steps......" to enforce Judgment within 28 days and a mistaken belief, by the Respondent, that compliance with the Bankruptcy Act and Rules of the court applies only to unrepresented individuals and is not relevant to corporations and lawyers. Regardless of the Freezing Orders and undertakings by the Respondent, no credible submission has been made as to why the Respondent did not immediately seek recovery of costs in September/October 2011.
(Jones’ submissions, filed 26 June 2014)
I note the above, however, there has been no submission by Purnell Motors expressing the authority conferring the power on this Court to make such an order. Notwithstanding, for the reasons stated herein, it is not necessary such an order be made.
Application for Summary Dismissal
This addresses Purnell Motors’ Application in a Case, filed on 22 April 2014 seeking summary dismissal of Jones’s extant applications in these proceedings. I note the observations of his Honour Judge Burnett in his decision in Forest v Sydney Airport Corporation Ltd & Anor [2014] FCCA 208 at [26]-[27] where his Honour stated:
26. The principles governing the Court’s exercise of powers under s.17A Federal Circuit Court of Australia Act 1999 (Cth) are now well settled. Lindgren J, in White Industries Aust Ltd v Commissioner of Taxation [2007] FCA 511, summarised the principles as follows:
“[53] The “no reasonable prospects of success” formula of s.31A is that which was adopted in r.24.2 of the United Kingdom’s Civil Procedure Rules (“CPRs”) following the recommendation of Lord Woolf, Master of the Rolls, in his Access to Justice: Final Report to the Lord Chancellor on the Civil Justice System in England and Wales (HMSO, 1996), ch 12, ss.31-36. The same test has been adopted in rr.292(2) and 293(2) of Queensland’s Uniform Civil Procedure Rules 1999.
[54] Under s.31A I must be satisfied that the applicants have no reasonable prospect of success, but as s.31A(3) makes clear, this does not mean that I must be satisfied that the proceeding is hopeless or bound to fail. I suggest that the legislature’s intention in enacting s.31A was to lower the bar for obtaining summary judgment (including summary dismissal) below the level that had been fixed by such authorities as Dey v Victorian Railway Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91-92 ...”
27. The statements of Lindgren J were endorsed by the majority in George v Fletcher (Trustee) [2010] FCAFC 53 at [75], where they stated:
“...
These remarks have since frequently been cited with approval by various judges of this court. They offer valuable guidance in relation to the background to the enactment, purpose and meaning of s.31A and its equivalent, s.17A. The suggestion made by Lindgren J (at [54]), with which we agree, that the intention of the legislature in enacting s.31A was to “lower the bar for obtaining summary judgment” does not carry with it the additional proposition that the intention was to remove the bar completely. True it is that s.31A is not concerned just with pleadings but with substance, not form. The mere presence of a factual controversy, however trifling, implausible, tenuous or tangentially relevant is not a bar to the exercise of the power conferred by s.31A to grant summary judgment. That would be inconsistent with the way in which the phrase “no reasonable prospect of success” is to be read in light of s.31A(3) (and s.17A(3)).”
The power of this Court to summarily dismiss an application is set out in s.17A of the Federal Circuit Court of Australia Act 1999 (Cth) (the “FCC Act”). Insofar as it is relevant to this case, that section provides in subsection 17A(2) which states:
(2) The Federal Circuit Court of Australia may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
Subsection 17A(3) of the FCC Act provides:
(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
Subsection 17A(4) of the FCC Act states:
(4) This section does not limit any powers that the Federal Circuit Court of Australia has apart from this section.
Regulation 13.10 of the Federal Circuit Court Rules 2001 (Cth) (the “FCC Rules”) reflects s.17A of the FCC Act, and states as follows:
The Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if the Court is satisfied that:
(a) the party prosecuting the proceeding or claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim; or
(b) the proceeding or claim for relief is frivolous or vexatious; or
(c) the proceeding or claim for relief is an abuse of the process of the Court.
The approach to be taken when considering an application pursuant to s.17A of the FCC Act is to be similar to that undertaken by the Federal Court pursuant to s.31A of the Federal Court of Australia Act 1976 (Cth), which is in virtually identical terms. This provision was considered by the High Court in Spencer v Commonwealth of Australia (2010) 241 CLR 118. In that case their Honours Hayne, Crennan, Kiefel and Bell JJ held the power to dismiss an action summarily is not to be exercised lightly, but full weight must be given to the expression “no reasonable prospect” as a whole.
Hayne, Crennan, Kiefel and Bell JJ stated in Spencer (supra) at [58]:
58. How then should the expression "no reasonable prospect" be understood? No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is “no reasonable prospect.” The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like “no reasonable prospect” is to be avoided...
Hayne, Crennan, Kiefel and Bell JJ at [59] in Spencer continued:
59. In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like “clearly” “manifestly” or “obviously”) as “frivolous”, “untenable", “groundless” or “faulty". But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word “reasonable", in the phrase “no reasonable prospect", be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a “frivolous”, “untenable”, “groundless" or “faulty" claim.
(emphasis added)
Then Hayne, Crennan, Kiefel and Bell JJ in Spencer at [60] stated:
60. Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is "no reasonable prospect" of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to "no reasonable prospect" can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase "just and equitable" when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes.
(emphasis added)
The relevant principles regarding summary dismissal applications has been considered in the following matters: White Industries Australia Ltd & Anor v Assistant Commissioner of Taxation & Anor (2007) 160 FCR 298 per Lindgren J; Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720 per Rares J; Australian Securities and Investment Commission v Cassimatis & Anor (2013) 302 ALR 671 per Reeves J; Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 per Finkelstein, Rares and Gordon JJ; Polar Aviation Pty Ltd v Civil Aviation Safety Authority (No. 4) (2011) 203 FCR 293 per Kenny J.
In Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499 per Sundberg J, his Honour provided a convenient summary of the principle at [37] where he stated:
37. The principles governing the operation of s 31A of the Act were canvassed in detail by Lindgren J in White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 (White Industries) and Rares J in Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720 (Boston). In White Industries 160 FCR at [59], Lindgren J considered that a claim requires “real” as opposed to “fanciful” or “merely arguable” prospects in order for it to have reasonable prospects of success as required by s 31A. Justice Rares in Boston 236 ALR at [45] was of the view that, unless there are no real issues of fact – such that “only one conclusion can be said to be reasonable” – summary judgment (or dismissal) ought not be given pursuant to s 31A. The Full Court has recently considered the summary judgment standard in Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 (Finkelstein, Rares and Gordon JJ) (Jefferson Ford). Although different views were taken as to the precise operation of s 31A, the following principles appear to have been endorsed:
- In applying s 31A, the court does not conduct fact finding but must assess the strength of the allegations made by reference to the pleadings, affidavits and any other evidence adduced, in order to determine whether the claim is sufficiently strong to warrant a trial: see Jefferson Ford 167 FCR at [23] (Finkelstein J), [74] (Rares J) and [130] (Gordon J); see also Bradken Resources Pty Ltd v Lynx Engineering Consultants Pty Ltd [2008] FCA 1257 at [28] (Emmett J); Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920 at [6] (Finkelstein J). Ultimately, the court must consider whether there are any real, as opposed to fanciful, issues of fact or law that require proper determination at a trial.
- In assessing whether there are reasonable prospects of success, the court should draw all reasonable inferences (but only reasonable inferences) in favour of the non-moving party: see Jefferson Ford 167 FCR at [132] (Gordon J). Moreover, where the evidence on a summary judgment application is of an ambivalent character, there will be a real issue of fact and therefore reasonable prospects of success for the purposes of s 31A: see Boston 236 ALR at [45]; Jefferson Ford 167 FCR at [73] (Rares J) and [130] (Gordon J).
- The moving party bears the onus of persuading the court that its opponent has no reasonable prospects of success: see Jefferson Ford 167 FCR at [127] (Gordon J); Boston 236 ALR at [45]. However, where the moving party establishes a prima facie case for summary judgment, the opposing party must be able to point to “specific factual or evidentiary disputes that make a trial necessary”: see Jefferson Ford 167 FCR at [127] (Gordon J).
- As s 31A requires in effect a prediction as to the outcome of a claim, the court should be more reluctant to summarily dismiss a claim where real questions of fact and credit arise. In those cases, the court will not have all material evidence before it until trial, the credit of important witnesses will not have been tested and it will as a consequence be very difficult if not impossible to fairly assess the prospects of the claim: see Jefferson Ford 167 FCR at [20] (Finkelstein J); Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955 at [6] (Gilmour J).
His Honour Sundberg J’s remarks have been endorsed in subsequent cases, including some of which have been decided since the High Court judgment in Spencer (supra), namely Deputy Commissioner of Taxation v Southgate Investment Funds Ltd [2010] FCA 1298 per Kenny J and Helal v McConnell Dowell Constructors (Aust) Pty Ltd (2010) 193 FCR 213 per Ryan J.
In Spencer (supra) (noted above), French CJ and Gummow J stated at [24]-[26]:
24. The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process. The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd said:
"The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried".
More recently, in Batistatos v Roads and Traffic Authority (NSW) Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde which included the following:
“Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way."
There would seem to be little distinction between those approaches and the requirement of a "real" as distinct from "fanciful" prospect of success contemplated by s 31A. That proposition, however, is not inconsistent with the proposition that the criterion in s 31A may be satisfied upon grounds wider than those contained in pre-existing Rules of Court authorising summary dispositions.
25. Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.
26. Where an application under s 31A requires consideration of apparently complex questions of fact, then the caution uttered by Lord Hope is relevant. The importance of those considerations is amplified if the case involves resolution of issues of law and fact, or mixed law and fact.
(footnotes omitted)
The first step in Jones’ Application for Review seeking to have the sequestration order set aside is to have the extension time of time required in order to file the Application for Review granted. Mr Gregory has prepared detailed written and oral submissions, specifically addressing the issue of whether the extension of time should be granted.
Mr Gregory referred the Court to the decision in Hunter Valley Developments Pty Ltd & Ors v Cohen (1984) 3 FCR 344 per Wilcox J, being a decision under the Administrative Decision (Judicial Review) Act 1977 (Cth). His Honour discussed at some length the considerations ordinarily relevant to an application for leave to extend the time within which to file a notice of appeal. His Honour made the following observations:
17. Section 11 of the Administrative Decisions (Judicial Review) Act does not set out any criteria by reference to which the Court's decision to extend time for an application for review under s.5 is to be exercised. Already there have been a number of decisions of Judges of this Court, all sitting at first instance, dealing with the approach proper to be taken. They differ a little, both in language and in emphasis, but I venture to suggest that from them may be distilled the following principles to guide, not in any exhaustive manner, the exercise of the Court's discretion:
(a) Although the section does not, in terms, place any onus of proof upon an applicant for extension an application has to be made. Special circumstances need not be shown but the Court will not grant the application unless positively satisfied that it is proper so to do. The "prescribed period" of 28 days is not to be ignored (Ralkon v Aboriginal Development Commission [1982] FCA 153; (1982) 43 ALR 535 at p 550) Indeed it is the prima facie rule that proceedings commenced outside that period will not be entertained (Lucic v Nolan (1982) 45 ALR 411 at p 416) It is a pre-condition to the exercise of discretion in his favour that the applicant for extension show an "acceptable explanation of the delay" and that it is "fair and equitable in the circumstances" to extend time (Duff at p 485; Chapman v Reilly, Neaves J, 9 December 1983, not reported, at p 7).
(b) Action taken by the applicant, other than by making an application for review under the Act, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished. A distinction is to be made between the case of a person who, by non-curial means, has continued to make the decision maker aware that he contests the finality of the decision (who has not "rested on his rights": per Fisher J in Doyle v Chief of Staff [1982] FCA 124; (1982) 42 ALR 283 at p 287) and a case where the decision maker was allowed to believe that the matter was finally concluded. Compare Doyle, Chapman, Ralkon and Douglas v Allen (Morling J, 3 April 1984, not reported) at p 18 with Lucic at pp 414-415 and Hickey v Australian Telecommunications Commission (1983) 48 ALR 517 at p 519. The reasons for this distinction are not only the "need for finality in disputes" (see Lucic at p 410) but also the "fading from memory" problem referred to in Wedesweiller v Cole [1983] FCA 94; (1983) 47 ALR 528.
(c) Any prejudice to the respondent including any prejudice in defending the proceedings occasioned by the delay is a material factor militating against the grant of an extension: see Doyle at p 287, Duff at pp 484-485, Hickey at pp 525-527 and Wedesweiller at pp 533-534.
(d) However, the mere absence of prejudice is not enough to justify the grant of an extension: Douglas at p 18, Lucic at p 416, Hickey at p 523. In this context, public considerations often intrude (Lucic, Hickey). A delay which may result, if the application is successful, in the unsettling of other people (Ralkon p 550, Becerra pp12-13) or of established practices (Douglas p 19) is likely to prove fatal to the application.
(e) The merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted: Lucic p 417, Chapman p 6.
(f) Considerations of fairness as between the applicants and other persons otherwise in a like position are relevant to the manner of exercise of the Court's discretion: Wedesweiller at pp 534-535.
In Grundy v Wattyl Australia Pty Ltd [2002] FCA 1480 per Downes J, his Honour considered the relevant issues on an application for an extension of time to apply for a review of a Registrar’s exercise of power to make a sequestration order, where the application was made over four months out of time. His Honour made the following observations therein at [9]-[10]:
9. It follows that provisions for the review of registrars' decisions are very important, but time limitations, even very short time limitations, provided they are not absolute, are permissible. Indeed, the rationale for short time limits would seem to be the achieving of certainty at an early point of time without compromising the requirement for review. This is confirmed by the requirement that review applications be promptly heard.
10. Bankruptcy administration must begin promptly. If bankruptcy administrations are to be at risk of termination months after they have begun, with issues as to how intervening costs incurred by the trustee are to be met, problems could arise with respect to the proper administration of bankrupt estates. The present application was made more than four months out of time. In the interim the trustee had incurred substantial costs in connection with the administration of the estate.
Mr Gregory submits that the authorities show it is relevant to have regard to the work done by the Trustee, and the interest of creditors and the public in the prompt administration of bankrupt’s estates: Khan v Kerr & Anor [2007] FMCA 512 per Barnes FM (as she was then) at [143]. Thus, particularly significant for these proceedings, the Court will have regard to public interest in the orderly administration of insolvent debtors’ estates under the Bankruptcy Act to meet the legitimate claims of creditors: see, in the context of applications for annulment of a bankruptcy under s.153B of the Bankruptcy Act Green v Dare [2002] FMCA 297 per Driver FM (as he was then) at [8]. In that case, prior to the sequestration order, the applicant bankrupt had done all that she could to dispose of her interests in the only real property from which she could have met the petitioning creditors debt, by transferring it to a company which had then gifted it to a family trust in which the bankrupt was not a beneficiary.
In Oberlechner v Commonwealth Securities Ltd [2003] FMCA 511 Driver FM (as he then was) found at [10] the applicant bankrupt had not cooperated with his trustee in the course of the administration of the bankruptcy. In Drake v Jones [2009] FMCA 298 per Barnes FM (as she was then), her Honour at [111] considered a bankrupt in a state of denial about his affairs and in particular the claims of the petitioning creditor.
In Hunter Valley Developments Pty Ltd & Ors v Cohen (supra) at [22(e)], his Honour Wilcox J indicated that before an application for an extension of time will be granted, an applicant must show that he has an arguable basis for the Court not to affirm the sequestration order. In Atkinson v Commissioner of Taxation [2000] FCA 998 per Sackville J at [3], his Honour stated:
3. The Commissioner takes no point as to the adequacy of the applicant's explanation for the relatively short delay in invoking the Court's appellate jurisdiction. The Commissioner opposes the grant of leave on the basis that the applicant has not shown that he has any arguable grounds of appeal. The Commissioner correctly submits that if the applicant is unable to identify any arguable ground of appeal, an appeal would be futile and the Court would not grant an extension of time: Jess v Scott (1986) 12 FCR 187 (FC), at 195; Tydeman v Deputy Registrar of Child Support Agency [1999] FCA 936, at [5]; Brehoi v Minister for Immigration and Multicultural Affairs [1999] FCA 772 (FC), at [12].
Jones’ contention in respect of the 28 day time limit is incorrect in law and fact and, consequently, does not support the basis for going behind the judgment on which the sequestration order is based, with the remedy lying in an appeal to the District Court.
The second contention arises from an oral submission, made by Jones, at the directions hearing on 29 July 2013, claiming that Purnell Motors withheld information from him where he stated:
Jones: Purnell Motors withheld that information from me and took no action with respect to enforcing the judgment until April 2012…
(Transcript, Federal Circuit Court, 29 July 2014, at p.6.43- p.7-2)
The issue is that Jones does not identify the relevant information that was withheld or how the withheld information is relevant to the issue under consideration. Mr Bamford submits that Purnell Motors lodged the Costs Assessment certificate on 20 September 2011 and was not under any relevant obligation to Jones. Significantly, the lodging of the Costs Assessment certificate on 20 September 2011 was within time.
In an attempt to make good this ground, Jones filed and served the documents titled “Basis of Relief and Witness Information” (see Schedule “3” to this judgment) and Jones’ April Affidavit. Jones has consciously continued to contend that Purnell Motors, through Mr Bryett, had acted in an improper manner by withholding information from him:
a)Where Mr Bryett had provided Mr Sigler of Curlington Legal (who was at that time acting for Jones) with a copy of the Costs Assessment certificate in early 2012 (see letter dated 20 December 2012 from the Office of the Legal Services Commissioner responding to a letter of Jones of 7 July 2012 (Jones’ April Affidavit, at Annexure “RJ” 118); and
b)Where evidence of the provisions of that material at that time was before the Federal Circuit Court (Bamford September Affidavit, at [13]), on the Transcript of the hearing before the District Court on 15 July 2013 (Bamford September Affidavit, Annexure “JGB” 01-045).
Jones’ April Affidavit discloses the critical matter which Jones was aware of, but of which he failed to inform the Court that he was in the possession of a letter dated 30 August 2012 from the Supreme Court (Mr James Howard, Manager, Costs Assessment (Jones’ April Affidavit, Annexure “RJ” 114 and 115)) notifying Jones that the certificates and reasons concerning the Costs Assessment had been sent to Curlington Legal which was returned by Australia Post marked “return to sender” (see Jones’ April Affidavit, Annexure “RJ” 114).
This ground of review cannot be sustained as a legitimate basis for going behind the decision on which the sequestration order is founded.
The third contention is that Purnell Motors, in its application for an asset freezing order, had not complied with the orders. This issue was raised in oral submissions, from the bar table, in the following manner:
Jones: … In the interim, your Honour, they went to the court and misrepresented to the court – and I know that sounds serious, and it is – misrepresented to the court that the orders of 20 July were merely orders with respect to alternate service of subpoenas and they did not mention to the court, the District Court at that time, that they had not complied with the orders which were dependent on the receipt of the costs assessment. So – and that was some three months later….
(Transcript, Federal Circuit Court, 29 July 2014, at p.7.5-10)
Jones contends that the orders were not complied with in the respect of two elements:
a)Purnell Motors misrepresented to the District Court that the orders of 20 July 2011, were merely orders with respect to alternate service subpoenas; and
b)Purnell Motors did not mention to the District Court that they had not complied with the orders which were dependent on the receipt of the Costs Assessment.
I agree with the submissions made by Mr Bamford that this Court does not have the jurisdiction to interfere with the District Court’s orders and Jones himself was at liberty to apply and had that avenue available to him at all relevant times, but did not exercise that option. Jones knew of this at all times and ought to be taken to be aware of that option. Further, Jones does not, in the evidence of his three affidavits filed in these proceedings, set out what these defects were or supplied any evidential base on which the Court with the appropriate jurisdiction could proceed. Jones has not adduced any adequate evidence to support this contention and has failed to do so when:
a)Jones, as a party to the District Court proceedings, had full access to all materials on the District Court file relied on by Purnell Motors for seeking and obtaining extensions of the asset freezing orders;
b)Jones was notified as early as 1 July 2013 (when these proceedings came before Registrar Ng) that this was a matter for Jones to take up with the District Court;
c)The three freezing orders had been and/or were in place in the District Court proceedings in accordance with their terms:
i)As to asset freezing orders against Jones personally, subject to “extensions to this order” (Item 13d)(see Jones’ April Affidavit, Annexure “RJ” 42 and as to the misunderstanding of Jones, see Jones’ April Affidavit, Annexure “RJ” 16 at [9] and the relationship of these matters to the alienation of the two properties to third parties for zero monies);
ii)All with the liberty to apply, available at all times;
d)That liberty to apply has not been exercised by anyone: Duncan-Strelec v Tate [2008] NSWSC 1145;
e)Jones has not adduced adequate evidence in support of this claim and the Federal Circuit Court, under the relevant cross-vesting heads of legislation, lacks jurisdiction to disturb the assets freezing orders of the District Court that underpin this contention;
f)Jones has, from 1 July 2013, been aware of the jurisdictional error and yet persists with his reliance on this aspect in the Application for Review; and
g)Jones is not the registered proprietor of either of the two properties affected by third party assets freezing orders and had informed this Court and the District Court that he had no interest in those two properties.
Ultimately, the extension of the third party assets freezing orders was a matter for consideration by the District Court at the instigation of the parties affected by an order granting liberty to apply. Again, this is an issue that cannot sustain the application to go behind the judgment founding the sequestration order.
The fourth contention is that Purnell Motors presented to the District Court when the third party asset freezing orders were extended, that they would move to enforce the District Court judgment, yet Purnell Motors took several months to do so. This contention was raised in oral submissions during the directions hearing on 29 July 2013. Jones stated:
Jones: …In that affidavit, your Honour, they represented that if the freezing orders were extended by the court or given by the court then they would then move to enforce the judgment which again took several months…
(Transcript, Federal Circuit Court, 29 July 2014, at p.5.10-13)
Mr Bamford assisted the Court by indicating that the affidavit referred to by Jones is understood to be that of Mr Bryett, sworn 20 July 2011 and filed in the District Court (Affidavit of Christopher Bryett, sworn 23 August 2012 at [4] and Annexure “A”).
Mr Bamford, in his written submissions of 2 May 2014, has identified from evidence filed in these proceedings four statements made by Jones during various directions hearings that are relevant to this contention. These items are:
a)16 March 2012 – Purnell Motors sought the issuance of the Bankruptcy Notice on that date (Bamford Lawyers letter to AFSA (formerly known as ITSA));
b)23 March 2012 – Delays encountered in the issuance of Bankruptcy Notice by ITSA (ITSA letter of 23 March 2012, which identified the following defects in the application:
i)“Richard Chris Jones” is not stated in the judgment order; and
ii)Final amount of the post-interest schedule is incorrect;
c)30 March 2012- Bankruptcy Notice issued by ITSA on that date: Affidavit of Christopher Bryett, sworn 23 August 2012, Annexure “C” and the Affidavit of Mark Ruthven, sworn 23 April 2012, Annexure “A”);
d)16 April 2012 – the Bankruptcy Notice was served on that date (Affidavit of Personal Service of Mark Ruthven sworn 23 April 2012). It is noted that Jones was complaining to the Office of Legal Services Commissioner and provided a copy of the Bankruptcy Notice served on him on Monday 9 April 2012 (Letter from Office of Legal Services Commissioner, 19 April 2012, to Bamford Layers and attached to that letter was a letter from the Office of the Legal Services Commissioner to Jones on the same date);
e)Jones sought and obtained legal advice not to take action until the Costs Assessment was completed so that Jones could then negotiate an outcome. Jones stated:
Jones: …The advice I received in July and August, the legal advice I received at the time and from an accountant, was to wait until the costs assessment was delivered before you try and negotiate an outcome.
(Transcript, Federal Circuit Court, 29 July 2014, at p.7.17-20)
f)Jones stated:
I relied on that...
(Transcript, Federal Circuit Court, 29 July 2014, at p.7.22)
g)19 April 2012 – Jones took the matter to the Legal Services Commissioner on that date (Legal services Commissioner Letter, 19 April 2012), which states:
On 09.05.11 we received a complaint about your firm from Richard Jones.
Later in the same letter it states:
Mr Jones has recently provided me with a copy of a bankruptcy notice served on him on Monday 9 April 2012.
h)Jones stated that the information he was given from the Legal Services Commissioner was as follows:
Jones: …I took the matter to the Legal Services Commission and they also said, “Well, wait till the costs assessment comes out" …
(Transcript, Federal Circuit Court, 29 July 2014, at p.7.23)
i)Jones stated:
Jones: …I waited in vain, your Honour, depending on that order of the court, of which I was not informed…
(Transcript, Federal Circuit Court, 29 July 2014, at p.7.23-24)
j)Jones stated:
…that they [Purnell Motors] did not comply with other undertakings in the freezing orders which included that the plaintiff [Jones] and the other parties be immediately served with certain – and they're in the order requested that I put before you now, which would include any transcripts or affidavits or orders of the court – they were not provided to me in December so I didn't even know then that the judgment had been delivered. So, your Honour, I believe that having remained silent and in breach of the order of 20 July that Purnell Motors had no right to issue a bankruptcy notice six months later.
(Transcript, Federal Circuit Court, 29 July 2014, p. 7.25-31)
Despite Jones’ claim he knew unequivocally from receipt of the Bankruptcy Notice that Purnell Motors were pursuing bankruptcy proceedings and that he had taken steps to alienate the properties that were the subject of the third party asset freezing orders.
I am not satisfied that any of the issues raised in this contention establish a basis on which this Court could undertake the course of going behind the judgment on which the Bankruptcy Notice is based. None of the avenues of review or appeal were pursued and in the absence of any action of that nature, there is no residual avenue via a claim in the bankruptcy jurisdiction of this Court seeking to set aside or annul the sequestration order.
The fifth contention concerns Jones’ claim that Purnell Motors remained silent and in breach of the District Court’s orders made on 20 July 2011 and, consequently, had no right to issue the Bankruptcy Notice. Jones stated before this Court:
… [T]hat they [Purnell Motors] did not comply with other undertakings in the freezing orders which included that the plaintiff [Jones] and the other parties be immediately served with certain – and they're in the order requested that I put before you now, which would include any transcripts or affidavits or orders of the court – they were not provided to me in December [2011] so I didn't even know then that the judgment had been delivered. So, your Honour, I believe that having remained silent and in breach of the order of 20 July [2011] that Purnell Motors had no right to issue a bankruptcy notice six months later.
(Transcript, Federal Circuit Court, 29 July 2014, p.7.25-31)
The costs assessment certificate issued was on 5 December 2011 and there was nothing to advise that Purnell Motors was, in any event, under the obligation to notify Jones of when the costs assessment certificate was issued. After obtaining the District Court judgment the next step was to issue a bankruptcy notice, which occurred on 30 March 2012 and was served on Jones on 16 April 2012. In the circumstances, it was for Jones to remain vigilant as to what steps were being taken by Purnell Motors to recover their judgment debts and there was no obligation upon Purnell Motors to advise Jones of what steps they were undertaking. Jones sought and obtained his own advice and acted upon it. It is not the responsibility of Purnell Motors to advise him of any course that they intended to pursue.
Jones’ April Affidavit does not address the issue of the Bankruptcy Notice, rather, it focuses on some issue of non-compliance with the asset freezing orders or associated undertakings. In this respect, at the directions hearing held on 29 July 2013, Jones stated:
…it has been used as a way of engineering my bankruptcy, your Honour, and that's where it lies – if for no other reason, your Honour, than – an order which compels me to do certain things on pain of going to prison if I don't comply, the same order places conditions on the person seeking it, Purnell Motors, and they act with impunity even though I rely on those orders. And that is grossly unjust, apart from anything else…
(Transcript, Federal Circuit Court, 29 July 2014, p. 13.44-47)
I agree with the submissions made by Mr Bamford that Jones’ contention is made in relation to a matter that occurred before the sequestration order was made on 5 October 2012. Jones did nothing to address these earlier matters when he did have standing to do so. This is something that Jones acknowledges:
…I cannot go to any court of appeal because I have no standing.
(Transcript, Federal Circuit Court, 29 July 2014, p. 14.9)
On the basis that Jones is, in effect, focused on the freezing orders and he is seeking an avenue to revisit those issues, it must be considered against the following background:
a)The only property legally owned by Jones, at sequestration, was the Leichhardt property, which rendered no surplus to unsecured creditors on sale by the mortgagee, Westpac; and
b)If the asset freezing orders non-compliance concerns either or both of the alienated properties:
i)Jones concedes that he has no interest in the properties:
ii)Any non-compliance is a matter for current proprietors; and
iii)Any non-compliance with the asset freezing orders does not impact the underlying debt which remains intact and unpaid and Jones concedes that he has no assets.
I have included the above admissions, submitted by Messrs Bamford and Gregory in an attempt to demonstrate the areas of focus of Jones’ submissions and his affidavit material is of little assistance to this Court when asked to review a sequestration order by a registrar of this Court. Throughout the process, the volume of material has increased, but does not address the essential elements to justify an order to set aside or annul sequestration. The Court notes that throughout this preparatory period prior to the hearing issues have arisen, such as the accusation of fraud. Jones has been put on notice as to the need to formulate his case, the requirement to meet the fundamental elements that particularise the fraud claims and that the allegation must be established by a strict proof. I am not satisfied that Jones comprehends the principles of such a claim and the steps that he is required in the presentation of his evidence to be in a position to present this to the Court.
Further, I have formed the view that this claim has been accentuated by Jones’ frustration at the circumstances that he finds himself in. A number of other claims raised by Jones fall into the same category and do not assist in an application to have the sequestration order set aside or annulled.
The service of the Bankruptcy Notice, on Jones on 16 April 2012 made Jones at risk of committing an act of bankruptcy. From that time, Jones was well aware that judgment had been entered and despite the Bankruptcy Notice containing that important information, Jones elected to go overseas. The Court is not in a position to make any comment on the reason for his departure, however, he chose to do so without leaving any address or contact details at which he could be contacted. That fact alone was causative of additional and unnecessary costs to Purnell Motors for the need to effect substituted service. The Court also notes that the period of time from the date of the service of the bankruptcy notice and the date of departure was in the vicinity of four to five months, and during that period Jones took no action to challenge the issue of the Bankruptcy Notice or pay the debt. Throughout this period, Jones was aware of the service of the Bankruptcy Notice, which, by its express terms stated the consequences of non-compliance. The Bankruptcy Notice clearly states the quantum of the debt, the period in which it is to be paid and the avenues available to establish that a cross-claim, set-off or cross-demand exists as challenge to the debt. It is acknowledged that Jones has suffered a series of illnesses, but there is no evidence before the Court that these were experienced during the period between the service of the Bankruptcy Notice and his departure overseas. The period in which to challenge a bankruptcy notice is 21 days, however, a period of 4-5 months passed before Jones’ departure and, during that period no action was pursued.
Conclusion
On the material before the Court I am not satisfied that an application to set aside or annul the sequestration order would succeed and, consequently, the Application for Review and Jones’ Application in a Case should be dismissed pursuant to Rule 13.10(a) of the FCC Rules on the basis that these applications by Jones have no reasonable prospects of success.
Costs
On 17 June 2014 the solicitors for Purnell Motors filed written submissions applying for indemnity costs against Jones. Those submissions set out a detailed summary of the unsuccessful avenues which Jones was seeking to pursue in the Application for Review of the sequestration order. This submissions request the Court to consider that the circumstances of this matter warrant the departure from the ordinary rule that costs would follow the event and address whether indemnity costs might be awarded. References are made to the decision in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 per Sheppard J where his Honour concluded at 234:
The question must always be whether the particular facts and circumstances of the case warrant the making of an order for payment of costs other than on a party and party basis…
In support of this Mr Bamford made the following submissions in written submissions seeking indemnity costs filed in chambers on 17 June 2014 at [36]-[42], where it states:
36. In Lowe v Mack Trucks Australia Pty Ltd (2008) FCA 711 Justice Kenny reviewed the words of the full Court in Re Wilcox; - Ex parte Venture Industries (No2) (1996) 72 FCR152 where Justice Cooper and Merkell reiterated Justice Sheppard’s approach saying “in order to exercise a discretion (regarding costs) judicially, the following principles have been accepted by the Court as applicable:
(a) The Court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the Court imparting from the usual course.
(b) The circumstances which may warrant departure from the usual cause arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the court in departing from the usual course.
(c) Whilst the circumstances in the case which the indemnity costs have been ordered; - offer a guide, the question must always be whether the particular facts and circumstances of the case warrant the making of an order for costs other than on a party/party basis.
37. His Honour then quoted the unanimous words of Justices Gray, Carr and Goldberg in Hamod v NSW (2002) 188 ALR 659 at page 665 being:
‘indemnity costs are not designed to punish a party for persisting with the case that turns out to fail. They are not means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred as a normal costs order could not be expected to do when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs’.
38. Justice Kenny continues “In particular, the Court may award indemnity costs in respect of misconduct that causes loss of time to the court and to other parties and cites Justice French in Tetijo Holdings Limited v Keeprite Australia Pty Ltd [1991] SCA 187.
39. This concept of unconscionable loss of time being incurred by the respondents and it was noted with Justice Middleton’s award of indemnity costs in Xat Ky v Australvic Property Management Pty Ltd (No.2) [2007] FCA 1785:
“where there was a considerable loss of time, and inconvenience to the parties and the court ...”
40. The further relevant words of Justice Kenny are adopted from Rosnik v Government Insurance Office (1997) 42 NSW LR 208 @ 616 being:-
“The court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation” before departing from the usual party and party costs order.
41. The circumstances here resultant from the conduct of the Applicant are such as to warrant an award of indemnity costs: see Bhagat v Global Custodians Ltd [2002] FCAFC 51; [2002] FCA 223.
42. A lay litigant is not immune to an order for indemnity costs. (See Bhagat v Global Custodians Ltd [2002] FCAFC 51; [2002] FCA 223).
In support of Purnell Motors’ claim there are references made to the actions undertaken by Purnell Motors (solely consequential upon the bringing the applications and the matter of their conduct by Jones) in this Court for the extension of the asset freezing orders in the District Court that have been protective of the position of all unsecured creditors. In the absence of concurrent opposition to the applications and the maintenance of asset freezing orders, the assets of the bankrupt estate of Jones would have been at risk. The costs incurred by Purnell Motors for the preservation of the assets of the bankrupt estate of Jones, by the extension of the asset freezing orders, ought to be included within the scope of any costs order by the Court in these proceedings.
Although the Court can sympathise with the position that Jones finds himself in, it is the result of the pursuit of issues that should have been resolved long before the issuing of the Bankruptcy Notice became necessary. This Court is very conscious of the statement of their Honours Gray, Carr and Goldberg JJ in Hamod v New South Wales & Anor (2002) 188 ALR 659, where Gray states at [20] (Carr and Goldberg JJ agreeing):
Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. …
However, a substantial amount of time of the legal representatives of Purnell Motors and this Court has been taken up while Jones attempted to structure his case in order to proceed. Significantly, on 15 October 2013, Jones caused the issue of subpoenas against Messrs Dale, Gregory, Bryett, Bamford and Ruthven when the application was listed for hearing on 30 October 2013. The issue of the subpoenas caused the abandonment of the proposed three day hearing and the filing and hearing instanter of an amended application in a case by Purnell Motors.
Although Jones claimed that it was an issue that was beyond his control, a significant problem throughout these proceedings was communicating with Jones because of the circumstances of him living in an area not serviced by regular post and where Jones claims he has little if no access to telephone or internet services for various reasons. Despite efforts being made by Purnell Motors to provide Jones with methods of serving and receiving documents through law firms local to him, this has provided little if any assistance and communication with Jones has remained a significant problem. I also note that my chambers, when attempting to contact Jones, has often been thwarted despite sending correspondence to multiple addresses associated with Jones. I further note correspondence has been sent by Jones to the Court which has not been sent to Purnell Motors and provides either no means of return communication or advises that no return communication to Jones will be accepted. In my view, some of this action has been deliberate on the part of Jones to hinder the expeditious resolution of these proceedings which, Jones claims, is one of the outcomes he seeks. This course of conduct is a factor relevant to the determination of whether costs should be awarded on an indemnity basis.
In the circumstances, I am satisfied that costs should be awarded on an indemnity basis for the purpose of compensating Purnell Motors their costs incurred that would not be expected in normal proceedings.
Note on Jones’ Health
Correspondence was received by my chambers on 30 June 2014 from Mr K. Love, a registered psychologist, and on 21 July 2014 from Dr H. Herb, a general practitioner at Dorrigo. Both letters raise concerns about Jones’ health, mental state and the effect these proceedings are having on him. I note that despite Jones filing submissions well out of time, the Court has considered these nonetheless and addressed them in these reasons. This was communicated by my associate to Dr Herb, who informed my associate he would advise Jones accordingly. However, the Application for Review was filed by Jones and a significant number of the delays in the expeditious resolution of the proceedings have been as a result of acts or omissions by Jones. Notwithstanding, the Court has attempted to deal with these proceedings in a manner fair to both parties and this should be noted for the record. I also note that my associate will, immediately after the handing down of these reasons, inform Dr Herb of the outcome of the proceedings and provide a copy of the reasons, if necessary, as he is the medical practitioner who has care of Jones’ health.
I certify that the preceding two hundred and thirteen (213) paragraphs are a true copy of the reasons for judgment of Judge Lloyd-Jones
Associate:
Date: 24 July 2014
- AGLC
- Purnell Motors Pty Ltd v Jones (No.2) [2014] FCCA 1617
- Case
- [2014] FCCA 1617
- Decision Date
CaseChat Overview and Summary
The primary legal issues before the Court were whether to grant the debtor an extension of time to pursue his application for review of the sequestration order, and whether his applications had any reasonable prospect of success. The Court was also required to consider Purnell Motors' application for summary dismissal of the debtor's proceedings, based on the argument that they had no reasonable prospect of success. The debtor sought to challenge the sequestration order by, among other things, going behind the judgment debt upon which it was based, alleging various procedural improprieties and abuses of process by the creditor.
The Court reasoned that the debtor's application for an extension of time was significantly out of time and lacked an acceptable explanation for the delay. Furthermore, the Court found that the debtor's proposed grounds for challenging the sequestration order, including allegations of misrepresentation of costs and abuse of process concerning freezing orders, did not demonstrate a reasonable prospect of success. The Court applied the principles governing summary dismissal under s.17A of the Federal Circuit Court of Australia Act 1999 (Cth) and rule 13.10 of the Federal Circuit Court Rules 2001 (Cth), which require the Court to be satisfied that a party has no reasonable prospect of successfully prosecuting their claim. The Court noted the debtor's extensive and largely unsuccessful litigation history and the prejudice to creditors and the trustee caused by the prolonged delay.
Consequently, the Court dismissed the debtor's Application for Review and Application in a Case. The Court also ordered that the costs of Purnell Motors in respect of these proceedings be paid from the bankrupt estate on an indemnity basis.
Orders
Orders of the court
1.
On the basis that Richard Jones has no reasonable prospect of success pursuant to reg.13.10(a) of the Federal Circuit Court Rules 2001 (Cth) that the Application for Review filed 18 June 2013 and Application in a Case filed 4 July 2013 be dismissed.
2.
The costs of Purnell Motors Pty Ltd, in respect of these proceedings from 18 June 2013 up to and including today’s date, be paid from the bankrupt estate of Richard Jones on an indemnity basis.
FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY
SYG 1012 of 2012
PURNELL MOTORS PTY LTD
Applicant
And
RICHARD JONES
Respondent
REASONS FOR JUDGMENT
Introduction
1.
Before the Court are proceedings in the matter of the Bankrupt Estate of Richard Jones (“Jones”) who, on 5 October 2012, had a sequestration order made against his estate by a registrar of this Court.
2.
On 26 April 2013, Jones filed a first application for review of the Registrar’s sequestration order. This was subsequently withdrawn by orders of the Court on 13 May 2013 and Jones filed a second application for review on 18 June 2013 (the “Application for Review”). The Application for Review came before a registrar of this Court on 6 July 2013 and was subsequently referred to my docket for the further case management and hearing of the matter. I have previously set out in some detail the procedural history relating to these proceedings in Purnell Motors Pty Ltd v Jones [2014] FCCA 620 which was delivered on 1 April 2014. This judgment needs to be read in conjunction with this current judgment and the chronologies tendered by counsel for Purnell Motors Pty Ltd (“Purnell Motors”) which form Schedule “1” and Schedule “2” to these reasons.
3.
The Court notes the ongoing case management has been made more difficult because of Jones’ current circumstances. Since his return to Australia from England where Jones was staying at the time of his sequestration and remained because of ill-health, a freezing of his accounts by the Trustee of his estate occurred. On return Jones states he has taken up residence in a caravan located on a property in the rural area near Dorrigo, NSW and is subject to frequent relocation. His address for service is PO Box U58, University of New England, Armidale, New South Wales, which is only cleared by Jones on an irregular basis. Jones does not possess a telephone, although he has been able to borrow a telephone facility which has enabled him to participate in telephone hearings, but this service is limited and has only been able to be accessed by the Court on pre-determined days at nominated times. Purnell Motors have assisted Jones by delivering and receiving correspondence via two different firms of solicitors, one located at Armidale and one at Dorrigo.
4.
At various times Jones has experienced further periods of illness which has resulted in him being unable to respond to orders made by the Court in respect to the filing of submissions and responses. Details of these delays, which have been critical to the completion of these proceedings, are dealt with below.
Issues currently before the Court
5.
The Application for Review filed on 18 June 2013 by Jones seeks the following orders:
1. Order for extension of time for application for review
2. That the order for sequestration be annulment annulled.
3. Such other orders as the court considers just.
6.
The Application in a Case of Jones filed on 4 July 2013 by Jones states (and seeks the following orders):
1. Order to Stay the Order for Sequestration
2. Order to transfer the matter
a. to Armidale, or in the alternative
b. to Coffs Harbour, or in the alternative
c. to Grafton, or in the Alternative
d. to Tamworth at the convenience of the Court
3. Orders to produce documents, In the case of each application for extension for freeze orders the following documents for each of the hearings on or about 20th July, 2011, 15th December, 2011, 17th January, 2012, 7th June 2012, 10th December 2012, 7th June 2013: and any other dates on which applications were heard specifically but not limited to.
a) the order(s)
b) The notice of motion to be relied on at the Hearing on the return date
c) The following material in so far as it was relied on by the Plaintiff at the hearing when the order was made:
i. The affidavits (or draft affidavits):
ii. Exhibits capable of being copied
iii. Any written submissions:
iv. Any other document that was provided to the Court: and
a) A transcript or, if none is available, a note, of any exclusively oral obligation of fact that was made and of any exclusively oral submission that was put to the Court and serve on the applicant as the Court directs
4. Order for compensation and damages
7.
The Application in a Case of Purnell Motors filed 22 April 2014 states:
1. That leave be granted to file this Application in a Case.
2. The Court notes that pursuant to the Court’s directions on 1 April 2014, the Applicant, Richard Jones, has filed and served a document headed, ‘Basis of Relief and Witness Information’. A copy of the document is annexed hereto and marked ‘A’.
3. The Court notes that the document annexed hereto and marked ‘A’ (Schedule “3” to the current judgment) includes the following basis of relief:
“Abuse of Process – Bill of Costs
…
2. Misrepresentation of costs for preparation of submissions by Mr Gregory.
….”.
On the basis that the Applicant has no reasonable prospect of successfully relying on that basis of relief in prosecuting any claim for relief in the proceedings, insofar as the Applicant relies on that basis of relief, the Applicant’s claims for relief be dismissed; further or in the alternative, the Applicant not be permitted to rely on that basis of relief in prosecuting any claim for relief in the proceedings.
4. Further, that the Applicant not be permitted to attack the personal or professional conduct of Mr Gregory, in the proceedings, whether by attempting to prove that Counsel’s fees were other than appropriate in amount, or otherwise.
5. The Court notes that the document annexed hereto and marked ‘A’ includes the following bases of relief:
(a) “Denial of Natural Justice and right to a defence”.
(b) “Abuse of Process – Bill of Costs
1. The Bill of Costs submitted was an attempt at ‘unjust enrichment’.
….”.
(c) “Abuse of Process – Bill of Costs
….
3. Assessment delayed by the Defendant
….”
(d) “Procedures required by law were not observed specifically:
….
i. Manager Costs Assessment did not comply with LPA requirements of the Legal Professions (sic) Act”.
(e) “Abuse of Process – Bill of Costs
….
4. Denied right to a Review of Costs Assessment.”
(f) [Pertaining to the freezing orders obtained against the Applicant:]
i. “Breach of Court orders”
ii. “Breach of Undertakings
1. Undertakings were not complied with as required by law. Specifically:
a. FO of 29th June 2011 on Richard Jones
b. FO of 20th July 2011 on Richard Jones.”
iii. “Breach of rules – Freezing Orders
Freezing Orders used for security:
1. The Defendant abused the Freezing Orders on the Plaintiff and used them as security
2. The Defendant knowingly threw away the assets set aside by undertaking by non performance of the orders and undertakings”.
iv. “Bankruptcy Notice Invalid”.
v. “Abuse of Process – Freezing Orders”
vi. “Inequity”
vii. “Equity”
viii. “Estoppel”
ix. “The Freezing Orders of July 20th, 2011 created an estoppel laches”.
x. “Legitimate debt could have been satisfied”
(g) [Pertaining to the freezing orders obtained against third parties:]
i. “Fraudulent representations to the Court”
ii. “Breach of Undertakings
1. Undertakings were not complied with as required by law. Specifically:
……
a. FO of 15th December 2011 on Crest Australia
b. FO of 15th December 2011 on Sue Hombsch
Subsequent applications for extension of Freezing Orders.”
iii. “Breach of rules – Freezing Orders
Freezing Orders used for security:
1. …
2. ….
3. The Defendant sought further security in Third Party assets pending enforcement of the Judgment at their pleasure”.
iv. “The Freezing Orders against Third Parties not legitimate.”
v. “Abuse of Process – Freezing Orders on Third Parties.”
(h) [Apparently pertaining to the freezing orders generally:]
i. “By pressing a farrago of abuses of court processes the Defendant orchestrated my bankruptcy in a way which rendered any defence difficult if not impossible and in any event costly to all parties”.
ii. “Abuse of process – Undertakings”
iii. “Public Interest”
(i) “Procedures required by law were not observed specifically:
i. Application for Substituted Service of Creditors Petition.
ii. Application for Order for Sequestration.”
On the basis that the Applicant has no reasonable prospect of successfully relying on those bases of relief, or any of them, in prosecuting any claim for relief in the proceedings, insofar as the Applicant relies on those bases of relief, and each of them, the Applicant’s claims of relief be dismissed; further or in the alternative, the Applicant not be permitted to rely on those bases of relief, or any of them, in prosecuting any claim for relief in the proceedings.
6. The Court notes that the document annexed hereto and marked ‘A’ (on page 5) particularises the Applicant’s claim for “Compensation and damages”. On the basis that the Applicant has no reasonable prospect of successfully prosecuting it, the Applicant’s claim for “Compensation and damages” be dismissed.
7. On the basis that the Applicant has no reasonable prospect of successfully prosecuting them, that the Application for Review filed 18 June 2013 and Application in a Case filed 4 July 2013 be dismissed.
8. Costs.
9. Further or in the alternative, the Court notes that the document annexed hereto and marked ‘A’ includes the information provided with respect to RODNEY DALE following the Court’s directions on 1 April 2014. On the basis that the evidence which the Applicant proposes to elicit from RODNEY DALE will not assist the Applicant to prosecute successfully the claims for relief he seeks in the proceedings, pursuant to rule 15A.09 of the Federal Circuit Court Rules 2001 the subpoena to give evidence issued by the Applicant to RODNEY DALE dated 15.10.14 be set aside; further, pursuant to rule 15.01 of the Federal Circuit Court Rules 2001 the Applicant not be permitted either to call RODNEY DALE to give evidence, or to cross-examine him.
10. Further or in the alternative, that the subpoena issued by the Applicant to JOHN GERARD BAMFORD dated 15.10.13 be set aside pursuant to rule 15A.09 of the Federal Circuit Court Rules 2001 as to:
(a) Paragraph 2 of the Schedule to the subpoena on the ground that it is an abuse of process as it seeks to effect the outcome sought in paragraph 3 of the document titled ‘Attachment – sought:’ attached to the Application dated 04.07.13 and filed by the Applicant in the proceedings and is therefore premature; further or in the alternative, on the ground that it is vexatious and oppressive; and
(b) Paragraph 3 of the Schedule to the subpoena on the grounds that it is too broad and an abuse of process.
11. Further or in the alternative, the Court notes that the Applicant having represented to the Court that he was ready to proceed and that the affidavits filed to that time by the Applicant contained the total claim of the Applicant all the material on which the Applicant intended to rely, and on the basis of those representations the Court gave directions regarding the service of evidence, the Respondent prepared evidence, and the matter was listed for hearing on 30 October 2013, shortly prior to 30 October 2013 and without fore-notice the Applicant served subpoenas which resulted in the adjournment of the hearing and over 5 months thereafter the Applicant served his affidavit sworn 8 April 2014. On the basis that, now to permit the Applicant to read that affidavit would occasion further delay, irremediable additional expense to the Respondent and irremediable damage to other creditors of the Applicant, the Applicant not be permitted to rely on his affidavit sworn 8 April 2014 in the proceedings.
12. Further or in the alternative, that the matter be set down for hearing.
13. Such further or other order as to the Court seems fit.
14. Liberty to apply on 3 days notice.
Procedural Steps prior to the Hearing on 2 May 2014
8.
The second Application for Review (filed on 18 June 2013) was listed for first directions on 1 July 2013 when it was referred to me by the Registrar. During that initial directions hearing, Jones explained his circumstances and the numerous issues that he intended to ventilate ranging from the making of freezing orders, in respect of assets that were or formerly were his, in the District Court and ultimately the sequestration order. It was apparent that Jones had not marshalled his evidence or submissions into any order suitable to proceed. However, on 1 July 2013 Jones told the Court that he was ready to proceed. It was immediately apparent to the Court that the parties had been involved in vigorously contested proceedings in the past and their relationship was not cordial. Schedule “1” is a chronology prepared by Bamford Lawyers which lists the various directions hearings and orders made by both the District Court and this Court and encompass the areas that Jones has indicated orally that he wishes to include with his Application for Review.
9.
On 29 July 2013 the Court made directions, pursuant to which Jones served his letter dated 22 August 2013. Jones did not intimate that he proposed to rely on evidence additional to the affidavits which he had filed and served.
10.
Shortly prior to the hearing on 30 October 2013 Jones served subpoenas to various persons to attend to give evidence.
11.
On 30 October 2013 Jones consented to a direction in the terms of prayer 3 in the Amended Application of Purnell Motors, filed that day, regarding the evidence he proposed to elicit from counsel retained by Purnell Motors. Pursuant to that direction, Jones handed up a handwritten document.
12.
On 30 October 2013 the Court made specific directions directing Jones to identify with specificity the oral evidence he proposed to seek to elicit from other witnesses and the time he expected it to take. Jones did not comply with that direction.
13.
On 1 April 2014 the Court:
a) Made orders in relation to Purnell Motors’ Amended Application on 30 October 2014, in particular regarding Jones not being permitted to call the Purnell Motor’s counsel to give evidence, and delivered reasons for those orders; and
b) Ordered Jones to file and serve an outline of the basis of the relief he seeks and extended the time for Jones to comply with the directions on 30 October 2013 directing Jones to identify with specificity the oral evidence he proposed to seek to elicit and the time he expected it to take.
14.
Jones served, and foreshadowed that he would file a document headed “Basis of Relief and Witness Information”. A copy of the document forms Schedule “3” to these reasons.
15.
Jones also served a further affidavit of 152 pages, sworn on 8 April 2014 (“Jones’ April Affidavit”). It includes at Annexure “RJ” p.16-21” an affidavit of Mr Johnson sworn 25 March 2014 and various documents regarding the costs assessment, including the Reasons of the Costs Assessor.
16.
On 15 April 2014 the Court:
a) Directed Jones to file and serve authorities supporting his claim the Court has power to go behind the judgment on the grounds on which Jones asks it to do so (particularly, by reference to freezing orders made by the District Court) and his submissions in support of his various applications by 28 April 2014.
b) Listed the matter for hearing of Purnell Motor’s Application filed 22 April 2014, on 2 May 2014.
17.
On 1 May 2014, a day before the hearing listed for 2 May 2014, Purnell Motors obtained a copy of Jones’ list of authorities and written submissions from the Court having discovered that they appeared on the Court file, but had not been served.
Scope of these proceedings
18.
In my earlier interlocutory judgment Purnell Motors Pty Ltd v Jones [2014] FCCA 620 delivered on 1 April 2014, at [61]-[62] I referred to my comments made to the parties during a directions hearing that there was a preliminary issue as to whether this Court, sitting in its bankruptcy jurisdiction should in fact be going behind a decision of the District Court, which has not been appealed and forms the basis of a number of procedural steps leading to the issue of the Bankruptcy Notice and Creditor’s Petition, also undertaken without challenge, resulting in a sequestration order being made in September 2012, 6 months prior to the first review application and over 12 months prior to it being ready to be heard in these proceedings.
19.
From oral submissions made from the bar table Mr Gregory confirmed that the principle debt arises out of an order for costs which was assessed and judgment entered on that assessment. There has been no application to review the assessment and there has been no application made to set aside the judgment. There was an asset freezing order made against Jones in relation to his disposal of two properties for no money and he has not applied to set aside or vary those orders. There were freezing orders made against a third party to whom Jones transferred properties and he informed the District Court that he had no interest in those properties. He has made no application to set aside or vary those orders.
20.
The Official Receiver issued a s.139ZQ Notice (of the Bankruptcy Act 1966 (Cth)) on each of those transferees on the basis that the transfers are void as against the Trustee. One of those transferees has transferred the property back to the Trustee, while the transfer of the other property back to the Trustee is still in progress. Mr Gregory indicated to the Court that is has been now 12 months since the sequestration order was made and at least a couple of years since the original judgment was entered on the Costs Assessment.
21.
The matter originated in early 2004 when Jones purchased a series 3 Range Rover, on the belief that its diesel engine gave better fuel economy and extended engine life, which suited his work commitments in rural areas. The vehicle’s purchase was made at Purnell Motors Pty Ltd show room in Arncliffe. Approximately 6 months after the purchase, Jones arranged for Purnell Motors to fit four additional driving lights and a rear-facing work light mounted on the roof-rack of the vehicle. Jones was dissatisfied with a number of aspects of the vehicle, culminating in a failure in the vehicle’s electrical system, causing the engine to stop and all external lights to extinguish, requiring the vehicle to be returned to Purnell Motors for repair. From that point, Jones was dissatisfied with both the vehicle’s safety and performance.
22.
Ultimately, this dissatisfaction lead to Jones, who was at that stage represented, to bring proceedings in the NSW District Court against Purnell Motors with judgment being delivered by his honour Hungerford ADCJ on 10 February 2010 with verdict and judgment for Purnell Motors against Jones. Jones was ordered to pay Purnell Motors costs totalling 80% of those costs assessed on an ordinary basis. A certificate of determination of costs was issued on 8 September 2011 for the amount $277,582.02 together with a certificate of determination of costs of the costs assessor of the same date for the amount of $5004.91.
23.
The Costs Judgment was made on 10 September 2012 and entered on 20 September 2012 for the amount $282,686.93. This was the basis for Bankruptcy Notice BN 1900 issued on 30 March 2012 (the “Bankruptcy Notice”) and served on Jones on 16 April 2012. A creditor’s petition was issued on 9 May 2012 on the basis that Jones failed to comply on or about 7 May 2012 with the requirements of the Bankruptcy Notice served on him on 16 April 2012 or to satisfy the Court that he had a counter-claim, set off or cross demand equal to or more than the sum claimed in the Bankruptcy Notice (the “Creditor’s Petition”).
24.
The Court accepts that Jones left the country in August or September 2012 to visit London to attend to the estate of his deceased aunt. During that visit he indicated that he suffered the first of a series of heart attacks and other health issues which have inhibited his ability to pursue issues regarding his insolvency. However, he departed the country in August or September 2012 in the knowledge of the existence of the Bankruptcy Notice demanding payment which he had failed to satisfy on or before 7 May 2012. Further, he did not advise the creditor’s lawyers of any contact details during his absence
25.
I expressed to the parties my concern as to the scope of these proceedings, which appeared to be far ranging from the grounds pleaded in the Application for Review and the Application in a Case filed by Jones on 4 July 2013. I asked the parties to indicate their approach to these issues. Jones, from the bar table, stated that he had no intention and he hoped that no one else had any intention of going back beyond 2009/2010 and essentially is it a matter of the Costs Assessment, rather than the decision of the District Court. Jones acknowledged that the decision of the District Court should have been appealed at the time, if there was an avenue for appeal, but that was not pursued. Jones confirmed that he had not appealed the District Court decision at all, but merely the Costs Assessment and the processes undertaken since then.
26.
Mr Gregory indicated that a judgment had been handed down on the Costs Assessment and Jones had not sought to have that decision set aside or reviewed. I put to Jones that presumably that his intention is to go back to the mechanism of coming to the costs order total which is, in effect, going back to the Costs Assessment. Jones confirmed that it was his intention to pursue that course by calling the parties issued with subpoenas on 15 October 2013, namely, Messrs Bamford, Gregory, Bryett, Dale and Ruthven. This approach was being adopted because he was prevented from appealing the Costs Assessments because he was not aware that it had been completed and that that is the major issue in bringing these proceedings.
27.
As I indicated in my earlier judgment, I accept that the bankruptcy court has the power to go behind a judgment relied upon by a petitioning creditor. However, the authorities have indicated that the Court is reluctant to go behind a judgment and exercise a discretion to embark on a fresh trial of underlying issues in the absence of good reason for question in the judgment debt which has been relied upon in the petition.
28.
The legal principles of going behind judgments was considered by his Honour Manousaridis in Kuhadas v Gomez [2014] FCCA 1130 at [19]-[26] where his Honour states:
19. A person in Australia is made bankrupt when a court makes a sequestration order under s.52(1) of the Bankruptcy Act 1966 (Cth) (Act). Before a court can make a sequestration order, it must be satisfied the person against whom it is sought has committed one of the “act[s] of bankruptcy” defined in s.40(1) of the Act.
20. One act of bankruptcy is defined in paragraph (g) of s.40(1) of the Act. That paragraph applies to persons who are judgment debtors; that is, persons against whom a final judgment for an amount of money has been obtained in a court. A judgment debtor commits an act of bankruptcy if he or she fails to comply with a bankruptcy notice issued under the Act demanding payment of the amount of the debt recorded in, or to be more accurate, constituted by the judgment.
21. The reason s.40(1)(g) of the Act requires that it be a judgment debt rather than some other debt which the debtor must fail to pay before the court can be satisfied a person has committed an act of bankruptcy is the nature of a judgment debt: a judgment debt “creates an obligation of its own force” and “for most purposes as between the parties, it is conclusive evidence of the existence of the obligation which it creates”. In other words, a judgment debt constitutes the highest proof of a debt that can be obtained, and thus provides the surest grounds for inferring a judgment debtor’s inability to pay his or her debts when the judgment debtor does not pay the judgment debt in response to a bankruptcy notice issued under the Act.
22. In most cases courts of bankruptcy accept judgment debts as recording a true debt, and accept a judgment debtor’s failure to pay the judgment debt demanded in a bankruptcy notice as an act of bankruptcy. A judgment debt, however, “is never conclusive in bankruptcy”; it “does not always represent itself as the relevant debt of the petitioning creditor, even though under the general law, the prior existing debt has merged in a judgment”. Courts of bankruptcy, therefore, hold in reserve the power to inquire into whether the judgment debt is in fact based on a true debt. And a bankruptcy court’s determining whether a debt recorded in a judgment records a true debt is known as “going behind the judgment”.
23. A bankruptcy court’s power to go behind a judgment has most often been exercised at the hearing of a creditor’s petition under s.52(1) of the Act. The nature and the reasons for the exercise of the power of going behind a judgment were amply described in the following passage from the judgment of the plurality in Corney v Brien:
Section 56 (2) (a) of the Bankruptcy Act 1924-1950 provides that the court at the hearing shall require proof of the debt of the petitioning creditor. Under this provision the Court of Bankruptcy has undoubted jurisdiction to go behind a judgment obtained by default or compromise or where fraud or collusion is alleged and inquire whether the judgment is founded on a real debt. In Ex parte Kibble . . . Sir W.M. James L.J. said: "It is the settled rule of the Court of Bankruptcy, on which we have always acted, that the Court of Bankruptcy can inquire into the consideration for a judgment debt". Sir G. Mellish L.J. said: "It is quite clear that in the Court of Bankruptcy the consideration for a judgment may be investigated, particularly when the judgment has gone by default" . . . . This case was discussed and followed in Ex parte Lennox . . . where the reasons why the Court of Bankruptcy will go behind a judgment debt are fully discussed. Lindley L.J. said that "the Court of Bankruptcy will not allow itself to be put in motion at the instance of a person who is not a real creditor" . . . In In re Fraser . . . Kay L.J. said: "It is old law in bankruptcy that, neither upon an attempt to prove a debt, nor upon a petition for an adjudication of bankruptcy or a receiving order against a debtor, is a judgment against him for the debt conclusive. In Ex parte Bryant . . . Lord Eldon said: 'Proof upon a Judgment will not stand merely upon that, if there is not a Debt due in Truth and Reality, for which the Consideration must be looked to'." In In re Gooch . . . Scrutton L.J. said: "The county court registrar held quite correctly that he was at liberty to go behind the judgment, and see whether there was a good debt to support it". In In re a Debtor . . . Astbury J. said "True it is that the Bankruptcy Court may, upon a prima-facie case being shown, go behind a judgment for the purpose of satisfying itself that the debt enforceable thereunder was a real debt." In Petrie v. Redmond, a case in this Court . . . Latham C.J. said: "The court (that is, the Court of Bankruptcy) is entitled to go behind the judgment and inquire into the validity of the debt where there has been fraud, collusion or miscarriage of justice. . . . Also the court looks with suspicion on consent judgments and default judgments."
24. A court of bankruptcy will not, however, go behind a judgment as a matter of course. It will do so only in certain circumstances. The circumstances in which it will do so have been described in different ways. In Corney v Brien the plurality said that s.56(2)(a) of the Bankruptcy Act 1924-1950 (Cth), which in substance was the same as s.52(1)(c), conferred “undoubted jurisdiction to go behind a judgment obtained by default or compromise or where fraud or collusion is alleged and inquire whether the judgment is founded on a real debt”. In Wren v Mahony Barwick CJ (with whose reasons Windeyer and Owen JJ agreed) said:
Circumstances tending to show fraud or collusion or miscarriage of justice or that a compromise was not a fair and reasonable one, in the sense that even if not fraudulent it was foolish, absurd and improper, or resulted from an unequal position of the parties . . . offer occasions for the exercise by the Court of Bankruptcy of its power to inquire into the consideration for the judgment.
25. In the same case, Barwick CJ stated in broader terms the circumstances in which a court of bankruptcy may go behind a judgment:
The judgment is never conclusive in bankruptcy. . . . But the Bankruptcy Court may accept the judgment as satisfactory proof of the petitioning creditor’s debt. In that sense that court has a discretion. It may or may not so accept the judgment. But it has been made quite clear by the decisions 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. It must then exercise its power, or if you will, its discretion to look at what is behind the judgment. . . . The Court’s discretion in my opinion is a discretion to accept the judgment as satisfactory proof of that debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner.
26. The court’s power to go behind a judgment debt that is exercised on an application for a sequestration order is available to be exercised after a bankruptcy notice demanding payment of the judgment debt has been issued but before the time for complying with it has expired. It is available to be exercised on an application to set aside a bankruptcy notice.
(footnotes omitted)
29.
I considered this issue in Commonwealth Bank of Australia v Kalkbrenner [2013] FCCA 1914 at [8] where I referred to a decision of Barnes FM (as she was then) in Rookharp Pty Ltd v Webb & Anor (2011) 254 FLR 410 at [168]-[169] where her Honour stated:
Going behind a judgment
168. It is not in dispute that the court has power to go behind a judgment that forms the basis for a bankruptcy notice (and hence for a creditor’s petition) to determine whether it is founded on a real debt on the basis that a sequestration order should not be made on the petition of a person who is not a real creditor. What is in issue is whether in truth and reality there is a debt due which can found a bankruptcy notice. In Wren v Mahony (1972) 126 CLR 212 at 224–5 ; [1972] HCA 5 at [16] Barwick CJ (with whom Windeyer and Owen JJ agreed) pointed out:
… the emphasis is upon the paramount need to have satisfactory proof of the petitioning creditor’s debt. The court’s discretion in my opinion is a discretion to accept the judgment as satisfactory proof of that debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner.
169. However the court will only go behind a judgment in this manner in order to determine whether the petitioning creditor’s debt should be struck out altogether, not merely to determine whether the judgment debt should be reduced, but rather to ascertain whether the creditor has a debt upon which the bankruptcy proceedings can be founded (see Oliveri v Stafford (1989) 24 FCR 413; [1989] FCA 486 and Re Longo; Ex parte Longo (1995) 57 FCR 523 ; [1995] FCA 1324). The issues about calculation of interest and a payment of $10,000 are not such, even if made out, as to warrant going behind the judgment insofar as that is intended to be submitted for the debtor.
30.
Throughout Jones’ written submissions he focuses on the issue of going behind the judgment in relation to the costs orders, however, Jones has had ample time to pursue any challenge to the cost determination and this could have been pursued at a time well before Jones claims that he was suffering from ill health. The judgment was founded on a real debt, in the sense considered in Wren v Mahony (1972) 126 CLR 212. The suggestion of fraud in respect to the preparation of the costs application was addressed by the Costs Assessor and was rejected. I am not satisfied that the discretion to go behind the costs judgment ought to be exercised. Consequently, the various claims raised by Jones in respect of the Court exploring issues that have been established by the Costs Assessment are not within the scope of the Review requested.
31.
Jones, in his submissions, addressed a number of issues referred to the general case management of this matter, together with issues arising from the interim judgment in this matter, delivered on 1 April 2014. I put those aside as they have little or no bearing on the Application in a Case seeking summary dismissal.
Preparation for hearing
32.
Throughout the period that this matter has been before the Court, Jones has appeared as a self-represented litigant. It is revealed that in some of the submissions filed Jones had previously been represented by a solicitor by the name of Mr D. Sigler of Curlington Legal, Business and Technology Lawyers. However, it is not clear at what point that retainer was terminated. It is apparent that in respect to the preparation of some documentation, Jones has been assisted by someone with legal training. A review of the documentation filed makes this clearly apparent as the original application contains grounds of review that are not clearly expressed or specific in nature and without particularisation. In contrast, the two recent submissions filed by Jones are 21 and 32 typed pages in length respectively, which respond to issues that have been ventilated in this matter and are supported by authorities relevant to the principle being discussed.
33.
At the commencement of the proceedings, I was particularly concerned by the inadequacy of the Application for Review, coupled with lengthy oral submissions from the bar table ranging over broad aspects of this matter, a substantial part of which did not fall within the jurisdiction of a bankruptcy court.
34.
Jones acknowledged that most of the avenues for judicial review of issues in other jurisdictions were now denied to him by the Trustee of his bankrupt estate. The limited avenue available was to challenge the sequestration, although the real focus of his concern does not specifically arise from that order.
35.
On several occasions during direction hearings, it was pointed out to Jones that the power of this Court to go behind the judgment or order on which the bankruptcy was based was limited by a number of long standing and established line of authority. In an attempt to focus on the issue to be considered during a hearing and provide Purnell Motors notice as to what material they would require to respond, on 29 July 2013 the Court ordered:
1. By 19 August 2013 Mr Jones is to advise the solicitors for the petitioning creditor and the Trustees, in writing, the specific source of power (in the case of a section of an act or regulation, by identifying, as appropriate, the specific Act and its section(s), and/or regulation and the regulation(s)), and the specific grounds, on which he relies in seeking each prayer for relief in the Application for Review filed 18 June 2013 and Application in a Case filed 4 July 2013.
…
3. The Application be listed for hearing on 30 October 2013 at 10.15am in Court 6D, John Maddison Tower, 88 Goulburn St, Sydney.
Order 1 was not complied with.
36.
On 15 October 2013 Jones filed, by post, 5 subpoenas with the Court. These subpoenas were addressed to:
a) John Gerard Bamford to attend Court to give evidence and produce documents;
b) Simon Gregory to attend Court to give evidence and produce documents;
c) Christopher Gary Bryett to attend Court to give evidence;
d) Rodney Dale to attend Court to give evidence; and
e) Mark Ruthven (process server) to attend Court to give evidence and produce documents.
37.
On 23 October 2013, Purnell Motors filed an Application in a Case and on 28 October 2013 filed two Notices of Opposition to the subpoenas issued to Simon Gregory and John Gerard Bamford. At the hearing on 30 October 2013 these issues were addressed, and this is contained in the Court’s judgment in Purnell Motors Pty Ltd v Jones [2014] FCCA 620 which was delivered on 1 April 2014.
38.
As a consequence of that decision the following orders were made on 1 April 2014:
1. Leave is granted for the Amended Application in a Case to be filed.
2. Leave is granted for the Amended Application in a Case to be returnable instanter.
3. Prayer 3 of the Amended Application in a Case was consented to by Mr Jones.
4. Jones is not permitted to call Simon Gregory to give evidence on its application, in Mr Jones’ case.
5. subpoena issued by the Mr Jones to Simon Gregory dated 15 October 2013 be set aside pursuant to Regulation 15A.09 of the Federal Circuit Court Rules 2001.
6. Mr Jones’ Application for a Stay of the Sequestration Order is dismissed.
39.
On 15 April 2014 the following orders were made by the Court:
1 The applicant, Mr Jones, file and serve on or before 28 April 2014 written submissions and a list of authorities addressing the legal basis of his claims that this Court should go behind the judgment founding the Bankruptcy Notice upon which the Creditor’s Petition under review is based. These submissions and list of authorities must be served on either Barwick Stevens Lawyers Dorrigo or Watson McNamara & Watt Lawyers Armidale no later than close of business on 28 April 2014.
2. The application be set down for interlocutory hearing on 2 May 2014 at 10.15am at Level 6, John Maddison Tower, 88 Goulburn Street, Sydney.
40.
On 9 April 2014 Jones filed a document identified as “Basis of Relief and Witness Information”, a copy of which is located at Schedule “3” to these reasons.
41.
On 25 April 2014 Jones filed detailed written submissions (18 pages in length) together with a list of authorities (3 pages in length).
Hearing 2 May 2014
Application in a Case filed 22 April 2014
42.
Mr Gregory informed the Court that Purnell Motors moved on the Application in a Case, filed on 22 April 2014 and for the purposes of that Application proposes to rely on the evidence listed below at [49] which was formally read.
Approach adopted by Purnell Motors
43.
Mr Gregory indicated to the Court that the approach that he had adopted to the Application in a Case filed 22 April 2014 is briefly summarised as follows.
44.
Mr Gregory stated that Jones, in his Application for Review filed on 18 June 2013, seeks specifically Order 2:
1. Order for extension of time for application for review
2. That the order for sequestration be annulment annulled.
3. Such other orders as the court considers just.
Mr Gregory indicated that there is no criticism of Jones, but this ground is not a clear indication of the relief that he seeks. Mr Gregory acknowledged that the Court had previously drawn to Jones’ attention that there are two possible avenues that he may be intending to pursue to achieve his objective being:
a) A review of the Registrar’s decision with a view to have it set aside, which requires a preliminary step being that Jones obtain an order for an extension of time for his application to be heard before an application for review of the Registrar’s decision could proceed; or
b) An application for annulment made under s.153B of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”).
45.
This confusion is brought about by the wording used by Jones in his application. Clarification has been sought as to which approach he was intending to pursue, but this request has not been responded to.
46.
Mr Gregory indicated that his submissions had been prepared on the basis of the authorities to this effect, that this is an application for an extension of time as a prerequisite for an application for review of the Registrar’s decision, not an application for an annulment under s.153B of the Bankruptcy Act. Mr Gregory indicates that his arguments are advanced on the basis that the primary relief that Jones needs to obtain is an order for an extension of time for the hearing of the Application for Review. I agree that this is the appropriate approach despite prayer 2 of the Application for Review seeking annulment and the term “set aside” not being present. In those circumstances, Jones bears the onus to establish that it is not futile for the Court to rehear the application for sequestration and it is not a hearing de novo.
47.
Alternatively, if the application was construed as an application under s.153B, the discretionary factors that would militate against annulment of the bankruptcy are relevantly the same as militate against an extension of time for a hearing to set aside a sequestration order, in that the sequestration order ought not to have been made.
48.
Other considerations to take into account are that Mr Bamford has informed the Court that Jones cannot pay his debts as they fall due and this issue is something that none of his applications to date have sought to grapple with. The implication of the whole regime is that someone who is bankrupt will not simply be able to have the sequestration order set aside, walk free and not pay their debts when the insolvency regime is set up on the basis that it prevents such occurrences.
Evidence
49.
Purnell Motors relied upon the following evidence:
a) In the Amended Application in a Case filed by Purnell Motors on 30 October 2013 it states that the Application is supported by the affidavits filed in the Court in these proceedings and served on Jones to date in support of Purnell Motors’ opposition to the Application of Jones to be heard on 30 October 2013;
b) Affidavit of John Gerard Bamford sworn 29 October 2013 (the “Bamford October Affidavit”);
c) Affidavit of Rodney Dale, sworn 4 October 2012 (the “First Dale Affidavit”);
d) Affidavit of Christopher Bryett, sworn 23 August 2012;
e) Affidavit of Christopher Bryett, sworn 25 September 2012;
f) Affidavit of Debt of Rodney Dale, sworn 18 September 2013;
g) Affidavit of Rodney Dale, sworn 29 October 2013;
h) Affidavit of Search of Chris Bryett, sworn 5 October 2012; and
i) Hearing Transcript of District Court proceedings, Jones v Purnell Motors Pty Ltd, 15 July 2013. p.14.35-44 (the “Transcript”).
50.
Jones filed the following evidence, but did not seek to read the material during the hearing:
a) Affidavit of Richard Jones, affirmed 8 April 2014 (filed 9 April 2014) (“Jones’ April Affidavit”).
51.
Both parties refer to a number of affidavits filed previously in the proceedings, but do not rely on them. These affidavits are:
a) Affidavit of Jason Lloyd Porter, sworn 18 September 2013 (the “Porter Affidavit) ;
b) Affidavit of John Gerard Bamford, sworn 18 September 2013 (the “Bamford September Affidavit”); and
c) Affidavit of Richard Jones, sworn 12 June 2013, filed 18 June 2013 (“Jones’ June Affidavit”).
For the purposes of these reasons I will consider these affidavits as read.
Application in a Case; Orders 3 and 4 – Bill of costs and Counsel’s fees
52.
Initially, Mr Gregory sought formal orders made in accordance with the terms of Orders 3 and 4 in the Application in a Case. Mr Gregory indicated that Order 3 picks up the only witness information that Jones was directed to file and serve, setting out the Grounds on which he bases his claims for relief in these proceedings which pertained to Mr Gregory’s conduct that he misrepresented costs for the preparation of submissions. Order 4 is sought in order to prevent Jones from attacking counsel for Purnell Motors and limit him to relying on evidence before the Court. Mr Gregory confirmed that Jones should be able to read his affidavit (Jones’ April Affidavit) but only to the extent that it addresses issues contained in Purnell Motors’ Application in a Case, filed on 22 April 2014.
53.
Jones indicated to the Court that in Jones’ April Affidavit at Annexure “RJ”, p.139-148, there is evidence in relation to Mr Gregory, specifically that he did not have in Court the invoices that he provided to the Costs Assessor. However, contained within Jones’ April Affidavit there is a copy of the Costs Assessor’s report which contains reference to comments by the Costs Assessor with respect to Mr Gregory.
54.
Jones indicated that Jones’ April Affidavit contained a letter from him addressed to Mr Bryett, who at the time was the instructing solicitor for Purnell Motors. Jones submits that there were contentions about the time taken for the preparation of submissions. During the final day of the hearing before the District Court there was considerable argument in relation to submissions and costs in those proceedings. The judge determined that it should following normal convention and a time table was set for the provision of submissions. Jones indicated that it was his recollection in respect of the hours spent, which he suggested were inflated.
55.
Mr Gregory referred the Court to the transcript of the District Court proceedings (Jones v Purnell Motors & Anor, District Court proceedings, No. 4712/2007, costs assessment case No. 2010/00323325) on 4 November 2009 which appeared in Jones’ April Affidavit at Annexure “RJ”, p.140. Mr Gregory acknowledged that there had been extended discussions about submissions which finalised an order being made in the District Court. Purnell Motors put on their submissions first, in accordance with the normal common law procedure. Those proceedings concerned 42 heads of loss and this was handled in submissions with a Scott Schedule that went through the particulars in the claim for those 42 claims and the supporting evidence. There was a timetable set on 4 November 2009 for the hearing of oral submissions after service of written submissions by counsel. The hearing was initially set for 16 November 2009 but required an adjournment to 23 November 2009 on the application by Mr Gregory in order to complete submissions. The letter from Curlington Legal to Mr Chris Bryett of Bamford Lawyers, dated 23 November 2009 (Jones’ April Affidavit, at Annexure “RJ” p. 147) was written to ensure that Purnell Motors provided its submissions prior to 23 November 2009.
56.
This Court was then referred to the Costs Assessor’s reasons for determination (Jones’ April Affidavit at Annexure “RJ”, p. 90-99). In the determination the following appears:
There was objection that counsels fees are grossly unreasonable. That is ill-founded. Despite the very heavy involvement, the fact of the matter is that the litigation in question involves substantial descent into detail and that is a notoriously time consuming task. I note that Counsel claimed at $330 per hour, that I am satisfied, is a fair and reasonable rate.
The objection to the time taken by Counsel for the preparation of submissions is not made out, I am satisfied that the time claimed is fair and reasonable. The matter took a long time in the preliminaries, involved a number of substantial amendments to the claim as it developed, and a substantial number of hearing days, all of the matter involved great detail and relatively complex law.
(Jones April Affidavit at Annexure “RJ” p. 92)
57.
I directed the question to the parties that if the Costs Assessor had taken a contrary view in respect of the amount claimed, the above comment would not have been made and the certificate would not have been issued. This was not disputed. Mr Gregory made the submission that this was the sum total of evidence on which Jones could rely on to make out the ground that there was a misrepresentation of costs for preparation of submissions. Mr Gregory requests that Jones not be permitted to rely upon his oral submissions and that he was over-looking the reasons contained in the judgment in Purnell Motors v Jones [2014] FCCA 620 which addresses the inability of Jones to successfully address matters that were determined by the Costs Assessor, in any event, in this matter.
58.
Jones indicated that the objection to the time taken by Counsel for preparation for submissions is not made out and he was now seeking to put before the Court the nature of his objection which he would be entitled to do in a review, had that occurred. Jones contends that it is not reasonable that someone can make more than double the amount of time spent on a submission, when in the belief that a statement to his Counsel that he believed that after 48 hours he had only a couple of hours to go to complete. The invoice, however, indicates more than double the amount of time spent after that, including up to 12 hours per day spent on those submissions over the following six or seven days.
59.
I indicated to Jones that it may be appropriate that he sought the tender of evidence from the Costs Assessor as the Costs Assessor has the function of providing a filtering process. If anything in respect of the costs claimed did not comply with the Court Rules, legislation and the appropriate practice in relation to costing, it is for the Costs Assessor to identify them, raise them with counsel seeking the costs and request justification for that costing claim.
60.
In the absence of any evidence to the contrary I would assume as with all costs assessments that the procedures have been carried out in detail by a professional who understands the procedures, the rules that apply and the common practice of seeing multiple costs applications. Further, if the Costs Assessor determines that something is out of the ordinary, questions would be raised. There is no reference that any question has been raised and the District Court accepted from the Costs Assessment that there is no query established.
Response to Prayers 3 and 4 – Bill of Costs and Counsel’s fees
61.
Jones submits that Orders 3 and 4 were summarily dealt with on 2 May 2014. He did not agree with that decision on the basis on which it was made. The Bankruptcy Act makes specific provisions for review of a costs assessment for the reason (amongst others) that any person (specially over a 10 month period with over 500 pages of multiple submissions for the respondent) does not always get everything right in determining what is fair and reasonable. It is not appropriate that Mr Gregory give evidence from the bar table in his own defence: Coe v NSW Bar Association [2000] NSWCA 13. Jones states that he was not required to provide any reference to the matter in his submissions of 25 April 2014 and did not do so.
62.
Jones submits that the judgment delivered on 1 April 2014 was based on the narrow issue of Mr Gregory giving evidence and was not required and nor did it consider all the matters to be taken into consideration for going behind the judgment. Jones claims that he had no opportunity to provide any submissions to go behind the judgment. Counsel for Purnell Motors on 30 October 2013 did seek reasons for the application for an extension of time. The Court allowed Jones to summarise those reasons in oral submissions.
63.
Counsel for Purnell Motors replied that Jones had not offered any grounds of review. A transcript would show that the Court determined that Jones should not provide those grounds at that time. Jones contends that in the Application in a Case of 22 April 2014 that Purnell Motors now seeks a “second bite of the cherry” with respect to reasons for Jones’ leave to extend the time for the Application for Review. I have summarised Jones’ written submissions, retaining the authorities upon which he relies, but have not reproduced the extracted material from those authorities.
64.
Jones submits that the basis for relief is not futile and the orders requested by Purnell Motors should not be made. Jones states that the statement made by Mr Gregory in submissions at the hearing on 30 October 2013 that if required to respond to the subpoena and give evidence that he would be required to “return his brief”.
65.
Jones contends that this is not valid evidence as to why Mr Gregory should not have been examined. Jones contends that on 30 October 2013 the hearing was taken up by argument about the Application in a Case filed by Purnell Motors. The hearing of 2 May 2014 was almost entirely taken up by Purnell Motors speaking to a Further Application in a Case and over 60 pages of late submissions. These have all been efforts to prevent the Court from hearing Jones’ evidence which, among other things, clearly show contempt of Court orders, contempt of undertaking by solicitors and Purnell Motors, abuses of process and failures to comply with the central requirements of the Bankruptcy Act.
66.
To avoid any suggestion that Jones’ submissions have not been accurately addressed I reproduced the following paragraph:
19. If, as Mr Bamford exclaimed during the telephone hearing on April 15th 2014, words to the effect "my client just wants to be paid' (the Applicant does not have the benefit of a transcript), then the answer lies in September 2011 when Purnell's failed to comply with court orders " thereafter take steps......" to enforce Judgment within 28 days and a mistaken belief, by the Respondent, that compliance with the Bankruptcy Act and Rules of the court applies only to unrepresented individuals and is not relevant to corporations and lawyers. Regardless of the Freezing Orders and undertakings by the Respondent, no credible submission has been made as to why the Respondent did not immediately seek recovery of costs in September/October 2011.
(Jones’ submissions, filed 26 June 2014)
67.
I note the above, however, there has been no submission by Purnell Motors expressing the authority conferring the power on this Court to make such an order. Notwithstanding, for the reasons stated herein, it is not necessary such an order be made.
Application for Summary Dismissal
68.
This addresses Purnell Motors’ Application in a Case, filed on 22 April 2014 seeking summary dismissal of Jones’s extant applications in these proceedings. I note the observations of his Honour Judge Burnett in his decision in Forest v Sydney Airport Corporation Ltd & Anor [2014] FCCA 208 at [26]-[27] where his Honour stated:
26. The principles governing the Court’s exercise of powers under s.17A Federal Circuit Court of Australia Act 1999 (Cth) are now well settled. Lindgren J, in White Industries Aust Ltd v Commissioner of Taxation [2007] FCA 511, summarised the principles as follows:
“[53] The “no reasonable prospects of success” formula of s.31A is that which was adopted in r.24.2 of the United Kingdom’s Civil Procedure Rules (“CPRs”) following the recommendation of Lord Woolf, Master of the Rolls, in his Access to Justice: Final Report to the Lord Chancellor on the Civil Justice System in England and Wales (HMSO, 1996), ch 12, ss.31-36. The same test has been adopted in rr.292(2) and 293(2) of Queensland’s Uniform Civil Procedure Rules 1999.
[54] Under s.31A I must be satisfied that the applicants have no reasonable prospect of success, but as s.31A(3) makes clear, this does not mean that I must be satisfied that the proceeding is hopeless or bound to fail. I suggest that the legislature’s intention in enacting s.31A was to lower the bar for obtaining summary judgment (including summary dismissal) below the level that had been fixed by such authorities as Dey v Victorian Railway Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91-92 ...”
27. The statements of Lindgren J were endorsed by the majority in George v Fletcher (Trustee) [2010] FCAFC 53 at [75], where they stated:
“...
These remarks have since frequently been cited with approval by various judges of this court. They offer valuable guidance in relation to the background to the enactment, purpose and meaning of s.31A and its equivalent, s.17A. The suggestion made by Lindgren J (at [54]), with which we agree, that the intention of the legislature in enacting s.31A was to “lower the bar for obtaining summary judgment” does not carry with it the additional proposition that the intention was to remove the bar completely. True it is that s.31A is not concerned just with pleadings but with substance, not form. The mere presence of a factual controversy, however trifling, implausible, tenuous or tangentially relevant is not a bar to the exercise of the power conferred by s.31A to grant summary judgment. That would be inconsistent with the way in which the phrase “no reasonable prospect of success” is to be read in light of s.31A(3) (and s.17A(3)).”
69.
The power of this Court to summarily dismiss an application is set out in s.17A of the Federal Circuit Court of Australia Act 1999 (Cth) (the “FCC Act”). Insofar as it is relevant to this case, that section provides in subsection 17A(2) which states:
(2) The Federal Circuit Court of Australia may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
70.
Subsection 17A(3) of the FCC Act provides:
(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
71.
Subsection 17A(4) of the FCC Act states:
(4) This section does not limit any powers that the Federal Circuit Court of Australia has apart from this section.
72.
Regulation 13.10 of the Federal Circuit Court Rules 2001 (Cth) (the “FCC Rules”) reflects s.17A of the FCC Act, and states as follows:
The Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if the Court is satisfied that:
(a) the party prosecuting the proceeding or claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim; or
(b) the proceeding or claim for relief is frivolous or vexatious; or
(c) the proceeding or claim for relief is an abuse of the process of the Court.
73.
The approach to be taken when considering an application pursuant to s.17A of the FCC Act is to be similar to that undertaken by the Federal Court pursuant to s.31A of the Federal Court of Australia Act 1976 (Cth), which is in virtually identical terms. This provision was considered by the High Court in Spencer v Commonwealth of Australia (2010) 241 CLR 118. In that case their Honours Hayne, Crennan, Kiefel and Bell JJ held the power to dismiss an action summarily is not to be exercised lightly, but full weight must be given to the expression “no reasonable prospect” as a whole.
74.
Hayne, Crennan, Kiefel and Bell JJ stated in Spencer (supra) at [58]:
58. How then should the expression "no reasonable prospect" be understood? No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is “no reasonable prospect.” The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like “no reasonable prospect” is to be avoided...
75.
Hayne, Crennan, Kiefel and Bell JJ at [59] in Spencer continued:
59. In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like “clearly” “manifestly” or “obviously”) as “frivolous”, “untenable", “groundless” or “faulty". But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word “reasonable", in the phrase “no reasonable prospect", be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a “frivolous”, “untenable”, “groundless" or “faulty" claim.
(emphasis added)
76.
Then Hayne, Crennan, Kiefel and Bell JJ in Spencer at [60] stated:
60. Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is "no reasonable prospect" of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to "no reasonable prospect" can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase "just and equitable" when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes.
(emphasis added)
77.
The relevant principles regarding summary dismissal applications has been considered in the following matters: White Industries Australia Ltd & Anor v Assistant Commissioner of Taxation & Anor (2007) 160 FCR 298 per Lindgren J; Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720 per Rares J; Australian Securities and Investment Commission v Cassimatis & Anor (2013) 302 ALR 671 per Reeves J; Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 per Finkelstein, Rares and Gordon JJ; Polar Aviation Pty Ltd v Civil Aviation Safety Authority (No. 4) (2011) 203 FCR 293 per Kenny J.
78.
In Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499 per Sundberg J, his Honour provided a convenient summary of the principle at [37] where he stated:
37. The principles governing the operation of s 31A of the Act were canvassed in detail by Lindgren J in White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 (White Industries) and Rares J in Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720 (Boston). In White Industries 160 FCR at [59], Lindgren J considered that a claim requires “real” as opposed to “fanciful” or “merely arguable” prospects in order for it to have reasonable prospects of success as required by s 31A. Justice Rares in Boston 236 ALR at [45] was of the view that, unless there are no real issues of fact – such that “only one conclusion can be said to be reasonable” – summary judgment (or dismissal) ought not be given pursuant to s 31A. The Full Court has recently considered the summary judgment standard in Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 (Finkelstein, Rares and Gordon JJ) (Jefferson Ford). Although different views were taken as to the precise operation of s 31A, the following principles appear to have been endorsed:
- In applying s 31A, the court does not conduct fact finding but must assess the strength of the allegations made by reference to the pleadings, affidavits and any other evidence adduced, in order to determine whether the claim is sufficiently strong to warrant a trial: see Jefferson Ford 167 FCR at [23] (Finkelstein J), [74] (Rares J) and [130] (Gordon J); see also Bradken Resources Pty Ltd v Lynx Engineering Consultants Pty Ltd [2008] FCA 1257 at [28] (Emmett J); Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920 at [6] (Finkelstein J). Ultimately, the court must consider whether there are any real, as opposed to fanciful, issues of fact or law that require proper determination at a trial.
- In assessing whether there are reasonable prospects of success, the court should draw all reasonable inferences (but only reasonable inferences) in favour of the non-moving party: see Jefferson Ford 167 FCR at [132] (Gordon J). Moreover, where the evidence on a summary judgment application is of an ambivalent character, there will be a real issue of fact and therefore reasonable prospects of success for the purposes of s 31A: see Boston 236 ALR at [45]; Jefferson Ford 167 FCR at [73] (Rares J) and [130] (Gordon J).
- The moving party bears the onus of persuading the court that its opponent has no reasonable prospects of success: see Jefferson Ford 167 FCR at [127] (Gordon J); Boston 236 ALR at [45]. However, where the moving party establishes a prima facie case for summary judgment, the opposing party must be able to point to “specific factual or evidentiary disputes that make a trial necessary”: see Jefferson Ford 167 FCR at [127] (Gordon J).
- As s 31A requires in effect a prediction as to the outcome of a claim, the court should be more reluctant to summarily dismiss a claim where real questions of fact and credit arise. In those cases, the court will not have all material evidence before it until trial, the credit of important witnesses will not have been tested and it will as a consequence be very difficult if not impossible to fairly assess the prospects of the claim: see Jefferson Ford 167 FCR at [20] (Finkelstein J); Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955 at [6] (Gilmour J).
79.
His Honour Sundberg J’s remarks have been endorsed in subsequent cases, including some of which have been decided since the High Court judgment in Spencer (supra), namely Deputy Commissioner of Taxation v Southgate Investment Funds Ltd [2010] FCA 1298 per Kenny J and Helal v McConnell Dowell Constructors (Aust) Pty Ltd (2010) 193 FCR 213 per Ryan J.
80.
In Spencer (supra) (noted above), French CJ and Gummow J stated at [24]-[26]:
24. The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process. The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd said:
"The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried".
More recently, in Batistatos v Roads and Traffic Authority (NSW) Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde which included the following:
“Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way."
There would seem to be little distinction between those approaches and the requirement of a "real" as distinct from "fanciful" prospect of success contemplated by s 31A. That proposition, however, is not inconsistent with the proposition that the criterion in s 31A may be satisfied upon grounds wider than those contained in pre-existing Rules of Court authorising summary dispositions.
25. Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.
26. Where an application under s 31A requires consideration of apparently complex questions of fact, then the caution uttered by Lord Hope is relevant. The importance of those considerations is amplified if the case involves resolution of issues of law and fact, or mixed law and fact.
(footnotes omitted)
81.
The first step in Jones’ Application for Review seeking to have the sequestration order set aside is to have the extension time of time required in order to file the Application for Review granted. Mr Gregory has prepared detailed written and oral submissions, specifically addressing the issue of whether the extension of time should be granted.
82.
Mr Gregory referred the Court to the decision in Hunter Valley Developments Pty Ltd & Ors v Cohen (1984) 3 FCR 344 per Wilcox J, being a decision under the Administrative Decision (Judicial Review) Act 1977 (Cth). His Honour discussed at some length the considerations ordinarily relevant to an application for leave to extend the time within which to file a notice of appeal. His Honour made the following observations:
17. Section 11 of the Administrative Decisions (Judicial Review) Act does not set out any criteria by reference to which the Court's decision to extend time for an application for review under s.5 is to be exercised. Already there have been a number of decisions of Judges of this Court, all sitting at first instance, dealing with the approach proper to be taken. They differ a little, both in language and in emphasis, but I venture to suggest that from them may be distilled the following principles to guide, not in any exhaustive manner, the exercise of the Court's discretion:
(a) Although the section does not, in terms, place any onus of proof upon an applicant for extension an application has to be made. Special circumstances need not be shown but the Court will not grant the application unless positively satisfied that it is proper so to do. The "prescribed period" of 28 days is not to be ignored (Ralkon v Aboriginal Development Commission [1982] FCA 153; (1982) 43 ALR 535 at p 550) Indeed it is the prima facie rule that proceedings commenced outside that period will not be entertained (Lucic v Nolan (1982) 45 ALR 411 at p 416) It is a pre-condition to the exercise of discretion in his favour that the applicant for extension show an "acceptable explanation of the delay" and that it is "fair and equitable in the circumstances" to extend time (Duff at p 485; Chapman v Reilly, Neaves J, 9 December 1983, not reported, at p 7).
(b) Action taken by the applicant, other than by making an application for review under the Act, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished. A distinction is to be made between the case of a person who, by non-curial means, has continued to make the decision maker aware that he contests the finality of the decision (who has not "rested on his rights": per Fisher J in Doyle v Chief of Staff [1982] FCA 124; (1982) 42 ALR 283 at p 287) and a case where the decision maker was allowed to believe that the matter was finally concluded. Compare Doyle, Chapman, Ralkon and Douglas v Allen (Morling J, 3 April 1984, not reported) at p 18 with Lucic at pp 414-415 and Hickey v Australian Telecommunications Commission (1983) 48 ALR 517 at p 519. The reasons for this distinction are not only the "need for finality in disputes" (see Lucic at p 410) but also the "fading from memory" problem referred to in Wedesweiller v Cole [1983] FCA 94; (1983) 47 ALR 528.
(c) Any prejudice to the respondent including any prejudice in defending the proceedings occasioned by the delay is a material factor militating against the grant of an extension: see Doyle at p 287, Duff at pp 484-485, Hickey at pp 525-527 and Wedesweiller at pp 533-534.
(d) However, the mere absence of prejudice is not enough to justify the grant of an extension: Douglas at p 18, Lucic at p 416, Hickey at p 523. In this context, public considerations often intrude (Lucic, Hickey). A delay which may result, if the application is successful, in the unsettling of other people (Ralkon p 550, Becerra pp12-13) or of established practices (Douglas p 19) is likely to prove fatal to the application.
(e) The merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted: Lucic p 417, Chapman p 6.
(f) Considerations of fairness as between the applicants and other persons otherwise in a like position are relevant to the manner of exercise of the Court's discretion: Wedesweiller at pp 534-535.
83.
In Grundy v Wattyl Australia Pty Ltd [2002] FCA 1480 per Downes J, his Honour considered the relevant issues on an application for an extension of time to apply for a review of a Registrar’s exercise of power to make a sequestration order, where the application was made over four months out of time. His Honour made the following observations therein at [9]-[10]:
9. It follows that provisions for the review of registrars' decisions are very important, but time limitations, even very short time limitations, provided they are not absolute, are permissible. Indeed, the rationale for short time limits would seem to be the achieving of certainty at an early point of time without compromising the requirement for review. This is confirmed by the requirement that review applications be promptly heard.
10. Bankruptcy administration must begin promptly. If bankruptcy administrations are to be at risk of termination months after they have begun, with issues as to how intervening costs incurred by the trustee are to be met, problems could arise with respect to the proper administration of bankrupt estates. The present application was made more than four months out of time. In the interim the trustee had incurred substantial costs in connection with the administration of the estate.
84.
Mr Gregory submits that the authorities show it is relevant to have regard to the work done by the Trustee, and the interest of creditors and the public in the prompt administration of bankrupt’s estates: Khan v Kerr & Anor [2007] FMCA 512 per Barnes FM (as she was then) at [143]. Thus, particularly significant for these proceedings, the Court will have regard to public interest in the orderly administration of insolvent debtors’ estates under the Bankruptcy Act to meet the legitimate claims of creditors: see, in the context of applications for annulment of a bankruptcy under s.153B of the Bankruptcy Act Green v Dare [2002] FMCA 297 per Driver FM (as he was then) at [8]. In that case, prior to the sequestration order, the applicant bankrupt had done all that she could to dispose of her interests in the only real property from which she could have met the petitioning creditors debt, by transferring it to a company which had then gifted it to a family trust in which the bankrupt was not a beneficiary.
85.
In Oberlechner v Commonwealth Securities Ltd [2003] FMCA 511 Driver FM (as he then was) found at [10] the applicant bankrupt had not cooperated with his trustee in the course of the administration of the bankruptcy. In Drake v Jones [2009] FMCA 298 per Barnes FM (as she was then), her Honour at [111] considered a bankrupt in a state of denial about his affairs and in particular the claims of the petitioning creditor.
86.
In Hunter Valley Developments Pty Ltd & Ors v Cohen (supra) at [22(e)], his Honour Wilcox J indicated that before an application for an extension of time will be granted, an applicant must show that he has an arguable basis for the Court not to affirm the sequestration order. In Atkinson v Commissioner of Taxation [2000] FCA 998 per Sackville J at [3], his Honour stated:
3. The Commissioner takes no point as to the adequacy of the applicant's explanation for the relatively short delay in invoking the Court's appellate jurisdiction. The Commissioner opposes the grant of leave on the basis that the applicant has not shown that he has any arguable grounds of appeal. The Commissioner correctly submits that if the applicant is unable to identify any arguable ground of appeal, an appeal would be futile and the Court would not grant an extension of time: Jess v Scott (1986) 12 FCR 187 (FC), at 195; Tydeman v Deputy Registrar of Child Support Agency [1999] FCA 936, at [5]; Brehoi v Minister for Immigration and Multicultural Affairs [1999] FCA 772 (FC), at [12].
87.
Mr Gregory submits that s.52(2)(b) of the Bankruptcy Act gives the Court a discretion to dismiss a creditor’s petition:
(2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:
…
(b) that for other sufficient cause a sequestration order ought not to be made;
it may dismiss the petition.
(emphasis added)
88.
It is for the debtor who has committed the act of bankruptcy to persuade the Court of something which overrides “the interest of the public in the stopping of unremunerated trading, and the rights of the individual creditor who are unable to get their debts paid to them as then become due”.
89.
In Totev v Sfar (2006) 230 ALR 236 per Allsop J (as he was then), at [37]-[45] his Honour stated:
37. 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 the dealing with the insolvent debtor and the rights of individual creditors are outweighed by other considerations: Cain v Whyte [1932] HCA 6; (1933) 48 CLR 639 at 645-6 and 648. In Cain v Whyte, the judgment of Henchman J sitting as the judge in bankruptcy for the District of Southern Queensland was approved by Rich, Starke, Dixon, Evatt and McTiernan JJ. At 645-46 Henchman J was recorded as saying the following:
...Mr. Philp, however, argues that the Court has a discretion even though the proofs that I have alluded to have been made. He suggests that in the present case "other sufficient cause" exists, within the meaning of sec. 56 (3) (b), which throws upon me an obligation to dismiss, or gives me a discretion to dismiss, the petition. I agree that the sections do leave a certain amount of discretion in the Bankruptcy Judge (see secs. 54, 56 (2) and 56 (3)), and I do not agree with the argument put forward by Mr. Graham that the words "other sufficient cause" should be limited to the one case where the Court is satisfied that the petition is put forward solely for some collateral illegitimate end, and not for the purpose of securing the equal distribution of the available assets amongst the creditors. 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. ...
38. See also Rozenbes v Kronhill [1956] HCA 65; (1956) 95 CLR 407 at 414 per Dixon CJ, Webb J and Fullagar J; and Dowling v Colonial Mutual Life Assurance Society Ltd (1915) 20 CLR 509 at 520-521.
39. In Re Svir; Ex parte Commissioner of Taxation [1998] FCA 503; (1998) 83 FCR 314 at 317, Burchett J said the following after referring to the above passage from Cain v Whyte:
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.
40. It is for the debtor to show "other sufficient cause". A claim sounding in money by the debtor against the petitioning creditor may amount to such other sufficient cause. The matter was examined by the Full court in Ling v Enrobook Pty Ltd [1997] FCA 226; (1997) 74 FCR 19. At 25-26, after referring to Cain v Whyte, the Full Court referred to the relevant authorities (in particular Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 at 115-116 per Gibbs J, sitting in bankruptcy) and stated the principles. Despite the length of the passage it is appropriate to set it out.
A review of the authorities discloses that in certain circumstances, but not in all circumstances, the fact that the debtor has pending before a court a legitimate claim to funds sufficient to satisfy the petitioning creditor's debt will amount to "other sufficient cause" not to make a sequestration order (Re Yeatman; Ex parte Yeatman (1880) 16 Ch D 283; Maddestra v Penfolds Wines Pty Ltd [1993] FCA 406; (1993) 44 FCR 303; Re James; Ex parte Carter Holt Harvey Roofing (Australia) Pty Ltd (No 2) (1994) 51 FCR 14; Ling v Commonwealth). The circumstance that the legitimate claim of the debtor is one against the judgment creditor is likely to be a significant circumstance for the purposes of s 52(2)(b).
Lehane J's reasons for judgment show that his Honour understood the principles established by the relevant authorities. His Honour rightly said:
"As a general proposition (and those authorities say nothing to the contrary) there is no apparent reason why a petitioning creditor should not be entitled to have a sequestration order made, if the requirements of s 52 are otherwise satisfied, simply because the debtor may have a counterclaim or cross-demand against some other creditor."
The primary submission pressed on behalf of the appellant was that:
"the public interest in allowing Mr Ling to prosecute his action against the Commonwealth ... is ... a public interest which overrides the ... present respondent's interest and prima facie entitlement to a sequestration order."
It was contended that the primary judge erred in principle in supposing that the relevant public interest factor can be confined to cases where the petitioning creditor is the defendant in the debtor's action.
In Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 at 115-116 Gibbs J said:
"The second main contention of the debtor is that he is entitled to damages for the wrongful removal of his own property ... The question immediately arises whether I should proceed to determine the existence and extent of the debtor's alleged claim. The position is different from that which arose in relation to his claim that the trucks were sold at an undervalue. In that regard any sum which the mortgagee was entitled to have brought to its credit as the amount which was realised, or ought to have been realised, on the scale [sic] of the mortgaged property must also be allowed to the credit of the debtor as surety, thus pro tanto reducing the amount of his indebtedness. It was therefore necessary to determine in this Court the questions that arose in relation to that aspect of the matter. Where, however, the debtor claims to be entitled to unliquidated damages in tort against the petitioning creditor the position seems to me to be different. As a general rule this Court is not an appropriate forum to decide such a claim and is limited to forming a view as to whether it appears that there is sufficient validity in the debtor's claims to justify a dismissal or adjournment of the petition ... Considerable evidence directed to this issue has been given before me and it seems to me that I ought to consider this evidence for the purpose of deciding only whether it is probable that the debtor has against the petitioning creditor a claim which is likely to succeed. If I am satisfied that the debtor has a claim against the petitioning creditor equal to or exceeding the amount of the judgment debt, I should not make a sequestration order. If, however, it appears that the debtor has a claim which is less than the amount of the petitioning creditor's judgment debt, the proper course would seem to be to require the debtor, if he desires to avoid a sequestration order, to pay the difference between the amount of the judgment debt and the amount which it seems probable to me that he will recover in the proceedings against the petitioning creditor. In many cases it would be more convenient, assuming that the debtor showed that he had a real claim to litigate, to adjourn the proceedings to enable his claim to be tried in the ordinary courts, but that course was not taken in the present case, partly because the existence of any valid claim was vigorously denied by the petitioning creditor and partly because the proceedings in the Supreme Court have been somewhat dilatory."
The above approach was adopted in this Court by Olney J in Re James; Ex parte Carter Holt Harvey Roofing (Australia) Pty Ltd (No 2) and applied by the Full Court of this Court in Ling v Commonwealth (1996).
The above authorities do not, in our view, support the appellant's contention that the courts recognise a public interest in allowing a debtor to prosecute litigation commenced by the debtor. The public interest recognised by such authorities is that which, in broad terms, is reflected also in s 40(1)(g) of the Act; that is, that a sequestration order ought only to be made on the basis of an indebtedness which is not counterbalanced by a claim by the debtor against the petitioning creditor. Such authorities provide no comfort to a debtor who asserts a claim, not against his or her creditor, but against a third party.
The authorities also show that satisfaction that the debtor is well advanced with litigation likely to result in the debtor being in a position to pay his or her debts may well provide a basis for a finding that there is a "sufficient cause" for a sequestration order not to be made (see, for example, Maddestra v Penfolds Wines Pty Ltd). But the authorities do not suggest that it is in the public interest to allow insolvent debtors to prosecute litigation generally. They only recognise that it is not in the public interest for a debtor to be forced into bankruptcy by reason of a state of insolvency likely to be of only short duration.
41. In Re James; Ex parte Carter Holt Harvey Roofing (Australia) Pty Ltd (No 2) (1994) 51 FCR 14, Olney J after referring to Re Schmidt, cited by the Full Court in Ling v Enrobook, said at 22:
In the passage from Re Schmidt which is quoted above, Gibbs J suggested that in many cases it would be more convenient to adjourn the proceedings to enable the debtor's claim to be tried in the ordinary courts, but such a course would be justified only on the assumption that the debtor showed that he had real claim to litigate. It seems to me that Gibbs J has distinguished between a claim of the debtor against the petitioning creditor that is likely to succeed (which would justify the Court refusing to make a sequestration order) and the existence of a "real claim" which presumably the Court has been unable to classify as one that is likely to succeed, but nevertheless is thought to have sufficient integrity to warrant the debtor being given an opportunity to have it litigated. In such a case Gibbs J thought that it would be appropriate to adjourn the petition pending resolution of the litigation.
42. Katz J in International Alpaca Management Pty Ltd v Evsar [1999] FCA 72 stated the matter as follows at [54]:
I begin my discussion of that approach with the proposition that " it is not in the public interest for a debtor to be forced into bankruptcy by reason of a state of insolvency likely to be of only short duration ": Ling v Enrobook Pty Ltd [1997] FCA 226; (1997) 74 FCR 19 (Davies, Wilcox and Branson JJ). When, therefore, an insolvent debtor, in order to demonstrate "sufficient cause ", relies upon the existence of a monetary claim against the petitioning creditor which the debtor alleges means (leaving out of account the debtor´s possible bankruptcy) that the debtor´s state of insolvency is likely to be of only short duration, an assessment of that claim must be made in order to determine whether it is likely to terminate shortly the debtor´s state of insolvency. That assessment will involve a consideration of the strength of that claim on liability, the strength of that claim on quantum and the stage, if any, which the prosecution of that claim has reached. If, after consideration of those matters, an assessment is made that (leaving out of account the debtor´s possible bankruptcy) the existence of that monetary claim against the petitioning creditor means that the debtor´s state of insolvency is likely to be of only short duration, then the existence of that claim may amount to "sufficient cause " why a sequestration order ought not to be made.
43. In St George Bank v Helfenbaum [1999] FCA 1337 at [13] Sundberg J summarised the authorities:
The existence of a cross-claim may be a `sufficient cause´ within s 52(2)(b) for declining to make a sequestration order: Ling v Enrobook Pty Ltd [1997] FCA 226; (1997) 74 FCR 19 at 25. It is for the debtor to establish the existence of `sufficient cause´: Cain v Whyte [1932] HCA 6; (1933) 48 CLR 639 at 645-646; Ling at 24. He must establish that he has a real claim against the creditor that is likely to succeed. If the Court is satisfied that there is such a claim, and that its quantum is likely to equal or exceed the creditor´s claim, it will not make a sequestration order. If the claim is likely to be less than the creditor´s claim, the Court will require the debtor, if he is to avoid a sequestration order, to pay the difference between the judgment debt and the amount he is likely to recover on his claim. See Re Player (1962) 19 ABC 277 at 282; Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 at 115-116; Ling at 25-26; Commonwealth Bank v McDonald [1999] FCA 984. A debtor does not establish a real claim that is likely to succeed merely by producing a statement of claim in an action against the creditor: Re Rivett; Ex parte Edward Fay Ltd (1932) 5 ABC 182; Player at 282, or by pointing to the existence of current litigation against the creditor: cf Re Douglas Griggs Engineering Ltd [1963] 1 Ch 19 at 23. While the Court does not try the cross-claim in advance, the debtor must adduce sufficient evidence to show that it is a real claim which is likely to succeed: cf Vogwell v Vogwell (1939) 11 ABC 83 at 88; Player at 282.
44. It may be that the fourth sentence of the above passage in St George Bank Ltd v Helfenbaum is open to debate as to whether it states the matter slightly too unequivocally in the light of what was said in Ling v Enrobook. Nevertheless, what is clear is that the fact that there has been an act of bankruptcy does not make the claim by the debtor against the petitioning creditor irrelevant. It should be examined to assess whether it can be said that there is sufficient evidence to show that it is a real claim which is likely to succeed. Also relevant is the stage of the litigation, the length of time for its vindication and any other relevant matters. It goes without saying that solvency is a relevant consideration. In some circumstances, it may be difficult to assess the likelihood of success of the debtor’s claim. All the authorities show that central to the showing of "other sufficient cause" for the purposes of s 52(2)(b) is the question of the prospects of success. The case is not tried in the bankruptcy court, but the material is examined for the purpose alluded to by Gibbs J in Re Schmidt. As Olney J identified in Re James, if a likelihood of success can be demonstrated, that may justify a refusal of a sequestration order. Alternatively, the circumstances may reveal a claim of a character and nature in which likelihood of success cannot be predicted with accuracy but in the circumstances the petition should be dismissed or an adjournment of the petition should granted: see the approach of Sundberg J in Ling v Commonwealth [1996] FCA 1646;(1996) 68 FCR 180 at 195-196, with which Wilcox J and Whitlam J agreed. If the claim is one in which credit of witnesses will be involved, and a debtor sets out the nature and detail of the case and all his or her evidence the debtor may only be able to persuade the bankruptcy court that, if relevant criteria are believed, he or she has good prospects of success. What should be proved, or what is sufficient to be proved, in any given case will depend upon the circumstances. The context in which the issue arises is also important. The discretion involved in s 52(2)(b) is a broad one, and, importantly, it is informed by public interest considerations concerned with the dealing with insolvents. It is to be distinguished from the task involved in deciding whether a claim exists that satisfied s 40(1)(g) of the Act. There, the task, prior to the commission of an act of bankruptcy, is the identification of a bona fide or genuine claim: Ebert v Union Trustee Co of Australia Ltd [1960] HCA 50; (1960) 104 CLR 346; Re Brink; Ex parte Commercial Banking Co of Sydney Ltd [1980] FCA 78; (1980) 44 FLR 135; Vogwell v Vogwell (1939) 11 ABC 83. Lindgren J summarised the position in relation to s 40(1)(g) in Glew v Harrowell[2003] FCA 373; (2003) 198 ALR 331 at [9]- [12] as follows:
There are authorities suggesting that Glew and Tresidder must satisfy me of the following interrelated and sometimes overlapping matters:
• that they have a "prima facie case", even if they do not adduce evidence which would be admissible on a final hearing making out that case (Ebert v The Union Trustee Co of Australia Ltd [1960] HCA 50; (1960) 104 CLR 346 ("Ebert") at 350; Re Brink; Ex parte Commercial Banking Company of Sydney Ltd [1980] FCA 78; (1980) 44 FLR 135 ("Brink") at 141; Gomez v State Bank of NSW Ltd [2002] FCAFC 101 at [17], [18]);
• that they have "a fair chance of success" or are "fairly entitled to litigate" the claim: Brink at 141; Re Gould; Gould v Day [1999] FCA 1650 at [27], [28]; Re Capsanis; Capsanis v The Owners – Strata Plan 11727 [2000] FCA 1262 at [11]); and
• that they are advancing a "genuine" or "bona fide" claim (Re Capsanis ... at [11]).
It may be that the first and second formulations are intended to cover the same ground. In Brink Lockhart J treated (at 141) the reference to a "prima facie case" in Ebert as a reference to "a fair chance of success".
In Brink Lockhart J said (at 141) that the Court is not required to "undertake a preliminary trial of the counter-claim, set-off or cross demand". But, clearly, the application of the criteria above requires the Court to make some kind of preliminary assessment, though obviously not to determine the counter-claim, set-off or cross demand finally. And in Guss v Johnstone [2000] HCA 26; (2000) 171 ALR 598, Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ stated (at 606):
"[40] The state of satisfaction referred to in s 40(1)(g), and s 41(7), involves weighing up considerations as to the legal and factual merit of the claim relied upon by the debtor, and the justice of allowing the bankruptcy proceedings to go ahead or requiring them to await the determination of the claim."
Plainly, in order to "satisfy" the Court for the purposes of par 40(1)(g), the debtor is not required to prove, as on a final hearing, the asserted entitlement to recover from the creditor. Accordingly, evidence tendered on an application to set aside is to be tested for admissibility, not as if the proceeding were one in which the debtor’s claim was being finally determined, but by reference to the question whether the Court should be satisfied that the debtor has a claim deserving to be finally determined.
Perhaps little more can usefully be said than that a debtor must satisfy the Court that there is sufficient substance to the counter-claim, set-off or cross demand asserted to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy.
45. Mr Totev referred to and relied upon some of those authorities dealing with applications concerning s 40(1)(g) to the effect that all he had to do before the Federal Magistrates Court was demonstrate a bona fide or genuine claim. That was to misunderstand the nature of the task at hand. The context was different. There had been an act of bankruptcy and the question was whether "other sufficient cause" had been shown. The cases to which I have referred reveal the principles to be applied in that respect.
90.
On appeal in Totev v Sfar (2008) 167 FCR 193 her Honour Bennett J at [51]-[52] (with Emmett and Cowdroy JJ agreeing) stated:
51. I have had the advantage of reading, in draft, the reasons for decision of both Emmett and Cowdroy JJ. I gratefully adopt their Honours’ description of the course of the proceedings in the Federal Magistrates Court and in this Court. I agree that, to the extent that the appeal is based on the grounds in the notice of appeal, it should be dismissed for the reasons given by Cowdroy J.
52. I agree with Cowdroy J for the reasons given by his Honour that, other than the following matter, the Federal Magistrate correctly exercised his review powers and considered for himself whether a sequestration order should be made. However, the Federal Magistrate did not satisfy himself of all of the matters necessary for the making of a sequestration order by him on a de novo hearing, namely verification of the matters stated in the petition, service of the petition and the currency of the debt owing as at the de novo hearing (s 52(1) of the Bankruptcy Act 1966 (Cth) (‘the Bankruptcy Act’)); (‘the necessary affidavits’). Nor did his Honour waive compliance with the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) (Pt 4 r 4.06) concerning the necessary affidavits.
91.
His Honour Cowdroy J, also in Totev v Sfar (2008) 167 FCR 193 observed at [86] (with Emmett and Bennett JJ agreeing):
86. The existence of a counterclaim by a debtor against a petitioning creditor has been held not to constitute sufficient reason for the Court to decline to make a sequestration order, even though it has been recognised that, in an appropriate case, such a claim might constitute ‘other sufficient cause’: see Ling v Enrobook (1997) 74 FCR 19 at 25-26 and Re Schmidt; Ex parte Anglewood Pty Ltd (1967) 13 FLR 111 at 115-117. The determination of such question will depend upon an assessment of the particular facts in each case, considered in conjunction with the interests of the petitioning creditor.
92.
Mr Gregory, in oral submissions referred to questions that were raised with Jones at the directions hearing on 29 July 2013 in respect of the question of power to take into account the various matters on which he seeks to rely as entitling him to have the sequestration order set aside. Section 52 of the Bankruptcy Act relates to the presentation of the petition and does, at s.52(2)(b), provide the Court with a discretion to dismiss the petition if the Court is satisfied by the debtor that there is other sufficient cause that an order not be made. Mr Gregory indicated that it was his understanding of my question, directed to Jones, was to identify any authority, which is not unlike the situation that he is asking, of the Court to exercise its discretion which would show that it was a proper exercise of discretion not to make a sequestration order. Mr Gregory submits of what is comprehended by s.52, but is not present in the materials prepared by Jones (and filed on 30 April 2014) is an authority that comes close to this case. To the contrary there are a number of authorities identified in Mr Gregory’s submissions that identify various factors that militate against an exercise of discretion in Jones’ favour.
93.
Mr Gregory, in written submissions, contends that in the determination of the appropriate order, including whether to decline to set aside a sequestration order that should not have been made, the Court may take into account considerations relevant to the making of an annulment order, pursuant to s.153B of the Bankruptcy Act, including whether the bankrupt is able to pay his debts, the interests of the creditors, public policy considerations arising from the Bankruptcy Act and whether the applicant has made any proposal for payments of fees and charges incurred by the trustee in the course of the administration. The significance the administration of the bankrupt estate increases as time passes.
94.
In Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589, his Honour Deane J observed at 605:
… [B]ankruptcy proceedings are not merely proceedings inter partes in that questions of status and the rights of third parties are involved…
95.
In Alaeddin v CGU Workers Compensation (NSW) Ltd [2007] FMCA 1833 per Raphael FM (as he was then), his Honour stated at [13]:
13. …The conduct of the bankrupt has not been exemplary. If he had taken up his concerns about the policy charges at the time proceedings were first commenced against him, a large amount of legal time would not have had to be spent. He was also wrong to have disposed of his motor vehicle without handing over the proceeds of sale to the trustee. These factors tell against the making of an order setting aside the sequestration order and dismissing the petition. Finally, the debt which led to the sequestration order was a business debt. The debtor was a one-man business. The obtaining of workers compensation insurance is a statutory obligation. It is in the public interest that the insurers as agents of the State collect premiums. The type of debt also militates against acting on the review.
96.
In Blanco v Employers Mutual Indemnity Ltd & Anor [2002] FMCA 38 per Driver FM (as he was then) at [14] his Honour stated:
14. Mr Haylen, for the trustee, submitted to me that it was open to the Court to exercise a discretion not to grant the relief sought by the applicant, having regard to the events leading up to and following the making of the sequestration order. This presents something of an intellectual conundrum. On the one hand, the review of a sequestration order made by a registrar involves rehearing of the creditor's petition. If there was no basis for the sequestration order then it should not have been made and ought to be set aside. On the other hand, time has moved on since the making of the sequestration order. There is authority that it is open to the Court to have regard to considerations relevant to an annulment application on the review of a registrar's decision to make a sequestration order: BBC Hardware Ltd v Boutros (unreported, Federal Court of Australia, 6 March 1998, per Emmett J). That is what I did in Barber v Bone Thorpe International Pty Ltd [2001] FMCA 4. There will be circumstances in which it is reasonable and proper to decline to set aside a sequestration order that should not have been made in the interests of creditors, and having regard to the public policy considerations arising from the Bankruptcy Act. Such cases ought not to be common. The legislature has drawn a distinction between the review of a registrar's decision and an annulment application. The former is subject to a short time limit while the latter can be made years after a sequestration order. Clearly, the significance of the administration of a bankrupt's estate increases as time passes. In most cases a review application will be determined within a short time after the sequestration order is made and events following that sequestration order will not be particularly significant.
97.
In Barber v Bone Thorpe International Pty Ltd [2001] FMCA 4, his Honour Driver FM (as he was then) stated at [15]-[19]:
15. When reviewing a decision of a Registrar to make a sequestration order a judge can take into account considerations relevant to the making of an annulment order pursuant to s.153B of the Bankruptcy Act: BBC Hardware Ltd v Boutros (unreported, FCA, 6 March 1998, Emmett J). Apart from the considerations already mentioned, the factors relevant to the exercise of the Court's discretion to annul a bankruptcy are first, whether the bankrupt was represented on the return date of the creditor's petition and whether the matters raised in the application could have been raised before the court at the hearing of the creditor's petition. In the present case the bankrupt was not represented and did not have the opportunity to raise the matters on the hearing of the creditor's petition.
16. Secondly, the commercial morality of the bankrupt prior to the sequestration order being made is a relevant factor. The applicant has been engaged in commercial activities with the respondent, principally in Vietnam. The facts relating to those dealings are in part disputed and the circumstances leading to the judgment debt and the claim by Sennaway against the respondent are somewhat murky. Among other things, there were outstanding criminal proceedings against the principal of the respondent company, although Mr Daniel has deposed that the prosecution has been discontinued. It is apparent that Ms Barber has been unwise in the way in which she has not given proper attention to her affairs leading to the sequestration order. I am not able to say, however, that Ms Barber has behaved improperly or that she has shown commercial immorality.
17. The next relevant factor is the bankrupt's conduct during the course of the bankruptcy prior to the present application. It appears that the applicant's conduct during this short period since the making of the sequestration order has been proper. In particular she has delivered her statement of financial circumstances to the trustee, although Mr Preston has queried the completeness of that financial statement.
18. The next relevant factor is whether the bankrupt was at the relevant time insolvent. As noted above, there is some evidence that at the time of the sequestration order the applicant was not insolvent.
19. The final factor is whether the applicant has made any proposal for payment of fees and charges incurred by the trustee in the course of the administration. Ms Barber has asserted that she has sufficient money to pay her outstanding debts including the costs of the trustee and Mr de Robillard has submitted today that those costs would be paid.
98.
Mr Gregory next brought to the Court’s attention to authorities where the time between the making of the sequestration order and the subsequent application to set that order aside was considerable. In The Austral Brick Co Pty Ltd v Daskalovski [1998] FCA 782 the debtor, against whom the sequestration order had been made applied for it to be set aside pursuant to O.35 r.7 of the Federal Court Rules 1979 (Cth). That rule provided that the setting aside of judgment or order in terms the same as r.16.05(2) of the FCC Rules. Emmett J considered that it was inappropriate to make an order under the rule, where the estate had already been administered in bankruptcy, which was the case in that matter. He said that it would normally be exercised in circumstances were the matter comes before the Court very soon after the order for sequestration has been made and before there had been any administration of the estate.
99.
Mr Gregory then addressed the Court in respect of a broad overview as to why the Court should not grant an extension of time to Jones, separating the submissions into three categories. These factors militate against the Court exercising its discretion to extend the time. Mr Gregory contends that the sequestration order was made on 5 October 2012. The Application for Review was not made within 21 days of the making of the sequestration order. The Application for Review of the Registrar’s exercise of power to make a sequestration order is consequently out of time. The Application for Review was, in fact, made eight and a half months after the sequestration order was made. At the time of this hearing, 18 months has now elapsed. Mr Gregory argues that Jones has not done that which would be required to “positively satisfy” the Court that it is proper to extend time:
a) The factors militating against the Court exercising its discretion to extend the time for making an application for review are many and powerful. The Court ought not be “positively satisfied” that it is “fair and equitable” in the circumstances to exercise its discretion to extend the time for making an application for review;
b) Jones has not shown an “acceptable explanation for the delay”; and
c) In any event, given the basis on which Jones contends that on a review the sequestration order ought not be affirmed, the extension of time for application would be futile, or, at least so weak as not to outweigh the matters otherwise weighing against the grant of an extension or, were the Court to grant an extension, weighing against the Court, in the exercise of its discretion, in respect of setting aside the sequestration order.
100.
In Grundy v Wattyl Australia Pty Ltd (supra) his Honour Downes J observed at [9]:
9. It follows that provisions for the review of registrars' decisions are very important, but time limitations, even very short time limitations, provided they are not absolute, are permissible. Indeed, the rationale for short time limits would seem to be the achieving of certainty at an early point of time without compromising the requirement for review. This is confirmed by the requirement that review applications be promptly heard.
101.
Mr Gregory argues that this requirement weighs significantly against Jones’ current applications in these proceedings in respect of the public interest in the ordinary administration of the insolvent debtors’ estates under the Bankruptcy Act to meet legitimate claims of creditors, the interest of creditors and the payment and reimbursement of the trustees for their administration: see Khan v Kerr & Anor (supra) per Barnes FM (as she was then) at [143] where her Honour stated:
143. For the sake of completeness considerations of fairness as between the applicant and other persons in a like position do not assist the applicant. It is also relevant to have regard to the statutory context, the availability of an application for annulment (not subject to the same time limit), the time that has in fact passed, the work done by the Trustee and the interests of creditors and the public in the prompt administration of bankrupt estates.
Factors militating against the grant of an extension of time
102.
Mr Gregory, in his written submissions, contends that the central significance to the public interest in the ordinary administration of insolvent debtor’s estates under the Bankruptcy Act is to meet the legitimate claims of creditors and the interest of Purnell Motors, if not creditors of Jones’ estate generally. In support of this submission the Court is referred to the decision his Honour Hungerford ADCJ in his decision in Jones v Purnell Motors Pty Ltd & Anor [2010] NSWDC 82. His Honour addressed critically Jones’ prosecution of the District Court proceedings. Mr Gregory referred the Court specifically to the following paragraphs:
35. In the result, the case developed to a claim for economic loss of about $180,000 in relation to a vehicle costing $118,150 which in a period of five years had been so maintained to have deteriorated to a poor condition. And that was so largely in relation to matters unconnected with the issues arising from the additional driving lights and where in August 2005 an amount of $3,200 was quoted to remedy those matters. It is to be emphasised that the case against the first defendant was directed only to the problems from the driving lights and not those other matters whereas that against the second defendant, which settled for $10,000, was concerned with the wider issues as well.
…
46. A primary submission put for the first defendant on its pleading, as foreshadowed, was that there was no jurisdiction in the Court to allow the plaintiff’s claims by reason of s 86 of the Trade Practices Act which made the plaintiff’s claims, including those at common law and under the NSW State statutes, exclusive to the Federal Court of Australia and even though the Trade Practices Act claims were abandoned. Otherwise, the first defendant admitted negligent breach of its duty of care in wiring the four roof rack driving lights in October 2004 but pleaded that omission was rectified in November 2004 when re-wiring was done and, in any event, it was put that no damage was thereby suffered by the plaintiff. The plaintiff’s remaining claims were either not admitted or denied and, specifically, any consequent damage or loss to the plaintiff was vigorously resisted.
…
86. Overall view of claimed losses: On any view of the items claimed, which amounted to a total of $150,351.03, the success to the extent of $100 for fuel costs is clearly de minimus. Otherwise, in my view, the claims as being losses with respect to the incorrect wiring of the four roof rack driving lights were simply misconceived and not supported by any credible evidence or logic. Indeed, the single highest claim of $93,150 for the alleged decrease in value of the Range Rover had no reasoned support. And neither did the claim for loss of income of $17,900. I have to say that in setting out the detailed claims in his affidavit the plaintiff seems to have embarked upon a course to unreasonably recover significantly more than the original cost of the vehicle of $118,150 and where the fault occasioned by the incorrect wiring of the four roof rack driving lights was rectified. However, he seemed determined to pursue his dissatisfaction with the vehicle, not only with the defendants but with other relevant bodies such as the Roads and Traffic Authority, DOTARS, the Ombudsman, motoring journals, the national press, the CEO of Ford, and so on. Regrettably, it seems to me, that determination has resulted in a case against the first defendant, of a not insignificant nature occupying eight hearing days plus extensive written submissions, of claims wholly disproportionate to the issues and of the real measure of any economic loss he may have thought he sustained.
103.
After receiving Purnell Motors’ draft bill of costs, which Jones had been ordered to pay, Jones transferred two of his properties for no payment. During the process of that transfer, in the context of communications regarding any undertaking by Jones to alleviate the need for Purnell Motors to apply for an asset freezing order against him, Jones represented through his solicitors to Purnell Motors by its solicitors that he had no intention of selling the two properties and that “if there is a reasonable prospect at any time of him being unable to satisfy (Purnell Motors’) assessed costs then he would provide a similar undertaking to Purnell Motors for these properties as he had for (another property) Rofe Street to cover any shortfall”. Judgment for those assessed costs was subsequently entered on which the Bankruptcy Notice was founded and which remains unpaid.
104.
Mr Gregory submits that in the context of implications of the annulment of a bankruptcy under s.153B of the Bankruptcy Act was considered in Green v Dare (supra) per Driver FM (as he was then). Driver FM gave particular weight to the behaviour of an applicant bankrupt, who, prior to having a sequestration order made against her estate, had “done all that she could to dispose of” her interests in the only real property from which she could have met the petitioning creditor’s debt, by transferring to a company which had then gifted it to a family trust in which the bankrupt was not a beneficiary.
105.
Mr Gregory contends that were the sequestration order to be set aside or, in the alternative, the bankruptcy annulled, the delay would have occasioned significant prejudice to the creditors and Trustee. Jones has not paid his debts, including the judgment debt to Purnell Motors, he has not paid Purnell Motors its costs of the application for a sequestration order, and he has not established that were the sequestration order set aside, that he would be able to pay his debts, let alone make full and frank disclosure of his financial position. Jones has not been employed since 2005 or 2006 and for the last 18 months his only income appears to be a disability pension. The Dorrigo property which the Trustee has recovered from Ms Susanne Lea Hombsch through the issue of a s.139ZQ Notice, founded in s.121 of the Bankruptcy Act is earning $200 per month (Porter Affidavit at [14]). Apart from the Dorrigo property, which the Trustee has recovered from Ms Hombsch, Jones does not, within or outside his bankrupt estate, have any significant assets (Porter Affidavit at [9]-[13]).
106.
Mr Gregory referred to the exchange between Jones and the Court on 29 July 2013 when he indicated he did not have any assets (Bamford September Affidavit at [5]). On 30 October 2013 Jones informed the Court that he had difficulties with his financial predicament proposed for providing a means by which the Court or Purnell Motor’s legal representatives could communicate with him. The Federal Circuit Court transcript reveals the following exchange:
Mr Gregory: There are one or two things your Honour. The first is Mr Jones at the moment has a post office box as his address for service. I would- I seek a physical address and a phone number by which we can contact or a person who can be contacted which constitutes due contact with Mr Jones for the purpose of communication and service. For example My Bryett had an application in respect of a subpoena to him for an order for costs and was not able to effect service because it was only a post office box address. And your Honour has averted to the difficulties that have been posed for the Court this week.
(Transcript, Federal Circuit Court, 30 October 2013, p.37.40)
107.
At p.38.5 of the Federal Circuit Court transcript the following exchange is revealed:
Mr Jones: Your Honour, with respect to that and Mr Bryett in particular, it seems as that has been raised, he forwarded a letter to the solicitor that I engaged to deal with subpoenas in anticipation that there would be a need for a reliable contact address. I have been travelling for the last three or four days. And that letter was received and it was forwarded to me via friends and their email addresses, so that I got it in Sydney. There was no problem with doing that. I also received a notice requesting the grounds of opposition to the application, which was sent at some point last week, and I have available to me here. All the affidavits of service have come to me prior to the Court date today. I unfortunately, live in a caravan. As Mr Gregory has pointed out I have no assets and I rely on friends largely for accommodation and all other services.
The costs of a phone and internet access, apart from its unreliability in areas where I stay is not something that I can afford to outlay every month, something like $100 a month and I just not- being in a position of a bankrupt, I’m trying to defend myself with both hands tied behind my back. I have, with the subpoenas where they’ve been urgent and critical – I have made arrangements with local solicitors and a friend has paid that. I don’t know what that has cost but that’s what’s going to be done. And the post office box has proved reliable and I don’t know that I can under what – on what basis I can get a phone which I can’t afford to pay for.
(Transcript 30 October 2013, p.38.5)
There are further references to this issue in the Federal Circuit Court transcript at p.44.5 and p.45.5.
108.
Mr Gregory has provided the Court with a summary of Jones’ liabilities, being as follows:
a) Priority payments:
i) 4% of gross money received into the estate (Bankruptcy (Estate Charges) Act 1997 (Cth), s.3 (Porter Affidavit, Annexure “JLP” at p. 01/040)
ii) Trustee’s fees and expenses (which to date have been funded: $69,260.95 (including GST)) (Porter Affidavit at [22]);
iii) Costs of Petitioning Creditor of applying for sequestration order – fixed at $10,498 on making of sequestration order.
b) Debts:
i) Liabilities of $350,000 (subject to receipt and proper consideration of proofs) (Porter Affidavit at [20]);
ii) Debts to Jones’ former solicitor and Dean Brooks of unknown amounts) (Porter Affidavit at [20]);
iii) Respective liabilities to the Australian Taxation Office;
iv) Orders to pay Purnell Motors costs in its application for freezing orders (Bamford September Affidavit, Annexure “JGB” at p.01-087).
109.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
Full text does not contain this section.