Ramsay Health Care Australia Pty Ltd v Compton
[2017] HCATrans 95
[2017] HCATrans 095
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S53 of 2017
B e t w e e n -
RAMSAY HEALTH CARE AUSTRALIA PTY LTD ACN 003 184 889
Appellant
and
ADRIAN JOHN COMPTON
Respondent
KIEFEL CJ
GAGELER J
KEANE J
NETTLE J
EDELMAN J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON THURSDAY, 4 MAY 2017, AT 10.15 AM
Copyright in the High Court of Australia
MR J. STOLJAR, SC: May it please the Court, I appear with my learned friend, MR J.E. HYNES, for the appellant. (instructed by Minter Ellison Lawyers)
MR G.O’L. REYNOLDS, SC: If the Court pleases, I appear for the respondent with my learned friends, MR M.J. O’MEARA and MR S. KANAGARATNAM. (instructed by Pavuk Legal)
KIEFEL CJ: Yes, Mr Stoljar.
MR STOLJAR: Your Honours, the question in this appeal is when a court in bankruptcy can or should go behind a judgment given after a fully contested hearing. The discretion that a court exercises in that circumstance is statutory and the starting point is to examine the language of the statute, namely section 52 of the Bankruptcy Act - if I could take your Honours to that section. Your Honours will recollect that section 52(1) stipulates that:
At the hearing of a creditor’s petition, the Court shall require proof of –
and I will pass over (a) and (b) for present purposes and come to (c):
the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
Section 52(2) is really the other side of the coin:
If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor –
of matters (a) or (b), (a) is really solvency:
it may dismiss the petition.
In either event, the critical words, in our submission, are “if it is satisfied”. The discretion, as we read it, contemplated by the statute is a narrow one. More precisely, the discretion is simply whether to accept the judgment as satisfactory proof of the debt and we draw support for that proposition from the judgment of the Chief Justice in Wren v Mahoney (1972) 126 CLR 212 at 224.
EDELMAN J: Mr Stoljar, section 52(1) is a provision which, in some form or another, goes back basically to 1831, does it not?
MR STOLJAR: It certainly goes back to 1883. Section 7 of the Bankruptcy Act 1883 is in substantially the same form, yes.
EDELMAN J: The 1883 Act was the radical reformation.
MR STOLJAR: Yes.
EDELMAN J: The power existed right from Lord Broome’s Act in 1831, I think.
MR STOLJAR: As I understand it, it existed before that. I cannot say with specificity, your Honour.
EDELMAN J: If that is the case then given that what the concern was was a concern of a court which was exercising essentially a Chancery jurisdiction, are not the words that the High Court was using, focusing upon “fraud, collusion, or miscarriage of justice”, words of jurisdiction ‑ in other words, words that align with fraud, accident and surprise? It is just talking about the common circumstances in which a Chancery Court or a Bankruptcy Court would intervene.
MR STOLJAR: When your Honour says “the High Court” your Honour means in Corney?
EDELMAN J: Yes.
MR STOLJAR: Certainly the High Court’s exercise of discretion in its description of its discretion in Corney would have been informed by those considerations, your Honour, yes.
EDELMAN J: But why then would the discretion be limited in any way? In a sense, why would it be limited in any way that a Court of Chancery - other than a Court of Chancery would have been limited in issuing an injunction to restrain the execution of a judgment at common law?
MR STOLJAR: Because when construing these words, your Honour - in a sense, your Honour’s question goes to the heart of the case: which approach to take in respect of the exercise of this discretion. The answer is that when one looks at the task the Court is actually undertaking, namely accepting the judgment as satisfactory proof of the debt or not, the attention of the Court in undertaking that exercise is directed towards whether the judgment itself can be impeached in any way. The only way, we would respectfully submit, that, as the discretion has been explained by the Court since at least 1888, when the judgment of Re Flatau, that I am going to take your Honours to, explained it, is in circumstances in which there has been fraud, collusion or miscarriage of justice.
EDELMAN J: But that was the exercise of discretion, not the existence of the power, though. There is a difference between the two.
MR STOLJAR: That is so.
EDELMAN J: It may be that after the 17th century Courts of Chancery were exercising powers to injunct the enforcement of common law orders far less liberally.
MR STOLJAR: Yes.
EDELMAN J: But that does not deny that the power existed, does it?
MR STOLJAR: If your Honour is talking about a power that may have existed pre‑1883 that may have built up in practice in the Chancery Division, that is one thing, but we would respectfully say after 1883, when the Bankruptcy Act in England came into effect, section 7, which was the forerunner of section 52, the courts have consistently construed those sections as enabling a court to go behind a judgment given after a fully contested hearing only in the limited circumstances that I have indicated to your Honour.
EDELMAN J: I have probably detained you too far already; thank you.
MR STOLJAR: Without travelling back over our written outline, your Honours will recollect that in the present case the judgment was given after a three‑day hearing in the New South Wales Supreme Court. Counsel appeared for both sides. A judgment was delivered with written reasons a few weeks after the hearing. At the time of the presentation of the creditor’s petition there was not then pending, nor had there ever been, an appeal from the judgment. The judgment had not been set aside or varied and it had certainly not been paid in whole or even in part.
The question then which presents itself for this appeal is whether a court in bankruptcy can or should go behind a judgment given after investigation of that kind. The proposition for which we contend in the outline of oral submissions that your Honours should have is that the decided cases, particularly Corney v Brien (1951) 84 CLR 343, make clear that a court in bankruptcy will go behind a judgment given after a full investigation of the facts if, and only if, there has been fraud, collusion or miscarriage of justice. As I will develop in due course, that statement of principle has been cited and applied in many subsequent cases.
I will come to those cases in a moment, but before doing that may I make or propound the further proposition that also appears in our outline and that is that the approach for which we contend is consistent with the principle of finality in litigation. As your Honours well know, that principle is a fundamental part of the common law and, more particularly, the common law framework in which the discretion conferred by section 52 should be considered.
Our submission is that, conformably with this principle, if or to the extent that there is doubt as to the scope of the statutory discretion conferred by section 52, your Honours would prefer a construction which gives effect to that public interest.
KEANE J: Well, it certainly seems that the primary judge did that. Is not the difficulty, though, that to speak of the desirability of finality in litigation is unlikely to be a dispositive consideration in section 52 because one is concerned principally with the interests of third parties – other creditors, for example – who were not parties to the litigation at all?
MR STOLJAR: Well, that is so, your Honour. That has certainly been a consideration developed in the cases. It seems to have been developed more in the context of an apprehension about consent judgments that a bankrupt would seek by that means.
KEANE J: Default judgments, consent judgments.
MR STOLJAR: Yes, your Honour, that is so and there is that public interest that needs to be weighed in the mix, but we would say that the principle of finality is, at the very least, an important consideration to be weighed in the mix. The fundamental difficulty – and I am skipping ahead a bit, but if I can just to endeavour to answer your Honour Justice Keane’s question – with the approach that the Full Court has taken is that a person can come to the hearing of a creditor’s petition and simply say, “Well, at trial I elected not to call witnesses A, B or C, or I elected to run the case in a particular way” and that aspect of the matter fades into insignificance.
What becomes important on the approach taken by the Full Court is simply whether, at the time of the hearing of the creditor’s petition, there are substantial reasons or there is other evidence available, pursuant to which it could be said that the judgment debt is not still owing and it is in that sense that we submit the principle of finality comes into play because, in a nutshell, a person should be bound by the way they conducted the litigation below.
KEANE J: But that last proposition cannot be decisive, can it, because it is recognised that in cases of collusion or consent judgments, or the classic case, default judgment ‑ ‑ ‑
MR STOLJAR: Yes.
KEANE J: If the notion that a party is bound by the conduct of their case then how do we go behind default judgments. Why is not the answer, you allow judgment to go against you, you are bound by your conduct, end of story?
MR STOLJAR: Because the rigour with which the principle is applied may depend on the precise circumstances in which the judgment was given. So that if default judgment has been entered and it may be, for example, to take an extreme case, in a circumstance in which a person for some reason says they were not served or were not on notice. That is one thing, but where a person has participated in a trial, represented by counsel, and made forensic decisions about the way they wish to conduct that trial, in that circumstance, we would respectfully submit, the proposition that a person is bound by the way they conducted the case may loom larger than in the case of a default judgment.
KEANE J: That is right and that might be something that a court exercising the discretion and going behind the judgment might bear steadily in mind with other factors. But in this case is it not the position that the primary judge stopped at the point of saying you are bound by the conduct of your case at trial, that he did not go on to consider the sorts of questions that might arise - the question: how did you come not to read the affidavit showing the quantum of the counter claim.
MR STOLJAR: Well, he referred to that aspect of the case to some extent because he said there was no explanation. I think he say that Ms Stevis, the deponent of the affidavit was apparently in court during the trial but there was no explanation proffered as to why she had not been called and likewise he said there was no explanation proffered as to more generally why the matters sought to be agitated have not been propounded at trial. So he did advert to it but he did not take the matter any further.
I indicated that I would take your Honours to the decided cases. May I begin a survey of some of the cases and, more particularly, the more salient ones by taking your Honours to Re Flatau, Ex parte Scotch Whisky Distillers [1888] 22 QBD 83. Now, one significant aspect of this case is firstly that it was in a series of cases which really ventilated and analysed the law relating to the Bankruptcy Act 1883. There was a spate of cases and decisions, particularly, of the Master of the Rolls Lord Esher. But, perhaps more pertinently for present purposes, it was a case and one of the few in which a judgment debtor sought to go behind a judgment given after a full contest at trial. If I take your Honours to page 85 of the judgment, about the middle of the page, the Master of the Rolls says:
Another point was taken –
There were two points really in the case. The first related to an adjournment which I need not detain your Honours with but if I could ask your Honours to look at the paragraph beginning “Another point was taken”, the Master of the Rolls says - this is the point:
although an action has been tried by the proper tribunal, a judge alone or a judge with a jury, and definite issues have been thoroughly tried out, and decided against the debtor, and judgment has been given against him accordingly, he against whom judgment has thus been given, without his being able to suggest that there was any miscarriage of justice at the trial -
If I may pause there for a moment and ask your Honours to note in particular the words “at the trial”, the issue is whether the judgment that has been given by the previous court can be impeached in some way. The question really is whether that judgment should not have been obtained by reason of some miscarriage of justice at the trial. The words “miscarriage of justice”, as we have endeavoured to indicate in our outline, are a broad import. There may be many different varieties of miscarriage of justice which could have occurred at the trial. An obvious one would be some lack of procedural fairness, perhaps. But it is a miscarriage of justice that occurred at the trial rather than being something that occurred extraneous to the forensic process. Going back to Lord Esher’s words:
miscarriage of justice at the trial, is entitled to go into the Court of Bankruptcy, and, even though he has appealed against the judgment, assert that the action was not properly tried, and say to the registrar, you must try every one of the issues over again, upon the same evidence if I choose, or upon new evidence, and you have no discretion in this matter. It is not necessary now to repeat that, when an issue has been determined in any other court, if evidence is brought before the Court of Bankruptcy of circumstances tending to shew that there has been fraud, or collusion, or miscarriage of justice, the Court of Bankruptcy has power to go behind the judgment and to inquire into the validity of the debt. But that the Court of ‑ ‑ ‑
EDELMAN J: That is the point it is talking about. It is talking about jurisdiction, is it not? It is the Court of Bankruptcy, historically, exercising what is essentially a Chancery jurisdiction.
MR STOLJAR: Yes.
EDELMAN J: The core of the Chancery jurisdiction was fraud, accident and surprise.
MR STOLJAR: Yes.
EDELMAN J: They are not words that are confining the ability to exercise the power.
MR STOLJAR: The discretion needs to be exercised judicially, and where the courts have developed rules about how the exercise of discretion is to be or can be limited, we would submit that those operate in a very similar way. They limit the ability of the court to go behind the judgment even if the jurisdictional foundation for that is the one that your Honour Justice Edelman has outlined.
GAGELER J: At least on one reading of the argument presented and the judgment made in this case, it was focused on the equivalent of section 52(2)(b); that is, section 7(3) of the 1883 Act.
MR STOLJAR: Yes.
GAGELER J: That is putting the ultimate question on a slightly different basis, I think, from the way in which you opened, that is, you said the question really is one that arises under section 52(1)(c).
MR STOLJAR: Yes.
GAGELER J: Whereas this case on which you rely would say it is really a question of whether there is other sufficient cause within the meaning of section 52(2)(b). Perhaps nothing turns on it; it is actually a different provision and possibly a different mode of analysis.
MR STOLJAR: It is. We would respectfully submit that the way I endeavoured to put it in opening was they are the two sides of the same coin and it does not result in any fundamental way in any difference in the way that the discretion is exercised. I will track down the reference but from memory the Full Court made reference to the fact that some of the cases treat the discretion as being exercised under 52(1) and others under 52(2) and did not suggest that there was any that gave rise to any material difference for the purposes of the present debate.
GAGELER J: Conceptually it would be different. One would accept the debt as being the judgment debt and just ask whether the discretion under 52(2)(b) should be exercised. That is one conception of what is going on here.
MR STOLJAR: Yes.
GAGELER J: The other involves this notion that you can have a judgment debt that is a debt for some purposes but not perhaps for others, which conceptually I have a slight difficulty with.
MR STOLJAR: Yes. Whether one approaches it from the one point of view or the other, there nevertheless remains, as it were, three gates, one of which needs to be opened in order to proceed through to exercise of a discretion. The essential approach, we respectfully submit, is that where there has been a contested hearing – other considerations may arise in other situations – one needs to have established at least a prima facie case, and this is the teaching of Justice Fullagar in Corney, of fraud, collusion or miscarriage of justice.
NETTLE J: Why should the creditors of the putative bankrupt be prejudiced by, hypothetically, the incompetence of counsel that ran the defence?
MR STOLJAR: We would respectfully submit they are not being prejudiced.
NETTLE J: That is to say the creditors other than your client.
MR STOLJAR: Yes, I understand. They are not being prejudiced, your Honour. The question for present purposes is whether a sequestration order should be made. The creditor who has gone to trial, conducted the hearing and been successful in obtaining a judgment should, in the ordinary course, be in a position to take that judgment further and obtain a sequestration order, we would respectfully submit.
NETTLE J: You can take the judgment further and get a writ of fi fa and execute to your heart’s delight.
MR STOLJAR: Yes.
NETTLE J: You cannot put the bankrupt into bankruptcy and affect his relationship with other creditors unless the debt is owing.
MR STOLJAR: That is so, but the question as to whether the debt is owing is one that has been ventilated before a superior court in this present case and the bankrupt has, one would – particularly if he was represented and participated in the hearing – one would infer that he had propounded whatever forensically he or she regarded as appropriate to propound at that hearing.
EDELMAN J: Your submission has to go even further than that, does it not? Being represented and participating does not really matter that much. For you, you draw the line between, say, a default judgment or summary judgment in the absence of a defendant in a circumstance where, say, an unrepresented defendant turns up, makes almost no submissions and then has judgment entered against him or her.
MR STOLJAR: At a final hearing?
EDELMAN J: Yes.
MR STOLJAR: I will accept that. Consistently with what I was saying, that would be a situation in which the court would be limited in going behind the judgment on the position that we are propounding to the three gates that I have said. However, “miscarriage of justice” is a broad term and I indicated that the categories are not closed and it may be – it is difficult to reason in the abstract – that a person in that position might be able to establish some miscarriage of justice more easily than a person who was represented by counsel.
KIEFEL CJ: Is not the point that Lord Esher is making in Re Flatau simply the statement at the bottom of page 85 and the top of 86 that there is no obligation on the court in every case to inquire into a debt? Something has to be shown to enliven the Court’s jurisdiction to exercise its powers as the Chancery Court did. When Lord Esher says that the section gives no more than a judicial discretion, he is talking about a particular kind of discretion, not one at large – not even one which gives options. I think it was explained by Chief Justice Barwick in Wren v Mahoney that what Lord Esher refers to as discretion is quite limited.
MR STOLJAR: Yes.
KIEFEL CJ: It is meant in quite a narrow sense. The question here really is whether the primary judge’s approach was the correct understanding of what that discretion was.
MR STOLJAR: Yes.
KIEFEL CJ: Whether one can weigh in balance in the conduct of a party in litigation or whether there is a higher principle as to whether or not the debtor is required to found bankruptcy.
MR STOLJAR: Well, that is so, and the way that the primary judge resolved that matter was to examine the way the trial had been conducted. Although he does not quite address the matter in the way that we would say would be the approach pursuant to Justice Fullagar in Corney he, nevertheless, focused his mind on the question as to whether, in effect, there had been some miscarriage of justice at the trial.
KIEFEL CJ: But the primary judge turned his face against the evidence as to debt. That is the real issue. That is the area that we are in, is it not?
MR STOLJAR: Yes, he did. But we would say he did that correctly and consistently with the principles that I will be endeavouring to enunciate to your Honours.
KIEFEL CJ: We have interrupted you enough, I think.
MR STOLJAR: May I take your Honours briefly to the decision of Lord Justice Fry on page 86 in the same decision and, again, passing over the first point and looking at the paragraph beginning about the middle of 86, “The second ground”, Lord Justice Fry says:
It is true that in some cases the Court of Bankruptcy has gone behind a judgment, when it has been obtained by fraud, collusion, or mistake. But this power has never, so far as I am aware, been extended to cases in which a judgment has been obtained after issue have been tried out before a Court.
Justice Fullagar picks up on that in Corney, as I will point to your Honours in due course. The final judgment is that of Lord Justice Lopes, page 87 he deals with the second point and says he entirely agrees “with the other members of the Court” and his Lordship observes in comments which foreshadow in speaking loosely in some way the principle of finality to which I have made reference:
Proceedings in bankruptcy are already scandalously long; if this contention were well founded they would be almost interminable. I agree that in cases of mistake, fraud, or miscarriage of justice the Court of Bankruptcy will go behind a judgment, but the present case is not one of that kind.
That is Re Flatau. The next case that I will take your Honours to is the case on my friend’s list In re Hawkins; Ex parte Troup [1895] 1 QB 404, and I only wish to take your Honours to that case to illuminate a point that has already travelled to some extent between myself and your Honours this morning, and that is that the circumstances in which a court may go behind a judgment may vary depending on the nature of the judgment that is under investigation.
In Hawkins there was a judgment obtained after a compromise of the action. If your Honours look at page 404 your Honours will see the judgment was signed in pursuance of the terms of compromise and different considerations are enlivened in that event. So, if your Honours go to 409, your Honours will observe at about the middle of the page that Lord Esher says:
Where a judgment has been obtained by a compromise, the Court has to say, looking at that compromise and all the facts which led up to it, whether in their opinion it is a just and proper compromise. In one case I know it was said that the Court would go behind a judgment obtained by compromise, and consider that compromise as one of the facts in the case. I myself should say that the question for the Court is whether there is, or is not, a reasonable doubt that the judgment had been obtained by one side or the other fairly.
Again pausing there, his Honour is emphasising that the question is whether judgment has been obtained fairly, and if not, the judgment itself may be impeached. Then his Honour says:
If the compromise is found to be a reasonable one the Court will support the judgment; but if it is found not to be a reasonable compromise, although not fraudulent, then the Court will not support the judgment.
KEANE J: This is speaking of the Bankruptcy Court.
MR STOLJAR: Yes.
KEANE J: The Bankruptcy Court is satisfying itself as to whether the compromise is reasonable.
MR STOLJAR: Yes, and I only draw attention to it as making the point that the circumstances in which a court may go behind a judgment may vary and this is the principle which regulates a circumstance in which the judgment has been entered after a compromise. Likewise, if I could direct your Honours to page 412, your Honours will see that in Lord Justice Lopes’ judgment, he says about 11 lines from the bottom of that page:
In my judgment, both an ordinary judgement and one obtained by compromise may be inquired into directly, but not before, it is made out that either the one or the other has been improperly or unfairly attained. I do not go the length of saying that it must have been fraudulently obtained; it is sufficient, in my opinion, if it is made out that the judgment was improperly or unfairly obtained.
Lord Justice Rigby, your Honours, was in dissent and he said a court would only go behind a judgment given after a compromise, if there had been fraud.
Now, another case on our list that I will not take your Honours to because we have dealt with it in our submissions and the relevant passage is set out in Corney v Brien which I am about to take your Honours to, but I note that this Court has examined this issue in Petrie v Redmond [1943] St R Qd 71 and as I indicated, the relevant passage is in Corney. So, if I could take your Honours now to Corney v Brien, the leading case, and begin on page 346 where your Honours will see the start of the judgment of Justice Dixon, as his Honour then was, Williams, Webb and Kitto and your Honours will observe about five lines in, that this:
judgment was obtained in default of appearance to a writ issued out of the Supreme Court of New South Wales.
Now on 347, the beginning of the first new paragraph on 347, their Honours set out their analysis of the law. They point to section 56(2)(a) of the Bankruptcy Act which was in similar terms to 52 and note that it:
provides that the court at the hearing shall require proof of the debt of the petitioning creditor -
and then observed that:
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.
The word “or” delineates between the different categories of judgment. Jurisdiction is there where it is “obtained by default or compromise or”, i.e. in the case of judgments obtained otherwise than by default or compromise, there has been fraud or collusion. Their Honours then recite a number of principles drawn from the cases and then on the top of 348, their Honours quote from Petrie v Redmond and cite the proposition that the Chief Justice enunciated in that case, namely:
“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 judgment and default judgments.”
KIEFEL CJ: Going back to page 347, just after the part you referred to.
MR STOLJAR: Yes.
KIEFEL CJ: In referring to Ex parte Kibble and to what Sir George Mellish had said, it said:
“It is quite clear that in the Court of Bankruptcy the consideration for a judgment may be investigated ‑ ‑ ‑
MR STOLJAR: Yes.
KIEFEL CJ: That is what the Court of Chancery was doing, following the old practice applicable to estates and seeing whether or not there was proper consideration for a debt.
MR STOLJAR: Yes.
KIEFEL CJ: That tends to suggest a wider consideration - exercise of power by a court, does it not?
MR STOLJAR: We would respectfully submit, no, it is sometimes used – sometimes the courts have talked about using it or examining whether there has been proper consideration for the judgment but we would respectfully submit that in a circumstance in which one is considering bankruptcy legislation as it has evolved in this country that really the issue is not so much considerations of what – or the issue of consideration for the judgment as it may have been understood in some of those very early cases but rather the question whether the judgment can be accepted as satisfactory proof of the debt.
KEANE J: It is not “can”, it is not whether the judgment can be accepted, it is whether it should.
MR STOLJAR: Yes, yes, that is so, your Honour, yes. Page 349 in Corney, their Honours deal with the decision at first instance in the paragraph beginning “His Honour accepted Newham as a witness of truth” – I will not take your Honours through the detail of the factual inquiry but at the bottom of that page when their Honours say:
He thought that the claim was irregular –
they were referring to the trial judge. Then, later, on the top of 350, their Honours say that the trial judge, in effect, declined to go behind the judgment because it was not made out or there was not sufficient evidence:
the judgment had been obtained by fraud or collusion or there had been some miscarriage of justice.
Then, their Honours treat the facts in some detail over the next few pages and at 352 at the bottom of the page, their Honours observe:
It is to be noted that in his reasons for judgment his Honour does not refer to the freedom with which a Court of Bankruptcy goes behind a judgment obtained by default. He refers only to the court inquiring into the consideration for a judgment debt that has been obtained by fraud or collusion or where there has been some miscarriage of justice.
Pausing there, we have in our outline propounded the proposition that the fact that there is that freedom where there is a default judgment suggests that as a corollary of that proposition there is no such freedom where the judgment was preceded by a contested hearing. The judgment of Justice Fullagar begins on page 353 and your Honours will see that the final paragraph on that page beginning “Generally speaking” is his Honour’s analysis of the relevant propositions derived from the earlier cases. I will not take your Honour through the detail of that but come to the salient propositions which begin on page 356 at the bottom of the page ‑ ‑ ‑
KIEFEL CJ: Is not the starting point, though, the statement at page 353 that in a Court of Bankruptcy a judgment has not conclusive effect.
MR STOLJAR: Yes, that is certainly – and that proposition loomed large in the Chief Justice’s judgment in Wren and I will certainly be coming to that. But at the bottom of 356, his Honour concludes his summary and enunciates some propositions which have been formulated on the basis of what has fallen from his Honour in the preceding few pages. In particular, at the bottom of 356, his Honour Justice Fullagar says:
No precise rules exist as to what circumstances call for an exercise of the power, but certain things are, I think clear enough.
His Honour’s first proposition is this:
If the judgment in question followed a full investigation at a trial on which both parties appeared, the court will not reopen the matter unless a prima‑facie case of fraud or collusion or miscarriage of justice is made out.
We would respectfully endorse that proposition and we say it is clear on its face.
EDELMAN J: It is unclear whether that is referring to “will not” in the exercise of its discretion or “cannot” as a matter of power.
MR STOLJAR: It is arguably open to be stating either of the propositions that your Honour has put to me, but even if it is only stating the latter proposition it is sufficient in this circumstance in that it represents the circumstance in which the discretion exercised judicially will be so exercised. It is not stated with any qualification ‑ ‑ ‑
KIEFEL CJ: What do you say about the passage from Lord Esher’s judgment in In re Fraser referred to at the bottom of page 355 over to 356, where Lord Esher says that the decision is based upon the fact that there might be an interference with the rights of other creditors who might not be able to sue for their debts if an order for bankruptcy is made, and then critically says:
The existence of the judgment is no doubt prima facie evidence of a debt; but still the Court of Bankruptcy is entitled to inquire whether there really is a debt due to the petitioning creditor.
That is what it is all about, is it not?
MR STOLJAR: The proposition that the judgment debt is not conclusive – and bankruptcy is not a proposition that we would cavil with – it is not conclusive because in circumstances in which there has been fraud, collusion or miscarriage of justice, a court may go behind it.
KIEFEL CJ: Quite; I understand that. But Justice Fullagar is here quoting with approval a statement by Lord Esher that the Court of Bankruptcy is entitled to inquire whether there really is a debt due to the petitioning creditor. That is the key statement.
MR STOLJAR: Yes. We would respectfully submit he accepts the proposition that the court may wish to inquire, but it will not do so in every case, and in the case of a judgment given after a contested hearing it will only do so in the limited circumstances enunciated at the top of 357. In the case of a judgment obtained by compromise, for example, which his Honour goes on to deal with immediately thereafter on 357, where judgment has been entered in pursuance of a compromise, ground must be shown challenging the compromise. His Honour there deals with Hawkins that I have taken your Honours to. His Honour then says at the bottom of 357:
But, wherever the judgment in question is a judgment by default, it appears that the court will always “go behind” the judgment if there is what it regards as a bona‑fide allegation that no real debt “lay behind” the judgment.
So his Honour accepts that it is open to the Bankruptcy Court to inquire, and then enunciates the circumstances in which that inquiry will be made with reference to the different categories of judgment that may be obtained and may give rise to different considerations. His Honour then says on 358:
If the case should be one of those rare cases (I have not actually found one in the Reports since 1888, when Fry L.J. said that he knew of none) where it is legitimate to “go behind” a judgment entered after trial in court, there would be, I think, no alternative but to re‑try the whole case.
Then at the top of 359 his Honour says:
The judgment being by default, and these statements having been made on oath, I do not think that the Court of Bankruptcy could, consistently with principle, have declined to go behind the judgment.
KIEFEL CJ: I note that on page 358 Justice Fullagar states again with emphasis the statement from Lord Esher in In re Fraser about whether there really is a debt due ‑ that is the question ‑ at about point 6. As Lord Esher said in re Fraser, it seems to be a matter of some importance.
MR STOLJAR: It is a matter of importance, your Honour, but consistent with what his Honour said on 357, it must be the case that his Honour was not endeavouring to suggest that in every case a court of bankruptcy will simply launch itself upon an inquiry as to ‑ ‑ ‑
KIEFEL CJ: No, that is what Lord Esher was saying in the case, Flatau, that you were taking us to. There would have to be cause shown.
MR STOLJAR: Yes.
KIEFEL CJ: The question is whether or not the cause is limited to the types of cases that you are referring to.
MR STOLJAR: Yes. I suppose what I say about that is that the natural reading of what is said by Justice Fullagar at the bottom of 356 and the top of 357 is that at least where there has been a contested trial and judgment has been given after that trial then it is so limited. We draw support for that from the fact that his Honour says the court will not reopen the matter unless a prima facie case of fraud or collusion or miscarriage of justice is made out. His Honour does not say, for example, the court may reopen the matter provided sufficient reason is given for doing so, which may include those three matters. He is very specific in the way that he formulated the approach.
EDELMAN J: He is saying that against a background of nearly a century where there is no apparent case where a court has reopened outside those categories.
MR STOLJAR: Yes.
EDELMAN J: So it may be that the “will not” really is a reference to the fact that an invariable exercise of the discretion is that the court would not go behind outside the categories.
MR STOLJAR: Is your Honour ‑ ‑ ‑
EDELMAN J: But not necessarily one which will have to occur in every instance but just simply one where, for the last century, it appears that it is so rare that the court will not do it.
MR STOLJAR: We would respectfully submit that it is more than just a description of what has occurred over the years since at least 1888 through to 1951. I really cannot add to what I have said before. The natural reading of the proposition is one that is unqualified. His Honour is not saying the court has power but exercises it rarely. Indeed, I am not aware of a case where it has happened. He really is saying “will not unless”.
Perhaps I can develop that point a little bit. I obviously need to come to Wren v Mahoney and explain why, in our respectful submission, it does not propound the approach that the Full Court found. Before I do so, and perhaps to try and address some of the points that your Honour Justice Edelman has put to me, I can point your Honours to our submissions in reply.
On page 4, paragraph 11, we articulated the proposition that Justice Fullagar’s statement of principle has been cited many times in subsequent cases. Although I am not going to take your Honours to all the cases in the footnotes that we have put there, if I could just indicate to your Honours briefly that a number of those authorities have not simply quoted approvingly what Justice Fullagar had to say but have approached resolution of the issue that faced the Full Court below and resolved that issue in precisely the manner for which we would contend.
So more precisely, in, for example, Re David; Ex parte Lahood, the second case in that note, Justice Lockhart, beginning on 308 and continuing through to 309, dealt with a situation in which there had been a contested hearing and in essence said there needs to be either fraud, collusion or miscarriage of justice. One looks at the evidence presented by the debtor for one of those three, if I can continue my expression of “gateways” for better or for worse, but one looks as to whether one of those three gateways opens and if none of them do, that is the end of the application. I am not doing justice to the nuances of Justice Lockhart’s judgment but that in a nutshell is what he said.
KEANE J: The very phrase “miscarriage of justice” is against the notion that there is some rigid limitation on the exercise of the power.
MR STOLJAR: Well, we would respectfully put it in a slightly different way, your Honour. We would say that the miscarriage of justice is broad enough to encompass a wide range of circumstances and ensures that the exercise of the discretion is not approached in a rigid or formulaic fashion, but rather it is designed to focus attention to the question of the circumstances in which the judgment was obtained which in turn focuses attention on whether the judgment itself is satisfactory proof of the debt.
By approaching the question in that way, one arrives at an outcome which precludes, in effect, what happened here, namely, a person running a case in a particular way in the person’s own forensic interest and no doubt on the advice of counsel, and then on the hearing of a sequestration order simply saying, well, in effect, I would like to have another go. I would like to call evidence that I did not call below. I do not need to proffer any explanation. I am not bound by the way I conducted my case at trial. I would just like to, in a sense, take two and start again. That, we submit, is not an approach that is one that would have found favour with Justice Fullagar and, we submit, is not the correct construction of the statutory discretion.
EDELMAN J: I suppose you would say that, assuming there had been essentially an unlimited equitable jurisdiction to consider circumstances of a debt even after final judgment at common law, that over time that jurisdiction became narrowed to these particular categories and the miscarriage of justice was left broad enough to encompass all of the possible circumstances where the principle of finality might not hold.
MR STOLJAR: Yes, and in support of that proposition, your Honour, we would point to the fact that it is not purely, after all, an equitable jurisdiction anymore. It now has a statutory overlay – or more precisely, there is a statutory jurisdiction which may, to some extent, be informed by the equitable jurisdiction to which your Honour has made reference.
NETTLE J: Mr Stoljar, could I just ask you, being a statutory jurisdiction, does it attract Norbis v Norbis principles about the exercise of discretion, that is to say, whilst appellate courts can give guidance from time to time in the form of so‑called rules that might help judges apply the discretion, the discretion is given by Parliament. In the end it is a discretion.
MR STOLJAR: We would respectfully submit that we have not analysed the question precisely in the context of Norbis in our submissions, but the way that we have endeavoured to address what I apprehend to be the substance of what your Honour is putting to me is this. We would say that the discretion properly understood is a narrow one, whether to accept – I am sorry, I am repeating myself to some extent – whether to accept the judgment as satisfactory proof of the debt. That, as we put it, narrow exercise of discretion is one that is susceptible of being informed by statements by appellate courts and indeed has been informed.
This also comes from the decision of the Chief Justice in Wren. It is not some discretion at large where a court should not be fettered in the way that it exercises its discretion, but the court is really approaching the case or the issue on a narrow basis.
May I come back to the survey of cases in footnote 4 and without travelling into the detail just develop some of the references. Udovenko was a decision of the Full Court. We have given a reference to 421 – that is the decision of Justice Davies. He referred to the very proposition in – I am sorry, your Honours, I was only proposing to give your Honours some additional references for footnote 4. So Udovenko, the reference of 421 is Justice Davies, who says or, in effect, cites the relevant passage from Justice Fullagar that I have taken your Honours to. Justice Foster agreed with him. That, however, was a default judgment case.
Then in Miles v Shell Company of Australia Justice Sundberg enunciates the proposition without qualification that I have taken your Honours to from Justice Fullagar’s judgment. Then there are a series of cases – not all the ones identified here but a subset of them – in which courts have considered a circumstance in which they are being asked to go behind a judgment given after a contested hearing and have approached it on the basis of inquiring whether the evidence establishes fraud, collusion or miscarriage of justice and invariably they have said that it does not reach that height. But the fundamental approach is the one for which we contend, namely, that one is limited to those three circumstances and that is the first and, indeed in some cases, the last question that the judges will ask. So Taylor v Taylor falls into that category.
In Seymour – that was another decision of a Full Court – their Honours cited Corney and Udovenko and approached their decision on that basis of the paragraph that we have indicated; a similar approach in National Australia Bank v Freeman. Yarranova was a decision of Justice Gordon which was to similar effect and, likewise, the last two cases that we identify in that outline: Di Iorio and Nadarajapillai.
GAGELER J: The language of “fraud, collusion or miscarriage of justice” suggests that the focus is on the impeachment of the judgment ‑ ‑ ‑
MR STOLJAR: Yes.
GAGELER J: Rather than whether there is some underlying consideration. It is rather what is wrong with this judgment - what, if anything, is wrong with this judgment from an equity perspective?
MR STOLJAR: Yes, that is so, your Honour. That is the position. The first dot point is that the cases that I have indicated to your Honours establish that there is a line of authority which applies Corney in a manner consistent for the way for which we would contend. There are authorities which apply Wren in a broader way. We have identified at least one, a decision of the Full Court, Ahern v Deputy Commissioner of Taxation.
But before I do that and address that, and what we say emerges from that line of authority, I should take your Honour squarely to Wren v Mahoney because there is no doubt that some of the language in Wren v Mahoney is, on its face, broader than the way that Justice Fullagar put it in Corney and I need to confront that head on.
So, if I could take your Honours to Wren v Mahoney and a starting point is on page 215. The underlying issue related to a deed of indemnity pursuant to which a Mr Wren indemnified a Mr Mahoney in relation to relevantly claims made against the latter by the Commissioner of Taxation. As his Honour the Chief Justice, with whom Justices Windeyer and Owen agreed, observes on 215 – I am looking at about point 6 on the page:
However on 28th April the defendant’s pleas were struck out by a judge of the Supreme Court and the respondent enabled to sign final judgment in debt for the sum of $68,896.40 that being the amount of tax and interest thereon due to the Income Tax Commissioner –
Then the creditor’s petition is set out in full on page 216 and curiously, despite the fact that a judgment had been obtained, the petition itself referred to and relied on the underlying matters. The real issue about the indemnity, your Honours, was whether liability to indemnify crystallised upon payment by Mr Mahoney of a tax debt or only upon a claim being made against Mr Mahoney by the ATO and, in essence, a judge at first instance found that on the wording of the indemnity the debt crystallised merely upon the making of a claim and he, therefore, struck out the defence as events stood.
It is then slightly unclear what happened precisely after that but it would appear that some sort of leave was given to the plaintiff to enter judgment, but if I can continue with my survey of the Chief Justice’s judgment. At page 220 his Honour observes in the penultimate paragraph:
The petition recited the entry of judgment in the Supreme Court following an order striking out pleas in the action in that Court. But it alleged the debt to be due “for breach of the covenant of indemnity”. The judgment was a judgment in default of a plea. The particular nature of the contest before the judge of the Supreme Court did not appear from the petition.
Then, his Honour importantly at the bottom of that page says:
It was clear that no contested fact had been decided in the Supreme Court, but that it must have been held that as a matter of law the deed between the parties had given rise in the undisputed circumstances recited in the petition to a debt due by the appellant to the respondent.
His Honour, then, from page 221 recites the relevant authorities. At the bottom of 222 he adverts to Re Flatau where his Honour says:
But, it has been made clear that the Bankruptcy Court will not as a matter of course inquire into the validity of a judgment debt –
Then, his Honour cites from In re Hawkins; Ex parte Troup and then, importantly, about 12 lines from the bottom, his Honour says:
Reference can also be made to the decision of this Court in Corney v. Brien and the cases there cited.
It would appear clear, in our respectful submission, that his Honour was not endeavouring to depart from the teaching in Corney. One then comes to 224 and this is the passage oft cited and I am going to come to it in a minute, a long paragraph taken from this judgment – from this page in the Full Court’s judgment, and it is really where they draw the broad approach that I have indicated to your Honours. But it is useful to start, we respectfully submit, with the discussion of Lord Esher in Re Flatau. So, that is what the Chief Justice is referring to in the fourth line. He quotes from Lord Esher’s judgment and then goes on:
His Lordship, in using this expression, was not intending, in my opinion, to weaken the emphasis he had always placed on the need for the Court of Bankruptcy to be satisfied of the existence of the petitioning creditor’s debt. Rather, if one reads all his expressions in the several cases I have cited, he was pointing out that the Bankruptcy Court could in general accept a judgment debt as a sufficient proof of that debt particularly where it resulted from a fully heard contest between parties but that it always had the power to go behind the judgment and if the case was a proper one, should do so.
That sentence was not part of the extract which the Full Court quoted. The Full Court quoted from the sentence beginning “The judgment is never conclusive in bankruptcy”. But if I could pause at that sentence beginning “Rather, if one reads all his expressions” and just emphasise that the Chief Justice is recognising that that a Court in Bankruptcy is particularly reluctant to go behind a judgment:
where it resulted from a fully heard contest between the parties but that it had always had the power to go behind the judgment and if the case was a proper one, should do so.
Now, when is the case a proper one for doing so? We would submit, in the circumstances adverted to by Justice Fullagar in Corney where there has been fraud, collusion or miscarriage of justice and given that his Honour is clearly endorsing the judgment in Corney, his Honour should not be construed as putting forward any other proposition. One then comes to the passage that has been oft quoted:
The judgment is never conclusive in bankruptcy.
Pause there, and as the Chief Justice put to me earlier, that proposition is consonant with what Justice Fullagar said and, indeed, with what earlier judgments have said. It is never conclusive. The Court in Bankruptcy always has power in appropriate circumstances to go behind a judgment. The question is what are those ‑ ‑ ‑
GAGELER J: This all proceeds, as you point out, from the debt relied upon by the petitioning creditor as being the debt due for breach of covenant and the judgment is in some way relied on as evidence of that debt. Is that the way it was being put in this case. I mean, it is rather different from coming in with a judgment debt and saying that is my debt.
MR STOLJAR: Yes, well the petition did advert to the judgment as well as the underlying debt. It was slightly unusual in that regard but ‑ ‑ ‑
GAGELER J: I mean the underlying debt ceases to exist when you have a judgment, does it not? I mean just basic - it merges in the judgment.
MR STOLJAR: Yes, it merges in the judgment save that and, as it were, at law and as between the creditor and the judgment debtor, the debt is merged but a court in bankruptcy has, as we have adverted to earlier on in discussion, still has the power to go behind the debt and examine in appropriate circumstances the underlying debt itself.
GAGELER J: So what I was just exploring - would it be different if the petitioning creditor relies simply on the judgment?
MR STOLJAR: Well, it would be different in that the Chief Justice - I am coming to this in a moment, but in the present case he really adverted to two factors upon which it was appropriate for the court in bankruptcy to go behind the judgment. The first was the fact that in the rather idiosyncratic circumstances of this case the underlying debt itself had been called upon in aid of seeking a sequestration order which rather directed the attention of the Court in Bankruptcy to that underlying dispute. That was the first thing and the second matter that the Chief Justice relied on was the fact that the judgment was one given in default of a plea and no substantive issue had been tried out in the Supreme Court.
KIEFEL CJ: Just adverting to the practice in the petition, I think there was a practice to refer both to a debt in a default judgment and the underlying debt so that if the default judgment went, the petition did not have to reissue.
MR STOLJAR: Well, yes, that may well be the case, your Honour, yes.
EDELMAN J: In a sense, the expression “going behind a judgment” is misleading, is it not? It is not so much going behind the judgment as at least in the circumstances that are recognised, the Bankruptcy Court not being bound by the common law judgment.
MR STOLJAR: Yes, bound in the sense that – not in a strict sense bound by but whether the court should accept that judgment on its face as proof of the debt.
EDELMAN J: Yes.
MR STOLJAR: But on its face, it is a judgment of in this case the Supreme Court for nearly $10 million which had not been appealed from and one would have thought was pretty good evidence. But can I come back to 224, unless there are any other matters that your Honours wish to put to me? I had just dealt with the sentence “The judgment is never conclusive in bankruptcy”, and then the Chief Justice goes on:
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. 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.
This is an important sentence, and I will read it first and then advert to matters that arise from it:
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.
The first matter that I was going to emphasise there is that his Honour is referring to decisions of the past and endeavouring to summarise the effect of those decisions. He is not striking out on his own. The decisions of the past to which his Honour is making reference one might conclude from the preceding pages in his judgment include Corney. That is the first proposition. The second proposition is that his Honour says:
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 –
the court can no longer accept it. What his Honour really is – his Honour is putting the proposition at a reasonably high level of generality. The reasons, as I have endeavoured to point out to your Honours in the course of argument this morning, will vary depending on the circumstances in which the judgment was obtained. Default judgments are one thing, judgment by compromise are another, fully contested hearings are another. It may be that there could be other categories. None come readily to mind but there might be other categories, but the precise reasons will vary from circumstance to circumstance. Then continuing:
It must then exercise its power, or if you will, its discretion to look at what is behind the judgment: to what is its consideration. It is not the law, in my opinion, that whether in any case the Court of Bankruptcy will consider whether there is satisfactory proof of the petitioning creditor’s debt is a mere matter of its own discretion.
Pausing there, it does not appear to be on his Honour’s view some general discretion:
Nothing in Corney v Brien lends support for such a view. Rather 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.
At the risk of labouring the point, his Honour was not suggesting that those substantial reasons were at large, which is the way in which that sentence has been construed, we would respectfully submit, out of context. What his Honour is saying is that the substantial reasons emerge from the decided cases and will vary depending on the circumstances in which the judgment was entered.
Now, that is the, as it were, analysis of the relevant principles and then his Honour turns to the specific facts. I have really dealt with this in discussion with your Honour Justice Gageler, but the Chief Justice then turns to the specific considerations for why the Court of Bankruptcy could go behind the judgment here and the first was because, as his Honour says in the long paragraph beginning “Although”:
The recital of the terms of the deed as the source of the debt –
in the petition itself, but then importantly his Honour says:
So far as the recited judgment was concerned, the reasons for judgment of the Supreme Court in striking out the appellant’s pleas in the common law action were not binding on the learned judge in Bankruptcy.
His Honour there uses the term that your Honour Justice Edelman put to me a moment ago:
There had been no more in the Supreme Court than a contest at the pleading stage of the action. No more could have been decided than a question of law.
His Honour plainly, in our submission, was bringing this case within the category described in Corney, namely, where the court has a freedom to go behind a judgment given in default, in this case, of a plea, because there had been no factual contest in the Supreme Court. That is the decision of Justice Barwick. Our proposition is that nothing in Wren v Mahony properly understood detracts from or alters the principles described in Corney. It was a form of default judgment and that was one of the critical factors which the Chief Justice took into account.
I indicated earlier on that there is a line of country which goes against me on this and says, in effect, that one can take particularly the last sentence at the top of 225 that I adverted to from the passage of Chief Justice Barwick and says that if there are substantial reasons shown on the hearing of the petition a court can go behind the judgment as if that is at large. We would say, properly understood, that is not the approach. We say the preponderance of authority favours the narrow approach, but there certainly are authorities taking that broader approach. One of them is Ahern v Deputy Commissioner of Taxation (1987) 76 ALR 137, which we have dealt with in our written outline.
To the extent that there is a divergence of views, we would respectfully say that, again, in part principle finality and in part the long history of the authorities that I have endeavoured to take your Honours through would support your Honours resolving this case in favour of the preponderance of authority rather than the cases which take the more expansive view.
KEANE J: In the 30 years since Ahern’s Case was decided, has any decided case disapproved of it?
MR STOLJAR: Not that I am aware of, your Honour. Ahern, of course – we have endeavoured to deal with this in our outline – was a default judgment and it was also a question where the critical issue appeared to be whether an adjournment should properly have been given. So it was not a case where the court was considering a judgment being set aside after a contested hearing. But in answer to your Honour’s question, I am not aware of anything that has doubted it. Indeed, it may well have been cited approvingly in subsequent cases. I can endeavour to track that down, your Honour.
NETTLE J: It has been followed and applied three times in the Federal Court.
MR STOLJAR: Yes, we will endeavour to track that down. I am not sure what ‑ ‑ ‑
NETTLE J: It was followed in Bomanite 32 FCR 379. It was applied in Bunnings 54 FCR 342 and it was applied in Westpac Bank v Carver 126 FCR 113.
MR STOLJAR: Yes, we will have a look at those, your Honour. I certainly do not suggest anything other than that there are authorities which have said, in effect, what I endeavoured to say earlier on. They have said, in effect, a court can go behind a judgment after a contested hearing if substantial reasons are shown, which may include fraud, collusion or miscarriage of justice. That is in a nutshell the proposition. But we would respectfully submit that the preponderance of authority favours the narrow and if there is doubt about it the principle of finality favours the narrow.
Can I then, just before I come to the judgment of the Full Court, let your Honours know that, as I observed at one point earlier, Justice Fullagar said in 1951 that he was not aware of any case in which a court had gone behind a judgment given after a fully contested hearing. We are now in 2017, 66 years later, and we endeavour to try and find a case where that might have occurred.
I am just going to give your Honours the reference, but there is a case – we have found one – where a court did go behind a judgment given after a fully contested hearing essentially on the basis that I was putting to your Honour Justice Nettle advancing that proposition. The authority is Re Kyle [1995] FCA 1423. It is a brief judgment given ex temp on the day of the hearing in relation to a debt for a few thousand dollars and it appears that the attention of the learned judge was not directed to the relevant passage in Corney. He only refers to the passage in Wren that I have taken your Honours to.
Indeed it is unclear if there was in fact any contest as to whether one could go behind the judgment. His Honour – it was Justice Drummond – did go behind it and he reduced the debt from a few thousand dollars to a few hundred dollars, so it was below the statutory threshold. Since the issue was not explored in Re Kyle in any detail, without meaning any disrespect to his Honour, I was not proposing to take up your Honours’ time with it, but if your Honours would be assisted by a copy, we do have a copy of it.
Could I then come to the decision of the Full Court. I direct your Honours’ attention to page 370 of the appeal book, where your Honours will see that at the top of that page their Honours deal with Corney v Brien, and then on 371, paragraph 59, their Honours quote from Justice Fullagar and set out in bold the passage that we have attached weight to in our oral submissions this morning. Then at 60, their Honours say:
we do not consider –
the passage involved:
to represent an exhaustive statement of the circumstances in which a court of bankruptcy may or should ‘go behind’ a judgment . . . The cases discussed by Fullagar J . . . do not suggest as much. Nor does the joint judgment.
We respectfully say that that proposition is clear on its face and it is intended to be an exhaustive statement of the circumstances. We would say that is consistent with Re Flatau and it is consistent with many cases which have followed it. So our first ground is simply that their Honours should have, but did not, apply Corney.
Then their Honours go on and deal with the Chief Justice’s decision in Wren, on page 372 and following of the appeal book, in particular at paragraph 63. Their Honours describe as important the sentence from the Chief Justice’s decision:
“where reason is shown for questioning whether . . . there was in truth and reality a debt . . . then the court of bankruptcy can no longer accept the judgment as satisfactory proof.
The nub of it is really in 69, on page 375. Their Honours begin paragraph 69 under the heading “Disposition of the appeal” by observing:
the primary judge considered that the discretion to ‘go behind’ the Supreme Court judgment was not enlivened because Mr Compton was represented by counsel . . . there was available evidence that had been filed in that Court addressing the quantum . . . and a forensic decision was made to confine the issue to be resolved by that Court to the enforceability of the guarantee. The matters upon which his Honour relied focused on the way in which Mr Compton conducted his case in the Supreme Court rather than on the central issue, which was whether reason was shown for questioning whether behind the judgment there was in truth and reality a debt due to the petitioning creditor. Had the focus been on that issue, the answer would have been quite different –
We put the proposition that that approach really manifests the three grounds on which we rely in the sense that it does not take the approach prescribed by Corney, it takes a broad approach apparently drawn from Wren but we would respectfully say, properly understood, Wren does not stand for that proposition. But, in particular, and coming to the third ground, the problem with this approach is that it enables a judgment debtor in that circumstance to simply say, well, the only issue is now on the hearing of the petition. What evidence can I martial to suggest that I do not owe this money and I am free to martial any evidence that I can get.
In this case, he was going to call Ms Stevis and put on further evidence despite the fact that Ms Stevis had, as it appears from the primary judge’s judgment, been in court but not called and all that one has to ask is whether that evidence makes out, at least, a prima facie case that no debt was due.
We would respectfully submit, properly understood, the approach must be whether the judgment can be accepted, whether the judgment can be impeached and, in order to address that question, the three matters that Justice Fullagar adverted to need to be – one of at least the three need to be made out. We have endeavoured to expand on some of those matters in our outline but that, in a nutshell, is the basis on which we say that the Full Court fell into error both in its allowing the appeal and going on in its exercise of discretion afresh.
KEANE J: Would you accept that if it emerged that the material was not tendered at the trial in the Supreme Court because of the incompetence of counsel would that meet – would that be encompassed by the notion of miscarriage of justice?
MR STOLJAR: One might need a bit more information about it, your Honour, but ‑ ‑ ‑
KEANE J: I understand that. I understand you would need more facts but if that were the case, I am just looking at this – what is involved in a miscarriage of justice. You have a fully contested case. The conduct of the case by one side is affected by incompetence on the part of counsel. Is that a case that would be included in the idea of miscarriage of justice?
MR STOLJAR: It is a difficult question to answer in the abstract but my answer as best I can is that conceivably it might be if the incompetence was so great that it denied the client procedural fairness, let us say, but if it was – I think my submission would be that generally mere incompetence of counsel would not be sufficient for there to be a miscarriage of justice. I think one is driven to that from some other statements in the authorities.
NETTLE J: TKWJ, do you mean - that sort of incompetence?
MR STOLJAR: Yes, that might be one example.
NETTLE J: But that is the level you say it would need to go to in order to be within miscarriage of justice within the meaning of the Corney v Brien formulation?
MR STOLJAR: Well, it would need to be something of that nature, your Honour, yes. One might need to give – that is a matter that has not been ventilated and is a matter that I might need to give some further consideration to and perhaps get back to your Honour. But, on its face, it might need to reach that level, yes. Unless I can assist your Honours in any other way, those are my submissions. May it please the Court.
KIEFEL CJ: Thank you, Mr Stoljar. Yes, Mr Reynolds.
MR REYNOLDS: I presume your Honours have our synopsis of argument.
KIEFEL CJ: I think you can proceed, Mr Reynolds.
MR REYNOLDS: My friend has said this case started or focused on a separate question. If I can take your Honours to our synopsis, paragraph 1.1, the principle the Full Court applied – and there is no doubt about this – was whether there was reason to question whether, behind the judgment debt, there was in truth any debt owing to the petitioning creditor. The Full Court found not just reason but substantial reason to question and also circumstances which they branded as unusual, which I will come to later on.
There is no issue that that principle derives from Wren, at page 224, a principle which has been applied in scores of cases. There is not any challenge on this appeal to the correctness of Wren. Moreover, as we say at paragraph 1.6, the appellant – that is, Ramsay – does not dispute that Wren articulates the principle which the Full Court applied. As I say, that was the principle applied by the Full Court. It correctly found reason to question. Indeed, it correctly found substantial reason to question.
NETTLE J: But, Mr Reynolds, Mr Stoljar contends that the Full Court misunderstood the true meaning of Wren, that Chief Justice Barwick was not striking out on his own but rather affirming, albeit in different and more expansive terms, what had been said in Corney v Brien.
MR REYNOLDS: Well, your Honour, we are fiercely at issue with my learned friend about that. Can I put four propositions to your Honours, which I submit are at the centre of this case. We say that Ramsay, the appellant, says each of these things. The first proposition they articulate – and this we have at paragraph 2.2 – is that Wren is not a general principle to be applied to determine whether you go behind a judgment. Secondly – and this is in paragraph 2.2(ii) – Ramsay says that Wren, at page 224, does not apply where there is a judgment after a full investigation at a trial in which both parties appeared.
The third proposition we have put at paragraph 3.2 is that Corney is authority for the proposition that that if the judgment followed a full investigation at a trial on which both parties appeared, the court will only reopen the matter if a prima facie case of fraud or collusion or miscarriage of justice is made out. Importantly, and fourthly – this is paragraph 3.3 – Corney establishes a definition of “miscarriage of justice” which is, I will say at this stage, narrow rather than broad.
So we divide up our analysis under these two grounds of appeal. We put them in a different order, but I do not think there would be any dispute that they are the four propositions that my learned friend seeks to establish. We disagree with every single one of them, and I am going to attempt today to go through each of those propositions and indicate why, with great respect, they are misconstrued.
Can I start then, if your Honours go to paragraph 2.1, or rather 2.2, I restate those first two propositions which Ramsay puts, namely that Wren is not a principle of general application and a particularisation of that – that is, that the principle does not apply where there is a judgment after a full investigation at a trial in which both parties appear.
We submit that Wren does articulate very obviously a general proposition of universal application that applies in every situation in which a judge considers whether or not to go behind a judgment and it follows from that that the general proposition will apply in this particular situation which my learned friend refers to, namely after a full investigation at a trial.
I go further than that. I submit that when Chief Justice Barwick imposed this judgment he took extreme care and went out of his way to formulate a general principle at page 224 which could be applied every single time a primary judge needed to consider that issue. Part of the reason why I submit he did it was because he was trying to clear up some uncertainty in the law and he went through all of the cases, digested them and came up with, if you like, a purple passage, a locus classicus, a vade mecum for every first instance judge to look at whenever they look at that particular issue.
I will take your Honours I hope briefly back to page 224. The way he did it essentially was to focus on one concept and that is the concept of proof. What your Honours will see there on page 224 is a judgment from a man who by reason of the nature of practice in New South Wales at the time he was at the Bar knew the particular point that is discussed at page 224 like the back of his hand, as did anyone who practised in the common law jurisdiction particularly before 1970. What I submit underlies the whole of it is an analysis which is derived from but to some extent adapts the law about in civil cases on prima facie case about evidential onus and about tactical onus.
What his Honour is doing there, that is obviously an analysis which starts from fact. I interpolate, this is a facts case too, but the beauty, I respectfully submit, of his treatment here is that he is able to formulate not only a general principle where no one before him had been able to do that, next, he is able to formulate a principle which will apply to all of these different circumstances - fact, law, fraud, collusion, unfair compromises - and finally, that he is capable of protean application within each of those categories depending on a particular nature of the circumstances of the case.
GAGELER J: Well, you have established that it is a thing of beauty, but does that make it ratio?
MR REYNOLDS: Well, we submit that it is, and again my learned friend and I are at loggerheads strongly on this, as clear an example of ratio as one would ever find, partly for the reasons that I have already indicated. If I were to say to your Honours today, of course your Honours realise that when your Honours hand down a judgment in this case that all of the primary judges sitting in Bankruptcy are going to be looking at it when they look at going behind a judgment, your Honours would regard that as an impertinent remark because it is obvious as all get out that this judgment in this case will likewise be referred to in that context.
Chief Justice Barwick knew that. He also knew that these cases do not get up to up to this Court very often. This is over 40 years since it has been to this Court and when Judges of this Court are looking at questions of that kind that have a very important practical operation in the trenches, they have to make certain that they do not fob off the issue and just decide the case on the particular facts. They need to provide guidance to the judges below, otherwise there is, with great respect, justifiable criticism of them and, with respect, your Honours would, without any reminder from me, already have been conscious of that.
KIEFEL CJ: Thank you for that, Mr Reynolds. I suppose it is rather important that in Wren v Mahoney the decision is one – is a decision of four Judges. It is not just Chief Justice Barwick.
MR REYNOLDS: Three Judges, your Honour. Justices Windeyer and Owen ‑ ‑ ‑
KIEFEL CJ: I thought it was four. I see Justice Walsh quoted.
MR REYNOLDS: Just to ‑ ‑ ‑
KIEFEL CJ: Yes, you are quite right.
MR REYNOLDS: Whilst, if I may divert a little, your Honour Justice Gageler talking to my friend, I think it was in relation to Re Flatau, said to him, I think you will find they were interpreting the equivalent of section 52(2) on our statute, and they were. My note is page 86, point 5 of Flatau but the reason I mention that is that if your Honours go to the other two Judges, or particularly Justice Menzies with whom Justice Walsh agreed, it is a 52(2) analysis, not the analysis we are talking about which focuses on proof of debt which is the other subsection, as my learned friend said initially. That is clear from page 232 at about point 7.
So that again, with great respect to the way my learned friend has both put his argument and responded to questions, we are not dealing here with some statutory discretion; nothing like it. We are talking just about proof, full stop. That is all and all that is happening at page 224 is that Sir Garfield is analysing that concept in a particular way and formulating, as I have said, a principle of the most catholic of operations.
Can I go back to the end of page 224 - my learned friend has already taken your Honours to it and I do not want to belabour the issues but your Honours will see on that page - I will not take you to each of them - that the word “proof” is mentioned again and again and again and the lead in of this discussion which starts at 221 at about point 3 is as to the place a judgment occupies in bankruptcy proceedings.
So we then get a discussion of the case law as my learned friend, with respect, correctly said down to about 224 at about point 2 and then the issue is, well, what is the place of this judgment in proof? Well, Sir Garfield says at about point 4 that the judgment is never conclusive and that picks up the earlier statement at 222 at point 7 in the quote from Lennox where it is said to be “prima facie evidence of a debt”.
But we are talking here about proof of the underlying debt. Your Honour Justice Gageler has referred – raised the issue of, in effect, which debt are we talking about. We have said in our submissions – this is the respondent’s submissions at paragraph 23, there is no doubt that we are talking here about the underlying debt. Sir Garfield - this is at about point 7 on the page - talks about whether behind the judgment there is in truth and reality a debt. So we are talking about getting behind it.
GAGELER J: Of course, whatever pre‑existing liability, whether it was contractual or tortious is gone, it does not exist once the judgment comes in. That is the whole nature of a judgment.
MR REYNOLDS: Your Honour, I understand that. If we were just proving the judgment and the debt was the judgment debt then tender of the judgment would prove that.
GAGELER J: Of course, and it may well be that a court of equity – or a court exercising an equitable discretion would say that judgment is impeachable for some reason.
MR REYNOLDS: Perhaps, yes. But what we are talking about here is the place that the judgment - and I do not mean the reasons - plays in the proof of the underlying debt.
GAGELER J: You are proving something that does not exist.
MR REYNOLDS: You are proving that in truth and reality there was a debt due to the petitioning creditor. We have summarised some of the cases, if your Honours go to submissions at paragraph 23 and I have summarised various passages including from an earlier decision of this Court. It cannot, with respect, be the judgment debt itself because there would be proof. If we are talking about proof, proof perfect upon the tender of that judgment.
GAGELER J: I just need to understand this - if the judgment debt is for damages in a negligence action the analysis that you are advancing applies.
MR REYNOLDS: Yes.
GAGELER J: So what you are proving to a Court of Bankruptcy is the underlying tortious liability.
MR REYNOLDS: Yes, exactly. This is, at one level, the root of the problem because as your Honours well know normally a judgment cannot be tendered, by that I mean the orders, cannot be tendered as proof of the underlying facts. We know that. The rule in Hollington v Hewthorn, hearsay, opinion and what have you, but the books on evidence say there is a very, very special exception that applies in this particular context to proof - do you tender the judgment and that is proof - I underline these words - of the underlying debt. We have noted that relevant reference at footnote 2 on the bottom of page 3 of our submissions. We have given a reference there.
KIEFEL CJ: How does the debt arise in tort, though? Are you really saying that this principle applies in a case of tort? It is referring to commercial transactions or transactions upon which a debt arises.
MR REYNOLDS: No, I would submit that it is general.
KIEFEL CJ: Would you go back and retry an action for breach of duty and see whether there was an award of damages?
MR REYNOLDS: If necessary.
KIEFEL CJ: Where is the debt, apart from the judgment?
MR REYNOLDS: Your Honour, in that situation you need to show that there is, in truth, a debt, and you do that by proving the underlying cause of action.
KIEFEL CJ: But there is no underlying debt upon which the judgment is founded.
NETTLE J: It is spoken of in terms of the obligation to pay damages in an unliquidated claim. That is what is meant to be the debt, is it not?
MR REYNOLDS: I think that is right, your Honour, yes.
NETTLE J: The underlying obligation of the defendant to satisfy the liability to the plaintiff in damages.
MR REYNOLDS: Yes.
NETTLE J: Quantified is the underlying debt of the bankruptcy petitioner.
MR REYNOLDS: That is right, your Honour.
NETTLE J: In the case of an unliquidated claim, the propensity of the Court of Bankruptcy to go in and reinvestigate would be far more limited than in the case of a liquidated claim, would it not?
MR REYNOLDS: Yes, it would. Just to jump ahead, part of what I am saying about this notion of reason to question is that it is protean and it will depend on the circumstances. So if you take that example then it is going to be very, very difficult to establish reason to question in that context. Conversely, to take another example of a facts situation, if you had fresh evidence, for example, which showed beyond a shadow of a doubt that the earlier decision was wrong then that would be easy. Then you might have a case in the middle zone, a case perhaps like this one, with the special circumstances we have set out, for example, at paragraph 2.12 of our submissions.
Once the judgment is in evidence it is only prima facie evidence and it is a very unusual principle that was developed to allow that to occur. That was something which, as I have said, a practitioner from my State of Sir Garfield Barwick’s vintage knew very, very well about getting to the jury because they had to know it inside out, back to front and sideways.
So what he is doing is he takes it as a given that there is prima facie evidence, very unusually. He then says well, okay, if that is prima facie evidence what does the debtor, in effect, need to show before we can go behind that prima facie evidence and compel the creditor to prove his debt aliunde that it is not relying on the judgment? So if you like, it is based on the slide of the evidential onus which remembering, of course, the creditor bears the legal onus, there is a judgment ‑ that is prima facie evidence – then that notionally – I underline that word – may cast some kind of tactical burden to the debtor. How does the debtor thrust it back in this context? He, Sir Garfield, says, shows reason to question which – if your Honours could focus, with respect, on these words –involves a measure of acceptance of the debtor’s case.
The reason I stress that - your Honours will see on page 224 the word “accept” and “accept”, “accept”, “accept” all through that page. That is because Sir Garfield understood that all the cases that are on this question of prima facie evidence in this country stress the words “if accepted”. Can I just explain what I mean by that?
If you are talking about what constitutes prima facie evidence, you say evidence which is capable of satisfying the tribunal of fact if accepted. That is again at the bottom of what the Chief Justice is saying there. He is adapting that concept and he uses the expression, I submit, “reason to question” because it is an omnibus term which will apply not only to facts – he would not use that expression just with facts – but also to law and also to fraud, collusion, Uncle Tom Cobley and all, whatever you want to raise. It all comes within that rubric. The next point, if I can move on - I have rather belaboured it ‑ ‑ ‑
GAGELER J: Just so I absolutely understand where you are coming from, you say that a creditor in bankruptcy is only ever proving the underlying liability, whether it is in contract or in tort, and a judgment in every case is only at best evidence of that underlying liability.
MR REYNOLDS: This is a partial answer, I accept. The cases talk about the underlying debt. We have set them out at paragraph 23 of our submissions. If I may be permitted a moment of candour, I have not, to be frank ‑ ‑ ‑
GAGELER J: I expect more than a moment of candour.
MR REYNOLDS: ‑ ‑ ‑ explored fully in my own mind the full ramifications of everything that your Honour has said, but for the time being I am resting on the proposition that the courts talk about the underlying debt. We have set out the cases that support that and I would submit, to go on from that, that that would in the case your Honour posits involve proving the underlying liability but, as I say, it is not something I have explored in detail.
So we submit all of that, apart from being laudatory of Sir Garfield’s abilities, is intended to satisfy or to persuade your Honours that all of this is intended as a general principle. It has within it some malleability, some protean content. It is not dissimilar, if I could just mention this, to the expression “reasonable satisfaction” as interpreted by Sir Owen Dixon in Briginshaw v Briginshaw which I think is in 60 CLR.
Your Honours in that context know that there is no third standard of proof. The particular standard of proof is protean in content. It will vary from situation to situation and in particular contexts that may involve – you may need, as it were, notionally a bit more evidence to be reasonably satisfied in some context rather than others.
Now, picking up what your Honour Justice Nettle said to me, in a fact situation you are probably going to need a bit more. I am going to come back to that; in some fact situations a hell of a lot more to establish this notion of reason to question. That is, I submit, the beauty of it as a general principle.
So far as, and this is the next point at paragraph 2.5 of our synopsis, so far as its applicability to fully heard contests is concerned – that is, this principle – Sir Garfield deals with that at page 224 at about point 3 and he says there – and this is really just your Honour Justice Nettle’s point again, talks about the court in general accepting:
a judgment debt as sufficient proof of that debt particularly where it resulted from a fully heard contest between parties –
So he is loading up the issue there a little. I am going to take your Honours to some cases later on but if I can flag two words. The first word is “reluctant” and the second word is “cautious”, because the later cases say that in this context if you are talking about a situation where there has been a fully heard contest between parties, then the court will be cautious or reluctant to find that there is reason to question in the same way that a judge dealing with an allegation of adultery or fraud would be reluctant to find it without certain proofs, something other than – as Sir George Rich said – uncertain matters pointing with a wavering finger to an affirmative conclusion. You need more.
We do not dispute that, but I do underline this point, and that is there is not any dispute – I started off with this – that there is reason to question. That is the application of the principle of the facts here but the Full Court went further. They found substantial reason to question and there is not any challenge to that. My learned friend, as is his right, as is his client’s right, seeks to undermine all of that as a matter of principle.
The third proposition I move to at paragraph 2.6 is that the principle is protean. I have really covered this. There are two aspects. Can I just mention them very briefly. The first is that it covers – this is when I said “Uncle Tom Cobley and all” – every situation, and it is sufficiently protean in content to cover not only, for example, fact, which is where Sir Garfield gets this from, but also law, which is what he was talking about in this particular case and also the other categories of fraud and collusion.
The second aspect is that within each of these categories there is also some malleability and, again, I have made this point already. Can I reiterate it briefly, and that is, there will be facts cases and facts cases. Some will be very difficult to establish reason to question; others will be very easy. Sir Garfield said at point 3 on page 224 that, as a general proposition, the judgment would be accepted where there has been a full trial, a full investigation and what have you.
I said I would mention a couple of words. Your Honours should have the decision in a case called Simon v Vincent J. O’Gorman (1979) 41 FLR 95. The particular passage – I will be very brief, your Honours – is at page 111, at about point 6. This is Justice Lockhart with whom Justice Fisher agreed. It is at about point 6 on the page, the paragraph beginning:
The courts are reluctant to exercise this jurisdiction where the judgment was entered after a full investigation of the issues at a trial –
I will come back to that case in due course. Another case is an unreported decision of Wenkart v Abignano [1999] FCA 354, Justices Sackville, North and Hely. At paragraph [24] their Honours there refer to fraud, collusion and miscarriage. They say these words:
These are not the only circumstances in which a court will exercise its power to go behind the judgment, but caution –
that is the word I was after:
is to be exercised where the judgment results from “a fully heard contest between parties” –
I gave the example before where a facts case – what a court would very easily find reason to question is a fresh evidence case where there are mountains of fresh evidence which proves almost to a point of certainty that the original decision was wrong.
GAGELER J: Can we go back to Simon and Justice Lockhart?
MR REYNOLDS: Would your Honour pardon me for a moment?
GAGELER J: Yes.
MR REYNOLDS: This is at page 111?
GAGELER J: Yes.
MR REYNOLDS: I have it, your Honour.
GAGELER J: Two paragraphs up from the one you read, his Honour introduces the discussion by saying:
The circumstances in which the court will inquire into the validity of a judgment debt are not closed; but it is clear that the court will not inquire as a matter of course into that question -
Is that the question, that is, is the inquiry into the validity of the judgment debt or is it an inquiry of some other nature?
MR REYNOLDS: Your Honour, I fall back on the time‑honoured expression as to whether there is in truth and reality a debt. There has been – and this may underline some confusion in my thinking – a tendency in the cases to gloss over that a little. It depends how one reads “validity of a judgment debt”. I am surmising that I am not reading it as your Honour may be thinking it should be read.
EDELMAN J: It must be referenced to a different point from the one that you are making. It is a preliminary stage of the inquiry. Otherwise, if there were just one inquiry, it would mean that in every case a debtor would be entitled to say the court cannot be satisfied that the judgment is final unless we re‑run the entire trial, and every single case would be able to be re‑run as an entire trial. There is a preliminary question that I think Simon is talking about and the cases were talking about, which is whether you take the step to, in the phrase, go behind the judgment.
MR REYNOLDS: Yes. That, we submit, that step is taken or not taken depending on the application of the principle Sir Garfield enunciates. We submit that it is not a question of jurisdiction at all. It is not a question of the exercise of a statutory discretion at all. It is proof pure and simple, with one overlay and that is that one has to dilate the concept to some extent to allow for these other situations we have talked about, namely situations of law, fraud, collusion and what have you. But this is the principle, we submit, which is one fundamentally based on an extrapolation from the cases about evidential onus.
KIEFEL CJ: There is authority, is there not, in the Federal Court that there is a two‑step approach to be adopted? Is Wolff v Donovan (1991) 29 FCR 480 authority for that?
MR REYNOLDS: Well, your Honour, I would have to ‑ ‑ ‑
KIEFEL CJ: I think that is the case, that is the way in which it is approached – has been approached for some time. I do not think it bears upon your submissions.
MR REYNOLDS: No. I am grateful for that, but can I just add one thing, and there have been some statements that have fallen from your Honours today about this, about the absence of much case law on this point and judges and perhaps even my learned friend trying to take advantage of that, adopting a pro‑creditor line and saying, well, there are no cases, does that not in effect mean there is an underlying jurisprudential problem from the debtor’s point of view.
We submit there is a very simple answer to it, and it is an example just based on common experience of life in the Bankruptcy Courts. It is by the time one gets to the stage where – I will call him a debtor proleptically – is defending an application for a sequestration order. He or she has probably lost already once, perhaps twice, has already had to pay his own costs and the other side’s, has already sought advice about whether to appeal, may even have run an appeal and have lost an appeal and we are assuming that and therefore have paid those costs, and one assumes also that has received a bankruptcy notice and has not complied with that, and then has received an application for a sequestration order and has not paid the debt off at that point.
It is no amazing thought to say that the reason for that is that by this stage this person is in dire financial difficulties and simply does not have the money to have another crack at a factual investigation that he or she has already lost at least once, perhaps twice. That is the reason, the obvious reason, we submit, why there are so few cases in this context.
Can I go back to the fourth proposition – this is in paragraph 2.7 of our submissions – which we have said is the Full Court have stated that the principle, that is the principle in Wren at 224 applies is both, I should have said, of general application and also applies to cases such as the present – that is, cases where there has already been a full investigation of facts.
Now, your Honours should have a copy of Ahern v Deputy Commissioner of Taxation (1987) 76 ALR 137 and the relevant passage is at the bottom of page 147 where, last two lines, the Full Court says, I agree it is obiter:
Even where the judgment was obtained following a hearing on the merits where both parties appeared, if there are substantial reasons for questioning whether behind the judgment there is in truth and reality a debt due to the petitioning creditor, the court will go behind the judgment and inquire into the consideration for it –
They then quote Sir Garfield at page 224. In the middle of page 148, they say:
These cases rest on the broad principle that before a person can be made bankrupt the Court must be satisfied that the debt on which the petitioning creditor relies is due by the debtor and that if any genuine dispute exists as to the liability of the debtor to the petitioning creditor it ought to be investigated before he is made bankrupt. Bankruptcy is not mere inter partes litigation. It involves change of status and has quasi‑penal consequences.
So there is that passage ‑ ‑ ‑
GAGELER J: That was a case about the adjournment of a bankruptcy petition when there was a dispute going on in other proceedings as to the underlying tax liability.
MR REYNOLDS: I think that is right, your Honour.
GAGELER J: It was not about the Bankruptcy Court itself examining the underlying tax liability.
MR REYNOLDS: Your Honour, I take it as a dictum, I did not put it any higher than that, interpreting Sir Garfield’s test broadly both - that is indicating it is a general application and applies to this case. I agree it is not ratio. Nor, for that matter, is the passage in Simon’s Case which I took your Honours to before at page 111. I was not seeking to escape, not that I need to, from page 111 at point 3 where Justice Lockhart, again with Justice Fisher agreeing, says the circumstances “are not closed” and talks of fraud, collusion and miscarriage being the most frequent examples.
That is not series of closed categories. Courts again are reluctant – I took your Honours to that passage before - and then also again back to the Wenkart Case at paragraph 24 which says that again these are not the only circumstances in which a court will go behind a judgment. That is not just fraud, collusion or miscarriage.
Your Honours, the same approach, we say at paragraph 2.8 of our submissions, was taken by Justice Beach. With all due respect to him I do not think I need to do more than refer to that reference there. It is actually paragraphs 25 to 26 and your Honours might add in also my learned friend’s reference to Re Eric Kyle [1995] FCA 1423, a decision of Justice Drummond. Can I refer your Honours, in particular, to paragraphs 3, and 24 to 28.
Can I say this? My learned friend took your Honours to a footnote in his reply on page 4 and somehow I think he was suggesting that there are a whole lot of cases, which I add are not on the lists, that support his reading of Corney in particular. My learned juniors have checked those cases and they tell me that is not accurate but, again, because we do not have them I cannot really go to them.
But the other thing is that they do not – even if they embrace a test of fraud, collusion or miscarriage – they do not take the further step and say that miscarriage is critical - my learned friend - of saying the test of miscarriage is narrow. Now, if your Honours want, we can provide a detailed note but, I submit, I am not attacking my learned friend but it makes it a little difficult to deal with an argument based on the construction of those judgments where we do not have them before us.
The sixth proposition that I rely on in submissions is there is no suggestion in Wren at 224 of some sort of carve‑out of any description. Seventhly, we come back to this issue of proof and we make the point again that if we are right on the characterisation of this test as being a matter of proof then there is not going to be rules and sub‑rules.
It is again very similar to the situation that arose in Briginshaw. There is no third standard of proof. You do not have a different set of rules where there is an allegation in a civil case of fraud, for example. You apply the same principles but they will have a protean application in that particular context and that protean application, we submit, is within the test Sir Garfield articulated which has, as I have submitted, an inbuilt malleability in it of the two kinds I mentioned earlier.
Our eighth proposition is that one cannot find his statement of principle, as my learned friends would say, this is at paragraph 2.11, that the debt nominated in the petition or the initial judgment being by default. Now, we have dealt with this is in our submissions at paragraphs 68 and 70 but the overriding point that I make, I have made it before, is that the statement of principle at 224 is general. There is then an application of that principle at 225 and, of course, Sir Garfield has to look at the particular circumstances, but he is not to apply his general principle to the particular circumstances of the case.
But he is not articulating a principle only in relation to default judgments or because of the nature of the way that the debt was expressed in the petition. It just cannot be read that way and I do put it high. I say that is not really an open construction of it. I come back to this idea I started off with previously that Sir Garfield is not formulating a judgment that can only be used by a judge at first instance when the debt as it is framed in the petition is only in a particular form and limiting his discussion of the jurisprudential concept to that one tiny situation. That, with respect, would border on abnegation by Sir Garfield of his functions as a judge in dealing with a case unless there was a very, very good reason for it.
I submit it is very clear that that is not what he is doing, not hunkering down on just one aspect of the case and saying no, this is very, very complex. I am just, let me make it clear, only dealing with a situation where the petition says such and such and that is what I am dealing and that is the ratio of this case is something you can balance on the top of a pin. That just is not so, we submit.
We submit there is not any doubt of what Sir Garfield was up to here. It is our final paragraph, 2.13, he is going out of his way to make it clear and, with respect, when one has a close look at it, it is, with respect, hats off. It is going in an area where, as I said before, no one had really been able to bring it all together before and Sir Garfield does that and, I respectfully submit, with great aplomb and in a way that has been applied day in and day out by first instance Bankruptcy judges.
Can I pause there to make this point, and that is that I said my learned friend had to establish four propositions. He needs to establish, I submit, all four of them, the first two being, that Wren is not a principle of general application and more particularly, and this is the second point, it does not apply to where there is a full investigation of facts. I submit it is clear that Wren does and that really that is the end of my learned friend’s argument and except something that I will have to say about this notion of finality, but I obviously cannot assume that and I need to soldier on and deal with propositions 3 and 4 and that is our heading the first ground and quote the ground in paragraph 3.1 and the two propositions just to remind your Honours, this is 3 and 4 propositions I started with, that the ground focuses on Corney and it says, this is paragraph 3.2, it:
is authority for the proposition that if the judgment followed a full investigation at a trial on which both parties appeared, the court will only reopen the matter if a prima facie case of fraud or collusion or miscarriage of justice is made out.
Secondly, that Corney also establishes that a miscarriage of justice here has some narrow meaning and my learned friend has a number of matters. Again, we are fiercely at loggerheads with my learned friend about this. Dealing with the first of these propositions my learned friend took your Honours to page 347, at about point 3, the paragraph beginning “Section 56”, talked about there being “undoubted jurisdiction to go behind a judgment” in a number of situations.
We make the point in our submissions to say that the Court has undoubted jurisdiction to do X in situations 1, 2 and 3. But it does not and cannot amount to a statement that that is an exhaustive list of those situations. Moreover, their Honours are not dealing – and my learned friend did tell your Honours this – with a case involving a full investigation at a trial and his proposition talks about that.
This case cannot be authority for that unless the particular statement of principle that is applied is formulated in broad terms to that particular situation and, again, my learned friend did tell your Honours this. Page 352 at the bottom deals with the fact that it is by default and talks about freedom - can I just dilate on that a moment.
Again, there, you see another aspect of why Sir Garfield’s test is, with respect, so good because it will be protean enough to allow for the fact that in that context there will be a greater freedom in going behind the judgment again in that context. No different test, but the test will be applied differently, just as judges – that is, it will be applied to the particular situations in the same way that judges look at an issue, say, of fraud or adultery.
Nor does the passage at the top of page 348 get anywhere near establishing the proposition either. I am not going to go to Petrie, but can I just mention a number of points about this. Chief Justice Latham in Petrie was not talking about establishing a general proposition. He was talking in a very general way and not stating a test and he said that it was impossible, in a passage that is not quoted at 348, to lay down any general rule.
He does not say that the court can only go behind the judgment in these so‑called three situations. He does not mention the expression after a full investigation at a trial, which is part of my learned friend’s proposition. He does not mention the notion of a factual challenge to the earlier decision. He does not say that miscarriage of justice should be read narrowly and he certainly does not say that it should be read narrowly as my learned friends submit it should.
Can I add this final point, that if one reads in that context “miscarriage of justice” without any gloss or rider of a narrow kind then it certainly does not present any problem for my client. With all due respect, we submit that this case comes nowhere near establishing this proposition or either of them.
Can I come to the second of them and that is that it establishes some form of narrow meaning of “miscarriage of justice”. Your Honours, it would be obiter to begin with because that was not the issue here, but I cannot even find any passage in this judgment to discuss in that context. It is just, with respect, not open to submit that first of all this test is, as my learned friend says, but to say that there is some rider on the notion of miscarriage of justice, as he tries to articulate, we submit that there is, with respect, nothing to respond to.
Can I make a few comments about what Justice Fullagar said, at pages 356 to 357, and I will deal with this quite briefly. The first is again that these remarks are clearly obiter and they are very wide obiter of what the late Justice Meagher used to call unbuttoned obiter. This has absolutely nothing to do with this case, which is a default judgment, and to go for a canter around these issues was not, with respect, appropriate and to suggest that ‑ ‑ ‑
GAGELER J: I mean, really, how can you say that about Justice Fullagar and say something quite the opposite about Chief Justice Barwick? Really you just cannot make those statements.
MR REYNOLDS: Your Honour, let me respond to that. What Justice Fullagar is doing is, my learned friend says, picking out a particular situation. He is not articulating general proposition. That is what Chief Justice Barwick is doing and I submit that is perfectly respectable. The real difficulty here, in my learned friend’s argument, is this notion of articulation of sub‑rules here and that is what underlies this kind of discussion is that you get like a third standard of proof. It does not exist.
There is a general principle and this, of course, was before Sir Garfield’s judgment and in a sense Sir Wilfred is striking out a little and I am not meaning, with respect, to insult his Honour. All I am saying is, because it is important to my case, that it is nowhere near being even the ratio of his own judgment.
GAGELER J: All I am suggesting is that you would be better directing your submissions to the legal principle rather than the judicial method.
MR REYNOLDS: I will not pursue the matter but your Honours have heard what I have said. The second thing is that it was not argued, this point. We submit that even these passages my learned friends like are not authority for the two propositions. There is not any definition here of miscarriage of justice. Next, it does not define “miscarriage of justice”, as my learned friend does.
Finally, the discussion is predicated upon there being a full investigation of the facts. We make this point by reference to our summary at paragraph 2.12 that there was not any full investigation relevantly of the facts here. So that is the end of that first ground. I took it as the second ground in order but that is because we say the logic of the argument ‑ ‑ ‑
KIEFEL CJ: We will venture up to the third ground then, Mr Reynolds.
MR REYNOLDS: That is all I need to deal with. If your Honours are looking at your watches, I think I can deal with this fairly shortly.
KIEFEL CJ: The Court will be rising at 12.45 in any event, Mr Reynolds, so you do not need to feel rushed.
MR REYNOLDS: Your Honour, perhaps I should withdraw what I just said but I will try and finish quickly. Your Honours see the ground there, “failing to give any or sufficient weight to the principle of finality in litigation”. This is a weight argument. We submit again that there are grave difficulties with it.
The first is that the Full Court – this is paragraph 4.3 of our synopsis – did refer to the public interest in finality expressly in substance in those paragraphs and responded to the submission that was put to them in that regard which did not include a discourse on the High Court authorities on finality stemming from the advocate’s immunity cases.
The second problem is a larger one, and it is this. These principles that were applied by the Full Court from the cases take account of finality in litigation and attempt to balance out two things, and I will explain this in a moment. The first is the public interest in finality, and the second is the other interesting factors that are looked at in this particular context. Your Honour Justice Nettle has stressed one to my learned friend and that is the interests of the other creditors.
So there is a tension here, and there is a tension between on the one hand finality and on the other hand the factors that we see at paragraph 4.5 of our synopsis there, the interests of the other creditors, the conduct of the jury is not to prejudice those other creditors, that the bankruptcy affects a change of status, that bankruptcy is quasi‑penal and the broad principle – that is a quote from Ahern’s Case that I took your Honours to earlier which the Full Court refers to.
There is a judgment of Lord Hoffmann – I have just mislaid the reference but I will give it to your Honours – where he talks about a judgment in bankruptcy being not quite a judgment in rem and not quite a judgment in persona.
I will just give your Honours the reference. It is Cambridge Gas Transportation v Official Committee (2007) 1 AC 508. So there is a very delicate balance there, I submit, and your Honours are not obviously the first to look at that issue but the balancing between on the one hand the notion of finality and these other interests is something which all of the discussions of the principles in this area have picked up and what you in effect get, I submit, is a sort of halfway house.
You get some stretching of the principles in favour of the creditor in this context but, again, there are other principles that work the other way. Now, the principles that work the other way are at paragraph 4.6. Even though they are the same parties, you do not get res judicata or an issue estoppel. The judgment creditor has to prove the debt and the judgment creditor may not obtain a sequestration order or succeed in proving the debt.
So they are aspects of the equation that work against the creditor and to some extent impact on finality. As far as res judicata is concerned, the discussions are fairly general but one notion might be the idea that in substance, albeit not in form, the other creditors are notionally treated as being parties to the bankruptcy case.
Again, that may be what is underlying some of Lord Hoffmann’s concern in the case I referred your Honours to. But, on the other hand, the courts do lean over to some extent to assist the judgment creditor. How do they do that? Well, we have set that out in paragraphs 1, 2 and 3 which seem to have turned into four propositions in my notes, but let me put it this way.
First of all, the judgment is prima facie evidence of the underlying debt, and I made the point earlier that that is a very rare exception to the principle that a judgment is not proof of the underlying facts. Secondly, and this is also very unusual, even though the creditor has the legal onus – this may even be unique, I have not full investigated, but it is very, very unusual for a tactical onus to be put on the opponent on an issue of proof, and that is what happens here by, in effect, shifting the burden onto the debtor to show reason to question. So that is the other stretch of principle that works in favour of the creditor.
The third thing is this test of reason to question, and I have already said a number of times but can I just repeat it in context. That that contains within it by reason that it is protean sufficient adaptability to take some account of finality and the varying circumstances in which and varying degrees of the various circumstances in determining whether there is reason for questioning in this facts context.
Fourthly, there is a reference to Sir Garfield talked about generally accepting, but in this case the Full Court found that there were unusual circumstances which we have summarised at paragraph 2.12. To the extent that the cases stress the notion of reluctance or caution or that things need to be unusual, as they found here, then that also gives some weight to finality.
May I conclude by saying this: the ground talks about weight and great weight, we submit, is given to this notion of finality both expressly in the judgment and, secondly, in the adoption of principles where the judges have over the last two centuries balanced carefully the notion of finality against the other relevant interests. If the Court pleases, those are my submissions.
KIEFEL CJ: The Court will now adjourn until 2.15.
AT 12.45 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.14 PM:
KIEFEL CJ: Yes, Mr Stoljar.
MR STOLJAR: Your Honours, the first proposition that my friend contended for was that the Chief Justice in Wren was formulating what he described as a general protean principle. We would say, with respect, that there are three difficulties with that proposition. The first is that nothing in the judgment in Wren suggests that that is what his Honour was endeavouring to do. One would have expected him to advert to that if that was his intention.
Secondly, and perhaps more importantly, it is at odds with a number of statements in a judgment that I have already taken your Honours to, which are to the effect that the Chief Justice was mindful of Corney and the other “decided cases”, as he put it, and was endeavouring to summarise their effect rather than replace them with some general or protean principle.
KIEFEL CJ: But his Honour also stated, I think at least once if not twice, that there was nothing in Corney v Brien which was inconsistent with what he was saying.
MR STOLJAR: He also said that, yes, your Honour. So we would respectfully submit that, given that he clearly regarded Corney still as good law, that the ‑ ‑ ‑
KIEFEL CJ: You say that what he said should be read in light of Corney v Brien, not the other way around?
MR STOLJAR: Absolutely, your Honour, yes. And the last point, the third point, that we would make about it is that if his Honour was departing, we ask rhetorically why his Honour was departing from what had been said in Corney v Brien about the freedom with which courts go behind default judgments and the like, why would he have said on page 225 – or made a point of saying that this was a judgment in default of a plea and that there had been no substantive issue – factual contest in the Supreme Court. So that is all we say about that proposition.
The next matter is that your Honour Justice Nettle raised in the context of Ahern some cases which had followed it and also asked me whether I was aware of any case which had, as it were, declined to follow it. The answer to the latter question is no. In respect of Ahern, could I remind your Honours of what we said about that in our written outline at paragraph 43 and following.
We drew to your Honours’ attention the relevant passage in Ahern in 43. In 44 we pointed out that Ahern involved a default judgment and that, secondly, the issue in Ahern was more to do with the adjournment of a creditor’s petition rather than the circumstances in which a court exercises a discretion to go behind a default judgment.
Then we articulated the proposition on the top of page 12 that, with the greatest respect to the Full Court in Ahern, the proposition, if it was intended to be some general proposition, was not an accurate statement of law for the reasons which we describe in summary terms there and I have endeavoured to articulate more fully today. But, if I could just add to 44 the point that in Ahern there was no analysis of – or in the relevant passage there was no analysis of Corney, still less of the particular passage in a judgment of Justice Fullagar to which attention has been given this morning.
Then, coming to the cases that your Honour Justice Nettle mentioned to me in argument, there were three. The first is Westpac v Carver (2003) 126 FCR 113. That does refer to and follow Ahern but not in the context of the particular passage that we have extracted in our submissions. The issue was an adjournment pending an appeal and it was on that topic that Ahern was followed. The next was Bommernite v Slatex (1991) 32 FCR 379, the issue there related to leave to adduce further evidence. Again, Ahern was followed but not in relation to that particular proposition.
The third was Bunnings v Bullen (1994) 54 FCR 342. That was a stay application in relation to declaratory relief that had been granted. Again, the issue was whether – in substance it was the same principles as are illuminated by the granting of adjournment. It was for that matter that Ahern was cited, not anything to do with Wren v Mahoney.
Could I then come thirdly to some of my friend’s propositions about miscarriage of justice? He said that we had contended for a narrow operation of those words. That is correct only to this extent: that we say there must be a miscarriage of justice at trial, adopting the language of Lord Esher in Re Flatau.
There must be some basis upon which the judgment itself could be impeached. So we say that a miscarriage of justice in this context is not broad enough to extend to some miscarriage of justice extraneous to the forensic process. But we accept that when one understands miscarriage of justice at trial that that language is susceptible of a broad construction and would encompass a wide range of factual matters.
We respectfully endorse what was held in one of the cases on our list, Dawodu v American Express [2001] BPIR 983. The relevant passage is at 990. Without taking your Honours back through it, the passage itself appears at about D on that page and it follows several pages in which Justice Etherton has considered in considerable detail all of the leading decisions. His Honour says:
My only qualification to the summary by Warner J is that the cases establish that what is required before the court is prepared to investigate a judgment debt, in the absence of an outstanding appeal or an application to set it aside, is some fraud, collusion, or miscarriage of justice. The latter phrase is of course capable of wide application according to the particular circumstances of the case. What in my judgment is required is that the court be shown something from which it can conclude that had there been a properly conducted judicial process it would have been found, or very likely would have been found, that nothing was in fact due to the claimant.
My friend next made some submissions about Petrie v Redmond. In the light of those, although I have said in‑chief that I will not take your Honours to it, if I may do so now - again it is on our list. The starting point is at page 72, where the judgment below is reproduced, a judgment of Justice Philp. His Honour says at the bottom of 72:
I was asked to go behind these judgments and orders of the Magistrates Court on various grounds, the only ground pressed ultimately being that due notice of dishonour was not proved in the Magistrates Court to have been given and in fact was not given.
Then his Honour goes on to say:
In the Magistrates Court both parties were represented by independent counsel, and there is no suggestion of fraud or collusion in the obtaining of the judgment.
It seems to me that both counsel assumed that due notice of dishonour had been given, and fought the case on that basis. Both they and the magistrate possibly made a mistake in law as to what was the proper date of payment –
Then his Honour repeats the dictum of Lord Esher in Re Flatau. Pausing there, of course, as your Honours are well aware, Petrie preceded Corney by seven years or so, and then goes on to say:
it held that it had no power to go behind the judgment even if it thought the trial judge was wrong on a vital point of law. To the same effect I think is the decision in In re a Debtor.
Then his Honour says:
It seems to me, then, that I should not go behind a judgment such as this merely because the defendant might or would have succeeded if counsel had fought the action differently.
Further down the page, his Honour then says:
in case I am wrong in holding that I should not go behind –
He has a look at the evidence and says that he would not have changed his decision in any event. Then the matter came before this Court, beginning on page 75. It would appear their Honours seem to have indicated to the respondent that he need not continue. It says he was stopped by the Court but, in any event, the Chief Justice then has his judgment beginning in the final paragraph of 75, notes that:
The alleged act of bankruptcy was the failure to comply with a bankruptcy notice based on a judgment –
and that is a judgment, of course, after a contested hearing. Then his Honour the Chief Justice further down the page in the penultimate line holds:
The court 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, as stated in –
and his Honour refers to Lennox, Flatau and Re a Debtor and other cases. Also, the Court looks with suspicion on consent judgments and default judgments.
Now, my friend says, well, he does not introduce the word “only” and it might go behind a judgment in circumstances in addition to or separately from “fraud, collusion or miscarriage of justice”. We would respectfully submit that that is a difficult construction because his Honour, we would say precisely identifies the circumstances entitled to go behind the judgment where those three matters have been made out. He does not say events including those, or words to that effect, but then his Honour goes on to say:
Also the court looks with suspicion on consent judgments and default judgments.”
would appear to be, in our respectful submission, a natural reading of that sentence to conclude that where there had been a judgment after a contested hearing, then going behind it is confined to those three matters identified in the top line, but otherwise there is a greater freedom. His Honour then goes on to note the point that has been ventilated in argument on a number of occasions this morning, namely:
The court also strives to prevent creditors from being defrauded by collusive or dishonest proceedings by friends of the debtor, or other people.
That feeds in part into the proposition that a court will more readily go behind a judgment given by default or consent. Why, because in those circumstances the possibility of the debtor colluding with persons who may be allied with his or her interests is greater. Where there has been a contested hearing, the prospect of there being some fraud or collusion would appear to be less.
That is the first point. But in any event, that is why, we would respectfully submit, the formulation in those terms has been deployed because if there was fraud or collusion between the debtor and other persons, such that judgment should be impeached, that fraud or collusion being such as to prejudice in some way the rights of other creditors of the debtor, then that is precisely a circumstance in which the Court may go behind the judgment, even if there has been a contested hearing.
KEANE J: Mr Stoljar, looking at the judgment of Justice Philp, page 73 about point 6, it is apparent that he did go behind the judgment.
MR STOLJAR: Yes, as I understood it, your Honour, he ‑ ‑ ‑
KEANE J: He went behind it because he apprehended that it was at least arguable that the transaction which gave rise to the debt was a money‑lending transaction and might therefore have been unenforceable, and on his own notion, it seems, having seen that possibility, he asked counsel to further consider the matter and it was re‑argued before him and having considered the matter on that re‑argument concluded that the problem that he apprehended was not in truth a problem and made the sequestration order.
MR STOLJAR: Yes. But, your Honour, that would appear to be, in our respectful submission, in the context in which, in the paragraph immediately before, he says:
I did hear evidence, and in case I am wrong in holding that I should not go behind the judgment upon the ground stated, I desire to say –
certain matters.
KEANE J: Yes, that is right. On the point that was argued before him initially, he concluded that he would not go behind the judgment. But he goes on to say:
But I think I should go behind the judgment for a special reason which was not raised before me.
MR STOLJAR: Yes.
KEANE J: So that he is actually – and having considered that further reason concluded that it was in truth no reason not to make a sequestration order. But it is an example – it is an example of a case where a judge apprehending the possibility of a miscarriage of justice, not involving some circumstance impeaching the actual judgment but inquiring as to whether there is a real debt, went behind the contested litigation.
MR STOLJAR: Yes, that is so. However, it is still appropriate, in our respectful submission, to put it into context in the sense that he has heard evidence and he then, as it were, the field had been opened up and he then examined one aspect of the matter.
KEANE J: But this is at the point as to whether there is reason to inquire and unlike the primary judge in this case who decided not to inquire because there had been a contested hearing and a judgment after it, his Honour, noting that there had been a contested hearing and then noting from his own review of the facts that there was this possibility that the judgment debt was not truly owing, made his own inquiry.
MR STOLJAR: He did.
KEANE J: In circumstances that are exactly the sort of case we are concerned with.
MR STOLJAR: Well, not quite. He adopted a different approach from the primary judge below, that is so, but his ultimate conclusion, we would respectfully submit, does not – or the fact that there was this final twist in the tail, as it were, that although he said he should not go behind it and then said, “If I am wrong, I will go behind it” and then ventilated a matter that he had observed himself and gave consideration to that matter, the last aspect is not a matter that seems to have been a matter that the High Court in its consideration of the matter took into account.
But in any event, we would respectfully submit, it does not alter the matter of principle in the way that I have endeavoured to communicate it this morning. It is, as it were, a curiosity about this particular judgment that ultimately, at the end of the day, did not go anywhere because his Honour, having heard the evidence and having identified a point, did not take the matter any further. Excuse me just a moment.
NETTLE J: Just the last couple of lines of the Chief Justice’s judgment, page 76, the last sentence in fact of the judgment:
The judge was doing only what he was required to do to satisfy himself that there was a petitioning creditor’s debt.
He appears to refer to the trial judge going behind the judgment in order to consider the ramifications of the Money Lenders Act in the point which he had raised himself and it was not contested before.
MR STOLJAR: Yes.
NETTLE J: Is not the last sentence of Chief Justice Latham’s judgment confirmatory of the propriety of what the judge below had done?
MR STOLJAR: Yes. There is no suggestion of any impropriety in what the judge did below, but what we would respectfully submit is that what the judge did below was strictly unnecessary for his reasoning process. His reasoning process could have concluded at about the middle of page 73. True it is, as Justice Keane has put to me, he did observe something about the evidence himself and investigated that, but that does not mean that the approach which he contemplates in the top part of 73 would not have been an entirely proper approach.
NETTLE J: The question was more directed to Justice Keane’s observation that the judge had perceived himself a reason to go behind the judgment, and then there is the last sentence of Chief Justice Latham’s judgment which characterises what the trial judge had done in so going behind the judgment as only what he was required to do to satisfy himself that the debt was due.
MR STOLJAR: In an exploration that had taken place in the context of considering whether there was fraud, collusion or miscarriage of justice.
KEANE J: But it was not. Sorry, it was not fraud or collusion.
MR STOLJAR: No.
KEANE J: But his Honour was concerned at the possibility ‑ ‑ ‑
MR STOLJAR: Of a miscarriage of justice.
KEANE J: Yes.
MR STOLJAR: And his Honour, for that reason – this touches upon to some extent a matter that your Honour Justice Keane raised with me this morning about whether conduct of counsel or proceeding by mistake could give rise to a miscarriage of justice. But his Honour had, as it were, opened the door and ventilated the evidence considering that question and he was, as the Chief Justice says, properly considering whether there was a petitioning creditor’s debt or whether the judgment could be impeached by fraud, collusion or, relevantly here, miscarriage of justice.
In the course of that inquiry, although he may not have needed to, he identified a point for himself which he considered, but ultimately it was not determinative, but we would respectfully submit that does not, as it were, alter the fundamental approach which he took. Once the door had been opened by the potential of a miscarriage of justice, he was, we would respectfully say, at liberty to identify a point for himself to consider further and upon that further consideration he ultimately determined not to take the matter forward.
Just touching upon the question of the rights of other creditors, just one other aspect of Corney that I should remind your Honours of; page 355, at about point 7, his Honour Justice Fullagar refers to a passage from the decision of Lord Justice Lindley in Ex parte Kibble where the Lord Justice said:
“The court will not allow bankruptcy proceedings to be had recourse to for the purpose of enforcing debts which are fictitious, and not real, even although they are in the form of judgment debts.”
Then his Honour goes on to develop that further by considering Lord Esher in Lennox. That is dealing with this question of the protection which needs to be afforded to the other creditors of the particular judgment creditors at arm’s length from the judgment creditor. But the Bankruptcy Court is not concerned with a legitimate and lawful invocation of the bankruptcy laws. What it is concerned with is what is identified on 355, recourse to be had to enforce debts which are fictitious and not real.
The formulation “fraud, collusion or miscarriage of justice” would provide that protection because if there were debts which had been incurred or a judgment debt which had been created or incurred fraudulently or through collusion for the purposes of defeating creditors, that is precisely the sort of circumstance which might lead to the judgment being impeached.
That is all I wish to say in reply, may it please the Court. May I thank the Court for expediting this matter and bringing on the hearing quickly. As your Honours will recollect, the creditor’s petition expires on 5 June but it is entirely a matter for your Honours how far your Honours
wish to take that into account in the consideration of the matter. Unless there is anything further, those are my submissions, may it please the Court.
KIEFEL CJ: The Court will adjourn briefly to consider the course it will take.
AT 2.37 PM SHORT ADJOURNMENT
UPON RESUMING AT 2.41 PM:
KIEFEL CJ: At least a majority of the Court is of the view that the appeal should be dismissed. The orders of the Court are:
1.Appeal dismissed.
2.Appellant pay the respondent’s costs.
The Court will publish its reasons in due course.
The Court will adjourn until 10.00 am tomorrow.
AT 2.42 PM THE MATTER WAS CONCLUDED
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