Perovich v Lane Rowin Pty Ltd [2008] HCATrans 120 (7 March 2008)

Last Updated: 11 March 2008

[2008] HCATrans 120

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Brisbane No B59 of 2007

B e t w e e n -

SILVANA PEROVICH

Applicant

and

LANE ROWIN PTY LTD

Respondent

Application for special leave to appeal

KIRBY J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 7 MARCH 2008, AT 10.13 AM

Copyright in the High Court of Australia

MR G.T. BIGMORE, QC: May it please the Court, I appear on behalf of the applicant. (instructed by James Conomos Lawyers)

MR M.R. BLAND: May it please the Court, I appear for the respondent. (instructed by QBM Lawyers)

KIRBY J: Mr Bigmore, what do you say in this application?

MR BIGMORE: Your Honour, had the federal magistrate not found his own previous decision and cited it in his reasons for judgment I would have great difficulty in overcoming the second step that was identified in Ebner. It certainly is clear from Ebner that not only must there be a basis for apprehended bias but there also must be an articulation of the basis to the Court which is asked to recuse.

KIRBY J: Can I come at this in a slightly different way and ask you, is it the fact, as is put in the written argument, that the applicant’s affidavit disclosed debts of $20.6 million?

MR BIGMORE: Yes.

KIRBY J: And that the affidavit did not reveal that she had means of paying those debts?

MR BIGMORE: No, it is not, your Honour. The affidavit is hopelessly inadequate to establish solvency, that was conceded, but what was said in the affidavit was that she was able to borrow against assets in order to pay debts.

HAYNE J: But if the affidavit is, as you put it, hopeless to establish solvency, what are we doing, what are we achieving?

MR BIGMORE: I do not know what we are achieving, your Honour.

KIRBY J: You have to say we are achieving upholding the purity of the process that people who have - - -

MR BIGMORE: Yes.

KIRBY J: I understand all that, but if the bottom line is that your client is insolvent, then the sequestration order was properly made on the objective facts and would have been made by any judicial officer hearing the application.

MR BIGMORE: With respect, your Honour, no. What we say, another judicial officer hearing the matter – and one does not know whether the apprehension of bias has anything to do with this – another judicial officer could have a different approach to it altogether and grant the application for adjournment. This was the first return of the petition. She said, “Here is some evidence” and her counsel said, “I would like more time to adduce more evidence. I did not draw that affidavit. I did not get the case ready for trial today. I would like some weeks in which to supplement the material”. The cases show that ones takes into account in these sorts of applications for disqualification the stage at which the proceeding is at.

KIRBY J: That is true, but the bottom line is indicated in Justice Hayne’s question. It is directed to whatever we think about what the judicial officer should have done in the objective facts, was any injustice done by his order? The answer, with a $20 million indebtedness and hopeless affidavit not disclosing solvency, appears to be no injustice was done. We have cases – take the last case; you sat there listening to it – where it is suggested there was a serious injustice; a half a million dollar verdict taken away. We have so many cases where there is an arguable issue of justice but in your client’s case, with all respect, it does not seem to be there.

MR BIGMORE: Could I come at it a different way, your Honour? There was no evidence of admitted insolvency. She was asserting in the affidavit she did make that she could pay her debts.

KIRBY J: That would not be enough, would it?

MR BIGMORE: It would not be enough.

KIRBY J: I do not know if it was different in my day but, just to assert, $20 million for most people is not small beer.

MR BIGMORE: Indeed, your Honour.

KIRBY J: It may be for counsel, of course.

MR BIGMORE: Not in Victoria, your Honour, perhaps elsewhere. This, your Honour, was the first return. Had there been a trial on the merits and that been all the material there was, I would not be troubling your Honours. The problem in this case is that - - -

HAYNE J: What answer do you make to application book page 55, paragraph 8, where it is said that the magistrate took the affidavit “at face value”, made no adverse finding about the applicant’s credit? Where does that leave us?

MR BIGMORE: The ultimate issue in the case was whether she was solvent or not. Her evidence on that was critical.

HAYNE J: Her evidence was accepted at face value but found deficient and you accept that the evidence was rightly found to be deficient.

MR BIGMORE: Yes, at that stage but in the face of a submission that there should be an adjournment to supplement that evidence. Your Honour, paragraph 8, which you have identified, is not the end of it. His Honour did say that he took her evidence at face value but, by the same token, then said that he did not accept her evidence, he did not accept her assertions which passed as evidence. They were not objected to as such. They are clearly assertions rather than evidence of her ability to pay her debts. But his Honour, with respect, cannot say, “I accept your evidence at face value but I do not believe you when you say you will be able to pay your debts” which is the point we brought out in paragraph 11 on page 47.

KIRBY J: Can I ask you this, I should have looked this up before I came in, but given that the order remains in place against your client, does she require the consent of the Federal Court or an official in order to be able to proceed with these proceedings?

MR BIGMORE: I understand not, your Honour. That has certainly been my experience over many years that - - -

KIRBY J: There is no point that has been taken on this but it just struck me as a bit odd that a person with $20 million owing can proceed without any leave of the Court or other trustee in bankruptcy or some other person.

MR BIGMORE: As your Honour has probably seen, there is no stay in relation to the proceedings under the sequestration order.

KIRBY J: Anyway, there is no point taken on it so we will proceed.

MR BIGMORE: There is no point taken and, indeed, in Cameron v Coal this Court allowed the appeal of a bankrupt even though he had no permission from any trustee or creditor to bring it. It seems to be longstanding that appeals by bankrupts – one of the few things they have left is the right to appeal against the sequestration.

KIRBY J: Yes, dealing with the very issue of whether that order ought to have been made affecting their status. It is not like a proceeding for some other action that is somehow related.

MR BIGMORE: No, your Honour, and, indeed, a bankrupt could make an application for annulment without such an impediment either, the logic of course being that if the bankrupt is impugning the basis upon which the bankruptcy came about, then he or she ought to be able to do that.

KIRBY J: Yes.

MR BIGMORE: In paragraph 11 on page 47 we highlighted the way in which the magistrate dealt with her affidavit, notwithstanding his statement that he accepted it at face value. With respect, although his Honour rehearsed the authorities in the area thoroughly, at the bottom of page 7 of the application book in paragraph 12 it would seem that his Honour was confusing the notion of a prior adverse finding on a critical fact and a prior adverse finding as to credit. The two might run together in a particular case but on this particular occasion his Honour was at pains to say, “On the existing affidavit I can determine solvency”, without saying anything about her credit, because it is really a mathematical exercise.

HAYNE J: Justice Tracey on appeal considered whether the discretion to grant the adjournment had miscarried. His Honour found it had not. How is your point still alive? You have had an appeal, you have had the point reconsidered.

MR BIGMORE: Justice Tracey’s error, with respect, is at page 36 of the appeal book in paragraph 28 – I am sorry - - -

HAYNE J: I thought page 39, paragraph 38 was the difficulty for you.

MR BIGMORE: Yes. That is the difficulty, but the answer might be in paragraph 33. His Honour Justice Tracey attributed to the reasonable bystander the certain knowledge that the magistrate had not had brought to his attention the earlier decision in which the adverse finding had been made.

KIRBY J: In that respect counsel, or the representative then appearing for your client, gave some encouragement to that notion.

MR BIGMORE: Yes, indeed. He completely referred to the wrong previous decision and, as I say, the second hurdle in Ebner is very high but for the fact that the magistrate found the decision and, as we would say, stained the record of the Federal Magistrates Court with - - -

KIRBY J: But is there not a point in Justice Tracey’s reasons where he says the very fact he cites the earlier decision which is contrary to the fact that he had asserted indicated that he had forgotten the fact. That is a pretty powerful point.

MR BIGMORE: Yes, paragraph 33 on page 38. What we say to that, your Honour, and we have said this in the written submission, is that it is just as open to the reasonable bystander to take the view that having cited the decision and put it in the record of the decision that we complain about now, his Honour must be taken to have understood what he said in that case.

KIRBY J: That is a fiction. We are looking into what a person sitting in the back of the court, being reasonable, would attribute to a judge who says he had never made an adverse finding on credit and actually cites a case which does have that finding. Why would a judge do that if it was going to reveal that what he was saying was absolutely wrong? He only would do it if he did not remember it.

MR BIGMORE: I appreciate that, your Honour. We have been counselled, including your Honour’s judgment in Smits and Leslie relatively recently, to look at general principle rather than to try and find bright lines but your Honour’s point, if I understand it, is that the line was so bright in this case that had the magistrate been properly informed by counsel he would have disqualified himself and, indeed, that is the thing which makes this case odd. Certainly if counsel had made an adequate submission – although I am not blaming counsel, counsel was obviously not properly instructed – but counsel made a submission which drew the magistrate’s attention to the wrong case but he still persisted with the submission that there had been a prior adverse finding.

The magistrate found a case and there was a prior adverse finding in that case. If the magistrate had been told of the right case and had read where he had made those robust adverse findings, his Honour, obviously knowing the law as he recited it, must have disqualified himself. That is what perhaps is so odd about this case. It makes it unique in the sense that - - -

KIRBY J: I see the way you put it, but the fact is that it is very hard to overcome Justice Tracey’s analysis that by citing it that is proof positive that he did not remember it; he did not remember what had happened and therefore that was not in his mind at the time he proceeded.

MR BIGMORE: The alternative scenario is that he took the view – and this is open on the construction of his language. It was rejected by Justice Tracey but it is open, in our submission. His Honour at first instance might have taken the view that, “Even though I did make adverse findings in that case I have now found over the weekend I was not referred to it. The second limb of Ebner, or the second step in Ebner to which his Honour referred, requires counsel to articulate the basis in his submission. He did not do so. Therefore I do not have to consider, on the question of disqualification, whether I did make adverse findings before or not”.

We would say that if that is the proper construction, then his Honour was wrong because even though counsel had not got to the right case, his Honour having found it and read it must surely have disqualified himself, recalled his ruling and found another judge, especially given the early stage of the proceeding.

KIRBY J: Yes. You have put it as well as it can be put, Mr Bigmore.

MR BIGMORE: I am very grateful for your Honour’s indication, if your Honour pleases. If the Court pleases.

KIRBY J: Thank you, Mr Bigmore. The Court does not need your assistance on this occasion, Mr Bland.

The application contests a judgment entered by the Federal Court of Australia, (Justice Tracey), dismissing an appeal from orders of Federal Magistrate Wilson, sitting in the Federal Magistrates Court. The Federal Magistrate declined to disqualify himself from hearing proceedings concerning an application for a sequestration order in respect of the applicant. The Federal Magistrate said that he had not earlier made adverse findings against the applicant. This statement proved to be factually incorrect. The Federal Magistrate was led to this conclusion, in part by his defective memory and in part by the way the matter was conducted at trial by the representative then appearing for the applicant.

In the Federal Court, Justice Tracey identified the correct legal principles, as was conceded by counsel for the applicant before us. He referred to Johnson v Johnson [2000] HCA 48; (2000) 201 CLR 488 and Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337. He proceeded to apply them.

We are not convinced that error has been shown or that an appeal would enjoy reasonable prospects of success, were we to grant special leave. Nor is there any substantive injustice in this case calling for this Court’s intervention. The applicant’s affidavit disclosed debts of $20,605,152 and it was conceded that the applicant’s affidavit was “hopeless” to establish solvency on the part of the applicant. No injustice was therefore done by the making of the order by the Federal Magistrate to sequestrate the applicant’s estate.

Special leave is refused. The applicant must pay the respondent’s costs.

The Court will now adjourn in order to proceed with the fifth application.

AT 10.28 AM THE MATTER WAS CONCLUDED