Boensch v Somerville Legal Pty Ltd

ROBERTSON J: 1 This matter came before me as duty judge in circumstances where no documents had been filed pending the outcome of an application for the waiver of filing fees and where the documentary material before me was sparse. I shall refer to the moving party as the prospective appellant and to the other party as the prospective respondent. 2 On 4 April 2019 a judge of the Federal Circuit Court of Australia dismissed, with costs, an application to that court in respect of a bankruptcy notice issued on 7 February 2019. The creditor's name, and the present prospective respondent, is Somerville Legal Pty Ltd. The total debt amount stated in that bankruptcy notice is $109,956.75. 3 It appears, although reasons for judgment are not available, that the primary judge dismissed the application and refused to extend the time for compliance with the bankruptcy notice: s 41(6A) of the Bankruptcy Act 1966 (Cth). 4 It also appears that the primary judge did not reach the issue, put by the prospective appellant, whether the bankruptcy notice constituted an abuse of process, it having been argued that because the bankruptcy notice was an abuse of process it could not support an act of bankruptcy (see s 40(1)(g)) and should be set aside. The way in which this submission was advanced before the primary judge involved an assumption that such a bankruptcy notice stands outside the terms of s 41(6A). Implicit in the orders of the primary judge is that this submission was not accepted. 5 I was told by Mr Graham, the solicitor who appeared for the prospective respondent, that a creditor's petition had issued, having been filed in the Federal Circuit Court of Australia on 5 April 2019. Instructions had been given for the service of that petition. I was also told that the creditor's petition had been set down in the Federal Circuit Court of Australia for hearing on 16 May 2019. 6 The prospective appellant originally sought the following interlocutory orders: 4. An order that the time for compliance with the bankruptcy notice issued to the appellant upon the application of the respondent by the Official Receiver on 7 February 2019 no. BN 234046 be extended until the final determination of the appeal in this proceeding pursuant to s. 41(6A) of the Bankruptcy Act 1966. 5. An order that the respondent be restrained from filing a creditor's petition in this Honourable Court and in the Federal Circuit Court of Australia founded upon the noncompliance with the bankruptcy notice issued to the appellant upon the application of the respondent by the Official Receiver on 7 February 2019 no. BN 234046 pursuant to the provisions of the Bankruptcy Act 1966 until the final determination of the appeal in this proceeding pursuant to the Bankruptcy Act 1966 or the Federal Court Act 1976. 7 Prayer for relief 4 seeks on an interlocutory basis part, at least, of the final relief the prospective appellant would seek on appeal, that is, that an extension of time be granted for compliance with the bankruptcy notice. 8 As may be seen, prayer for relief 5 in its original form has been overtaken by events. 9 In his oral submissions in reply, Mr Bingham, solicitor for the prospective appellant, sought to amend prayer for relief 5 to read as follows: An order that proceedings relating to the creditor's petition be stayed. 10 Mr Graham, for the prospective respondent, consented to that amendment. The proceedings referred to were the proceedings in the Federal Circuit Court of Australia to which I have already referred. I grant leave so to amend. 11 The argument before the primary judge appears to have focussed on whether an application had been made to that court to set aside the bankruptcy notice before the expiration of the time fixed for compliance with its requirements. 12 This in turn depended, in part, on when the bankruptcy notice had been served. 13 One aspect of the dispute as to service seems to have been that if a document was served by email but not read once received, then that constituted "proof to the contrary" within the meaning of regulation 16.01(2) of the Bankruptcy Regulations 1996 (Cth). The bankruptcy notice was sent by email on Thursday 7 February 2019. 14 The significance of the issue is that the date of service determines the last day for compliance with the bankruptcy notice. The prospective appellant did not file an application to set aside the bankruptcy notice in the Federal Circuit Court until 4 March 2019. 15 The prospective respondent appears to have successfully submitted to the primary judge that because service was effected by email, service occurred on 7 February 2019. Thus the application on 4 March 2019 was beyond the 21 days stipulated. 16 Alternatively, the prospective respondent may have successfully submitted to the primary judge that even if the notice was served by post on 8 February 2019 the 21st day would have been 1 March 2019. On either of those scenarios the application to set aside the bankruptcy notice was out of time. The argument for the prospective appellant on that latter scenario was that the bankruptcy notice was served on 8 February 2019 but because that day was a Friday the counting of the 21 days did not start until the following Monday. In this respect the prospective appellant relied on s 36(2) of the Acts Interpretation Act 1901 (Cth). 17 Subject to the abuse of process question, an act of bankruptcy occurred on 1 March 2019. 18 I am not persuaded that the "service" point is sufficiently arguable so as to found the interlocutory relief sought by the prospective appellant. 19 It seems to me to be clear that the "proof to the contrary" referred to in r 16.01(2) of the Bankruptcy Regulations is not concerned with whether the person on whom the document is served has read the document but with proof that the document has not been received by or served on that person either at all or as at a specified date. That is what the provision says. See also Skalkos v T & S Recoveries Pty Ltd [2004] FCAFC 321; 141 FCR 107 at [16] and [25]. 20 In the alternative, it does not seem to me to be sufficiently arguable that s 36(2) of the Acts Interpretation Act applies in the present case so that the 21 day period excludes the Saturday and Sunday following the service of the bankruptcy notice by post. Again, that is not what the provision says. Although that provision is likely to apply to the calculation of time for compliance with a bankruptcy notice (as to which see s 46(1) of the Acts Interpretation Act and Swarbrick v Burge [2009] FMCA 985; 236 FLR 311 at [12]), it is concerned with an Act or instrument requiring or allowing a thing to be done where the last day for doing the thing is a Saturday, Sunday or a holiday. That is not the present case. 21 I turn then to the abuse of process point and assume for present purposes, in favour of the prospective appellant, that an allegation of abuse of process means either that the regime for applying for an extension of time for compliance with the bankruptcy notice does not apply or that the prospective appellant would have been entitled to have the bankruptcy notice set aside. 22 The first two points appear to have been that on the date of issue of the current bankruptcy notice on 7 February 2019 pending proceedings were on foot in both the District Court, seeking to set aside the Local Court judgments the foundation of the bankruptcy notice, and in the Supreme Court, relating to a deed, mortgage and caveat which were alleged to secure the payment of the same debt the subject of this current bankruptcy notice. 23 As to the proceedings in the District Court, there is a Notice of Motion filed on 19 March 2019 in the District Court of New South Wales in proceedings No. 2017/40506 and an Amended Summons filed in those proceedings. Orders were made on 14 December 2018 striking out the summons, it appears for want of prosecution. The District Court proceedings, the prospective appellant says, were not dismissed. 24 It seems that there is a notice of motion brought by the present prospective appellant in those proceedings "listed … at Parramatta on 29 April 2019 at 9:30 AM". It appears that the substantive relief sought in an Amended Summons Commencing an Appeal is as follows: 2. Appeal allowed. 3. Judgment of the Local Court of New South Wales in proceeding no. 2017 /17687 dated 18 January 2017 in the amount of $91,212.35 be set aside. 4. Judgment of the Local Court of New South Wales in proceeding no. 2017 /1767 4 dated 18 January 2017 in the amount of $4,061.75 set aside. 5. Certificates of Determination of Costs issued under s. 368 of the Legal Profession Act 2004 in assessment no. 2016/116908 in the amounts of $96,219.02 (dated 2 August 2016) and $91,212.35 (dated 12 January 2017) be set aside. 6. Certificates of Determination of Costs issued under s. 369(3) of the Legal Profession Act 2004 in assessment no. 2016/116908 in the amount of $2,425.50 (dated 2 August 2016) and $4,061.74 (dated 12 January 2017) be set aside. 25 It seems that an earlier hearing, on 29 January 2019, was vacated, the reason being given on the relevant form that the summons was struck out. 26 The notice of motion, to which I have referred, seeks leave to file an amended summons pleading amended grounds of appeal and that the order made by the Registrar striking out the summons for want of prosecution be set aside. I was told by Mr Graham for the prospective respondent that that interlocutory application is opposed. 27 The point is, however, that as at the date the current bankruptcy notice was issued, 7 February 2019, the summons instituting the appeal had been struck out. I do not see a basis for the contention of abuse of process in those circumstances. 28 Turning then to the claim for abuse of process in relation to the Supreme Court proceedings, I was taken to the judgment in Somerville Legal Pty Limited and v Franz Boensch [2019] NSWSC 267, delivered on 13 March 2019. In that case, the defendant, the present prospective appellant, denied the validity of the Deed of Agreement and Mortgage entered into by the parties on 21 September 2015, that monies were owing under the Deed and that the plaintiff had a caveatable interest pursuant to the Deed. This was said to be for reasons including that the Deed was unjust within the meaning of the Contracts Review Act 1980 (NSW), because the Deed had allegedly been procured by the plaintiff through misleading or deceptive and/or unconscionable conduct and/or duress, and because the Rydalmere property in question was held by the defendant as trustee for the Boensch family trust. It was also said that the proceedings were an abuse of process in circumstances where the plaintiff had registered a certificate of costs determination against the defendant as a judgment of the Local Court on 18 January 2017 and had served a bankruptcy notice "on 8 February 2019" seeking payment of that debt. 29 The orders made in the Supreme Court on 13 March 2019 were: (1) The plaintiff's claim, as set out in the amended statement of claim dated 30 October 2017, be discontinued on the application of the plaintiff under UCPR r 12.1. (2) The Deed of Agreement and Mortgage dated 21 September 2015 between the defendant/cross-claimant and the plaintiff/cross-defendant (Deed) be set aside. (3) Direct the plaintiff/cross-defendant to withdraw caveat number AK72913T in respect of Folio 7366-5. (4) The plaintiff/cross-defendant to pay the defendant/cross-claimant's costs of the proceedings, including the costs of the hearing on 13 March 2019, except where the defendant/cross-claimant has otherwise been ordered to pay the plaintiff/cross-defendant's costs pursuant to prior orders of this Court in these proceedings. (5) Otherwise, dismiss the cross-claim dated 9 May 2017. (6) Note the undertaking given by the plaintiff/cross-defendant to the Court not to take any steps to enforce or otherwise rely on the Deed. 30 The point for present purposes is that Henry J said in her judgment: 22. I am also not satisfied that the commencement and maintenance of these proceedings are an abuse of process as alleged by the defendant/cross-claimant. This case was commenced in respect of the caveat and has, at least since 30 October 2017, been about whether the plaintiff/cross-defendant holds and is entitled to enforce a mortgage. I accept that the terms of the statement of claim filed 31 March 2017 sought to obtain judgment in the amount of $99,336.61, which includes the amount of the judgment in the Local Court proceedings. However, as submitted by counsel for the plaintiff/cross-defendant, this claim was made to support the claim of the caveatable interest and the mortgage. 23. In any event, that pleading was overtaken by the amended statement of claim on 30 October 2017, which does not seek judgment or damages in any sum by the plaintiff. 24. Further, I am not satisfied that it is an abuse of process to maintain proceedings seeking a declaration as to the enforceability of security in respect of a debt which is the subject of a judgment from the Local Court or in respect of which a bankruptcy notice has been issued by the plaintiff/cross-defendant. I accept the submissions of the plaintiff/cross-defendant's counsel that the time for election as a secured creditor arises, not on the issue of the bankruptcy notice, but upon the sequestration order when the creditor is then entitled to prove their debt in the bankruptcy. 31 Similarly, in my opinion the claim for abuse of process in respect of the issue of the current bankruptcy notice, by virtue of the mere existence of the Supreme Court proceedings, is not made out. I am not persuaded that it is arguably apparent that the purpose of the bankruptcy notice was "to put pressure on the debtor to pay a debt rather than to invoke the Court's insolvency jurisdiction" such that the filing of the bankruptcy notice was itself an abuse of process: see Lindholdt v Merritt Madden Printing Pty Ltd [2002] FCA 260 at [42]. 32 I also do not accept the submission that it is reasonably arguable that issuing the bankruptcy notice was for the purpose of putting pressure on the debtor, the prospective appellant, to abandon his appeal to the District Court or his cross-claim in the Supreme Court. 33 The submission on behalf of the prospective appellant then turned to two earlier bankruptcy notices which had been set aside by consent. The prospective appellant submitted there was a concession on 3 October 2017 by the present prospective respondent not to issue any further bankruptcy notice until all substantive proceedings concerning the existence of a debt owing by the prospective appellant were finally determined. 34 I am not persuaded for present purposes that what the prospective respondent's legal representative said to the Registrar on 3 October 2017 as to the prospect of a further (third) bankruptcy notice gives rise to an arguable abuse of process. 35 None of the authorities on which the prospective appellant relied assisted him in establishing an arguable case of abuse of process: see Lindholdt v Merritt Madden Printing Pty Ltd [2002] FCA 260 at [42]-[43], Re Sarina; Ex parte Council of the Shire of Wollondilly (1980) 43 FLR 163 at 165, HWY Rent Pty Ltd v HWY Rentals (in liq) (No 2) [2014] FCA 449 at [72]-[81] and Seller v Deputy Commissioner of Taxation [2011] FCA 865; 282 ALR 80 at [14]-[20]. 36 I should not be taken necessarily to accept the prospective appellant's contention that questions of service of a bankruptcy notice do not arise where the bankruptcy notice constitutes an abuse of process, is therefore invalid, and is therefore a nullity. Thus I do not necessarily accept the prospective appellant's submission for present purposes that s 41(6A) would not apply if abuse of process were made out. The matter was not fully argued, although Seller at [15] may support the correctness of that submission to the extent it relates to the prospective appellant's application to have the notice set aside. However, as I have said, an arguable case of abuse of process has not been made out. 37 I turn then for completeness to the balance of convenience. In my opinion the balance of convenience does not favour the making of the interlocutory orders the prospective appellant seeks, or either of those orders. 38 Both Corney v Brien [1951] HCA 31; 84 CLR 343 and Wren v Mahony [1972] HCA 5; 126 CLR 212 and the principles to be derived from them involved a creditor's petition and the making of a sequestration order. It seems to me that the abuse of process issue would be able to be agitated by the prospective appellant in relation to the making of a sequestration order under s 52, when that matter is heard in the Federal Circuit Court of Australia. Mr Bingham for the prospective appellant accepted this. 39 As to irremediable prejudice, in Guss v Johnstone at [63] the High Court held that an appellate reversal of a decision in relation to s 41(7) may alter the consequences of such a decision. The High Court said that the consequences for proceedings and events that had occurred in the meantime would vary with the circumstances, but they could include the same consequences as flowed from the order in Streimer v Tamas (1981) 37 ALR 211, where the statutory power to extend time for compliance with a bankruptcy notice, given by s 41(6A), was exercised after an act of bankruptcy had been committed. Thus, if successful on his appeal in this Court in having the bankruptcy notice set aside or the time for compliance with it extended, the prospective appellant may be able to avoid having committed an act of bankruptcy. 40 Further, Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 at 148 is authority for the proposition that "in general a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings provided that the appeal is based on genuine and arguable grounds". In this respect, much will depend on the status of the proceedings in the District Court as at the date the creditor's petition is listed for hearing in the Federal Circuit Court of Australia. 41 Similarly, prayer for relief 5 as amended can, in my view, be dealt with on 16 May 2019 when the creditor's petition is set down for hearing in the Federal Circuit Court. This is not a matter to warrant interlocutory relief. If the appeal to this Court is instituted, then that can also be taken into account. 42 There is no evidence of other immediate prejudice to the prospective appellant. 43 There was a reference in oral submissions to an application for special leave to appeal to the High Court of Australia. It is not at all clear what that application relates to. No documents were put into evidence in relation to it. All that was said was that the application had good prospects of success and if a sequestration order was made the conduct of the proceedings would be taken out of the hands of the prospective appellant. I give this submission no weight. 44 On the limited material before me, the proposed appeal does not have sufficient prospects. Alternatively, the balance of convenience does not weigh in favour of the grant of the interlocutory relief. I refuse the interlocutory application for an extension of time in which to comply with the bankruptcy notice. I also refuse the application to stay the proceedings in the Federal Circuit Court of Australia. 45 The interlocutory application is dismissed. If the notice of appeal is filed, the appropriate costs order is that costs be the respondent's costs in the cause. If the note of appeal is not filed, I grant the prospective respondent leave to communicate with my associate to seek the alternative order that the prospective appellant pay the prospective respondent's costs of this interlocutory application. In either case, costs should be on a party/party basis. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.

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