Shaw v Yarranova Pty Ltd - [2013] FCCA 1627

FEDERAL CIRCUIT COURT OF AUSTRALIA

SHAW v YARRANOVA PTY LTD & ANOR

[2013] FCCA 1627

Catchwords:
BANKRUPTCY – Application to set aside bankruptcy notice – whether proceedings should be adjourned – whether creditor’s affidavit admissible in view of s.91 Evidence Act – whether applicant has chance of success in collateral Supreme Court proceedings – whether applicant acting bona fide and with due diligence – whether form of bankruptcy notice misleading – application dismissed.

Legislation:
Evidence Act 1995, s.91
Bankruptcy Act 1966, ss.41(6A), 41(6C)

Cases cited:
Ainsworth v Burden [2005] NSWCA 174
Uniform Evidence Law, Ninth Edition, Law book Co. 2010
Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264
Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71
Re Vincenzo Cirillo Ex Parte: Heytrack (Aust) Pty Ltd [1991] FCA 93
Re Hamor Ex parte Deamer and Anor (1967) 11 FLR 261
McDonnell v Fernwood Fitness Centre Pty Ltd [2005] FMCA 877
James v Federal Commissioner of Taxation (1955) 93 CLR 631
McIntyre v Gye (1994) 122 ALR 289

Applicant:

JOHN RASHLEIGH SHAW

First Respondent:

YARRANOVA PTY LTD
(ACN 077 517 616)

Second Respondent:

NEWQUAY STAGE 2 PTY LTD
(ACN 086 482 644)

File Number:

MLG 1680 of 2012

Judgment of:

Judge Burchardt

Hearing date:

7 August 2013

Date of Last Submission:

7 August 2013

Delivered at:

Melbourne

Delivered on:

25 October 2013

REPRESENTATION

The Applicant:

In person

Counsel for the Respondent:

Mr Fary

Solicitors for the Respondent:

Arnold Bloch Leibler

ORDERS

The application be dismissed.
The applicant pay the respondents costs.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1680 of 2012

JOHN RASHLEIGH SHAW

Applicant

And

YARRANOVA PTY LTD (ACN 077 517 616)

First Respondent

NEWQUAY STAGE 2 PTY LTD (ACN 086 482 644)

Second Respondent

REASONS FOR JUDGMENT

Introductory

By his Application filed 24 December 2012 the applicant, Mr Shaw seeks to set aside a Bankruptcy Notice served upon him on

14 December 2012. His Affidavit in Support filed on the same date asserts, correctly enough, that the Bankruptcy Notice is founded upon unpaid costs orders of the Supreme Court of Victoria. The affidavit asserts:
“4. I have disputed the validity of the costs orders on the basis that the primary judgements were procured by fraud & as a consequence those orders and consequential orders should be set aside.
5. If my applications are successful the resultant costs orders will be set aside.”
Mr Shaw had much to say about a number of aspects of the matter, but the issues I will address will be:
a)Why I declined to adjourn the proceeding at its commencement;
b)Why I admitted almost all of the respondents’ affidavit evidence into evidence; and
c)Whether or not the Court should exercise its discretion to set aside the Bankruptcy Notice.
For the reasons that follow, I will explain my Rulings in relation to a) and b) and why it is that I decline to exercise the Court’s powers to set aside the Bankruptcy Notice.

The application to adjourn

When the matter first commenced, Mr Shaw indicated that he was aware of orders made by Registrar Luxton on 21 February 2013 which inter alia required him to serve any further affidavits on which he intended to rely by 15 March 2013 and serve any short affidavit exhibiting a copy of any transcript of the hearing in the Supreme Court of Victoria of 11 April 2013, and any reasons given by that Court in respect of that hearing, by 18 April 2013.
Mr Shaw confirmed that the hearing had indeed taken place but asserted that he had not complied with those orders because his appeal from that decision is still on foot before the Court of Appeal of the Supreme Court of Victoria, (“the Court of Appeal”).
He asserted that this appeal will make all prior judgments irrelevant. He sought that the hearing of the Application to set aside the Bankruptcy Notice be adjourned until that appeal was held and said that this Court should not second-guess the Court of Appeal.
The second strand of his argument was that he had been ambushed with material on the day of the hearing. Mr Shaw said that the respondents had been ordered to file their affidavit material by late April 2013 and complained that he had no opportunity to respond. He asserted that he wished to cross-examine the deponent of the respondents’ affidavit material, Mr Alexander William King. He further asserted that delay would not be prejudicial to the creditors.
Counsel for the respondents referred to the affidavit material upon which he sought to rely. He confirmed that he sought to rely on paragraphs 4, 5 and 6 of Mr King’s affidavit affirmed on 2 August 2013 and Annexures AWK-27 and AWK-29 (the transcript of hearing before Dixon J and His Honour’s Reasons) and AWK-35 to AWK-38 which were emails from the respondents’ solicitors to the applicant in April 2013, in which putting the matter broadly those solicitors were trying to discover if Mr Shaw proposed to comply with Registrar Luxton’s orders.
Mr Fary counsel for the respondents also confirmed that he sought to rely upon paragraphs 2, 3, 4 and 5 of an affidavit of Mr King affirmed on 6 August 2013 which attested service upon Mr Shaw of the material sought to be relied upon. He also sought to rely on paragraph 7 of that affidavit which annexes AWK-54, being an order made by Judicial Registrar Pedley in the Court of Appeal on 31 July 2013. Counsel submitted that none of this material took the applicant by surprise as he had been directly involved in all of it.
Mr Shaw, whose submissions in my view regrettably can be characterised as suggesting something of a filibuster, suggested that he had received the affidavit of Mr King affirmed on 2 August 2013 only very recently before the proceeding and that he simply had not had sufficient time to consider the matter.
Having heard those submissions, I indicated that I would not adjourn the proceeding and I will now give my Reasons. Mr Shaw has been engaged in litigation with the respondents since at least 2003. (See annexure AWK-20 to Mr King’s affidavit affirmed 19 February 2013 - annexure AWK-20 is an affidavit filed by Mr Shaw, which annexes materials showing 2003 proceedings).
The matters of which Mr Shaw complains in substance naturally precede the issue of proceedings in 2003 and it would appear from materials filed in this proceeding that the original controversy dates back to the early 2000s.
The current tranche of proceedings appears to flow reasonably directly from orders made by Associate Justice Daly on the 7 March 2008. That decision refers to matters “over 12 years ago”. On any view, this litigation has been actively underway for a very long time. From the submissions Mr Shaw made, it is apparent that at least if he gets his way the litigation will continue for a very long time into the future.
Insofar as Mr Shaw sought to press his argument on the footing that this Court should not proceed until the conclusion of the decision of the Court of Appeal, in my opinion his submission is misconceived. All that is being contemplated at this stage is whether or not a Bankruptcy Notice should be set aside. Any arguments that might be more properly put about, as it were, preventing Mr Shaw from having the benefits of any success in the Court of Appeal would more appropriately await an Application for a Sequestration Order.
Furthermore, for reasons to which I shall come, even on very preliminary acquaintance, it did not seem to me that Mr Shaw’s Application in the Court of Appeal was over-endowed with prospects of success, not least because the Court of Appeal itself has said so.
Furthermore, bankruptcy as a matter of its nature that it requires expeditious attention. There are very significant issues in bankruptcy as to when the act of bankruptcy occurs. Delay is of its nature likely to be prejudicial to respondents, even if only in respect of such matters as the relation back period. Mr Shaw’s submission that there was no likely prejudice to the respondents in delay is entirely contrary to experience.
Insofar as Mr Shaw sought an adjournment on the footing that he was ambushed by the late service of material, that assertion needs to be seen in context. First of all as he acknowledged, Mr Shaw had wittingly failed to put on materials that he had been ordered to file by Registrar Luxton. Some of those materials were clearly readily available to him.
In the circumstances the provision to the Court of the decision and antecedent transcript before His Honour Justice Dixon, the emails between the parties, and the order in the Court of Appeal (in respect of which Mr Shaw apparently appeared) were utterly incapable of being unfair to him. He was well aware of their substance because he had participated directly in the creation, so to speak, of all the documentation concerned.
In all the circumstances it was, in my view, quite clearly plainly inappropriate to adjourn for some indeterminate period into the future at which stage the decision of the Court of Appeal might be known and might be favourable to Mr Shaw.

The admission of materials

Mr King was called to give evidence and Mr Shaw took objection to the effect of almost all of his affidavit material. As articulated, the objections fell into two parts. The first, although not put in these terms relates to s.91 of the Evidence Act 1995 (“the Evidence Act”). That section reads as follows:
“(1) Evidence of the decision, or of a finding of fact, in an Australian or overseas proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding.
(2) Evidence that, under this Part, is not admissible to prove the existence of a fact may not be used to prove that fact even if it is relevant for another purpose.”
In Ainsworth v Burden [2005] NSWCA 174, Hunt AJA (Handley and McColl JJA agreeing) stated at [109]:
“It is clear that s 91 does not prevent the tender of judgments which contain findings as to the existence of facts relevant to the issues in the trial in which they are tendered. It merely prevents the judgments from being tendered for the purpose of proving the existence of those facts. If they are admissible for some other purpose — as they are in the present case, in order to demonstrate that they would have persuaded any honest-minded person that the defendant’s allegations were false — they may not then be used to prove the existence of those facts, a consequence which would otherwise have flowed from s 60 of the Evidence Act.”
In Commentary at 1.3.6040 of Odgers Uniform Evidence Law, Ninth Edition, Law book Co. 2010, the learned author asserts:
“Thus, this provision does not prevent evidence being given with judgments for the purpose not of establishing the truth of the facts found, but to establish the terms of a judgment and its effect.”
Thus, insofar as the material sought to be adduced by Mr King’s affidavit material consists of past judgments of the Supreme Court of Victoria, Mr Shaw’s objection is plainly misconceived. The material merely proves the terms of the judgments and orders made.
The other basis, as I understood it, that Mr Shaw objected to the tender of much of the material was that it was irrelevant not least and primarily because all prior judgments would be overtaken by the decision in his forthcoming appeal to the Court of Appeal. As indicated in this judgment, that is not a sustainable submission.
It should be noted that I upheld some minor criticisms on the part of Mr Shaw, which were objections to conclusionary remarks and the like. Subject to those objections, I therefore admitted the affidavits of Mr King.

The cross-examination of Mr King

Mr King was called and cross-examined. He confirmed that he was an equity partner in the firm Arnold Bloch Leibler, who are the solicitors for the respondents. It became apparent that Mr Shaw only wished to cross-examine on the affidavit affirmed on 19 February 2013, and it rapidly became apparent that it would be necessary to control the scope of cross-examination.
At least one question put to Mr King was summarily overruled by me because it seemed to me to be scandalous. It was put to Mr King that he was not, contrary to his affidavit assertion, in fact the solicitor having care and conduct of the proceeding on behalf of the respondents. In my view, a question of that sort could only be put where a proper evidentiary basis had already been put in place to enable such an outlandish challenge to be put forward.
What really emerged was that Mr Shaw was seeking to establish through Mr King a grand conspiracy of some kind between Arnold Bloch Leibler and the two respondents in this case, whom he would wish to show were, in some fashion, interrelated.
It is sufficient to say for these purposes that Mr King was an excellent witness who responded to those questions that I permitted to be put to him directly and straightforwardly. To the extent that this is of any moment, I would record that he was clearly a witness of truth.

The submissions of the parties

Following the conclusion of Mr King’s cross-examination, we moved to submissions. It should be noted that Mr King had, in effect, been interposed. Although this was on one view not entirely regular, as it would ordinarily be for the applicant to go first, it seemed to me to be the most efficient way to deal with the matter at the time.
Mr Shaw tendered his affidavit, affirmed 24 December 2012. There was no request to cross-examine.
Essentially, in his submissions, Mr Shaw repeated that he was in limbo. He has to conclude the Court of Appeal case before he can issue the substantive proceeding, which he has endeavoured to issue by way of summons, to attack the original judgment which has given rise to his travails. He pointed out that the Court of Appeal has not refused to hear his case and that the issue of fraud he is raising is not yet determined. He said that the orders of Daly AsJ, to which I have referred, were not final orders. He further complained that the Bankruptcy Notice issued to him did not specify who was to be paid. He confirmed that he was alleging fraud and, indeed, towards the conclusion of his submissions, he alleged that the witnesses were suborned and he was the subject of a wide-ranging conspiracy.
I do not propose to seek to traverse each and every submission made by Mr Shaw at any length. It should be noted that the transcript will not, perhaps, fully convey the time consuming and self-serving nature of much of what he had to say. He is plainly a man very used to litigation and entirely comfortable in it. Mr Shaw did, however, confirm that he had recently issued proceedings in the Federal Court which, from what he said, appears to be some form of collateral proceeding, in the event his Supreme Court affairs come to nothing.
Ultimately, the point put by Mr Shaw nonetheless, comes down to a very simple proposition. He complains that there has never been a determination whether there was fraud or not. He said that his evidence was not yet put on and that he was trying to issue subpoenas to get evidence.

Submissions of the respondents

Once again, I do not propose to deal with each matter raised. The respondents had filed written submissions upon which counsel essentially relied. In addition to those submissions, which speak for themselves and with which I shall deal with in more detail, the respondents’ counsel submitted that the nature of the proceedings before Dixon J was such that fraud simply could not be raised. It is further submitted that fraud is a serious allegation and requires detailed and cogent particulars.
Counsel submitted that s.41(6C) of the Bankruptcy Act 1966 (“the Bankruptcy Act”) required a two-step procedure.
Once again, without doing any discourtesy to the able written and oral submissions made, what the respondents’ position boils down to, in essence, is that the nature of Mr Shaw’s appeal is misconceived and insufficiently likely to succeed to make it appropriate to postpone the matter further, especially in circumstances where the original debts are so old. The judgment ultimately challenged is, itself, from 2008 and has never been the subject of an Application for a Stay. Counsel referred to the serious consequences of delay in bankruptcy proceedings to which I have already referred.
In relation to the point about the form of the Bankruptcy Notice, counsel submitted that the Bankruptcy Notice could not have misled the applicant. According to its terms (see exhibit R4) the address for payment and the persons to be paid were clearly set out and it was submitted that the Bankruptcy Notice arose from a debt that was joint and several. I will return to this matter also.

The course of past litigation

There has been an enormous amount of litigation between these parties, as the affidavit material makes clear. It seems beyond doubt that Bell J tried the proceeding, involving these parties, in February and March 2006 and it is plain that the applicant lost. He was the one who appealed (see annexure AWK-2 to the affidavit of Mr King, affirmed 19 February 2013 and the Reasons for Judgment of Mukhtar AsJ, dated 19 October 2002 at [2]).
From those reasons, it is equally clear that Mr Shaw appealed and his appeal was dismissed on 20 April 2007. On 20 April 2007, the Court of Appeal ordered Mr Shaw to pay any damages sustained by the respondents by reason of a Stay ordered on 26 May 2006, and those damages were referred for assessment and further orders.
Daly AsJ assessed the damages and her decision was given on 7 March 2008. Annexure AWK-50 to Mr King’s affidavit, affirmed 2 August 2013, is the Reasons for Judgment of Daly M, as her Honour then was. Her Honour assessed the respondents’ damages at $54,706.13.
As earlier indicated, no Application for a Stay of the orders that Daly AsJ made, arising from her conclusions, has ever been made. That decision of Daly AsJ was, however, the subject of an appeal which was, itself, dismissed.
On 29 August 2012, Mr Shaw lodged a summons, in which he sought, relevantly, to set aside the orders of Daly AsJ dated 7 March 2008 on the grounds that, “there is fresh evidence and that they were provided on the basis of false and misleading affidavits and fraud”. (See Mukhtar AsJ’s decision at [4]).
That application came on in due course on 18 October 2012 and was dismissed (see annexure AWK-1). Mukhtar AsJ’s Reasons are set out in annexure AWK-2 dated 19 October 2012. I note that at paragraph [8] of those Reasons for Judgment, Mukhtar AsJ said:
“It is convenient I think to give some introduction to the origins of this case. Over 12 years ago, Mr Shaw made a contract to buy an apartment “off the plan” from the first defendant (“Yarranova”), a developer. …”
His Honour’s Reasons went on to point out that Yarranova Pty Ltd had assigned its interest to the second respondent at some later point.
At [12], his Honour noted that one of the appeals taken by Mr Shaw to the Court of Appeal involved an assertion of fraud and dishonesty perpetrated by the vendor’s and their solicitors. His Honour said:
“… The insinuation seemed to be that the vendor’s solicitors were also shareholders of the defendants and somehow their beneficial interest in the companies impinged upon the assessment of costs. …”
His Honour noted that during the currency of the proceedings, which took place in 2012, the Court of Appeal said in a footnote:
“We note that Mr Shaw has not applied to set aside the earlier orders on the basis that they were obtained by fraud.”
At [13], his Honour Mukhtar AsJ said:
“It is apprehended that Mr Shaw has with alacrity seized on that footnote and conceived of the idea to go back and seek to set aside the assessment of damages for fraud. …”
As Mr Shaw has conceded in this Court, his object is transparent. If he can attack the assessment of damages, then something of approximately 20 or so subsequent orders, made by various Judges and Judicial Officers will, he says, collaterally fall away.

His Honour Mukhtar AsJ went on to explain why, for reasons which in my respectful view would involve the application of well-established authority, it was not appropriate for the matter to proceed by way of summons. That would require, if the matter were to proceed at all, a separately pleaded case proceeding by way of writ. It was for those reasons that the summons had been summarily dismissed.
Mr Shaw appealed the decision of Mukhtar AsJ and the matter was heard by Dixon J, who heard the matter on 11 April 2013. The transcript of hearing of the First Appeal is annexed to Mr King’s affidavit, affirmed 2 August 2013 (AWK-27) and his Honour Dixon J’s Reasons for Judgment annexure AWK-29. They were given ex tempore. It is sufficient to say that his Honour entirely upheld Mukhtar AsJ’s reasoning as to the desirability of proceeding, not by way of summons but by way of writ. His Honour also upheld Mukhtar AsJ’s reasoning in relation to subpoenas issued by the applicant, which were part of his endeavour to get evidence to support his assertions of fraud.
I note that his Honour, having asserted that he would have dismissed the appeal, went on, nonetheless to say at [27]:
“… I am reluctant to encourage the plaintiff to proceed with this matter on the basis that the summons is dismissed ‘without adjudication on the merits’. No ‘merits’ are evident.”
His Honour traversed the matter and dealt with the applicant’s assertions in some detail at [35]-[53]. At [34] his Honour said:
“… I am satisfied that Mr Shaw’s claims that the assessment by Daly AsJ could be set aside for fraud is fanciful, with no real prospect of success.”
At [53] his Honour continued:
“There is no basis to anticipate that the allegations can be made out, if a further opportunity is given to Mr Shaw to develop a statement of claim.”
I bear in mind that the terms of s.91 of the Evidence Act resolutely preclude me from accepting his Honour Dixon J’s observations as concluding the factual disputes with which his Honour purported to deal. Nonetheless, as the learned editor of Odgers’ points out, this does not prevent me from being aware of the substance and effect of the judgment. The substance and effect is that a very experienced Judge of the Supreme Court regarded Mr Shaw’s claims as being very unlikely to succeed.
Mr Shaw appealed the decision of Dixon J and the appeal was struck out through failure on his part to comply with interlocutory orders. Following hearing the Court of Appeal constituted by Nettle and Neave JJA granted, in effect, the applicant leave to continue with his Application. The Court’s Reasons for Judgment are annexure AWK-49. Nettle JA who gave the Reasons for Judgment said at [3]:
“Having heard the applicant, however, and taking some little time to consider the matter, we are persuaded that despite considerable doubts about the utility of the appeal which is proposed, it is appropriate that we should make an order that the appeal not be taken to have been abandoned.”

Consideration

The first question that arises is whether the Bankruptcy Notice should be set aside because of the appeal that Mr Shaw has underway before the Court of Appeal. In a sense, this issue is very similar to whether or not the hearing of this Application should be adjourned until after the hearing of the appeal itself. In my view, Mr Shaw’s Application faces possibly even greater difficulties in this regard. The fact is that the orders now sought to be attacked were made as long ago as 2008.
The further fact is that all Mr Shaw’s attacks upon that Judgment, which have been in part fitful from time to time, to say the least, have been unsuccessful to date. Dixon J took the dimmest view of the applicant’s chances of success. It is well established that the prospects of success, assessed necessarily at an interlocutory level in this proceeding, are a relevant consideration. (See Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 at [270]-[271] per Lehane J). Here, on the materials as they stand, it must be said that I would regard Mr Shaw’s chances of success as slight.
There is a strong element of reservation in the Judgment of the Court of Appeal to which I have referred, and the strong remarks of Dixon J, which I have also referred to. Indeed, Dixon J would go further. Without adjudicating finally on the matter, he has expressed a strong view that, in effect, Mr Shaw should not be permitted to start all over again in any event. Mr Shaw readily acknowledged that he does not presently have proof to establish fraud. Indeed, it is his stated intention to try and get that proof as and when his case to set aside the original Judgment is commenced.
This is so whether it be by way of summons, if his appeal to the Court of Appeal is successful, or by way of other originating proceeding, being either presumably a writ in the Supreme Court, or the essentially unidentified proceeding apparently lodged in the Federal Court. The fact is that there is no clear cogent evidence of fraud at this stage even on Mr Shaw’s own position, and I note that he has had since 2008 to start trying to get it. Furthermore, as already indicated, the likelihood of possible delay is very considerable.
It is common cause that the appeal to the Court of Appeal will not be heard before 2014. It is equally clear, although it is not perhaps conceded, that there is inherent likelihood of prejudice to the creditors in delay of the onset of bankruptcy, if bankruptcy there is to be. The date of the commission of the act of bankruptcy is an important matter for the reasons to which I have already referred.
It is clear that the Court should not exercise the broad discretion open to it pursuant to s.41(6A) of the Bankruptcy Act to extend time.
It should be noted that the discretion in s.41(6A) is, subject to the matters in subsections (a) and (b), at large subject only to the fact that the Court may not extend time if it makes one of the findings provided for by s.41(6C). (See McQuade and Gronow, Australian Bankruptcy Law & Practice, Sixth Edition, Thomson Reuters at 41(6A).20. Copious authorities are cited in support of that proposition).
Here, I would not be prepared to find that either matter set out in s.41(6C) is satisfied. It is certainly the case that Mr Shaw has applied for an extension of time on the ground that he has applied to set aside the Judgment and Order in respect of which the Bankruptcy Notice was issued (s.41(6C)(a)). I am not prepared to find that the proceedings instituted by Mr Shaw are not bona fide or not being prosecuted with due diligence. Mr Shaw, however misconceived his case may be, clearly passionately believes in it. While there is room for argument as to whether he has prosecuted his affairs with due diligence, for all his experience he remains self-represented and the evidence does not go quite far enough to establish that aspect of the matter.
Accordingly, the Court is left with the general discretion under s.41(6A) and as I have said, and would hope to make clear, the various matters that fall for consideration as to the exercise of that discretion overwhelmingly point to not granting Mr Shaw the relief he seeks. It should be noted that in Byron v Southern Star Group, Lehane J stated at page 270:
“The commission of an act of bankruptcy is, undoubtedly, a serious matter; it is, however, of a different order of gravity from the change of status brought about by the making of a sequestration order; and there is also to be taken into account the interest of both the judgment creditor and other creditors of the judgment debtor in ensuring that, if ultimately a sequestration order is made, the relevant act of bankruptcy occurs earlier rather than later.”
That is another cogent set of reasons for not granting Mr Shaw the relief he seeks.

The form of the Bankruptcy Notice

Here, Mr Shaw’s complaint is that the form of the Bankruptcy Notice was likely to mislead him. The Bankruptcy Notice is exhibited to an affidavit of a process server which is tendered as exhibit R4. The Bankruptcy Notice is clearly in the prescribed form. Under the heading: “You are notified that: Creditor’s name and ABN/ACN if applicable …”, there is included Yarranova Pty Ltd and Newquay Stage 2 Pty Ltd, with their ACN numbers.
Their address is given at an address in St Kilda Road, Melbourne. Under the heading “claim/s that you owe the following debt” there set out:
“1. Amount as per the attached final judgment/s or final order/s (note A) $412,891.64.”
There are then set out off-sets for moneys already paid, and a final total of $388,880.16 is set out.
On page 2, the Bankruptcy Notice says relevantly:
“1.    You are required, within 21 * days after service on you of the Bankruptcy Notice, to either:
(a)     pay to the creditor the amount of the debt claimed; or
(b)     make arrangement to the creditor’s satisfaction for settlement of the debt.
…
2.    Payment of the debt can be made to Arnold Bloch Leibler, Level 21 333 Collins Street, Melbourne Vic 3000 …”
The Bankruptcy Notice appends orders made by Wood AsJ for costs in a number of proceedings, all between Mr Shaw and the respondents, which total the relevant sum. No criticism has been advanced of the fact that the Bankruptcy Notice is based on multiple judgments between the same parties and no such criticism could be sustained. What Mr Shaw was really saying was that the Bankruptcy Notice was confusing to him because he did not know who to pay. Did he have to pay, he asked rhetorically, one or other or both of the creditors?
This was, of course, sophistry as I pointed out to Mr Shaw. He had already said that he had the money (and was solvent) but that essentially he refused to pay it. Nonetheless, the test is not whether Mr Shaw was, in fact, likely to be misled, but whether the Bankruptcy Notice itself was likely objectively to mislead a debtor. It is well established that the form of the Bankruptcy Notice should follow the form of the Judgment. (See Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71).
The orders made by Wood AsJ from time to time were all relevantly in the same form. That issued on 24 September 2009 and authenticated on 5 October 2009, relevantly reads:
“The costs of the Defendants are taxed and allowed in the sum of $51,950.20 to be paid by the Plaintiff.”
Contrary to the submission of counsel for the respondents, I think this was a joint debt. There is no evidence before the Court to suggest that this was a joint and several debt. In a case in which the form of order was slightly different but not materially so, in my view, namely Re Vincenzo Cirillo Ex Parte: Heytrack (Aust) Pty Ltd [1991] FCA 93, von Doussa J said at [25]-[27]:
“25. The form of the judgment is consistent with the judgment being one in respect of an obligation owed jointly by the debtor to the creditors. However, that is not conclusive. It would be open to the judgment creditors, in my opinion, to lead evidence to establish clearly the basis of their claim and whether it was in respect of an obligation owed to them jointly, or to them jointly and severally.
26. Although the matter was distinctly raised in the course of the hearing by the debtor, the evidence does not satisfy me that the debt was one owed jointly and severally, and not one owed jointly. The particulars of claim have been tendered today, but they are brief, as is customary in that jurisdiction, and ambiguous as to the nature of the obligation. The debtor's contention is that in the absence of proof from the petitioning creditor that the debt was one owed jointly and severally, this court should assume that it was a joint debt and approach the matter accordingly. I am disposed to think that argument is correct.
27. In the case of a judgment entered in favour of judgment creditors to whom an obligation is owed jointly by a debtor, it is clear that proceedings under the Bankruptcy Act, whether a bankruptcy notice or a creditor's petition, must be taken out in the name of all those to whom the joint obligation is owed. …”
His Honour went on to refer inter alia to the decision in Re Hamor; Ex parte Deamer and Anor (1967) 11 FLR 261, to which I shall return. His Honour found against the creditors in that case because both of them had not been parties to the issue of the petition.
In McDonnell v Fernwood Fitness Centre Pty Ltd [2005] FMCA 877, the same issue about creditors arose before Riethmuller FM, as his Honour then was. In that case the Court noted at [11]:
“As can be seen from the terms of the judgment ultimately entered pursuant to rule 21.04, the claims by each of the respondents against the applicant and the two related companies were, at best, a mixture of joint and several claims.”
His Honour noted that one of the issues he had to address (at [12](i)) was:
“Whether the bankruptcy notice could be issued by two distinct creditors with respect to a composite debt (that is, debts owed to each of them, but severally not jointly).”
In Re Hamor, Gibbs J, as his Honour then was, he had to deal with circumstances where there were two judgment creditors but the Bankruptcy Notice required payment to one or other of them. The debt was a joint debt.
Relevantly, his Honour extracted, from the decision of James v Federal Commissioner of Taxation (1955) 93 CLR 631, at page 263 of the Judgment, as follows:
“Here the order is an order that the plaintiff pay the costs of the action to the defendants. In order that the bankruptcy notice should be in accordance with this judgment it should direct the plaintiff to pay the three defendants named in the action. In the same way it should notify the debtor that he may secure or compound the debt to their satisfaction.”
His Honour went on to say at page 263:
“The question arises in the present case whether the bankruptcy notice requiring payment to Charles R. Dreamer or Noyes Bros Pty Ltd could mislead the debtor who received it. A debtor who acted in accordance with such notice might make a payment to either one of the petitioning creditors. However, the rule of the common law is that payment to one or two joint creditors is a good discharge of the joint debt (Powell v Broadhurst; Wallace v Kellsall, Husband v Davis). I have not been referred to any authority that suggests this principle is less applicable to the case of a joint judgment debt than to any other joint debt and I can see no valid reason for drawing any such distinction. Therefore, if the debtor had acted in accordance with the terms of the notice, and had paid one or the other of the creditors, the judgment debt would have been discharged and the judgment would have been satisfied. If, out of caution or prudence, the debtor wished to pay both creditors the notice would not prevent him from paying both he would comply with the requirement to pay one. It seems to me to follow that the form of the notice could not possibly embarrass or mislead the debtor because he could safely comply with these provisions. The debtor could see on the face of the notice that the judgment had been obtained by Charles R. Dreamer and Noyes Pty Ltd. Although the notice in form did not require the debtor to pay the debt in accordance with that judgment it did say in substance because he would satisfy the judgment if he complied with the terms of the notice as to payment. The defect in the notice therefore seems to me to be purely formal and, since it is clear that no injustice was caused by the giving of the notice in this form, the notice is saved by s.7 of the Bankruptcy Act.”
The facts of that case were marginally different from those here because in that case the judgment and the notice required to pay the one creditor or the other. Here, however, the bankruptcy notice required to pay the respondents and did so in terms entirely consistent with the judgment entered.
As I have indicated, there is no evidence before me that would suggest that the obligation to pay the respondents was joint and several. To the contrary, all the form of the orders suggested that it was in fact a joint debt. In these circumstances and bearing in mind the Bankruptcy Notice expressly indicated that the applicant could “make arrangements to the creditor’s satisfaction for settlement of the debt”, it is quite clear that looked at objectively the form of the Bankruptcy Notice could not have misled Mr Shaw. (see also McIntyre v Gye (1994) 122 ALR 289 at [294]-[295]):
“Payment to one of a number of joint creditors discharges a debt owed to them jointly at law.”
In my view there is no deficiency in the Bankruptcy Notice and it follows that this attack upon it must fail.

Conclusion

For all of the above reasons, I order that the application be dismissed with costs.

I certify that the preceding eighty-three (83) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Associate:

Date: 25 October 2013