Trustees of the Toowoomba Sports Ground Trust v Hagan
[2007] FMCA 910
•25 July 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| TRUSTEES OF THE TOOWOOMBA SPORTS GROUND TRUST v HAGAN | [2007] FMCA 910 |
| BANKRUPTCY – Sequestration order – entitlement of original trustees to enforce the costs order – trustees were no longer statutory trustees – respondent is able to meet his debts – other sufficient reasons an order should not be made – prosecution of respondent’s claim. |
| Anti-Discrimination Act 1991 (Qld) Associations Incorporation Act1981 (Qld) Bankruptcy Act 1966 (Cth) Consumer Law and Other Justice Legislation (Miscellaneous Provisions) Bill 1996 Freedom of Information Act1992 (Qld) Human Rights and Equal Opportunity Commission Act1986 (Cth) Land Act1994 (Qld) Property Law Act 1975 (Qld) Racial Discrimination Act1975 (Cth) Trusts Act1973 (Qld) |
| Bouzaid –v- Horowhenua Indoor Bowls Centre Inc [1964] NZLR 187 Bradley v Commonwealth (Rhodesian Information Centre case) (1973) 128 CLR 557 Cain v Whyte (1933) 48 CLR 639 Cameron v Cole (1944) 68 CLR 571 Commissioner of Police v Tanos (1958) 98 CLR 383 Cox –v– Journeaux (No 2) (1935) 52 CLR 713 Deen –v– Lamb [2001] QADT 20 Ebert-v- the Union Trustee Co of Australia (1960) 104 CLR 346 Faulkner –v– Bluett (1981) 52 FLR 115 Hagan –v– Trustees of Toowoomba Sports Ground Trust [2001] FCA 123 John Waymouth Ahern v Deputy Commissioner of Taxation (1987) 76 ALR 137 Keenan –v–Deputy Commissioner of Taxation (1999) 42 ATR 101 Kibby-v- Registrar of Titles [1999] 1 VR 861 at 872 Lewis (as liquidator of Doran Constructions Pty Ltd) & other v Doran & Ors [2005] NSWCA 243 Official Receiver and Liquidator of Jubilee Cotton Laws Limited –v– Lewis [1924] AC 958 Re Capel; Exparte Caram Finance Australia Limited Unreported, Federal Court of Australia, Cooper J, 1 July 1996 |
| Re James and Another; Ex Parte Carter Holt Harvey Roofing (Australia) Pty Ltd (1993) 123 ALR 342 Re Laktos: Exparte Laktos –v- Deputy Commissioner of Taxation Unreported, Federal Court of Australia, Fin J 9 April 1998 Re Schmidt; Ex Parte Anglewood Pty Ltd (1967) 13 FLR 111 Sandell v Porter (1966) 115 CLR 666 Sarina; Exparte Wollondilly Shire Council (1980) 48 FLR 372 Trkulja –v– Victoria [2001] VSC 62 Wak –v– Franklins Limited (1997) EOC 92-901 |
| Applicant: | TRUSTEES OF THE TOOWOOMBA SPORTS GROUND TRUST |
| Respondent: | STEPHEN HAGAN (AKA STEVEN HAGAN) |
| File number: | BRG 741 of 2006 |
| Judgment of: | Burnett FM |
| Hearing date: | 23 January 2007 |
| Delivered at: | Brisbane |
| Delivered on: | 25 July 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr S. Cooper |
| Solicitors for the Applicant: | Gilshenan & Luton |
| Counsel for the Respondent: | Mr A.J. See |
| Solicitors for the Respondent: | Drakopolous Black |
ORDERS
That the application be dismissed.
Costs reserved.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 741 of 2007
| TRUSTEES OF THE TOOWOOMBA SPORTS GROUND TRUST |
Applicant
And
| STEPHEN HAGAN (AKA STEVEN HAGAN) |
Respondent
REASONS FOR JUDGMENT
Introduction
The Applicant, the Trustees of the Toowoomba Sports Ground Trust apply for the sequestration of the estate of the Respondent, Stephen Hagan. The act of bankruptcy alleged to have been committed is a non-compliance with Bankruptcy Notice Number QN647/2006 duly served on or about 14 August 2006.
The Bankruptcy Notice was premised upon a costs order made by the High Court of Australia against the Respondent on 19 March 2002. The costs were subsequently taxed and the subject of a Certification of Taxation issued by the Registry of the High Court on 30 October 2003 for the sum of $16,111.67.
Save for the matters as identified as being in dispute it is not an issue that at the hearing the Applicant provided proof of the matters required by section 52(1)(a) to (c) Bankruptcy Act and that prima facie the Court ought to be satisfied with the proof of those matters.
In the circumstances I accept the Applicant’s submission that the Trustee has a prima facie right to a sequestration order unless the Respondent can establish a defect as alleged or some special circumstance which would justify the Court in departing from its usual practice; Cain v Whyte[1].
[1] (1933) 48 CLR 639 at 646.
The Respondent has filed a Notice Stating Grounds of Opposition to the application in which he has identified five grounds. Before proceeding to examine each ground some background is necessary.
Background
The Respondent is an activist for indigenous rights. He sought orders against the Applicant pursuant to provisions of the Racial Discrimination Act1975 (Cth) in respect of signage at a sports reserve administered by the Applicants. He contended that the word “Nigger” which appeared in signage on the “ES “Nigger” Brown Stand” at the sports reserve contravened the provisions of that Act. He brought proceedings in the Federal Court claiming compensation for loss and damage. His application was dismissed with costs on 10 November 2000. He subsequently appealed to the Full Federal Court. On 23 February 2001 that appeal was also dismissed with costs. That appeal was followed by an Application for Special Leave to appeal to the High Court which application was refused with costs.
The costs order made by the High Court was subsequently assessed and a Certificate of Taxation issued on 30 October 2003 in the sum of $16,111.67. A Bankruptcy Notice in respect of such amount together with interest was issued on 16 May 2006. Despite service of that notice the Respondent did not pay the money or make arrangements with the Applicant to satisfy settlement of the debt.
The Grounds of Opposition filed identified five grounds in opposition to the application, namely
a)the Applicant is not entitled to enforce the final judgment or order the subject of a Bankruptcy Notice as the Bankruptcy Notice is invalid;
b)the Applicant as named “Applicant Creditor” is not owed the debt as the individuals who were trustees are no longer trustees;
c)the Applicant is not owed the debt subject to the petition;
d)the Respondent is able to pay his debts; and
e)there is on ongoing counter-claim against the creditors and claim against the State of Queensland.
Entitlement of original Trustees to enforce the costs order
The first three issues were addressed by the Respondent in his outline under the heading “Threshold Argument”. Broadly Counsel for the Respondent submitted that the Applicant was not entitled to enforce the final judgment or order the subject of the Bankruptcy Notice. In summary the submission was to the effect that the Bankruptcy Notice identified the creditors as the “Trustees of the Toowoomba Sports Ground Trust” (The Trust) it being the creditor identified in the Certificate of Taxation provided by the Brisbane office of the Registry of the High Court dated 30 October 2003. He contended that the persons to whom the taxation order was made out were various nominated individuals who were the named trustees, for the time being, of the land designated as reserved grounds under the Lands Act 1994 (Qld). It was submitted they were in place as trustees prior to the Toowoomba Sports Ground Inc being appointed as trustee of the Toowoomba Sports Ground Trust[2].
[2] Affidavit Reginald Cyril Murphy filed 10 November 2006 paragraph 4.
Accordingly it was contended that at the time the Bankruptcy Notice was issued the persons in whose favour the costs order was made (namely the “Trustees of the Toowoomba Sports Ground Trust”) were not entitled to enforce the final judgment or order. Nor were they entitled to make application for a Bankruptcy Notice or be applicants in a creditor’s application because:
a)those named trustees were no longer statutory trustees of the reserve for the purposes of the Land Act because their role as individual trustees had come to an end;
b)the final order, as a debt owing, did not attach to the Trust as the action commenced under the Racial Discrimination Act was an action against persons under the Act and the Trust did not have any legal personality, it being nothing more than a “statutory obligation”; and/or
c)the final order, as a debt owing, did not attach to the former trustees because section 92(2) of the Land Act prevented civil liability attaching to those persons and accordingly the former trustees had no claim at law to the subject debt.
Trustees were no longer statutory Trustees
The Respondents contention was that the Toowoomba Sports Ground Inc (The Association) became incorporated under the Associations Incorporation Act1981 (Qld) (AI Act) on 19 July 2002 and that the Association was not appointed as trustee of the sports reserve until
13 August 2004. Accordingly it did not assume any rights or entitlements as trustees until that time. It was contended that the Association, as trustee of the sports reserve, was subject to the regulatory arrangements for trustees under the Lands Act and in particular section 90 which specifically excluded the operation of the Trusts Act1973 (Qld) and in particular section 15(1) of the Trusts Act. The exclusion of operation of the Trusts Act was relied upon in support of a contention that the conveyance transfer or assignment of any of the trust property by the former trustees of the Trust was subject to the specific regulatory arrangements provided for within Chapter 3 of the Lands Act 1994 and also section 199 of the Property Law Act 1975 (Qld)[3]. It was submitted there was no evidence before the Court that there had been an assignment of the debt in accordance with those statutory provisions and in the absence of such assignment, the Association as a new trustee could not lay claim to the debt the subject of the creditor’s petition.
[3] Providing for statutory assignments of things in action.
For the Applicant it was submitted that the Respondent’s submission on this point was misconceived. The Applicant submitted that on
19 March 2002, the date that the costs order alleged in the Bankruptcy Notice was made, the trustees of the Trust were an unincorporated Association of individuals[4]. It was submitted that s.92(2) dealt with the liability of trustees of statutory trusts, not with the liability of other parties to the trustees.
[4] I accept the Applicant’s submission that the individual Trustees collectively constituted an unincorporated association in accordance with the principles of Kibby-v- Registrar of Titles [1999] 1 VR 861 at 872.
Section 92 of the Land Act relevantly provides:
“92 Protection from liability
(1)A Trustee appointed by the Minister under this part does not incur civil liability for an act done, or omission made, honestly and without negligence under this Act.
(2)If subsection (1) prevents a civil liability attaching to the trustee, the liability attaches instead to the State.
(3)Subsection (1) does not apply to a statutory or incorporated body.”
It was contended by the Applicant that the purpose of the section was explained in the Explanatory Notes to the Land Bill which provided,
“…some protection for Trustees who are unable to pay for public liability insurance from trust funds (where the Trust does not generate enough revenue to cover the cost of such insurance), and who are not protected or required to have such insurance under some of the Statutes”.
It was submitted by the Applicant that the section made no provision about the liability of other parties to the trustees and that the flaw in the Respondent’s submission was apparent because if his contention was correct then no individual trustee of a statutory trust entitled to the protection provided by section 92(2) could ever sue and recover damages or costs from another party on behalf of any trust.
It was contended that section 92(2) does not prevent an asset such as a chose in action acquired by the members of the unincorporated association in their capacity as trustees, attaching to those members. It was further submitted that nor did it operate in such a way that debts incurred by the unincorporated association, and in this instance the Association, in the ordinary course of administering a trust would be met by the State. It was submitted that in circumstances where the funds held on behalf of the trust were expended by the unincorporated association in defending the proceedings brought by the Respondent, the trustees were entitled to enforce the costs order against the Respondent notwithstanding any immunity from civil liability provided to those individual trustees by operation of the Act. Accordingly the chose in action was held as an asset by the unincorporated association on behalf of the Trust and available to it.
I accept the Applicant’s submission in that regard. The meaning of section 92 is in my view plain; a Trustee “does not incur civil liability” as provided under section 92(1). The Respondent’s construction which purports to introduce a mirror obligation in relation to “entitlements” cannot be justified upon a plain reading of the section. I agree with the Applicant’s submission that in any event such a construction would be illogical as, if it were correct, no individual trustee of a statutory trust entitled to the protection provided by section 92(2) could ever sue and recover damages or costs from another party on behalf of the trust. Clearly if that was to be the intention of the legislation it would have to be clearly expressed as such. I reject the Respondent’s contentions in respect of this ground.
Standing of the Toowoomba Sports Ground Inc
The Association became incorporated under the AI Act on 19 July 2002. The Association was appointed as trustee of the sports reserve on 13 August 2004 and assumed its rights, obligations and entitlements as trustee from that time[5].
[5] Affidavit of Reginald Cyril Murphy filed 10 November 2006 at paragraph 15 and annexure RCM8 [concerning day of consent] and paragraph 16 and annexure RCM9 [noting 13 August 2004 as the date of publication in the Queensland Government Gazette].
It was contended by the Respondent that as section 90 of the Land Act excludes the operation of the Trusts Act1973 there was no evidence to demonstrate there had ever been any conveyance, transfer or assignment of any of the trust property of the former trustees of the Toowoomba Sports Ground Trust and accordingly in the absence of any evidence to that effect there could have been no assignment of the debts due to the Trust[6].
[6] Section 15(1) of the Trusts Act provides that “where a new trustee is appointed the instrument of appointment vests, subject to the provisions of any other Act, the trust property and the persons who become and are the trustees as joint tenants without any conveyance, transfer or assignment”.
In response to that submission the Applicant submitted that as the Association was incorporated to replace the unincorporated association of individuals then acting as trustees to the Trust the relevant provisions of the AI Act thereby effected the conveyance, transfer or assignment. In particular the Applicants relied upon section 23 of the AI Act which relevantly provides:
“23 Transfer of other assets, rights and liabilities
(1) On incorporation of an association, the association’s assets, rights and liabilities become the incorporated association’s assets, rights and liabilities.
(2) A legal proceeding by or against the association that has not been finished before the incorporation of the association may be continued and finished by or against the incorporated association.”
The Applicant submitted that as the application for special leave was heard on 19 March 2002 being prior to incorporation of the unincorporated association, the costs order following from that proceeding was a chose in action that was:
a)an asset of the unincorporated association; and
b)personal property held by members of the unincorporated association on trust for the benefit of the Trust and Trust property.
It was contended then that upon the incorporation of the Association, the entitlement of the members of the unincorporated association to enforce the costs order against the Respondent became an asset of the Association and accordingly the Association did not need to rely upon section 15(1) of the Trusts Act as the source of the vesting power. It was further submitted that additional evidence of the intention to transfer and convey the chose of action is demonstrated by the records of the proceedings of an extraordinary general meeting of the unincorporated association held on 31 October 2002 where it was resolved that the trustees would transfer all assets and any interest or entitlement in any property, real or personal, of the Trust to the Association with immediate effect. Clearly that resolution would have included the chose in action created by the costs order.
It was further submitted on behalf of the Applicant that upon the vesting or transfer the other assets held by the members of the unincorporated association as trustees the Association became a trustee of the assets of the Trust under general principles of equity. Those assets included the chose in action being the claim for costs. It was submitted that it was immaterial that taxation of the costs occurred after the incorporation of the Association and the transfer of the chose in action. It was submitted that although the formal appointment of the Association as trustee of the Trust under the provisions of the Lands Act was not formally gazetted until 13 August 2004 and that this was after the making of the costs order and the issuing of the Certificate of Taxation, it did not alter the fact that under the general law the Association held the chose in action created by the costs order on behalf of the Trust from no later than 31 October 2002. It was therefore submitted by the Applicant that the Respondent’s submission that the Association did not assume any rights from the entitlements as trustee until 13 August 2004 was not correct.
Finally it was submitted on behalf of the Applicant that in any event the proceedings in the High Court were brought by the Respondent against the “Trustees of the Toowoomba Sports Ground Trust” not against particular named individuals. It was submitted that this was a reference to trustees of the Trust from time to time and that accordingly any person validly appointed as a trustee of the Trust was entitled at any time during their trusteeship to enforce the costs order made by the High Court in favour of the Trust whether or not that person was a trustee at the time the order was made. Subject to the matter discussed below I accept the Applicant’s submissions as being correct. The Respondent’s submissions are, with respect, simply misconceived. There are clear provisions governing the success of rights, duties and obligations of unincorporated associations provided for by the AI Act. The Respondent’s submissions seek to distinguish their operation. However the logic of his argument is flawed when measured against the very clear expression of the legislation. There is no need for evidence of any express assignment of rights. That occurred as a matter of law.
Incorporation of Unincorporated Association
During the course of the proceeding one other issue associated with this matter was raised. A concern arose as to whether or not the association was properly incorporated because a question as to its eligibility for an incorporation may have been enlivened by operation of section 5(d) of the AI Act 1981.
The matter was the subject of supplementary submissions. In the event the Applicant in its submissions identified the issue as being resolved by section 15(2) of the AI Act. Section 15(2) of the AI Act relevantly provides,
“Certificate of incorporation
(1) On registration of the association, the chief executive must issue a certificate of incorporation to the association.
(2) The certificate is conclusive evidence that the requirements of this Act about the association's registration and matters preceding or incidental to the registration have been complied with.”
A Certificate of Incorporation under the AI Act pursuant to section 15 was exhibited certifying the Incorporation of the Toowoomba Sports Ground Inc[7]. It was submitted by the Applicant that on a plain reading of section 15(2) of the IA Act the Certificate provides conclusive proof of the valid incorporation of the Association and that as such the Court is prevented from considering whether the Association was ineligible for incorporation by reason of section 5. In particular it was submitted that the underlying policy for this could be found in the Explanatory Notes to the Consumer Law and Other Justice Legislation (Miscellaneous Provisions) Bill 1996 which noted in respect of the proposed section 15(2),
“Clause 7 provides that a Certificate of Incorporation is conclusive evidence that the requirements of the Act about the Association’s registration have been complied with. The provision mirrors section 122 of the Corporations Law. The provision is designed to assist association members and those who deal with them, by ensuring that the legal status of the associations and corporations cannot be challenged.
This is because after incorporation the association may have entered into contracts, gained tile of land, obtained machine gaming licences, opened bank accounts etc. If the incorporation of the association is opened to challenge, the association’s dealings with third parties and the ownership of its property holdings may be seriously compromised. The problem would be compounded the longer the association has its corporate status. On balance, the benefit of protection of third parties in dealing with the association outweighs the benefits of leaving open to challenge the incorporation of the association.”
[7] Affidavit of Reginald Cyril Murray filed 10 November 2006 annexure RCM7.
It was further submitted that this approach was consistent with similar provisions in corporations legislation which precluded Courts from going behind Certificates of Registration; Official Receiver and Liquidator of Jubilee Cotton Laws Limited –v– Lewis[8]; Bouzaid –v– Horowhenua Indoor Bowls Centre Inc[9].
[8] [1924] AC 958 at 972-973.
[9] [1964] NZLR 187 at 191-193.
The Respondent did not make any submissions in response to the Applicant’s submission on this matter. In my view the Applicant’s submissions are correct.
It follows that unless the Chief Executive had reasonable cause to believe that it was desirable that the incorporation of an unincorporated association be cancelled by reason of one of the matters identified in section 93(1), the Certificate of Incorporation is conclusive and it is not necessary to consider any argument beyond that point.
Conclusion – Entitlement of Association as Trustees
It follows that the Association having been properly incorporated a conveyance transfer or assignment of the chose in action was effected by operation of section 23 of the IA Act and the Toowoomba Sports Ground Inc as Trustees of the Toowoomba Sports Ground Trust were entitled to enforce the rights of the Toowoomba Sports Ground Trust including those rights associated with the enforcement of the Certificate of Taxation.
Respondent is able to meet his debts
The evidence concerning the Respondent’s capacity to satisfy his debts is scant. He deposed to the receipt of net pay of $1,300 per fortnight or approximately $2,600 per month in respect of which his monthly commitments total approximately $2,300 leaving a surplus of $1,300 per month available to discretionary spending[10].
[10] Affidavit of Stephen Hagan filed 2 August 2005 at paragraph 9 .
In addition the Respondent swore that as he will receive additional income from writing interests (although whether this income will be recurrent or otherwise is not deposed to). In particular:
a)He is negotiating for consulting contracts with the Christensen fund for $1,250 per week;
b)He will receive $24,000 for a consultancy for an Australian Film Incorporated funded documentary;
c)He has an interest in a property located at 3 Belclaire Drive Westbrook valued at $240,000 which is subject to mortgage;
d)He has personal assets insured for $450,000 comprising household items and a 2004 Holden SS Commodore sedan valued at $52,000 which sedan is subject to a finance arrangement with $26,000 remaining outstanding;
e)He expects to earn $60,000 from a private business “Boida Wata” (with no timeframe discussed); and
f)He does not have any other debts other than “these regular commitments” which I take to be a reference to the mortgage and the finance on his motor vehicle and the debt claimed for by the Applicant[11].
No supporting evidence was adduced beyond the Respondent’s assertions in his affidavit of 17 November 2006.
[11] Affidavit of Stephen Hagan filed 17 November 2006.
In addition there was evidence from the Respondent that his bank, the Commonwealth Bank of Australia, had approved a loan in the sum of $30,850. Notice of approval was contained in the letter dated 22 January 2007. The terms of the letter indicate the Bank’s willingness to advance a sum of $30,300 to the Respondent. When read in conjunction with the Respondent’s application filed 17 January 2007 there is some question whether the Respondent himself has any interest in the property. Given that the addressees of correspondence from the bank are both the Respondent and his wife; that the correspondence is addressed concerning “Your home loan enquiry”; and the proposal contained in the bank’s letter of offer dated 8 January 2007 appears to be premised upon there being a home already owned by the addressees, I consider on balance the evidence demonstrates the Respondent has equity in his home at 3 Belclaire Drive Westbrook. The nature of his equity was not particularised but given it relates to a home, correspondence was addressed to the Respondent and his wife and the demands for information and loan requirement were joint, I infer they owned the property jointly. Notwithstanding the fact that the property is jointly owned, his wife will secure the loan and will make the funds available to the Respondent to discharge his indebtedness.
The Respondent contends he was and is able to pay his debts. Accordingly he sought the favourable exercise of the Court’s discretion under section 52(2)(a) of the Bankruptcy Act. It was apparent that in this instance the Respondent’s failure to pay was rather one of a “refusal” to pay premised upon a genuine belief related to a matter of principle. I do not doubt the genuineness of his beliefs irrespective of whether they are well founded. He submitted that support for a favourable exercise of the discretion could be found from the authority of the Federal Court in Keenan –v–Deputy Commissioner of Taxation[12]. In particular the Respondent cited the judgment of Kiefel J where Her Honour, referring to the judgment of Deane J in Sarina; Exparte Wollondilly Shire Council,[13] stated,
“…there is no policy discernible in the bankruptcy legislation which would entitle a creditor to make a recalcitrant debtor bankrupt even though the debtor satisfies the Court that he is solvent. The Bankruptcy Act 1966 is concerned with persons who are insolvent.”
[12] (1999) 42 ATR 101 at 103.
[13](1980) 48 FLR 372.
What was essentially contended for by the Respondent was that the Respondent was an able but unwilling debtor. In his final oral submissions Counsel for the Respondent emphasised that the Respondent was an activist and that he did not intend to pay the sum claimed.
In his submissions Counsel for the Applicant contended at the outset that the onus of proving solvency rested upon the Respondent; Re Capel; Exparte Caram Finance Australia Limited[14]. He submitted that it was not sufficient for the Respondent to show that his assets exceeded his liabilities; but, in order for the Respondent to satisfy the Court that he was able to pay his debts as they fell due he must provide evidence of his financial position in its entirety; Re Laktos: Exparte Laktos–v–Deputy Commissioner of Taxation[15]. The Applicant submitted that this test required evidence from the Respondent of inter alia,
a)levels of his current expenses;
b)ability to meet his recurrent expenses out of recurrent earnings or otherwise; and
c)the speed with which assets could be realised to meet his debts.
[14] Unreported, Federal Court of Australia, Cooper J, 1 July 1996 [at 7-9].
[15] Unreported, Federal Court of Australia, Fin J 9 April 1998 [at 6].
It was submitted that the Respondent’s affidavits failed substantially to satisfy that test.
The widely accepted test of a person’s ability to pay his/her debts as and when they become due was stated by Barwick CJ in Sandell v Porter[16] His Honour stated[17]:
“- - insolvency is expressed … as an inability to pay debts as they fall due out of the debtor’s own money. But the debtor’s own monies are not limited to his cash resources immediately available. They extend to monies which he can procure by realisation, by sale or by mortgage or pledge of his assets within a relatively short time – relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor. The conclusion of insolvency ought to be clear from a consideration of the debtor’s financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor’s inability, utilising such cash resources as he has or can command through the use of his assets, to meet his debts as they fall due which indicates insolvency.” (emphasis mine)
[16] (1966) 115 CLR 666
[17] at 670.
Likewise Giles JA in Lewis (as liquidator of Doran Constructions Pty Ltd)& other v Doran & Ors[18] noted:
“- - insolvency is, first and last, a question of fact “to be ascertained from a consideration of the company’s financial position taken as a whole. In considering the company’s financial position as a whole, the Court must have regard to commercial reality. Commercial realities will be relevant in considering what resources are available to the company to meet it’s liabilities as they fall due, whether resources other than case are realisable by sale or borrowing on security and whether such realisations are achievable.”[19]
[18] [2005] NSWCA 243
[19] At paragraph 80
Given the Respondent’s cashflow and the loan facility available to him relative to the modest debt claimed by the Applicant I am not satisfied that the Respondent lacks an ability to pay his debts. Undoubtedly the respondent’s evidence in respect of this issue was poorly prefaced and presented. However that should not detract from the ultimate conclusion open to be drawn when the evidence is considered as a whole.
Even were my finding (based on inferences) of his interest in property wrong, given the Respondent is in employment there are clearly available other means by which the Applicant would be capable of successfully enforcing its debt.
The Respondent having satisfied the Court that he is able to pay his debts the application should be dismissed.
Other sufficient reasons an order should not be made
The Respondent contends that pursuant to section 52(2)(b) the Court should dismiss the petition as there are other sufficient reasons a sequestration order ought not to be made.
Those matters are
a)the prospect of a set off or counterclaim which could not have been pursued in the earlier proceedings; and
b)the effect any sequestration order might have upon the Respondent’s capacity to prosecute its claim.
Set Off or Counterclaim
In his submissions the Respondent outlined in some detail the background and history of the litigation concerning his efforts to have what he regarded as the racially offensive term “Nigger” removed from a sign on the grandstand which then read “The “ES” Nigger Brown Stand”.
Briefly the litigation had its genesis in a complaint made by the Respondent to the Human Rights and Equal Opportunity Commission on 19 July 1999 pursuant to section 46P of the Human Rights and Equal Opportunity Commission Act1986 (Cth). That litigation involved proceedings by the Respondent against the former Trustees commencing in the Commission and ultimately proceeding to a single then Full Court of the Federal Court and then to the High Court of Australia. In each instance the Respondent was unsuccessful.
The Respondent continued to prosecute his case against the Trustees by petitioning the United Nations Committee on the Elimination of Racial Discrimination in accordance with Article XIV of the International Convention on the Elimination of All Forms of Racial Discrimination. That process is still pending although irrespective of its outcome no enforceable orders will arise from such proceedings.
In the meantime on 24 February 2005 the Respondent wrote to the new trustee, the Association, asking that the Association exercise their administrative functions under section 46 of the Land Act 1994 (Qld) and remove the offending word from the signage. By correspondence dated 18 March 2005 the Association responded to that request but failed to identify whether the Association had taken a decision to remove the signage or not. Accordingly on 5 April 2005 the Respondent made an application to the Association under the Freedom of Information Act1992 (Qld) to ascertain whether or not a decision by the Association had been made. There was a failure by the Association to comply with that request which resulted in the Respondent writing to the Office of the Information Commissioner asking that it review that decision.
Concurrently it appears that the Respondent wrote to the Minister for
Resources and Mines asking that he either (a) direct the Association as Trustee to remove the offending term from the sign or (b) direct the Association to advise as to whether or not it intended to retain or remove the sign in response to the Respondent’s request and provide reasons for the decision that he made. The Respondent is considering its position in respect of that matter given the Minister’s advice that he had no plans to take any further action in the matter.
On 23 March 2003 the Respondent made an application to the Anti-Discrimination Commission of Queensland on the basis that the presence of the offending word on the grandstand and apparent refusal by the Association to remove the sign is a public act that encourages hatred towards, serious contempt for and severe ridicule of Aboriginal people and dark skinned people and is in direct contravention of section 124A of that Act[20].
[20] That avenue of litigation was not available to the Respondent at the time of its original proceedings before the Human Rights and Equal Opportunity Commission.
The complaint to the Anti-Discrimination Commission of Queensland has been broadened to include allegations of breaches of section 46 (discrimination in the provision of goods and services) and section 101 (discrimination in the administration of State laws and program areas).
The Respondent submits that any new claims that arise as a consequence of the exercising of the administrative powers of the Trustee or of the fresh claim under section 124A before the Anti-Discrimination Commission of Queensland were claimed were not capable of being set up in an action or proceeding in which the costs orders against the Respondent were ordered.
In particular the Respondent refers to that part of section 40(1)(g) of the Bankruptcy Act concerning the commission of an act of bankruptcy. The Respondent contends that an act of bankruptcy would be committed under section 40(1)(g) only if it satisfied the matters provided for therein and the debtor (in this case the Respondent) did not satisfy the Court that he had a counterclaim set off or cross demand equal to or exceeding the amount of the judgment debt payable under the final order “that he…could not have set up in the action or proceeding in which the judgment order was obtained.” It was submitted that the meaning of the term “could not have set up in the action” provided for in section 40(1)(g) was “could not as a matter of law set up”: Re James and Another; Ex Parte Carter Holt Harvey Roofing (Australia) Pty Ltd[21]. Accordingly the Respondent submitted, it did not matter whether the continued prosecution of the case against the Applicant be characterised as either a counterclaim, set off or cross demand; Re Schmidt; Ex Parte Anglewood Pty Ltd[22].
[21] (1993) 123 ALR 342 at 348.
[22] (1967) 13 FLR 111 at 116.
In its submissions the Applicant did not take issue with the matters submitted by the Respondent summarised above. However the Applicant submitted that to succeed on this point the Respondent must establish that his claim is a “real claim” that is “likely to succeed”, having “sufficient validity… to justify a dismissal of adjournment of the petition”. Re Schmidt; Ex Parte Anglewood Pty Ltd[23].
[23] Supra at 116.
Accordingly it was submitted that in order to succeed the Respondent had to demonstrate more than a bona fide claim; rather, the Respondent had to demonstrate that the claim had a reasonable probability of success. It was submitted that this would require the Respondent to show that he had a prima facie case: Ebert-v- the Union Trustee Co of Australia[24].
[24] (1960) 104 CLR 346 at 350.
Concerning the Respondent’s claim to the United Nations Committee on the Elimination of Racial Discrimination it was submitted that such a claim would not constitute sufficient cause not to make a sequestration order because:
a)the decision by the Committee would form part of the body of public international law but could not be enforced directly in Australia unless through legislation passed by competent parliament: Bradley –v– Commonwealth[25];
b)the Association is not a party to the claim made to the Committee as those proceedings were between the Respondent and the Federal Government;
c)the Committee had no power to make any award of damages which could then operate to reduce the debt owed by Mr Hagan to the Association (even if it were a party).
[25] (1973) 128 CLR 557.
Under the optional protocol to the international covenant on civil and political rights the Committee does not have power to award compensation, only to forward its views on the claim to the parties.
In my view the Applicant’s submissions on this point are plainly correct. The claim made by the Respondent to the United Nations Committee on the Elimination of Racial Discrimination could not give rise to a counterclaim, set off or cross demand by the Respondent to the Applicant as even if were such proceedings to result in an award of damages it would not be one against the Applicant in favour of the Respondent.
The Applicant submits concerning the second substantive basis of claim by the Respondent, namely the complaint made to the Queensland Anti-Discrimination Commission, that the claims made against the Association are said to arise under section 46, 101 and 124A of the Anti-Discrimination Act 1991 (Qld)[26]. However in submissions made the Respondent also relied upon section 46 (discrimination in goods and services area) and section 101 (discrimination in administration of State laws and programs areas). The Applicant submits that in order to consider the prospects of success of the Queensland proceedings regard should be had to the prior course of proceedings in the Commonwealth which involved a hearing before the Human Rights and Equal Opportunity Commission together with the subsequent reviews by the Federal Court at first instance, the Full Court of the Federal Court and the High Court. The Applicant submits that so far as those proceedings were concerned the judgment of the Full Federal Court described Mr Hagan’s appeal to that Court as being without merit and having no realistic prospects of success: Hagan –v– Trustees of Toowoomba Sports Ground Trust[27]. Subsequently the application for special leave was refused. The clear inference is that a single Judge of the High Court saw no realistic prospects.
[26] In the Respondent’s Notice Stating Grounds of Opposition to an Interim Application or Petition he identifies only section 124A (vilification on the grounds of race, religion, sexuality or gender identify unlawful) of the Anti-Discrimination Act 1991 (Qld) as a basis for compliant. However in submissions made the Respondent also relied upon section 46 (discrimination in goods and services area) and section 101 (discrimination in administration of State laws and programs areas).
[27] [2001] FCA 123 at [31].
The Applicant submits that there is no sufficient difference in any material sense between the Commonwealth and State legislation to conclude that the Respondent’s present claim before the Queensland Anti-Discrimination Tribunal would enjoy any greater prospect of success than those proceedings which have already been dismissed by the Federal Court. Moreover the Applicant says that in particular the absence in the State legislation of the provision requiring that the conduct complained of be engaged in “because of” someone’s race is not a sufficient basis to contend that the decisions in the Federal proceedings are likely to be distinguished. It was submitted that although it is not an express requirement of the State legislation that offensive conduct be engaged in “because of” someone’s race it is difficult to see how conduct could incite hatred, serious contempt or severe ridicule of a race of persons if that conduct was not engaged in because of race. It was submitted that the intent of both pieces of legislation was the same and that the provisions in question would produce the same result when applied to identical facts. It was submitted on behalf of the Applicant that as the Respondent’s claims under the Queensland legislation are advanced on precisely the same grounds as is complained under the Commonwealth legislation there is a strong likelihood that the Tribunal would consider and follow the decisions of the Federal Court, Full Federal Court and High Court. Further it was submitted that even if the difference between the language of the Commonwealth and State provisions meant that the Tribunal was not strictly bound by the High Court decision it was submitted that the reasoning adopted in that Court and the Federal Court below would be considered so persuasive as to make it “inconceivable” that the Tribunal would come to a different conclusion than the Federal Court as to what is essentially the same claim, namely whether the display of the signage constitutes racial vilification.
I accept the Applicant’s submissions. I agree that the absence of the express words providing for the causative link between conduct and race which is required in the Commonwealth Act but not the State Act would not be material in the present case. The presence of the verb “incite” in section 124A creates a clear nexus between the conduct and race. The absence of the words “because of” do not appear to materially add to the character of the conduct proscribed.
I accept that the likely outcome of proceedings before the Queensland Anti-Discrimination Tribunal will mirror those of the Human Rights and Equal Opportunities Commission and accordingly will fail.
[28] (1997) EOC 92-901.
In addition it was submitted by the Respondent that in any event the complaints under section 46 and 101 in respect of discrimination concerning the area of goods and services and the administration of State laws and programs will also fail. It was submitted that section 10 of the Anti-Discrimination Act1991 (Qld) provides that discrimination occurs when a person treats or proposes to treat a person with an attribute (here race or skin colour) less favourably than another person without the attribute is or would be treated in circumstances that are the same or not materially different. In this case it was submitted that the Respondent’s claim for alleged discrimination will face difficulties where the language complained of has not been used against him personally. In particular the Applicant referred to a decision of
Wak –v– Franklins Limited[28]. That case is authority for the proposition advanced by the Applicant particularly given that,
a)the language complained of has not been used in a racial sense but as the nickname of a sportsman in the context of honouring the achievements of that person;
b)the word has not been specifically directed at the Respondent; and
c)there is no material before the Court to establish the persons other than the Respondent complain of less favourable treatment as a result of the existence of the sign.
I accept the Applicant’s submission that there are good grounds to doubt the probability of the Respondent succeeding in a claim based upon discrimination under section 46 or 101.
Concerning section 124A the Applicant submitted that there has never been any evidence beyond the Respondent’s own belief to suggest that the display of the sign incites hatred against, serious contempt for or severe ridicule of either the Respondent himself or Aboriginal people as a group. Although it is contended that proof of actual incitement is not required the test of whether incitement has occurred is an objective one based on a hypothetical listener or viewer: Deen –v– Lamb[29].
[29] [2001] QADT 20.
In that regard the relevant audience was said to be “a reader who is of fair Aboriginal intelligence, and who is neither perverse or morbid, nor of a suspicious mind, nor one who is avid of scandal…” and does not include “on the one hand those persons who are either over-sensitive to criticism of their race, religion or culture, and on the other hand, those who are too thick-skinned to appreciate the nature of an act as one which has relevant tendency to incite”.
The Applicant submitted that the objective test could not be satisfied in circumstances where the language complained of is not being used in a racial sense but as the nickname of a sportsman and that that distinction would be obvious to the hypothetical person.
The second reading speech following the introduction of the Bill inserting section 124A into the Anti-Discrimination Act makes it clear that the racial vilification provisions are intended to apply only to serious matters, prohibiting only the type of communication which undermines social stability and cohesion[30].
[30] Queensland Hansard, 22 March 2001 at 67.
It was therefore submitted by the Applicant that the signage whilst offensive to the Respondent and possibly others is not the type of communication that the Parliament intended to prohibit when it enacted section 124A (the racial vilification law). I accept that submission. The signage has been in place for some considerable time. So much would be apparent by reference to the structure to which it lends its name. Whilst the signage might be viewed in poor taste by reference to contemporary standards it would in my view be apparent to any fair minded observer that the signage is a product of attitudes and taste of a bygone era and in that context could not be seen as an act intended or directed to incite hatred towards serious contempt for or severe ridicule of the Respondent or any other group of persons on the grounds of race. I accept the Applicant’s submissions that the Respondent’s prospects of successfully prosecuting its claim in the Queensland Anti-Discrimination Tribunal are poor.
In any event it was submitted on behalf of the Applicant that even if the Respondent was successful in its claims before the Anti-Discrimination Tribunal the quantum of his loss would be in the order of no more than $4,000. In that regard I note the submission that that proposition concerning quantum was not disputed by the Respondent’s Counsel at the hearing[31].
[31] Affidavit of Peter William Martin sworn 26 October 2006, exhibit PWM-1 at p.74 line 5 to p.75 line 9 of the transcript.
In that regard I note the submissions made by the Applicant that the Respondent has not pointed to any decisions or awards that would support a contention on his part that if successful on his anti-discrimination claim he would receive compensation in an amount sufficient to extinguish the debt owed under the High Court costs order. Further I note the Applicant’s submission that where a debtor has a counter claim for less than the amount of the petitioning creditor’s judgment debt the debtor, if he wishes to avoid a sequestration order, should be required to pay the difference between the amount of the judgment debt and the amount that it seems probable he would receive in the proceedings against the petitioning creditor: Re Schmidt; Ex Parte Anglewood Pty Ltd[32]. In this case not only has the Respondent not placed any evidence before the Court demonstrating the prospect of an assessment of general damages beyond a modest if not token sum but he has also failed to provide any evidence of a willingness to pay the difference between a sum which might be contended for as being appropriate in the circumstances and the judgment debt.
[32] Supra at 116.
In those circumstances I accept the Applicant’s submission that whatever damages might flow from a successful prosecution of the claim before the Queensland Anti-Discrimination Tribunal any such assessment would not be regarded as sufficient cause not to make a sequestration order.
Finally concerning the judicial review proceedings alluded to in the Respondent’s submissions I accept the Applicant’s contention that despite the prospect of such proceedings being raised more than fourteen months ago the Respondent has still not served the Association with any judicial review proceedings. In those circumstances it seems likely that that claim is not being prosecuted.
It is further contended by the Applicant that despite its submissions concerning the prospects of proceedings before the Queensland Anti-Discrimination Tribunal the Respondent has in any event been dilatory in the prosecution of its claims in that forum. It was submitted that the Respondent’s claims in the Queensland Anti-Discrimination Tribunal were filed in March 2005 after an earlier petition for sequestration had been filed and served by the Applicant. This is not withstanding that the application for special leave was refused by the High Court approximately three years earlier on 19 March 2002. Further to those delays it is submitted that following the filing of its application before the Queensland Anti-Discrimination Tribunal directions had been issued by that Tribunal in particular on 17 July 2006 concerning the conduct of the Respondent’s claim in that jurisdiction. It appears that despite the issue of directions in that application the Respondent has failed to comply with those orders[33].
[33] See affidavit Payne sworn 26 October 2006 exhibit CJP 1 and paragraphs (10) and [11].
Although delay in the prosecution of the claim of itself is not a determining factor it is in my view a matter which could lead to an inference concerning the Respondent’s belief as to prospects. In this case where the Respondent has been in receipt of pro bono legal services delay in the prosecution of the application in the context and background and history of the application generally especially lends some support to the inference that those who have been providing pro bono services do not necessarily share the respondent’s confidence in the prospect of successfully prosecuting this new application.
Prejudice to Mr Hagan’s entitlement to prosecute
[35] (1944) 68 CLR 571 at
In his submissions Counsel for the Respondent submitted “there is a fundamental right of the Respondent at stake”. That right was that the granting of any order would be highly prejudicial if not fatal to the Respondent’s rights to prosecute his case at law. In support of that contention the Respondent relied upon the decision of the Full Court in John Waymouth Ahern –v– Deputy Commissioner of Taxation[34];
Cameron –v– Cole[35]; and Commissioner of Police –v– Tanos[36].
[36] (1958) 98 CLR 383 at 395.
[34] (1987) 76 ALR 137 at 147-149.
It was submitted that the grant of any sequestration order would severely impact upon the capacity of the Respondent to pursue the full range of remedies he was entitled to. In the event, in this application, for reasons provided above a sequestration order has not been made. However if my determination in that regard were in error I would in any event not consider that any sequestration would adversely impact upon the Respondent’s rights.
In his submissions the Applicant noted the exception provided for in section 60(4) of the Bankruptcy Act in respect of the general vesting rule found in section 58(1). In particular section 60(4) of the Act provides
“Notwithstanding anything contained in this section, a bankrupt may continue, in his own name, an action commenced by him before he became a bankrupt in respect of:
(a) any personal injury or wrong done to the bankrupt…
(5) In this section, “action” means any civil proceeding, whether at law or in equity.”
In my view it was correctly submitted by the Applicant that the test whether under section 60(4) of the Bankruptcy Act a bankrupt may continue in his own name for his own benefit an action commenced by him previous to his bankruptcy for personal injury or wrong done to himself is, whether the damages or part of them are to be estimated by immediate reference to pain felt by the bankrupt in respect of his mind, body or character and without reference to his rights of property; Cox –v– Journeaux(No 2)[37]. By way of illustration and supporting authority the Applicant referred to Faulkner –v– Bluett[38] as authority for the central proposition where the essential cause of action is the personal injury done to the person or feelings of the bankrupt the right to sue remains with the bankrupt.
[37] (1935) 52 CLR 713 at 721.
[38] (1981) 52 FLR 115 at 118-120.
It was submitted that although there has been no occasion to consider whether a claim brought pursuant to anti-discrimination legislation would fall within the exception created by section 60(4) this form of action would fall within the exception. It was submitted that the Respondent’s claims are personal to him and to that end it could be said the essential cause of action underlying the various claims is offence alleged to have been caused to the Respondent by the continued use of a racial epitaph on signage maintained by the Applicant. In those circumstances the claims would clearly be seen to be claims for personal injury done to the Respondent’s feelings. Another useful analogous authority referred to by the Applicant was the decision in Trkulja –v– Victoria[39] which involved a claim for physical inconvenience and mental distress arising by reason of a malicious prosecution. In that instance that claim was seen to be personal to the bankrupt and fell within the exception provided by section 60(4).
[39] [2001] VSC 62.
I accept that in this case the claim made by the Respondent is one which is personal to him. It does in my view fall within the exception provided for by section 60(4) of the Act. On that basis it could not be submitted on behalf of the Respondent that a sequestration order against him would prejudice his entitlement to pursue that claim.
Conclusion
I do not accept the Respondent’s contentions that the Applicant was not entitled to rely upon the judgment debt determined in favour of its predecessor because of lack of form. Further I do not accept that its application should fail because other sufficient cause was made out pursuant to s.52(2)(b) of the Bankruptcy Act, by reason of an ongoing claim, or counterclaim which conduct he pursued in the earlier proceedings. However I do accept the Respondent is able to pay his debts and on this basis alone the application is dismissed.
I certify that the preceding eighty-three (83) paragraphs are a true copy of the reasons for judgment of Burnett FM
Associate: Bev Schmidt
Date: 1 August 2007
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