APPEAL AND NEW TRIAL – whether the primary judge denied the appellants procedural fairness – whether the primary judge failed to provide adequate reasons for judgment
BANKRUPTCY AND INSOLVENCY – whether creditor’s petition had lapsed – whether creditor’s petition invalid – whether bankruptcy notice invalid – whether appellants were solvent – whether primary judge erred in failing to go behind the judgment – whether petitioning creditors obtained benefit of legal costs paid unlawfully through misappropriation of funds – appeal dismissed
EVIDENCE – application to adduce further evidence on appeal – whether further evidence would result in different outcome – application dismissed
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Toogood v Gott [2023] FCA 1521
Case
[2023] FCA 1521
Decision Date
CaseChat Overview and Summary
In this case, the appellants, the Toogoods, appeal against a new sequestration order made against their estates by the primary judge in the Federal Circuit and Family Court of Australia. The respondents, Mr Gott and the Council, along with other individuals, are petitioning creditors who initiated the bankruptcy proceedings against the appellants. The appeal revolves around several legal issues, including whether the primary judge denied the appellants procedural fairness, whether the creditor's petition had lapsed, whether the bankruptcy notice was invalid, whether the appellants were solvent, and whether the primary judge erred in failing to go behind the judgment. The appellants also sought to adduce further evidence on appeal, which was dismissed by the court.
The court found that the primary judge provided adequate reasons for judgment and rejected the appellants' claims of procedural unfairness, including the allegation of apprehended bias. The court held that it was not necessary for the primary judge to address every argument raised by the appellants, and that the primary judge's reasons were sufficient to inform the parties of the broad outline and constituent facts of the reasoning on which the decision was made. The court also rejected the appellants' claims regarding the invalidity of the creditor's petition, the bankruptcy notice, and the appellants' solvency. The court found no error in the primary judge's decision and dismissed the appeal, along with the interlocutory applications made by the appellants. The appellants were ordered to pay the respondents' costs of the appeal.
Orders
Orders of the court
1. The appeal be dismissed.
2. The appellants’ interlocutory applications be dismissed.
3. The appellants pay the respondents’ costs of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
I will discuss the factual background, primary judge’s reasons, the relevant legislation and two interlocutory applications made by the appellants, before turning to consider the grounds of appeal. Factual background In 2017, the first respondent, James Gott, commenced proceedings for damages for defamation against the appellants in the District Court of Queensland. Mr Gott was then the Chief Executive Officer of the second respondent, the Cassowary Coast Regional Council (the Council). In the defamation proceedings, the appellants filed a defence and counterclaim, joining the Council, John Kremastos (a former Mayor of the Council), Ricky Taylor (a former Councillor) and Tracy Taylor (Mr Taylor’s wife) as defendants to the counterclaim. Mr Gott, the Council, Mr Kremastos, Mr Taylor and Ms Taylor ultimately became the petitioning creditors and are the respondents to the appeal. I will refer to them collectively as the petitioning creditors. In the District Court, Mr Gott filed an application to strike out paragraphs of the appellants’ defence, as well as another application seeking various forms of relief. The petitioning creditors filed an application to strike out the counterclaim. On 26 April 2018, Judge Lynham ordered that most of the defence be struck out and the counterclaim be struck out in its entirety and that the other aspects of relief sought be dismissed or adjourned. The appellants were ordered to pay the petitioning creditors’ costs of the interlocutory applications. Costs were assessed in a contested assessment process. On 24 January 2019, a Registrar ordered that the appellants pay the petitioning creditors’ costs of $74,157.96. The costs went unpaid by the appellants. On 5 March 2019, the petitioning creditors caused a bankruptcy notice to issue against the appellants, relying on the costs orders made by the District Court. On 3 April 2019, a Registrar of the Federal Court dismissed the appellants’ application to set aside the bankruptcy notice. On 5 April 2019, the petitioning creditors filed a creditor’s petition. On 31 October 2019, in Toogood v Gott [2019] FCA 1792, Greenwood J dismissed the appellants’ application for review of the Registrar’s decision dismissing the application to set aside the bankruptcy notice. On 21 November 2019, in circumstances where the appellants had not appeared at the hearing, the primary judge made a sequestration order against the estate of each appellant. On 24 December 2020, on the appellants’ application, his Honour set aside the sequestration order. On 22 October 2021, following a contested hearing, the primary judge made a new sequestration order against the estate of each appellant. It is from that order that the appellants have appealed. The progress of the appeal stalled in the Federal Court, including because the initial docket judge eventually recused himself. The matter was ultimately transferred to me. The legislative scheme Section 52 of the Bankruptcy Act 1966 (Cth) provides, relevantly: 52 Proceedings and order on creditor’s petition(1) At the hearing of a creditor’s petition, the Court shall require proof of:(a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);(b) service of the petition; and(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.…(2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:(a)that he or she is able to pay his or her debts; or(b) that for other sufficient cause a sequestration order ought not to be made;it may dismiss the petition.…(4) A creditor’s petition lapses at the expiration of:(a) subject to paragraph (b), the period of 12 months commencing on the date of presentation of the petition; or(b) if the Court makes an order under subsection (5) in relation to the petition—the period fixed by the order;unless, before the expiration of whichever of those periods is applicable, a sequestration order is made on the petition or the petition is dismissed or withdrawn.(5) The Court may, at any time before the expiration of the period of 12 months commencing on the date of presentation of a creditor’s petition, if it considers it just and equitable to do so, upon such terms and conditions as it thinks fit, order that the period at the expiration of which the petition will lapse be such period, being a period exceeding 12 months and not exceeding 24 months, commencing on the date of presentation of the petition as is specified in the order.The reasons of the primary judge
Evidence
Evidence Before The Court
The appellants have indicated they do not press Grounds 6 and 15 as separate grounds of appeal. The applications to adduce further evidence I will consider the appellants’ two interlocutory applications to adduce further evidence in the appeal. The Court has a discretionary power to receive further evidence in an appeal: s 27 of the Federal Court of Australia Act 1976 (Cth) (the FCA Act). The appellants seek to adduce the following documents: 1. 6 and 7 April 2021 Emails to Judge Jarrett Appellants and respondents2. SC669/21 Correspondence re s.54 Property Law Act 4/4/223. 8 April 2022 Judgment Justice Henry SC669/214. Councillor Conduct Tribunal decisions for:a. John Kremastos 26/11/21b. Wayne Kimberly 24/3/215. Excerpts of Council Annual Reports for the years:a. 2018/2019b. 2019/20206. Right to Information application Council decision 7/12/217. Councillor Conduct Tribunal Finding of misconduct against John Kremastos (fifth respondent) 9/5/228. Cassowary Coast Council Purchase Order PI032935 27/7/179. Bundle of Connolly Suthers Invoices matter no 17074510. Bundle of Connolly Suthers Invoices matter no 171186 The appellants no longer seek leave to adduce the Councillor Conduct Tribunal (CCT) decision for John Kremastos as it is part of the material filed in the matter. In Northern Land Council v Quall (No 3) [2021] FCAFC 2 at [16], the Full Court observed that to adduce further evidence under s 27 of the Federal Court of Australia Act, two conditions will normally be relevant: first, whether the further evidence is such that, had it been adduced at trial, the result would very probably have been different. Second, whether the party seeking to adduce the evidence demonstrates it was unaware of the evidence and could not have been, with reasonable diligence, made aware of the evidence. It is not enough that the new evidence is relevant and otherwise admissible, instead it must be demonstrated that “at the lowest, ‘probability’, and at the highest, ‘certainty’, of a different result” would have arisen from the admission of the new evidence: NASB v Minister for Immigration and Multicultural Affairs & Citizenship [2004] FCAFC 24 at [42]. The petitioning creditors do not object to the admission of the purchase order or tax invoices issued by Connolly Suthers, the petitioning creditors’ solicitors. Those documents will be admitted into evidence in the appeal. The judgment of Henry J is not evidence, and I am able to have regard to it. I am not satisfied that any of the other documents would probably have affected the outcome of the trial. Accordingly, they will not be admitted into evidence in the appeal. Consideration An appeal to this Court from the Federal Circuit Court and Family Court (Division 2) (FCFCOA (Div 2)) under s 24(1)(d) of the FCA Act is an appeal by way of rehearing: see for example, Martires v Endura Paint Pty Ltd (No 2) [2021] FCA 179 at [6]. Such an appeal requires demonstration of error on the part of the primary judge: Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; (2018) 264 CLR 541 at [30].
Decision
Reasons for decision
The fifth ground must be rejected.Ground 1: The primary judge failed to provide adequate reasons for judgment The appellants submit that the primary judge did not discuss or give reasons for issues raised by the appellants in their oral and written submissions. In particular, they claim that the primary judge did not address the lack of jurisdiction of inferior courts, the invalidity of the bankruptcy notice, the application of s 52(5) of the Bankruptcy Act, the status of the third petitioning creditor, and the funds supplied to Ms Taylor by the Council. The petitioning creditors argue that while the appellants raised many arguments, in dealing with the “kernel of [the appellants’] arguments”, the primary judge correctly recorded that the effect of their submissions was that there was no debt due and owing because the costs of the petitioning creditors had been paid by the Council or that the Council had been reimbursed. Before the primary judge, the appellants filed submissions 48 pages in length, asserting nine “grounds” upon which the matter should be dismissed. In CMU16 v Minister for Immigration and Border Protection [2020] FCAFC 104; (2020) 277 FCR 201, the Full Court explained at [89] that:It may be accepted that the primary judge was under a duty to give adequate reasons for his decision, but what is adequate depends on the circumstances of the case. It is not the law that judicial reasons must deal with every detailed point which might have been put on behalf of one party or the other. In DAO16 v Minister for Immigration and Border Protection (2018) 258 FCR 175 at [47], the Full Court held that: Where, in the decision of an ordinary dispute, reasons are necessary, they are necessary because of the expectation that, being a judicial decision, a sufficient explanation will be given of why the order was made. And, in my opinion, it will ordinarily be sufficient if … by his [or her] reasons the judge apprises the parties of the broad outline and constituent facts of the reasoning on which he [or she] has acted. The Court is not required to decide every matter which is raised in argument, and it can decide a case in a way which does not require the determination of a particular submission: Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 at 385; see also Payne v Long (2020) 280 FCR 362 at [57]; Kovan Engineering (Aust) Pty Ltd v Gold Peg International Pty Ltd [2006] FCAFC 117; (2006) 234 ALR 241 at [119]. The issue before the primary judge was whether a sequestration order should be made against the estates of the appellants. Broadly, this required the primary judge to determine whether the applicant had proved the matters required under s 52(1) of the Bankruptcy Act and whether there was any reason to go behind the Registrar’s order to determine whether there was a debt owing. His Honour began his reasons by addressing the appellants’ submission that a sequestration order could not be made because the creditor’s petition was stale. The arguments raised by the appellants concerning the jurisdiction of inferior courts was concerned with this issue. His Honour set out the relevant facts and applicable law relied upon to come to his conclusion that the creditor’s petition had not lapsed. In my opinion, that reasoning subsumed and inferentially rejected the appellants’ submissions regarding jurisdiction of inferior courts.
Ratio Decidendi
Legal Principle Established
I am not satisfied that any of the other documents would probably have affected the outcome of the trial. Accordingly, they will not be admitted into evidence in the appeal. Consideration An appeal to this Court from the Federal Circuit Court and Family Court (Division 2) (FCFCOA (Div 2)) under s 24(1)(d) of the FCA Act is an appeal by way of rehearing: see for example, Martires v Endura Paint Pty Ltd (No 2) [2021] FCA 179 at [6]. Such an appeal requires demonstration of error on the part of the primary judge: Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; (2018) 264 CLR 541 at [30]. I do not propose to address all of the extensive grounds and submissions made by appellants. A number of them are subsumed by my consideration of grounds and submissions of greater generality. The appellants also make numerous assertions that comments made by the primary judge in the course of argument or the reasons were factually inaccurate, whereas any such errors made no difference to the outcome of the case. I will only address the grounds and submissions that are capable of making a material difference to the outcome. Ground 5: The primary judge denied the appellants procedural fairness The appellants’ fifth ground of appeal alleging denial of procedural fairness is, in substance, an allegation of apprehended bias on the part of the primary judge. In Jorgensen v Fair Work Ombudsman (2019) 271 FCR 461, the Full Court, applying Concrete Pty Ltd v Parramatta Design and Developments Pty Ltd (2006) 229 CLR 577, held at [93] that where an appeal involves allegations of bias along with other substantive or discrete grounds, the appellate court should first deal with the issues of bias. That is because those grounds, if made out, would strike at the validity of the trial and require the matter to be remitted for retrial. The appellants’ allegations of denial of procedural fairness are as follows:42.Judge Jarrett unfairly refused to allow the appellants to appear by telephone prior to 17 January 2020 necessitating several further court days and hearings. 43.The appellants were compelled to file a recusal application to Judge Jarrett due to his demeanour, sarcasm, rudeness and apparent derision of the appellants. 44.For the hearing on 23 and 24 March 2021, Judge Jarrett refused to permit the appellants to cross examine the first and second respondents despite being present in the court room.45.During the hearing, the appellant stated to Judge Jarrett that they believed they were entitled to be at the least treated civilly, Judge Jarrett replied in a loud angry tone “This is me being civil.”46.His Honour did not at times permit the appellants to provide submissions. 47.His Honour appeared to be bored by appellants submissions and was writing something during submissions by the appellants which did not appear to relate to the proceedings.48.His Honour did not consider the written and oral submissions given by the appellants on 23 And 24 March 2021 and failed to address the issues raised by the appellants in the written reasons for the 22 October 2021 Judgment and Orders. 49.His Honour addressed Counsel for the respondents with appropriate tone and courtesy. The same tone and courtesy was not extended to the appellants. 50.His Honour permitted the respondents to file further material without leave in contravention of the directions made on 25 January 2021. 51.His Honour permitted the respondents to strike out material he had previously relied upon to make the judgment in the same matter on 24 December 2020. 52.His Honour acted as the litigator rather than an impartial judge and made statements indicating he had prejudged the matter. 53.His Honour on 24/3/21 referred to several cases to Respondents Counsel that were not referred to the appellants.54.His Honour appeared enraged when the appellants brought up the (Antoniolli) case and accused the appellants of misleading the court.55.His Honor was rude and disparaging to the appellants…(Footnotes and citations omitted)