Cottrell v Wilcox

REASONS FOR JUDGMENT 1 I heard yesterday morning a motion seeking a stay of proceedings under a judgment, an appeal having been brought from that judgment. The applicant on the motion (and the appellant on the appeal) was Mr David Mervyn Cottrell, who participated by telephone in the hearing of his motion. Mr Cottrell was not legally represented. I announced at the conclusion of the hearing of Mr Cottrell's motion that I had decided not to grant the stay which he had sought and would give my reasons for that decision as soon as possible. What follows are those reasons. 2 The background to Mr Cottrell's motion is that on 29 November 2000, a Registrar of this Court made a sequestration order against Mr Cottrell's estate on the petition of Mr John Alfred Wilcox, that petition being supported by another creditor of Mr Cottrell's. Mr Cottrell applied for review of that order, but, on 22 December 2000, Conti J affirmed that order. Then, on 29 December 2000, Mr Cottrell filed in person both a notice of appeal from the judgment of Conti J and a notice of the present motion. Subsequently, on 5 February 2001, Mr Cottrell filed in person a supplementary notice of appeal. 3 It is not in dispute that O 52, r 17(1) of the Federal Court Rules (Cth) confers on me the power to grant the relief sought by Mr Cottrell in his motion. Further, it is plain that, in order to obtain the stay which he seeks, it is incumbent on Mr Cottrell to persuade me that at least one of his grounds of appeal is an arguable one. 4 The supplementary notice of appeal which Mr Cottrell filed on 5 February 2001 contained sixteen numbered grounds of appeal. Before, however, dealing with any of those grounds of appeal, it is appropriate that I turn to the reasons for judgment of Conti J. 5 From those reasons, one discovers that Mr Wilcox's creditor's petition had been based on Mr Cottrell's failure either to comply with or to have set aside a bankruptcy notice served on him by Mr Wilcox. In fact, Mr Cottrell had brought no proceeding in this Court to have that bankruptcy notice set aside. The bankruptcy notice had been based on a default judgment obtained by Mr Wilcox against Mr Cottrell in the Local Court at Wagga Wagga, New South Wales. That default judgment had been entered on 17 August 1999 in proceedings begun in 1992, in which proceedings Mr Cottrell had, in 1992, filed both a defence and cross-claim. 6 Mr Cottrell was, before the sequestration order was made against his estate, a plaintiff in proceedings in the Victorian County Court against a number of defendants, not including Mr Wilcox or the creditor who supported Mr Wilcox's petition. At the date of the judgment of Conti J, the hearing of those County Court proceedings had already occupied twenty days and Mr Cottrell estimated that the hearing would require another forty days before it was concluded. Within days before the making of the sequestration order against Mr Cottrell's estate, Mr Wilcox's solicitors and the solicitors for the defendants in Mr Cottrell's action in the County Court had reached an agreement on behalf of their respective clients that those defendants would share equally with Mr Wilcox the latter's legal costs of the sequestration proceeding against Mr Cottrell. 7 According to the reasons for judgment of Conti J (at [5]), before him, Mr Cottrell's "main" or "principal" argument against the affirming of the Registrar's making of the sequestration order against his estate had depended on a passage from the reasons for judgment of a Full Court of the High Court of Australia (Dixon CJ and Webb and Fullagar JJ) in Rozenbes v Kronhill (1956) 95 CLR 407 at 417. That passage was as follows: "… a court will not allow its process to be abused. There is an abuse of process if a pending bankruptcy petition, or a threat of proceedings in bankruptcy, is used as a means of extortion. The word 'extortion' is not a technical term, and it has in bankruptcy law 'no special and artificial significance divorced altogether from the ordinary implication of the word'. The court will look strictly at the conduct of a creditor using or threatening bankruptcy proceedings, and extortion may be held to have taken place if the creditor has used, or attempted to use, a pending petition, or a threat of a petition, in order to extract from the debtor money which the debtor is not bound to pay, or in order to obtain some secret and unfair advantage over other creditors. But extortion will not be held to have taken place 'in the absence of mala fides or anything amounting to oppression in fact'. There must be a real intention on the part of the creditor to use the process for some other end than its legitimate end, and there must be a real exertion of pressure." 8 As to that argument by Mr Cottrell, Conti J disposed of it as follows (at [10]): "I return then to the case (or at least the principal case) mounted by Mr Cottrell for setting aside of the sequestration order. I am unable to see how the improper purpose for which Mr Cottrell contends, as exemplified in the doctrine enunciated in Rozenbes v Kronhill, supra at 417, can have any application to the circumstances of the impugned cost sharing agreement. Mr Wilcox did not use the pendency of the bankruptcy proceedings as a means of exacting money from Mr Cottrell which Mr Cottrell was not bound to pay. The circumstance that the defendants to the Victorian County Court proceedings stood to benefit at least in a temporary or practical sense from Mr Cottrell's bankruptcy, subject to what the trustee in bankruptcy might elect to do, does not seem to me to be material in relation to the issue of alleged improper purpose on the part of Mr Wilcox. No suggestion of champerty was made by Mr Cottrell, nor do I think could have been rightly made. Doubtless for their part, the defendants to the Victorian County Court proceedings considered themselves substantially burdened by the subsistence of those protracted court processes in which they had become embroiled at the instance of a determined litigant who was without the financial means to meet any adverse court order for costs made in their favour." 9 A number of the grounds of appeal in Mr Cottrell's supplementary notice of appeal were directed to establishing that Conti J had erred in rejecting Mr Cottrell's argument before him which had been based on Rozenbes. 10 As to whether the passage which I have quoted above from the reasons for judgment of Conti J discloses an arguable case of appellable error on his part, I do not accept that it does. There was no evidence before Conti J to suggest that there existed in the present case either of the two circumstances contemplated by the High Court in Rozenbes as sanctioning the dismissal of a creditor's petition as an abuse of process. 11 I add further that, even if Mr Wilcox's purpose in bringing the sequestration proceeding against Mr Cottrell had been to bring to an end some other proceeding which Mr Cottrell then had on foot against Mr Wilcox himself, that would not have justified a dismissal of Mr Wilcox's sequestration proceeding: see my reasons for judgment in Meehan v Alfaro (1999) 93 FCR 201 at 209-11, [40]-[47], referring to earlier authority on the point, including a decision of a Full Court of this Court. In those circumstances, I find it extremely difficult to see how it could be arguable that Mr Wilcox's reaching of the agreement reached between himself and the Victorian defendants could justify the dismissal of Mr Wilcox's creditor's petition. 12 An alternative argument made by Mr Cottrell before Conti J had depended on the circumstances surrounding the Wagga Wagga Local Court judgment. In the reasons for judgment of Conti J (at [6]), his Honour referred to some affidavit evidence before him which had been sworn by Mr Cottrell, in which Mr Cottrell had deposed as follows: "That the applicant has always had a viable counter-claim/cross-demand of equal value to the petitioning creditor's claim that has not been tested before the court because of the failure of the court to hear such a claim. However, the documents relating to the cross-claim have always been on the court file…." 13 However, Conti J recorded more than once in his reasons for judgment the fact that Mr Cottrell had failed before him utterly to establish that that cross-claim had any prospects of success. For instance, his Honour said (at [4]), "Mr Cottrell impressed me … as a person of not inconsiderable acumen and intelligence, and as possessing sufficient rudimentary understanding of legal principles and court practices as to be able to present his contentions with vigour and emphasis. I regret to say however that when pressed upon vulnerable aspects of his contentions, he was as evasive as he was emphatic, particularly in relation to the issue as to whether he had available to him a cross demand or cross claim against the sum of money the subject of the Petition for Sequestration in Bankruptcy brought by Mr Wilcox." Later (at [7]), his Honour referred, not only to Mr Cottrell's cross-claim, but to his defence as well, saying, "The material … provided by Mr Cottrell does not provide me with any hint as to the existence of a viable basis for any defence to or a counter-claim of equal value to or exceeding Mr Wilcox's claim in the bankruptcy proceedings, so that I am left in the position where Mr Cottrell, who as I indicated is not without a certain basic understanding of legal matters, has not established that he ever had any realistic or bona fide answer or defence to the subsequent petition of Mr Wilcox, unless he could establish his case as to improper purpose." 14 A number of the grounds of appeal in Mr Cottrell's supplementary notice of appeal were directed to establishing that Conti J had erred in rejecting Mr Cottrell's argument before him which had been based on the circumstances surrounding the Wagga Wagga Local Court judgment. 15 As to whether the passages which I have quoted above from the reasons for judgment of Conti J disclose an arguable case of appellable error on his part, I do not accept that they do. There was no evidence before Conti J in the present case which would have permitted his Honour to form the view that, assuming Mr Cottrell's defence were ever litigated to finality, it would, or even could, result in the dismissal of Mr Wilcox's claim. In those circumstances, I do not consider that an appellate court would interfere with his Honour's exercise of discretion to decline to go behind the judgment of the Wagga Wagga Local Court. Neither was there any evidence before Conti J in the present case which would have permitted his Honour to form the view that, assuming Mr Cottrell's cross-claim were ever litigated to finality, it would, or even could, result in a money judgment in favour of Mr Cottrell, let alone one of any particular quantum. In those circumstances, I do not consider that an appellate court would interfere with his Honour's exercise of discretion to treat the existence of that cross-claim as insufficient cause to refuse to make a sequestration order against Mr Cottrell's estate: for a discussion of matters relevant to the exercise of that particular discretion, see my reasons for judgment in International Alpaca Management Pty Ltd v Ensor [1999] FCA 72 (10 February 1999, unreported) at [54]. 16 I add further that, on the hearing before me, I gave Mr Cottrell leave to file in Court two affidavits supporting his motion, one sworn on 26 December 2000 and the other sworn on the following day. Mr Cottrell then read those affidavits and, as well, tendered five documents, each relating to the Wagga Wagga Local Court proceedings. There was, however, nothing in any of that evidence which was capable of remedying the evidentiary gaps which had existed before Conti J so far as Mr Cottrell's defence and cross-claim are concerned. (If there had been, it would have been necessary for me to make some prediction as to whether a Full Court of this Court, hearing Mr Cottrell's appeal, would have been prepared to have regard to such evidence on the appeal. However, in the circumstances, the task is unnecessary.) 17 Thus far, I have restricted myself to discussing Mr Cottrell's grounds of appeal in so far as they deal with arguments which had been made by Mr Cottrell before Conti J based either on Rozenbes or on the circumstances surrounding the Wagga Wagga Local Court judgment. It appears to me that most, if not all, of the grounds of appeal in Mr Cottrell's supplementary notice of appeal were intended to allege error on the part of Conti J in rejecting those two arguments by Mr Cottrell, which two arguments had been the basis of Mr Cottrell's attempt to persuade Conti J not to affirm the Registrar's sequestration order. I add, however, that, to the extent to which those grounds of appeal may be construed as raising issues which had not been argued before Conti J, I am not prepared to have regard to their possible arguability for the purpose of determining Mr Cottrell's stay application, since no good reason appears to me to think that a Full Court of this Court will permit Mr Cottrell to raise them on his appeal. 18 In the circumstances, Mr Cottrell's motion is dismissed. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katz.