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Bechara v Bates [2021] FCAFC 34 (16 March 2021)
Last Updated: 16 March 2021
FEDERAL COURT OF AUSTRALIA
Bechara v Bates [2021] FCAFC 34
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File numbers:
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Judgment of:
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Date of judgment:
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16 March 2021
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Catchwords:
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BANKRUPTCY – sequestration orders – application for
review to Federal Circuit Court judge of sequestration orders made by registrar
– where Federal Circuit Court judge dismissed application for review for
non-attendance and for want of prosecution –
review is a hearing de
novo – meaning of “hearing de novo” –
necessary for fresh compliance with s 52(1) of the Bankruptcy Act 1966
(Cth) – inappropriateness of dismissal for non-attendance or want of
prosecution by debtor – application for review
to be remitted to Federal
Circuit Court for hearing de novo – status of registrar’s
order – whether creditor’s petition has lapsed – where
sequestration order made
within 12 months of presentation of creditor’s
petition PRACTICE AND PROCEDURE – registrars – review
of registrar’s power to make sequestration order – review is a
hearing de novo – meaning of “hearing de novo”
HIGH COURT AND FEDERAL COURT – appeal from orders made by
single judge in appellate jurisdiction of Federal Court – appeal dismissed
as incompetent
– relief granted under s 39B of the Judiciary Act
1903 (Cth)
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Legislation:
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Cases cited:
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Body Corporate for Sanderling at Kings Beach v Samsakopoulos (No 2)
[2020] FCCA 1909
F Hoffmann-La Roche & Co AG v Secretary of State for Trade and
Industry [1975] AC 295
R v Commonwealth Court of Conciliation and Arbitration; Ex parte Ozone
Theatres (Aust) Ltd [1949] HCA 33; 78 CLR 389
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Division:
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General Division
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New South Wales
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Commercial and Corporations
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General and Personal Insolvency
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Number of paragraphs:
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Date of last submissions:
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19 February 2021
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Counsel for the Applicant/Appellant: |
Mr A Martin of Martin Legal |
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Counsel for the Respondent in NSD 2386 of 2018 and First Respondent in NSD
658 of 2020:
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The Respondent appeared in person
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Solicitor for the Respondent in NSD 2386 of 2018 and First Respondent in
NSD 658 of 2020:
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Bannister Law
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Counsel for the Second Respondent in NSD 658 of 2020:
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The Second Respondent filed a submitting notice
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ORDERS
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ALLSOP CJ, MARKOVIC AND COLVIN JJ
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DATE OF ORDER:
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16 MARCH 2021
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THE COURT ORDERS THAT:
- The
appeal be dismissed as incompetent with no order as to costs.
- The
sum of $5,000 provided by the appellant for security for costs and any interest
thereon be returned to the appellant.
ORDERS
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NSD 658 of 2020
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BETWEEN:
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MARIA BECHARA
Applicant
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AND:
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PHILIP BATES
First Respondent
FEDERAL CIRCUIT COURT OF
AUSTRALIA
Second Respondent
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ORDER MADE BY:
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ALLSOP CJ, MARKOVIC AND COLVIN JJ
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DATE OF ORDER:
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16 MARCH 2021
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THE COURT ORDERS THAT:
- The
orders of the Federal Circuit Court of Australia made on 8 December 2016
dismissing the Interim Application filed on 25 July 2016
and ordering costs; on
3 March 2017 dismissing the Application in a Case filed on 5 January 2017 and
ordering costs; and on 17 May
2017 dismissing the Application in a Case filed on
2 May 2017 and ordering costs be quashed and set aside.
- The
application for review, in the form of the Interim Application filed on 25 July
2016, of the order of Registrar Tesoriero made
on 5 July 2016 that the estate of
Maria Bechara be sequestrated under the Bankruptcy Act 1966 (Cth) and of
the order concerning costs be remitted to the Federal Circuit Court of Australia
for hearing according to law as a de novo hearing of the
creditor’s petition filed on 7 April 2016, to be heard as soon as
reasonably possible.
- The
first respondent pay the applicant’s costs of the application, such costs,
and all other outstanding orders for costs as
between the parties in litigation
in the Federal Circuit Court of Australia, the Federal Court of Australia and
the High Court of
Australia, not be enforced and no steps be taken to enforce
such costs until after orders are made consequent upon the hearing of
the
creditor’s petition in the application for review.
Note: Entry of orders is dealt with in Rule 39.32
of the Federal Court Rules
2011.
REASONS FOR
JUDGMENT
THE COURT:
The context of the proceedings: relevant principles of the
operation of judicial power
- When
it comes to federal judicial power in Australia, certain matters are
fundamental. The judicial power of the Commonwealth may
only be exercised by
judges of federal courts or other courts exercising federal jurisdiction and
membership of a federal court is
confined to judges appointed in accordance with
s 72 of the Constitution. However, federal judicial power may be
delegated to registrars if the power exercised by them is subject to review or
appeal by a
judge or judges of the court: Harris v Caladine [1991] HCA 9;
172 CLR 84 at 94–95 (Mason CJ and Deane J), 123, 126 (Dawson J),
150–151 (Gaudron J) and 164 (McHugh J) (noting the dissenting views
to the
effect that federal judicial power invested in a federal court cannot be
exercised by a registrar, at 109 (Brennan J) and
141 (Toohey J)). The
opportunity for a review by way of hearing de novo is sufficient to
satisfy this requirement: Harris v Caladine 172 CLR at 95, 123 and
164.
- It
is now an accepted incident of judicial power that it may be exercised in this
way, namely by an order being made pursuant to a
delegation, but only if the
order may be reversed or otherwise corrected by a judge on review. In such
cases, however, it is important
to recognise that the review (or by de novo
“appeal”) is not concerned with correcting error and in that
respect is to be differentiated from the statutory rights
of appeal that have
gradually become an established part of the judicial system. Nor is it a review
de novo as a further stage in a tiered process. Rather, the review is an
attribute of a recognised mechanism by which the exercise of judicial
power may
be delegated to an officer of the Court who is not a judge, such as a registrar.
The right to seek review attaches to the
delegation and is an attribute of the
nature of the delegated authority.
- So,
if a registrar exercises delegated judicial power within a formal structure that
enables review by the Court, the order of the
registrar takes effect as an
exercise of judicial power by the judges of the Court, but the exercise of that
delegated power depends
for its validity upon the availability of review by the
judges of the Court. The exercise of the delegated power is not deferred
until
there has been a review or confirmation of the order by a judge. Nor does the
exercise of delegated judicial power operate
in some provisional manner pending
a review. Rather, the registrar’s order takes effect as an order of the
judges of the Court
but on the basis that a judge may be asked to make an order
in place of the exercise of delegated authority.
- Then,
if the review process is validly invoked in respect of an order made by a
registrar, there is the possibility that by subsequent
decision of a judge of
the Court a different order will be made in place of the existing order. In
effect, the delegated exercise
of power is undone or revoked and a decision by a
judge is made in its place.
- In
consequence, where an application is brought to review the exercise of a
delegated judicial power it is often emphasised that the
review by the judge
should be undertaken promptly. The nature of the delegation produces the
potential that parties may act on the
basis of the delegated exercise of
judicial power only to have the decision reversed when the process of judicial
oversight that
is reserved as part of the delegation is invoked
successfully.
- If
there is a concern about steps being taken by parties based upon the order that
has been made in the exercise of delegated power
then interim relief could be
sought pending the outcome of the review. However, the nature of the review
means that matters can be
addressed when the decision is made on review because
inherent in the nature of the delegation is a reservation by the Court of an
ability to revisit the order by way of review and make whatever order may have
been made by the officer in the exercise of the power
of delegation. There are
limits upon the extent to which such delegations (themselves being an exercise
of judicial power) can be
the subject of control by Parliament. Nevertheless, it
is well established that laws can be made by which a power to delegate of
the
kind just described may be recognised.
- If
an order is made by a registrar in the exercise of delegated judicial power and
there is a review that results in a different conclusion by a judge to
that reached by the registrar then an order is required to bring the operation
of the existing order to
an end. The Court, on review, does not determine that
the earlier order was made without authority. Rather, by way of oversight,
it
makes a new order to replace the registrar’s order and does so in the
exercise of the power of review which is a condition
of the delegation. The fact
that the nature of the review conducted by the Court is a de novo review
does not mean that the review proceeds as if no order had been made by the
registrar or that the Court, if persuaded to make
a different decision, makes
orders as if there had been no order by the registrar.
- The
present case concerns the effect of these fundamental principles upon a
sequestration order made by a registrar of the Federal
Circuit Court and
the events that unfolded after the person who was the subject of the order, Ms
Bechara, sought a review of the making of the
order by a judge of that Court.
Introduction
- The
background facts to the matter before the Court are recounted in the reasons of
the Chief Justice in Bechara v Bates (No 2) [2020] FCA 659 delivered at
the conclusion of a case management hearing on 14 May 2020. Those reasons were
delivered in order to alert the parties
to some of the difficulties present in
the constitution of the proceeding as an appeal from the orders made by the
first Federal
Court judge (see Bechara v Bates [2018] FCA 460), being
orders made in the appellate jurisdiction of the Court: see [2020] FCA 659 at
[9]–[25].
- On
12 June 2020, Ms Bechara filed an amended notice of appeal and an application
under s 39B of the Judiciary Act 1903 (Cth) directed at quashing the
decision of the Circuit Court, together with further written submissions. The
Chief Justice directed
pursuant to s 20(1A) of the Federal
Court of Australia Act 1976 (Cth) that the matter be heard
by a Full Court in the original jurisdiction.
- On
4 September 2002, Mr Bates filed a further amended notice of contention in the
appeal. Mr Bates filed further submissions in November
2020.
- The
representation of the parties has not been clear or consistent. Mr Martin has
come in and out of the matter for Ms Bechara. Mr
Bannister of Bannister Law is
the solicitor on the record for Mr Bates, though Mr Bates has appeared in his
own interests as advocate.
At the hearing of the appeal and the application
before this Court, Mr Martin appeared for Ms Bechara as advocate, but not as
solicitor
on the record. This was less than satisfactory; nevertheless, the
Court heard Mr Martin.
- Shortly
after 14 May 2020, at the next case management hearing, Mr Martin on behalf of
Ms Bechara objected to an amicus curiae being appointed, a matter that
the Chief Justice had raised on 14 May: [2020] FCA 659 at [32]. As a consequence
of that objection that step was not taken.
- The
delay in this matter has been exacerbated by the Covid-19 pandemic.
Nevertheless, the delay and confusion by the parties in bringing
the proceedings
forward is regrettable in a matter of bankruptcy.
- There
were numerous separate submissions filed which we will address in substance in
due course. The supporting material for both
the appeal and the s 39B
application was placed in unsatisfactory electronic form by the parties. The
Court, of its own motion, collected all relevant documents
in a two volume
bundle. The bundle prepared by the parties, together with the volumes prepared
by the Court were marked as evidence
in the s 39B application and as a court
book to support the appeal.
- Before
turning to what occurred in this case and why, because of the miscarriage of the
proceeding in the Circuit Court, Ms Bechara
is entitled to relief
notwithstanding the significant delay, it is necessary and appropriate to set
out the fundamental legal principles
concerning the review by judges of orders
made by registrars under s 104 of the Federal Circuit Court of
Australia Act 1999 (Cth) (and s 35A of the Federal Court
Act), in particular in respect of the making of a sequestration order in
bankruptcy. Important aspects of the practical consequences
of these principles
were not appreciated by the Circuit Court judge nor by Mr Bates, the creditor,
who as a barrister appeared for
himself. The principles provide the answer to
the underlying question of principle and practice in the administration of
bankruptcy
in the Circuit Court and this Court.
The nature of review under s 104 of the Circuit Court Act and s
35A of the Federal Court Act
- The
nature of a review under s 104(3) of the Circuit Court Act and under s
35A(6) of the Federal Court Act of an order made by a registrar (often
but not always in the context of the review of the making of a sequestration
order in bankruptcy)
has been the subject of a significant number of decisions
of this Court. All are consistent. To underpin the validity of the delegation
of
judicial power of the Commonwealth to a non-judicial court officer there must be
a rehearing de novo before a judge of the Court (whether Circuit Court or
Federal Court). The review does not hinge, or focus, upon error in the decision
of the registrar. It is a hearing de novo, in which the matter is
considered afresh on the evidence and on the law at the time of the review, that
is at the time of the hearing
de novo. The importance of the de
novo rehearing is Constitutional, being the supervisory condition that
enables judicial power to be delegated to a registrar. All the
jurisprudence
stems from this requirement marked out by the High Court in the landmark
decision in 1991 of Harris v Caladine [1991] HCA 9; 172 CLR 84, which is discussed in
many of the cases referred to below.
- Justice
Branson made the position clear in 1995 in Sheahan v Joye [1995] FCA 351;
57 FCR 389 at 391. The Full Court made the position clear in 1997 in
D’Antuono v Minister for Health [1997] FCA 1370; 80 FCR 226 at
229–231 (Burchett J) and 240–241 (Carr J). The matter was made clear
by Davies J in 1998 in Jageev Pty Ltd v Deane [1998] FCA 513 and by Katz
J in 1999 in New Era Installations Pty Ltd v Don Mathieson & Staff Glass
Pty Ltd [1999] FCA 475; 31 ACSR 53 at 54–56 [2]–[4] and
Meehan v Alfaro [1999] FCA 832; 93 FCR 201 at 202 [2]. The correctness of
these decisions was challenged in 2001 in the Full Court by the Commonwealth
Bank as a creditor in bankruptcy
proceedings against litigants in person in
Martin v Commonwealth Bank of Australia [2001] FCA 87; 217 ALR 634. The
challenge was rejected: Martin 217 ALR at 635–636 [6]–[7]. In
Martin the primary judge had not reheard the creditor’s petition
afresh or de novo. Rather, his Honour had looked at the prospects of
success of a special leave application directed to the underlying debt for
“the
purpose of deciding whether the exercise by the registrar of her
discretion had miscarried”: Martin 217 ALR at 637 [14]. Such an
approach contained the implicit error that for the review to succeed there must
be shown some error on
the part of the registrar: D’Antuono 80 FCR
at 233 and Martin 217 ALR at 637 [14]. In Martin, the Bank had
filed no affidavits on the review application. If the affidavits filed and read
before the registrar were to have been
relied on they did not comply with the
timing requirements of the rules for the hearing of a creditor’s petition:
Martin 217 ALR at 637–638 [16]. There had been no hearing of the
creditor’s petition afresh, and so the review had miscarried.
- The
nature of the review was once again the subject of detailed consideration by a
Full Court in 2006 in Pattison v Hadjimouratis [2006] FCAFC 153; 155 FCR
226. The point of issue in that case was the nature of relief available if the
review of a sequestration order was successful.
There was a difference between
the majority, Nicholson and Jacobson JJ, and Lander J as to whether an order
annulling the bankruptcy
was available to be made in the alternative to setting
aside the sequestration order. There was no disagreement, however, as to the
nature of the review as a hearing de novo: Pattison 155 FCR at 229
[6] (Nicholson J), 233–234 [21]–[29] and 235 [41]–[43]
(Jacobson J), and 250–251 [148]–[154]
(Lander J).
- Two
paragraphs of the reasons of Lander J ([153]–[154]) clearly state the
position:
[153] Once the application is brought, a party, who is
entitled to a hearing de novo under s 104(2) of the FMA is under no obligation
to demonstrate error on the part of the Registrar who made the original order.
Indeed, a hearing of this kind requires the party
seeking the sequestration
order to establish all of the matters upon which the order is based. In a case
such as this the onus remains
upon the petitioning creditor to show an
entitlement to a sequestration order under s 43(1) of the Bankruptcy
Act.
[154] The parties are not confined to the evidence which was before the
Registrar but both parties may rely on that evidence and
any further evidence
which is relevant to the issues to be considered on the rehearing. The federal
magistrate should proceed as
if he or she were considering the claim raised in
the petitioning creditor’s petition for the first time. If there be in
this
or any other case an exercise of discretion by the Registrar, the exercise
of that discretion by the Registrar does not bind the
federal magistrate in any
way. Because the parties seeking the rehearing had no obligation to show error,
the party does not have
to establish that the exercise of the Registrar’s
discretion miscarried in the sense described in House v The King
(1936) 55 CLR 499.
- The
position was reiterated by the Full Court in 2008 in Totev v Sfar [2008]
FCAFC 35; 167 FCR 193. An oft-repeated thereafter and pellucid statement of the
nature of the review was contained in the reasons for judgment of Emmett
J (the
primary judge in Martin) at 167 FCR 196–197
[9]–[15]:
[9] The rationale for the review regime briefly
described above is that the making of a sequestration order involves the
exercise
of the judicial power of the Commonwealth. Under Ch III of the
Constitution of the Commonwealth, that power cannot be exercised
otherwise than by a justice appointed under Ch III. A registrar of the Federal
Magistrates Court
is not a justice. On the other hand, judges of the Federal
Magistrates Court are justices appointed under Ch III.
[10] For a delegation of power to a registrar of the Federal Magistrates Court
to be valid, the powers and functions of the registrar
must be subject to review
by a judge of the Federal Magistrates Court on questions of both fact and law.
If the review of the exercise
of the power by the registrar is by way of hearing
de novo, the delegation will be valid (Harris v Caladine [1991] HCA 9; (1991)
172 CLR 84 at 95). Indeed, on one view, nothing less than a hearing de
novo would be sufficient. That is to say, there must be a complete rehearing
of the facts and the law as they exist when the judge reviews
the order made by
the registrar; otherwise, the registrar, and not the judges of the Court, would
be exercising the original jurisdiction
of the Court (Harris v Caladine
172 CLR at 164).
[11] It may be arguable that subjecting the exercise of powers or functions by a
registrar to an appeal would be sufficient (Harris v Caladine 172 CLR
at 95). However, that is not the safeguard that has been adopted in
relation to the delegation of powers and functions to registrars
of the Federal
Magistrates Court. It is clear from r 20.03 of the General Rules that the review
of a registrar’s sequestration
order is to be by way of a hearing de
novo.
[12] A hearing de novo is different from an appeal stricto sensu
and is different from an appeal by way of rehearing. In the case of an appeal
stricto sensu, the question would be whether, upon the material before
the registrar, the conclusion reached by the registrar was correct. In an
appeal
by way of rehearing, the appellate court would rehear the matter as at the date
of the appeal, but on the evidence called
before the registrar, subject to a
power to receive further evidence where appropriate: the rights of the parties
would be determined
by reference to the circumstances, including the law, as
they existed at the time of rehearing (Harris v Caladine 172 CLR at 125).
In each case any question concerning the exercise of discretion would be subject
to the restrictions imposed on
an appellate court in reviewing the exercise of a
discretion (see House v The King (1936) 55 CLR 499).
[13] In the case of a hearing de novo, however, the judge reviewing the
order begins afresh and exercises for himself or herself any discretion
exercised by the registrar.
The parties commence the proceeding again, subject
to any rules concerning the use of evidence adduced before the registrar. The
hearing de novo involves the exercise of the original jurisdiction and
the petitioner, in the case of a bankruptcy petition, must start again, call
witnesses and make out the petitioner’s case (Harris v Caladine 172
CLR at 124).
[14] Because the hearing of an application for review of a sequestration order
is a hearing de novo, it would not be sufficient for the reviewing judge
to be satisfied that the registrar made no error and simply to dismiss the
application
for review. The judge who hears the review application must hear the
petition afresh and must be satisfied as to the matters referred
to in s 52 of
the Bankruptcy Act. Thus, the reviewing judge must herself or himself be
satisfied with the proof of:
- the matters stated in the petition;
- the service of the petition; and
- the fact that the debt or debts on which the petitioning creditor relies is
or are still owing.
The reviewing judge must also exercise afresh the
discretions conferred by s 52(2).
[15] In particular, unless the Bankruptcy Rules are waived, the judge must have
the affidavits referred to in r 4.06 of the Bankruptcy
Rules, which must be
sworn shortly before the hearing. Except in the case of a review on the same day
as the sequestration order
was made, the affidavits relied upon before the
registrar would not satisfy r 4.06. In the absence of fresh affidavits, it would
be necessary that compliance with the Bankruptcy Rules be
waived.
See also Cowdroy J at 167 FCR 210–211 [91]–[94]. Justice Bennett
agreed with both Emmett J and Cowdroy J in this respect: 167 FCR at 204
[51]–[52].
- There
was a difference of view in Totev of Bennett and Cowdroy JJ from that of
Emmett J concerning the reconciliation of the nature of the review (the hearing
de novo) and the time limits of the life of the creditor’s petition
in s 52(4). It will be necessary in due course to deal with this
issue upon
which the Court disagreed in Totev.
- In
2016, in Zdrilic v Hickie [2016] FCAFC 101; 246 FCR 532 a Full Court once
again dealt with the nature of the review by way of hearing de novo.
Zdrilic concerned the use of summary disposal powers to dismiss an
application for review of the making of a sequestration order. The Court
at 246
FCR 536–541 [16]–[29] once again went over the requirements of a
review by way of de novo hearing.
- Given
its nature as a Constitutional imperative (to use the apt words of Beach J in
Tran v Pu [2015] FCA 97; 228 FCR 562 at 566–567 [19]) and the lack
of necessity for error on the part of the registrar to be demonstrated for
success in the review,
the use of summary disposal procedure was criticised. The
Court in Zdrilic 246 FCR at 541–542 [32] referred to and approved
what Beach J had said about this in Tran v Pu:
Beach J doubted whether an application for summary
dismissal was appropriate in an application for review of a sequestration order,
observing at [28] and [31]:
28. Fourth, there may be cases where an
application for review is brought mala fide, for an improper purpose or
otherwise constitutes an abuse of process (Williams v Spautz [1992] HCA 34; (1992) 174
CLR 509 at 526-531 per Mason CJ, Dawson, Toohey and McHugh JJ). But in such a
case, an application to stay the review (or summary dismissal)
may be the
appropriate process to follow. But in this case, no such application was
brought. Further, no such circumstance was alleged.
Further, I say this
generally, for it is hard to conceive of such a case in the context where an
application for review is brought
by a debtor challenging the making of a
sequestration order. Further, if the effect of the stay produces an
impermissible absence
of review of the Registrar’s order, then yet further
problems may arise.
31. It was said that the Court had a power of summary dismissal (s 17A(2) of the
FCC Act and r 13.10 of the FCC Rules) and that this
power had been exercised by
her Honour in the present case on the basis of the Deed being a bar. But no such
formal application was
made; there was no formal document and my review of the
transcripts for the hearings on 21 and 26 August 2014 does not support the
contention that such a power was being exercised. ... Further, if such a summary
dismissal power was available, then it might be
used in circumstances such as
discussed in [28] above. But such circumstances were not the present case.
Further, if it was to be
used in circumstances such as the present, her Honour
would first have been required to consider the matters set out in [20]-[27]
above before considering whether to exercise her powers to summarily dismiss the
application for review on the basis of the Deed
alone being a bar. No such
consideration occurred. More particularly in that context, her Honour would have
been required to consider
the public effect and third party consequences of
exercising her powers of summary dismissal.
- The
circumstances of Zdrilic were complicated and were discussed in detail by
the Court at 246 FCR 542–554 [33]–[90]. The headnote to the report
amply summarises what happened for present purposes:
The respondents filed a creditor’s petition
against the applicants. The appellants filed a notice stating grounds of
opposition.
A judge of the Federal Circuit Court heard and dismissed the notice
of opposition. However, the judge did not then hear the petition.
Rather, he
ordered that the petition be heard before a registrar. Later that day, a
registrar made a sequestration order. Subsequently,
the appellants filed a
review application of the registrar’s decision. The respondents then filed
an interlocutory application
seeking that the review application be summarily
dismissed. A judge of the Court (the primary judge) heard the review application
and the interlocutory application. The primary judge summarily dismissed the
review application as an abuse of process. The primary
judge went on to consider
the petition “to the extent that it [was] necessary” and — as
is usual in unsuccessful
review proceedings — confirmed the sequestration
order.
The review application was summarily dismissed, but the judge did go on to deal
with the matter as a de novo review. Thus the appeal from the
confirmation of the sequestration order was dismissed.
- Importantly
for present purposes, the Court discussed the inappropriateness of summary
disposal of applications for review, saying
at 246 FCR 553
[86]–[89]:
[86] The difficulties of considering a review
application in the context of a summary dismissal application under s 17A of the
Federal
Circuit Court Act and FCC Rule 13.10 are apparent from [24] and [26] of
the primary judge’s reasons and in the discussion between
the primary
judge, Mr Zdrilic and the solicitor for the respondents referred to at [76] and
[79] above.
[87] Section 17A of the Federal Circuit Court Act and r 13.10 of the FCC Rules
permit the Federal Circuit Court to stay or dismiss
a proceeding generally or in
relation to any claim for relief in the proceeding if the party prosecuting the
proceeding or claim
for relief has no reasonable prospects of success or it is
frivolous or vexations [sic] or it is an abuse of process. At [24] the
primary
judge held:
The legislation is clear. The Applicants
have no reasonable prospects of success. ... the Application for Review is
plainly an abuse
of process.
[88] The primary judge then dismissed the application
for review under s 17A of the Federal Circuit Court Act and r 13.10 of the FCC
Rules.
[89] Had he stopped there, the primary judge would clearly have fallen into
appealable error. Whether or not the appellants’
opposition to the
sequestration proceedings had merit or any reasonable prospect of success, the
appellants had a statutory right
based on a “constitutional
imperative” to a review of the registrar’s exercise of power
conducted by a judge. It
is extremely difficult to contemplate any circumstance
where the exercise of that right would constitute an abuse of process. An
application for review of a registrar’s decision filed pursuant to s 104
of the Federal Circuit Court Act is not an application
which is prosecuted by a
debtor/applicant for the review; it is a demand that a claim for relief (a
sequestration order) brought
by the creditor be heard by a judge as if no
sequestration order had been made. The “prosecutor” of an
application for
a sequestration order based on a creditor’s petition is
the creditor; the only onus a debtor bears is the one (s)he assumes
if (s)he
seeks to resist the grant of an order based on proof of solvency or “any
other sufficient cause” under s 52(2) of the Bankruptcy Act. In our
opinion, the respondents should not have filed their application for summary
dismissal and the primary judge should not have
entertained it. Like Beach J, we
find it hard to conceive of any case in which it would be appropriate to see
summary dismissal of
an application for review brought by a debtor challenging
the making of a sequestration order.
- Thus,
relevant to the matter before us, the following is, and has been since the
mid-1990s, clear about the nature of a de novo hearing by way of review
of a sequestration order in bankruptcy made by a registrar:
(a) The application for review leads to a
hearing de novo of the creditor’s petition.
(b) The hearing (or rehearing) of the creditor’s petition is not
prosecuted by the debtor (applicant for review) but by the
creditor in the
proceeding in which the registrar’s order was made.
(c) The application for review is a demand that the claim for relief (the
sequestration order) be heard by a judge.
(d) The onus is upon the creditor to prosecute its petition. The only onus of
the debtor/bankrupt against whose estate a sequestration
order has been made is
to prove either solvency or any other sufficient cause under s 52(2) of the
Bankruptcy Act 1966 (Cth).
(e) An appreciation of the above considerations makes it evident that summary or
default judgment terminating an application for
review is highly likely to be
misconceived and founded upon a misconception that the applicant for review has
an onus to prosecute
an application or to show error in the approach of the
registrar.
- There
are some complexities and difficulties yet to be fully and certainly resolved,
but the approach of the Court conformable with
the Constitutional requirements
laid down by Harris v Caladine has been clear and consistent.
- The
complexities are brought about by the intersection of the above nature of the
de novo hearing, the orders that can or should be made upon the success
or failure of the prosecution of the creditor’s petition before
the judge
on review, and the status of the extant sequestration order as an order of the
Court (see s 103(2) of the Circuit Court Act).
- The
complexities are: first, the issue that divided the Court in Totev v Sfar
concerned with proper construction of s 52(4) and (5) of the Bankruptcy
Act; secondly, the issue that divided the Court in Pattison: if a
creditor’s petition is dismissed on the rehearing whether in the
alternative to setting aside the sequestration order
an order for an annulment
can be made; and, thirdly, whether there is power to be found in s 104(3) of the
Circuit Court Act or s 35A(6) of the Federal Court Act, as an
incident of making orders on the review and in particular setting aside the
sequestration order, to order some division of
responsibility for the
trustee’s costs between the trustee, the debtor and the creditor: see
Body Corporate for Sanderling at Kings Beach v Samsakopoulos (No 2)
[2020] FCCA 1909 and cf Flint v Richard Busuttil & Company Pty Ltd
[2013] FCAFC 131; 216 FCR 375 at 385 [55].
- We
will come to the first issue later. The second and third issues may become
relevant upon the remittal of the matter to the Circuit
Court. We next address
the nature of an application for a sequestration order and then what happened in
the Circuit Court.
Proceedings and order on a creditor’s petition
- Due
formality has long been required in respect of an application by a creditor for
an order sequestrating the estate of a person
on the basis of insolvency. The
requirements to be met by a creditor who petitions for bankruptcy reflect the
significance of the
making of such an order for the status of any person. The
resonant words of Deane J in Kleinwort Benson Australia Limited v Crowl
[1988] HCA 34; 165 CLR 71 at 82 (albeit in dissent) should never be forgotten in
dealing with the law of bankruptcy.
- Section
52(1) of the Bankruptcy Act provides:
At the hearing of a creditor’s petition, the Court
shall require proof of:
(a) the matters stated in the petition (for which purpose the Court may accept
the affidavit verifying the petition as sufficient);
(b) service of the petition; and
(c) the fact that the debt or debts on which the petitioning creditor relies is
or are still owing;
and, if it is satisfied with the proof of those matters, may make a
sequestration order against the estate of the debtor.
- In
practical terms, such proof must demonstrate an act of bankruptcy and requires
current affidavit evidence that the debt is still
owing and that a sequestration
order has not been made since the bringing of the petition.
- If
such matters are not proven then the petition will be dismissed or adjourned to
enable the creditor to comply.
- As
to dismissal, s 52(2) provides as follows:
If the Court is not satisfied with the proof of any of
those matters, or is satisfied by the debtor:
(a) that he or she is able to pay his or her debts; or
(b) that for other sufficient cause a sequestration order ought not to be
made;
it may dismiss the petition.
- Therefore,
a debtor may point to a failure by a creditor to prove the matters required or
may take an active role in opposition to
the petition and seek to satisfy the
Court that he or she is able to pay his or her debts or that there is other
sufficient cause
as to why the order should not be made. In the latter case, but
not the former, the debtor bears the onus. The opportunity for the
debtor to
prove solvency reflects the fact that the petitioning creditor is likely to rely
upon a matter such as a failure to comply
with a bankruptcy notice in order to
prove the relevant act of bankruptcy. A debtor who claims to be solvent
notwithstanding such
a failure will bear the onus of demonstrating that to be
so.
What happened in the Circuit Court and the miscarriage of the
Circuit Court hearings
The facts from December 2015 to April 2017
- On
11 December 2015, a bankruptcy notice was issued on behalf of Mr Bates addressed
to Ms Bechara in the sum of $127,936.91 arising
from judgments in the Local
Court and Supreme Court for legal fees. Ms Bechara made an application on 30
December 2015 to set the
notice aside which was dismissed by a registrar on 5
April 2016. A creditor’s petition was filed by Mr Bates on 7 April 2016.
An order for substituted service was made on 13 May 2016. On 5 July 2016 a
sequestration order against the estate of Ms Bechara was
made by a registrar of
the Circuit Court.
- On
25 July 2016, TressCox Lawyers, on behalf of Ms Bechara, filed an “Interim
Application” in the matter of Maria Bechara
in which Mr Bates was the
applicant (creditor) and Ms Bechara was respondent. The wrong form was used:
Form B3 not Form B3A provided
for by the Federal Circuit Court (Bankruptcy)
Rules 2016 (Cth) (FCC Bankruptcy Rules) which commenced operation on
1 April 2016. See FCC Bankruptcy Rules, rules 2.01(1)(b) and 2.02(3) discussed
below. Form B3A was
specifically designed for and entitled “Application
for Review”. Form B3 was entitled “Interim Application”.
But
the document filed by Ms Bechara made the nature of the application clear. The
“interim orders sought” were:
- The
orders made by Registrar Tesoriero on 5 July 2016 be set aside pursuant to
section 104(3) of the Federal Circuit Court of Australia Act 1999.
- The
Applicant’s Creditor’s Petition dated 7 April 2016 be dismissed
pursuant to s52(2)(b) of the Bankruptcy Act 1966.
- Costs.
- There
could be no doubt that this was intended as an application for review under s
104(2) of the registrar’s sequestration order and the exercise of the
Circuit Court’s review power under s 104(3) to make any order it
thinks fit in relation to the matter in respect of which the registrar’s
order was made. It is to be noted
that the basis for a separate order dismissing
the petition was s 52(2)(b) (“other sufficient cause”) not s
52(2)(a) solvency. Nevertheless, as discussed below, the position of Ms Bachara
as to her solvency was an issue discussed in the progress
of the case management
of the application. It will be necessary to return to the form of the
application.
- Creditors
were notified of the application for review by Mr Bates’ solicitor on the
same day, 25 July 2016.
- The
matter came on for directions or case management before the Circuit Court judge
on 17 August 2016. Mr Bates appeared and Mr Maloney
(from TressCox Lawyers)
appeared for Ms Bechara. Two supporting creditors appeared.
- Mr
Maloney asked for a six week adjournment. He said that the adjournment was
required “in order to have some time to negotiate
with [Ms
Bechara’s] creditors whom she intends to pay out in good faith.”
- The
matter was stood over by consent to 27 September 2016, for directions. On that
day, Mr Bates appeared for himself, Mr Payne for
Ms Bechara and a legal
representative for a third supporting creditor (another counsel) appeared.
- Mr
Payne explained to the judge that Ms Bechara had had some family difficulties,
but that some negotiation had taken place. After
some inconclusive discussion,
Mr Bates stated that “we just want the matter listed for hearing”.
He referred to Ms Bechara’s
claim of solvency and said: “we’re
here because we don’t think she is ...”. The judge then asked:
“How
do you envisage the process evolving to a final hearing?” Mr
Bates responded:
MR BATES: Yes. Well, if I can speak frankly, your
Honour, it’s not clear to me, at least, from this review application, what
the real ground of review is. It appears to me, frankly, that it’s just
being really used as an opportunity to negotiate. I
don’t understand, from
the affidavit that has been put on by Mr Payne, as to what the real ground of
review is except that
she would like to negotiate and make an offer which is
really inadequate when she claims to be solvent. On the current material,
I
– I find it hard to see that there’s an arguable basis for the
review. I mean, I know it’s – officially
it’s there but, I
mean, nothing seems to be put up. I mean, everything was – so from our
perspective, subject to what
my friend wants to put on - - -
- With
respect to Mr Bates, this way of putting the matter contained the implicit
error, as a foundational assumption in what he put
to the Court, that Ms Bechara
was required to show error in the decision of the registrar or in the making of
the order.
- Using
this assumption, the judge then sought to distil issues: of solvency and service
prior to the hearing before the registrar.
At this case management hearing,
there was an affidavit of Mr Payne (who acted for Ms Bechara) that had been
circulated, but not
filed. It was not in the appeal book before us. Mr Bates
said the following (wrongly thinking that the affidavit had been
filed):
MR BATES: ... she says, as I understand the evidence,
that she didn’t actually see it for a certain time but, certainly, she
was
served and doesn’t appear at any time, really, to have sought to pay the
debts which she claims to be solvent for. I mean,
we don’t think
she’s solvent because she hasn’t paid up and – and made
certain representations which indicate
that she wasn’t solvent. But she
claims in the most recent affidavit, which is Mr Payne’s affidavit which
is filed in
this court and sworn on 17 August, she claims to be solvent so on
that basis we would say, well, if you’re solvent, pay your
debts. Why
should we accept an offer when you’re solvent, that’s how we would -
- -
- After
the judge asked for a likely length of hearing, Mr Bates discussed the issues of
service and solvency in a way which can be
seen to contain, at least in part,
the same misconception. In the discussions about the likely length of hearing,
no one adverted
to the fact that it was a rehearing of the creditor’s
petition and that he, Mr Bates, would have to read affidavits.
- The
matter was set down for final hearing on 8 December 2016. One comment of the
judge makes clear that he was viewing the matter
from the perspective of the
misconception that Mr Bates had put forward. His Honour said to Mr Payne about
Ms Bechara and her putting
on her evidence:
HIS HONOUR: Well, it may be that you will need to put to
her that it’s her application and she needs to prosecute it with a
little
bit more impulsion and vigour than appears to have been done in the past.
That’s not a critical comment. It’s
a factual comment. There are
other parties who have interest in this matter. I accept what you say.
She’s the sole carer. But
I’m not going to go six weeks.
- Mr
Bates then reinforced this by saying:
MR BATES: I mean, in my respectful submission –
well, I’m just going to repeat what your Honour has said. I mean, this
is
her application. It has been on for a long time and Ms Bechara herself has had
many years as a solicitor. I don’t think
she renewed – she
hasn’t renewed her current practicing certificate for the first time, but
she knows about need to cooperate
with court deadlines. If necessary, my friend
can go and visit her presumably at her home while she’s caring for her
mother
and take instructions there.
- After
further discussion orders were made that day as follows:
- The
applicant debtor (respondent) to file and serve any evidence by way of
affidavit, on or before 18 October 2016.
- The
respondent creditor (applicant) to file and serve any evidence by way of
affidavit on or before 8 November 2016.
- The
parties to file and serve any objections to the affidavit evidence on or before
15 November 2016.
- The
applicant debtor (respondent) to file and serve an outline of written
submissions on or before 25 November 2016.
- The
respondent creditor (applicant) to file and serve an outline of written
submissions on or before 2 December 2016.
-
The application is set down for final hearing on 8 December 2016 at 10:15am
before Judge Nicholls at Court 8.2, 80 William Street
Sydney.
- This
order of things would be unexceptional if all concerned understood that this was
the rehearing of the creditor’s petition
which would require proof by Mr
Bates of all matters in s 52(1) of the Bankruptcy Act, and that the
timetable was limited to any issues arising under s 52(2). That, however, was
not the context. This was seen as (in the judge’s and Mr Bates’
words) Ms Bechara’s application,
and the focus, at least in part,
including of Mr Payne, appeared to be on whether there was error in the
registrar’s orders.
Why else would the question of substituted service and
Ms Bechara not seeing the petition be relevant? By this time, she plainly
knew
of the petition and no issue of service could sensibly arise at the de
novo rehearing in December 2016. The reality was the application was being
viewed as her application to prosecute: to set aside the registrar’s
order
implicitly for some vitiating error.
- Ms
Bechara did not comply with the timetable. On 29 November 2016 TressCox emailed
the Court informing the Court, in substance, that
Ms Bechara would not be
attending the hearing personally or by her lawyers, who were withdrawing.
TressCox requested the hearing
to be adjourned.
- On
30 November 2016, Mr Bates emailed the Court opposing any adjournment.
- On
1 December 2016, the Court emailed the parties refusing an adjournment.
- On
5 December 2016, Mr Bates filed and served written submissions. The submissions
were consistent with the application being one
for Ms Bechara to prosecute: That
it was for her to show vitiation of an otherwise valid order. The penultimate
paragraph reveals
this. It stated:
All formal requirements to establish that a
sequestration order should be made, were proved by admissible evidence on 5 July
2016
before Registrar Tesoriero, presiding, who rightly made the sequestration
order that day against the respondent debtor’s estate.
There was no recognition that this was a rehearing of the petition and that Mr
Bates carried the onus of proving the matters in s 52(1) of the Bankruptcy
Act.
- The
matter was called on for hearing on 8 December 2016. Only Mr Bates appeared. The
judge asked whether it was appropriate to proceed
in Ms Bechara’s absence.
Mr Bates recounted what had happened. He tendered the recent correspondence
showing Ms Bechara’s
solicitors ceasing to act. Mr Bates relied on his
submissions. The judge’s approach was to approach the matter on the basis
of two options outlined in the following exchange:
HIS HONOUR: Yes, Well, the issue is how we proceed.
MR BATES: Yes.
HIS HONOUR: Because while you were the applicant in seeking the sequestration
order, she is the applicant in seeking to have it set
aside.
MR BATES: Yes.
HIS HONOUR: And if I can be satisfied that she has had reasonable notice and I
find that she has not attended and there’s no
satisfactory explanation for
her non-attendance, then the rules permit me to dismiss her application for
review pursuant to rule
13.03C(1)(c), because of her non-attendance.
MR BATES: Yes, your Honour.
HIS HONOUR: That’s one option.
MR BATES: Yes, your Honour.
HIS HONOUR: The second option is that, as you’ve indicated here in your
submissions, that she has not conducted her application
with due diligence, and
has not complied with court orders and, therefore, it may be that I find that
she was in default in relation
to her application, in which case that’s
another basis for dismissal.
MR BATES: Yes, your Honour. Your Honour, I would press both bases, your Honour.
HIS HONOUR: Or we could do both. Yes.
MR BATES: Yes. Well, I would press them both on – both, on the basis that
both apply. Based on the documents, I don’t
want to rehearse them again,
but she’s clearly – she’s’ not taken by surprise.
- The
first basis: rule 13.03C(1)(c) of the Federal Circuit Court Rules
2001 (Cth) was in the following form:
(1) If a party to a proceeding is absent from a hearing
(including a first court date), the Court may do 1 or more of the
following:
...
(c) if the absent party is an applicant—dismiss the
application;
- Reliance
on this rule discloses with clarity the misconception. Though the application
for review was brought by Ms Bechara, the true
applicant (the prosecutor of the
creditor’s petition) in the hearing de novo was Mr Bates: see
Zdrilic 246 FCR at 553 [89]. The absence of Ms Bechara if no adjournment
was to be granted meant that the (re)hearing of the creditor’s
petition
could proceed without effective opposition and with no evidence as to any aspect
of s 52(2).
- The
second basis: the failure to prosecute with due diligence, displays the same
error. Rule 13.03B(1)(a) provided:
(1) If an applicant is in default, the Court may order
that:
(a) the proceeding be stayed or dismissed
as to the whole or any part of the relief claimed by the applicant;
or
- If
Ms Bechara had failed to take the opportunity to file evidence and submissions
addressed to s 52(2), that is not a reason not to
undertake a rehearing of the
creditor’s petition. It might disentitle her from leading evidence for
issues under s 52(2) if
she had not complied with the timetable; but it did not
relieve Mr Bates of his responsibility to prosecute the hearing de novo
of his creditor’s petition.
- The
whole of the hearing on 8 December 2016 was directed to the evidence as to Ms
Bechara’s non-attendance and failure to file
evidence and submissions in
default of orders. No evidence was led to satisfy s 52(1) of the Bankruptcy
Act. There was no evidence in the application before us as to whether Mr
Bates had relevant evidence ready on 8 December 2016. If he
had, there is,
perhaps, no reason to believe that, with affidavits and searches brought up to
date, it would have been other than
straightforward to prove matters under s
52(1) at the hearing. The debt was still owing. The bankruptcy notice had not
been set aside. No evidence was available of matters in s 52(2) despite ample
opportunity for the debtor to bring it forward. However, the creditor did not
present the proof required by s 52(1) of the Bankruptcy Act. Without that
proof, the judge could not determine that a sequestration order may be made and
could not affirm the exercise of delegated
authority by the registrar in making
the sequestration order.
- The
judge then delivered reasons, made orders dismissing the interim application
(being an application for review) for non-appearance
under rule 13.03C(1)(c) of
the Circuit Court Rules and for default under rule 13.03B(1)(a) and awarded
costs: Bates v Bechara [2016] FCCA 3489. The reasons traversed the
history of the matter. At [27]–[31] of the reasons, the judge made clear
his view that Ms Bechara
had not prosecuted her application which was one in
which she had to explain why the registrar’s orders should be set aside:
[27] It is also important to note that Ms Bechara made
her application to set aside the sequestration order on 25 July 2016. She was
legally represented at that time. The application was said to be an
“interim” application, although it would appear that,
more properly
under the FCC Rules, it should have been an Application in a Case. In any event,
in either case, an affidavit in support
of either of these types of applications
should have been filed. I refer here to rr.4.05 or and 4.08 of the FCC Rules in
this regard.
No supporting affidavit had been filed.
[28] The concern here is that this is not simply a matter of a lack of form. The
failure to comply with the Rules in this regard
by Ms Bechara, who was legally
represented at the time, and the failure to comply with Court orders made on 27
September 2016, leaves
Ms Bechara’s case before the Court unexplained.
That is, her case to set aside the orders made by the Registrar. Importantly,
it
is her conduct, and not that of Mr Bates, that has resulted in that state of
affairs.
[29] Therefore, in all, the following arises. The Registrar of the Court made a
sequestration order in relation to Ms Bechara’s
estate on 5 July 2016. Ms
Bechara has applied, on 25 July 2016, for that order to be set aside and for the
creditor’s petition
to be dismissed. She has had a reasonable opportunity
to prosecute her case. Her application, after a number of Court events, was
set
down for hearing today. I find that she had reasonable notice of the Court event
today.
[30] No formal application for an adjournment has been made. When the matter was
called today, there was no appearance by, or on
behalf of, Ms Bechara. I
understood the communication from Ms Bechara’s former lawyers, sent on her
instructions, to be an
attempt to explain her non-appearance today. I find,
nonetheless, that it is appropriate in all the circumstances set out above,
that
Ms Bechara’s application be dismissed because of her non-appearance
pursuant to r.13.03C(1)(c) of FCC Rules.
[31] A further basis on which to dismiss Ms Bechara’s application is that
she has not complied with orders of the Court for
the proper progress of the
case. On what is set out above, I find that Ms Bechara has failed to comply with
the Court’s orders
(orders 1, 3 and 4 of 27 September 2016)
(r.13.03A(1)(a) of the FCC Rules) and in particular, I find that, in the
circumstances,
she has failed to prosecute her application with due diligence
(r.13.03A(1)(e) of the FCC Rules). The appropriate order therefore
should be
made pursuant to r.13.03B(1)(a) of the FCC Rules. That is, dismissed as to the
whole of the relief claimed by Ms Bechara.
I will make that order relying on
both parts of the FCC Rules.
- The
rules as to supporting affidavits were not apposite. As has been noted, the form
used by Ms Bechara (Form B3) was not the correct
form for an application for
review. The correct form was Form B3A “Application for Review”,
required by 2.02(3) of the
FCC Bankruptcy Rules. Form B3A makes clear what is
happening: The applicant applies for a review of the exercise of power described
in the form. The details of the exercise of power are stated: registrar;
registry or place; date or order; terms of order; and details
of the orders
sought to be reviewed.
- Rule
2.01 of the FCC Bankruptcy Rules provided for an “Originating Application
and Interim Application”. Rule 2.01(1)
provided that unless the Rules
otherwise provided a person must make an application required or permitted
by the Bankruptcy Act to be made to the Court that is in a proceeding
already commenced in the Court by filing an interim application in accordance
with
Form B3. The Rules did, however, otherwise provide. Rule 2.02 concerned
“Exercise of powers by Registrars”. Rule 2.02(3)
provided that
subject to any direction of the Court or a judge to the contrary, an application
under s 104(2) for review must be
made by filing an application in accordance
with Form B3A within 21 days of the date on which the power was exercised by the
registrar.
Thereafter div 7.2 “Review of Sequestration Order” and
rule 7.05 “Review of Registrar’s Decision” provided
for notice
to the trustee and each person known to be a creditor.
- The
form of the interim application did not, however, mask the substance of the
application made by paragraph 1 of the form used:
a review of a
registrar’s sequestration order; and the form cannot change the nature of
the application made. No affidavit
in support was needed. The application, once
filed, engaged the Constitutional imperative to hear afresh the creditor’s
petition.
The fact that paragraph 2 relied upon s 52(2)(b) of the Bankruptcy
Act did not alter the nature of the application. It was a provision that
dealt with the matters to be proven by the creditor as well as
instances where
the debtor sought to establish matters on which he or she bore the onus. The
application was not confined to a review
on the basis that such matters would be
established by the debtor. It challenged the whole basis for the making of the
sequestration
order and, as a result, the creditor was required to prove the
matters required by s 52(1) on the hearing of what was described as the interim
application.
- On
5 January 2017, State Lawyers Pty Ltd, on behalf of Ms Bechara, filed an
“Application in a Case” seeking to set aside
the orders of 8
December 2016.
- On
22 February 2017, the Application in a Case was set down for hearing on 3 March
2017.
- An
affidavit dated 3 March 2017 of Mr Hiramanek of those solicitors was filed in
support. The affidavit was three paragraphs. One
subparagraph deposed that the
orders were made in the absence of “the applicant” (Ms Bechara),
though no mention was
made of rule 16.05(2)(a) of the Circuit Court Rules
(setting aside an entered order that was made in the absence of a party). The
affidavit also stated that the interim application had not been heard.
- Mr
Hiramanek also filed submissions on 3 March 2017. The first submission was that
Ms Bechara was entitled to have her interim application
heard on the merits. No
reliance was placed on the fact that this was an application for review with the
consequences to which we
have referred. Reliance was placed on rule 16.05 of the
Circuit Court Rules. Assertions of bias were also made.
- The
transcript of the hearing is unavailable. On 3 March 2017, the judge delivered
extempore reasons. The application was dismissed.
The approach of the Circuit
Court judge is adequately encapsulated in his Honour’s reasons in Bates
v Bechara (No 2) [2017] FCCA 985 at [10]–[19].
[10] Nonetheless, I proceed today on the basis that this
is an application made pursuant to r.16.05(2)(a) of the FCC Rules. That is,
that
both the orders were made in the absence of Ms Bechara.
[11] It is the case that the Court does have the discretion to set aside or vary
orders made in the absence of a party. The elements,
or factors, relevant to the
exercise of that discretion are non-exhaustive. However, in my view, given the
circumstances of this
case, three elements or factors emerge for immediate
consideration.
[12] One is whether there is merit in the original “substantive”
application (that is, the AIC made on 25 July 2016),
such that the interests of
justice call for that meritorious matter to be aired at a final hearing. This is
what Ms Bechara calls
for in her submissions.
13] The difficulty for Ms Bechara is that she has never articulated her case.
The application filed on 25 July 2016, which was dismissed,
as I said earlier,
pursuant to two Rules of this Court, state that the “orders” made by
Registrar Tesoriero on 5 July
2016 be set aside. This is the sequestration
order. The application also included that Mr Bates’ creditor’s
petition
dated 7 April 2016, be dismissed. There is nothing in that application
to indicate the grounds upon which the Court should move to
make the orders
sought. Nor was any evidence filed to satisfactorily explain that application.
[14] What appears to have escaped Ms Bechara’s attention in her written
submissions is that there were a number of subsequent
opportunities, and orders
made by the Court, giving her the opportunity to address what I have described
as the important deficiencies
in the conduct of the application that she had
made. It may be that Ms Bechara needs to focus on the fact that her
“substantive”
application was not just dismissed for want of
appearance. It was dismissed for want of prosecution and her failure to comply
with
Court orders. Court orders which were directed to the issue of enabling her
to set out her case.
[15] What is left is an AIC which itself is deficient given the absence, both of
itself, and in the supporting documentation that
has been provided, of any
satisfactory explanation of the merits of the case she now seeks to
reinstate.
[16] It must also be said, that the submissions that have been handed up today
are absent any outline of what the arguable case Ms
Bechara says needs to be
heard by the Court. There is also no indication of the case that Ms Bechara
seeks to put before the Court.
Ms Bechara has had, in my view, a more than
reasonable opportunity, and a reasonable length of time, including with her AIC,
to prepare
for the hearing of that application and to articulate, or even at
least outline, the case that she wishes to pursue at a hearing.
There is nothing
before the Court to indicate what that case may be. On that basis, I cannot find
that there is any merit in that
original “substantive” application
such that it calls for its reinstatement in the interests of justice.
[17] It is not in the interests of justice to re-open this matter simply to
create a further delay in the disposition of the original
application that Ms
Bechara put before the Court.
[18] It is in this sense that I come to the second element. That is, prejudice
to Mr Bates. It is clear that Ms Bechara has a right
to pursue matters in the
Court. If she has a case to be heard, then she is entitled to have an
opportunity to put that case. Mr Bates
has, equally in my view, a reasonable
expectation that if Ms Bechara has been given a reasonable opportunity to
articulate that case,
and repeatedly fails to do so, then any further extension,
or delay, is prejudicial to him. I am not persuaded, in the circumstances,
that
this is a prejudice that can be addressed only by the matter of costs. That is
because, and it cannot be forgotten, that the
order that the Registrar made was
a sequestration order. There are obvious consequences that flow from the very
nature and character
of such an order.
[19] The third element is whether Ms Bechara has provided any explanation for
the way in which her matter has come before the Court
today. I thank Mr Hermiz
who attended and acted to the extent of his instructions. I accept his role
today is limited to the instructions
that he received. But there is nothing that
has been put before the Court today that causes me to find that I can be
satisfied that
any further time should be granted to Ms Bechara in the sense of
re-opening her case that was dismissed on the previous occasion.
She already has
had a reasonable and fair opportunity to present her case.
- Ms
Bechara then in April renewed the application for reinstatement, this time
acting for herself. This application was heard on 17
May 2017. It was dismissed.
The transcript reveals that the judge (properly) said that he had dealt with the
matter and if Ms Bechara
was dissatisfied she should appeal. The order was
interlocutory.
- We
will come to the attempt by Ms Bechara to appeal in the next section of these
reasons. At this point it is necessary to consider
what had occurred up to this
time.
- Whilst
one can understand the degree of frustration in Mr Bates and in the Circuit
Court judge reflected in some of the transcript,
the reality is, however, that
Ms Bechara had engaged, albeit by the wrong form, the Court’s jurisdiction
(subject to all proper
procedural controls) to hear a review of a sequestration
order made by a registrar. Over 20 years of jurisprudence illuminated the
features of this kind of application. The submissions and approach of Mr Bates,
his failure to bring forward evidence to satisfy
s 52(1) of the Bankruptcy
Act, and the approach and reasons of the Circuit Court judge disclose with
clarity that each viewed Ms Bechara as the substantive applicant
in her
substantive application. This was wrong. As an applicant for review of a
sequestration order she was entitled (as a Constitutional
imperative), subject
to all proper procedural orders, to a hearing de novo of the
creditor’s petition. It did not occur.
The submissions of Mr Bates in this Court and consideration
of the Circuit Court hearings
- The
submissions of Mr Bates in support of his Second Further Amended Notice of
Contention and in support of his submissions on the
appeal and the s 39B
application contended that the Circuit Court judge had before him a
“bare” interim application without
an affidavit in support which did
not engage an entitlement to a review. The argument of Ms Bechara based on the
loss of the review
(by way of Constitutional imperative) was said to be new and
precluded by Coulton v Holcombe [1986] HCA 33; 162 CLR 1. He submitted
that the facts engaged what was said to be the so-called “clean
kill” principle in the summary disposal
of matters, relying on Kimber v
The Owners Strata Plan No 48216
[2017] FCAFC 226 
; 258 FCR 575 in the
application of summary judgment procedure.
The “bare application” argument
- There
appear to be two limbs to the “bare application” argument. The first
is that the interim application was not accompanied by an
affidavit “stating the facts relied on”: rules 4.05(1) and 4.08(2)
of the Circuit Court Rules. But the only two
facts necessary to establish was
the making of a sequestration order by a registrar and a request for a de
novo rehearing. No error in the making of the order need be shown. The wrong
form was used, but its content stated clearly that it was
in substance an
application for review of a sequestration order made by a registrar. Counsel,
and a judge exercising jurisdiction
in bankruptcy, ought to have understood the
nature of such an application. Not to do so is to misapprehend the nature of the
jurisdiction
being exercised.
- The
second limb of the “bare application” argument relies on something
said by Gaudron J in Harris v Caladine at 172 CLR 153–154 where her
Honour said:
It is necessary to tum to the nature of the review
process required by s. 37A(9) of the Act. In so far as that sub-section provides
for the “review” of the “exercise of [a] power”
delegated to a registrar or deputy registrar in accordance
with that section, it
was clearly intended that there should be a process enabling complete
consideration of the matter as dealt
with and not merely a process, such as is
involved in the appeal process under s. 94 of the Act, directed to remedying
errors of
law. Such a review entails a consideration of whether, quite apart
from legal or other error, a different result should be arrived
at. But, as is
clear from the word “review” and from the expression “exercise
of power”, it was also intended
that a decision made in exercise of
delegated power should have force and effect unless and until set aside in or in
consequence
of the review process. Thus, a decision is not one that is
provisional or, as argued on behalf of the appellant, one that is set
at nought
by the filing of an application for review, with the consequence that in the
present case the Family Court was automatically
obliged to determine, as a
contested matter, what order should be made under s. 79 of the Act. Rather, the
review process is one
in which the Family Court must first determine whether the
order should be set aside. That issue may be decided on the basis that,
even
though there is no discernible error in the decision in question, circumstances,
including intervening circumstances, require
a different result. Although the
Full Court treated the review process as being of a more limited nature than
that indicated, it
was correct in rejecting the only argument put to it on
behalf of the appellant concerning the nature of that process, namely, that
merely by the filing of an application for review it was obliged to treat the
question arising under s. 79 as one to be determined
as a contested matter.
- That
passage can be seen to be directed to the status of the order and what the Court
was obliged to do in the context of a consent
order. The parties had, by
agreement, settled a property dispute and a registrar of the Family Court of
Australia made a consent
order under s 79 of the Family Law Act 1975
(Cth), which empowered the Court to “make such orders as it considers
appropriate altering the interests of the parties in
the property”.
Justice Gaudron was recoiling at the proposition that the consent order (based
on the agreement of the parties,
but one to which the Court had given
consideration, albeit in that context) was effectively provisional and a
contested hearing could
be obtained merely by filing an application for review,
irrespective of the agreement that underlay the order. That is an entirely
different context and raises different issues to the circumstances here of the
making of a (non-consensual) sequestration order by
a registrar and an
application for review. The passages from the reasons of Gaudron J set out above
do not, in any way, undermine
the approach this Court has taken since the 1990s
which we have set out earlier.
- Nothing
in the reasons of the other members of the High Court in Harris v
Caladine is to the contrary. Reliance was specifically placed on what
Brennan J said at 172 CLR 108 and on what Dawson J said at 172 CLR 125. Nothing
there qualifies or undermines in any way what we have said as to the correct
approach
to the review of a sequestration order made by a registrar.
The summary judgment “clean kill” argument
- Mr
Bates submitted that the Circuit Court judge legitimately approached the
application on a summary basis which was authorised in
clear cases, even in
review applications. Reliance was placed on Kimber [2017] FCAFC 226 ; 258 FCR 575 especially
at 600 [73] and the reference to the need for a “clean kill”.
- With
respect to the Court in Kimber the utility of such a metaphorical phrase
is doubtful. The principles in Spencer v Commonwealth [2010] HCA 28; 241
CLR 118 at 130–131 [22]–[23] speak for themselves without such a
metaphor.
- The
submission, however, lacks substance. In Kimber a registrar had refused
to set aside a bankruptcy notice. The debtor applied for a review which was
dismissed by the primary judge
(Kimber v The Owners Strata Plan No 48216
[2016] FCA 1090) on an application for summary judgment. It is not necessary
to analyse the approach of the primary judge in Kimber. Her Honour and
the Full Court on appeal were dealing with a litigant in person who had filed
and was relying on a huge body of confused,
and often plainly irrelevant,
material. The litigant bore the onus in the rehearing: to set aside the
bankruptcy notice. Summary
disposal was sought by the creditor under s 31A of
the Federal Court Act. Notwithstanding the decision of Beach J in Tran
v Pu in February 2015 and Zdrilic in August 2016, the primary judge
in Kimber on 1 September 2016 proceeded with the summary disposal hearing
and made orders on 8 September 2016 summarily disposing of the application
for
review of the order to set aside the bankruptcy notice. The Full Court allowed
the appeal. The reasons of the Court contain important
guidance to represented
parties in how they are obliged to assist the Court when a litigant in person
may be confused or misdirected
or lacking apparent competence. The appeal was
allowed because the primary judge had not been directed to possible issues
favourable
to Ms Kimber arising under s 41(5) of the Bankruptcy Act. As
to the summary disposal procedure, the Court (which included Farrell J who was
part of the Full Court in Zdrilic) said the following at 258 FCR 602
[81]–[82]:
[81] It is appropriate to add a few other remarks. As
noted by the Full Court in Zdrilic v Hickie [2016] FCAFC 101; (2016) 246 FCR 532,
applications for summary judgment or dismissal do not sit easily with
applications for review of a Registrar’s decision in
light of the
“constitutional imperative” that the Registrar’s decision be
subject to review by a judge. Further,
debtors in the bankruptcy jurisdiction
are often not legally represented. They often have a minimal grasp on the legal
issues directly
relevant to an application to set aside a bankruptcy notice or
to resist a sequestration order. The essentially technical issues
concerning
pleadings and the form of evidence which arise on applications for summary
judgment or dismissal can add to confusion
and bewilderment at the process which
seems to some litigants in person to have little or nothing to do with the
underlying facts
in circumstances where the proceedings have substantial
consequences for them.
[82] Worse, such applications are often not time or cost efficient compared to a
prompt hearing of the review application. As in
this case, applications for
summary judgment or dismissal may open new avenues of appeal and involve
consideration of whether or
not leave to appeal the summary judgment or summary
dismissal should be given, all of which add to time and cost of resolving the
proceedings. There should be no reason why review applications cannot be heard
quickly, with primary reliance on the materials which
were before the Registrar.
Indeed, like Ms Kimber, it is likely that many debtors without legal
representation make the unsafe assumption
that evidence which was submitted to
the Registrar will automatically be before the judge on the review application.
- Kimber
is of no assistance to Mr Bates. Before leaving it, however, may we add our
voice to what was said in Zdrilic 246 FCR at 541–542 [32],
referring with approval to Beach J in Tran v Pu, and in Kimber 258
FCR at 602 [81]–[82]. If the matter is hopeless, it should be heard and
disposed of promptly at a final hearing. This approach
is consistent with the
character of the power being exercised by the Court on such applications.
Adopting the language of McLure
JA in Liebherr-Australia Pty Ltd v
Bloomfield [2006] WASCA 128 at [8], there is a “parasitic relationship
between the delegation of jurisdiction (or power) and a right of review or an
appeal de novo” the existence of which is essential to the validity
of the delegation.
- In
any event, the summary disposal power was not used here. The application
was dismissed for want of appearance and for default in compliance with
directions. We have stated the
obvious flaw in that approach in a review of a
sequestration order. It was a hearing of a creditor’s petition for Mr
Bates
to prosecute.
The Coulton v Holcombe argument
- It
was argued that the “Constitutional argument” was not run before the
Circuit Court judge and if it had been it could
have been met by evidence. The
Second Further Amended Notice of Contention (2nd FANC)
identifies that prejudice in a way that reiterates the misconception of what was
happening or should have been happening before
the Circuit Court judge. The
2nd FANC states at 3(a) and (b):
(a) that at the reinstatement hearing before Nicholls
J in the Federal Circuit Court of Australia, on 3 March 2017, at which the
Appellant was legally represented (and was decided by Nicholls J in Bates v
Bechara (No 2) [2017] FCCA 985, following on from His Honour’s
previous judgment in Bates v Bechara [2016] FCA 3489 when His Honour had
dismissed the present Appellant (Bechara) did not make the new constitutional
argument (which she first made
in the leave to appeal hearing before Flick J, as
summarised in Bates v Bechara [2019] FCA 1077 at [43], [47], [48], [50],
[54]);
(b) but if the appellant had made (at the reinstatement hearing on 3 March 2017)
her new constitutional argument (which she first made at the leave to
appeal application before Flick J), the present respondent would have
been able to meet that additional argument before Nicholls J at the hearing on 3
March 2017,
or at an adjournment thereof, by adducing evidence (to uphold the
correctness of Nicholls J’s judgment of 8 December 2016
the sequestration order made [a]gainst Ms Bechara’s estate on 5 July
2016); and
- We
will come to the hearing before Flick J (the second Federal Court judge). The
so-called “new constitutional argument”,
being the submission that
the Circuit Court judge misunderstood the nature of the judicial task before
him, was squarely raised before
the first Federal Court judge in circumstances
to which we will come.
- The
point is not that there was a new Constitutional argument, but that the de
novo hearing of the creditor’s petition had not taken place. The
evidence of the correctness of the registrar’s decision was
not relevant.
The rehearing takes place de novo. The whole argument based on Coulton
v Holcombe represents a continuing misunderstanding by Mr Bates of the
proper nature of what was before the Circuit Court from July 2016 to December
2016, indeed March 2017. The fact that other practitioners may have also
misunderstood the position assists in understanding why
the Circuit Court judge
was not assisted properly, but it does not engage Coulton v Holcombe 162
CLR at 7.
The case management argument
- Mr
Bates further submitted that this was interlocutory case management properly
undertaken by the Circuit Court judge. The difficulty
with this is that the
orders proceeded on a fundamental misconception of what was before the Court. In
an application for review
of a sequestration order made by a registrar, if the
debtor/bankrupt fails to take the opportunity to file evidence in support of
the
hearing de novo of the creditor’s petition or fails or refuses to
appear at the date fixed for hearing, the proper course, and only proper
course,
to follow (if the adjournment is to be refused) is to deal with what is before
the Court, that is the creditor’s petition
prosecuted by the creditor. At
that hearing evidence is led to satisfy s 52(1) of the Bankruptcy Act. If
the Court would otherwise be minded to conclude that a sequestration order would
have been appropriate at the date of rehearing,
it dismisses the application for
review leaving the registrar’s order in place and the date of the debtor
being made bankrupt
as the date of the registrar’s order and preferably,
for the sake of good order, confirms or affirms the registrar’s
order. It
is a misconception of the nature of the application before the Court to dismiss
an application for review of a sequestration
order because of failure of a
debtor to appear at a hearing of a creditor’s petition or the failure of
the debtor to file in
time pursuant to case management orders evidence that may
go to s 52(2) of the Bankruptcy Act.
- The
above is not to doubt for one moment that case management of applications for
review is an important and legitimate consideration.
The Circuit Court is
entitled to make rules that govern procedures for an application for review. For
the reasons we have already
set out those procedures must conform with the
fundamental nature of what is before the Court. If the application for review is
of
a sequestration order made by a registrar, the Court must recognise and
appreciate that what is before it is the creditor’s application in
the nature of a hearing de novo of the creditor’s petition. The
application for review by the debtor/bankrupt engages the process of the Court
hearing the
creditor’s petition afresh. Of course, that process of
getting the creditor’s petition to a hearing by the application for review
can and
should be case managed with despatch. But a dilatory debtor who fails to
file evidence or does not appear at a date fixed for hearing
which is properly
not vacated or adjourned in the circumstances lays himself or herself open to a
creditor’s petition being
(re)heard in his or her absence; he or she does
not lay himself or herself open to the application for review being dismissed
without
the hearing of the creditor’s petition, the prosecution of which
is the responsibility of the creditor.
- For
the Court to do so is to misunderstand the nature of the application for review
of a sequestration order made by a registrar.
- The
above should not be understood to affect or impede legitimate procedural
controls and proper case management techniques in respect
of applications for
review of exercises of power by registrars, especially those in respect of which
the applicant bears the onus
of proof: such as in setting aside a bankruptcy
notice.
- Nothing
we have said removes from the Court, or denudes the Court of, power to regulate
its procedure or to case manage busy lists,
especially in bankruptcy. If a
debtor/bankrupt seeks a review of a sequestration order by filing an application
for review, the Court
should case manage such an application with despatch. If
the debtor/bankrupt is dilatory or unco-operative in compliance with orders,
the
matter before the Court – the creditor’s petition for rehearing
– should go forward. That dilatoriness does
not, however, absolve the
Court of responsibility for hearing (de novo) what the application for
review brings forward – the creditor’s petition.
- An
application for review of a registrar’s exercise of power may bring
forward for hearing (de novo) an application of the party who may be
recalcitrant, such as an application to set aside a bankruptcy notice. The
moving party for
that rehearing is the debtor. If proper case management and
default in compliance with orders or non-attendance give rise to questions
of
orders in default of appearance or want of prosecution of the defaulter’s
application, so much can be accepted.
- Where
such occurs in the review of the making of a sequestration order, the proper
curial response is to hear the creditor’s
petition, not (as occurred here)
not to hear the creditor’s petition. That occurred because of an apparent
and clear misunderstanding
by the Circuit Court judge of the nature of the
judicial task before him. His Honour was assisted in, and indeed led into, that
fundamental
error by the creditor who was also the advocate in his own cause.
- The
orders made on 8 December 2016 and on 3 March 2017 were thus vitiable with
jurisdictional error and, subject to discretionary
considerations, would found
the making of an order by this Court to set aside the orders of the Circuit
Court made on 8 December
2016 and 3 March 2017. It will be necessary to return
to the orders of 17 May 2017.
- We
will deal with discretion and other aspects of the orders sought in the s 39B
application in due course.
The invocation of the appellate jurisdiction of the Federal
Court: The application for an extension of time in which to seek leave
to appeal
before the first Federal Court judge
- On
6 June 2017, Ms Bechara, acting for herself, filed an application for an
extension of time in which to seek leave to appeal and
for leave to appeal from
the orders of the Circuit Court made on 8 December 2016 and 3 March 2017 and in
the same application sought
leave to appeal from the orders of 17 May 2017. The
orders of 17 May 2017 were interlocutory and required leave. The application
for
leave as to the orders of 17 May 2017 was two days out of time: Federal Court
Rules rule 35.13(1). An extension of time was not sought, only leave to
appeal.
- All
these applications were in the appellate, not original, jurisdiction of the
Court. The grounds of the application focused upon
what was said to be the
injustice and illegitimacy of the refusal of the adjournment application and the
findings that Ms Bechara
had not prosecuted her application with diligence. Ms
Bechara also claimed actual or apprehended bias in the decision not to reinstate
the application for review. There is one aspect of the application that touched
upon the real error of the Circuit Court judge. In
referring to the judgment of
3 March 2017, Ms Bechara stated:
The Rules did not require an affidavit to be filed. The
Rules provide that the interim application seeking to review the exercise
of
power by a Registrar must proceed by way of a hearing de
novo.
Here, Ms Bechara was in effect complaining, not only about the refusal of the
adjournment, but also that the creditor’s petition
should have been heard
(de novo).
- The
matter was case managed by a judge of the Court (the first Federal Court judge).
Evidence was put on. There were delays. Eventually,
the matter came on for
hearing on 15 March 2018. Mr Kumar, of counsel, appeared for Ms Bechara.
- The
submissions on behalf of Ms Bechara by Mr Kumar dated 2 March 2018 raised the
absence of a de novo review, referring to Pattison 155 FCR at 235
[42]–[43], Tran v Pu 228 FCR at 569 [29] and Schepis v
Osborne [2015] FCA 192; 146 ALD 602 at 607–608 [27] where Rangiah J
stated with clarity the requirement of the Court to hear the creditor’s
petition. Mr
Kumar’s submissions expressly stated that the Circuit Court
was “required to satisfy itself of all the matters in s 52 of the
Bankruptcy Act”. The resistance of Mr Bates continued to be that Ms
Bechara had not shown any error in the registrar’s decision. The
judge
reserved and delivered judgment on 6 April 2018, dismissing the application for
an extension of time: Bechara v Bates [2018] FCA 460. The reasons
addressed the 8 December 2016 and 3 March 2017 orders, but not the 17 May
orders. The reasons focused on the lack of
error demonstrated in the
registrar’s decision.
- At
[23]–[26], the first Federal Court judge dealt with the argument about s
104 of the Circuit Court Act:
[23] Nor was it in issue that the FCC was required to
undertake a de novo review of the Registrar’s decision: see e.g.
Pattison v Hadjimouratis [2006] FCAFC 153; (2006) 155 FCR 226
(Pattison) at [59] (Jacobson J). However, by giving judgment in
default, counsel for Ms Bechara submitted that arguably the FCC did not
undertake
the task required of the Court on a review of the Registrar’s
decision under s 104 of the FCCA Act. In the applicant’s
submission, the
power to summarily dismiss the proceeding for non-appearance under r
13.03C(1)(c) of the FCC Rules was not available
as a matter of statutory
construction on a review application under s 104. As a result, the applicant
submitted that r 13.03C(1)(c)
of the FCC Rules ought to be read down so as to,
in effect, carve out from its scope of operation, proceedings involving a review
of a sequestration order under s 104 of the FCCA Act. In support of this
argument, counsel for the applicant referred to the fact
that s 17A of the FCCA
Act, which confers power summarily to dismiss a proceeding, does not extend to a
power to give judgment in
default, i.e., by reason of non-attendance at a
hearing, failure to comply with Court orders, or failure to prosecute.
[24] As a result, in the applicant’s submission it was arguable that the
primary judge ought to have satisfied himself on the
hearing de novo that
the sequestration order was properly made and, in particular, that all of the
criteria for the making of such an order were
met, rather than simply dismissing
the application for non-appearance. As such, the applicant submitted that the
primary judge misconstrued
s 104 in summarily dismissing the proceeding and
ought therefore on 3 March 2017 have allowed the review proceeding to be
re-opened
so as to enable the application for review of the Registrar’s
decision to be dealt with on the merits. In short, it was the
applicant’s
submission that it was arguable that the FCC was required to satisfy itself that
the sequestration order was properly
made irrespective of whether or not the
applicant appeared.
[25] The contention that the FCC lacked power to give a default judgment on a s
104 review lacks any reasonable prospects of success.
[26] First, the applicant’s counsel could not refer to any authority
supporting that contention.
With respect, an application for review of a sequestration order enlivens
the requirement for the creditor to prosecute the creditor’s petition.
Such an application for review should not be
dismissed for default by the
debtor.
- At
[29]–[32], the first Federal Court judge dealt with rules 13.03B and
13.03C of the Circuit Court Rules:
[29] Fourthly, the Court’s powers to give judgment
in default under r 13.03B(1)(a) and 13.03C(1)(c) are expressed in entirely
general terms and do not differentiate between different kinds of proceedings.
In this regard, the words actually used by the legislature
are the surest guide
to legislative intent: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory
Revenue (Northern Territory) [2009] HCA 41; (2009) 239 CLR 27 at [47] (Hayne, Heydon,
Crennan and Kiefel JJ). Nor would the construction for which the applicant
contends further any identifiable legislative
purpose. To the contrary, r
1.03(1) of the FCC Rules provides that:
The object of these Rules is to assist the
just, efficient and economical resolution of
proceedings.
[30] That object would be undermined if an applicant
could file a bare application for review of a sequestration order and take, as
here, no steps whatsoever to progress that application whether by way of
appearing at hearings, complying with the requirements of
rr 4.05 and/or 4.08 of
the FCC Rules to file an affidavit to explain the grounds of review, complying
with court orders, or otherwise.
Even on the present application for an
extension of time, no basis on which to challenge the sequestration order itself
was identified
by counsel for Ms Bechara. The Court and the respondent remain
completely in the dark as to the basis on which Ms Bechara sought
review of the
Registrar’s sequestration order.
[31] Finally, the applicant relies in support of her construction upon the fact
that s 104(2) of the FCCA Act imposes no obligation
upon a party to establish an
arguable case before the Court may review an order made in the absence of that
party (Pattison at [155] (Lander J)). However, that does not alleviate a
party of the obligation to identify some basis on which the application for
review is made and otherwise to prosecute her or his application for review with
due diligence.
[32] In short, s 104 providing for review of certain decisions by a Registrar
should plainly be read in the context of, and subject
to, ordinary case
management principles as reflected in the expressed objects of the FCC Rules and
therefore as subject to the ordinary
mechanisms by which the FCC enforces those
principles such as by exercising the discretion to give judgment in default. The
proposed
challenge alleging the contrary has no reasonable prospects of success.
- With
the utmost respect, these reasons reflect a misapprehension of the nature of an
application for review of a sequestration order made by the registrar.
The prosecuting party is the creditor. To dismiss the application the
creditor’s petition should be
heard. Default or non-appearance of the
debtor is not default or non-appearance of the prosecuting party to the
creditor’s
petition re-enlivened for hearing by the bona fide filing of an
application for review.
- Importantly
for present purposes, however, the first Federal Court judge also concluded that
the adjournment was properly refused.
At [34]–[36], her Honour
said:
[34] In refusing to grant the adjournment, the FCC had
regard, among other things, to the following considerations:
(1) despite Ms Bechara having practised previously as a solicitor and benefited
from independent legal advice in relation to her
review application, she elected
not to proceed in an appropriate way by making an interlocutory application with
supporting evidence
(default judgment at [15]);
(2) as a consequence of not proceeding in an appropriate way, she deprived Mr
Bates of an opportunity to know what was put in support
of the orders sought and
to respond appropriately, and did not act so as to promote the efficient conduct
of cases before a “very busy Court” (default judgment at
[14]);
(3) this was not the first request for an adjournment by Ms Bechara in the
proceedings - earlier requests had been acceded to on
two prior occasions,
despite Ms Bechara having failed to provide adequate explanations for those
adjournments (default judgment at
[18]);
(4) the letter from a doctor attached to the 29 November 2016 letter did not
comply with the Court rules as to expert opinion evidence
(default judgment at
[19]);
(5) the 29 November 2016 said nothing about Ms Bechara’s capacity to give
instructions to her (then) solicitors to have them
apply in the proper way with
supporting evidence for an adjournment, or, beyond mere inference, explain why
she was unable to attend
the hearing (default judgment at [20]); and
(6) as a former solicitor, Ms Bechara could be taken to know that appearances
can be arranged, for example, by telephone and that
this is often done to assist
persons who are unable physically to attend court (default judgment at [21]).
[35] There is no challenge proposed to any of these facts and therefore no
suggestion that the FCC acted on any misapprehension of
the facts so as to
engage the principles in House v The King on this basis. In addition,
upon the 29 November 2016 letter being forwarded to Mr Bates on 30 November
2016, Mr Bates replied on
the same day explaining that he opposed the
adjournment and setting out the reasons for his opposition. The Deputy Associate
to the
primary judge advised the parties by email on 1 December 2016 that the
matter remained listed for hearing on 8 December 2016. Subsequently
on 5
December 2016, Mr Bates filed submissions seeking that the matter be dismissed,
and opposing the application for an adjournment.
Again it is not proposed to
contest these facts.
[36] It follows that Ms Bechara could have been in no doubt that her informal
request for an adjournment was opposed and was on clear
notice that the matter
would proceed on 8 December 2016, despite her informal request for an
adjournment. Yet she neither applied
for an adjournment in compliance with the
rules with a supporting affidavit, nor filed any further submissions in response
to those
of Mr Bates. In those circumstances, the allegation that the failure to
grant the adjournment constituted a breach of procedural
fairness has no
reasonable prospects of success.
- With
respect, the first Federal Court judge’s view about there being no
prospects of success of showing the adjournment to have
been wrongly refused has
great force.
- The
only order made by the first Federal Court judge on 6 April 2018 was the
dismissal of the application for an extension of time.
Costs orders were made
later. The orders of 17 May 2017 were not the subject of her Honour’s
reasons, but were in substance
encompassed within the order made refusing an
extension of time. The 17 May 2017 orders had and have no substantive life
separate
from those of December 2016 and March 2017.
- Costs
were thereafter debated and were awarded in favour of Mr Bates in a judgment of
30 April 2018 in the sum of $6,000.
- Before
examining what occurred in the High Court it is necessary to address three
matters arising from three provisions of the Federal Court Act.
- First,
the first Federal Court judge was exercising appellate not original
jurisdiction. Section 25(2) of the Federal Court Act recognises in paras
(a) and (b) that applications for leave to appeal and applications for an
extension of time within which to institute
an appeal are within the appellate
jurisdiction. Sections 33(4B)(a) and (d)(iv) recognise that applications of the
kind mentioned
in s 25(2) and applications for extension of time for making an
application for leave to appeal are in the exercise of appellate
jurisdiction.
- Secondly,
there is no appeal to a Full Court (a fortiori to another single judge)
from judgments of the Court exercising appellate jurisdiction. Appeals are only
from a single judge exercising
original jurisdiction: s 24(1)(a) of the
Federal Court Act.
- Thirdly,
s 33(4B) of the Federal Court Act relevantly provides:
(4B) An appeal must not be brought to the High
Court from a judgment of the Court (whether constituted by a Full Court or a
single
Judge) in the exercise of its appellate jurisdiction if the judgment
is:
(a) a determination of an application of
the kind mentioned in subsection 25(2); or
...
(d) a decision to do, or not to do, any of the following:
...
(iv) extend the time for making
an application for leave to
appeal;
...
- Thus,
not only were the orders in the applications made by a single judge in the
appellate jurisdiction of the Federal Court and thus
not amenable to appellate
review by a Full Court, but also no appeal could be brought against them in the
High Court of Australia.
The High Court application: s 75(v) application for an order to
show cause against the Federal Court to quash the decision of the
first Federal
Court judge
- Perhaps
recognising these matters as to the lack of available appellate review and the
inability to seek special leave to appeal from
the orders of a single judge
exercising appellate jurisdiction in matters described in s 33(4B)(a) and
(d)(iv), on 2 May 2018 new
lawyers (Weighbridge Lawyers) acting for Ms Bechara
filed in the High Court an application to show cause under s 75(v) of the
Constitution seeking to quash the orders of the first Federal Court judge made
on 6 April 2018.
- The
application for an order to show cause sought orders for mandamus and certiorari
arising from and in respect of the first Federal
Court judge’s orders on 6
April 2018. The error of the first Federal Court judge was said to be the
failure to set aside the
8 December 2016 and 3 March 2017 orders by the Circuit
Court judge. Paragraphs 9–12 of the application clearly set out what
Mr
Kumar had been arguing before the first Federal Court judge:
9. The Federal Circuit Court did not review the decision
of the Registrar exercise [sic] under s 103 on the basis on the basis [sic] it
could rely upon FCCA Rules 13.03B and 13.03C to simply dismiss the
Plaintiff’s application.
10. The Federal Court of Australia misconstrued and misdirected itself as to the
construction of s 104 of the Federal Circuit Court of Australia Act 1999
whereby the Court found the Rules displacing the requirements of the Act and
thereby fell into jurisdictional error.
11. The Court below misconstrued as to the party that ought to file evidence
first (it falling on the Defendant as the Applicant
in the FCCA) and misdirected
itself as the review under power exercised under s 103 did not change the role
of the Plaintiff as appellant. Her Honour thereby asked [the] incorrect question
as to which party ought
to have filed evidence.
12. The Federal Court of Australia exceeded its jurisdiction and / or fell into
error in refusing to grant leave to appeal to the
Court.
- On
5 June 2018, submissions were filed by Weighbridge Lawyers. These submissions
succinctly set out the point in the narrative of
the matter (now including the
orders of 17 May 2017):
13. In the Federal Circuit Court of Australia there was
application for sequestration by Bates.
14. The Registrar in exercise of its power made an order pursuant to s 103 of
the Federal Circuit Court of Australia Act 1999 (Cth) (the “FCCA
Act”).
15. The Registrar exercised its the [sic] power and made sequestration order
pursuant to s 103 of the FCCA Act.
16. The plaintiff pursed her right of review pursuant to s 104 of the FCCA
Act.
17. On 29 November 2016, the Plaintiff’s former solicitor forwarded [a]
letter to the FCCA that the Plaintiff needed further
adjournment till February
2017.
18. The matter was determined in the absence of the Plaintiff on 08 December
2016. There subsequent attempt to reinstate or set aside
default judgment, the
applications made on 03 March 2017 and 17 May 2017.
19. Her Honour’s construction of s 104 of the FCCA Act stating that the
fact a party was absent could give rise to application
being refused is correct
and that the Court below was not required to otherwise be satisfied that the
circumstances in which the
requirements of the Bankruptcy Act such as that there
was debt was still in existence was not required to be ascertained. A decision
of this nature is legally unreasonable.
Her Honour therefore has fallen into
error.
20. The Court below (second defendant) refused to grant leave to the Plaintiff
to appeal the decisions of the Court below. The Plaintiff
has already pointed
out the flaws in consideration of the review on 08 December 2016. Her Honour has
fallen into error of law which
is jurisdictional error: Tran v Pu [2015]
FCA 97.
21. The Court below must in exercise of its powers review the Registrar’s
decision: Tran v Pu [2015] FCA 97; Schepis v Osborne [2015] FCA
192; Pattison v Hadjimouratis [2006] FCAFC 153 at [42]- [43]. The
non-appearance of the Plaintiff on 8 December 2016 does not alter the fact the
review should have been carried out.
- The
submissions went on to identify the misconstruction of s 104 of the Circuit
Court Act by the first Federal Court judge as jurisdictional error.
- The
submissions of Mr Bates took two procedural points: that the appellate
jurisdiction of the Federal Court had been by-passed and
then the ordinary
procedure of special leave to appeal should be engaged. He said at para
3:
The plaintiff’s Application and Summons should be
dismissed as they seek to side-step the ordinary appeal court hierarchy, and
to
leap frog the filter of special leave, by bringing the plaintiff’s dispute
straight from a judgment of a single judge of
the Federal Court of Australia
(Perry J) to the High Court of Australia. This procedure would by-pass both the
appellate jurisdiction
of the Full Court of the Federal Court of Australia, and
the regular requirement of a grant of special leave to appeal to the High
Court
of Australia. Such sidestepping, by-passing and leap-frogging is not appropriate
here: Construction Forestry Mining and Energy Union v Director of the Fair
Work Building Inspectorate [2016] HCA 41, (2016) 91 ALJR 1 at [22] (Nettle
J); Dimitrov v The Supreme Court of Victoria [2017] HCA 51 at [19]
(Edelman J). The usual appeal hierarchy should be exhausted. The plaintiff does
not enliven any recognised exception (Construction, supra, per Nettle J
at [23]-[24]).
- Mr
Bates further supported the first Federal Court judges’ construction of s
104.
- Mr
Martin appeared. He had just taken over the matter from Weighbridge Lawyers. He
did not contradict the clearly wrong submission
of Mr Bates that a Full Court
appeal and special leave were available. They were not: see [108]–[112] above.
- No
doubt misled by this submission of Mr Bates, compounded by Mr Martin’s
failure to address the issues, perhaps understandably
in the light of the
recency of his retainer, the High Court justice dismissed the application on the
basis that the orders of the
first Federal Court judge were amenable to appeal:
Bechara v Bates & Anor [2018] HCATrans 164 at p 9 ll 345–p 10
ll 366, p 10 ll 379–390, and p 11 ll 398–404.
- The
matter then returned to the Federal Court.
The return of the matter to the Federal Court: the extension of
time and granting of leave to appeal
- In
this Court, on 30 October 2018, Mr Payne (formerly of TressCox, now of HWL
Ebsworth Lawyers) filed on behalf of Ms Bechara an application
for extension of
time and leave to appeal from the judgment of the first Federal Court judge on 6
April 2018. The same complaints
were made as had been made in the s 75(v)
application.
- Affidavits
in support annexed the High Court transcript. Mr Bates opposed the application.
An affidavit of Mr Bates attached a report
to creditors prepared by the Official
Trustee. The report noted that Ms Bechara had not filed a statement of affairs
in compliance
with s 54 of the Bankruptcy Act. The report gave no
information about Ms Bechara’s financial affairs or solvency.
- The
submissions in support of the application clearly identified the error that had
occurred before the Circuit Court judge. They
were, perhaps, articulated more
clearly, certainly at more length, than Mr Kumar had done; but his articulation
had been tolerably
clear and to the same effect.
- The
question of appellate jurisdiction was dealt with by setting out the approach of
the High Court justice.
- Mr
Bates’ opposition was based on the submitted correctness and merit of the
approach taken by the Circuit Court judge.
- The
matter was heard on 13 March 2019. Mr Martin and Mr Bates appeared. No one
submitted that the appellate jurisdiction could not
be engaged. The submissions
and further submissions in the matter were voluminous; but the fundamental issue
which we first dealt
with in these reasons was by now fully articulated. That
said, and with due respect to Mr Kumar, he had articulated it clearly before
the
first Federal Court judge.
- On
12 July 2019, the second Federal Court judge delivered judgment granting an
extension of time and leave to appeal from the orders
of the first Federal Court
judge on 6 April 2018: Bechara v Bates [2019] FCA 1077.
- In
his reasons, the second Federal Court judge described as a “new
argument” what appeared at [40]–[41] of his reasons:
[40] The argument as advanced before the primary Judge
was in substance that the task of the Federal Circuit Court Judge in conducting
a review under s 104 was not susceptible of the discretionary powers to
summarily dismiss a proceeding conferred by the Federal Circuit Court
Rules. The task being undertaken by the Federal Circuit Court Judge was, so
the argument ran, a task free of the ability to exercise those
discretionary
powers. The argument was that s 104 stood outside of the ambit of the Federal
Circuit Court Rules conferring a summary power of dismissal. That argument
was advanced in terms of a process of construing the Federal Circuit Court
Rules.
[41] The new argument now sought to be relied upon was in substance an argument
more directed to the inability of a Registrar to
make a sequestration order
without the ability of the bankrupt to seek review of that decision by a Chapter
III Judge. It was an
argument which accepted the ability of a Registrar to make
such an order but an argument which mandated a de novo review of the
Registrar’s decision upon an application for review being made under s
104. Concealed below this broadly expressed new argument was a further question
as to what steps needed to be undertaken by an applicant
seeking review to
require a de novo review to be undertaken.
- With
respect, Mr Kumar had put this argument clearly in early 2018, fleshing out Ms
Bechara’s application in June 2017.
- At
[49], the second Federal Court judge said:
The decisions of the Federal Circuit Court Judge
involved the exercise of discretionary powers. It is difficult to contend that
that
Judge erred in the exercise of those discretions by not resolving an
argument not advanced. The difficulty is only compounded when
attention is
shifted to the decision of present relevance, namely that of the primary Judge.
The primary Judge was also exercising
a discretionary power, namely the
discretion to grant or refuse an extension of time. And that discretion was
exercised, at least
in part, by reference to a consideration as to whether the
Federal Circuit Court Judge had erred. It is even more difficult, with
respect,
to seek to challenge the decision of the primary Judge by reference to an error
said to have been committed by the Federal
Circuit Court Judge in not resolving
an argument not then advanced and by reference to an argument not advanced to
the primary Judge.
- With
respect, a Circuit Court judge sitting in bankruptcy should apprehend the
correct approach to a review of a sequestration order
of a registrar as
explained by at least four Full Courts over the years. Further, the argument was
clearly put, on those authorities,
or at least some of them to the first Federal
Court judge.
- Leave
to appeal was granted limited to what the second Federal Court judge said were
new arguments (though they were not new) as set
out at [58] of his
Honour’s reasons:
The grant of leave to appeal, it is respectfully
considered, should be subject to two qualifications or conditions, namely:
- a Notice of Appeal should be filed,
confined to the new argument as identified during the course of oral
submissions, that new Ground perhaps extending beyond a question simply
as to whether the filing of the Interim Application in July 2016 in the
Federal Circuit Court was sufficient of itself to occasion the necessity to
undertake a de novo review of the Registrar’s decision and possibly
extending to the necessity to file and serve further evidence as to the basis
upon which that Interim Application was sought to be advanced; and
- expressly reserving to the Full Court the freedom to revoke the grant of
leave to appeal should (for example) the necessity to rely
upon further evidence
on appeal that was not before the primary Judge render the grant of leave to
appeal inappropriate on the facts
of the present case.
It is left to the Applicant to draft a Notice of
Appeal which properly raises for the consideration of the Full Court the
questions which are to be resolved. In the absence of any challenge
to the
finding of fact made by the primary Judge as to the application for review being
but “a bare application”, it is anticipated that the grant of
leave would be confined to the resolution of the two questions as to whether the
Interim Application constituted an application for review and whether the
making of such an application required a de novo review to be
undertaken.
- The
notice of appeal was filed on 26 July 2019 against all the orders of the Federal
Court made on 6 April 2018. The grounds, conforming
with the conditions of
leave, were:
- The
Courts below erred by failing to find that the Interim Application filed on 25
July 2016 constituted a valid application for review
for the purposes of s104
Federal Circuit Court of Australia Act, 1999 (Commonwealth).
- The
Courts below erred by failing to find, in conformity with Zdrilic v
Hickie [2016] FCAFC 101 at [89]; [2016] FCAFC 101; (2016) 246 FCR 532 at 553; Totev v
Sfar [2008] FCAFC 35; (2008) 167 FCR 193 at 197; and Martin v
Commonwealth Bank of Australia [2001] FCA 87, that the discretion exercised
by the Federal Circuit Court Judge miscarried at the outset
because:
(a) there was imposed upon the Federal
Circuit Court Judge a “constitutional imperative” to undertake a
de novo review of the Registrar’s order upon the filing of an
application for review under s104 Federal Circuit Court of Australia Act
(1999) (Commonwealth), by reference to evidence filed on behalf of the party
opposing the review, and
(b) there was no necessity on the part of the
appellant to file and serve further evidence as to the basis upon which that
Interim
Application was sought to be advanced.
- The
orders sought included the consequential orders of the setting aside of the
orders made by the Circuit Court judge on 8 December
2016 and 3 March 2017.
- Mr
Bates then sought security for costs. On 1 October 2019, this was ordered in the
sum of $5,000.
- A
notice of contention was filed.
- On
14 May 2020, the Chief Justice made it clear to the parties that there was a
difficulty with the appeal in that it was from orders
made in the appellate
jurisdiction. Thereafter the application under s 39B of the Judiciary Act
seeking to set aside the Circuit Court orders of December 2016 and March 2017
was filed. It was supported by evidence that set out
the history of the matter.
- For
the reasons that we have set out at length there was a fundamental error made by
the Circuit Court judge in the approach to the
application for review of a
sequestration order. The error was repeated by the first Federal Court
judge.
- The
appeal must, however, be dismissed as incompetent. There is no appellate
jurisdiction in the Federal Court Act to hear appeals from orders made by
a judge in the appellate jurisdiction.
- The
error of the Circuit Court judge was jurisdictional. He misunderstood the nature
of the judicial task before him and in so doing
failed to deal with the hearing
of the creditor’s petition that was the task before him.
- Two
related questions now arise. The first is that to which the Chief Justice
referred at [27]–[29] of his reasons of 14 May
2020 and which divided the
Court in Totev v Sfar: Whether, by reference to s 52(4) and (5) of the
Bankruptcy Act, the creditor’s petition is now stale; and, if it
is, the consequences thereof.
- The
second, depending on the answer to the first, is whether discretionary
considerations mean that orders setting aside the Circuit
Court order should not
be made.
The s 52(4) and (5) issue: Is the creditor’s petition now
stale? And if so, what is the remedial consequence?
- Subsections
52(4) and (5) of the Bankruptcy Act provide for the lapsing and extension
of time of a creditor’s petition. They are in the following
terms:
(4) A creditor’s petition lapses at the
expiration of:
(a) subject to paragraph (b),
the period of 12 months commencing on the date of presentation of the petition;
or
(b) if the Court makes an order under subsection (5) in relation to
the petition—the period fixed by the order;
unless, before the expiration of whichever of those periods is applicable, a
sequestration order is made on the petition or the petition
is dismissed or
withdrawn.
(5) The Court may, at any time before the
expiration of the period of 12 months commencing on the date of presentation of
a creditor’s
petition, if it considers it just and equitable to do so,
upon such terms and conditions as it thinks fit, order that the period
at the
expiration of which the petition will lapse be such period, being a period
exceeding 12 months and not exceeding 24 months,
commencing on the date of
presentation of the petition as is specified in the
order.
- In
Totev v Sfar [2008] FCAFC 35; 167 FCR 193, the Federal Court by a single judge had set
aside an order of a Federal Magistrate who had dismissed an application for
review of
a sequestration order by a registrar. Upon remittal to the Federal
Magistrates Court for the de novo hearing of the creditor’s
petition more than 24 months had elapsed since the original presentation of the
creditor’s
petition.
- Justice
Emmett considered the creditor’s petition to be stale by the time of the
second rehearing and so the only order that
could be made would be to dismiss
the petition. Justice Bennett with whom Cowdroy J agreed on this point did not
consider the petition
stale, though for other reasons given by Cowdroy J the
appeal would be allowed.
- The
approach of Emmett J in Totev v Sfar to the intersection of s 104 review
and s 52(4) and (5) is seen at 167 FCR 196–197 [10]–[14],
197–198 [16]–[17], and 204 [48]. His Honour’s approach was
urged upon us by Mr Martin
on behalf of Ms Bechara: The rehearing is de
novo, involving the exercise of original jurisdiction and the petitioner
starting again. Section 103(2) of the Circuit Court Act, which
provides that the
registrar’s order (being the exercise of power delegated) is taken for all
purposes to be an order (an exercise
of power) of the Circuit Court, made
unclear, according to his Honour, when the sequestration order by the reviewing
judge takes
effect. At [16], Emmett J said:
In the light of s 103(2) of the Federal Magistrates
Act, the effect of a registrar’s sequestration order, when an
application is made for review, may be unclear in that there may
be a question
as to when a reviewing judge’s sequestration order takes effect. For
example, since the proceeding before the
reviewing judge would be a hearing
de novo, a sequestration order made by the reviewing judge would
ordinarily take effect when it was made. It would not normally operate
nunc
pro tunc, so as to be effective from the date when the registrar’s
order was made. On the other hand, if the reviewing judge decided
not to make a
sequestration order, the registrar’s order would cease to be of any
effect.
- At
[48], Emmett J said that the rehearing must be regarded as a petition on the
basis that no sequestration order has been made, otherwise he said it
could not be de novo. His Honour continued:
... There had been no order extending the currency of
the petition under s 52(5) prior to 15 December 2005, when the period of 12
months from the presentation of the petition had elapsed. Further, by the time
that the petition had come before the primary judge
for the second time,
considerably more than 24 months had elapsed since the presentation of the
petition. Thus, even if the primary
judge embarked on a hearing of the petition
de novo, following remitter by the Federal Court, his Honour could not
have made a sequestration order. Accordingly, the second hearing
could only
have had one result, namely, that the petition be dismissed, since, by that
time, the petition had lapsed. That was the
only order that was open to the
primary judge.
- With
respect, this is to give the notion of the de novo hearing too mechanical
and rigid a form. It must take its place in its statutory context, which here
includes s 103(2) of the Circuit Court Act. Section 103(2) means a
sequestration order has been made and the debtor’s status has changed. The
hearing is de novo in the original jurisdiction and proceeds again, on
the same petition. However, the hearing is undertaken in order to ensure the
supervision of the exercise of delegated judicial power by the registrar. The
mere bringing of the application for review does not
invalidate, revoke or
suspend the exercise of that delegated authority. It remains a valid exercise of
delegated judicial power but
subject to the review. The form of the review
hearing is a de novo consideration, but while that review is pending the
delegated authority by which the registrar made the order (in the present case
the sequestration order) remains in existence and so too the order made in its
exercise.
- Therefore,
if after concluding the de novo review the judge would otherwise make a
sequestration order, that is, all the matters in s 52(1) are proved and no
matter in s 52(2)
arises to stand in the way of a conclusion that a
sequestration order ought be made, the application for review will be dismissed
and the exercise of delegated authority will remain operative. The Court may
make this clear by affirming the order of the registrar.
On the other hand, if
the conclusion reached on the de novo review is that the petition should
be dismissed (whether or not for reasons that were available or present before
the registrar),
that order will be made, and the sequestration order set aside
or annulled: see Pattison.
- Looking
at the matter thus, and recognising the effect and status of the
registrar’s order (“for all purposes”)
there has been before
the times set out in s 52(4)(a) and (b) of the Bankruptcy Act a
sequestration order made. An application for review does not make the
registrar’s orders provisional or ineffective.
- Thus,
even after two years from the presentation of the petition, the hearing of the
creditor’s petition on the de novo review, re-enlivened for this
purpose, could take place. There may seem some tension in saying that it is a
hearing de novo of the creditor’s petition, but at the same time
recognising the effect of the registrar’s order until set aside or
annulled.
That, however, is but a consequence of the nature of the review in its
full statutory context. The availability of the review is
an aspect of the
delegated authority. It is not an appeal to detect error. One begins again. But
the application once filed does
not affect the order made by the registrar. If,
on a hearing de novo, the entitlement for a sequestration order is made
out, the protection of the supervision has been effected. There is no call to
interfere with the effect of the earlier making of the order. If after full
rehearing afresh, de novo, again the judge considers that a sequestration
order is appropriate, he or she will not interfere with the registrar’s
order,
will dismiss the application for review and affirm the registrar’s
order. We leave aside consideration of circumstances where
on review some error
was shown in the registrar’s order such that a view is taken that the
order should not have been made
then, but it is clear that the order should now
be made. Section 104(3) would appear to be wide enough to encompass such a
circumstance.
- Our
view accords with the reasoning of Bennett J at 167 FCR 204–205
[53]–[62], with which Cowdroy J agreed at 206 [64].
- The
view we favour is supported by the text and structure of s 52(4) and (5). The
provisions of paras (a) and (b) of subs (4) are informed by subs (5). The lapse
occurs after 12 months, or, if extended
under subs (5), after 24 months. Both
circumstances are qualified by the words thereafter in s 52(4): relevantly,
“unless, before the expiration of whichever of those periods is
applicable, a sequestration order is made on the
petition”.
- Such
an order has been made (by the registrar). It is an order of the Court: s 103(2)
of the Circuit Court Act. That a review should take place promptly and
not be delayed for two years can be accepted. That does not, however, deny the
clear
words of s 52(4). To accept the view of Emmett J requires the effect of s
103(2) to be undermined by the entitlement to review under
s 104(2) and the
nature of a de novo review. This is contrary to the effect of the review
being an aspect of the delegated authority – making the delegation valid.
The de novo review as a rehearing of an existing creditor’s
petition is given full protective effect even though the registrar’s
order
remains in effect until the reviewing court deals with the petition and makes
orders that affect it.
- Thus
we reject the argument that this Court should now dismiss the petition and set
aside the sequestration order or remit the matter
with a direction for that
result to occur.
As a matter of discretion should orders be made setting aside
the Circuit Court orders and remitting the application for review to
a
rehearing?
- There
is no controversy as to the proposition that orders under s 39B(1) of the
Judiciary Act (or s 75(v) of the Constitution) are subject to a
discretion. That discretion is not at large. In Re Refuge Review Tribunal; Ex
parte Aala [2000] HCA 57; 204 CLR 82 at 101–110 [43]–[62]
Gaudron and Gummow JJ discussed the discretionary considerations to prohibition.
The Chief Justice
and Hayne J agreed with this discussion: see 204 CLR at 89 [5]
and 144 [172], respectively.
- At
204 CLR 106 [51], Gaudron and Gummow JJ said that the statement of Gibbs CJ in
R v Ross-Jones; Ex parte Green [1984] HCA 82; 156 CLR 185 at 194 should
be accepted as the correct approach to the exercise of the original jurisdiction
in which a writ of prohibition
is sought against an officer of the Commonwealth.
In Ross-Jones, Gibbs CJ stated (at 194):
If, therefore, a clear case of want or excess of
jurisdiction has been made out, and the prosecutor is a party aggrieved, the
writ
will issue almost as of right, although the court retains its discretion to
refuse relief if in all the circumstances that seems
the proper
course.
- At
204 CLR 108 [56], Gaudron and Gummow JJ noted:
Some guidance, though it cannot be exhaustive, as to the
circumstances which may attract an exercise of discretion adverse to an
applicant
is indicated in the following passage from the judgment of Latham CJ,
Rich, Dixon, McTiernan and Webb JJ in a mandamus case, R v Commonwealth Court
of Conciliation and Arbitration; Ex parte Ozone Theatres (Aust) Ltd [(1949)
[1949] HCA 33; 78 CLR 389]. Their Honours said [at 400]:
For example the writ may not be granted if a
more convenient and satisfactory remedy exists, if no useful result could ensue,
if the
party has been guilty of unwarrantable delay or if there has been bad
faith on the part of the applicant, either in the transaction
out of which the
duty to be enforced arises or towards the court to which the application is
made. The court’s discretion is
judicial and if the refusal of a definite
public duty is established, the writ issues unless circumstances appear making
it just
that the remedy should be
withheld.
- Gaudron
and Gummow JJ also, at 204 CLR 108 [57], cited Lord Denning in F Hoffmann-La
Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295
at 320 where his Lordship said of a plaintiff who delays proceedings: “He
may be disbarred from relief if he has acquiesced
in the invalidity or waived
it. If he does not come with due diligence and ask for it to be set aside, he
may be sent away with nothing
...”.
- The
passage by Gaudron and Gummow JJ in Aala 204 CLR at 108 [56] was cited in
SZBYR v Minister for Immigration & Citizenship [2007] HCA 26; 235 ALR
609 at 618 [28], Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ
observing:
This Court has previously emphasised that the grant of
the constitutional writs is a matter of discretion, and the same principles
apply to the grant of relief by the Federal Magistrates Court and the Federal
Court pursuant to s 39B of the Judiciary Act 1903 (Cth).
- At
618 [29], Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ then applied the
principles discussed in Aala, concluding that no useful result could
ensue from the grant of the relief sought by the appellants because the Tribunal
to whom
the matter would be remitted if relief were granted was bound by the
governing statute to refuse the appellants’ case.
- Paragraph
56 of Aala and the cited passage in R v Commonwealth Court of
Conciliation and Arbitration; Ex parte Ozone Theatres (Aust) Ltd [1949] HCA
33; 78 CLR 389 have been referred to in a number of Full Court decisions,
including Commissioner of Taxation v Cancer and Bowel Research Association
Inc [2013] FCAFC 140; 305 ALR 534 at 543 [13] and SZQBN v Minister for
Immigration and Citizenship [2013] FCAFC 94; 213 FCR 297 at 303
[39]–[44].
- The
following are examples of the discretion not to grant relief: unreasonable delay
in bringing the application for relief: R v Australian Broadcasting Tribunal;
Ex parte Fowler (1980) 31 ALR 565; where an appeal lies which has not yet
been pursued: R v Gray; Ex parte March [1985] HCA 67; 157 CLR 351 at 375;
McGowan v Migration Agents Registration Authority [2003] FCA 482; 129 FCR
118; where there is a suitable alternative remedy: Phong v Attorney-General
(Cth) [2001] FCA 1241; 114 FCR 75; where an applicant has acquiesced in the
conduct of proceedings known to be defective: Re McBain; Ex parte Australian
Catholic Bishops Conference [2002] HCA 16; 209 CLR 372; where no “real
injustice” has been suffered: R v Aston University Senate; Ex parte
Roffey [1969] 2 QB 538 at 551 and 559; where the cost and injustice flowing
from having to repeat the whole process would have been wholly disproportionate
to the practical effect of the error: NRMA Insurance Limited v Ainsworth
[2011] NSWCA 292; 59 MVR 195 [14]–[16] (though in relation to
non-jurisdictional error); where an applicant does not come to the court with
clean hands:
SZQBN [2013] FCAFC 94; 213 FCR 297; undisclosed improper or fraudulent
objects: R v Commissioners of Customs and Excise; Ex parte Cook [1970] 1
WLR 450; futility or lack of utility: Aala [2000] HCA 57; 204 CLR 82; Prodduturi v
Minister for Immigration and Border Protection [2015] FCAFC 5; 144 ALR 243
at [38], or where events have overtaken the proceedings so as to render the
issue moot: Civil Aviation Safety Authority v Administrative Appeals
Tribunal [2001] FCA 1319; 33 AAR 439.
- The
considerations relevant to the grant of relief here are as follows: It was Mr
Bates who urged the misconceived approach to the
December 2016 hearing of the
application for review. It is he who has maintained that approach up to and
including argument in this
Court. If he had been ready to read the affidavits
that had been before the registrar and rely upon updated affidavits as to debt
and search, it may well be that the dismissal of the application would have
occurred, for the correct reason: a rehearing of the creditor’s
petition. Given Ms Bechara’s conduct leading up to the December hearing it
is difficult
to see why there was any error in refusing an adjournment; and that
conclusion was drawn by the first Federal Court judge. Thus,
perhaps, Mr
Bates’ own conduct was the only intervening factor in an available proper
exercise of power. However, there was
no evidence before us as to whether Mr
Bates was in a position to proceed with the creditor’s petition on 8
December 2016.
He may, himself, have required a short adjournment, on which
date Ms Bechara may have been able to appear. We do not know.
- The
solvency of Ms Bechara has not been the subject of evidence. The following
exchange took place between the Chief Justice and Mr
Martin during a case
management hearing on 22 May 2020:
HIS HONOUR: ... Well, the
question then arises, what the effect of 52(4) is, what the Full Court said, and
what the status of the
Registrar’s decision – sequestration order
is. All that will probably have to be covered and dealt with. If you’re
right, Mr Martin, then we have to look at what orders flow from any either
successful appeal or successful application under 39B(1).
Relevant to that might
be, Mr Martin, whether Ms Bechara is solvent. Might be, I’m not saying it
is, might be, because if she
is not solvent what are we doing? ... I don’t
know whether she was solvent in 2016. I don’t know whether she’s
solvent in 2020. But the question of solvency, at some point, will enter a Full
Bench’s head, collective head, and that is
at the point of exercising a
discretion, if you’re right, to grant relief under 39B(1) it may be
relevant to understand her
solvency. I only raise that because – this is
all going to be sent back for a Circuit Court to hear another creditor’s
petition and she can’t prove her solvency then what’s going on and
why are we dealing with this.
MR MARTIN: Can I interpose there, your Honour.
...
HIS HONOUR: ... What I was raising of [sic: for] your and Ms Bechara’s
consideration is that if, accepting the fact, that,
for the purposes of debate
today, that she was entitled to have a hearing in December of 2016 in which Mr
Bates went first in a de
novo creditor’s application, what is the point of
taking public resources of requiring that now to happen if she is not solvent?
Now, it may be that the proper answer to that is, whether or not she’s
solvent today, it’s when the creditor’s
application comes on for
hearing that matters as to whether she’s solvent, and that may be a good
answer to that. All I’m
doing is raising for your and Ms Bechara’s
consideration that it may be that if she is not solvent, there may be very
little
point in all this; however, I will not say any more. Do you take my
point? I mean, if it goes back to the Circuit Court and she’s
not solvent
and she can’t show she’s solvent, what have we been doing in this
whole exercise, assuming Mr Bates and those
acting for him put together evidence
sufficient to establish prima facie an order under section 52? If she is
solvent, well, I understand
the importance of it. I’m just raising it for
your consideration and for Ms Bechara’s consideration, given the amount
of
time and effort that is going to go into hearing the appeal and the application
in August and, if you’re successful, sending
it back to the Circuit Court.
MR MARTIN: Your Honour, is
your question rhetorical or are you seeking a response?
HIS HONOUR: No, ... it’s neither. I’m raising it for your
consideration that you may want to turn your mind to it either
in the conduct of
this application and whatever evidence you bring or otherwise, that’s all,
that if she isn’t in fact
solvent, what are we doing? If she is solvent or
she considers she will be solvent if and when this ever went back to the Circuit
Court, then I fully understand the importance of the application to her.
MR MARTIN: ... Now, your Honour is really saying, “Yes, I know all
that,” and it might be wasted exercise if my client
is not solvent. The
two answers I have to that, which I’m trying to couch elegantly and not
provocatively, is that in relation
to my client’s solvency, it would be my
intention to keep my powder dry on that topic because it’s for the
petitioning
creditor to be the prosecutor, and he would be prosecuting an act of
bankruptcy, and there are plenty of solvent people who have
committed acts of
bankruptcy. And the second thing I would be saying is that because of the
constitutional point that was first –
well, as far as I’m aware,
first talked about in Totev but much more
deeply talked about in Zdrilic, if the Full Court were to say,
“Yes, this is all fine, but what’s the point?” would the court
not be giving me
an easy run in a special leave application.
HIS HONOUR: Right. Well, you’ve answered my question in a sense because I
did not want the application to move forward without
an addressing of that
issue; you’ve addressed it and you’ve obviously thought about it and
I won’t say any more.
This exchange raised for both parties the relevance
of proof of Ms Bechara’s solvency.
- There
has been a delay of over four years. Some part of that delay has been due to Ms
Bechara not advancing her case. Yet, she has,
at least since her application of
6 June 2017 and certainly since the submissions of Mr Kumar in March 2018, put
the submission that
there should have been a hearing de novo of the
creditor’s petition.
- Mr
Bates put the submission that there was a delay in filing the s 39B application.
With respect, that submission lies ill in the mouth of the party or counsel who
persuaded the High Court to dismiss
the show cause application under s 75(v)
(equivalent to the s 39B application) directed to the Federal Court and Circuit
Court on the basis of (non-existent) rights of appellate review in the Federal
Court. After remittal Ms Bechara prosecuted the appeal until the difficulty was
pointed out to her.
- Mr
Bates pointed to the fact that Ms Bechara has not filed her statement of
affairs, which was due within 14 days of the registrar’s
orders. That is
for the Official Trustee to take up. The Official Trustee was informed of these
proceedings, but did not appear.
- Mr
Bates submitted that Ms Bechara’s breaches of timetabling orders leading
up to the summary disposal of the matter should
count against her on discretion.
Mr Bates also submitted that the delay prejudices him as the petitioning
creditor. These matters,
however, explain only how Mr Bates himself has caused
this problem by his misunderstanding of what was called for by the Court in
December 2016.
- Mr
Bates did not take on the burden of showing on a prima facie or other basis that
Ms Bechara is not solvent. He could have sought
to have done so by interlocutory
procedures or subpoenas.
- The
Court is left without information as to the solvency position of Ms Bechara.
- In
all the above circumstances and on the state of the evidence before us, and in
the light of the absence of a rehearing de novo of the creditor’s
petition, the seriousness of the change of status to that of a bankrupt, and the
role played by Mr Bates
in the error and confusion over the years, we would make
orders setting aside the orders of the Circuit Court made on 8 December
2016, 3
March 2017 and 17 May 2017 and remit the application for review and the
rehearing of the creditor’s petition to the
Circuit Court.
- That
remitted hearing should take place as soon as possible.
- As
to costs we would order that Mr Bates pay Ms Bechara’s costs of the
application under s 39B. The appeal in our view is incompetent and there should
be no order as to costs in it. They should lie where they fall. As to costs
ordered by the first Federal Court judge and the High Court we have no power to
vary them or set them aside. We would, however, in
support of the hearing of the
creditor’s petition, order that no step be taken by any party to enforce
any costs order until
the result of the creditor’s petition rehearing is
known. All these costs orders may simply be matters with which the trustee
in
bankruptcy must concern himself or herself.
Final comment
- Applications
for review of exercises of delegated power by registrars should be reheard by
judges de novo as soon as reasonably practicable. This is especially
so in bankruptcy, and even more so if it is a review of a sequestration
order that changes the status of a debtor, enlivens powers
of a trustee and
brings about changes to property. Delay is not only prejudicial to the debtor or
bankrupt, but also to the creditor
and potentially to members of the public.
- Application
for review of sequestration orders should be listed and heard conformably with
what they are: the (re)hearing of a creditor’s
petition in bankruptcy.
Orders
- The
orders of the Court will be:
A. Upon the application under s 39B of the Judiciary Act (NSD 658 of
2020):
- The
orders of the Federal Circuit Court of Australia made on 8 December 2016
dismissing the Interim Application filed on 25 July 2016
and ordering costs; on
3 March 2017 dismissing the Application in a Case filed on 5 January 2017 and
ordering costs; and on 17 May
2017 dismissing the Application in a Case filed on
2 May 2017 and ordering costs be quashed and set aside.
- The
application for review, in the form of the Interim Application filed on 25 July
2016, of the order of Registrar Tesoriero made
on 5 July 2016 that the estate of
Maria Bechara be sequestrated under the Bankruptcy Act 1966 (Cth) and of
the order concerning costs be remitted to the Federal Circuit Court of Australia
for hearing according to law as a de novo hearing of the
creditor’s petition filed on 7 April 2016, to be heard as soon as
reasonably possible.
- The
first respondent pay the applicant’s costs of the application, such costs,
and all other outstanding orders for costs as
between the parties in litigation
in the Federal Circuit Court of Australia, the Federal Court of Australia and
the High Court of
Australia, not be enforced and no steps be taken to enforce
such costs until after orders are made consequent upon the hearing of
the
creditor’s petition in the application for review.
B. In relation to the appeal from a single judge of the Federal Court (NSD 2386
of 2018):
- The
appeal be dismissed as incompetent with no order as to costs.
- The
sum of $5,000 provided by the appellant for security for costs and any interest
thereon be returned to the appellant.
I certify that the preceding one hundred and
seventy-eight (178) numbered paragraphs are a true copy of the Reasons for
Judgment of
the Honourable Chief Justice Allsop and Justices Markovic and
Colvin . |
Associate:
Dated: 16 March 2021
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