Shannon v Commonwealth

Case [2014] FCAFC 108

FEDERAL COURT OF AUSTRALIA

Shannon v Commonwealth Bank of Australia [2014] FCAFC 108

Citation: Shannon v Commonwealth Bank of Australia [2014] FCAFC 108
Appeal from: Commonwealth Bank of Australia v Robson [2013] FCA 1430
Parties: GEOFFREY ANTHONY SHANNON v COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124), WILLIAM ROLAND ROBSON and MAXWELL PRENTICE
File number: NSD 7 of 2014
Judges: LOGAN, FLICK & PERRY JJ
Date of judgment: 29 August 2014
Catchwords: PRACTICE AND PROCEDURE – Whether refusal to grant adjournment violates hearing rule – Exercise of discretion of primary Judge – No appealable error demonstrated – Application to adduce further evidence would not have led to any different result
Legislation:

Bankruptcy Act 1966 (Cth) Pts VB, X; ss 5, 52, 178, 204, 222
Family Law Act1975 (Cth)

Federal Court of Australia Act1976 (Cth) ss 24, 27, 37M, 37N
Federal Court Rules 2011 (Cth) r 36.57

Cases cited:

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170
Aon Risk Services Australia Limited v Australia National University (2009) 239 CLR 175
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833, (2001) 117 FCR 424
CDJ v VAJ (1998) 197 CLR 172
Cement Australia Pty Ltd v Australian Competition and Consumer Commission (2010) 187 FCR 261
Commonwealth Bank of Australia v Geoffrey Anthony Shannon [2013] NSWSC 1076
Commonwealth Bank of Australia v Robson [2013] FCA 1430
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Managements Marketing Pty Ltd (2013) 303 ALR 199
Freeman v National Australia Bank Ltd (2003) 2 ABC (NS) 32; [2003] FCAFC 200

Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478
Guss v Johnstone [2000] FCA 1455
Hingston v Westpac Banking Corporation (2012) 200 FCR 493
House v R (1936) 55 CLR 499
Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427
Moran v Robertson (2012) 10 ABC (NS) 84
NASB v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 24, (2011) 192 FCR 254
Norbis v Norbis (1986) 161 CLR 513
Re Dingle; Westpac Bank Corporation v Worrell (1993) 47 FCR 478
Reece v Webber [2011] FCAFC 33
Sali v SPC Ltd (1993) 116 ALR 625
Stead v State Government Insurance Commission (1986) 161 CLR 141
Sullivan v Department of Transport (1978) 1 ALD 383

John Roach, Friday the 13th Phobia Rooted in Ancient History (12 August 2004) National Geographic News, <

Date of hearing: 9 May 2014
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 132
Counsel for the Appellant: Mr D R Pritchard SC
Solicitor for the Appellant: Blueprint Law
Counsel for the First Respondent: Mr D McLure
Solicitor for the First Respondent: Gadens
Solicitor for the Second Respondent: The Second Respondent filed a Submitting Notice save as to costs
Counsel for the Third Respondent: Mr J T Johnson
Solicitor for the Third Respondent: Sally Nash & Co Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

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Shannon v Commonwealth [2014] FCAFC 108
Case
[2014] FCAFC 108
Decision Date

CaseChat Overview and Summary

In the Federal Court of Australia, Mr Shannon appealed against the decision of the primary judge who had set aside a personal insolvency agreement and ordered that a sequestration order be made against his estate. The Commonwealth Bank of Australia (CBA) had applied under the Bankruptcy Act 1966 (Cth) to set aside the personal insolvency agreement, and the primary judge allowed the application on the grounds that the agreement's terms were unreasonable and it was in the public interest to set it aside. The court also allowed an appeal by the CBA against the decision of the trustee to value a proof of debt at $1.00 for voting purposes at a creditors' meeting. Mr Shannon's appeal focused on the primary judge's refusal to grant an adjournment on 13 December 2013, allowing the hearing of the CBA's application and appeal to proceed on 16 December 2013.

The primary legal issue before the court was whether the refusal to grant the adjournment constituted a denial of procedural fairness. Mr Shannon argued that the adjournment was necessary due to insufficient preparation time with his new solicitors and his residence at his parents' home to care for his ailing father. The court considered whether the primary judge's refusal to grant the adjournment led to a miscarriage of justice or affected the final result.

The court held that Mr Shannon had not demonstrated any appealable error in the primary judge's refusal to grant the adjournment. The court found that Mr Shannon had been aware of the hearing dates since 29 November 2013 and had not acted with urgency to seek an adjournment. The court also found that the primary judge had properly considered Mr Shannon's father's medical condition and his need to care for his father, but was entitled to be skeptical about the impact on Mr Shannon's ability to prepare for the hearing. Furthermore, the court rejected Mr Shannon's assertion of an error of fact in the primary judge's observation that the case would be "largely documentary" and "readily accessible to him through Court documents or property searches".

In conclusion, the court dismissed Mr Shannon's appeal, stating that the refusal to grant the adjournment did not constitute a denial of procedural fairness and did not affect the final result. The court also dismissed Mr Shannon's amended interlocutory application to lead further evidence. Mr Shannon was ordered to pay the CBA's costs of and incidental to the appeal, including the amended interlocutory application to lead further evidence, to be taxed if not agreed.

Orders

Orders of the court

1. The appeal is dismissed.

2. The Amended Interlocutory Application filed by the appellant to lead further evidence is dismissed.

3. The appellant is to pay the first respondent’s costs of and incidental to the appeal, including the Amended Interlocutory Application to lead further evidence, to be taxed if not agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons below, I am satisfied that there was no denial of procedural fairness and the notice of appeal otherwise exposes no appealable error. It follows that Mr Shannon’s appeal must be dismissed.BACKGROUNDTHE CREDITORS’ MEETING ON 26 JUNE 2013 AND EXECUTION OF THE PERSONAL INSOLVENCY AGREEMENT A meeting of Mr Shannon’s creditors was held under Pt X of the Bankruptcy Act 1966 (Cth) (the Act) on 26 June 2013. It was attended by creditors claiming to prove debts which amounted to a cumulative total of about $46 million. A majority of Mr Shannon’s creditors, by number and value, voted to require him to execute a draft personal insolvency agreement which had been circulated before the meeting. A debtor may only be required to execute a personal insolvency agreement by special resolution of his creditors: s 204(1)(b) of the Act. Section 5 of the Act defines a ‘special resolution’ to mean “a resolution passed by a majority in number and at least three-fourths in value of the creditors present personally, by telephone, by attorney or by proxy at a meeting of creditors and voting on the resolution”. Notwithstanding the value of debts claimed, Mr Shannon offered to contribute only $200,000 towards the payment of his debts under the draft agreement. That contribution was to be made with the assistance of a third party. A further $50,000 was to be paid to the second respondent, Mr Robson, who was then the “controlling trustee” for the purposes of s 188 of the Act. The CBA had lodged two proofs of debt. The first claimed a debt owed to Bankwest, a division of the CBA, in the sum of $8,508,963.55. The second claimed a separate debt owing to the CBA for $755,546.46. While the second debt was admitted for voting purposes in the amount claimed, Mr Robson chose to value the proof of debt of Bankwest for voting purposes at only $1.00. The CBA opposed the resolution to require Mr Shannon to execute the draft personal insolvency agreement. After taking into account the results of other proof valuation decisions made by Mr Robson, none of which were later challenged, the requisite vote of at least three-fourths in value was able to be achieved because of Mr Robson’s decision as to the value for voting purposes of the Bankwest proof of debt. Moreover, by far and away, in value terms, those creditors who voted in favour of requiring Mr Shannon to execute the personal insolvency agreement were creditors personally related to him. Mr Shannon executed a version of the personal insolvency agreement on 5 July 2013. It is necessary to state “a version” because the version executed by him differed somewhat from that which had been approved by special majority at the creditors’ meeting.THE APPLICATION TO SET ASIDE THE PERSONAL INSOLVENCY AGREEMENT The CBA applied to the Court pursuant to s 222(1) of the Act for an order setting aside the personal insolvency agreement. That application was not, as perhaps it might have been, alternatively grounded on an allegation that, in terms of s 222(2)(e) of the Act, the personal insolvency agreement had not been entered into in accordance with Pt X of the Act on the basis that the agreement as executed differed from the draft presented to and approved at the creditors’ meeting on 26 June 2013.

Evidence

Evidence Before The Court

Other bases upon which Mr Shannon relied on 13 December 2013 in seeking an adjournment were:1.insufficiency of preparation time on the part of his new solicitors, who were only retained on 4 December 2013; and2.his residence principally at his parents’ home at Tuncurry in New South Wales from 30 November 2013 so as to care for his ailing father and related difficulties in providing instructions to his new solicitors.EVIDENCE ON THE APPLICATION In support of his adjournment application on 13 December 2013, Mr Shannon also gave oral evidence by telephone from Tuncurry on the New South Wales Central Coast. Mr Pitt, a solicitor in the employ of Mr Shannon’s former solicitors, Levitt Robinson, was called by the CBA and gave evidence in chief but was not cross-examined. Also in evidence was an email sent by Mr Shannon to Mr Pitt on 22 November 2013. That email responded to an email forwarded to him by Mr Pitt earlier that day from Mr McQuillan which had been sent on the same day. For reasons that will become apparent, the terms of Mr Shannon’s email are important. He stated that:Hi Sam [Mr Pitt], this is the first I have seen anything.I have a monthly arrangement with Tony, another instalment is due Monday.I am not happy about his comments to you and think we need the best in any event.What is required to be done as I am not aware.I was of the view that I am there in your office on Monday to finalise my affidavit for my conflict case that we are to run.I have assembled all the material being the annexures and have a base to start with.The idea on this new conflict motion was to cause a stay on all matters including the overturning of my part 10 application and also to any previous judgement etc.If you think that this new conflict motion won’t cause a stay of an adjournment of the current matters please advise.I have spent all week virtually building this document with annexures.By the way we need the best barrister Stewart has as well for this.[sic] The references to “Tony” and “Stewart” are, inferentially, to Mr McQuillan and to the principal of Levitt Robinson, Mr Stewart Levitt. The text of Mr McQuillan’s email was read out in the course of Mr Shannon’s oral evidence by telephone. However, it was never finally resolved as to whether privilege in respect of that email was waived. That question arose in the course of Mr Shannon’s oral evidence and it is evident even from a cursory study of the transcript that Mr Shannon’s evidence was somewhat stilted, perhaps by reason of the fact that he appeared via telephone link. What Mr Shannon did say, in the course of the exchanges concerning his email of 22 November and Mr McQuillan’s email forwarded to him by Mr Pitt that day, was this:His Honour … I wonder if you could answer the question Mr McLure [counsel for the CBA] asked you? ___ SorryWhether you had any written or oral communication with any lawyer acting for you in which you had been told prior to 29 November 2013 that these proceedings were set down for hearing on 16 and 17 December this year? ___ Yes, The 16th and – I got – I got a communication on 22 November – and that wasn’t from – that was forwarded to me from Mr Pitt from the barrister, Mr McQuillen[sic] [Emphasis added]

Decision

Reasons for decision

The CBA also appealed pursuant to s 178 of the Act against Mr Robson’s decision to value the Bankwest proof of debt at $1.00 for voting purposes at the meeting.THE DECISION BELOW On 16 December 2013, the primary judge set aside the personal insolvency agreement and ordered that a sequestration order be made against Mr Shannon’s estate. In the course of so doing, his Honour voiced his opinion that the CBA’s appeal under s 178 of the Act should be allowed and that Mr Robson should, on the evidence then before the Court, have admitted the CBA’s proof at full value. The allowance of the CBA’s s 178 appeal was not translated directly into the orders below but rather seems to have been treated as implicit in the order under s 222(1) setting aside the personal insolvency agreement. The s 222(1) application was granted on the basis that the terms of the personal insolvency agreement were unreasonable (s 222(1)(d) of the Act) and because it was in the public interest for that agreement to be set aside (s 222(1)(e) (“for any other reason”). Either ground sufficed to sustain the decision to allow the s 222(1) application. THE APPEAL Mr Shannon’s appeal does not allege any error of law or fact in the conclusion, based on the material before the primary judge, that the terms of the personal insolvency agreement were unreasonable. Nor does he contend that, on that same material, the CBA’s s 178 appeal should not have been allowed. Instead, while the grounds of appeal are prolix, the essence of his challenge is that the primary judge’s decision to refuse his application for an adjournment on 13 December 2013 and to proceed with the hearing of the Bank’s s 222 application and s 178 appeal on 16 December 2013 denied him procedural fairness. The CBA was the only active respondent to Mr Shannon’s appeal. Both Mr Robson and Mr Prentice made submitting appearances. Mr Robson adopted a like stance at the trial in the original jurisdiction. REFUSAL OF THE ADJOURNMENT APPLICATION ON 13 DECEMBER 2013 CAPACITY TO FOUND AN APPEAL AGAINST THE FINAL ORDERS ON AN INTERLOCUTORY DECISION The order made on 13 December 2013 dismissing Mr Shannon’s application was interlocutory. However, that does not mean that the only means open to him to challenge the correctness of that order was forthwith to have sought leave to appeal and a related stay. To the contrary, s 24(1E) of the Federal Court of Australia Act1976 (Cth) (Federal Court Act) provides that:The fact that there has been, or can be, no appeal from an interlocutory judgment of the Court in a proceeding does not prevent:(a)a party from founding an appeal from a final judgment in the proceeding on the interlocutory judgment; or(b)the Court from taking account of the interlocutory judgment in determining an appeal from a final judgment in the proceeding. The sequestration order was a final judgment and requires no grant of leave to appeal. Even so, as his appeal is grounded in a challenge to an interlocutory order, Mr Shannon must show that any error in that interlocutory order affected the final result: Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427 at [78]; Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478 at [4]-[7] (Gerlach v Clifton Bricks). In particular, in Gerlach v Clifton Bricks at [6]-[7], Gaudron, McHugh and Hayne JJ stated:6The proposition that any interlocutory order can be challenged in an appeal against the final judgment in the matter is often stated in unqualified terms. The better view, however, is reflected in the formulation adopted in Spencer Bower, Turner and Handley where it is said that “on an appeal from the final order an appellate court can correct any interlocutory order which affected the final result”.(emphasis added).7It is necessary to make the qualification, “which affected the final result'', at least to reflect the well-established principle that a new trial is not ordered where an error of law, fact, misdirection or other wrong has not resulted in any miscarriage of justice. [Footnote references omitted]

Ratio Decidendi

Legal Principle Established

Finally, it was Mr Shannon’s evidence that he changed solicitors “on or about 2 December 2013” [affidavit of 12 December 2013]. They became solicitors on the record on 5 December. On any view, Mr Shannon was aware by then, and had been since 29 November 2013, of the precise terms of the orders made by the Court on 31 October 2013. Even so, no sense of urgency attended his actions or those then newly engaged to act for him. It was not until 9 December that his new solicitors wrote to the CBA’s solicitors seeking agreement for an adjournment which was declined. Only on 10 December 2013, at approximately 4:00 pm, was there communication with the primary judge’s associate in which Mr Shannon’s solicitors sought a date for the hearing of an adjournment application.CONSIDERATION OF THE ADJOURNMENT APPLICATION The primary judge’s findings as to this course of events after 29 November 2013 are not challenged. What is put is that there was insufficient time for Mr Shannon and his new legal representatives to prepare. In the face of it emerging only in cross-examination that Mr Shannon had spent an entire week in Sydney in late November with his then lawyers, the primary judge was entitled to be sceptical about the impact of Mr Shannon’s father’s illness and his need to care for his father on Mr Shannon’s ability to prepare for the hearing on 16 December 2013. That is not to say that his Honour ignored, as Mr Shannon’s submissions suggested, Mr Shannon’s father’s medical condition. Quite the reverse. His Honour expressly took that into account. It proved decisive in his Honour’s conclusion that Mr Shannon’s father would not be able to give evidence in the proceeding, notwithstanding Mr Shannon’s submission in support of the adjournment that he was to be called. Further, apart from the legitimate scepticism grounded in Mr Shannon’s extended absence from his father while in Sydney, the primary judge expressly adverted, as he was entitled to do on the evidence, to the fact that, despite his contention that he had to remain in Tuncurry to care for his father, Mr Shannon had ready access there to a computer, an internet connection and a telephone. There was also said to be error of fact in his Honour’s observation that the case for Mr Shannon in respect of the CBA’s application would be “largely documentary” and “readily accessible to him through Court documents or property searches”. There are a number of reasons why I reject this asserted error of fact. Firstly, a threshold issue for Mr Shannon on the s 222 application was to persuade the Court that the s 178 challenge to the valuation of the CBA’s proof should not be upheld. The CBA’s proof was based on guarantees of corporate indebtedness in respect of loans made by the Bank to two companies controlled by him. The guarantees themselves must have been in writing. Secondly, the primary judge was entitled to exclude on the medical evidence the prospect that Mr Shannon’s father could ever give evidence. Thirdly, when the list of material identified on behalf of Mr Shannon (set out at [34] below and quoted above) as the material on which he proposed to rely at a hearing, the description of that material as “largely documentary” is not inapt. It is also an apt description of the substantive content of the further affidavit evidence which the Court was asked to admit.