Davis v Insolvency and Trustee Service Australia

Davis v Insolvency and Trustee Service Australia - [2010] FCA 69 - FCA 2010 case summary — Zoe

[16]

4 On 24 April 2009, at very short notice, I heard an application brought by Mr Davis for leave to amend his Application for a second time and for interlocutory injunctive relief. Mr Davis' application for an interlocutory injunction was prompted by the fact that, by Notice dated 25 March 2009 (the Notice), the Registrar had purported to require payment to the Registrar, pursuant to s 72A of the Child Support (Registration and Collection) Act 1988 (Cth) (the Collection Act), of any moneys due to Mr Davis or becoming due to him from three named persons, DC Beale, MJ Horton and AJ McMinn (the Estate's solicitors), up to the amount of $53,383.11 (being the amount due to the Registrar under the Local Court orders plus interest). At the time the Notice was issued, the Registrar believed that the Estate's solicitors were the executors and trustees of the Will of the late Dr Eric Lewis Davis (Dr Davis), who was Mr Davis' father, and that the estate would, in the future, be obliged to pay moneys to Mr Davis in his capacity as a residuary beneficiary under his late father's Will. As the interlocutory hearing proceeded, it became clear that the named persons were not the executors and trustees under Dr Davis' Will. Their true role was as the solicitors for the executor and trustee of that Will (Mr Graham John Cowley). 3 In these Reasons for Judgment, I will adopt the same abbreviations as I adopted in Davis No 1. 4 In Davis No 1, I granted leave to the applicant to amend his Application. He availed himself of that leave by filing a Further Amended Application on 1 June 2009. 5 After I delivered judgment in Davis No 1, and after the applicant and his legal advisors had had an opportunity to read and consider my Reasons for Judgment in Davis No 1, the applicant applied for an order that I disqualify myself from hearing the Registrar's summary dismissal Motion which was fixed for hearing that same day, 29 May 2009. I declined to disqualify myself (as to which see Davis v Insolvency and Trustee Service Australia (No 2) [2009] FCA 589. I then proceeded to hear the Registrar's summary dismissal Motion. 6 The case of the applicant which must be scrutinised in considering and determining that Motion is the case which he now propounds in his Further Amended Application filed on 1 June 2009. 7 On 25 May 2009, the applicant filed a Notice of Motion in which he sought orders that the Registrar's summary dismissal Motion be dismissed or, alternatively, that the hearing of that Motion be adjourned to some unspecified date in the future. In addition, in that Notice of Motion, the applicant sought directions for the further disposition of the Motion which he had filed in which he claimed the interlocutory injunctive relief to which I have already referred. 8 At the commencement of the disposition of the matters before the Court on 29 May 2009, Counsel for the applicant submitted that I should proceed to hear the applicant's Notice of Motion filed on 25 May 2009 before dealing with any other matter. I declined to take that course and indicated to Counsel that I would deal with that Motion at the same time as dealing with the Registrar's summary dismissal Motion. 9 Towards the end of the hearing, Counsel for the applicant and I discussed his client's Notice of Motion filed on 25 May 2009. It was conceded by Counsel that he had had a fair opportunity to deal with that Notice of Motion during the course of his submissions and that it should be dealt with at the same time as the Registrar's summary dismissal Motion. In the course of that discussion, the following was said: HIS HONOUR: Mr King, earlier today you raised the notice of motion filed on 25 May and I ruled at that time that it should not be dealt with before your submissions, but rather during the course of your submissions. Given the orders which you have sought in that notice of motion, do you accept you have now dealt with those during the course of your submissions?

[48]

THE APPLICANT'S CASE 19 In his Further Amended Application, the applicant seeks relief by way of the Constitutional writs pursuant to s 39B(1A) of the Judiciary Act 1903 (Cth) (the Judiciary Act) and ss 5, 6 and 8 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) the ADJR Act). He also makes reference to what he describes as the general law pursuant to the Court's pendent or associated jurisdiction. It is reasonably clear that the applicant seeks judicial review of the Local Court orders (as to which, see the extract from Davis No 1 at [2] above) and challenges the effect and validity of transactions entered into based upon those orders. Unfortunately, the applicant has failed to specify in his Application the grounds upon which he seeks that review. 20 In his claims for relief, the applicant claims a declaration that the Local Court orders are invalid and of no effect and an order setting aside those orders. His contention is that those orders were made without jurisdiction or power. It seems that the other relief claimed by the applicant is consequential upon this fundamental attack upon the Local Court orders. Prominent amongst the consequential relief claimed is relief designed to protect the applicant's former interest in certain real property in Queensland, namely, the property known as 20 St Kevins Avenue Benowa QLD (the Queensland property) together with orders restraining the first respondent and the Registrar from selling or otherwise disposing of that property. I will explain the relevance of that claim for relief later in these Reasons. 21 The second important consequential matter is the challenge by the applicant to the validity of a Notice to Pay Money issued by the Registrar pursuant to s 72A of the Collection Act dated 25 March 2009 served upon the fourth respondents on 30 March 2009. 22 The applicant's arguments may be summarised as follows: (a) The Magistrate who made the Local Court orders had no jurisdiction or power to make orders in respect of real property situated in Queensland; (b) That Magistrate had no jurisdiction or power to make orders in relation to the Queensland property without making Ms Lau (the former joint tenant), who is now the applicant's wife, a party to the proceedings; (c) The Magistrate who made the Local Court orders had no power to exercise summary Federal jurisdiction; and (d) The Commonwealth laws pursuant to which the Local Court orders were made are invalid because they contravene s 51(xxxi) of the Constitution. 23 In oral submissions, Counsel for the applicant contended that s 72A of the Collection Act was invalid. He also submitted that the conferral of Federal jurisdiction on the Local Court of NSW, which is a court of limited jurisdiction, is ineffectual because that conferral is subject to the overriding principle that the Commonwealth must take the State court as it finds it. It was submitted that the Commonwealth cannot confer an alien function, or make the State court a different kind of court from that which it finds at the point of conferral. 24 The applicant also contended that, when the first respondent became registered on the title to the Queensland property and thus severed the joint tenancy between the applicant and Ms Lau thereby converting the prior ownership into a tenancy in common between the first respondent and Ms Lau, those actions constituted an acquisition of property otherwise than on just terms. It was said that this rendered the relevant legislation invalid and the actions pursuant to it of no effect.

[109]

(2) Courts shall have the jurisdiction conferred or imposed on them by or under any Act or other law. 33 Section 4(3)(a) provided that a reference to an Act in the Local Courts Act included a reference to an Act of the Commonwealth. The Local Courts Act therefore recognised that the Commonwealth Parliament may confer Federal jurisdiction on local courts. In Ly v Jenkins (2001) 114 FCR 237 at [99] Sackville J, as a member of the Full Court which decided that case, said: Section 7(2) of the Local Courts Act recognises that Local Courts, in addition to the jurisdiction possessed by Courts of Petty Sessions immediately before the appointed day, also have the jurisdiction conferred or imposed upon them by any other Act or law. Section 7(2), having regard to the terms of s 4(3) of the Local Courts Act, specifically contemplates that jurisdiction may be conferred on Local Courts not only by State law but by Commonwealth enactments. In other words, the New South Wales Parliament has recognised that the Commonwealth Parliament, in the exercise of its constitutional powers, may confer jurisdiction on Local Courts in relation to summary offences created by Commonwealth law. 34 At the time, there was a jurisdictional limit imposed on NSW Local Courts in terms of the quantum of money that may be claimed in those Courts in any debt recovery proceedings: see s 65(1)(a) of the Local Courts Act. At that time, the limit was $60,000.00. The enforcement proceedings taken in the present case were well within that limit. 35 One of the important submissions made by the applicant in the present case was that the Local Court of NSW had no jurisdiction to issue a Writ of Execution against the Queensland property. This may well have been correct if the judgment lying behind such a Writ was purely State based and had not resulted from the application of Federal law. However, as the Registrar submitted, it is not necessary in the present case to resolve that question. There is an additional conferral of jurisdiction pursuant to s 104(2) of the Collection Act which provides that each local court in New South Wales is invested with jurisdiction in relation to matters arising under that Act. 36 The Registrar submitted that the jurisdiction conferred by s 104(2) of the Collection Act is not limited by locality for a number of reasons. The Registrar submitted that: (a) Section 77(iii) of the Constitution states that the Commonwealth Parliament may make laws "[i]nvesting any court of a State with federal jurisdiction", which by s 76(ii) includes jurisdiction in matters arising under any law made by Parliament. As Latham CJ explained in Peacock v Newtown Marrickviile General Co-Operative Building Society No 4 Ltd (1943) 67 CLR 25 at 37, this is a power "to give new, additional, jurisdiction to State courts". Further, Parliament may "make the jurisdiction as wide or as narrow as it pleases with respect to persons, localities or amounts involved". (See, generally, Ly v Jenkins 114 FCR 237 at [70]-[71] (per Sackville J), Moore J agreed.). (b) The general words used in s 104(2) of the Collection Act do not suggest any territorial limitations. Indeed, in Commonwealth Acts, unless the contrary intention appears, references to "localities, jurisdictions and other matters and things shall be construed as references to such localities, jurisdictions and other matters and things in and of the Commonwealth" (Acts Interpretation Act 1901 (Cth), s 21(1)(b). See also s 17(a)). By its very nature, federal jurisdiction "is exercised in Australia, not in a State or Territory. And federal jurisdiction is no different when exercised by State courts. They, too, exercise federal jurisdiction throughout Australia, not merely in its States" (Commonwealth v Mewett (1997) 191 CLR 471 at 525 (per Gaudron J); see, also, Breavington v Godleman (1987) 169 CLR 41 at 87 (per Wilson and Gaudron JJ). (c) Section 104(2) of the Collection Act may be contrasted with s 39(2) of the Judiciary Act, which generally confers federal jurisdiction on State courts (including the Local Court) subject to any pre-existing jurisdictional limits placed on those courts under State law, including as to "locality [or] subject-matter" (Federated Sawmill, Timberyard and General Woodworkers' Employees' Association v Alexander (1912) 15 CLR 308 at 312 (per Griffiths CJ)). (d) Nor can s 104(2) be equated to a provision which merely states that a debt can be sued for and recovered in any court of summary jurisdiction. Such a provision, which confers jurisdiction on State courts by implication, generally takes such courts as they are, with all their limitations as to jurisdiction (subject to any contrary intention) (Federated Sawmill, Timberyard and General Woodworkers' Employes' Association v Alexander 15 CLR 308 at 313 (per Griffiths CJ)). (e) Further, if s 104(2) were construed so as to maintain territorial limits on State courts, it would stymie the conferral of federal jurisdiction. The Collection Act is designed to ensure children receive from their parents the financial support that the parents are liable to provide (s 3(1)(a)). To that end the Registrar may be tasked with collecting child support debts as debts due to the Commonwealth. The child support scheme is a national one, and a debtor may hold assets in various States and Territories. While jurisdiction to recover debts is also conferred on the Family Court and Federal Magistrates Court (s 104(1)), it would frustrate the purposes of the Collection Act if the Registrar could not pursue, in courts of summary jurisdiction (which are more common and accessible), writs of execution on real property in other States and Territories. 37 I agree with the submissions which I have set out at [36] above. Counsel for the applicant did not engage in detail with those submissions and did not advance an answer to them. Rather, the thrust of his submissions was that his ultimate proposition was at least arguable and should therefore be allowed to go to trial. 38 I do not agree that the applicant's contention that the Magistrate who made the Local Court orders did not have jurisdiction to make those orders is arguable. The Local Court's jurisdiction in relation to matters arising under the Collection Act was not limited by any geographical limitations otherwise applicable to the Local Court as a matter of State law (if any such limitations, in truth, exist). 39 For these reasons, the applicant's contention that the Magistrate who made the Local Court orders had no jurisdiction to make those orders has no reasonable prospect of succeeding. 40 The applicant also contended that the Magistrate who made the Local Court orders did not have power to make those orders. But, in order to succeed in an argument along these lines, the applicant must demonstrate that, not only did the Magistrate misconstrue his powers, but that he acted outside his jurisdiction by committing jurisdictional error. The mere fact that an inferior court might misconstrue its powers is not a basis for judicial review pursuant to s 39B of the Judiciary Act. 41 For these reasons, I do not think that the applicant has a reasonable prospect of succeeding in a separate challenge to the Local Court orders based upon lack of power. 42 In any event, in my view, the Magistrate who made those orders did have power to make them. This conclusion is explained and supported by the observations of Sackville J in Flanagan v Australian Prudential Regulation Authority (2004) 138 FCR 286 at [15]-[21]. 43 In Davis No 1 at [14]-[25], I extracted various passages from the judgments of the High Court in Luton v Lessels 210 CLR 333 which explain the statutory scheme in question. In light of that explanation, the Registrar submitted: (a) Part 4 of the Assessment Act provides for applications to the Registrar for administrative assessments of "child support". A successful application results in child support being payable for the child by the liable parent to the carer entitled to child support: Assessment Act, s 31(1). (b) That liability is a "registrable maintenance liability" for the purposes of the Collection Act: Collection Act, s 17(2). Generally, where the Registrar makes a child support assessment under which a registrable maintenance liability arises, the Registrar must immediately register the liability under the Collection Act: s 24A(1). Once the liability is registered, amounts payable under the child support assessment under which the liability arises become debts due to the Commonwealth by the liable parent in accordance with the particulars of liability entered in the Child Support Register: Collection Act, s 30(1). Section 67 provides for "late payment penalties" to be imposed in respect of child support debts that remain unpaid. (c) Debts due to the Commonwealth under the Collection Act may be sued for and recovered by the Registrar in a court having jurisdiction under the Collection Act: s 113. The Local Court has jurisdiction (see s 104(2)). (d) Section 109A(1) of the Family Law Act 1975 (the Family Law Act) provides that the power of the judges to make Rules of Court under s 123 extends to making Rules of Court for or in relation to the enforcement by the court of the Collection Act or the Assessment Act. The rule-making power includes providing for a variety of orders in respect of a person who fails to pay an amount payable under a registered maintenance liability pursuant to the Collection Act or the Assessment Act: s 109A(2)(c)(iv). The orders specified include the issue of a warrant of execution against property of a person and the making of an order for the sequestration and, if necessary, the sale of property of that person: s 109A(3)(b), (d). (e) Section 105(1) of the Collection Act provides that the Family Law Act and the Family Law Rules apply generally to proceedings under the Collection Act (other than proceedings under s 113(1)(c)(i)) as if the proceedings were proceedings under the Family Law Act, and "a court having or exercising jurisdiction in the proceedings were a court having or exercising jurisdiction under that Act". Chapter 20 of the Family Law Rules, including Pt 20.3 which deals with "enforcement warrants", therefore becomes applicable to enforcement proceedings under s 113(1)(c)(ii) of the Collection Act. (f) Chapter 20 of the Family Law Rules sets out a procedure by which child support liabilities and costs, including the costs of enforcement, may be enforced (r 20.01(1)(a), (2)(c), (d), (f)). Where the obligation is a child support liability, the obligation may be enforced by a person entitled to do so under the Registration Act: r 20.04(d). An application may be made under Pt 20.3 for the seizure and sale of real property under an "enforcement warrant" (r 20.16). An "enforcement officer" is then under a duty to seize or sell property of the person subject to the liability in the sequence that the enforcement officer considers is best for promptly enforcing the warrant, avoiding undue expense or delay and minimising hardship to the payer and any other person affected: r 20.18(1). An enforcement officer may, when enforcing a warrant, enter any real property that is the subject of the warrant, using such force as may be necessary and eject from the property any person who is not lawfully entitled to be on the property: r 20.18(2). Property seized under an enforcement warrant remains the subject of the warrant unless it is released by full payment of the total amount owing, the sale of the property, an order of the court or the consent of the payee: r 20.20(1). A person against whom an enforcement warrant has been issued (or affected third parties) may serve a notice of claim against the enforcement officer to, in effect, resist enforcement (r 20.25). Provision is made for the hearing of an application to determine the claim (r 20.29). 44 These submissions are correct. The applicant put nothing by way of contradictory submission. I accept them. 45 The fact that Ms Lau was not a party to the proceedings before the Local Court does not affect the power of the Court to make the orders which it made on 8 November 2005. In addition, the matter is probably specifically covered by r 20.59(2) of the Family Law Rules which is in the follow terms: If an order is made against a person who is not a party to a case, the order may be enforced against the person as if the person were a party. 46 A joint tenancy may be severed by a court order that requires the property the subject of the joint tenancy to be dealt with in a manner that expressly or by necessary implication is inconsistent with the continuance of the joint tenancy (see Butt, Land Law (5th ed, 2006) at [1487] and Guthrie v ANZ Banking Group Ltd (1991) 23 NSWLR 672 at 680 (per Meagher JA)). 47 The contentions made on behalf of the applicant that the Magistrate who made the Local Court orders did not have power to effect a severance of the joint tenancy in respect of the Queensland property and did not have power to make orders affecting the Queensland property in the absence of Ms Lau as a party to the enforcement proceedings are bound to fail. For this reason, the applicant has no reasonable prospect of succeeding in respect of these contentions.

[110]

Acquisition of Property 48 Apart from the Constitutional challenge mounted by the applicant, there is no challenge in the present proceedings to the validity of the underlying child support debt owed by the applicant to the Commonwealth. The substance of the contention advanced by the applicant is that any law of the Commonwealth which underpins the making of the Local Court orders contravenes s 51(xxxi) of the Constitution and is therefore invalid. 49 Laws which confer jurisdiction and power on courts to enforce existing debts are not laws with respect to the acquisition of property. Such legislation falls outside s 51(xxxi) of the Constitution. The statutory scheme relevant to the creation and enforcement of the debt in question in the present case is not a law with respect to the acquisition of property (see the discussion by Brennan J, as he then was, in Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 at 178-181; see also Airservices Australia v Canadian Airlines International Ltd (1999) 202 CLR 133 at [98] (per Gleeson CJ and Kirby J)). In Airservices Australia v Canadian Airlines International Ltd 202 CLR 133 at [345], McHugh J said that the notion of fair compensation in that context was incongruous with a statutory scheme designed to assist in the recovery of debts. 50 The Registrar submitted that: (a) In this case, it would frustrate the objectives of the legislation if just terms had to be provided to persons whose property was seized as part of a scheme for the enforcement of child support liabilities. The means selected by Parliament to ensure such liabilities are met are appropriate and adapted to meet the objectives of the child support scheme, which is otherwise within legislative power. The child support scheme is supported by each of s 51(xxii) (marriage power), s 51(xxxvii) (State reference power), s 51(xxxix) (incidental power) and s 122 (territories power) of the Constitution: Luton 210 CLR 33 at [6] (per Gleeson CJ), and [91]-[92] (per Kirby J). (b) Similarly, a law will also not be characterised as a law with respect to the acquisition of property if the law is not directed towards the acquisition of property as such but is instead concerned with the adjustment of competing rights, claims or obligations of persons in a particular relationship or area of activity: Nintendo Co Ltd v Centronics Systems Pty Ltd (1994) 181 CLR 134 at 160-161 (per Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ). The impugned provisions here meet this description. They are part of a scheme designed to adjust the competing interests of parents vis-à-vis their child or children. See, also, Airservices Australia v Canadian Airlines International Ltd 202 CLR 133 at [497], [501], [503] (per Gummow J, Hayne J agreeing). 51 I agree with those submissions. 52 The applicant's contention that the legislation supporting the Local Court orders is invalid by reason of the operation of s 51(xxxi) has no reasonable prospect of succeeding.

[124]

71 For the above reasons, the Notice was not bad in form. 56 In Davis No 1, Counsel for the applicant also advanced a second broad challenge to the s 72A Notice. At [72], I said: 72 As to the second broad ground of challenge to the Notice, Counsel for Mr Davis submitted that, for a notice under s 72A to be valid, the Registrar must have evidence of and be in a position to prove one or more of the matters referred to in subpars (a) to (d) of s 72A(1) as at the date the notice is issued. In this case, therefore, the Registrar must have been able to prove that one or more of the threshold matters referred to in the subparagraphs existed as at 25 March 2009. Counsel submitted that, in the present case, the Registrar had not proven the necessary facts, in respect of which she bore the onus, and that therefore the Notice was invalid or ultra vires. I do not agree with this interpretation of s 72A advanced on behalf of Mr Davis. However, I do not think that I need to decide for the purpose of the present application the question of law embedded in Mr Davis' contention. I think that the Registrar did establish to a sufficient degree that the Estate's solicitors may, in the future, hold moneys due to Mr Davis and thus be within one or more of the classes referred to in subpars (a) to (d) in s 72A(1). I reject this submission. 57 I have also again carefully considered this argument advanced on behalf of the applicant. I adhere to what I said at [72] in Davis No 1. 58 I should add that what is required by s 72A(1) of the Collection Act is that the Registrar have some reasonable basis in her mind when giving a payment notice authorised by the section for thinking that one or other of the circumstances adumbrated in subs (1)(a) to (d) is the fact. Here, the Registrar was told by the solicitor for the applicant that the fourth respondents were the Executors of the applicant's late father's estate. This turned out to be incorrect. However, the fact is that they are the solicitors for the Executor of the applicant's late father's estate. Because the applicant is a beneficiary under his late father's Will, the information conveyed to the Registrar was a reasonable basis for the Registrar to come to the view that the fourth respondents may subsequently hold money for or on account of the applicant or may subsequently hold money on account of some other person for payment to the applicant or might have authority from some other person to pay money to the applicant. The same may be said of the facts in the present case, namely, that the fourth respondents are the solicitors who are acting for the Executor of the applicant's late father's estate. There was a reasonable basis for the Registrar to think that the fourth respondents may hold money for or on account of the appellant. 59 The idea behind s 72A is that the Registrar should be empowered to issue what is in effect a statutory garnishee in order to aid the recovery of child support debts due to the Commonwealth. The enforcement action contemplated by the section should not be surrounded with unduly technical requirements directed to notions of standard of proof or the like. 60 For the reasons which I explained at [72] of Davis No 1 and for the additional reasons which I have just given, I think that this second ground of challenge to the s 72A Notice has no reasonable prospect of succeeding.

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