Taylor David Pty Ltd v Khan
[2019] FCCA 3609
•12 December 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| TAYLOR DAVID PTY LTD v KHAN | [2019] FCCA 3609 |
| Catchwords: BANKRUPTCY – Practice and procedure – application to set aside orders for dismissal of proceedings for want of appearance – whether explanation for failure to appear – whether different orders to those sought to be set aside might be made – application dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth), s.306(1) Federal Circuit Court Rules 2001 (Cth), rr.13.03C(1)(c), 16.05(2)(a) |
| Cases cited: FBS18 v Minister for Home Affairs [2019] FCAFC 196 Kyriackou v Shield Mercantile Pty Ltd (2004) 138 FCR 324 Matheson v Scottish Pacific Business Finance Pty Ltd [2005] FCA 670 Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132 Re McSwiney; Ex parte Davies; (unreported, FCA, Beaumont J, P1611 of 1986, 24 November 1986) Swart v Carr (No.2) [2008] FMCA 1204 Yang v Mead [2009] FCA 1202 |
| Applicant: | TAYLOR DAVID PTY LTD |
| Respondent: | SHERASZAL KHAN (ALSO KNOWN AS SHER AFZAL KHAN) |
| File Number: | BRG 527 of 2018 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 8 November 2019 |
| Date of Last Submission: | 8 November 2019 |
| Delivered at: | Sydney |
| Delivered on: | 12 December 2019 |
REPRESENTATION
| Solicitors for the Applicant: | Taylor David Lawyers |
| The Respondent appeared in person |
ORDERS
The application in a case filed on 18 September, 2019 is dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 527 of 2018
| TAYLOR DAVID PTY LTD |
Applicant
And
| SHERASZAL KHAN (ALSO KNOWN AS SHER AFZAL KHAN) |
Respondent
REASONS FOR JUDGMENT
This is an application to set aside an order that I made on 25 March, 2019 dismissing the respondent’s application to review a sequestration order made by a registrar on 11 July, 2018.
On 31 May, 2018 the applicant presented a creditor’s petition against the respondent. The petition relied upon an act of bankruptcy constituted by the respondent’s failure to comply with a bankruptcy notice that had been served upon him on 23 January, 2018. The debt set out in the bankruptcy notice was $8,825.26. The debt was evidenced by a judgment of the Magistrates Court of Queensland given on 21 November, 2017 in the applicant’s favour against the respondent.
The petition was listed for hearing on 11 June, 2018. The respondent filed no notice of intention to appear and he did not appear at the hearing of the petition before the registrar. A sequestration order was made in his absence.
Three weeks later, on 1 August, 2018 the respondent filed an application to review the registrar’s decision. That application came before another judge of this court on 22 October, 2018. The applicant informed the Court that he had made an application to set aside the judgment entered against him or perhaps that he had appealed the making of that order. On that day, his Honour made the following order:
1. That in the event the Respondent is unsuccessful in his appeal he is required to file and serve any further affidavit material he intends to rely upon by no later than 4.00pm on 8 March 2019.
2. That this matter be adjourned for hearing of the review of Registrar’s decision at 9.30am on 25 March 2019 in the Federal Circuit Court of Australia at Brisbane.
NOTATION:
A. It is expected that the Respondent sort out the default judgment by contacting the Magistrates Court or appealing (sic) to the District Court.
The application for review came before me on 23 March, 2019. The applicant for review (the respondent to the creditor’s petition) did not appear. No affidavits were filed by the respondent between the order made on 22 October, 2018 and 23 March, 2019. Because the respondent failed to appear to prosecute his application for review, I dismissed it pursuant to the provisions of r.13.03C (1)(c) of the Federal Circuit Court Rules 2001.
Nearly six months later, the respondent filed the present application on 18 September, 2019. It is supported by two affidavits, one filed with the application in a case and the other filed on 11 October, 2019. The respondent appeared before me to argue his application. The respondent to the application (the petitioning creditor) also appeared. The respondent informed me at the hearing that he had telephoned his trustee in bankruptcy to tell them the present application was before the Court, but it seems that he has not served either his application to review the registrar’s decision or the present application upon his trustee in bankruptcy.
The respondent asks the Court to exercise the power given to it by r.16.05(2)(a) of the Federal Circuit Court Rules. On such an application, the task for the court is to consider whether or not it is in the interests of justice to reinstate the respondent’s application for review: FBS18 v Minister for Home Affairs [2019] FCAFC 196. Such an application usually requires the consideration of three matters:
a)whether there is a reasonable explanation for the applicant’s absence at the relevant hearing;
b)whether there are material arguments available to the applicant that might reasonably lead to the making of an order different to that sought to be set aside; and
c)whether there is any prejudice to the party with the benefit of the orders sought to be set aside that is not able to be adequately addressed by the court.
However, each case needs to be determined according to its own facts and circumstances. Other matters may also be relevant.
In his affidavit filed on 18 September, 2019 the respondent deposes to the following matters:
a)His real name is sher Afzal khan and that is the name that appears in his Australian passport. He is only known by Sher Afzal Khan;
b)He is the CEO of a “non-profitable” organisation known as Australian Multicultural Charity, which helps “local community free of charge in immigration, Refugee, homeless legal issues etc.”;
c)A company called Progressive Transport Pty Ltd was facing winding up proceedings in the Supreme Court of Victoria in Melbourne on 25 January, 2017;
d)A director of that company contacted the Charity to assist the company to find a lawyer in Melbourne to set aside “the default judgment”, seemingly upon which the winding up application was based;
e)On 13 February, 2017 he contacted the senior partner of the applicant’s law firm and was put in touch with a lawyer from the applicant’s Brisbane office;
f)He introduced himself and advised the solicitor of his position as CEO of the Charity, together with a brief of his past legal and working history;
g)He advised the solicitor that a director of Progressive Transport Pty Ltd had contacted him for help to find a lawyer in Melbourne to set aside a default judgment and deal with an application to wind up the company;
h)He also advised the solicitor that the company’s directors did not speak English well and he would be assisting them to prepare the draft affidavits of the company directors for the purposes any court applications;
i)The solicitor “clearly understood my involvement to assist Progressive transport company Two director being CEO of the AMC charity not as a client”;
j)He prepared affidavits by the company’s two directors and sent them to the solicitor;
k)The solicitor asked for $3000.00 to be deposited in a trust account, but he declined to do so;
l)A director of the company paid $7305.00 into the trust account of the applicant but the solicitors failed to file “notice of application in the Supreme court as I instructed on behalf of the company Directors on 8 March 2017, to set aside the default Judgment”;
m)The engagement of the applicant’s services was terminated after four months in June, 2017;
n)The applicant filed a statement of claim in Magistrates Court of Queensland against four defendants, namely:
i)Baljeet Kour, a director of Progressive Transport;
ii)Paramjit Singh of Progressive Transport;
iii)Sheraszal Khan; and
iv)Ravinder Pal Singh;
o)The applicant obtained default judgment on 19 September, 2017 against Kour, Singh and Singh;
p)The applicant obtained default judgment on 21 November, 2017 against Khan.
The respondent asserts that the solicitor with whom he dealt (as set out above), Mr Chad Gear, provided “false affidavit to the court on 31 May 2018, SHERASZAL KHAN (also known as sher Afzal Khan)”.
He also asserts that the registrar made an “error to grant default Judgment applicant obtained on 11 July 2018 against the respondent SHERASZAL KHAN (ALSO KNOWN AS SHER AFZAL KHAN)” although he does not say why.
He further asserts that the applicant “obtained default order from the Registrar by fraud including my real name in his affidavit SHERASZAL KHAN (ALSO KNOWN AS SHER AFZAL KHAN)”. He argues that “if applicant wish to make claim against me, he must file new statement of claim in the Magistrate court which would be defended vigorously.”.
In his affidavit filed on 11 October, 2019 the respondent reiterated that his proper name was “Sher Afzal Khan”. He annexed a copy of his passport which shows his given name to be “SHERAFZAL”. He also points out that the bankruptcy notice was issued in the name “Sheraszal Khan” as was the judgment by default upon which it was based. He repeats his claim that by presenting a creditor’s petition using the name “Sheraszal Khan (also known as sher Afzal khan)”, the solicitor for the petitioning creditor acted fraudulently.
Consideration
The respondent has provided no evidence which would go towards an explanation for his failure to appear before the registrar when the sequestration order was made or his failure to appear upon his application for review that was listed on 25 March, 2019. There is simply no evidence as to his explanation. In the course of the hearing before me he sought to provide that explanation from the bar table. His explanation was that he was caring for his sick wife, who had cancer, and who passed away in July, 2019. I accepted the respondent’s assertion that his wife had passed away without requiring him to tender a death certificate. There is, however, no evidence about why the respondent could not and did not appear before me on the day listed for the hearing of his application in March, 2019.
He also told me that he had made an application to set aside the judgment given against him but that it too had been dismissed because he did not appear at that hearing. He intended to appear and went to the court building on the date and at the time listed for the hearing of his application but he could not find the court room. By the time he had found the court room, his application had been dismissed.
He also asserted from the bar table that he was solvent and was able to pay the petitioning creditor’s debt. However, he provided no evidence as to his solvency. Whilst the respondent sought an adjournment to provide further evidence as to his solvency, I declined the adjournment on the basis that he had already had several opportunities to file material as to his solvency (before the hearing of the creditor’s petition and before the hearing of the application to review the registrar’s decision and again on this application) but had not taken the opportunity to present any evidence of his solvency.
The respondent’s main point was that the name that appears on the Magistrates Court judgment and in the bankruptcy notice is not his name and that the petitioning creditor has sought to cure that difficulty by including his real name in the creditor’s petition. Indeed the difficulty with his name appears to have prompted this application. The respondent has tried to leave the country and travel overseas, but has been prevented from doing so because of his bankruptcy.
The difference between the respondent’s name as it appears in the judgment and the bankruptcy notice and how it appears in the creditor’s petition is twofold. First, in the judgment and bankruptcy notice the respondent’s name appears as one word “Sheraszal” whereas he says it is in fact two words, namely “sher Afzal” or “Sher Afzal”. The document upon which he relies to prove that, namely his Australian passport, demonstrates that his first name appears as one word, namely “SHERAFZAL”. There is some other evidence that bears on this point. In the affidavit of service of the bankruptcy notice sworn by Chad Walter Gear and filed on 31 May, 2018 there appears some correspondence from the respondent. That correspondence was prompted by service of the bankruptcy notice upon the respondent. His letter (annexure CWG – 4 to Mr Gear’s affidavit) bears the letterhead “KHAN CONSULTANT” and has what appears to be a handwritten signature above the printed characters: “S.A. Khan”. That letter attaches two earlier letters, one dated 10 January, 2018 and the other dated 12 January, 2018. Both are on the same letterhead and are signed in the same way.
The second difference between the respondent’s name as it appears in the judgment and bankruptcy notice and what he claims to be his name is its spelling. The petitioning creditor has used a spelling which includes an S rather than an F in “Sherafzal”.
It is common ground that the respondent has attempted to set aside the judgment by default that was obtained against him by the petitioning creditor. There is no evidence that the application was successful. The petitioning creditor contends that the application was dismissed. The respondent agrees with that. No order setting aside the judgment by default has been produced nor has any notice of appeal from that judgment or any judgment refusing to set it aside.
That the respondent would apply to have the judgment by default set aside notwithstanding his contention that he is named incorrectly in the judgment demonstrates that there was no confusion about the identity of the respondent in those proceedings. If indeed he was not the defendant in the proceedings, properly named, he would have had no standing to apply to have the judgment by default set aside. The evidence does not demonstrate that there was any confusion about the identity of the respondent as a defendant to the Magistrates Court proceedings.
It is necessary for the bankruptcy notice to follow the judgment upon which it relies. That includes the description of the parties to the judgment: Swart v Carr (No.2) [2008] FMCA 1204 at [14]. The bankruptcy notice here uses the same name for the debtor that appears in the Magistrates Court’s judgment. In that sense, the bankruptcy notice follows the judgment. There is nothing to suggest that the bankruptcy notice is apt to mislead the debtor or is otherwise invalid. Indeed, in his letter to the petitioning creditor’s solicitor dated 23 January, 2018 the respondent says (errors in the original):
Ref to your email 23 Jan 2018.
1. Today I have received bankruptcy Notice from you which vigorously would be defendant.
There is no evidence that the respondent took any steps to apply to have the bankruptcy notice set aside on the basis of any defect in it.
The creditor’s petition includes the respondent’s name as it appears in the Magistrates Court judgment and the bankruptcy notice but has added the words “also known as Sher Azfal Khan”. It is the respondent’s case, that the correct form of his name is Sher Azfal Khan.
Formal errors in a bankruptcy notice do not result in its invalidity unless they cause “substantial injustice”: Kyriackou v Shield Mercantile Pty Ltd (2004) 138 FCR 324 at 336. “The touchstone of invalidity is thus whether any error is “capable of misleading” a debtor in a manner that results in “substantial injustice” ”: Yang v Mead [2009] FCA 1202 at [15].
It is no surprise then that in Re McSwiney; Ex parte Davies; (unreported, FCA, Beaumont J, P1611 of 1986, 24 November 1986) the Federal Court concluded that a bankruptcy notice was not defective by reason of the debtor being identified as “Trevor John McSwiney” rather than “Trevor Peter McSwiney”. The apparent defect was cured by s.306(1) of the Bankruptcy Act.
Further, in Matheson v Scottish Pacific Business Finance Pty Ltd [2005] FCA 670 Kiefel J, as the Chief Justice then was, said:
[10] Mr Matheson has referred me to the definition of ‘legal name’ in Black’s Law Dictionary, 8th edn, ed BA Garner, West Pub Co, USA (2004) pg 1048 as ‘a person’s full name as recognised in law’. That does not however mean that a court document such as a bankruptcy notice or petition is void if the full legal name of the person is not provided. There is no doubt that Mr Matheson is the person named in the District Court proceedings and in these proceedings and that he has understood that to be the case. He has represented himself and appeared. There was no ambiguity created by the bankruptcy notice or petition. In any event if there was an irregularity in the mode of description, it is of a formal nature and one that can be validated by s 306(1) of the Bankruptcy Act: Re Draper; Ex parte Australian Society of Accountants (1989) 154 FCR 41. A ‘formal defect or an irregularity’ within the meaning of that section is one that could not reasonably mislead the debtor: Re Wimbourne; Ex parte The Debtor (1979) 24 ALR 494. In my opinion, the petition notice does not cause any injustice as it was not likely to mislead the debtor.
There can be no doubt that the respondent is the person named in the Magistrates Court judgment, the bankruptcy notice and in the creditor’s petition. He has always understood that to be the case. He has represented himself as the respondent or defendant to the various proceedings.
A bankruptcy court may accept a judgment as sufficient proof of a debt owed by a debtor to a creditor but is not bound to do so. It may go behind the judgment so as to determine if a debt is truly owed by the debtor to the creditor: Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132. In that case, the plurality (Kiefel CJ, Keane and Nettle JJ) said (footnotes omitted):
For the purposes of s 52 of the Act, a judgment may usually be taken to be sufficient evidence of a debt in that a judgment against a debtor in favour of a creditor obtained after a trial is, generally speaking, a reliable indication of the true state of indebtedness as between creditor and debtor. Indeed, such a judgment can usually be expected to provide the most reliable statement of the debt humanly attainable because the ordinary processes of the adversarial system provide a practical guarantee of reliability. The testing of the relative merits of a claim and counterclaim under the rigours of adversarial litigation will usually establish the true state of accounts as between the parties to the proceedings. Accordingly, a Bankruptcy Court will usually have no occasion to investigate whether the judgment debt is a true reflection of the real debt. But where the merits of a claim and counterclaim have not been tested in adversarial litigation, a judgment debt will not have this practical guarantee of reliability.
The respondent here argues that there is no true debt owed by him to the petitioning creditor. He says that the default judgment entered against him should not be taken as sufficient proof of the debt against him and if he is allowed to pursue his application for review he will demonstrate why that is so. On the material before me, the basis of that argument for the respondent seems to be that he acted as an intermediary only between the other defendants or perhaps the company Progressive Transport and the solicitors. It is his case that he was not the petitioning creditor’s client but rather the company or the company’s directors were the client.
The difficulty for the respondent however is that his evidence to support those assertions is non-existent. In his affidavit filed on 19 September, 2019 the highest his case gets is that: “Mr Chad Gear clearly understood my involvement to assist Progressive transport company Two director being CEO of the AMC charity not as client” (faithfully reproduced). However, his evidence is also that he was the person providing the instructions to the solicitors: see paragraph 12 of his affidavit. The onus is upon the respondent to demonstrate that there are material arguments available to him that might reasonably lead to the making of an order different to that made by me on 25 March, 2019. An argument that the respondent was not the petitioning creditor’s client needs to be supported by some evidence and there is none before me.
The petitioning creditor does not suggest that there is any substantial prejudice that would be occasioned by the setting aside of my order made on 25 March, 2019 that could not be adequately addressed by an order for costs.
Conclusion
The respondent has not:
a)established that he had an explanation for his failure to appear on 25 March, 2019 when I dismissed his application to review the decision of the registrar to make a sequestration order against the respondent’s estate;
b)has not provided any explanation for his failure to apply promptly for the reinstatement of his application for review following the dismissal of it; and
c)has not established that there are material arguments available to him that might reasonably lead to the making of an order different to that made by me on 25 March, 2019.
Having regard to those matters, and notwithstanding the absence of any prejudice to the petitioning creditor if I were to set aside my earlier order, the respondent’s application must nonetheless be dismissed.
I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 12 December, 2019.
Associate:
Date: 12 December, 2019
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