Evans v Hi-Fert Pty Ltd

REASONS FOR JUDGMENT 1 This is an appeal from a decision of a Federal Magistrate given on 17 June 2003. The Honourable the Chief Justice has determined that the appeal should be heard by a single judge pursuant to s 25(1)(a) of the Federal Court of Australia Act 1976 (Cth). 2 The appellant also applies for a stay and for an expeditious hearing. The reason for this is that his house and a portion of his property is to be auctioned by a secured creditor, the Commonwealth Bank of Australia, in the next day or so. In response to that application the Court has brought the matter on expeditiously for an early hearing. 3 The appellant also seeks a stay. The effect of a stay would appear to be primarily to prevent the Bank from enforcing its security. The Bank has not been joined as a party and was only served some one hour before these proceedings commenced, and that at the instigation of the Court. I am not be prepared to order a stay in these circumstances without having heard from the Bank, whatever the merits. 4 However, to avoid any prejudice to the appellant, it seemed to me the appropriate course was to proceed expeditiously to deal with the whole appeal, in the hope that if there were any prospects of success for him, that could be achieved today. 5 The appellant applied to the Federal Magistrate to review the decision of the Registrar to make a sequestration order and, second, to annul the sequestration order that had been made. The Federal Magistrate dismissed the review application on the basis that it was out of time. He then proceeded to hear the annulment application. 6 The background to the sequestration order is that the respondent had obtained a default judgment in the South Australian Magistrates Court in relation to an alleged delivery to the appellant of 36 tonnes of fertiliser to the value of $12,060.00 on 29 June 2000. 7 On 25 July 2001, the respondent entered judgment against the appellant for the amount of $13,901.93. On 6 September 2001, the respondent issued a bankruptcy notice which was served on 6 February 2002. The petition was first heard on 23 September 2002. The appellant attended that hearing and a subsequent hearing on 14 October 2002. On 23 October 2002, the appellant applied in the South Australian Magistrates Court to set aside the judgment supporting the bankruptcy notice. 8 On 20 November 2002, a South Australian Magistrate dismissed the application to set aside the judgment. The decision of the Federal Magistrate records that that rejection was apparently on the basis that the appellant failed to disclose a reasonable defence on the merits. 9 The appellant subsequently appealed to the Supreme Court, but that appeal was dismissed by Duggan J in the case of Evans v Hi‑Fert Pty Ltd [2003] SASC 186, on the basis that the appellant did not have the standing to pursue the appeal. 10 In the interim, Registrar Christie made a sequestration order on 5 December 2002. 11 The Federal Magistrate, after reciting the factual background, noted that he had a discretion pursuant to s 153B of the Bankruptcy Act 1966 (Cth) to annul the bankruptcy and for that purpose he could go behind the judgment debt in the South Australian Magistrates Court. He properly noted that the decision to make an order annulling a bankruptcy involved a heavy burden. He also noted that he should consider the matter on the facts as they were before him. 12 The argument put by the appellant before the Federal Magistrate (and indeed before the South Australian Magistrates Court) was that he was not in fact indebted to the respondent for the amount claimed. He argued that the amount of fertilizer which had been delivered or which was intended to be delivered to him was in fact returned by him and had then been sold to a third party. He argued that he was not indebted to the respondent. 13 For that purpose he filed not only an affidavit of his own but also an affidavit by a Mr Hughes who, at the time of the relevant transaction, was an agent for the respondent. The Federal Magistrate acknowledged that it was not beyond the bounds of possibility that what Mr Evans claimed was correct. He said, however, that: '…[it] was merely a possibility and on the state of evidence before me I am not persuaded that such a sequence of events occurred.' 14 Having looked at the material that was before him, I am satisfied that his analysis of that was correct. 15 The Magistrate found: 'It follows that I am not persuaded that the default judgment obtained in the South Australian Magistrates Court is unsafe or that I should interfere with the sequestration order made by Registrar Christie. The annulment application therefore falls at the first hurdle in that I am not persuaded that the sequestration order made on 5 December 2002 should not have been made.' 16 The Federal Magistrate went on to deal with the question whether he would have exercised his discretion to annul the sequestration order if he had been persuaded that the default judgment was doubtful. There were a number of reasons he gave for not doing so. The first, he said, was that there was other evidence that the appellant was insolvent, including that the bank had taken possession of the farm and was pursuing its rights. Secondly, he said that the bankrupt had not been cooperative with the trustee. Thirdly, he said that the bankrupt had not made any offer for the payment of the fees and charges incurred by the trustee. For these reasons, the Federal Magistrate would have declined to exercise any discretion to annul the bankruptcy in any event. 17 In the proceedings before me, further affidavits by the appellant and by Mr Hughes have been filed. In my view, none of that material could constitute 'fresh evidence' within the ordinary rules of this Court. No explanation has been given as to why that material was not produced before the Federal Magistrate. I note that the appellant was represented before the Federal Magistrate and that affidavits of both the appellant and Mr Hughes, whose fresh affidavits are now sought to be tendered on this appeal, were before the Federal Magistrate. Consequently, I have not received those fresh affidavits. I do note, however, that even if I had, I do not think the result would have been any different. 18 I cannot see any error in the decision or reasons of the Federal Magistrate. Consequently, the appeal must be dismissed. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Selway.