Purnell Motors Pty Ltd v Jones (No.2)
[2014] FCCA 1617
•24 July 2014
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 |
| Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499 Alaeddin v CGU Workers Compensation (NSW) Ltd [2007] FMCA 1833 Atkinson v Commissioner of Taxation [2000] FCA 998 Australian Securities and Investment Commission v Cassimatis & Anor (2013) 302 ALR 671 Bank of Western Australia Ltd v Salmon [2009] FMCA 1155 Barber v Bone Thorpe International Pty Ltd [2001] FMCA 4 Blanco v Employers’ Mutual Indemnity (Workers’ Compensation) Ltd & Anor [2002] FMCA 38 Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720 Cameron v Cole (1944) 68 CLR 571 Catterick v Owners Corporation PS302189T [2011] FMCA 694 Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589 Coe v NSW Bar Association [2000] NSWCA 13 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Commonwealth Bank of Australia v Kalkbrenner [2013] FCCA 1914 Countrywide Banking Corporation v Kingston [1990] 1 NZLR 629 Davis v Pagett (1986) 10 FCR 226 Deputy Commissioner of Taxation v Southgate Investment Funds Ltd [2010] FCA 1298 Drake v Jones [2009] FMCA 298 Duncan-Strelec v Tate [2008] NSWSC 1145 Forest v Sydney Airport Corporation Ltd & Anor [2014] FCCA 208 Giannarelli & Ors v Wraith & Ors (1988) 165 CLR 543 Green v Dare [2002] FMCA 297 Grundy v Wattyl Australia Pty Ltd [2002] FCA 1480 Hamod v New South Wales & Anor (2002) 188 ALR 659 Helal v McConnell Dowell Constructors (Aust) Pty Ltd (2010) 193 FCR 213 Hunter Valley Developments Pty Ltd & Ors v Cohen (1984) 3 FCR 344 Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 Jones v Purnell Motors Pty Ltd & Anor [2010] NSWDC 82 Khan v Kerr & Anor [2007] FMCA 512 Kuhadas v Gomez [2014] FCCA 1130 Oberlechner v Commonwealth Securities Ltd [2003] FMCA 511 Olivieri v Stafford and Ors (1989) 24 FCR 413 Papps v Tapp (1997) 78 FCR 524 Pattison v Hadjimouratis (2006) 155 FCR 226 Polar Aviation Pty Ltd v Civil Aviation Safety Authority (No. 4) (2011) 203 FCR 293 Purnell Motors Pty Ltd v Jones [2014] FCCA 620 Rangott vMarshall (2004) 139 FCR 14 Re Beauchamp; Ex parte Beauchamp [1904] 1 KB 572 Re Bedford; Ex parte H C Sleigh (Qld) Pty Ltd (1967) 9 FLR 497 Rookharp Pty Ltd v Webb & Anor (2011) 254 FLR 410 Shepard v Chiquita Brands South Pacific Ltd [2004] FCAFC 76 Spencer v Commonwealth of Australia (2010) 241 CLR 118 Symons v Bateman [1999] FCA 658 Tagget v Sexton (2009) 255 ALR 522 The Austral Brick Co Pty Ltd v Daskalovski [1998] FCA 782 Totev v Sfar (2006) 230 ALR 236 Totev v Sfar (2008) 167 FCR 193 Vonidis v BMW Australia Finance Ltd [2011] FCA 589 White Industries Australia Ltd & Anor v Assistant Commissioner of Taxation & Anor (2007) 160 FCR 298 Wren v Mahony (1972) 126 CLR 212 |
| 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
2
43
6