Di Iorio v Wagener

REASONS FOR JUDGMENT 1 The applicant, Peter Di Iorio seeks leave to appeal against an interlocutory judgment of the Federal Circuit Court of Australia given on 9 February 2015. The Federal Circuit Court dismissed Mr Di Iorio's application for an extension of time to seek review of a sequestration order made by a Registrar. 2 It is necessary to set out something of the procedural history of Mr Di Iorio's litigation in order to place the present application into context. 3 Mr Di Iorio was a registered builder. The respondent, Gary Wagener, is a tradesman who seems to have specialised in cladding work. Mr Di Iorio engaged Mr Wagener to perform work in 2010, but a dispute ensued. Mr Wagener took proceedings against Mr Di Iorio in the Queensland Civil and Administrative Tribunal ("QCAT"), claiming that he was owed a debt of $8,150. A contested hearing took place on 26 August 2010, and an order was made that Mr Di Iorio pay Mr Wagener the sum of $8,240. 4 The QCAT order was filed in the Magistrates Court of Queensland, which then issued a judgment against Mr Di Iorio on 27 September 2010 for the sum of $8,240. 5 Mr Di Iorio applied for leave to appeal against the QCAT order, but leave was refused on 30 November 2010. 6 On 13 August 2014, Mr Wagener had a bankruptcy notice served on Mr Di Iorio. Mr Di Iorio then filed another application for leave to appeal against the QCAT decision. That application was dismissed on 10 October 2014. Mr Di Iorio filed yet another application for leave to appeal on 16 October 2014. On the same day an application to stay the original order of QCAT was refused. The material does not disclose the fate of the third application for leave to appeal, but there is no suggestion by Mr Di Iorio that his application succeeded. In fact, his major complaint is that he has lost every application he has made to QCAT. I infer that his third application was unsuccessful. 7 On 16 September 2014, Mr Wagener filed a creditor's petition. On 23 October 2014, a Registrar made a sequestration order against Mr Di Iorio's estate when he failed to appear at the hearing. 8 Mr Di Iorio was entitled to apply to the Federal Circuit Court for review of the Registrar's decision pursuant to s 104 of the Federal Circuit Court of Australia Act 1999 (Cth). Section 104 provides, relevantly: (2) A party to proceedings in which a Registrar has exercised any of the powers of the Federal Circuit Court of Australia under subsection 102(2) or under a delegation under subsection 103(1) may: (a) within the time prescribed by the Rules of Court; or (b) within any further time allowed in accordance with the Rules of Court; apply to the Federal Circuit Court of Australia for review of that exercise of power. (3) The Federal Circuit Court of Australia may, on application under subsection (2) or on its own initiative, review an exercise of power by a Registrar under subsection 102(2) or under a delegation under subsection 103(1), and may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised. 9 The time limit for the making of an application for review of a decision of the Registrar is set out in r 2.03 of the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth). Rule 2.03 provides, relevantly: (1) Subject to any direction by the Court or a Judge to the contrary, an application under subsection 104(2) of the Act for review of the exercise of a power of the Court by a Registrar under subsection 102(2), or under a delegation under subsection 103(1), of the Act must be made by application for review within 21 days after the day on which the power was exercised. 10 Mr Di Iorio did not file any application for review of the Registrar's decision until 13 November 2014, which was outside the 21 day time limit. He sought an extension of the time within which to file the application. The Federal Circuit Court has a discretionary power under s 104(2) of the Federal Circuit Court of Australia Act and r 2.03(1) of the Federal Circuit Court (Bankruptcy) Rules to extend the time limit. 11 The Federal Circuit Court was required to consider whether it should exercise its discretion in favour of extending the time for the filing of the application for review of the Registrar's decision. The primary judge noted that the matters which would inform the exercise of the discretion included the length of the delay, the reason for the delay and whether any purpose would be served in granting the extension. His Honour considered that the delay was not substantial. His Honour noted that there was nothing in the affidavits to explain why Mr Di Iorio delayed in filing the application, but said that the Court would not shut out a good claim that had prospects of success. The primary judge then said that the difficulty for the applicant was that his claim had no prospects of success. That was because no basis was demonstrated to go behind the judgment upon which the bankruptcy notice was based. In addition, any cross-claim, cross-demand or set-off could have been raised in the original proceeding before QCAT. 12 As I understand Mr Di Iorio's submissions to this Court, his complaint is that the primary judge did not engage in a review of the merits of QCAT's decision. Mr Di Iorio may be understood as alleging that the primary judge erred in failing to find that he had prospects of defending the creditor's petition by proving that he does not, in truth, owe any debt to Mr Wagener. Mr Di Iorio may be taken to submit that he had sufficient prospects of persuading the Federal Circuit Court to "go behind" the judgment and QCAT's decision to justify an extension of time. 13 Section 40(1) of the Bankruptcy Act 1966 (Cth) provides, relevantly: (1) A debtor commits an act of bankruptcy in each of the following cases: … (g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not: (i) where the notice was served in Australia - within the time specified in the notice; or (ii) where the notice was served elsewhere - within the time fixed for the purpose by the order giving leave to effect the service; comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; 14 Section 41(1) provides, relevantly: (1) An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor: (a) a final judgment or final order that: (i) is of the kind described in paragraph 40(1)(g); and (ii) is for an amount of at least $5,000; 15 Section 43 provides, relevantly: (1) Subject to this Act, where: (a) a debtor has committed an act of bankruptcy; and (b) at the time when the act of bankruptcy was committed, the debtor: (i) was personally present or ordinarily resident in Australia; … the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor. 16 Section 52 provides, relevantly: (1) At the hearing of a creditor's petition, the Court shall require proof of: (a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient); (b) service of the petition; and (c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing; and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor. … (2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor: (a) that he or she is able to pay his or her debts; or (b) that for other sufficient cause a sequestration order ought not to be made; it may dismiss the petition. 17 A judgment upon which a bankruptcy notice is based is not conclusive of the existence of a debt. Section 52(1)(c) requires the Court exercising jurisdiction in bankruptcy to be satisfied that the debt is still owing. It is well established that the Court has the power to determine whether, in truth, the debt exists. 18 In Corney v Brien (1951) 84 CLR 343, Dixon, Williams, Webb and Kitto JJ said at 347: Section 56(2)(a) of the Bankruptcy Act 1924-1950 provides that the court at the hearing shall require proof of the debt of the petitioning creditor. Under this provision the Court of Bankruptcy has undoubted jurisdiction to go behind a judgment obtained by default or compromise or where fraud or collusion is alleged and inquire whether the judgment is founded on a real debt. 19 In the same case, Fullagar J said at 353-354: Generally speaking, a judgment at law for a sum of money creates an obligation of its own force. The pre-existing obligation, which the judgment is intended to enforce, merges in the new obligation so created, and, for most purposes as between the parties, it is conclusive evidence of the existence of the obligation which it creates. It may in some circumstances be set aside by the court which entered it, but, unless and until it is set aside that is, generally speaking, its effect. It has, however, been well settled for very many years that in a court having jurisdiction in bankruptcy a judgment has no such conclusive effect. The court will in many cases, as it is commonly said, "go behind" the judgment and inquire into the existence of the debt upon which it is said to be founded. 20 Fullagar J said at 356-357: No precise rules exist as to what circumstances call for an exercise of the power, but certain things are, I think, clear enough. If the judgment in question followed a full investigation at a trial on which both parties appeared, the court will not reopen the matter unless a prima-facie case of fraud or collusion or miscarriage of justice is made out. In In re Flatau; Ex parte Scotch Whisky Distillers Ltd. (1888) 22 Q.B.D. 83, at p.86 Fry L.J. said: "This power has never, so far as I am aware, been extended to cases in which a judgment has been obtained after issues have been tried out before a court". 21 Fullager J added at 358: The question whether the judgment is to be reopened or "gone behind" at all will, of course, often involve some preliminary investigation of the merits of the attack on the judgment. But, when once the court decides that it will "go behind" the judgment, the cases which I have cited show, in my opinion, that the whole matter is open. When once it is considered proper to "reopen", the only question will be whether there was, in fact and in law, a debt which could legally found the judgment - whether there was in "Truth and Reality" an obligation not of record before there was an obligation of record. If the case should be one of those rare cases (I have not actually found one in the Reports since 1888, when Fry L.J. said that he knew of none) where it is legitimate to "go behind" a judgment entered after trial in court, there would be, I think, no alternative but to re-try the whole case. The matter to be decided is the existence or non-existence of a debt antecedent to the judgment. 22 In Wren v Mahony (1972) 126 CLR 212, Barwick CJ (with whom Windeyer and Owen JJ agreed) said at 222-223: But, it has been made clear that the Bankruptcy Court will not as a matter of course inquire into the validity of a judgment debt: In re Flatau; Ex parte Scotch Whisky Distillers Ltd. (1888) 22 Q.B.D. 83. In that case the judgment followed a trial of an action with a jury. Circumstances tending to show fraud or collusion or miscarriage of justice or that a compromise was not a fair and reasonable one, in the sense that even if not fraudulent it was foolish, absurd and improper, or resulted from an unequal position of the parties (see In re Hawkins; Ex parte Troup [1895] 1 Q.B. 404, at p. 409) offer occasions for the exercise by the Court of Bankruptcy of its power to inquire into the consideration for the judgment. 23 Barwick CJ, referring to Re Flatau; Ex parte Scotch Whisky Distillers Ltd said at 224-225: His Lordship…was pointing out that the Bankruptcy Court could in general accept a judgment debt as sufficient proof of that debt particularly where it resulted from a fully heard contest between parties but that it always had the power to go behind the judgment and if the case was a proper one, should do so. The judgment is never conclusive in bankruptcy. It does not always represent itself as the relevant debt of the petitioning creditor, even though under the general law, the prior existing debt has merged in a judgment. But the Bankruptcy Court may accept the judgment as satisfactory proof of the petitioning creditor's debt. In that sense that court has a discretion. It may or may not so accept the judgment. But it has been made quite clear by the decisions of the past that where reason is shown for questioning whether behind the judgment or as it is said, as the consideration for it, there was in truth and reality a debt due to the petitioning creditor, the Court of Bankruptcy can no longer accept the judgment as such satisfactory proof. It must then exercise its power, or if you will, its discretion to look at what is behind the judgment: to what is its consideration. It is not the law, in my opinion, that whether in any case the Court of Bankruptcy will consider whether there is satisfactory proof of the petitioning creditor's debt is a mere matter of its own discretion. Nothing in Corney v. Brien (1951) 84 C.L.R. 343 lends support for such a view. Rather the emphasis is upon the paramount need to have satisfactory proof of the petitioning creditor's debt. The Court's discretion in my opinion is a discretion to accept the judgment as satisfactory proof of that debt. That discretion is not well exercised where substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner. 24 QCAT conducted a hearing on the merits. Both parties were present at the hearing. Mr Di Iorio made three attempts to obtain leave to appeal against QCAT's decision, all of which failed. In order to persuade the Federal Circuit Court to go behind the judgment, Mr Di Iorio was required to demonstrate circumstances tending to show fraud or collusion or miscarriage of justice. Mr Di Iorio certainly alleged fraud and collusion on the part of both Mr Wagener and QCAT. Mr Di Iorio based his allegations on assertions that the decision of QCAT was obviously wrong and that QCAT was biased against him because he is Italian. 25 Mr Di Iorio alleges that Mr Wagener presented false evidence to QCAT. He argues that QCAT should have found that he did not owe any debt because Mr Wagener: (a) did not have a tradesman's licence; (b) had produced a false licence; (c) had not produced any written contract; (d) did not do the work that he had been contracted to perform; (e) did not perform the work he did do to a reasonable standard. 26 Mr Di Iorio accepted that he had raised all of these arguments before QCAT. It is apparent that QCAT rejected the arguments, since it found that Mr Di Iorio was indebted to Mr Wagener in the amount claimed by Mr Wagener. Mr Di Iorio did not produce any evidence before the Federal Circuit Court or this Court suggesting fraud or collusion on the part of Mr Wagener. 27 As to Mr Di Iorio's allegation of fraud or collusion against QCAT itself, he asserts that he has prosecuted some 20 applications before QCAT and failed in every one of them. He reasons that, given the number of applications he has made, the only explanation for his complete lack of success must be QCAT's discrimination and fraudulent conduct against him. The discrimination is said to be because he is Italian. However, there is a much more plausible explanation for his lack of success, namely that there has been a lack of merit in each of the applications he has brought. It is, for example, impossible to see how there could have been merit in Mr Di Iorio's second and third applications for leave to appeal against QCAT's decision of 26 August 2010. 28 The circumstances where the Court will find that a Tribunal has not acted in good faith are rare and extreme, particularly where all that is relied on is the decision itself: cf SBBS v Minister for Immigration and Multicultural and Indigenous Affairs (2002) 194 ALR 749 at [44]; [2002] FCAFC 361. There is not the slightest evidence of discrimination or fraud by QCAT. 29 In these circumstances, it is clear that the Federal Circuit Court was correct to find that there was no arguable basis to go behind the judgment in order to enquire whether any debt was truly owed. 30 Mr Di Iorio sought an adjournment of his application for leave to appeal so that he could obtain evidence of the "many, many" occasions of QCAT's fraudulent conduct. He claimed that he had been too busy to obtain that material because of other legal proceedings he is taking. I refused the adjournment because Mr Di Iorio had been notified of the hearing date some 3 months ago and has had ample time to organise his evidence. 31 I consider that Mr Di Iorio has not demonstrated any arguable case of error in the judgment of the Federal Circuit Court. His application for leave to appeal will be dismissed. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rangiah.