Zdrilic v Hickie

Case [2016] FCAFC 101

FEDERAL COURT OF AUSTRALIA

Zdrilic v Hickie [2016] FCAFC 101

Appeal from: Zdrilic & Anor v Hickie & Anor [2015] FCCA 2882
File number: NSD 1628 of 2015
Judges: KATZMANN, FARRELL AND MARKOVIC JJ
Date of judgment: 5 August 2016
Catchwords: BANKRUPTCY – appeal from a judgment of the Federal Circuit Court of Australia dismissing an application for review of a registrar’s decision to make a sequestration order – appropriateness of an application for summary dismissal of an application for review of a sequestration order – review of a registrar’s decision requires a hearing de novo – whether judge conducted a hearing de novo
Legislation:

Bankruptcy Act 1966 (Cth) ss 51(1), 52(2), 52(3)

Federal Circuit Court of Australia Act 1999 (Cth) ss 5, 17A, 31A, 102(2)(i), 103(1), 104(2)

Federal Circuit Court (Bankruptcy) Rules2006 rr 2.02, 2.06, Sch 2 items 9, 10, 11

Federal Circuit Court Rules 2001 rr 1.03, 13.10, 20.03

Federal Court of Australia Act 1976 (Cth) s 37M
Cases cited:

Bass v Permanent Trustee Company Limited (1999) 198 CLR 334

Harris v Caladine (1991) 172 CLR 84

Hickie & Anor v Zdrilic & Anor [2015] FCCA 1329

Martin & Another v Commonwealth Bank of Australia (2001) 217 ALR 634

Re Mirko Trepic Ex Parte: Arrowcrest Group Pty Ltd [1990] FCA 583

Totev v Sfar and Another (2008) 167 FCR 193

Tran v Pu (2015) 228 FCR 562
Date of hearing: 9 May 2016
Date of last submissions: 24 June 2016
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 94
Counsel for the Appellants: Mr S Golledge (Pro Bono)
Counsel for the Respondents: Mr F Lever SC
Solicitor for the Respondents: Bartier Perry

ORDERS

NSD 1628 of 2015
BETWEEN:

SAM ZDRILIC

First Appellant

AMY ZDRILIC

Second Appellant
AND:

DAVID HICKIE

First Respondent

VOCIFA PTY LIMITED ACN 002 076 235

Second Respondent

JUDGES:

KATZMANN, FARRELL AND MARKOVIC JJ

DATE OF ORDER:

5 AUGUST 2016

THE COURT ORDERS THAT:

1.The appeal be dismissed.

2.The appellants pay the respondents’ costs as agreed or taxed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

THE COURT:

  1. The appellants, who are husband and wife, were made bankrupt on the petition of the respondents when a registrar of the Federal Circuit Court of Australia (Federal Circuit Court) made a sequestration order against their estates.  The appellants, who at that stage were self-represented, applied for review of that order and the other orders made by the registrar at the time (the Review Application).  About two weeks later, the respondents applied for summary dismissal.  The primary judge granted that application, dismissing the Review Application and confirming the sequestration order: Zdrilic & Anor v Hickie & Anor [2015] FCCA 2882.

  2. The appellants applied for leave to appeal and on 10 February 2016 that application was granted by consent and the appeal listed for hearing before a…

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AGLC
Zdrilic v Hickie [2016] FCAFC 101
Case
[2016] FCAFC 101
Decision Date

CaseChat Overview and Summary

In the case of Zdrilic v Hickie, the appellants, Zdrilic, sought to appeal a decision by the Federal Circuit Court of Australia, dismissing an application for review of a registrar’s decision to make a sequestration order against them. The appeal was against the primary judge’s orders dismissing their application for review of the sequestration order, confirming the sequestration order, and ordering that the creditor’s costs be paid from the appellants’ estate in accordance with the Bankruptcy Act.

The key legal issues in this case revolved around the appropriateness of an application for summary dismissal of an appellant’s application for review of a sequestration order and whether the review of a registrar’s decision required a hearing de novo. Specifically, the court needed to determine if the judge conducted a hearing de novo when dismissing the Review Application.

The court found that the Federal Circuit Court of Australia had the power to order summary judgment under s 17A of the Federal Circuit Court Act. However, the court held that the power of summary judgment did not apply to the Review Application in this case. The court further found that the primary judge did not conduct a hearing de novo and instead made a determination based on the merits of the Review Application. This was contrary to the constitutional imperative that the judicial power of the Commonwealth only be exercised by judges of federal courts or other courts exercising federal jurisdiction. Consequently, the court dismissed the appeal and ordered the appellants to pay the respondents’ costs as agreed or taxed.

Orders

Orders of the court

1. The appeal be dismissed.

2. The appellants pay the respondents’ costs as agreed or taxed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The power of the Federal Circuit Court to order summary judgment is found in s 17A of the Federal Circuit Court Act which provides:Summary judgment(1)The Federal Circuit Court of Australia may give judgment for one party against another in relation to the whole or any part of a proceeding if:(a)the first party is prosecuting the proceeding or that part of the proceeding; and(b)the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.(2)The Federal Circuit Court of Australia may give judgment for one party against another in relation to the whole or any part of a proceeding if:(a)the first party is defending the proceeding or that part of the proceeding; and(b)the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.(3)For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:(a) hopeless; or(b) bound to fail;for it to have no reasonable prospect of success.(4)This section does not limit any powers that the Federal Circuit Court of Australia has apart from this section. Division 13.3 of the FCC Rules relates to summary disposal and stay of proceedings. Rule 13.10 provides:Disposal by summary dismissalThe Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if the Court is satisfied that:(a)the party prosecuting the proceeding or claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim; or(b)the proceeding or claim for relief is frivolous or vexatious; or(c)the proceeding or claim for relief is an abuse of the process of the Court.THE NATURE OF A HEARING DE NOVO As the FCC Rules recognise, a review of an exercise of power by a registrar must proceed by way of a hearing de novo. Anything less than a hearing de novo would probably constitute a failure to adhere to what Beach J referred to in Tran v Pu (2015) 228 FCR 562 (Tran v Pu) at [19] as “the constitutional imperative”, that is to say the requirement that the judicial power of the Commonwealth only be exercised by judges of federal courts or other courts exercising federal jurisdiction: see Totev v Sfar and Another (2008) 167 FCR 193 (Totev v Sfar) at [10] (per Emmett J) and Harris v Caladine (1991) 172 CLR 84 at 164 (Harris v Caladine) (per McHugh J) (discussed later in these reasons). Harris v Caladine concerned a consent order made by a deputy registrar of the Family Court for the settlement of property under s 79 of the Family Law Act 1975 (Cth). The husband and wife had attended before a deputy registrar and signed short minutes relating to their property interests. An order was made by consent reflecting the terms of the short minutes. A formal order was subsequently signed and sealed. The consent order was made pursuant to O 36A r 2(1) of the Family Law Rules 2004 which delegated certain powers to registrars, including, in para (n), the power to make consent orders. Thereafter, pursuant to O 36A r 5(2), the wife applied for review of the order made by the deputy registrar. At the time, O 36A r 7(4) of the Family Law Rules provided that a court reviewing an exercise of a power by a registrar shall proceed by way of hearing de novo but may have regard to the proceedings, including the evidence given and any affidavit filed before the registrar, as the case requires.

Ratio Decidendi

Legal Principle Established

On the same day, a registrar of the Federal Circuit Court ordered that a sequestration order be made against the estate of the appellants, that the applicant creditor’s costs (including any reserved costs) be taxed and that they be paid from the estate of the respondent debtors in accordance with the Bankruptcy Act (the Sequestration Orders). In addition, pursuant to s 52(3) of the Bankruptcy Act, the registrar stayed the sequestration order for 21 days. The transcript of the hearing before the registrar reveals that the purpose of granting the stay was to allow the appellants to consider their appeal rights in relation to the orders made by Judge Lloyd-Jones dismissing the Notice of Opposition. On 17 June 2015 the appellants filed the Review Application relevantly seeking orders that:1.Pursuant to s 104(3) of the Federal Circuit Court of Australia Act 1999, the orders made by Registrar NG on 27 May 2015 in the proceedings SYG2324/2014 be set aside or in the alternative the bankruptcy be annulled.2.The Creditor’s Petition be set aside or in the alternative be adjourned until 30 days after the determination of the NSW Court of Appeal proceedings 2012/156726 against the related respondents (HTT Respondents). If the Creditor’s Petition is adjourned and ultimately the appeal proceedings 2012/156726 are successful the Creditor’s Petition be set aside on payment of the debt. Further, if the appeal proceedings 2012/156726 are successful the adjournment of the petition to continue until the recovery by the Zdrilic parties of costs and/or damages, whichever one occurs first.4.In the alternative, a stay of the execution of the sequestration order made on 27 May 2015 to continue beyond the 21 days already stayed until 30 days after the determination of the NSW Court of Appeal proceedings 2012/156726. If the appeal proceedings 2012/156726 are successful the stay to continue until the recovery by the Zdrilic parties of any money or costs and/or damages, whichever one occurs first.… The appellants did not file a notice of appeal from the orders of Judge Lloyd-Jones or apply for leave to do so. On 29 July 2015 the respondents filed an interlocutory application seeking orders that the Review Application be dismissed pursuant to r 13.10 of the FCC Rules and for payment of their costs (the Summary Dismissal Application). On 17 September 2015 the Review Application and the Summary Dismissal Application were listed for hearing before the primary judge. On 26 November 2015 the primary judge made orders dismissing the Review Application, confirming the sequestration order, and ordering that the creditor’s costs (including any reserved costs and the costs of the Review Application) be taxed and paid from the appellants’ estate in accordance with the Bankruptcy Act.THE JUDGMENT DISMISSING THE NOTICE OF OPPOSITION: HICKIE V ZDRILIC Given the way in which this matter has proceeded it is necessary to consider the orders made and the judgment given by Judge Lloyd-Jones in dismissing the Notice of Opposition.