Wentworth v Rogers [2009] NSWSC 1038 (2 October 2009)

Last Updated: 8 October 2009

NEW SOUTH WALES SUPREME COURT

CITATION:
Wentworth v Rogers [2009] NSWSC 1038


JURISDICTION:
Common Law

FILE NUMBER(S):
19228/1982

HEARING DATE(S):
23 April 2008, 18 February 2009, 11 March 2009

JUDGMENT DATE:
2 October 2009

PARTIES:
Katherine Wentworth (Plaintiff)
Gordon Rogers (Defendant)
Toni Rogers (Applicant on a motion)

JUDGMENT OF:
Rothman J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Self represented (Plaintiff)
No appearance (Defendant)
R Lovas (Applicant on a motion)

SOLICITORS:
Self represented (Plaintiff)
No appearance (Defendant)
Dorrough & Smart Solicitors & Attorneys (Applicant on a motion)



CATCHWORDS:
JUDGMENTS – enforcement proceedings – effect of bankruptcy – provable debt – judgment for damages and costs against debtor made before bankruptcy – enforcement only in accordance with Bankruptcy Act 1966 (Cth)

LEGISLATION CITED:
Bankruptcy Act 1966 (Cth)
Civil Procedure Act 2005
Supreme Court Act 1970
The Constitution
Uniform Civil Procedure Rules 2005

CATEGORY:
Procedural and other rulings

CASES CITED:
Clyne v Deputy Federal Commissioner of Taxation [1984] HCA 44; (1984) 154 CLR 589
Foots v Southern Cross Mind Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52
Griffin v Pantzer [2004] FCAFC 113; (2004) FCR 209
Keramianakis v Regional Publishers Pty Ltd [2009] HCA 18; (2009) 237 CLR 268
R v Metal Trades Employers’ Association; Ex parte Amalgamated Engineering Union [1951] HCA 3; (1951) 82 CLR 208
Re Payne; Heuzenroeder v Trustees (1934) 7 ABC 127
Wentworth v Rogers (Supreme Court of New South Wales, Dunford J, 15 December 2004, unreported)
Wentworth v Rogers [2003] NSWSC 371

TEXTS CITED:


DECISION:
(i) The plaintiff’s motion is dismissed;[<br>][<br>](ii) The first defendant, Mr Gordon Rogers, shall pay the costs of the plaintiff and Mrs Rogers, as agreed or assessed;[<br>][<br>](iii) The parties be granted leave to apply for any consequential order on 5 days’ notice to the other party and the Court. Notice to the Court may be made to my Associate directly.



JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COMMON LAW DIVISION

ROTHMAN J

2 OCTOBER 2009

19228/1982 Katherine Wentworth v Gordon Rogers

JUDGMENT

1 HIS HONOUR: These proceedings have a long and tortuous history. This last aspect relates to a notice of motion, dated 4 December 2007, which itself has had a lengthy and tortuous history, by which Ms Katherine Wentworth applies for an account of assets of Mr Gordon Rogers, her former husband, and his current wife, Mrs Toni Rogers. The motion also seeks an account in respect of transactions between Mr and Mrs Rogers and the joinder of Mrs Rogers as a party to the proceedings. Consequential orders for the payment of money into Court are also sought.

2 On 14 December 2007, the Court granted a Mareva injunction. Ms Wentworth has issued subpoenas against, inter alia, Mrs Rogers, and Mrs Rogers has applied to have those subpoenas set aside. Central to the issue, between the parties in this round of litigation, is the capacity of Ms Wentworth to examine Mr Rogers, in circumstances where Mr Rogers has become bankrupt. A judge of this Court has noted that a detailed history of the litigation between these two parties would fill a number of volumes: Wentworth v Rogers (Supreme Court of New South Wales, Dunford J, 15 December 2004, unreported) [Exhibit A, page 51]. A number of chronologies are before the Court, none of which dealt completely with all of the hearings in all of the proceedings between these parties. It is necessary to trace, as briefly as possible, the steps immediately giving rise to the notice of motion and the subpoenas, in order to understand the issues and thereafter discuss the ability of Ms Wentworth to enforce, in law, the judgment debt in her favour, in the circumstances of the judgment debtor’s bankruptcy. Lastly, the Court will deal with the effect, if any, of those matters on the issues of joinder and the appropriateness of the subpoenas.

Relevant Procedural History

3 It is unnecessary, for the purposes of this judgment, to detail all of the litigation between Ms Wentworth and Mr Rogers. Nor is it necessary to detail all of the hearings and judgments that have occurred or been issued in this particular proceeding. It is necessary, however, to understand how the matters come before the Court, as presently constituted, and how these present motions arise.

4 In 1981, Ms Wentworth initiated criminal proceedings against Mr Rogers, relating to alleged conduct during their marriage. Shortly thereafter, and in the same year, Mr Rogers agreed with Mrs Rogers (i.e. his current wife) that he would indemnify her for any legal costs incurred by her in any litigation between Ms Wentworth and Mr Rogers. The agreement anticipated that interest would be charged on funds advanced by Mrs Rogers to Mr Rogers and the debt (being the funds advanced and the interest) was secured against interests in property held by Mr Rogers.

5 On 2 November 1982, a magistrate dismissed the criminal proceedings, to which reference has been made. On 14 December 1982, Ms Wentworth commenced proceedings for civil assault, against Mr Rogers, for which cause of action Ms Wentworth relied on the same conduct that had been the subject of the criminal proceedings.

6 In June 1983, Mrs Rogers obtained the unencumbered title to certain property at Northbridge, which Mrs Rogers thereafter held on an unencumbered basis. On 30 July 1983, Mr Rogers executed a further indemnity in favour of Mrs Rogers, in relation to any legal charge by the Legal Aid Commission, which indemnity had the effect of diminishing Mr Rogers’ interest in any joint property by the amount of any interest or payment made to the Legal Aid Commission.

7 On or about 8 October 1984, the Court of Appeal quashed the dismissal of the proceedings by the Magistrate and Mr Rogers was committed for trial on the criminal charges. On 26 July 1985, Mr Rogers was acquitted of the criminal charges. In August 1985, Mr Rogers cross-claimed, in the civil proceedings, for malicious prosecution. As is usual, the civil proceedings, including the cross-claim, were heard together and the claim was dismissed, but judgment was entered in the cross-claim, in favour of Mr Rogers.

8 On 6 March 1987, the Court of Appeal set aside the damages awarded on the cross-claim, and the judgment for the defendant on the claim itself, and remitted the matter for retrial. The retrial was listed for hearing, commencing on 26 April 1994. On 4 March 1994, the Court refused an application by Mr Rogers for a stay of the proceedings. On the same date, Mr Rogers transferred 50% of his interest in two lots of property (Lots 71 and 72), such transfer being, it was said, for the consideration of one dollar.

9 On 22 April 1994, Mr Rogers entered into a further agreement, purportedly for an amount of $130,000. Mr Rogers, it was said, owed Mrs Rogers this amount as a result of monies lent for legal costs and interest. The amount was secured over Mr Rogers’ property interests. The agreement was effected by deed. The mortgage was rendered efficacious by a memorandum and the deed to which reference has been made.

10 The civil proceedings, now, by order of the Court, separated in order that the claim would be heard in different proceedings to the cross-claim, commenced on 14 June 1994 and, on completion, the jury reached a verdict in favour of Ms Wentworth. Mr Rogers was ordered to pay the amount of the verdict and costs of the proceedings. It is an understatement to note that there were difficulties associated with obtaining payment of the judgment debt, including costs. Those difficulties were, at least in part, caused by Mr Rogers’ disposal of his assets to Mrs Rogers and/or the encumbrance thereof in favour of Mrs Rogers.

11 The verdict (of a jury) and judgment was for damages of $2000, and for costs, amounting to $184,000. A Mareva injunction issued and was continued. There were various interlocutory skirmishes. On 9 May 2003, his Honour Justice Howie (Wentworth v Rogers [2003] NSWSC 371) dismissed proceedings taken by Ms Wentworth, which proceedings sought to set aside the property transactions between Mr Rogers and Mrs Rogers. His Honour held that there had been nothing in the preparation of the deed and mortgage that led him to find that there was fraud.

12 Nor, on his Honour’s findings, was there any impropriety or conspiracy to defraud Ms Wentworth by or between any of Mr Rogers, Mrs Rogers, and/or their legal representatives. Further, Howie J did not consider that the transactions were a sham, but were, and were intended to be, security for the past and future payments made by Mrs Rogers on behalf of Mr Rogers. Moreover, his Honour considered that the original agreement in 1981 gave rise to the debts that were ultimately secured or repaid by the arrangements in 1993.

13 Ms Wentworth appealed the judgment of Howie J, which appeal was dismissed (with costs) by the Court of Appeal in or about November 2004. In the meantime, the Court had, on 25 November 2003, issued a Mareva injunction. A writ of execution against Mr Rogers’ property (or interests therein) was issued and stayed. Ms Wentworth applied for the stay to be lifted, which application was refused, as was the appeal from the refusal. There was an appeal to the High Court of Australia, which was refused. Further, there was a stay of the assessment of the costs orders, in favour of Mr Rogers against Ms Wentworth.

14 When, on 23 July 2007, one of the two lots of property (Lot 71), to which earlier reference has been made, was sold by Mrs Rogers, purportedly as mortgagee in possession, freezing orders were made by the Court. (Lot 72 had been sold earlier and the proceeds, less costs, were paid into Court and, by later order of the Court, paid out to Mrs Rogers.) Those freezing orders were made on 15 December 2007. The Court made further freezing orders on 15 February 2008 and on 3 March 2008. On 18 March 2008, the Court ordered that Mr Rogers pay into Court the amount of the proceeds of the sale of his interest in the aforesaid land by 4.00pm on 28 March 2008. No amount has been paid.

15 Because of difficulty in serving Mr Rogers with documents, orders for substituted service were made. On 24 April 2008, Mr Rogers, on his own application, was made bankrupt, naming Ms Wentworth and Mrs Rogers as his creditors. The Court has before it correspondence between Ms Wentworth and the Official Receiver. Essentially, the Official Receiver determined that there were no assets or monies available for any payment to Ms Wentworth, after the priority debts to Mrs Rogers had been partially satisfied.

16 As earlier stated, Ms Wentworth seeks to challenge (once more) the genuineness of Mr Rogers’ debt to Mrs Rogers, and the transfer of properties or interests in property to Mrs Rogers, in order to obtain some or all of the amount to which she is entitled as the judgment creditor in the earlier mentioned proceedings. For that purpose, Ms Wentworth seeks to examine Mr Rogers and Mrs Rogers and has issued subpoenas against each.

17 It is noteworthy that the bankruptcy petition occurred the day after Ms Wentworth filed the amended notice of motion of 23 April 2008. By that motion, Ms Wentworth sought an account of Mr Rogers’ interest in Lots 71 and 72 and an account of the proceeds from any sale of those lots. In addition, Ms Wentworth, in that motion, sought orders regarding the payment of such monies into Court, presumably, once an account or examination has established assets available to Mr Rogers, or to meet his debts. At the time of the bankruptcy petition, the money amounts claimed by Ms Wentworth had been ascertained. They were the award of damages and the costs, to each of which reference has earlier been made, and, by that time, costs had been assessed and determined.

The Effect of the Bankruptcy on the Enforcement Proceedings

18 Those prayers for relief contained in the motion, of which notice has been given, that seek an order to account, are, purportedly, based upon the provisions of s 108 of the Civil Procedure Act 2005. That provision permits, subject to the Uniform Civil Procedure Rules 2005 (“UCPR”), the Court to issue orders requiring persons, bound by a judgment or order, to attend for oral examination on any material question, or to produce any document or thing in his or her position that relates to a material question.

19 The first obvious aspect of the provisions of s 108 of the Civil Procedure Act is that it applies so as to allow the Court to require only those persons bound by a judgment or order to attend for examination. Mrs Rogers is not such a person. The provisions of s 108 of that Act grant additional powers for the enforcement of orders and are not exclusive of powers that hitherto existed: see s 138 of the Civil Procedure Act. The Supreme Court of New South Wales, as a supreme court of general jurisdiction, has inherent power and jurisdiction to enforce its own judgments: see R v Metal Trades Employers’ Association; Ex parte Amalgamated Engineering Union [1951] HCA 3; (1951) 82 CLR 208 at 241. That inherent jurisdiction is continued by operation of ss 22 and 23 of the Supreme Court Act 1970: see Keramianakis v Regional Publishers Pty Ltd [2009] HCA 18; (2009) 237 CLR 268 at [36]. Those inherent powers and/or jurisdiction would seem to permit the examination of persons, other than parties, who, on reasonable grounds, are alleged to be party to avoiding or circumventing the execution of a judgment of the Court. On one view, such a power is an incident of the inherent power to punish for contempt: see R v MTEA, supra at 241.

20 Such inherent powers and jurisdiction are subject to valid limitations imposed by the legislature. In particular, the inherent powers and jurisdiction of the Supreme Court and the provisions of s 108 of the Civil Procedure Act are overridden by any valid federal legislation inconsistent therewith. For reasons that become obvious, it is unnecessary for the Court to deal with the broader scope and meaning of inconsistency under s 109 of The Constitution. It is sufficient to state the trite proposition that a valid federal law overrides a law of the State.

21 The provisions of the Bankruptcy Act 1966 (Cth), in particular s 58 thereof, have the effect that, when a person becomes a bankrupt, all of that person’s property vests forthwith in the Official Trustee. Otherwise than is provided by the Bankruptcy Act, the express provisions of that Act prohibit a creditor from enforcing any remedy against the bankrupt in respect of a provable debt. In that sense, the claim, being a provable debt against a bankrupt, is converted from a chose in action to an equitable right to share in the bankrupt estate: Clyne v Deputy Federal Commissioner of Taxation [1984] HCA 44; (1984) 154 CLR 589 at 594-5; Re Payne; Heuzenroeder v Trustees (1934) 7 ABC 127.

22 As earlier stated, Ms Wentworth seeks to enforce, against Mr Rogers, debts that arise from orders of the Court, including costs orders, all of which were issued prior to the date of bankruptcy. Debts that arise from judgments issued prior to the date of bankruptcy will be provable debts and will be enforceable only in accordance with the Bankruptcy Act: see Foots v Southern Cross Mind Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52. Unlike the factual situation with which the High Court was concerned in Foots, supra, the judgment on damages and the judgment on costs had issued (and, in relation to the costs, been assessed) prior to the date of bankruptcy. In those circumstances, the express provisions of s 58(3) of the Bankruptcy Act apply and prevail over the provisions of State Law, including the inherent jurisdiction of the Court. As is obvious from the foregoing, the judgment debt is a liability which arose before the date of bankruptcy and is therefore provable pursuant to the terms of s 82 of the Bankruptcy Act.

Conclusion

23 After the bankruptcy of Mr Rogers, the ownership of his assets vested in the Official Receiver. These assets included documents owned by him, including accounting documents and books of account. Ms Wentworth seeks to take steps, in these motions, which steps are ancillary to the enforcement of the orders of the Court. Ms Wentworth is prohibited from enforcing the orders of the Court, otherwise than in accordance with the Bankruptcy Act. Ms Wentworth is not proceeding in accordance with that Act.

24 As a consequence, the enforcement proceedings cannot continue in their current form. With great respect, I accept and adopt the concern repeated by Allsop J, as he then was, in Griffin v Pantzer [2004] FCAFC 113; (2004) FCR 209 at [176] regarding “the ability of the fraudulent to hide behind the bankruptcy laws.” I do not, by that comment, find or suggest that Mr Rogers has been fraudulent. However, the filing of the bankruptcy petition on the day after the filing of the notice of motion by Ms Wentworth must be, at least inferentially, more than coincidental. The alleged debts to Mrs Rogers had existed for some period of time prior thereto.

25 Notwithstanding the seeming injustice of disentitling, at least in these proceedings, Ms Wentworth from proceeding to examine the bona fides of the transactions that denied her the fruits of her victory, that is the required outcome of the operation of the Bankruptcy Act. As a consequence, it is unnecessary to deal with the notice of motion by Mrs Rogers relating to the subpoenas. The subpoenas can only stand, if the enforcement proceedings were able to continue.

26 The Court makes the following orders:

(i) The plaintiff’s motion is dismissed;

(ii) The first defendant, Mr Gordon Rogers, shall pay the costs of the plaintiff and Mrs Rogers, as agreed or assessed;

(iii) The parties be granted leave to apply for any consequential order on 5 days’ notice to the other party and the Court. Notice to the Court may be made to my Associate directly.

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LAST UPDATED:
7 October 2009