Westpac Banking Corporation v Goodman
[2010] FMCA 993
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WESTPAC BANKING CORPORATION v GOODMAN | [2010] FMCA 993 |
| BANKRUPTCY – Sequestration order – whether available act of bankruptcy – whether judgments relied on have been stayed – whether counterclaim which could not have been set up in the proceedings where judgments obtained – whether creditor seeking to prevent debtor taking action against creditor – whether enough to refuse sequestration order – sequestration order made – costs. |
| Bankruptcy Act 1966, ss.40(1), 41(1), 44(1)(a), 52, 116(2)(b) Bankruptcy Regulations 1966, reg.6.03 Bankruptcy Legislation Amendment Act 2010, sch.4 (Part 1) |
| Abigroup Limited v Abignano (1992) 29 FCR 74 Bayne v Blake No. 2 (1909) 9 CLR 360 Bride v KMG Hungerfords (a firm) (unreported) FCA 23 April 1998 Cain v Whyte (1933) 48 CLR 639 Clyne v Deputy Commissioner of Taxation (1984) 52 ALR 657 Goldberg v Morrow [2005] FCA 1038 Goodman v Westpac Banking Corporation [2010] FMCA 714 ICM Agriculture Pty Ltd (ACN 006 077 765) v Young (2009) 260 ALR 515 Radich v Bank of New Zealand (1993) 45 FCR 101 Re Coyne; Ex parte Binningup (South) Pty Ltd (unreported) 10 November 1992 Re King; Ex parte Commercial Bank of Australia Ltd (No.2) [1920] VLR 490 Re Skinners and Smiths Application (1982) 45 ALR 553 Rigg v Baker (2006) 155 FCR 531 Sarina v Council of the Shire of Wollondilly (1980) 32 ALR 596 SCAA v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 668 Totevv Sfar (2008) 5 ABC(NS) 691 Williams v Spautz (1992) 174 CLR 509 |
| Applicant: | WESTPAC BANKING CORPORATION |
| Respondent: | MORRIS GOODMAN |
| File Number: | MLG 1059 of 2010 |
| Judgment of: | Turner FM |
| Hearing date: | 15 November 2010 |
| Date of Last Submission: | 14 December 2010 |
| Delivered at: | Melbourne |
| Delivered on: | 17 December 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr Nichol |
| Solicitors for the Applicant: | Gadens Lawyers |
| The Respondent appeared In Person |
ORDERS
A sequestration order is made against the estate of Mr Morris Goodman.
Mr Warren White be appointed as the trustee of the bankrupt estate of Mr Morris Goodman.
The costs of this matter follow the event and be taxed by the Registrar and paid according to the Bankruptcy Rules.
The interim application filed by the debtor on 4 October 2010 is dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1059 of 2010
| WESTPAC BANKING CORPORATION |
Applicant
And
| MORRIS GOODMAN |
Respondent
REASONS FOR JUDGMENT
The Court has before it a creditor’s petition by the applicant Westpac Banking Corporation against the respondent Morris Goodman. The petition seeks a sequestration order. Mr Nichols represented the applicant; the respondent was self represented.
For the Court to have jurisdiction to make a sequestration order there must be an available act of bankruptcy within the terms of s.40(1) of the Bankruptcy Act 1966 (the “Act”).
The creditor alleges that the debtor has committed an act of bankruptcy as defined in s.40(1)(g) as follows:
40 Acts of Bankruptcy
(1)A debtor commits an act of bankruptcy in each of the following cases:
…
(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:
(i)where the notice was served in Australia – within the time specified in the notice; or
(ii)where the notice was served elsewhere – within the time fixed for the purpose by the order giving leave to effect the service,
comply with the requirement of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained.
The Court will examine whether that provision is applicable here.
·The judgments or orders relied on by the creditor have not been stayed
·The creditor has served a Bankruptcy Notice on the debtor
·The debtor has not complied with the requirements of the notice
·The Court, is not satisfied that the debtor has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sums payable under the final order, which the debtor could not have set up in the actions or proceedings in which the judgements or orders were obtained.
The creditor has obtained the following final orders against the debtor:
Order by Associate Justice Mukhtar made on 5 March 2010 in Supreme Court of Victoria proceeding number SCI 20008 06400 (“Supreme Court proceeding”) that the Respondent pay the Applicant the sum of $1,200.
Order of Justice Cavanough made on 15 April 2010 in the Supreme Court proceeding that the Respondent pay the Applicant the sum of $3,500.
(Affidavit of Robert Thomas Hinton sworn 11 November 2010).
There is no proof that either of the orders in the above matters have been stayed.
The debtor is seeking leave to appeal against a decision of Justice Cavanough in the Supreme Court of Victoria, but leave has not been granted, and the decision has not been stayed.
The Court is satisfied that the creditor served a Bankruptcy Notice personally on the debtor in Australia on 15 June 2010 (the Notice is annexed to the affidavit of service of John Edward Batho sworn
26 July 2010).
An affidavit by John Edward Batho has been filed identifying the debtor.
The Notice required the debtor to pay the creditor $4,700.00 within
21 days after service of the Bankruptcy Notice. The Court is satisfied that the debtor has not, within the time specified in the Notice, complied with the requirements of the Notice. The Court refers to the affidavit of Ciriaco Nigro sworn 12 November 2010 that as at that date the debtor has failed to pay the $4,700.00 to the creditor. The date of the act of bankruptcy is 26 July 2010.
For the defence of “solvency” to be relied on, which it is not here (but as the debtor s self represented it will be considered), there must be “realisable assets” available to pay all creditors. The onus is on the debtor. The Court refers to the affidavit of the debtor affirmed on
4 November 2010 as to his assets that he:-
·Owns a Nissan Maxima with a market value of $2,500.00
·Owns furniture with his wife with a value of $3,000.00
·Has no income.
The Court finds that the property that is divisible amongst the creditors of a bankrupt does not extend to the following:–
·The bankrupt’s household property that is: “of a kind prescribed by the regulations” (s.116(2)(b)(i) of the Act). Regulation 6.03(3)(b) of the Bankruptcy Regulations 1996 (the “Regulations”) identifies household property which is not divisible as including “sufficient household furniture”.
·Property used by the bankrupt “as a means of transport, which does not exceed the value prescribed by the regulations” (s.116(2)(ca) of the Act). Regulation 6.03B(3) prescribes a maximum value of $5,000.00.
The debtor’s assets are therefore not “realisable assets available to pay all creditors”.
The debtor is not solvent and solvency cannot be used as a bar to the creditor seeking a sequestration order. Section 52(2)(a) of the Act provides that if the Court is satisfied that the debtor is able to pay his debts the Court may dismiss the petition. The Court is not so satisfied and does not dismiss the petition.
The Court does not find that the petition should be dismissed for futility as it may only be after sequestration, with a full examination by the trustee in bankruptcy, that assets come to light Radich v Bank of New Zealand (1993) 45 FCR 101. Also it is important to ensure that people cannot deliberately continue to avoid bankruptcy by alleging destitution or ridding themselves of their assets Radich (supra 101). Accordingly, the mere fact that there are no reasons for suspecting that the debtor has any assets, is not a ground for refusing to make a sequestration order Bayne v Blake (No.2) (1909) 9 CLR 360 at [364-365]. The onus of proving that there are no assets lies with the debtor Radich (supra).
The debtor alleges that the creditor’s petition has been presented “not with a bona fide view of obtaining an adjudication but with the view of putting pressure on the debtor to prevent him from taking action against the creditor”. If a creditor has an interest in the debtor being made bankrupt to stifle litigation, that in itself is not enough for refusing the making of a sequestration order Re Coyne; Ex parte Binningup (South) Pty Ltd (unreported) 10 November 1992 at [22]. An order should not be refused if apart from that motive the petitioning creditor is entitled to the order sought Re King; Ex parte Commercial Bank of Australia Ltd (No.2) [1920] VLR 490 at 510.5, Bride v KMG Hungerfords (a firm) (unreported) FCA 23 April 1998 at 9.2. Apart from making the allegation (Affidavit of Morris Goodman affirmed
15 September 2010) nothing has been presented to the Court in support of the allegation. The Court finds that the onus of proof of improper motive or abuse of process is on the debtor Williams v Spautz (1992) 174 CLR 509 at 529.8. There is no evidence of the creditor’s state of mind as to improper motive and the Court will not infer an improper motive Bride v KMG Hungerfords (a firm) supra at 8 – 9. The contention is denied by the creditor and rejected by the Court. Even if such a notice were shown, the creditor would otherwise be entitled to the orders sought for the reasons expressed below.
The Court accepts the uncontested evidence of Robert Thomas Hinton in his affidavit sworn 12 November 2010 as follows:
I have this day searched the National Personal Insolvency Index maintained by the Insolvency & Trustee Service of Australia for the name of the Respondent, MORRIS GOODMAN, and found that:
a)there are no other Bankruptcy Petitions currently presented in this district against MORRIS GOODMAN;
b)the said MORRIS GOODMAN is not an undischarged Bankrupt; and
c)there are no details of a debt agreement, in relation to the debt on which the Applicant relies, in the Index:
i)on the day when the petition was presented; and
ii)on the day when the search was made.
The Court accepts the submissions by Mr Nichols that to dismiss a petition for sequestration pursuant to s.52(2)(b) of the Act, the burden is on the debtor to prove that the petition should be dismissed for “other sufficient cause” including that there is merit in his appeal against the Order of Justice Cavanough, or in the debtor’s new Federal Court claim. The debtor has not discharged that burden (see below).
Whether the Federal Court proceedings were filed?
The Court was informed by Louise Rhodes of Gadens Lawyers that the proceedings purported to be issued by Mr Goodman against Westpac in the Federal Court of Australia on 15 November 2010 had not been issued (email to Court 17 November 2010 at 12.39pm). Mr Goodman responded to Louise Rhodes by email that he had made amendments to the document as required by the Registrar of the Federal Court and refiled the papers on 17 November 2010 (email to Louise Rhodes 17 November 2010 at 1.04pm).
The creditor accepts that proceedings were filed on 17 November 2010 and given number VIC984/2010. The creditor submits:
(1)The debtor must establish that the proceeding is genuine and serious and he has not reasonably been able to litigate it (before now).
The Court finds that there is no apparent reason disclosed by the Application why the debtor could not have litigated the matter before now.
(2)That the debtor has not filed any material going to the merit of the proceeding.
The Court accepts those contentions. In his final submissions the debtor merely states that the material is available for the Court to read. The Court does not find that the mere filing of proceedings in the Federal Court is “other sufficient cause” within s.52(2)(b) of the Act, to dismiss the petition.
The creditor alleges that the debtor is seeking to re-litigate the matters sought in the VCAT proceeding and dismissed by Justice Misso. Sufficient material has not been filed to prove that. Further the creditor alleges that the only loss suffered was by the primary debtor (Worldwide Enterprises Pty Ltd) which was the creditor’s customer, and the loan to it was repaid by Mrs Goodman. Again there is insufficient information before the Court to establish those contentions.
Whether there is “other sufficient cause” for a sequestration order not to be made, including whether the debtor has proceedings in the Federal Court or Supreme Court against the creditor that have a reasonable prospect of success?
In response to the orders in chambers of the Court on 23 November 2010, Mr Goodman sent a letter to the Court stating that “there is no need to look for any further merits” and that “merits of Federal Court proceedings against Westpac are irrelevant in the exercise of discretion by… FM Turner”, and that “without proper deliberation of the merits of the case in the Federal Court, any Court is in no position to decide the case and conclude if the case has reasonable prospect of success. It is usually accepted that the plaintiff case is bona fide and has reasonable prospect of success”.
The debtor has therefore refused to comply with the orders of
23 November 2010 and has not provided anything to enable the Court to decide that he has a current matter before the Federal Court against the creditor that “is likely to succeed” (post).
The debtor, similarly, has failed to provide such material in relation to his proceedings in the Supreme Court of Victoria. The proceeding in the Supreme Court is an appeal against the decision of Justice Cavanough awarding costs against the debtor in his failed appeal against the order of Associate Justice Mukhtar on 5 March 2010 who dismissed the applicant’s application with costs, that an application made by Westpac be dismissed for want of prosecution.
Justice Cavanough set out in detail his reasons for decision: He looked at the matter afresh [5] and decided that he:
“would make in substance the same orders that Associate Justice Mukhtar made” [5].
His Honour was:
“not satisfied that Westpac has been guilty of inappropriate delay in the proceeding, or that the proceeding is an abuse of process in any sense relevant for the purposes of the relevant rules and principles”.
His Honour found that:
“…there are two independent, albeit partly related, bases for Westpac’s submissions that this proceeding is not foredoomed to fail and is not being kept on foot as an abuse of process and is not a case that can appropriately be characterised as involving a want of prosecution within the meaning of Order 24 of the Rules”[11].
Having considered the reasons for decision of Justice Cavanough (Annexure RTH-1 to the Affidavit of Robert Thomas Hinton sworn 16 September 2010), and having considered the submissions the Court finds that the debtor’s appeal is not likely to succeed.
Whether debt exceeds required statutory maximum?
The Court finds:
·That the Bankruptcy Notice was issued by the creditor against the debtor on 12 May 2010 and served on him on 15 June 2010 (Affidavit of John Edward Batho sworn 26 July 2010 at [2]).
·That the statutory minimum of $5,000.00 required to support a Bankruptcy Notice (s.41(1)(b)(ii) of the Act) was enacted by the Bankruptcy Legislation Amendment Act 2010 (No. 106, 2010) which by Schedule 4, Part 1 commenced 28 days after Royal assent. The $5,000.00 limit commenced on 11 August 2010 (Clause 1 – Commencement – Column 3). Before that, the minimum was $2,000.00,
The Bankruptcy Notice had been issued and served by 15 June 2010. The statutory minimum of $5,000.00 therefore did not apply to the Bankruptcy Notice or to the Creditor’s Petition filed 27 July 2010 (s.44(1)(a) as amended by the above Act, with the same date of commencement).
Whether the costs orders relied on by the Creditor are final judgments or final orders (as required by s.41(1)(a) of the Act)?
The debtor submits that the costs orders are “not final, but interlocutory and appealed as well”. It has not been claimed that they have been stayed.
The creditor submits that the orders on which the Bankruptcy Notice is based are final orders, and, are not interlocutory. The creditor relies on the judgment in Clyne v Deputy Commissioner of Taxation (1984) 52 ALR 657 per Gibbs CJ. That decision does not contain the quotation sought to be relied on by the creditor.
The creditor relies on various other decisions to assert that a “costs order can be treated as a final order for the purposes of a bankruptcy notice”. The creditor refers to a passage in Goldberg v Morrow [2005] FCA 1038 at [19] that:
“It is also well settled that a costs order can be treated as a final order for the purposes of a bankruptcy notice”
That passage appears to be a submission by the respondent and not a finding by Justice Crennan [19]. Abigroup Limited v Abignano (1992) 29 FCR 74 was referred to by the creditor. There is no finding on that question in that decision.
In Re Skinners and Smiths Application(1982) 45 ALR 553 Justice Fitzgerald held on p.555:
Having regard to s 40(3)(b), it does not seem open to doubt that the orders for costs are final orders for the purposes of the Bankruptcy Act: cf Re Wheeler (a debtor) [1982] 1 WLR 175. Further, notwithstanding Re Ravasio; Ex parte Leonard Norman Pty Ltd (1965) 6 FLR 373, it was not submitted that Skinner and Smith are not creditors in respect of the amount of the costs ordered to be paid for the purposes of the Act, and I propose to follow Re Pannowitz; Ex parte Wilson (1975) 6 ALR 287
See also Re Cartwright; Ex parte Cartwright v Barker [1975] 1 WLR 573 and other cases cited in McDonald Henry and Meek's Australian Bankruptcy Law and Practice, supra, pp 70 and following.
The Court is not aware of any authority contrary to the decision that “having regard to s 40(3)(b), it does not seem open to doubt that the orders for costs are final orders for the purposes of the Bankruptcy Act”. The Court finds that the orders for costs on which the Bankruptcy Notice is based are final orders for the purposes of that notice.
Whether debtor has offsetting claims against the creditor so that a Bankruptcy Notice should not have been issued?
That question has been dealt with by Federal Magistrate O’Dwyer in Goodman v Westpac Banking Corporation [2010] FMCA 714 (MLG956 of 2010) where His Honour held, that in VCAT and in the Magistrates Court of Victoria (at Melbourne) the extant applications were unsuccessful [7]. As to the proceedings issued by the debtor in the Supreme Court, Federal Magistrate O’Dwyer decided at [8] and [9]:
8. Before the outcomes of the VCAT and Magistrates’ Court proceedings were known, however, in the proceedings on foot in the Supreme Court, where Mr. Goodman had initiated an application to have Westpac’s proceedings against him dismissed for want of prosecution, he was unsuccessful and an order for costs was made against him by his Honour Associate Justice Mukhtar in the sum of $1200 on 5 March 2010; which decision was appealed and the grounds expanded by Mr Goodman to include an order for dismissal for abuse of process (in addition to want of prosecution) before his Honour Justice Cavanough, who, in turn, also made an order for costs against Mr Goodman on 15 April 2010 for $3500. Those proceedings initiated by Mr. Goodman were unsuccessful and a total amount of costs of $4700 was awarded. It is those costs that form the basis upon which the bankruptcy notice was served.
9. Mr Goodman has applied, pursuant to s.41(7) of the Bankruptcy Act 1966 to have the bankruptcy notice set aside. That section clearly provides that in order for the bankruptcy notice to be set aside the debtor – in this case Mr Goodman – must convince the court that he has a reasonable prospect of successfully counter-claiming or setting off or making a cross-demand in relation to the moneys claimed against him...
And at [10] to [12]
10… Mr. Goodman does not appear, nor has he been able to persuade me, that he has a claim against the bank that amounts to a set off, counter-claim or a cross-demand.
11. Mr. Goodman has informed the court that he has written to his Honour Justice Cavanough seeking from him, because of the now determination of his VCAT and Magistrates’ Court proceedings, a rethink and for him to amend his order made on 15 September 2010. In the normal course of events, I am satisfied that his Honour would not entertain such a process, and that the only reality for Mr Goodman if he wishes to alter the orders made would be for an appeal to the Full Court of the Supreme Court of Victoria. When that was put to Mr Goodman, he indicated that he would do that if he had to do it.
12. However, there is nothing in the material before me that, even if he was to do that, indicates a reasonable prospect of success on his part, and, for that reason, I cannot give a great deal of weight to what he proposes in that regard.
After the Court reserved its decision on 15 November 2010, the debtor sent written contentions to the Court on 22 November 2010 as follows:
“I had a meeting today with Mr. Michel, a Business Manager Information & Registry of Australian Government Insolvency and Trustee Services Australia.
He informed me that this government office cannot be responsible for the irregularly issued Bankruptcy Notice and Creditor’s Petition. The overriding obligation is to be candid and act in accordance with Rules and Regulations. The onus is on the party who made an application for issuance of Bankruptcy Notice.
The following points were concluded at the meeting:
(1)The issue of a Bankruptcy Notice does not represent a certification of all aspects of the Bankruptcy Notice. The Official Receiver will not identify defects that are not obvious or immediately apparent on the face of the Bankruptcy Notice. The onus is on author of application for issuance of Bankruptcy Notice.
(2)The debt due to the judgment must be of “final judgment” and not interlocutory. The Gadens Lawyers had a responsibility to inform the Government Office about this fact. They clearly deceived and mislead the Official Receiver.
(3)The Bankruptcy Notice would not be issued if the applicant would be candid and informed the Official Receiver that there are offsetting claims which are the same or more than the sum in the requested Bankruptcy Notice.
(4)Amendments to the Bankruptcy Act 1966 passed on 24 June 2010 by Federal Parliament increase the minimum threshold from $2,000 to $5,000 being the amount for which:
(i)a bankruptcy notice may be issued; and
(ii)a creditors petition may be presented
(5)ITSA issued a public notice to all creditors about the amendments.
(6)Gadens Lawyers knew well about all the above when they made an application for Bankruptcy Notice and Creditor’s Petition.
(7)Gadens Lawyers used the lack of legal skills of Mr. Goodman and mislead the Court.
(8)Creditors should note that it will not be possible to present a creditor’s petition after the amendments take effect based solely on judgment or order for less than $5,000. This will apply where a debtor has committed an act of bankruptcy by failing to comply with bankruptcy notice based on that same judgments or order prior to the date which the amendment takes effect.
(9)The amount claimed was $4,700, which is less than the threshold of $5,000 and in accordance with the amended Bankruptcy Act 1966 , Westpac has no legal basis to proceed with application by Creditor’s Petition.
(10)The bankruptcy notice was based on interlocutory order and not the final order.
(11)At the time of application for bankruptcy notice, there were offsetting claims in VCAT for about 1.2million and Magistrates Court for amount of $45,149.79, The application as per Gippsreal v Kurek in VSC was improper and without reasonable cause.
(12)The bankruptcy notice which was issued irregularly by Gadens Lawyers is scandalous and oppressive and was issued in breach of statute and Rules and Regulations. It was issued by ulterior motives to prevent and disrupt the administration of justice.
(13)Gadens Lawyers in a statement to the general public stated that I quote:
“Gadens Lawyers insolvency group is a leader in the field. With dedicated team of insolvency lawyers acting for many of Australia’s leading financial institutions and insolvency practitioners , we operate at the cutting edge of insolvency laws in Australia to provide a seamless delivery of service to our clients. Our depth of experience and skill is such that we act for administrators, liquidators and receivers in the largest of national corporate collapses and for trustees in bankruptcy in the most complex of bankruptcy administrations.
Our partners are members of the Insolvency Practitioners Association of Australia. As members of the Law Council of Australia (and Law Institute of Victoria’s) Insolvency and Reconstruction Committee, a number of our partners have been influential in the development of insolvency laws in recent years.
This experience often leads to invitations for our team members to provide commentary to national and local press and radio, as well as presenting to industry group and forums.
What distinguishes us from the competition is the combination of technical skill with commercial solution.”
(14)The above mentioned representation is misleading and deceptive if I can judge their conduct and performance in case MLG956.2010.
(15)Their conduct can be described as “bullying” with total disregard to provisions of statute and rules.
(16)In addition, Gadens Lawyers acted in bad faith and in total disregard to Court’s resources and willfully wasted the valuable time of the Court and the other party.
(17)Gadens Lawyers improperly conducted themselves in Supreme Court proceeding 6400/2008. Their misconduct resulted in Three Supreme Court orders to set aside on basis of irregularity, the previously irregularly obtained judgments.
(18)Their misconduct is currently a matter for the Legal Service Commissioner to determine.
(19)Their misconduct in commencement of the Supreme Court proceeding and their misconduct during the proceeding resulted in Federal Court action against them for over 11 Million dollars.
(20)Gadens Lawyer by their misconduct, breached many provisions of LIV Conduct Rules for Solicitors and Barristers and brought the legal profession into disrepute.
(21)There are many cases when the Court punished the legal representative for their misconduct, deception, misleading and waste of Court’s time. It would be correct and proper that the Honourable Court would punish Gadens Lawyers for their misconduct.
(22)Honourable Judges in Lemoto v Able Technical Pty.Ltd & Ors(2005) NSWCA 153 in 96 stated the following: The Courts have not only an obligation to administer justice, the courts have an obligation to the general public to facilitate the just, quick and cheap resolution of real issues in the proceeding.: Supreme Court Rules Pt.1 r.3 , sec.76A of Supreme Court Act 1970.
(23)In the same case in 94: “The passage from Lord Wright’s speech in Myers v Elman I have extracted earlier in this judgment emphasis that the historical jurisdiction has to order solicitor to pay costs, was exercised in circumstances where solicitor had failed his or her duty to the court in the administration of justice.”
In Kelly v Jowett(2009) NSWCA 278 held , per McColl JA, Beazley JA and Barrett J agreed with concept that a solicitor has to pay for improperly conducting the proceeding and caused unnecessary waste costs.Sec.60, 56, 57, 58 61.62. In 58 : “ These provisions reflect the fact that” courts are concerned not only with justice between the parties, which remains their priority, but also with public interest in the proper and efficient use of public resources: Aon Risk Services LTD v Australian National University (2009) HCA 27;(2009) ALR 14 at (23) per Frencj (sic “French”) CJ. The resolution of disputes serves the public as a whole, not merely the parties to the proceedings: Aon (at 113) per Gummow, Hayne,Crennan, Kiefel and Bell JJ.
I can bring dozens of legal authorities in support of ordering waste costs, but because this is a letter and not submission I just bring a few.
(24)In Abigroup v Harverster 2009 SASC 39 the judge overturned previously awarded order for security for costs because the party was not candid in court and did not inform the court that the insurance indemnified the party for incurred legal costs.
(25)I trust this letter will be in assistance”.
As a result of those contentions, the Court made the following orders in chambers on 23 November 2010:
(1)The applicant file and serve written submissions in response to the submissions of Morris Goodman received via email and dated 22 November 2010 within 7 days.
(2)The respondent file and serve any written submissions in reply within a further 7 days.
(3)The parties are to include written submissions as to:
(a)The merits of the appeal against the Order of Justice Cavanough; and
(b)The merits of the debtor’s new proceedings in the Federal Court of Australia.
The debtor sent an email to the Court on 23 November 2010 as follows:
“I just can't understand the reason of this new order. In my view we simply wasting time and resources of Honourable Court.
I am very disturbed by the Court’s action and this Court’s attention to irrelevant matters instead of relevant matters.
The jurisdiction of this Court confined to the issuance and legitimacy of the Bankruptcy Notice and Creditor’s petition.
This letter is as to save costs.
The relevant matters.
(1)The basic problem and starting point with the amount in question, which is $4700.00. Due to amended Bankruptcy Act 1966 the threshold for proceeding with Bankruptcy Notice and Creditor Petition is no less than $5000.00. Just for that reason the Bankruptcy Notice and Creditors Petition should be set aside. To pursue them in Court represents an abuse of legal process, vexatious and frivolous litigation.
(2)It is in addition to offsetting claims in time of issuance of Bankruptcy Notice and Creditors Petition. This makes the issuance of Bankruptcy Notice and Creditors Petition improper and without reasonable cause. To pursue them in Court represents an abuse of legal process, vexatious and frivolous litigation due to lack of substance.
(3)The third issue is the debt is not due to the final judgment or order as per requirement for issuance of Bankruptcy Notice. The order id (sic “is”) not final , but interlocutory and appealed as well.
(4)It was an onus on Westpac’s legal representatives to take into consideration all the material before them prior approaching the Official Receiver for issuance of Bankruptcy Notice.
(5)As a matter of fact the Westpac’s legal representatives concealed the relevant material from the Official Receiver. The Westpac’s legal representative acted with deceit and their action was misleading.
(6)The action by Westpac’s legal representatives was improper, without reasonable cause and irregular. This is not their first example of misconduct. Their misconduct started with misconceived and improper commencement of proceeding in Supreme Court by ulterior motive for material gain.
(7)The commencement of Supreme Court proceeding was in breach of reached agreement to adhere to internal process of resolution of dispute. The misconduct continued throughout all stages of the Supreme Court proceeding.
(8)There is no need to look for any further merits. The above mentioned facts are sufficient for Honourable FM Turner to set aside the Bankruptcy Notice and Creditor’s Petition.
With all due respect matters of merits of the appeal from orders of J Cavanough and merits of Federal Court proceeding against Westpac are irrelevant in the exercise of discretion by Honourable FM Turner.
The above mentioned matters are the only relevant matters in the exercise of discretion. The Honourable FM Turner, in exercise of his discretion, should apply the "bright line legal principle". There is no need to look for anything else. The above mentioned matters are sufficient for the Honourable FM Turner to set aside the application by Westpac. Due to the mentioned reasons of irregularity of issuance of Bankruptcy Notice and Creditor’s Petition, the continuation of this litigation is improper and lacking of substance.
(9)Without proper deliberation of the merits of the case in the Federal Court, any Court is in no position to decide the case and conclude if the case has reasonable prospect of success. It is usually accepted that the plaintiff case is bona fide and has reasonable prospect of success.
The current application before the Honourable FM Turner represents an act of malicious prosecution”.
The creditor then forwarded its submissions to the Court on
2 December 2010.
The creditor submits that the orders for costs are final orders. The Court has accepted that submission (supra).
The creditor submits that the $5,000.00 minimum debt required to support a Bankruptcy Notice did not commence until 11 August 2010. The Court has accepted that submission (supra).
The creditor submits that the question of whether the debtor had offsetting claims was dealt with by Federal Magistrate O’Dwyer by decision on 6 September 2010 (supra). The Court accepts that submission.
The creditor submits that the VCAT proceeding was dismissed by Judge Misso on 11 November 2010, and that the Magistrates Court proceedings were struck out on 3 August 2010. The debtor was unsuccessful in the Supreme Court where he applied to have the creditor’s proceeding against him dismissed for want of prosecution (Justices Mukhtar and Cavanough). Those matters are proven by the material on file.
Associate Mukhtar dismissed the application before him on 5 March 2010, and an order for costs was made against the debtor for $1,200.00. The debtor appeal against that decision, that appeal was dismissed by Justice Cavanough on 15 April 2010; Justice Cavanough ordered the debtor to pay costs of $3,500.00.
The debtor has sought leave to appeal against the decision of Justice Cavanough. At the date of the hearing before this Court leave to appeal had not been granted, and the order for costs has not been stayed. Having considered the material on the Court’s file and the reasons of Justice Cavanough (Annexure RTH-1 to Affidavit of Robert Thomas Hinton sworn 16 September 2010), and the submission of the parties, the Court is not satisfied that the debtor’s appeal to the Supreme Court is “likely to succeed”.
The debtor is required to satisfy the Court that his litigation against the creditor is “likely to succeed”, and not merely that he has an arguable claim: ICM Agriculture Pty Ltd (ACN 006 077 765) v Young (2009) 260 ALR 515 to constitute “other sufficient cause” for the purposes of s.52(2)(b) [85] [86] [114]).
The debtor has not so satisfied the Court in relation to merit in either the Supreme Court or Federal Court proceedings.
Even if the debtor established a “sufficient cause” under s.52(2)(b) of the Act the Court still maintains a discretion to make the sequestration order. (Ibid [118] referring to Sarina v Council of the Shire of Wollondilly (1980) 32 ALR 596 at 599–600). The power to dismiss under s.52(2) of the Act is permissive not mandatory (Ibid 600.5).
The mere existence of an arguable claim, counterclaim or appeal by the debtor does not, however, by itself necessarily constitute “other sufficient cause” to dismiss the creditors petition Rigg v Baker (2006) 155 FCR 531; Totevv Sfar (2008) 5 ABC(NS) 691.
By order dated 23 November 2010 (supra) the Court required the parties to file submissions on the merits of the proceedings relied on by the debtor.
The debtor filed submissions on 14 December 2010, as follows:
Supreme Court proceeding 6400/2008
The procedural objections at the beginning of the submissions have no relevance in determining whether a sequestration order should be made.
The Court finds nothing in the submissions to establish that the debtor “is likely to succeed”: ICM (supra) and refers to its analysis of the decision of Justice Cavanough (supra).
The debtor attacked the decision of Federal Magistrate O’Dwyer for reasons that are not relevant for present purposes.
The debtor then alleges that the costs orders could not support the Bankruptcy Notice. The Court has dealt with that issue (supra).
The debtor then alleges ulterior motive. That issue has been dealt with (supra).
The debtor then referred to Supreme Court proceeding SCI 2010 03182, but gives little detail of the matter. The debtor has not shown that matter is “likely to succeed”.
The debtor claims that the cost orders in the Supreme Court are not final orders (and cannot support the Bankruptcy Notice) The Court has rejected that contention (supra).
The debtor then claims that at the date of the Bankruptcy Notice he had claims on foot in VCAT and the Magistrates Court (Victoria). That is not determinative of whether there is “other sufficient cause” for the purposes of s.52(2)(b) of the Act.
The debtor then contends that it is inappropriate for a successful party to seek that an order for costs be complied with immediately. The Court refers to its decision (supra) that an order for costs can support a Bankruptcy Notice Re Skinners and Smiths Application (supra). The Court rejects the debtor’s contention.
The debtor then contends that he did not commit an act of bankruptcy “due to the deceit of the Official Receiver”. This contention is apparently based on the assertion that information was withheld from the Official Receiver. However the Court has found that the debtor has committed an act of bankruptcy (supra).
The debtor complains that the creditor should not make submissions that the debtor’s action in the Supreme Court is without merit and is not “likely to succeed”. That issue is one that should properly be covered in submissions by the parties.
The debtor contends that Justice Cavanough’s reference (obiter) to the debtor not being precluded from issuing further proceedings if he wishes, is proof that his Honour did not exercise his discretion “in accordance of modern case management”. The Court finds no merit in that contention.
The debtor contends that Justice Cavanough had the discretion to dismiss the matters for want of prosecution. That is correct; however his Honour exercised his discretion and decided not to dismiss it.
The debtor complains that he has been prevented from obtaining access to the recordings of proceedings in the Supreme Court. That is not relevant to the issue to be determined by this Court as to whether his proceedings in the Supreme Court are “likely to succeed”.
The debtor alleges bias. The Court refers to the following passage in SCAA v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 668 at [38]:
“Reasons for decision reflect conclusions reached at the end of the decision making process, and if the decision is against the party complaining, the expression of adverse findings on credit and fact are an inevitable part of the expression of the reasons. The mere fact of adverse findings at the end of the matter give rise to no inference as to the state of mind of the decision maker before and whilst the matter was under consideration, nor of prejudgment of the issues that fell for decision. Even where it is possible to show that the adverse findings or some of them are contrary to the evidence or unreasonable, or that the reasoning process is hopelessly flawed, that without more is unlikely to demonstrate that the decision maker had embarked on the case with a closed mind, not open to persuasion”.
The debtor refers to the authorities on the meaning of “special circumstances” which must be considered in the context in which it appears. The Court accepts that contention, but the debtor then proceeds to refer to the jurisdiction to extend time. The issue has no relevance to the issues to be decided by this Court.
Merits of the proceedings in the Federal Court VID984/2010
The debtor declines again to provide proof of merit in that matter and states:
“It is available for the Honourable FM Turner to read the material”.
The debtor alleges that as a general rule a “court should proceed on the basis that the claim is bona fide with reasonable prospects of success”. However those are issues that the Court must determine in this matter and it is not to apply such a rule for the purposes of s.52(2)(b) ICM (supra).
The Court finds that the debtor has not established “that for other reasonable cause a sequestration order ought not to be made”.
Nothing has been put to outweigh the right of the creditor to the payment of the debts owing to it Cain v Whyte (1933) 48 CLR 639.
The Court is satisfied of compliance with the matters in s.52(1) of the Act and finds no exceptional circumstances to refuse a sequestration order under s.52(2)(b) of the Act.
The Court finds no ground to dismiss the petition pursuant to s.52(2)(b) of the Act or for any other reason.
The Court makes the sequestration order sought by the creditor as follows:
(1)A sequestration order is made against the estate of Mr Morris Goodman.
(2)Mr Warren White be appointed as the trustee of the bankrupt estate of Mr Morris Goodman.
The Court further orders that:
(3)The costs of this matter follow the event and be taxed by the Registrar and paid according to the Bankruptcy Rules.
(4)The interim application filed by the debtor on 4 October 2010 is dismissed.
I certify that the preceding sixty-eight (68) paragraphs are a true copy of the reasons for judgment of Turner FM
Date: 17 December 2010
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