Coshott v Burke

1. The application is dismissed.
2. The applicant pay the second respondent's costs of the proceedings. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 2086 of 2011

JUDGE: RARES J DATE: 27 APRIL 2012 PLACE: SYDNEY

REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 This is an application by the bankrupt, Robert Coshott, to review a decision of his trustee in bankruptcy, partially to admit the Commonwealth Bank of Australia's proof of debt for a judgment debt and an estimation of the value of orders for costs in its favour.

Background 2 The bankrupt has been negotiating for some time with his trustee in bankruptcy to arrange an annulment of his bankruptcy. The trustee agreed on 30 March 2011 to facilitate the annulment by advertising that it proposed to distribute a final dividend to creditors within five business days. He did that in an advertisement published in the Sydney Morning Herald on 6 April 2011. That called for proofs of debt to be provided on or before 26 April 2011, pursuant to s 145 of the Bankruptcy Act 1966 (Cth). The bank, which is the second respondent, did not file a proof of debt with the trustee prior to 26 April 2011. The principal proceedings came before me on 21 July 2011, for the purpose of making orders that would enable an annulment to take place on the following day by payment of all the bankrupt's proved debts in full, together with interest, in accordance with s 153A of the Act. 3 During the course of the directions hearing on that day, a letter was received by the trustee from the solicitor acting for the bank that referred to an email from the trustee of 3 July 2011. The solicitor confirmed that costs orders had been made against the bankrupt in favour of the bank both at first instance and in the New South Wales Court of Appeal. The letter asserted that, because at the time it appeared to the bank that Mr Coshott's bankruptcy was imminent at the suit of other creditors, the bank had not incurred what it considered to be the irrecoverable costs of proceeding to prepare a bill of costs for assessment in accordance with the Legal Profession Act 2004 (NSW). The letter referred to the bank's accounting records of the costs and disbursements that it had incurred of about $340,000 and advised that it intended to include in its proven debt a claim for 90% of the disbursements and 60% of the solicitor's costs, in the total sum of $253,072.10. As a result, the trustee said at the hearing on 21 July 2011 that he was not in a position to proceed with providing the bankrupt with a certificate of annulment because he could not be satisfied that all the bankrupt's debts had been paid in full for the purposes of s 153A. The principal proceedings were then adjourned. 4 Next, the bank proceeded to lodge to proofs of debt with the trustee, one on 11 August 2011, seeking to prove for costs of $253,072.10, the second on 27 September 2011, seeking to prove the underlying judgment debt based on a MasterCard debt and interest in a total sum of $137,221.31, together with the costs incurred on that matter. The trustee determined on 2 November 2011 to admit the two proofs of debt in the sums of $201,529.19 and $115,028.65, totalling $316,557.84, and to reject the balance of the amounts the bank claimed.

The present application 5 On 23 November 2011 the bankrupt filed an application seeking a declaration that any debt not proved with the trustee by 26 April 2011 not be taken into account in a final dividend, and orders that the decisions of the trustee partially to allow the debts claimed by the bank be reversed. In his contemporaneous affidavit in support, the bankrupt referred to the orders and notations of agreements that had been made on 30 March 2011 to facilitate the proofs of debt and the decision of the trustee to allow in part and reject in part the debts sought to be proved by the bank. 6 The bankrupt also annexed to his affidavit a document entitled "Mutual Release Agreement" dated 23 June 2005 (the release). That document purported to be signed on behalf of the bank by its solicitor, John Lanser, and by Peter Ryner, the then-solicitor for the bankrupt and his wife, who were joint debtors. The witnesses to the signatures purported to be those of a solicitor employed by the bank at the time, Melinda Keating, and the then-secretary of Mr Ryner, Annie Maloney. The operative part of the release provided that in consideration of the sum of $1, the receipt of which was acknowledged, and the entry into the agreement by each party, they released each other from, among all other things, judgments and costs orders. 7 The bankrupt argued that the bank's failure to seek to pursue recovery against him for the period between the end of 2005 and July 2011 was explicable by reason of the existence and operation of the release. The bank, on the other hand, contended that the release was a fabrication. It contended that it knew nothing of the release and that the release is inconsistent with the contemporaneous events in 2005 that I will describe now.

Events in 2005 and their genesis 8 In 1996, the bankrupt and his wife commenced proceedings against the bank in the District Court of New South Wales. These proceedings became consolidated with recovery proceedings commenced by the bank against Mr Coshott in the Local Court of New South Wales for a debt on his MasterCard. That claim was for $26,203.14 plus interest from September 1995. On 3 September 2003, Sorby DCJ delivered a lengthy reserved judgment dismissing the proceedings brought by Mr and Mrs Coshott against the bank, with costs. His Honour overlooked, however, dealing with the MasterCard debt claim at that time. On 11 November 2003, Sorby DCJ gave judgment on the latter claim in favour of the bank for $78,387.33, plus costs. In the meantime, Mr and Mrs Coshott had brought an appeal to the Court of Appeal of the Supreme Court of New South Wales against Sorby DCJ's order of 3 September 2003. On 17 June 2004, that Court dismissed the appeal with costs: Coshott v Commonwealth Bank of Australia [2004] NSWCA 189. 9 In early 2005 the bankrupt filed a notice of motion in the District Court seeking to set aside the second judgment of Sorby DCJ in respect of the MasterCard debt. On 1 March 2005, the District Court dismissed the notices of motion. Mr Coshott then filed a summons for leave to appeal in the Court of Appeal on 9 March 2005. 10 Mr Lanser was the solicitor with a carriage of the matter within the office of the general counsel of the bank, then Mr JK O'Sullivan. On 4 May 2005, Mr Lanser wrote to Hill Ryner & Co, the solicitors acting for Mr Coshott, complaining that their client's leave application had not complied with a number of procedural rules of the Court of Appeal. Mr Lanser appeared before a registrar of the Court of Appeal on 16 May 2005. Mr Coshott, who had been a solicitor at one stage of his life, appeared in person and told the Court that Mr Ryner was otherwise engaged. The matter was adjourned until 20 June 2005. Mr Lanser continued to brief senior counsel who had been retained for the bank throughout the proceedings before Sorby DCJ and in the Court of Appeal. 11 On 20 June 2005, the Court of Appeal proceedings again came before the registrar when Mr Lanser and Mr Coshott both appeared. Mr Coshott was ordered to serve the bank with an index to the application book in the Court of Appeal by 4 July 2005, and further orders were made, culminating in the proceedings being adjourned for callover until 18 July 2005. 12 Between 18 and 25 July 2005, Mr Ryner was a principal witness in a probate action tried before Palmer J in the Supreme Court. Mr Ryner was cross-examined extensively in those proceedings. His Honour delivered judgment on 1 August 2005, in which he made damning findings against Mr Ryner: Pozniac Estate: Morgan v Reuben [2005] NSWSC 766. His Honour found that Mr Ryner was a person who had been willing to commit perjury. He also found that Mr Ryner was willing to fabricate evidence to support his assertions if he thought it was in his interests to do so (see at [71]). Palmer J referred a copy of his reasons to the Law Society of New South Wales since those findings bore on Mr Ryner's fitness to practise as a lawyer. 13 As I have mentioned, the disputed release is dated 23 June 2005. If it were made on that day, then it is difficult to understand how the following steps occurred in the Court of Appeal proceedings, culminating in their dismissal with costs by that Court on 15 December 2005. 14 On 26 July 2005, Mr Lanser wrote to Hill Ryner & Co confirming that he had mentioned their appearance when the matter had come before the registrar on 18 July. Both Mr Lanser and Mr Ryner purported to be the signatories to the release agreement. Mr Lanser's letter noted that orders were made by consent requiring the bank to file its response to Mr Coshott's submissions by 25 July, and that he was to file his reply by 8 August. The letter noted that the matter had again been listed before the Court of Appeal on 15 August and enclosed a copy of the bank's response to the summons for leave to appeal. When the proceedings came before the registrar again on 15 August 2005, there was no appearance by Mr Coshott, and the matter was stood over to 29 August 2005. When Mr Lanser returned from Court, he found that he had received a voicemail from Mr Ryner to the effect that he had been jammed somewhere, and asked Mr Lanser to take any date for hearing. 15 On 18 August 2005, Mr Coshott filed a notice in the Court of Appeal proceedings that he was now acting for himself in lieu of Hill Ryner & Co. On 29 August 2005, the proceedings were again before the registrar, when Mr Lanser and Mr Coshott appeared. The matter was fixed for hearing on 15 December 2005. The proceedings came before Mason P and McColl JA on that day. Mr Coshott accepted that the Court record showed that he appeared for himself before the Court of Appeal on that day. The Court ordered that Mr Coshott's summons be dismissed with costs. The judgment of the President, with which McColl JA agreed, was as follows, in totality: "This matter seeks to ventilate an issue that was raised as a ground of appeal in an earlier appeal to this Court. At that stage the claimants were represented by senior counsel who conceded in argument that point would "run with the outcome of the appeal". The appeal was resolved and with it the point and it would be an injustice to allow leave in the present case for the point to be agitated afresh. I propose that the summons be dismissed with costs."

The circumstances bearing on the authenticity of the release 16 Each of Mr Lanser, Ms Keating, and Mr Ryner had no recollection of ever having signed the release document. Mr Coshott gave evidence that as best he could work out, in late November or early December 2005, Mr Ryner had delivered a copy of the release to the reception of Bay Pacific Insurance Pty Limited, his brother's company, in which Mr Coshott occupied a small office. Mr Coshott said he had read the release when he received it. Mr Coshott said that he had never seen the original of the release, and had only ever seen a copy. He said he was ignorant of the existence of the release from its date of 23 June 2005 until he received it in late 2005. By then he was an experienced litigant. His experience has enlarged since. 17 Mr Ryner's offices were down the corridor on the same floor of the same building as Bay Pacific's. However, since Palmer J's decision, Mr Ryner had not been seen in his office very much. Mr Ryner's former secretary, Ms Maloney, had begun working for Bay Pacific as its receptionist shortly after Palmer J gave his decision on 1 August 2005. Mr Coshott says he saw Mr Ryner only once after the delivery of Palmer J's judgment, and that occasion was about two years later in the precincts of the Supreme Court. Mr Coshott had not asked Ms Maloney, who apparently witnessed the release being signed by Mr Ryner, anything about it, either at the time he received it from her at the reception desk. He said that he had asked her if she recalled the deed and that she had replied that she could not recall something so long ago. 18 Mr Lanser, whose evidence I accept as a witness of truth without reservation, said that, as a solicitor, he had no authority from the bank to sign any documents involving the bank giving up or releasing claims or compromising proceedings, including in respect of its entitlements to costs. He said the procedure in the bank was that he could sign or initial terms of settlement so they might be fully documented later, on which occasion they would be executed by an officer of the bank, who would sign under a power of attorney in accordance with delegated authority limiting the amounts for which the person was entitled to compromise the bank's rights. Different officers of the bank had authority to sign for claims involving different amounts of money. Mr Lanser had none. He had never signed a document like the release before in his 27 years of working for the bank. He said that the release's execution clause was not in accordance with the precedent form the bank used. Moreover, the release document itself was not on any letterhead of any solicitors or any other person. Mr Lanser did not initially recall whose was the signature of the witness. He subsequently recalled that Ms Keating worked as one of the 35 solicitors in the office of the bank's solicitor, J.K. O'Sullivan, for about two years. He had not seen her since she left the bank. He did not initially recognise her signature until Mr Coshott was able to identify her by name in an affidavit. 19 Unsurprisingly, Ms Keating had no recollection of signing the release, but accepted that the signature appearing as that of the witness of Mr Lanser's execution of it was hers. It is visually identical to her signature as it appeared at the foot of the first page of an affidavit sworn by Mr Lanser on 24 January 2005 before Ms Keating in one of the District Court motions brought by Mr Coshott in respect of seeking to set aside Sorby DCJ's judgment relating to the MasterCard debt. However, on the release document, Ms Keating's signature appears to be larger and in thicker pen than on the first page of the affidavit which it so distinctly otherwise resembles. 20 Mr Ryner was brought from prison to give evidence. He said that he had been taking medication since at least prior to the time of the trial before Palmer J, and that the medication affects his memory. He demonstrated this in the witness box by failing to remember a considerable number of proceedings in which he had acted for Mr Coshott or members of his family. The last time he spoke to Mr Coshott about the proceedings involving the bank was some time in 2005. Mr Ryner said he had no involvement with his firm after August 2005. He said that the file his firm maintained had always been kept in the control of Mr Coshott in the latter's office within Bay Pacific's office down the corridor from Mr Ryner's firm. 21 Mr Ryner said that he had no recollection of the release, and said that his office did not use the type or font with which the document had been engrossed. He said he had never used the form of mutual release agreement in which the release had been written. He said that while he appeared to have signed the original of the document, he did not have any recollection of doing so. He then said, first, that it was very rare, and, later, that he would never have signed on behalf of clients instead of the clients themselves signing. He could not explain how his signature had been placed on the document. He asserted that Ms Maloney's signature as it appeared on the release document did not look as refined as her usual signature. When he received letters from Mr Lanser, he said that his secretary, namely, Ms Maloney, would take the letters to Mr Coshott's office. Mr Ryner said that when he no longer had a secretary, he himself dropped letters at Bay Pacific's office reception desk. He agreed that he had been very difficult to contact or find in 2005 after the proceedings had occurred before Palmer J and after his Honour's decision had been handed down. 22 Mr Ryner admitted matters that Palmer J found against him, including the judge's finding about his protestations of vaguery in his recollection: see Pozniac Estate [2005] NSWSC 766 at [47]. Mr Ryner accepted that he had been convicted on six counts of perjury and a count of knowingly using a false instrument arising out of his evidence in that case, and that he was serving a custodial sentence of five and a half years imprisonment, commencing in April 2010. 23 The bank also led evidence that it had no documents relevant to the existence of the release or of any negotiations for bringing such a document into existence.

Additional evidence from the bank 24 At the hearing on 20 April 2012, Mr Coshott relied on the bank's failure to do anything to enforce the judgment or cost orders in the period between 2005 and 2009. On 20 November 2009, the bank lodged a proof of debt with the trustee, seeking only the principal of the MasterCard debt of $27,017.86, without relying at all on Sorby DCJ's judgment. The trustee's solicitors wrote to the bank, care of Mr Lanser, twice in late November 2010, referring to a direction I had given to the trustee to adjudicate on proofs of debt. The letters referred to the trustee's understanding that the bank and Mr Coshott had been in litigation and that costs orders had been made in favour of the bank at trial and on appeal. The letters invited the bank to reconsider its earlier proof of debt. Those letters went unanswered, apparently because Mr Lanser was preparing to commence six months long service leave on 1 January 2011, immediately before his retirement from full-time employment. I infer that the trustee's letters were simply placed on the bank's file or their significance was overlooked at the time. 25 On 19 April 2011, the trustee's solicitors wrote to Maria Brucker, a vendor relationship officer of the bank. The letter notified the bank that Mr Coshott was seeking an annulment, and inquiring whether the bank sought interest on its proof of debt. The evidence is silent as to whether or not the trustee had written earlier to the bank giving it notice in accordance with his advertisement that it should prove for its debts no later than 26 April 2011 for the purposes of the declaration of a final dividend with a view to assisting in finalising an annulment of the bankruptcy. Next, Ms Brucker received an email from the trustee on 3 July 2011 informing her that the proposed settlement of Mr Coshott's annulment had not gone ahead on 30 June 2011. The trustee asked her to calculate what the bank would be due as at 22 July 2011, when the settlement was now scheduled to occur. The letter explained that s 153A of the Act required the debtor to pay interest on the debts admitted to proof, unlike a normal bankruptcy. The trustee advised Ms Brucker to check with the bank's legal department to ascertain if there were outstanding costs orders made in favour of the bank against the bankrupt. 26 Ms Brucker reviewed the proof of debt and, on 7 July 2011, concluded that the debt was statute barred. She emailed the trustee on that day withdrawing the bank's proof of debt stating that it was statute barred, which the trustee accepted. Self-evidently, Ms Brucker was no lawyer and had not made any sufficient inquiries. However, it appears that she must have done something after writing that withdrawal. 27 Charles Tilley is now the solicitor employed as the bank's head of major disputes and employee relations, legal. His involvement with Mr Coshott's bankruptcy matters began on 21 July 2011 when he was made aware of the trustee's earlier request to Ms Brucker of 3 July 2011. Mr Tilley reviewed the bank's legal file in respect of Mr Coshott. He said the file contained "limited information", but he ascertained that the bank had obtained costs orders in its favour against Mr Coshott. He said the legal file did not have any record of the trustee's advertising of the annulment or calling for proofs of debt that had occurred in April 2011. However, Ms Brucker was aware of the annulment application from at least the receipt of the trustee's letter of 19 April 2012, and she, on the bank's behalf, had had subsequent correspondence with him on that matter.

The parties' submissions about the authenticity of the release 28 The bank objected to the admissibility of the release on the basis that it failed to meet any of the criteria of s 48(1) of the Evidence Act 1995 (Cth). In particular, the bank argued that the requirements of s 48(1)(b) had not been met, because there was no evidence of the existence of the original of the release, or of what had become of it. Mr Coshott argued that the bank's inactivity in acting on the judgment debt and costs orders constituted an admission by it for the purposes of s 48(1)(a). 29 Mr Coshott argued that the release helped to explain why, since he received a copy of the document in late 2005, the bank had done nothing to enforce the judgment debt and orders for costs. He argued the bank had not given any explanation as to its failure to seek to enforce the judgment, despite it being an issue in the proceeding. I granted an adjournment to enable the bank to supplement its evidence in that regard at the conclusion of the first day of hearing. 30 Mr Coshott argued that before coming to a finding that the release is a concoction, I should be satisfied to a higher standard than the ordinary civil standard of proof on the basis of what he asserted Branson J had said in Qantas Airways Limited v Gama (2008) 167 FCR 537 at 576-577 [139].

Consideration 31 In Gama 167 FCR at 576-577 [139] Branson J discussed the principles applicable in a case like this: see too, per French and Jacobson JJ at 167 FCR at 571 [110] and Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 at 479-482 [29]-[39], where Weinburg, Bennett JJ and I discussed the provisions of s 140 as well. There, Branson J said, and I agree, that: "The correct approach to the standard of proof in a civil proceeding in a federal court is that for which s 140 of the Evidence Act provides. It is an approach which recognises, adopting the language of the High Court in Neat Holdings 67 ALJR 170; 110 ALR 449, that the strength of the evidence necessary to establish a fact in issue on the balance of probabilities will vary according to the nature of what is sought to be proved - and, I would add, the circumstances in which it is sought to be proved." 32 Ordinarily, the more serious the consequences of what is contested in litigation, the more a court will have regard to the strengths and weaknesses of evidence before it in coming to a conclusion. In deciding whether it is satisfied of a particular fact on the balance of probabilities, s140(2) requires the Court, relevantly, to take into account the nature of the claim in issue, the nature of the subject matter of the proceeding and the gravity of the matters alleged. 33 The bank sought to lodge proof of debts in bankruptcy based on a judgment debt and costs orders established in its favour after contested and protracted litigation. The amounts in issue are substantial, now totalling well over $300,000, including interest. The nature of Mr Coshott's defence to the proof of those debts in his bankruptcy is that the release was executed on 23 June 2005 during the pendency of the appeal, challenging the judgment debt and a costs order. The consideration for the release of what were then a judgment and costs orders worth well over $200,000 was stated as $1. There was no evidence of any settlement negotiations or contemporaneous recognition of the release. The gravity of the bank's allegation is significant, namely, that the purported release is a fabrication. The only person who can benefit from the existence of the release is Mr Coshott. He has given no evidence of any basis upon which it could be inferred that there was any prospect of his claim succeeding before the Court of Appeal in 2005. 34 The question then arises as to why the bank would give up its entitlement to a not insignificant monetary judgment, including interest, for the MasterCard debt and its right to have its substantial costs orders assessed in respect of lengthy hearings and contests in the Court of Appeal. There is no explanation in the evidence for the bank agreeing to do so. 35 Mr Coshott argued that the bank's failure to produce forensic expert evidence that the release document was a fabrication was fatal to the bank's assertion. I reject that contention. There is no dispute by any of the three persons who gave evidence that the release appears to bear their signatures. But it is readily possible to take copies of signatures from one document and insert them in another using photocopiers or other technology. The original of the release document was never produced in evidence. There is no sufficient explanation for its absence from evidence or any credible explanation as to where it might be. The copy of the release in evidence is not crystal clear. It looks to have been copied more than once. Mr Coshott had access to documents bearing the, or copies of the, actual signatures of each of the persons whose signatures appear on the release, through having received correspondence and affidavits during the course of the District Court and Court of Appeal proceedings and, in Mr Ryner's and Ms Maloney's case, in the course of his other dealings with those persons. 36 I am not satisfied that the release represents a document that was ever executed by any of the parties or persons whose signatures it bears. First, it is inconceivable that Mr Lanser would have continued to act and involve the bank in the Court of Appeal proceedings, incurring the time, trouble and expense of doing so, including the cost of briefing senior counsel, for another six months if he had signed a release on or about 23 June 2005. Secondly, there is no conceivable reason why the bank would want to give up its undoubted claim against Mr Coshott for over $80,000, including interest by then, based on the District Court judgment, or its entitlements to orders for costs before Sorby DCJ or the 2004 Court of Appeal proceedings. Mr Coshott was not then bankrupt, and although he may have had other creditors chasing him, that would not give the bank any reason to give up for nothing its rights to a perfectly good opportunity to recover the judgment debt and costs when assessed by ordinary processes or to prove in his bankruptcy, were that to occur. Thirdly, no contemporaneous documentation suggests that any negotiations had occurred to settle the proceedings brought by Mr Coshott in the Court of Appeal or elsewhere. Mr Lanser's contemporaneous correspondence with both Hill Ryner & Co and senior counsel he briefed demonstrates that those proceedings remained active and on foot at all times until their final disposition on 15 December 2005. 37 Moreover, Mr Coshott's version of events that he received the copy release in late November or early December 2005 is inconsistent with his own contemporaneous conduct. He appeared before the Court of Appeal on 15 December 2005, when, apparently after the Court heard argument, his proceedings were dismissed with costs. If he then knew of an agreement for mutual releases between himself and the bank, it is inconceivable that proceedings would have continued before the Court of Appeal with senior counsel on the other side, let alone get to the point where the Court delivered, albeit brief, reasons. Additionally, Mr Coshott never made any contact with the bank in relation to the release in 2005 after he claimed that he received it. Had he received it before 15 December 2005, it is beyond credulity that Mr Coshott did not rely on it in the Court of Appeal to say that the proceedings were moot. And if he received it soon afterwards, he gave no explanation at all why he said nothing about it to the bank, which continued the Court of Appeal proceedings unnecessarily, involving Mr Coshott appearing on 15 December 2005, and having costs ordered against him. 38 Mr Coshott's former experience as a lawyer has helped him to be astute to look after his own interests. I cannot accept that he would have refrained from contacting the bank or remain silent about its flagrant breach of the release in continuing the Court of Appeal proceedings to judgment against him, if he had received, some time after those events, the release that purported to have been made six months earlier. 39 I do not believe that Mr Coshott received a copy of the release in late November 2005 or early December 2005 or at any time, as he claimed. All the evidence from 2005 points to the fact that the release did not exist on or about 23 June 2005, or any time prior to the decision of the Court of Appeal on 15 December 2005. By then Mr Ryner was no longer acting for Mr Coshott, and therefore could not have had authority to sign the document as his solicitor. Mr Lanser denied that he was authorised to sign the release at all, and in particular, said that the document was not in a form he would recognise as he one he would sign, or had authority to sign. I accept his evidence, as I have said. I am comfortably satisfied that the purported release of 23 June 2005 consisted of a forgery onto it of the signatures of those persons who purported to be its signatories and witnesses, and that no such agreement was ever made between anyone acting on behalf of the bank and anyone acting on behalf of Mr Coshott. 40 I accept the bank's argument that the document is a fabrication. It is inconceivable that the release could be a genuine document, having regard to the factors to which I have referred. I infer that the bank, which had not written off the principal of the MasterCard debt at any time, had lost track of what it was doing - or rather not doing - internally about pursuing its rights against Mr Coshott. There is no evidence that the bank acted, at any time, so as to recognise a binding, legal, operative release of its judgment debt or costs orders. The evidence points to slack administration within the bank and against a conscious abstention from taking recovery action, including lodging a proof of debt, by reason of the existence of a release. Had there been release in 2005, the MasterCard debt would have been written off before the bank proved for it in November 2009. 41 The release document was fabricated. Mr Coshott put it forward as genuine. The inference that I am satisfied is appropriate is that he was responsible for the fabrication. Mr Ryner had ceased to act in the proceedings well before Mr Coshott claimed to have received the document. I have reservations about accepting Mr Ryner's evidence, having regard to his own fabrication of a document in 2003, as found by Palmer J, to benefit his client in those proceedings, and his giving perjured evidence to his Honour. I do not suggest, however, that he did so here. There is no direct evidence of Mr Ryner's involvement in the creation of the release, apart from what appears to be his signature on it. 42 For these reasons, that the claim by Mr Coshott that the bank released the debts that it sought to prove must be rejected. That leaves the question of what should be done in respect of the proof of debt.

The statutory scheme 43 Division 1 of Part VI of the Act deals with proof of debts. The debts provable in bankruptcy are provided for in s 82. For the purposes of the Act, s 83 provides that a creditor is not taken to have proved a debt until a proof of debt lodged by him or her has been admitted. Next, s 84 provides that, subject to Div 1 of Pt VI, a creditor who desires to prove a debt in bankruptcy must lodge, or cause to be lodged, with the trustee a proof of debt in accordance with that section. The trustee can require verification of a proof. Relevantly, s 102(1)(b) provides that the trustee must examine each proof of debt on the grounds of the debt sought to be proved, and, subject to the power of the Court to extend the time, must not later than 14 days after the expiry of the period specified in the notice of intention to declare a dividend as the period within which creditors may lodge the proof of debt, admit the proof in part and reject it in part. 44 In a case such as the present, the trustee must give written grounds for the rejection of that part of the debt sought to be proved that is not admitted (s 102(2)). Division 5 of Pt VI of the Act deals with the distribution of the bankrupt's property. A trustee must, with all convenient speed declare and distribute dividends amongst the creditors who prove their debts (s 140(1)). Before declaring a dividend, the trustee must send notice of his or her intention to each person who, to his or her knowledge, claims to be or might be a creditor but has not lodged a proof of debt and has not been sent a notice under s 140 in relation to the declaration of a previous dividend (s 140(5)). Under s 144, a creditor, who has not proved his or her debt before a declaration of a dividend, is entitled to be paid out of any available money, for the time being in the hands of the trustee, dividends that he or she has failed to receive before that money is applied to the payment of a future dividend. However, a creditor is not entitled to disturb the distribution of any dividend declared before he or she had proved his or her debt. 45 Significantly, s 145 provides that when the trustee of the estate of a bankrupt has realised all property of the bankrupt or so much of it as can, in his or her opinion, be realised without needlessly protracting the trusteeship, he or she must declare and distribute a final dividend. Before doing that, the trustee has to give notice in the manner prescribed by the regulations to each person who, to his or her knowledge, claims to be or might be a creditor but had not proved his or her debt that, if the person does not prove his or her debt within the period specified in the notice, the trustee will proceed to declare a final dividend without regard to that creditor's claim. The Court has power to extend the period within which a person claiming to be a creditor may prove his or her debt pursuant to s 145(5) and the trustee may not declare a final dividend until 21 days after the expiration of the period specified in the notice. 46 Next, Div 5 of Pt VI provides for annulment of a bankruptcy on payment of the bankrupt's debts in the following manner. Section 153A(1) provides: "(1) If the trustee is satisfied that all the bankrupt's debts have been paid in full, the bankruptcy is annulled, by force of this subsection, on the date on which the last such payment was made." 47 When the trustee is so satisfied he or she must, before the end of two days beginning on that date, give to the Official Receiver a written certificate setting out the former bankrupt's name, bankruptcy number and the date of annulment (s 153A(2)). The effect of an annulment is provided for in s 154. Substantially, that provision deems valid all sales and dispositions of property, payments duly made and acts done before the annulment by the trustee, or anyone acting under the authority of the trustee or the Court, and it also allows the trustee to apply any property of the former bankrupt still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy, including the trustee's remuneration and expenses and, subject to a number of other provisions of s 154, the remainder of the property re-vests in the former bankrupt (s 154(1)(c) . 48 Importantly, and unlike s 153 of the Act that deals with the effect of a discharge, there is no provision in Div 5 of Pt VI that provides, on an annulment, for the discharge of any extant debts not proved in the bankruptcy. Where a bankrupt is discharged from bankruptcy, the discharge operates by force of s 153(1) to release him or her from all debts, including secured debts provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor surrendered his or her security for the benefit of creditors generally.

Arguments on whether the admission of the proof should be reversed 49 The bank claimed that it would suffer prejudice if its proof of debt were now rejected. This was because, it argued that having sought to prove in the bankruptcy, it would be estopped from later asserting its entitlements under its judgment debts and costs orders were I to reverse the trustee's decision to admit its debt to proof despite it being submitted after 26 April 2011. Mr Coshott, on the other hand, argued that he will suffer prejudice by remaining under the constraint of bankruptcy and that he has done so for the period since July last year. He said that to the extent that he still will wish to pursue his annulment application he will have incurred additional interest obligations in the succeeding 10 months to his proved creditors, claims worth over $2.3 million worth of creditors.

Consideration 50 The bank led no evidence that it did not receive a notice from the trustee of his intention to distribute a final dividend for which it had to prove on or before 26 April 2011. On the other hand, Mr Coshott has not proved that the trustee gave a notice under s 145 of the Act to the bank. Of course, such a notice, as the agreement between the trustee and the bankrupt that I noted on 30 March 2011 provided, was intended to be given to Mr Coshott's creditors to facilitate the trustee being in a position to be satisfied under s 153A(1) that the bankrupt's provable debts had been paid in full. The bank advised the trustee and the Court on 21 July 2011 that it wished to prove for its costs entitlement. However, it said nothing at that time about proving for the judgment debt itself. It was well out of time, had it had notice to prove by 26 April 2011, for the purposes of receiving a final dividend. 51 I am satisfied that if the trustee had refused to allow the bank to prove and proceeded to effect the annulment, the bank would have been able to enforce its judgment debt and costs orders. The effect of an annulment would be as Drummond J held in Re Coyle (1993) 42 FCR 72 at 77 namely that: "the bankruptcy is set aside ab initio and the annulled bankruptcy will be treated as never having taken place for any purposes, save those set out in s 154 and save in other special situations of the kind referred to in Oates v Commissioner of Taxation (1990) 27 FCR 289 at 297" (emphasis added); see too Union Club v Lord Battenberg (2006) 66 NSWLR 1 at 13-19 [52]-[81] per Giles JA, 28 [128] per Santow JA, 40 [178]-[179] per Bryson JA; Macdonald v Raupach [2011] NSWCA 320 at [18] per Young JA with whom Bathurst CJ and Sackville AJA agreed; Hingston v Westpac Banking Corporation [2012] FCAFC 41 at [126] per Greenwood, McKerracher and Nicholas JJ. Nonetheless, if the bank were not allowed to prove, and an annulment were effected by the trustee, the bank would then have to undertake a formal assessment of the costs orders in its favour and suffer the further delay of seeking then to enforce them, perhaps without success. 52 One of the objects of the Act is to ensure an equal division of the bankrupt's available property among his or creditors. An annulment under s 153A(1) is intended to ensure that if the bankrupt seeks to be relieved of the burdens of bankruptcy, he or she must ensure that all creditors who have provable debts be paid in full, including interest to the time of the effecting of the annulment. 53 In Re Wong: Ex parte Wong v Donnelly (1995) 63 FCR 426 at 440A-442F, Sackville J considered similar arguments. His Honour concluded that in determining whether he or she is satisfied of the matters specified in s 153A(1), the trustee can take into account not only proofs of debt likely to be lodged, but those that have been lodged but have not yet been fully determined in accordance with procedures laid down by the Act itself. He observed that (63 FCR at 441G-442A): "whether the trustee can or should be satisfied that all the bankrupt's debts have been paid for the purposes of s 153A(1) depends on the circumstances the trustee is required to assess. The trustee is entitled, at the least, to consider whether a creditor's proof of debt will be admitted through the processes provided for in the Act. A trustee is also entitled not to be satisfied that all the bankrupt's debts have been paid if, for example, he or she is aware that a proof of debt has been lodged but not yet determined as required by s 102(1)." 54 Indeed, it is difficult to see how the trustee could be so satisfied so as to facilitate an annulment if a proof of debt is awaiting determination that , if accepted, will constitute one of the "debts" that have been proved in the bankruptcy: Wong 63 FCR at 441G-442B. The operation of s 153A is not conditioned on the scheme of Div 5 of Pt VI of the Act providing for discharges. The purpose for which the trustee advertised for lodgment of proofs of debt pursuant to s 145(5) was to seek to ensure that all creditors with debts provable in the bankruptcy would prove and thus they could be ascertained so that he could be satisfied for the purposes of s 153A of the Act that the arrangements that the bankrupt proposed would ensure that all his provable debts were paid in full. 55 In this case, unsatisfactory as the bank's evidence is, I am satisfied that through some error or oversight it failed timeously to pursue its lodging of proofs of debt. Since the trustee was not prepared to form a state of satisfaction on 21 July 2011 sufficient to allow the application for annulment to proceed to finality, the trustee was subsequently obliged to give consideration to whether they were provable debts. I am of opinion that in that regard he was not constrained by s 145(3). That provision was inapposite to deal with an annulment application, although apposite to flesh out who might be the bankrupt's creditors for the purposes of the trustee forming the state of satisfaction s 153A(1) required him to form. 56 The function of the Court under s 104 is not to consider the correctness or otherwise of the trustee's decision in light of the material before the trustee, but to determine in light of the material before the Court whether the applicant for review has a debt that should be admitted to proof or has established that a debt admitted to proof ought not to have been. The court can take into account inconsistencies in the material provided to the trustee and the evidence before the Court: Re DK Rogers; Ex parte v CMV Parts Distributors Pty Limited (1989) 20 FCR 561 at 562-563 per Von Doussa J; Payne; Ex parte Levi [1986] FCA 439 (23 September 1986 per Toohey J); BDT Holdings Pty Limited v Piscopo [2009] FCA 151 at [4] per myself. An application to review a trustee's decision under s 104 is an original proceeding that the Court hears de novo: see too Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 at 340-341 per Brennan and Dawson JJ, with whom, on this matter, Toohey J agreed at 354. 57 The conduct of the bank, its tardiness in seeking to lodge its proof of debt and its effect in frustrating the processes of the annulment cannot be condoned. However, Mr Coshott put forward a document that I have found to be fabricated in order to defeat the bank's claim. I have rejected that ground. That factor has caused delay. It has meant that the trustee had to assess, and now the Court standing in his shoes, must assess the bank's claim on its merits. 58 There is no other answer to the bank's claim to be entitled to prove for its debts to the extent the trustee has admitted them. Justice would not be done by rejecting the bank's claim to prove in the events that now exist: Wong 63 FCR at 441-442. Overall, in the exercise of my discretion I think that it would be fairer to allow the bank to prove for its undoubted entitlements in Mr Coshott's bankruptcy than to reject the proofs and subject the bank to the vagaries of being able to recover against Mr Coshott at a later time, and with the further inconvenience and expense of an assessment of its costs. 59 For these reasons I am of opinion that the application must be dismissed. I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.