Caram Finance Australia Limited (formerly called Marac Finance Australia Limited) v Capel B8/1999 [2000] HCATrans 67 (10 March 2000)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Brisbane No B8 of 1999

B e t w e e n -

CARAM FINANCE AUSTRALIA LIMITED (formerly called MARAC FINANCE AUSTRALIA LIMITED)

Applicant

and

ELWYN JOHN CAPEL

Respondent

Application for special leave to appeal

KIRBY J

HAYNE J

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 10 MARCH 2000, AT 1.02 PM

Copyright in the High Court of Australia

MR R.G. BAIN, QC: May it please the Court, I appear for the applicant. (instructed by Clayton Utz Solicitors)

MR E.J. CAPEL appeared in person.

KIRBY J: Yes, Mr Bain.

MR BAIN: As your Honours will have seen, this application raises the question of an erroneous interpretation, as it is submitted, of section 58(3) of the Bankruptcy Act by the Court of Appeal. In my respectful submission, that is a matter of general importance, at least for these reasons. It is an important provision in a major federal statute. It is a decision which other courts, including other intermediate appellate courts, would be required to abide, having regard to the well-known desirability for consistency in interpreting federal statutes. And it will have the effect of inhibiting a range of applications, not simply contempt proceedings, but as the written outline says, criminal or quasi-criminal proceedings which otherwise would be brought to superior courts of record. I focus, if I may - - -

HAYNE J: Let it be assumed for the purpose of argument that the point is one of general application. Why was the Court of Appeal wrong in its conclusion that this was a legal proceeding in respect of a provable debt?

MR BAIN: Because the Court of Appeal gave an unduly wide meaning in context to the phrase "in respect of", your Honours. And to the extent that at least one member of the Court of Appeal, his Honour Mr Justice Pincus, relied upon a decision of the Full Federal Court in Fraser v Commissioner of Taxation, there is no support in that authority, in my submission, for the opinion of the Court of Appeal and, rather, the Court of Appeal has misunderstood and misapplied that.

The essential concern is that, as demonstrated by the Full Federal Court in Fraser and, in particular, I take your Honours to the identification of the purposes of the Bankruptcy Act by his Honour Justice Beaumont, with whom the other members of the court agreed, at page 112 and it is between lines E and F by reference to other authority, there is nothing in the nature of a contempt application which interferes with any of the three purposes there identified as the function of the modern bankruptcy law.

HAYNE J: Why not? Why, when you seek to commit somebody for contempt, do you not thereby interfere with the bankruptcy administration, if only because the alleged contemnor might ordinarily be expected to wish to retain counsel and expend funds for that purpose?

MR BAIN: Well, your Honour, the fact that a person may be committed for contempt does not prevent the contemnor from moving in the appropriate way under the present regulations to defend proceedings or to assist his trustee in bankruptcy. It may involve some administrative complications, but it does not interfere with the process. And may I respectfully add that the concern that section 58 represents is not with the co-operation or availability of the contemnor, that is the bankrupt; rather, it is in concern of the debt which is spoken of in the paragraph in question. And that is consistent, in my submission, with the function of the bankruptcy law which, in each of the three aspects identified by his Honour Justice Beaumont, focuses upon the estate, not the person, and focuses upon assets in the estate and the function of the official trustee to have sole rights in and about the getting in of those assets, the use and distribution of those assets. It has nothing to do, in my respectful submission, in this connection with the contemnor's availability although, as I have submitted, that would not be an impediment.

HAYNE J: But how was the alleged contemnor to purge the contempt otherwise than by payment of the money?

MR BAIN: The alleged contemnor can rely upon the fact that there have been intervening circumstances in the appropriate case which neutrally explain the contempt. The contemnor can demonstrate an inability to pay the money but otherwise express himself or herself in such a fashion as to be regretful, to demonstrate appropriate contrition, to show sufficient respect for the court's process, that the court may regard the conduct as purging the contempt. Payment of the fine, if that has proven by subsequent events to be impossible, whether before or after bankruptcy, is not the only way in which, charged with the relevant contempt, the contemnor can purge the contempt. It is not - - -

HAYNE J: Is not the whole purpose of the proceedings for contempt brought by the litigant, having the benefit of the undertaking, to exert pressure on the bankrupt to pay the money which the undertaking required?

MR BAIN: No, your Honour, it is not, and particularly not in this case because, as your Honours will have appreciated from the sequence of events, the undertakings were given in October 1996, some 17 months elapse, or thereabouts, until the hearing of the bankruptcy application before his Honour Justice Finn. Then some couple of months further elapse until the motion for contempt in May 1998, by which time, as set out plainly by his Honour Mr Justice Muir in the reasons, particularly commencing at page 5 of the book - which I need not take your Honour to - the bankrupt had emphatically refused under any circumstances to pay.

He had said that, rejecting an opportunity advanced in that regard by his Honour Justice Finn. He had said that in the material which had been put on in the Federal Court. And by the time he came to present to his Honour Mr Justice Muir, it was abundantly plain that, on his case, he did not have any means of paying and, of course, was then bankrupt; and, secondly, would not, in any event, pay. So this was an application made with no prospect whatsoever as a practical reality of obtaining money out of it, but, more importantly, of its character not being directed to getting money.

It is contrast, for example, to the style of application which features in all the subsection 60(1) cases in which, in one way or another, there is an attempt, directly or indirectly, by a claimant to obtain some advantage, on the one hand, in respect of other creditors or otherwise to take a role, contrary to the trustee's exclusive role, in getting in assets or otherwise altering the state of the bankrupt's estate. It is that distinction, in my respectful submission, your Honours, which is illustrated by the difference in language between section 58(3) of the Act and section 60(1). I do not wish to delay your Honours unnecessarily on that. The relevant provisions are set out for convenience in full at page 28 of the application book.

Your Honours will note at section 60(1), particularly paragraph 60(1)(b), the quite deliberate contrasting words in subparagraphs (b)(i) and (ii) "non-payment" of debt and, underscored by the preparatory words in (b) "whether civil or criminal". Now to be plain, in our respectful submission, if there was any implication of the bankruptcy in respect of the contempt or on the contempt, then an application by the respondent under section 60(1) to the Federal Court was both competent and, in the clear language of the Bankruptcy Act, the appropriate vehicle by which to address any concerns he had about being charged with contempt, having been made bankrupt. The fact that that is recognised, explicitly, in the language of civil and criminal and, indeed, is a good illustration of the need for that phrase, and the fact that the relevant inquiry for section 60(1) purposes is the non-payment of something, rather than the thing itself, is also an illustration of fundamental importance, in my submission.

KIRBY J: But the bottom line is, you are seeking to have the respondent punished for contempt in respect of a provable debt as to costs, and that is something which, by the law of the federal Parliament, is left under federal administration and is outside the interference of a State court. I mean that is the fact of the matter. You are seeking to have him punished in respect of a provable debt.

MR BAIN: Well, in my respectful submission, that is not the nature or the intent of the application with respect to contempt. It is perhaps a fine, but important and clear, in my submission, distinction, that the application for contempt makes the respondent amenable to the Supreme Court's power in respect of his not having made good a promise, the equivalent of an injunction if pronounced by the Court. As the outline says, of course it is a material fact in that, that what was otherwise a provable debt was not paid, but that is not to equate - - -

KIRBY J: It is not only material, it is the very source of the alleged contempt; it is inextricably wound up in the bankruptcy.

MR BAIN: Well, in my respectful submission, the nature of the contempt application is to bring the disobedience to the Supreme Court's attention for it to respond to the disobedience. It is not an application which, as explained by his Honour Justice Beaumont, as I have indicated, is anything to do with getting in the debt or taking a role in the administration of the bankrupt's estate, and when - - -

KIRBY J: You do not think that the risk of having to bring your toothbrush puts a little bit of pressure on the person to bring along the money? Of course it does; let us be real about this.

MR BAIN: If is, of course, a possibility that, charged with contempt, and however obdurate to date before that, that an alleged contemnor may pay money which has not earlier been paid and, in that way, seek to purge the contempt, but even so, with respect, subject only to the question of whether the motion would be pursued, so far as the nature of a contempt application is concerned, that is not an end to the matter, because the fact that there has been money paid may not be accepted by the court as being an appropriate response.

KIRBY J: But the question is whether putting pressure on people - leave aside this case - we have to look at this as a matter of general principle, putting pressure on people in the position of the respondent is consonant with the scheme of the Bankruptcy Act, and it just is not.

MR BAIN: Yes, and, in my respectful submission, if so wide a view as your Honour is intimating were taken, that would obviate the need for the language in section 60(1) of "in respect of the non-payment of a provable debt". The legislation plainly distinguishes between things which may have as their predicate the non-payment of a provable debt, and something which is more direct or substantial being, as your Honours know, section 58(3) says "any legal proceeding in respect of a provable debt". Now, in respect of the debt means that the proceeding of its nature is directed at the debt. For example, to take the very good illustration of afforded in Fraser, the one case on section 58(3), one of recent significance, it refers to others, there the Commissioner of Taxation seeks to avoid a consent order with respect to assets made between a taxpayer and his wife in the Family Court. The nature of that application is to strike directly at the asset base of someone who subsequently became bankrupt. That is an application of its force and of its character directed at the debt. It is in respect of the debt. The debt could be taken as the property the subject matter of the action. Here there is the independence or the several subject matters of the personal behaviour of the contemnor, on the one hand, and such assets as he may have, on the other.

HAYNE J: And of a high-minded creditor that brings this application purely for the satisfaction for the honour of the Court. Come, come, Mr Bain, the creditor brought the proceedings in the hope of seeing some cash at the end of the day.

MR BAIN: Well, with respect, your Honour, the material before the courts below and the findings which had been made, and the persistence and obduracy and flat refusal under any circumstances, the sworn refusal repeated in submissions under any circumstances to pay tell strongly against that and, with great respect, what your Honour Justice Hayne has suggested is really not an inference which should be drawn from the material in this case. That is not to say, that is not to avoid or seek to deflect questions of the motivation in a practical reality of a claimant for contempt. Obviously in the swirl of commercial litigation, particularly, your Honours would be only too well familiar, of contempt applications sometimes being used as tools.

However, eschewing that as having occurred in this case, the reality is that the application is directed at the person; it is not directed at the property and it is directed at property in respect of a provable debt with which section 58(3) operates, because otherwise, and, indeed, as his Honour Justice Beaumont emphasised of the character of section 58(3) in Fraser, in contrast to section 60(1), 58(3) is an absolute bar. It says, in effect, in this connection, that another court will be the gatekeeper to a court of superior record in respect of disobedience to its orders and, to the extent that it matters, but as an illustration of how inappropriate that concept would be, as here, a case where there was nearly 18 months time lag, with many changed circumstances, potentially, between the promise, the undertaking, and the application for punishment for contempt, where there has been a sworn capacity in the bankrupt to have paid over an extensive period prior to the earliest he says his changed circumstances occurred, even after those changed circumstances, a capacity in the bankrupt to pay, if he wanted to, but a disinclination to borrow.

Then, as I have already said at the risk of repetition, the bankrupt's affirmation that under no circumstances will he pay. All this is fact with which your Honours would not be concerned in any appeal, but it is in response to the question, illustration of why, to give such a wide meaning to what is an absolute bar of proceedings in one court in respect to disobedience to its own orders, is inappropriate. It is, again at the risk of repetition, to underscore the consciousness which the legislature had in using, quite deliberately it must be inferred, language of "civil or criminal", as qualificatory words or perhaps expanding words in section 60(1) and not in section 58(3) and the concept of intruding the non-payment of something as the trigger or the predicate rather than dealings with assets, to put it in the simplest of terms; dealing with assets which handsomely fits, in my respectful submission, the discussion of the Full Federal Court at page 112 and 113. The three things are:

the assets of the bankrupt are distributed rateably among creditors; to ensure that one creditor does not obtain an undue advantage over other creditors. The third is to bring about the discharge of a debtor from future liability.

Elsewhere, at page 114, your Honours will see a discussion of the rights of the trustee, to which I have alluded as being the exclusive rights to deal in the assets. So the purpose statutorily, the sense, commonsensically, and the emphasis of the plain language is "in respect of" a debt. This Court has repeatedly said, and the authorities are referred to in Fraser, that "in respect of" is a phrase of wide connection, it takes colour from context, but the width of that conjunctive phrase cannot overcome the necessity for the subject matter to remain important, that provable debt is the subject matter in respect of section 58(3) in contrast, as I have said, to section 60(1).

Unless your Honours had anything further of me, anything else would only be repetitious of the outline of argument, those are the submissions for the applicant.

KIRBY J: Thank you very much, Mr Bain. Mr Capel, the Court does not need your assistance.

In our view, the decision of the Court of Appeal of the Supreme Court of Queensland in this matter is not attended by doubt. Special leave to appeal is therefore refused with costs.

MR BAIN: Your Honours, as to costs, Mr Capel appears in person. In my submission, a costs order is inappropriate in those circumstances.

KIRBY J: Is not the situation similar to that which arose in the Court of Appeal, that is to say that the costs that he recovers in this Court will be those costs to which a litigant in person is entitled. He may be entitled to his bus fare into the court and perhaps matters of that kind, maybe something a bit more. That is not something we would normally trouble ourselves with.

MR BAIN: I understand, your Honours. Your Honours having said that, I accept that it is a taxing matter. Thank your Honours.

KIRBY J: Do you wish to be heard on that, Mr Capel, or are you content with that order.

MR CAPEL: No, your Honours, I think you have summed it up there. There are certain items that I can claim and there are some legal advice that I obtained which I can claim as well.

KIRBY J: That will be a matter for you to sort out between you, and if you cannot, then that will be a matter of taxation.

MR CAPEL: It is a taxing matter, your Honours.

KIRBY J: The order is the application is dismissed with costs.

AT 1.22 PM THE MATTER WAS CONCLUDED