Bechara v Bates

The submissions before the primary Judge 26 The argument as formulated before the primary Judge involved a question of the construction of the ss 103 and 104 of the Federal Circuit Court Act and the Federal Circuit Court Rules 2001 (Cth) (the "Federal Circuit Court Rules"). The argument was that r 13.03C of the Federal Circuit Court Rules, which confers the discretionary power to summarily dismiss a proceeding for non-appearance, did not extend to a proceeding to review a sequestration order under s 104: cf. [2018] FCA 460 at [23]. 27 When resolving the argument previously advanced, the primary Judge whose decision is now sought to be challenged recorded in her reasons for decision that it "was not in issue that, in making the sequestration order, the Registrar was exercising delegated power under s 103(1) of the FCCA Act and therefore that the FCC's jurisdiction to review that decision was engaged under s 104(2) of the FCCA Act": [2018] FCA 460 at [22]. No challenge is now sought to be made in support of the Application seeking to challenge that reasoning of the primary Judge. 28 The primary Judge then moved on to record the argument advanced as to the Federal Circuit Court Judge not having power to summarily dismiss a "s 104 review" proceeding for non-appearance under r 13.03C(1)(c) of the Federal Circuit Court Rules. The primary Judge concluded that the argument "lacks any reasonable prospects of success" (at para [25]) and gave five reasons for reaching that conclusion (at paras [26] to [31]). Her Honour the primary Judge concluded: [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.

The Proposed Grounds of Appeal as initially formulated 29 The Application for an extension of time and leave to appeal in the present proceeding annexed a draft of the Notice of Appeal consisting of 12 Grounds of Appeal to be relied upon should an extension of time and leave to appeal be granted. 30 Proposed Grounds of Appeal 1 to 9 as formulated in the proposed Notice of Appeal can be largely placed to one side. None of those Grounds identified any appellable error said to have been committed by the primary Judge. 31 Proposed Grounds 10 and 11 were ill-expressed but at least made some attempt to identify some error alleged to have been made by the primary Judge. Those two proposed Grounds were expressed as follows: 10. The Court below misconstrued as to the party that ought to file evidence first (it falling on, the Defendant as the Appellant in the FCCA) and misdirected itself as the review under the power exercised under Section 103 did not change the role of the Appellant as appellant. Her Honour thereby asked incorrect questions as to which party ought to have filed evidence. 11. The Federal Court of Australia, in Judge Perry's decision, exceeded its jurisdiction and/or fell into error in refusing to grant an extension of time and leave to appeal. Proposed Ground 12 in the Notice of Appeal, which was a reference to the application for an order to show cause filed in the High Court of Australia, can also be placed to one side. 32 It is to be recollected that the decisions sought to be challenged before the primary Judge were those of the Federal Circuit Court dismissing Ms Bechara's Interim Application. Specifically, the decision to dismiss the Interim Application seeking review under s 104 of the Federal Circuit Court Act for (inter alia) non-appearance and the subsequent decision to refuse to reinstate that application. 33 With respect to proposed Ground 10 of the draft Notice of Appeal in this proceeding, there is considerable uncertainty as to the error sought to be identified. The reference to "the party that ought to file evidence first" is obscure. It is perhaps a reference to orders made by the Federal Circuit Court in September 2016 to ready the case for hearing before that Court. The reference to "incorrect questions" is equally obscure. It is unclear whether this Ground is to be construed (and confined) to an attempt to question procedural directions made by the Federal Circuit Court as to the order in which evidence was to be filed. If so, it is even more unclear whether any such procedural direction occasioned any prejudice. But, on any approach to the meaning to be given to Ground 10, there is no self-evident error in the manner in which the primary Judge resolved the application before her. Ms Bechara was given an adequate opportunity before her Honour to advance whatever evidence and submissions she saw fit before the primary Judge. She was then represented by Counsel. Separate from the argument as to whether a proceeding under s 104 can be summarily dismissed, it is difficult to understand the error sought to be attributed to the primary Judge. The "incorrect questions" to which the proposed Ground is directed are not further identified. This Ground, accordingly, does not appear to have any merit to warrant the discretion being exercised to extend time in order to permit Ms Bechara's appeal to proceed to a full hearing. 34 Proposed Ground 11 is nothing other than a statement of a conclusion and lacks any identification or specification of the error said to have been committed. 35 Significantly, what was missing from proposed Grounds 10 and 11 - and also missing from the case as sought to be advanced before the primary Judge - was any attempt to identify any error said to have been committed by the Registrar when making the sequestration order or any attempt to identify why a sequestration order ought not to be made at that point of time when the Federal Circuit Court Judge dismissed the proceeding. Other than the argument that the Federal Circuit Court Judge had no power to enter a default judgment when called upon to conduct a review under s 104, there was no separate argument advanced before the primary Judge as to why the making of the sequestration order should be now called into question. 36 It was unclear from the submissions advanced on behalf of Ms Bechara at the hearing as to whether she continued to rely upon these proposed Grounds should an extension of time been granted. To resolve any uncertainty, to the extent that she wished to continue to rely upon these Grounds as initially formulated, an extension of time and leave to appeal to pursue these Grounds is refused.

The new argument 37 That leaves for consideration the fate of the proposed new argument. 38 The solicitor appearing on behalf of Ms Bechara quite frankly and quite properly accepted that the proposed new argument relied upon in support of the Application for Extension of Time and Leave to Appeal was not an argument advanced before either the Federal Circuit Court Judge or the primary Judge. 39 Pursuant to leave granted at the hearing, a proposed Amended Draft Notice of Appeal was provided to the Court but was not filed. The Amended Draft Notice of Appeal contained seven proposed Grounds of Appeal. But none of the redrafted proposed Grounds, with respect, clearly articulated the new argument sought to be resolved. 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. 42 On one view, this newly formulated argument was the subtext to the arguments previously relied upon before the primary Judge. But, so expressed, it was not the argument previously articulated. 43 On this approach, an applicant seeking review of a Registrar's decision to make a sequestration order need do little more than file an application for review. Even in the absence of further evidence from an applicant, the argument was that it was the function of the Federal Circuit Court Judge to thereafter conduct a de novo review by reference (if necessary) to evidence filed on behalf of those opposing the review. A failure on the part of an applicant seeking review to comply (for example) with Court orders for the filing of evidence, it was submitted, did not absolve the Federal Circuit Court Judge of the necessity to undertake a de novo review. 44 In advancing that submission, reliance was placed on behalf of Ms Bechara upon the following observations of Emmett J in Totev v Sfar [2008] FCAFC 35, (2008) 167 FCR 193 at 197 ("Totev"): [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. Reliance was also placed upon Martin v Commonwealth Bank of Australia [2001] FCA 87. 45 Given the potential importance of the new argument, leave was granted to the parties to file further written submissions after the hearing had completed. It was not in question that leave could be granted to a party to raise a new argument different to those previously advanced before a primary Judge. The only question was whether the Court in the exercise of its discretion should permit it to do so. 46 Pursuant to leave granted and after the hearing concluded, reliance was also placed upon the following observations of Katzmann, Farrell and Markovic JJ in Zdrilic v Hickie [2016] FCAFC 101, (2016) 246 FCR 532 ("Zdrilic") at 553: [89] … 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. 47 It is a consideration of those belatedly filed submissions which has led to the conclusion that the new argument is of sufficient merit that it should be resolved on appeal. In granting both the extension of time to raise the new argument and leave to appeal confined to that new argument, no concluded opinion is expressed as to the merit of the new argument. The only opinion that has been reached is that it is in the interests of the administration of justice that it should be resolved. The grant of an extension of time and leave to appeal, however, necessarily had to confront the not insubstantial reasons relied upon by Mr Bates in opposing leave being granted. These arguments should be briefly mentioned.

The absence of error & misdirected argument 48 The most fundamental difficulty confronting reliance upon the newly articulated argument as a basis for granting an extension of time and leave to appeal is that it was not an argument previously advanced before either the Federal Circuit Court Judge or the primary Judge whose decision is now sought to be impugned. Indeed, it only belatedly emerged during the course of the present hearing seeking to challenge the decision of the primary Judge. 49 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. 50 But the reason why such considerations do not prevail is that on the view being advocated on behalf of Ms Bechara at present is that the discretion being exercised by the Federal Circuit Court Judge miscarried at the outset. Although the primary Judge's attention was unquestionably diverted by the parties into an area of dispute as to the correct construction of the Federal Circuit Court Rules, on the argument as now advanced there was imposed upon the Federal Circuit Court Judge a "constitutional imperative" to undertake a review of the Registrar's order: Zdrilic [2016] FCAFC 101 at [89], (2016) 246 FCR 532 at 553.

An argument advanced without the benefit of the reasons of the primary Judge & the prospect of further facts 51 Further difficulties confronting Ms Bechara in seeking an extension of time and leave to appeal include the desirability of any appellate Court having the not inconsiderable benefit of the reasons and findings of a primary Judge and the prospect that there remain outstanding unresolved questions of fact of relevance to the argument to be advanced. 52 On one view, the mere filing of an application seeking review under s 104 may not in all circumstances warrant a contested hearing, or indeed, any hearing as to whether a sequestration order ought be made: cf. Harris v Caladine (1991) 172 CLR 84. There in question was the validity of an order made by consent by a Deputy Registrar of the Family Court. Pursuant to Rules of the Family Court, a Registrar (or Deputy Registrar) had delegated power to make such an order and a Court reviewing such an exercise of power was required to "proceed by way of a hearing de novo". Mason CJ, Deane, Dawson, Gaudron and McHugh JJ held the order valid (Brennan and Toohey JJ dissented). In the course of her reasoning, Gaudron J relevantly observed (at 153-154): It is necessary to turn to the nature of the review process required by s. 37A(9) of the Act. In so far as that subsection 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. 53 Albeit not expressly so stated, it may be that her Honour was there contemplating that there mere filing of an application for review would not be sufficient to thereafter compel a reviewing Court to undertake a de novo review. 54 The present concern is an unresolved question as to whether the Interim Application as was filed by Ms Bechara in July 2016 could properly be characterised as a process which has properly invoked the necessity to undertake a complete de novo review of the Registrar's decision. 55 Although the reasons for decision of the primary Judge on the present argument would unquestionably have been of assistance, the absence of such reasons necessarily always arises in cases where a new argument is raised on appeal. And the prospect of there being outstanding findings of fact may well be addressed by the submission advanced on behalf of Ms Bechara that no fact is necessary other than the fact that an application for review under s 104 had been filed.

The grant of leave to appeal - subject to conditions 56 The new argument now relied upon by the Applicant essentially raises for resolution two interrelated questions, namely: whether the Interim Application filed in July 2016 constituted an application for review for the purposes of s 104 of the Federal Circuit Court Act; and whether the Federal Circuit Court Judge was required to undertake a de novo review upon the Interim Application being filed. Presumably by reason of the manner in which the argument proceeded before the primary Judge, the former concern was given but passing consideration. The learned primary Judge only referred to this question in the context of the Federal Circuit Court Rules stating that the object of those Rules being "to assist the just, efficient and economical resolution of proceedings": [2018] FCA 460 at [29]. Her Honour considered that the object of the Federal Circuit Court Rules "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": [2018] FCA 460 at [30]. Had the new argument as now formulated on behalf of Ms Bechara been advanced before the primary Judge, her Honour may (potentially) have made further findings of fact. 57 The grant of the extension of time stands separate from the grant of leave to appeal to permit this new argument to be raised. 58 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. 59 No extension of time and no leave to appeal is granted with respect to the Amended Draft Notice of Appeal provided to the Court on 19 March 2019. Concealed within those amended Grounds of Appeal are questions which overlap those initially set forth in the proposed Grounds of Appeal as initially formulated and go well beyond the limited issues which now attract the grant of leave.

CONCLUSIONS 60 The factual background to the two decisions of the Federal Circuit Court Judge (including the lack of compliance with Court orders) and the manner in which the Applicant sought to challenge the decision of the primary Judge expose the Applicant as a person not warranting any great judicial indulgence. 61 Indeed, the belated manner in which the new argument has been raised by the Applicant only further underscores the prior lack of any real consideration being given to the argument at the centre of her attempt to have the sequestration order made by the Registrar in July 2016 set aside. Whether there is any continued utility in now making such an order, if appropriate, is also a separate question that may need to be addressed. 62 But the argument has been finally identified. Whether the argument should prevail, or even whether it is susceptible of being resolved in the absence of further facts being found, are matters which can be addressed by a Full Court. Upon further consideration, a Full Court may even set aside the order now to be made granting leave to appeal. 63 The making of a sequestration order, and the "Constitutional imperative" that it be susceptible of de novo review by a Chapter III Judge, are matters which potentially go beyond the private interests of the parties to the present proceeding and are matters fundamental to the manner in which the Federal Circuit Court is to resolve applications made under s 104 of the Federal Circuit Court Act. They are matters which should, it is respectfully considered, be addressed and resolved. 64 An extension of time in which to commence the proceeding and leave to appeal should thus be granted. 65 The costs of the present Application are reserved for consideration by the Full Court.

THE ORDERS OF THE COURT ARE:

1. The Application for Extension of Time and Leave to Appeal is granted.
2. The Applicant is to file a Notice of Appeal giving effect to these reasons within fourteen days.
3. Costs reserved. I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick.